MUHAIVIMAD JAWED ZAKARIA, JUDI CIAL MEMBER.-- By this consolidated order , we intend to dispose of above titled appeals filed by the appellant/taxpayer against the impugned order No. 29 passed u/s. 122(1)/122(5) for the Tax Year 2015, Order No. 05 dated 9.11.2018 passed u/s. 122(1)122/(5) for the Tax Year 2016 and Order Nos. 80 & 81 passed u/s. 170(4) of the Income Tax Ordinance, 2001 for the Tax Years 2015 and 2016 passed by the learned CIR(Appeals-IV), Karachi.
First we take up the appeals filed against orders passed u/s. 122 (1)/122(5) of the Income Tax Ordinance, 2001.
Appeals against order u/s. 122 (1)/122(5)
2. The appeals for both the tax year 2015 and tax year 2016 are against the order under section 122(1)/122(1)(5) and grounds of appeal are identical, as such, the same are decided by this combin ed order . Similarly the remaining two appeals are against the order rejecting the refund of the appellant as such are consequential in nature.
FACTS
3. Brief facts of the case are that for the tax years 2015 and 2016, the appellant had filed normal return of income under section 114 of Income Tax Ordinance claiming the status as that of "manufacturer ". The Return so filed deemed to be order under section 120 of Income Tax Ordinance. The Zonal CIR selected the cases for both the years for audit under section 177 of Income Tax Ordinance. Required details were filed and after examining the details/documents notice u/s. 122(9) was issued confronting various issues. The main issue confronted is that the tax-payer is not an "industrial undertaking " within the meaning of section 2(29)(c) of Income Tax Ordinance, 2001 and that the tax paid at import stage under section 148 is full and final discharge of tax liability . The reply .to the notice under section 122(9) was furnishe d, however the same was not found convincing as such the orders were passed under section 122(1)1(5) of Income Tax Ordinance and the appellant was assigned the status of commercial importer as against the manu facturer and the tax paid u/s. 148 at Custom stage was treated as full and final discharge of tax liability . Besides the additions were also made under section 111(1)(b) of Income Tax Ordinance 2001 in both the years. Aggrieved by the orders, appeals were preferred to the CIR(A) and the learned CIR(A) remanded the case by following various decisions of the superior appellate fora. Aggrieved by the orders of the CIR(A). Hence these appeals.
4. On the date of hearing Mr. Muhammad Mehtab Khan Advocate attended as AR while the department was represented by Mrs. Maryam Habib as DR .
Analysis and discussions
5. The learned AR assailed the order of the learned CIR (A) both on law and facts and contended that the order of the learned CIR (A) was factually and legally not maintainable and hence prayed that this Court may decide the appeals both on law and on facts. The arguments on the law are summarized as under: After audit proceedings the OIR was required to issue notice under section 177(6) requiring explanation/clarification on the issues detected in audit proceedings. Case-law on the issue reported as 2015-PTD-1242 and un-reported case in the case of A.O. Clinic bearing ITA No. 867/KB/2017 dated 19.09.2018 [(NOW reported as (2019) 120 Tax 125 (T rib)] referred.
The order is without jurisdiction as nb notice under section 122(1)(5) of the Income Tax Ordinance was issued for assuming jurisdiction as provided in section 122(1)(5) of the Ordinance. The mandatory requirements of section 122(5) and clauses (i), (ii), (iii) of section 122(5) have not been fulfilled as has been held in the above-referred cases. The mandatory notice in terms of section 122(5) read with section 122(8) pointing out any definite information of concealment has never been given. DCIR failed to fulfill prerequisite requirement under section 122(5) and has not brought on record " definite information ".
No prescribed notice in terms of Rule 68 required to be issued for amendment was not issued.
The selection of the case for audit and conducting audit in itself does not mean amendment of assessment.
The order has been passed under section 122(1) without invoking the provisions of section (5) or section (5A) of the Ordinance. The provisions of sub-section 122(1) are mother sub-section while the other provisions are subsidiary and in support he referred the case-laws reported as 2008-PTD-2006 and 2009- P-FD-1067.
That for making addition under section 111 no specific/independent valid notice under section 111 was issued as has been held by the Hon'ble High Courts of Sindh and Lahore in the cases reported as 2017-PTD-1839 and 2019- PTD1825 and catena of the judgment of this appellate forum in respect of addition under section 111. The learned AR argued that the provisions of section 1 11(1)(b) are not applicable on unexplained liabilities.
That the learned CIR(A) was not justified to remand back to the OIR when the CIR(A) himself satisfied that no specific notice for addition u/s. 111 were issued and that the mandatory provisions have been violated and binding decision reported as 2017-PTD-1830 has been ignored.
That the learned CIR(A) was not justified to ignore the decision on the issue of assigning status of the appellant to Commercial importers as against the manufacturer when the issue has already been settled that mixing, blending, gridding, cutting, crushing, flavoring, packing of tea manufacturing."
6. On facts the learned AR argued that the appellant falls within the definition of "Industrial undertaking" as provided in section 2(29)(c) of Income Tax Ordinance as the appellant fulfills the criteria of being an industrial undertaking as provided in the provision of law i.e. (i) appellant employs more than 30 persons and is engaged in (ii) manufacture of goods and the raw material used in process is substantially changes the original condition. The AR argued that the word "manufacture has not been defined in section 2 of the Ordinance however the same word has been defined in section 153(7)(iv) of the Ordinance to mean the person engaged in the production or manufacturing of goods which includes an article singly or in combination with other articles, material, components, is either converted into another distinct article or product is so changed, transferred or reshaped that it become s capable of being put to use differently or distinctly; or a process of-assembling, mixing, cutting or preparation of goods in any other manner ;
7. Elaborating the arguments the learned AR argued that different types of TEA LEAVES are imported from different countries. The reason of import from different countries is that each country's tea has different taste, fragrance and flavor . After its import the leaves are dried, crushed, mixed, grinded, blended, colored, flavored and packed into various sizes and then it is sold in the market under the brand name of PURL Tea. The process of drying, crushing, mixing, blending, cutting flavoring, packing in different shape/size and tagged and name amount to manufacturing as provided in section 153(7)(iv) of the Income Tax Ordinance. This issue has already been settled in the case reported as 81- TAX-34 and followed in other cases. The case-laws bearing ITA Nos.
1034/KB/2013, 1035/KB/2013, 1036/KB/2013 and ITA No 1037/K13/2013 decided on 18.06.2014 was also referred. The learned AR also argued that in parallel case engaged in the same business in the name of SPACTCOS the department itself accepted that the process of mixing, blending, cutting, flavoring of tea is "Manufacturing" as such the order in appeal is violation of Article 25A of the Constitution as has been held in the case reported as 2014-PTD-709. The AR also referred to a clarification issued by the FBR bearing C. No. 1(13)WHT/2008, dated 17th Nov., 2011 wherein it was clarified that import of tea leaves is to be treated as import of raw material by an industrial establishment and that the instructions of the Board are binding on the department under section 214 of Income Tax Ordinance.
8. In respect of addition under section 111 the learned AR argued that the provisions of section 111(1)(b) are not applicable on liabilities.
The addition under section 1 11 has been made in two years as under: TAX YEAR 2015 TAX YEAR 2016 Addition under section 1 11(1)
(b) (Dif ference in stock)3,545,737 1.188.024 Addition under section 1 11(1)
(b) (On account of foreign liabilities)3,190,000 3,190,000 Addition under section 1 11(1)
(b) (unexplained local liabilities)3,240,000 135,480,987 Addition under section 1 11(1)
(b) (brought forward accumulated wealth)8,391,458 73,919,512 Addition under section 1 11(1)
(b) (inflow income in wealth statement) 1,840,000 The liabilities, if unexplained, can be added under section 111(1)(a) of Income Tax Ordinance. Similarly , the brought forward wealth for the preceding year can be added in preceding year and not in the year under appeal. The expenses incurred attract the provisions of section 111(1)(c) of Income Tax Ordinance. In any way, the issuance of independent/specific notice asking for the explanation was never issued rendering the addition liable to be deleted in both the years.
9. The learned DR vehemently supported the order of the authorities below however the case-laws referred hereinabove could not be distinguished rebutted by him.
Finding/opinion of the Court
10. The arguments have been heard and orders of authorities below and record perused. Our findings on law and on facts are as under: 11, The order under section 122(1)1(5) of the Ordinance, suffers from number of legal infirmities and is totally an illegal order which does not meet the legal requirements stipulated in section 214C R/W Section 177 as well as requirements of Section 177(6) and Section 122(9) of the Ordinance. Sub-rules (4) & (5) of Rule 231F of the Income Tax Rules, 2002 (the 'Rules'), in particular , stipulate the essential requirements of conducting audit of the affairs of the taxpayers under section 214C of the Ordinance, which read as under: "231F .--- Selection and conduct of audit.--- (1) This rule shall apply to selection of cases for audit by the FBR under section 2140 of the Income T ax Ordinance, 2001 (XLIX of 2001)
(4) On completion of examination of books of accounts, data or information under this rule the discrepancies, if found, shall be intimated to the taxpayer for obtaining taxpayers" explanation, in the form of audit report, seeking taxpayer's explanation on these points.
(5) Explanations of the Taxpayer , where found not acceptable, shall be intimated to the taxpayer , through a notice under section 122(9 ) of the Income Tax Ordinance, 2001 about the amendment in assessment alongwith the rationale or basis of such amendment and necessary amendment in assessment order shall be #assed under section 122 o the said Ordinance after affording adequate opportunity of hearing to the taxpayer ." (Emphasis Supplied)
12. There is no denying the fact that the OIR has not issued notices under section 177(6) of the Income Tax Ordinance which is requirement of law . The provisions of section 177(6) are reproduced hereunder: 177(6) After completion of the audit the Commissioner may, if considered neces sary, after obtaining taxpayer's explanation on all the issues raised in the audit, amend the assessment under sub-section (1) or sub-section (4) of section 122, as the case may be."
The above provisions have already been settled by the Division Bench of this Tribunal in numbers of Judgments. If any authorities are needed one may easily place reliance on following: 2015-PTD-1242
34. A bare reading of the above sub-section (6) quoted supra, clearly lays down firstly that is obligatory upon the CIR/ DCIR/OIR that after formulation of audit report audit observation/objections/charge-sheet, he ought to first confront the same to the taxpayers the contents of the Report on all the issues. Secondly , after considering the explanation of the taxpayers, if he considers necessary that the same is required to be amended on the basis of definite information then he may invoke sub-section of Section 122 for acquiring jurisdiction to amend the order under sub-section (4) read with sub-section (5) as the case may be. However , the DCIR has not followed the requirement of law in letter and spirit and passed the order under section 122(1), 122(5) of the Income Tax Ordinance, 2001 without confronting the Taxpayer the contents of the audit report/charge-sheet before invoking the amending assessment order under section 122(1) read with sub-sections (4), (5) and clauses (0, (ii) & (iii) of Section 122(5) of Income Tax Ordinance, 2001 or even before the issuance of notice under section 122(9) of the Income Tax Ordinance, 2001. Therefore, assessment in this cases has been framed in total ignorance of the law and in violation of the prescribed procedure and legal requirement. The CIR/DCIR/OIR, in total oblivion of the procedure has been made for the amended assessment under the provisions of section 122(1) in continuation to the proceedings of audit under sections 177, 122(1) and 122(5). In our opinion the fact that the order has been amended under section 122 should be the point of favour of selecting a case for audit instead of being, treated as an obstacle in the path of selection of case for audit because on the basis of amendment of an order it can be safely assumed that the return which has been converted into assessment order cannot be relied upon.
35. The audit proceeding under section 177 is only a procedure to find out some defects in the accounts and to obtain information to further enter into the jurisdiction under section 122(1) for making an amended assessment after acquiring authority under section 122(5) on the basis of "definite information". We may further observe that for all practical purposes S. 177 of the Income Tax Ordinance, 2001 was a just process to reach to conclusion as to from where the CIR/OIR/DCIR/assessing officer could further modify an already assessed income for which law had very clearly provided the provisions in terms of Section 122(5) of the Income T ax Ordinance, 2001.
Another unreported case cited by the learned counsel of the taxpayer ,,bearin g ITA No 867/KB/2017 dated 18.09.2018 of A.O. Clinic (now reported) as referred to above it has been held as under: [(2019) 120 T AX 125(T rib.)]
13. We are of the considered opinion that Section 177 does not in itself provide any power or absolute empowerment to modify assessment or re-determine the income of taxpayer . In this regard the key point which is to be kept in mind is that it is not a return of income which is being processed by the CIR/DCIR/OIR, selecting and thereafter conducting/doing audit. He is dealing an assessment order which by process of law has acquired a sanctity . The finalized assessment, therefore, cannot just be moded or disturbed in continuation of the proceedings of audit under section.
14. The selection of audit or even conduc ting/doing of audit does not mean or include an assessment or amended assessment/alteration or odification of assessment. The selection of audit and thereafter conducting of audit proceeding is just process and audit authority before invoking provision of section 122 for amendment have to frame charge-sheet audit, audit observation/audit qualfication/audit report and the same ought to be communicated to the taxpayer for rebuttal and the explan ation/reply/assertion contention//objections of taxpayer must be obtained and considered before proceeding for invoking section 122. Only thereafter assessment may be amended u/s. 122.
The mere (firstly) issuance of notice u/s. 122(9) read with Section 122(1) after selection but before conducting audit of the taxpayer is not complete requirement of law. Department first has to reject the objection/rebuttal of taxpayer on audit report then require to acquire jurisdiction u/s. 122(9) and then 122(5). However , this having not been done so. We may conclude this issue that the CIR(OIR after selection and conducting audit ought in every case to be able to give the, taxpayer all the charges/ objection/issues raised in audit against taxpayer such as to enable him to answer/explain them before invoking provisions of section 122 and after obtaining and considering explanation of taxpayer on audit objections, only there after, if the CIR/OIR may consider necessary . The CIR/DCIR/OIR may amend the assessment u/s. 122(1)(4)(5) after fulfilling all requirements of law subject to definite information and fulfilment of further condition of clause N, (ii) or (iii) of sub-section (5) of Section 122. After the above two decisions the Legislators as appear has modified the provisions of section 177(6) by Finance Act, 2019 to read as under: "177(6) After completion of the audit, the Commissioner shall after obtaining taxpayers' explanation on all the issues raised in the audit issue an audit report containing audit observations and findings."
The word "may" was substituted by the word "shall" which mean the issuance o notice become compulsorily .
15. In respect of assumption of jurisdiction under section 122(1)(5) of Income Tax Ordinances the law is very well- settled that once the audit proceedings are concluded and the deemed order is required to be amended then the assumption of jurisdiction under section 122(5) is a pre-condition pointing out clauses (i), (ii), (iii) as the case may be pointing out the definite information in possession in terms of section 122(5) of the Ordinance. However , perusal of the order shows that no such notice(s ) was given as such the orders are tainted with illegality without lawful jurisdiction.
16. No definite information has been confronted which is pre-condition for amendment of assessment. The "definite information has been finally adjudicated in the following reported case-laws."
2013-PTD-884 (Lahore High Court)
"The term "definite information" in section 122(5) of the Ordinance is not just any information but definite enough to satisfy the concern officer that income chargeable to tax of an assessee has escaped assessment or total income of an assessee has been under assessed, etc. "definite: means indisputable, known for certain, explicitly precise, clearly defined, leaving nothing to implication, established beyond doubt and cut and dried. Definite information is, therefore, that select information which falls within the restrictive meaning of the word "definite" explained above.
The law also provides that definite information must be acquired from audit or otherwise. Applying the interpretative tool/doctrine of ejusdem generis which literally . means"of the same kind or class" and the doctrine provides that where general words follow an enumeration of two or more things, they apply only to persons or things of the same general kind or class speccally mentioned the word "otherwise" appearing next to the word "audit" in section 122(5) of the Ordinance on the basis of the above doctrine means a methodology akin or similar to audit where some determined final, certain indisputable, calculated information is picked up from any available record of the assessee. "Otherwise," therefore, does not mean putting information through further process of cakulation by the department. The word "acquire" used in section 122(5) of the Ordinance which litethlly means to "gain possession of in the present context connotes that the information already exists and has to be picked up from the records or documents. This acquisition provides no margin for incomplete, imprecise and in exact information to be completed through further calculation or processing as that would not be acquiring information but analyzing it. Reading of Section 122(5) of the Ordinance, therefore, shows that information in a definite, final and conclusive form must already exist in some document or record at the time of acquisition. Any information which is incomplete or requires further processing fall outside the domain of definite information and can best pass for a departmental opinion, judgment, guesstimate, approximation or estimate.
2007-PTD-2601 "15. In most of the cases the Courts try to implement the provisions of law and avoid declaring it as redundant. It is obviously under the spirit that laws are always made for implementation and not to just remain as part of the statute without being of any benefit to the public-at-large. However , this tribunal has in many cases not allowed issuance of notices in slipshod manner without indicating the actual reason of issuance thereof. The Hon'ble Lahore High Court has even gone to hold that issuance of a notice under section 65 without indicating the reason or issuance of notice in terms of sub-section (1), (2) or (3) or (a), (b) or (c) of the said section to be as illegal. In this notice under section 62 is statedly issued which provision does not exist in the scheme of new law. There is 'a provision under the title "amendment of assessment" and the same is 122(1) and all other provisions are subject to the said section 122. In the earlier part of our discussion we have already held that section 122(1) is the mother provision while all other sub-sections are helping and the same determine the fitness of the amendment of the assessment to be made under section 122(1). The Assessing Officer in this case has not even bothered to mention the subsection in its notice. Hence even if one is confident that section 122 could be enough for acquiring jurisdiction, non-mentioning of the other provision in terms of sub-section (5) or sub-section (5) is fatal as the parameters for each of the said provisions are entirely different from the other . Besides, erroneousness of the assessment for determining prejudice to the interest of revenue in a deemed assessment order shall also need a good deal of dilation and discussion. There are certain more questi ons which would require answer in a case like this. The Assessing Officer has proceeded to make the assessment under section 120. The provision of section 122 which has been titled as an amendment of assessments, provides full authority for making an assessme nt. These provisions in fact are para-materia to the assessments under section 62 as well as 63 in addition to 65 and 66(A) etc. Section 120 does not come into picture for amendment of an assessment. Its application is only upto the deemed assessment order and has no extension beyond the said language."
Other judgments on definite information Word "Definite Information"---defined through judicial rulings Based upon deferent judgments of the superior courts, the Lahore High Court has held that:
(i) And assessment cannot be reopened or amended on the basis of every information for the reason that every information is not a "definite information: "Definite information" cannot be given a universal meaning. It has to be construed in each case.
(iii) The expression "definite information" means more than mere material which may cause a reasonable belief.
There must be definite and direct information without there being any further need to acquire further material to support it. Where the department has to rely upon further reasoning or inquiry to clothe there information with credibility , it is not definite information.
(iv) Where a taxpayer has disclosed all the material facts without any concealment, it the absence of discovery of any new facts which can be treated as "definite information" the assessment cannot be amended.
(v) The expression "definite information" includes factual information as well as information about the existence of binding judgment of a competent Court of law or forum. However , this does not cover a case where after framing assessment consciously , the Assessing Authorities realize that any provision of law has been ignored or not applied or misapplied.
(vi) Any interpretation of provisions of law by a functionary which is not charged with the duty/function to interpret such provision judicially is not "definite information". Thus, a circular issued by the Board of Revenue whereby it interprets any legal provision cannot be termed as "definite information".
(vii) A different interpretation of legal provision or deriving a different information from a given set of facts cannot be reckoned as "definite information". It is merely a change of opinion. CIR vs. Sika Paint Industries 2018 PTD 749 (LHC).
What is not definite information?
This Court examined the above argumen t in the Commissioner Inland Revenue v. Messrs Sika Paint Industries"
(2017 LHC 1979 (sic) and observed that what the law prohibits is a roving inquiry into the affairs of a taxpayer . It excludes from the domain of "definite information" any incomplete information that requires further inquiry into the affairs of the taxpayer before the Department can reach a conclusion or, as the Hon'ble Supreme Court said in the Chappal Builders case (supra), "to cloth their information with credibility". C77 vs. Messrs Sefam (Pvt.) Ltd. 2017 PTD 2162 (LHC). Debatable information could not be held to be "definite information". [2004 PTD 9831 Assessment order could not be amended under S. 122 (1) of the Income Tax Ordinance, 2001 on the basis of information the existence of which has not been undoubtedly established. 2011 PTD (T rib.) 187 . Definition should be beyond any doubt.
Whereas the word definite carries inter allia manning, defined having distinct limited fixed, exact, clear , bounded, every information cannot be treated as the basis for reopening of the assessment, but the information should be of the nature which should qualify , as a definite information. 1993 PTD 766=1993 SCMR 1232 rel. in 2010 PTD (Trib.)
2162. No fishy inquiries--------- definite information sine qua non.
The Hon'ble Supreme Court in the case reported as 1993 SCMR 1108= 1993 PTD 1108 has held that "it was the duty of the department before re-opening a case of self-assessment, to be in possession of definite information regarding the department's assertion against -the assessee. The expression definite information, and similar other expression used in the above-noticed provisions or other related provisions agains t the assessee. The expression definite or other related provisions certai nly meant much more than mere material so as to cause a reasonable belief of even, such evidence which might lead to a definite belief. Unless there is definite direct information and there is no further need to put the said definite information to trial by putting in further supporting material the process of self-assessment could be reopened.
Doubtful: information is not definite information The tangible information and such proof that leads to the reason to believe could only be considered as a definite information. Any estimate gossip personal whims or surmises could not be termed as the definite information. The prefix of definite with suffix of information makes the term more strong. Any information which creates doubts or provides reason to suspect that the income has been concealed does not form a part of the term definite information 2010 PTD (T rib.) III.
Definite information mere guess, gossip or rumor - is not definite information.
The definite inforination should not be based on mere guess, gossip or rumor but it should be based on material evidence. 1993 PTD [SHC] 804.
Wrong or untrue statement/information is not definite information.
Term definite information has not been defined in the Income Fax Ordinance, 1979/2001 it will be assumed that the legislature intended to give ordinary dictionary meaning to it, whenever it is required to be dealt with. Word information when it is qualified with the word definite, would mean that the said information in all probabilities correct in all respect and therein no likelihood of it been wrong or untrue and there is no necessity to conduct probe to be satisfied about its exactness/correctness, and there is no chance of its being untrue" 2012 PTD (T rib.) 741 .
Definite information should be minifies from the show-cause notice.
It is a well-settled principle that amending provision under section 122(5) can be invoking only when an order passed by the Officer was found amenable on the basis of a definite information and that information should be manifest in the show-cause notice and not subsequently by a fishing enquiry . The main information officer had not to probe. The officer has to point out specific facts whether it was a sale proceeds. Muhammad Asif Dishad vs. CIR RT Multan 2015 PTD (T rib.) 2271.
Definite information any estimate, gossip personal whims or surmises cannot he termed as the definite information.
Any estimate, gossip, personal whims or surmises could not be termed as the definite information. Any information which creates doubts or provides reason to suspect that the income has been concealed does not form a part of the term "definite information".
Reliance in this regard may safely be placed on the decisions reported as 1993SCMR 1232 and 2010 PTD (Trib.)
122. Arrows Advertisting (Pvt.) Ltd, Lah. vs. CIR, Lahore 2016 PTD (T rib.)189 .)
13. As regards the addition made under section 1 11 of Income Tax Ordinance, 2001 it will be advantageous to reproduce the said provisions which read as under: "111. Unexplained income or assets. (1) Where:
(a) any amount is credited in a person's books of account;
(b) a person has made any in vestmentor is the owner of any money or valuable article; a person has incurred any expenditure; or
(d) any person has concealed income or furnished inaccurate particulars of income including.
(i) the suppression of any production, sales or any amount chargeable to tax; or
(ii) the suppression of any item of receipt liable to tax in whole or in part.
And the person offers no explanation about the nature and source of the amount credited or the investment, money , valuable article, or funds from which the expenditure was made suppression of any production, sales, any amount chargeable to tax and of any item of receipt liable to tax or the explanation offered by the person i>c tot in the Commissioners opinion, satisfactory the amount credited value of the investment, money value of the article or amount of expenditure suppressed amount of production sales or any amount chargeable to tax or of any item of receipt liable to tax shall be included in the person's income chargeable to tax.................
14. The above provisions have been settled in a number of decisions both by this Tribunal and by the Hon'ble Sindh and Lahore High Courts. For making addition u/s. 111 the OIR was required to issue specific and separate notice u/s. 111 asking for the explanation however no notice was issued rendering the addition liable to be deleted.
Mere confronting through notice u/s. 122(9) do not fulfill the legal requirement of section 111 as held by the learned ATIR in the case reported as 111- TAX-447(T rib), 2007-PTD-2319, 201 1-PTD-1242 and 2017-PTD-1839: Sindh High Court
9. From the bare perusal of the above statutory provisions, it is clear that the addition under section 111 of the Income Tax Ordinance, 2001 can be made, only if an opportunity is rovided to the taxpayer through specific notice, whereby the taxpayer is confronted with any the aforesaid eventuality as visualized under section 111 of the Income Tax Ordinance , 2001 whereas, if the taxpayer fails to offer any explanation about nature and source of the amount credited or the investment made money or valuable article, or funds from which the expenditure was made; only then, such addition can be made in the income of taxpayer . In the instant case it appears that no notice under section 111 of the Income Tax Ordinance was issued to the taxpayer , nor the taxpayer was specifically confronted with such proposed addition by the taxation officer so that the taxpayer could have offered some explanation in this regard In view of above undisputed facts the addition made by the taxation officer under section 111 in the instant matter appears to be without any lawful authority .
2019-PTD-1825 (Lahore High Court)
"8. Perusal of the provisions of section 111 of the Ordinance of 2001 shows that if the instances/categories of unexplained income and assets, mentioned therein come to the knowledge of the Commissioner , he is not obliged to form an opinion on the basis of information so gathered rather is requited to issue notice to the taxpayer seeking explanation, confronting the information collected that its case comes within the head(s) specified in sub-section (1). Though word "notice" is not specifically mentioned in the said provisions of law but words "....the person offers no explanation...." and or the explanation offered by the person is not, in the Commissioner's opinion, satisfactory ...." clearly suggest that for an explanation to be offered by the person, he must have been issued a notice. After said notice and failure on the part of taxpayer to offer satisfactory explanation, such addition can be made in the income of the taxpayer . For an explanation to be offered by a registe red person, he must have been issued a notice without which no explanation could be offered, within the contemplation of Section 111 of the Ordinance of 2001.
10. Non-issuance of separate notice under Section 111 has caused prejudice to respondent-taxpayer as substantial compliance of said provisions of law has not been made . The ordinary meaning of "Notice" as referred to by learned Legal Advisors, with reference to various dictionaries, are not applicable to the issue in hand. Non- issuannce of proper notice in order to invoke provisions of Section 111 cannot be taken lightly and its non- compliance may lead to render the proceedings not in conformity with or according to the intent and purpose of law.
In the instant case, neither notice under section 111 of the Ordinance of 2001 has been issued to the taxpayer nor was the taxpayer specifically confronted with such proposed addition so that the taxpayer could have advances some explanation in this regard. Thus impugned addition appears to be without any lawful authority .
2014 PTD (T rib.) 2085.
We are of the considered view that addition under section 111(1)(b) cannot be made without making inquiry . Firstly , the assessing officer will have to ask the taxpayer to submit explanation regarding nature and source of amount and after considering the explanation, then addition under Section 111(1)(b) will be made. Asking for explanation means conducting of inquiry which is beyond the scope of section 122(5A). Hence, additions under section 111(1)
(b) for tax years 1996, 1997, are ordered to be deleted.
15. We further rely upon the case authored by one of the Member of this D.B. and reported as Dr. Muhammad Azeem Almani 2015 PTD (T rib.) 1242 wherein it has been observed as under: "36. Each provision has its own eventuality The DCIR has not given independent separate notice or disclosed his mind under separate notice which clause he has made addition. Each clause has different eventuality . Hence the aforesaid addition under section 111(1) are without filling the legal requirement of said clauses is illegal, unwarranted and uncalled for, ab initio void. That in numerous cases it has been held by the higher appellate courts that specific, separate and independent mandatory notice under section 111(1) of the Income Tax Ordinance, 2001 specifying and invoking a relevant sub-section and particular clauses be issued prior to making addition. However in the instant case no specific, separate and independent 'mandatory notice under section 111(1) of the Income Tax Ordinan ce, 2001 has been issued and served upon the appellant. Therefore the addition made under section 111(1) of Income Tax Ordinance, 2001 is unjust, unfair , illegal and liable to be annu lled. Reliance may be made on judgment of the Tribunal reported as 2012 PTD (Trib.) 312 whereby the learned Tribunal has cancelled the order passed under section 122(1) by the DCIR as statutory notice was not served upon the taxpayer .
45. Fatal defects in different additions under section 111. Addition made on account of suppressed sales was made without mentioning any relevant section or clause which action is not permissible under the law as the assessing authority has to mention the relevant charging provision under which he is going to proceed to make such addition.
(ii) Unless it could be owner of money or valuable article, no addition could be made under section 1 11(I) (b).
(iii) Even otherwise amendment under section 111 of Income Tax Ordinance, 2001 made by Finance Act, 2011 being a charging provision cannot be applied retrospectively hence addition merits deletion on this ground.
(iv) The issuance of a specific notice under section 111 is a pre-requisite for making addition under section 111(1).
Perusal of recorded reveals that no such notice was ever issued in the case which renders the whole proceedings for making such addition as void and illegal.
(v) We are not convinced with the conten tion of the learned DR that there is no need to issuance a specific notice under section 111 as the taxpayer has duly confronted through notice under section 122(9). The issue in hand has already been decided by the honourable Karachi High Court in the case reported as 2010 PTD 704 and by this Tribunal in the case reported as 2010 PTD (Trib.) 790 Ammar Steel Industry ,' Lahore vs. CIR Zone-IV , RTO, Lahore 2015 PTD (T rib.) 2042.
57. Addition under section 111 without specific notice. Addition made under section 111(c) witho ut issuance of specific notice under that section was not sustainable in the eye of law and deleted 2012 PTD (T rib.) 790 . ii. In numerous cases it has been held by the higher appellate courts that, specific, separate and independent mandatory notice under section 111(1) of the Income Tax Ordinance, 2001 specifying and invoking a relevant sub- section and particular clauses be issued prior to making addition. However , in the instant case no specific, separate and independent mandatory notice under section 111(1) of the Income Tax Ordinance, 2001 is unjust, unfair , illegal and liable to be annulled. CIR, R TO, Hyderabad vs. Dr . Muhammad Azeem Almani 2015 PTD (T rib.) 1242.
58. Addition under section 1 11 without specific and separate show-cause notice.
No separate notice u/s.' 111(c) was issued to the taxpayer , therefore, the addition made under section 111(1)(c) was not sustainable in the eye of law . The addition was deleted by the Appellate T ribunal. 2012 PTD (T rib.)790 .
59. Issuance of specific notice under section 1 11.
The question "Whether on facts and circumstances of the case the Learned ATIR was justified in adjudicating that for invocation of addition under section 111 of Income Tax Ordinance, 2001 show-cause notice under section 111 does not require issuance of any notice? Was answered in affirmative by the Sindh High Court in 2017 PTD 1839 for the following reason : Explanation (Contd.)
"4. From bare perusal of the above statutory provisions, it is clear that the addition under section 111 of the Income Tax Ordinance, 2001, can be made, only if an opportunity is provided to the taxpayer through specific Notice, whereby , the taxpayer is confronted with any of the aforesaid eventuality as _visualized under section 111 of the Income Tax Ordinance, 2001, where if the taxpayer fails to offer any explanation about nature and source of the amount credited or the investment made, money or valuable articles, or funds from which the expenditure was made only then, such addition can be made in the income or the taxpayer .
60. It is also observed with grave concern that addition under . section 111 have been made without issuing specific and separate notice under section 111 which is sine qua non and no addition under section 111 with specification of relevant clauses and sub-section of section 111 of the Ordinance, therefore, the additions made under section 111 also merits deletion on legal plane too. Imran Pipe Mills (Pvt.) Ltd. vs. CIR Zone-IV RTO 2019 PTD (Trib.) 4 Note: other issues discussedin this order were in respect of suppression of sales and suppress ion of purchases.
PTD 2019 LHC 1452 Separate specific notice requirement mandatory .
The question before the Court was: "Whether there is a need to issue a separate notice for addition u/s. 111 when the law only require that if the explanation offered by the taxpayer , is not satisfactory or no explanation is offered by the taxpayer , the unexplained income shall be included in the person's income chargeable under the head 'income from other sources' after confronting the taxpayer u/s. 122(9) of the Income T ax Ordinance, 2001?"
The Court answered in favour of the taxpayer and held that separate specific notice was necessary and observed that: "11. So far as argument of learned legal advisors of applicant department, with reference to the cases of Abdul Ghani and Zamindara Paper and Board Mills supra, that mere substance of notice is to be seen and mentioning of Section 111 with its all ingredients alongwith notice under section 122(9) read with Section 122(5A) fulfils the conditions, suffice it to say that law mandates the issuance of separate notice/explanation within the contemplation of Section 111, therefore , same Cannot be made redundant. CIR, TRO, Faisalabad vs. Faqir Hussain & another 2019 LHC 1452 ."
16. Even on facts the additions are not maintainable. In the Tax years 2015 and 2016 the appellant was issued under section 122(9) for making addition in dif ference in stock in trade to read as under: Tax Year 2015 "3. As per your income tax Return you have declared closing stock at Rs. 6,779,5 43 in the Trading account. The same is also declared in the balance sheet portion of your return at the same amount but sales tax record shown your closing stock at Rs. 10,325,280/-. You are required to explain to why the different amount of stock at Rs.
354,737/- may not be amended to your declared income u/s. 1 11(1)(b).
17. The addition has been made on the basis that in Income Tax Return the stock has been shown at higher side while in the Sales Tax Return the same has been shown at lower side. The addition u/s. 11 I can be made when the appellant/tax-payer has no source of finance. In the case under appeal the source of financing the import has not been doubted as such no addition can be made and that the provisions of section 111(1)(b) are not applicable as such the addition shall stand deleted.
18. The next addition is in respect of trading liabilities of Rs. 3,190,000/-. The perusal of the order shows that this addition was not confronted, Any additio n which is not a part of show-cause notice cannot be sustained. Even otherwise the liabilities if unexplained attract the provisions of section 111(1)(a) and not section 111(1)(6), the addition purely baseless shall stand deleted.
19. In respect of addition of Rs. 3,240,828/- the same was confronted in the following words: "5. You have declared other liabilities at Rs. 3,240,828. You are required to provide details of the creditors alongwith their postal addresses and phone number to vary the same. Please note that if the same has not been provided, the amount shall be treated as your fake liabilities and the same shall he added in your income u/s. 111(1)(b) of the Income T ax Ordinance, 2001."
20. The notice was responded by the AR of the appellant that all the liabilities are in respect of foreign imports payable. The entire imports has been accepted as such there is no justification for making addition which is hereby deleted more particularly when the provisions of section 1 1 I(1)(b) are not applicable on liabilities.
21. In respect of addition of brought forward wealth of previous year amounting to Rs. 8.391,458/-. As per OIR own version the same has been brought forward from preceding year i.e. 30.6.2014 as such addition if any can be made in Tax year 2014 and not in the year under appeal. More particularly when the value of opening stock, debtors, closing bank balance etc. which are part of Balance sheet have been accepted. The addition of prior year wealth cannot be made in the year under appeal more partic'ularly when the appellant/taxpayer is an old assessee duly registered under the Sales Tax and Income Tax. The addition as such stand deleted.
22. The addition u/s. 174(2) amounting to Rs. 1,188,024J- is without identifying any single party more particularly when the claim of expenses under the head is Rs. 5,686,440/- and on filing of details the claim vas partially accepted. The addition without identifying the names cannot be sustained which shall now stand deleted more particularly the OIR has computed the income of the appellant under PTR/FTE regime.
23. The last addition of Rs. 1,840,000 u/s. 111(1)(a) pertains to inflow appearing in the Wealth statement. The said amount has been offered for taxation. Even otherwise the same is not "liability" attracting provisions of section 111(1)(a). Even if it is not offered for tax then the same could be taxed under section 111(1)(b) being investment and owner of valuable article. Since the addition is illegal the same shall stand deleted.
24. In the Tax year 2016 the addition on account of liabilities Rs. 3,190,000/- and of Rs. 135,480,987 has been made u/s. 111(1)(b) and these provisions are not applicable under the said provisions. The liabilities are not the investment or the ownership of investment as such the addition on account of trade and other liabilities shall stand deleted. The liabilities remaining unexplained may be added u/s. 1 11(1)(a) strictly in accordance with law (if any).
25. The addition of brought forward wealth of previous year amounting to Rs. 8,391,458/- cannot be made in the appeal of tax year 2016. The case for the previous year 2015 was also audited, The addition of difference in stock in Income Tax and Sales Tax Returns has been made on the basis that in Income Tax Return the stock has been shown at higher side-while in the Sales Tax Return the same has been shown at lower side. The addition u/s. 111 can be made when the appellant/taxpayer has unexplained nature and source of finance. In the case under appeal the source of financing the import has not been doubted as such no addition can be made and that the provisions of section 11 1(1)(b) are not applicable as such the addition for addition of difference in stock, both opening and closing stock shall stand deleted. Perusal of the order shows that the addition on account of stock has also not been properly confronted and without confronting (discussed supra) no addition can be made which is hereby deleted.
26. The core issue of "industrial undertaking" has already been settled by' the learn ed ATIR in ITA No. 427/KB/2017 dated December 13, 2017 reported as 2018 PTD 1 188 (Trib.), wherein the ATIR held that: "13. We have heard both parties and find that the CIR (Appeals-I) has passed a very detail order considering the facts of the case of the appellant and the law we are reproducing some relevant text from the order which is as under: The above observations of the honourable Chief Commissioner in this case are very relevant and the learned Additional Commissioner was bound to distinguish the referred judgment of the division bench of the ATIR, Lahore in the case of Pyramid Gas and the above judgment of the ATIR and when he chose to overlook the entire judgment and the parallel case of Pyramid Gas, then this appeal is reduced to an "Open and Shut Case" because the learned ATIR has already decided the issue in favour of the appellant in the identical case of Pyramid Gas which is on all fours on facts as well as in law. Given above position, I am bound by law to follow the decision of the learned ATIR in the case of Pyramid Gas being on all fours both on facts and law. There is no scope for any fact finding and re-determining the status of the appellant as an industrial undertaking or a manufacturer as the department has itself accepted that it is an identical case as that of Pyramid Gas on facts and law. The learned ATIR Lahore in this case has already elaborately determined that the case of M/s. Pyramia Gas qualifies for exemption under section 148 being an industrial undertaking.
On the merits also the appellant has shown to the learned Additional Commissioner as well as before me that it imports bulk LPG mix as raw material for self-consumption at a different sea worthy pressure and then at its plant in' Punjab, its pressure and composition is a changed to the required standard for commercial or domestic users by blending the high pressure butane which is imported by road from Taftan border in special bowsers. It is explained by the appellant that its consumers require high pressure LPG, i.e. more propane and less butane. However , the two LPG handling terminals in Karachi do not allow the import of LPG with higher propane content due to safety reasons, The appellant, therefore, is required to import LPG with higher propane content via land route through Taftan border . The appellant then passes the two different LPG it imports through its LPG handling, mixing, bottling and filling plant to form an LPG with the correct propane content and pressure. Colored photographs of the LPG plant showing different machines and equipment have also been produced which are placed on file. The appellant has shown that it qualifies all the conditions of being an industrial undertaking as envisaged under section 2(29)(c) of the Ordinance, 2001.
All the above facts have also been stated by the appellant under the penalty of perjury as a sworn testimony and signed documents before the honourable High Court of Sindh in the Suit No. 230 of 2017 filed by the appellant involving the same controversy . Such statements given under oath are presumed to be truthful or at least made in good faith in the absence of the contrary . Thus there is no reason to disapprove or disbelieve them.
It is also noted from the record that the appellant explained to the learned officer: about its plant in Muzaffargarh Punjab. But the learned officer has not discussed the same in the impugned order. The pictures produced before the honourable Sindh High Court as well as before me show that the plant is a large establishment. Considering the fact that LPG import of more than Rs. 5 billion has been made in the year, it is easy to understand that it is not a small industrial establishment that could handle such large quantity of high explosive gases and its blending and bottling etc. Apart from consuming electricity at more than Rs. 1 million through its installed electric meter reference number R-271572405671, Account No.27562405671019, bearing the appella nt's NTN and Sales Tax registration, the appellant also consumed diesel of more than Rs. 2.4 million during the year on running its 2 diesel generators, 125 KVA and 82 KVA in order to meet power outages.
As regards the issue if the appellant is a manufacturer or not, it is important to mention here that the law has restricted the adjustability of tax collected under section 148 of the Ordinance, 2001 'with the factum of being an "industrial undertaking". It is beside the point if a taxpayer is a manufacturer or not because the definition of "manufacturer" has teen provided in a limited scope under section 153(7) of the Ordinance, 2001 and cannot be generalized for application to adjustability of tax collected at import stage under section 148. Had this been the intent of the legislature, it would have provided the definition of manufacturer under the relevant clause of section 2 of the Ordinance, 2001 instead of section 153(7) ibid This proposition has also been accepted by the honourable Chief Commissioner in his order under section 122-B dated 17.01.2017, the relevant excerpt is reproduced as under: "It is also held further that definition of 'manufacturer' as prescribed under section 153(7) is not relevant in the instant situation. However on the factual plane, the petitioner is burdened with the task to prove that (a) its case qualifies as an 'industrial undertaking' and (b) its case fulfills the conditions specified in S.R.O. 717W/2014. "
Despite above legal position, the appe llant has been able to show that it squarely falls in the definition of manufacturer as provided under section 153(7) of the Ordinance, 2001 as well under the Sales T ax Act, 1990.
The thrust of the arguments of the learne d Additional Commissioner is that "substantial" change is not brought in the resultant output product of the appellant and hence it does not qualify to be an industrial undertaking as envisaged under section 2(29)(c) of the Ordinance, 2001. But in the referred judgment of the division bench of the honourable ATIR, Lahore in I.TA. No. 1130/LB/2016 in the identical case of Pyramid Gas, it has specifically dealt with this issue and in paras 8 to 16 reprod uced above has explained the entire process of manufacturing as well as how it qualifies as in industrial undertaking. For the sake of brevity it is not repeated here.
Given above position and the judgment of the division bench of the learned ATIR, Lahore in LTA. No. 1130/LB/2016 dated 13.06.2016 in the identical case of Pyramid Gas (Pvt.) Limited being on all fours on facts and law and this position has been accepted by the department, I am left with no option but to rule that the judgment of the ATIR is squarely applicable to the appellant. It is accordingly ordered that its status as an industrial undertaking be accepted by the department seeking guidance from the referred judgment of the ATIR, Lahore. Consequently , the return filed under the normal law will be accepted by the department subject to further amendment under section
122. As regards the charge of Super Tax, if the income of the appellant falls within the threshold of Super Tax the same shall be payable on the basis of normal return, otherwise not.
The appeal is disposed of in the manner and to extent as indicated above"
14. The judgment of DB of ATIR in case of Pyramid Gas (Pvt.) Ltd. I.T.A. No. 1130/LB/2016 where the ATIR has given a finding of fact that the activities/process the company to be manufacturing and the company to be an industrial undertaking as defined in section 2(29)(c) of the Income Tax Ordinance, 2001. We are reproducing some relevant text from the order as under:--- "9. The AR explained that while the Income Tax Ordinance, 2001 does not define the term, manufacturer with specific reference to section 2(29)(c) therefore definition given in other sections or sister acts have to be applied. It was claimed that the above definitions of manufacturer covers the activity of the appellant i.e. missing, blending, remarking, packing, repacking therefore it has to be treated as Industrial undertaking and exemption certificate rejected by the respondent was not only without jurisdiction but also against the correct appreciation of law .
10. It was asked from the AR that how the end product is different from the original material used. The AR explained that the original material is a raw form of LPG which cannot be used in its imported form. The process of diluting, mixing and filtering enables to make the end product useable. The AR of the taxpayer contended conversion of something not useable in its ordinary form to something useable or useable differently is also manufacturing.
11. It was explained that the imported LPG have density of propane 95% and butane 5% or in the ratio of 16%:.84% and even 60% : 70% ratio. The percentage of butane and propane changes from refinery to refinery .
The AR explained that however , LPG used in vehicle in Pakistan the users in food industry required 65% : 35% ratio, requirement of other users of different category is also different. Therefore in order to make the right percentage of butane/propane ratio, processing, mixing and diluting quarely qualifies as manufacturing.
12. The departmental representative supported the order and contended exemption certificate whether appealable or not has long been laid to rest through judgment cited as 2007 PTD 2088 (Trib). Therefore this contention is not acceptable.
13. The departmental representative also contended that the appellant has availed remedy of revision by the Chief Commissioner as provided under section 122B therefore remedy of appeal was not available with the appellant.
14. However , the AR explained that there is no bar in availing alternate or more than one remedies as provided under the law. He contended that section 122B, section 129 or section 131 has not put any bar on filing or admitting appeal in the event of availing remedy of revision.
15. The objection of the respondent department on the appeal of the appellant are found without merit. The learned DR was asked to distinguish the case from the judgment pronounced in 2007 PTD 2088 . Further , no provision of the Ordinance has been quoted which prohibits availing remedy of appeal when revision has been filed. Therefore objections on the acceptability of appeal are found without merit.
16. On the issues, we have heard the parties and perused the relevant sections. Since, the term "manufacturer" has not been defined in Income Tax Ordinance, 2001 with reference to an Industrial Undertaking as defined in section 2(29C), therefore; the definition is borrowed from allied Act i.e. the Sales Tax Act, 1990. The said definition squarely covers the activities of the appellant to be manufacturing. Further , employment of more than 10 persons and use of electrical energy has remained an uncontroverted fact therefore we hold that the respondent Commissioner was not justified to cancel the exemption certificate and we restore the same the C1R is directed to restore exemption certificate under section 148 and complete any formality in this regard within seven days of this letter .
17. Appeal is decided to the extent and manner indicated above.
15. We also note that the Chief Commiss ioner of Inland Revenue while passing, order under section 122B of the Income Tax Ordinance, 2001 has held "the order of the learned Tribunal in the case of the Pyramid Gads (Pvt.) Ltd. is on all fours with its case both in facts and law, where under identical circumstances the Division Bench of the Tribunal held that the taxpayer , who was engaged in similar line of business, qualified as "industrial undertaking".
16. We have perused sections 2(29)(c) and 153(7)(iv)(a)(b) of the Income Tax Ordinance; 2001. For better understanding of the matter the two provisions are reproduced below:--- Section 2(29)
"Industrial undertaking" means---
(a) An undertaking which is set up in Pakistan and which employ:
(i) Ten or more persons in Pakistan and involves the use of electrical energy or any other form of energy which is mechanically transmitted and is not generated by human or animal energy; or
(ii) Twenty or more persons in Pakistan and does not involve the use of electrical energy or any other form of energy which is mechanically transmitted and is not generated by human or animal energy; And which is engaged in --- The manufacture of goods or materials or the subjection of goods or materials to any process which substantially changes their original condition; or
(ii) Ship building; or
(iii) Generation, conversion, transmission of distribution of electrical energy or the supply of hydraulic power; or
(iv) The working of any mine, oil-well or any other source of mineral deposits; and
(b) Any other industrial undertaking which the Board may by notification in the Of ficial Gazette, specify , **section 153(7)(iv)(a)(b)
"Manufacture "or " produce "includes: "Manufacture 'for the purpose of the section means, a person who is engaged in production or manufacture of good, which includes:--
(a) any process in which an article singly or in combination with other articles, material, components, is either converted into other distinct article or produce is either so changed, transferred, or reshaped that it becomes capable of being put to use differently or distinctly; or
(b) A process of assembling, mixing, cutting or preparation of goods in any other manner The respondent has employed more than 10-employees and paid salaries to these employees, further use of electrical energy is also there and there is a detail process involved as explained by AR in detail and also confirmed from the photographs of the facility where processing as being carried out It is therefore held that respondent is meeting the statutory , requirements of these provisions.
17. We have gone through the order of learned Appellate Tribunal and observed CIR(A) and learned Appellate Tribunal and observed that finding of fact in the case of respondent and in the case of Pyramid Gas (Pvt.) Ltd is same both the tax-payers are engaged in similar business wherein a detail process is involved It is evident that it is not a case of commercial importer . The learned AR also submitted copies offacility where processing is being carried out which show tanks, pipelines, motors, pumps, various gauges and other equipment and machinery which is used for mixing of two types of gases, filing bottling according to various process es of safety . After going through the case-laws, texts of exemption certificate, order passed by Chief Commissioner Inland Revenue under section 122B of the Income Tax Ordinance, 2001, status of the respondent as manufacturer as mentioned in Tax Payer Online Verification from FBR website, relevant sections i.e. 2(29)(c), 153(7) of the Income Tax Ordinance, 2001 and 2(16) of the Sales Tax Act, 1990 and photographs of the facility where proce ssing is carried out we have no hesitation in holding that respondent is an industrial undertaking as per sections 2(29)(c) and 153(7)(iv)(a)(b) of the Income T ax. Ordinance, 2001 as it meets all prescribed conditions of these provisions.
18. The DR has also not been able to rebut the finding of the C11? (Appeals-1) and the arguments of the learned AR summarized above. The issues raised by the department have already been adjudicated and decided against the department in case of Pyramid Gas (Pvt.) Ltd. LTA. No 1130/LB/2016 which is on all fours to that of the respondent and the CIR (Appeals-I) has passed a very detail and well-reasoned order to which we agree and which has not been rebutted by DR. Considering the above appeal filed by the department is dismissed and the order of the CIR (Appeals-I) is confirmed and requires no interference.
19. The appeal is decided in the manner indicated above."
27. The issue of "Industrial Undertaking/Manufacturing" is not a new phenomenon it has always been accepted.
The same has also been decided by the Division Bench of this Tribunal in the case reported as 2000 PTD (Trib)
874 wherein the appellant was engaged in the same kind of business i.e. import of tea leaves. The Tribunal while assigning the status of assessee/taxpayer as that of the "manufacturer" held as under: "Assessee was a tea company importing dust and tea leaves--Assessee was mixing, blending and packing the tea and then selling the same in market--Assessing Officer assigned the assessee status of a manufacturer and allowed exemption under clause 118-E of Part I of Second Schedule of Income Tax Ordinance, 1979--Inspecting Additional Commissioner cancelled the assessment and charge the tax under S. 80-C of Income Tax Ordinance, 1979 as an importer on the ground that assessee was neither industrial undertaking nor engaged in the process of production and manufacturing as he was dealing in import and then sale of tea by mixing, blending and packing the same, thus, activities of the assessee were not covered by definition of manufac turing and production"---V alidity- Meaning of the word "manufacture" had been expanding with, the passage of time and had now expanded to the extent that mixing, blending, coloring and flavoring of tea amounted to manufacture because not only that required a, sophisticated process but an art and skill which was not very common-Assessee was an industrial undertaking and was engaged in the manufacture of finished tea out of imported raw leaves and dust after subjecting same to a manufacturing process. Exemplion allowed by the Assessing Officer was not interfered with but was declared to be in consonance with the view expressed by the Central Board of Revenue in Circular No. 4 of 1995, dated 15.7.1995---Orders of Inspecting Additio nal Commissioner under S.66-A were quashed and original orders of Assessing Officer were restored by the Appellate T ribunal."
(Empahsis by us)
28. We may further rely on the latest judgment reported as 2019 PTD (Trib) 2092 (M/s. Khyber Tea and Foods Company v. The Collector of Custom, Peshawar) wherein the Hon'ble Division Bench has eloquently defined the "Manufacture" assigned the process of assembling, mixing, cutting or preparation of goods in any other manner as manufacturing activity as under: "Section 2 (16) of sales T ax Act, 1990 provides as under:---- "Manufacture" or produce "includes:
(a) Any process in which an article singly or in combination with other articles, materials, components, is either converted into another distinct article or product is so changed, transformed or reshaped that it becomes capable of being put to use defiantly or distinctly and includes any process incidences any process incidental or ancillary to the completion of a manufactured product;
(b) Process of printing, publishing, lithography and engraving; and
(c) Process and operations of assembling, mixing cutting, diluting, bottling, packaging, repacking or preparation of goods in any other manner .
Section 2(17) of Sales T ax Act, 1990 provided as under: "Manufacturing" or producer means a person who engages, whether exclusively or not, in the production or manufacturer of goods whether Or not the raw material of which the goods are produced or manufactured are owned by him, and shall include:
(a) a person who by any process of operation assembles, mixes, cuts, dilutes, bottles, pages repackages, or reapers good by any other manner;
(b) an assignee or trustee in bankruptcy , liquidator , executor , or curator , or any manufacturer , or producer and any person who dispossess of his asset in any fiduciary capacity , and
(c) any person firm or company which owns, holds, claims or uses any patents, proprietary , or other light to goods being manufactured, whether in his or its name or on his or its behalf, as the ease may be whether or not such person, firm or company sells, distributes, consigns, or otherwise disposes of good.
Section 153(7)(b) of Income T ax Ordinance, 2001 provides as under: "Manufacture "or" produce Includes: "Manufacture " for the purpose of the section means, a person who is engaged in production or manufacture of goods, which Includes:--
(c) any process in which an article singly or in -combination with other articles, material, components, is either converted into other distinct article or produce is either so changed, transferred, or reshaped that it becomes capable of being put to use differently or distinctly; or
(d) A process of assembling, mixing, cutting or, preparation of goods in any other manner Some examples of manufacturing are as under: i. Grinding and mixing of different items which create the spices. ii. Blending of different origin of Black tea in order to create taste and flavour . iii. Powdering of leaves and sticks of green tea after mixing with green cardamom makes a marketable product. iv. Grinding and mixing of dry fruits i.e. almonds, peanuts, nutmeg, and dry fruits etc. for kheer etc. v. Cutting of tissue paper roll in small size. vi. Cutting of broom stick into small size. vii. Act of cutting the tin plates to size. viii. Assembling of different parts of sewing machines. ix. Cutting of iron sheet of making cupboards, boxes, doors etc. x. Mixing of milk of buffalo, goat and cow .
Hence reliance takes place on 2004 PTD 791 Karachi High Court, 2012 PTD 1343 , 2012 PTD 1632 , 2002 PTD 490, 2001 PTD 2097 = 2001, SCMR 1376, 2001 PTD 2982 , 2004 PTD 788, 2013 PTD (Trib.) 600, 2016 PTD 80, 2015 PTD 990 , 2013 PTD 327 , 2015 PTD 2480 , 2017 PTD 1497 Sindh High Court and 2006 PTD 1056 .
29. We have also privileged to go through the provisions of section 2(29)(c) of the Income Tax Ordinance, 2001, which read as under:--- INDUSTRIAL UNDERT AKING 2(29)(c) "Industrial undertaking" means--
(b) An undertaking which is set up in Pakistan and which employ:
(iii) Ten or more persons in Pakistan and involves the use of electrical energy or any other form of energy which is mechanically transmitted and is not generated by human or animal energy; or
(iv) Twenty or more persons in Pakistan and does not involve the.use of electrical energy or any other form of energy which is mechanically transmitted and is not generated by human or animal energy; And which is engaged in -
(v) The manufacture of goods or materials or the subjection of goods or materials to any process which substantially changes their original condition; or
(vi) Ship building; or
(vii) Generation, conversion, transmission of distribution of electrical energy or the supply of hydraulic power; or
(viii) The working of any mine, oil-well or any other source of mineral deposits; and
(b) Any other industrial undertaking which the Board may by notification in the of ficial Gazette, specify ,
30. The perusal of the order shows that the appellant has responded the notice by clarifying that the appellant has more than 30 plus employees as well as having power generation (page 5/12 of the order) and that the claim of the appellant is fully covered within the above provisions read with section 153(7) of Income Tax Ordinance after imports the original tea leaves are converted into another distinct article and are changed or reshaped for putting into the use differently or distinctly and even the process of mixing, blending, cutting, grinding, crashing, packing/shaping/branding or preparation of goods in another form.
31. The issue of status that of Manufacturing/Industrial Establishment has been settled by this Tribunal in the case- law reported as above and followed by this Tribunal in ITAs 1034 to 1037/KB/2013 dated 18.6.2 014 wherein it has been held that the imports of Tea leaves and its mixing, cutting , grinding, flavoring amount to manufacturing.
The issue has finally been settled by the Board in the clarification C.N. 1(13)WHT .2008, dated 17th November , 2011 and the relevant portion reads as under: "The import of "tea leaves" is therefore to be treated as import of raw material by an industrial establishment subject to collection of tax under section 148 to the Income T ax Ordinance 2001 @ 3%.
32. The above clarification is in consonance with the various decisions of the Appellate Authorities and are binding on the department as such we see no reason following our earlier decisions and the above clarification to hold that the appellant is an Industrial undertaking with the definition of section 2(29)(c) of Income Tax Ordinance.
33. However , reverting back to the merit of the case whether the registered perso n is indulged in "Manufacturing" or Service Provider . The word "Manufac turing" has been defined in the landmark book "Understanding VAT" by William Lovell whereby the term has been defined as under: "Anything done for a consideration which is not a supply of goods is a supply of services. Apart from obvious services like those of an accountant or solicitor , these include the hire of goods in most cases, repairs of all kinds, making up, another person's goods, hire of staff assignment of rights (copyrights, patents rights, use of a trade name, etc.) Even not doing something for a consideration is a service. The test is "has ownership of goods changed? If not, it is services ".
(underlining for emphasis)
34. We may further rely upon Corpus Juris Secundum-55 at page 669 wherein it is stated that word "MANUF ACTURE" has been defined as production of articles for use from raw or prepared materials by giving these materials new forms, qualities, properties, or combinations, whether by hand labor or by machinery , also anything made for use from raw or prepared materials. The ingredients of "Manufacturing" as reproduced above, it is crystal clear that the change of ownersh ip is sina qua non. In this regard we rely upon the treatise and judgments reported as under: Civil and Milita Press Ltd. v . Pakistan 1985 CLC 1021 The word "manufacture" is generally understood to mean bringing into existence a vendible product known in the market.
Municipal Council Domoh v . Vrailal Manilal & Co., AIR 1982 SC 844 "Manufacture", means such transformation that brings about a new and different Article with a distinctive name and character for use Union of India v . Delhi Cloth and General Mills AIR 1963 SC 79 The word "manufacture" used as a verb is generally understood to mean as bringing into existence a new substance and does not mean merely to produce some change in a substance, however , minor in consequence, the change may be.
Mewa Lal v . Tara Ram, AIR 1973 All 165 In order to prove that there was a manufacturing process, it is also essential to prove that the article must change its nature and it becomes an altogether dif ferent commercial article.
In the book "W ords and Phrases," V ol. 26 In the book "W ords and Phrases," V ol. 26, the said word has been given the following meaning: ".......Manufacture implies a change but every change of an article is the result of the treatment, labour and manipulation, a new and dif ferent article must emerge having a distinctive name, character or use...."
35. From the above treatise and citations, it emerges that in order to bring an article within the framework of word "manufacture" an article must:---
(a) change shape;
(b) emerge as a new product;
(c) be identifiable and commercially marketable;
(d) be an altogether dif ferent product.
(e) The manufacture which is liable to tax/duty must be the bringing into existence of a new substance known to the market and does not mean merely to produce some change in a substance however minor in consequence, the change may be
(f) The word "manufacture implies a change but every change in the raw material is not manufacture. There must be such a transformation that a new and dif ferent article must emerge having a distinctive name, character or use.
(g) In order to bring an article within the framework of word "manufacture" an article must change shape; emerge as a newer product; he identifiable and commercially Marketable and is an altogether dif ferent product.
36. Therefore, we are of the considered opinion that "Manufacture" means any activity which result in transformation into a new commodity which is commercially distinct and separate commodity .
The test to determine whether a particular activity constitutes "manufacture" or not is whether by that activity a new or different goods emerge having distinctive name, use and character . The moment there is transformation into new commodity commercially known as distinct and separate commodity having its own character , use and name, whether it be result of one process or several processes, manufacture takes place. The 'essence of manufacture' is that there must be transformation, a new and different article must emerge having a distinctive name, character and use. The 'essence of manufacture' is the change of one object to another for the purpose of making it marketable.
37. Before parting with this judgment we may deem it appropriate to reproduce an excerpt from the judgment delivered by one of the members wherein the judicial member while observ ing the requirement of section 122(1)/122(5) recorded his finding in IT A No. 946/KB/2014 as under:-- "Further perusal and examination of the amended order passed u/s. 122(1) of the Income Tax Ordinance, 2001 reveals that the DCIR while passing the order had not adhered to the requirem ents of law. The words used in section 122 he considers necessary that the same is required to be amended on the basis of definite information then he may invoke subsection (1) of Section 122 for acquiring jurisdiction to amend the order under sub-section
(4) read with sub-section (5) as the case may be. However , the DCIR has not followed the requirement of law in letter and spirit and passed the order u/s. 122(1) of the Income Tax Ordinance, 2001. The DCIR had passed the amended assessment only u/s. 122(1) without fulfilling the mandatory conditions of section 122(5), we may observe that what to speak of mandatory conditions of section 122(5), it appears he has not invoked the main provisions of section 122(5). Hence, the amended assessment in this case has been fromed in total ignorance of the law and in violation of the prescribed procedure and legal and mandatory requirements. The CIR/DCIR/OIR, in total oblivion of the mandatory requirement/condition precedent has been set out for the amended assessment under the provisions of section 122(5). The CIR/DCIR/OIR, may amend the assessment u/s. 122(1), (4)45) (as the case may be) after fulfilling all requirement of law subject to definite information and fulfilment of further condition of clause (1), (it) or (iii) of sub-section (5) of Section 122."
37. Orders of the Officers below arc vacated and both the appeals against the amended orders passed u/s. 122(1)/122(5) are hereby allowed.
Appeals against orders under section 170(4) of the Income T ax Ordinance, 2001
38. Now, we take tip the appeals filed by the taxpayer against refusal of refund u/s. 170(4) of the Income Tax Ordinance, 2001. Following grounds of appeals have been agitated: GROUNDS OF APPEAL UNDER SECTION 170(4)
39. Following grounds of appeal have been agitated against rejection of refund u/s. 170(4) of the Income Tax Ordinance, 2001:
1. The order passed by the learned CIR(A) is bad in law and on facts.
2. That the learned CIR(A) was not justified to confirm the order passed by the OIR which is barred by .time as provided in section 10(4) when on the basis of deem doer the appellant is entitled to refund of tax.
3. That the learnd CIR(A) has ignored the fact that status of the tax-payer is determined through the process of audit proceedings and the jurisdiction of the, refunding authority is to survey the payment of tax deposited.
Facts
40. Brief facts of the case are that the appellant had filed his Return of income u/s. 114 under normal tax regime claiming the status as that of "manufacturer". The cases for both the years Were selected for audit and the deemed order was amended u/s. 122(1)(5). In the amended order the status of the appellant was assigned as that of importer and the tax collected at import stage u/s. 148 of Income Tax Ordinance was deemed to be the final discharge of full tax liability resulting no refund to the tax-payer . An appeal was preferred to the CIR(A) which was rejected hence this appeal.
41. The learned counsel for the Appellant submitted that that genuine 'refunds of a taxpayer cannot be denied. This issue has already been settled in a number of cases by the ATM and the superior forums.
42. The learned D.R. on the other hand, supported the orders of the officers below . He reiterated that the taxpayer is not indulged in manufacturing and tax deducted was final, therefore, no refund is available to the taxpayer .
43. W e have heard both the learned representatives and have gone through the records of the case.
44. As, held by the ATIR in reported judgment cited as 2010 PTD (Trib.) 519, the C1R is under a mandatory obligation to, suo motu, dispose of any refund claim arising as per return of income and an order under section 170(4) of the Ordinance must also be passed within the 60 days timeframe. If this is not done, a delay in the disposal of the refund claim is evident and compensation for the delay is payable under section 171 of the Ordinance. The deemed assessment under section 120(1) of the Ordinance is an assessment order applicable "for all purposes of this Ordinance" as stated in the statute itself. The deemed assessment order is therefore relevant for refund purposes as well. This judgment of the Tribunal is binding on all departm ental functionaries. In case the refund claimant fails to respond to a short document notice issued by the tax depar tment requisitioning tax payment information relevant to a refund claim, an order under section 170(4) of the Ordinance must still be passed within the mandatory 60 days' time frame.
45. In this context it is pointed out that it has been held by the Supreme Court of Pakistan in reported judgment cited as PTCL 2002 CL. 1 (Assistant Collector Customs Pakistan versus Khyber Electric Lamps MFG Com pany Ltd., Peshawar) that: "It is well-settled proposition of law that a thing required by law to be done in a certain manner must be done in the same manner as prescribed by law or not at all."
46. We deem it mandatory to refer to Article 31(2)(b) of the Constitution of Islamic Republic of Pakistan, 1973 which provides that the State shall endeavour to promote unity and the observance of the Islamic moral standards; and Article 37(d) says that the State shall ensure inexpensive and expeditious justice, By virtue of Article .2A of the Constitution of Islamic Republic of Pakistan, 1973 the principles and provisions set out in the Objectives Resolution have been made substantive part of the Constitution. The objective resolution reflects the. will of the people of Pakistan to establish an order wherein the principles of social justice as enunciated by Islam shall also be fully observed. No doubt public servants hold such amount as an "Amanah " and are supposed to refund/return it to the person entitled to it.
47. It should be kept in mind that a claim regarding over :payment of tax is to be verified from record and if the record is not available, due to lapse of a long period, a claim could not be verified and if a refund is allowed without verification from original record it may lead to bogus refund and corrupt practices. Therefore, the legislature has set a time limit of three years (previously two years) in .order to avoid convenience and bogus refunds, besides discouraging the delayed applications/cla ims, which could not be verified. It has been held in 2010 PTD 768 (Trib) that: "7...................Even Otherwise the Government functionaries, especially in an Islamic or a democratic society governed by ruleof law, are supposed to do justice and not to deprive the people of their rights on ground or technicalities. Article 29 of the Constitution of Islamic Republi c of Pakistan in unequivocal terms, commands as under: "29. Principles of policy . (1) The Principles set out in this Chapter shall be known as Principles of Policy , and it is the responsibility of each organ and authority of State, and of each person performing functions on behalf of an organ or authority of the State, to act in accordance with those Principles insofar as they relate to the functions of the organ or authority . Article 31(2)(b) provides that the State shall endeavour to promote unity and the observance of the Islamic moral standards; and Article 37(d) says that the State shall ensure inexpensive and expeditious justice. By virtue of Article 2A of the Constitution of Islamic Republic of Pakistan, 1973 the princip les and provisions set out in the Objectives Resolution have been made substantive part of the Constitution. The Objectives Resolution reflects the will of the people of Pakistan to establish an order wherein the principles of social justice as enunciated by Islam shall also be fully observed. The Objectives Resolution admits that sovereignty over the entire universe belongs to Allah Almighty alone and the authority which He has delegated to the State of Pakistan, through its people for being exercised within the limits prescribed, by him, is a sacred trust ..................
No doubt ..................... If over payment of tax is easily verifiable, there is no bar to adjust or refund the same even if' an application is made after the period of two years. However , it does not mean that a tax- payer is free to claim the refund of an overpaid tax at his sweet will at any time even after the expiry of many years. It should be kept in mind that laches may defeat the claim . The view expressed by the Honourable Supreme Court of Pakistan on a similar issue, in case of "Pfizer Laboratories Limited v.
Federation of Pakistan and others" cited as (1998) 77 T ax 172 (S. C. Pak.) = PLD 1998 SC 64 is illuminating. In that case it was held that a genuine refund claim could not be refused on the ground that application was not filed within prescribed time. When a refund claim is verifiable and genuineness of over payment of tax is established after verification, but it is refused mere on technicalities it does not look fair ."
The LHC in 2015 PTD 91 1 has held that "8. 1 have heard the learned counsel for the parties and gone through the record.........The facts and figures in this case are not disputed (5)......
(ii) The petitioner filed an application with the request to apply part of the delayed compensation worked out for the tax year. 2008 refund towards its advance tax liability for the period commencing from July, 2014 to October , 2014. It is clear and obvious from the record that there were sufficient amounts of delayed payment compensation available with the department to adjust the petitioner's tax liability for the period commencing from the July to October , 2014. However , instead of making adjustment of the compensation due to the petitioner , the department proceeded to adjust the liability against the principal amount of refund for the tax years 2008 and 2009.: Through this device, the department attempted to deprive the petitioner of its right to claim any further compensation for delay in payment of refund amount already due for the tax years 2008 and 2009. This is on account of the fact that section 171 of the Ordinance does not provide for any compensation for delay in payment of the compensation. This in essence means that the department can indefinitely delay payment of compensation to the petitioner of which substantial amounts are payable to him and thereby defeat the very purpose of enacting section 171. The sole purpose of section 171 ibid is to induce the department to pay/adjust the amount of refund expeditiously and promptly by making adjustments against the principal amount of refund. The department has made an effort to avoid its duty to promptly repay/adjust the amount of refund and at the same time indefinitely delay payment of compensation on which no further compensation is payable. This modus operandi ex facie is an attempt to play fraud on the statute, defeat the purpose of law and deprive the petitioner of an amount which is due to it by the department by way of a refund having been paid in excess of its tax liability .
(iii) The whole purpose of requiring payment of compensation on account of delayed payment of refund is to compensate the taxpayer for the excessive tax collected by the department. Section 171 of the Ordinance on the one hand provides for payment of compensation to the taxpayer and on the other casts a duty on the department either to adjust the refund to reduce the tax liability of the taxpayer or pay the refund quickly . The intention of the lawmaker behind incorporating this provision is not hard to fathom i.e. the state cannot be allowed to withhold indefinitely what it admits is due to the 'taxpayer by way of refund.
The impugned actions of the respondents amount to subverting, and, avoiding the duty cast upon the department by the lawmaker which cannot be allowed at the expense of a taxpayer who had paid by way of advance tax more than what he was required to pay. Such actions - constitute violation of Constitutional guarantees and amounts to taking away of property without due process of law .
(iv) Sections 170 and 171 have to be read in tandem. These provide a mechanism to ensure that taxpayers are protected against looses that they incur on account of excessive payment of tax and delays in- refund of the same. If the mode of action adopted by the respondent department is allowed would result in unjust enrichment of the respondent because by applying the principal amount of refund to reduce the advance tax liability of the petitioner, the respondents have attempted to absolve themselves of making any further delayed payment compensation. The delayed payment compensation already due can, by using this methodology, be deferred indefinitely by respondent department without having to pay any further amounts on account of non-payment or delayed payment/adjustment of the amount of compensation that had already accrued Unjust enrichment offend against the principal of economic justice embodied in the Constitution. Reliance in this regard may be placed on Sui Northern Gas Pipelines Limited v. Deputy Commissioner Inland Revenue and others (2014 PTD 1939), Messrs Pfizer Laboratories Limited v. Federation of Pakistan and others (PLD 1998 SC 64), Ikram Bari and 524 others National Bank of Pakistan through President and another (2005 SCMR 100)- and Pakistan Tobacco Company Ltd. and another v. Federation of Pakistan through Secretary, Ministry of Commerce, Islamabad and 3 others (1999 SCMR 382) State functionaries are required to act justly, fairly and transparently. Further it is settled law that where two interpretations of a taxation provision are possible, the one most beneficial to the taxpayer must be adopted. In the first place, in the afore-noted background two interpretations of sections 170 and 171 are not logically possible and even if they were possible, the one beneficial to the petitioner should have been adopted. In the second place, I have not found any substance in the argument made by the department that there is nothing in sections 170 and 171 of the Ordinance to suggest that the department is under an obligation to utilize the amount of compensation first and adjust the balance against the amount of refund In, view of the clear and obvious intent of lawmaker in drafting sections 170 and 171, in my opinion, there was no need to spell out the same by way of a specific provision in the Ordinance. The fact of the matter is that both amounts are admittedly payable by the state to its citizen. One attracts the obligation to pay compensation at the rate of 15% per annum for the period of delay while the other does not. If the State intentionally decides to adjust a taxpayer's liability against an amount for non-payment of which it is required to pay compensation and does not make such adjustment against an amount for delayed payment on which it does not have to pay any compensation, it can. delay payment/adjustment of such compensation indefinitely without any penal consequence. The intention of such action cannot by any stretch of the language be termed as bona fide, fair or just.
9. For the afore-noted reasons, the impugned adjustment memo dated 15-10-2014 is declared to be illegal, without lawful authority and contrary to the provision of the Ordinance. The department is directed to adjust the advance tax liability of the petitioner for the period commencing from July, 2014 through October , 2014 first against the amount of delayed payment compensation worked out for the tax year 2008 and make the resultant adjustment in the total amount of refund as well as delayed payment compensation payable to the petitioner . The respondents are directed to reduce the petitioner's tax liability by applying the compensation amount till such time it is fully adjusted before utilizing the available refund amount for adjustment or repayment of the same to the petitioner . The petition is accepted in the afore-noted terms."
48. Finally , we would refer to the landma rk judgment of SCP in case of M/s. Pfizer supra, which has settled the issue that genuine refund cannot be withheld. The relevant excerpts from the principles laid down in the said judgment are reproduced
13. From the above case-law and the treatise, the following principles are deducible:
(i) ...........................................
(ii). ........................................
(iii) .........................................
(iv). .......................................
(vii) That where some money is received by the Government not lawfully due, the plea of limitation by its departments is one which the Court always looks upon with dis-favour as it is violative of the principles of morality and justice.
(viii) That when moneys are paid to the State which the State has no legal right to receive, it is ordinarily the duty of the State, subject to special provisions of any particular statute or special facts and circumstances of the case, to refund the amount so received and in case of failure, a superior Court in exercise of its Constitutional jurisdiction can direct the refund of the same if no disputed questions of facts are involved.
(ix) That there may not be legal liability on the part of a Government functionary to refund any amount received by it as a tax or other levy by virtue of certain special provisions under the special law but keeping in view that we are living in a democratic society governed by the rule of law and every Government, which claims to have ethical and moral values, must do what is fair and just to the citizens regardless of legal technicalities ....................."
49. As the issue of status has now been settled by this bench and the appellant has been assigned the status as that of manufacturer consequentially , these two appeals pertaining to the order u/s. 170(4) are allowed and the orders of the two authorities below are also hereby vacated. The department is directed to pass consequential order under section 170(4) of the Income Tax Ordinance, 2001 strictly in accordance with, law after giving full and fair opportunity of being heard.
50. All the four appeals are hereby allowed accordingly .