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Petitioner: CANNO N PRODUCTS LTD. VS Respondent: INCOMETAX OFFICER, COMPANIES CIRCLE, JUDGMENT
Court Name: Sindh High Court Judge(s): Ajmal Mian, Syed Haider Ali Pirzada Title:CANNO N PRODUCTS LTD. vs INCOMETAX OFFICER, COMPANIES CIRCLE,
JUDGMENT
Reported As: PLD 1985 Karachi 572 Result: Order Accordingly Judgment JUDGMENT ' AJMAL MIAN, J.-By this common judgment we intend to dispose of the above six writ petitions, as they involve the interpretation of Self-assessment Scheme, (hereinafter referred to as the Scheme), of income-tax 1983-84 contained in Circular Nos. 8, 11 and 14 of 1978. The brief facts leading to the filing of the above petitions are as follows : (i) Constitutional Petition No, D-35 of 1984. ' The petitioner is a private limited company. For the first time it was assessed to income-tax for the year ending on 31-12-1980 which corresponded to the assessment year 1981-82. The petitioner for the income-tax assessm ent year 1981-82 declared loss of Rs, 46,897 and was assessed at a loss of Rs, 34,230. In the year 1982-83 the petitioner declared income as Rs, 54,224 and was assessed at the same figure. In the assessm ent year 1983-84 the petitioner filed return showing an income of Rs, 76,273. It is the case of the petitioner that it received a letter dated 13-8-1983 from the Income- tax Officer stating therein, that the income-tax return for the assessment year 1983-84 is under process for finalisation under the Scheme and in this respect it was asked for submission of- certain details which were submitted through their counsel's letter dated 17-8-1983, but the petitioner was surprised to receive an order dated 30-11-1983 stating therein, that their case has been selected for detailed scrutiny for the assessment year 1983-84. The above selection has been made as for the assessm ent year 1982-83 instead of taking assessed figure of Rs, 54,224 has taken declared profit of Rs, 88,454 for comparing the income for the assessment year 1983-84. The petitioner being aggrieved by the above action has filed the present petition. (ii) Constitutional Petition No, D-129 of 1984.
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' The petitioner is a partnership firm, which is engaged in manufacturing of soap. The petitioner for the assessm ent year 1983-84 filed income-tax return under the Scheme and declared income of Rs, 1,78,109 and claimed immunity from detailed scrutiny in terms of Circular No, 8 of 1983 but the respondents declined through respondent No, l's letter dated 6-12-1983 and respondent No, 3's letter dated 24-1-1984 probably for the reason that while comparing the income declared for the assessm ent year in question with the income of the preceding years, the income figure without adjustment of depreciation has been made the basis. The petitioner being aggrieved by the above actions of the respondents has filed the present petition. (iii) Constitutional Petition No, D-344 of 1984. ' The petitioner is a partner of Messrs Anchor Associates. The petitioner was last assessed as a salaried person in the year 1974-75 at Rs, 34,213. The petitioner filed his income-tax return for the year 1983-84 on 10-10-1983 declaring total income of Rs, 52,747 but filed revised return on or about 1-11-1983 declaring income of Rs, 82,745 before adjusting the depreciation. The petitioner received a letter dated 1-12-1983 from respondent No, 3 i. e. The Income-tax Officer informing that the respondent No, 1, i,e, the Central Board of Revenue (hereinafter referred to as the Board), had been pleased to exclude his case from the purview of the Scheme. The above petition involves the following questions :- (i) Whether the petitioner can be considered an assessee for the purpose of the Scheme 1983-84 ? (ii) Whether the revised return could have been filed to avail of the Scheme ? And (iii) Whether the figure of income should be after adjustment of depreciation or before ? ' The petitioner being aggrieved by the above action has filed the present petition ? (iv) Constitutional Petition No, D-345 of 1984. ' The petitioner is also a partner of Messrs Anchor Associates. She filed her income-tax return on 10- 10-1983 declaring her income as Rs, 34,828. She filed revised return on 1-11-1983 declaring a total income of Rs, 41,447 against the assessed income for the year 1982-83 amounting to Rs, 33,242. The petitioner received a letter dated 1-12-1983 from respondent No, 3 i. e. The Income-tax Officer informing her that the respondent No, 1, i. e. The Board had been pleased to exclude the petitioner's case from the purview of the Scheme and selected the same for detailed scrutiny. The controversy in the present petition is as to whether the petitioner could file revised return for availing of Scheme. If the revised return is to be accepted, her case is covered under the Scheme. The petitioner being aggrieved by the above action of the respondents has filed the present petition. (v) Constitutional Petition No, D-346 of 1984. ' The petitioner is also a partner of Messrs Anchor Associates. She submitted her return of income- tax for the year 1983-84 on 10-10-1983 declaring income of Rs, 18,131 but she filed a revised return on 24-11-1983 declaring net income of Rs, 14 463 against assessed income of Rs, 19,922 for 1982-83 but the total income before depreciation Rs, 36,742 and claimed immunity from detailed scrutiny under clause 6 of the Scheme 1983-84. The petitioner received a letter dated 1-12-1983 from the respondent No, 3 informing her that the respondent No, 1 i. e. The Board has been pleased to exclude the petitioner's case from the purview of the Scheme and selected the same for detailed scrutiny. The present petition involves, prima facie the following two questions :- (i) Whether a revised return could have been filed under the Scheme, and (ii) Whether the amount of increased income for the year 1983-84 should be the figure before adjustment or after adjustment depreciation and super tax. ' The petitioner being aggrieved by the above action has filed the present petition. (vi) Constitutional Petition No, D-674 of 1984. ' The petitioner is a private limited company and is involved in the business of import and local purchase and sale of tyres. The petitioner for the year 1981-82 declared loss of Rs, 31,742 but were assessed loss at 25,408. For the year 1982-83 the petitioner declared loss of Rs, 2,52,079 but
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assessed at Rs, 1,88,235 as loss. For the year 1983-84 the petitioner filed declaration under the Scheme and declared income of Rs, 19,933 but respondent No, 1 through its letter dated 26-1-1984 informed the petitioner that they did not qualify under immunity clause of Scheme 1983-84. In spite of the efforts on the part of the petitioner, the respondents adhered to the above stand. The petitioner has .Therefore filed the present petition. In the present petition inter alia the questions, whether the loss can be treated as income for comparing the income of the year 1983-84, and whether para. 6 of Circular No, 14 of 1980 is ultra vires of the power of the Board, are involved. 2. The respondents have filed comments in some petitions and counter-affidavits in some of the petitions. They have resisted the above petitions, on the ground that since the petitioners were not qualified under the Scheme, their cases were to be scrutinised in detail. 3. We have heard, the learned counsel for the parties at length and we are of the view that the following points require determination':- (a) Whether the petitions are maintainable ? (b) Whether the figure of income for the year 1983-84 should be the figure before adjustment of depreciation/super-tax or after the adjustment of depreciation/super-tax ? (c) Whether an assessee can file a revised return before the passing an assessment order or selection of his case for detailed scrutiny ? (d) Whether for the purpose of comparison of the income for the year 1983-84 with the income of the preceding year the income assessed is to be made the basis or the income declared ? (e) Whether a person assessed more than four years back remained an assessee for the purpose of the Scheme for the year 1983-84 ? (f) Whether mere fact that an assessee had submitted his return marked as 'immune from detailed scrutiny' for the year 1982-83 though was not qualified would be entitled to claim the benefit of the Scheme 1983 on the ground that the department did not object to his submission of the return marked 'immune from detailed scrutiny' ? (g) Whether for the purpose of comparison of the income of the preceding year for sub paras. (a), (b) and (c) of para. 6 of the Scheme loss can be taken into consideration ? (h) Whether para. 6 of Circular No, 14 of 1983 is ultra vires of the power of the Board ? 4. Adverting to the first point, it may be observed that there cannot be any cavil to the proposition that the High Court will decline to exercise its constitutional writ jurisdiction in case it finds that under the relevant law the machinery for getting redress has been provided for but at the same time if it finds that the action of the Government functionaries concerned is without jurisdiction and contrary to the law, the High Court may entertain a writ. Mr. Shaikh Haider has referred to the following cases on the above point :- (i) Muhammad Hussain Munir and others v. Sikandar and others PLD 1974 SC 139, in which the Hon'ble Supreme Court of Pakistan while construing the provisions of Punjab Consolidation of Holdings in section 2 (b) Act (IV of 1936) held that : "It is wholly wrong to consider that the constitutional provision was designed to empower the High Court to interfere with the decision of a Court or tribunal of inferior jurisdiction, merely because in its opinion the decision is wrong. In that case, it would make the High Court's jurisdiction indistinguishable from that exerciseable in a full-fledged appeal, which plainly is not the intention of the Constitution-makers". (ii) Muhammad Asghar v. Safia Begum and another PLD 1976 SC 435, in the above case the honourable Supreme Court while construing section 10 of the Colonization of Government Lands (Punjab) Act (V of 1912) observed that where a Court or tribunal has jurisdiction and it determines a question it cannot be said that it acted illegally or with material irregularity merely because it came to an erroneous decision on question of fact or even of law and that the High Court is not justified to interfere in exercise of its writ jurisdiction.
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' However, Mr. Shaikh Haider learned counsel for the respondent department conceded that in case the Court finds that the impugned actions are contrary to the Scheme, this Court can invoke the constitutional jurisdiction to grant the redress. We are inclined to hold that the High Court cannot substitute itself in place of the hierarchy of forums provided under the relevant law, nor it will entertain a constitutional writ petition on the ground that the competent tribunal has taken an erroneous view of fact or even of law but we are at the same time of the view that in case an impugned action is beyond purview of the relevant law or Scheme, the High Court can entertain a constitutional petition instead of forcing a party to place at the mercy of the forums of which the action is impugned. The basic question, therefore, in the instant case is, whether the impugned actions are contrary to the provisions of the Ordinance or the Scheme. 5. Before taking up the other contentions of the learned counsel for the parties, it may be pertinent to observe that under section 55 of the Ordinance every person whose total income or the total income of any other person in respect of which he is assessable for any year exceeds the maximum amount which is not chargeable to tax or he has been charged to tax for any of the four income years immediately preceding the said income year is required to furnish a return of the total income for the said income year in case of a company before 1st day of August next following the income year or within 15 days of the expiry of six months from the end of the income year whichever is later and in, every other case where the income ends at any time between the 1st day of July, and the 31st day of December, (both days inclusive), on or before the 1st day of August next following and in other cases on or before 1st day of October next following. Whereas section 57 provides that if any person has not furnished a return of total income as required by, or under, any provision of the Ordinance or having furnished a return, discovers any omission or wrong statement therein, he may without prejudice to any liability incurred by him under any provision of the Ordinance or the repealed Act furnish a return or a revised return, as the case may be, at any time before the assessm ent is made. It may also be pertinent to point out that under section 59, it has been provided that where the return of total income for any income year furnished by the asses-see under section .55 qualifies for acceptance in accordance with the provisions of a Scheme of Self-assessm ent made by the Central Board of Revenue for that year or under any instructions or orders issued thereunder, the Income-tax Officer shall assess by an order in writing, the total income of the assessee on the basis of such return and determine the tax payable on the basis of such assessm ent. It also empowers the Income-tax Officer while assessing the total income under a Self assessm ent Scheme to make such adjustments as may be necessary including under sections 34, 35, 36, 37, 38, 50, 53 or 54 or the rules made un der section 165 and the First Schedule and the 3rd Schedule. It also provides that no order under subsection (1) shall be made in any case after the 30th day of June of the financial year next following the income year respect of which a return of total income has been furnished under section 55. It may also be pertinent. To point out that under section 165 the Central Board of Revenue has been empowered to m9,ke rules for carrying out the purposes of the Ordinance, by a Notification in the official Gazette on the various items referred to under subsection 2 of the above section including the rules prescribing the manner in and the procedure by which the income, profits and gains liable to tax and the tax payable under this Ordinance is to be determined in the case of- (i) income derived in part from agriculture and in part from business ; or (ii) persons to whom section 59 applies ; or (iii) non-residents. ' The Board has also been empowered to determine the value of any allowances, benefits or perquisites or for providing the ascertainment or determination of any income to be included in the total income of an assessee, and any deduction from such income for prescribing fee and other
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charges to be paid in respect of any matter referred to in the Ordinance and also for providing anything which is to be or may be prescribed in the Ordinance. ' The Board has been framing Self-Assessment Scheme in terms of section 57 read with section 59 of the Ordinance for each assessm ent year through Circulars since the time of its introduction in or about 1979. For the assessm ents years in question namely 1983-84, the Board has issued Circular No, 8 of 1983, dated 26-6-1983 containing the Self-assessment scheme, Circular No, 11 of 1983, dated 17-7-1983 containing the explanation regarding important changes made under the scheme of 1983-84 as compared to 1982-83 and Circular No, 14 of 1983, dated 24-11-1983 issued in pursuance of para. 5 of the above Circular No, 8 of 1983. 6. After having dealt with the relevant provisions of the Ordinance and the circulars relating to Self- assessm ent Scheme, 1983-84, it may be appropriate to revert to the first controversy, namely, whether the income figure for the assessment year 1981-84 should be the income figure before the adjustment of depreciation/super-tax or after the adjustment of the same. ' It has been vehemently urged by Mr. Rehanul Hassan Naqvi that as the words "before adjustment of depreciation" appearing in the Self-assessment scheme of the year 1982-83 contained in Circular No, 10 of 1982, dated 2-8-1982 have been omitted from the Self-Assessment Scheme for the year 1983-84, the income declared for the year 1983-84 should be the figure after adjustment of depreciation,. ' On the other hand Mr. Shaikh Haider has submitted that the note 3 (e) of Circular No, 8 of 1983 containing the Self-assessm ent scheme 1983-84 makes it clear that the comparison of the income declared and assessed was to be made before the adjustment of depreciation and. Zakat. In this regard, it may be pertinent to quote para. 6 (a) and (b) of the Self-Assessment Schemes 1982-83 and of 1983-84 : "6. Cases which will not be selected for detailed scrutiny.-The following categories of cases shall be immune from selection for detailed scrutiny, subject to the contentions specified against each :- 1982 Scheme {{DATA MISS ARANGE}} (a) Cases which were immune from (a) If the income declared for the detailed scrutiny for both assess- assessment year A982-83 before ment years 1980-81 and 1981-82 by virtue of declaring higher income in accordance with Circular No, 18 of 1980 and Circular No, 11 of 1981. (b) Cases which were immune from detailed scrutiny for either of assessment years 1980-81 or 1981-82 by virtue of declaring higher income in accordance with Circular No, 11 of 1981. the adjustment of depreciation is higher by 15% or more as compared with the average of the assessed income, before adjustment of depreciation of the three preceding years. (b) If the income declared for the assessment year 1982-83, before the adjustment of depreciation is higher by 20% or more as campared with the average of the assessed income, before adjustment of depreciation of the three preceding years. 1983 Scheme "6. Cases which will not be selected for detailed scrutiny.-The following categories of cases shall be immune from selection for detailed scrutiny subject to the conditions specified against each. (a) Cases which were immune from detailed scrutiny for both assessment years 1981-82 and 1982- 83 by virtue of declaring higher income. (b) Cases which were immune from detailed scrutiny for either of assessment years 1981-82 or 1982-83 by virtue of declaring higher income. (a) If the income declared for the assessment year 1983-84 is higher by 15 per cent. Or more as compared with the average of the assessed income of the preceding three years ;
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OR If the income declared for the assessment year 1983-84 bears the same proportion to the income last assessed as the turnover/receipts declared for assessment year 1983-84 bears to the turn-over/receipts last assessed provided that the income declared for assessment year 1983-84 is higher than the income last assessed ; whichever is higher. (b) If the income declared for the assessment year 1983-84 is higher by 20 per cent. Or more as compared with the average of the assessed income of the three preceding years ; OR' If the income declared for assessm ent year 1983-84 bears the same proportion to the income last assessed as the turnover/receipts declared for assessment year 1983-84 bears to the turn- over/receipts last assessed provided that the income declared for assessment year 1983-84 is higher than the income last assessed ; whichever is the higher." {{DATA MISS ARANGE}} A comparison of the above-quoted paras. Indicate, that from paras. (a) and (b) of para. 6 of Scheme 1983-84 the words, "before adjustment of depreciation" have been omitted. Further note 3 (e) of the above Scheme makes it clear that the comparison of the income declared and assessed would be made before the adjustment of depreciation and Zakat. The above note is a part of the Scheme and, therefore, is to be read with the above paras. Of the Scheme. In view of the above para. 3 (e) of the note, the omission of the words "before adjustment of depreciation" in paras. (a) and (h) of the Scheme of 1983-84 is of no consequence. ' Mr. Rehanul Hassan Naqvi has referred to the following cases in support of his contention. (i) The Commissioner of Income-tax, East Pakistan v. Messrs Hossen Kasam Dada, Karachi PLD 1961 SC 375, wherein the Supreme Court referred to the well-known principle of construction of a provision of a statute namely, where two equally reasonable constructions are possible, one strict and the other beneficial to the assessee, then the latter should be preferred. (ii) Messrs Dreamland Cinema, Multan v. Commissioner of Income-tax, Lahore PLD 1977 Lah. 292. In the above case a Division Bench of the Lahore High Court placed reliance on the above Supreme Court case and held that when equally reasonable two constructions are possible, one strict and other beneficial to the assessee, the beneficial construction was to be placed, while considering the provisions of section 24 (2) explanation 2 Income-tax Act (XI of 1922). ' In our view, the above cases have no application to the instant case as two constructions are not possible in view of the clear provision contained in para. 3 (e) of the note to the scheme of 1983-84, which is a part of the scheme providing the manner of comparing the income declared and assessed. We are, therefore, of the view that the respondent department, therefore, has acted in accordance with the scheme by comparing the income declared and assessed without adjustment of depreciation or even the super tax. It may be pertinent to observe that the super-tax is payable by a firm though it is apportioned in proportion between the partners according to their profit sharing capacity. The declared income of a firm is to be compared with the assessed income of the preceding years without adjusting the payment of super-tax which is a E tax liability which cannot be placed on a better footing than the item of depreciation or Zakat referred to in note 3 (e). But in case of a partner of a registered firm, his net income is to be compared with his assessed income of the preceding years, as in his case the question of claiming any adjustment of depreciation will not arise for the reason that the depreciation is claimed by his firm. 7. As regards the second point in issue, whether an assessee can file a revised return after availing of Self-Assessm ent Scheme, it may be observed that it was vehemently urged by Mr. Mazhar-ul Hassan that under section 57 of Ordinance referred to hereinabove an assessee is entitled to file a revised return before the assessm ent is made and, therefore, the petitioners in Constitutional Petitions Nos. 344 to 346 of 1984 could have filed the revised return for availing of the benefit of the scheme 1983-84.
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On the other hand, it was vehemently urged by Mr. Shaikh Haider that the scheme is a self- contained document and since there is no provision for filing a revised return and as the above petitioners in the aforesaid three petitions had filed ordinary returns, they could not have revised the same for availing of the benefit of the scheme. We are inclined to hold that since the Self-Assessment Scheme has been framed under, the Ordinance and as there is no provision in the scheme contrary to section 57 of the Ordinance, a revised return can be filed by an assessee in terms of section 57 at any time before the assessm ent is made even for the purpose of the scheme so long as the assessee concerned qualifies in terms of the scheme. 8. Reverting to the question, whether for the purpose of comparison of the declared income with the income of the preceding years, the assessed amount is to be taken as the basis or the income declared for the preceding year is to be made basis, it may be observed that in Constitutional Petition No, 35 of 1984 the petitioner in their income-tax return for the year 1982-83 had shown net profit as per profit and loss account Rs, 88,454 against which they claimed loss of assessment 1981-82 amounting to Rs, 34,230, which was allowed and therefore, they were assessed at the figure of Rs, 54,222. It has been urged by Mr. Rehanul Hassan Naqvi that for the purpose of comparison of the declared income for the assessm ent year 1983-84 the assessed income for the year 1982-83 namely Rs, 54,224 is to be made the basis, whereas according to Mr. Shaikh Haider the assessed income for the year 1982-83 is Rs, 88,454 whereas taxable income is Rs, 54,224 and according to him the former figure is to be taken as the assessed income for comparison with the declared income of 1983-84 under the scheme. Mr. Rehanul Hassan Naqvi has referred to relevant sub- paras. (a), (b) and (c) of para. 6 of the scheme, which speak of assessed income and not declared income; whereas Mr. Shaikh Haider has referred to the First Schedule to the Ordinance, which provides schedule of rates of income-tax and refers to the words "taxable income". We are inclined to hold that for the purpose of deciding the question, whether an assessee is qualified for…
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