W.T.As. Nos. 754/LB, 1123/LB and 969/LB of 2002, decided on 17th December, 2003. Versus W.T.As. Nos. 754/LB, 1123/LB and 969/LB of 2002, decided on 17th December, 2003.
ORDER
1. These appeals pertaining to assessment years 1992‑93 by a limited company arise out of (1) orders of the CIT(A) Zone VI, Karachi, dated 16‑10‑1997 setting aside the DCWT's order of assessment, (2) order of the CIT(A) Zone‑I, Lahore, dated 11‑5‑2002, rejecting assessee's contention on limitation issue and (3) order of the CIT(A) Zone-1, Lahore, dated 4‑3‑2002 rejecting. assessee's appeal on matter pertaining to CAT Levy but deleting levy of Addl. tax/penalty.
2. It is the appellant's contention that the DCWT originally finalized CAT assessment in assessee company's case (on 26‑9‑1997) by not including capital work in progress in the assets found liable to such levy. That assessment was set aside by the CWT(A) on 16‑10-1998. The assessee then filed NIL CAT Return on 20‑2‑1999 and the same was accepted by the DCWT. Capital work in progress was not included by the assessee in the assets held liable to CAT levy and the DCWT accepted assessee's contention. Subsequently following ITAT Full Bench judgment reported as 1982 Tax (Trib.) 155, dated 30‑11‑1999 the DCWT served notice on the assessee to rectify his earlier order and ignoring assessee's protestations, the previous assessment order, dated 20‑2‑1999 was rectified on 31‑3‑2001 and capital work in progress was subjected to CAT levy. Penalty and additional tax was also charged. In appeal the CWT(A) has confirmed CAT Levy through rectified order but deleted penalty/additional tax, in line with ITAT FB judgment cited Supra.
3. The assessee company is now before the ITAT against the order of the CWT(A). The appellant submits that firstly the CAT assessment for assessment year 1992‑93, dated 31‑3‑2001 is allegedly hit by expiry of limitation of time. Secondly, it is argued that the original assessment order, dated 20‑2‑1999 could not have been subsequently rectified under section 35 because the taxability or otherwise of capital work in progress was a controversial issue on which there had been conflicting judgments by the Tribunal and the matter was only finally put to rest by the ITAT (FB) judgment, dated 30‑11‑1999. It is also the appellant's contention that there had been a change of opinion by the DCWT on the matter pertaining to taxability of capital work in progress under CAT. Finally it is contended that the ITAT Full Bench judgment, dated 30‑11‑1999 relied on by the DCWT to rectify assessee's earlier assessment, dated 20‑2‑1‑999 was not in the field when assessee's original assessment was finalized and the said ITAT (FB) judgment could not be used retrospectively to rectify assessment made in assessee's case.
4. The following case‑law, has been cited by the assessee:
2. (1976) 34 Tax 133 (SC. Ind); 2003 PTD (Trib.) 260; 1993 BTD 766; 2003 PTD (Trib.) 2683; 1990 PTD (Trib.) 844; 1990 PTD 868 and 1997 PTD (Trib.) 146:
5. The DR argues that the appellant's objections are misconceived and rectification has rightly been made by the DCWT.
6. We have heard both sides and have examined the available record and our findings are recorded as under:‑‑
(1) Appellant's contention on limitation has no merit and the AR leas so conceded at the end of his submissions before the Tribunal.
(2) So far as rectification of the original assessment order by the DCWT is concerned, under the law both legal as well as factual mistake are open to rectification. The condition precedent to rectification however is that these mistakes be readily apparent to any one connected with the proceedings i.e. the mistakes be `floating on the surface of the record'. Any attempt to `discover' the mistake through protracted debate/lengthy analysis would invalidate any invocation of the provisions of section 35 of the Wealth Tax Act (since repealed). In the case of the present assessee, assessee's failure to cite work in progress as an asset in the CAT Return filed on 20‑2‑1999 does, in our considered judgment, constitute a `mistake' as envisaged in law Capital work in progress is uniquely a Balance Sheet item and is invariably cited on the Assets side of the Balance Sheet. There can be no question of it's citation on the Liabilities side of the Balance Sheet Capital work in progress is thus admittedly an asset of the company. The only question is whether it is an asset for purposes of levy of CAT. The assessee says that this has been a debatable issue. In our opinion however, once it is accepted that capital work in progress is indeed an asset of the company then there can be no reasonable escuse to exclude it from the purview of CAT. The ITAT judgment referred to by the assessee in which capital work in progress was excluded from CAT levy (W.T.A. No. 220(PB) of 1996‑97, dated 30‑6‑1997) is an order `per incurium' as the DR did not draw the attention of the Tribunal to the fact that as per standard International Accounting practice/principles, capital work in progress is uniquely and invariably cited on the Assets side of the company's Balance Sheet. Needless to say an order passed `per incurium' has no force in the eye of law and the ITAT in it's Full Bench judgment, dated 30‑11‑1999 has only taken formal cognizance of this all important aspect and has passed an order consistent with standard accountancy principles in matter pertaining to marshalling of assets and liabilities in a company's Balance Sheet. In this view of the matter therefore, the DCWT has on 31‑3‑2001 rightly rectified the earlier defective order, dated 20‑2‑1999 as capital work in progress was bound to be treated as an asset of the company and the DCWT had earlier not so treated the same.
(3) So far as levy of addl. tax and penalty is concerned, no doubt in the ITAT (FB) judgment the same has been deleted because of the multiplicity of circulars issued by C.B.R. confusing the assessee's on matter pertaining to filing of CAT Return. However, subsequently the ITAT in W.T.A. No. 90/LB of 2001 (AY 1992‑93) dated 27‑9‑2003 has held that whatever confusion existed initially ought to have been substantially resolved over time and accordingly the assessee should have filed CAT Return when Notice was issued by the DCWT on 4‑3‑1997. However, the assessee waited till 20‑2‑1999 before CAT Return was finally filed and that too was not correctly filed as is evident from the fact that capital work in progress was not cited as an asset of the company which it undoubtedly is. Under the given facts and circumstances therefore we do not find any mitigating circumstances in assessee's case that could justify deletion of penalty/addl. tax amount in it's entirety. We therefore vacate the CIT(A) finding in this regard. In the case of additional tax it is either to be charged in full or not at all. In assessee's case as it is to be charged, it is directed to be charged in full. As for penalty, we direct that penalty be levied at token amount of Rs.500,000 as the Tribunal has already held that penalty is levied so as to have a deterrent effect on the assessee and on others similarly placed and is not a normal mode of raising revenue.
3. (Sd.) (Sd.)
4. (Muhammad Tauqir Afzal Malik) (Muhammad Munir Qureshi)
5. Judicial Member Accountant Member
6. MUHAMMAD TAUQIR AFZAL MALIK (JUDICIAL MEMBER).‑‑‑ I have gone through the judgment of learned Accountant Member, I with utmost regard and respect disagree with the finding on legal plain. As narrated in my learned brother's order the return of the assessee was finalized on 20‑2‑1999. Subsequently, the Department following ITAT's Full Bench judgment reported as (1982) Tax (Trib.) 155, dated 30‑11‑1999 the DCIT served notice on the assessee to rectify the earlier order and ignoring assessee's protest, the previous assessment order, dated 20‑2‑1999 was rectified on 31‑3‑2001 and capital work in progress was subjected to CAT levy. Penalty and additional tax was also charged, CWT (A) confirmed CAT levy through rectified order but deleted penalty/additional tax in line with the ITAT Full Bench judgment cited supra. File learned Member has not only upheld the rectified assessment but also ordered for full charge of the additional tax and token penalty of Rs.500,000.
7. In this context I would like to add that the principle of Stare decisis has to be applied in this case. In this connection. I will refer to my own judgment passed in M.A. No. 221/LB of 2601 on 31‑8‑2001 reported as 2002 PTD (Trib.) 946.
8. At the material time the work in progress was not included in the assets in the CAT proceedings and the case of the assessee was finalized as such. There is no provision in Wealth Tax Act to keep on changing the assessments already finalized which are past and closed transactions.
9. In the similar circumstances, the Honourable High Court in the decision of Writ Petition No.235 of 2002 relying on the judgment of he Honourable Supreme Court of Pakistan cited as Income Tax Officer, Central Circle‑II, Karachi and another v. Cement Agencies Ltd. (PLJ) 1969 SC 322) gave his finding as under:‑‑
10. "I have gone through the cited precedent and find that the ratio of the said case is squarely applicable in the present case. In the precedent case, it was held by the Honourable Supreme Court that an interpretation placed on a statute by a Court would be applicable prospectively in future cases and such interpretation would not affect past and closed matters.
11. Relying on the aforesaid precedent, I hold that the show‑cause notice issued to the petitioner under section 17‑B of the Wealth Tax Act and the impugned order, dated 31‑3‑2001 passed by the IAC Wealth Tax cancelling the assessments for the years 1998‑99 and 1999‑2000 are without lawful authority. "
12. As a difference of opinion has arisen in this case, therefore, reference is required to be made to 3rd Member by the Chairman, ITAT.
13. (Sd.)
14. (Muhammad Tauqir Afzal Malik)
15. Judicial Member
16. Therefore, under the given circumstances, the following question of law is formulated for reference:‑‑
17. "In view of the facts and circumstances of the case and applying the principle of Stare Decisis whether the assessments finalized before the order of the Full Bench can be rectified."
18. (Sd.) (Sd.)
19. (Muhammad Munir Qureshi) (Muhammad Tauqir Afzal Malik)
20. Accountant Member Judicial Member
21. MUHAMMAD SHARIF CHAUDHRY (ACCOUNTANT MEMBER). ‑‑‑The instant case has been referred to the undersigned by the worthy Chairman of ITAT for resolution of difference of opinion which arose up between the learned Members of the Division Bench comprising of Mr. Muhammad Tauqir Afzal Malik, Judicial Member and Mr. Muhammad Munir Qureshi, Accountant Member. I have heard both the parties and have considered the relevant facts of the case. I have perused the record and the case‑law produced before me by the learned AR of the assessee.' I have also appreciated the arguments given at the bar by the Authorized Representatives of both the parties.
22. Facts of the case in brief are that the assessee filed nil return for the purpose of Corporate Assets Tax on 20‑2‑1999 and the same was accepted by the DCWT. Capital work in progress was not included by the assessee in the assets held liable to CAT and the DCWT accepted the assessee's contention. Subsequently relying on ITAT's Full Bench decision reported as 1982 Tax (Trib.) 155, dated 30‑11‑1999, the DCWT on. 31‑3‑2001 rectified the previous assessment order, dated 20‑2‑1999 and capital work in progress was included in the value of the assets for charge of CAT. Penalty and additional tax was also charged. In appeal the learned CWT(A) confirmed the CAT levied but deleted the penalty/additional tax. The matter was brought before the ITAT by both the parties as the assessee was aggrieved with the confirmation of charge of CAT whereas the Revenue was aggrieved with the action of the CWT regarding deletion of penalty/additional tax. However, both the Members of the ITAT different with each other. The learned Accountant Member who is the author of the decision upheld the CVT's order on levy of CAT and restored the action of the Assessing Officer on penalty and additional tax. On the other hand the learned Judicial Member has relied upon a judgment of the apex Court and has held that the rectification action taken by the Assessing Officer on 'the basis of Full Bench decision of the ITAT is illegal and, therefore, no CAT and no additional tax and penalty is leviable.
23. I agree with the learned Judicial Member in holding that action taken by the Wealth Tax Officer in rectifying the assessment order, dated 20‑2‑1999 on 31‑3‑2001 on the basis of Full Bench decision of the ITAT, dated 30‑11‑1999 is illegal and void in view of the judgment of the Honourable Supreme Court of Pakistan reported as PLD 1969 SC 322. In this judgment the Honourable apex Court of the country has clearly held that the past and closed transactions in a case cannot be reopened on the basis of a judgment of a Court delivered subsequently in some other case. This judgment of the Honourable Supreme Court of Pakistan is squarely, applicable to the instant case. Therefore, the rectification order passed by the Assessing Officer, dated 31‑3‑2001 is annulled. It would mean that the levy of CAT as well as penalty and additional tax stand deleted.
24. Thus all the three appeals filed by both the parties arc disposed of in the manner indicated above.
25. (Sd.)
26. (Muhammad Tauqir Afzal Malik)
27. Judicial Member
28. M.B.A./280/Tax (Trib.) Order accordingly.