I.T.A. No.2689/LB of 2002 and W.T.A. No.5282/LB of 2003, decided on 24th March, 2005. VS I.T.A. No.2689/LB of 2002 and W.T.A. No.5282/LB of 2003, decided on 24th March, 2005., 2006 PTD-INCOME-TAX-APPELLATE-TRIBUNAL-PAKISTAN 76 (2005)

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

----Ss. 80D, 65, 66A & Second Sched. Cl. (126D)---Protection of Economic Reforms Act (XII of 1992), S.6---Minimum tax on income of certain persons---Profit and gains of the assessee were exempt from the levy of income tax under Cl. (126D) of the Second Schedule to the Income Tax Ordinance, 1979---Minimum tax under S.80D of the Income Tax Ordinance, 1979 was charged which was upheld by the First Appellate Authority on the ground that the Appellate Tribunal had categorically held that exemption from payment of tax under S.80D of the Income Tax Ordinance, 1979 was not available to the units whose profits and gains were exempt from tax udder Cl. (126D) of the Second Schedule of the Income Tax Ordinance, 1979---Assessee contended that in the presence of earlier order for the assessment year 1997-98, wherein tax under S.80D of the Income Tax Ordinance, 1979 was not charged on the basis that Cl. (126D) of the Second Schedule of the Income Tax Ordinance, 1979 was covered under the provisions of "otherwise notified" used in S.6 of the Protection of Economic Reforms Act, 1992 which still held the field and had attained finality, the orders were without jurisdiction and void ab initio---Validity ---Legality and the propriety of the decision was open to revisional proceedings under S.66A of the Income Tax Ordinance, 1979 apart from action under S.65 of the Income Tax Ordinance, 1979 on account of definite information but none of the recourse was taken either before passing the orders or even afterwards and as such the decision attained finality and was binding on the Department---Impugned orders had decided the same legal issue against the assessee taking a contrary view of the earlier decision---Vested right had been created in favour of the assessee with the order of the Assessing Officer for the assessment year 1997-98 which could not be taken away in the subsequent year---Re-adjudication of the same issue by the successor Assessing Officer was against the principles of administration of justice and fairplay---Principle that each year involves independent assessment was not applicable in the given facts and circumstances as the issue involved was not a question of fact but a question of law which had attained finality through the order of assessment year 1997-98 especially when Assessing Officer had not given any reason for deviating from the earlier decision---Assessing Officer erred in refusing to rectify the assessment order for the assessment year 1997-98 and to levy minimum tax under S.80D of the Income Tax Ordinance, 1979 in assessment year 2000-2001 and First Appellate Authority had also erred in confirming the treatment of the Assessing Officer---Orders of the authorities below were vacated and levy of tax under S.80D of the Income Tax Ordinance, 1979 was disapproved by the Appellate Tribunal---Assessing Officer was further directed to rectify the order for the assessment year 1998-99 and delete the tax charged under S.80D of the Income Tax Ordinance, 1979---As the appeals were decided on the preliminary issue that two contradictory orders on a question of law could not exist by at one and the same time, other issue/argument was not adjudicated by the Appellate Tribunal.

2004 PTD 3020 rel.

2001 PTD 1829; 2001 PTD (Trib.) 865 and Elahi Cotton Mills Limited v. Federation of Pakistan 1997 PTD 1555 ref.

(b) Income tax---

----In the presence of an earlier order, other orders contrary to the order cannot be allowed to hold the field for the simple reason that two contrary orders on a question of law cannot exist at one and the same time.

Shahid Perveaz Jami for Appellant.

Ghazanfar Hussain, D.R. for Respondent.

Date of hearing: 22nd March, 2005.

JUDGMENT

NASEER AHMAD (ACCOUNTANT MEMBER).---The instant appeals have been filed at the behest of assessee for the assessment years 1998-99 and 2000-2001 to agitate that the learned First Appellate Authority was not justified to hold that minimum tax liability under section 80D can be charged in the case which qualifies for exemption under the provisions of clause 126D of the Income Tax Ordinance, 1979.

2. Brief facts giving rise to the present appeals are that the assessee, a private limited company, derives income from poultry feed. Profit and gains of the company were exempt from the levy of income tax under clause 126D of the Second Schedule to the Income Tax Ordinance, 1979. However, the Assessing Officer charged tax under section 80D in both the years under appeal. The tax so levied was A contested before the learned CIT(A) who upheld the same on the ground that the ITAT has categorically held that exemption from payment of tax under section 80D was not available to the units whose profits and gains were exempt from tax under clause 126D. The assessee still feeling dissatisfied has filed further appeal before this Tribunal.

3. It may not be out of place to specifically mention here that the department was asked time and again. to produce the records of assessment proceedings and for that purpose many opportunities were afforded to the department but all were in vain and even on the last date of hearing the learned DR has shown his inability to produce the same. However, he stated that he had no objection to proceed further in the matter. It may be added that the DR was specifically requested to bring the assessment records on 2-11-2004, 4-12-2004, 6-1-2005, 15-2-2005 and 25-2-2005. Under these facts and circumstances we have to rely upon the contention of the learned AR of the assessee when assessment records have not been produced.

4. The AR of the appellant/assessee in support of his claim of waiver from minimum tax under section 80D has given the following two arguments:

(a) In the presence of earlier order for the assessment year 1997-98, wherein tax under section 80D was not charged on the basis that clause (126D) is covered under the provisions of "otherwise notified" used in section 6 of the Protection of Economic Reforms Act, 1992 which still holds the field and has attained finality, the impugned orders are without jurisdiction and void ab initio in accordance with the principles laid down by the Sindh High Court in 2004 PTD 3020.

(b) As per principle laid down by the Supreme Court in 2001 PTD 1829 Clause (126D) is protected under the Protection of Economic Reforms Act, 1992 and due to this subsequent judgment of the apex Court the reliance of the learned CIT(A) on 2001 PTD (Trib.) 865 is no more valid.

5. While elaborating his arguments the AR of the appellant/assessee argued that in the assessment year 1997-98 which was the first year of business the legal issue of levy of minimum tax under section 80D was thoroughly examined by the then Assessing Officer in the light of the expression "otherwise notified" used in section 6 of the. Protection of Economic Reforms Act, 1992 and the principle laid down by the Supreme Court of Pakistan in the case of Elahi Cotton Mills Limited v. Federation of Pakistan reported as 1997 PTD 1555 with reference to overriding effect of said section of the Act contained in special statute over section 80D of the Income Tax Ordinance, 1979. Thereafter the Assessing Officer gave a conscious finding with proper application of mind on the legal issue that minimum tax under section 80D is not chargeable. AR urged that unless and until the finding given in the assessment order of the assessment year 1997-98 was reversed through the mechanism provided under the Income Tax Ordinance, 1979 the Assessing Officer cannot pass a contradictory order on the legal issue in the subsequent year.

6. The AR pleaded that the principle that each year involves independent assessment and any Income Tax Authority is not bound by its earlier order is not applicable in the given facts and circumstances wherein a question of law was involved which is to be decided once and would be applicable to all the years whereas question of facts varies from year to year. He further pleaded that the order for the assessment year 1997-98 could have been revised under section 66A by the IAC or even the Assessing Officer himself could have made additional assessment under section 65 if he had definite information that minimum tax under section 80D is leviable in cases where income is exempt under clause (126D). The AR concluded his arguments on this issue by stating that the impugned orders are against the principle of administration of justice and fairplay as propounded by the Sindh High Court in 2004 PTD 3020 and as per ratio of the said judgment the impugned orders to the extent of levy of tax under section 80D are without jurisdiction and void ab initio.

7. As regards the other issue of protection under the Protection of Economic Reforms Act, 1992 the AR of the appellant/assessee argued that due to the latest judgment of the Supreme Court of Pakistan reported as 84 Tax 25(SC) the reliance of the learned CIT(A) on judgment of the learned ITAT reported as 83 Tax 3 (Trib.) is no more valid. He pleaded that the Supreme Court has held that S.R.O. 921(I)/94, dated 22-9-1994 and S.R.O. 1189(I)/94, dated 12-11-1994 issued under the Customs and Sales Tax Acts are protected under the Protection of Economic Reforms Act, 1992. He pointed out that the learned ITAT in 83 Tax 3 (Trib.) had held that expression "otherwise notified" used in section 6 of the Protection of Economic Reforms Act, 1992 would cover only those notifications which are issued under the Protection of Economic Reforms Act, 1992. He argued that contrary to the view of the learned Tribunal the apex Court has given protection to the aforesaid S.R.Os. issued under section 13 of the Sales Tax Act, 1990.

8. The learned DR on the first issue of levying minimum tax under section 80D in the presence of contrary order in the assessment year 1997-98 pleaded that if a mistake has been made by the then officer and the same has not been reversed by the IAC or the successor officer that does not mean that Department is bound to repeat the mistake in the subsequent assessment year. However, he could not point out that on what basis, reasoning and inquires the successor Assessing Officer has taken a contrary view. When asked to comment on reliance made on judgment reported as 2004 PTD 3020 and to give any counter-reliance he conceded that no counter-reliance is available. As regards reliance by the AR on judgment of Supreme Court in 84 Tax 25 in the context of expression "otherwise notified" he observed that the said judgment was not available at the time of making assessments in question and since the Supreme Court has given protection to the S.R.Os. mentioned in their judgment issued in 1994 then the benefits of the said judgment is also available to the appellant in respect of clause (126D).

9. We have given our due consideration to the respective arguments and reliances and are of the considered opinion that arguments of the AR are convincing on the preliminary objection of contradictory treatment as per principle laid down by the Sindh High Court in 2004 PTD 3020. The facts of the said reported case are. that on 10-2-1999 Messrs Galaxo Limited was served with a show-cause notice by Additional Collector, Sales Tax, Karachi stating that the Company was supplying Eno Fruit Salt without payment of Sales Tax, treating it as exempted under item No.37 of the Sixth Schedule to the Sales Tax Act, 1990 whereas the said item is not a `drug' and as such sales tax is payable for the period from July, 1996 to April, 1998. However, while passing order-in-original on 4-2-2000 he accepted the claim of exemption from sales tax as a drug. Subsequently, Collector or C.B.R. did not exercise suo motu revisional jurisdiction to consider the legality or propriety of the order passed accepting the claim of exemption as a drug. However, a second show-cause notice, dated 17-10-2001 was issued covering the period from October, 1996 to April, 2001 again confronting the that the goods in question are not exempt from sales tax and demanding sales tax thereof and this time order was passed against the Company and the same was maintained by the Appellate Tribunal. On. that the said company filed appeal before the Sindh High Court wherein it was inter alia urged that once finding on an issue was given by the Adjudicating Authority the same became final, it cannot be reagitated again and again as it would be manifestly against the principle of justice and fair play. The Honourable Court decided the issue in favour of the appellant company with the following observations:--

"We have given our anxious consideration to the facts and circumstance of the case and the contentions raised by the learned Advocates for the parties. For the purpose of answer to question No.2, the facts are admitted and we need not to dilate on it in any detail. It is admitted fact that the order, dated 4-2-2000 (issued on 8-2-2000) competently passed by the Additional Collector-II, deciding the same issue as agitated in the second show-cause notice and after a full-fledged hearing and deliberation it was decided that the Eno Fruit Salt enjoyed exemption from the payment of sales Tax. The order was open to appeal under section 45 (as it stood before substitution by Finance Act, 2000) and was subject to suo motu revision by the Board. Neither any appeal was preferred by the Sales Tax Department assailing the findings nor any revisional proceedings were initiated. The effect was that the order passed by the Additional Collector (Adjudication),' attained finality having binding effect on the Sales Tax Department. Re-initiating of same issue by the Sales Tax Department is against all the principles of administration of justice and fairplay. This course of action cannot be allowed because, firstly it is against the principles of administration of justice, secondly, it is discriminatory in nature, as any order passed in adjudication not assailed in appeal by an assessee, is always treated to be final and the same principle should be applicable to the Department; thirdly, it militates against the principles applicable to the tax matters, that the issues once settled and accepted by the Department shall not be allowed to be deviated, because it will create uncertainty which has always been deprecated and disapproved by the Superior Courts, Legislature as well as the Board itself, fourthly, in the present case, the issue stands decided by an adjudicating order. The legislature has gone by enacting section 65 in the Sales Tax Act, 1990 to the extent of recognizing practice which is result of inadvertence. The learned Tribunal is also aware of this provision, which has been referred in the concluding part of the impugned order; fifthly, a vested right has been created in favour of appellant with the order of the Adjudicating Authority, which cannot be taken away by executive branch of the Sales Tax Department by the initiating fresh proceedings on the same issue.

For the foregoing reasons, it is held that the Sales Tax Department could not reagitate a matter which has been decided' against it vide Order-in-Original No.9 of 2000. The said order could be assailed in appellate or revisional proceedings which were not initiated and, therefore, it hold the field and in the presence of the earlier order, dated 4-2-2000, another order contrary to the said order cannot be allowed to hold the field for the simple reasons that two contrary orders cannot exist at one and at the same time. All the subsequent order proceedings commencing with the issuance of letter, dated 22-6-2001 issued by the' Senior Auditor and further proceedings on the basis of second show-cause notice, dated 17-10-2001 are without jurisdiction and void ab initio. The question No.2 is answered in negative."

10. First, second, third and fifth principles laid down in the aforesaid extract are squarely applicable in the case of assessee/appellant before us. The Assessing Officer while making assessment for the assessment year 1997-98 which was the first year of assessee's business, examined the legal issue of levy of minimum tax under section 80D as the income was exempt from tax under clause (126D) and came to the conclusion that the said clause is covered under the expression "otherwise notified" used in section 6 of the Protection of Economic Reforms Act, 1992 relying on which the Honourable Supreme Court of Pakistan had waived minimum tax under section 80D in cases enjoying exemption under clauses (118C), (118D) and (118E). The legality and propriety of this decision was open to revisional proceedings under section 66A of the Income Tax Ordinance, 1979 apart from action under section 65 on account of definite information. But none of the recourse was taken either before the passing the impugned orders or even afterwards and as such the decision attained finality and was binding on the Department. However, in the impugned orders, the same legal issue has been decided against the assessee taking a contrary view to the c earlier decision. Whereas a vested right had been created in favour of the assessee with the order of the Assessing Officer for the assessment year 1997-98 which .cannot be taken away in the subsequent year. The re-adjudication of the same issue by the successor Assessing Officer is against the principle of administration of justice and fairplay. We are of the considered opinion that the principle that each year involves independent assessment is not applicable in the given facts and circumstances as the issue involved is not a question of facts but a question of law which has attained finality through the order of assessment year 1997-98 especially when Assessing Officer has not given any reason whatsoever for deviating from the earlier decision. It is pertinent to note here that in the case before Sindh High Court the legal issue in both the orders of the Adjudication Officer was the same i.e. exemption of sales tax on Eno Fruit Salt as a drug although different periods were involved. The same is the case here, legal issue is the same but years are different.

11. Accordingly we are in respectful agreement with the Honourable Sindh High Court that in the presence of an earlier order, other orders contrary to the order cannot be allowed to hold the field for the simple reason that two contrary orders on a question of law cannot exist at one and the same time. Resultantly, it is held that learned Assessing Officer has erred in refusing to rectify the assessment order for the assessment year 1997-98 and to levy minimum tax under section 80D in 2000-2001 and the learned First Appellate Authority has also erred in confirming the treatment of the Assessing Officer. Therefore, we vacate the impugned orders of the authorities below and levy of tax under section 80D is disapproved and we further direct the Assessing Officer to rectify the order for the assessment year 1998-99 and delete the tax charged under section 80D in both the years.

12. Since we have decided both the appeals on the preliminary issue that two contradictory orders on a question of law cannot exist at one and the same time so there is no need to adjudicate the other issue/ argument.

13. Appeals are disposed of in the manner given above.

C.M.A./431/Tax (Trib.)??????????????????????????????????????????????????????????????????????? Appeals accepted.