1. AJMAL MIAN, J.-1. By this common judgement we intend to dispose of the above six writ petitions, as they involve the interpretation of Self Assessment Scheme, (hereinafter referred to as the Scheme), of Income Tax, 1983-84 contained in Circular Nos. 8, 11 and 14 of 1983. The brief facts leading to the filing of the above petitions are as follows:'
1. Constitutional Petition No. D-35 of 1984.
2. The petitioner is a private limited company. For the first time it was assessed to income tax for the year ending on 31-12-1980 which corresponded to the assessment year, 1981-82. The petitioner for the income tax assessm ent year 1981-82 declared loss of Rs. 46,897 and was assessed at a loss of Rs. 34,230/-. In the year 1982-83 the petitioner declared income as Rs. 54,224/- and was assessed at the same figure. In the assessm ent year 1983-84 the petitioner filed return showing an income of Rs. 76,273/-. It is the case of the petitioner that it received a letter dated 13-8-1983 from the Income Tax Officer stating therein, that the income tax return for the assessment year 1983-84 is under process for finalisation under the Scheme and in this respect it was asked for submission of certain details which were submitted through their counsel's letter dated, 17-8-1983, but the petitioner was surprised to receive an order dated 30-11-1983 stating therein, that their case has been selected for detailed scrutiny for the assessm ent year 1983-84. The above selection has been made as for the assessm ent year 1982-83 instead of taking assessed figures of Rs. 54,224/- has taken declared profit of Rs. 83,454/- for comparing the income for the assessment year 1983-84. The petitioner being aggrieved by the above action has filed the present petition.
3. II. Constitutional Petition No. D-129 of 1984.
4. The petitioner is a partnership firm, which is engaged in manufacturing of soap. The petitioner for the assessm ent year 1983-84 filed income tax return under the Scheme and declared income of Rs.
5. 1,78,109/- and claimed immunity from detailed scrutiny in terms of Circular No.8 of 1983 but the Respondents declined through Respondent No. 1's letter dated, 6-12-1983, and Respondent No.3's letter dated, 24-1-1984 probably for the reason that while comparing the income declared for the assessm ent year in question with the income of the preceding years, the income figure without adjustment of depreciation has been made the basis. The petitioner being aggrieved by the above actions of the Respondents has filed the present petition.
6. III. Constitutional Petition No. D-344 Of 1984.
7. The petitioner is a partner of M/s. Anchor Associates. The petitioner was last assessed as a salaried person in the year 1974-75 at Rs. 34,213/-. The petitioner filed his income tax return for the year 1983-84 on 10-10-1983 declaring total income of Rs. 52,747/- but filed revised return on or about 1- 11-1983 declaring income of Rs. 82,745/- before adjusting the depreciation. The petitioner received a letter dated 1-12-1983 from Respondent No.3 i.e. The Income Tax Officer informing that the Respondent No. 1, i.e. The Central Board of Revenue (hereinafter referred to as the Board), had been pleased to exclude his case from the purview of the Scheme. The above petition involves the following questions:
(i) Whether the petitioner can be considered an assessee for the purpose of the Scheme, 1983-84;
(ii) Whether the revised return could have been filed to avail of the Scheme; and
(iii) Whether the figure of income should be after adjustment of depreciation or before.
8. The petitioner being aggrieved by the above action has filed the present petition.
9. IV. Constitutional Petition No. D-.345 of 1984.
10. The petitioner is also a partner of M/s. Anchor Associates. She filed her income tax return on 10-10- 1983 declaring her income as Rs. 34,828. She filed revised return on 1-11-1983 declaring a total income of Rs. 41,447/- against the assessed income for the year 1982-83 amounting to Rs. 33,242/-.
11. The petitioner received a letter dated 1-12-1983 from Respondent No.3 i.e. The Income Tax Officer informing her that the Respondent No. 1 i.e. The Board had been pleased to exclude the petitioner's case from the purview of the Scheme and selected the same for detailed scrutiny. The controversy in the present- petition is as to whether the petitioner could file revised return for availing of Scheme. If the revised return is to be accepted, her case is covered under the Scheme. The petitioner being aggrieved by the above action of the Respondents has filed the present petition.
12. V. Constitutional Petition No. D-346 of 1984.
13. The petitioner is also a partner of M/s. Anchor Associates. She submitted her return of income tax for the year 1983-84 on 10-10-1983, declaring income of Rs. 18,131/- but she filed a revised return on 24-11-1983 declaring net income of Rs. 18,463/- against assessed income Rs. 19,922/- for 1982-83 but the total income before depreciation Rs. 36,742/-, and claimed immunity from detailed scrutiny under clause 6 of the Scheme 1983-84. The petitioner received a letter dated 1-12-1983 from the Respondent No. 3 informing her that the Respondent No. 1 i.e. The Board has been pleased to exclude the petitioner's case from the purview of the Scheme and selected the same for the detailed scrutiny. The present petition involves,- prima facie the following two questions:
(i) Whether a revised return could have been filed under the Scheme; and
(ii) Whether the amount of increased income for the year 1983-84 should be the figure before adjustment or after adjustment of depreciation and super tax.
14. The petitioner being aggrieved by the above action has filed the present petition.
15. VI. Constitutional Petition No. D-674 of 1984.
16. The petitioner is a private limited company and is involved in the business of import and local purchase and sale of tyres. The petitioner for the year 1981-82 declared loss of Rs. 31,742 but were assessed loss at Rs.25,408/-. For the year 1982t83 the petitioner declared loss of Rs. 2,52,079/- but assessed at Rs. 1,88,235/- as loss. For the year 1983-84 the petitioner filed declaration under the Scheme and declared income of Rs. 19,933/- but Respondent No.1 through its letter dated, 26-1- 1984 informed the petitioner that they did not qualify under immunity clause of Scheme 1983-84.
17. Inspite of the efforts on the part of the petitioner, the Respondents adhered to the above stand. The petitioner has therefore filed the present petition, In the present petition inter alia the questions, whether the loss can be treated as income for comparing the income of the year 1983-84, and whether para 6 of the Circular No. 14 of I960 is ultra vires of the power of the Board, are involved.
2. The Respondents have filed comments in some petitions and counter-affidavits in some of the petitions. They have resisted the above petitions, on the ground that since the petitioners were not qualified under the Scheme, their cases were to be scrutinised in detail.
3. We have heard the learned counsel for the parties at length and we are of the view that the following points require determinations:
(a) Whether the petitions are maintainable?
(b) Whether the figure of income for the year 1983-84 should be the figure before adjustment of depreciation/super tax or after the adjustment of depreciation/super tax.
(c) Whether an assessee can file a revised return before the passing of an assessment order or selection of his case for detailed scrutiny.
(d) Whether for the purpose of comparison of the income for the year 1983-84 with the income of the preceding year the income assessed is to be made the basis or the income declared.
(e) Whether a person assessed more than four years back remained an assessee for the purpose of the Scheme for the year 1983-84.
(f) Whether mere fact that an assessee had submitted his return marked as 'immune from detailed scrutiny' for the year 1982-83 though was not qualified would be entitled to claim the benefit of the Scheme, 1983 on the grounds that the department did not object to his submission of the return marked 'immune from detailed scrutiny'.
(g) Whether for the purpose of comparison of the income of the preceding year for sub-paras a, b and c of para 6 of the Scheme, loss can be taken into consideration?
(h) Whether para 6 of Circular No. 1A of 1983 is ultra vires of the power of the Board?
4. Adverting to the first point, it may be observed that there cannot be any cavil to the proposition that the High Court will decline to exercise its constitutional writ jurisdiction in case it finds that under the relevant law the machinery for getting redress has been provided for but at the same time if it finds that the action of the Government functionaries concerned is without jurisdiction and contrary to the law, the High Court may entertain a writ.
18. Mr. Shaikh Haider has referred to the following cases on the above point:
(i) Muhammad Hussain Munir and others v. Sikandar and others, PLD 1974 S.C. 139, in which the Honourable Supreme Court of Pakistan while construing the provisions in section 2(b) of Punjab Consolidation of Holdings Act (IV of 1936) held that: "lt is wholly wrong to consider that the constitutional provision was designed to empower the High Court to interfere with the decision of a Court or Tribunal of inferior jurisdiction, merely because in its opinion the decision is wrong. In that case, it would make the High Court's jurisdiction indistinguishable from that exercisable in a full-fledged appeal, which plainly is n6t the intention of the Constitution-makers."
(ii) Muhammad Asghar v. Sofia Begum and another, PLJ 1976 S.C. 480. In the above case the honourable Supreme Court while construing Section 10 of the Colonization of Government Lands (Punjab) Act (V of 1912) observed that where a Court or tribunal has jurisdiction and it determines a question it cannot be said that it acted illegally or with material irregularity merely because it came to an erroneous decision on question of fact or even of law and that the High Court is not justified to interfere in exercise of its writ jurisdiction.
19. However, Mr. Shaikh Haider learned counsel for the respondent department contended that in case the court finds that the impugned actions are contrary to the Scheme, this court can invoke the constitutional jurisdiction to grant the redress.
20. We are inclined to hold that the High Court cannot substitute itself Vin place of the hierarchy of forum provided under the relevant law, nor it will entertain a constitutional writ petition on the ground that the competent Tribunal has tal^en an erroneous view of fact or even of law but we are at the same time of the view that in case an impugned action is | beyond purview of the relevant law or Scheme, the High Court can entertain a constitutional petition instead of forcing a party to place at the mercy of the forums of which the action is impugned.- The basic question, therefore, in the instant case is, whether the impugned actions are contrary to the provisions of the Ordinance or the Scheme.
5. Before taking up the other contentions of the learned counsel for the parties, it may be pertinent to observe that/under section 55 of the Ordinance every person whose total income or the total income of any other person in respect of which he is assessable for any year exceeds the maximum amount which is not chargeable to tax or he has been charged to tax for any of the four income years immediately preceding the said income year is required to furnish a return of the total income for the said income year in case of a company before 1st day of August next following the income year or within 15 days of the expiry of six months from the end of the income year which ever is later and in every other case where the income years ends at any time between the 1st day of July and the 31st day of December (both days inclusive), on or before the 1st day of August next following and in other cases on or before 1st day of October next following. Whereas Section 57 provides that if any person has- not furnished a return of total income as required by, or under, any provision of the Ordinance or having furnished a return, discovers any omission or wrong statement therein, he may without prejudice to any liability incurred by him under any provision of the Ordinance or the repealed Act, furnish a return or a revised return, as the case may be, at any time before the assessm ent is made. It may also be pertinent to point out that under section 59, it has been provided that where the return of total income for any income year furnished by the assessee under section 55 qualifies for acceptance in accordance with the provisions of a Scheme of Self-assessm ent made by the Central Board of Revenue for that year or under any instructions or orders issued thereunder, the Income Tax Officer shall assess, by an order in writing, the total income of the assessee on the basis of such return and determine the tax payable on the basis of such assessm ent. It also empowers the Income Tax Officer while assessing the total income under a Self-assessm ent Scheme to make such adjustments as may be necessary including under sections 34, 35, 36, 37, 38, 50, 53 or 54 or the rules made under section 165 and the First Schedule and the Third Schedule. It also provides that no order under sub-section (1) shall be made in any case after the 30th day of June of the financial year next following the income year in respect of which a return of total income has been furnished under section 55. It may also be pertinent to point out that under section 165 the Central Board of Revenue has been empowered to make rules for carrying out the purposes of the Ordinance, by a Notification in the official Gazette on the various items referred to under sub-section (2) of the above section including the rules prescribing the manner in and the procedure by which the income, profits and gains liable to tax and the tax payable under this Ordinance is to be determined in the case of--
(i) income derived in part from agriculture and in part from business; or
(ii) persons to whom section 59 applies; or
(iii) non-residents.
21. The Board has also been empowered to determine the value of any allowances, benefits or perquisites or for providing the ascertainment or determination of any income to be included in the total income of an assessee, and any deduction from such income for prescribing fee and other charges to be paid in respect of any matter referred to in the Ordinance and also for providing anything which is to be or may be prescribed in the Ordinance.
22. The Board has been framing Self-assessment Scheme in terms of section 57 read with section 59 of the Ordinance for each assessm ent year through Circulars since the time of its introduction in or about 1979. For the assessm ent years in question namely 1983-84, the Board has issued Circular No. 8 of 1983 dated 26-6-1983 containing the Self-assessment Scheme, Circular No. 11 of 1983 dated, 17-7-1983 containing the explanation regarding important, changes made under the Scheme of 1983-84, compared to 1982-83 as and Circular No. 14 of 1983 dated, 24-11-1983 issued in pursuance of para 5 of the above Circular No.8 of 1983.
6. After having dealt with the relevant provisions of the Ordinance and the Circulars relating to Self- assessm ent Scheme 1983-84, it may be appropriate to revert to the first controversy, namely, whether the income figure for the assessment year 1983-84 should be the income figure before the adjustment of depreciation/super tax or after the adjustment of the same.
23. It has been vehemently urged by Mr. Rehanul Hassan Naqvi that as the words "before adjustment of depreciation" appearing in the Self-assessment Scheme of the year 1982-83 contained in Circular No. 10 of 1982, dated 2-8-1982 have been omitted from the' Self-assessment Scheme for the year 1983-84, the income declared for the year 1983-84 should be the figure after adjustment of depreciation.
24. On the other hand Mr. Shaikh Haider has submitted that the note 3(a) of Circular No. 8 of 1983 containing the Self-assessm ent Scheme 1983-84, makes it clear that the comparison of the income declared and assessed was to be made before the adjustment of depreciation and Zakat.
25. In this regard, it may be pertinent to quote para 6 (a) and (b) of the Self-assessment Schemes 1982-83 and of 1983-84: "6. Cases which will not be selected for Detailed Scrutiny.- The following categories of cases shall be immune from selection for detailed scrutiny, subject to the conditions specified against each:- 1982 Scheme Cases which were immune (a) from detailed scrutiny for both assessment years 1980- 81 and 1981-82 by virtue of declaring higher income in accordance with Circular No. 1983 Scheme "6. Cases which will not be selected for detailed scrutiny.- The following categories of cases shall be immune from selection for detailed scrutiny subject to the conditions specified against each:
(a) If the income declared for the assessment year 1983-84 is higher by 13 percent or more as compared with the average of the assessed income of the preceding three years; OR If the income declared for the assessment year 1983-84 bears the same proportion to the income last assessed as the turn-over/receipts declared for assessment .- year 1983-84 bears to the turn-over/receipts last assessed provided that the income declared for assessment year 1983- 84 is higher than the income last assessed; . Whichever is higher. (b) If the income declared for the assessment year 1983-84 is higher by 20 percent or more as compared with the average of the assessed income of the three preceding years; OR If the income declared for assessment year 1983-84 bears the same proportion to the income last assessed as the turn-over/receipts declared for assessment - year 1983-84 bears to the turn- over/receipts last assessed provided that the income declared for assessment year 1983-84 is higher than the income last assessed; whichever is the higher."
26. A comparison of the above quoted paras indicates, that from paras (a) and (b) of para 6 of Scheme, 1983-84 the words, "before adjustment of depreciation" have been omitted. Further note 3(e) of the above Scheme makes it clear that the comparison of the income declared and assessed would be made before the adjustment of depreciation and Zakat. The above note is a part of the Scheme and, therefore, is to be read with the above paras of the Scheme. In view of the above para 3(e) of the note, the omission of the words "before adjustment of depreciation" in paras
(a) and (b) of the Scheme of 1983-84 is of no consequence.
27. Mr. Rehanul Hassan Naqvi has referred to the following cases in support of his contention.
(i) The Commissioner of Income Tax, East Pakistan v. Messrs Hossan Kasam Dada, Karachi PLD 1961 S.C. 375, wherein the Supreme Court referred to the well known principle of construction of a provision of statute namely, where two equally reasonable construction are possible, one strict and the other beneficial to the assessee, then the latter should be preferred.
(ii) Messrs Dreamland Cinema, Multan v. Commissioner of Income Tax, Lahore, PLD 1977 Lah. 292. In the above case a Division Bench of the Lahore High Court placed reliance on the above Supreme Court case and held that when equally reasonable two constructions are possible, one strict and other beneficial to the assessee, the beneficial construction was to be placed, while considering the provisions of Section 24(2) explanation 2 Income Tax Act (XI of 1922).
28. In our view, the above cases have no application to the instant case as two constructions are not possible in view of the clear provision contained in para 3(e) of the note to the Scheme of 1983-84, which is a part of the Scheme providing the manner of comparing the income declared and assessed. We are, therefore, of the view that the respondent department has acted in accordance with the Scheme by comparing the income declared and assessed without adjustment of depreciation or even the super tax. It may be pertinent to observe that the super tax is payable by a firm though it is apportioned in proportion between the partners according to their profit sharing capacity. The declared income of a firm is to be compared' with the assessed income of the preceding years without adjusting the payment of super tax which is a tax liability which cannot be placed on a better footing than the item of depreciation or Zakat referred to in note 3(3). But in case of a partner of a registered firm, his net income is to be compared with his assessed income of the preceding years, as in his case the question of claiming any adjustment of depreciation will not arise for the reason that the depreciation is claimed by his firm.
7. As regards the second point in issue, whether an assessee can file a revised return after availing of Self-assessm ent Scheme, it may be observed that it was vehemently urged by Mr. Mazharul Hassan that under section 57 of the Ordinance, referred to hereinabove an assessee is entitled to file a revised return before the assessment is made and, therefore, the petitioners in Constitutional Petition Nos. 34A of 1984 to 346 of 1984 could have filed the revised return for availing of the benefit of the scheme, 1983-84.
29. On the other hand, it was vehemently urged by Mr. Shaikh Haider that the Scheme is a self contained document and since there is no provision for filing a revised return, and as the above petitioners in the aforesaid three petitions had filed ordinary returns, they could not have revised the same for availing of the benefit of the scheme.
30. We are inclined to hold that since the scheme has been framed under the Ordinance and as there is no provision in the scheme contrary to Section 57 of the Ordinance, a revised return can be filed by an assessee in terms of section 57 at any time before the assessment is made even for the purpose of the Scheme so long as the assessee concerned qualifies in terms of the Scheme.
8. Reverting to the question, whether for the purpose of comparison of the declared income with the income of the preceding years, the assessed amount is to be taken as the basis or the income declared for the preceding year is to be made basis, it may be observed that in Constitutional Petition No. 35 of 1984 the petitioner in their income tax return for the year, 1982-83 had shown net profit as per profit and loss account Rs. 88,454/- against which they claimed loss of assessment year, 1981-82 amounting to Rs. 34,230/-, which was allowed and, therefore, they were assessed at the figure of Rs. 54,222/-. It has been urged by Mr. Rehanul Hassan Naqvi that for the purpose of comparison of the declared income for the assessment year, 1983-84 the assessed income for the year 1982-83 namely Rs. 54,224 is to be made the basis, whereas according to Mr. Shaikh Haider the assessed income for the year 1982-83 is Rs. 88,454 whereas taxable income is Rs. 54,224/- and according to him the former figure is to be taken as the assessed income for comparison with the declared income of 1983-84 under the Scheme. Mr. Rehanul Hassan Naqvi has referred to relevant sub para a, b and c of para 6 of the Scheme, which speak of assessed income and not declared income; whereas Mr. Shaikh Haider has referred to the First Schedule to the Ordinance, which provides schedule of rates of income tax and refers to the words "taxable income".
31. We are inclined to hold that for the purpose of deciding the question, whether an assessee is qualified for Self-assessm ent Scheme, the assessed income for the preceding years referred to in sub-paras a, b and c of para 6 is to be taken into consideration and not declared income.
32. Factually, it is taxable income which is the assessed income. Mr. Shaikh Haider is unable to cite any provision of the Ordinance or the rules framed thereunder or even any citation to support his contention that for the purpose of the assessment year 1982-83 declared profit Rs. 88,434/- is to be treated as assessed income and not the assessed amount namely, Rs. 34,224/-.
33. On the other hand Mr Rehanul Hassan has referred to the following cases;
(i) United Netherlands Navigation Co. Ltd. v. Commissioner of . Income Tax, South Zone (West Pakistan), Karachi (1965) Taxation (Volume XII) page 57, in which the Honourable Supreme Court while construing Section 1CK2)(vi) and proviso to section 24(2)(b) observed as follows- "It would be proper to explain here that reference in Section 1CX2)(vi), proviso to Section 24(2)(b). In accordance with Section 24 benefit for unabsorbed losses in any year is also to be given to the assessee in the succeeding years in which there may be profits. There is a difference, however, between the benefit which is given as depreciation and the benefit which is given as trading losses.
34. Benefit for depreciation is given while computing the profits for a particular year. There is no benefit given for any previous unabsorbed losses while computing the profits but when profits have been computed benefit is given for losses before assessment takes place. The proviso to Section 24(2)
(b) says, however, that if there be in existence any unabsorbed depreciation the previous losses are to be deducted from the profits or gains before unabsorbed depreciation is allowed."
(ii) The Income Tax Officer District II Kanpur and others vs. Mani Ram and others , AIR 1969 S.C. 543.
35. In the above case the Indian Supreme Court while construing Sections 18A (3) and 23 B of the Income Tax Act, 1922 held that expression "any person who has not hitherto been assessed" cannot be interpreted to be a person who has been provisionally assessed as the word "regularly" in sub- section (3) of Section 18A has not been employed.
36. The above judgments lend support to the conclusion which we are inclined to take that an assessed income is different from a declared income.
37. This is the common ground that in case Rs. 5A,224/- is to be treated as-the assessed income for the year 1982-83 the petitioner would qualify for the Scheme for the year 1983-84 as they had declared the income for the above year as Rs. 76,273/-.
9. Adverting to the question, whether a person assessed more than 4 years back remained an assessee for the purpose of the Scheme, it may be observed that Mr. Mazharul Hassan has referred to para 4 of the instructions regarding Self-assessment for the returns received between 1-7-1979 to 15-6-1979, which reads as follows: "4. New Case means a case where no assessments have been made by the Department so far whether on G1R or T.R. Or whether a notice under Sections 22(2)/34 has been served or not."
38. On the other hand Mr. Shaikh Haider learned counsel for the respondent department has placed reliance on the aforesaid section 55 referred to hereinabove particularly on clause (b) of sub- section (IT which inter alia enjoins every person who has been charged to tax for any of the four income years preceding the said income year to file a return. It has, therefore, been contended by him that a person who has not been assessed for more than four income years preceding to the income year under reference, he is not an assessee.
39. From the above quoted para 4 of the above instructions for the year 1979 of the Scheme, it appears that new cases have been defined a case where no assessments have been made by the Department. It is not clear, whether the above instructions for the year 1979 hold good for the year 1983-84. Clause (d) of para 6 of the Scheme referred to cases of new tax payers and provides that if such cases fulfil the conditions specified in para 1 (b)(i) of the Scheme, they will be covered by the Scheme, which reads as follows: "(b) New taxpayers:
(i) New tax payers unable to explain their investment: Cases where a return of income is filed for the first time by an Individual, AOP, URF or HUF and net assets of taxpayer(s) at the close of the income year do not exceed Rs. 100,000 subject to the condition that the declared income, in no case, is less than the following scale: Net assets at the close Income as percentage of of the Income year net assets.
(1) First Rs. 50,000 60% of net assets.
(2) Next Rs. 50,000 45% of net assets.
40. Note:- In computing net assets, assets acquired by a taxpayer through inheritance will be excluded.
(ii) New tax-payers able to explain their investment: Cases where a return of income is filed for the first time by a taxpayer and the income declared does not conform to the standard specified in para 1(b)(i) above, and the assessee has proof of the source of investment, the return shall be accepted subject to the condition that it shall be open for selection for detailed scrutiny."
41. Since the petitioner in constitutional Petition No. 344 of 1984 was last assessed as the salaried person in 1974-73, he is not covered by sub-paras a, b and c of para 6 of the Scheme as there cannot be comparison of his declared income with the assessed income of the years referred to in the above sub-paras a to c and, therefore, for the purpose of the Scheme he falls under sub-para
(d) of para 6 namely cases of new tax payers.
10. Reverting to the point, whether mere fact that an assessee has submitted his return for the year 1982-83 marked with the remark "immune from detailed scrutiny" would be entitled to the benefit under the Scheme for the year 1983-84 though factually he was not qualified for claiming immunity from detailed scrutiny for the above year 1982-83, it may be observed that while arguing The constitutional petition No. D-129 of 1984 Mr. Rehanul Hassan Naqvi has submitted that the petitioner in the year 1982-83 submitted his return under the caption "immune from detailed scrutiny" and as the respondent department did not object to it and accepted the same the petitioner's case falls under para 6(b) of Circular No. 8 of 1983. In this regard, it may be pertinent to observe that we have examined the petitioner's Case for the year 1982-83 and find that factually the petitioner was not qualified for the Scheme for the year 1982-83 as at the relevant time, namely, at the time of filing of the return in 1982-83 on 26-9-1982 the assessment for the assessment years 1975-76, 1976-77, 1977-78 and 1978-79 were completed as assessed income at Rs. 19,050/-, Rs. 1,02,643, Rs. 1,30,540/- and Rs. 5,13,805/- including the amount of depreciation respectively against the declared income of Rs. 11,192, Rs. 80,034, Rs. 1,21,023 and Rs. 1,34,752/- respectively. According to Mr. Rehanul Hassan Naqvi sub para (b) of para 6 of the Scheme was applicable to the petitioner; whereas according to Mr. Waheed Farooqui sub para (c) of para 6 was applicable.
42. The above sub paras have been reproduced hereinabove. Since we have held that in the year 1982-83 the petitioner was not qualified for claiming the benefit of the Scheme for the year 1982-83, the petitioner's case falls under sub para (c) of para 6, which require that the income declared for assessm ent year 1983-84 should be higher by 20% or more as compared with the highest assessed income in any of the three preceding years. The petitioner in the above petition filed declaration on 8-10-1983 for the year 1983-84 under the scheme for the above year declaring income of Rs.
43. 1,78,108/-. The above figure is admittedly less than 20% or more as compared with the highest assessed income in any of the three preceding years for the reason that the assessment for the years 1978-79 and 1979-80 were already completed by re-assessment on 14-10-1983 and the assessed incomes were Rs. 2,23,000/- and Rs. 3,00,000/- respectively. The petitioner was therefore not qualified for the Scheme for the above year.
44. We are unable to subscribe to the contention of Mr. Rehanul Hassan Naqvi that the mere fact that the respondent department did not object to the filing of the return for the year 1982-83 with the remark "immune from detailed scrutiny", by the petitioner, would constitute an estoppel against the department. The petitioner has not been able to show that on account of the above omission on the part of the Respondent department, he has changed his position to his detriment or dis- advantage.
11. Adverting to the question, whether for the purpose of comparing the declared income with the assessed income the loss could be taken into account, it may be observed that Mr. Sirajul Haq learned counsel for the petitioner in Constitutional Petition No. 674 of 1984 has referred to the definition of income given in clause 24 of Section 2 of the Ordinance, which reads as follows: "(24) "income" includes-
(a) any income profits or gains, from whatever source derived, chargeable to tax under any provision of this Ordinance under any head specified in Section 15;
(b) any loss of such income, profits or gains; and
(c) any sum deemed to be income, or income accruing or arising or received in Pakistan under any provision of this Ordinance, but does not include, in the case of a share holder of a domestic company, the amount representing the face value of any bonus shares or the amount of any bonus declared, issued or paid by the company to its share holders with a view to increasing its paid-up share-capital."
45. A perusal of the above quoted clause indicates that even a loss is included in the definition of the income. However, Mr. Shaikh Haider has referred to note 6 of the Scheme for the year 1983-84, which reads as follows: "6. In case loss was assessed in any of the three immediately preceding years, such year in which loss was assessed shall be ignored for calculation of average, etc. Of the assessed income of the three preceding years. The average, etc. Of the assessed income shall be calculated for such lesser number of years in which the assessment resulted in income."
46. It has been urged by Mr. Shaikh Haider that in view of the above note 6 which is a part of the Scheme, the loss is to be ignored and, therefore, the petitioner in the above petition No. 674 of 1984 was not entitled to the benefit of the Scheme as in the preceding two years they had declared and shown losses and were assessed as such; whereas Mr. Sirajul Haq has submitted that the above note 6 has no application as it speaks of calculation of average, lt may be pointed out that sub paras (a) and (b) of para 6 of the Scheme inter alia speaks of average of assessed income of the preceding three years. The above paras prima facie are not applicable as the petitioner's case is not covered either by sub para (a) or sub para (b) as admittedly the petitioner's cases were not immuned from detailed scrutiny for the years 1981, 1982 and 1983 by virtue of declaring higher income. In this view of the matter, the petitioner's case falls under sub para (c) of para 6, which deals with other cases and provides that if the income declared for assessment year 1983-84 by an assessee is higher by 20% or more as compared with the highest assessed income in any of the three preceding years he will be qualified for the Scheme. If we were to take the petitioner's losses assessed in the assessm ent years 1981-82 and 1982- 83 as income in terms of clause 24 of Section 2 of the Ordinance, the petitioner's declared income Rs. 19,933/- for the assessment year 1983-84 will be admittedly more than 20% as compared with the last assessed income in any of the three preceding years. Since under the scheme no definition of the term "income" has been given, the definition of the above word provided for in clause (24) of Section 2 of the Ordinance shall be applicable.
47. We are inclined to hold that aforesaid note 6 to the Scheme is applicable where the average of the assessed income of the preceding three years is to be worked out. It has been provided that in case loss was assessed in any of the three immediately preceding years, such year in which loss was assessed shall be ignored for calculation of average of the assessed income of the three preceding years, and that the average etc. Of the assessed income shall be calculated for such lesser period of years in which the assessment resulted income. The above note 6 is apparently relatable to above sub clauses (a) and (b) of para 6 of the Scheme and not to sub clause (c) of the above para which does not speak of working out average. We are, therefore, further inclined to hold that petitioner in the above petition was qualified for the Scheme in terms of sub clause (c) of para 6. Even otherwise any Scheme contrary to the provisions of the Act may be ultra vires of the power of the authority entrusted with the power of framing of the Scheme.
48. 12, (a) We are now left with the last submission of M/s. Sirajul Haq and Rehanul Hassan Naqvi that para 6 of Circular No. 14 of 1983 is ultra vires of the power of the Board. It may be advantageous to reproduce the relevant portion of the above Circular, which reads as follows: "CIRCULAR NO. 14 OF 1983 (INCOME TAX)
49. SUBJECT: Self Assessm ent Scheme - Classes of cases set apart for detailed scrutiny for the assessm ent year 1983-84.
50. In accordance with para 5 of Circular No. 8 of 1983- dated 26th June, 1983, Central Board of Revenue has decided to select the following classes and categories of cases for detailed scrutiny for the assessm ent year 1983-84 out of return filed upto 10th October, 1983:-- Company and Non-Company.
(1) Printing, dyeing, calendering, sizing or finishing factories.
(2) Flour Mills.
(3) Tanneries.
(4) Beverage manufacturers (limited companies only).
(3) Commercial importers with imports exceeding Rs. 10 Lacs last year, and
(6) Cases selected by Central Board of Revenue."
51. A perusal of the relevant portion of the above circular indicates that the same has been issued in pursuance of the power reserved by the Board under para 5 of Circular No. 8 of 1983 contalolog the Self Assessm ent Scheme for the assessment year 1983-84. It may also be pertinent to reproduce above para 5 of Circular No. 8, which reads as follows: "5. Selection of cases for Detailed Scrutiny.- (a) The cases or classes of cases will be selected for scrutiny by Central Board of Revenue under a policy to be announced after the receipt of returns.
52. The NTN of cases selected for detailed scrutiny and details of classes which may be selected by the' Central Board of Revenue, shall be displayed on the notice boards in Income Tax Offices. The taxpayers concerned shall be promptly informed. Cases once selected for detailed scrutiny will not be excluded from that category on the^basis of upwards revision of declared income.
(b) Cases where the requirements of the return, as specified in para 2, are not fulfilled and the taxpayer fails to provide such particulars/documents within one month of the date of service of a letter from the Income Tax Officer requisitioning them, would be eligible for being taken up for detailed scrutiny."
53. A plain reading of the above quoted para indicates that the Board has reserved the power to select the cases or class of cases for detailed scrutiny under a policy to be announced after the receipt of the returns and that the cases selected for detailed scrutiny, and details of classes which may be selected by the Central Board of Revenue were to be displayed on the notice board in the Income Tax Offices and the taxpayers were to be promptly informed. It was also provided that the cases once selected for detailed scrutiny would hot be excluded from the category on the basis of upward revision of declared income. It further provides that the cases where the requirements of the return as specified in para 2 of the Scheme were not fulfilled, inspite of the expiry of one month from the service of a letter from the Income Tax Officer, requisitioning them, would be eligible for being taken up for detailed scrutiny. It has been vehemently urged by M/s. Sirajul Haq and Rehanul Hassan Naqvi that the power contained in para 6 of above Circular 14 with the Botrd to select any case is ultra vires of its power.
(b) In furtberence of the above submission Mr. Sirajul Haq has referred to the following cases:
(i) North British and Mercantile Insurance Co., In re (ITR 1937 Volume 5) page 349, in which Costallo J. One of the Judges of the Full Bench of the Calcutta High Court while construing the provisions of Section 18(5) of the Income Tax Act, 1922 and rules 25 and 35 of the rules framed under Section 59 of v the said Act observed that the rules cannot take away the rights conferred in the Act itself though once the rules are published in the Gazette they take effect as if they were enacted under the Act itself. The observation of Justice Wills in the case of Queen v. Bird and others reported in (1898) Q.B. 340) to the effect that "the principles that where a power to make regulations is given to a public body by statute, no regulation made under it can abridge a right conferred by the statute itself" was referred to with approval.
(ii) Mehreen Zaibun Nisa vs. Land Commissioner Multan and others, PLD 1975 S.C 397. In the above case the honourable Supreme Court while construing the provisions of the Land Reforms Regulation, 1972 and the Land Reforms (Punjab Amendment) Ordinance XV of 1972 and while considering the question of delegated Legislation observed as follows: "The absence of standards or guidelines in a statute would not necessarily render the statute unconstitutional, while the conferment of uncontrolled and arbitrary power on the delegate would render the statute void. It is generally accepted that no provision of law can fall within the rule against delegated Legislation if it is based on a policy, discoverable from that provision itself, which has x to be implemented by the person against whom the charge of unauthorised Legislation is made."
(iii) Messrs Firdous Spinning and Weaving Mills Ltd. And 2 others vs. Federation of Pakistan and 2 others, PLD 1984 Kar. 522, in which a Division Bench of this Court while considering the question, whether the Government could withdraw the notification exempting from payment of customs duty bn Automatic-cone-winders and after analysing the case law on the basis of the judgments in the cases of Saleh Mohammad vs. Traffic Manager, Port Trust, Karachi reported in PLD 1961 Karachi 349, the case of Zaibtan Textile Mills Ltd. Vs. Central Board of Revenue reported in 1971 Karachi, 333 and the case of Kruse vs. Jhonson (1898) (2) QB page 91, inferred that notification and bye-laws can be struck down as invalid, if found by the Courts to be unreasonable.
(iv) Shaikh Naseem Anwar vs. Income Tax Officer (Investigation) Circle III, Dacca and another, (1963) Taxation Volume 7 page 358. In the above case a Division bench of the Dacca High Court while construing Section 5(2) of the Income Tax Act (XI of 1922) under which the case of the petitioner was assigned to Income Tax Officer (Investigation) Circle III, held that the above assignment was not in terms of sub-section (2) of Section 5. It -may be advantageous to reproduce sub-section 2 of section 5 and the relevant observation of S.M. Murshad, J (as he then was) on the above aspect: "Section 5(2) The Central Government may appoint a Commissioner of Income Tax for any area specified in the order of appointment and may appoint Commissioners of Income Tax, not more than three in all, each to discharge, without reference to area, and to the exclusion of any Commissioner appointed for any area, the functions of a Commissioner in respect of any cases or classes of cases assigned to him by the Central Board of Revenue."
54. "Observations of S.M. Murshed, J.-It would be apparent from an examination of the language of the impugned order passed on 12th of December, 1961, as shown in Annexure B of the affidavit-in- opposition, that it purports to assign cases to the "Special" Commissioner and not case-were but person-were. There is no limitation upon the cases as to their number, or assessment year or years.
55. The assignment of cases has been expressly made with reference to the petitioner personally and also with reference to a number of other persons. This is nothing but a person-were assignment of work. There is no mention anywhere that it is a mere assignment of pending cases of the petitioner.
56. There is also no. Indication as to assignment of such cases with reference to any assessment year or years. Without any reference to specified cases or pending cases and without any reference to particular assessm ent year or years, it is pure and simple assignment of work appertaining to the petitioner with reference to him (and others) personally, unqualified by any specifically mentioned cases or by any limitation of time-past, present or future. It simply transfers all cases of the petitioner on a personal reference to him without any other qualification or limitation. In these circumstances, it cannot but be held that the aforesaid order is an assignment of work to the "Special" Commissioner person-were and not case-were. To hold otherwise would tantamount to saying that there is no distinction between assignment of work case-were or person-were. We have already quoted the impugned order in existance, and, to us, it seems that there can be no manner of doubt that this is a typical instance of distribution of work person-were, a course unwarranted by the terms of Section 5(2) of the Act.
57. We, therefore, hold that order dated the 12th of December 1961, as embodied in Annexure 'B' to the affidavit-in-opposition is without lawful authority and of no legal validity. It must also, therefore, be held that the further notice dated the 16th of December 1961 as shown in Annexure 'C' of the said affidavit-in-opposition is equally bad in law."
(v) Income Tax Officer (Investigation) Circle III, Dacca and another vs. Shaikh Nasim Anwar and another, 1966 Taxation Volume XIV, page 1, in which the honourable Supreme Court maintained the above Dacca Judgment on different grounds and held that the order assigning jurisdiction to Commissioner signed by a Section Officer on behalf of the Central Board was not legal.
(c) On the other hand Mr. Shaikh Haider, learned counsel for the respondent has referred to the following judgments:
(i) Rao Bahadur Ravulu Subba Rao and others vs. Commissioner of Income Tax, Madras, ITR Volume 30, page 163. In the above case the Indian Supreme Court while maintaining the judgment of the Madras high Court held that the right to apply for registration by a firm under section 26A of the Income Tax Act is to be determined exclusively with reference to the prescription laid down therein and not with reference to any other law. It was held that since under Rules 2 and 6 of the Income Tax Rules, 1922 the application was to be for registration of the firm was to be signed by a partner and not by an attorney. The application signed by an attorney was not competent.
(ii) Commissioner of Income Tax, Bengal v. Messrs Mahaliram Ramjidas, I.T.R. 1940, Volume VHI, page 442, in which the Privy Council while construing Section 34 of the Income Tax Act, 1922 held that in interpreting a section of a taxing Act which deals merely with the machinery of assessment and does not impose any charge on the subject, that construction should be preferred which make the machinery workable. . (ut res valeat potius quam pereat).
(iii) Gurshai Saigal vs. Commissioner of Income Tax, Punjab, I.T.R. 1963 Volume 48, page 1. In the above case the indian Supreme Court while construing Section 18A (3) (6) (8) and (9) of the Income Tax Act and after referring to the above P.C. Case held that the provisions in a taxing statute dealing with machinery for assessment have to be construed by ordinary rules of construction i.e. To say in accordance With clear intention of the legislature, which is to make a charge levied effective. The distinction between a charging section providing machinery for effecting the recovery was also highlighted.
(iv) Messrs Escorts Ltd. Vs. Income Tax Officer, Lahore, 1975 P.T.D. 50, in which a learned Single Judge of Lahore High Court held that in interpreting a section of a taxing statute which deals merely with the machinery of assessm ent and does not impose a charge on the subject, that construction be preferred which make the machinery workable.
(v) Unreported judgment of a Division Bench of this Court dated 23-10-1984 in the case of Messrs Burhan Engineering Company Ltd. vs. The Income Tax Officer and others. In the above case after analysing the case law one of the principles deduced from the cited and discussed cases was that since Section 34 of the Income Tax Act is not the charging section but deals merely with the machinery of assessm ent, that construction should be preferred which make the machinery workable.
13. From the above cited judgments the following principles of law are deduced:-
(i) That the rules framed in pursuance of a provision in a statute cannot take away or abridge a right conferred by the relevant statute.
(ii) That the absence of standards or guide lines in a statute would not necessarily render the statute unconstitutional but conferment of uncontrolled and arbitrary power on the delegate would render such provision as void.
(iii) That a notification and bye-laws issued or framed under a statute can be struck down as invalid if found to be arbitrary and unreasonable.
(iv) The phrase "any cases" or "classes of cases" employed in sub-section (2) of section 5 of the Income Tax Act, 1922 does not warrant the assignment of cases by the Central Government person-were.
(v) That if under a provision of a statute certain benefits are allowed on fulfilment of certain conditions, the person claiming such benefits should comply with the terms and conditions so prescribed, failing which he cannot claim the benefits.
(vi) That a charging Section is to be strictly construed in a taxing Act hut a section providing the machinery of assessm ent like section 34 of the Income Tax Act, 1922 should be construed which make the machinery workable.
14. Having dealt with the above cases, we may revert back to the question, whether para 6 of Circular No. 14 is ultra vires of the power of the Board. The Scheme has been framed as observed hereinabove in pursuance of the power contained in Section 59 read with Section 165 of the Ordinance. Under clause (a) of sub-section (2) the Board has been empowered to prescribe the manner in and the procedure by, which- the income, profits and gains liable to tax and the tax payable under the Ordinance shall be determined even for the person to whom Section 59 is applicable. The Scheme contained in Circular No. 8 at the most can be equated with a' specie, of delegated Legislation. Para 5 of the Scheme empowered the Board to frame a policy to be announced after the receipt of the returns for the cases or classes of cases to be selected for scrutiny. This power can be said to be even inferior than the power of an authority entrusted with the power of the delegated Legislation contained in a provision of the statute. Circular No. 14 of 1983 as observed hereinabove in para 12 was issued in pursuance of the above para 5 of Circular No. 8.
58. It may be observed that paras 1 to 5 of the above Circular No. 14 of 1983 provide the cases or classes of cases which are to be selected for detailed scrutiny by providing the criteria; whereas para 6 purports to confer upon the Board the power to select cases without providing any qualifications or conditions, In our view, this power cannot be spelt out either from Section 59 read with Section 165 (2) or even from para 5 of Circular No. 8 of 1983. It may again be pointed out that para 5 under which the above Circular No. 14 of 1983 has been issued speaks of cases or classes of cases which terms will not cover an individual case, In this view of the matter, above para 6 of Circular No. 14 of 1983 is ultra vires of the power of the Board, whereas paras 1 to 5 of Circular No. 14 are intra vires of the power of the Board. The Board being at the epic or hierarchy provided for in the Ordinance, it can provide that no case will be selected for detailed scrutiny without its approval or approval of any other person specified in the Scheme but it cannot assume the power to select itself an individual case as it will not be covered under clause (a) of sub-section (2) of Section 165 which empowers the Board to prescribe the manner in and procedure by which the income, profits and gains liable to tax and the tax liabilities under the Ordinance shall be determined, In this regard, it may be pertinent to refer to the case of Haji Hashmatullah and 9 others vs. Karachi Municipal Corporation and 3 others reported in PLD 1971 Karachi, 514, in which an order passed by the Commissioner of Karachi as the Controlling Authority under Section 111 of the Municipal Administration Ordinance (X of 1960) was impugned inter alia, on the ground that he had no power to reject the resolution of the Karachi Municipal Corporation for granting the plot to a particular person and to direct the allotment of the same to some other person. A Division Bench of the erstwhile High Court of Sind and Baluchistan while commenting upon the above aspect observed as follows: "Section 111 provides the mechanism for control over the activities of Municipal Committees. The object of the control is to keep watch to ensure that the acts of the Municipal Committees are not against law or public interest as is clear from the section itself. The Controlling Authority, therefore, cannot impose his will or decision except for the attainment of that object. Keeping in view the object of the control and the powers conferred by clauses (a), (b) and (c) to Section 111 subject to the fulfilment of the condition precedent, we are of the view that the doctrine 'Ejusdem generis' is applicable to the present case. Clause (d) is merely ancillary and cannot be taken out of the context, lt, therefore, did not confer unlimited powers on the Controlling Authority but he could impose certain conditions for the transfer of the plot to the petitioners or give certain directions such as reconsideration of the proposal made by the Chairman. Another serious infirmity in the order of the Controlling Authority is that apart from the non-fulfilment of the condition precedent which has already been dealt with and need not be repeated the Controlling Authority did not come to the conclusion that the transfer of plot in favour of the Trust Committee was in public interest but the order was founded upon the earlier commitment made by the Chairman. Mere non-fulfilment of the commitment does not mean involvement of public Interest. Action taken under a statute must fulfil conditions of statute to gain validity. It, therefore, follows that the Commissioner had gone beyond the powers conferred on him and had done something more than what he was required to do under the law."
15. (a) In view of the above discussion we dismiss the following three petitions with no order as to costs as the petitioners were not qualified for claiming immunity from detailed scrutiny under the Scheme.
(i) C.P. No. D-129/1984 as the petitioner's declared income Rs. 1,78,109/-, for the year 1983-84 is not more than 20% as compared with the highest assessed income in any of the 3 preceding years for the reasons referred to hereinabove in para (10).
(ii) C.P. No. D-344/1984. The petitioner's case does not fall within the category of an assessee for the purpose of the Scheme for the reasons recorded hereinabove in para (9).
(iii) C.P. No. D-346 of 1984. The petitioner's declared income for 1983-84 was Rs. 18,463/- as compared to the last assessed income for the year 1982-83 Rs. 19,922/-.
(b) We allow Constitutional Petitions Nos. D-35 of 1984, D-345 of 1984 and D-674 of 1984 with no order as to costs and declare that the petitioners' cases are covered by the Scheme for the reasons already discussed hereinabove in paras (1) (iv), (6), (7), (8) and (11) and, therefore, they are liable to be assessed without any detailed scrutioy unless their cases fall under paras 1 to 5 Of above Circular No. 14 of 1983. We also declare that para 6 of above Circular No. 14 of 1983 is ultra vires of the power of the Board.