| Case ID |
179bdb4f-99a8-4dc2-9a0c-4b18c8ce1081 |
| Body |
View case body. Login to View |
| Case Number |
Civil Appeal No. K-1 of 1983 |
| Decision Date |
May 16, 1988 |
| Hearing Date |
|
| Decision |
The Supreme Court of Pakistan overturned the Sindh High Court's decision dated 19-12-1982, which had dismissed the Constitutional petition filed by Edulji Dinshaw Limited challenging the legality of notices issued under Section 65 of the Income Tax Ordinance, 1979. The Supreme Court declared both the notices and the subsequent assessment orders dated 26-12-1982 as illegal and beyond the jurisdiction of the Income Tax Officer. The court emphasized that Edulji Dinshaw Limited was a property holding company, not engaged in the business of buying and selling properties, as evidenced by its consistent assessments under Section 9 of the Income Tax Act, 1922. The company's transactions were fully disclosed in its tax returns, and the Income Tax Officer had no legal basis to reopen the assessments for the years 1971-72 to 1980-81 under Section 65. Furthermore, the Supreme Court highlighted that the assessment orders were issued after a stay order was passed on 23-12-1982, rendering them null and void. The court also noted the lack of prima facie evidence of any new facts that would justify reopening the assessments. Consequently, the court restrained the Income Tax Officer from taking any further action against Edulji Dinshaw Limited related to these notices, affirming the protection of legitimate tax disclosures and the finality of completed tax assessments. |
| Summary |
In the landmark decision of Civil Appeal No. K-1 of 1983, adjudicated by the Supreme Court of Pakistan on May 16, 1988, Edulji Dinshaw Limited successfully challenged the issuance of notices under Section 65 of the Income Tax Ordinance, 1979, and the ensuing assessment orders dated December 26, 1982. The core issue revolved around the contention by the Income Tax Officer that Edulji Dinshaw Limited, a family-owned private limited company, was illicitly engaged in the business of buying and selling properties, thereby attracting higher tax liabilities under Section 65. However, the company maintained that it functioned solely as a property holding entity, with its activities limited to acquiring, holding, and leasing immovable properties belonging to family members, as explicitly stated in its Memorandum and Articles of Association.
Throughout its 30-year operational history, Edulji Dinshaw Limited had consistently filed its Income Tax Returns with detailed disclosures of property transactions, categorizing proceeds from property sales and government compensations as capital gains under Section 9 of the Income Tax Act, 1922. These transactions were not frequent enough to suggest a trading business but were instead indicative of prudent investment maneuvers. The company emphasized that no properties were purchased from external parties, and all sales were transactions among family members, further substantiating their stance as a non-trading entity.
The Supreme Court meticulously reviewed the arguments and evidence presented. It underscored that the Income Tax Officer lacked the jurisdiction to reopen assessments solely based on a change of opinion, especially when no new evidence of concealment or suppression of facts was brought forth. The court referenced multiple precedents from both Indian and Pakistani jurisprudence, reinforcing the principle that tax authorities cannot undermine completed and disclosed assessments without substantial justification.
Moreover, the court condemned the procedural impropriety exhibited by the Income Tax Officer, who proceeded to issue assessment orders post the execution of a stay order by the court. This action rendered the orders null and void, as affirmed by prior cases like Abdul Rashid Khan and others. The Supreme Court highlighted that once a tax assessment is finalized based on full disclosure and conscious consideration by tax authorities, it should remain conclusive unless incontrovertible new evidence arises.
The judgment also touched upon the ethical conduct of tax officers, dismissing allegations of mala fides due to the lack of a detailed hearing for legal arguments. The court stressed the importance of adhering to established legal protocols and ensuring that taxpayer rights are protected against arbitrary and jurisdiction-violating actions by tax authorities.
In essence, the Supreme Court's decision fortified the legal safeguards for companies that maintain transparent and honest tax practices, preventing undue harassment by tax officials. It reinforced the doctrine that tax assessments, once duly completed and disclosed, should be esteemed final, promoting a fair and just taxation system. This case serves as a pivotal reference for future disputes involving tax assessments and the jurisdictional limits of tax authorities in Pakistan. |
| Court |
Supreme Court of Pakistan
|
| Entities Involved |
Income Tax Officer,
Edulji Dinshaw Limited
|
| Judges |
ABDUL KADIR SHAIKH,
S.A. NUSRAT,
ZAFFAR HUSSAIN MIRZA
|
| Lawyers |
Khalid Anwar,
S.M. Abbas,
Mansoor Ahmed Khan,
M.S. Ghaury,
Muzaffar Hassan
|
| Petitioners |
EDULJI DINSHAW LIMITED
|
| Respondents |
Income Tax Officer
|
| Citations |
1990 SLD 155,
1990 PTD 155,
(1990) 61 TAX 105,
1990 PLD 399
|
| Other Citations |
Abdul Rashid Khan and 2 others v. Mst. Nasim Akhtar 1974 S C M R 509,
Calcutta Discount Co., Ltd, v. Income-tax Officer A.I.R. 1961 S C 372,
Gemini Leather Stores v. Income-tax Officer A.I.R. 1975 S C 1268,
Parashuram Pottery Works v. Income-tax Officer A.I.R. 1977 S C 429,
Income-tax Officer v. Madnani Engineering Works Ltd. 1979, 118 I.T.R. 1,
Commissioner of Income-tax Delhi v. M.K.S. Pratap Kumari of Alwar 1982 P T D 59,
Dalal Consultants and Engineers Pvt. Ltd. v. Miss D.V. Bapat, Income-tax Officer and another 1983 P T D 317,
Wyeth (India) Pvt. Ltd. v. N.D. Bhatt. Inspecting Assistant Commissioner of Income-tax and another 1982 Vol. 137 I.T.R. 20,
Jawaharlal Daraybuxmal v. Commissioner of Income-tax M.P. 1982 Vol. 137 I.T.R. 54,
Harshvadan Nabgaldas v. Income-tax Officer, Ahmedabad and another 1982 Vol. 137 I.T.R. 147,
Premier Cloth Mills Ltd. v. Sales-tax Officer 1972 S C M R 257,
Usmania Glass Sheet Factory v. Sales-tax Officer P L D 1971 S C 205,
Nagina Silk Mills Ltd. v. Income-tax Officer P L D 1903 S C 322,
Hussain Sugar Mills Ltd. v. Pakistan 1981 P T D 169,
Lakshminarayan Ram Gopal & Sons Ltd., v. Government of Hyderabad 1954 Vol. 25 I.T.R. 4-19 at page 4W,
Dr. H.K. Mahtab v. Income-tax, Officer 1981 P T p 74,
Sham Narain & another v. Income-tax Officer District VI11 Ward F (1) New Delhi and others 1981 Vol. 131 I.T.R. 105,
Eruch Maneckji and others v. Income-tax, Officer 1979 P T D 461,
K.M.O. Chettiyar Firm v. Commissioner of Income-tax 1934 I.T.R. 155,
1966 Vol. 60 1.T.R. 65,
1960 (62) I.T.R. 578,
A.I.R. 1959 S C 1252,
1965 (57) I.T.R. 21,
1957 (37) Taxation 233,
1976 (102) I.T.R. 202,
40 Tax Cases 523,
38 Tax Cases 203,
A.I.R. 1965 S C 1905,
1947 (15) I.T.R. 50,
1979 P T D 465,
PICIC v. Commissioner of Income-tax 1980 P T D 322,
Commissioner of Income-tax v. Habib Bank 1985 S C M R 284,
British Tax Encyclopaedia Vol. 5 pages 1013-1014,
Californian Copper Syndicate v. Harris 1903-1911 5 T C 159 ref.
|
| Laws Involved |
Income Tax Ordinance, 1979,
Constitution of Pakistan, 1973
|
| Sections |
65,
185(3)
|