COMMISSIONER OF INCOME TAX, LAHORE VS Messrs PRODUCT SERVICES, 2006 PTD-LAHORE-HIGH-COURT-LAHORE 2814 (2006)

Wealth Tax Act (XV of 1963)---

----S.17-A(1)(b)---C.B.R. Circular No.2 dated 27-7-1981---Tune limit for completion of assessment and re-assessment-Interpretation of S.17-A, Wealth Tax Act, 1963---Assessment was to be framed within two years from the date of filing of the return---Assessment made beyond the period of two years from the date of the return or the revised return was invalid and coram non judice---Principles.

Bare reading of the section 17-A, Wealth Tax Act, 1963 shows its provisions to be prohibitory in nature containing a negative command. It was mandatorily enjoined therein that "no order of assessment shall be made under section 16, Wealth Tax Act, 1963 at any time after the expiration of period" prescribed in the said section. The law thus. restricted the period within which the power and jurisdiction could be exercised to make the assessment by the Assessing Authority. Any assessment made beyond such period of limitation was coram non judice and without lawful authority. The time bars and periods of limitation are provided in the clauses (a) and (b) of subsection (1) of section 17-A. These periods revolve around a cut off date which is the first day of July, 1981 when the said section 17-A was introduced in the Act through the Finance Ordinance, 1981. The perspective and effect of this date on the prescribed period, becomes clear when the provisions of section 17-A are re-put with emphasis on this date wherever it occurs in the section.

The present appeals involve assessment of the returns filed under section 15 of Wealth Tax Act, 1963 for the assessment years commencing after the first day of July, 1981. And to these returns clause (b) of subsection (1) of section 17-A are applied. The first part of clause (b) provides a. period of "four years from the end of assessment year in which the net wealth was first assessable". First part of section 17-A(1)(b) ends at a comma which again is followed by the word "OR" in clause (b). The comma and then `or' separate the above quoted first part from the second part. It thus emphasizes the disjunctiveness and independence of the second part which provides a period of "two years from the date of the furnishing of a return or a revised return under section 15, whichever is later-------" In the present case, the return or the revised returns were filed under section 15 by the assessees.

The rider "whichever is later" related to the date of the return or the revised return filed under section 15 which gave a right to an assessee to file a return even after the period under section 14 of the Wealth Tax Act, 1963 or if such return was filed but suffered from an omission or a wrong statement, a revised return could be filed by the assessee.

In view of the independence and disjunctiveness of the second part of clause (b) of subsection (1) of section 17-A, the Assessing Authorities were allowed the powers to make the assessment within "two years of the date of the return or the revised return", whichever was later. The concession thus given to Revenue by the Statute was viz. the date of the return or the revised return respectively filed under section 15. The expression "whichever is later:" did not allow comparativeness between "four years" of the first part and the "two years" of the second part. Such interpretation would be defeative of the independence of two separate statutory provisions distinctly legislated in clause (b). Any guidelines or instructions in C,B.R's Circular No.2 contrary to the above interpreted provisions of clause (b), were not binding on the Assessing Authorities as the circular was to be read in consonance with the provisions of section 17-A.

Income Tax Appellate Tribunal therefore validly adjudged the assessments made beyond the period of two years from the dates of the returns or the revised returns as invalid and coram non judice.

Khadim Hussain Zahid, Muhammad Ilyas Khan, Shahid Jamil Khan, Ahmad Rauf and Sajjad Ali Jafari for Appellants.

ORDER

This appeal and those mentioned in the Appendix attached herewith seek to raise the same questions of law. These appeals are therefore being decided by this single judgment.

2. The question raised in all these cases, though differently worded, precisely reads as follows:--

Whether clause (b) of subsection (1) of section 17-A of the Wealth Tax Act, 1963 provides time limitation of four years from the end of the assessment year, in which the net wealth was first assessable?

OR

Whether the Income Tax Appellate Tribunal was justified to hold that under the provisions of section 17-A(l)(b) of the Wealth Tax Act, 1963 the assessment was to be framed within two years from the date of filing of the return?

3. In all these appeals, the provisions of section 17-A(1)(b) were invoked by the Assessing Officer after two years of the filing of the wealth tax returns or' the revised returns respectively by the assessees. ITAT held the assessments to be beyond the period prescribed in section 17-A(l)(b) of the Wealth Tax Act, 1963 and thus invalid. The plea of the department is that subsection 1(b) of section 17-A comprises two parts. The first part envisages four years from the end of the assessment year in which the net wealth was first assessable. And that the second part provides two years period from the date of the furnishing of the return or the revised return under section 15 whichever is the later. It is submitted that the four years period being later in time was the limitation period for finalizing the assessment rather than the period of two years as has been restrictively interpreted by the learned ITAT.

4. Mr. Shahid Jamil Khan, learned counsel for the department, argued that section 17-A of the late Wealth Tax Act, 1963, when read in the context of sections 14, 15 and 16, provided four eventualities; firstly as per section 14(1); secondly under section 14(2) where notice was served by the Assessing Officer, thirdly where the return was voluntarily filed by the assessee under section 15; which was not the revised return but was original in nature and fourthly was the case of revised return. It was argued that under section 17-A(1)(b), the limitation provided was four years where the return was not filed. And that in all these cases the returns were not filed by the assessee voluntarily but they were so required by the Assessing Officer in terms of section 16(5), therefore, the period of limitation would be Tour years and not two years.

5. Mr. Muhammad Ilyas Khan, the learned counsel for department in other cases, relied entirely upon Circular No. 2 of 1981 dated 27-7-1981 issued by the Board of Revenue and argued that this circular interpreted the said provisions, and that the period limitation was to be calculated or computed in terms of the circular. The other learned counsel for the department adopted the above arguments.

6. Heard.

7. Section 14 of the Wealth Tax Act, 1963 (now repealed) obliged every person whose net wealth rendered him liable to the wealth tax, to file the wealth tax return on the evaluation date and to accordingly pay the wealth tax. On failure of a person to furnish the return within the time allowed under section 14 or on discovery of an omission or a wrong statement in the return filed, section 15 ibid permitted such assessee to file at any time but before the making of an assessment, a return or the revised return, as the case may be. On the returns filed under section 14 of under section 15 (including the revised return thereof), the Deputy Commissioner of Wealth Tax under section 16 was obligated to assess the net wealth of the assessee and determine the amount of tax payable or the amount refundable to an assessee. For making such an assessment (under section 16), limitation period was statutorily prescribed in section 17-A, ibid; the interpretation of which is the subject of cases before us.

8. The provisions of section 17-A read as under:

"17-A. Time limit for completion of assessment and re assessment.---(1) No order of assessment shall be made under section 16 at any time after the expiration of a period of---

(a) four years commencing on and from the first day of July, 1981, or two years from the date of the filing of a return or a revised return under section 15, whichever is later, where the assessment year is an assessment year. commencing before that date; or

(b) four years from the end of assessment year in which the net wealth was first assessable, or two years from the date of the furnishing of a return or a revised return under section 15, whichever is later, where the assessment year is an assessment year commencing on or after the first day of July, 1981."

9. The bare reading of the above section shows its provisions to be prohibitory in nature containing a negative command. It was mandatorily enjoined therein that "no order of assessment shall be made under section 16 at any time after the expiration of period" prescribed in the said section. The law thus restricted the period within which the power and jurisdiction could be exercised to make the assessment by the Assessing Authority. Any assessment made beyond such period of limitation was coram non judice and without lawful authority.

10. The time bars and periods of limitation are provided in the above reproduced clauses (a) and (b) of subsection (1) of section 17-A. These periods revolve around a cut off date which is the first day of July, 1981 when the said section 17-A was introduced in the Act through the Finance Ordinance, 1981. The perspective and effect of this date on the prescribed period, becomes clear when the provisions of section 17-A are re-put with emphasis on this date wherever it occurs in the section:---

"Time limit for completion of assessment and re-assessment.---(1) No order of assessment shall be made under section 16 at any time after the expiration of period of --

(a) four years commencing on and from the first day of July, 1981

Or

Where the assessment year is an assessment year commencing before that date (1-7-1981), two years from the date of the filing of a return or a revised return under section 15, whichever is later,

Or

(b) four years from the end of assessment year in which the net wealth was first assessable,

Or

Where the assessment year is an assessment year commencing on or after the first day of July, 1981", two years from the date of the furnishing of a return or a revised return under section 15, whichever is later.

11. Clause a above was applicable to the assessments pending as of 1-7-1981 or to the returns filed thereafter but for the assessment year(s) which had commenced before 1-7-1981. C.B.R.'s Circular No.2 dated 27-7-1981 clarified clause (a) as under:---

"(B) Time limit on. assessment orders to be passed under section 16 (section 17A(1))

Two different time limitations have been prescribed in respect of wealth that was taxable before insertion of this new section, and for the wealth that will become taxable after insertion of the new section.

(a) Assessment for any charge year up to 1980-81 has to be finalized before the later of the following two dates:

(a) By 30-6-1985 or

(b) Two years from the date of filing of a return or a revised return under section 15.

In view of this provision of section 17A the arrear assessments pending as on 1-7-1981 have to be finalized by 30-6-1985."

In the present appeals, clause (a) above was not relevant as none of the cases before us related to assessments and returns for assessment years upto 1-7-1981.

12. The present appeals involve assessment of the returns filed under section 15 ibid for the assessment years commencing after the first day of July, 1981. And to these returns clause (b) of subsection (1) of section 17-A applied.

13. The first part of clause (b) provides a period of "four years from the end of assessment year in which the net wealth was first assessable". The above quoted text of the first part of section 17-A(1)(b) ends at a comma which again is followed by the word "OR" in clause (b). The comma and then `or' separate the above quoted first part from the second part. It thus emphasizes the disjunctiveness and independence of the second part which provides a period of "two years from the date of the furnishing of a return or a revised return under section 15, whichever is later-----" In the cases before us, the return or the revised returns were filed under section 15 by the assessees.

14. The rider "whichever is later" related to the date of the return or he revised return filed under section 15 ibid which gave a right to an assessee to file a return even after the period under section 14 or if such return was filed but suffered from an omission or a wrong statement, a revised return could be filed by the assessee.

15. In view of the independence and disjunctiveness of the second part of clause (b) of subsection (1) of section 17-A, the Assessing Authorities were allowed the powers to make the assessment within "two years of the date of the return or the revised return", whichever was later. The concession thus given to Revenue by the Statute was viz. the date of the return or the revised return respectively filed under section 15. The expression "whichever is later:" did not allow comparativeness between "four years" of the first part and the "two years" of the second part. Such interpretation would be defeative of the independence of two separate statutory provisions distinctly legislated in clause (b). Any guidelines or instructions in C.B.R's Circular No. 2 contrary to the above interpreted provisions of clause (b), were not binding on the Assessing Authorities as the circular was to be read in consonance with the provisions of section 17-A ibid.

16. The learned Income Tax Appellate Tribunal validly adjudged the assessments made beyond the period of two years from the dates of the returns or the revised returns as invalid and coram non judice.

17. The questions as raised in the present appeals are answered as above with the result that the appeals are dismissed.

M.B.A./C-46/LAppeal dismissed.