COMMISSIONER OF INCOME TAX/WEALTH, TAX COMPANIES ZONE, ISLAMABAD VS TARIQ AZIZ
2009 P T D 1718
[Islamabad High Court]
Before Muhammad Munir Peracha and Syed Qalb-i-Hassan, JJ
COMMISSIONER OF INCOME TAX/WEALTH, TAX COMPANIES ZONE, ISLAMABAD
Versus
TARIQ AZIZ and 6 others
T.A. No. 31 of 2003, decided on 11/05/2009.
(a) Wealth Tax Act (XV of 1963)---
----Ss.17(1) & 17-A(2)(b)(c)---Wealth escaping assessment-'Definite information' received by Revenue regarding purchase of property by assessee in foreign country---Service of demand notice on assessee on 14-9-1998---Failure of assessee to declare such property in return filed after such notice---Passing of assessment order on 30-6-2001---Validity--Such notice would be deemed to have been issued under S.17(1)(a) of Wealth Tax Act, 1963 attracting period of limitation under S.17-A(2)(b) thereof---Such assessment order was not hit by period of limitation.
(b) Wealth Tax Act (XV of 1963)---
----Ss. 17(1)(a)(b)---Wealth escaping assessment, completion of---Limitation, determination of---Test stated.
A notice under section 17, Wealth Tax Act, 1963 cannot be issued by the Deputy Commissioner unless definite information has come into his possession, therefore, the real test would not be whether the notice has been issued in consequence of any information. The criteria to determine as to notice has been issued under which clause of section 17(1) would be whether the wealth escaped assessment due to omission or failure on the part of the assessee to make a return of his net-wealth or to disclose fully and truly all material facts necessary for his assessment. In case, the wealth escaped assessment due to omission or failure of the assessee, notice under section 17(1) will be given and since the wealth escaped assessment due to the failure of the assessee, a longer period for completion of the assessment has been provided. This intention of the legislature can be gathered from the use of the phrase "notwithstanding that there has been no such omission or failure as is referred to in clause (a)" used in clause (b) of section 17(1).?
Hafiz Munawar Iqbal for Petitioner.
Ghulam Sarwar for Respondent.
Date of hearing: 4th May, 2009.
JUDGMENT
MUHAMMAD MUNIR PERACHA, J.---The Assessing Officer passed assessment order on 30-6-2001 in respect of assessment years 1993-1994 and 1994-1995. Paragraphs Nos. 1, 2, 3 and 4 are relevant and are being reproduced:--
"The assessee an individual and Director of Messrs Engineering and Technology International (Pvt.) Limited. No returns filed for the charge years under consideration. Information collected by the Central Board of Revenue from Inland Revenue Service, UK according to which the assessee purchased property at 1-Latymir Gardens London N3 3HE for a consideration of pound sterling 61000 and it is still registered in the name of assessee.
(2) On the basis of the information notice under section 17 were issued for filing of wealth tax returns for the assessment years 1993-94 to 1994-95. In compliance to which the assessee filed wealth tax returns declaring net wealth asunder:-
| 1993-94 | 1994-95 |
| 235,000 | 621,935 |
(3) In both the returns the assessee failed to declare the asset i.e. 1-Latymir Gardens London N3 3HE. The assessee was properly confronted on this point through notices under sections 16(3) and 16(4) in compliance to which the assessee denied the ownership. However, the contention of the assess is unacceptable due to the fact that the information available in this office is authenticated as provide by the Central Board of Revenue.
(4) In view of the above facts the contention of the assessee is rejected and the property is included in his net wealth."
2. The assessee challenged the assessment order through an appeal before Commissioner of Income Tax (Appeals). The Commissioner Income Tax (Appeals) recorded the finding that notice under section 17 of the Wealth Tax Act were served on the assessee on 14-9-1998 and, therefore, the assessment order, dated 30-6-2001 is hit by limitation. The department felt dissatisfied with the order passed by the Appellate Authority and approached Income Appellate Tribunal. The Tribunal vide judgment, dated 16-4-2003 dismissed the appeal. Through the present appeal, Commissioner of Income Tax has assailed the order of the Tribunal as well as that of the Commissioner of Income Tax (Appeals).
3. We have heard learned counsel for the appellant as well as respondents and have gone through the record of the case.
4. Learned counsel for the appellant submits that the Commissioner of Income Tax (Appeals) as well as the Tribunal erred in law in holding that the assessment order is hit by limitation. On the other hand, learned counsel appearing for the respondents supports the orders of the Commissioner of Income Tax (Appeals) as well as that of the Tribunal. Section 17-A deals with time limit for completion of assessment and reassessment. Section 17-A is reproduced:--
"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.
Explanation No.---Where, by an order referred to in sub-section (4), any asset is excluded from the net wealth of one person and held to be the asset of another person, then, an assessment in respect of such asset on such other person shall, for the purposes of subsection (2) of section 17 and this section be ?deemed to be one made in consequence of, or to give effect to, any finding or direction contained in the said order.
(2) No order of assessment or re-assessment shall be made under section 17,--
???????????
(a) where any proceeding Or an assessment or re-assessment is pending on the first day of July, 1981, at any time after the expiration of period of four years commencing on and from that date;
or
(b) where the assessment or re-assessment is to be made in a case falling within clause (a) of subsection (1) of section 17 for which a notice has been served under that subsection on or after the first day of July, 1981 at any time after the expiration of a period of four years from the end of the assessment year in which such notice was served; or
(c) where the assessment or re-assessment is to be made in a case falling within clause (b) of section 17 for which a notice has been served under that subsection on or after the first day of July, 1981', after the expiration of a period of--
(i) four years from the end of the assessment year in which the net wealth was first assessable, or???????????
(ii) two years from the date of service of such notice, whichever period expires later" :
Section 17-A(1) deals with the limitation for completion of assessment under section 16 of the Wealth Tax Act; 1963 whereas section 17-A(2) provides limitation for completion of assessment or reassessment made under section 17. Section 17 read as follows:--
"Wealth escaping assessment.--(1) If the Deputy Commissioner
(a) has reason to believe that by reason of the omission or failure on the part of. the assessee to make a return of his net wealth under section 14 of any assessment year or to disclose fully and truly all material facts necessary for his assessment for that year, the net wealth chargeable to tax has escaped assessment for that year, whether by reason of under assessment or assessment at too low a rate or otherwise; or
(b) has, in consequence of any information in his possession, reason to believe, notwithstanding that there has been no such omission or failure as is referred to in clause (a), that the net wealth chargeable to tax has escaped assessment for any year, whether by reason of under assessment or assessment at too low a rate or otherwise; or
(c) has reason to believe' that the verification by the Revenue Officer in respect of a return filed in pursuance of the provisions of first proviso to subsection (1) of section 14--is not correct or incomplete,
he may, in cases falling under clause, (a) or clause (c), at any time within five years and in cases falling under clause (b), at any time within four years of the end of that assessment year, serve on the assessee a notice containing all or any. of the requirements which may be included in a notice under subsection (2) of section 14, and. may proceed to assess or re-assess such net wealth, and the provisions of this Act, shall so far as may be, apply as if the notice had issued under that subsection:
Provided that no proceedings under this subsection shall be initiated unless definite information has come into the possession of the Deputy Commissioner or he has obtained the previous approval of the Inspecting (Additional Commissioner) of Wealth-tax in writing to do so.
(2) Nothing contained in this section limiting the time within which any proceeding for assessment or re-assessment may be commenced shall apply to an assessment or re-assessment to be made on such person in consequence of or to give effect to any finding or direction contained in an order under section (17B) 23, 24, 25, 26, 27 or 29:
Provided that the provisions of this subsection shall not apply in any case where any such assessment or re-assessment, relates to an assessment year in respect of which an assessment or reassessment could not have been made at the time the order which was the subject-matter of the appeal, reference or revision, as the case may be, was made by reason of any provision limiting the time within which an action for assessment or re-assessment may be taken.
5. The question to be determined in this case is whether the notice issued to the assessee was under section 17(1)(a) attracting section 17-A(2)(b) or it was under section 17(1)(b) and the period of limitation applicable is section 17-A(2)(c). The Commissioner Income Tax (Appeals) as well the Tribunal came to the conclusion that the notice issued was under section 17(1)(b) whereas the case of the department before this Court is that the notice was issued under section 17(1)(a). It is not disputed that if the notice was under section 17(1)(a), the assessment order is within limitation and that in case it is found that the notice was under section 17(1)(b), the assessment order is hit by limitation. The argument of the learned counsel appearing for the assessee is that since the notice issued to the assessee was in consequence of an information, therefore, the notice should be treated to have been issued under clause-b of section 17(1). In our view the contention of the learned counsel is not tenable because proviso to section 17(1) reads as under:--
"Provided that no proceedings under this subsection .shall be initiated unless definite information has come into the possession of the Deputy Commissioner or he has obtained the previous approval of the Inspecting (Additional Commissioner) of Wealth-tax in writing to do so".
A notice under section 17 cannot be issued by the Deputy Commissioner unless definite information has come into possession of Deputy Commissioner, therefore, the real test would not be whether the notice has been issued in consequence of any information. The criteria to determine as to notice has been issued under which clause of section 17(1) would be whether the wealth escaped assessment due to omission or failure on. the part of the assessee to make a return of his net-wealth or to disclose fully and truly all material facts necessary for his assessment. In case the wealth escaped assessment due to omission or failure of the assessee, notice under section 17(1)(a) will be given and since the wealth escaped assessment due to the failure of the assessee, a longer period for completion of the assessment has been provided. This intention of the legislature can be gathered from the use of the phrase' `notwithstanding' that there has been no such omission or failure as is referred to in clause (a) used in clause (b) of section 17(1). In the case in hand, the assessee did not file return. In our view, notice shall be deemed to have been issued under section 17(1)(a) and the period of limitation attracted shall be under section 17A(2)(b). The Commissioner Income Tax (Appeals) as well as Income Tax Appellate Tribunal were wrong in holding that the assessment order was hit by the period of limitation.
6. We, therefore, allow this appeal. Since the order of assessment was set aside on the short ground of order of assessment being barred by-time and the appeal was not disposed of on merits, the case is remanded to the Income Tax Tribunal.
S.A.K./C-14/Isl?????????????????????????????????????????????????????????????????????????????????? Case remanded.