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I.T.As. Nos.1232/KB and 1233/KB of 1983-84, decided on 30th June, 1987.

---S. 23--Workers Welfare Fund Ordinance (XXXVI of 1971), S.4- Necessary for Income-tax Officer to pass an order under Workers' Welfare Fund Ordinance 1971, at the time of making an assessment under S.23 of the Act--Where for some reasons Income-tax Officer failed to pass an order at that point of time, he should do the needful as soon thereafter as may be:

It is necessary for the I.T.O. to pass an order under Workers' Welfare Fund Ordinance, 1971, at the time of making an assessment under section 23 of the Act. If for some reasons he failed to pass an order at that point of time he should do it "as soon thereafter as may be".

The words "as soon as may be" very clearly indicate that the order should be passed either at the time of making an assessment and if it is not found possible for some reasons then "as soon thereafter". This should mean only in number of days and not in years.

The liability of an assessee must be finalised and he should be informed of his total liability through a notice of demand.

Every tax ought to be levied at the time, or in the manner in which it is most likely to be convenient for the contributor to pa it.

The tax which each individual is bound to pay ought to be certain and not arbitrary.

The action of the I.T.O. in levying "Workers Welfare fund" after the lapse of six years was neither certain nor convenient for, the tax-payer. Besides, such order under section 4(1) of the Worker-,'

Welfare Fund Ordinance, 1971 cannot by any stretch of imagination be termed "as soon thereafter". It took six years to the I.T.O. to realize whether or not to levy Workers' Welfare fund under Ordinance, 1971, although the benefit of this levy directly accrued to the appellant. Tribunal, therefore, directed the deletion of the levy of Workers' Welfare Fund.

Black's Law Dictionary, p. 146 and I.T. A.No.1696/KB of 1982-83 ref

Ebrahim Dahoodwala, C.A. for Appellant.

Muhammad Farid. D.R. for Respondent.

Date of hearing: 10th June, 1987.

.--These two appeals have been filed against the order of the learned Commissioner of Income-tax (Appeals) Zone-6, Karachi,

2. The appellant is an Industrial Unit. Assessment for, the year 1973-74, was finalised under section 23(3) on 23-12-1974. Mr. Ebrahim Dahoodwala, the learned counsel stated that the assessing officer had not levied Workers' Welfare Fund under Workers Welfare Fund Ordinance, 1971 while computing the total income of the appellant. It was not done thereafter for six years during which the assessment order was rectified a number of times. Mr. Dahoodwala, the learned counsel, stated that the order of rectification was made as under:

On 22-1-1975 for correcting depreciation allowance.

On 26-5-1977 for connecting loss ignored.

On 6-6-1977 for reversing the assessment order 'made on 26-5-1977.

On 13-6-1977 to allow carry-forward losses.

On 30-6-1980 to give effect to the order for revised depreciation loss for the year 1973-74."

On the last occasion the I.T.O. levied tax under section 4 of the Workers' Welfare Fund Ordinance, 1971. Much emphasis was laid by the learned counsel on the number of rectifications carried out by the Income-tax Officer after the date of finalisation of assessment and each time ignoring the levy of Workers' Welfare Fund. He was particularly bitter about the last order of rectification carried out on 30-6-1980, which he said, was barred by limitation and in which according to him, the I.T.O. levied Workers' Welfare Fund.

2. Mr. Farid, the learned Departmental' Representative stated that each of the rectification carried out was necessary in view of the nature of the mistakes the Income-tax Officer was confronted with. On 30-6-1980, rectification was necessary because of the loss carried forward due to appeal effect given in the assessment year 1973-74. It was also in the interest of the assessee as it reduced his income. The learned counsel's contention that the order under section 4 of the Workers' Welfare Fund Ordinance, 1971, was incorporated in the rectification order under section 35 of the Income-tax Act (Repealed) is therefore, not correct. The levy, he argued, was not contingent upon the rectification order made under section 35 after Repealed Act, 1922 on 30-6-1980. He stated that it can be levied any time after the finalisation of assessment as the assessee gets benefit of deduction of the amount from the total income. He gave his interpretation of the words "as soon thereafter as may be" appearing in section 4(4) of Workers' Welfare Fund Ordinance, 1971 to mean even 10 years after the completion of assessment order. Subsection (4) of section 4 of Workers Welfare Fund Ordinance, 1971 reads as under:----

"At the time of making an assessment under section 23 of the Act, or as soon thereafter as may be, the I.T.O., shall by order in writing, determine the amount due from the industrial establishment under subsection (1), if any, on the basis of income so assessed after taking into account' the amount paid by the industrial establishment under subsection, (3) in respect of year and the industrial establishment shall pay the amount 5o determined on or before the date specified in the order."

From the above it may be seen that it is necessary for the I.T.O. to pass an order under Workers' Welfare Fund Ordinance, 1971, at the time of making an assessment under section 23 of the Act. If for some reasons he failed to pass an order at that point of time the subsection says "as soon thereafter as may be". These words have been interpreted in various ways. The learned Commissioner of Income-tax observed:

"the objections of the Authorised Representative are misconceived, firstly the order dated 30-6-1980 levying the W.W.F. has been passed under section 4(L) of W.W.F. Ordinance, 1971 and therefore cannot be construed to be an order a/s 35 on which the limitation of 4 years as applied by the Authorised Representative would apply. Under the said Workers' Welfare Fund Ordinance, 1971 no limitation for levying of the funds has been prescribed. In subsection (4) of section 4 of the Ordinance it has been laid down that the Workers Welfare Fund would be charged at the time of making an assessment under section 23 of the Income Tax. Act or as soon thereafter as may be by an order in writing determining the amount due from industrial establishment. It is clear that the legislature did not clearly specify as has been done in the case of income tax assessment the period for passing an order u/s 4 of the Workers' Welfare Fund. The phrase 'as soon thereafter as may be' clarified the position to that effect. It is different question as to what constitutes a phrase 'as soon thereafter as may be' would mean in terms of period of time.- - - - - - - - - - - - - - --In the light of the language of the section 4(4) I do not consider that there is any disability imposed on the I.T.O. or that his order stands vitiated due to the order has been passed in the year 1980."

At this point of time the learned counsel produced before us the interpretation of the words "as soon as may be" from Balck's Law Dictionary page 146 Revised Fourth Edition as under:----

"Promptly and with due deligence as soon as was reasonably possible-- within a reasonable time-- as soon as possible- forthwith-- as soon as they conveniently can."

From the WWF Ordinance, 1971 as well as the meaning attached to it (the words "as soon as may be" very clearly indicate that the order should be passed either at the time of making an assessment and if it is not found possible for some reasons then "as soon thereafter". This should mean only in number of days and not in years) as has very ably been held by the Tribunal in its decision in I.T.A. No.1696/KB of 1982/83 dated 6-5-1987, 1987 P T D 506 against an order passed under subsections (6) and (8) of the section 18-A by the assessing officer.

"thus it is obvious that additional tax is to be added to the tax determined on the basis of regular assessment if both are made at one and the same time or, in any case before the notice of demand is issued".

Now to conclude we hold that the I.T.O. is required to rectify an order under section 18-A either alongwith regular assessment or within reasonable time and for reasonable cause but, in any case before notice of demand is issued."

The finding of the Tribunal clearly lays down the principle that the liability of an assessee must be finalised and he should be informed of his total liability through a notice of demand. It also conforms to Adam Smith's Canons of Taxation, laid down in the "Wealth of Nations"; Book v. The two relevant canons, 'Canon of Convenience' and 'Canon of Certainty' are reproduced below:

"Every tax ought to be levied at the time, or in the manner, in which it is most likely to be convenient for the contributor to pay it."

"the tax which each individual is bound to pay ought to be certain and not arbitrary."

Thus, the action of the I.T.O. in levying Workers' Welfare fund at ten the lapse of six years was neither certain nor convenient for the tax-payer. Besides, the order under section 4(1) of the Workers' Welfare Fund Ordinance, 1971, passed by the I.T.O. on 30-6-1980 cannot by any stretch of imagination, be termed "as soon thereafter". Here we agree with the contentions of the learned counsel that it took six years to the I.T.0 to realise whether or not to levy Workers' Welfare fund under Ordinance, 1971, although the benefit of this levy directly accrued to the appellant. In view of the above discussion we direct the deletion of the levy of W.W.F.

The assessment order for the year under consideration was finalised on 14-4-1980 in which the I.T.O. levied surcharge at Rs.31,687. Since the period of filing of appeal against this order had already expired, the appellant filed an application dated 7-8-1980 for rectification of the mistake. It was refused by the I.T.O. In appeal the C.I.T. observed:

"The nearest course for the appellant was to file an appeal on the question of surcharge which has not been done. The grievance of the appellant arose out of the original assessment order passed on 14-4-1980, whereas this appeal has been filed on 31-8-1980. It is out of time and the same is dismissed."

There being no merit in appeal the same is dismissed.

M.B.A./405/T Appeal dismissed.

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