MUHAMMAD JAWED ZAKARIA, JUDICIAL MEMBER:---This full Bench was constituted by the Hon'ble Chairman to hear the above titled wealth tax appeals.
2. Brief facts of the case are that the assessee (hereinafter referred to as the "appellant") above named is a private limited company engaged in the business of manufacturing and fabrication of machinery parts. It was alleged by the appellant before the authorities below that due to temporary cessation of business activities, the appellant leased out portion of its plot of land No. B- 61, SITE, Karachi, to M/s Indus Motors Co. Ltd. on a monthly rent and had declared the said income as business income. The appellant took the stand that property leased to M/s Indus Motors Co. Ltd. was not held for the purposes of letting out. The appellant did not file return of wealth for the assessm ent years 1990-91 to 1995-96. The Learned Deputy Commissioner of Wealth Tax, Circle 10, Cos.-V, Karachi, imposed wealth tax vide orders passed under section 16(3) of the Wealth Tax Act, 1963 dated 27-04-1996, estimating the value of property on the basis of actual rent received on the sole pretext of its being letting out on rent. Before the Learned Commissioner Income Tax, Appeals- IV, Karachi, it was contended that the subject property leased out on rent could not be taxed under the provision of section 2(e)(ii) of the Wealth Tax Act, 1963, as the property owned by the Appellant was not held for letting out as the principle business activity of the Appellant was manufacturing and fabricating of machinery parts. The scope of the provision of section 2(e)(ii) of the Wealth Tax Act, 1963 are confined to those immoveable properties which are held for the purposes of the business of construction and sale, or letting out of property; therefore, the scope of said provision cannot be expended to include all immoveable properties, purpose of which are otherwise than described in section 2(e)(ii). The learned CLT(A-IV), after hearing the argument set-aside the assessm ent orders and remanded them back to the Assessing Officer for re-examination of the matter afresh with reference to the law contained in section 2(e)(ii) of the Act, 1963 vide order dated 30-07-1996. The Assessing Officer as per directions of the Learned CIT(A-IV) held vide orders passed under sections 16(3)/23 of the Wealth Tax Act, 1963 dated 19-05-1997, that the appellant is not liable to wealth tax and dropped the proceeding initiated earlier by the Assessing Officer.
However, subsequently the Learned IAC vide order passed under section 17-B of the Wealth Tax Act, 1963 dated 18-05-2001 cancelled all the assessment orders dated 19-05-1997 on the ground that the immoveable property on the valuation date is on rent is sufficient to bring the Appellant into the ambit of chargeability under the Wealth Tax Act, 1963. Being aggrieved the appellant filed appeals before the Tribunal and the Income Tax Appellate Tribunal (the ITAT now ATIR) on appeals filed by the Appellant merely, accepted the contentions of the appellant on theory of merger disposed of all the appeals. Consequently, the Respondent (CIT) filed appeals, before the Hon'ble High Court of Sindh at Karachi bearing W.T.As. Nos. 133 to 170/2002 the cases were remanded back to the Learned ITAT with the direction to re-hear the parties on merits and decide the appeals by fresh decision allowing both the parties to raise any question of fact and law, as deemed fit by them. The ITAT vide consolidated order dated 28-12-2006 after giving due consideration to all the facts proposed for constitution of Full Bench. It is pertinent to mention here that the matter was pending for such a long time and was waiting for hearing, the Hon'ble Chairman soon after he assumed the charge / post of Chairman, ATIR and taken cognizance of the fact that a considerable, time has already elapsed ad no order was passed by the ex-chairmen for its hearing, hence ordered for early and speedy disposal of the case. Therefore, the full bench has been constituted and heard both the parties.
3. The following common grounds have been taken by the Appellant for all the years under appeal:--
1. That the order passed by the learned Inspecting Additional Commissioner of Income Tax Range- III, Companies-IV, Karachi is bad in law and on facts.
2. That the order passed by the learned Inspecting Additional Commissioner of Income Tax Range- III. Companies IV, Karachi is without jurisdiction.
3. That the learned Inspecting Additional Commissioner of Income Tax Range-III, Companies-IV, Karachi has erred in invoking section 17-B of the Wealth Tax Act, 1963.
4. That the learned Inspecting Additional Commissioner of Income Tax Range-III Companies-IV, Karachi has erred in cancelled the order passed by the learned Assessing Officer under sections 16(3)/23 of the Wealth Tax Act, 1963 as erroneous as well as it is prejudicial to the interest of revenue.
5. That the appellant craves permission to add, amend, alter or substitute the grounds of appeal at the time of hearing.
4. Miss Lubna Perwaiz appeared on behalf of the appellant while Mr. Naeem Hassan represented the department.
5. The learned counsel for the Appellant vehemently challenged the jurisdiction of the successor IAC to invoke the provision of section 17-B of the Wealth Tax Act, 1963. She contended that in compliance of the directions of the learned CIR(A) the appeals were remanded back and in re- assessm ent proceedings the DCIR had dropped the proceedings initiated after thorough scrutiny, proceedings and after taking into consideration all the fact, circumstances and law i.e. section 2(e)
(ii) read with CBR Circular No. 18 of 1991 dated 2nd July 1991 and orders passed under sections 16(3)/23 of the Wealth Tax Act, 1963 dated 19-05-1997, that the assessee is not liable to wealth tax and dropped the proceeding initiated by the Assessing Officer. She went on to urge that the IAC had approved the action of the DCIR in dropping the proceedings, hence, the orders of the Assessing Officer had merged with the orders of the learned IAC. She, in support of her contentions, placed reliance on the whole catena of judgments. She vehemently stressed that the IAC had already approved and supervised proceedings of Wealth Tax Officer/Assessing Officer, thus, successor IAC / counterpart was debarred from taking action under Section 17-B of the Wealth Tax Act, 1963.
6. The learned counsel further strengthen her contentions by relying on the case law 1996 PTD 750 wherein the Learned ITAT has discussed the issue of approval of the IAC if the IAC had granted the approval, the successor IAC has been precluded from taking any action.
7. On factual plane, it was contended that the subject property leased out on rent could not be taxed under the provision of section 2(e)(ii) of the Wealth Tax Act, 1963, as the property owned by the Appellant was not held for letting out as the principle business activity of the Appellant was manufacturing and fabricating of machinery parts. The scope of the provision of section 2(e)(ii) of the Wealth Tax Act, 1963 are confined to those immoveable properties which are held for the purposes of the business of construction and sale, or letting out of property; therefore the scope of said provision cannot be expended to include all immoveable properties purpose of which are otherwise then described in section 2(e)(ii) of the Wealth Tax Act, 1963.
8. The learned counsel vehemently asserted that the orders passed by the DCIR were neither erroneous nor prejudicial to the interest of revenue, therefore, invocation of section 17-B by the successor IAC beyond the jurisdiction as the assessing officer has passed the re-assessment orders under sections 23/16(3) of the Wealth Tax Act after taking into consideration the relevant provisions of section 2(e)(ii) and the CBR Circular and the same were duly approved by the IAC.
She is of the view that the jurisdiction in this case has not been validly exercised and is ab-initio void and illegal as there is no basis for treating the assessment order to be erroneous in so far as prejudicial to the interest of revenue. All the issues has been thoroughly considered by the WTO/Assessing Officer in accordance with law after conscious application of mind and after giving due consideration to section 2(e)(ii) of the Wealth Tax Act, 1963 and the same having been approved by the then IAC / Superior taxing authority. Therefore, according to her the assessments cannot be subjected to provision/section 17-B ibid on the basis of mere disagreement, as the assessm ents cannot be termed as erroneous under the presumption, surmises and conjectures.
She has submitted that the assessments for all the years under review have been passed after detailed scrutiny as such the same cannot be said to be erroneous being prejudicial to the interest of revenue and recourse cannot be had to section 17-B of the Wealth Tax Act, 1963, thus, learned IAC is debarred and precluded from indulgence in such like position as held by the Hon'ble Superiors' Courts. The learned counsel, therefore, vociferously, further went on to stress that in view of the submissions made hereinabove and case laws decided by the Learned ITAT on the subject and principles of interpretation settled by Hon'ble Apex Court, the orders under section 17B of the Wealth Tax Act, 1963 dated 18-05-2001 passed by the Learned IAC are not sustainable in law and may be annulled.
9. The learned D.R. on the other hand supported the order passed under section 17-B of the Wealth Tax Act, 1963 by the learned IAC. He contended that the taxpayer was liable to pay wealth tax liability which he failed to pay. He contended that the learned IAC has rightly imposed wealth tax vide orders passed under section 17-B of the Wealth Tax Act, 1963 estimating the value of property on the basis of actual rent received as the appellant let out property on rent.
10. We have given our earnest consideration to the rival arguments addressed by the contending parties and have also been perused all the relevant facts of the case, and have also perused the relevant records, impugned orders/document case papers, statutory law and case laws submitted by the learned representatives of both the parties.
11. As the core issue involved in this appeal pertains to exercise of jurisdiction under section 17-B of the Wealth Tax Act, 1963, under which the proceedings have been initiated, we deem it proper to reproduce the same for better perception:-- Section 17B.
Powers of Inspecting Assistant Commissioner to revise Wealth-tax Officer 's order (1) The Inspecting Assistant Commissioner may call for and examine the record of any proceedings under this Act, and if he considers that any order passed therein by the Wealth-Tax Officer is erroneous in so far as it is prejudicial to the interests of revenue, he may, after giving the assessee an opportunity of being heard and after making, or causing to be made, such enquiry as he deems necessary, pass such order thereon as the circumstances of the case justify, including an order enhancing modifying the assessment, or cancelling the assessment and directing a fresh assessment to be made.
(2) The provisions of subsection (i) shall, in like manner, apply-- a) where an appeal has been filed under sections 23, 24 and 29, or a reference has been made under section 27 against an order passed by the wealth tax officer, and
(b) Where an appeal or reference referred to in clause (a) has been decided, in respect of any point or issue which was not the subject matter of such appeal or reference.
(3) No order under subsection (I) shall be made after the expiry of four years from the date of the order sought to be revised.
Explanation:---For the purposes of this section an order prejudicial to the interests of revenue shall include an order passed without lawful jurisdiction"
(underline for emphasis)
12. The main thrust of the arguments of the learned counsel is that the orders under section 17-B ibid are without jurisdiction as the reassessment proceedings were initiated in pursuance of the order of the learned CIR (A) and orders were passed under sections 23/16(3), under the supervision / consultation of the learned IAC and the same were got approved by him. From perusal of the orders passed under sections 23/16(3) we have found that the DCIR while passing the orders was constantly in touch with the learned IAC as it appears from the Note in the body of the order which is reproduced as under:-- "Office Note: The assessment proceedings have been dropped after time to time consultation/discussion with IAC R-III/Cos-IV and his approval letter No. IAC/H-III/COS-IV/96- 97/1063 dated 27-5-1997."
13. From perusal of the above NOTE, it is evident that the re-assessm ent proceedings were dropped by the Taxation Officer / DCWT with the consultation/ supervision/guidance of the learned IAC and the subsequent/successor IAC cannot re-open/revise the case being equal in authority /counter part. The Taxation Officer / DCWT had not blindly or tacitly dropped the re-assessment proceedings but after consulting the statutory law and CBR Circular and with the consultation, supervision, involvement and guidance of the then learned IAC. In the case reported as 1996 PTD 750 wherein the Learned ITAT has discussed regarding seeking approval of the Learned IAC, the relevant observations of the Tribunal are reproduced as under:--
13. "Held, Reverting to the question mentioned at para. 6 of this judgment, our answer is negative. It is also because though the approval granted by the IAC was not the statutory requirement of the Act yet par excellence he had not only supervised but also fully involved while finalizing the assessment in respect of the assessment years 1988-89 to 1990-91 are concerned. Therefore there was a very heavy onus probandi on the successor IAC to establish that the assessments in question were erroneous in so far these were prejudicial to the interest of revenue."
That the Learned ITAT in para 15 of the above decision has also held that:-- "15. ... Thus, our answer to the questions mentioned at para 9 is also in negative because the IAC was duly involved in the finalization of these assessments and the conditions enumerated in section 17-B for invoking the provisions of the said section do not exist in the present case."
14. In another case the reported as 1997 PTD (Trib) 902 which deals with section 66-A of the repealed Income Tax Ordinance, 1979 which is par-materia to section 17-B of the Wealth Tax Act, 1963, it has been held while concluding the decision as under:-- "We further agree with the contention of the learned counsel for the appellant that under section 66A of the Income Tax Ordinance, 1979, an IAC has no authority to substitute his own discretion and his own way of appreciating the facts for arriving at preconceived desired result."
The above case has also been relied upon by the Hon'ble Federal Tax Ombudsman in the case reported as 2008 PTD 694 while observing as under:-- "9. To sum up, the impugned show-cause notice dated 27-9-2003 for invoking section 122(5 A) lacks bona fide because it: c. overlooks the facts that mere disagreement, or the possibility that the IAC/CIT can frame a better, or a more revenue yielding assessment, is not a valid ground for revising already completed assessment."
15. In another case the Hon'ble High Court in the case reported as [1996 PTD (Trib.) 750] and [2001 PTD (Trib.) 3810] where it was held that "an order which has been approved/supervised guided/consulted/ involved by an IAC cannot be revised by successor IAC."
16. Reliance is further placed by us on the unreported decision of this Tribunal dated 26.10.1998 in I.T.A. No. 1913/KB of 1996-97, I.T.A. No. 1507/KB of 1997-98 wherein this Tribunal has examined the issue of jurisdiction under section 66A of the Ord., 1979 which is pari-materia to section 17-B of the W.T. Act, 1963 in detail. In that case the assessm ents were approved by the predecessor IAC and this Tribunal found the order, passed under section 66A to be invalid and without jurisdiction. In observing this we are fortified by the order of this Tribunal bearing I.T.As. Nos. 1913 to 1915, 334 to 335 and 1507/KB of 1996-97 dated 26.10.1998 wherein the learned Division bench of this Tribunal has observed as under: "35. Having given our careful consideration to the foregoing facts and circumstances as well as the submissions made from the two sides supra, we find that firstly, the ratio of decisions, on the question of validity Jurisdiction exercised by the, learned Inspecting Additional Commissioner under section 66A, under the circumstances is, in favour of the appellant because, admittedly, the claim of the appellant for exemption under clause (86) supra, being the only issue considered by the DCIT and the Inspecting Additional Commissioner, has been allowed in the assessment order Passed under section 62 with the approval of the inspecting Additional Commissioner. The revision of such orders by him or his successor, therefore, is nothing but change of opinion which cannot be sustained hence vacated (Underlining is ours)
In this respect, further rely on a case law reported as 1996 PTD (Trib.) 750 wherein it was held that:- - "If the assessment in a particular case is made under the supervision and with consultation of the IAC (predecessor-inoffice) then the successor IAC is, ipso facto, debarred to revise, such assessment".
17.From perusal of the above judgments it is manifestly clear that if an IAC is all along associated with assessm ent proceedings or if an order is approved by the Inspecting Additional Commissioner (Predecessor in Office) then revision of such order by the IAC (Successor in Office) is not permissible.
18.We are constrained to observe that, in spite of various authoritative pronouncements of superior courts to the effect that powers conferred on the IACs are restricted with in-built limitation, supervisory in nature and that if an assessment order is passed consciously after application of mind to the material facts by the WTO/DCIT/OIR/AO after considering provision of Wealth Tax Act (as the case may be) and confronting the issues involved to the appellant, the same assessment cannot be branded as erroneous and hence, the IAC is debarred to take action under section 17-B.
Therefore, the authorities concerned violated the precedent conditions of section 17-B. Most unfortunate aspect is, that, when one set of incumbent in office is replaced the new incumbent in office indiscriminately resorts to his authority to the detrimental interest of the other. The revising of assessm ent under section 17-B if based on genuine and valid ground has a serious and hitherto unattended dimension in as much as it exposes the inefficiency or indifference of the Taxation Officer/DCWT who routinely pass so many erroneous order which are prejudicial to the interest of revenue thus knowingly or otherwise cause loss to the revenue. In case proceedings initiated under section 17-B had to be dropped /filed without affecting the assessment, or these fails at the appellate stage, the IAC's efficiency for invoking section 17-B is to be evaluated by his superiors. It can safely be presumed that no such cognizance has been taken systematically and seriously.
Similar, is the position with respect to the action for reopening of assessment, under section 65 of the repealed Income Tax Ordinance, 1979 or 122(5). or 122(5A) of the Income Tax Ordinance, 2001. A well focused study of the percentage of success of such proceeding is necessary to establish the bona fide of action under section 65 or section 66-A of the Repealed Income Tax Ordinance, 1979 or 17-B of the Wealth Tax Act, 1963. Contents of both these sections have also been included in the new Income Tax Ordinance, 2001 as subsections (5) and (5A) of section 122.
19. We are of the view that if such eventuality goes on befalling then no order of the subordinate officer would attain finality. It would not only aggravate the miseries of the taxpayer but also lead to multiple series of assessm ents and would multiply protracted litigation which is not the intention of the legislature and there will be no end of litigation. This could have been opened flood gate of corruption. The IAC has not been given free hand to invoke the provision of Section 17-B of Wealth Tax Act, 1963 =Section 66-A of the (Repealed) Income Tax Ordinance 1979, [Provisions of subsection 122(5A) of the Income Tax Ordinance, 2001], in each and every assessment/order made by the Taxation Officer/ DCWT. The very purport and tenor of the said section is to safeguard the interest of revenue and for that purpose the IAC is vested with the power to revise the order of the subordinate officer where same has acted with flagrant violation of law and fact. Merely disagreeing by the IAC with the conclusion of the assessing officer arrived at by him in the assessm ent order of a particular case is not warranted by law. It would also frustrate the very purpose of the said section where the successor IAC after assuming charge, calls and examines the record of a particular case and on similar set of facts, which have already been considered by the earlier IAC and with his supervision/guidance/involvement/ consultation a conscious assessm ent has been framed by the Deputy Commissioner of Wealth Tax cancels that assessment and directs fresh assessm ent to be made or enhances or modifies the assessment. Undoubtedly, it amounts to excess of jurisdiction which is not tenable in law and the successor IAC should refrain not to invoke the provisions of section 17-B. The facts of the case of the appellant are identical to that case as in this case also the predecessor IAC has given the approval to assessment and successor IAC re-opened/revised the wealth tax assessment under the garb of section 17-B of the Wealth Tax Act, 1963. From a bare reading of Section 17-B of Wealth Tax Act, 1963 or Section 66-A of the (late) Income Tax Ordinance, 1979 it is very clear that limited and restricted powers of modifying or enhancing or revising powers have been vested on the IAC. The order passed by the learned IAC. under section 17-B is against the provision of section because it is very clear that a careful reading of section states that the action under section 17-B can be initiated by the learned IAC on his own.
20. We may further observe that in this case the jurisdiction under Section 17-B of the Act, 1963 has been exercised not in accordance with the provision to the Wealth Tax Act. The primary question under consideration is the scope of action that can be undertaken by the taxation authorities/IAC under Section 17B Wealth Tax Act. As a result the matter that needs to be settled is the line of demarcation between the action that can be undertaken by way of invoking section 17B. Section 17B is pari materia as contained in Section 34A of the Income Tax Act, 1922 or Section 66A of the Income Tax Ordinance, 1979. Under these provisions Inspecting Assistant Commissioners, an officer being administrative supervisor of the Income Tax Officer/Taxation Officer/DCIT/DCWT has been authorized to revise the order passed by the Income Tax Officer/Wealth Tax Officer/Assessing Officer if the same is 'erroneous in so far it is prejudicial to the interest of revenue'. A bare perusal of the language of the section leaves us no doubt that power under section 17-B is independent as it is apparent from the use of words "if he considers". There is no doubt in concluding that consideration is of the learned IAC without any directions and after perusal and examination of record of any proceedings. In PLD 1972 Lahore 316 it was laid down that the officer having power is required to decide himself without any directions. From a bare reading of section 17-B ibid reproduced above, it is manifestly clear that following precedent conditions ought to be fulfilled before invoking provisions, of section 17-B:-- 1). There should be "proceedings under the Act.
2). In such proceeding the Officer must have "passed an order 3). The IAC should consider the said order.
4). The learned Inspecting Assistant Commissioner of Income tax, should call for and examine the records of any proceedings.
5). Any order proposed to be revised "should be erroneous".
(The error envisaged is not one which dependents on possibilities or guess but ought to be actually an error of either of fact or law.
6). Such an order should have resulted in prejudice to the interests of revenue.
7). The order of the assessing officer in question "must not only be erroneous but also the error in the assessing officer's order" must be of such a kind that it can be said of it that it is prejudicial to the interests of the revenue. In other words, merely because the officer 's order is erroneous, the IAC cannot interfere. Further, merely because the order of the officer is prejudicial to the interests of the revenue then again, that is not enough, recourse cannot be had to section 17-B [66A of the repealed Income Tax Ordinance, 1979] 8). The learned Inspecting Assistant Commissioner of Income tax, must provide the assessee an opportunity of being heard.
9). The learned Inspecting Assistant Commissioner of Income lax, must make or cause to be made such inquiry which he deems fit and 10). The IAC should consider that the said order is erroneous and prejudicial to the interests of the revenue. (Both limbs must coexist simultaneously.)
21. Powers of the IAC to revise DCWT/DCIR's orders can be exercised if aforesaid conditions are satisfied. Whereas, in the instant case, the predecessor IAC had applied his mind while approving assessm ent/proceedings after examination the relevant provisions of W.T. Act and CBR Circular and DCWT with the consultation of his superior i.e. IAC had arrived at a judicious conclusion, such a conclusion could not be termed as erroneous because the Assessing Officer/Taxation Officer / DCWT/OIR had exercised the quasi judicial powers vested in him.
22. A microscopic analysis of the said provision of law, research and study of judge made laws and treatise emerge, the following principles of law can be laid down:-- The provisions of section [17-B /(66-A)] empower the IAC, inter alia, to call for and scrutinize the record of any proceeding under the Act and, if necessary, to revise any order passed therein if he considers that the order passed by the Taxation Officer/DCWT/DCIT/Assessing Officer is erroneous and prejudicial to the interests of the Revenue. Two facets that are required to be taken note of are that it may be "any order" and the order might be one passed by the Taxation Officer/DC WT/DCIT Officer "in any proceeding" under the Act, Therefore, in essence, the initial words of section [17-B/(66-A)] "any proceedings" under the Act are of immense signification. The use of the words "any order passed therein" by the Taxation Officer/DCWT/DCIT Officer also has its importance. Section 17-B(66-A)/I.T.Ord.1979) uses the words "pass such order thereon as the circumstances of the case justify, including...." The word "proceedings" hence, is wider term compared to the work "assessm ent". The word "assessment" has been used only after the word "including" towards the end of sections [17-B/(66-A)] and in the earlier part of section [17-B/ (66- A)], the only word used is "proceedings". The power under sections [17-B/(66-A)] could be exercised only if the order of the Taxation Officer/DCWT/DCIT was erroneous and prejudicial to the interests of the Revenue. The revisional power under section [17-B/(66-A)] is a quasi-judicial power hedged in with limitation and has to be exercised subject to the same and within its scope and ambit. So far as calling for the records and examining the same 'to consider' or in other words, to form an opinion that the particular order is erroneous in so far as it is prejudicial to the interests of the Revenue, is a quasi-judicial act because it is an important decision and the same cannot be based upon the whims or caprice of the revising authority. There must be materials available from the records called for by the IAC. This is so because it is well-settled that when exercise of statutory power is dependent upon the existence of certain objective facts, the authority before exercising such power must have materials on record to satisfy it in that regard. If the action of the authority is challenged before the court it would be open to the courts to examine whether the relevant objective factors were available from the records called for an examined by such authority. The power under sections [17-B/(66-A)] to revise an order is quasi-judicial in character.
It, therefore, follows that in making all orders under this section, the IAC must pass a speaking order giving reasons, otherwise the order may be vitiated. It is necessary for the IAC to state in what manner he considered that the order of the Taxation Officer/DCWT/DCIT Officer was erroneous and prejudicial to the interests of the revenue and what the basis or material was for such conclusion.
This being so, the IAC must give his own reasons for being satisfied that the order passed by the Taxation Officer/DCWT/DCIT Officer is erroneous and is prejudicial to the interests of the revenue.
This conclusion is further strengthened by the use of the words "if he considers" used in sections [17-B(66-A)](1) which postulates a scrutiny by the IAC of all the relevant facts for holding that the order is erroneous and is also prejudicial to the interests of the revenue. If the IAC's order does not disclose such reasons, it suffers from an infirmity and is clearly vitiated. The very fact that the IAC is required to make an order after affording an opportunity of hearing to the taxpayer ingrains in the process the requirement of recording reasons for his conclusion, as is necessary for an quasi- judicial order required to be made by a quasi-judicial authority. It cannot be doubted nor it has been questioned that orders under sections [17-B/(66-A)] bear the stamp of quasi-judicial nature and require to be supported by reasons for their conclusion. The necessary consequence is that while passing the order revising an order passed by a subordinate officer of the rank of Income-tax Officer or DCIR the IAC must record reasons in support of his conclusion that the order is revised being erroneous and that it would be prejudicial to the interests of the Revenue due to such erroneousness. In passing an order of revision under sections [17- B/(66-A)], the IAC is not empowered to ignore the binding decisions rendered by the Supreme Court or by the Hon'ble High Court or even by the learned Tribunal. Merely because the Department is contemplating to file a special leave petition, the IAC cannot refuse to follow or cannot ignore such binding decision when the Court has settled the law in question. In that view of the matter, when the Taxation Officer/DCWT/DCIT Officer has passed an order in consonance with the law laid down by the binding decision, it cannot be said that the Taxation Officer/DCWT/DCIT Officer's order is erroneous so as to entitle the IAC to exercise his revisional power. The power reposed on the IAC, no doubt, is a power of judicial nature and, therefore, such power is to be exercised lawfully and with due application of mind. The power cannot be exercised mechanically or at the behest of some other authority other than on the own discretion of the revisional authority himself. The IAC, therefore, is not to exercise his discretion on the dictation of some other authority. Under the provisions of sections [17-B/ (66-A)1, it is not that mere prejudice to the Revenue, or a mere erroneous view which can be revised but there should be the added element of 'unsustainability' in the order of the Taxation Officer/DCWT/DCIT Officer, which clothes the IAC with jurisdiction to issue notice, and proceed to make appropriate orders. The power of revision under sections [17-B/(66-A)] can be exercised by the IAC when the following factors co-exist: (i) there should be a proceeding under the Act; (ii) in such proceeding the Taxation Officer/DCWT/DCIT Officer must have passed an order; and (iii) the IAC should consider that the said order is erroneous and prejudicial to the interests of the revenue. It is that the provisions of sections [17- B/(66-A)] can't be invoked when two views are possible. The error envisaged by sections [17-B/(66-A)] is not one which depends on possibility or guesswo rk, but it should be actually an error either of fact or of law.
22. Exercise of revisional power by the IAC should not become a fiat, but should be within the bounds of law and satisfy the need of fairness in administrative action and fair play and full compliance with the requirements of the principles of natural justice as in quasi-judicial proceedings and in making a quasi-judicial order. The scope of interference under sections [17- B/(66-A)] is not to set aside merely unfavourable orders and bring to tax some more money to the treasury nor is the section meant to get at sheer escapement of revenue which is taken care of by other provisions in the Act. The prejudice that is contemplated under sections [17-B/(66-A)] is prejudice to the income-tax administration as a whole, sections [17-B/(66-A)] is to be invoked not as a jurisdictional corrective or as a review of a subordinate's order in exercise of the supervisory power but it is to be invoked and employed only for the purpose of setting right distortions and prejudices to the Revenue which is a unique conception which has to be understood in the context of and in the interest of revenue administration. Such a power cannot in any manner be equated to or regarded as approaching in any way of appellate jurisdiction or even the ordinary revisional jurisdiction conferred on the IAC which caters other provisions. Sections [17-B/ (66-A)] provides for revision of the order by the IAC. However, the IAC does not have unfettered discretion to revise the order and the condition necessary for invoking the power must exist. From a reading of sections [17-B/(66-A)](1), it is clear that the power of suo motu revision can be exercised by the IAC only if, on examination of the records of any proceedings under this Act, he considers that any order passed therein by the Taxation Officer/DCWT/DCIT/ Officer is 'erroneous in so far as it is prejudicial to the interests of the revenue' . It is not an arbitrary or unchartered power. It can be exercised only on fulfillment of the requirements laid down in sections [17-B/(66-A)](1). The consideration of the IAC as to whether an order is erroneous in so far as it is prejudicial to the interests of the Revenue, must be based on materials on the record of the proceedings called for by him. If there are no materials on record on the basis of which it can be said that IAC acting in a reasonable manner could have come to such a conclusion, the very initiation of proceedings by him will be illegal and without jurisdiction. A definite finding of error and prejudice to the interest of revenue essential-For making a valid order under sections [17-B/ (66-A)](1), it is essential that the IAC has to record and express finding to the effect that the order sought to be revised is erroneous as well as prejudicial to the interests of the revenue. The factual matrix stares in the face of the record in the light of the legal requirement of a satisfaction that invoking of the power under sections [17-B/(66-A)] necessarily presupposes the statutory satisfaction that although there is some error with regard to the completed assessm ent, the order passed by the Officer has to be erroneous in so far as it is prejudicial to the interest of the Revenue. In other words, the plain language of sections [17-B/ (66- A)] is more than abundantly clear that it is not every error or mistake that should induce the IAC to resort to exercise of the powers under sections [17-B/ (66-A)].
23. Now reverting to factual plane, whether the appellant was required to pay wealth tax, we are of the considered opinion that the Learned IAC was unjustified in invoking the provisions of sections 17-B of the Wealth Tax Act, 1990 as the order under section 16(3)/23 of the Wealth Tax Act, 1963 dated 19-05-1997 was neither erroneous nor prejudicial to the interest of revenue as the order was passed after giving conscious consideration to the submissions of the appellant that intention of the legislature for insertion of section 2(e)(ii) of the Wealth Tax Act, 1963 was to tax those immoveable properties that are held for the purposes of business of construction and sale, or letting out of property.
24. The ingredients of the said provision and the explanation to the section is confined to purposes of:-- i). letting out or business of letting out; ii). construction and letting out; and iii). construction and sale of property.
The said provision does not provide to include all those immoveable properties of the companies that are fully or partly leased on the valuation date.
25. As observed earlier, the Appellant is a private limited company engaged in the business of manufacturing and fabrication of machinery parts, therefore, the appellant is not indulged and not carrying out the business of letting out the property. In the given circumstances, invoking of provisions of section is not held to be maintainable. It is now well settled principle that provisions of taxing statute are strictly interpreted and the charges are imposed on the taxpayer with a clear and unambiguous language, it is also trite law that court/Tribunal should apply correct law, whether, litigants point out or not. If there is two reasonable views / interpretations are possible, views favours the subject / citizens to be adopted. The same view as that of ours has been endorsed by the Hon'ble Supreme Court of Pakistan and the various other High Courts in catena of decisions, some of them illustrated below:-- 1: Mehran Associates Ltd. v. CIT reported as 1993 SCMR 274 = 1993 PTD 69 "Held, The cardinal principles of interpretation of fiscal statutes seem to be that all charges upon the subject are to be imposed by clear and unambiguous words. There is no room for intendment nor there is any equity or presumption as to tax. A fiscal provision of a statute is to be construed liberally in favour of the taxpayer and in case of any substantial doubt the same is to be resolved in favour of the citizen.
2. Collector of Customs, Karachi v. Messrs Abdul Majeed Khan reported as 1977 SCMR 371 "Held, Moreover, in interpreting a penal or a taxing statute the court must look to the words of the statute and interpret them in the light of what is clearly expressed. It cannot imply anything which is not expressed, it cannot import provisions in the statute so as to support assumed deficiency, as held in Messrs Hirjina & Co. (Pakistan) Ltd. v. Commissioner of Sales Tax, Central, Karachi (2). Last but not the least it is also well established that penal provisions of a stature should be strictly construed and in case of any ambiguity or doubt arising from the construction, the benefit must go to the accused person Muhammad Ali v. State Bank of Pakistan Karachi (3)"
3. Messrs Harjina Co. v. Commissioner of Sales Tax reported as 1971 SCMR 128 "Held, In interpreting the taxing statue the Courts must look to the words of the statute and interpret it in the light of what is clearly expressed. It cannot imply any thing which is not expressed; it cannot import provisions in the statute so as to support the assumed deficiency".
4. Amin Spinning Mills and another v. Deputy Collector Central Excise and others 2004 PTD 2479 (SC AJ&K)
"Held, It is by now well settled that a Court of law and Tribunal should apply correct and relevant law of the land on the proposition before it irrespective of the fact that a party has referred the law or not. If two views are possible from reading a provision of law, then the view which favours the citizens may be given preference over the second view. The aforesaid solitary principle of law is supported by the authorities title The State v. Syed Qaim Ali Shah (1992 SCMR 2192), and B.P Biscuit Factory Ltd. Karachi v. Wealth Tax Officer and another (1996 SCMR 1470)."
5. Mst. Zarina Yousaf v. Inspecting Additional Commissioner of Income Tax/ Wealth Tax, Sailkot Range, Sialkot and another 2005 PTD 108 (H.C. Lah.)].
"Held, If two reasonably acceptable interpretations of a provision of law are possible then the one that goes to the benefit of the subject should, be adopted. "
6. Micropak (Pvt.) Ltd., Lahore v. Income Tax Appellate Tribunal, Lahore and 2 others 2001 PTD 1108] "Held, Where two interpretations of a taxing statute are equally possible then the one favorable to the subject was to be adopted." When two interpretations are possible in relation to any provision in the discipline of taxation, the one of favourable to the assessee would prevail.
7. IAC of Income Tax and others v. Messrs Micro Pak (Pvt.) Limited and others 2002 PTD 877 (SC Pak)
"Held, Before parting with these matters, it may be observed that all concerned are one on the point that when two interpretations are one on the point that when two interpretations are possible in relation of any provisions in the discipline of taxation, the one favourable to the assessee is to prevail. The learned Members of the Division Bench of the High Court were quite right in reiterating the above principle of law in paragraph 12, already reproduced above, of the impugned judgment."
8. Allied Bank of Pakistan Ltd., Azad Kashmir Branches,Mirpur through Inam Elahi Azhar, EVP and Provincial Chief PHQ (Panjab) v. Income Tax Appellate Tribunal, AJK Council, Muzaffirabad and others 2000 PTD 2872 "Held, Where a provision was open to two reasonably possible interpretations, then, the interpretation which favours the taxpayer has to be adopted."
9. J.A. Textile Mills Ltd. v. CBR 1999 PTD 4138.
"Held in case of other laws are statute which infringe upon the rights of citizen or a party the apex court in re: Abdul Rehman v. Inspector General of Police, Lahore and 2 others (PLD 1995 SC 546) favoured a beneficial interpretation. The rule settled in re; CIT, East Pakistan v. Messrs Hossen Kasam Dada, Karachi (PLD 1961 SC 375) states that when two equally reasonable constructions are possible one strict and other beneficial then the latter should be preferred. The situation, thus, calls for employing a least two general principles. First that where an article or income can equally placed be placed under two heads of income or tariff then the one favourable to the tax payer should be adopted. Second when an item or income etc. expressly falls into one clause then its placing into another clause would be unjustified. All the moreso, when the other clause is subject to a higher rate of tax.
10.Rijaz (Pvt.) Ltd. v. Wealth Tax Officer Circle III Lahore 1996 PTD 489 "Held, It was observed that according to the well-accepted principles of interpretation the doubt has to be resolved in favour of the citizen. In these circumstances, the law-marker could clarify its intention by adding an explanation which cannot be legitimately objected to.
11.Commissioner Sales Tax v. Rizki Ink Company Ltd. 1991 PTD 783 "Held..... according to us, it two interpretations are possible then any interpretation which favours the assessee has to be preferred."
12. CIT, Central Zone B, Karachi v. Zakia Siddiqui 1989 PTD 135 "Held, It is well recognized principle of interpretation that if a fiscal statute is capable of two reasonable interpretations then the once which is favourable to the subject be adopted."
13.Highland Manufactures (Pak.) Ltd., v. CIT, (West), Karachi 1984 PTD 250 "Held, We would observed that the Income Tax provisions have to be strictly construed and should be interpreted in a manner which is more favourable to the subject. "
14.CIT v. Muhammad Kassim 2000 PTD 280 "Held, If there was any doubt or ambiguity in the language used in the statue which rendered same capable to several interpretations, then the interpretation favourable to the assessee or the citizen was to be adopted."
15.Searle Pakistan (Pvt.) Ltd., v. Government of Pakistan through Secretary Ministry of Finance and another PLD 1993 Kar.799.
"Held, There is no cavil about the settled principle of interpretation that taxing provisions should be strictly interpreted and the benefit of ambiguity, if any, must go the subject.
16.Dreamland Cinema, Multan v. CIT, Lahore PLD 1977 Lah. 292 "Held, Where two equally reasonable constructions are possible, one strict and the other beneficial to the assessee, the latter should be preferred in a taxing statute."
17.Hari Kirshana Das v. CIT, UP [5 ITC 275 (Allahabad)] "Held, The Income Tax Act is a fiscal enactment and in the case of an ambiguity, it is to be construed by the well-known principle in favour of the subject and not against the subject."
18.Rower & Co. v. The Secretary of State of India [1 ITC 161 (Burma)] "Held, In Finance Act, 1894 and Studdert, in re (1990) 2 Ir. R. 400 at p. 410] Fitzgibbon L.J said: "The benefit of the doubt is the right to the subject".
19.Crown Bus Service Ltd, Lahore v. CBR and others 1976 PTD 321 "Held, It is well settled that courts should follow that construction of law which does not lead to startling results or destructive ends."
20.Sundar Das v. Collector of Gujrat [1 ITC 189 (Lahore.)] readwith Secy. to Commr. Salt v.
Ramanathan Chetti, minor by guardian[l ITC 37 (Mardras)
"In Partington v. Attorney-General [(1869) 4 E.G.I App. H.L. 100], Lord Cairns stated the rule thus "Held, No tax can be imposed except by words which are clear and the benefit of the doubt is the right of the subject [per Lord Justice FitzGibbon in re Finance Act, 1894 and studdert [(1900) 2 Ir. R.
400], and the Court is not entitled to substitute for express words or an irresistible inference a process of guess-work, however subtle the reasoning or ingenious the marshalling of facts by which such a process is supported. If the person sought to be taxed comes within the latter of the law he must be taxed, however great the hardship may appear to the judicial mind to be. On the other hand if Crown seeking to recover the tax cannot bring the subject within the letter of the law, the subject is free, however apparently within the spirit of the law the case might otherwise appear to be. In other words, if there be admissible, in any statute, what is called an equitable construction, certainly such a construction is not admissible in a taxing statue, where you can simply adhere to the words of the statute."
21.In Coltness Iron Company v. Black [(1881) 6 App. Cas. 315] Lord Blackburn stated the same rule somewhat differently. The noble Lord said: "Held, No tax can be imposed on the subject without words in an Act of Parliament clearly showing an intention to lay a burden on him. But when that intention is sufficiently shown it is not open to speculate on what would be the fairest and most equitable mode of leying that tax."
22.Secretary of State v. Seth Khemchand Thaoomal [1 ITC 26 (Sindh)] "Held, As, observed in Maxwell on the Interpretation of Statutes, 4th Ed., page 429: Statutes, which impose pecuniary, burden, are subject to the rule of strict construction. It is a well-settled rule of law that the charges upon the subject must be imposed by clear and unambiguous languages, because in some degree they operate as penalties."
Before parting with these appeals, we may observe cardinal principle of interpretation of taxing statutes that if there are two consist rational/interpretation, the court should not adopt such construction which would lead to an absurdity. The fiscal provision of a statute is to be construed liberally in favour of taxpayer and in case of any substantial, doubt the same is to be resolved in favour of the taxpayer. If the language used in a statute is capable of two constructions, one which is consistent with good sense and fairness and the other which would make its operation unduly oppressive, unjust or unreasonable, or which would lead or strange, inconsistent results or otherwise introduce and element of bewildering uncertainly and practical inconvenience in the working of the statute, the court is to choose the former. When the state is inclined to give some benefit to a taxpayer the terms of provisions of the policy J should be interpreted in a liberal manner and with an intention to see that the purpose for which the policy is framed is fulfilled and the beneficiary is helped. The interpretation must not be such which would frustrate the object of the policy. The superior courts have held that the interpretation that had been consistently followed by superior appellate fora or by department and which had become a long standing practice, had almost acquired force of law and such practice, could not be lightly departed. Where department practice had followed a particular course in implementation of rules, whether right or wrong it would be extremely unfair to make a departure from it. It is very much interesting to take not of the following golden words of Lord Denning in Seaford Court Estates v. Asher.(1949)2 ALL ER 155, 164:-- "When a defect appears to Judge cannot simply fold his hands and blame the draftsman. He must set to work on the constructive task of finding the intention of Parliament and then he must supplement the written word so as to give force and life' to the intention of the legislature. A judge should ask himself the question how, if the makers of the Act had themselves come across this ruck in the texture of it, they would have straightened it out? He must then do as they would have done. A judge must not alter the material of which the Act is woven, but he can and should iron out the creases."
26. Consequently, the Wealth Tax Assessment for the charge years mentioned sura, could not be re-opened/revised by the IAC under section 17-B of the Wealth Tax Act, 1963, therefore, the same are liable to be annulled and that of the DCIR passed ordered under sections 23/ 16(3) of the Wealth Tax Act, 1963 are hereby restored.
27. All the appeals are hereby allowed.