MUMTAZ INDUSTRIES Versus SALES TAX OFFICER

MUHAMMAD AKRAM, J.‑This is a petition under Article 98 of the late Constitution of Islamic Republic of Pakistan, 1962 challenging the validity of three assessment orders dated the 17th of June 1965, 16th of May 1966 and 24th of June 1967 passed by the respondent, the Sales Tax Officer, A‑Circle, Gujranwala, against the petitioner relating to the financial, years 1960‑61, 61‑62 and 62‑63 respectively.

2. Briefly the relevant facts are these. The petitioner is a duly registered firm and manufactures electric fans for sale. The assessee duly filed its three quarterly sale tax returns for all the three years 1960‑61,. 1961‑62 and 1962‑63 in question. The last quarterly returns ending: 30th of June in each of the respective years in question were respectively filed on 29th July 1961. 29th July 1962 and 23rd of July 1963 in accordance with section 13 (1) of the Sales Tax Act.

3. On receipt of these returns, the respondent, however, did not make any assessments on the petitioner‑firm for quite some time. It was only on 25th of February 1965 that the respondent issued summons to the petitioner to appear before him with complete accounts for completing the assessment for the period from 1‑7‑1960 to 30‑6‑1961. In pursuance to the notice the respondent actually completed the assessment for this period against the petitioner only on the 17th of June 1965.

Similarly in respect of the next year 1961‑62 (corresponding to the period from 1 st July of 1961 to 30th of June 1962) the Sales Tax Officer issued the summons to the petitioner only on the 27th of December 1965 and the relevant assessment under section 10 (3) for the year 1961‑62 was completed only on the 16th of May 1966.

In respect of the next year 1962‑63 the summons were issued by the, respondent on the 13th of April 1967 and the assessment against: the assessee was completed only on the 25th of June 1967 under section 10 (3) of the Act.

4. The assesses‑firm went up in separate appeals against the orders passed in respect of each of the three years to the Appellate Assistant= Commissioner of sales tax. He disposed of these appeals by a consolidated order passed on the 30th of December 1967. Dissatisfied, the petitioner then filed further appeals disposed of together by the Income Tax Appellate Tribunal camp at Gujranwala on the 23rd of April 1970. Eventually the petitioner‑firm moved the Appellate Tribunal under section 17 (1) of the Act for reference to the High Court. But the Tribunal rejected the application on, the 19th of October 1970.

5. In these circumstances the petitioner‑firm has filed the above petition, challenging the validity of the aforesaid three impugned assessment orders passed by the respondent on 17th of June 1965, 16th of May 1966 and 24th of June 1967 respectively relating to the years 1960‑61, 61‑62 and 62‑63. This petition is based on the following three main grounds urged before us at the hearing

(1) That the three assessment orders in question made by the respondent under section 10 (3) of the Act were barred by time and are ab initio without jurisdiction.

(2) That by virtue of the Government of Pakistan Ministry of Finance (Revenue Division) Notification (sales tax) dated 27th of June 1951 the electric fans were exempt from the payment of the sales tax and, as such, the Sales Tax officer acted without juris diction in levying the sales tax on the fans manufactured by the petitioner‑firm.

(3) That Mr. G. Sarwar, Assistant Income‑tax Officer who passed the last impugned order dated 24th June 1967 was not properly empowered as an Income‑tax Officer and, therefore, he had no jurisdiction to legally function as a Sales Tax Officer in the area.

6. We shall take up each of these objections to the assessments completed against the assessee‑Company in their proper sequence. In elaborating on the first objection, it may at once be conceded that there is no period of limitation directly provided as such for the completion of the assessment under any of the sections of the Sales Tax Act. In this connection the learned counsel for the petitioner pointed out that there are only two provisions is sections 10 and 28 for framing the assessment under the Act. Section 10 of the Act deals with the regular assessment. This section read with rules 39 and 40 of the Sales Tax Rules makes it obligatory on every manufacturer or producer and every licensed wholesaler and every exporter to file with the Sales Tax Officer quarterly returns on or before the 31st of October, 31st of January, 30th of April and 31st of July each year showing the total sales. He must also attach with the return the receipts issued by the Treasury showing the amount of tax paid in accordance with subsection (1) of section 12 of the Act. Subsection (1) of section 10 of the Sales Tax Act provides for the submission of a return within thirty days of the end of each quarter relating to the sales in that quarter. There is no provision in the Sales Tax Act corresponding to section 22 (2) of the Income tax Act for the issuance of a notice calling upon the assessee to file a return. Under subsection (2) of section 10 of the Sales Tax Act if the Sales Tax Officer is satisfied that the return submitted by the assessee is complete and correct, he shall make an order of assessment on the basis of such return and determine the 'tax payable after giving credit for the amount already deposited towards the tax. This subsection corresponds to section 23 (1) of the Income‑tax Act. In case, however, the Sales Tax Officer is not so satisfied, he may after calling for such further particulars and books of account and documents, determine the tax payable in accordance with section 10 (3) of the Sales Tax Act. The Sales Tax Officer is also entitled ‑to make an assessment to the best of his judgment in accordance with ‑section 10 (4) of the Act. These two last mentioned subsections correspond to the provisions contained in subsections (3) and (4) of section 23 of the Income‑tax Act.

7. Subsection (5) of section 10 of the Sales Tax Act lays down that ‑nothing contained in that section shall prevent a Sales Tax Officer from determining in a single assessment the tax payable in respect of the sales made in two or more quarters of the same year. Under this subsection the Sales Tax Officer is competent to make a single assessment for two or more quarters of the same year, but he cannot make a single assessment of a quarter of one year with a quarter of another year.

8. There is nothing in subsections (2), (3) and (4) of section 10 of the ,:Act prescribing any period within which the quarterly assessment must be completed by the Sales Tax Officer. In this connection subsection (5) of this section is only an enabling provision and it merely empowers the Sales Tax Officer to complete a single assessment for two or more quarters of the same year.

9. But the learned counsel for the petitioner relied on section 28 (1) of the Act to contend that these assessments in question are barred by time. It is reproduced below for the sake of convenience

"If for any reason in any year tax has escaped assessment or has been under assessed, or has been assessed at a rate lower than that provided under this Act, or excessive relief or refund has been allowed, the Sales Tax Officer may at any time within five years of the end of that year assess or re‑assess the tax payable or the relief or refund allowed after issuing a notice to the assessee and making such enquiry as he considers necessary."

In this connection the learned counsel laid emphasis before us to contend that under this subsection if for any reason the tax has "escaped assessment" for "any year" resort can be made to the provisions contained in section 28 for the assessment of the tax that had thus escaped within five years from the end of that year. From this the learned counsel pressed hard to draw an inference that the original assessment under section 10 of the Act must be made from year to year. Thereafter in completing the assessments the Sales Tax Officer must resort to the supplementary provisions for assess ment of escaped tax in accordance with section 28 of the Act.

10. It is common ground before us that the petitioner had filed the quarterly returns in respect of all the three years in question within time. The only objection of the petitioner is that as the assessments on these return were not completed by the Sales Tax Officer within time, they had "escaped assessment" in the respective years within the meanings of section 28 of the Act. The learned counsel for the petitioner argued that even failure on the part of the Sales Tax Officer to complete his assessment during the relevant year would tantamount to an escapement of the tax. He maintains that if for any reason in any year the tax is not assessed it would result in escapement of the tax. In this connection he relied on the head‑note of section 28 of the Act to show that if a "tax is not assessed" it amounts to escaped assessment.

11. But we are not impressed with this argument advanced before us. It is evident that in this case the quarterly returns duly filed by the assessee, were all along pending with the Sales Tax Officer for completing the assessment and it could not be said that the time for its completion had run out. In re : Lachhiram Basantlal ( 133 I C 182 ) a Full Bench of the Calcutta ,High Court in connection with a parallel provision in a sister enactment in section 34 of the Indian Income‑tax Act, 1922 observed that income has not escaped assessment if there are pending, at the time, proceedings for the assessment of the assessee's income, which have not yet terminated in a final assessment thereof. In Harakchand Makanji and Co. v. Commissioner of Income‑tax, Bombay City ((1948) 16 1 T R 119) it was held that where the assessee had himself chosen voluntarily to make a return, no question could arise under section 34 of assessment escaping. The Supreme Court of India in Commissioner of Income‑tax, Bombay City v. Ranchooddas Karsondas ( (1959) 36 1 T R 569 ) held that where in respect of any year a return had been voluntarily submitted before assessment, the Income‑tax Officer could not choose to ignore the return and any notice of reassessment and consequent assessment under section 34 of the Act is invalid. In that case the income‑tax Officer issued, notice under section 34 of the Act when the assessee had already filed the return and the period of limitation for making the assessment order had not yet expired. In contrast to this in Muhammad Shakoor‑Muhammad Bashir v. Commissioner of Income‑tax ( 1972 P T D 545 ) the return filed by the assessee remained undisposed of and the Income‑tax Officer was precluded by the bar of limitation under section 34 (3) of the Act to make the assessment. In that case the Allahabad High Court held that income had escaped assessment within the meanings of section 34 of the Act.

12. The Privy Council in Sir Rajendranath Mukerjee C .,L T. Bengal (AIR 1934 P C 30) held that if an assessment was not made on income within the tax. year then that income could not be said to have escaped assessment within that year and could be subsequently assessed. The Privy Council observed that

"The appellants. however, submit that this is a case of income escaping assessment within the meaning of section 34. Assessment they argue, is a definite act, indeed the most critical act in the process of taxation. 1f an assessment is not made on income within the tax year then that income, they submit has escaped assessment within that year, and can be subsequently assessed only under section 34 with its time limitation. This involves reading the expression `has escaped assess ment' as equivalent to 'has not been assessed'. Their Lordships cannot assent to this reading. It gives too narrow a meaning, to the word `assessment' and too wide a meaning to the word 'escaped'."

In their Lordships opinion the word assessment was not confiend in the Statute merely to the definite acts of making a final order of assessment. In Mannalal Modi v. Commissioner of Income‑tax, Bihar and Orissa ((1956) 29 1 T R 30), on a discussion of the case law on the subject, the Court held that as the return filed by the assessee was still pending and it was immaterial so far as the assessee was concerned before which Officer it was pending, it could not be said that the income had escaped assessment and, therefore, the Income‑tax Officer had no jurisdiction to issue a notice under section 34 of the Act.

13. These are quite weighty observations and are mutatis mutandis applicable also to the interpretation of section 28 of the Sales Tax Act. The word "assessment" in the context is not merely confined to the final act of making the order of assessment. The assessment proceedings start wit the filing of the return under section 10 (1) of the Act and are complete with the making of the final order of assessment. As such there cannot be an "escapement" of the tax after the return has been filed and thereby the process of assessment is set in motion. In the context the head‑not cannot control the meanings of section 28 of the Act.

14. In the absence of anything express, there is no force in the contention of the petitioner that the intendment of the Sales Tax Act, more especially the provisions contained in sections 10 and 18 thereof, is sufficient to show that the assessment must be completed during the year of assessment and that if that was not done the tax must be held to have escaped assessment./ In that connection the following observation of their Lordships of the Privy Council in Sir Rajandranath Mukarjee v. C. I. T. made in the context of sections 23 and 24 of the Income‑tax Act are helpful and mutatis mutandis applicable to this case before us

"The appellants were not able to point to any express provision of the Act limiting the time within which an assessment must be made. In particular, section 33, under which the assessment in question purports to have been made, contains no such limitation. They rely, however, on inferences which they sought to draw from other sections of the Act, and especially from section 34. The language of the Act is no doubt naturally suited to the normal case of taxation carried through all its process within the compass of the tax year, but their Lordships do not find in any of the sections to which they were referred, apart from section 34, any provisions which would justify the importation into the Act of an implied prohibition against the making of an assessment after the expiry of the tax, year. Nor does section 34, when it is examined, support the appellants' conten tion. That section applies to two cases, viz. (1) the case where income has escaped assessment in any year, and (2) the case where income has been assessed at too low a rate in any year. In either of these cases a notice calling for a return may be issued and an assess ment or re‑assessment may be made of such income as has escaped assessment or has been assessed at too low a rate in the tax year, but such notice may be served only within one year after the expiry of the tax year. The inferences which the appellants asked their Lordships to draw from those provisions were : (1) that it is only in the cases to which section 34 applies that an assessment can be made after the expiry of the tax year, and (2) that if a case does fall within either of the cases to which section 34 applies no assessment can be made after the expiry of the tax year unless it is made within the year following the tax year, or at least unless a notice calling for a return is made within the year following the tax year."

"It will be observed that under section 34, if a notice is served within one year after the expiry of the tax year, the subsequent assessment or re‑assessment may apparently be made at any time after service of the notice and not necessarily within the year following the tax year. It would be odd if in this case the assessment could be made more than a year after the expiry of the tax year, while in the normal case, where a return is made within the year, the assessment could not be made a day after the expiry of the tax year. Their Lordships do not accept the inference sought to be drawn from section 34, that it is only where income has escaped assessment in the tax year, or has been assessed too low in that year, that an assessment may be made after the expiry of the tax year. It may be that in the two cases to which the section applies if no notice is served within the year following the tax year, no subsequent assessment or re‑assess meat can be made of the income which has escaped assessment or been assessed too low, but that is not to say that in no other case can an assessment be made after the expiry of the tax year." ‑

We would like to add here that these observations were made by their Lordships of the Privy Council in the context of section 34 of the Income‑tax Act as originally enacted.

15. But before us on behalf of the assessee reliance was placed on the case of A ta Hussain Khan Ltd. v. Commissioner of Income‑tax, East Pakistan, Dacca ( (1968) 17 Taxation 220 ). In that case the facts were that for the charge year 1957‑58 the Sales Tax Officer issued a notice on the 1st May 1961 and completed the sales‑tax assessment on the 26th June 1961 under section 10 (4) of the Sales Tax Act. On appeal by the assessee, the Appellate Assistant Commis sioner annuled the assessment holding that the said assessment was illegal as no notice under section 28 of the Act was issued. The Appellate Tribunal, however, differed with the view taken by the Appellate Assistant Commissioner and expressed the opinion that the Sales Tax Officer rightly made the assessment under section 10 (4) of the Act. On reference, the High Court held that the assessment could be made in this case only under section 28 of the Sales Tax Act and a notice should have been issued, proceedings conducted and enquiry held, as contemplated in section 28 as distinguished from section 10 of the Act. But that case is distinguishable on the facts in as much as the assessee did not file any return and thereby the sales were suppressed. It was, therefore, held that the escaped assessment could be completed under section 28 and not section 10 (4) of the Act.

16. Reliance was also placed on, the reported case of the Supreme Court of Pakistan in the Commissioner of Income‑tax, East Pakistan v. Hossen Kasam Dada, Karachi ( (1961) 4 Taxation 96 ). In that case the facts were that the Business Profits Tax Officer for the first time on the 16th of January 1952 served notices on the respondent‑firm under section 1 l of the Business Profits Tax Act calling upon it to furnish returns of the profits of its business for the accounting period 1st April 1946 to 14th July 1946 and 15th July 1946 to 14th July 1947. Thereafter he proceeded to assess the firm under section 12 (1) of the said Act to the extent of Rs. 1N,460 for the first account ing period and to Rs. 63,038 for the next accounting period. These assess ments were completed on the 30th of January 1952. On appeal to the Appellate Assistant Commissioner, however, the assessments were set aside on the 26th January 1953 on the ground that no prior approval for the assessment had been taken from the inspecting Assistant Commissioner for the aggregation of profits, and the Taxing Officer was directed to re‑assess the same. The re‑assessments were complete on the 31st of May 1955, and were this time confirmed on appeal on the 8th of February 1958. But on a further appeal to the Income‑tax Appellate Tribunal the assessments were again set aside on the ground that the assessment having been initiated after the period of limitation contained in section 14 of the said Act were illegal sad therefore void. The High Court also, on reference, upheld the view taken by the Appellate Tribunal and answered the question submitted to it in the negative. The view taken both by the Appellate Tribunal and the High Court was to the effect that the statute had to be read as a whole and reading all the sections of the statute together the intention of the Legislature that could be gathered therefrom was to prescribe a period of limitation for assessing business profits by section 14 of the Act which was held to control the provisions of section 11 thereof. In the certificated appeal before the Supreme Court it was contended on behalf of the Com missioner of Income‑tax that this conclusion is wrong, as section 14 of the Act deals with an entirely different matter, namely, the recovery of tax which has escaped assessment. It was argued that a tax escapes assessment only in a case where no assessment has been made after initiation of proceedings. In a case, however, where no assessment has at all been initiated, there can be no question at all of any profits chargeable to the tax escaping assessment. Thus, since section 11 does not prescribe any period of limitation, the High Court was in error in reading into it something which was not there. In the Supreme Court after examining the scheme of the Business Profits Tax Act held that under section 11 of the B4siness Profits Tax Act too the return has necessarily to be in respect of profits made during a chargeable accounting period and, therefore, the notice calling for such a return should ordinarily be issued within a reasonable period after the termination thereof and this reasonable period, should not extend beyond the period, specified in section 14 of the Act. In the opinion of the Supreme Court, the Legislature did not feel the necessity of fixing any period in section 11 of the Act during which the assessment could be initiated in view of the fact that by a subsequent section, namely, section 14, it was proposing to fix a time‑limit within which profits, which have escaped assessment, may be made liable to tax. In Messrs Dada Ltd: v. Commissioner of Income‑tax ( PLD1974SC310 ) the Supreme Court referred to the case of Messrs Hossen Kosam Dada Karachi and observed that in that case it was impliedly held that without issuing notice under section 14 of the Business Profits Tax Act, proceedings initiated under section 11 were sufficient and the notice calling for a return under section 11 should ordinarily be issued within a reasonable period not extending beyond that specified undersection14 of the Act. In that case the Supreme Court also repelled the contention advanced before it that failure to initiate proceedings under section 11(l) of the Business Profits Tax Act within the accounting chargeable year amounted to escapement of income. The Court further observed that the words "escaped assess ment" in section 34 of the Income‑tax Act means to "evade or elude or an acc)dental or inadvertent omission." In conclusion the Court held that in proceedings initiated under section 11 (1) of the Business Profits Tax Act, a notice could be issued within a reasonable time after termination of the accounting chargeable year and that reasonable period should not extend beyond the period specified in section 34 of Income‑tax Act. It was not necessary that the notice should have been issued within the chargeable accounting period and that on failure to do so, proceedings under section 34 of the Income‑tax Act should have been initiated.

17. The two Supreme Court cases noticed in the two preceding. paragraphs are authorities under the Business Profits Tax Act and are for that reason distinguishable. In that Act there is no provision corresponding to section 10 of the Sales Tax Act under which an assessee is required to suo motu file his quarterly returns within time without any notice issued in this behalf. Even otherwise the ratio in the two cases under, the Business Profits Tax Act, if applied to in the instant case, shall mean that the original assessment under section 10 of the Sales 7 ax Act could be completed at any time within five years of the end of relevant year specified in section 28 of the Act. Indeed it was not disputed before us that looked at from this angle the impugned assessment were made within time.

18. As a result of our above discussion we have no hesitation in bold in that the three assessments in question made by the respondent under section 10 (3) of the Sales Tax Act were not barred by time. They were mad with jurisdiction and are intra vires.

19. Now coming to the next objection, we find that the Sales Taxi 0ff"icer completed his assessments against the assessee on the manufactured fans relating to the years 1960‑61, 1961‑62 and 1962‑63 on the 17th of June 1965, 16th of May 1966 and 24th of June 1967 respectively. By virtue of the Government of Pakistan Ministry of Finance (Revenue Division) Notification No. S. R. O. 432(K)/65 dated 14th of June 1965, issued under section 7 (1) of the Sales Tax Act, electric fans were exempt from the payment of the sales tax. The learned counsel, therefore, contended before us that after the date of this notification the Sales Tax Officer had no .jurisdiction and lawful authority to subject the electric fans manufactured by the assessee to sales tax. But the objection is misconceived. it is not denied that in the three years 1960‑61, 1961‑62 and 1962‑63 in question the .electric fans were chargeable to sales tax. In accordance with section 3 (1) (a read with section 3 (4) (i) the liability for the payment of the tax on .manufactured fans was incurred by the assessee at the time of the .delivery of goods to the purchaser and the subsequently issued notification in question had no retrospective effect to absolve the assessee of the liability .already incurred during the three assessment years. There is thus no force i this objection which is repelled.

20. The last objection raised by the petitioner is directed against the .assessment dated 24th of June 1967 made by Mr. Ghulam Sarwar, Assistant Income‑tax Officer, Gujranwala, relating to the year 1962‑63. It was con tended before us that at the time Mr. Ghulam Sarwar was only an Assistant Income‑tax Officer and that in the absence of any specific authorisation he was not entitled to act as a Sales Tax Officer and complete the assessment. There does not appear to be any force in this contention either. Section 5 of the Sales Tax Act lays down that the Sales Tax Authorities shall exercise the same powers as under the Income‑tax Act. Section 2 (7) of the Income tax Act, 1922 defines the term "Income‑tax Officer" to mean a person appointed to be Income‑tax Officer under section 5 and includes a person .appointed to be Special Officer, a Tax Recovery Officer and an Assistant Income‑Tax Officer. Section 5 of the Income‑tax Act enumerates the authorised income‑tax authorities including the Assistant Income‑tax Officer. Section 5 (5‑A) lays down that the Assistant Income‑tax Officer, Examining Officer and Inspectors of Income‑tax shall perform such functions in the execution of this Act as may be assigned to them by the Income‑tax Authorities under whom they are appointed to work and shall be subordinate to such authorities. Therefore, in respect of the functions duly assigned to him, the Assistant Income‑tax Officer is also an Income‑Tax Officer within the meanings of section 2 (7) of the Income‑tax Act. In Haji Nazimuddin Muhammad Amanullah and others v. Commissioner of Sales Tax, Dacca Zone, Dacca ( (1970) 22 Taxation 59 ) the Examining Officer was held to have jurisdiction to make sales tax assessment. Similarly in Tajudfiin Maula Bux v. Sales Tax Officer, D‑Circle Lahore ( (1971) 23 Taxation 317 ) it was held that the Examining Officer appointed under the Income‑tax Act was competent to perform the functions of the Sales Tax Officer under the Sales Tax Act.

21. But in this connection there is yet another aspect of the case. This objection was not at all raised at any stage before the Sales Tax Authorities .at the hearing in this case. It was for the first time raised only in this Court, 1n this connection in Ghulam Mohi‑ud‑Din v. Chief Settlement Commissioner ( P L D 1964 S C 829 ) the Court observed

"One of the grounds upon which the Courts in England have consistently) held a party seeking such a writ to have disentitled himself to this extraordinary remedy is his failure to object to such usurpation of jurisdiction before the Tribunal concerned or to raise the objection at the earliest opportunity before the Tribunal, whose illegal order he seeks to have quashed by the writ, if he was aware that the Tribunal lacked the jurisdiction it purported to exercise."

In this connection the Court further observed that

"The principle upon which the writ is refused in such cases is not that jurisdiction has been conferred on the Tribunal concerned by waiver and acquiescence but that even though the impugned order is without jurisdiction the person seeking to have it quashed should not be granted that discretionary relief as he had stood by and allowed the Tribunal to usurp a jurisdiction which it did not possess knowing that the Tribunal concerned was committing such an illegality in consequence of something done by that person himself."

Similarly in Hafeez‑ud Din v. Mian Khadim Hussain, Additional Deputy Commissioner, Lahore and another ( P L D 1965 Lab. 439 ) a Division Bench of the then High Court of West Pakistan observed

"A party litigating must act consistently. It is a wholesome doctrine of law that a party cannot be allowed to play fast and loose, blow hot and cold and approbate and reprobate to the detriment of the opponent. Where a person knowingly and wilfully invites the Court to adopt a procedure, he cannot be permitted to turn round and blame the Court for the very same procedure which he himself invited the Court to follow. When the conduct of the applicant has been such as to disentitle him to the assistance of the Court. no writ can be issued at his instance even though the impugned order may in fact be found to have been passed by the authority concerned without any jurisdiction. It is not that the order under attack has been clothed with any legality but because of the fact that the mouth of the person who has acquiesced in it is shut against it and in equity he cannot be heard to say anything against it. The Court will refuse to exercise its discretion in his favour in those circumstances. A person can be said to have acquiesced when he was aware or could have been aware of the defect of jurisdiction in the Tribunal with the exercise of due diligence but did not object to the usurpation of the power by the Tribunal and invited it to exercise the jurisdiction which it lacked."

In these circumstances the petitioner cannot be permitted to raise this objection. for the first time in this Court. It cannot therefore, be entertained, especially as it would also necessitate an enquiry into the fact as to whether or not the' Assistant Sales Tax Officer had been authorized in this behalf or not.

21. For the foregoing reasons there is no force in this writ petition which is dismissed with costs. Petition dismissed.