I.T.As. Nos. 680/LB to 682/PB of 2004, decided on 29th March, 2005. VS I.T.As. Nos. 680/LB to 682/PB of 2004, decided on 29th March, 2005., 2006 PTD-INCOME-TAX-APPELLATE-TRIBUNAL-PAKISTAN 2485 (2005)

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

----Second Sched., Part-IV, Cl. (6F) & S.13---Exemption---Assessee purchased property in March, 1998 i.e. before the insertion of clause (6F) of the Part-IV of the Second Schedule of the Income Tax Ordinance, 1979 in open auction by Privatization Commission on behalf of the Government but except the call deposit money amount was invested in the period from 1-7-1998 to 16-12-1999, which date had been specified in the said clause---Assessee pleaded that source of investment was immune from probe under the said clause as the same had retrospective effect being beneficiary to the assessee---First Appellate Authority rejected the plea of the assessee by observing that the said clause was inserted by Finance Act, 1998, which was given effect from 1-7-1998, while the appellant had purchased the property in open auction prior to the date of insertion of said clause and the assessee was not qualified to avail the benefit of the clause---Validity---Clause (6F) of the Part-IV of the Second Schedule of the Income Tax Ordinance, 1979 was of beneficial nature and such-like beneficial insertions and amendments where no specific date of operation had been incorporated, will operate retrospectively---As per proviso of clause (6F) of the Part-IV of the Second Schedule of the Income Tax Ordinance, 1979 the amount invested in purchase of any assets through public auction up to 16-12-1999 was immune from probe and no addition could be made under S.13 of the Income Tax Ordinance, 1979---Entire investment was made prior to target date of 16-12-1999---Addition made was deleted by the Appellate Tribunal.

2003 PTD 812 rel.

1981 PTD 210; 1997 PTD 1555; 1993 SCMR 73; 1992 SCMR 1652 and 1995 PTD 812 (Trib.) 1113 ref.

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

---Second Sched., Part-IV, Cl. (6F)---Exemption---Investment---Word "invested" as used in clause (6F) of the Part-IV of the Second Schedule of the Income Tax Ordinance, 1979 by the Legislature was of key importance as it had been used in "past participle form" and covered all those `investments' which had been made in the past.

2003 PTD 812 1997 rel.

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

---Second Sched., Part-IV, Cls. (6F) & Cl. (8)--Cls. (6F) & Cl. (8) of the Part-IV of the Second Schedule of the Income Tax Ordinance, 1979 are identical in their form'.

Zahidur Rehman, Anthorised Representative for Appellant.

Yousaf Ghaffar, D.R., for Respondent.

ORDER

JAVED IQBAL (JUDICIAL MEMBER).---Through these three further appeals relevant to assessment years 1998-99 to 2000-2001 assessee has challenged the impugned finding recorded by CIT(A) vide its appellate order Nos. 1808 to 1810, dated 13-10-2004 on the grounds that completion of ex parte assessment and addition made under section 13(1)(aa) of the Income Tax Ordinance, 1979 (hereinafter called the Ordinance) are illegal, the order has been passed on the date other than the date of default, hence on this ground to it is, against the law.

Brief relevant facts for the disposal of these appeals are that the appellant an AOP consisting of 11-members namely Shahid Gul and partners engaged in construction and sales of commercial properties. On 5-3-1998 the AOP purchased the property of Messrs Dean's Hotel Building along with the land beneath the building in public auction for a sum of Rs.36,40,00,000. Assessee is a member of AOP having share of 1/11th share; payment was made in the instalments; the break-up of which is reproduced as under:--

In order to probe the source of investment statutory notices were issued which as per assessment order were defaulted on the alleged non-attendance of assessee hence, combined ex paste order under section 63 for all the assessment was passed by making the additions under section 13(1)(aa) of the repealed Income Tax Ordinance in the respective years. The aforementioned additions contained the share of investment made in the purchase of Deans Hotel building and land beneath it, cash in hand prize bond and the personal expenditure shown by the assessee in his wealth statement filed along with the return of income. Feeling dissatisfied assessee challenged the combined assessment order before the L/CIT(A), who rejected the appeal of assessee, hence these further appeals on behalf of assessee before us. The LIAR of the assessee reiterated his contention as per grounds of appeal which are reproduced as under:--

(1) "That neither the notice under section 56 nor under section 61 were ever issued on the appellant, therefore, not only notice under section 62 but even the assessment order made in consequence thereof is illegal, hence the order of Assessing Officer as well as LICIT(A) not maintainable in law.

(2) That after coming into force of the Income Tax Ordinance, 2001, wherein irrespective of the fact that whether of the year in which the investment was made is completed or not addition is to be made in the year of the discovery, whereas the Assessing Officer has made the investment in which the investment was made, therefore, the notice under section 13 of the Income Tax Ordinance, 1979 and in consequence thereof the addition under that section unlawful and of no legal effect.

(3) That even otherwise the Assessing Officer has not passed the order on the alleged date of default i.e. 14-5-2004 and instead thereof has passed order on 18-5-2004 for, which date no notice was issued or served on appellant therefore the order of Assessing Officer as well as L/CIT(A) are not maintainable in law and ought to be annulled.

(4) That in clause 6F of Part IV of the Second Schedule to Income Tax Ordinance, 1979 the legislature has used the word; invested; is in past participle, therefore it even cover the investment already made at the time of insertion of the aforementioned clause.

(5) That the Honourable Peshawar High Court, Peshawar has already interpreted the word invested, therefore, the assessment of any other meaning to said word by the subordinate authority is against the law and is of no legal effect.

(6) That according to the judgment of apex Courts any beneficial amendment is applicable to all the pending cases before the Assessing Officer and appellate forum and since the provision of clause 6F of Part IV of the Second Schedule is beneficial in nature therefore its application is retrospective.

(7) That the Assessing Officer has even treated the amount of cash in hand from the preceding assessment year under section 13 of the I.T.O., 1979 which was beyond the jurisdiction of the Assessing Officer.

(8) That the L/CIT(A) was not justified to confirm the ex parte order for single default of the appellant.

(9) That this appellant was bona fide resident of FATA therefore, the Assessing Officer had no authority to probe his source of, earned in that area."

To support his contention the LIAR of the assessee referred the judgment reported as 1981 PTD 210 (Lhr. H.C.) and the judgment of Peshawar High Court reported as 2003 PTD 812, 1997 PTD 1555 (SC Pak.); 1993 SCMR 73; 1992 SCMR 1652. On the other hand L/DR on his turn while supporting the impugned order read out the following portion of the impugned order.

"As regards appellant's second common objection regarding claim of immunity from the provisions of section 13 of the Income Tax Ordinance, 1979 (Repealed) under clause (6F) of Part IV of the Second Schedule to the Income Tax Ordinance, 1979 (Repealed) assessment record as well as provisions of the above clause examined showed that in fact clause (6F) was inserted by the Finance Act, 1998 which was given effect w.e.f. from 1-7-1998 against which the appellant has purchased this property in question in the open auction held by the Privatization Commission of Pakistan on 5-3-1998. Thus the appellant was not qualified to avail the benefit of clause (6F). When confronted to this position of the case the L/AR of the appellant claimed that on 4-3-1998 the AOP participated in the auction of Dean's Hotel, Peshawar in which highest bid offered at Rs.36,40,00,000 was accepted but the proper Agreement to sell was later on executed on 16-6-1999 due to which he is entitled to avail the benefits of clause (6F). In rebuttal to this contention of the learned A.R. of the appellant the Assessing Officer pleaded that this plea of the L/AR of the appellant is incorrect for the reason that since clause (6F) was inserted through Finance Act, 1998 due to which assets purchased through public auction by the Government in March, 1998 i.e. before the insertion of clause (6F) by Finance Act, 1998 are not covered the provisions of clause (6F) as the Legislature has not given retrospective effect to clause (6F). When confronted to these arguments of the Taxation Officer the L/AR in his counter-comments pleaded that it is correct that auction for the sale of property was, held in March, 1998 in which AOP's bid was accepted on 9-3-1998 but proper agreement to sell between the parties was drawn on 16-6-1999 while proper sale-deed of the property between the parties was made on 16-12-1999 due to which the Assessing Officer should have allowed the benefits of clause (6F) to the appellant. After giving due consideration to the above facts of the case and placing reliance on a case-law reported as 1995 PTD (Trib.) 1113, 1 do not find myself in agreement with the contentions and arguments of the appellant and his AR as clause (6F) had been inserted and made effective w.e. from 1-7-1998 as legally any amendment in a taxing statute to be prospective and not retrospective until and unless the legislature has deemed fit to give it retrospective effect through clear and unambiguous legislation which has not been done in this case. Accordingly all these three appeals on this common issue also failed and are rejected."

We have heard the arguments of the parties and have perused the orders of the lower authorities and have also examined the relevant provision of law contained in clause 6F of Part IV of the Second Schedule to the Ordinance and also the cases-law referred by the L/AR of the assessee. It has been seen that the assessee is a member of an AOP namely Messrs Shahid Gul and partners having its head office at Nasir Mansion Railway Road, Peshawar, took part in the open auction conducted on 5-3-1998 for the sale of Deans Hotels building along with the land beneath it through Privatization Commission, Ministry of Finance acting as an agent of seller Messrs Associated Hotel Pakistan Limited as, public company incorporated under the law of Pakistan with its registered office at Lahore. The AOP in the said auction offered the highest bid and as such was declared successful bidder. Out of total amount of bid at Rs.36,40,00,000 each of the member including assessee contributed 1/11th share at Rs.33,090,909 which was paid in instalments, the break-up of which has already reproduced supra. To probe the source of investment proceeding were initiated. Ex parte assessment was completed by Assessing Officer which was confirmed by the First Appellate Authority, but from the assessment order it reveals, that in compliance to statutory notices assessee has not only filed the return of total income but also the wealth statement its reconciliation, with raising the plea that the source of investment was covered under clause 6F of Part-IV of the Second Schedule to the repealed Income Tax Ordinance, but the plea of assessee was turned down by Assessing Officer and addition was made under section 13(1)(aa) of the repealed Ordinance. As the assessee has made the compliance of statutory notices and submitted the documents and has taken the plea that source of investment its immune from probe under clause 6F of the Second Schedule to the Income Tax Ordinance, therefore, the completion of ex parte assessment and its confirmation by L/CIT(A) is unjustified. As regards the effect of clause 6F of Part-IV of the Second Schedule to the late Ordinance, it was pleaded on behalf of assessee that it has retrospective effect, while the L/CIT(A) rejected this plea of assessee by observing that this clause was inserted by Finance Act, 1998, which was given effect from 1-7-1998, while the appellant has purchased the property in question in the open auction held by the Privatization Commission of Pakistan on 5-3-1998 i.e. prior to the date of insertion of clause 6F thus he appellant was not qualified to avail the benefit of clause 6F. As per impugned order any amendment in a taxing statute is to be prospective and not retrospective until and unless the legislature specifically give it retrospective effect through clear and unambiguous legislation, which has not been done in this case. We are not convinced with this conclusion of lower authority. There is no doubt that, the appellant has purchased the property in March, 1998 i.e. before the insertion of clause 6F, in open auction by Privatization Commission on behalf of the Government but except the call deposit money amounting to Rs.1,00,00,000 out of which assessee contribution was at 1ls.9,09,091 while the rest of the bid amount was invested in the period from 1-7-1998 to 16-12-1999, which date has been specified in the clause (6F).

Further the word invested as used in clause 6F by the legislature is of key importance as it has been used in "past participle form" and covers all those `investments' which have been made in the past. Our this view is strengthened from the case-law reported as 2003 PTD 812. Wherein his lordship Mr. Justice Tallat Qayum has interpreted the word invested:--

"The operative paras. 10 and 11 of his judgment are reproduced as under;

"So far as the other argument of the learned counsel for the petitioner that clause (8) has retrospective application preventing the Assessing Officer to probe into source of income under section 13(1)(aa) of the Ordinance is concerned, the same also has a force in the following reasons:--

Firstly, in clause (8) the word "invested" has been used which is of key importance as it has been used in past participle form. It had covered all those investments, which had been made in the industrial undertaking whose income was assessed under sections (118C), (118D) and (118E) of Part-I of the Second Schedule to the Ordinance at the time of insertion of clause (8-F). It is worth-mentioning here that Messrs Kaghan Ghee Mills (Pvt.) Ltd. had been set up prior to the issuance of Notification S.R.O. 1283(I)/90, dated 12-12-1990 and pursuant to the said notification the said company was treated as set up and assessed under clause (118-C).

Secondly, in the Notification S.R.O. 1283(1)/90, dated 13-12-1990 no date has been given for application of clause (8), therefore, there is no bar imposed by the authorities which issued the said Notification to interpret retrospectively.

Thirdly, Clause 8 is beneficial in nature. It is also by now established principle of law that if any Notification/Circular is of benevolent nature, the same would go to the assistance of assessee. In this regard reliance can safely be placed on the following judgments:

(i) The CIT, East Pakistan, Dacca v. Noor Hussain PLD 1946 SC 657.

(ii) Laxmichand Hirjibahi v. CIT Gujrat-III (128-ITR).

(iii) Gujrargravures Pvt. Ltd. v. ITO, Company Circle-VIII, Ahmedabad and another (154 ITR 786).

(iv) Rajan Ramkrishana v. CWT Gujrat-I (127 ITR 1)

(v) Nanvit Lal C. Zaveri v. K.K. Sen (56 ITR 198).

(vi) Ellerman Lines Ltd. v. CIT (82 ITR 913).

(vii) Bechardas Spg. and Wvg Mills Co. Ltd. v. CIT (ITR 153 of 1976).

(viii) Tata Iron & Steel Co. Ltd. v. N.C.I. Padhayaya (ITR 961)

(ix) Navnit Lal Ambalal v. CIT (1976) 105 IT 735)

(x) M.M. Annaiah v. CIT (76 itr 582-Mys)

(xi) Dr. T.P. Kapadia v. CIT (87 ITR 511 Mys.)

(xii) Dattatraya Gopal Shette v. CIT, Poona Range, Poona Kania (sic).

(xiii) CIT Karala-I v. B.M. Edward India Sea Foods, Cochin (119 ITR 334).

(xiv) Raja Rejeswari Weaving Mills v. ITO `A' Ward, Cannanore and others (113 ITR 405)

(xv) CIT Assam, Nagaland, Meghalaya, Anipur and Tripura (102 ITR 408).

(xvi) (150 ITR 460).

(xvii) ECO Bank v. CIT (237 ITR 889), (1999 PTD 3752).

(xviii) (T.R. No.33/97) (Usman Ghee Industries v. CIT) and

(xix) CIT v.Muhammad Kassim 2000 PTD 280.

Fourthy the purpose of insertion of clause (8) was to encourage industrialists to promote the investment in the industrial undertaking without fear of probing their source of income, therefore, employing clause (8) retrospective would be in line of promotion of the purpose of the Legislation. It is not always necessary that retrospective application is found in express words. In the absence of express words whenever there in intendment to the effect that some provisions will be retrospective in its application, effect can be given to that intendment. In this regard reliance can be safely placed on Alif Din v. Noor (PTD 1969 Peshawar-62).

The net result of the above discussion is that the Income Tax Officer and L/ITAT have failed to properly appreciate that the petitioner was entitled to benefit of clause (8) of Part-I of Second Schedule of the Ordinance. We, therefore, while answering this Tax Reference hold that the petitioner was entitled to benefit of clause (8) of Part- 1 of the Second Schedule of Income Tax Ordinance, 1979. We also set aside the assessment order, dated 26-6-1993, passed by the Income Tax/Assessment Officer and the order of L/I.T.A.T., dated 16-5-1994 and restore the order of the CIT(A), dated 12-4-1994. The reference is sent to the LT.A.T. in terms of section 136(5) of the Ordinance with the direction to pass necessary orders as required under the above mentioned section of law. The Registrar of this Court is directed to send certified copy of this judgment under the seal of the Court and under his signatures to the Appellate Tribunal enabling it to the needful. There shall be no orders as to costs.

Reference answered in negative."

For the purpose of comparison it will not be out of place to re-produce clause (6F) and clause (8) of Part-IV of the Second Schedule:---

"The provision of section 13 or Chapter XI or Chapter XII shall not apply in respect of any amount invested in purchasing of any land or any other assets sold through public auction by the Federal Government or a Provincial Government or a body established or controlled by such Government.

Clause (8) of Part-IV. The provisions of section 13, Chapter XI or Chapter XII shall not apply in respect of any amount invested in the purchase of shares of a company owning and managing an industrial undertaking the profits and gains from which are exempted under clause (18C) or clause (118D) or clause (118E) of Part-I of this Schedule."

From the comparison of both the clauses it is evident that both the assertions i.e. clause 6F and clause (8) of Part-IV of the Second Schedule to the repealed Ordinance are identical in its form and contents therefore the ratio of the judgment of Hon'ble Peshawar High Court Peshawar is fully applicable to the present case of appellant and as such the conclusion of L/CIT(A) being without any basis is not sustainable in law, while the immunity of probe of investment under clause 6F even cover the past transaction. Beside above it has also been found that the clause 6F of Part-IV of Second Schedule is of beneficial nature and as per above quoted judgment of Hon'ble Peshawar High Court and also through various other judgments the Hon'ble High Courts and apex Courts of the country on the subject have held that such-like beneficial insertion and amendments where no specific date of operation has been incorporated will operate retrospectively. In the light of above discussion we hold that as per proviso of clause 6F of Part-IV of 2nd Schedule to the repealed Ordinance the amount invested in purchase of any assets through public auction up to 16-12-1999 is immune from probe and no addition could be made under section 13 of the repealed Ordinance while in the instant case the entire investment made by the appellant is prior to target date of 16-12-1999. Therefore the addition made on this count merits deletion, hence deleted.

While on the issue of addition under the same section on account of declaration of cash, prize bonds and personal expenses the Assessing Officer has never confronted the assessee in respect of above addition in terms of section 13 of the late Ordinance but has completed ex parte assessment. Therefore on this count we deem it proper to set aside the order of the lower authorities on this part of addition and to direct the Assessing Officer to reframe the assessment after affording the proper opportunity of being heard and confronting the assessee and order it accordingly.

In this way appeals on behest of assessee succeed in the above indicated manner.

C. M. A. /96/Tax (Trib.)Appeals succeeded.