BEFORE MUHAMMAD MUNIR QURESHI, ACCOUNTANT MEMBER AND SYED NADOEM SAQLAIN, JUDICIAL VS BEFORE MUHAMMAD MUNIR QURESHI, ACCOUNTANT MEMBER AND SYED NADOEM SAQLAIN, JUDICIAL
2002 P T D (Trib.) 231
[Income-tax Appellate Tribunal Pakistan]
Before Muhammad Munir Qureshi, Accountant Member and Syed Nadoem Saqlain, Judicial
Member 1. T. A. No.4279/LB of 2000, decided on 24/01/2001.
(a) Income Tax Ordinance (XXXI of 1979)---
----Ss. 65 & 61---Additional assessment---Revised returns---Notice under S.61 of the Income Tax Ordinance, 1979---Contention was that assumption of jurisdiction by issuing notice under S.61 of the Income Tax Ordinance, 1979 without first invoking the provisions of S.65 of the Income Tax Ordinance, was illegal---Validity-Revised returns of income were filed suo motu and thus there was no cause to issue notice under S.65 of the' Income Tax Ordinance, 1979---Revised returns indicated that original returns too must have been filed earlier---When such returns were available with the Assessing Officer there was no point in invoking the provisions of S.65 of the Income Tax Ordinance, 1979 Assumption of jurisdiction was declared in order by the Tribunal.
(b) Income Tax Ordinance (XXI of 1979)----
----S 13(1)(aa)-Deemed income---Gold brought into Pakistan-- Personal effects---Nothing was brought on record to establish that gold brought into Pakistan was ever cited as "personal effects" under Personal baggage Rules---Gold bullion brought into Pakistan could not qualify as "personal effect" or "household item".
(c) Income Tax Ordinance (XXXI of 1979)---
----Sched. 11, Cl. (130A)---Exemption---Assessment year 1995-96-- Clause (130A) of the Second Sched. of the Income Tax Ordinance, 1979 could only be relevant to assessment years 1991-92 and 1992-93 and not to assessment year 1995-96.
(d) Income Tax Ordinance (XXXI of 1979)---
----S. 13(1.)(aa)---Deemed income---Purchases outside Pakistan---Source of investment---Explanation of---Contention that provisions of Income Tax Ordinance, 1979 were not applicable to the purchase of gold outside Pakistan---Validity---Purchase made outside Pakistan conferred no special privilege with regard to applicability of the provisions of the Income Tax Ordinance, 1979 at the time of assessment of assessee's total income in Pakistan.
(e) Income Tax Ordinance (XXXI of 1979)----
----S. 13(1)(aa)---Protection of Economic Reforms Act (XII of 1992)-- Deemed income---Gold---"Import of gold" or "brought into Pakistan"-- Difference in the two expressions not material---Source of investment-- Explanation of---Not material whether gold was seen as having been "imported" into Pakistan or simply "brought into Pakistan" ---Material fact was that in the context of assessment of assessee's total income, the acquisition of gold by the assessee was indeed relevant and unless the assessee was able to offer a satisfactory explanation with regard to source of investment, the provisions of S.13 of the Income Tax Ordinance, 1979 were liable to be invoked---Term "import" need not be interpreted narrowly and in its broader sense, the act of bringing the gold into Pakistan did seem to constitute "import" ---Protection of Economic Reforms Act, 1992 also offers no protection to assessee in the context of levy of income-tax on assessee's income from undisclosed sources.
(f) Income-tax---
----"World income"---Exemption---Tax payer is required to declare total world income and in case income-tax had been paid abroad, credit for the same is available in terms of avoidance of double taxation.
Mian Ashiq Hussain for Appellant. Shoukat Ali Sh., D.R. for Respondent.
Date of hearing: 19th January, 2001.
ORDER
MUHAMMAD MUNIR QURESHI (ACCOUNTANT MEMBER).---This appeal by an individual member of an A.O.P. is directed against order of the A.A.C., Lahore, dated 30-9-2000.
2. The facts in this case are that the appellant filed Returns (marked "revised") of Income for the assessment years 1991-92 to 1998 99 on 1-5-1999 declaring 50% share income from AOP Messrs Zohaib Jewellers, Moon Market, Allama lqbal Town, Lahore, detailed as
under:---
Date of filing of
Asstt. YearDeclared IncomeRevised Return
1991-92 to
1994-95Nil1-5-1999
1995-96Rs.15,0001-5-1999
1996-97Rs.16,0001-5-1999
1997-98 ,Rs.16,0001-5-1999
1998-99(Loss Rs.15,32,000)1-5-1999
3. Residential Status was cited by the appellant in all the Returns of Income as that of "Resident". When the Returns of the AOP (in which the appellant was member) and that filed by appellant in his individual capacity were put to scrutiny; the Assessing- Officer found that on 23-3-1995 (i.e. in the period relevant to assessment year 1995-96) the appellant had brought into Pakistan 3000 tolas gold bars from the UAE valuing Rs.132.66.600 on which he paid Rs.265,322 as duty to the Customs Authorities at airport. ACIT's examination of appellant's income tax Return for 1995-96 indicated that the appellant's declared resources were not sufficient to finance purchase of 3000 Tolas of Gold. The A.C.I.T. then issued notice under section 13 of the Ordinance intimating to appellant his intention to invoke the provisions of 13(1)(aa) of the Ordinance and include sum of Rs.1,32,66,600 in the computation of appellant's Total Income for 1995-96 as the appellant had failed to identify the sources of investment relevant to the import of 3000 Tolas of gold by him into Pakistan on 23-2-1995~(assessment year 1995-96).
4. Appellant responded to the A.C.I.T's. show-cause notice and
advised that the said notice appeared to have been issued due to some misunderstanding as the gold had not been "imported" by the appellant but had rather been brought into Pakistan as "personal baggage". The appellant further advised A.C.I.T. that he had been working in the UAE (Charjah) since 1960 and had adequate resources to finance purchase of 3000 Tolas Gold. The appellant .also argued that as the gold in question had been purchased outside Pakistan, the provisions of section 13 of the income Tax Ordinance, 1979 were not applicable and could not be brought into play to tax the investment made by appellant towards acquisition of the asset i.e. gold. The Protection of Economic Reforms Act, 1992 was also apparently referred to by appellant to substantiate his contention that the 3000 Tolas Gold brought by him into Pakistan in 1995 enjoyed immunity from interrogation as to sources of investment involved to finance the acquisition.
5.Appellant's reply did not find favour with the A.C.I.T. and he determined appellant's total Income for 1995-96 at Rs.1,32,81,600 including addition under section 13(1)(aa) read with section 30 of the Ordinance, amounting to Rs.1,32,66,600.
6Before the first appellate authority, the appellant contested the assessment made as illegal `reiterating arguments made before the A.C.I.T. at assessment stage. The appellant further explained that Clause 130A of the Second Schedule to the Income Tax Ordinance, 1979 specifically exempted income of returning expatriate Pakistanis from levy of tax under the Income Tax Ordinance, 1979.
7. The AAC examined appellant's various explanations and rejected them all as misconceived in law and otherwise without any merit with regard to exemption claimed by appellant vide clause 130A of the Second Schedule, the AAC found that the said provisions provided no protection to appellant. The AAC noted that the appellant had cited his resident status in the Returns of Income filed by him for the assessment years 1991-92 to 1998-99 as that of "Resident". Further, the AAC observed that even if clause 130A was applicable to appellant's situation, the exemption available to appellant (as returning expatriate) was for 1991-92 and 1992-93 only (1st year of residence in Pakistan and the year next following) and no exemption was available for 1995-96 the assessment year in which the assessee brought 3000 Tolas of gold into Pakistan. Resultantly, the A.A.C. maintained the assessment of the A. C. I. T.
8. Before the I.T.A.T., the appellant has emphasized the alleged illegal assumption of jurisdiction by the A:C.I.T. by statedly issuing notice under section 61 of the Ordinance straightaway without first invoking the provisions of section 65 of the Ordinance. Further, the appellant contends that the A.C.I.T. failed to appreciate the fact that the 3000 Tolas Gold had been brought by appellant into Pakistan as "personal baggage" at the time of transfer of residence and no interrogation as to sources of investment was permissible in law with regard to personal baggage items. The appellant again emphasized that the had not been "imported" into Pakistan which wasstatedly evident from the fact that no letter of credit had been opened and no tax paid under section 50(5) at the time of its alleged import.
9The D.R. has been heard
10. We have given the explanations offered by appellant our earnest consideration and our findings on the matter are recorded as under:---
(a)It is the appellant's contention that the assumption of jurisdiction over appellant's case by the A.C.I.T. is illegal as notice under section 61 was statedly issued without first issuing notice under section 65. The record available to us shows that the appellant filed Revised Returns of Income on 1-5-1999 for the assessment years 1991-92 to 1998-99 as "individual" member of AOP with 50% share and with residential status cited as that of "Resident" in all the years. Out of these revised returns filed by appellant, the A.C.I.T. picked up the return for 1995-96 for scrutiny as it was in the period relevant to assessment year 1995-96 that the appellant had brought 3000 Tolas Gold into Pakistan and for which he did not appear to have any (bona fide) sources of investment. As the Revised returns of income were filed suo motu there was clearly no cause to issue notice under section 65. Also, the filing of Revised returns indicated that Original returns too must have been filed earlier. Thus, when these returns were available to the Assessing Officer there was clearly no point in invoking the provisions of section 65 of the Ordinance A.C.I.T's. assumption of jurisdiction is thus found to be in order.
(b)It is the appellant's contention that the gold in question was brought into Pakistan by appellant as "personal baggage" at the time of "transfer of residence" and no questions could, therefore, be raised as to sources of investment involved.
We have looked into appellant's contention and we reject the same for the reason that "personal effects" brought into Pakistan by returning expatriates are required to be declared formally as "personal baggage" as per personal baggage rules and the appellant has brought nothing on record to establish the 3000 r, Tolas Gold brought by him into Pakistan in 1995-96 were ever cited by him as "personal effect" under personal baggage rules. Infect gold bullion brought into Pakistan cannot qualify as "personal effect" or "house hold item". Appellant's contention is thus rejected.
It is the appellant's contention that as per clause 130A of the Second Schedule to the Ordinance, the income accruing or arising to appellant outside Pakistan (and which income was statedly usedto finance purchase of 3000 Tolas gold brought into Pakistan in 1995-96) was exempt from levy of income tax in Pakistan and section 13(1)(aa) could not, therefore, be invoked in appellant's 3se.
We have looked into the matter and we find that firstly the appellant having declared residential status as that of "Resident" in returns of income filed for 1991-92 to 1998-99, it is not at all clear that appellant can legitimately be treated as a returning expatriate in assessment year 1995-96. Even if it be accepted C that in 1991-92 the appellant was indeed a returning expatriate, even then clause 130A can only be relevant to 1991-92 and 1992-93 and not to 1995-96. The express statutory stipulation makes this abundantly clear and there is no ambiguity at all. Appellant's contention is thus rejected.
(d)It is the appellant's contention that the 3000 Tolas gold having been purchased by appellant outside Pakistan, the provisions of the Income Tax Ordinance, were not applicable to the same.
It is our considered view that as the appellant is member of an AOP in Pakistan in the assessment year 1995-96 in which year the gold has been brought into Pakistan and as the gold was apparently brought into Pakistan in the context of jewellery business transacted by the AOP, appellant is required to identify the sources of investment involved and the fact that the gold was purchased outside Pakistan confers no special privileges with regard to applicability of, the provisions of the Income Tax I Ordinance, 1979 at the time of assessment of appellant's Total Income in Pakistan.
(e)It is really not material whether the 3000 Tolas gold is seen as having been "imported" into Pakistan or simply brought into Pakistan by appellant. What is material is that in the context of assessment of appellant's Total Income, the acquisition of gold by appellant is indeed relevant and unless the appellant is able to offer a satisfactory explanation with regard to sources of 1 investment, the provisions of section 13 are liable to be invoked. In any case the word "import" need not be interpreted narrowly as rightly observed by the AAC in her order of adjudication and in its'broader sense, the act of bringing the gold into Pakistan does seem to constitute "import".
(f)Although appellant claims that he earned income abroad, we note that details of such foreign income have not been disclosed in any of the returns filed by him. Under the law a taxpayer is required to declare total world income and in case income tax has been paid abroad, credit for tire same is available in terms of lF avoidance of double taxation.
(g)We agree with the A.A.C. and the A.C.I.T. that the Protection of Economic Reforms Act, 1992 offers no protection to G appellant in, the context of levy of income tax on appellant's income from undisclosed sources in 1995-96.
11. For the reasons cited above, we reject the appeal filed by appellant against order of the AAC.
12.Resultantly, appeal fails.
C.MA./M.A.K./157/Tax(Trib.) Appeal dismissed.