BEFORE KHALID WAHEED AHMED, JUDICIAL MEMBER AND MRS. SAFIA CHAUDHRY, ACCOUNTANT MEMBER VS BEFORE KHALID WAHEED AHMED, JUDICIAL MEMBER AND MRS. SAFIA CHAUDHRY, ACCOUNTANT MEMBER
2002 P T D (Trib.) 221
[Income-tax Appellate Tribunal Pakistan]
Before Khalid Waheed Ahmed, Judicial Member and Mrs. Safia Chaudhry, Accountant Member
M.As. (Stay) Nos. 483/LB to 487/LB and W.T.As. Nos. 1253/LB to 1257/LB of 2001, decided on 28/07/2001.
(a) Wealth Tax Act (XV of 1963)---
----Ss. 31-B, 35, 16 & 2(21)---Additional tax ---Assessment-- Rectification---Assessment was rectified under S.35 of the Wealth Tax Act, 1963 enhancing the liability of tax and charging---Additional tax- Assessee contended that additional tax under S.31B 1)(b) of the Wealth Tax Act, 1963 could only be charged through an order passed under S.16 of the Wealth Tax Act, 1963 and not through the order passed under S.35 of the Wealth Tax Act, 1963---Validity---Assessment framed under S.16(3) of the Wealth Tax Act, 1963 was rectified under S.35 of the Wealth Tax Act, 1963---Liability of tax was also to be re-determined as consequence of change made in the assessment through order of rectification---Assessee was liable to pay additional tax under S.31B alongwith the demand of wealth tax determined on the basis of amended assessment of wealth tax.
(b) Wealth Tax Act (XV of 1963)---
----S. 31-B, proviso---Proviso, added to S.31-B, Wealth Tax Act, 1963, by Finance Act, 1998---Retrospective effect---Amendment brought through the insertion of the proviso to S.31-B(1)(b) of the Wealth Tax Act, 1963, though being a part of substantial law yet was effective retrospectively in the case of pending assessment being remedial in nature.
CIT v. Shahnawaz Limited and others 1993 SCMR 73 rel.
(c) Wealth Tax Act (XV of 1963)----
----S. 31-B, proviso---Additional tax---Calculation---Additional tax should not be charged for a period more than the period mentioned in the proviso added to S.31-B(1)(b) of the Wealth Tax Act, 1963 through Finance Act, 1998.
CIT v. Shahnawaz Limited and others 1993 SCMR 73 rel.
Tanveer Aslam, I.T.P./A.R. for Applicant.
Muhammad Asif, D.R. for Respondent.
Date of hearing: 24th July, 2001.
ORDER
KHALID WAHEED AHMED (JUDICIAL MEMBER).---This consolidated order will dispose of all the above titled Stay Petitions as well as the wealth tax appeals.
2. W.T.As. Nos. 1253 to 1257/LB of 2001 pertaining to the assess ment years 1990-91 to 1994-95 impugn the combined Order Nos. 5229 to 5233, dated 31-3-2001 on the common grounds for all the years under appeal that the additional tax charged is illegal, harsh and excessive.
3. Relevant facts of the case under consideration are that the assessee declared his 1/8th share in the Property No. 93-Ferozepur Road, Lahore in the Returns of Wealth Tax filed for the assessment years 1990-91 to 1994-95. However, the value of the assessee's share in the above mentioned property was not included in the wealth of the assessee in the assessment of wealth tax framed on 26-6-1995 and 12-6-1996 for the assessment years 1990-91 and 1991-92 to 1994-95 respectively by the Assessing Officer on the pretext that the assessment of the same may be made in the hands of A.O.P. at G.I.R. No. 63/06 of the same Circle. However, as a result of CIT(A) Zone-III, Lahore's Order passed in the case of said A.O.P., the status of A.O.P. was abandoned implying thereby that the respective shares in defunct A.O.P., were liable to be assessed in the individual hands. Accordingly, the orders passed under section 16(3) for all the years were rectified under section 35 of the Wealth Tax Act, 1963 wherein the share in the A.O.P. was taxed in the individual hand i.e., appellant's hand. Appellant's share in the estimated value of property was determined at Rs. 13,78,836, Rs. 13,78,836, Rs. 13,78,836, Rs. 19,69,766 and Rs. 19,69,766 for the assessment years 1990-91,1991-92, 1992-93,1993-94 and 1994-95 respectively and added to the wealth of the appellant and wealth tax was levied accordingly. Additional Tax was also charged at Rs. 25,624, Rs. 19,003, Rs. 15,934, Rs. 21,433 and Rs. 15,005 for the assessment years 1990-91, 1991-92, 1992-93, 1993-94 and 1994-95 respectively. The rectification application filed by the assessee under section 35 of the Act for deletion of additional tax charged for the assessment years 1990-91 to 1994-95 was also rejected by the Assessing Officer.
4. At first appellate stage, the appellant's A.R. argued that after additional tax was levied at the time of framing original assessment under section 16(3), the additional tax is not leviable at the time of rectification under section 35. Learned CIT(A), however, rejected all the first appeals with the observations that the appellant's contention in this regard is not valid as the additional tax under section 31B was charged on the admitted tax liability. It was further observed in the impugned order of the learned CIT(A) that the appellant's application for rectification, dated 6-1-1999 was duly considered by the Assessing Officer and the same was rightly rejected.
5. Learned A.R. for the appellant has contended before this Appellate Bench that the additional tax charged is not maintainable because the Assessing Officer has not mentioned the provisions of law under which the additional tax was charged. Learned A.R. further contended that the additional tax could not be charged by an order of rectification through which the view point of the assessee has been accepted and, the value of his share in the property situated at 93-Ferozepur Road, Lahore has been included in his individual's net wealth. It is also the contention of the learned A.R. that no additional tax could be charged through a rectification order passed under section 35 of the Act because according to him additional tax could only be charged through an Order passed under section 16 of the Act. It has further been submitted by learned A.R. -that the original orders for the assessment years 1990-91 and 1991-92 to 1994-95 were passed on 26-6-1995 and 12-6-1996 respectively whereas the rectification for all the years under appeal has been made through order under section 35 passed after 3-1/2 and 2-1/2 years in December, 1998. Another contention of the learned A.R. is that the assessee could not be penalized by enhancement in liability made through charge of additional tax for the period of delay in determining the final wealth tax liability which was caused due to fault of the Department in not accepting the assessee's contention at the time of framing of original assessment, which has been accepted subsequently. It is also the contention of the learned A.R. that the additional tax under section 31B(1)(b) could not be charged for the period after the end of the assessment year next following the year in which the Return was filed because according to learned A.R. the amendment made through the addition of proviso in section 31-B of the Act through Finance Act, 1998 was retrospectively effective. It is the contention of the learned A.R. that the rectification order has been passed in December, 1998, the additional tax if at all to be charged should have been charged according to the amended provisions of section 31-B as amended by the Finance Act, 1998.
6. Learned D.R. in his arguments, defended the impugned first appellate as well as assessment orders. It is the contention of the learned D.R. that the CIT(A) confirmed the additional tax charged under section 31-B for non-payment of the admitted liability of tax. However, learned A.R. for the appellant rebutted this stand of the learned D.R. for the Revenue and submitted that the admitted tax liability on the basis of the Return was paid by the assessee wherever it was payable. Learned A.R. has also produced copies of the Return filed and the original assessment orders passed under section 16(3) of the Wealth Tax Act, 1963 for all the years under appeal in support of his above contention. Learned D.R. on behalf of the Revenue further argued that under the provisions of section 31-B(l)(b) of the Act ,the assessee was liable to pay additional tax if the tax paid under section 14-A was less than 80% of the tax payable as a result of the completion of relevant assessment. It is the contention of the Learned D.R. that the amendment brought in the section 31-B by insertion of the "proviso" through the Finance Act, 1998 was a substantial amendment made in law and was thus not retrospectively effective.
7. Arguments of learned representatives of both the contesting parties have been heard and the relevant orders as well as the relevant provisions of law have also been perused. An assessee is liable to pay additional tax under the provisions of section 31-B if he fails to pay tax due on the basis of the Return or the tax so paid is less than 80% of the tax payable as a result of completion of the relevant assessment under section 16 of the Act. The relevant provisions are being reproduced below:--
(31B) Additional Wealth-tax.---(1) Where an assessee--
(a) fails to pay the tax due from him on the basis of return or has paid an amount less than the amount so payable; or
(b) (has either failed to pay any tax under section 14-A of the tax paid under the said section) is less than 80 per cent of the tax payable as a result of completion of the relevant assessment under
(c) he shall, without prejudice to his liability under any other provisions of law, be liable to pay an additional amount of tax equal to fifteen per cent per annum."
8. The contention of the learned A.R., that the order has been passed under section 35 and not under section 16, he is not liable to pay additional tax is devoid of any merit. Under the above provisions of section 31B(1)(b) the Additional Tax could only be charged through an order passed under section 16 and not through the order passed under section 35 of the Act is devoid of any merit. Through the order passed under section 35 of the Act, the assessments already framed under section 16(3) were rectified. As a consequence of change made in the assessment through order of rectification the liability of tax, the definition of which as per section 2(21) of the Act also included additional tax, is also to be re-determined. It is pointed out here that the amendment made in the assessment of wealth tax purposes has not been contested by the assessee and only the charge of additional tax has been contested by him in the appeals. In our opinion, the assessee is liable to pay additional tax under section 31-B alongwith the demand of wealth' tax determined on the basis of amended assessment of wealth tax for the years under consideration. However, the contention of the learned A.R., that the provisions of the proviso inserted in section 31-B through Finance Act, 1998 were applicable retrospectively on the pending assessments carries force. In our opinion, the amendment brought through the insertion of the proviso after section 31-B(1)(b) though being B a part of substantial law yet was effective retrospectively in the case of pending assessments being remedial in nature. This view point finds support from the Judgment of the Supreme Court of Pakistan in the case titled "CIT v. Shahnawaz Limited and others" reported as 1993 SCMR 73. The issue in the reported judgment was that whether the amendment made in subsection (6) of section 18-A of the (Repealed) Income-tax Act, 1922 by the Finance Act of 1973 whereby the Additional amount of tax under subsection (6) of section 18-A could not be charged for a period not exceeding 15 months, extended also to the cases of the assesses who have submitted their Returns before coming into force of the said amendment but their cases of regular assessments had not been finalized and were still pending. The above issue was decided by the Sindh High, Court in the following manner:--
"In our view, as the amending provision under consideration had been inserted in subsection (6) of section 18-A, to remedy a wrong that was being done to the assessee, and the amending provision does not affect any vested right or create any new obligations, the amending provision is to be given retrospective operation for extending benefit to the affected parties in pending cases, to give effect to the intent of the. legislature. As observed earlier, a wrong was being done to the assessees by providing for an indefinite period during which they were made liable for payment of additional tax at the rate of 2% per mensem and this wrong was sought to be remedied by the remedial and curative amendment brought about by the Finance Act, 1973. If the intention of the Legislature had been that this remedy should be available only in respect of assessment for the year 1973-74 and subsequent years, the legislature would have used appropriate words to express such intention. No such appropriate words are mentioned in the amending provision. There is no reason why the remedial provision of the amending law should not be applied to pending proceedings. In fact, this appears to be the intent of Legislature."
The above findings of the Hon'ble Sindh High Court were affirmed by the august Supreme Court of Pakistan with the following observations:--
"However, nothing has been adduced before us in support of the last-mentioned submission. As explained in Crawford's `Statutory Construction' a statute relating to remedial law may properly, in several instances, be given retrospective operation and we are of the opinion that as the amendment in the instant case was introduced to redress an injury which in the words of Circular No. 6 of 1973 (Income Tax) issued on 7th July, 1973 by the Central Board of Revenue itself was 'designed to soften the law in favour of tax-payers who could previously be charged to additional tax up to the date of assessment even though the finalization of assessment was delayed due to no fault of theirs'. This was a proper case in which retrospective operation, to the extent the High Court gave to it, could be given to the amending law."
9. Similar issue is involved in the instant case where the above mentioned proviso inserted in section 31-B lays down that no additional tax under section 31-B(1)(b) can be charged for the period after the end of the assessment year next following the year in which the Return was filed. Following the principle laid down by the august Supreme Court of Pakistan, the wealth tax appeals of the assessee are accepted to the extent with the directions that the . additional tax for all the years under consideration should not be charged for a period more than the same mentioned in the proviso added after section 31-B(1)(b) through Finance Act, 1998. As a result, the appeals of the assessee bearing W.T.A. No.1253 to 1257/LB of 2001 succeed in the manner and to the extent mentioned above. We do not feel any need to decide the issue raised by the learned A.R., of the assessee that the additional tax should have been charged till the date of original assessment because it will be of no consequential effect 'for either of the parties in the presence of our findings on the issues already decided,
10. Since the main appeals of the assessee have been disposed of through this consolidated order, the Stay Petitions bearing M.As. (Stay) Nos.483 to 487/LB of 2001 seeking stay of tax demand till the disposal of the main appeals have become infructuous and are, therefore, dismissed accordingly.
C.M.A./M.A:K./154/Tax (Trib.) Appeals dismissed.