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

----Ss. 116, 63 & 138-E(4)---Imposition of penalty after notice of hearing, etc. ---Penalties could not be imposed in consequence of penalty proceedings initiated on the basis of assessment framed under S.63 of the Income Tax Ordinance, 1979 which stood modified by virtue of order under S.138-E(4) of the Income Tax Ordinance, 1979---Validity-- Assessment orders framed under S.63 of the Income Tax Ordinance, 1979 remained in force because those were neither vacated nor set aside by the Income Tax Settlement Commission---Only figures of property income adopted by the Assessing Officer were modified-- Assessing Officer rightly proceeded to finalize the penalty proceedings for the default, cognizance of which was taken during the course of assessment proceedings, and which remained in force for all purposes.

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

----Ss. 116, 63 & 138-E(4)---Imposition of penalty after notice of hearing, etc. ---Assessment framed under S.63 of the Income Tax Ordinance, 1979 was modified by virtue of order under 5.138-E(4) of the Income Tax Ordinance, 1979---Initiation. of penalty proceedings-- Assessee contended that there was an agreed assessment and penalties could not be imposed in case of agreed assessment---Validity---Penalty proceedings had been initiated before any agreement was reached and those were pending at the time of order passed by the Income Tax Settlement Commission---Had there been any agreement in respect of penalty proceedings. that should have been mentioned in the Income Tax Settlement Commission's order---Since there was no direction by the Income Tax Settlement Commission with regard to penalty proceedings already initiated and pending at the time of the order passed under S.138-E(4) of the Income Tax Ordinance, 1979, it could not be presumed that those had been dropped in consequence of settlement of her of the Income Tax Settlement Commission.

1992 PTD 155; 2001 PTD 1206 and 2001 PTD 2416

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

----Ss.116 & 111---Imposition of penalty after notice of hearing, etc.--Limitation---Since penalty orders were not passed within two years from. the date of service of notices issued under S. I 16 of the Income Tax Ordinance, 1979, same had become barred by limitation of time-- Validity---Assessing Officer was directed to drop the penalty proceedings in case the show-cause notices issued under 5.116 of the Income Tax Ordinance, 1979 were served upon the assessee on 30-6-1999-- However, if the notices were served after 30-6-1999, the penalty order passed under Ss.116 & III of the Income Tax Ordinance, 1979 shall, remain in force.

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

----Ss.27(2)(a) & 62---Capital gain--Receipt under an agreement for non-competition in business ---Chargeability to tax ---Assessee claimed it as capital receipt ---Validity---Assessee received such amount under an agreement as fee under non-competition agreement ---Assessee himself was not doing such business---Investment made in companies doing such business in which assessee was a Director had separately been sold and assessee had received his share as per his capital investment which amount was not under consideration---Assessing Officer rightly charged the amount of tax ---Assessee's case was not covered under S.27(2)(a) of the Income Tax Ordinance, 1979 and such receipts were not exempt from tax.

PLD 1978 Kar. 1047 = 1978 PTD 329; 1964 ITR 283; 1983 ITR 159 and PLD 1978 Kar. 1047 = 1978 PTD 328 ref.

PLD 1978 Kar. .1047 = 1978 PTD 329; (1991) 82 ITR 464 (SC); 53 ITR 283 (SC); (1959) 36 ITR 175 (SC); (1971) 82 ITR 804 and 1992 SCMR 250 distinguished.

2002 PTD (Trib.) 257 and 2002 PTD (Trib.) 983 rel.

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

----Ss.65, 27(2)(a), & 63---Additional assessment---Change of opinion-- Concealment of income---Re-opening of assessment ---Assessee contended that re-opening under S.65 of the Income Tax Ordinance, 1979 was not justified being change of opinion as no concealment was made and amount received as fee for non-competition in business was shown in Recortcilu3tion Statement filed alongwith the Statement of assets and liabilities--Such information was available with the Assessment Officer at the time of framing of assessment under S.63 of the Income Tax Ordinance, 1979---Validity---Objection was not maintainable as assessee had neither offered this amount for tax nor declared the same in the return as exempt income---Perusal of Reconciliation Statement filed alongwith Statement of Assets and Liabilities did not provide the details and sources of such receipt.

1993 SCMR 96; (1951) 20 ITR 208; (1982) 137 ITR 54 and PLD 1990 SC 399 rel:

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

----S.65---Additional assessment---If the income of the assessee was chargeable to tax under the provisions of law, it could not escape from such levy simply for the reason that the said income had not been taxed in the hands of another assessee.

Shafqat M. Chohan, A.R. for Appellant. Mrs. Sameera Yasin, D.R. for Respondent.

Date of hearing: 22nd February, 2003.

ORDER

KHALID WAHEED AHMAD (JUDICIAL MEMBER):--- All the titled appeals are being disposed of through this combined order for all the assessment years under consideration

2. The appellant is an individual assessee and derives income from salary, house property and agriculture. Through the titled appeals, the appellant impugns the Orders Nos. 18. 19, 17, 15 and 16 all dated 2-10-2002 passed by the learned Commissioner of Income Tax/Wealth Tax (Appeals). Zone-I, Lahore pertaining to the assessment years 1996-97, 1996-97, 1997-98, 1998-99 and 1999-2000 respectively. The issues taken by the appellant through the grounds of appeals are being reproduced below verbatim et literatim:--

(i)I.T.A. No.4713/LB of 2002 (Assessment year 1996-97)

Grounds of Appeal under section 110:----

1.That the impugned penalty dated 25-6-2002 for Rs.182,892 @ 56% of the gross amount of tax of Rs.365,783 levied under section 62/ 138E(4) of the Ordinance, is bad in law, without against, the facts of the case and law, hence not

2.That the learned C.I.T. (Appeals) has failed to consider the material facts of the- case and law. Hence, the confirmation of penalty through impugned order is not maintainable in the eye of law.

3.That the impugned penalty imposed vide order dated 25-6-2002 on the basis of cognizance in the original assessment dated 28-6-1999 under section 63 of the Ordinance, is barred by time and without jurisdiction. Hence, the penalty order is not maintainable.

4.That, the assessment order 28-6-1999 under section 63 has been modified vide order dated 13-6-2002 under section 62/138E(4) of the Ordinance, by giving effect to the directions of the learned Settlement Commission contained in order dated 5-5-2002 under section 138E(4) of the Ordinance. There fore, without taking cognizance of alleged default under sections 110/116 of the Ordinance in the final order dated 13-6-2002, the penalty order is not maintainable in the eye of law.

5.That, the Assessing Officer has failed to prove the element of MENS REA, hence the impugned penalty order is liable to be annulled.

6.That, in terms of section 110 of the Ordinance, the respondent may impose on the person "a penalty equal to fifty per cent of the amount of tax which would have been avoided if the income as returned by such person had been accepted as the correct income". Whereas, the respondent has imposed the penalty on the basis of gross amount of tax levied of Rs.365,783 under section 62/138E(4) of the Ordinance. Hence: the penalty imposed against the provisions of law is not maintainable.

7.That the all notices under section 61 of the Ordinance were duly complied with, the respondent Officer has failed to quote the date of any notice issued under section 61 of the Ordinance for which the cognizance has been taken in the assessment order under section 63 dated '28-6-1999. Hence, the impugned penalty imposed without fulfilment of the legal requirement has no legal effect.

Without prejudice to the above, there was no deliberate intention of the appellant in not compliance of notice under section 61 of the Ordinance. The respondent Officer has failed to prove the element of MENS REA, hence the impugned penalty order is liable to be cancelled.

9.That the imposing the penalty on the basis of defective notice under section 116 of the Ordinance is contradictory to the provisions of law, hence the penalty imposed on the basis of defective mandatory notice, is liable to be cancelled.

10.That the penalty order passed on the day other than fixed for hearing is not maintainable in the eye of law.

11.That the respondent has omitted to consider the reply to show cause vide letter dated 10-6-2002 in its true spirit and therefore the penalty imposed without providing the proper opportunity of being heard is liable to be cancelled.

(ii)I.T.A. No.4714/LB of 2002 (Assessment Year 1996-97)

Grounds of Appeal under section' 111:

(1)That, the impugned penalty order of Rs. 119,667 dated 5-6-2002 passed by the respondent Officer is bad in law, without jurisdiction and against the facts of the case, hence not maintainable.

(2)That, the learned C.I.T. (Appeals) is not justified to confirm the penalty order.

(3)That the impugned penalty imposed vide order dated 25-6-2002, without taking cognizance of default under section 111 in the original assessment dated 28-6-1999 under section 63 of the Ordinance, is barred by time and without jurisdiction. Hence, the penalty order is not maintainable..

(4)That, the assessment order 28-6-1999 under section 63 has been modified vide order dated 13-6-1999 under section 62/138E(4) , ofthe Ordinance, by giving effect to the directions of the learned Settlement Commission contained in order dated 5-5-2002 under section 138E(4) of the Ordinance. Therefore, without taking cognizance of alleged default under sections 111/116 of the Ordinance in the final order dated 13-6-2002 the penalty order is not maintainable in the eye of law.

(5)That the imposition of penalty under section 111 on the basis of notional income assessed for Rs.600,000 under section 13(1)(d) of the Ordinance, do not fall within the ambit of "INACCU RATE PARTICULARS" in terms of section 111 of the Ordinance. Hence, the impugned penalty is not maintainable.

(6)That, the Assessing Officer has failed to prove the element of MENS REA, hence the impugned penalty order is liable to be annulled.

(7)That the show-cause notice issued under section 116 of the Ordinance was defective in nature and therefore, the penalty imposed on the basis of such notice is liable to be deleted.

(8)That the respondent has omitted to consider the reply to show cause vide letter dated 10-6-2002 in its true spirit and therefore the penalty imposed without providing the proper opportunity of being heard is liable to be cancelled.

(iii)I.T.A. No.4715/LB of 2002 (Assessment Year 1997-98)

Grounds of Appeal under section 110

(1)That, the impugned penalty dated 25-6-2002 for Rs.74,843 @ 50% of the gross amount of tax of Rs.148,873 levied under section 62/138E(4) of the Ordinance, is bad in law, without jurisdiction and against the facts of the case and law, hence not maintainable.

(2)That, the learned C.I.T. (Appeals) has failed to consider the material facts of the case and law. Hence, the confirmation of penalty through impugned order is not maintainable in the eye of law.

(3)That the impugned penalty imposed vide order dated 25-6-2002 on the basis of cognizance in the original assessment dated 28-6-1999 under section 63 of the Ordinance, is barred by time and without jurisdiction. Hence, the penalty order is not maintainable.

(4)That, the assessment order 28-6-1999 under section 63 has been modified , vide order dated 13-6-2002 under section 62/ 138E(4) of the Ordinance, by giving effect to the directions of the learned Settlement Commission contained in order dated 5-5-2002 under section 138E(4) of the Ordinance. Therefore, without taking cognizance of alleged default under sections 110/ 116 of the Ordinance in the final order dated 13-6-2002, the penalty order is not maintainable in the eye of law.

(5)That, the Assessing Officer has failed to prove the element of MENS REA hence the impugned penalty order is liable to be annulled.

(6)That, in terms of section 110 of the Ordinance, the respondent may impose on the person "a penalty equal to fifty per cent of the amount of tax which would have been avoided if the income as returned by such person had been accepted as the correct income". Whereas, the respondent has imposed the penalty on the basis of gross amount of tax levied of Rs.148,873 under section 62/138E(4) of the Ordinance. Hence, the penalty imposed against the provisions of law is not maintainable.

(7)That the all notices under section 61 of the Ordinance were duly complied with, the respondent Officer has failed to quote the date of any notice issued under section 61 of the Ordinance for which the cognizance has been taken in the assessment order under section 63 dated 28-6-1999. Hence, the impugned penalty imposed without fulfilment of the legal requirement has no legal effect.

(8)That, in the assessment order under section 63 dated 28-6-1999 the respondent Officer himself admitted that on the issue of notice under section 62 the case was adjourned till 2-6-1999, whereas he showed his intention to make ex parte order on 31-5-1999. Hence, the impugned penalty imposed with mala fide intention has no legal effect.

(9)Without prejudice to the above, there was no deliberate intention of the appellant in not compliance of notice under section 61 of the Ordinance. The respondent Officer has failed to prove the element of MENS REA, hence the impugned penalty order is liable to be cancelled.

(10)That imposing the penalty on the basis of defective notice under section 116 of the Ordinance is contradictory to the provisions of law, hence the penalty imposed on the basis of. defective mandatory notice is liable to be cancelled.

(11)That the penalty order passed on the day other than fixed for hearing is not maintainable in the eye of law.

(12)That the respondent has omitted to consider the reply to show cause vide letter dated 10-6-2002 in its true spirit and therefore the penalty imposed without providing the proper opportunity of being heard is liable to be cancelled.

(iv)I.T.A. No.4716/LB of 2002 (Assessment Year 1998-99)

Grounds of Appeal under sections 62/65

(1)That, the orders of the both authorities below without consideration of the material' facts of the case and law. Hence, not maintainable in the eye of law.

Additions under section 13(1)(d)

(2)That the addition of ks.175,253 under section 13(1)(d) of the Ordinance, on the .ground of difference between declared purchase price by the appellant of Rs.15,50,000 for a Suzuki Vitara Jeep and its import value of Rs.17,25,253 paid by the seller Mst. Busra Bibi of Sheikhupura is against the provisions of law, hence not maintainable.

(3)That the appellant has not imported the said vehicle and purchased the same from the open market at the prevailing market price. Therefore, without bringing on record the contrary evidence, the impugned addition of Rs.173,253 is unjustifiable', hence is liable to be deleted.

(4)That cost of registration and CTV etc. of Rs.63,596 for, Toyota Corrolla Car purchased against Rs.15,50,000 has been charged to personal expenses and therefore the addition of said amount of Rs.63;596 under section 13(1)(d) of the Ordinance is without any lawful justification, hence not maintainable.

(5)That the source of said expenses of Rs.63,596 was not disputed by the Assessing Officer and therefore, the addition of .said amount under section 13(1)(d) of the Ordinance. is contrary to the provisions of section 13 of the Ordinance, hence not maintainable.

Additions under section 13 (1) (aa)

(6)That the addition of Rs.16,84,991 under section 13(1)(aa) of the Ordinance is contrary to the provisions of law and the facts of the case, hence not maintainable.

(7)That the appellant in the wealth statement has accounted the capital gain of Rs.81,90,000 against the sale price of Rs.10,125,009 by deducting the cost of land of Rs.18,10,000 and over head expenses of Rs.125,000. The observations of the Assessing Officer are contrary to the facts of the case, hence the said addition is liable to be deleted.

Tax on Capital Receipt

(8)That the amount of Rs.84,500,000 received as compensation by the appellant during, the year, under the Non-competition Agreement with the Coca Cola Beverage Pakistan Limited is of Capital nature, hence not liable to tax under the Ordinance Reliance is made on:

PLD 1978 Kar. 1047 = 1978 PTD 328;

1964 ITR 283

1983 ITR 159

(9)That, the aforesaid, compensation received not falls within the definition of "income" chargeable to' tax under any provision of the Ordinance. Hence is not liable to be taxed.

(10)That, the taxation of Rs.16,900,000 out of aforesaid amount of Rs.84,500 millions on the alleged ground of fee for the year under the non-competition agreement is contrary to the law and the fact of the case, hence not maintainable.

(11)That "FEE" is receivable against services rendered whereas the appellant has been restrained under the agreement for doing some thing. Therefore, the said consideration received falls within the definition of "COMPENSATION". Hence, not liable to tax under the Ordinance.

(12)That the appellant has not concealed the receipt of Rs.84,500 million and, the same was duly reconciled in the wealth statement, hence the notice issued under section 116 is liable to be cancelled.

(v)I.T.A. No.4717/LB of 2002 (Assessment Year-1999-00)

Grounds of Appeal under section 62 ,

(1)That, the orders of the both authorities below have been passed without consideration of the material facts of the case and law. Hence, are not maintainable in the eye of law.

Valuation of Rental Income

(2)That the valuation of ALV of the properties at Rs:671,580 against the declared at ,Rs.265,200 is without any proper basis and spot inquiries, hence not maintainable.

(3)That the appellant has declared the taxable rental income of Rs.185,411 value on the basis of actual rent received and therefore without bringing on record and contrary evidence, the assessment of rental income at Rs.303,797 later on reduced, to Rs.270,000 is still unjustifiable, hence not maintainable in the eye of law.

Tax on Capital Receipt.

(4) That the amount of Rs.84,500,000 received as compensation by the appellant during the assessment year 1998-99, under the Non-competition. Agreement with the Coca Cola Beverage Pakistan Limited is of Capital nature, hence not liable to tax under the Ordinance. Reliance is made on:

PLD 1978 Kar. 1047 =1978 PTD 328

1964 ITR 283

1983 ITR 159

(5) That, the aforesaid compensation received not falls within the definition of "income" chargeable to tax under any provision of the Ordinance. Hence is not liable to be taxed.

(6) That, the taxation of Rs.16,900,000 out of aforesaid amount of Rs.84,500 millions, on the alleged ground of fee for the year under the non-competition agreement is contrary to the law and the fact of the case, hence not maintainable.

(7) That, without prejudice to the aforesaid grounds, the alleged fee received is taxable in the year of the actual receipt, hence not taxable in the subject assessment year.

(8) That "fee" is receivable against services rendered whereas the appellant has been restrained under the agreement for doing something. Therefore, the said consideration received falls within the definition of "COMPENSATION". Hence, not liable to tax under the Ordinance.

(9) That the appellant has not concealed the receipt of Rs.84,500 million and the same was duly reconciled in the wealth statement for the assessment year 1998-99, hence the notice issued under section 116 is liable to be cancelled.

3. I.T.As. Nos.4713 4714 and 4715/LB of 2002 (Assessment Year 1996-97. 1996-97 and 1997-98).

Penalty under section 110 for the Assessment Years 1996-97 and 1997-98 and Penalty under section 111 for the Assessment year 1996-97.

Learned A.R. of the assessee in his arguments challenged the validity of the penalty order passed by the Assessing Officer mainly on the ground that the penalty imposed on the basis of proceeding initiated as a result of the original assessment dated 28-6-1999 framed under section 63 of the Ordinance was without jurisdiction because according to him these assessments were no more in existence having, been modified in consequence of the order passed by the Income Tax Settlement Commission (ITSC) under section 138E of the Income Tax Ordinance, 1979 and no cognizance was taken by the Assessing Officer while modifying the assessment vide his order dated 13-6-2002 under section 62/138E (4) of the Income Tax Ordinance, 1979. In this context. Learned A.R. cited the decision of the Tribunal reported as 1992 PTD 155 whereby it was held that to take cognizance of default for imposing penalty was necessary at the time of passing of the assessment order. It was also the contention of the learned A.R. of the of the assessee that the orders to impose penalty on 25-6-2002 on the basis of the assessment framed under section 63 of the Ordinance on 28-6-1999 were also barred by limitation of time under the proviso to section 116 of the Income Tax Ordinance, 1979. According to the learned A.R., the notices issued under section 116 of the Ordinance on the basis of assessment framed under section 116 on 28-6-1999 for all the years under consideration were served upon the assessee on 30-6-1999 and since no order was passed within the two years, these have become barred by limitation of time on 30-6-2001. Learned A.R. of the assessee contended that though this objection was not raised during the appeals filed against the penalty orders before the learned First Appellant Authority, however, it is the contention of the learned A.R. that being a legal objection going to the roots of the case, it could be raised before the Tribunal. It was also contended by the learned A.R. of the assessee that even on merits of the case, the penalty imposed was not justified after the issue having been settled by the ITSC. It is the contention of the learned A.R. that no penalty can be imposed in view of the case having been settled by the ITSC on agreed basis. The contention of the learned A.R. that the assessee has withdrawn his appeal in view of the agreement reached before the ITSC in which the issues under consideration were also raised by him, thus, it has also become a part of the agreement and now consequently no penalty can be imposed. Learned A.R. submitted that no penalty proceedings can be initiated in case of agreed assessment and to support this view point cited the case-law reported as 2001 PTD 1206 (Lah. H.C) and 2001 PTD 2416 (Lah. H.C.).

On the other hand, learned D.R. in his arguments supported the impugned order with the submission that the Assessing Officer was justified to impose the penalties because default under section 13 stood established. According to the learned D.R., the assessee himself accepted the' default under section 13(1)(d) before the Settlement Commission, therefore, was liable to imposition of penalty under section 111 of the Ordinance for the assessment year 1996-97. It is the contention of the learned D.R. that by the order of the Settlement Commission, the, assessments framed were modified only in respect of the property income and all remaining defaults, the cognizance of which was taken by the Assessing Officer were not agitated and thus stood confirmed and accepted by the assessee. Learned D.R. further submitted that the assessments framed by the Assessing Officer under section 63 of the Income Tax Ordinance, 1979 were not cancelled or set aside and thus the original order remained in force which was only modified to the extent of property income. According to the learned D.R., the penalty imposed on the basis of the notice issued in consequence of the assessment framed under section 63 was justified.

Arguments of learned representatives of both the parties have been heard and the relevant orders perused. Since the contentions raised by the assessee in all the three years are common, these are being disposed of through this combined order. We do not agree with the viewpoint expressed by the learned A.R. of the assessee that the penalties could not be imposed in consequence of penalty proceedings initiated on the basis of assessment framed under section 63 of the Ordinance which according to him stood modified by virtue of order under section 138E(4) of the ITSC. According to the learned A.R. of the assessee fresh notice under section 116 of the Ordinance was required to be, issued in consequence of the assessment order modified under section 138E(4) of, the Ordinance. In our opinion, the assessment orders framed under section 63 of the Ordinance remained in force because these were neither vacated nor set aside by the ITSC, Lahore vide its combined order dated 4-4-2000. The perusal of the said ITSC order reveals that only the figures of property income adopted by the Assessing Officer as per assessment framed under section 63 were modified. Under the circumstances, in our considered view, the Assessing Officer rightly proceeded to finalize the penalty proceedings for the default the cognizance of which was taken during the course of assessment proceedings, the order for which- remained in force for all purposes.

The contention of the learned A.R. that the penalty proceedings could not be imposed in the case of the agreed assessment is also not acceptable considering the facts of the instant case. The case-law cited by the assessee is also, not of any help to him for the reason that the facts of the instant case are distinguishable in the instant case. The penalty proceedings had been initiated before any agreement was reached and these were pending at the time of the order passed by the ITSC. Had there been any agreement in respect of the penalty proceedings, there should have been mention of the same in the ITSC's order. Since there was no direction by the ITSC with regard to the penalty proceedings already initiated and pending at the time of the order passed under section 138E (4) of the Ordinance, it cannot be presumed that these have dropped in consequence of the settlement order of the ITS. As a result the appeal of the assessee on this issue also fails.

However, the contention of the learned A.R. that the penalties imposed on the basis of the notice under section 116 of the Ordinance which have been served on 30-6-1999 were barred by limitation of time carries weight. The Assessing Officer is directed to drop the penalty proceedings in case the show-cause notices issued under section 116 of the Ordinance were served upon the assessee on 30-6-1999. However, if the notices were served after 30-6-1999, the penalty orders passed under section 116 for the assessment years 1996-97 and 19978-98 and under section 111 of the Ordinance for the assessment year 1996-97 shall remain in force.

All the three appeals for the assessment years 1996-97 and 1997-98 stand disposed of in the manner mentioned above:

4. I.T.A. No.4713, 4716 and 4717/LB of 2002 (Assessment Year 1998-99 and 1999-00).

The main issue raised through the grounds of appeals for both the years under consideration is the chargeability to tax of the amount received by the assessee as fee under non-competition agreement with Messrs Coca Cola Beverages Pakistan Limited. The estimation of property income for both the years under consideration and the additions made under sections 13(1)(d) and 13(1)(aa) made in the income for the assessment year 1998-99 have' also been contested through the grounds of appeals filed by the assessee.

The original assessment for the assessment year 1998-99 was completed at income of Rs.16,31,782 on 30-6-1999 under section 63 of the Income Tax Ordinance, 1979 due to the non-compliance of the statutory notices and non-furnishing of the essential documents such as wealth statement, wealth reconciliation statement etc. Subsequent to the completion of the income tax proceedings and during the wealth tax proceedings, it came to light that the assessee had received an amount of Rs.84,500,000 from Messrs Coca Cola' Beverages Pakistan Ltd. This amount was paid to the assessee in lieu of the non-competition agreement dated 9-1-1998 executed between the assessee and Messrs Coca Cola Beverages Pakistan Limited. The assessee was paid Rs.84,500,000 as consideration, in advance, for five years (1,69,00,000 per year) for not competing, utilizing his unique knowledge/experience in the field of business of beverages, for refraining from producing distributing or selling soft drinks (directly or indirectly) etc.

Later on, the case of the assessee was reopened under section 65 of the Ordinance for non-declaration of the amount of Rs.1,69,00,000 in the Return filed by him for the assessment year 1998-99. Re-assessment for the assessment year 1998-99 under sections 62/65 of the Ordinance and assessment for the assessment year 1999-2000 under section 62 of the Ordinance were completed by the Assessing Officer in the following manner:--

Assessment year 1998-99

ASSESSMENT YEAR 1999-2000

COMPUTATION OF INCOME

The additions of Rs.1,69,00,000 each made in the income of the assessee for the assessment years 1998-99 and 1999-2000 were contested to be unjustified through the grounds of appeals filed by the assessee before the learned First Appellate Authority. The addition made under section 13(1)(aa) and profit on sale of land as well as the estimation of property income were also contested to be unjustified through the grounds of appeal field before the learned First Appellate Authority for the assessment year 1998-99.

The contention of the assessee that the amount received from Messrs Coca Cola Beverages Pakistan Limited as Fee under the Non -Competition Agreement was receipt of capital nature which was not chargeable to tax. However, this plea of the assessee was not accepted by the learned First Appellate Authority which upheld the order of the Assessing Officer. The additions made under section 13(1)(d) and 13(1)(aa) of the Ordinance in the Income of the assessee for the assessment year 1998-99 were also upheld by the learned C.I.T.(A). However, the addition made to the income of the assessee on account of gain on sale of land for the assessment year 1998-99 was deleted by the learned C.I.T.(A). The property income for the assessment year 1999-2000 vas, however, fixed at Rs.2,70,000 in view of the same reduced to Rs.2,.60,000 against the assessed property income at, Rs.4,66.933 by the ITSC.

Learned A.R. of the assessee in his arguments mainly reiterated the same arguments as put forth by the authorities below. According to the learned A.R., the re-opening of assessment for the assessment year 1998-99 under section 65 of the Income Tax Ordinance, 1979 was not justified. It is the contention of the learned A.R. of the assessee that no concealment was made and the amount of Rs.8,45,00,000 was shown by him in the Reconciliation Statement filed alongwith the Statement of Assets and Liabilities as on 30-6-1998. Learned A.R. of the assessee contended that the initiation of the proceedings under section 65 was not justified being change of opinion because of the facts available on record while framing the assessment under section. 63 of the Income Tax Ordinance, 1979. In this context, learned A.R. of the assessee relied upon the decision of the Honourable Supreme Court of Pakistan reported as 1993 SCMR 96 whereby it was held that when once all the facts have been fully disclosed by the assessee and considered by the Income Tax Authorities and assessment has been consciously completed and no new fact has been discovered, there can be no scope for interference. With these concluded transactions under the provisions of section 65 on the ground that the income chargeable to tax has escaped assessment or has been under assessed etc. In this regard, the following case-law was also referred by the assessee:

(1951) 20 ITR 208; (1982) 137 ITR 54 and PLD 1990 (SC) 399

Learned A.R. of the assessee contended that notice under section 65 issued on the basis of the wealth tax assessment proceedings was not justified because the information on the basis of which the proceedings initiated were already available in the income tax assessment record while the proceedings under section 63 were completed. Learned A.R. also challenged the initiation, of the proceedings under section 65 and chargeability to tax of the amounts under consideration on the ground that the notice issued under section 65 on the similar ground has been withdrawn in the case of the other Directors and the amount was not charged to tax.

Learned A.R. of the assessee in his arguments vehemently contended that that taxability of the amounts received under the non- competition agreement with Messrs Coca-Cola Beverages Pakistan Limited. It is the contention of the learned A.R of the assessee that the amounts received from Messrs Coca Cola Beverages Pakistan Ltd. were of the nature of capital receipts which according to hint were not chargeable to tax. Learned A.R. stated that assessee received the said payments for not doing certain business. It is the contention of the learned A.R. that the assessee received the said amount being Director of the companies namely Messrs Durrani Bottles and Adil Beverages Ltd. learned A.R. further stated that Messrs Coca Cola Beverages purchased the above said two companies carrying on the business of beverage in which the assessee was also a Director and Shareholder. According to the learned A.R. to safeguard their interest Messrs Coca Cola Beverages Pakistan Limited also entered into separate agreements with the three Directors of the above companies under which they were paid certain amounts for not competing in the business of beverages for a period of five years for which they were paid compensation. It is the contention of the learned A.R. that since the assessee was stopped from his right to do a business, the payments against prohibition of such right were capital receipts which according to him were not chargeable to tax. To support his viewpoint, learned A.R. of the assessee relied upon the decision of the Karachi High Court reported as (1979) 39 Tax 21. In the quoted case, the assessee who was a sole agent was paid compensation on termination of Agency for loss of Sole Selling Agency's rights on the condition that it became a Dealer o the Principal impliedly not to compete with the business of the principal company. The compensation received was held to be capital receipts in the hands of the assessee. Learned A.R. also cited the case-law reported as (1991) 82 ITR 464 (SC); 53 ITR 283 (SC) and (1959) 36 ITR 175 (SC) in this regard. Learned A.R. further argued that the compensation received by the assessee was related to the investment made by him in the companies namely Messrs Durrani Bottles and Messrs Adil Beverages Ltd. It is the contention of the learned A.R that if the amounts were received by the company doing the said business of Beverages as capital received the same therefore, was to be treated as capital receipts in the hands of the Directors also. In this context, learned A.R. of the assessee cited the case-law reported as (1971) 82 ITR 804. Learned A.R. also cited the decision of the Supreme Court of Pakistan reported as 1992 SCMR 250. The facts of the quoted case are distinguishable from those in the instant case. In the case before us, the amount has neither been received by the companies nor declared as exempt from tax in the hands of the company.

With regard to the additions made under sections 13(1)(aa) and 13(1)(d), it was the contention of the learned A.R. that the additions made were unjustified. According to the learned A.R. the Assessing Officer has not properly appreciated the explanation filed by the assessee. On the issue of the assessment of property income for the assessment year 1999-2000, it was the contention of the learned A.R. of the assessee that the estimate of income adopted by the Assessing Officer was without any basis. According to the learned A.R., the assessee was not confronted on the proposed rental value to be adopted.

Learned D.R. in his arguments defended the impugned order for the same reasons as mentioned by the two authorities below in their orders. According to the learned D.R., the amounts received by the assessee were rightly charged to tax being the amounts paid as Fee under the Contract for Non-Competition. It is the contention of the learned D.R. that the receipts of the assessee were in lieu of the profit from business, therefore, these were taxable under the Income Tax Ordinance. Learned D.R. further submitted that the companies namely Messrs Durrani Bottlers and Messrs Adil Beverages Ltd., were voluntarily sold and there was no coercion to enter into an agreement upon the assessee and he has voluntarily withdrawn his rights to do the business of Beverages by entering into an agreement with Messrs Coca Cola Beverages. Learned D.R. also supported the addition made under sections 13(1)(aa) and 13(1)(d) in the income of the assessee for the assessment year 1998-99 for the same reasons as given by the Assessing Officer. Learned D.R. further submitted that the property income fixed at Rs.2,70,000 for the assessment year 1999-2000 was justified and reasonable in view of the history of the case.

Arguments of learned representatives of both the parties have been heard and the orders of the Authorities below as well as the case -law cited by both the parties have also been perused. Learned representatives of both the parties have mainly put forth their arguments on the issue of changeability to tax of the amounts received as fee under non-competition agreement with Messrs Coca Cola Beverages Pakistan Limited. In our opinion, the findings of the learned C.I.T. (A) on the issue are justified being well reasoned. The case-law relied upon by the assessee has been discussed in detail and distinguished by both the authorities below. Learned A.R. of the assessee has not been able in convincing us that how the amount received by the assessee under the agreement was not chargeable to tax or it was exempt from tax under any provision of law? The assessee received the amount in question under an agreement with Messrs Coca Cola Beverages Pakistan Limited as fee under non-competition agreement. It is important to point out here that the assessee himself was not doing the business of beverages. So far as the investment made in the two companies doing the business of beverages in which the assessee was a Director have separately been sold and the assessee has already received his share as per his capital investment which amount is not under consideration before us. In our opinion, the Assessing Officer rightly charged the amount of tax relying upon the decision of the Tribunal reported as 2002 PTD (Trib.) 257.

So far as the contention of the assessee that the amounts are receipts of capital nature, he has not been able in convincing us that how he was not chargeable to tax? Even the capital gains are chargeable to tax under the provisions of section 15 and section '27 of the Income Tax Ordinance, 1979. This issue also stands settled with the findings of the Tribunal in the reported as 2002 PTD (Trib.) 983. The case of the assessee is not covered under section 27(2)(a). In our opinion, such receipts are not exempt from tax.

The objection raised by the assessee with regard to re-opening of assessment under section 65 for the assessment year 1998-99 is not maintainable. The assessee has neither offered this amount for tax nor declared the same in the Return as exempt income. Further, the assessments were framed under section 63 of the Ordinance and the perusal of Reconciliation Statement filed alongwith the Statement of Assets and Liabilities does not provide the details and sources of such receipts.

As far as the contention of the assessee that the amounts could not be charged to tax in the hands of the assesses because the proceedings initiated under section 65 on the similar basis in the case of other Directors were dropped is concerned, it is not acceptable, because there is no estoppel in law. If the income of the assessee is chargeable to tax under the provisions of law, it cannot be escaped from such levy simply for the reason that the said income has not been taxes in the hands of another assessee. Under the circumstances of the case, the order of the learned C.I.T.(A) on this issue is maintained and the appeals of the assessee fail for the assessment years 1998-99 and 1999-2000.

Regarding the additions made under sections 13(1)(aa) and 13(1)(d), learned A.R. of the assessee has not been able to make out a case by putting forth any convincing argument or material in support of his contention. The findings of the learned C.I.T. (A) on both the issues are well reasoned, hence the same are not disturbed.

The estimation for the property income fixed for the assessment year 1999-2000 is also maintained being justified and reasonable under the circumstances of the case.

As result, the appeals of the assessee for both the years 1998-99 and 1999-2000 fail being devoid of any merits.

C.M.A./955/Tax(Trib.) Appeals dismissed.