Wealth Tax Act (XV of 1963)---

----Ss. 14B, 14(1)(c) & 16(5)---S.R.O. No. 1208(I)/95, dated 23-10-1996---C.B.R. Letter C. No.(12)WT/96, dated 30-7-1996-- C.B.R. Circular No.1(15)WT/96, dated 14-12-1996---Wealth Tax Rules, 1963, R.3---Minimum Wealth Tax---Return of Net Wealth was filed on prescribed Form-A for assessment year 1996-97 as on 3-9-1996 relevant to valuation, dated 30-6-1996---Assessment framed under S.16 of the Wealth Tax Act, 1963 was annulled by the First Appellate Authority on the ground that assessee had not filed his wealth tax return prior to 1996-97 and, as such was covered under S.14B of the Wealth Tax Act, 1963---Validity---Assessee was obliged to follow the rule for availing the provisions of S.14B of the Wealth Tax Act, 1963 and file a return in the prescribed Form AA and not Form A---Return filed by the assessee on 30-9-1996 could not be treated as a return in respect of assets covered under S. 14B of the Wealth Tax Act, 1963 as the same did not show that it was a return under S. 14B of the Wealth Tax Act, 1963---Mere mention of tax payable under S. 14B of the Wealth Tax Act, 1963 did not render the return on Form-A as a return valid for purposes of S.14B of the Wealth Tax Act, 1963---Order of the First Appellate Authority in treating the assessee as covered under S.14B of the Wealth Tax Act, 1963 was misdirected and unsustainable in law-- Appellate Tribunal vacated the order of the First Appellate Authority and upheld that of the Assessing Officer---Order under S.16(5) of the Wealth Tax Act, 1963 having been framed in disregard to R.8(3) of the Wealth Tax Rules, 1963 case was remanded for a denovo assessment keeping in view the sub-rule (2) & (3) of R. 8 of the Wealth Tax Act, 1963.

Haroon-ur-Rehman for Appellant.

Dr. Khawaja M. Waqar Khan, ITP for Respondent.

Date of hearing 17th January, 2003.

ORDER

SYED AQEEL ZAFAR UL HASAN (ACCOUNTANT MEMBER).---This departmental appeal against the order of the Commissioner of Wealth Tax (Appeals), Islamabad agitates against theannulment made by the Commissioner on the ground that the assessee was covered by section 14B of the Wealth Tax Act, 1963 (hereinafter called the Act) and, as such, an ex parte assessment under section 16(5) of the Act was not sustainable.

2. Brief facts of the case are that the assessee, an individual, filed a return of wealth tax on the prescribed Form-A for the assessment year 1996-97 relevant to the valuation dated 30-6-1996. The return was filed on 30-9-1996 wherein certain assets and liabilities were declared and in the relevant column-J, computation of tax was reflected. The net wealth of the assessee was shown as "BTL" (below taxable limit). A notice under section 16(4) was issued on 11-6-1999 for compliance on 25-6-1999. Since none appeared on the due date, a fresh notice under section 16(3) was issued on 28-6-1999 wherein the assessee was confronted with the departmental view, that the exemption claimed in respect of the property known as Rafi Centre, Mauve Area, G-7/1, Islamabad was not available under the law and the assessee was asked to furnish documentary evidence if any, in respect of his claim. Besides, bank statements for the period ending 30-6-1996 were also required to be furnished. On the due date, the assessee once again did not respond. Thereupon, an assessment under section 16(5) of the Act was framed whereby one house bearing No.5 located in G-6/4, Islamabad was granted exemption being self-occupied as claimed, while the property known as Rafi Centre, G-7/1, Islamabad was valued at Rs.35,990,000. In addition, the business capital was also assessed in accordance with income-tax record at Rs.50,000 as against a declared loss of Rs.16,287. The cash at bank was taken as declared at Rs.5,000. The liabilities claimed on account of loan claimed to have been taken from the Citi Bank at Rs.4,500,000 and from Mrs. Sitara Nasim Ellahi at Rs.400,000 were disallowed for lack of evidence. Net tax liability was worked out at Rs.1,166,297 which included an amount of. Rs.295,172 charged as additional tax.

3. The order was appealed against whereupon the Commissioner, vide his order, dated 4-11-1999, held that the assessee had not filed his wealth tax return prior to 1996-97 and, as such, was covered under section 14B of the Act. He accordingly, annulled the assessment made under section 16(5). Against the order of the Commissioner, the Department is now in appeal before us.

4. On the date of hearing the Department vehemently opposed the order of the Commissioner pointing out that the treatment accorded by the Assessing Officer on the facts and circumstances of the case was in accordance with law. The return filed by the assessee was on Form-A (WT-I) (Rev-1)) which was a prescribed form for assets to be declared under clause (b) of section 14(1) of the Act while assets falling under section 14B were covered by clause (c) thereof. As such, the assessment framed under section 16 was a valid assessment and the assessee could not claim the benefit of the provisions of section 14B for which a separate form of return had to be used, as prescribed. The Commissioner erred in law in treating the assessee to be covered under section 14B of the Act and in the circumstances, it was immaterial whether the assessee had, or had not, filed a return of wealth in the earlier years. It was urged that the order of the Commissioner being misdirected and contrary to law, be vacated and that of the Assessing Officer restored.

5. The AR on this part, strongly opposed the departmental appeal. His preliminary objection on which he placed a lot of emphasis, was that the appeal filed by the Department was barred by time. He pointed out that the order in question was passed by the Commissioner Appeals on 4-11-1999 and was received by the assessee as well as the Commissioner of Wealth Tax, Islamabad on 19-11-1999. As such, the limitation for filing of return expired on 19-1-2000. The present appeal had been filed, on 6-3-2000. Therefore, it was barred by limitation and could not be entertained.

6. This aspect of the case was duly looked into by the office. It was ascertained that the appellate order in question had been received in the office of the Commissioner of Wealth Tax, Islamabad, with whom the jurisdiction over the case did not then lie. The relevant portion of the reply received in this behalf is reproduced below:--

"The order of these Commissioner of Income Tax & Wealth Tax (Appeal) Zone-II, Islamabad was received in this office of the Commissioner of Income Tax and Wealth Tax, Rawalpindi on 6-1-2000 routed through Commissioner of Income Tax and Wealth Tax, Islamabad Zone being the assessment record of the assessee was transferred from his original jurisdiction vested with DCIT and WT Circle-07, Islamabad, to this office. Thus the second appeal was filed on 6-3-2000 as per i.e. in consequence of receipt of appellate order in the office of Commissioner of Income Tax and Wealth Tax, Rawalpindi on 6-1-2000. However, delay occurs due to transit period regarding transfer of assessment record from Islamabad to Rawalpindi may kindly be condoned and appeal filed may be accepted being within time."

7. It appears that the jurisdiction over the case of the assessee was originally vested in the Islamabad Zone but was subsequently changed at the instance of the assessee on the basis of change of residence from Islamabad to Rawalpindi. Since this change in jurisdiction was the result of an action of the assessee, the Commissioner of Appeals who was seized with the case, remained unaware of this fact. This resulted in wrong delivery of the appellant order to the Commissioner of Wealth Tax, Islamabad instead of CWT, Rawalpindi. The law in this regard clearly requires the appellate order to be served on the Commissioner, which should be the concerned Commissioner holding jurisdiction over the case of an assessee. Failure on the part of the assessee to intimate the Commissioner Appeals of the change in jurisdiction resulted in the wrong delivery of the appellate order to the Commissioner at Islamabad instead of Rawalpindi. In the circumstances, the delay in filing of appeal is justified and is accordingly condoned.

8. On merits, it was claimed by the AR that the return in question clearly mentions that tax was being paid under section 14B. No opportunity was provided to the assessee to explain his position it is alleged (it is nevertheless admitted by him that one notice was served on the assessee). As such, he contends, the Department was not justified to treat the return in question as a normal return relateable to the provisions of section 14(1)(b) of the Act. He pointed out that the return prescribed as "Form-AA" for use in cases covered by section 14B of the Act, was prescribed on 23-10-1996 by S.R.O. No. 1208(I)/96. By that time, the assessee had already filed the return on 30-9-1996. As such, there was no fault of the assessee to have submitted a return on a wrong format, it was argued. The Department on its part was obliged to treat the return as a return made under section 14(1)(c) of the Act and charge tax accordingly. It was pointed by the A.R. that section 14B had been inserted to introduce a liberal scheme and since all requirements, of the scheme had been fulfilled by the assessee, the facts of the case should be accordingly interpreted, it was contended.

9. The AR's contention that no opportunity was provided to the assessee to explain/substantiate his case appears negated by his acknowledgement at the bar that only one notice had been served on the assessee. It is accordingly disregarded.

10. We have given due consideration to the arguments raised on behalf of the assessee and have also gone through the relevant law. For a proper appraisal thereof, it would be convenient to reproduce the provisions of law and C.B.R. instructions/clarifications issued on the subject, as applicable to the present appeal. The same are as given hereunder:--

Section 14(1)(c)

"(1) Every person-

(a) ..........................................

(b) ..........................................

(c) who owns in any urban area-

(i) residential plot or house with land area of 500 sq. yards more; or

(ii) flat or apartment with covered area of 2000 sq. feet or more;...

(d) ............................................

shall, by the dates specified in subsection (IA), furnish to the Deputy Commissioner of Wealth Tax a return in the prescribed form and verified in the prescribed manner setting forth the particulars of his net wealth as on the valuation date:"

Section 14B

(1) ..........................................

(2) The tax under this section shall he payable alongwith return of wealth and shall be deemed to be the final discharge of tax liability of the assessee in respect of such asset irrespective of his overall tax liability under this Act:

(3) Provided that this provision shall---

(i) apply only to assessment; year 1996-97; and

(ii) not apply to any person who has either been assessed to tax or filed return of wealth for any year prior to assessment year 1996-97."

Wealth Tax Rule 3:

"(3) Return of Net- Wealth.-(1) The return of net wealth referred to in subsections (1) and (2) of section 14 (and section 14B) shall,--

(a) ..........................................

(aa) in respect of assets referred to in section 14B be in Form AA;"

C B R Circular C No. 1(15)WT/96, dated 14-12-1996.

The RCITs...........................................

Subject: Minimum Wealth Tax

..........................................

Press Release

A news item appearing in a section of press no 14-12-1996 with reference to advertisements regarding liability of payment of minimum wealth tax by owners of residential plots, houses and flats has been found misconceived and misleading, by the C. B. R.

(2) It has been pointed out that joint owners of urban property constitute an AOP which concept has already been deleted from the Wealth Tax law. There is, as such, no reason to believe that jointly held assets are to be clubbed together to fleece the taxpayers. However, even in the case of property jointly owned, where the share of each individual owner falls within the taxable limit, tax is payable individually by each such co-owner.

(3) The following important aspects of the law in this regard may be recounted:--

(i) only new taxpayers who have never filed a wealth tax return before, are required to file minimum wealth tax returns in Form "AA" which is being published in all leading newspapers. Rates of tax have been duly indicated therein. Taxpayers are free to make as many photocopies for their use, as may be desired. Returns may be filed in any income or wealth tax office, duly enclosing the tax payable in the form of a pay order/demand draft drawn in favour of the Commissioner of Wealth Tax.

(ii) minimum wealth tax is payable only in the year 1996-97 on property in urban areas which in the case of residential plots or houses should be on 500 sq. yards or more and in the case of flats or apartments be of covered area of 2000 sq. feet or more. In the cage of multiple owners of such urban property, .tax is payable by each co-owner if his individual share is of the aforementioned size.

(iii) for purposes of minimum wealth tax, new taxpayers cannot claim exemption during the year 1996-97 on one house owned and occupied for their self-residence.

(iv) new taxpayers owning other assets valuing rupees one million or more in addition to the said urban property, must also file separate returns of wealth tax in the regular Form "A" and pay tax thereon. For earlier years, if they were unable for any reason to declare their assets or pay tax thereon, they have the opportunity now to file returns for those earlier years. They will be immune from any penalty, additional tax or prosecution if correct returns are now filed and tax paid thereon.

(v) old taxpayers can also avail immunity for past-defaults for any reason by similarly, filing returns and paying tax for past years latest by 31st December; 1996.

If any further guidance/assistance is required, the nearest wealth tax office or Central Board of Revenue, Islamabad may please be contacted".

11. It is evident that the Form of Return used by the assessee was irrelevant for purposes of section 14B. Much before the extended date for the filing of the return namely, 31-12-1996, S.R.O. 1208 issued on 23-10-1996 had already prescribed a separate return fir declaring assets covered under section 14B of the Act. The AR acknowledges that such a newly prescribed return had been widely advertised in the press. Further, it is also established that the C.B.R. also sought cooperation of the tax bars to educate taxpayers in this regard. In fact, there is abundant material on record to show that circulars/letters were issued on 30-7-1996 (outlining the scope of section 14B Scheme), 9-9-1996 and 21-12-1996 (enclosing the Press Release copy), 16-12-1996 (regarding extension in last date for filing of returns and to enlist participation of the Tax Bar to educate taxpayers). In the circumstances, the return filed by the assessee on 30-9-1996 had been rendered infructuous and invalid for purposes of section 14B. As such, after the return filed by the assessee on 30-9-1996 had been rendered invalid, it was incumbent upon him to file a return in the prescribed form "Form-AA" to avail the scheme introduced by section 14B.

12. It has been admitted at the bar that no such return in the prescribed form was filed by the assessee. We also notice that the return filed by the assessee on 30-9-1996 does not conform to the requirements of section 14B. Instead, as in the case of the return required under section 14(1)(b), various others columns of the return relating to the business capital, cash and bank account, furniture, fittings and debts claimed as liabilities, have been filled in by the assessee. These details had nothing to do with the declaration required in the form of return for purposes of section 14B. The only indication of tax paid under section 14B appears as a note against the c9mputation of tax in column "J" of the return filed on 30-9-1996 in the wrong/inapplicable form. The intended scope of the 14B Scheme, is amply clear from the contents of the C.B.R. letter issued under C. No.(12)WT/96, dated 30-7-1996 which clearly states inter alia, that only such person as (a) has not filed a return of wealth tax in earlier years; and (b) owns a residential plot, house or flat in residential areas, situated among others, in the Islamabad Capital territory, is eligible to avail the concessionary rate for wealth tax payment. The condition that the asset in question be residential in nature, or belong to any of the three specific categories of being a plot, house or residential flat, also do not appear to be met by the assessee as it is to be located in the Mauve Area in G-7/1 Sector

13. In view of the foregoing facts, we are convinced that the return filed by the assessee on 30-9-1996 cannot be treated as a return in respect of assets covered under section 14B of the Act for the following:--

(i) S.R.O. 1208(I)/1996, dated 23-10-1996 amended rule 3 of the Wealth Tax Rules and inserted a new clause (aa) in sub-rule (1) which prescribed a separate Form AA for filing a return in respect of assets covered under section 14.

This being a mandatory requirement, the assessee was obliged to follow the rule for availing the provisions of section 14B of the Act and file a return in the prescribed Form AA and not Form A.

(ii) The return filed on 30-9-1996 does not show that it was return under section 14B. The mere mention of payable tax on, House No.5, Street 83, G-6/4, and Rafi Centre, G-7/1 under' section 14B, does not render the return on Form-A as a return valid for purposes of section 14B. In fact, it remains also to be established that the amount of tax paid at Rs.10,000 was at all the amount payable on the two immovable properties under section 14B. The mention of Nil value of House No.5, Street 83, G-6/4, with a narration "self-occupied separate block" in the return of wealth tax filed on 30-09-1996 goes against the scope of the Scheme as explained in the press release issued by the Department on 14-12-1996. It has clearly been stated therein that "for purposes of minimum wealth tax, new taxpayer cannot claim exemption during the year 1996-97 of one house owned and occupied for their self-residence". The fact that the assessee has claimed exemption for self-occupied house also indicates that the return filed by him was not under section 14B of the Act.

(iii) The property known as `Rafi Centre' does, not even fall within the ambit of section 14B as is clear from the C.B.R. letter, dated 30-7-1996 referred to above. The letter explains the provisions of section which specify that only residential plots or houses/flats qualify under the provisions of section 14B Rafi Centre being a commercial/industrial building, does not qualify for being charged to under that section.

14. As a result of the facts examined above, we are of the considered opinion at the order of the Commissioner in treating the assessee as covered under section 14B was mis-directed and unsustainable in law. It is, therefore; vacated and the view taken by the Assessing Officer is upheld. However the order passed under section 16(5) of the Act appears to have been framed in disregard of rule 8(3) of the Wealth Tax Rules. The liabilities claimed by the assessee also need to be verified for which due opportunity may be provided to the assessee. The case is, accordingly, remanded back for a denovo assessment by the Assessing Officer keeping in view the relevant sub -rules (2) and (3) of rule 8 ibid.

15. The departmental appeal succeeds in the, manner as indicated above.

C.M.A./787/Tax (Trib.) Departmental appeal accepted.