2003 P T D 1285

[Karachi High Court]

Before S. Ahmed Sarwana and M. Mujeebullah Siddiqui, JJ

SITARA CHEMICAL INDUSTRIES LTD. and another

Versus

DEPUTY COMMISSIONER OF INCOME-TAX

Constitutional Petition No.D-1225 of 2000, decided on 21/03/2003.

(a) Income Tax Ordinance (XXXI of 1979)---

----Ss. 62 & 12(12)---Companies Ordinance (XLVII of 1984), Ss.284, 285, 286, 287 & 288---Constitution of Pakistan (1973), Art. 199-- Constitutional petition---Merger of two public listed-companies-- Petitioner, the transferee company filed, its Return of income wherein the assets of transferred Company were shown as the assets of the petitioner-company in accordance with the provisions, of the Amalgamation Scheme approved by the High Court---Amalgamtion Order by the Court indicated that one company was transferred to the other on the basis of book value and the transferee Company got revalued the assets of the transferred---Difference of fair market value and sale/purchase value of the assets---Deemed income--Assessing Officer issued notice under S.62, Income Tax Ordinance, 1979 to the transferee Company to the effect that the surplus created by the said Company being, in fact, difference in the fair market value and the assets of the Company acquired by the transferee Company at cost price/book value, why the difference of the created reserve and the written down value as per books of the transferor should not be added under S.12(12) of the Income Tax Ordinance, 1979 to the total income of the transferee Company;--Validity---Issuance of notice by the Assessing Officer could not be said to be without jurisdiction and lawful authority---Any order restraining the Assessing Officer from asking any question or deciding any question which was within his statutory duty and power would disturb the entire system laid down by the Income Tax Ordinance, 1979 which the High Court refrained to do so---Petitioner, in circumstances, should file its reply to the notice supported by case-law and allow the Assessing Officer to consider the same and pass a written order with reasons therefore as required by S.62, Income Tax Ordinance, 1979-- Principle.

CIT v. Amsons Dairies Ltd. 1971 PTD 1075 = 1971 SCMR 589 and CIT v. Messrs Bufco Tanneries PLD 1966 Lah. 244; Roche Pakistan Ltd. v. Dy. CIT 2001 PTD 3090; Julian Hoshang Dinshaw Trust v. ITO 1992 PTD 1; Kamran Industries v. Collector of Customs PLD 1966 Kar. 68; Adamjee Insurance Company v. Pakistan (Secretary MOF) 68 Tax 176; Usmania Glass Sheet Factory v. Sales Tax Officer PLD 1971 SC 205; Shagufta Begum v. I.T.O. PLD 1989 SC 360; Khalid Mehmood v. Collector of Customs 1999 SCMR 1881; Al-Ahram Builders (Pvt.) Limited v. I.T.A.T. 1993 SCMR 29 and Ameen Textile Mills (Pvt.) Limited v. CIT and others 2000 SCMR 201 ref.

(b) Income Tax Ordinance (XXXI of 1979)---

----Ss. 62 & 12(12)---Constitution of Pakistan (1973), Art.199-- Constitutional jurisdiction of High Curt---Scope---Assessing Officer had issued notice to the petitioner under S.62 of the Income Tax Ordinance, 1979---Petitioner assailed the said notice through Constitutional petition without resorting to the available statutory remedies ---Validity-- Existence of adequate remedy under the Income Tax Ordinance, 1979-- Practice of approaching the High Court directly without resorting to the remedies available under the specific statutes disapproved---Impugned notice issued under S.62 of the Income Tax Ordinance by the Assessing Officer was strictly in accordance with law and was neither without jurisdiction nor mala fide and since adequate alternate remedies under the provisions of the Income Tax Ordinance, 1979 were available, High Court declined to interfere and dismissed the petition.

The High Court under Article 199 of the Constitution of Islamic Republic of Pakistan on the application of an aggrieved party, if it is satisfied that no other adequate remedy is provided by law, is authorized to make an order directing the person performing within the territorial jurisdiction of the Court, functions in connection with the affairs of the Federation, to refrain from doing anything he is not permitted by law to do or to do anything he is required by law to do. Thus jurisdiction can be exercised only if there is no other adequate remedy provided by law. Under the Income Tax Ordinance, if a person is aggrieved by an order passed by an Assessing Officer, the-Ordinance provides an appeal against such an order to the Commissioner of Income Tax and a second appeal to the Income Tax Appellate Tribunal and if the person is still dissatisfied with the order of the Tribunal, he can request the Tribunal to refer the question of law arising from the order of the Tribunal for an opinion of the High Court under section 136(1) of the Ordinance; and if the Tribunal refuses to do so, he can file an application to the High Court under section 136(2) for an opinion by the High Court. A party cannot be allowed to bypass an ordinary remedy provided by the statute in favour of a Constitutional petition under Article 199 of the Constitution. The superior Courts have always expressed disapproval of the practice of approaching the High Court directly without resorting to the remedies available under the specific statutes and have declined to interfere in matters where the High Court had refused to exercise its discretionary jurisdiction for the aforesaid reason.

Impugned Notice issued under section 62 of the Ordinance to the petitioner was strictly in accordance with law and was neither without jurisdiction nor mala fide and because adequate alternate remedies under the provisions of the Income Tax Ordinance, 1979 were available to the petitioner. Constitutional petition under Article 199 of the Constitution was not maintainable, which was accordingly dismissed with costs.

Shagufta Begum v. I.T.O. PLD 1989 SC 360; Khalid Mehmood v. Collector of Customs 1999 SCMR 1881; Al-Ahram Builders (Pvt.) Limited v. I.T.A.T. 1993 SCMR 29 and Ameen Textile Mills (Pvt.) Limited v. CIT and others 2000 SCMR 201 ref.

Per M. Mujeebullah Siddiqui, J. agreeing with S. Ahmed Sarwana, J.---

(c) Income Tax Ordinance (XXXI of 1979)---

----Ss. 62 & 12(12)---Companies Ordinance (XLVII of 1984), Ss. 284, 285, 286, 287 & 288---Constitution of Pakistan (1973), Art.199-- Constitutional petition---Amalgamation of two public listed-companies with the approval of High Court---Issuance of show-cause notice under S.62, Income Tax Ordinance, 1979 to the transferee Company on filing of its Return of Income---Validity---Deputy Commissioner of Income Tax has the jurisdiction to consider the consequences- and effects of the amalgamation of Companies, for the purpose of issues pertaining to the income-tax---Show-cause notice issued by the Deputy Commissioner of Income-tax under S.62 of the Ordinance was within his competence and no objection could be taken to such notice.

Fazilka Electricity Supply Co. Ltd. v. Commissioner of Income Tax, Delhi (1959) 36 ITR 411; Commissioner of Income-tax v. Haji Abdul Maji Khan Zaman & Co. 1973 PTD 459; Central India Industries Ltd. v. Commissioner of Income-tax, West Bengal (1975) 99 ITR 211; Commissioner of Income Tax v. Bharat Development (P.) Ltd. (1982) 135 ITR 457; Commissioner of Income Tax v. Karimi Industries 1983 PTD 100; Forbes Forbes Campbell & Company Ltd. v. Commissioner of Income-tax, Bombay (1984) 150 ITR 529 and Commissioner of Income Tax, Karnataka v. Master Raghuveer Trust (1985) 151 ITR 368 ref.

Muhammad Akram Shaikh, Sirajul Haq Memon and Hashim Padhiar for Petitioners.

Aqeel Ahmad Abbasi alongwith DCIT Sajidullah Siddiqui for Respondent.

S. Ziauddin Nasir, Standing Counsel.

Dates of hearing: 28th and 29th January, 2003.

JUDGMENT

S. AHMED SARWANA, J.---Sitara Chemical Industries Limited (petitioner) is a public listed-company has filed this petition against the Deputy Commissioner of Income Tax, Circle 10, Companies Zone-II, Karachi (Respondent No. 1) and Central Board of Revenue (Respondent No.2) seeking a declaration from this Court that Notice No. DCIT/CIR-10/COS-II/1999-2000, dated June 3, 2000, issued by respondent No. 1, is without lawful authority and of no legal effect and an injunction to restrain the aforesaid respondents from acting upon the impugned notice but may carry out the tax assessment otherwise. The brief facts giving rise to this, petition are as follows:

2. Sitara Chemical Industries Limited, a public listed-company and Sitara Spinning Mills Limited also a public listed-company filed a petition under section 284 read with section 287 of the Companies Ordinance, 1984 for approval of the Scheme of Arrangement under sections 284 to 288 of the Companies Ordinance, 1984, for amalgamation between Sitara Chemical Industries Limited and its members and Sutra Spinning Mills Limited and its members in the High Court (J. Misc. No.16 of 1999) praying for various orders under section 287 of the Companies Ordinance, 1984. After all formalities of the Issue of Notice of the petition for merger. Meetings of the Members of the aforesaid two Companies and passing of resolutions by the Members of the, respective companies in support of the amalgamation, the major creditors of the petitioners also having given their no objection to the scheme and no objection having been received by the High Court after publication in various newspapers as required by law, the petition was placed for approval before the Court. On 19-10-1999, a learned Judge of this Court after considering the matter and being satisfied that all requirements of law had been complied with and there did not appear any hurdle in the grant of the petition, sanctioned the Scheme of Amalgamation of the two Companies subject to the provisions of Companies Ordinance, 1984. Pursuant to the aforesaid Order, the following prayers made by the two petitioners in J. Misc. No.16 of 1999 stood granted.

(i) An order under section 287(i)(a) of the Companies Ordinance, 1984 transferring to and vesting in the Petitioner No. 1 the undertaking of the petitioner No.2 as more particularly described in the scheme of arrangement as set forth in "Annexure P/5" hereto, as subsisting immediately preceding the completion date as defined in the scheme.

(ii) An order under section 287(i)(b) of the Companies Ordinance, 1984 directing the petitioner No.1 to allot to the shareholders of petitioner No.2 within ninety (90) days of the completion date as defined in the scheme in accordance with its terms ordinary shares of the nominal value of Rs.19,850,090 credited as fully paid-up in the petitioner No.1 to the shareholders of petitioner No.2 on or before or such date as the Board of Directors of the petitioner No. 1 may agree "(Final Date").

(iii) An order under section 287(i)(c) of the Companies Ordinance, 1984 directing that all suits, appeal, arbitrations, governmental investigations and other legal proceedings instituted by or against petitioner No. 2 pending immediately before the completion date shall be treated as suits, appeal and legal proceedings by or against 'the petitioner No. 1 and may be continued, prosecuted and enforced- by or against the petitioner No. 1 accordingly.

(iv) An order that petitioner No.2 shall stand dissolved without winding up on the date on which ordinary shares of petitioner No.1 are issued to the shareholders of petitioner No.2 in accordance with the scheme of amalgamation (Annexure P/5 to the petition)."

3. It transpires that petitioner filed its Return of Income for the Assessment year 1999-2000 wherein, inter alia, the assets of Sitara Spinning Mills Limited were shown as the assets of the petitioner Company in accordance with the provisions of the Amalgamation Scheme approved by the High Court. After examining the statement of accounts submitted by the petitioners, several questions arose in the mind of respondent No.1; consequently, by Notice, dated 3-6-2000, the latter issued Notice to the petitioner under section 62, of the Income Tax Ordinance, 1979, asking it to explain certain points stated therein. The petitioner considering itself aggrieved by the Notice issued by respondent No.1 immediately filed the present petition on 17-8-2000 praying for the reliefs stated above. On 23-8-2000, the Court issued Pre-admission Notice to the respondents and D.A.-G. for 1-9-2000 when Mr. Abbasi filed a counter-affidavit of respondent No.1 and both Counsel agreed that they would argue the petitioner for final disposal at the Katcha Peshi stage and the matter was adjourned to 4-10-2000. By consent of both counsels, it was agreed that the parties shall maintain status quo till the following date of hearing. The matter came up before the Court on several dates but was adjourned for various reasons including non -availability of sufficient time at the disposal of the Court. Ultimately, eon 31-5-2001, the petition was admitted for regular hearing to consider, inter alia, the petitioner's contention, "whether amalgamation of two companies does not amount to sale and purchase of assets?" and the temporary injunction application was disposed of in the following terms:--

(i) The petitioner shall deposit an amount of Rs.43 Million with the department before 15-6-2001.

(ii) The deposits shall be without prejudice to the petitioner's contention that this amount is not payable by them.

(iii) Assessing Officer shall not pass any order until the decision of the petition."

4. The office was directed to fix the petition for regular hearing in August, 2001 which could not take place for various reasons until 28 January, 2001.

5. Mr. Akram Shaikh, learned counsel for the petitioner elaborated the history of the merger of Sitara Chemical Industries Limited (Petitioner) and Sitara Spinning Mills Limited which was approved by this Court by Order, dated 19-10-1999 and submitted that the re construction and amalgamation had been taken place with the approval of the Court, the transfer and vesting of the assets of Sitara Spinning Mills Limited with those of the Petitioner-Company and issuance of shares of Sitara Chemical Industries Limited to the Members of Sitara Spinning Mills Limited could not be termed as sale and purchase of assets as is used in the common parlance or under the provisions of the Income Tax Ordinance,: 1979. While referring to section 12(12) of the Income Tax Ordinance, he submitted that "sale" as generally understood and envisaged under the Sales of Goods Act, 1930 and the Transfer of Property Act, 1882, means transfer of property to goods from a seller to buyer for consideration paid or promised to be paid with handing over of physical possession of property and consequently transfer of assets from one company to another and issue of shares of one company in place of the other by an order of Court does not amount to a sale. He added that the term "purchase"- used in the said section contemplates the actual sale and purchase of assets and added that any transfer of property by way of gift, endowment or amalgamation is not included within the meaning of purchase. He urged that the power of the Income Tax Officer is limited to actual sale and purchase only and because the Legislature intentionally did not use the word ' transfer in section 12 but used the word "purchase" because transactions like gift, endowment or succession where no consideration is involved in the transfer of property from one person to another, would not come within the purview of section 12 of the Income Tax Ordinance. He vehemently urged that I.T.O. is required to act within the bounds of law arid the powers conferred on him by the statute and he cannot extend his jurisdiction by giving a meaning to the word "purchase" which was neither intended by the Legislature nor could be inferred from or interpreted on the basis of the provision of the Income Tax Ordinance. He then contended that respondent No. 1 by issuing a notice contrary to the provisions of Income Tax Ordinance, 1979 exceeded his jurisdiction and alternately submitted that the act of issuance of a notice by Respondent No. 1 was based upon erroneous assumption of jurisdiction which forced the petitioner to approach this Court for issue of a Writ of Certiorari as his fundamental rights guaranteed by the Constitution had been breached,

Mr. Shaikh also submitted that carrying forward and setting off of losses by the petitioner-company in its accounts was done in accordance with the internationally accepted criteria and cited the case of CIT v. Amsons Dairies Ltd. 1971 PTD 1075 = 1971 SCMR 589 and CIT v. Messrs Bufco Tanneries PLD 1966 Lah. 244, in support of his contention.

6. Mr. Aqeel Abbasi, warned counsel for tire respondents submitted that the petitioner it its Return of total income had revalued its assets which formed the basis of the impugned show-cause notice issued under section 62 of the Income Tax Ordinance. The said Notice, was in continuation of the assessment proceedings and was issued to seek the views of the petitioner on the questions which had arises from the return of total income filed by it. He added that no mala fide on the part of respondent No.1 had been alleged and that respondent No.1 issued the notice in the ordinary course in the exercise of hid, duty as an Assessing Officer because he wanted certain explanation from the petitioners' assessee before passing any order. He vehemently urged that the notice issued under section 62 of the Income Tax Ordinance, 1979 was is accordance with law and an order under Article 199 of the Constitution cannot be sought to restrain respondent No.1 from exercising his authority and seeking clarification front the petitioner which the former is required to do under section 62 of the Income Tax Ordinance, 1979. He added that respondent No.2 had not passed any final order or formed any final opinion but had only asked the petitioner to communicate its view-point before taking any action in the matter and, therefore, the question of issuing a Notice without jurisdiction or on erroneous assumption of jurisdiction does not arise acid the petition was liable to be dismissed. He referred to several judgments of the superior Courts including a judgment of this Court in the case of Roche Pakistan Ltd. v. Dy. CIT 2001 PTD 3090 in support of his arguments.

7. Exercising his right of reply, Mr. Shaikh, learned counsel for the petitioner, submitted that the question of maintainability could not be raised after the petition had been admitted in the presence of the counsel for the respondents. In any case, he added that the petition was maintainable because respondent No.1 had issued the impugned notice contrary to the provisions of section 12(12) of the Income Tax Ordinance, 1979, assuming that the transfer of assets and their re valuation pursuant to an order of the Court authorizing the amalgamation of two companies which was patently in violation of the provisions of the Income Tax Ordinance, 1979 and amounted to challenging the effect of merger as envisaged in sections 284 to 288 of the Companies Ordinance, 1984 as well as the meaning of re-organization, re-structuring, merger and amalgamation of companies as understood in the Companies Ordinance and in all modern countries of the world where laws similar to Companies Ordinance and Income Tax Ordinance, 1979 are in forces and respondent No. 1 thus exceeded his powers and jurisdiction and referred, among others: to the following cases:-

(i) Julian Hoshang Dinshaw Trust v. ITO 1192 PTD 1 (SC); (ii) Kamran Industries v. Collector of Customs PLD 1966 Karachi 68; (iii) Adamjee Insurance Company v. Pakistan (Secretary MOF). 68 Tax 176; and (iv) Usmania Glass Sheet Factory v. Sales Tax Officer PLD 1971 SC 205.

8. We have heard the arguments advanced by Mr. M. Akram Shaikh, learned counsel for the petitioner and Mr. Aqeel Ahmed Abbasi, learned counsel for the respondents, perused the Scheme of Amalgamation approved by this Court in J. Miscellaneous No. 16 of 1999 on 19-10-1999 and considered the same in light of the provisions of Income Tax Ordinance, 1979 and the Judgments of the superior Courts on the question of maintainability of the petition under Article 199 of the Constitution in the special facts and circumstances of this case.

9. Section 55 to section 67 contained in Chapter VII of the Income Tax Ordinance lay down the procedure for assessment of tax. Section 55 describes the person with specified qualifications who are required to file return of total income for any income year barring certain exceptions. Section 55A prescribes the method of furnishing return of income while section 59 lays down the conditions where the return of total income for any income year furnished by an assessee under section 55 qualifies for acceptance in accordance with the provisions of the Scheme of Self -Assessment made by the Central Board of Revenue for that year or under any instructions or orders issued thereunder. If the Deputy Commissioner is satisfied without requiring the presence of the assessee or the production by him of any evidence that the return furnished under section 55, is correct and complete he is empowered under section 59A to assess the total income of the assessee and determine the tax payable on the basis of such return by passing a written order. Section 61 authorizes the Deputy Commissioner, inter alia, to serve upon 'any person who has furnished a return of total income for any income year to attend his office or to produce or cause to be produced, any evidence on which that person, may rely in support of the return or any other evidence that the Deputy Commissioner may 'require. Under section 62, the Deputy Commissioner after considering the evidence on record including the evidence, if any, produced under section 61 and such other evidence as the Deputy Commissioner may require on specific points, is authorized to pass an order in writing assessing the total income of the assessee and determine the tax payable by him on the basis of such assessment.

10. The petitioner apparently filed a Return of total income before respondent No.1 for the assessment year 1999-2000 wherein it revalued the acquired assets at Rs.29,00,37,681. While Respondent No.1 was considering the Statement of Accounts, among others, a question arose in his mind that under the provisions of section 12(12) of the Income Tax Ordinance, 1979, the difference of fair market value and purchase price of the assets is deemed to be income of the assessee chargeable to tax and consequently, he issued to the petitioner a Notice, dated 3-6-2000 under section 62 of the Income Tax Ordinance, 1979 asking him to explain its point of view on the question and also explain how the losses of Sitara Spinning Mills Ltd. could be adjusted against the income of Sitrar Chemicals Industries Ltd. The show-cause notice; dated 3-6-2000 issued by Respondent No. 1 to the petitioner reads as follows:

"The Principal Officer,

Messrs Sitara Chemical Industries (Pvt.) Limited,

Karachi.

Subject: Assessment Year 1999-2000 Notice under section 62 of the Income Tax

Ordinance, 1979.

Please refer to the above noted subject.

After examining the statements of accounts, I give you notice under section 62 of the Income Tax Ordinance, 1979 as under:--

(1) During the year under consideration, assets of Messrs Sitara Spinning Mils Limited have been transferred to you. You have got revalued these assets at Rs.29,00,37,681. As per amalgamation order the assets of Messrs Sitara Spinning Mills Limited have been transferred to you on the basis of the book value. As per your accounts, fair market value of these assets; stands at Rs.29,00,37,681. Provisions of section 12(12) of the Income Tax Ordinance, 1979 lay down that in such event the difference of fair market value and the sale/purchase value of the assets is ineludible to the total income of the purchaser as deemed income. In this case the surplus of Rs.29,00,37,681 created by you is, in fact, difference in the fair market value and ,lie assets of the company acquired by you at cost price/book value. Therefore, the difference of the created reserve and the Written Down value as' per hooks of the seller is to be added under section 12(17) of the Income Tax Ordinance, 1979 to your total income at Rs.29,00,37,681. Please explain you point of view.

(2) You have sought adjustment of B/P losses of Messrs Sitara Spinning Mills (Pvt.) Limited amounting to Rs.24,75,26,348. You are hereby required to explain how these losses are adjustable against the income of Messrs Sitara Chemical Industries (Pvt.) Limited.

Please comply to the contents of this letter by 8-6-2000. In case of failure addition would be made to your total income and the losses as claimed will be disallowed.

11. On receipt of the above Notice under section 62 of the Ordinance, the petitioner felt that the meaning and interpretation given by respondent No.1 to transfer of assets of Sitara Spinning Mills Ltd. to the petitioner under the Scheme of Amalgamation sanctioned by the High Court was not correct and contrary to the provisions of section 12(12) of the Ordinance which relates to sale and purchase of property in the ordinary course of business and does not relate to transfer of assets under sections 284 to 288 of the Companies Ordinance, 1984 and instead of submitting his reply immediately approached this Court for a declaration that the, aforesaid Notice was without lawful authority and of no legal effect.

12. To appreciate the arguments advanced by both learned counsels on the maintainability of the petition, it would be appropriate to reproduce here the relevant provisions of section 62 of the Income Tax Ordinance, 1979 which reads as follows:--

"(62) Assessment on production of accounts, evidence etc.-- (1) The Deputy Commissioner after considering the evidence on record (including evidence, if any, produced under section 61) and such other evidence as the Deputy Commissioner may require, on specific points, shall, by an order in writing, assess the total income of the assessee and determine the tax payable by him on the basis of such assessment:

Provided that where the assessee books of account as evidence in support of the return, the Deputy Commissioner shall, before disagreeing with such accounts, give a notice to the assessee of the defects in the accounts and provide an opportunity to tire assessee to explain his point of view about such defects and record such explanation and the basis of commutation of total income of the assessee in the assessment order.

(2) .. .."

A perusal of the above section indicates that DCIT is authorized to seek clarification, explanation and point of view, of the assessee on the questions which arise in his mind before passing any order of assessment of income and determine the tax payable on such assessment. He is obliged to do so because the law directs that if he disagrees with the accounts or evidence, he shall give the assessee an opportunity of explaining his point of view. This is his statutory duty which he cannot overlook or bypass in any case.

13. Mr. Shaikh, learned counsel for the petitioner, vehemently contended that transfer of assets from Sitara Spinning Mills Limited to the petitioner (Sitara Chemical Industries Limited) did not amount to sale and further urged that the transfer of assets having taken place pursuant to the order of the High Court under section 284 of the Companies Ordinance in J. Misc. No. 16 of 1999 could not by any stretch of argument or imagination be termed as a sale/purchase which would attract the provisions of section 12(12) of the Income Tax Ordinance, 1979. He submitted that the Officers of the Income Tax Department are required to act strictly in accordance with the provisions of law and have no authority whatsoever to exceed the limits prescribed in the statute by giving meanings which are neither supported by the provisions of the Income Tax Ordinance nor are regarded as sale/purchase in the normal course of business and if any Assessing Officer takes any step or does any act which is patently beyond the authority prescribed by the Income Tax Ordinance, he would exceed his jurisdiction and his action would be subject to correction by an order of the High Court issued under Article 99 of the Constitution.

14. There is no cavil about the proposition advanced by Mr. Shaikh that the Assessing Officer has no authority to do any act or take any step beyond the authority which is vested in him under the provisions of the Income Tax Ordinance, 1979, however, it does not mean that if an assessee files a Return of total income under the provisions of the Income Tax Ordinance and the Assessing Officer has any question relating to the declared version or statement of account filed by the assessee, he has no power to ask the assessee to explain any entry, the statement of account or any other question that may arise in his mind in relation to the accounts submitted by an assessee. In the case of Roche Pakistan Limited v. CIT 2001 PTD 3090, after an elaborate discussion of the powers of the High Court under Article 199 of the Constitution to interfere in the proceedings under the Income Tax Ordinance, 1979 and various aspects of section 62 of the- said Ordinance, a Division Bench of this Court held that the Income Tax Officer has full authority to ask any question in relation to the Return of Income filed by an assessee and before passing any order he is required to give a notice to the assessee to .provide the necessary information or submit his explanation to the points raised by the Income Tax Officer and after providing him an opportunity of hearing and considering the reply given by the assessee pass the assessment order giving his reasons therefore including the reasons for the rejection of any explanation given by the assessee. As stated above an opportunity to the assessee to explain his point of view is a statutory requirement before passing an order of assessment. From the reading of the impugned notice, dated 3-6-2000 under section 62 of the Ordinance it is clear that respondent No.1 asked the petitioner to explain his view point on the question raised in the notice. The notice also refers to section 12(12) of the Income Tax Ordinance; relating to re-valuation of assets and inclusion of the difference between the price of assets paid by the assessee and their fair market value as deemed income of the assessee chargeable to tax under the Ordinance. Mr. Abbasi submitted that Respondent No.1, has in exercise of his powers granted to him under section 62 of the Income Tax Ordinance, performed his duty as required by law and has not transgressed his authority conferred upon him under section 62 of the Income Tax Ordinance, Mr. Abbasi explained that the Assessing Officer has neither formed any opinion nor has he passed any final order. He has only issued a Notice to the petitioner because he is obliged to do so under section 62 of the Ordinance before passing the assessment order. The issuance of Notice by respondent No.1 therefore cannot, be said to be without jurisdiction and lawful authority. Mr. Abbasi is justified in his argument and we agree with him that any order restraining Respondent No.1 from asking any question or deciding any question which is within his statutory duty and power would disturb the entire system laid down by the Income Tax Ordinance which the High Court should refrain from doing. The petitioner, in our opinion, should file its reply to the Notice supported by reported judgments cited by it in this Court and allow Respondent No.1 to consider the same and pass a written order with reasons therefore as required by section 62 of the Income Tax Ordinance.

15. The High Court under Article 199 of the Constitution of Islamic Republic of Pakistan on the application of an aggrieved party, if it is satisfied that no other adequate remedy is provided by law, is authorized to make an order directing the person performing within the territorial jurisdiction of the Court functions in connection with the affairs of the Federation to refrain from doing anything he is not permitted by law to do or to do anything he is required by law to do. Thus jurisdiction can be exercised only if there is no other adequate remedy provided by law. Under the Income Tax Ordinance, if a person is aggrieved by an order passed by an Assessing Officer, the Ordinance provides an appeal against such an order to the Commissioner of Income Tax and a second appeal to the Income Tax Appellate Tribunal and if the person is still dissatisfied with the order of the Tribunal, he can request the Tribunal to refer the question of law arising from the order of the Tribunal for an opinion of the High Court under section. 136(1) of the Ordinance; and if the Tribunal refuses to do so, he can file an application to the High Court under section 136(2) for an opinion by the High Court: It is well established that a party cannot be allowed to bypass an ordinary remedy provided by the statute ice, favour of a Constitutional petition under Article 199 of the Constitution. The Honourable Supreme Court of Pakistan has in several cases expressed its disapproval of the practice of approaching the High Court directly without resorting to the remedies available under the specific statutes and has declined to interfere in matters where the High Court has refused to exercise its discretionary jurisdiction for the aforesaid reason (see Shagufta Begum v. I.T.O. PLD 1989 SC 360, Khalid Mehmood v. Collector of Customs 1999 SCMR 1881, AI-Ahram Builders (Pvt.) Limited v: I.T.A.T. 1993 SCMR 29 and Ameen Textile Mills (Pvt.) Limited v.. CIT and others (2000 SCMR 201).

16. In light of the above, it is not necessary to discuss the various authorities cited by Mr. Shaikh on the point of maintainability of the petition and on the merits of the case. The said authorities may be referred to and used by the petitioner in its Reply to the Notice issued by respondent No. 1.

17. Accordingly, we are of the confirmed opinion that the impugned Notice, dated 3-6-2000 issued under section 62 of the Ordinance by respondent No. 1 to the petitioner is strictly in accordance with law and is neither without jurisdiction nor mala fide and because adequate alternate remedies under the provisions of the Income Tax Ordinance, 1979, are available to the petitioner, this Constitutional petition under Article 199 of the Constitution is not maintainable, it is accordingly dismissed with costs.

(Sd.)

SYED AHMED SARWANA

JUDGE.

M. MUJEEBULLAH SIDDIQUI, J.---I fully agree with the reasoning and the conclusion arrived at by my learned brother S. Ahmed Saiwana, J. I would like to cite few cases in support of the conclusion arrived at in the opinion recorded by my learned brother that the Deputy Commissioner Income Tax has the jurisdiction to consider the consequences and effects of the amalgamation of companies with the approval of High Court, for the purposes of issues pertaining to the Income-tax.

In the case of Fazilka Electricity Supply Co. Ltd. v. Commissioner of Income Tax, Delhi (1959) 36 ITR 411, the following question was referred to the High Court which arose out of the decision of the Income Tax Appellate Tribunal. The Income. Tax Appellate Tribunal heard the appeal against the findings given by the Income Tax Officer.

"Whether on the facts and in the circumstances of this case, and on a true interpretation of section 7(1) of the Indian Electricity Act and clause 9 of the Fazilka Electric Licence, 1934, the transaction, by which the Government acquired the under-taking could be regarded as a sale within the meaning of section 10(2)(vii) of the Income 'Tax Act?"

In the case of Commissioner of Income Tax v. Haji Abdul Majid Khan Zaman & Co. 1973 PTD 459, the following question was referred to the Lahore High Court arising out of the initial finding of the Assessing Officer:--

"Whether on the facts and in t e circ stances of the case the Tribunal was justified in holding that the surplus arising to the assessee firm on transfer of assets to the successor company was not taxable under the second proviso to section 10(2)(7)."

In the case of Central India Industries Ltd. v. Commissioner of Income-tax, West Bengal 1975 99 ITR 211, the following question was referred to Calcutta High Court and initially the- issue was considered and decided by the Income Tax Officer:--

"Whether, on the facts and. in the circumstances of the case, there was any exchange within the meaning of section 12B when the assessee was allotted shares in Birla Cotton Spinning and Weaving Mills Ltd. as a result of the amalgamation of Rajputana General Dealers Ltd. and Merchandise & Stores Ltd., so as to result an any capital loss in respect of the assessment year 1961-62 under section 12B of the Indian Income-tax Act, 1922?"

In the case of Shaw Wallace & Co. Ltd. v. Commissioner J Income Tax West Bengal 1979-119 ITR 399 the following question was referred which was decided in the first instance by the Income Tax Officer:--

"Whether, on the facts and in the circumstances of the case, the Tribunal was justified in law in holding that the loss representing the difference between the cost of the shares held by the assessee in Atlas Fertilizers Ltd., Bengal Distilleries Co. Ltd. and Indo-Agri. Ltd. and the net assets taken over by the assessee from the respective companies as a result of the scheme of amalgamation cannot be allowed as a capital loss within the meaning of section 45 read with S.2(47) of the Income Tax Act, 1961?"

In the case of the Commissioner of Income Tax v. Bharat Development (P.) Ltd. (1982) 135 ITR 457, the issues considered and finally referred to Delhi High Court for opinion were follows:--

"Whether, on the facts and in the circumstances of the case, the Tribunal was justified in holding that the surplus of Rs.2,01,445 and Rs.33,397 in the assessment year 1960 and 1961-62, respectively, arising on account of remission of debts consequent on the amalgamation of Matru Bhumi Nirman Private Ltd. and Swadeshi Nirman Private Ltd. could not be taxed as revenue receipts on the ground that the said amalgamations were neither business transactions nor adventure in the nature of trade?"

"(1) Whether, on the facts and circumstances of the case, the Income-tax Appellate Tribunal was justified in holding that the amalgamation of four companies, namely, Rashtriya Agencies (Pvt.) Ltd., Messrs Rajasthan Udyog Pvt. Ltd., Messrs Pepsu Trading Co. Ltd. and Messrs Dadri Marketing Ltd. was neither a business transaction nor an adventure in the nature of trade?

(2) Whether, on the facts and in the circumstances of the case, the Income-tax Appellate Tribunal was justified in holding that the surplus of, Rs.4,10,415 was riot taxable' as Revenue gain?"

In the case of Commissioner of Income Tax v. Karimi Industries 1983 PTD 100, reference was made to the Peshawar High Court as follows, which was decided at the initial stage by the Assessing Officer:--

"Whether on the facts and in the circumstances of the case, the Tribunal was justified in holding that the transfer of assets in. this case did not constitute a sale which could attract the provisions of section 10(2)(vii) of the Income Tax Act, during the year 1962-63?"

In the case of Forbes Forbes Campbell and Company Ltd. v. Commissioner of Income-tax, Bombay (1984) 150 ITR 529. The Assessing Officer decided the tax related issues arising out of the amalgamation of the two companies and ultimately the following question was referred to the Bombay High Court for opinion:--

"Whether, on the facts and in the circumstances of the case, the amount of Rs.2,55,378 being the excess of the value of the net assets of Latham Abercrombie and Co. Ltd., On the date of its amalgamation over the cost of the applicant's shareholding in that company is chargeable to tax as capital gains under section 45 of the Income Tax Act, 1961?"

In the case of Commissioner of Income Tax, Karnataka v. Master Raghuveer Trust (1985) 151 ITR 368, the Assessing Officer, decided certain tax related issues arising out of the amalgamation of the two companies and the following questions were referred to the Karnataka High Court for opinion:

"(1) Whether, on the facts and in the circumstances of the case, the Tribunal was justified in law in holding that no transfer was involved within the meaning of section 2(47) on the amalgamation of Syndicate Bank Ltd. with the Industrial Credit and Development Syndicate in spite of the provisions of section 47(vii) so as to attract the capital gains tax?

(2) Whether, on the facts and in the circumstances of the case, the Tribunal was justified in holding that in the event of it being held that a transfer was involved in the transaction in question, proportionate exemption to the extent of Rs.100 out of the total consideration of Rs.235 paid for every share of Rs.100 held in Syndicate Bank Ltd., would be available o the assessee?"

The purpose of citing the above cases is to show that the Assessing Officer have been exercising jurisdiction to consider the tax related issues arising out of amalgamation of the companies and consequently, the impugned show-cause notice issued by the Deputy Commissioner of Income-tax is within his competent and jurisdiction to which no exception can be taken. The petition is pre-mature and without any substance which stands dismissed accordingly.

M.B.A./S-283/KPetition dismissed.