COMMISSIONER OF INCOME TAX, ZONE-C, LAHORE VS MUHAMMAD ALAMGIR, 2008 PTD-LAHORE-HIGH-COURT-LAHORE 823 (2008)

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

----S.45-A---Protection against mistakes---Scope---If during proceedings, proper jurisdiction has been acquired and notice has also been properly served for obtaining reply of assessee but the same is not on prescribed pro forma provided in rules etc. or it has, by omission, mentioned some wrong provision while the text gives correct picture, it would not vitiate an assessment on the face of it---Smaller mistakes which might be made even after proper exercise of jurisdiction, are protected under S.45-A of Wealth Tax Act, 1963---Where there is question of non-observance of mandatory provision or notice was for the purpose of acquiring jurisdiction, the provision of S.45-A of Wealth Tax Act, 1963, can never be applied.

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

----Ss.3 [as amended by Wealth Tax (Amendment) Ordinance (XXI of 2000)], 16, (5), 45-A & 27---Assessing Officer---Wrong designation---Contention of authorities was that tax was charged by "Taxation Officer" who although was not mentioned in S.3 of Wealth Tax Act, 1963 to charge wealth tax but had jurisdiction to assess and no prejudice was caused to assessee---Validity---Held, there was no need of appointing fresh authorities, up to 30-6-2001, as the whole law as well as the officers appointed earlier under Wealth Tax Act, 1963, continued to enjoy their appointment and jurisdiction made and assigned earlier, change during such period, if any, was administrative---In such situation if Wealth Tax Officer was made "Taxation Officer" in addition to his earlier assignments, mere use of one of the two or both of the connotations, would not vitiate assessment, and provision of S.45-A of Wealth Tax Act, 1963, was fully applicable---Mere mentioning of another connotation in addition to Wealth Tax Officer or Deputy Commissioner of Wealth Tax or appropriate authority having mentioned wrong nomenclature though otherwise had full jurisdiction to assess the wealth of an assessee, did not cause any substantial harm to the assessee---Such was not a case of assessment under one enactment and demand under other law---Such was only a clerical error which was not of substantial nature---Assessments having been framed by Wealth Tax Officer who had powers to decide cases of income tax as well as a Taxation Officer under Income Tax Ordinance, 1979, or in some cases Income Tax. Ordinance, 2001, there was no substantial prejudice caused to the tax payers---Assessing Officer under Wealth Tax Act, 1963, therefore, had full jurisdiction and had rightly made the assessment after acquiring proper jurisdiction---Appeals having been decided by Income Tax Appellate Tribunal on legal issue ignoring factual controversy, High Court remanded the cases to Assessing Officer and directed the Assessing Officer to proceed in cases after issuing fresh notices to the assessees---Question was answered in negative.

Mrs. Tehmina Doltana v. Hafiz Naeem-ud-Din 1997 PTD 821 and 1999 PTD (Trib.) 4026 ref.

Muhammad Ilyas Khan, Khadim Hussain Zahid, Sajjad Ali Jafri, Shahid Jamil Khan, Jan Muhammad Chaudhary, Ahmad Rauf and Amjad Hussain Malik for Appellant.

Shahbaz Butt, Dr. Ilyas Zafar, Siraj-ud-Din Khalid, Iqbal Hashmi and Ch. Anwar-ul-Haq for Respondent.

Date of hearing: 29th January, 2008.

JUDGMENT

KH. FAROOQ SAEED, J.---This judgment will dispose of W.T.A. No.175 of 2005 to W.T.A. No.177 of 2005, W.T.A. No.5 of 2006 to W.T.A. No.11 of 2006, W.T.A. No.25 of 2006, W.T.A. No.26 of 2006, W.T.A. No.79 of 2006 to W.T.A. No.84 of 2006, W.T.As. No.152 of 2006 to 162 of 2006, W.T.A. No.164 of 2006 to W.T.A. No:169 of 2006, W.T.A. No.189 of 2006, W.T.A. No.190 of 2006, W.T.A. No.398 of 2006, W.T.A. No.411 to 414 of 2006, W.T.As. Nos.480 to 483 of 2006, W.T.A. No.803 of 2006, W.T.A. No.804 of 2006 and W.T.As. Nos.899 to 902 of 2006, as common questions of law are involved.

2. The petitioners have claimed that the following questions arises out of the orders of Income Tax Appellate Tribunal (I.T.A.T):--

"Whether in the facts and circumstances of the case the learned I.T.A.T. was justified to annulled (the apparent word is annul), the assessment merely for mentioning Taxation Officer instead of DCWT notwithstanding the fact that the mistake squarely covers in the provisions of section 45(A) of the Wealth Tax Act, 1963".

3. The petitioners inter alia have also requested that if the Honourable High Court feels that any other question also emerges out of the order of I.T.A.T., the same may also be taken up and disposed of.

4. The statement of fact that gives rise to the above question of law is as follows:--

"Wealth Tax Act, 1963, had created charge on the assets held by the wealth tax assessees under section 3 which remained operative till 30-6-2001 when the legislature introduced Ordinance No. XXI of 2000. This Ordinance made section 3 of the Wealth Tax-Act, 1963, inoperative w.e.f. 1-7-2001.

"The Act was later totally repealed by the Majlis-e-Shura, Parliament and it received the assent of the President on 16-6-2003. Later it was published for general information on 17-6-2003. The same is as follows:---

"The Wealth Tax Act, 1963 (XV of 1963), is hereby repealed and the repeal shall not:--

(a) affect the liability of any individual, Hindu undivided family, firm, association of persons or body of individuals, whether incorporated or not, and company to pay wealth tax, additional tax, penalty, surcharge, fee, charge and any other sum chargeable, leviable and payable under the said Act, in respect of an assessment year ending on or before the thirtieth day of June, 2001 and

(b) affect any investigation, legal proceedings or remedy in respect of any right, obligation or liability and any such investigation, legal proceedings or remedy may be instituted, continued and enforced and penalty or punishment may be imposed as if the said Act had not been repealed and for removal of doubts it is hereby declared that the provisions of the Act regarding appointment and jurisdiction of Wealth Tax authorities shall, notwithstanding repeal, shall remain in force".

5. The legislature thus while repealing the Wealth Tax Act, 1963, saved all the liabilities in respect of tax chargeable, leviable and payable under the said Act for the assessment year ending on or before 30-6-2001. Further it also protected the effects of investigation, legal proceedings etc. in respect of the year ending 30-6-2001. However, the provisions in terms of sections 9 and 10, that deal with the appointment and jurisdiction of wealth tax authorities were also saved.

6. The authorities in view of the above mentioned savings, started 'proceedings in respect of assessment pertaining to the years before repeal and assessed the same after due issuance and service of the notices under Wealth Tax Act. The notices were, however, issued by the Taxation Officers which connotation is used in Income Tax Ordinance, 2001, only and was never a part of the authorities provided under section 9 of the Wealth Tax Act, 1963 (repealed). These Taxation Officers included special officers, Assistant Commissioners, Deputy Commissioners etc., but for the purpose of assessment the title used as challenged by the respondents at subordinate stage was `Taxation Officer'. The arguments before the first appellate authority inter alia was that after repeal of the .Wealth Tax Act, the saving did not contain continuation of the proceedings in respect of the earlier year by a `Taxation Officer' as the said authority does not have any mentioning in the Wealth Tax Act, 1963, under its section 9. Moreover, the repealing provisions had only saved provisions of the Wealth Tax Act regarding appointment and jurisdiction of the wealth tax authorities to make an assessment under the provision of the said Act.

7. In second appeal before Income Tax Appellate Tribunal, the learned Members found the arguments as valid and convincing and decided the cases in favour of the tax payers by holding that wealth tax can only be assessed by a Deputy Commissioner and not by a `Taxation Officer'. The arguments being the same that it is only the `Deputy Commissioner' of Wealth Tax who had the authority to issue notices under the said law and assess the case under its various provisions. The reference application before us on the basis of above question of law has been argued at length. The question has been restricted by the arguments that the mistake was covered by the provision of section 45-A of the Wealth Tax Act, 1963. However, not much has been argued in favour of the said case. In any case since the same has become a part of the question it would require adjudication by us. The same speaks as follows:--

Section 45-A

"No assessment order, notice, warrant or other document made, issued or exercised or purporting to be made, issued or executed under this Act shall be void or otherwise inoperative merely for want of form, or for a mistake, defect or omission therein, if such want of form, or mistake, defect or omission is not of a substantial nature prejudicially affecting an assessee".

8. The above provisions of law deal with those matters which does not prejudicially affect an assessee. It means if during the course of some proceedings proper jurisdiction has been acquired and notice has, also been properly served for obtaining reply of the assessee but the same is not on a prescribed pro forma provided in rules etc., or it has by omission mentioned some wrong provision while the text gives correct picture, it would not vitiate an assessment on the face of it. This provision protects smaller mistakes which might by made even after proper exercise of jurisdiction. However, it can never be applied where there is a question of non-observance of mandatory provision or the notice was for the purpose of acquiring jurisdiction. Not that there is any doubt about it but the language itself being clear having used the words that the defect or omission is not of substantial nature, there shall obviously be no question of the ignorance of the basic issues that pertains to the very jurisdiction of the concerned authorities etc. The question as to whether the officer who is deciding the case is a Taxation Officer or Wealth Tax Officer apparently is not a minor issue. It is not merely an issue of want of form or a minor mistake. However, we shall see in the subsequent part as to whether there was an actual mistake having substantial disadvantage to the assessee or not.

9. The circumstances in which above provision is to apply have been decided in very clear and un-equivocal terms in the case referred as "Mrs. Tehmina Doltana v. Hafiz Naeem-ud-Din" decided in Writ Petition No.6399 of 1995 on 28-11-1995, reported as 1997 PTD 821. This judgment has practically clinched this issue in a very clear and un ambiguous manner. In this judgment the Honourable High Court has declared demand notice issued under section 85 and consequent penalty notices under section 93 under Income Tax Ordinance, 1979 (now repealed) to be as without lawful authority as the case under discussion before the authorities was that of wealth tax chargeable under Wealth Tax Act, 1963. Meaning thereby notices issued under a different statute for the assessment of wealth of the said assessee were held to be as not curable under the provisions of section 45-A referred by the respondent, Central Board of Revenue.

10. Keeping the language of law and the above judgment in view, the department's case as argued by learned legal Advisor Mr. Ilyas Khan, is that wealth tax authorities are alive and that they rightfully continued exercising the jurisdiction to assess the cases. The Tribunal, therefore, was not justified to cancel the same by holding that the Taxation Officer is not an authority mentioned in Wealth Tax Act, 1963. Further that in the presence of savings of the authorities under wealth tax, the taxation officer who was further appointed as such under Income Tax Ordinance, 2001, in addition to his being a wealth tax officer had full jurisdiction to assess the same. Mr. Shahid Jamil Khan arguing the issues from departmental side firstly referred section 8 which describes the wealth tax authorities. In section 8 among other authorities under section 8(1)(e) inter alia Deputy Commissioner of Wealth Tax has been mentioned as one of them. The same has been defined in section 2(10) to include a person appointed to act as a Deputy Commissioner' of Wealth Tax and includes Assistant Commissioner of Wealth Tax, a Wealth Tax Officer, a Special Officer, a Tax Recovery Officer and Deputy Director or Assistant Director, intelligence and investigation. It does not include a person who has been appointed as Taxation Officer. The learned legal advisor brought our attention to the judgment reported as (1999 PTD (Trib) 4026) which became the reason of amendment in section 8 of the Wealth Tax Act, 1963, by Finance Ordinance, 2000. He commented that there was no need for an amendment by the legislature as the provision did cover the situation as even the Assistant Commissioner was appointed to act as Deputy Commissioner for the said proceedings. Learned legal advisor further referred sections 9 and 10 which says that the Central Board of Revenue may appoint inter alia Deputy Commissioners and other Executive or Ministerial Officers and staff as may be necessary. His claim remained that since the appointing authority is Central Board of Revenue, any officer can be appointed to work as Deputy Commissioner, hence nomenclature be that Taxation Officer or Wealth Tax Officer, makes no difference. He added that the other wealth tax authorities who have been appointed by the Central Board of Revenue can also be appoint wealth tax authorities subordinate to it and such other Executive and Ministerial authorities. This authority has been provided under sections 9(1) and 9(2). Further that the jurisdiction of the wealth tax authorities has also been assigned specifically in section 10 and it is the Commissioner, who under its subsection (c) which provides that the Deputy Commissioner shall perform their functions in respect of such persons or classes of persons or such areas as directed by the Commissioner, to whom they are subordinates. He said that the authorities, its command system and determination of their areas of jurisdiction is completely available in the relevant wealth tax provisions. It is the Central Board of Revenue, the highest authority in the rank of fiscal matter in this country, which under section 9(1), appoints a Commissioner and under section 10(1) assigns jurisdiction. In return, the Commissioner can appoint any wealth tax authority under section 9(c) and assign the jurisdiction. The outcome of the same is that non-mentioning of a particular authority in section 8 which deals with the wealth tax authorities, does not have any bearing so far as its appointments and jurisdiction is concerned. He further urged that the use of the nomenclature as `Taxation Officer' should not be considered as fatal and the matter should be referred back to the Tribunal for disposal of the cases on merits of each case.

11. The respondent's case, on the other hand, remained that after repeal in 2000 of the wealth tax authorities, no authority was available to deal with the pending matters. They were in agreement in principle that the pending matters were fully covered by section 6 of the General Clauses Act. However, since there was no direction with regard to the subsequent authorities for dealing with the pending issues, the matters remained pending. The saving which carne in 2003 as has been mentioned by us in the earlier part vide order, dated 17-7-2003 came out for rescue, however, without a retrospective operation. Their opinion was that firstly the same would not apply in respect of the orders finalized by the Taxation Officer prior to the said legislation dated 17-6-2003. Secondly the term Taxation Officer does not have any existence in the wealth tax.

12. Mr. Siraj Khalid, Advocate was of the opinion that in the absence of a particular reference in terms of Taxation Officer in section 8 all actions under wealth tax by the said authority are without any jurisdiction. The averments of the learned legal advisor that g Commissioner is' `appointed to be as Commissioner' add a `Deputy Commissioner is a person appointed to act as' does not have any different meanings. He, however, in principle agreed that if there is particular and direct appointment of an authority to act as Deputy Commissioner of Wealth Tax or Wealth Tax Officer etc., the simple mentioning of Taxation Officer of Income Tax in addition to the maintaining of the words wealth tax officer would not be fatal under the law.

13. Mr. Shahbaz Butt, Advocate, who was also a respondent in some of the cases, on one hand adopted the arguments of Mr. Siraj Khalid, Advocate, and added that the suspension of the charging provision after the first day of July, 2001, under section 3, had no mentioning as to what would be fate of the pending assessment and who will assess the same. The subsequent amendment, dated 17-6-2003 is independent of the earlier. The earlier amendment had suspended the operation of section 3 only while the subsequent repeal was in respect of the entire Wealth Tax Act, 1963, subject to the savings provided for the pending assessments. None added any new authority for assessment of the pending assessment hence it could only be by the authorities mentioned in section 8 of the erstwhile Act which does not obtain the `taxation officer as one of them'. The other learned legal advisors of the department and counsel of the respondents adopted the arguments of their respective colleagues.

14. Before proceedings ahead it will be worthwhile if the charging provision i.e. section 3 is reproduced along with the amendment of 2000. The same is as follows:---

"Subject to the other provisions contained in this Act, there shall be charged for every financial year commencing on and from the first day of July, 1963, a tax hereafter referred to as wealth tax in respect of the net wealth or assets on the corresponding valuation date of every individual, Hindu undivided family, firm, association of persons or body of individuals whether incorporated or not, and company at the rate or rates specified in the First Schedule:

(Provided that no wealth tax shall be payable if the net wealth as reduced by the value of the agricultural land owned by the individual or the Hindu undivided family would not liable to pay such tax).

Amendment of Act XV of 1963:

(Provided that wealth tax shall not be chargeable in respect of any assessment year commencing on or after the first day of July, 2001).

The effect of above amendment is obvious. Wealth Tax Act for all practical purposes is intact and operational but the charge created on the wealth of an individual, Hindu undivided family, firm' and company on the valuation date, is not to be created in respect of the periods commencing on or after first day of July, 2001. This obviously means that charge of this tax namely wealth tax is up to 30th June, 2001 only. The added provision neither suspends the operation of section 3 up to 30-6-2001 nor working and application of any other provision of the Wealth Tax Act, 1963. Further this provision neither disturbs the earlier appointments of the wealth tax authorities nor the jurisdiction assigned to them by law. Wealth Tax Act was totally independent and separate statute and had nothing to do with any other law of the land including income tax. If the legislature in its wisdom had decided to withdraw the charge of tax on the assets of its subjects, no one can charge the same by virtue of judicial interpretation. However, since the power to appoint the authorities, assigning of jurisdiction or all other matters under any other provision of law had absolutely no disturbance, the same were applicable with full force and power. The situation, however, changed when the repealing provision was introduced on 17-6-2003 again by the legislature. If one looks into the effect of the two separate legislations one would be surprised to notice that the practical effect of the two remains the same. Section 3 became inoperative after 30-6-2001 while no other provision was disturbed which means issuance of notice, proceedings before taxation officer, assessments, appeals etc, etc, and all the corresponding proceedings till suspension of charge were alive. The repeal also came out with the same effect. The enactment i.e. Wealth Tax Act was repealed but authorities and their jurisdiction vis-a-vis payment of taxes, penalty, surcharge fee charge and other charges up to the date of repeal were saved. This repeal and saving read with section 6 of the General Clauses Act portraits the same picture as was depicted in ' the case of suspension of charge. The practical effect is that in none of the two situations any of the authority under wealth tax (repealed) was to be replaced by another or by a new one. However, the fact that the assessments have been framed in some cases by a `Taxation Officer' an authority under the Income Tax Ordinance, 2001, and in some cases by a wealth tax officer, who had an additional authority as a taxation officer is discussed hereafter.

15. Above discussion makes it clear that up' to 30-6-2001 there was no need of appointing fresh authorities as the whole law as well as the officers appointed earlier under Wealth Tax Act, 1963, continued to enjoy the appointment and jurisdiction made and assigned earlier. The charge during this period if any would be administrative. In this situation if wealth tax officer is made a `taxation officer' in addition to his earlier assignments mere use of the one of the two or both of the connotations shall not vitiate an assessment. In such like situation, the provision of section 45(A) can become fully applicable. Mere mentioning of another connotation in addition to the wealth tax officer or P.C.I.T. of Wealth Tax or the appropriate authority have mentioned a wrong nomenclature though otherwise had full jurisdiction to assess the wealth of an assessee obviously does not cause any substantial harm to the assessee. It is not a case of assessment under one enactment and demand under other law. It is only a clerical error which is not of a substantial nature. In both the situations since the appointment and jurisdiction of the authorities has not been disturbed, the obvious conclusion is that the authorities appointed earlier hold field for all purposes. There was no need for appointment of new authorities or assigning of new jurisdiction to new officers. Although, the repealing provision has apparently been drafted ignoring the effects of the governing law i.e. the General Clauses Act, yet it is clear and without any ambiguity. However, certain provisions which have been omitted by the draftsman in saving provisions are otherwise protected by section 6 of the General Clauses Act. The aforementioned section of the General Clause Act in clear terms protect the provision of the repealing clause in the following manner:---

Effect of repeal:---Where this Act, or any (Central Act) or Regulation made after the commencement of this Act, repeals any enactment hitherto made or hereafter to be made, then, unless a different intention appears, the repeal shall not:--

(a) revive anything not in force of existing at the time at which the repeal takes effect; or

(b) affect the previous operation of any enactment so repealed or anything duly done or suffered thereunder; or

(c) after any right, privilege, obligation or liability acquired, accrued or incurred under any enactment so repealed; or

(d) affect any penalty, forfeiture or punishment incurred in respect of any offence committed against any enactment so repealed; or

(e) after any investigation, legal proceedings or remedy in respect of any such right, privilege, obligation, liability, penalty, forfeiture, or punishment as aforesaid;

and any such investigation, legal proceedings or remedy may be instituted, continued or enforced and any such penalty, forfeiture or punishment may be imposed as if the repealing Act or regulation had not been passed".

The above language of law is clear and unambiguous. Even if the repeal and saving provision of the wealth tax introduced in 2003 was without the saving part, the right accrued in any manner like that of appeal against the order etc. or its continuation before higher and superior authorities or a liability acquired in terms of tax or levy created against the assessee by or under the repealing law remains intact. Similarly, the penalty imposed or punishment announced or any investigation started etc., also remains intact even after the repeal. As already mentioned in the appellate part, the saving provision has protected some of the above situation, but have left some of them which are protected by the aforementioned section 6 of the said Act. This obviously concludes that the authorities as well as jurisdiction which had already been assigned to them earlier or by subsequently orders was lawful and legally intact. The defect is only in mentioning the term `Taxation Officer'. However, nothing on record have proved that the authorities deciding the issue was not specifically assigned the duty to decide these cases. Learned legal advisor was asked to produce specific direction after the repealing provision to which they claimed that it was not required as the assessing officer has the jurisdiction to assess the cases already lying with them in continuity to the earlier jurisdictional order.

16. For all practical purposes the officers dealing with the wealth tax cases continued having jurisdiction as per old orders. The new jurisdiction which was to be assigned to them was for the assessment of income tax cases. There being a lot of changes in the income tax system in contradiction to wealth tax where we have seen that there was no change upto 30-6-2001 the new authorities to be appointed with new jurisdiction etc. was under new Income Tax Law. It was, therefore, the wealth tax' officer i.e. the Deputy Commissioner of wealth tax who was designated as taxation officer in addition to his earlier appointments mentioned above. No separate or new appointment or assigning jurisdiction to them under Wealth Tax Act repeal and saving provision was required being already vested in them.

17. The outcome of the above discussion, therefore, is obvious. Since in all these cases the assessment have been framed by the wealth tax officer who inter alia had the powers to decide the cases of income tax as well, as a taxation officer under the Income Tax Ordinance, 1979, or in some cases Income Tax Ordinance, 2001, there is no substantial prejudice caused to the taxpayer. The assessing officer under the Wealth Tax Act, therefore, had full jurisdiction and had rightly made the assessment after acquiring_ proper jurisdiction.

18. The answer to the question, therefore, is in "negative".

19. However, since all the appeals have been decided by the learned Income Tax Appellate Tribunal on the above legal issue ignoring the factual controversy, besides in some of the cases, the first appellate authorities have annulled the assessment which have been subsequently confirmed by the Tribunal, it will be appropriate and safe that the cases are remanded to the assessing officer. The assigning officer shall proceed in the case after issuing fresh notices to the assessee.

20. All the reference applications, therefore are accordingly disposed of.

M.H./C-30/LCase remanded.