VS, 2009 PTD-INCOME-TAX-APPELLATE-TRIBUNAL-PAKISTAN 1963 (2009)

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

----S.2(5)(ii)---Assets---Assessees contended that Taxation Officer treated the property owned by the assessee as taxable, whereas the property in question had not been held for the purpose of business of construction and sale or letting out and the same could not be subjected to tax as defined under S.2(5)(ii) of the Wealth Tax Act, 1963---Validity;---If, for some span of time the asset was rented out, it would not 'remain within the charge created by the definition of "asset" under S.2(1)(5)(ii) of the Wealth Tax Act, 1963, and explanation provided therein---Benefit of doubt had to be given to assessee and the case could have been decided in favour of the assessee---Term "held for the purpose of" could not be extended to apply where, for some time, the property had been let out while the original purpose remained self use---Letting out was not the actual use but the purpose which was subject to charge under the provision---Temporary let out of property was not subject to charge under Wealth Tax Act, 1963---Taxation Officer treated the property owned by the assessee as taxable without establishing that the purpose of assessee regarding the property was business of construction and sale or letting out under S.2(5)(II) of the Wealth Tax Act, 1963---Order of First Appellate Authority was vacated and orders passed by the Taxation Officer were cancelled by the Appellate Tribunal and levy of additional tax was also deleted.

2008 PTD 838; 1996 SCMR 1670; PLD 1985 Kar. 407 and 1989 PTD 1044 rel.

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

----S.17---Wealth escaping assessment---Non-ticking of sub-clause of the provision on the notice---Effect---Assessee contended that notice issued under S.17 of the Wealth Tax Act, 1963 was vague and illegal as no specific sub-clause had been marked which was mandatory requirement and the order passed by the Taxation Officer was ab initio, unlawful, without jurisdiction and subsequent proceedings built thereon were unlawful---Validity---Taxation Officer issued notice wherein he had not properly ticked sub-clause of the provision under which he was going to tax the assessee---Such vague notice was ab initio illegal and any consequent proceedings were without jurisdiction and liable to be quashed---Notice was not specifically ticked meaning thereby the Taxation Officer was not definite in his mind as to which clause of the provision mentioned on the notice was attracted to the facts of the case.

2002 PTD (Trib.) 260; 2001 PTD 480; 1997 PTD 47; 2004 PTD (Trib) 1052; 2000 PTD (Trib) 531 and 1983 PTD 246 rel.

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

----S.2(5)(ii)---Assets---Temporary let out of property was not subject to tax under the Wealth Tax Act, 1963.

2008 PTD 838 rel.

Abdul Rahim Lakhani for Appellant.

Dr. Abdul Sattar Abbasi, D.R. for Respondent.

ORDER

Through these five appeals the appellant has agitated against the consolidated impugned order of the learned Commission of Wealth/ Income Tax (Appeals) dated 14-2-2006 for the assessment years, 1995-1996 to 1999-2000 which were rectified through consolidated order dated 10-4-2006. The following common grounds have been framed by the appellant:--

"That the learned CIT(A) has erred in confirming order of the learned Taxation Officer/DCIT, Cir-2, Cos. V, Karachi, whereby property owned by the appellant at SITE treated as taxable under the Wealth Tax Act, 1963, whereas the property in question has not been held for the purpose of business of construction and sale or letting out, therefore, the same cannot be subjected to tax as defined under section 2(5)(ii) of the Wealth Tax Act, 1963.

That the notice issued under section 17 of the Wealth Tax Act, 1963, is vague and illegal as no specific sub-clause, which is mandatory has been ticked in the instant case there-fore, notice issued is ab initio unlawful and without jurisdiction and subsequent proceeding 'built thereon is also unlawful.

2. Brief facts leading to the instant appeals are that the assessee in this case is a Private Limited Company deriving income from processing of tobacco and storage. The original assessment in this case was finalized at the total wealth of Rs.41,389,680, Rs.33,208,000, Rs.29,804,190, Rs.32,247,140 and Rs.37,280,77 for the five years under review respectively. Being aggrieved, the appellant filed appeal before the learned CIT(A) who remanded back the case for fresh adjudication for all the years under review. The WTO during the-second round estimated the taxable wealth of properties situated at Landhi and Mardan at Rs.31,469,014, Rs.18,714,159, Rs. 16,902,936, Rs.20,941,385 and Rs.24,382,614 respectively for all the five years under review. The WTO also levied additional tax under section 31-B for all the years under review against which the assessee again filed appeal before the learned CIT(A). The learned CIT(Appeals) has upheld the treatment of the WTO in the second round. Subsequently, the assessee filed miscellaneous application for rectification and the learned CIT(A) vide consolidated order dated 10-4-2006 and the CIT(A) rectified his previous order dated 14-2-2006 cancelling all the orders passed by the Taxation Officer under section 16(3)/23 of the repealed Wealth Tax Act, 1963 for the years under review i.e. 1995-1996 to 1999-2000. The Department filed appeals against that order of the learned CIT(A) before this Tribunal, vide consolidated order dated 25-3-2006 in WTA Nos.03 to 07/KB/2006 this Tribunal dismissed all the five appeals. The Department then filed an appeal before the Honourable High Court of Sindh at Karachi and vide order dated 20-3-2009 in WTA Nos.75 to 79 of 2007. The orders of this Tribunal dated 25-8-2006 and order of the learned CIT(A) dated 10-4-2006 were set aside and the original order passed by the learned CIT(A) dated 14-2-2006 was restored with the observation that the learned CIT(A) has rectified the order on the ground that notice under section 17 was vague which ground was neither raised in the memo of appeal nor argued before the learned CIT(A) and therefore, the rectified order is not in the nature of the rectification order but tantamount to review of her order which she is not permitted to do under the provisions of Income Tax Ordinance, 1979. The Honourable High Court has however noted that instead of filing of appeal before the learned CIT(A) against the original order of learned CIT(A), which they were permitted under the law, the assessee has filed rectification application. Once the rectification application had succeeded they did not need any further remedy as they have already obtained the relief and now if they are asked to file an appeal before the Appellate Tribunal the same will be barred by the period of limitation and the Honourable High Court not wishing to punish (assessee) due to the illegal order of the CIT(A), has therefore, directed the Tribunal to consider any appeal, which the assessee has filed within thirty (30) days of this order to be within time and hear and dispose it of on merits in accordance with the Tribunal's Rules. Hence, these five appeals filed by the assessee on the above referred grounds.

3. Learned counsel representing the appellant contended that the WTO/Taxation Officer has treated the property owned by the appellant as taxable under the revoked Wealth Tax, Act, 1963, whereas the property in question has not been held for the purpose of business of construction and sale or letting out, therefore, the same cannot be subjected to tax as defined under section 2(5)(ii) of the revoked Wealth Tax Act, 1963. He has contended that the notice issued under section 17 of the revoked Wealth Tax Act is vague and illegal as no specific sub-clause has been marked which is mandatory requirement and therefore, the order passed by the Taxation Officer/WTO is ab initio unlawful, without jurisdiction and subsequent proceedings built thereon are also unlawful. The learned counsel for the appellant in this regard has placed before us Memorandum and Article of Association of the assessee-Company showing that the assessee-Company has been incorporated under the Companies Act in the year, 1956 and in sub-clause (b) of Article 3, it has been specifically mentioned that the objects for which the companies established are among other to carry on the business to Manufacturers of and dealers in Cigarettes, Cigars, Biris, Smoking Tobacco Snuff and other products and bye-products of Tobacco or any other allied or connected business. Learned counsel in this regard has referred a decision of the Honourable Lahore High Court 2008 PTD 838, wherein it has been held that if, for some span of time the asset was rented out, it would not remain within the charge created by definition of "asset" under section 2(1)(5)(ii) of the revoked Wealth Tax Act, 1963, and explanation provided therein. In such a case Court had to give benefit of doubt to assessee and the case could have been decided in favour of the assessee. Term "held for the purpose of" could not be extended to apply where for some time the property had been let out while the original purpose remained self use. Letting out was not the actual use but the purpose which was subject to charge under the provision. The Honourable High Court in this decision has decided that temporary let out of property was not subject to charge under wealth tax. In this regard the decision of the honourable Supreme Court of Pakistan reported as 1996 SCMR 1670 and the decisions of the Karachi High Court reported as PLD 1985 Kar. 407 and 1989 PTD 1044 have been referred.

4. On the other hand, learned D.R. supported the impugned orders of the two officers below. We have heard the learned representatives of both the sides and have also perused the impugned order of the learned CIT(A) and order passed by the Taxation Officer/WTO and all the orders referred above and the other record of the case. We are of the view that in this case the Taxation Officer/WTO has treated the property owned by the appellant as taxable without establishing that the purpose of the appellant regarding the property was business of construction and sale or letting out under section 2(5)(ii) of the revoked Wealth Tax Act, 1963. We have further noted that the WTO/Taxation Officer in this case has issued noticed under section 17 of the revoked Wealth Tax Act, 1963, wherein he has not properly ticked sub-clause under which he was going to tax the appellant. Hence, vague notice is ab initio illegal and any consequent proceedings are without jurisdiction and liable to be quashed. In this regard the following decisions have been referred which were also referred during the course of first round before this Tribunal 2002 PTD (Trib.) 260, 2001 PTD 480 (SC), 1997 PTD 47 (H.C.Lah.), 2004 PTD (Trib) 1052 and 2000 PTD (Trib) 531.

5. We have further noted that during the first round another decision of the Honourable High Court of Sindh was referred which is in an identical situation i.e. 1983 PTD 246. We are of the view that the notice in this case was not specifically ticked meaning thereby the WTO was not definite in his mind as to which one clause of notice is attracted to the facts of the case. We have further noted that the Honourable Lahore High Court in a case reported as 2008 PTD 838 referred above has already held that the temporary let out of property was not subject to tax under the revoked Wealth Tax Act, 1963.

6. In view of these facts, circumstance and the legal position, the consolidated impugned order of the learned CIT(A) is vacated and the order passed by the Taxation Officer in this respect are cancelled. The levy of additional tax is also deleted. All the five appeals filed by the assessee are allowed.

C.M.A./104/Tax(Trib.)Appeals allowed.