ISMAT KAMAL VS ASSISTANT COMMISSIONER OF INCOME-TAX WEALTH TAX, CIRCLE-II, ZONE-C, LAHORE
2001 P T D 807
[Lahore High Court]
Before Nasim Sikandar and Jawwad S. Khawaja, JJ
Mrs. ISMAT KAMAL
versus
ASSISTANT COMMISSIONER OF INCOME-TAX/WEALTH TAX CIRCLE-II,
ZONE-C, LAHORE and 2 others
I.T.A. No.362 of 1999, decided on 12/12/2000.
Wealth Tax Act (XV of 1963)---
----S. 31-B---C.B.R. Circular No. 5 of 1994, dated 19-9-1994 --- Additional wealth -tax---Levy of additional wealth tax was not mandatory---Value of rented out house was declared by the assessee on the basis of Annual Rental Value after deduction of allowances for fittings and fixtures, and 25% deduction in gross annual rent---Department pointed out that rebate on account of Annual Letting Value pertaining to rentals of furniture, fittings and fixture was not available after the year 1994---Assessee readily admitted the same and house was assessed on the higher value against originally assessed---Additional tax was charged which was upheld by the Appellate Tribunal while interpreting the word "shall" used in S.31-B of the Wealth Tax Act, 1963 on the ground that its levy was mandatory ---Validity-- Assessee had never been contumacious nor had been guilty of actively concealing any fact from the Revenue ---Assessee, after having been confronted, immediately agreed and offered to pay tax at the valuation-- Additional tax or penalty thus should not have been imposed only for the reason that it was legally permissible to do so---Levy of additional tax in a mechanical manner being not justified in the facts of the case levy was cancelled by the High Court in circumstances.
Manufacturers v. Collector 1995 PTD 345 and Shamroz Khan and another v. Muhammad Amin and others PLD 1978 SC 89 rel.
Ch. Amin laved and Ch. Ishtiaq Ahmad for Appellant.
Shafqat Mehmood Chohan for Respondents.
Date of hearing: 22nd November, 2000.
JUDGMENT
NASIM SIKANDAR, J.---This further appeal under section 27 of the Wealth Tax Act, 1963 calls into question a consolidated order recorded by 'the Lahore Bench of the Income-tax Appellate Tribunal on 11-8-1999 for the assessment years 1993-94 to 1997-98 whereby an order under section 17-B rendered by I.A.C. Wealth Tax Lahore Range-II, dated 8-5-1999 was maintained.
2. The appellant is an assessee of the Income-tax and Wealth Tax Department. On Wealth Tax side during the assessment years involved, she returned only three properties namely a self-occupied house in Canal View Housing Society, a house in Tipu Block, Allama Iqbal Town, Lahore and a plot in Chinar Bagh, Lahore. The self-occupied house having been claimed exempt is not in issue. The value of the plot in Chinar Bagh, Lahore is also not disputed by any of the parties. It is only House No. 12, Tipu Block Allama Iqbal Town, Lahore which is subject-matter of controversy. This house is admittedly rented out to different tenants through different rent- deeds. The original assessments in her respect were framed for the assessment years. 1993-94 to 1997-98 under section 16(3) of the Wealth Tax Act, 1963. In the first four years, the declared value of the house respectively Rs.21,60,000, 18,00,000 and Rs.24,00,000 was accepted by the revenue. In the year 1997-98, however, as against the declared value of Rs.24,00,000 it was assessed at Rs.79,200,000 though subsequently by rectification the value was brought down to Rs.65,40,000.
2. On 13-4-1999, I.A.C. Wealth Tax Range-II, Lahore served the assessee with a notice under section 17-B of the Act expressing his intention to re-open the assessment orders on the ground that all of them were erroneous in so far as these were prejudicial to the interest of the Revenue. In the first four years the objection was made against acceptance of the declared value while in the 5th year viz. 1997-98, it was noted that the Assessing Officer has allowed 25% deduction in gross annual rent ignoring C.B.R. Circular No.5 of 1994, dated 19-9-1994. In the view of the I.A.C. where property was rented out to tenant charging rent both for occupation and for fittings and fixtures separately, the claimed deduction for fittings and fixtures after the year 1994 was no more available.
3. In reply, the assessee on the very first opportunity admitted that rebate on account of A.L.V. pertaining to rentals of furniture, fittings and fixtures was not available in the year 1997-98. As to the value of the house in question in 5 years involved, it was readily admitted that factually the value of the house was assessable respectively at Rs.21,87,500, 54,00,000, 42,25,000 and Rs.76,14,000 for the years 1993-94 to 1997-98. The reply made by the assessee was duly accompanied with a complete chart on the basis of which the aforesaid valuation was made. The Revising Officer, however, ignored the same and assessed the wealth of. the assessee at Rs.48,76,577, 56,53,926, 77,72,316 and 84,49,671 as against the original assessments made at Rs.25,36,577, 20,53,926, 23,72,316 and Rs.28,29,671. In the last year viz 1997-98, the net wealth of the assessee was assessed at Rs.89,49,810. Also the assessee was found to have concealed/furnished in accurate particulars of wealth for all the aforesaid years. According to him the declared value .of the house in question was much less when compared with the value which should have been declared by the assessee" on the basis of the lease agreement obtaining on file". Therefore, for deliberately furnishing of in accurate particulars of wealth, penal proceedings under section 18 of the Wealth Tax Act, 1963 were directed to be initiated separately. Also additional wealth tax was levied at various sums on the basis of the difference between the returned wealth and the one ultimately determined by the Revising Officer.
4. The Lahore Bench of the Income-tax Appellate Tribunal on appeal partly agreed with the submissions made before it by the assessee after referring to an earlier judgment. It was directed that for the assessment years 1994-95 and 1996-97, the value of the house in question should be taken at Rs.54,00,000 and Rs.76,14,000 while for the year 1993-94 it was directed to be taken at Rs.54,00,000. In the assessment year 1995-96 the valuation of the house in question was determined at Rs.64,50,000 while in the year 1997-98 it was maintained on the statement of the assessee. However, the contention of the assessee against the imposition of the additional tax was rejected on the ground that its levy was mandatory and therefore, the Revising Authority had no discretion to delete the same
5. Before us, it is the case of the assessee that the Tribunal erred both on law as well as in fact in maintaining the imposition of additional tax. It is claimed that the Tribunal wrongly observed that imposition of additional tax under section 31-B was mandatory. It is submitted that a simple reading of the provision goes to state that the calculation of additional tax is based upon the failure of an assessee to pay tax with the return which falls short of 80% of the tax payable under section 16 of the Act. On the other hand, it is claimed that the petitioner had made no default while submitting the returns though subsequently she accepted that some of the valuations adopted in respect of the aforesaid house in question were less than the required assessment. Also it is claimed that there was no fault on the part of the assessee while putting in original returns inasmuch as these were accompanied with the lease agreements and therefore, nothing had been held back or concealed on the part of the petitioner. In support of the submissions reliance is placed upon 1995 PTD 345 Re: Malt-79 Manufacturers v. Collector and PLD 1978 SC 89 Re: Shamroz Khan and another v. Muhammad Amin and others
6. The learned counsel for the revenue, however, supports the order of the Tribunal maintaining the levy of additional tax.
7. The appellant has framed five questions of law for our consideration which are said to have arisen out of the order of the Tribunal. However, we are of the view that none of them except Question No. 1. arises out of the order. Questions Nos.2 to 5 were never raised before the Tribunal nor these were ruled upon in the impugned order. Therefore, we proceed to answer the Question No. 1 which is stated below:---
"Whether the Appellate Tribunal has misconstrued the provisions of section 31-B of the Wealth Tax Act, 1963 (hereinafter called the Act) in holding that the imposition of additional tax is mandatory provision?"
8. After hearing the parties we are persuaded to agree that in the given facts and circumstances neither there was any justification to levy additional tax nor in fact it was computed in a manner contemplated by law. The petitioner returned her net wealth without holding back any information with regard to the receipt of rent. Admittedly the returns were duly accompanied with the Tease agreements which were also considered by the Assessing Officer at the relevant time while accepting the disclosed value of the house in question. It will further be seen that on being confronted the assessee readily accepted that due to in advertence on the part of both the parties, the value of the house in question had been assessed at a low rate. Her claim of being one of the highest tax-payers and having never defaulted was brushed aside without a justifiable reason. In fact the above claims have not been seriously challenged even before us.
9. The learned counsel for the Revenue in terms of the judgment of the Tribunal claims that the use of word "shall" in section 31-B makes it obligatory on the part of the Assessing Officer to impose additional tax. However, the submissions so made are against the ratio settled by the Hon'ble Supreme Court of Pakistan .in Re: Shamroz Khan and another (supra). In that case, their Lordships while interpreting Order VIII, rules 11 and 12 wherein the expression "he shall be liable to have his defence, if any, struck out" concluded that it was not incumbent upon the Court to strike off the defence. Their Lordships elucidated the meanings of word "shall" as used in various statutes. In the other case relied upon in Re: Malt-79 Manufacturers (supra), this Court while interpreting the expression "shall be liable" as used in the parallel provision of section 30 of the Sales Tax Act, 1990 concluded that despite the use of the expression "shall" a discretion was vested in the adjudicating officer to levy or not to levy sales tax even in the event of failure of a person to pay the sales tax keeping in view the facts and circumstances of the case and reasons for non-payment.
10. The expression used in section 31-B is identical to the one as used in section 34 of the Sales Tax Act, 1990. The facts as earlier re-counted clearly show that the assessee had never been contumacious nor she has been guilty of actively concealing any fact from the Revenue. If there was a mistake in low declaration of the G.A.L.V. of the property in question then the Revenue Officer at the relevant time was a contributory inasmuch as he agreed with the basis on which the assessed had computed the valuation. After having been confronted she immediately agreed and offered to pay tax at the valuation which was close to the one as finally determined by the Tribunal. Additional tax or penalty should not be imposed only for the reason that it is legally permissible to do so. The opinion expressed by the Revising Authority and then the Tribunal that levy of additional tax in n mechanical manner, was to date back to the time of filing of returns is also not justified in the facts of the case as re-counted earlier.
11. Therefore, keeping in view the ratio settled in Re: Malt-79 Manufacturers (supra) we will return a negative answer to the aforesaid question of law. Resultantly the levy of additional tax shall stand cancelled.
C.M.A./M.A.K./-I-36/L Order accordingly.