W.T.As. Nos.286/KB to 288/KB of 2000-2001, decided on 4th February, 2002. VS W.T.As. Nos.286/KB to 288/KB of 2000-2001, decided on 4th February, 2002.
2002 P T D (Trib.) 2512
[Income Tax Appellate Tribunal Pakistan]
Before Javed Iqbal, Judicial Member and Muhammad Akhtar Nazar Mian, Accountant Member
W.T.As. Nos.286/KB to 288/KB of 2000‑2001, decided on /01/.
th
February, 2002. (a) Wealth Tax Act (XV of 1963)‑‑‑‑
‑‑‑‑Ss.14(2) & 3‑‑‑Income Tax Ordinance (XXXI of 1979), S.56‑‑ Provisions of S.14(4) of Wealth Tax Act, 1963 and provisions of S.56 of the Income Tax Ordinance, 1979‑‑‑No similarity‑‑‑‑From the plain language of the two sections, it was clear that S.56 of the Income Tax Ordinance, 1979 prescribed that notice could be given at any time for any income year whereas the notice under S.14(2) of the Wealth Tax Act, 1963 was served when an assessee liable to submit the return under S.14(l) did not file the return‑‑‑Subsection (1) of S.14 of the Ordinance relates to the suo motu filing of return by the assessee within the time prescribed under subsection (1‑A) of S.14 of the Wealth Tax. Act, 1963‑ ‑Provisions of S.14(1‑A) prescribe, dates for each financial year for which assessment was required to be made as provided in S.3 of the Wealth Tax Act, 1963‑‑‑‑Notice under S.14(2) of the Wealth Tax Act, 1963 could be issued during the financial year for which the Wealth Tax is required to be charged under S.3 of the Wealth Tax Act, 1963‑‑ Provisions of S.14(2) of the Wealth Tax Act, 1963 were materially different from the provisions of S.56 of the Income Tax Ordinance. 1979.
(b) Wealth Tax Act (XV of 1963)‑‑‑‑
‑‑‑‑Ss. 14(2) & 17‑‑‑Assumption of jurisdiction simultaneously. under Ss. 14(2) & 17 of the Wealth Tax Act, 1963‑‑‑Validity‑‑‑Assumptions of jurisdiction in different periods of times was subject‑matter of two different provisions of law‑‑‑During the financial year, proceedings for procuring the return were to be taken under S.14(2) of the Wealth Tax Act. 1963 and after end of the assessment year the jurisdiction could be assumed only under S.17 of the Wealth Tax Act. 1963‑‑‑There was no concept in law of having concurrent/simultaneous jurisdiction under both the provisions of law viz. Ss. 14(2) & 17 of the Wealth Tax Act, 1963 exit.
(c) Wealth Tax Act (XV of 1963)‑‑‑‑
‑‑‑‑S. 14(2)‑‑‑Income Tax Act (XI of 1922), S.22(2)‑‑‑Return of wealth‑ Initiation of proceedings by issuing notice under S.14(2) of the Wealth Tax Act, 1963 beyond the relevant assessment year ‑‑‑Validity‑‑ Assessment proceedings could not be initiated beyond the assessment year by issuing a notice under S.14(2) of the Wealth Tax Act, 1963.
PLD 1958 SC 104 and 1999 PTD 4037 rel.
(d) Wealth Tax Act (XV of 1963)‑‑‑‑
‑‑‑‑Ss.14 & 17‑‑‑Income Tax Act (XI of 1922), S.22(2)‑‑‑Assumption of jurisdiction under a provision other than the legal provision of law‑‑ Validity‑‑‑Assumption of jurisdiction under other than a legal provision was not a procedural mistake and being fatal to the whole proceedings could not be ignored by the Appellate Authorities.
2000 P D 39; PLD 1994 Kar. 671995) 71 Tax (KHC) 211: (1955) 27 ITR (BHC) 54; (1986) 54 Tax 105 (Trib.); 1995 PTD (Trib.) 7100(sic) and (1999) 79 Tax 76 (Trib.) rel.
(e) Wealth Tax Act (XV of 1963)‑‑‑‑
‑‑‑‑Ss.14 & 17‑‑‑Filing of return‑‑‑Jurisdiction‑‑‑Challenge to jurisdiction after filing of return in response to an invalid notice‑‑‑Validity‑‑‑Filing of return in response to an invalid notice, did not debar the appellant from challenging jurisdiction because even consent of the assessee could not give jurisdiction to an authority if it did not legally vest with the said authority.
PLD 1967 SC 314; PLD 1985 Kar. 411; PLD 1973 SC 236 and (1993) 68 Tax (Trib.) 145. rel.
(f) Wealth Tax Act (XV of 1963)‑‑‑‑
‑‑‑‑SsA4 & 17‑‑‑Constitution of Pakistan, (1973), Art. ‑‑‑Submission of return on an invalid notice‑‑‑Validity‑‑‑If it was considered that on the basis of submission of return on receipt of an invalid notice, the proceedings could not be challenged that would amount to discrimination against the person who submitted that return vis‑a‑vis a person who did not submit a return in response to an invalid notice‑‑‑No discrimination could be made under the law as all the assessees were to be treated equal as provided under Article 4 of the Constitution of Pakistan (1973).
PLD 1987 SC 447; PLD 1958 SC 201 and 1999 PTD 4037 rel.
(g) Wealth Tax Act (XV of 1963)‑‑‑‑
‑‑‑‑Ss.14 & 17‑‑Return of wealth‑‑‑Wealth escaping assessment‑‑ Jurisdiction‑‑‑Order passed without validly assuming jurisdiction standing test of appeal‑‑‑Validity‑‑‑Even consent of the assessee could not give jurisdiction to an authority which did not legally vest into‑‑ When there was no jurisdiction with an authority the orders passed by such authority were void and nullity in the eyes of law‑‑‑Where even, both the sides had agreed to waive a portion of a statutory provisions, same could not confer jurisdiction which according to statute was not there.
1975 (Supl.) Indian SCR 365 and 1958 PLD (SC) 201 rel.
(h) Wealth Tax Act (XV of 1963)‑‑‑‑
‑‑‑‑Ss.14, 17 & 10(5)‑‑‑Return of wealth‑‑‑Wealth escaping assessment‑‑ Jurisdiction' of Wealth Tax Authorities‑‑‑Calling in question the jurisdiction after filing of return, notwithstanding the provisions of S.10(5) of the Wealth Tax Act, 1963‑‑‑Validity‑‑‑Assessing Authority had jurisdiction over the case in two ways; firstly, as officer incharge over the area or cases and secondly be exercising the statutory powers for assessment‑‑‑Section 10(5) of the Wealth Tax Act, 1963 pertained to assignment of administrative jurisdiction to an Assessing Officer by his superior authorities which meant the jurisdiction assigned generally to a Circle in the field pertaining to the area or persons as prescribed in S.10(1)(c) of the Wealth Tax Act, 1963‑‑‑Once an assessee filed a return in a Circle he could not challenge that said Circle did not have jurisdiction over his case‑‑‑Exercise of legal jurisdiction for assessment proceedings was the foundation of the legal orders and therefore, could be challenged at any stage because it went to the very root of the assessment order.
(i) Wealth Tax Act (XV of 1963)‑‑‑‑
‑‑‑‑Ss.14(2) & 17‑‑‑Return of wealth‑‑‑Assumption of jurisdiction for filing of return by issuing a notice S.14(2) of the Wealth Tax Act, 1963, when the relevant financial year had already expired‑‑‑Validity‑‑‑No notice under S.17 of the Wealth Tax Act, 1963 having been served on the appellant/assessee after end of the assessment year, the Assessing Officer had no jurisdiction to proceed by issuing notice under S. 14(2) of the Wealth Tax Act, 1963‑‑‑Such order was thus ab initio void.
(j) Wealth Tax Act (XV of 1963)‑‑‑‑
‑‑‑‑Ss.14(2) & 15‑‑‑Return of wealth‑‑‑Filing of return under S.14(2) of the Wealth Tax Act, 1963‑‑‑Treatment of such return under S.15 of the Wealth Tax Act, 1963‑‑Validity‑‑‑Plain reading of S.15 of the Wealth Tax Act, 1963 indicated that it had to be a return which was not furnished within time allowed under S.14 of the Wealth Tax Act, 1963‑‑ No specification was provided as to whether the return was to be filed within tine allowed under S.14(1‑A) or in a notice under S.14(2) of the Wealth Tax Act, 1963‑‑‑Return filed within time as extended by the Assessing Officer for, compliance of the notice under S.14(2) of the Wealth Tax Act, 1963 could not be treated as a return under S.15 of the Wealth Tax Act, 1963‑‑‑Return was not filed, by the assessee suo motu or voluntarily but rather within extended time for the compliance of the notice under S.14(2) of the Wealth Tax Act, 1963, which was an invalid notice‑‑‑Whole superstructure created by the Assessing Officer or subsequently by the First Appellate Authority thus fell to ground because the basic notice under S.14(2) of the Wealth Tax Act, 1963 was illegal, invalid and void‑‑‑Assessment was annulled by the Tribunal.
(k) Wealth Tax Rules 1963‑‑‑‑
‑‑‑‑R.8(3)‑‑‑Valuation of building‑‑‑Principles.
(l) Wealth Tax Rules, 1963‑‑‑‑
‑‑‑‑‑R.8(3)‑‑‑Valuation of land and building‑‑‑Property in question having not been valued in accordance with the provisions of R. 8(3) of the Wealth Tax Act, 1963, both the assessments were set aside on the valuation of the property by the Tribunal with the direction that reassessments will be made by the Assessing Officer in accordance with the legal procedure.
Arshad Siraj for Appellant.
Aqeel Abbasi, Legal Advisor for Respondent.
Dates of hearing: 15th November, 2001, 26th January and 2nd February, 2002.
ORDER
MUHAMMAD AKHTAR NAZAR MIAN (ACCOUNTANT MEMBER).‑‑‑The appellant is aggrieved against a combined order of the learned CIT (A) Zone‑II, Karachi dated 21‑11‑2000 whereunder for the assessment years 1997‑98, 1998‑99 and 1999‑2000 the orders passed by the DCWT were confirmed by him. The order impugned before us is challenged both on legal and factual plans. The orders of the authorities below have been perused and the learned representatives of both the parties have been heard at length.
2. The facts so far as relevant for the disposal of these appeals are that the appellant company taken on lease a plot from Karachi Port Trust (KPT) and constructed a building thereon. The property is let out and in this view of the matter the company is liable to wealth tax on the value of the said property. Returns were not filed by the company and in order to procure returns the DCWT served on the company notices under section 14(2) of the Wealth Tax Act, 1963 (hereinafter referred to as the Act for all the years. For the assessment years 1997‑98 and 1998‑99 the notices under section 14(2) were issued on 7‑12‑1998 and for the assessment year 1999‑2000 the said notice under section 14(2) was issued on 10‑11‑1999. After prolonged correspondence and service of series of notices, return of net wealth were ultimately filed and the Assessing Officer accepted the G.A.R.V. as declared by the assessee for .the purpose of Income Tax assessments and determined the net wealth at 10 times of the G.A.R.V. In this way he charged wealth tax in all the years under appeal. Since no tax was paid by the assessee under section 14‑A of the Act additional tax under section 31‑B was accordingly charged by the learned DCWT. This treatment meted out to the appellant was confirmed by the learned CWT(A) and hence the appeals before the Tribunal.
ASSESSMENT YEAR 1997‑98.
3. It is argued by the learned A.R. that the Assessing Officer had illegally assumed jurisdiction for the assessment year 1997‑98 by issuing a notice under section 14(2) of the Act when the relevant financial year 1997‑98 had already passed. It is submitted by him that in these circumstances the Assessing Officer could assume jurisdiction for the year 1997‑98 only after serving notice under section 17 of the Act. The Assessing Officer proceeded without legally assuming the jurisdiction, the whole superstructure created thereafter falls down as held by the judicial authorities in a number of cases. In this connection he has referred to the cases cited as PLD 1958 Supreme Court 104 and 1999 PTD 4037 (Karachi High Court). According to the learned A.R. service of a notice under section 14(2) is not substitute to the service of a notice under section 17, which is vital and material because it relates to assuming jurisdiction. It is further submitted by the learned A.R. that filing of return for the assessment year 1997‑98 in response to an invalid notice under section 14(2) makes no difference and he has right to challenge the jurisdiction of the DCWT because it is for the Court to see as to whether the jurisdiction had rightly been assumed by the Assessing Officer. He has referred to the cages cited as 2000 PTD 39 (Lahore High Court) and PLD 1994 67 (Karachi High Court) to contend that when an Act says to do a thing in a particular manner it has to be done like that or should not be done at all. The learned A.R. argues that since in the instant, case issuance of notice under section 17 was condition precedent, this was required to be issued and without service of notice under section 17 all the proceedings are illegal for the assessment year 1997‑98.
4. The legal Advisor of the Department on his turn has stated that for the purpose of making assessment the first step is to initiate proceedings regarding calling for returns. There is no bar in issuing a notice under section 14(2) of the Act for this purpose because the provisions of section 14(2) of the Act are similar to those of section 56 of the Income Tax Ordinance, 1979 which can be issued even after and the assessment year, for the purpose of procuring returns of income. Since there is no bar or time frame prescribed for issuing a notice under section 14(2), the Court need not imply any, meaning into it which is not expressedly stated therein as the tax laws have to be interpreted strictly. The learned Legal Advisor adds that even if it is presumed that the notice calling for return has been issued under a section other than that under which it could legally be issued, then this is a procedural mistake which need not affect the assessment proceedings. Also since the return has been filed the assessee does not have a right now to challenge the notice in response to which the return had been filed. Alternately he claims that the DCWT has required the appellant to submit return in response to notice under section 14(2) by 12‑12‑1998 and since the return was not filed in time, the return tiled subsequently by the assessee at best be taken as a return filed voluntarily under section 15 of the Act, and therefore, there is no illegality in assuming the jurisdiction.
5. After hearing the learned representative of both the parties, we have framed for ourselves the following questions for determination which may resolve the legal controversy pertaining to the assessment year 1997‑98:‑‑
(1) Whether the provisions of section 14(2) of the Wealth ax Act, 1963 are similar to the provisions of section 56 of the Income Tax Ordinance, 1979?
(2) Whether can section 14(2) of the Act and section 17 of the Act simultaneously given jurisdiction to the Assessing Officer?
(3) Can an assessment proceedings be initiated by issuing notice under section 14(2) beyond the relevant assessment year?
(4) Whether assuming jurisdiction under a provision other than the legal provision of law is a technical mistake which need not be looked into by the appellate Courts?
(5) Can the assessee challenge the‑ jurisdiction after filing the return in response to an invalid notice?
(6) Can an order passed without validly assuming jurisdiction stand the test of appeal?
(7) Is an assessee entitled to call in question the jurisdiction of the Wealth Tax Authority after he has made the return of the net wealth, notwithstanding the provisions of subsection (5) of section 10 of the Act?
Question No.1.
Whether the provisions of section 14(2) of the Wealth Tax Act, 1963 are similar to the provisions or section 56 of the Income Tax Ordinance, 1979?
6. For the stake of the convenience the relevant provisions of section 14(2) of the Wealth Tax Act and those of section 56 of the Income Tax Ordinance, 1979 are reproduced below:‑‑
Section 14(2) of Wealth Tax Act.
(2) If the Deputy Commissioner is of the opinion that,‑
(i) the net wealth of any person is of such an amount; or
(ii) the assets of any person are of such nature as to render him liable to wealth tax under the Act, then notwithstanding anything contained in subsection (1), he may serve a notice upon such person requiring him to furnish within thirty days from the date of service of such notice, or such longer or shorter period as may be specified in the notice, a return in the prescribed form and verified in the prescribed manner and setting forth such other particulars as may be required in respect of the net wealth or assets of such person as the valuation date mentioned in the notice.
Section 56 of the Income Tax Ordinance, 1979:
56. Notice for furnishing return of total income.‑‑‑‑The Deputy Commissioner may, at any time by notice in writing, require any person who, in his opinion, is chargeable to tax or is required to file return of total income under section 55 for any income year to furnish a return of total income for such year within thirty days from the date of service of such notice or such longer or shorter period as may be specified in such notice or as the Deputy Commissioner may allow:
Provided that no notice under this section shall be issued after the expiration of five years from the end of the assessment year for which the return of income was due.
7. From the plain language of the two sections, it is clear that section 56 of the Income Tax Ordinance, 1979 prescribed that notice can be given at any time for any income year whereas the notice under section 14(2) of the Wealth Tax Act is served when an assessee liable to submit the return under subsection (1) of section 14 does not file the return. Subsection (1) relates to suo‑moto filing of return by the assessee within time prescribed under Subsection (1‑A) of the said section 14.
Section 14(1‑A) prescribes, dates for each financial year for which assessment is required to be made as provided in section 3 of the Wealth Tax Act. This means that a notice under section 14(2) can be issued during the financial year for which the wealth tax is required to be charged under section 3 of the Act. The irresistible conclusion is that provisions of section 14(2) of the Act are materially different from the provisions of section 56 of the Income Tax Ordinance, 1979.
Question No.2.
Whether can section 14(2) of the Act and section 17 of the Act simultaneously give jurisdiction to the Assessing Officer?
8. As has been stated above the notice under section 14(2) is to be issued within the financial year for which the wealth tax is to be charged since the charge of tax is with reference to every financial year. Now a situation may arise when the return is not filed by an assessee and the Department also fails to serve a notice under section 14(2) of the Act during the concerned financial year. It would not be prudent that the net wealth of such an assessee may be allowed to go untaxed. In our view this situation has been. catered to in section 17 of the Act. For facility of reference we quote below subsection (1) of section 17:‑‑
"17. Wealth escaping assessee.‑-‑(I) If the Deputy Commissioner
(a) has reason to believe that by reason of omission or failure on that part of the assessee to make a return of his net wealth under section 14 for any assessment year or to disclose fully and truly all material facts necessary for his assessment for that year the net wealth chargeable to tax escaped assessment for that year whether by reason of under assessment or assessment at too low a rate or otherwise; or
(b) has, in consequence of any information in his possession, reason to believe notwithstanding that has been no such omission or failure as is referred to in clause (a), that the net wealth chargeable to tax has escaped assessment for any year, whether by reasons of under assessment or assessment at too low a rate or otherwise.
he may, in cases falling under clause (a), at any time within five years and in cases falling under clause (b), at any time within four years of the end of the assessment year, serve on the assessee a notice containing all or any of the requirements which may be included in a notice under subsection (2) of section 14, and may proceed to assess or re‑assess such net wealth, and the provisions of this Act, shall so far as may be, apply as if the notice had issued under that subsection.
Provided that no proceedings under this subsection shall be initiated unless definite information has come into the possession of the Deputy Commissioner or he has obtained the previous approval of the Inspecting Additional Commissioner of Wealth Tax in writing to do so."
9. Clause (b) of subsection (1) of section 17 relates to a situation when a new information comes in the possession of the DCWT giving him reason to believe that the net wealth chargeable to tax has escaped assessment by reason of under assessment or assessment at too low a rate or otherwise. In our view clause (a) cater to the situation where the assessee fails to submit the return and the Department also fails to issue a notice under section 14(2) within the financial year for which the tax is to be charged clause (a) of subsection (1) of section 17 covers two situations as given below:‑‑
"Situation No. l.:
The Deputy Commissioner has reason to believe that by reason of omission or failure on the part of the assessee to make return of his net wealth under section 14 for any assessment year, the net wealth chargeable to tax has escaped assessment for the year and; in
Situation No.2:
The Deputy Commissioner has reason to believe that by reason of the omission or failure on the part of the assessed to disclose fully and truly all material facts necessary for his assessment for that year the net wealth chargeable to tax has escaped assessment for that year.
10. It is noteworthy that notice under section 17 can be served at any time within 5 years after the end of that assessment year thus it is clear that where the return has not been filed due to omission or failure on the part of the assessed, the Assessing Officer can call for the return during the concerned financial year by issuing notice under section 14(2) and after end of the financial year by the issuing a notice under section 17(1)(a) in situation No.1 above. The irresistible conclusion is that assumption of jurisdiction in different periods of times is subject- mater of two different provisions of law. During the relevant financial year proceedings for procuring the return are to be taken under section 14(2) and after end of the assessment year the jurisdiction can be assumed only under section 17. There is no concept of having. concurrent/simultaneous jurisdiction under both the provisions of law, viz section 14(2) and 17 of the Act.
11. It may be beneficially observed here that while arriving at the above conclusions, we have strictly read what is expressly stated in sections 14(2) and 17 of the Act.
Question No. 3
Can an assessment proceedings be initiated by issuing notice under section 14(2) beyond the relevant assessment year'?
12. As can be inferred from the foregoing para, 10 (supra), jurisdiction over the case cannot be assumed by the Assessing Officer by issuing notice under section 14 after end of the assessment year. In order to further understand and this we can conveniently refer to similar provisions of section 22(2) of the Repealed Income‑tax Act, 1922 which are reproduced below:‑‑
"(2) In the case of any person whose total income is, in the Income Tax Officer's opinion, of such an amount as to render such person liable to income tax, the Income Tax Officer may serve a notice upon him requiring him to furnish, within such period, as may be specified in the notice, a return in the prescribed form and verified in the prescribed manner setting forth alongwith such other particulars statements or accounts as may be prescribed his total income and total world income during the previous year:
Provided that the Income Tax Officer may in his discretion reduce or extend the period within which the return is required to be furnished."
13. As may be seen section 14(2) of Wealth Tax Act, 1963 and section 22(2) of the Repealed Income‑tax Act 1922 are similar in their contents. The Supreme Court of Pakistan in the case of Income Tax Officer, Central Circle. II Karachi and another v. Cement Agencies and others reported as (1969) 20 Taxation t has held that:‑‑
"The wording of the section clearly indicates that the return contemplated either by subsection (1) or subsection (2) of section 22 is a return which is filed within the year of assessment .It cannot be disputed that a notice under subsection (2) of section 22 cannot be issued after the, expiry of the year of assessment. If no notice under the said subsection has been issued nor has the assessee filed a return under subsection (1) of section 22 proceedings for assessment can only be initiated by the issue of a notice under section 34. "
Similar view has been taken by the Bombay High Court in (1955) 27 ITR (Bombay High Court) 54. In tilts view of the matter it is held that like subsection (2) of section 22 of the Repealed Income‑tax Act, 1922 the assessment proceedings cannot be initiated beyond the assessment year by issuing notice under section 14(2) of the Wealth Tax Act, 1963.
Question No.4.
Whether assuming jurisdiction under a provision other than the legal provision of law is a technical mistake which need not be looked into by the appellate Courts?
14. We have noted from perusal of case‑law that it has been held in connection with the provisions contained in the Repealed Income‑tax Act, 1922 that section 22(2) is a procedural section and any mistake or defect in this notice is procedural mistake which is not so fatal; however, section 34 is not a procedural section and compliance with it is a condition precedent for assumption of jurisdiction. In this connection the following case law can be referred with advantage:‑‑
"(1995) 71 Tax (KHC) 211, (1955) 27 ITR (BHC) 54, (1986) 54 Tax 105 (Trib.), 1995 PTD (Trib.) 7100 (sic), (1999) 79 Tax 76 (Trib.) ."
It is, therefore, clear that assuming jurisdiction under other than a legal provision is not a procedural mistake and being fatal to the whole proceedings cannot be ignored by the appellate authorities.
Question No.5.
Can the assessee challenge the jurisdiction after filing the return in response to an invalid notice?
15. Filing of return in response to an invalid notice, does not debar the appellant from challenging jurisdiction because even consent of the assessee does not give jurisdiction to an authority if it does not legally vest with the said authority. In this connection we are fortified by, the following decision of the Hon'ble Higher Courts:‑‑‑
1. PLD 1967 Supreme Court of Pakistan 314
2. PLD 1985 Karachi High Court 411.
3. PLD 1973 Supreme Court of Pakistan 236 and
4. (1993) 68 Tax (Trib.) 145.
16. It is also right of the appellant to be treated in accordance with law without any discrimination. For argument's sake if it is considered that on the basis of submission of his return on receipt of an invalid notice, the proceedings cannot be challenged then this would amount to discrimination against the person who submits return vis‑a‑vis a person who does not submit a return in response to an invalid notice. It is golden principle that no discrimination can be made under the law because all the assessees are to be treated equal. This has been so provided under Article 4 of the Constitution of Islamic Republic of Pakistan, 1973 and has been so implemented by the Superior Courts as held in the following cases:‑
PLD 1987 Supreme Court of Pakistan 447,
PLD 1958 Supreme Court of Pakistan 201 and
PTD 1999 Karachi High Court 4037.
Question No.6:
Can an order passed without validly assuming jurisdiction stand the test of appeal'?
17. As has been discussed above, even consent of the assessee cannot give jurisdiction to an authority which is not legally vested with the jurisdiction. When there is no jurisdiction or no valid jurisdiction with an authority the orders passed in these circumstances are void and nullity in the eyes of law. Waiver even where both the sides had agreed to waive a portion of a statutory provisions, cannot confer jurisdiction which according to statute is not there. In this connection reference can be made to the cases reported as 1975 (Sup).) Indian SCR 365 and PLD 1958 Supreme Court of Pakistan 201.
Question No.7:
Is an assessee entitled to call in question the jurisdiction of wealth tax authority after he has made the return of the net wealth, notwithstanding the provisions of subsection(5) of section 10 of the Act?
18. So far as this question is concerned, it may be stated that the Assessing Authority has jurisdiction over the case in two ways, firstly as officer incharge over the area or cases and secondly by exercising the statutory powers for assessment. Subsection (5) of section 10, included in the Chapter‑III (Wealth Tax Authorities) pertains to assignment of administrative jurisdiction to an Assessing Officer by his superior authorities. This means the jurisdiction assigned generally o a circle in the field pertaining to the area or persons as prescribed in clause (c) of subsection (1) of section 10. Once an assessee "files a return in a Circle, he cannot challenge that this circle does not have jurisdiction over his case. So far as the exercise of legal jurisdiction for assessment proceedings is concerned, this is the foundation of the legal orders and therefore, can be challenged at any stage because it goes to the very root of the assessment order.
19. After answering the questions which we have framed for ourselves, we have no hesitation in concluding that in the instant case there being no notice under section 17 of the Wealth Tax Act, having been served on the appellant after end of the assessment year, the Assessing Officer had no jurisdiction to proceed by issuing notice under section 14(2) of the Act and therefore, his order is ab initio void.
20. The learned Legal Advisor has argued that in case it is held that jurisdiction could not be assumed by the Assessing Officer, after end of the financial year through notice under section 14(2) of the Act, then the return submitted by the assessee may be treated as a return under section 15 of the Act and, therefore, the proceedings under section 16 may be treated as valid, having been made in pursuance of the return submitted under section 15 of the Act. For convenience we quote hereunder the said section 15 of the Wealth Tax Act, 1963:‑‑
15. Return after due date of amendment of return.‑‑‑‑If any person has not furnished a return within the time allowed under section 14 or having furnished a return under that section discovers any omission or a wrong statement therein, he may furnish a return or a revised return, as the case may be, at any time before the assessment is made."
21. A plain reading of section 15 indicates that it has to be a return which is not furnished within the time allowed under section 14. It may be noted that there is no specification as to whether the return is to be filed within time allowed under section 14(1‑A) or in a notice under section 14(2). In the instant case the return for the assessment year 1997‑98 was filed, as per records, within time as extended by the Assessing Officer for compliance of the notice under section 14(2). In this view of the matter and considering the facts and circumstances of this case, this return cannot be treated as a return under section 15. This is a return which was not filed by the assessee suo motu or voluntarily but rather within extended time given for the compliance of the notice under section 14(2), which has been held as an invalid notice. This being the position the whole superstructure created by the Assessing Officer or subsequently by the learned CIT(A) falls because the basic notice under section 14(2) is illegal, invalid and void. We, therefore, annul the assessment order for the assessment year 1997‑98.
ASSESSMENT YEARS 1998‑99 and 1999‑2000:
22. For the assessment years 1998‑99 and 1999‑2000 the proceedings are legally initiated by serving notices under section 14(2) in the respective financial years. Prima facie the value of the building taken at 10 times of G.A.R.V. as declared for Income Tax purposes may not be inappropriate but it is argued by the learned A.R. that in the instant case the land belongs to Karachi Port Trust and while determining the G.A.R.V. the lease money payable to KPT should be deducted from the G.A.R.V. as declared for Income Tax purposes. We feel that the proposed way of determining G.A.R.V. is not in accordance with the provisions of relevant rule 8(3) of the Wealth Tax Rules, 1963 which for the sake of convenience is reproduced below:‑‑
(3) Lands and buildings. ‑‑‑‑The value of lands and buildings excluding agricultural land, shall be estimated with due regard to the nature and size of the property, the amenities available and the price prevailing for similar property in the same locality or in the neighbourhood of the said locality:
Provided that the Deputy Commissioner shall not, except with the prior approval of the Commissioner, determine the value of any property at a sum higher than ten times the gross annual rental value of such property and, where such property is an open plot of land at a sum higher than the value of specified by the Collector of the District for the purposes of calculation or charging of stamp duty under the Stamp Act, 1989 except where such plot is purchased through an open auction or through invitation of bids of offers:
Provided further that any amount by way of advance or security which is not adjustable against the rent payable by the tenant shall be taken into consideration for determining gross annual rental value.
Explanation. ‑‑‑for the purposes of this sub‑rule, gross annual rental value means the sum for which the property might reasonably be expected to let, from year to year:
Provided that the Deputy Commissioner shall not, without the prior approval of the Inspecting Additional Commissioner, estimate the gross annual rental value at a sum higher than the rent paid or payable by the tenant."
23. A plain reading of the rule 8(3) reproduced supra makes it clear that the valuation of the building is to be made by the DCWT by taking following steps:‑
"(i) He is to determine the value of the building with due regard to the nature and size of the property, the amenities available and the price prevailing for similar property in the same locality or in the neighbourhood of the said locality. Obviously the nature of the property includes its status of being erected on such lease hold land;
(ii) He is to determine the gross annual rental value (G.A.R.V.) of the property which means the sum for which property might reasonably be expected to let from year to year, after taking into consideration the amount received by way of advance or security from tenant, which is adjustable against the rent payable by him. It may be stated that in the income tax the annual letting value cannot be taken at an amount less than the rent actually payable by the tenant but in the wealth tax there is no such restriction and the G.A.R.V. is to be determined with the consideration toy the circumstances of the case;
(iii) If G.A.R.V. as fixed by the DCWT is higher than the rent actually paid or payable by the tenant of the building then the DCWT has to seek approval of his IAC for taking this amount of G.A.R.V. of the building; and
(iv) He is to compare the value determined by him as at serial No.(i) above, with the G.A.R.V. as fixed by him according to the prescribed procedure at Serial No.(ii). Where the value of the building is higher than 10 times of the G.A.R.V. he is to seek the approval of Commissioner for taking this value.
24. Since in the instant case the property has not been valued in accordance wit the provisions of rule 8(3) as explained in para.23 (supra), both the assessments are set aside on the valuation of the property. The reassessment will be made by the DCWT in accordance with the legal procedure explained above.
25. So far as the calculation of additional tax is concerned, this will have to be recalculated by the Assessing Officer after giving a notice to the assessee disclosing the proposed calculation of additional tax and after hearing the point of view of the appellant.
26. Consequently all the appeals succeed to the extent and in the manner indicated above.
C.M.A./M.A.K./367/Tax(Trib.)
Order accordingly.