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Miscellaneous Applications Nos. 1(IB), 2(IB) and 3(IB) of 1986-87, decided on 7th February, 1987.

--S. 26--Appeal before Tribunal disposed of in absence of appellant-Review application moved on the ground that because of ailment of his mother, applicant had, through a telegram, made a request for adjournment of appeal--Record showing that no such telegram had been received by Tribunal--Copy of postal receipt produced by applicant also was not confidence inspiring as the seal affixed thereon did not bear any date nor the receipt indicated as to whom the telegram was addressed--Entries on receipt also appeared to be fresh--No effort was made by applicant to produce postal record to prove that any such telegram was actually sent and received by Appellate Tribunal or any member of its staff--Order of the Tribunal showing that although appeals were heard in absence of the applicant, yet those were disposed of on merits after taking into consideration all legal and factual issues involved therein--Appellate Tribunal, held, had not made any mistake apparent on the record in hearing the appeal in absence of the applicant--Review application, therefore, was not maintainable in circumstances.

---Ss. 13, 7 & 46--Wealth Tax Rules, 1963, R. 8--Central Board of Revenue Circular No. 8(11)/WT/IT-6/79, dated 18-2-1980--Determination of value of property--Rules made by the executive in exercise of their rule-making power cannot override provisions of statute passed by the Legislature--- Rules are subordinate to the section under which they are made--Where reconciliation between the section and the rules is not possible, the rules must give way--When rules have meaning and effect which is not consistent with the Act under- which they are made they are ultra vires--Mere fact that some Courts of the country have for a few years, adopted a particular interpretation of a legal provision, is, by no means, a sufficient reason for maintaining that interpretation if it is clearly opposed to some general principles--When the Rules provide a specific manner for determination of value of an asset, Central Board of Revenue, held, could not prescribe a different criteria through executive instructions or circulars etc-- Departmental opinions, therefore, were not binding upon a Court which was required to interpret the Rules, although those may be called in for the purpose of reaching a roper interpretation.

Rehabilitation Commissioner, Karachi v. S. A. Majid, Liberty Cinema, Karachi P L D 1956 Custodian (W.P.) 34; Muhammad Din & Sons Ltd. v. Assistant Director, Labour Welfare P L D 1968 Lah. 1012 and M.A. Chowdhury v. Messrs Mitsui O.S.K. Lines, Ltd. P L D 1970 S C 370 ref.

---Ss. 7 & 35--Wealth Tax Rules, 1963, R. 8(3)--Central Board of Revenue Circular No. 8(11)WT/IT-6, dated 18-2-1980--Determination of value of property-- Appeal-- Review--View of Appellate Tribunal that department has to adhere to provisions of R. 8(3), Wealth Tax Rules, 1963 instead of following C. B. R. Circular being not mistake apparent on record, held, was not liable to rectification under S. 35, Wealth Tax Act, 1963.

1983 P T D 148; 1976 P T D 109 and Muhammad Ayub Khan v. Chairman, Inspection Team P L D 1982 S C (A J & K) 102 ref.

--S. 7--Wealth Tax Rules, 1963, R. 8(3)--Central Board of Revenue Circular No. 8(11)W.T./IT-6, dated 18-2-1980, paras. 3 & 4- Determination of value of property- Scope and application of paras. 3 i 4 of Circular detailed

Under paragraph 3 of the Circular No. 8(11)WT/IT-6, dated 18-2-1980 where an assessee does not exercise the option in respect of exemption in favour of a self-occupied house, the value of such house would be worked out at ten times the annual rental value of such property, if the property was ever let out. In case, the property was never let out, the cost incurred on its construction, purchase or acquisition shall be adopted as the value for the purposes of wealth-tax if such cost is not determinable, the value will be taken at the cost, determined by the Provincial Tax Authorities for levy of 'property tax'. But this concession is restricted to one house only. Under para. 4 of the same Circular, it is provided that where an assessee has more than one house for the purpose of his own or his family's residence the valuation of other houses will be made in the following manner:

(a) a property will be valued at ten times of its annual rental value if it was let out during the last five years; and

(b) in other cases, on the basis laid down in sub-rule (3) of Rule 8 of the Wealth Tax Rules.

Where the assessee had shares in more than one house for which reason concession as specified in para. 3 of the said Circular, dated the 18th February, 1980 was not available to him and the house has to be valued in accordance with rule 8(3).

---Ss. 2(iii)(m) & 7--Exemption Scope and application of S. 2(iii)(m).

---Ss. 7 & 26--Determination of value of property--Appeal- -Dismissal- Review--Point not raised in first and second appeal, held, could not be raised or introduced through a review application -be To-re Tribunal as the same was beyond scope of review.

Haji Bostan v. Sahib Shah Ali P L D 1982 S C 102 fol.

Amir Alam Khan, F.C.A. for Applicant.

Maqbool Hussain Shah, D. R. for Respondent.

Date of hearing: 2nd February, 1987.

--The Department being aggrieved of the order of the Commissioner of Wealth Tax (Appeals), Zone-2, Rawalpindi, dated the 21st April, 1983, passed in Wealth Tax Appeals Nos. 502 to 504 relating to the assessment years 1979-80 to 1981-82, had filed three appeals before this Tribunal which were registered as W T. As. Nos. 39 to 41 (IB)/1985-86, and were fixed for hearing on the 13th September, 1986. The notice for the date of hearing of the appeals was duly served upon the assessee, namely, Mr. Ehsanullah Khan (the present petitioner) through registered post (acknowledgment due) on the 6th August, 1986. No one, however, turned up on behalf of the petitioner on the date of hearing nor any application for adjournment was received. Hence, by our order, dated the 13th September, 1986, we disposed of the appeals in absence of the petitioner by restoring y the order of the Wealth-tax Officer in respect of petitioner's immovable assets. The present applications have, therefore, been moved by the petitioner for review of our aforesaid order on the ground that because of ailment of his mother, he had, through a telegram, made a request for adjournment of the appeals.

2. In support of his contentions the petitioner produced a photo copy of the telegraphic message which he had sent to the Appellate Tribunal for adjournment of the date of hearing and a photo copy of the receipt issued by the Telegraph Department. From the record, however, it is amply clear that no such telegram had been received by the Tribunal. The copy of the postal receipt produced by the petitioner also does not inspire any confidence as the postal seal affixed thereon does not bear any date nor the receipt indicates as to whom the telegram was addressed. The entries on the receipt also appear to be quite fresh. Further, no effort has been made to produce the postal record to prove that any such telegram was actually sent and received by the Appellate Tribunal or any member of its staff. Therefore, the Appellate Tribunal had not made any mistake apparent on 'the record in hearing the appeal in absence of the petitioner who had abstained on the date of the hearing despite service of notice. It is also clear from the order of the Tribunal, dated the 13th September, 1986, that although the appeals were heard in absence of the petitioner, those were disposed on merits after taking into consideration all legal and factual issues involved therein. In this connection, we had heard the learned Departmental Representative and had also examined the relevant record.

3. Mr. Amir Alam Khan, F. C. A., the learned Authorised Representative of the petitioner, however, contended that even on merits, the order of the Appellate Tribunal need to be reviewed as certain mistakes had been made by it in passing the order. He explained that the valuation of the petitioner's house bearing No. 33-A, Satellite Town, Sargodha, was disclosed at Rs.48,000 for all the three years under consideration, but was determined by the Wealth-tax Officer at Rs.4,20,000, Rs.4,50,000 and Rs.4,80,000 for the assessment years 1979-80, 1980-81 and 1981-82 respectively. On appeal, the learned Commissioner of Wealth Tax (Appeals) relying upon the Central Board of Revenue's Circular No.8 (11)/WT/IT-6/79, dated the 18th February, 1980, accepted the disclosed valuation of the house as was determined by the Provincial Taxation Authority. But on second appeal preferred by the Department, the Appellate Tribunal reversed the finding of the learned Commissioner of Wealth Tax (Appeals) on the ground that the aforesaid Circular could not override the provisions of Rule 8(3) of the Wealth Tax Rules, 1963, which provides that determination of value of property should be made in accordance with its nature and size, the amenities available and the price prevailing for similar property in the same locality or neighbourhood. The learned Authorised Representative, however, relying upon Navnit Lal C. Javeri v. K.K. Sen, Appellate Assistant Commissioner of Income-tax, Bombay (1965) 56 ITR 198 (S C Ind.) contended that the Circulars issued by the Central Board of Revenue were binding on all officers and persons employed in execution of income-tax law irrespective of any conflict with the statutory provisions.

4. In that case, the assessee, a shareholder of a private limited company, took a loan of Rs.4,00,000 from the company sometimes during 1955. In the meanwhile, by virtue of Finance Act, 1955, section 2(6-A) (e) and section 12(1-B) were introduced in the Indian Income-tax Act, 1922. Under 2(6-A) (e) ibid, the advances and loans to shareholders were included in the definition of 'dividend', while by virtue of the aforesaid section 12 (1-B) such dividend income was made liable to tax in the previous year relevant to the assessment year ending on the 31st March, 1956, if an advance or loan remained outstanding on the 1st day of such previous year. At the time of introducing these amendments in the Parliament, the Minister of Revenue and Civil Expenditure gave an assurance that outstanding loans and advances which were otherwise liable to be taxed as dividends in the assessment year 1955-56 will not be subjected to tax if it is shown that they had been genuinely refunded to the respective companies before the 30th June, 1955. On the basis of this assurance a circular was issued by the Central Board of Revenue on the 10th May, 1955. However, the Income-tax Officer while making assessment of the assessee's Company included a sum Rs.2, 83,126 in the income representing accumulative profits of the company. This assessment was objected to by the assessee in appeal and after failing before the Appellate Assistant Commissioner and Income-tax Appellate Tribunal challenged the validity of section 12 (1-B) ibid read with section 2 (6-A) (e) of the Indian Income-tax Act, 1922 before the High Court in Constitutional petition. The High Court rejected the assessee's contention and held the aforesaid provisions to be constitutionally valid legislation. When the matter came up before the Supreme Court, the Chief Justice Mr. Gajendragadker opined that the Central Board of Revenue's Circular was binding on all officers and persons employed in execution of the Act whereunder notwithstanding the stringent provisions of section 12 (1-B) exemption was accorded to the companies and their shareholders if the past loans were genuinely refunded to the companies. The learned Judge, however, aggreeing with the High Court upheld the validity of the new provisions. The other member of the Bench, however, did not concur in with this opinion and held sections 2 (6-A)(e) and 12 (1-B) ibid to be void as these had imposed unreasonable restrictions on the fundamental rights to hold property under Articles 19(1)(f) of the Indian Constitution. Nevertheless the finding of Mr. Justice Gajendragadker was consistently followed in Ellerman Lines Limited v. Commissioner of Income-tax, West Bengal (1971) 82 ITR 913 (S.C. Ind) and K.P. Varghese v. Income-tax Officer Ernakulam (1981) 131 ITR 597 (S. C. Ind.).

5. From the detailed examination of the aforesaid cases, it is, however, amply clear that these decisions do not lay down that notwithstanding any conflict between a circular of the Central Board of Revenue and statute or rules framed thereunder, the former will prevail. It is rather a fundamental principle of law that the rules made by the executive in exercise of their rule-making power cannot override the provisions of the statute passed, by the Legislature. Rehabilitation Commissioner Karachi v. S. A. Majid, Liberty Cinema, Karachi PLO 1956 Custodian (W.P.) 34. It was also laid down in Muhammad Din & Sons Ltd. v. Assistant Director, Labour Welfare PLO 19688 Lah. 1012 that it is a cardinal principle of interpretation of statutes that the rules are subordinate to the section under which they are made. If reconciliation between the section and the rules is not possible, the rules must give way. And if they have meaning and effect, which is not consistent with the Act under which they are made, they are ultra vires. Therefore, as held in M.A. Chowdhury v. Messrs Mitsui O.S.K. Lines Ltd. PLO 1970 SC 370 'the mere fact that some Courts of the country have for a few years, adopted a particular interpretation of a legal provision, is by no means, a sufficient reason for maintaining that interpretation if it is clearly opposed to some general principles.

6. Under section 13 of the Wealth Tax Act, 1963, all officers and persons employed in execution of that Act are required to observe and follow the orders and instructions and directions of the Central Board of Revenue. But such orders and instructions or directions cannot be given to the Appellate Assistant Commissioner or of Commissioner so as to interfere in their discretion in exercise of their appellate functions: Further such orders, instructions, etc. cannot be issued in conflict with the statutory provisions or the rules made thereunder. On the other hand, the Wealth-tax Rules, 1963, were made in exercise of the powers conferred under section 46 of the Act. Under this provision, the rule-making authority had particularly been empowered to frame rules to specify 'the manner in which the market value of any asset may be determined'. Therefore, when the rules provide a specific manner for determination of value of an assets Central Board of Revenue cannot prescribe a different criteria through executive instructions or circulars nor in this regard the judicial forums are bound by such instructions, etc. In this respect, we are also fortified by Bashir Ahmad v. Muhammad Ali Khan Chowdhury etc. PLD 1960 SC 195 wherein it was held by the Supreme Court that the departmental opinions are 'clearly not binding upon a Court which is required to interpret the rules' although those 'may be called in aid for the purpose of reaching a proper interpretation'.

7. In fact, in the instant case, the issue which needs determination is whether by following rule 8 (3) of the Wealth Tax Rules, 1963, in working out the value of the property in disregard to the Central Board of Revenue's Circular No. 8 (11)WT/IT-6/79, dated the 18th February, 1980, the Appellate Tribunal had made any mistake. In this connection, it is well-settled that a decision on debatable questions of law is not a mistake apparent on record. In Omega Sports & Radio Works v. Commissioner of Income-tax 1983 P T D 148, it was held that mistake apparent on the record must be obvious and patent mistake and not established by long drawn process or reasoning on the points on which there may conceivably be two opinions. Similar view was taken by the Indian Supreme Court in an earlier decision in T. A. Ralaram, Income-tax Officer, Company Circle-IV Bombay v. Volkart Brothers 1976 P T D 109. Therefore, the Appellate Tribunal's finding to the effect that while determining the value of the house, Commissioner of Wealth Tax (Appeals) should have adhered to the provisions of Rule 8(3) of the Wealth-tax Rules, 1963, instead of following the Central Board of Revenue's Circular No. 8(11)WT/IT-6/79, dated the 18th February, 1980, may be disputed as having more than one opinion, but definitely, this finding was not liable to rectification under section 35 of the Wealth Tax Act, 1963. Because as laid down in Muhammad Ayub Khan v. Chairman Inspection Team P L D 1982 SC (Azad J&K) 27 an issue 'adjudicated and decided even on an erroneous view of the matter, cannot be regarded as a mistake apparent on the face of the record so as to invite interference in review jurisdiction.

8. Even otherwise, the aforesaid Circular was of not much help to the petitioners as he was owner of more than one house or part thereof. Under paragraph 3 of the said Circular where an assessee does not exercise the option in respect of exemption in favour of a self-occupied house, the value of such house would be worked out at ten times the annual rental value of such property, if the property was even let out. In case, the property was never let out, the cost incurred on its construction, purchase or acquisition shall be adopted as the value for the purposes of wealth tax. If such cost is not determinable, the value will be taken at the cost, determined by the Provincial Tax Authorities for levy of property tax'. But this concession is restricted to one house only. Under para. 4 of the same circular, it is provided that 'where an assessee has more than one house for the purpose of his own or his family's residence, the valuation of other houses will be made in the following manner:--

(a) A property will be valued at ten times of its annual rental value if it was let out during the last five years; and

(b) in other cases, on the basis laid down in sub-rule (3) of Rule 8 of the Wealth-tax Rules.

9. In the present case, the petitioner has admittedly shares in more than one house. Therefore, where the concession as specified in para. 3 of circular, dated the 18th February, 1980 was not available to him and the house has to be valued in accordance with rule 8 (3) ibid.

10. The learned Authorised Representative next contended that the assessee had only one-fourth share in the house No.33-A, Satellite Town, Sargodha. Hence, in view of the Explanation (iii) to clause (m) of section 2 of the Wealth-tax Act, 1963, the said property should have been assessed as an A.O.P., and that its valuation should have not been assessed in the hands of the petitioner in his individual capacity. It may, however, be seen that proviso to the said Explanation clearly provides that this treatment was only available if wealth tax was charged on such assets.-

11. Explanation (iii) to clause (m) of section 2 ibid was inserted by virtue of the Finance Ordinance, 1980, while the proviso was added in the next year. In this connection, the Finance Minister had, in his' Budget speech, dated the 26th June, 1981, clarified that this proviso was added as some persons had started fragmenting their total investments to avoid payment of wealth tax. In order to avoid such tendency, it was provided that the wealth tax shall be payable by an individual if he owns more than one property'. Admittedly the said house was not assessed as an A.O.P. or charged to tax under the Wealth-tax Act, 1963. Therefore, the petitioner could not claim exemption under Explanation (iii) ibid without paying tax on the house as an A. O. P.

12 Another fact which needs consideration is that this very plea was not taken before the learned Commissioner of Wealth-tax (Appeals) nor was raised before the Wealth Tax Officer. Therefore, in the garb of rectification of mistake, the order of the Appellate Tribunal could 3 not be assailed at this stage. In this respect, we draw support from Haji Bostan vs Sahib Shah Ali P L D 1982 SC 102 wherein it was held by the Supreme Court that a point which was not raised before the High Court during the course of hearing of the Regular Second Appeals, could not be allowed to be raised or introduced through a review application as the same was beyond the scope of review.

13. In view of the aforesaid discussion we are of the considered opinion that, since no mistake apparent on the record had been made by the Appellate Tribunal in its order dated the 13th September, 1986, the said order does not require any rectification or review as was sought by the petitioner.

14. All the three petitions are accordingly dismissed.

M. B. A./366/T Appeal dismissed.

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