TANVEER MEHBOBB Versus SALAH BHAI ABDUL HUSSAIN TAPAL
NAIMUDDIN, J .--By this application under section 17(1) of the Sales Tax Act, 1951, and the applications in S.T.R. Nos. 333 of 1974, 335 of 1974 and S.C.T.R. No. 40 of 1975, following common question of law said to arise out of the common order, dated 14-1-1974, passed by the Income-tax Appellate Tribunal (Additional Bench), Karachi, has been referred by the Commissioner of Income-tax/Sales Tax (East Zone), Karachi, for answer:
"Whether on the facts and in the circumstances of the case the learned Tribunal was justified in holding that the evasion of Sales Tax was covered by the provisions of M.L.R. 43/48?"
2. The facts giving rise to the question, as stated in the statement of facts, are that the respondent carried on business of dismentling of ship and selling it in scrap. For Assessment year 1954-55, Assessment year 1955-56, Assessment year 1956-57 and Assessment year 1957-58, sales tax proceedings were started under section 29(2) of the Sales Tax Act, 1951, in view of the C.B.R. Circular No. 9(54)-ST/64, dated 6-4-1967, which provided that the dismentling of ship was a manufacturing process and as such chargeable to sales tax and notice was issued. In response to the notice the respondent filed consolidated return for the period ending 31-3-1956, showing taxable sales at nil. No compliance was, however, made to summons served in Form S.S.T.
24. Therefore, ex parte assessment under section 10(4) of the Sales Tax Act, 1951, was made resulting in sales tax demands as detailed below:--
For the
(i) Assessment year 1954-55
Rs.56,154
(ii) Assessment year 1955-56
Rs.40,480
(iii) Assessment year 1956-57
Rs.37,372
(iv) Assessment year 1957-58
Rs.40,713
3. Aggrieved by the aforesaid order of assessment, the respondent filed separate appeals before the Income-tax Appellate Tribunal, wherein it was contended that the sales tax evaded or suppressed, if any by the respondent in the year 1958, in respect of the assessment made by the Sales Tax Officer, was covered by the declaration made under M.L.R. No. 43, as amended by the M.L.R. No. 48.
4. The Tribunal agreed with the contention an, allowed the appeals by a common order, as stated before, holding that the levy of the sales tax for the period under consideration was improper, resulting In the present reference.
6. We have heard Mr. A.A. Dareshani learned counsel for the applicant In S.T.R. Nos. 332, 333 and 335, all of 1574, and Mr. Waheed Faruqui, learned counsel for the applicant in S.T.R. No. 40 of 1975.
The respondent though served have, remained absent.
7. Now, before we consider the question we may refer to the relevant provisions of M.L.R. No. 43, as amended by the M.L.R. No. 48, which read as follows:--
(i) Any person, who has filed the return of his income under the Income-tax Act, 1922 for the assessment year 1954-55 or any assessment year thereafter, and who has reason to believe that the return so filed is not correct, may file a revised return of his true income by the 31st December, 1958. No action of any kind whatsoever shall be taken for having submitted an incorrect return originally, or in respect of the nature of the transaction from which the income represented by the difference between the revised return and the original return, hereinafter called the "excess income", was derived; nor will the fact of his having filed a revised return be taken as a ground for the reopening of any assessment under subsection (2) of section 34 of the Income-tax Act.
(ii) In case it is not possible for him to compile the revised return separately for each year, a consolidated revised statement showing his income for the entire period commencing with the assessment year 1954-55 may be filed "by the 31st December, 1958".
(iii) Notwithstanding anything to the contrary contained in sub paragraphs (i) and (ii) above, any person may file a return of income or a consolidated statement for any year, or years, prior to the assessment year 1954-55.
(iv) Any person, who has never filed his return of income or has never been assessed to tax so far, may also file a return of income or a consolidated statement by the 31st December, 1958, showing his true Income for any year or years, as the case may be, and no action of any kind whatsoever shall be taken against him for not having filed the return before".
6(i) The Central Board of Revenue may make such rules, or issue such orders, instructions or directions consistent with this Regulation as it may consider necessary to give effect to the provisions of this Regulation or concerning matters connected therewith, being matters for which no provision or no sufficient provision exists in this Regulation, and all such rules, orders, instructions and directions shall be deemed to form a part of this Regulation and shall have effect accordingly.
(ii) Without prejudice to the generality of the provisions of sub paragraph (i) above, such rules, orders, instructions or directions may provide for the determination of 'excess income' for the purposes of this Regulation, or the computation of the tax payable in pursuance of this Regulation".
8. Pursuant to paragraph 6, the Central Board of Revenue issued a Circular, dated 20-12-1958, inter alia providing as follows:--
"2. Where a tax-payer has filed a revised return or consolidated statement showing his excess income correctly, it would-be taken to represent all the income earned by him from all sources including suppression, if any, of taxes evaded or collected from customers but not paid to Government. Thus, sales tax assessment or proceedings for the recovery of excise or custom duty, etc., would not be started or reopened, as the case may be against such persons for re-valuation proceedings already pending with the Valuation Branch of the Customs Department would not be affected. Similarly, assessments under the Estate Duty Act, which have already been finalised would not be re-opened and any statement made under Martial Law Regulation No. 43, as amended, would not be utilised in completing pending estate duty assessments. This is, of course, on the assumption that all income and gains from such suppression or non-payment of taxes etc., are now included in the revised return or consolidated statement of the tax-payer concerned."
9. From the aforesaid circular it is clear that where a tax-payer filed revised return or consolidated statement, as in the present case, showing his excess income correctly it was taken to represent all the income earned by him from all sources including suppression, if any, of taxes evaded or collected from the customers but not plaid to the Government and as such the department could not have started the, sale tax assessment proceedings. There could be no manner of doubt as to the exclusion of sales tax evaded or not paid in the case where the circular applied as the suppression, evasion or non-payment of sales tax is expressly mentioned therein.
10. Further, it is not disputed that the excess income declared by the respondent covered the period mentioned in M.L.R. No. 43, asp amended by M.L.R. No. 48. The question is whether the sales tax, if any, suppressed or evaded or not paid could be recovered for the period for which consolidated statement showing excess income correctly had been filed. On the face of the clear words of the Circular there is no room whatever to doubt that the excess income declared covered the evasion, suppression or non-payment of sales tax for the aforesaid period and therefore, the assessment orders were rightly set aside.
11. We are fortified in our view by a decision of this Court in Ahmad Karachi Halwa Merchant v. Commissioner of Sales Tax, Karachil 1985 PTD 272, wherein it was held that 'paragraph 2 clearly provides that the sales tax in respect of the periods for which the declaration has been made, of course accepted as correct, will not be re-opened against such person for that period and accordingly it was further held that the Sales Tax Officer was not competent to re-open the case under section 28 of the Sales Tax Act.
12. We may mention that in the present case the order of assessment was passed by the Sales Tax Officer on a notice issued under section 28 of the Sales Tax Act.
13. However, it was contended by Mr. A.A. Dareshani though no such contention was raised by Mr. Waheed Faruqui and in our view rightly so that clause (ii) of Circular, dated 20-12-1958, travelled beyond the scope of the provisions of paragraph 2 of the M.L.R. No. 43, as amended by the M.L.R. No. 48 and the argument was that the Central Board of Revenue could issue instructions or directions consistant with the provisions of Regulation relating to income but could not extend the scope to the matter covered by the provisions of the Sales Tax Act.
14. As regards to this contention it would suffice to say that no such contention was raised before the Tribunal and no such question has been referred in the present reference.
15. We, therefore, answer the common question in all the aforesaid references in the affirmative. Since the respondent has remained absent there will be no order as to costs.' '
M. Y. H. Question answered in affirmative.