2010 P T D (Trib.) 1493
[Income-tax Appellate Tribunal Pakistan]
Before Khalid Waheed Ahmed and Khawaja Farooq Saeed, Judicial Members Amjad Ali Ranjha, Accountant Member
W.T.As. Nos. 692/LB and 693/LB of 2001, decided on 27/07/2002.
Per Amjad Ranjha, Accountant Members [Minority view]
Wealth Tax Act (XV of 1963)---
----Ss.17-B & 16(3)---Powers of Inspecting Assistant Commissioner to revise Wealth Tax Officer's order---Additional Commissioner--Inspecting Assistant Commissioner---Cancellation of assessment by the Inspecting Assistant Commissioner when the original order had been passed by another Inspecting Assistant Commissioner---Assessee contended that order passed under S.17-B of the Wealth Tax Act, 1963 was not maintainable as the original proceedings under S.16(3) of the Wealth Tax Act, 1963 were concluded by the Additional Commissioner and the order passed was without jurisdiction and not enforceable against the assessee---Validity---Provisions of S.17-B of the Wealth Tax Act, 1963 had rightly been invoked by the Inspecting Assistant Commissioner---Appeal on the issue was rejected.
Sandal Engineering (Pvt.) Ltd. v. IAC of Income/Wealth Tax 2001 PTD 1467 ref.
Wealth Tax Act (XV of 1963)---
----Second Sched., Part-1, Cl. (8A)---Exemption--Foreign remittances--Assessee contended that by induction of foreign remittance, he became lawful owner of assets equal to the amount of foreign remittance, which was previously covered by loan---Validity---Since share had already been purchased, though on loan, decrease in liability through repayment of loan could not be by any stretch of imagination considered creation of assets---Assets were created when the shares were purchased and any subsequent repayment of loan either through encashment of Foreign Currency could not be treated that assets were created as a result of encashment of Foreign Currency---Order passed by the Inspecting Assistant Commissioner disallowing the exemption claim, d on receipt of money in the shape of foreign currency was upheld by the Appellate Tribunal, rejecting assessee's appeal in toto.
Black's Law Dictionary, Sixth Edn. ref.
W.T.As. Nos. 1372 and 1373/LB of 2000 rel.
Words and phrases---
--increase'-'Creation'-Distinction-Increase in something was distinguishable from creation because word increase ostensibly implied the existence of something, while creation of a thing denoted bringing something into existence.
Black's Law Dictionary, Sixth Edn. rel.
Per Khalid Waheed Ahmed, Judicial Member
(a) Wealth Tax Act (XV of 1963)---
----Ss. 10(1)(c) & 17-B---Jurisdiction of Wealth-tax Authorities---Where the functions of Deputy Commissioner and Inspecting Assistant Commissioner were exercised by the Inspecting Assistant Commissioner and Commissioner respectively for the purpose of proceedings in respect of cases, the reference to Deputy Commissioner and Inspecting Assistant Commissioner was deemed to be reference to Additional Commissioner and Commissioner respectively---When assessment was framed by the Inspecting Assistant Commissioner, the reference by an Inspecting Assistant Commissioner in such case shall be a Commissioner as was explicit from the provisions of S.10(1)(c) of the Wealth Tax Act, 1963---Special Officer while framing the assessment was considered to be a Deputy Commissioner of Income Tax as per definition of Deputy Commissioner of Income Tax given in S.2(1)(10) of the Wealth Tax Act, 1963---Where such Special Officer was an Inspecting Assistant Commissioner, the jurisdiction of an Inspecting Assistant Commissioner in such case shall be exercised by Commissioner---Proceedings under S.17-B of the Wealth Tax Act, 1963 initiated by the Inspecting Assistant Commissioner whereby the assessment was also framed by the Inspecting Assistant Commissioner, were not maintainable.
Sandal Engineering (Pvt.) Ltd. v. IAC of Income/Wealth Tax 2001 PTD 1467 rel.
Per Khawaja Farooq Saeed Judicial Member---[Agreeing with]
Khalid Waheed Ahmad Judicial Member---[Majority view]
(b) Wealth Tax Act (XV of 1963)---
----Ss.17-B & 16(3)---Powers of Inspecting Assistant Commissioner to revise Wealth Tax Officer's order---Cancellation of assessment by the Inspecting Assistant Commissioner when the original order had been passed by another Inspecting Assistant Commissioner---Validity---Inspecting Assistant Commissioner when appointed as Special Officer remained an Inspecting Assistant Commissioner in addition to his special assignment as Special Officer of Income Tax; his status in office hierarchy remained that of a senior officer called as an Inspecting Assistant Commissioner---Assignment of Special Officer was not in derogation to his status and was an additional duty---When Commissioner stepped into the shoes of an Inspecting Assistant Commissioner for the purpose of a particular assignment he did not lose his status as a Commissioner, he remained entitled to all powers and jurisdiction assigned to him otherwise while his assignment to act as an Inspecting Assistant Commissioner in special circumstances was over and above his regular charge---Inspecting Assistant Commissioner cannot cancel the order of another Inspecting Assistant Commissioner even if the same had been finalized under special jurisdiction assigned to him as Special Officer---By stepping into the shoes of Assessing Officer in the designation of a Special Officer an Inspecting Assistant Commissioner was not deprived of his legal status in regular administrative hierarchy in any manner---Cancellation of assessment was highly unjustified which could not be upheld---Order passed under S.17-B of the Wealth Tax Act, 1963 being illegal was cancelled by the Appellate Tribunal.
Sandal Engineering (Pvt.) Ltd. v. IAC of Income/Wealth Tax 2001 PTD 1467 rel.
Muhammad Asif, D.R. for Appellant.
M. Iqbal for Respondent.
ORDER
AMJAD ALI RANJHA (ACCOUNTANT MEMBER).---These are two appeals by the assessee relevant to assessment years 1996-97 and 1997-98 against the order of Inspecting Additional Commissioner, Panel-06, Special Zone, Lahore, dated 27-2-2001 passed under section 17-B of Wealth Tax Act, 1963.
2. Assessee's grievances are summarized as under:
(i) That the order passed under section 17-B for assessment year 1996-97 is legally not maintainable as the original proceedings under section 16(3) of Wealth Tax Act, 1963 were concluded by the Additional Commissioner (SO-I), Coys Zone-I, Lahore, dated 28-2-1997 and hence, impugned order passed under section 17-B is without jurisdiction and not enforceable against the appellant.
(ii) The impugned order for assessment years 1996-97 and 1997-98 was simply based on change of opinion, hence not enforceable against the appellant.
(iii) Additions made at Rs.15,64,435 for assessment years 1996-97 and 1997-98 received in shape of foreign remittance are exempt under Second Schedule of Wealth Tax Act, 1963.
(iv) By induction of foreign remittance to the tune of Rs.15,64,435, the appellant became lawful owner of assets equal to the amount of foreign remittance, which was previously covered by loan for assessment years 1996-97 and 1997-98.
3. Call notices were issued in response to which, Mr. M. Iqbal, Advocate was present on behalf of the assessee-appellant whereas Mr. Muhammad Asif, DR was present on behalf of the revenue. Both the parties have been heard in detail and facts of the case have been looked into.
4. Firstly, we take up the issue of legality of action under section 66-A relevant to assessment year 1996-97 as taken in ground No.1 by the assessee. In this context, AR of the assessee has referred to Lahore High Court's judgment reported as 2001 PTD 1467 in case of Sandal Engineering (Pvt.) Ltd. v. IAC of Income/Wealth Tax, AR of the assessee argued that assessment for assessment year 1996-97 was completed on 28-2-1997 by Mr. Abdul Rasheed who was Additional Commissioner of Income/Wealth Tax hence in the view of the above quoted judgment of Hon'ble Lahore High Court, another IAC could not initiated proceedings under section 66-A in this case, as it is against the above referred judgment.
5. We have looked into this judgment and DR pointed out that the said Officer was not acting as Deputy Commissioner and had not been conferred with the powers of Deputy Commissioner under section 5(1)(c) or 5(1)(cc) but he was working as "Special Officer" as appointed by Central Board of Revenue. In this respect, AR of the assessee drew our attention to para.7 of Hon'ble Lahore High Court's above quoted judgment as on page 555, which is reproduced as under:--
"The factual position as alleged at the bar also finds support from the record that IAC who frame the original assessment in this case was never designated as special officer. According to the order, dated 23-8-1995 passed by CIT(Companies Zone), Faisalabad under section 5(1)(c) of the Ordinance, 1979 (with the prior approval of RCIT (Control Range)) certain IACs including the gentleman who framed the assessment in the case of the present appellant were directed to exercise powers conferred on Deputy Commissioner of Income Tax in respect of the classes of persons specified in the Schedule. The notification so made, it goes specified in the Schedule. The notification so made, it goes without saying, did made the IAC a DCIT or an Assessing Officer but it did not divest him of his position is the hierarchy as an IAC. The power given is in addition to his status and not its derogation."
6. Moreover, he also drew our attention to RCIT, Central Region's letter No.RCIT--3/88-89/250, dated 14th July, 1988 clarifying as under: --
"A number of Assistant Commissioners have been appointed by the Central Board of Revenue as Special Officer for disposal of assessment work. A question has been raised about the IAC in respect of Special Officer who will be authorized to grant statutory approval.
Legally a Special Officer is included in the definition of Income Tax Officer under section 2(25) of the Income Tax Ordinance, 1979. There is no qualification of the status of the person appointed as Special Officer. Therefore, whatever the status of the person, he will be subordinate to IAC. The Commissioner should therefore assign cases to Special Officer and place him under the supervision of IAC who will be granting all statutory approval required in respect of those cases.
The position of IAC acting as Income Tax Officer under the provisions of section 5(1)(c) is totally different. In their case the Ordinance specifically requires that the Commissioner shall act as IAC. There is no such provision in the case of Special Officer."
7. So looking into the facts of the case in the light of DR's arguments and the Hon'ble Lahore High Court's judgment as in para.7 reproduced above, we are of the considered opinion that provisions of section 17-B of Wealth Tax Act, 1963 have rightly been involved by the IAC. Therefore, assessee's appeal on this issue stands rejected.
8. Coming -to the other ground of appeal of the assessee regarding addition of Rs.15,64,435 received in shape of foreign remittance, the assessee has claimed exemption of wealth tax of the said amount on account of having received in shape of foreign currency, which was subsequently utilized for re-payment of loan which was originally used for the purchase of shares. IAC has not accepted appellant's plea as in his opinion, no new asset had been created. AR of the assessee vehemently argued and pointed out that IAC had erred in law while disallowing claim of exemption pertaining to foreign remittances. He submitted that enchased money was used in re-payment of loan utilized in order to purchase the shares. He further elaborated that when an. existing liability was discharged, this has caused to increase the asset of the appellant which resulted in creation of asset. Thus according to him, it had been brought within the purview of Clause (8A) of Part-I of Second Schedule of the Act.
9. Conversely, DR argued that encashed money had only been utilized to pay loan. He contended that payment of existing loan does not amount to creation of asset as postulated by Clause 8(A) of Part I to the Second Schedule of the Act. He supported the IAC's order stating that the impugned order did not call for any interference.
10. After hearing the arguments of both the parties, we are constrained to observe that assessee has no case at all. Admittedly shares were purchased on loan and that too prior to the encashment of foreign currency, so one can easily say that foreign currency was not used for the purchase of shares. We must say that assets were purportedly created when the shares were purchased and not when the loan utilized for purchase of shares was paid. At this juncture, it would be appropriate to reproduce relevant provisions of law, which are as follows:--
"8(A) Rupees amounts, or assets, created out of withdrawal from foreign currency accounts of encashment of US Dollar Bearer Certificates and Foreign Currency Bearer Certificates on or after the twenty ninth day of May, 1998 in the year of conversion or creation of assets and the following five years:
Provided that where investment in' the assets is not made entirely out of the aforesaid accounts and certificates, the exemption shall apply in the same ratio as the said conversion or encashment bears to the total investment."
11. Bare perusal of the above mentioned provision of law would show that law provides exemption to Rupees amounts or assets created out of withdrawal of foreign currency. In the instant case, the shares were not directly purchased through foreign currency but was got converted into Rupees, and then the encashment money was paid to repay the loan used for purchase of shares. Obviously, assets were created when the foreign currency was converted into Rupees and not when encashed Rupees were paid to repay the loan used in order to purchase shares.
12. Secondly, it is also worthy mentioning that clause (8A) applies to the assets created out of foreign currency after 29-5-1998 but in the present case, assets through purchase of share had already been created much prior to the encashment of foreign currency A/C.
13. Coming to the final arguments of the learned AR that when the liability was paid or in the alternative decrease in liability had caused to increase the assets implying thereby that assets have been created to attract clause (8A) of Pat-I of Second Schedule of the Act, we are of the opinion that it would be going too far, since accepted principle of interpretation is that one cannot go beyond what the legislature intended. Had the legislature wanted, it would have provided that decrease in liability on payment of loan would be considered an equivalent to creation of asset. In this respect, we can seek guidance from the dictionary meaning of the two words i.e. increase and create. Black's Law Dictionary, Sixth Edition "Increase means enlargement, growth, development, increment, addition, accession, extension while create means to bring into being, to cause to exist, to produce. Going through both the words in conjunction would show that increase in something is distinguishable from creation because word increase ostensibly implies the existence of something, while creation of a thing denotes bringing something into existence.
14. Reverting back to the plea of the assessee, it is observed that since share had already been purchased, though on loan, decrease in liability through repayment of loan cannot be...by any stretch of imagination considered creation of asset. Undoubtedly, assets were created when the shares were purchased and any subsequent repayment of loan either through encashment of foreign currency cannot be treated that assets were created as a result of encashment of foreign currency as envisaged by clause (8A) of Part I of 2nd Schedule to the Act for the purpose of allowing exemption.
15. In the light of above discussion, we uphold the impugned order passed by IAC disallowing the exemption claimed on receipt of money in the shape of foreign currency, thus rejecting assessee's appeals in toto.
16. It may not be out of place to mention that this issue has also been decided in W.T.As. Nos. 1372 and 1373/LB/2000 relevant to assessment years 1998-99 and 1999-2000 in the same manner in the case of Mr. Khalid Shafique, Lahore v. DCIT/WT, Circle 2, Zone-III, Lahore.
Khalid Waheed Ahmed, Judicial Member.
17. I have gone through the above order. I agree with the findings of my learned brother Accountant Member to the extent whereby on the issue whereby the order passed by the learned IAC disallowing the exemption claimed on receipt of money in the shape of foreign currency has been upheld. However, I am not in agreement with the viewpoint expressed by my learned brother regarding the issue raised by the assessee through the Ground No.2 of appeal for the assessment year 1996-97 whereby the jurisdiction of the learned IAC to initiate proceedings under section 17(B) of the Wealth Tax Act, 1963 for the assessment year 1996-97 was challenged. In my opinion, since the original assessment under section 16(3) of the Wealth Tax Act, 1963 for the assessment year 1996-97 was framed by the Additional Commissioner of Income Tax/Wealth Tax, the proceedings under section 17(B) could not be initiated by an officer of the same rank i.e. by an IAC. The assessee in support of his contention has referred to the decision of the Hon'ble Lahore High Court reported as 2001 (83) Tax 551. The relevant findings of which have also been reproduced by my learned brother in para.5 of the above order.
18. The name and designation of the Assessing Officer as mentioned in the assessment order framed under section 16(3) of the Wealth Tax Act for the year 1996-97 is reproduced as hereunder:
"(Abdul Rashid)
Addl. C.I.T./W.T.
(SO.I) Companies Zone-I, Lahore.
Code No.1-81-0383"
19. It is evident from the designation of the Assessing Officer as reproduced above that the Assessing Officer was not divested of his position as an IAC. The cancellation of assessment under section 66-A by the IAC in case where assessment was also completed by the IAC was not upheld by the Hon'ble Lahore High Court in the judgment reported as (2001) 83 Tax 51. As per relevant findings as also reproduced by my learned brother in para.5 of the above order, it has been observed that IAC was given the power of Assessing Officer in addition to his status and not its derogation. It is important to point out here that the "Special Officer" is included in the definition of Deputy Commissioner as defined in section 2(1)(10) of the Wealth Tax Act, 1963. The jurisdiction of the Wealth Tax Authorities has been provided in section 10 of the Wealth Tax Act, 1963. Section 10(1)(c) of the Wealth Tax Act, 1963 (which is the same as corresponding section 5(1)(c) of Income Tax Ordinance, 1979) is reproduced as hereunder:
"(c) the Inspecting (Additional Commissioner) and the (Deputy Commissioner) shall perform their functions in respect of such persons or classes of persons or such areas as the Commissioners, to whom they are subordinate, may direct; and .the Commissioner may, with the prior approval of the Central Board of Revenue, by general or special order in writing direct that the powers conferred on the (Deputy Commissioner) and the Inspecting (Additional Commissioner) by or under this Act shall, in respect of all or any proceedings relating to specified cases or specified persons or classes of persons, be exercised by the Inspecting (Additional Commissioner) and the Commissioner, respectively, and for the purposes of any proceedings in respect of such cases or persons, references in this Act or any rules made thereunder to "(Deputy Commissioner)" and "Inspecting (Additional Commissioner)" shall be deemed to be references to "Inspecting (Additional Commissioner)" and "Commissioner" respectively; and"
20. The perusal of the above quoted provisions reveals that in cases where the functions of the Deputy Commissioner and IAC are being exercised by the Inspecting Additional Commissioner and Commissioner respectively for the purpose of proceedings in respect of such cases the reference to Deputy Commissioner and Inspecting Additional Commissioner is deemed to be reference to Additional Commissioner and Commissioner respectively. In my opinion, when the assessment is framed by an IAC, the reference by an IAC in such case shall be a Commissioner as is explicit from the provisions of section 10(1)(c) as quoted above. A Special Officer while framing the assessment is considered to be a Deputy Commissioner of Income Tax as per definition of DCIT given in section 2(1)(10). However, in my opinion, where such Special Officer is an IAC, the jurisdiction of an IAC in such case shall be exercised by Commissioner as provided in section 5(1)(c) of the Ordinance. In my opinion, the proceedings under section 17(B) of the Wealth Tax Act initiated by the IAC for the assessment year 1996-97 whereby the assessment was also framed by the IAC are not maintainable in view of the judgment of the Lahore High Court reported as (2001) 83 Tax 551.
Since the difference of the opinion has arisen, the instant case is referred to the worthy Chairman for soliciting the opinion of Third Member on the following issues:
"(i) Whether the case law relied upon by the assessee reported as 2001 PTD 1467 is applicable on the facts of the instant cases?
(ii) Whether the proceedings under section 17(B) could be initiated by an IAC when the original assessment has been framed by the IAC?"
Khawaja Farooq Saeed, Judicial Member.
The two questions proposed by the learned brothers are as follows:
"(i) Whether the case law relied upon by the assessee reported as (2001) 83 Tax 551 (H.C. Lah.) is applicable on the facts of the instant case?
(ii) Whether the proceedings under section 17(B) could be initiated by and IAC when the original assessment has been framed by the IAC?"
As is evident from the above questions, in the first question the honourable friends want me to dilate upon as to whether the judgment referred in question No.1 is relevant for application on the facts and circumstances of this case or not. The second question, which in fact is part and parcel of first question, discloses the facts of this case. It says as to whether an IAC can cancel an order under section 17-B when the original order has been passed by another IAC. The learned Accountant Member is of the view that IAC has not made the assessment as an IAC but as a Special Officer. On the other hand the learned Judicial Member says that the status of an IAC even after appointment as a Special Officer remains that of an IAC. In fact this matter stand decided through the judgment mentioned by learned Accountant Member at page 2 of his order. With full respect to his observations, I would like to highlight the last three lines of the said para, which has been reproduced at page 2 by the learned Accountant Member supra:
"The factual position as alleged at the bar also finds support from the record that IAC who framed the original assessment in this case was never designated as special officer. According to the order, dated 23-8-1995 passed by CIT(Companies Zone), Faisalabad under section 5(1)(c) of the Ordinance, 1979 (with the prior approval of RCIT (Central Range) certain IACs including the gentleman who framed the assessment in the case of the present appellant were directed to exercise powers conferred on Deputy Commissioner of Income Tax in respect of the classes of persons specified in the Schedule. The notification so made, it goes without saying, did made the IAC a DCIT or an Assessing Officer but it did not divest him of his position in the hierarchy as an IAC. The power given is in addition to his status and not its derogation". (emphasis is mine)
Above lines read with following para decide the issue in totality: --
"The position of IAC acting as Income Tax Officer under the provisions of section 5(1)(c) is totally different. In their case the Ordinance specifically requires that the Commissioner shall act as IAC. .There is no such provision in the case of Special Officer."
The Honourable High Court in the aforementioned judgment has held in unequivocal terms, which is evident from the above two paras reproduced by me, that the IAC even when appointed as Special Officer remains an IAC in addition to his special assignment as SOIT. His status in office hierarchy remains that of a senior officer called as an IAC. The assignment of Special Officer is not in derogation to his status and is an additional duty. Similarly when Commissioner steps into the shoes of an IAC for the purpose of a particular assignment he does not lose his status as a Commissioner otherwise. He remains entitled to all powers and jurisdiction assigned to him otherwise while his assignment to act as an IAC in special circumstances is over and above his regular charge. This is what the Honorable High Court has opined and even if there is some doubt about the facts of this case, the above finding applies in full. I, therefore, respectfully agree with my learned brother Judicial Member that in the presence of judgment of honourable Lahore High Court there is no reason for us to hold that an IAC can cancel the order of another IAC even if the same has been finalized under special jurisdiction assigned to him as Special Officer. This therefore, shall be a repetition to say that by stepping into the shoes of an Assessing Officer in the designation of a Special Officer an IAC is not deprived of his legal status in regular administrative hierarchy in any manner. The cancellation in this case, therefore, is highly unjustified which cannot be upheld by me. The order under section 66-A therefore is to be held as illegal and is hereby cancelled.
C.M.A./63/Tax(Trib.)Appeal accepte