W.T.A. No. 107/LB of 2001, decided on 11th April. 2002. VS W.T.A. No. 107/LB of 2001, decided on 11th April. 2002., 2002 PTD-INCOME-TAX-APPELLATE-TRIBUNAL-PAKISTAN 2413 (2002)

Wealth Tax Act (XV of 1963)‑‑‑‑

‑‑‑‑Second Sched. C1. (7)(i), Ss. 2(4)(24) & 3‑‑‑Exemption‑‑‑Foreign Remittances‑‑‑Creation of assets‑‑‑Expiry date of exemption was 31‑12‑1997‑‑‑Rejection of claim of exemption for the assessment year 1998‑99‑‑‑Validity‑‑‑Wealth Tax Act, 1963 creates the charge of wealth tax on the assets of an assessee on the basis of concept of valuation date and financial year‑‑‑Wealth Tax Act did not admit the concept of calendar year or the year comprising a period of 12 months from the date of receipt of remittances as done by the Assessing Officer‑‑‑Word used in cl. (7)(1) of the Second Sched. to the Wealth Tax Act, 1963 means, financial year or assessment year relevant to the corresponding valuation date ‑‑‑Assessee received foreign remittances on 29‑12‑1992 and the relevant valuation date for the assessment of his assets fell on 30‑6‑1993 ‑First year of exemption for his remittances under cl. (7)(i) of the Second Sched. of the Wealth Tax Act, 1963 would be assessment year 1993‑94‑ Remittances would be exempted from wealth tax for a period of following 5 years up to assessment year 1998‑99, the year which is under consideration‑‑‑Word "year" used in cl. (7)(i) of the Second Sched. to the Wealth Tax Act, 1963 means "assessment year" and the remittances received by the assessee were thus exempt from Wealth Tax Act, 1963.

(1997) 76 Tax I (Trib.) distinguished.

M.H. Qamar, I.T.P. for Appellant.

Ahmed Kamal, D.R. for Respondent.

Date of hearing: 26th March, 2002.

ORDER

MUHAMMAD SHARIF CHAUDHRY (ACCOUNTANT MEMBER).‑‑‑Appeal has been filed by a wealth tax payer to call in question appellate order, dated 3‑10‑2000 passed by Commissioner. Income‑tax/Wealth Tax Appeal Zone‑IV, Lahore under section 23 of the Wealth Tax Act. It has been contended in the grounds of appeal that the learned Commissioner has wrongly set aside the case on the issue of exemption of foreign remittances instead of giving relief to the assessee.

It has been further contended that the learned Commissioner has wrongly confirmed the order of the Wealth Tax Officer on the issue of concealment of cash amounting to Rs.8 lacs, which had been duly declared in the Wealth Tax Return.

2. Appellant's A.R. and respondent's D.R. have been heard and available records have been perused. Appeal is decided on both the issues raised in the grounds of appeal in the light of the facts available on record and in the light of the pleadings made at the bar by the authorized representatives of the contending parties as under:‑‑

Issue of Foreign remittances:

3. As per facts available on record, assessee claimed exemption of assets ,and cash created out of foreign; remittances amounting to Rs.10,76,000 from wealth tax under clause (7)(i) read with (7)(ii) of the Second Schedule of the Wealth Tax Act of 1963. the ITO rejected the claim for the year under consideration on the plea that the assets had been received on remittances on 29‑12‑1992 and the period of five years for which the assets are exempt from wealth tax under the said clause; expired on 31‑12‑1997. Hence on the valuation date relevant to assessment year 1998‑99 i.e. 30‑6‑1998 the exemption under clause 7(ii) was not available to the assessee. In appeal filed against this treatment, the learned Commissioner has set aside the order and remanded the case for de novo action to the Assessing Officer.

4. It has been contended by the A.R. of the assessee that the `year' referred to in clause (7)(i) of the Second Schedule to the Wealth Tax Act of 1963 is assessment year and no other year and therefore, exemption is available to the assessee for the assessment year 1998‑99. It has been stated by the A.R. that in‑ support of this contention he produced a judgment of the ITAT cited as (1997) 76 Tax 1 (Trib.) before the Wealth Tax Officer who has misused this judgment instead of accepting the contention of the assessee. In the judgment the ITAT held that the word year used in clause (c) of section 25 of the Income Tax Ordinance, 1979, refers to assessment year, but the Wealth Tax Officer instead of following this judgment misused the following observations made by the learned ITAT in the said judgment:

"the Legislature itself has left it to the judicious exercise of the discretion by the DCIT, to deem the liability found unpaid within 3 years of the expiry of the income year in which it was first allowed, to be income from business or profession in the year in which such findings are made or any other year as the Deputy Commissioner may think fit. However, the discretion to postpone invoking the deeming provision is restricted to 5 assessment years beginning from first assessment year in which it could be invoked."

The A.R. has referred to the assessment order of the Wealth Tax Officer and has read out the following extract of the order to show how the abovementioned observations of the ITAT have been misused by the Wealth Tax Officer against the assessee.

"It becomes clear from the above that the very act of the Legislature by not affixing any adjective such as assessment year or financial year before the word year speaks volumes about the intention of the Legislature. The same has been duly taken notice of by the Worthy ITAT in their remarks that is has been left to the judicious exercise of the discretion by the DCIT. In the instant case, the assessee brought Gold in the year 1992. He continued enjoying exemption till assessment year 1997‑98. No interference was made in the relief provided by the Legislature. However, on 30‑6‑1998, the exemption is no longer available as the exemption period expired on 31‑12‑1997. Therefore, judiciously exercising my discretion, as dilated upon the Worthy ITAT, I add the abovementioned assets in the net wealth of the assessee as exemption period for the same has already expired."

5. The learned D.R. has strongly opposed the contention of the assessee and the arguments of his A.R. He has supported the case of the Assessing Officer and has submitted that the words used in clause 7(i) of the Second Schedule of the Wealth Tax Act, has rightly been taken by the Assessing Officer as calendar year.

6. We have gone through the assessment order the Wealth Tax Officer and the impugned appellate order of the learned Commissioner and have appreciated the arguments of the authorized representatives of both the parties. We feel no hesitation in agreeing with the A.R. of the assessee that the Wealth Tax Officer has misused reported judgment of the ITAT cited is (1997) 76 Tax 1 (Trib.). This judgment of the ITAT relates to interpretation of concept of 'year' used in clause (c) of section 25 of the Income Tax Ordinance, 1979. Clause (c) of section 25 authorizes a DCIT to deem a trading liability which is found not to have been paid within three years of the expiration of the income year in which it was allowed to be income of business or profession of the year in which such finding is made or any other year (not being a year commencing after the expiration of five years from the ends of the said three years) as the DCIT may think .fit. So, this clause gives discretion to the DCIT to treat an unpaid trading liability as income of the assessee of the year in which he makes finding' about its non‑payment or any other year. The learned ITAT has interpreted the words year which has been used in this clause as assessment year. The discretion to assess an unpaid trading liability in the year of finding or in any other year has been given to DCIT by the Legislature in this clause and not by the ITAT. Moreover, discretion given to the DCIT is specific to this clause and the discretion is confined to choosing of the year among the assessment years. How this judgment of the ITAT empowers a Wealth Tax Officer to interpret the words year used in clause 7(i) of the Second Schedule to the Wealth Tax Act as calendar year by exercising his so- called judicial discretion is not understandable? The action of the Wealth Tax Officer. in our opinion, is not only a gross misuse of powers vested in him by the taxing statutes but it is also a perverse use of faculty of judgment.

7. In our opinion, neither the abovementioned judgment of the ITAT nor the word year used in clause (c) of section 25 of the Income Tax Ordinance, 1979 is applicable to the issue before us. We are confronted with an issue of exemption of foreign remittances under clauses (7)(i) & (7)(ii) of the Second Schedule to Wealth Tax Act, of 1963. According to sub‑clause (i) of clause (7), assets brought or remitted by an assessee into Pakistan or received by an assessee from out side Pakistan, would be exempt from wealth tax in the year in which they are brought, remitted or received and the following five years. The word year has not been defined by this clause nor by any other section or clause of Wealth Tax Act, 1963.

However, in its overall scheme of charging of wealth tax on the assets and properties of an assessee, the Wealth Tax Act, 1963 talks of assessment year, financial year and valuation date. Section 2(4) of this Act defines assessment year as the year for which tax is chargeable under section 3. Section 3 deals with charge of wealth tax and it reads as follows:‑-

"Charge of wealth tax.‑‑‑Subject to the other provisions contained in this Act, there shall be charged for every financial year commencing on and from the first day of July, 1963, a tax (hereinafter referred to as wealth tax) in respect of the net wealth (or assets) on the corresponding valuation date of very (individual, Hindus undivided family, firm (association of persons or body of individuals, whether incorporated or not,) and company) at the rate or rates specified in the Schedule [:]"

If we read section 2(4) which defines assessment year and section 3 which creates charge of wealth tax for every financial year the things become clear. In fact assessment year and the financial year are the same for which wealth tax is to be charged. Valuation date as defined by section 2(24), in relation to any year for which an assessment is to be made under Wealth Tax Act, means the last day of the year previous to the year for which the tax is chargeable under this Act.

In the nutshell, the Wealth Tax Act creates the charge of wealth tax on the assets of an assessee on the basis of concept of valuation date and financial year. It does not admit the concept of calendar year or the, year comprising a period of 12 months from the date of receipt of: remittances as done by the learned Wealth Tax Officer in the case before: us. According to our view, the word used in clause (7)(i) of the Second' Schedule to the said Act means financial year or assessment year relevant to the corresponding valuation date. In the instant case the assessee received foreign remittances on 29‑12‑1992 and the relevant valuation date for the assessment of his assets fall on 30‑6‑1993. So the first year of exemption for his remittance under clause (7)(i) would be assessment year 1993‑94. In this way his remittance would be exempted from wealth tax for period of following 5 years upto assessment year 1998‑99, the year which is under consideration.

8. In view of the foregoing discussion it is held that the word year used in clause (7)(i) of the Second Schedule to the Wealth Tax Act of 1963 means assessment year and, therefore, the remittances received by the assessee, which are under discussion, are exempt from wealth tax under this clause for the year under appeal. Hence assessee's appeal‑ is allowed. Order accordingly.

Issue of concealment of cash;

9. It has been contended in the grounds of appeal that the reconciliation of wealth and facts available on record were enough to establish that gain amount of Rs.8 lacs was part of the cash which was duly declared in proper column but the Wealth Tax Officer has wrongly added this amount and the learned Commissioner has wrongly confirmed his action. According to the assessee, the true and correct, details of assets were shown and no fact was concealed, therefore, the Wealth Tax Officer was not justified to add the amount and initiate the action under section 18 of the Wealth Tax Act.

10. From the assessment order of the Wealth Tax Officer it transpires that the assessee sold his house for a consideration of Rs.35 lacs and purchased another house for Rs.25 lacs. He thus earned a gain of Rs.10 lacs out of which an amount of Rs.2 lacs had been gifted to his son. Thus he was left with an amount of Rs.8 lacs which according to the Wealth Tax Officer, he did not declare in his wealth for the purpose of tax. Therefore, the Assessing Officer added the amount in question to assessee's wealth and booked the assessee for the offence of concealment. This treatment of the Assessing Officer has been upheld by the First Appellate Authority.

11. The A.R. of the assessee has submitted that the amount of Rs.8 lacs which is under consideration was duly declared in the relevant column of the wealth tax return and nothing was concealed. Unfortunately wealth tax assessment record has not been produced before us nor the A.R. has produced a copy of the wealth tax return filed by the assessee for the year under consideration. In view of his situation it would meet the ends of justice if the assessment is set aside on this issue for de novo action by the Assessing Officer. The Assessing Officer is directed to provide reasonable opportunity of being heard to the assessee. If the assessee proves that the amount in question has been duly offered for wealth tax then the Assessing Officer should accept his contention. In case of failure of the assessee the Wealth Tax Officer would he justified to add the amount to assessee's wealth and book him for concealment.

C.M.A./M.A.K./364/Tax(Trib).

Order accordingly.