W.T.A. No.997/LB of 2001, decided on 24th August, 2002. VS W.T.A. No.997/LB of 2001, decided on 24th August, 2002., 2003 PTD-INCOME-TAX-APPELLATE-TRIBUNAL-PAKISTAN 163 (2002)

Wealth Tax Act (XV of 1963)‑‑‑

‑‑‑‑Ss.17(1)(a), 16(3) & 35‑‑‑Wealth Tax Rules, 1963, R.8(2)(ii)‑‑ Wealth escaping assessment‑‑‑Assessment‑‑‑Rectification of mistake‑‑ Valuation of shares‑‑Break up value‑‑‑Assessing Officer accepted the face value of shares while passing order under S.16(3) of the Wealth Tax Act, 1963‑‑‑Order passed under S.16(3) of the Wealth Tax Act, 1963 was rectified under S.35 of the Wealth Tax Act, 1963 which adopted the break up value of such shares which was worked out by including the surplus on revaluation of assets instead of earlier acceptance of the declared face value and the same was hit by limitation in First Appeal‑‑ Assessing Officer, at such juncture resorted to action under S.17(1)(a) of the Wealth Tax Act, 1963 and adopted the same break up value after confrontation‑‑‑Validity‑‑‑Order of the Appellate Authority was vacated by the Appellate Tribunal which annulled the proceedings initiated by issuance of notice under S.17(1)(a) of the Wealth Tax Act, 1963 and also annulled the assessment framed under Ss.16(3)/17(1)(a) of the Wealth Tax Act, 1963 which was blatantly in violation of law and as a result the existing order under S.16(3) of the Wealth Tax Act, 1963 was restored due to the reasons that there was neither any failure, or omission on the part of the assessee to make return of his net wealth nor he failed to disclose fully and truly the material facts necessary for his assessment, also there was nothing which could mean escaped assessment for charging the Wealth Tax, whereby there could be under assessment or assessment at too low a rate, that no new information had come on surface impelling the Assessing Officer to initiate proceedings under S.17(1)(a) of the Income Tax Ordinance, 1979 so as to reopen the finalized assessment under S.16(3) passed after conscious application of mind on the available facts on record; that the provisions like S.17(1)(a) of the Income Tax Ordinance, 1979 were not available to cover the negligence of the Department for not properly following the law while framing the assessment; that the Assessing Officer unlawfully extended his authority by assuming jurisdiction under S.17(1)(a) of the Income Tax Ordinance, 1979 when the time prescribed under S.35 had expired; that Assessing Officer resorted to undesirable practice by keeping the assessment proceedings pending for a period of two years and six days without any justification as was evident from the order passed and that provisions of law were not meant for applying them arbitrarily by the Assessing Officer‑‑‑No new facts had been brought on record in the present case, necessitating any action under S.17 by the Assessing Officer ‑‑‑Appellant/assessee had discharged wilfully the statutory responsibility vested in him in respect of proper submission of return and no instance had been noticed or pointed out regarding the violation which could cause an action by invoking the provisions of S. 17(1)(a) of the Wealth Tax Act, 1963.

Hamid Masood, F.C.A. for Appellant.

Muhammad Zulfiqar Ali, D.R. for Respondent.

Date of hearing: 24th August, 2002.

ORDER

Through this appeal the appellant/assessee has contested the order passed by the learned C.I.T./W.T.(A) pertaining to assessment year 1992‑93 by submitting the following grounds:‑‑‑

(1) That the order dated 14‑2‑2001 of the Commissioner of Income tax/Wealth Tax (Appeals) Zone III, Lahore is bad in law and against the facts of the case.

(2) That the learned Commissioner of Income‑tax Appeals was not justified to confirm the re‑opening of the assessment already completed.

(3) That the proceedings initiated under section 17(1)(a) are illegal as there is no omission of material facts necessary for assessment or non‑disclosure of material information in original Return. The case is barred by time.

Briefly the facts could be described as that the face value of the shares of Messrs Chennab Fabrics and Processor (Pvt.) Ltd. was accepted while passing the order under section 16(3) on 22‑4‑1993, therefore, the Assessing Officer rectified under section 35 the existing order passed under section 16(3) and valued for wealth tax purposes the impugned shares on BUV basis which was worked out by including the surplus on revaluation of assets instead of earlier acceptance of the declared face value, of course, after proper show‑cause notice dated 9‑8‑1997 conveying his expressed intention to rectify the acceptance of face value as it is against rule 8(2)(11) of the Wealth Tax Act, 1963 but the learned C.I.T./W.T.(A) in appeal held that the proceedings viz‑a‑viz order under section 35 are hit by the limitations for the reason that order was passed after the expiry of prescribed four years from the date of order under section 16(3) of the Wealth Tax Act. Now, at this juncture the Assessing Officer resorted to action under section 17(1)(a) of the Act and issued a notice which was complied with and the return duly marked with "filed under protest" was filed. The Assessing Officer through a show‑cause notice duly confronted the method of BUV to be followed by him by including the surplus of revaluation of fixed assets. The appellant/assessee objected to this working out of BUV by saying as unjust and against the law and also against the express pronouncement of the Honourable I.T.A.T. The appellant/assessee duly substantiated his contention by bringing in the notice of the Assessing Officer the verdict of I.T.A.T. in appellant/assessee's own case given in subsequent assessment years i.e. 1997‑98 and 1998‑99 wherein it was ordered for excluding such surplus on re‑valuation of assets for arriving at BUV under Wealth Tax Act, 1963. This contention was not, only acknowledged but also taken as corrected by the Assessing Officer while in the same breath rejected in simply by writing that Department has filed reference before the Honourable Lahore High Court on this very point so it is devoid of any merits. It is pertinent to mention here that the Assessing Officer was accorded permission by the I.A.C. on 9‑3‑1988 for proceeding under section 17(1)(a), whereas assessment was finalized on 15‑3‑2000 but the Assessing Officer failed to explain why this matter was kept in a state of limbo. It is for the senior officials of the Department to look into the matters because assessment order is silent regarding the time gap between 13‑3‑1998, which is the date of issuance of notice under section 17(1)(a) and its order dated 15‑3‑2000 this silence alone is enough to mar the final findings of the Assessing Officer in respect of the point of law involved.

The learned A.R. pleaded his case while the learned D.R. supported the Department's point of view.

With this background of the matter we are left with no other alternative except to vacate the order of the learned C.I.T./W.T.(A) and annul the proceedings initiated by issuance of notice under section 17(1)(a) of the Wealth Tax Act and also annul the assessment framed under sections 16(3)/17(1)(a) of the Wealth Tax Act, which is blatantly violation of law and as a result the existing order under section 16(3) of the Wealth Tax Act, 1963 is hereby restored due to the reasons given below:‑‑‑

(i) That there was neither any failure, or omission on the part of the assessee to make return of his net wealth nor he failed to disclose fully and truly the material facts necessary for his assessment, also there is nothing which could mean escaped assessment for charging the Wealth Tax, whereby there could be under assessment or assessment at too low a rate.

(ii) That no new information had come on surface impelling the Assessing Officer to initiate proceedings under section 17(1)(a) so as to reopen the finalized assessment under section 16(3) passed after conscious application of mind on the available facts on record.

(iii) That the provisions like section 17(1)(a) were not available to cover the negligence of the Department for not properly following the law while framing the assessment.

(iv) Thai the Assessing Officer unlawfully extended his authority by assuming jurisdiction under section 17(1)(a) when the time prescribed under section 35 was held as expired.

(v) That Assessing Officer resorted to undesirable practice by keeping the assessment proceedings pending for a period of two years and six days without any justification as is evident from the order passed.

(vi) That provisions of law are not meant for applying them arbitrarily by the Assessing Officer. Here in the instant case no new, facts had been brought on record necessitating any action under section 17 by the Assessing Officer. The Appellant/assessee had discharged willfully the statutory responsibility vested in him in respect of proper submission of return and no instance had been noticed or pointed out regarding the violation which could cause an action by invoking 'the provisions of section 17(1)(a) of the Wealth Tax Act, 1999.

As a result the appeal is disposed of as indicated above.

C.M.A./502/Tax(Trib.) Order accordingly.