Messrs S.N. H. INDUSTRIES (PVT.) LTD. VS INCOME-TAX DEPARTMENT and another, 2004 PTD-KARACHI-HIGH-COURT-SINDH 330 (2003)

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

----S.66-A---Re-opening of case---Power of Inspecting Additional Commissioner to revise Deputy Commissioner's order---Scope and prerequisites---Phrase "Prejudicial to the interests of the Revenue" has to be read in conjunction with "an erroneous order passed by the Assessing Officer"---Every loss of revenue in consequence of an order of the Assessing Officer could not be treated as prejudicial to the interests of the Revenue---Principles.

Section 66-A of the Income Tax Ordinance, 1979 had conferred powers on the Inspecting Assistant Commissioner/Additional Inspecting Assistant Commissioner to revise the order of Assessing Officer/Deputy Commissioner of Income Tax, after calling for and examining the record of any proceedings under the Ordinance, if he considered and was of the view that an order passed by the Assessing Officer/Deputy Commissioner of Income Tax was erroneous inasmuch as it was prejudicial to the interests of the Revenue. It further empowered the Assessing Officer/Deputy Commissioner of Income Tax to pass such order as the circumstances of the case would justify including an order enhancing or modifying the assessment, or cancelling the assessment and directing' a fresh assessment to be made subject to the condition that appropriate and effective opportunity of being heard was provided to the assessee/aggrieved party. From a bare perusal of section 66-A of the Ordinance it is to be noted that the Inspecting Assistant' Commissioner, was required to minutely examine the record of any proceedings which included the assessment finalized by the Assessing Officer/Deputy Commissioner of Income Tax to conclude that the assessment was erroneous and prejudicial to the interests of the Revenue to attract the provisions of this section.

The prerequisite to the exercise of jurisdiction by the Commissioner suo motu under it, is that the order of the Income-tax Officer is erronebus insofar as it is prejudicial to the interests of the Revenue. The Commissioner has to be satisfied of twin conditions, namely, (i) the order of the Assessing Officer sought to be revised is erroneous; and (ii) it is prejudicial to the interests of the Revenue. If one of them is absent i.e. if the order of the Income-tax Officer is erroneous but is not prejudicial to the Revenue or if it is not erroneous but is prejudicial to the Revenue; recourse cannot be had to the said section.

There can be no doubt that the provisions cannot be invoked to correct, each and every type of mistake or error committed by the Assessing Officer, it is only when an order is erroneous that the section will be attracted. An incorrect assumption of facts or an incorrect application of law will satisfy the requirement of the order being erroneous. In the same category falls orders passed without applying the principles of natural justice or without application of mind.

The phrase `prejudicial to the interests of the Revenue' has to be read in conjunction with an erroneous order passed by the Assessing Officer. Every loss of revenue as a consequence of an order of the Assessing Officer cannot be treated as prejudicial to the interests of the Revenue. For example, when an Income-tax Officer adopted one of the courses permissible in law and it has resulted in loss of Revenue; or where two views are possible and the Income-tax Officer has taken one view with which the Commissioner does not agree, it cannot be treated as an erroneous order prejudicial to the interests of the Revenue; unless the view taken by the Income-tax Officer is unsustainable in law.

Malabar Industrial Co. Ltd. v. Commissioner of Income-tax 2001 PTD 1106 applied.

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

----S.66-A---Constitution of Pakistan (1973), Art.199---Constitutional petition-- Reopening of case---Change of opinion by the Assessing Officer---Powers of Inspecting Additional Commissioner of Income Tax to revise Deputy Commissioner's order---Scope and extent---Capital gain---Business income---Loss of revenue ---Determination-- Principles-- Assessee, a company engaged in manufacturing and assembling television sets---Show-cause notice under S.66-A; Income Tax Ordinance, 1979 was issued to the assessee by Inspecting Assistant Commissioner on the ground of assessment order being erroneous as the Assessing Officer had wrongly dealt with a sum of Rs.75,00,000 by treating the amount as "capital gain" instead of "business income/profit and not subjecting same to tax which had led to the loss of revenue to the Government---Validity---Ground given in the show-cause notice that the sale of a commercial property by the assessee within a span of one and half years for a solitary transaction, was a transaction clearly in the nature of trade and business liable to be taxed, was a change of view/mind as previously after, accepting the explanation given by the assessee, the Assessing Officer had agreed with the assessee and had accepted the claim that the gain of Rs.75,00,000 was a "capital gain" exempt from tax and had been rightly transferred to profit and loss account---Assessment order had been finalized in consultation with the approval of the Commissioner of Income Tax and Assessing Officer before finalizing the assessment and releasing the same had discussed the same with the Inspecting Assistant Commissioner, thus both the Inspecting Assistant Commissioner and the Commissioner of Income Tax had scrutinized and examined the case of the assessee with regard to the nature of gain/profit of Rs.75,00,000 claimed by the assessee as "capital gain"---Both the Commissioner as well as Inspecting Assistant Commissioner, in circumstances, were stripped of the powers to exercise jurisdiction under S.66-A, Income Tax Ordinance, 1979 and the impugned notice was not issued in lawful exercise of jurisdiction---

The assessee, a private limited company incorporated under the Companies Ordinance, 1984, engaged in the business of manufacturing/assembling television sets filed its return of income for the assessment year 1991-1992 under section 55 of the Income Tax Ordinance, 1979 declaring a total income from business at Rs.29,17,506 in Part I of the return; in Part II of the return it claimed exemption in respect of-an amount of Rs.75,00,000 from sale of a portion of plot on the ground that it was capital gain; and in Part III of the return disclosed an amount of Rs.46,98,034 which was the tax deducted at source under section 50(5) of the Ordinance on imports, whereas the total tax payable by the assessee was Rs.16,30,371, thus claiming refund of a, sum of Rs.30,67,663 which was paid/deducted at source in excess of the tax due and payable. The assessment was finalized under section 62 in pursuance of a notice under section 61 of the Ordinance after detailed examination and scrutiny of the books of accounts, documents and the explanations submitted by the assessee. The assessee further submitted that additional evidence was also called for by the Income Tax Officer, as well as elaborate details of various accounts, reasons for lower production, reduced sales and explanations as to why the sale proceeds of Rs.5,000,000 from sale of a portion of plot was not to be treated income liable to tax. The assessee submitted that Assessing Officer, perusal, examination and scrutiny of all the above evidence, books of accounts and explanations finalized the assessment approval of the Commissioner of Income Tax, to whom the was forwarded by the Inspecting Assistant Commissioner of Income Tax. Inspecting Assistant Commissioner of Income Tax issued show-cause notice under section 66-A of the Ordinance calling upon the assessee to show cause as to why the assessment order be not cancelled and correct assessment be made. Feeling aggrieved and dissatisfied with the above show-cause notice and having no other alternate, adequate and efficacious remedy for assailing the same, the assessee filed Constitutional petition.  

In the present case, in the show-cause notice under, section 66-A, Income Tax Ordinance, 1979 issued by the Inspecting Assistant Commissioner, the reason advanced for the order Being erroneous was that the Assessing Officer had wrongly dealt with a sum of Rs.75,00,000 by treating it as capital gain instead of treating the same as business income/profit and not subjecting it to tax which led to loss of revenue to the Government. The assessee had claimed the excess price of Rs.75,00,000 as capital gain on the ground; that at the time of purchase of the plot the assessee had no intention of retaining it for sale thereof at enhanced price for earning business income; that, it was not carrying on business of sale and purchase of immovable properties for earning its income; that transaction of sale of a portion of the plot was a single and isolated transaction not in the line of business of the assessee; and that the excess/enhanced sale proceeds of Rs.75,00,000 was a casual income which could not be subjected to tax. The sum of Rs.75,0,0,000 was declared by the assessee in his return and was claimed as capital gain. The assessee had provided very detailed arguments in support of his contention that the gain/profit of Rs.75,00,000 was treated by him as capital gain and not as income or profit. It was submitted by the assessee that as the available space at the plot was proving inadequate, the assessee acquired an industrial plot measuring 38,720 square 1989 for a consideration of Rs.85,18,400 on which after construction and installation of plant and machinery manufacturing/assembling TV sets an area of 20,000 square yards remained unutilised which was to be utilized for expansion/enlargement of manufacturing plant with the increase in the demand of the TV sets. However, the policy relating to the manufacture/assembling TV sets underwent a drastic change on account of liberal Import Policy Government in allowing import of manufactured TV sets pressure of IMF, and other foreign lending agencies which market with foreign assembled/manufactured TV sets and placed the assessee in a very adverse and difficult situation forcing it to abandon his plans of expansion the manufacturing/assembling plant by adding additional construction to the existing plant rendering the industrial plot of 38,720 square yards unwieldy too big and surplus, which was the ground for selling a portion thereof measuring 20,000 square yards for Rs.1,25,00,000. An explanation to the above effect was submitted by the assessee which was taken into consideration by the Assessing Officer before accepting the version of the assessee. In the circumstances, the contention raised in the show-cause notice that the sale of a commercial property within a span of one and half years for a solitary transaction, was a transaction clearly in the nature of trade and business liable to be taxed, was a change of view/mind as previously, after accepting the explanation given by the assessee, the Assessing Officer had agreed with the assessee and accepted the claim that the gain of Rs.75,00,000 was a capital gain exempt from tax and had been rightly transferred to profit and loss account.

The assessment order was finalized in consultation and with the, approval of the Commissioner of Income Tax, as is evident from the office note attached to the assessment order. As a matter of fact specific notice under section 62 of the Ordinance calling upon the assessee to submit their explanation with regard to their claim of Rs.75,00,000 as capital gain exempt from tax was issued on the direction of the Commissioner of Income Tax, to whom the matter was sent by the Inspecting Assistant Commissioner of Income Tax who had no jurisdiction to accord approval in the matter as the assessed income exceeded Rs.10,00,000 and according to the instructions issued by the Central Board of Revenue such matters were to be referred to the Commissioner of Income Tax for approving the proposed assessment. The Assessing Officer, before finalizing the assessment and releasing the same, had discussed it with the Inspecting Assistant Commissioner. Thus, both the Inspecting Assistant Commissioner of Income Tax and the Commissioner of Income Tax had scrutinized and examined the case of the assessee with regard to the nature of gain/profit of Rs.75,00 000 claimed as capital gain. In the circumstances, even if it be accepted for the sake of argument that the finding of the Assessing Officer holding the gain/profit of Rs.75,00,000 from sale of the portion of plot as capital gain was not in accordance with law, the Inspecting Assistant Commissioner of Income Tax would have no authority and jurisdiction under section 66-A of the Ordinance to issue notice to the assessee to show cause why the assessment be not cancelled as being erroneous and prejudicial to the Revenue inasmuch as he himself had become a party to the said finding when he examined, scrutinized and discussed the issue with the Assessing Officer on the principle that one could not be a Judge in his own cause. This is so because when the Inspecting Assistant Commissioner of Income Tax on account of his collaboration with the Assessing Officer, scrutinizing and examining the case, had more or less acted as an Assessing Officer, then in respect of such assessment he would not be allowed to exercise the powers of revision under section 66-A of the Ordinance. In such a situation by having recourse to section 5(1)(c) of the Ordinance the powers of revision under section 66-A could have been exercised by the Commissioner of Income Tax. However, in the present case even the Commissioner of Income Tax, could not have exercised these powers as he also had been associated with the assessment of the assessee and had scrutinized, examined and issued directions to the Assessing Officer for finalizing the assessment. As a matter of fact notice under section 62 of the Ordinance calling for explanation and production of relevant material for deciding the nature of the sale transaction was issued on his direction. He, therefore, also became a party to the assessment and was precluded from issuing a notice under section 66-A of the Ordinance to the petitioner for showing cause as to why the assessment order be not cancelled being erroneous and prejudicial to the Revenue as the same was made and finalized on his advice and recommendation. Both of them, therefore, were stripped of powers to exercise jurisdiction under section 66-A of the Ordinance and the impugned notice was not issued in lawful exercise of jurisdiction.

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

----S.66-A---Re-opening of case---Powers of Inspecting Additional Commissioner to revise Deputy Commissioner's order, scope and extent---Inspecting Assistant Commissioner of Income Tax was authorized under S.66-A, Income Tax Ordinance. 1979 to issue a notice for re-opening the case if he considered that any order passed by the Income Tax Officer was erroneous causing prejudice to the interests of the Revenue---Mere erroneous order of the Income Tax Officer without causing prejudice to the interests of the Revenue would not authorize the Inspecting Assistant Commissioner to exercise power under S.66-A of the Ordinance and the two requirements mentioned above were to be necessarily established.

Glaxo Laboratories Ltd. v. Inspecting A.C. PLD 1992 SC 549 fol.

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

----S.66-A---Constitution of Pakistan (1973), Art.199---Constitutional petition-- Re-opening of case---Change of opinion by the Assessing Officer---Powers of Inspecting Additional Commissioner to revise Deputy Commissioner's order---Scope and extent---Issuance of show-cause notice to the assessee by Inspecting Additional Commissioner of Income Tax under S.66-A, Income Tax Ordinance, 1979---Essential ingredients-- -"Capital gain" or "adventure in the nature of trade" of a transaction by the assessee---Determining factors ---Assessee, in the, present case, was engaged in the manufacturing/assembling of television' sets and acquired an industrial plot for meeting with the requirements of further expansion of manufacturing/assembling plant on account of increased demand of television sets ---Assessee actually utilized a portion of the said plot for existing plant---Planning of the assessee of further expansion was adversely affected by the Government Policy in allowing the import of television sets as a result of which the market was flooded with imported television sets and on account of such situation the assessee was faced with a dilemma as a huge amount got stuck up in the plot in question Which was of no use to the assessee because of shattering of his plan of expanding the television manufacturing/assembling plant-- Assessee's assertion was that the untilized portion of the plot was proving to be a white elephant for it thus forcing the assessee to take a decision for its disposal---Effect---Purchase and sale of immovable properties was not the line of business of the assessee and the purchase of plot and sale of portion thereof was a single and isolated transaction of its kind which had been undertaken by the assessee---Record had established that initially when the assessee had purchased the plot in question assessee had no intention to sell the same for earning profits or income by getting enhanced price---Assessing, Officer, in circumstances, had correctly concluded that the transaction of sale of a portion of the plot was not an adventure in the nature of trade and accepting the sale proceeds from the portion of the plot as "capital gain" not liable to be taxed---Assessing Officer, in coming to such conclusion did not commit any illegality, warranting interference by the Inspecting Additional Commissioner of Income Tax---Decision to issue a notice under S.66-A of the Ordinance calling upon the assessee to show cause as to why the assessment be not cancelled and a fresh assessment be made was a "change of view or mind"---Assessment was neither erroneous nor was prejudicial to the interests of the Revenue which were the IN essential ingredients to be fulfilled before a notice under S.66-A of the Ordinance could be issued---Show-cause notice under S.66-A of the Ordinance on the basis of change of view or mind would not be a valid and proper notice being without lawful authority and thus void---Principles.

No hard and fast rules or principles can be laid down for determining whether a transaction of sale of immovable property or movable property resulting in profit/gain was a transaction in the nature of trade or not. In deciding the above issue many factors and circumstances are required to be taken into consideration and the primary factor is the intention of the party at the time when he acquired the asset whether immovable or movable. Such intention is to be gathered from the attending circumstances, facts, the nature of the business of the assessee, the nature of the transaction of sale, the nature of the assets/properties and the relationship ref the assessce with the purchaser. In the present case the business or trade of the assessee was manufacturing/assembling of TV sets. It acquired an industrial plot measuring 38,720 square yards for meeting with the requirement of further expansion of manufacturing/assembling plant on account of increased demand of TV sets It actually utilised a portion of 18,720 square yards for existing manufacturing/assembling plant the planning of the assessee of further expansion was adversely affected on account of the Government Policy in allowing import of TV sets as a result of which the market was flooded with imported TV sets. It is also to be taken into consideration that the public generally prefers a commodity or article manufactured in a foreign country as compared to the locally manufactured similar commodity or article. On account of this situation the assessee was faced with a dilemma as a huge amount got stuck up in the plot in question which was of no use to it on account of shelving his plan of expanding TV manufacturing/assembling plant. Assessee's assertion was that the unutilized portion of the plot was proving to be a white elephant for the assessee thus forcing him to take a decision for its disposal. The purchase and sale of immovable properties was not the line of business of the assessee and the purchase of plot measuring 38,720 square yards and sale of a portion thereof measuring 20,000 square yards was a single and isolated transaction of its kind which had been undertaken by the assessee. From the material on record it was established beyond any doubt that initially when the assessee had purchased the plot in question it had no intention to sell it for earning profits or income by getting enhanced price.

The Assessing Officer had correctly concluded that the transaction of sale of a portion of plot measuring 20,000 square yards was not art adventure in the nature of trade and accepting the sale proceeds from the portion of the plot as capital gain not liable to be taxed. The Assessing Officer in coming to the above conclusion did nor commit any illegality, which would have warranted interference with such finding. The decision to issue a show-cause notice under section 66-A of the Ordinance calling upon the assessee to show cause as to why the assessment be not cancelled and a fresh assessment be made, was a change of view or mind. The assessment was neither erroneous nor was prejudicial to the interests of, the Revenue which were two essential ingredients to be fulfilled before a notice under section 66-A of the Ordinance: for its cancellation could be issued. Show-cause notice tinder section 66-A of the Ordinance on the basis of change of view or mind would not he a valid and proper notice. The show-cause notice under section 66-A of the Ordinance was without lawful authority and was void.

Glaxo Laboratories Ltd. v. Inspecting A.C. PLD 1992 SC 549; Commissioner of Income-tax, Karachi v. A. Razak H.K. Dada 1979 PTD 465; G. Venkataswami Naidu & Co. v. Commissioner of Income- tax (1959) 35 ITR 595; Jaldu Manikyala Rao v. Commissioner of Income-tax, Madras (1955) 28 ITR 220,and Commissioner of Income tax, Bombay v. H. Holck Larsen (1986) 160 ITR 67 fol.

(e) Constitution of Pakistan (1973)---

----Art. 199---Constitutional jurisdiction of High 'Court---Scope---Alternate remedy, existence of---Significance---If the order or action complained of was so patently illegal, void or wanting in jurisdiction that any further recourse to alternative remedy may only be counter productive and by invoking of Art. 199 of the Constitution the mischief could forthwith be nipped in the bud then in such matters existence of alternative remedy would not bar the exercise of Constitutional jurisdiction by the High Court.

Khalid Mahmood v. Collector of Customs 1999 SCMR 1881; Gatron Industries Ltd. v. Government of Pakistan and others 1999 SCMR 1072; Adamjee Insurance Company Ltd. v. Pakistan through the Secretary to Government of Pakistan in the Ministry of Finance, Islamabad and 5 others 1993 SCMR 1778; Edulji Dinshaw Ltd. v. Income Tax Officer PLD 1990 SC 399 = 1990 PTD 155; The Murree Brewery Co. Ltd. v. Pakistan through the Secretary to Government of Pakistan, Works Division and 2 others PLD 1972 SC 279 and Usmania Glass Sheet Factory v. Sales Tax Officer 1971 PTD 1 ref.

(f) Constitution of Pakistan (1973)---

----Art.199---Constitutional jurisdiction of High Court---Scope---Relief in Constitutional jurisdiction would be available to a party where impugned order was without lawful authority, prejudicial, unjust and mala fide.

Khalid Mahmood v. Collector of Customs 1999 SCMR 1881; Gatron Industries Ltd. v. Government of Pakistan and others 1999 SCMR 1072; Adamjee Insurance Company Ltd. v. Pakistan through the Secretary to Government of Pakistan in the Ministry of Finance, Islamabad and 5 others 1993 SCMR 1778; Edulji Dinshaw Ltd. v. Income Tax Officer PLD 1990 SC 399 = PTD 1990 155; The Murree Brewery Co. Ltd. v. Pakistan through the Secretary to Government of Pakistan, Works Division and 2 others PLD 1972 SC 279 and Usmania Glass Sheet Factory v. Sales Tax Officer 1971 PTD 1 ref.

Sirajul Haque Memon for Petitioner.

Aqeel Ahmed Abbasi for the Income-tax Department.

Sajjad Ali Shah, Standing Counsel for the Pakistan.

Date of hearing: 16th September, 2003.

JUDGMENT

SAIYED SAEED ASHHAD, C.J.---In this Constitutional petition, the petitioner has sought the following reliefs:--

(i) declare that the impugned show-cause notice under section 66-A is without jurisdiction, illegal, arbitrary, null and void;

(ii) quash the impugned show-cause notice;

(iii) declare that the assessment made by the Income-tax Officer had been validly made and cannot now be re-opened under section 66-A;

(iv) restrain the respondent No.1 from cancelling, modifying, or enhancing the assessment made by the Income-tax Officer;

(v) declare that the assessee is entitled to the refund determined in the assessment order and the exercise to invoke jurisdiction under section 66-A is mala fide and of no legal effect;

(vi) give any other relief that this Honourable Court may deem fit and proper;

(vii) award costs of the petition to the petitioner.

The facts as disclosed by the petitioner in the memo. of petition are that the petitioner, a private limited company incorporated under the Companies Ordinance, 1984, engaged in the business or manufacturing/assembling television sets filed its return of income for the assessment year 1991-1992 under section 55 of the repealed Income Tax Ordinance, 1979 (hereinafter referred to as "the repealed Ordinance") declaring a total income from business at Rs.29,17,506 in Part I of the return; in Part II of the return it claimed exemption in respect of an amount of Rs.75,00,000 from sale of a portion of Plot No.2, Sector 20, Korangi Industrial Area, Karachi on the ground that it was capital gain; and in Part III of the return disclosed an amount of Rs.46,98,034 which was the tax deducted at source under section 50(5) of the repealed Ordinance on imports, whereas the total tax payable by, the petitioner was Rs.16,30,371, thus claiming refund of a sum of Rs.30,67,663 which was paid/deducted at source in excess of the tax dug and payable. The assessment of the petitioner was finalized under section 62 in pursuance of a notice under section 61 of the repealed Ordinance after detailed examination and scrutiny of the books of accounts, documents and the explanations submitted by the petitioner. The petitioner further submitted that additional evidence was also called for by the Income Tax Officer, respondent No.5 as well as elaborate details of various accounts, reasons for lower production, reduced sales and explanations as to why the sale proceeds of Rs.5,000,000 from sale of a portion of Plot No.2, Sector 20, Korangi Industrial Area, Karachi was not to be treated as income liable to tax. The petitioner submitted that respondent No.5, after perusal, examination and scrutiny of all the above evidence, material, books of accounts and explanations finalized the assessment vide order, dated 8-12-1991 with the approval of the Commissioner of Income-tax, respondent No.4 to whom the assessment was forwarded by the Inspecting Assistant Commissioner of Income-tax, respondent No.3. Respondent No. 3 issued show-cause notice, dated 15-2-1993 under section 66-A of the repealed Ordinance calling upon the petitioner to show-cause as to why the assessment order, dated 8-12-1999 be not cancelled and correct assessment be made. Peeling aggrieved and dissatisfied with the above show-cause notice and having no other alternate, adequate and efficacious remedy for assailing the same, the petitioner filed this Constitutional petition.

Counter-affidavit was filed by Mutiur Rehman, Inspecting Assistant Commissioner of Income-tax, respondent No.3, wherein he objected, to the maintainability of the petition on the ground that only a show-cause notice was issued under section 66-A of the repealed Ordinance which did not amount to making an adverse order against the petitioner as a result of which it could not be said to be an aggrieved party entitled to invoke the Constitutional jurisdiction of this Court and the same was filed with the sole object to avoid enquiry to be held by respondent No.3. It was further submitted that the petitioner should have waited for an order under section 66-A of the repealed Ordinance it pursuance of the notice and the same could have been assailed by way of an appeal before the Income Tax Appellate Tribunal. On facts it was submitted that the petitioner obtained a plot measuring 38,720 square yards from K.D.A. in Korangi Township in 1999 against payment of Rs.85,18,400 and after bifurcation thereof sold a portion measuring 20,000 square yards for Rs.1,25,00,000 making a profit of Rs.75,00,000 within a period of one year which transaction was to be treated as an adventure in the nature of trade but due to inadvertence the amount of Rs.75,00,000 was exempted by treating it as capital gain which rendered the assessment as erroneous and prejudicial to the Revenue resulting in the show-cause notice for cancelling the assessment and making a fresh assessment. It was further submitted that the object, of approval by superior officers namely, the Inspecting Assessing Commissioner of Income-tax and the Commissioner of Income-tax was for the purpose of vigilance and guidance as they were required to supervise the working of subordinate officers and in doing so neither the Commissioner of Income-tax nor the Inspecting Assistant Commissioner of Income-tax was required to examine or scrutinize the entire record or arrive at a finding for the purpose of finalization of assessment but only cursorily and without attending to details would examine the proposed assessment order with a view to ensure that no illegality or irregularity was committed by the Assessing Officer. It was submitted that the show -cause notice under section 66-A was not on account of change of opinion but on account of the fact that a serious and grave illegalities had been committed by the Assessing Officer in finalizing the assessment which was not only erroneous but was also prejudicial to the interest of the Government/Revenue necessitating its cancellation. It was prayed that the petition was without any substance, did not merit consideration and was liable to be dismissed.

We have heard the arguments of Mr. Sirajul Haque Menton, Advocate for the petitioner, Mr. Aqeel Ahmed Abbasi, Advocate on behalf of the Income-tax Department and have also perused the material on record. We have also heard the arguments of Mr. Sajjad Ali Shah, learned Standing counsel, who was present in Court on Court notice.

Mr. Sirajul Haque Memon vehemently attacked the notice under section 66-A of the repealed Ordinance on the ground that it was merely a change of mind with a view to delay the payment of refund of Rs.29,00,252 with mala fide intention and ulterior motive as refund of such a huge amount resulted in decreasing the figure of collection of tax thus making it difficult for the respondents to achieve the target fixed by Central Board of Revenue. Respondent No.2 for the Income-tax Officers, the Inspecting Assistant Commissioners of Income-tax and Commissioner of Income-tax; that this was one of the commonest ground on which the assessees seeking refund are harassed by the Income-tax Department and are directed not to press for the refund else their cases would be reopened and if in spite of such direction the assesses continues to pursue their refund claims then the Income-tax Department initiates illegal proceedings against such assessees; that the notice under section 66-A' was even otherwise improper and illegal on the ground that the Inspecting Assistant Commissioner of Income-tax had been associated with proceedings for finalization of the assessment as such he was a party to the assessment order and could not subsequently take steps to cancel the same on the ground that it was erroneous and prejudicial to the Revenue; that normally in cases where the Inspecting Assistant Commissioner of Income-tax had been associated with the assessment and had given approval to the assessment proposed by the Assessing Officer, the show-cause notice under section 66-A would be issued by the Commissioner of Income-tax being the next higher authority of the Inspecting acting Assessing Commissioner of Income-tax but in the present case even the Commissioner of Income-tax was precluded from issuing notice under section 66-A cancelling the assessment as he was also a party to the assessment order, dated 8-12-1991. It was elaborated by Mr. Sirajul Haque Memon that according to the standing. directions/instructions of Central Board of Revenue, respondent No.2, assessment orders wherein the assessee's income exceeded Rs.5,00,000 were required to be approved by the Inspecting Assistant Commissioner of Income-tax and if the income exceeded Rs.10,00,000 then approval was to be obtained from the Commissioner of Income-tax and in accordance with the above instructions the case was originally sent to the Inspecting Assistant Commissioner of Income-tax, who after examination thereof forwarded the same to the Commissioner of Income-tax.

Mr. Aqeel Abbasi appearing on behalf of the Income-tax Department submitted that the mere fact that the Inspecting Assistant Commissioner of Income-tax or Commissioner of Income-tax had been consulted by the Assessing Officer before finalizing the assessment would not lead, to a conclusion that both of them were associated with the assessment and had become a party to the assessment order; that examination and scrutiny of the draft of proposed assessment is made by the Inspecting Assistant Commissioner of Income-tax/Commissioner of Income-tax on the directions/instructions of Central Board of Revenue, respondent No.2 and not in exercise of their powers and authority under the repealed Ordinance; that consequently scrutiny and examination by the Inspecting Assistant Commissioner of Income-tax and the Commissioner of Income-tax of the draft of proposed assessment would not be an obstacle in the exercise of the powers conferred upon them by the repealed Ordinance and they would be fully entitled to issue a show cause notice under section 66-A of the repealed Ordinance cancelling an assessment finalized by the Assessing Officer on the ground that it was erroneous and prejudicial to the Revenue; that the Assessing Officer had committed a grave illegality in accepting the claim of the petitioner that sale of a portion of Plot No.2, Sector 20, Korangi Industrial Area, Karachi for Rs.1,25,00,000 was not an adventure in the nature of trade and the same was examined as the amount of Rs.75,00,000 was capital gain and on coming to know of the above illegality the Inspecting Assistant Commissioner of income-tax was within his right to issue a show-cause notice under section 66-A of the repealed Ordinance to the petitioner cancelling the assessment on the ground that it was erroneous and prejudicial to the Revenue and the amount of Rs.75,00,000 which ought to have been subjected to tax had escaped from assessment resulting in huge revenue loss to the exchequer. He finally concluded that in the above circumstances issuance of show-cause notice under section 66-A of the repealed Ordinance by the Inspecting Assessing Commissioner of Income-tax could not be said to be merely on a change of mind but it was on account of illegality/grave irregularity committed by Assessing Officer in finalizing the assessing rendering it erroneous and prejudicial to the Revenue.

Section 66-A of the repealed Ordinance had conferred powers on the Inspecting Assistant Commissioner/Additional Inspecting Assistant Commissioner to revise the order of Assessing Officer/Deputy Commissioner of Income Tax, after calling for and examining the record of any proceedings under the repealed Ordinance, if he considered and was of the view an order passed by the Assessing Officer/Deputy Commissioner of Income Tax was erroneous inasmuch as it was prejudicial to the interests of the Revenue. It further empowered the Assessing Officer/Deputy Commissioner of Income Tax to pass such order as the circumstances of the case would justify including an order enhancing or modifying the assessment, or cancelling the assessment and directing a fresh assessment to be made subject to the condition that appropriate and effective opportunity of being heard was provided to the assessee/aggrieved party. From a bare perusal of section 66-A of the repealed Ordinance, it is to be noted that the Inspecting Assistant Commissioner, respondent No.3 was required to minutely examine the record of any proceedings which included the assessment finalized by the Assessing Officer/Deputy Commissioner of Income Tax to conclude that the assessment was erroneous and prejudicial to the interests of the Revenue to attract the provisions of this section. As to what orders could be said to be erroneous and prejudicial to the interest of the Revenue was considered at great lengthy by the Supreme Court of India in the case of Malabar Industrial Co. Ltd. v. Commissioner of Income tax, reported in 2001 PTD 1106 and following observation was made in this regard:--

"A bare reading of this provision makes it clear that the prerequisite to the exercise of jurisdiction by the Commissioner suo motu under it, is that the order of the Income-tax Officer is erroneous insofar as it is prejudicial to the interests of the Revenue. The Commissioner has to be, satisfied of twin conditions, namely, (i) the order of the Assessing Officer sought to be revised is erroneous; and (ii) it is prejudicial to the interests of the Revenue If one of them is absent i.e. if the order of the Income-tax Officer is erroneous but is not pre judicial to the Revenue or if it is not erroneous but is prejudicial to the Revenue, recourse cannot be had to section 263(1) of the Act.

There can be no doubt that the provisions cannot be invoked to correct, each and every type of mistake or error committed by the Assessing Officer, it is only when an order is erroneous that the section will be attracted. An incorrect assumption of facts or an incorrect application of law will satisfy the requirement of the order being erroneous. In the same category falls orders passed without applying the principles of natural justice or without application of mind."

"The phrase `prejudicial to the interests of the Revenue' has to be read in conjunction with an erroneous order passed by the Assessing Officer. Every loss of' revenue as a consequence of an order of the Assessing Officer cannot be treated as prejudice to the interests of the Revenue. For example, When an Income-tax Officer adopted one of the courses permissible in law and it has resulted in loss of Revenue; or where two views are possible and the income-tax Officer has taken one view with which the Commissioner does not agree, it cannot be, treated as an erroneous order prejudicial to the interests of the Revenue, unless the view taken by the Income-tax Officer is unsustainable in law."

By applying the above pronouncements and observations to the facts of the present case, it is to be noted that in the show-cause notice, dated 15-2-1993 issued by the Inspecting Assistant Commissioner, respondent No.3 the reason advanced for the order being erroneous was that the Assessing Officer had wrongly dealt with a sum of Rs.75,00,000 by treating it as capital gain instead of treating the same as business income/profit and not subjecting it to tax which led to loss of revenue to the Government. The petitioner had claimed the excess price of Rs.75,00,000 as capital gain on the ground; that at the time of purchase of the plot the petitioner had no intention of retaining it for sale thereof at enhanced price for earning business income; that, it was not carrying on business of sale and purchase of immovable properties for earning its income; that transaction of sale of a portion of the plot was a single and isolated transaction not in the line of business of the petitioner and that the excess/enhanced sale proceeds of Rs.75,00,000 was a casual income which could not be subjected to tax. The sum of Rs.75,00,000 was declared by the .petitioner in his return and was claimed as capital gain. It is to, be noted that the petitioner had provided very detailed arguments in support of his contention that the gain/profit of Rs.75,00,000 was treated by him as capital gain and not as income or profit. It was submitted that as the available space at the plot at F.B. Area was proving inadequate, the petitioner acquired an industrial plot measuring 38,720 square yards in 1989 for a consideration of Rs.85,18,400 on which after raising construction and installation of plant and machinery for manufacturing/assembling TV sets an area of 20,000 square yards remained unutilized which was to be utilized for of manufacturing plant with the increase in the demand of the However, the policy relating to the manufacture/assembling underwent a drastic change on account of liberal import Policy Government in allowing import of manufactured TV sets due to the pressure of IMF and other foreign lending agencies which flooded the market with foreign assembled/manufactured TV sets and placed the petitioner in a very adverse and difficult situation forcing it to abandon his plates of expansion the manufacturing/assembling plant by adding additional construction to the existing plant rendering the industrial plot of 38,720 square yards unwieldy too big and surplus, which was the ground for selling a portion thereof measuring 20,000 square yards to Messrs United Technologies (Pvt.) Ltd., Karachi for Rs.1,25,00,000. An explanation to the above effect was submitted by the petitioner vide their letter, dated 10-11-1991, which was taken into consideration by the Assessing Officer before accepting the version of the petitioner. In the circumstances, the contention raised in the show-cause notice that the sale of a commercial property within a span of one and half years for a solitary transaction, was a transaction clearly in the nature of trade and business liable to be taxed, was a change of view/mind as previously, after accepting the explanation given by the petitioner, the Assessing Officer had agreed with the petitioner and accepted the claim that the gain of Rs.75,00,000 was a capital gain exempt from tax and had been rightly transferred to profit and loss account.

It is also to be observed that the assessment order was finalizes in consultation and with the approval of the Commissioner of Income Tax, Range-II, Companies-II as is evident from the office note attached to the assessment order. As a matter of fact specific notice under section 62 of the repealed Ordinance calling upon the petitioner to submit their explanation with regard to their claim of Rs.75,00,000 as capital gain exempt from tax was issued on the direction of the Commissioner of Income Tax, Companies-II to whom the matter was sent by the Inspecting Assistant Commissioner of Income Tax who had no jurisdiction to accord approval in the matter as the assessed income exceeded Rs.10,00,000 and according to the instructions issued by the Central Board of Revenue such matters were to be referred to the Commissioner of Income Tax for approving the proposed assessment. The Assessing Officer, before finalizing the assessment and releasing the same, had discussed it with the Inspecting Assistant Commissioner. Thus, both the Inspecting Assistant Commissioner of Income Tax and the Commissioner of Income Tax had scrutinized and examined the case of the petitioner with regard to the nature of gain/profit of Rs.75,00,000 claimed as capital gain. In the circumstances, even if it be accepted for the sake of argument that the finding of the Assessing Officer holding the gain/profit of Rs.75,00,000 from sale of the portion of plot as capital gain was not in - accordance with law, the Inspecting Assistant Commissioner of Income Tax would have no authority and jurisdiction under section 66-A of the repealed Ordinance to issue notice to the petitioner to show cause why the assessment be not cancelled as being erroneous and prejudicial to the Revenue inasmuch as he himself had become a party to the said finding when he examined, scrutinized and discussed the issue with the Assessing Officer on the principle that one could not be a Judge in his own cause. This is so because when the Inspecting Assistant Commissioner of Income Tax on account of his collaboration with the Assessing Officer, scrutinizing and examining the case, had more or less acted as an Assessing Officer, then in respect of such assessment he would not be allowed to exercise the powers of revision under section 66-A of the repealed Ordinance. In such a situation by having recourse to section 5(1)(c) of the repealed Ordinance the powers of revision under section 66-A could have been exercised by the Commissioner of Income Tax viz. respondent No.4. However, in the present case even the Commissioner of Income Tax, respondent No.4 could not have exercised these powers as he also had been associates with the assessment of the petitioner and had scrutinized, examined and issued directions to the Assessing Officer for finalizing the assessment. As a matter of fact notice under section 62 of the repealed Ordinance calling, for explanation and production of relevant material for deciding the nature of the sale transaction was issued on his direction. He therefore, also became a party to the assessment and was precluded from issuing a notice under section 66-A of the repealed Ordinance to the petitioner for showing cause as to why the assessment order be not cancelled being erroneous and prejudicial to the Revenue as the same was made and finalized on his advice and recommendation.Both of them, therefore, were stripped of powers to exercise jurisdiction section 66-A of the repealed Ordinance and the impugned notice issued in lawful exercise of jurisdiction.

The question as to what types of transactions of sale were to be treated as adventure in the nature of trade and the excess or enhanced amount/profit was to be treated as revenue /business income and what types of transactions were not to be treated as adventure m the nature of trade and the excess or enhanced amount/profit was not to be treated as revenue/business income but capital gain was considered in great detail and depth by the superior Courts of Pakistan and the Supreme Court of India in several cases and it will be proper and useful to refer to the relevant portions from the judgments of these cases which are as under:--

(i) Glaxo Laboratories Ltd. v. Inspecting A.C. reported in PLD 1992 SC 549, (ii) Commissioner of Income-tax, Karachi v. A. Razak H.K. Dada reported in 1979 PTD 465, (iii) G. Venkataswami Naidu & Co. v Commissioner of Income-tax reported in (1959) 35 ITR 595, (iv) Jaldu Manikyala Rao v. Commissioner of Income-tax, Madras reported in (1955) 28 ITR 220 and (v) Commissioner of Income-tax, Bombay v. H. Holck Larsen (1986) 160 ITR 67.

In the case of Galxo Laboratories Ltd. v. Inspecting A.C., reported in PLD 1992 SC 549 (supra), our Supreme Court while examining the provisions of section 66-A of the repealed Ordinance observed that the Inspecting Assistant Commissioner was authorized under the said section to issue a notice for re-opening the case if the considered that any order passed by the Income-tax Officer was erroneous causing prejudice to the interest of the Revenue. The Supreme Court further observed that mere erroneous order of the Income Tax Officer without causing prejudice to the interest of the Revenue would not authorise the Inspecting Assistant Commissioner to exercise power under section 66-A and the above two requirements were to be necessarily established.

In the case of Commissioner of Income-tax, Karachi v. A. Razak, H.K. DADA (supra) the issue before this Court was whether, purchase and sale of shares was an adventure in the- nature of trade or was merely a change of investment? This Court after examining the facts and the law came to the conclusion that in the absence of evidence of assessee's intention to make profits at the time of purchase of shares, mere purchase and sale of shares, though purchased against ready delivery and sold in ready delivery in one lot and in a single transaction in cash, would not be sufficient to constitute adventure in the nature of trade and the gain/surplus funds arising out of sale of shares could not be held to be revenue' income liable to tax. In the case of G: Venkataswami Naidu & Co. v. Commissioner of Income Tax, (supra) the Supreme Court of India was called upon to determine the question whether a particular transaction of sale of land would be an adventure in the nature of trade or not? It will be appropriate to reproduce the relevant portion from the judgment as under:--

"As we have already observed it is impossible to evolve any formula which can be applied in determining the character of isolated transactions which come before the Courts in tax proceedings. It would besides be inexpedient to make any attempt to evolve such a rule or formula. Generally speaking, it would not be difficult to decide whether a given transaction is an adventure in the nature of trade or not. It is the cases on the border line that cause difficulty. If a person invests money in land intending to hold it, enjoys its income for some time, and then sells it at a profit, it would be a clear case of capitalaccretion and not profit derived from an adventure in the nature of trade. Cases or realization of investments consisting of purchase and resale, though profitable, are clearly outside the domain of adventures in the nature of trade. In deciding the character of such transactions several factors are treated as relevant. Was the purchaser a trader and were the purchase of the commodity and its resale allied to his usual trade or business or incidental to it? Affirmative answers to these questions may furnish relevant data for determining the character of the transaction. What is the nature of the commodity purchased and resold and in what quantity was it purchased and resold? If the commodity purchased is generally the subject-matter of trade, and if it is purchased in very large quantities; it would tend to eliminate the possibility of investment for personal use, possession or enjoyment. Did the purchaser by any act subsequent to the purchase improve the quality of the commodity purchased and thereby made it more readily resalable? What were the incidents associated with the purchase and resale? Where they similar to the operations usually associated with trade or business? Are the transactions of purchase and sale repeated? In regard to the purchase of the commodity and as subsequent possession by the purchaser, does the element, of pride of possession come into the picture? A person may purchase a piece of art, hold it for some time and if a profitable offer is received may sell it. During the time that the purchaser had its possession he may be able to claim pride of possession and aesthetic satisfaction; and if such a claim is upheld that would be a factor against the contention that the transaction is in the nature of trade. These and other considerations are set out and discussed in judicial decisions which deal with the character of transactions alleged to be in the nature of trade. In considering these decisions it would be necessary to remember that they do not purport to lay down any general or universal test. The presence of all the relevant circumstances mentioned in any of them may help the Court to draw a similar inference; but it is not a matter of merely counting the number of facts and circumstances pro and con; what is important to consider is their distinctive character. In each case, it is the total effect of all relevant factors and circumstances that determines the character of the transaction; and so, though we may attempt to derive some assistance from decisions bearing on this point, we cannot seek to deduce any rule from them and mechanically apply it to the facts before us.

In this connection it would be relevant to refer to another test which is some times applied in determining the character of the transaction. Was the purchase made with the intention to resell it at a profit? It is often said that a transaction of purchase followed by resale can either be an investment or an adventure in the nature of trade. There is no middle course and no half way house. This statement may be broadly true; and so some judicial decisions apply the test of the initial intention to resell in distinguishing adventures in the nature of trade from transactions of investment. Even in the application of this test distinction will have to be made between initial intention to resell at a profit which is present but not dominant or sole; in other words, cases do often arise where the purchaser may be willing and may intend to sell the property purchased at profit, but he would also intend and be willing to hold and enjoy it if a really high price is not offered. The intention to resell may in such cases be coupled with the intention to hold the property. Cases may, however, arise where the purchase has been made solely and exclusively with the intention to resell at a profit and the purchaser has no intention of holding the property for himself or otherwise enjoying or using it. The presence of such an intention is no doubt a relevant factor and unless it is offset by the presence of other factors it would raise a strong presumption that the transaction is an adventure in the-nature of trade. Even so, the presumption is not conclusive; and it is conceivable that, on considering all the facts and circumstances in the case, the Court may, despite the said initial intention, be inclined to hold that the transaction was not an adventure in the nature of trade. We thus come back to the same position and that is that the decision about the character of a transaction in the context cannot be based solely on the application of any abstract rule, principle or test and must in every cases depend upon all the relevant facts and circumstances."

In the case of Jaldu Manikyala Rao v. Commissioner of Income Tax, Madras, (supra), the Andhra High Court was dealing with the question whether a sole transaction was an adventure in nature of trade or not in respect of an assessee who, was a trader interested in several lines of business, purchased a share in a final mortgage decree for sale. Thereafter he instituted Proceedings for the execution of the decree and sold some of the mortgaged properties. The amount realized from sale of the mortgaged property exceeded the price paid by him for purchase of the decree and the excess price was included by the Assessing Officer in the income of the assessee in the relevant assessment year as a receipt arising from his business. The Andhra High Court after taking into consideration the facts of the case, the relevant provisions of the law and the case law cited before it laid guidelines for determining whether a particular transaction would be an adventure in the nature of trade or not. These guidelines are reproduced as under:--

"We may now state what in our opinion, constitute relevant factors in arriving at a conclusion of fact on the question to whether a particular transaction is or is not an adventure in the nature of trade or commerce. What is the nature of the thing to which the transaction relates? A man may buy a horse, a book or a piece of land. They may be for use or enjoyment by himself. If a man buys a decree, for instance as in this case, it isimpossible to say that the subject-matter of purchase is for use and enjoyment. The scale of the transaction is also a material factor. If a man goes into the market and buys an immense quantity of a metal or cotton or toilet paper as in the case of Livingston v. Commissioners of Inland Revenue, it would not be nature and reasonable to suppose, that the thing purchased was for personal use. The purpose, the motive or intention in entering into the transaction will also be a proper matter for consideration. One may buy a thing merely because it is going cheap with the remote intention of making a profit at an opportune time. In such case, he may not be, in the phrase of Lord President Clyde, "plunging into the waters of trade"; vide Balgownie Land Trust Ltd. v. Commissioner of Inland Revenue. Then again, the relation of the particular transaction to the ordinary business of the assessee would be a proper element to be taken into account. If at is clearly connected with the assessee's normal business, the determination of the question would, of course be easy. It would then be manifestly stamped with the qualities of trade. Further the question may also be asked. Is the receipt arising out of the transaction in the nature of a windfall, of a casual and non-recurring nature and not properly describle as arising from any business or trade? If a man draws a prize at a lottery or makes a profitable bet or wins a prize in a crosswords competition as it is called, the receipts could scarcely be described as arising from any business. Still another question which would have a bearing on the matter would be: Is it an investment, i.e., is the money laid out in buying a thing expected to fetch a regular periodical return? A lawyer may buy a share certificate or a debenture in a company. There would be no presumption in such a case that the share or debenture was purchased with the sole object of re-selling at a profit. On the other hand, if a person regularly dealing in shares does so, surely it would be a piece of business. The nature of the operations involved in acquiring and disposing of a thing may also be relevant. It is true that a consideration of all these questions may not be necessary in deciding a particular case. A clear answer to one or other of the questions thus raised may be decisive in some cases. But all or some of them would have to be answered in many cases. In the present case, what is purchased is a decree. As stated above, the very nature of the subject-matter precludes its acquisition for use or enjoyment. Of course, it is conceivable that a man may purchase a decree to accommodate the decree-holder or the judgment debtor or it may be even to harass or annoy the one or the other of the, but such a motive has been ruled out in this case. The transaction cannot be described as one of speculation, like a bet, or buying a ticket in a lottery. It is a clear case of laying out money with a view to reap a profit. "

In the case of Commissioner of Income Tax, Bombay v. H. Holck Larsen (supra) the Supreme Court of India while faced with the question of deciding 'whether sale' of shares by an assessee, who was a partner in a firm and was allotted certain number of shares and had also purchased some equity shares in the company, which was formed upon conversion of the firm, was to be treated as adventure in the nature of trade or whether the transaction lacked the element of trading and .was in the nature of capital gain/investment, laid down certain principles/guidelines for such determination. It will be appropriate to reproduce the relevant portions from the said judgment as under:

"(1) The second question is what are the legal principles applicable to, the facts of these types of cases to determine whether the conduct was that of a dealer in shares or of an investor in shares."

2. "The question has been asked in a number of a cases; `If this was not trading, what was it?' With all deference to those who have used that argument, I do not think that it is very useful in most cases. Human affairs and business 'affairs are of infinite variety. They do not fit neatly into categories or classes. In nominate contracts and transactions are of frequent occurrence, and I would not expect to find appropriate names to denote new kinds of operations devised for the sole purpose of gaining tax advantages. In the present case the question is not what the transaction of buying and selling the shares lacks to be trading, but whether the later stages of the whole operation show that the first step the purchase of the shares was not taken as, or in the course of, a trading transaction.

The real question as Lord Reid said was not whether the transaction of buying and selling the shares lacks the element of trading, but whether the later stages of the whole operation show that the first step the purchase of the shares was not taken as, or in the course of, a trading transaction."

3. "How a question of this nature should be viewed has been indicated by this Court as early as 1958 in G. Venkataswami Naidu & Co. v. CIT, (1959) 35 ITR 594. The question there was whether sale of a land to a company could be treated on the facts and circumstances of the case as an adventure in the nature of trade. There, on the facts, this Court upheld the findings of the Appellate Tribunal in affirming that the assessee knew that it would be able to sell the lands to the managed company whenever it thought it profitable to do so; that the assessee had purchased the four plots of land with the sole intention of selling them to the mills at a profit which intention raised a strong presumption in favour of the view taken by the Tribunal. "

(4) "In the case of Janki Ram Bahadur Ram v. CIT (1965) 57 ITR 21 (SC), this Court observed that the profit motive in entering into a transaction was not decisive, for an accretion to capital did not become taxable income merely because an asset was acquired in the expectation that it might be sold at a profit. This Court further observed that if a transaction was related to the business which was normally carried on by the assessee, though not directly part of it, an intention to launch upon an adventure in the nature of trade might readily be inferred."

(5) "In Raja Bahadur Kamakhya Narain Singh v. CIT (1970) 77 ITR 253 (SC), the question of adventure in the nature of trade was again considered by this Court and it was reiterated that since the expression "adventure in the nature of trade" implied the existence of certain element in the transactions which in law would invest these with the character of trade or business and the question on that account became a mixed question of law and fact, the Court could review the Tribunal's findings if it had misdirected itself in law. It was fairly clear that where a person in selling his investment realized an enhanced price, the excess over his purchase price was not profit assessable to tax as income, but it would be so, if what was done was not a mere realization of the investment but an act done for making profit. The distinction between the two types of transactions is not always easy to make. Whether the transaction is of one kind or the other depends on the question whether the excess is an enhancement of the value by realizing a security or a gain in an operation of profit making. The assessee might invest his capital in shares with the intention to resell these if in future their sale brings in a higher price. Such an investment, though motivated by a possibility of enhanced value, did not necessarily render the investment a transaction in the nature of trade. "

From the portions/passages reproduced above, no hard and fast rules or principles can be laid down for determining whether a transaction of sale of immovable property or movable property resulting profit/gain was a transaction in the nature of trade or not. In deciding the above issue many factors and circumstances are required to be taken into consideration and the primary factor is the intention of the party at the time when he acquired the asset whether immovable or movable. Such intention is to be gathered from the attending circumstances, facts, the nature of the business of the assessee, the nature of the transaction of sale, the nature of the assets/properties and the relationship of the assessee with the purchaser. Applying the pronouncements and the principles laid down in the afore-cited cases, it is to be observed that the business or trade of the assessee was manufacturing/assembling of TV sets. He acquired an industrial plot measuring 38,720 square yards for meeting with the requirement of further expansion of manufacturing/assembling plant on account of increased demand of TV sets. It actually utilized a portion of 18,720 square yards for existing manufacturing/assembling plant. The planning of the assessee of further expansion was adversely affected on account of the Government policy in allowing import of TV sets as a result of which the market was flooded with imported TV sets. It is also to be taken into consideration that the public generally prefers a commodity or article manufactured in a foreign country as compared to the locally manufactured similar commodity or article. On account of this situation the assessee was faced with a dilemma as a huge amount got stuck up in the plot in question which was of no use to it on account of shelving his plan of expanding TV manufacturing/assembling plant. In the words of Mr. Sirajul Haque Memon, the learned counsel for the petitioner, the unutilized portion of the plot was proving to be a white elephant for the petitioners thus forcing him to take a decision for its disposal. It is also to be noted as already stated above that the purchase and sale of immovable properties was not the line of business of the petitioner and the purchase of plot measuring 38,720 square yards and sale of a portion thereof measuring 20,000 square yards was a single and isolated transaction of its kind which had been undertaken by the petitioner. From the material on record it is established beyond any doubt that initially when the assessee had purchased the plot in question it had no intention to sell it for earning profits or income by getting enhanced price than.

For the foregoing reasons, we are of the view that the Assessing Officer had correctly concluded that the transaction of sale of a portion of plot measuring 20,000 square yards was not an adventure in the nature of trade and accepting the sale proceeds from the portion of the plot as capital gain not liable to be taxed. The Assessing Officer in coming to the above conclusion did' not commit any illegality, which would have warranted interference with such finding. In view of the above, the decision to issue a show-cause notice, date 15-2-1993 under section 66-A of the repealed Ordinance calling upon the petitioner/assessee to show cause as to why the assessment be not cancelled and a fresh assessment be made, was a change of view or mind. The assessment was neither erroneous nor was prejudicial to the interests of the Revenue which were two essential ingredients to be fulfilled before a notice under section 66-A of repealed Ordinance for its cancellation could be issued. Show-cause notice, dated 15-2-1993 under section 66-A of the repealed Ordinance on the basis of change of view or mind would not be a valid and proper notice. The show-cause notice, dated 15-2-1993 under section 66-A of the repealed Ordinance was without lawful authority and was void.

On behalf of the respondents the maintainability of this Constitutional petition was vehemently assailed on the ground that the petitioner could not have invoked the Constitutional jurisdiction of this Court as the impugned notice was merely a show-cause notice which did not violate any fundamental or vested right of the petitioner resulting in legal loss which were essential condition for having recourse to Article 199 of the Constitution of the Islamic Republic of Pakistan. It was submitted on behalf of the Respondents that the proper course for the Petitioner was to have waited for a decision/order in pursuance of the show-cause notice and to have assailed the same in accordance with the provisions of the repeated Ordinance. The contention advanced by Mr. Aqeel Ahmed Abbasi on behalf of the respondent is without any substance in view of the pronouncements made by the Supreme Court in a large number of cases to the effect that if the order or action complained of was so patently illegal, void or wanting in jurisdiction that any further recourse to alternative remedy may only be counter productive and by invoking of Article 199 .the mischief could forthwith be nipped in the bud then in such matters existence of alternative remedy would not bar the exercise of Constitutional jurisdiction by this Court. Such pronouncements were made by the Supreme Court in the cases of: (i) Khalid Mahmood v. Collector of Customs, reported in 1999 SCMR 1881; (ii) Gatron Industries Ltd. v. Government of Pakistan and Others, reported in 1999 SCMR 1072; (iii) Adamjee Insurance Company Ltd. v. Pakistan though the Secretary to Government of Pakistan in the Ministry Finance, Islamabad and 5 others, reported in 1993 SCMR 1778; (iv) Edulji Dinshaw Ltd. v. Income Tax Officer, reported in PLD 1990 SC 399 = 1990 PTD 155; (v) The Murree Brewery Co. Ltd. v. Pakistan though the Secretary to Government of Pakistan, Works Division and 2 others, reported in PLD 1972 SC 279; and (vi) Usmania Glass Sheet Factory v. Sales Tax Officer, reported in 1971 PTD 1. The observations arrived at -and the pronouncements made in all the aforecited authorities are to the effect that relief in writ/Constitutional jurisdiction would be available to a party where impugned order was without lawful authority, prejudicial, unjust and mala fide. In view of the discussions, the objection raised by Mr. Aqeel Ahmed Abbasi relative to Constitutional petition without recourse having been made by the petitioner to the remedies available under the repealed Ordinance is without any substance and is overruled.

Upon the above discussion and for the foregoing reasons, we find that this Constitutional petition carries weight and merits consideration. Accordingly, we allow this Constitutional petition with no order as to costs.

M.B.A./S-353/K Petition allowed.