CRESCENT JUTE PRODUCTS LIMITED, LAHORE VS COMMISSIONER OF INCOME TAX, LAHORE and another, 2006 PTD-LAHORE-HIGH-COURT-LAHORE 2001 (2005)

Income Tax Ordinance (XXXI of 1979)---

----Ss.65 & 156---Constitution of Pakistan (1973), Art.199---Consti tutional petition---Notice under S.156 of Income Tax Ordinance, 1979 to reopen assessment framed three years ago allowing depreciation to the company merged in petitioner's company---Validity---Matter of depreciation allowances claimed by petitioner had been considered and decided by Assessing Officer after a careful reading of record without any concealment or misrepresentation by petitioner and with full knowledge of law---Reopening of matter would be required to alter depreciation allowances granted by Assessing Authority---Remedy under 5.156 of Income Tax Ordinance, 1979 would be available for correction of errors floating on surface of record---Relief sought through impugned notice was outside purview of S.156 of Income Tax Ordinance, 1979---High Court accepted constitutional petition and declared the impugned notice to be illegal.

Jawad Hassan for Petitioner.

Muhammad Ilyas Khan for Respondents.

Date of hearing: 1st December, 2005.

JUDGMENT

UMAR ATA BANDIAL, J.---The petitioner-company and its subsidiary Messrs Ujala Cotton Mills Limited ("UCM") filed a joint petition under sections 153 and 153-A of the Companies Act, 1913 for the merger/amalgamation of UCM with the petitioner-company. By order dated 19-1-1983 the High Court allowed the merger/amalgamation to take effect from 30-6-1981. The petitioner's income tax return for the assessment year 1982-83 was filed on 30-1-1983, inter alia, claiming depreciation on depreciable assets previously owned by the merged company, UCM. On 28-2-1983 the respondent No.2 Income Tax Officer completed income-tax assessment of the petitioner in respect of the said assessment year by an order which also took account of the merger/ amalgamation of UCM with the petitioner-company. Subsequently notice dated 30-4-1983 was issued to the petitioner, inter alia, under section 65 of the Income Tax Ordinance, 1979 ("Ordinance") seeking to reopen its assessment for the assessment year 1982-83, another notice dated 4-7-1983 under section 62 of the Ordinance was then served disputing the validity of the merger/amalgamation as well as the amount of depreciation claimed by the petitioner. The latter notice was challenged by the petitioner before this Court in Writ Petition No.3168 of 1983 and Writ Petition No.3169 of 1983. Vide judgment dated 14-10-1984 the said notice was declared to be illegal. The Intra-Court Appeal filed against the said judgment by the department also failed to bear result. Respondent No.2 nevertheless served another notice dated 23-2-1985 under section 65 of the Ordinance of the petitioner. This was yet again followed by a notice dated 23-6-1985 under section 156 of the Ordinance served upon the petitioner by the respondent No.1, Commissioner of Income Tax. It is the latter notice which is presently impugned in this petition.

2. Learned counsel for the petitioner submits that the impugned notice purporting to rectify a mistake in the assessment of the petitioner's income tax liability for the assessment year 1982-83 is in fact a notice to reopen the assessment of the petitioner for the said assessment year. It would be useful to reproduce the relevant contents of the impugned notice:---

"Consequent upon merger of the Ujala Cotton Mills Limited with Messrs Crescent Jute Products Mills Limited, the assets and liabilities of the merged subsidiary became assets and liabilities of the company into which it got merged viz. Messrs Crescent Jute Products Mills Limited, Lahore. During the assessment year 1982-83 you claimed depreciation in addition to your own assets on the assets of Messrs Ujala Cotton Mills Ltd. The assets of Messrs Ujala Cotton Mills Ltd., having been acquired and gone into production before 30-6-1981 were entitled initial depreciation @ 25% as then admissible. Perusal of record shows that initial depreciation on such assets were claimed at 40% and allowed as such. Obviously the depreciation was allowed at higher rate than that admissible in law."

3. A reading of the aforesaid notice undoubtedly shows its purpose to modify a considered finding given in the petitioner's assessment order for 1982-83 regarding admissible depreciation allowances. This purport turns on avoiding 1-7-2001 as the date of commercial production of the undertaking of UCM. The history of the case shows that the respondents are dissatisfied with their acceptance of the merger of UCM and the date of commercial production of its undertaking. The matter of depreciation allowances claimed by the petitioner were considered and decided by the respondent-authorities after a careful reading of the record without any concealment or misrepresentation by the petitioner and with full knowledge of the law. To alter the depreciation allowance granted by the Assessing Officer to UCM requires the reopening of the matter whereas the remedy under section 156 of the Ordinance is available for correction of errors that float on the face of the record. The relief sought by the impugned notice is outside the purview of section 156 of the Ordinance.

4. The impugned notice follows shortly after the earlier attempts by the respondents to redo petitioner's aforesaid assessment were set at naught by the judgment of this Court dated 14-10-1984 passed in Writ Petition No.3168 of 1983 as also endorsed by a learned Division Bench in Intra-Court Appeal. No concrete argument opposing the relief prayed has been submitted by the learned counsel for the respondents.

5. In view of the foregoing discussion the impugned notice dated 23-6-1985 by the respondent No.l is declared to be illegal, without lawful authority and of no legal effect. In the result this petition is allowed with no order as to costs.

S.A.K./C-22/LPetition accepted.