I.T.A. NO. 509(IB) OF 1986-87, DECIDED ON 30TH AUGUST, 1987. Versus I.T.A. NO. 509(IB) OF 1986-87, DECIDED ON 30TH AUGUST, 1987.
ORDER
1. Brief facts giving rise to this appeal are that the assessee who is an individual, filed a return to declare income as under:----
(i) Share from registered firm namely, AA Kay Enterprises, Ltd,. Rawalpindi.
2. Rs. 45, 026
(ii) Salary
3. Rs. 24,000
4. Total Income
5. Rs. 69,026
2. Income as disclosed above, was accepted by the Income Tax officer by virtue of an order passed under section 59(1) of the Income Tax Ordinance, 1979 (hereinafter called the Ordinance). Against the said order, the assessee filed an appeal before learned CIT (Appeals) on the ground that he was not allowed unilateral relief as is admissible under section 164 of the Ordinance. On account of the foregoing reason, learned CIT (Appeals), set aside assessment by virtue of Order No.632, dated 13-2-1985, directing the Income Tax Officer to re-examine the assessee's contention with regard to unilateral relief under section 164 of the Ordinance. This time again, income from salary was charged to tax alongwith assessee's share from the registered firm styled as AA Kay Enterprises, Rawalpindi, and he was not given the benefit of unilateral relief. In this view of the matter, appeal was filed before learned AAC, which was disposed of vide appeal No.3107, dated 8-9-1986. Since the assessee did not feel satisfied with the findings of learned AAC, he filed second appeal before the Tribunal for the redress of his grievance. The appeal after hearing has been disposed of today.
3. After hearing both the parties, I have noted that the assessee received a sum of Rs.24,000 on account of salary from Azad Kashmir Tourism Corporation, Rawalakot. Since return was filed in the status of a resident and it was accepted by the Income Tax Officer, a sum of Rs.24,000 on account of salary was rightly charged to tax in the hands of the assessee alongwith his share income from AA Kay Enterprises, Rawalpindi. However, on the salary which was included in the total income of the assessee, he was entitled to unilateral relief in accordance with the provisions of Section 164 of the Ordinance which is set out below for facility of reference:-
6. "If any person who is resident in Pakistan in any year proves to the satisfaction of the Income Tax Officer that, in respect of any income which has accrued or arisen to him during that year outside Pakistan, he has paid income tax, by deduction or otherwise, in any country (including a country in which there, is an agreement under Section 163 for the avoidance of double taxation), the Income Tax Officer may, subject to such rules as may be made in this behalf, deduct from the tax payable by him under this Ordinance a sum equal to the tax calculated on such double-taxed income at the average rate of tax (of Pakistan or the average rate of tax) of the said country whichever is lower."
4. As has been stated above, the assessee was entitled to unilateral relief in respect of salary that was charged to tax alongwith assessee's share income from A A Kay Enterprises, Rawalpindi, under the above section. This order is, however subject to the condition that the Income Tax Officer will satisfy himself that tax on salary was paid by deduction or otherwise in Azad Jammu and Kashmir.
5. In respect of AA Kay Enterprises, Rawalpindi, in which the assessee is a partner, assessment relating to the charge year 1982-83, was finalized under section 59(1) of the Ordinance by virtue of Income Tax Officer's order dated 26-12-1982. In consequence thereof, A A Kay Enterprises, Rawalpindi, became entitled to a refund of Rs.41,254 by virtue of demand notice of even date. However, before finalization of assessment in the case of AA Kay Enterprises, Rawalpindi, the assessee by virtue of an application dated 10-10-1982, had requested for an adjustment of Rs.11,921 in respect of his case. In this connection, the said letter is reproduced below for facility of reference: -
7. "On behalf of above assessee, we enclose the following:-
8. Registered fir m.
(i) Return of total income for the assessment year 1982-83.
(2) Computation of income and tax liability for the year ending 30th June, 1982.
(3) A copy of income and expenditure account for the ending 30th June, 1982 and a copy of Balance Sheet as at 30th June, 1982.
(4) A copy of partners Accounts.
(5) Photo copy of receipted challan No.93, dated 16th June, 198 for Rs.1,00,000 being the amount of advance tax.
9. On the basis of these documents a sum of Rs.41,232 has been excess paid and we request you that the same may be adjusted against the demands in respect of under-mentioned particulars:-
10. Assessment Year
11. Date of assessment Order
12. Income assessed
13. 1st 1979-80
14. 27th June 1982
15. Rs.15,000
16. 2nd 1980-81
17. 7th April 1982
18. Rs.1,45,612
19. Highest income
20. Rs.1,45,610
21. Add:20% for immunity from detailed scrutiny.
22. Rs. 29,122
23. Rs. 1,74,732
24. Income for assessment year 1982-83 declared.
25. Rs.2,38,850
26. Partners
27. Mr. Niaz Ahmad
28. Return of total income for the assessment year 1982-83 alongwith the following: -
(i) Computation of income and tax liability for the income year ended 30th June, 1982,
(ii) Statement of assets and liabilities as at 30th June, 1982,
29. On the basis of these documents tax liability comes to Rs.8,695 which may be kindly set off against the excess deposit of tax in the case of the firm as requested.
30. Mr. Mohammad Yaqub
31. Return of total income for the assessment year 1982-83 alongwith the following: -
(i) Computation of income and tax liability for the income year ended 30th June, 1982.
(ii) Statement of assets and liabilities as at 30th June, 1982.
32. On the basis of these documents tax liability comes to Rs.8,695 which may kindly be set off against the excess payment of tax in the case of the firm.
33. Sardar Khalid Ibrahim
34. Return of income and tax for the assessment year 1982-83 alongwith the following:-
(i) Computation of income and tax liability for the income year ended 30th June, 1982.
(ii) Statement of assets and liabilities as at 30th June, 1982.
35. On the basis of these documents the amount of liability in Pakistan comes to Rs.13,499 which may kindly be set off against the excess payment made in respect of the firm to the extent of Rs.11,921. We enclose photo copy of receipted challan dated 10th October, 1982 for Rs.1,578 being the amount of tax payable after the adjustment as requested.
36. Sardar Mohammad Ovais
37. Return of total income for the assessment year 1982-83 alongwith the following: -
(i) Computation of total income and tax liability for the income year ended 30th June, 1982.
(ii) Statement of assets and liability as at 30th June, 1982.
38. On the basis of documents the amount of tax liability in Pakistan comes to Rs.20,119 which may kindly be set off against the excess payment made in respect of the firm to the extent of Rs.11,921. We enclose photo copy of receipted challan dated 10th October, 1982 for Rs.8,125 being the amount of tax payable after adjustment as requested.
39. We shall be pleased to provide you any information you may require to finalize the assessment."
6. From the content of the above letter, it is abundantly clear that alongwith return in the case of AA Kay Enterprises, Rawalpindi, the assessee had also filed his return for the charge year 1982-83, accompanied by computation of income and tax payable thereon. There is also no doubt that before finalization of assessment in the case of AA Kay Enterprises, Rawalpindi, the assessee requested for an adjustment of Rs.11,921 against demand to the extent of Rs.13,499 payable by him for the charge year 1982-83. In fact, after adjusting a sum of Rs.11,921, which represented assessee's share of refund against disclosed income in the case of A A Kay Enterprises, Rawalpindi, he further paid a sum of Rs.1,578 so as to completely discharge his dues. This part of the evidence, which was before the Income Tax Officer, was not even examined by him much less recording a finding on it. Even learned AAC overlooked this important piece of evidence and consequently, fell into an error in again remitting this matter for consideration by the Income Tax Officer. As learned DR on behalf of the department, has not controverted the fact that the assessee was entitled to a refund of Rs.11,921 on the basis of assessment in the case of A A Kay Enterprises, Rawalpindi, the assessee was entitled to an adjustment of a sum of Rs.11,921 for the charge year 1982-83. And after paying a sum of Rs.1,578 nothing was due from him on the basis of returned income for the charge year 1982-83.
7. Since on the basis of evidence made available before me, the assessee had discharged his admitted liability of income tax, there was no justification with the Income Tax Officer to have imposed additional tax on the assessee. This point was agitated before learned AAC who through an oversight did not pass an order on it. Therefore, on this point, assessment is set aside and the case is remitted to learned A AC with a direction that he should pass an order on the foregoing objection of the assessee in accordance with law.
8. Finally, I also agree with the legal objection raised by learned counsel of the assessee that the Income Tax Officer, committed an error in imposing surcharge at the rate of 10$ on the amount of the alleged tax, notwithstanding the fact that by virtue of the Finance Ordinance, 1982, it was not leviable on taxable income below Rs.1,00,000. In this connection, I have with advantage relied on an amendment brought in the First Schedule to the Ordinance vide paragraph B, which is incorporated below:-
SURCHARGE IN NON-COMPANY CASE
40. The original para B was as follows:----
41. "B. In the case of every Ten per cent of person other than the income tax company: and super tax.
42. Provided that nothing in this paragraph shall apply in the case of an individual whose taxable income is less than Rs.1,00,000."
43. The figure 50,000 was substituted by the Finance Ordinance, 1982, w.e.f. assessment year 1982-83. (Complete Income Tax Law 1986-87 Edition by S.A. Salam).
9. Since assessed income of the assessee was Rs.69,026, he was not liable to surcharge at the rate of 10% w.e.f. assessment year 1982-83 on account of an amendment brought in paragraph B of the First Schedule to the Ordinance. As a positive finding could have been recorded on this point by learned A AC , he also fell into an error in again remitting the case to the Income Tax Officer for having a second look on it. I only wish that he could have discharged his duty by giving a positive finding on it. Since he did not do so, it is ordered accordingly.
10. Appeal filed by the assessee succeeds to the extent and in the manner indicated above.
44. M. B. A. /442/T Order accordingly.