TAHIR ABBAS VS GOVERNMENT OF PUNJAB, 2016 PTD-LAHORE-HIGH-COURT-LAHORE 1470 (2016)

(a) Punjab Agricultural Income Tax Act (I of 1997)---

----Ss. 3, 4 & 2---Punjab Agricultural Income Tax Rules, 2001, Rr. 5, 6, 12 & 13---Assessment of agricultural income tax---Procedure---Filing of Return of income---Scope---Limitation for assessment---Best judgment assessment---Assessment orders by the Collector for several different assessment years---Validity---First assessment order passed by the Collector was for the assessment year 2012-13 i.e. 01-07-2012 to 31-06-2013---Said order was passed on 12-01-2016 which was time barred as more than two years had passed from the date of impugned order---No assessment or recovery could be made for said assessment year---Assessment order was to be passed at the end of the assessment year and thereafter the tax be collected---Assessment year would start from July and end twelve months thereafter---Authorities were directed to ensure to follow the requirements of law and pass assessment orders for each assessing year at the prescribed time---Collector had to determine as to which tax was higher to be paid on cultivated land or on agricultural income---Collector must pass speaking order to show as to how he calculated and assessed the tax from the owner of the property---Nothing was on record to explain and justify the impugned assessment orders which were not a speaking order---Assessment orders did not give any detail on the basis of which the figures had been calculated and tax had been assessed---Agricultural income tax return filed by the owner of the land must be taken into consideration for assessment of agricultural income tax---Every owner of the land had to file a return on or before 30th of December following income year---Collector could extend the date for filing of returns but no extension of time could be given beyond 30 days---Where no return was filed, notice must be issued to the owner by the Collector requiring the return to be filed---If no return was filed, then the Collector could pass assessment order based on his "best judgment assessment"---Impugned assessment orders passed by the Collector were set aside and cases were remitted for passing fresh order after following the required process of law---Constitutional petition was allowed in circumstances.

(b) Administration of justice---

----Mandate of the law must be strictly followed.

Saeed Akhtar Khan, Ch. Muhammad Idrees, Intizar Hussain, Mian Abdul Aziz, Iqbal Khurshid Mughal, Mian Kashif Abbas, Muhammad Shafique Anjum, Ch. Zulfiqar Ali, M.A. Ghaffar ul Haq, Ch. Irfan Sadiq Tarrar, Muhammad Kamran ur Rashid Meo, Sh. Muhammad Akram, Ghulam Rasool Sail and Mian Tariq Husain for Petitioners.

Ch. Sultan Mahmood, AAG, with M. Khalid, AC Kamalia and Rizwan Nazir, Deputy Secretary (Recovery Board of Revenue, Punjab for Respondents.

Date of hearing: 16th March, 2016.

JUDGMENT

AYESHA A. MALIK, J.---This common judgment decides upon the issues raised in the Writ Petitions detailed in Schedule "A", appended with the judgment.

2.All the Petitioners are land owners in Tehsil Kamalia, District Toba Tek Singh. They have been issued assessment orders by Assistant Commissioner, Kamlia ("AC") who is the Collector of the Tehsil in terms of the Punjab Agricultural Income Tax Act, 1997 ("Act"). The assessment orders pertain to the years 2012-13, 2013-14 and 2014-15. The case of the Petitioners is that they have paid agricultural income tax as per Section 3(1) of the Act-read with the First Schedule, hence they are not liable to pay agriculture income tax on second time as demanded by the AC. The other contention of the petitioners is that a relief package in terms of letters dated 22.9.2015 issued by the Director General, Directorate General Agriculture (Ext. & AR), Punjab and 5.8.2016 issued by the Additional Secretary (Admn), Government of Punjab, Agriculture Department, Lahore was given to the farmers for losses occurred in the previous years which has not been considered by the AC while passing assessment orders. Moreover the orders passed by the AC have failed to take into consideration the process provided under the Act for the purposes of assessment of agricultural income tax. It is their case that without issuance of notices and hearing the parties, the impugned orders have been passed for different assessment years. More importantly the orders are not speaking orders and have failed to follow the procedure laid down under the Act and the Punjab Agricultural Income Rules, 2001 ("Rules"). In this regard, they have relied upon the two judgments of this Court dated 26.10.2015 passed in W.P. No.15628/2015 and 3.2.2016 passed in W.P. No.87/2016 to urge that this matter has been repeatedly decided by this Court. However the Collector of Tehsil has issued the assessment orders in absolute disregard of this Court's judgments as well as in violation of the Act and the Rules.

3.Learned counsel for the Petitioners argued that the assessment orders raise a demand for agriculture income tax without making any assessment as required under Sections 3 and 4 of the Act. Learned counsel further argued that the orders failed to show on which date they have decided what formula has been applied and how the amounts have been calculated. They argued that the figures on the assessment order appear to be random figures as no basis have been given as to from where these amounts have been taken and how they have been calculated. They have also pointed out item No.7 of the order to show that income tax has already been paid and this has not been taken into consideration. It has been argued that the Act as well as the Rules provide a limitation for assessment to be made whereas the assessment orders pertaining to the year 2012-13 are time barred order as no assessment can be made after the expiry of two years from the end of the assessment year in which agriculture income was first assessable. Learned counsel argued that without following the process and without making a proper assessment, the so called assessment orders are in absolute violation of the law prescribed for the levy, assessment and collection of agricultural income tax.

4.Report and para wise comments have been filed in W.P. No.4406/2016 which have been relied upon for all the petitions. Learned Law Officer at the very outset, explained that this is the first year in which an effort has been made by the Respondents to levy, assess and collect agriculture income tax from the land owners as provided under the Act and the Rules. Learned Law Officer further stated that the orders passed by the AC provide the heads under which the amounts have been calculated and prior to the issuance of the assessment orders, notices were issued to the Petitioners. However, the Petitioners did not respond to any of the notices. He further argued that a comprehensive effort has been made to levy the tax as per the law.

5.Assistant Commissioner/Collector Tehsil Kamalia is also present in Court along with the original record pertaining to the cases of the Petitioners. He stated that he issued the notices to the Petitioners in December 2015 and thereafter passed the assessment orders on 12.1.2016. When questioned that there are three different assessment orders for three different assessment years, he clarified that all assessment orders for the different assessment years were issued on 12.1.2016. With respect to the process followed by him, he stated that notices under Rule 6 of the Rules were issued to the Petitioners for filing of returns. Since they did not comply with the said notices, the assessment orders were passed in January 2016. With regard to the calculations made and the figures provided in the impugned orders, the AC while relying upon the original files stated that he has looked at the girdawiries for calculation of tax on cultivated land and that his calculations are evident from the case files as he has taken the information from the relevant documents of the Petitioners. He further explained that guidelines have been issued on the procedure for assessment and collection of agricultural income tax which has been followed by him.

6.Heard and record perused.

7.All the cases pertain to Tehsil Kamalia, District Toba Tek Singh and have been assessed by the AC who is present in Court. At the very outset, the Respondents were confronted with two judgments of this Court which provide detail procedure to be followed under the Act and the Rules which have not been followed. The Respondents have no response to this query. It appears that the entire exercise of passing assessment orders was carried out without implementing the judgments of this Court.

8.The first issue before the Court is with respect to the question of limitation. Admittedly, all the assessment orders were passed on 12.1.2016. The assessment orders pertain to the assessment years 1.7.2012 to 30.6.2013, 1.7.2013 to 30.6.2014 and 1.7.2014 to 30.6.2015. The Act defines "assessment year" in Section 2(ac) and income year in Section 2 (da) of the Act as follows:--

Assessment year "The period of twelve months beginning on the first day of July next following the income year".

Income year "The financial year next preceding the said assessment year."

According to Section 2(j) of the Act "tax year" means the agricultural year as defined in the Punjab Land Revenue Act, 1967. "Agricultural year" means the year commencing on the first day of July or on such other date as the Board of Revenue, with the approval of Provincial Government, may by notification appoint for any specified area. Thereafter the assessment year starts from first of July and ends twelve months thereafter. Rule 13 of the Rules provides that no assessment shall be made after the expiry of two years from the end of the assessment year in which total agricultural income was first assessable. The first assessment order is for the assessment year 2012-13, meaning from 1.7.2012 to 31.6.2013. Given that the order was passed on 12.1.2016, the assessment order for the 2012-13 is clearly a time barred order as more than two years have passed from the date of the impugned order issued on 12.1.2016. Hence no assessment or recovery can be made for this assessment year by the Respondents.

9.The next question that arises is with respect to the assessment years 2013-14 and 2014-15. Admittedly, the assessment orders were all passed on the same date being 12.1.2016, meaning that assessment for the year 2013-2014 and the assessment for the year 2014-15 were made in January 2016. The only justification offered for this wrong practice is that an effort has been made to streamline the process and start assessing agricultural income tax as required under the Act and the Rules so as to recover revenue due to the Petitioners. In this regard, the law clearly requires that at the end of the assessment year, an assessment order shall be passed and thereafter the tax shall be collected. The assessment year starts in July and ends twelve months thereafter. Instructions to this effect are also provided in the form of guidelines issued by the Respondents, however, it was clearly not followed by the AC. The mandate of the law must be strictly followed. The Respondents are directed to ensure that they follow the requirements of the law and pass assessment orders for each assessing year at the prescribed time as required under the Act and the Rules, so that at the end of the every assessing year the tax pertaining to that particular tax year can be collected. Furthermore in future the practice of passing assessment orders for several different assessment years in one go should be avoided by the Respondents.

10.The other challenge to the assessment orders is that these are not speaking orders and that the prescribed process was not followed. Section 3(i) of the Act provides that agricultural income tax shall be levied, assessed and collected in respect of agricultural income of the owner, at the rate specified in the First Schedule to the Act. The explanation provides that the tax calculated under the First Schedule is based on the cultivated land for a tax year. Subsection (3) of Section 3 provides that agricultural income tax shall be levied, assessed and collected for each assessment year on the total agricultural income at the rate specified in the Second Schedule and subsection (4) provides that out of the two taxes assessed under subsections (1) and (3) to Section 3 of the Act, the assessee shall be liable to pay the tax, whichever of the two shall be greater. This means that the AC was required to make an assessment of tax year under Section 3(1) and (3) of the Act. He has to determine which tax is higher, meaning thereby the Petitioners have to pay tax on cultivated land or on agricultural income and he could only then raise the demand for agricultural income tax. The impugned orders have not carried out this exercise and are not issued in accordance with Section 3 of the Act as there is no assessment under Section 3(1) or (3). It also appears that in some cases demand for tax on cultivated land and agricultural income has been raised.

11.The AC has totally misunderstood the function of assessment of agricultural income tax and the order to be passed thereunder. For the purposes of assessment and collection of tax Sections 4, 4-A, 4-B, 4-C and 4-D of the Act provides the mechanism to be followed on the basis of which an assessment has to be made by the Collector of the Tehsil. While adopting the procedure, a speaking order must be passed by the Collector of the Tehsil to show how he calculated and assessed the tax from the owner of the property. The order must detail everything and reliance on the record is misconceived. The assessment order is an appealable order, hence it must provide the details on the basis of which an appeal can be filed. For taxing purposes, the Respondents cannot rely on the record to explain and justify an assessment order. The orders impugned before the Court are not speaking orders and do not give any detail on the basis of which the figures have been calculated and ultimately tax has been assessed. The concept of assessing tax requires an application of mind by the adjudicating officer. The Collector of the Tehsil must document the basis of his calculations, the documents relied upon and show his calculations. Assessment to tax is made on an annual basis and must take into consideration the returns filed by the owner of the land as required under Section 4 of the Act read with Rule 5 of the Rules. Every owner of land is required under the Act to file a return in terms of Form-A on or before 30th day of December following income year. The Collector of the Tehsil can extend the date for filing of returns to facilitate the taxpayer but no extension of time can be given beyond 30 days. Where no return is filed notice must be issued to the owner by the Collector of the Tehsil requiring the return to be filed. If no return is filed he can pass an assessment order based on his best judgment in terms of Rule 12 of the Rules. Depending on the best judgment assessment order must be a speaking order wherein the Collector of the Tehsil must show the basis of his calculation for the purposes of assessing the total agricultural income of the assessee and explaining how he has determined the amount of tax that is payable.

12.In these petitions, the AC stated that the impugned orders are based on his best judgment under Rule 12 of the Rules as no returns were filed by any of the Petitioners. He further states that he issued notices in December; 2015 and passed the assessment orders in January, 2016. Learned counsel for the Petitioners admitted that the Petitioners have not filed their tax return as required under the Act. In this regard, it has already been held that filing of agricultural tax returns is mandatory and the assessing officer that is the Collector of the Tehsil must consider the returns filed by the owners of the land before passing the assessment orders.

13.With respect to W.Ps. Nos.6376, 6377, 6378, 6379 and 6677 of 2016, it is stated that these Petitions raise the common question of law as stated in the preceding paragraphs, however, these Petitions pertain to Tehsil Sargodha, District Sargodha, hence are decided in the same terms thereof.

14.In W.Ps. Nos. 7602, 8239 and 8392 of 2016 challan forms have been issued to the Petitioners along with notices requiring the amounts to be paid within seven days. In these cases, the Petitioners have not filed any return and there is no assessment orders. Every owner of land is required under the Act to file returns in terms of Form-A on or before 30th day of December following income year. He is liable to pay tax with respect to agricultural income in one income year. He may by means of a challan make payment and also furnish his return so that the liability can be assessed. Rule 4 of the Rules when read with Section 3 of the Act clearly provides that the tax that is required to be paid by the taxpayer is either based on the assessment made under Section 3(1) or based on the assessment made under Section 3(3) whichever is higher on a taxpayer who has declared the agricultural income in the income tax returns filed under the Income Tax Ordinance, 2001 at the rate specified in the Second Schedule as per the challan issued. However, notwithstanding the same the returns will still have to be filed and an assessment order will still have to be made on the basis of which it can be determined whether any balance tax is due from the owner of the land. It is noted that as per the earlier judgments of this Court dated 26.10.2015 and 3.2.2016, it has already been stated that filing of returns and issuance of assessment orders is mandatory even under Section 3(b) of the Income Tax Ordinance, 2001 and amounts can only be recovered from the owners of the land after an assessment order has been issued. The Respondents have developed a wrong practice of seeking recovery of agricultural income based on the issuance of challan without issuance of an assessment order.

15.In view of the aforesaid, these petitions are allowed. The impugned assessment orders passed by the AC are set aside and the cases are remitted to the AC concerned for passing fresh orders after following the required process of law.

Schedule - A

Details of Writ Petitions mentioned in judgment

Dated 16.3.2016 passed in W.P. No.440/2016

ZC/T-8/LPetition allowed.