(a) Wealth Tax Act (XV of 1963)‑‑‑

‑‑‑‑S. 2(5)(ii)‑‑‑Assets‑‑‑Assessment of property in the hands of association of persons‑ ‑‑On the basis of departmental records pertaining to income‑tax, it stood established that association of persons was holding the property for the business of letting it out‑‑‑Such an asset in the hands of association of persons was taxable in view of the provision of S.2(5)(ii) of the Wealth Tax Act, 1963 and the Explanation attached thereto.

(b) Wealth Tax Act (XV of 1963)‑‑‑

‑‑‑‑Ss. 17(1)(a)(b), 17A(2)(b) & 14‑‑‑Wealth escaping assessment‑‑ Limitation for completion of assessment and re‑assessment ‑‑‑Assessee contended that no notice under S.14 of the Wealth Tax Act, 1963 could be served beyond 4 years from the relevant assessment year and no assessment could be made under S.16 of the Wealth Tax Act, 1963 after expiry of 4 years from the end of the relevant assessment year as provided under S.17A(1)(b) of the Wealth Tax Act, 1963‑‑‑Validity‑‑ Assessee was required under the law to submit a return of net wealth under S.14 of the Wealth. Tax Act, 1963‑‑‑By reason of its omission or failure on the part of the assessee to make a return of its net wealth under S.14 of the Wealth Tax Act, 1963, a notice under S.17(1)(a) and not under S.17(1)(b) of the Wealth Tax Act, 1963 was to be served by the Assessing Officer and such a notice could be served within 5 years from the end of the relevant assessment year and the assessment could be completed within two years from the end of the assessment year in which notice under S.17(1)(a) was served, as provided in S.17A(2)(b) of the Wealth Tax Act, 1963‑‑‑Assessnient proceedings initiated and completed were not barred by time.

(c) Wealth Tax Act (XV of 1963)‑‑‑

‑‑‑‑S. 17, proviso‑‑‑Wealth escaping assessment‑‑‑Issuance of notice‑‑ Approval from Inspecting Additional Commissioner‑‑‑Definite informa tion ‑‑‑Assessee contended that for the issuance of notice under S.17 of the Wealth Tax Act, 1963, approval from Inspecting Additional Commissioner was essential notwithstanding the use of word "or" in the proviso to S.17 of the Act which needed to be read as "and" ‑‑‑Validity‑‑ Word "information" had been used only in sub‑clause (1)(b) and such "information " in possession of the Assessing Officer may or may not be definite‑‑‑Where the Assessing Officer was sure that information was definite he need not seek previous approval of the Inspecting Additional Commissioner and where the information was not definite he had to

seek the approval of the Inspecting Additional Commissioner‑‑‑If it was presumed that notwithstanding conspicuous omission of the word "information" in sub‑clause (1)(a) of S.17 the proviso was practically applicable to sub‑clause (a) also, even then there could be no information more definite to what was the declaration of the assessee itself in the income‑tax proceedings ‑‑‑Assessee, in the present case, had itself been showing the business of letting out of property and it could not take diametrically opposite position during the wealth tax proceedings that it and omitted or failed to submit return of net wealth as provided in S. 1.4 of the Wealth Tax Act, 1963‑‑‑First Appellate Authority was not justified in canceling the order of the Assessing Officer in circumstances‑‑‑Order of the First Appellate Authority was cancelled by the Appellate Tribunal and restored that of the Assessing Officer.

Zaki Ahmed, D.R. for Appellant.

Salman Pasha for Respondent.

Date of hearing: 26th June, 2003.

ORDER

MUHAMMAD AKHTAR NAZAR MIAN, (ACCOUNTANT MEMBER).‑‑‑In the instant case the Department has come in appeal against combined order, dated 28‑11‑2000 made by the learned CWT(A) while deciding appeals for the assessment years 1994‑95, 1995‑96, 1996‑97, 1998‑99 and 1999‑2000 against orders passed by the Assessing Officer under section 16(5) of the Wealth Tax Act, 1963 (hereinafter called the Act). This is s range to note that the Department does not appear to have filed appeal for the assessment year 1996‑97 where in the same circumstances similar relief has been allowed by the learned CWT(A) in the impugned combined order. Orders of the Authorities below have been perused and the two learned representatives have been heard on behalf of the Department and the respondent assessee.

2. The facts so far a. relevant for the disposal of these appeals are that the Assessing Officer found the assessee respondent to be an AOP deriving income from business of letting out property but it had failed to file returns of wealth as required under section 14(1) of the Act. He accordingly issued notices under section 17 of the Act for all the years under appeal and these notices were issued without obtaining prior approval of his IAC. Since returns of wealth were not filed by the assessee‑respondent although certain correspondence went on between the Department and the respondent's counsel Mrs. Zakaria Loya & Company, ex parte assessments had to be competed by the Assessing Officer under section 16(5) of the Act by evaluating the let out. property at 10 times of GARV. The assessments completed in this way were challenged in appeal be ore the learned CWT(A) by the assessee respondent where it was submitted that assessments for the assessment years 1994‑95 and 1995‑96 were barred by time in view of provisions of section 17A of the Act and in respect of all assessment years the legality of proceedings were challenged before the learned CWT(A). The learned CWT(A) cancelled the orders passed by the Assessing Officer under section 16(5) of the Act. It would be interesting to quote the operating part of the appellate order made by the learned CWT(A).

"On hearing and considering the arguments of the A.R. of the appellant and perusing the record, and capital account of members of AOP whereby wealth tax returns are not mandatory in this case, I find that there is force in the contention of the AR of the appellant. The appellant derives rental income and is also engaged in export business. In the preceding years neither wealth tax returns were filed nor the department ever directed to file the return in the past. The issue that needs adjudication is whether the property in question let out partly to Messrs Muller and Philips Pak (Pvt.) Ltd. on rent with basement, comes within the ambit of an Asset chargeable to Wealth Tax as defined in Circular 5 of section (2) of Wealth Tax Act. The appellant has no regular business of letting out. Nor was the property built with such an intention of letting out. There appellant was conducting his other regular business from the said premises. The property has been shown, in the capital account of members of AOP.

The appellant being engaged in the export business was never subjected to wealth tax in the past.

Keeping in view the above and locating to the fact the members of the AOP have been subjected to tax already relying also on the history of the case, the orders under section 16(5) of Wealth Tax Act stand cancelled accordingly.

3. Now the Department has come in a peal against this order of the learned CWT(A).

4. It is submitted by the learned D.R. that the assessee‑respondent has been regularly declaring property income as income of the AOP which clearly shows that the AOP has been holding the property for the purpose of letting out and therefore, the said property is an asset liable to wealth tax in accordance with the definition of assets given in section 2(1)(5)(ii) (and Explanation attached therewith) of the Act. He also submits that if the Department had never brought the property to wealth tax in the preceding years, there ft n be no estoppel in taking legal proceedings in this case for the years tinder appeal provided the law so permits.

5. The learned A.R. submits that he has been advised by his client to say that the property income had never been declared by the AOP or so taxed by the Department in the hands of AOP and that the income as well as wealth pertaining to the property had been shown by the members of AOP and therefore, taxing the wealth in the hands of AOP was not proper. About the additional ground of assessments for the assessment years 1994‑95 and 1995‑96 regarding time limitation, the learned A.R. submits that in the, instant case provisions of section 17(1)(b) were applicable and no notice could be served beyond 4 years from relevant assessment year and no assessment could be

made under section 16 after expiry of 4 years from the end of the relevant assessment years as provided under section 17A(1)(b) of the Ordinance.

6. We have given due consideration to the submissions made by both the learned representatives. We have also examined the income tax records produced on our requirement by the learned D.R. pertaining to the AOP Messrs Wali Muhammad and Co. existing at NTN 10‑16‑0280310. The Income Tax Assessment Record‑ produced by the learned D.R. is incomplete. The Returns Cover, however, contains the following documents:‑‑

Assessment year 1996‑97

(1)A statement under section 143B of the Income Tax Ordinance, 1979 declaring exports of Rs.4,169,200 and tax deduction of Rs.20,846.

(2)Income Tax Return serial No.083852 declaring total income of Rs.711,439 from house property under section 19 of the Ordinance in respect of property of Plot. No.F‑121. Hub River Road. Side, Karachi. The return was filed under Self Assessment Scheme with status as AOP and nature of business as rental income and exports.

Assessment Year 1997‑98;

(1)A statement under section 143B of the Income Tax Ordinance, 1979 declaring exports of Rs.4,536,985 with tax deduction of Rs.17,687;‑

(2)Income Tax Return under Self‑Assessment Scheme immune from audit with status as AOP and nature of business as rental income and exports. Rental income of Rs.696,014 was declared and tax payable with the return was paid.

Assessment Year 1998‑99.

(1)A statement under section 143B of the Income Tax Ordinance, 1979 showing export of Rs.25,500.

(2)Income Tax return with status as AOP under simplified Self Assessment Scheme showing nature of business as rental income and export with income from house property declared at Rs.868,615.

Assessment Year 1999‑2000:

(1)A statement under section 143B showing export of Rs.3,484,400 with tax deduction of R.17,422.

(2)Return under Universal Self‑Assessment Scheme showing nature of business as‑ rental income and the income declared is Rs.1,013,379.

In this case there is a letter from the A.R. to the Assessing Officer that return having been filed under Self‑Assessment ‑Scheme automatically stands so accepted under the law.

7. Other documents in the Income Taw Return Cover are relevant to the assessment years 2000‑2001 and 2002‑2003 which are not in appeal before us. However, we have noticed that even in these years the AOP has declared its income from house property and the income is from the property which is subject‑matter of wealth tax in appeals before us. On the basis of what has transpired on examination of departmental records pertaining to income‑tax, it stands established that this AOP is holding the property for the business of letting it out. Such an asset in the hands of AOP is obviously taxable in view of the provisions of section 2(1)(5)(ii) and the Explanation attached thereto oil the Wealth Tax Act, 1963.

8. Now coming to the objection of the learned A.R. that assessments for the years 1994‑95 and 1995‑96 were barred by time. We are afraid we cannot subscribe to this view of the learned A.R. as we have held above the assessee‑respondent was required under the law to submit a return of net wealth under section 14 of the Act. By reason of its omission or failure on the part of the assessee respondent to make a return of its net wealth under section 4 of the Act, a notice under section 17(1)(a) and not under section 1 (1)(b) was to be served by the Assessing Officer and such a notice can to served within 5 years of the end of the relevant assessment year and the assessment could be completed within two years from the end of the assessment year in which notice under section 17(1)(a) was served, as has been laid down in section 17A(2)(b) of the Act. In view of these provisions of law we do not find that the assessment proceeding initiated and completed by the Assessing Officer for the assessment years 1994‑95 and 1995‑96 were in any way barred by time.

9. The learned A.R. then referred to the proviso to section 17(1) which for the sake of reference: reference is reproduced below:‑‑

"Provided that no proceeding; in this subsection shall be initiated unless definite information has come into the possession of the Deputy Commissioner of he has obtained the previous approval of the Inspecting Additional Commissioner of Wealth Tax in writing to do so."

It was asserted by the learned A.R, that in the instant case approval for issuing notice under section 17 had not been obtained by the Assessing Officer from his IAC which was essential notwithstanding the use of word "or" in the proviso which needs to be read as "and". We have given due consideration to the submissions made by the learned A.R. but unfortunately we cannot subscribe to his view. We have noticed that the word "information" has beep used only in clause (b) of subsection (1) and this "information" possession of the Assessing Officer may or may not be definite. Where the Assessing Officer is sure that the information is definite he needs not seek previous approval of his IAC and where the information is not definite he has to seek the approval of his. Still if this is presumed that notwithstanding conspicuous omission of the word "information" in clause (a) of subsection (1) this proviso is practically applicable to sub‑clause (a) also, even then there could be no information more definite to what is declaration of the assessee itself in the income‑tax proceedings. As stated above in the income‑tax proceedings the assessee has itself been showing the business of letting out of property and therefore, it cannot take diametrically opposite position during the wealth tax proceedings that it had not omitted or failed top submit return of net wealth as provided in section 14 of the Act. We are therefore, not convinced with this arguments of the learned A.R.

10. Consequently we hold that the learned CWT(A) was not justifier in canceling the orders of the Assessing Officer and in this view of the matter the combined order of the learned CWT(A) so far as it is relevant to the assessments under appeal before us is cancelled and orders of the Assessing Officer for these years accordingly stand restored.

11. Consequently the appeals succeed in the manner indicated above.

C.M.A./853/Tax (Trib.)Appeals accepted.