W.T.As. Nos.775/LB to 778/KB of 2004, decided on 16th August, 2005. VS W.T.As. Nos.775/LB to 778/KB of 2004, decided on 16th August, 2005., 2006 PTD-INCOME-TAX-APPELLATE-TRIBUNAL-PAKISTAN 2004 (2005)

(a) Wealth Tax Act (XV of 1963)---

----S.17B---Powers of Inspecting Additional Commissioner to revise Wealth Tax Officer's order---Jurisdiction---While exercising jurisdiction under S.17B of the Wealth Tax Act, 1963, Inspecting Additional Commissioner had been given two powers to pass order enhancing or modifying the assessment or cancelling the assessments and directing a fresh assessment to be made---Inspecting Additional Commissioner had cancelled assessments, but simultaneously had enhanced the assessments for which he was under legal obligation to make direction for fresh assessment to be made.

(b) Wealth Tax Act (XV of 1963)---

----S.17B-,--Powers of Inspecting Additional Commissioner to revise Wealth Tax Officer's order---Jurisdiction---Directions by the Inspecting Additional Commissioner---Inspecting Additional Commissioner, instead of passing formal order in accordance with law directed concerned officer to make fresh assessment, and had also directed the Special Officer "to go through the order carefully" as "the case under reference involves potential revenue, therefore, action on your part must be completed on priority basis under intimation to this office"---Such order passed under directions by the superior officer could never be fair and justified being' passed under the pressure of the superior officers and could not be appreciated.

(c) Wealth Tax Act (XV of 1963)---

----S.17B---Powers of Inspecting Additional Commissioner to revise Wealth Tax Officer's order---Change of opinion---Addition of stock/bills receivable in net wealth---During first round, Inspecting Additional Commissioner in his order under S.17B of the Wealth Tax Act, 1963 did mention/discuss stock/bills receivable, but not added the same towards net wealth---Liabilities were disallowed in order to convert the losses declared into net wealth at certain figures, while in second round, Inspecting Additional Commissioner had made the addition of the same which would tantamount to change of opinion which was not permissible under the law.

(d) Interpretation of statutes---

----When a statute confers a certain duty, on an officer, it is that officer who has to make up his mind and pass the order in accordance with law and exercise his discretion uninfluenced by any opinion of any other authority.

(e) Wealth Tax Act (XV of 1963)---

----Ss.16, 17B, 23 & 31B---Assessment---Cancellation of assessments and directions by the Inspecting Additional Commissioner for completion of assessment---Validity---Inspecting Additional Commissioner while remanding the case of Assessing Officer had specifically directed that the case under reference involved potential revenue, therefore, action on his part must be completed on priority basis under intimation to his office which clearly showed that the Assessing Officer had acted as a tool of the Inspecting Additional Commissioner and had not applied his own mind to the facts of the case available on record which was in violation of law and not sustainable---Additions made by the Assessing Officer was without justification---Order of First Appellate Authority was vacated and order passed under S.16/17B/23 of the Wealth Tax Act, 1963 was cancelled---Original assessment was restored---Addition made under S.31B of the Wealth Tax Act, 1963 was deleted by the Appellate Tribunal.

2001 PTD 804 ref.

Shahid Abbas for Appellant.

Anwar Ali Shah, D.R. for Respondent.

ORDER

Through these four appeals, the appellant has assailed the consolidated impugned order of the learned C.W.T.(A) dated 16-6-2004 for the assessment years 1994-95 to 1997-98 on the following common grounds: ---

(1) That the order was passed by the learned C.W.T.(Appeal) is bad in law, unlawful, unjustified, against the facts of the case, even is not a speaking order to cover all the aggrieved facts of the case.

(2) That the order was passed, by the assessing officer, without issuing a notice under lawful jurisdiction.

(3) That the ex parte assessment made by the assessing officer without giving sufficient opportunity of being heard is bad in law and unjustified:

(4) That the order passed by the assessing officer on the basis of order under section 17B of the Wealth Tax Act, 1963 is without jurisdiction, unjustified, bad in law and against the facts of the case.

(5) That the order passed by the assessing officer is out of jurisdiction.

(6) That the order passed by the IAC under section 17B is unjustified, unlawful and against the facts of the case.

(7) That the valuation of assets made by the assessing officer is excessive, harsh and against the history of the case.

The original assessments in this case were completed under section 16(3) of the revoked Wealth Tax Act, 1963 vide order dated 1-6-1996 for the assessment years 1994-95 & 1995-96, order dated 20-1-1995 for the assessment year 1996-97 and order datedl5-10-1997 for the assessment year 1997-98 by the assessing officer at net Wealth as under:

??????????????????????????????????? 1994-95?????????? 1995-96?????????? 1996-97?????????? 1997-98

Immoveable Assets? 81,06,000???? 82,64,000???? 86,96,000???? 91,75,000

Moveable Assets???? 72,12,495???? 76,12,000???? 83,62,000???? 86,62,000

Total????????????????????? 1,53,18,495? 1,58,76,000? 1,70,58,000? 1,78,37,000

Less Liability

as claimed????????????? 1,39,67,495? 1,65,96,872? 2,33,73,151? 3,00,97,907

Net Wealth assessed13,51,000??? 7,20,872????? 63,15,149???? 1,22,60,90

??????????????????????????????????????????????????????????? (Liability)????? (Liability)????? (Liability)

???????????

Later on, these above assessments were taken up by the learned IAC on the grounds that these are erroneous being prejudicial to the interest of revenue for the reasons that residential house has wrongly been allowed as self-occupied, as the proprietor of an AOP does not fall within the purview of section 2(c)(ii) of the Wealth Tax Act and that the loans claimed have been wrongly allowed, as these are cash demand

which are always utilized for business transactions and covered under capital account. The learned IAC cancelled the assessments under section 17B and modified the assessments as under:---

??????????? 1994-95?????????? 1995-96?????????? 1996-97?????????? 1997-98

Total assets liable to

Wealth Tax?? 1,99,43,495? 2,31,20,760 2,44,68,520 2,54,42,200 Less basic

Exemption???? 10,00,000???? 10,00,000???? 10,00,000???? 10,00,000

Balance Wealth?????? 1,89,43,495? 2,21,20,760? 2,34,68,520? 2,44,42,200

The appellant filed appeal before this Tribunal and the order under section 17-B was set aside vide order dated 17-3-1999 in W.T.As. Nos. 93 to 96/LB of 1999 with the directions that the assessee should be given proper opportunity of being heard. He should be confronted on all the relevant issues on which the assessment under section 17B was based.

Learned IAC during the course of second round again cancelled the original assessments and modified the assessments on the basis of revised wealth tax assets as under:---

??????????? 1994-95?????????? 1995-96?????????? 1996-97?????????? 1997-98

Immoveable Assets? 85,31,1000?? 1,06,89,000? 88,21,000???? 89,70,000

Moveable Assets???? 2,23,79,990? 2,38,08,872? 3,37,85,151? 4,38,60,662

Total? 3,09,80,990? 3,44,97,872? 4,26,06,151? 5,28,10,662

Less liability? 1,39,67,495? 1,65,96,872? 2,33,73,151? 3,26,28,662

Total net assets

liable to wealth tax? 1,69,43495?? 1,79,01,000? 1,92,33,000? 2,01,82,000

The appellant again filed appeal before this Tribunal and vide order dated 25-8-2001 in W.T.As. Nos.1605,1606,1607 and 1608/LB of 2002, the impugned order dated 18-8-2000 to the extent of cancelling the assessment and invoking of Section 17-B was maintained. However, the impugned order was vacated with regard to modification of the original assessment orders and it was directed that fresh assessments to be made after providing the assessee an opportunity of being heard and to produce the evidence, if any, in support of his contentions. The learned IAC sent the matter to Special Officer and he being assessing officer made the assessments on 30-3-2002 as under:---

??????????? 1994-95?????????? 1995-96?????????? 1996-97?????????? 1997-98

Immovable Assets?? 85,31,1000?? 1,06,89,000? 88,21,000???? 89,70,000

Movable Assets????? 2,23,79,990? 2,38,08,872? 3,37,85,151? 4,38,60,662

Total? 3,09,10,990? 3,44,97,872? 4,26,06,151? 5,28,10,662

Less Liability1,39,67,495? 1,65,96,872? 2,33,73,151? 3,26,28,662Total net assets

liable to wealth tax? 1,69,41495?? 1,79,01,000? 1,92,33,000? 2,01,80

The appellant now against the above treatment went in appeal before the learned C.I.T.(A) on the following grounds:---

(1) That the show-cause notice under section 17-B was issued on different grounds and the addition was made on other grounds which is illegal and unjustified.

(2) That the learned S.O. was not justified to add stock and bills receivable in the wealth of the assessee which is illegal and against the law.

(3) That the learned S.O. was not justified to add the amount of stock and bill receivable at Rs.1,73,56,872 when as per certificate the bills receivable is at Rs.383747.25 and Rs.2,44,368.

(4) That the learned S.O. was not justified to calculate the additional tax under section 31-B on the assessment order under section 17B/16 (3) which is illegal and void. The additional tax under section 31-B only applicable on the assessment order under section 16.

The learned C.W.T.(A) vide order dated 27-6-2002 set aside the assessments with the following directions:

"The plea as mentioned in the grounds of appeal requires consideration by the assessing officer. These points were not taken up during the course of hearing. Considering these would go a long way in meeting the ends of justice".

The assessment were again finalized vide order dated 27-6-2003 by repeating the original wealth assessed vide order dated 30-3-2002 as under: ---

??????????????????????????????????? 1994-95?????????? 1995-96?????????? 1996-97?????????? 1997-98

Immovable Assets?? 85,31,1000?? 1,06,89,000? 88,21,000???? 89,70,000

Movable Assets????????? 2,23,79,990???? 2,38,08,872? 3,37.85,151? 4,38,60,662

Total? 3,09,10,990? 3,44,97,872???? 4,26,06,151? 5,28,10,662

Less Liability? 1,39,67,495? 1,65,96,872???? 2,33,73,151? 3,26,28,662

Total net assets

Liable to wealth tax?? 1,69,43,495? 1,79,01,000? 1,92,33,000? 2,01,82,000

Wealth tax payable??? 3,98,587????????? 4,22,525????????? 4,55,825????????? 4,97,550

Additional tax??????????? 59,78863378? 68374? 91,933 under section 31-B

Total tax???????????????????? 4,58,375????????? 4,58,903????????? 4,24,199????? 5,51,483

Appellant again filed appeal before the learned C.W.T.(A) and in the second round, the learned C.W.T.(A) vide impugned order dated 16-6-2004 has confirmed the above said assessments for all the four years. Now the matter has again come up before this Tribunal.

Mr. Shahid Abbas, Advocate has appeared on behalf of the appellant and has contended that the order passed under section 17B was illegal ab initio, void inasmuch as the assessment was completed in pursuance of letter No.369 dated 1-11-2001 issued by the IAC with the direction to S.O. to complete the assessment after providing a proper opportunity of being heard without passing any judicial order under section 17B/24 of the Wealth Tax Act, 1963. He has contended that the point in issue is that the Tribunal vide order dated 25-8-2001 in W.T.As. Nos. 1605 to 1608/LB of 2000 though has confirmed the cancellation, yet directed that afresh assessment to be made after providing the assessee an opportunity of being heard. In response to these directions, the learned IAC should have passed fresh order cancelling the assessments under section 17B and directing the Special Officer to frame assessments. But the IAC by way of administrative order/letter No.369 dated 1-11-2001 directed the S.O. to frame fresh assessments with the following remarks:---

"You are hereby directed to go through the order carefully and re-assessments should be framed afresh after providing proper opportunity of hearing to the assessee. The case under reference involves potential revenue, therefore, action on your part must be completed on priority basis under intimation to this office".

He has argued that this action of the learned IAC is illegal for two reasons firstly that he had to pass order under section 17B/24 and since no such order was passed, any action taken by the assessing officer is ab initio void and liable to be cancelled. Secondly, the aforesaid directions of the learned IAC tentamounts to pressurizing the S.O. to complete assessments as per his advice, which is the clear prejudice and merits cancellation of the assessments.

Learned counsel for the appellant has pleaded that injustice on the part of the department is apparent from the facts of the case. He has pointed out that when originally provisions of Section 17B were invoked, the learned IAC did mention/discuss stocks/bills receivable but not added the same towards net wealth. However, liabilities were disallowed in order to convert the losses declared into net wealth at certain figures. On this point, the appellant was confronted that "stocks/bills receivable can not be allowed as no assets has been declared as taxable". It was explained before the learned IAC that Messrs Javaid Textile Corporation was a proprietorship so that business liabilities are also the personal liabilities of the proprietor. In this connection, a Certificate from Bolan Bank Limited was also produced stating that these receivables were owed by the appellant against certain properties which were duly taxed and the bank in this certificate also explained that "when a party supplies any item to other party, the bank makes payment of that bill to the supplier on behalf of the purchaser and purchase the bill from supplier till the realization of amount from the purchaser, the payment made by the Bank to the Supplier, is treated as liability of the Supplier". He has contended that the appellant also filed details of assets such as machinery, furniture and fixture, stocks and bills receivable which have been offered for taxation against the liabilities/stock receivable but no reason whatsoever was given to add the receivable in the total wealth of the appellant. According to the learned counsel, in fact each and every detail was produced before the learned IAC but great injustice has been done for none of the appellant's fault. He has contended that even otherwise, first non-inclusion of the stocks receivable in total wealth and addition of the same on second time is tentamount to change of opinion which is not permissible in law. According to the learned counsel, the stocks/bills receivable is a part of the capital of the appellant whereas the assessee had shown net business capital so if there is a bill receivable there must be bills payable hence the addition of the stocks receivable in wealth is void ab initio and illegal having no factual net effect over the wealth. He has contended that it is to be noted that the department itself has not added stock/bills receivable by accepting the contention of the appellant in the succeeding years i.e. 1998-99 to 2000-01. He has, therefore, prayed that the additions made under the heads stocks/receivable bills may kindly be deleted.

He has contended that additional tax under section 31B(l)(a) was also charged for all the years on the ground that appellant has not paid tax on the basis of return or has paid an amount less than the amount so payable. In this regard, he has pleaded that tax as per returns was paid. In fact, the department is demanding tax on the disputed wealth computed after the cancellation/framing of the order under section 17B against which present appeals were filed. He is of the view that the additional tax under section 31-B(1)(a) is neither mandatory nor mechanical. In this regard, he has referred the decision of the Hon'ble High Court reported as 2001 PTD 804. He has, therefore, requested for the deletion of addition.

On the other hand, learned DR is supporting the impugned orders of the Officers below.

We have heard the learned representatives of both the sides and have also perused the impugned order of the learned C.W.T.(A), the assessment order, the order of this Tribunal during first round, the letter of the learned IAC to the Special Officer dated 1-11-2001 regarding re-assessments and other relevant record of the case.

While perusal of the order of this Tribunal dated 25-8-2001, we have found that the impugned order under section 17B to the extent of cancelling the assessments was maintained and the remaining order was vacated with regard to modification of the assessment orders, as the learned IAC under section 17B of the revoked Wealth Tax Act, 1963 while exercising jurisdiction has been given two powers (1) to pass order enhancing or modifying the assessment or (2) cancelling the assessments and directing a fresh assessment to be made. In the present case, he has cancelled the assessments for all the four years, but simultaneously has enhanced the assessment for which he was under legal obligation to make direction for fresh assessment to be made. We have further noted that the learned IAC instead of passing formal order in accordance with law directed to the concerned officer to make fresh assessment, and has directed the S.O. "to go through the order carefully" and has further directed that "the case under reference involves potential revenue, therefore, action on your part must be completed on priority basis under intimation to this office". We are of the view that the order passed under such directions by the superior officer can never be fair and justified being passed under the pressure of the superior officers and cannot be appreciated.

On the merits of the case, we have found that during the first round, the learned IAC in his consolidated order under section 17B did mention/discuss stock/bills receivable, but not added the same towards net wealth. However, liabilities were disallowed in order to convert the losses declared into net wealth at certain figures, but in the second round, has made the addition of the same which tentamounts to change of opinion which is not permissible under the law.

We have further noted that the learned C.W.T.(A) during the first round has set aside the assessment with the specific directions that "the plea as mentioned in the grounds of appeal requires consideration by the assessing officer. These points were not taken up during the course of hearing. Considering these would go a long way in meeting the ends of justice". But during the second round, the assessments have been upheld without considering the original assessments and has not even touched the single issue raised in the grounds of appeal before the learned C.W.T.(A) for which the matter was remanded back for reconsideration. Appellant has specifically objected the show-cause notice which was on different grounds, while the addition has been made on the issues which were not in the show cause. Likewise, regarding the additions made no clarification has been given by the assessing officer. We have further noted that the learned C.W.T.(A) without giving any reason and justification has upheld the assessment order without considering the fact that assessments were set aside with specific directions which have not been complied with.

We are of the view that when a statute confers a certain duty on an officer, it is that officer who has to make up his mind and pass the order in accordance with laws an exercise his direction uninfluenced by any opinion of any other authority as has been held by this Tribunal as well as superior courts. In this case, the learned IAC while remanding back the case to assessing officer has specifically directed that the case under reference involves potential revenue, therefore, action on his part must be completed on priority basis under intimation to this office which clearly shows that the assessing officer has acted as a tool of the learned IAC and has not applied his own mind to the facts of the case available on record which is in violation of law and not sustainable.

Considering all these facts, we find no justification in the additions made by the assessing officer. The consolidated impugned order of the learned C.W.T.(A) is vacated and the consolidated order under section 16(3)/17B/23 for all the four years under review is cancelled. Original assessments for all the four years stand restored. Consequently, the addition made under section 31B is deleted.

All the four appeals filed by the assessee are allowed.

C.M.A./518/Tax(Trib.)???????????????????????????????????????????????????????????? Appeals allowed