I.TAS. NOS. 1158(IB) AND 1159(IB) OF 1986-87, 11(IB), 12(IB),639(IB), 506-A(IB) TO 506-F(I$),V VS I.TAS. NOS. 1158(IB) AND 1159(IB) OF 1986-87, 11(IB), 12(IB),639(IB), 506-A(IB) TO 506-F(I$),
1991 P T D (Trib.) 583
[Income-tax Appellate Tribunal Pakistan]
Before Farhat Ali Khan, Chairman, Abrar Hussain Naqvi, Syed Amjad Hussain
Bokhari, Judicial Members, Mirza Muhammad Wasim and Junejo M. Iqbal,
Accountant Members
I.TAs. Nos. 1158(IB) and 1159(IB) of 1986-87, 11(IB), 12(IB),639(IB), 506-A(IB) to 506-F(I$), 798(IB), 799(IB) of 1987-88, 157(IB), 158(IB), 285(IB), 286(IB), 291(IB) to 293(IB) of 1988-89, 215(IB) to 217(IB) of 1989-90, C.MAs. Nos. 4(IB) and 5(IB) of 1990-91, decided on 14/03/1991.
(a) Income-tax Appellate Tribunal Rules, 1981---
----R. 12---Rule 12, Income-tax Appellate Tribunal Rules, 1981 is directory in nature and its violation would not necessarily entail dismissal in each and every case but the facts and circumstances of each case would be examined in order to decide as to whether the violation thereof must lead to dismissal or be condoned.
Per Abrar Hussain Naqvi, Judicial Member; Mirza Muhammad Wasim, Accountant Member agreeing.---
Rule 12 of the Income-tax Appellate Tribunal Rules, 1981 is not mandatory but directory. As the said Rule is directory its non-compliance is curable when necessary. The Tribunal, in its discretion, can dispense with the compliance of the said Rule. The said Rule is not redundant as where the Tribunal is of the opinion that the Rule has been intentionally and deliberately violated, it can refuse to entertain the appeal. Where the non-compliance is inadvertent or by mistake and the respondent has the knowledge of appeal, non-compliance will not be fatal to the appeal. Mode of service through Registered Post is not mandatory. In reference applications the non-compliance of Rule 12 is not fatal to the reference applications.
Per Junejo M. Iqbal, Accountant Member.---
The right of appeal granted to the appellant under section 134 of the Ordinance has been expressly granted by the legislature and it cannot be snatched away or sacrificed at the altar of procedural niceties dictated by the Income Tax Appellate Tribunal Rules. This, however, does not mean that Rules have to be observed by default rather than by compliance. Each case has to be examined on its merits. No premium can be placed on any irregularity committed by an appellant. But at the same time, valuable right of appeal can also not be extinguished by an irregularity or an omission or defect which was either unintentional or error committed unwittingly or inadvertently. Surely, the Income-tax Appellate Tribunal is vested with discretionary jurisdiction which could be exercised in appropriate cases where sufficiency of cause preventing timely compliance with Rules is shown to the satisfaction of the Tribunal.
Per Farhat Ali Khan, Chairman.---
Rule 12 of the Income Tax Appellate Tribunal Rules of 1981 though directory, in nature yet its default was to be examined in each and every case under its facts and circumstances in order to determine as to whether the appeal should be rejected due to its violation or the default should be excused.
Since all the learned Members have agreed it is held that Rule 12 is directory in nature and its violation would not necessarily entail dismissal in each and every case but the facts and circumstances of each case would be examined in order to decide as to whether the violation thereof must lead to dismissal or be condoned.
Per Abrar Hussain Naqvi, Judicial Member and Mirza Muhammad Wasim, Accountant Member agreeing.---
(b) Income Tax Ordinance (XXXI of 1979)---
----S. 133(8)---Phrase "to regulate its own procedure" occurring in S.133(8), Income Tax Ordinance, 1979---Connotation---Phrase encompasses in it the entire procedure for filing and hearing the appeals.
The phrase "to regulate its own procedure" is not restricted to only the conduct of the procedure in Court after filing the appeals/petitions. This includes power to ask the person who approaches the Court or Tribunal to comply with certain requirements which is as a matter of fact rule of convenience and for orderly conduct of Court proceedings.
This is, therefore, fallacious to aruge that phrase "power to regulate its own procedure" is only restricted to the conduct of hearing of cases and the rules could be framed only for the procedure from the stage after filing the appeal. The law has given a right of appeal and the Tribunal has been constituted to hear these appeals. Certain basic prerequisites have been provided by the law itself as for instance the limitation and the payment of fee in case of filing of appeal by the assessee. The appeal is to be filed in the prescribed form and to be verified in the prescribed manner. Thus, the Central Board of Revenue under its rule-making powers can prescribe the form of appeal which it has been made under Rule 195 of the Income-tax Rules and has also been given power to prescribe the manner of verification which has also been provided in the form of appeal. The fee has also been prescribed by the Ordinance. Apart from this the procedure for filing the appeals is to be laid down by the Tribunal under its power given in section 133(8) of -the Ordinance. The phrase "power to regulate" its own procedure encompasses in it the entire procedure for filing and hearing the appeals.
(c) Income-tax Appellate Tribunal Rules, 1981---
----R.12---Income-tax Rules, 1982, R. 195---Income Tax Ordinance (XXXI of 1979), Ss. 129 to 135 & 165---Rule 12, Income Tax Appellate Tribunal Rules, 1981 is purely a procedural Rule and Income-tax Appellate Tribunal was empowered to frame such Rule---Rule 12 being not in conflict with any provision of the Ordinance was intra vires of the Ordinance----Procedure for filing appeals outlined.
Reading of the Tribunal's Rules, the Income-tax Rules, 1982 framed by the C.B.R. and the Ordinance, together the following procedure is emerged for filing the appeals:
(i) The appeal is to be filed in the prescribed form and verified in the prescribed manner;
(ii) it is to be accompanied by a fee of hundred rupees (if the appeal is filed by assessee);
(iii) the appeal is to be filed within 60 days of the date on which the impugned order is communicated to the assessee or to the Commissioner as the case may be;
(iv) the appeal memo. is to be accompanied with certain documents as required by Rule 11 of the Tribunal Rules including a certificate as provided under Rule 12 i.e. a certificate that a copy of memorandum and grounds of appeal had been sent to the respondent by registered post.
(d) Income-tax Appellate Tribunal Rules, 1981---
----Rr. 12, 11 & 15---Discretionary powers of Income Tax Appellate Tribunal to accept the appeal in case certificate required under R. 12 was not filed---Where the memorandum of appeal was returned and it was either not filed again or the shortcomings were not made up, the Tribunal had the discretion to pass such order as it may deem fit.
Sub-rule (3) of Rule 11 of the Tribunal's Rules provides that the Tribunal may accept the memorandum of appeal which is not accompanied by all or any of the documents referred to in Rule 11. Rule 16 of the Tribunal Rules provides that where the appeal is not filed in the manner specified by the Tribunals Rules, certain Officers of the Tribunal have power to return the appeal of the appellant and to bring it in conformity with the provisions of the said rules within such time as may be fixed. In case the appeal is returned and is not re-filed within the prescribed time or the appellant does not comply with the provisions of the aforesaid rule, the Officer of the Tribunal has to place the memorandum of appeal before the Tribunal for such order as it may deem fit.
The position which emerges after narrating the above procedure would be that in case certificate as required under Rule 12 is not filed, the Tribunal has power in its discretion to entertain the appeal without such a certificate under sub-rule (3) of Rule 11. Another power which is vested in the Tribunal is under sub-rule (3) of Rule 15 where the memo. of appeal is returned and it is either no, filed again or the shortcomings are not made up, the Tribunal has a discretion pass such order as it may deem fit. In the face of these two discretionary powers with the Tribunal there could be no possible difficulty in implementing the Rules.
(e) Words and phrases---
......Shall" and "may" are interchangeable depending on the nature of a particular provision in which the word has been used.
(f) Income-tax Appellate Tribunal Rules, 1981---
----R. 12---Civil Procedure Code (V of 1908), O.XLIII, R. 3 & S. 121---Rule 3 of O.XLIII, C.P.C. is not pari materia with R. 12, Income-tax Appellate Tribunal Rules, 1981.
Orders and Rules are attached to the Civil Procedure Code as a Schedule and section 121 of the C.P.C. has specifically laid down that these rules shall have effect as if enacted in the body of the Code. Obviously these Orders and Rules are on much higher pedestal than the subordinate legislation which is made under the delegated power of the Legislature. The Income-tax Appellate Tribunal Rules, 1981 do not stand on the same pedestal as part of the Ordinance though these have been framed under the powers given by the Ordinance. These Rules have been made "to regulate its procedure" and are rules of convenience for the orderly and prompt conduct of business. Secondly, it would be pertinent to note, that Order XLIII, C.P.C. applies only to some interlocutory orders and not against the judgments passed on merits. Interlocutory orders against which the appeals can be filed have been enumerated in section 104 and Rule 1 of Order XLIII, C.P.C. Thus, Rule 3 of Order XLIII, C.P.C. is not pari materia with Rule 12 of the Tribunal Rules. Thirdly, there is an important privilege to the respondent which is lost if the Rule is not complied with. If the notice is given under Rule 3, Order XLIII the respondent is entitled to appear before the Court and can resist the admission of the appeal at the preliminary stage and can also resist the possible stay order to be granted. He can cut short the time for disposing of the appeal in getting the appeal dismissed in limine and can get costs also. It would be seen that violation of the Income-tax Appellate Tribunal Rules, Rule 12, does not entail any benefit or injury to the respondent. This Rule is more of convenience than of substance. The objection against the violation of such Rule is merely of technical nature and to insist on it would only to demand a pound of flesh.
(g) Income Tax Appellate Tribunal Rules, 1981---
----R. 12---Violation of R. 12 does not entail any benefit or injury to the respondent---Rule being more of convenience than of substance, objection against the violation of said Rule was merely of technical nature and to insist on it would only be to demand a pound of flesh.
Violation of the Income-tax Appellate Tribunal Rules, 1981, Rule 12 does not entail any benefit or injury to the respondent. This rule is more of convenience than of substance. The objection against the violation of such Rule is merely of technical nature and to insist on it would only to demand a pound of flesh.
Rule 12 has been made for convenience and its non-compliance does not in any way cause prejudice to the other party nor it affects the jurisdiction of the Tribunal. This rule is, therefore, obviously regulatory by its nature and cannot be said to be mandatory.
(h) Interpretation of statutes---
---- Rules of procedure---Factors to be kept in mind to determine as to whether provision was mandatory or regulatory---Where small errors were made and no substantial injury or prejudice was caused to the opposite-party the Rule was not to be regarded as mandatory.
The rules of procedure are made for the orderly conduct of Court business. In order to see whether a provision is mandatory or directory a number of considerations have to be kept in mind. The factors which are to be kept in mind as to whether a provision is mandatory or regulatory are as under:--
(1) The intent of legislature cannot be gathered from the use of the words "shall" or "may" as this is not conclusive and the words are interchangeable.
(2) It has to be seen whether permissive interpretation is possible.
(3) Whether any consequence of the non-compliance has been provided?
(4) Whether any injury or prejudice has been caused to the opposite-party because of the non-compliance of the provision?
(5) The importance of the subject-matter of the .provision-and the effect of the non-compliance on the subject-matter is also to be seen.
(6) What is the real intent of the Legislature?
(7) Whether the provision and its compliance is of-substance or mere of form and convenience?
(8) Whether there is any absolute prohibition?
Where small errors are made and no substantial injury or prejudice is caused to the opposite-party the rule is not to be regarded as mandatory.
Kondall v. Jamilton (1879) 4 App. Cas. 504; Cropper v. Smith (1884) 26 Ch.D 700, 710; Ghouri Kumari Devi v. Commissioner of Income-tax (1959) 37 ITR 220; Sheonath Singh v. C.I.T. (1958) 33 ITR 591; Tariq Transport Company v. Sargodha-Bhera Bus Service PLD 1958 SC (Pak.) 437; Niaz Ahmed v. Ghulam Ali PLD 1963 SC 382 and Zain Noorani v. Secretary of National Assembly PLD 1957 SC (Pak.) 46 ref.
Mere error of procedure cannot be allowed to defeat justice.
(i) Administration of justice---
----Mere error of procedure cannot be allowed to defeat justice.
Kondall v. Jamilton (1879) 4 App. Cas. 504; Cropper v. Smith (1884) 26 Ch.D 700, 710; Ghouri Kumari Devi v. Commissioner of Income-tax (1959) 37 ITR 220; Sheonath, Singh v. C.I.T. (1958) 33 ITR 591; Tariq Transport Company v. Sargodha-Bhera Bus Service PLD 1958 SC (Pak.) 437; Niaz Ahmed v. Ghulam Ali PLD 1963 SC 382 and Zain Noorani v. Secretary of National Assembly PLD 1957 SC (Pak.) 46 ref.
(j) Administration of justice---
---- Violation of a directory provision does not invalidate the proceedings.
(k) Interpretation of statutes---
---- Directory provision of a statute---Court has to reconcile such provision so that it could fit in the circumstances.
(l) Income-tax Appellate Tribunal Rules, 1981--
----R. 12---Rule 12 though was regulatory and was not of substance yet that would not mean that it was the sweet will of the appellant to comply or not to comply with it---Intentional non-compliance of R.12---Effect---Procedure explained.
Though, .Rule 12, Income Tax Appellate Tribunal Rules, 1981 is regulatory and is not of substance it does not mean that it is the sweet will of the appellant to comply or not to comply with it. In case the rule is not complied with, first the officers of the Tribunal have authority to return the appeal. If the non-compliance of the rule persists the appeal has to be placed before the Tribunal and the Tribunal has the power to pass `such order as it thinks fit'. The Tribunal at that stage can examine as to whether the violation of the rule was intentional or by way of inadvertent mistake or error. If the Tribunal finds that the non-compliance of the Rule on the part of the appellant was intentional and to defeat the rule, the Tribunal has the power not to entertain the appeal as it has not been filed in accordance with the Rules. However, if the Tribunal is of the opinion that the mistake was unintentional, the Tribunal can provide another opportunity to the appellant to comply with the rule and cure the defect. Where the respondent has already appeared or it is already in the knowledge of the respondent that the appeal has been filed, such a direction may not be necessary because that would be only a formality. In such cases on objection by the respondent, the Tribunal has again to see as to whether the rule has been intentionally violated. If the Tribunal is of the opinion that the rule has been violated intentionally it may refuse to entertain the appeal.
(m) Income-tax Appellate Tribunal Rules, 1981---
----Rr. 12 & 15---Procedure where a false certificate was filed by the appellant and office of the Tribunal was not able to invoke provision of R. 15(1)---If it was proved that the certificate had been falsely filed knowingly and intentionally, in such cases the appeal may not be entertained on account of fraud played upon the Court.
If a false certificate has been filed by an appellant in that case the officers of the Tribunal would not be able to invoke the provision of Rule 15(1) of the Income-tax Appellate Tribunal Rules. The appeal will be admitted as a matter of course and it might be discovered only after an objection is taken by the respondent: In such cases it would be again for the Tribunal to decide as to whether an intentional fraud has been played on the Court or it was by way of mistake. If it is established that a fraud has been played on the Court then again the Tribunal is empowered to refuse to entertain the appeal of the appellant as fraud vitiates all proceedings.
If it is proved that the certificate has been falsely filed knowingly and intentionally, in such cases the appeal may not be entertained on account of fraud played upon the Court.
(n) Income-tax Appellate Tribunal Rules, 1981---
----R. 12---Service of notice of appeal under R. 12---Modes.
The compliance of Rule 12, Income Tax Appellate Tribunal Rules, 1981 in any form can be considered as sufficient compliance. The intention of the rule is that the respondent should know beforehand that the appeal has been filed against him. If this purpose is achieved it is immaterial as to what was the mode of service of notice. The rule cannot be interpreted strictly. The mode of service has been provided in order to resolve the controversy as to the service of notice. Once it is established that the respondent had the notice of appeal it would be a sufficient compliance of Rule 12 and the respondent is estopped from raising such a question.
P L D 1988 Ouetta 9 ref.
(o) Income-tax Appellate Tribunal Rules, 1981---
----Rr. 12, 32 & 35---Income Tax Ordinance (XXXI of 1979), S. 136---Reference application---Compliance of R. 12---Copy of the application has to be sent to the respondent before filing of the application for reference and certificate thereof has to be appended with the application---Non-compliance of R. 12 cannot be regarded as fatal to the reference application---Mention of R. 12 in R. 32 of the Income-tax Appellate Tribunal Rules, 1981 is by an inadvertence and no substantial object is achieved by compliance of R. 12 in reference application.
Rule 32 of the Income Tax Appellate Tribunal Rules, 1981 has made applicable, inter alia, Rule 12 mutatis mutandis to an application under subsection (1) of section 136 of the Income Tax Ordinance, 1979. This means that in an application for reference it is required that the copy of the application is to be sent to the respondent before filing of the application and a certificate thereof has to be appended with the application.
Rule 12 is directory and for the purpose of convenience. The object of the rule is to expedite the proceedings and to cut short the time for disposing the appeals as the respondent is informed of the filing of the appeal beforehand. If this object is kept in view, in reference applications the compliance of Rule 12 is found to be a mere formality inasmuch as section 136 of the Ordinance already provides that a reference application is to be decided by the Tribunal within 90 days of the receipt of such application. Rule 35 of the Tribunal Rules provides that on receipt of the notice of the date of hearing of the application, the respondent shall submit a reply to the application at least seven days before the date of hearing. Thus, in normal conduct of the Court business a reference application is to be decided within 90 days from the date of the receipt of the application and the respondent is also entitled to file a reply seven days before the date of hearing. In the context of those provisions, the compliance of Rule 12 as a matter of fact is only a formality and not of substance. If the respondent has to submit his reply seven days before the date of hearing that would mean that he should have a notice of date of hearing at least a fortnight before the date of hearing, as the entire proceedings are to be concluded within 90 days of the filing of the reference application. Thus, even if Rule 12 is complied with, the respondent cannot do anything to expedite the reference application nor is it necessary. Conversely if Rule 12 is not complied with, the respondent cannot derive any benefit nor any injury is caused to him. Thus, non-compliance of Rule 12 cannot be regarded as fatal to the reference application. As a matter of fact, mention of Rule 12 in Rule 32 is by an inadvertence and no substantial object is achieved by compliance of Rule 12 in reference applications.
(p) Income-tax Appellate Tribunal Rules, 1981---
----R.12---Rule 12 is directory and for the purpose of convenience---Object of R.12 is to expedite the proceedings and to cut short the time for disposing the appeal.
Per Junejo M. Iqbal, Accountant Member, Syed Amjad Hussain Bokhari, Judicial Member agreeing.---
(q) Income-tax Appellate Tribunal Rules, 1981---
----8. 12---Rule 12 is based on maxim "audi alteram partem" (no one should be condemned unheard).
Rule 12 safegaurds the right of a respondent in an appeal. It is based on the well-known Roman maxim "audi alteram partem" (no one should be condemned unheard. Unless the respondent to the dispute is aware of grounds on which the appeal has been preferred, it would not be possible for him to defend his position or his case. It has, therefore, been required that the memo. of appeal alongwith the -grounds taken shall be sent to the respondent by registered post before the filing of appeal and a certificate to that effect appended with the memo. of appeal. After all, if the appellant has a substantive right of appeal, so has the respondent to defend himself. 1t cannot be termed as "more of convenience than of substance". It certainly has its own role to play in order to safeguard the interests of the respondent in an appeal
(r) Income-tax Appellate Tribunal Rules, 1981---
----Rr. 12, 19 & 32---Income Tax Ordinance (XXXI of 1979), Ss. 134 & 136-- Appeal to Income-tax Appellate Tribunal and reference to High Court---Rule 12, Income-tax Appellate Tribunal Rules alerts the respondent immediately so that he could safeguard his interests by taking appropriate counter-measures in respect of pending assessment proceedings as well as appeals.
Rule 19 of the Income-tax Appellate Tribunal Rules, 1981 is applicable both in the case of an appeal as well as a reference application, whereby a copy of appeal memo. and grounds or copy of reference application, is supplied to the respondent alongwith the notice of hearing before the Tribunal. If the intention was just to inform- the respondent before the date of hearing, rule 19 was good enough and where was then the need for bringing in rule 12 and rule 32? This was done intentionally to alert the respondent immediately so that he could safeguard his interests by taking appropriate counter-measures in respect of pending assessment proceedings as well as appeals, if any. In fact, Rule 32 has to be shown more respect in the case of reference application under section 136 than an appeal under section 134 of the Ordinance. Rule 12 has not beers incorporated in rule 32 out of inadvertence but by design to provide adequate opportunity to the respondent of defending himself.
(s) Income-tax Appellate Tribunal Rules, 1981---
----R. 12---Interpretation of implications of R.12.
While interpreting the implications of rule 12 it has to be kept in mind that appeal is an important step in the legal proceedings granting a substantive right to an appellant to pursue the course of justice to its logical end. The right of appeal has been granted by the legislature under section 134 of the Income Tax Ordinance and it cannot be snatched away or extinguished by mere technicalties. A perusal of the language of Rule 12 indicates that no penalty has been prescribed for the failure to comply with it. It does not use any negative or prohibitory language. It is, therefore, safe to conclude that the rule is directory in nature and not mandatory. After all the object and purpose of these rules is to grease the machinery of legal process and not to choke or obstruct the course of justice. That is precisely why rule 11(3) of the Rules empowers the Tribunal to accept the memorandum of appeal even where it is not accompanied by all or any of the documents required to be furnished to the Tribunal. Rule 15(1) provides for the return of memorandum of appeal if it is not filed in the manner specified in the Rules so that the defects, if any, may be removed to bring it in conformity with them. The purpose of relaxation, as provided under the Rules is to safeguard the substantive right of appeal to the Tribunal granted under section 134 of the Ordinance.
Montreal Street Railway Co. v. Normandine (1917) A C 170 (PC); State of Gujarat v. Ram Prakash Puri (1970) 2 S C R 875 (SC); C.I.T. v. Calcutta Discount Company (1973) 91 I T R (SC); Mela Ram & Sons v. C.I.T. (1956) 29 I T R 607 and C.I.T. v. Chenanippa Mudaliar (1969) 741 T R 41 (SC) ref.
(t) Income Tax Ordinance (XXXI of 1979)---
----S. 134--Appeal to Appellate Tribunal---Tribunal is empowered to permit an appellant to urge grounds not set forth in the memo of appeal and in contesting the appeal---Tribunal is not restricted to the grounds set forth in memo of appeal or taken with the leave of the Tribunal.
C.I.T. v. S. Nelliappan (1967) 661 T R (SC) ref.
(u) Income-tax Appellate Tribunal Rules, 1981---
----R. 12---Income Tax Ordinance (XXXI of 1979), S. 134---Any defect or failure to comply with the requirement of R. 12 falls within the category of an irregularity rather than an illegality which could be fatal to the fate of an appeal-- Such defects or irregularities were curable and rectifiable by an amendment taking effect from the date documents were originally filed, and that the Tribunal could exercise its discretionary jurisdiction to condone such defects.
Sheonath Singh v. C.I.T. West Bengal (1958) 33 ITR 591; Dhanpat Mal Diwanchand v. C.I.T. (1954) 26 ITR 357; Gouri Kumari Devi v. C.I.T. Bihar & Orissa (1959) 37 ITR 220; Chhotay Lai Vishn Lai v. C.I.T. (1962) 45 ITR 490 and Laxminarayan Behari Lal v. C.I.T., Sitapur (1960) 39 ITR 649 ref.
Per Farhat Ali Khan, Chairman.---
(v) Income-tax Appellate Tribunal Rules, 1981---
----R.12---Legislative history and purpose of enacting R. 12 detailed---Rule 12 was introduced purposely and its value has further been enhanced by introduction of the preliminary hearing system.
(w) income-tax Appellate Tribunal Rules, 1981---
----Rr. 12 & 32---Rule 12 has been inadvertently mentioned in R. 32 of Income-tax Appellate Tribunal Rules, 1981.
Rule 12 has been inadvertently mentioned in Rule 32 for the simple reason that if the Tribunal rejected the reference application filed in violation of the relevant Rules of 1981, the applicant would not suffer any irreparable loss as he could go direct to the High Court under subsection (2) of section 136 of the Ordinance. However, an applicant cannot go directly in reference to the High Court in each case of the rejection of his reference application by the Tribunal. From subsection (2) of section 136 of the Ordinance it appears that only in those cases where the Tribunal refuses to state the case on the ground that no question of law arises a direct reference application could be moved to the High Court. Since refusal on the ground that no question of law was arising is the only criterion the rejection of the reference application for non-compliance of Rules of Procedure of this Tribunal would not vest an applicant with the right of moving reference application directly to the High Court. Thus, it is clear that the case of an appellant stands on different footing than that of a case of an applicant moving reference application in violation of the Rules for the simple reason that by virtue of Rule 11(3) and Rule 15 (1) the Tribunal can either give an opportunity to the appellant to rectify mistake or to dispose with some omission which in case of reference application is not available for the simple reason that Rules 11 and 15 of the Rules of 1981 do not find place in Rule 32.
(x) Income Tax Ordinance (XXXI of 1979)---
----S. 136---Reference application filed in violation of Income-tax Appellate Tribunal Rules---Effect.
If an application is filed in violation of Income-tax Appellate Tribunal Rules, 1981 the first conclusion would be to reject such reference application. However, in such case those applicants would suffer whose period of limitation has expired but those who are still within 90 days may file fresh application in accordance with Rules as there is no bar provided by any law for filing second application. However, in both the cases this anomalous position may be avoided if the Registrar or any officer authorised by him acts vigilantly and diligently by pointing out immediately the defect which he finds in the reference application. There may be cases in which the applicant may have enough time for rectifying the mistake. However, in those cases where the applicant comes on the last day of limitation he may face difficulty for the simple reason that though subsection (4) of section 134 has given the power to the Tribunal to enlarge the period of limitation in case of late filing of appeal on its satisfaction that the appellant was prevented by sufficient cause from presenting it within the prescribed period, yet no such power has been given to the Tribunal under section 136 of the Ordinance. However, subsection (2-A) of section 136 provides a remedy to an applicant whose application is rejected by the Tribunal 'for being time-barred; such party may move to the High Court. However, it is to be kept in mind that an application which is rejected for the reason that it is not in accordance with the Rules of 1981 shall not be deemed to have been rejected on the ground that it is time-barred and thus both an assessee or the department may suffer. Rules 11 and 15 should also be included in Rule 32 of the Rules of 1981 and if it is done both the assessee and the department would receive same benefit as they are entitled to get as appellant. In other words if Rules 11 and 15 are added in Rule 32 of the Rules of 1981 the conclusion regarding filing of the appeals in violation of the Rules shall become at once applicable and every case would be decided under its own facts and circumstances by this Tribunal.
(y) Income-tax Appellate Tribunal Rules, 1981---
----R. 32---Procedure in respect of application for reference---Need of adding Rr. 11 & 15 in R.32 stressed---Guidelines for both office of the Tribunal and appellants/applicants also given by the Tribunal meanwhile.
Rules 11 and 15 should also be included in Rule 32 of the Rules of 1981 and if it is done both the assessee and the department would receive same benefit as they are entitled to get as appellant. In other words if Rules 11 and 15 arc added in Rule 32 of the Rules of 1981 the conclusion regarding filing of the appeals in violation of the Rules shall become at once applicable and every case would be decided under its own facts and circumstances by this Tribunal.
Amendment of Rule 32 is not an easy affair. Meanwhile the Tribunal must ensure that the reference applications as and when presented should be scrutinized on the date of presentation and the defects if any should be pointed out to the applicants so that they may present fresh application if they are still within period of limitation. Needless to say that in such case the applications with defects can neither be admitted in the discretion of the Tribunal nor cart be returned back for removal of the defects. On the other hand, it will be advisable to all the applicants that they should move their reference applications well before the expiry of the period of limitation so that if any defect is pointed out to them they may have enough time to resubmit the application according to the Rules.
The word "may" as used in Rule 15 of the Rules of 1981 should be taken to mean "shall" to make it obligatory on the part of Registrar or the officer authorised to return such appeal to the appellant so as to resubmit it in conformity with the provisions of these Rules. Thus, the Rules of 1981 provide a unique example of laying down such provisions of law in which the word "shall" is to be read as "may" and the word "may" is to be read as "shall" under the facts and circumstances of each case. Needless to say that when Rule 15 is included in Rule 32 its benefit would also be available to applicants of Reference application.
(z) Income-tax Appellate Tribunal Rules, 1981---
----R. 15---Word "may" as used in R. 15 has to be taken to mean "shall" to make it obligatory on the part of Registrar or the officer authorised to return such appeal to the appellant so as to resubmit it in conformity with the provisions of the Rules.
The word "may" as used in Rule 15 of the Rules of 1981 should be taken, to mean "shall" to make it obligatory on the part of Registrar or the officer authorised to return such appeal to the appellant so as to resubmit it in conformity with the provisions of these Rules. Thus, the Rules of 1981 provide a unique example of laying down such provisions of law in which the word "shall" is to be read as "may" and the word "may' is to be read as "shall" under the facts and circumstances of each case. Needless to say that when Rule 15 is included in Rule 32 its benefit would also be available to applicants of Reference application.
(aa) Income-tax Appellate Tribunal Rules, 1981---
----R. 15---Return of memorandum of appeal---Whether Registrar can extend period of limitation under R. 15.
In those cases in which the appeal is presented within prescribed period of limitation and the Registrar returns it to the appellant for removal of some defects the presentation is taken on the date on which it was originally presented hence no question arises regarding enlargement of period of limitation by the Registrar. In this connection Rule 8 of the Rules of 1981 lays down that the Registrar or the Officer authorised shall endorse on memorandum of appeal the date either on which it is presented or deemed to have been presented under Rule 7 and shall sign the endorsement. The endorsement of the date of presentation precedes its scrutiny and detection of defects for which it may be returned back and thus the date of presentation remains effective when the appeal is resubmitted within the prescribed time under Rule 15.
(bb) Income-tax Appellate Tribunal Rules, 1981---
----While interpreting the Rules the Tribunal or the Commissioner of Income-tax (Appeals) were required to keep into consideration as to whether the mistake on the part of Court or its officer was or was not the cause of injury caused or to be caused to a tax-payer or the Department---Every case had to be considered under its own facts and circumstances.
1990 P T D (Trib.) 1042 clarified.
1990 P T D (Trib.) 1042; 1988 P T D (Trib.) 155; 1987 P T D 641; 1987 P T D (Trib.) 116; (1988) 58 Tax (Trib.)15; 1989 P T D (Trib.) 1004; 1989 P T D 917;1987 P T D 389; 1989 P T D 10 (Trib.) and 1989 P T D (Trib.) 16 rel:
Z. A. Sheikh for Appellant.
Sultan Mansoor, Legal Advisor for Respondent.
I.N. Pasha, Rehan Naqvi, Sikandar Hayat Khan, Nazar Hashmi, Zia H. Rizvi, M. Ashraf Hashmi, Akhtar Hussain, Zahid Yasim Mufti, Aslam Anwar and Muhammad Amin Butt: Amicus curiae.
Date of hearing: 21st November, 1990
ORDER
ABRAR HUSSAIN NAQVI (JUDICIAL MEMBER).---A question has arisen as to what is the scope of powers of the Tribunal vis-a-vis consequence of non-compliance of Rule 12 of the Income-tax Appellate Tribunal Rules, 1981 (hereinafter referred to as Rules). Since, there were conflicting views of various Benches of the Tribunal a larger Bench was constituted to resolve the controversy. Apart from the learned counsel for the parties some other eminent counsel named above from Karachi, Lahore, Faisalabad, Multan, Rawalpindi and from other places were also invited to address and to assist the Court. I must pay tribute to all the learned counsel as all of them took pains in studying the question and assisting the Court. Some of the learned counsel have also sent written arguments and I have benefited from the written arguments as well. Copious case-law has been cited in support of their respective views expressed by the various counsel.
2. The precise question before us to decide is as to whether Rule 12 is mandatory or directory in nature. Corollary to this question is another question as to what are the consequences if Rule 12 is not complied with. I shall try to be brief as far as possible so that a clear view is expressed and further confusion is not created. Before proceeding further it would be convenient to quote Rule 12 of the Rules which reads as under :--
"Intimation of film of appeal to the respondent.--The appellant shall, before filing of appeal, send a copy of memorandum and grounds of appeal to the respondent by registered post. A certificate to this effect shall be appended with the appeal."
It may be mentioned that Rule 11 of the Rules provides as to what documents are to be accompanied with the memorandum of appeal. One such document which is required to be filed under Rule 11 is a certificate as provided under Rule 12. Sub-rule (3) of Rule 11 empowers the Tribunal to dispense with any of the documents. This sub-rule is reproduced below:--
"The Tribunal may, in its discretion, accept a memorandum of appeal which is not accompanied by all or any of the documents referred to in this rule."
3. Normally, sub-rule (3) of Rule 11 quoted above should have been sufficient to set at rest the controversy. In this sub-rule the Tribunal has a discretion either to accept or reject the memorandum of appeal if the certificate as required by Rule 12 is not filed alongwith the appeal. However, the matter does not end here. There are certain other complications such as where, though a certificate has been filed but in fact the Rule has not been complied with in strict sense. For instance where the copy of memo and grounds of appeal had not been sent to the respondent by Registered Post as required by Rule 12 though the service is otherwise effected. Another Rule which may be reproduced is Rule 15 which reads as under:--
"Return of memorandum of appeal. etc.---Where a memorandum of appeal is not filed in the manner specified hereinbefore, the Registrar or the officer authorised under rule 7 may return it to the appellant or his authorised representative, if any, to bring it in conformity with the provisions of these rules within such time as. he may fix"
4. It may be noted that the appeal before the Tribunal is a statutory right under section 134 of the Ordinance. Subsection (5) of section 134 requires that the appeal is to be filed to the Tribunal:--
(i) In the prescribed form;
(ii) to be verified in the prescribed manner;
(iii) in case of an assessee it is to be accompanied by a fee of one hundred rupees.
5. Now by some of the counsel a great stress has been laid on the words "prescribed form" and "prescribed manner". Some of the counsel have gone to the extent that the Tribunal has exceeded its power to call the appellant to comply with Rule 12. Their argument was that the Ordinance has only provided that the appeal is to be filed in the `prescribed form' and to be verified in the prescribed manner. The worn `prescribed' has been dcfmed in the Ordinance in section 2(33) of the Ordinance as under:--
"Prescribed" means prescribed by Rules made under this Ordinance."
According to these learned counsel the rule-making power is given to the C.B.R. by section 165 and the C.B.R. has made the Rules for carrying out the purposes of this Ordinance. In section 165(2)(e) it has been laid down that such rules may "provide for anything which has to be or may be prescribed in this Ordinance". Rule 195 of the Income-tax Rules made by the C.B.R. has prescribed the form of appeal to the Tribunal and the manner of verification. Similarly form of reference application under section 136(1) of the Ordinance has also been prescribed nude s Rule 196 of the Ordinance. In the form prescribed under Rule 195 of the Income-tax Rules, two notes have also been given which are reproduced below for ready reference:--
"(1) The memorandum of appeal (including grounds of appeal when filed on a separate paper) must be in triplicate and should be accompanied two copies (at least one of which should be a certified copy of the ordeer' appealed, against and two copies of the order of the Income Tax Officer
(2) The memorandum of appeal in the case of an appeal by the assessment be accompanied by a fee of one hundred rupees. The appeal fee must be credited in the treasury or a branch of the National Bank of Pakistan or the State Bank of Pakistan after obtaining a challan from the Income Tax Officer and the triplicate portion of the challans sent to the Tribunal with the memorandum of appeal. The Appellate Tribunal will not accept cheques, hundies or other negotiable instruments."
From the above-quoted notes it is evident that these are reproduction of what is contained in subsection (5) of section 134 of the Ordinance. The only addition made in these notes is the manner in which the fee is to be paid. The C.B.R. has the authority to make rules prescribing the form of appeal and the manner of verification. The form has been prescribed and the manner of verification has also been given. So far as section 134(5) is concerned the C.B.R. was not required to do anything more than that. Now sortie of the counsel have asserted that for the procedure to the prescribed for filing of appeals before the Tribunal it was the C.B.R. who was to frame Rules under section 165 and not the Tribunal. According to them for carrying out the purposes of the Ordinance the C.B.R. had been given powers and not the Tribunal. Thus Rule 12 is ultra vires of the powers of the Tribunal. I am not prepared to contribute to this view on the principle of special bus non derogant i.e. special provisions exclude the general provisions. The C.B.R. has been given the rule-making powers under section 165 generally for carrying out the purposes of the Ordinance while the Tribunal has been . given specific powers under subsection (8) of section 133 which is reproduced below:--
"Subject to the provisions of this Ordinance, the Appellate Tribunal shall have power to regulate its own procedure, and the procedure of Benches of the Tribunal in all matters arising out of the discharge of its functions, including the places at which the Benches shall hold their sittings."
This subsection specifically provides that it is the Appellate Tribunal who has power "to regulate its own procedure". Now it has to be examined as to what the phrase "to regulate its own procedure" connotes. Some of the learned counsel have argued that this phrase only means that the Tribunal has to make rules to regulate its own procedure starting from the stage of filing of appeal. Before the filing of appeal what was to be done by the appellant, is outside the jurisdiction of the Tribunal and therefore, the Tribunal could not frame such rules to bind down an appellant to follow certain procedure before the filing of appeal. Before filing the appeal what was to be done by the appellant was to be prescribed by the C.B.R.
6. I have very carefully examined the contention. This objection to the jurisdiction of the Tribunal is more apparent than real. The phrase "to regulate its own procedure" is of much wider scope than has been contended to be by these learned counsel. We have not to go very far to understand the real meaning of this phrase. Under Article 191 of the Constitution regarding the regulation of the procedure of the Supreme Court it has been provided "subject to the Constitution and law, the Supreme Court can make rules regulating the practice and procedure of the Court". Similarly, Article 202 of the Constitution lays down subject to the Constitution and law the High Court may make rules regulating the practice and procedure of the Court or of any Court subordinate to it". We note that both the Supreme Court as well as the High Courts have prescribed rules of procedure inter alia, which also require from the petitioner/appellant to follow certain procedure and file certain documents before filing the appeals. It therefore follows that the phrase "to regulate its own procedure" is not restricted to only the conduct of the procedure in Court after filing the appeals/petitions. This includes a power to ask the person who approaches the Court or Tribunal to comply with certain requirements which is as a matter of fact rule of convenience and for orderly conduct of Court proceedings. Here I would also refer to section 122 of the Civil Procedure Code which reads as under:--
"Power of certain High Courts to make rules.---(The High Courts).....may, from time to time after previous publication, make rules regulating their own procedure and the procedure of the Civil Courts subject to their superintendence, and may by such rules annul, alter or add to ail or any of the rules in the First Schedule."
It would therefore be seen that both the Constitution as well as the Civil Procedure Code have similar provisions and under those powers the Supreme Court and the High Courts have prescribed certain procedure including filing of certain documents alongwith the appeals/petitions. This is therefore fallacious to argue that phrase power to regulate its own procedure" is only restricted to the conduct of hearing of cases and the rules could be framed only for the procedure from the stage after filing the appeal. The law has given a right of appeal and the Tribunal has been constituted to hear these appeals. Certain basic prerequisites have been provided by the law itself as for instance the limitation and the payment of fee in case of filing of appeal by the assessee. The appeal is to be filed in the prescribed form and to be verified in the prescribed manner. Thus the C.B.R. under its rule-making powers can prescribe the form of appeal which it has made under rule 195 of the Income-tax Rules and has also been given power to prescribe the manner of verification which has also been provided in the form of appeal. The fee has also been prescribed by the Ordinance. Apart from this the procedure for filing the appeals is to be laid down by the Tribunal under its power given in section 133(8) of the Ordinance. The phrase "power to regulate" its own procedure" encompasses in it the entire procedure for filing and hearing the appeals.
7. It may be, noted that in Indian Income-tax Act, 1961 there is similar provision empowering the Tribunal `to regulate its own procedure'. Under that provision the Tribunal has made the Rules prescribing certain pre-conditions before filing the appeals. This phrase vis-a-vis the power of the Tribunal to frame rules came under discussion in Chhotey Lal Kishan Lal v. Commissioner of Income-tax by the Allahabad High Court and reported as (1962) 65 I T R 490. At page 493 of the report the High Court observed as under:--
"The Income-tax Appellate Tribunal has answers under section 5-A(8) to regulate its own procedure and if the Tribunal makes rules regulating such procedure the rules would be valid so far as they are calculated to regulate the procedure in the Income-tax Appellate Tribunal. In our opinion, the institution of an appeal only marks the commencement of the procedure before the appellate authority, and in what form an appeal may be presented and who may be shown in the array of parties in the appeal is also a matter of procedure specially when the substantive rights of parties are not involved".
Then at the same page it was further observed:--
"We are, therefore, of opinion that rule 14 (regarding impleading as party) of the Appellate Tribunal Rules cannot be assailed as invalid."
8. Now reverting back to Rule 12, it is purely a procedural rule and the Tribunal was empowered to frame such rule. Since, it is not in conflict with any of the provisions of the Ordinance it is intra vires of the Ordinance.
9. Reading the Tribunal's Rules, the Income-tax Rules framed by the C.B.R. and the Ordinance, together the following procedure is emerged for filing the appeals:-
(i) The appeal is to be filed in the prescribed form and verified in the prescribed manner;
(ii) it is to be accompanied by a fee of hundred rupees; (if the appeal is filed by assessee);
(iii) the appeal is to be filed within 60 days of the date on which the impugned order is communicated to the assessee or to the Commissioner as the case may be;
(iv) the appeal memo. is to be accompanied with certain documents as required by Rule 11 of the Tribunal's Rules including a certificate as provided under Rule 12 i.e. a certificate that a copy of memorandum and grounds of appeal had been sent to the respondent by registered post.
Sub-rule (3) of Rule 11 of the Tribunal's Rules provides that the Tribunal may accept the memorandum of appeal which is not accompanied by all or any of the documents referred to in Rule 11. Rule 15 of the Tribunal's Rules provides that where the appeal is not filed in the manner specified by the Tribunal's Rules, certain officers of the Tribunal have power to return the appeal of the appellant to bring it in conformity with the provisions of the said rules within such time as may be fixed. In case the appeal is returned and is not re-filed within the prescribed time or the appellant does not comply with the provisions of the aforesaid rule, the Officer of the Tribunal has to place the memorandum of appeal before the Tribunal for such order as it may deem fit.
10. The position which emerges after narrating the above procedure would he that in case certificate as required under Rule 12 is not filed, the Tribunal has tower in its discretion to accept the appeal without such a certificate under sub-rule (33) of Rule 11. Another power which is vested in the Tribunal is under sub-rule (33) of rule 15 where the memo. of appeal is returned and it is either not filed again i or the shortcomings are not made up, the Tribunal has a discretion to pass such order as it may deem fit. In the face of these two discretionary powers with the Tribunal fail to see as to what could be possible difficulty in implement1ting the Rules. The learned counsel, broadly speaking, advanced two contradictory views. One group of the learned counsel was of the view that compliance of Rule 12 is mandatory and non-compliance of it would result in rejection of the appeal. The second group of the learned counsel was of the view that this is a directory provision and is a rule of convenience and the failure to comply with this rule cannot take away the statutory right of appeal. In any case it was pleaded that under the discretionary powers of the Tribunal it had the powers to condone such a non-compliance.
11. Both groups of the learned counsel have cited numerous cases of the superior Courts in support of their views. It is not possible for us to discuss each and every case cited before us. However, I would like to deal with certain group of cases where a common view has been expressed. First of all would like to take up the arguments of those learned counsel who hold the view that this is a mandatory provision. The main plank of their argument was that in Rule 12 the word `shall' has been used. Their second contention was that the rules of procedure made by the Tribunal are meant to be followed and if these rules arc not compiled with then these rules become redundant. Now it is settled law that the words `shall' and `may' are interchangeable depending on the nature of a particular provision in which the word has been used. Many cases have been cited on the subject which need not be discussed as the principle is too well-settled to need any authority. As to what is mandatory or a directory provision an elaborate discussion is found in Corpus Juris Secundum. Volume LXXXII. At page 376 of the book it has been observed as under:--
"In the application of subsidiary rules for the determination of the legislative intent in the respect there is no small confusion in the decisions, but certain principles have been recognized as established. Whether a statute is mandatory or directory depends on whether the thing directed to be done is of the essence of the thing required, or is a mere matter of form, and what is a matter of essence can often be determined only by judicial construction. Accordingly, when a particular provision of statute relates .to some immaterial, matter, as to which compliance with the Statute is a matter, of convenience rather than substance, or where the directions of a Statute are given merely with a view to the proper, orderly and prompt conduct of-business, it is generally regarded as directory unless followed by words of a solute prohibition: and a Statute is regarded as director where no substantial rights depend on it no injury can result from ignoring it, and the purpose of the legislature can be accomplished in a manner other than that prescribed, with substantially the same result."
Black's Law Dictionary also gives almost the same meaning of the word `mandatory'. Some of the learned counsel have relied upon some recent decisions of the superior Courts to support the contention that non-compliance of the procedural rule' is fatal to the appeals. The following cases have been cited in support of this contention:--
(1) M/s. Sethi Brothers, Lahore v. C.I.T. reported as 1987 P T D 703.
(2) Government of Pakistan v. Niaz Muhammad reported as P L D 1967 SC 271.
(3) C.I.T. v. Javed A. Sheikh reported as 1989 P T D 525.
(4) C.I.T. v. Gulzar Muhammad reported as 1989 P T D 1008.
(5) C.I.T. v. Kohinoor Trading Company reported as 1989 P T D 1047.
12. However, with utmost respect to the learned counsel none of these cases are relevant for the simple reason that in impugned order or decree had not been filed. It is obvious if the copy of the impugned order is not filed the Appellate Court cannot adjudicate the appeal. Some cases have also been quoted at the Bar where a similar certificate was to be filed under Order 43, Rule 3 of the Civil Procedure Code and as a consequence of non-compliance; the appeals were rejected. With utmost respect, these cases are also not applicable on the facts of the present case for two reasons. Firstly, the rules made under the Civil Procedure Code are part and parcel of the C.P.C. itself. These Rules and Orders had been framed under section 122 of the Civil Procedure Code which has already been reproduced above. Section 121 of the Civil Procedure Code reads as under:--
"Effect of rules in First Schedule.---The rules in the First Schedule shall have effect as if enacted in the body of the Code until annulled or altered in accordance with the provisions of this Part."
These Orders and rules are attached to the Civil Procedure Code as a Schedule and section 121 of the C.P.C. has specifically laid down that these rules shall have effect as if enacted in the body of the Code. Obviously these Orders and rules are on much higher padestal than the subordinate legislation which is made under the delegated power of the Legislature. The Tribunal rules do not stand on the same padestal as part of the Ordinance though these have been framed under the powers given by the Ordinance. These rules have been made `to regulate its procedure' and are rules of convenience for the orderly and prompt conduct of business. Secondly, it would be pertinent to note, that Order 43 applies only to some interlocutory orders and not against the judgments passed on merits. Interlocutory orders against which the appeals can be filed have been enumerated in section 104 and rule 1 of Order 43, C.P.C. Thus, rule 3 of Order 43, C.P.C. is not pari materia with rule 12 of the Tribunal rules. Thirdly, there is an important privilege to the respondent which is lost if the rule is not complied with. If the notice is given under rule 3 Order 43 the respondent is entitled to appear before the Court and can resist the admission of the appeal at the preliminary stage and can also resist the possible stay order to be granted. He can cut short the time for disposing of the appeal in getting the appeal dismissed in limine and can get costs also. It would be seen that violation of the Income-tax rule 12 does not entail any benefit or injury to the respondent. This rule is more of convenience than of substance. The objection against the violation of such rule is merely of technical nature and to insist on it would only to demand a pound of flesh.
13. The rules of procedure are made for the orderly conduct of Court business. In order to see whether a provision is mandatory of directory a number of considerations have to be kept in mind. On going through the case-law the considerations which are to be kept in mind as to whether a provision is mandatory or regulatory the following factors are to be kept in mind:--
(1) The intent of Legislature cannot be gathered from the use of the words `shall' or `may' as this is not conclusive and the words are interchangeable;
(2) it has to be seen whether permissive interpretation is possible;
(3) whether any consequence of the non-compliance has been provided;
(4) whether any injury or prejudice has been caused to the opposite party because of the non-compliance of the provision;
(5) the importance of the subject-matter of the provision and the effect of the non-compliance on the subject-matter is also to be seen;
(6) what is the real intent of the Legislature;
(7) whether the provision and its compliance is of substance or more of form and convenience;
(8) whether there is any absolute prohibition.
14. There is enough case-law available to support the view that where small errors are made and no substantial injury or prejudice is caused to the opposite-party the rule is not to be regarded as mandatory. in Chhotey Lal Kishan Lays case referred to above, impleading a wrong respondent was held to be merely an error and curable and not fatal to the appeal. The Income-tax Appellate Tribunal Rules provided that the Income-tax Officer was to be impleaded as respondent but the appellant impleaded the Appellate Assistant Commissioner as respondent. The Tribunal in that case had refused to admit the appeal on the ground that the appeal was not maintainable because of the violation of the rule 14 of the Income-tax Appellate Tribunal Rules. When the question was referred to the High Court for opinion the High Court finally observed as under:--
"But we are of opinion that the opinion that the memorandum of appeal even as it stood was not invalid or illegal, and having regard to the other facts of the case relating to the procedure that was followed on the filing of this appeal by the Appellate Tribunal we are of opinion that it was a good appeal and should have been decided on merits:"
In many cases the superior Courts have consistently held that mere error of procedure cannot be allowed to defeat justice. The English Courts have also held the same view. In Kendall v. Jamilton reported as (1879) 4 App. Cas. 504 it was observed as under:--
"Procedure is but the machinery of the law after all -- the channel and means whereby law is administered and justice reached. It strangely departs from its proper office when, in place of facilitating, it is permitted to obstruct, and even extinguish, legal rights, and is thus made to govern where it ought to sub-serve."
In another case Cropper v. Smith reported as (1884) 26 Ch.D.700,710 Lord Bowen L.J. said:--
"It is a well-established principle that the object of Courts is to decide the rights of the parties, and not to punish them for mistakes they make in the conduct of their cases by deciding otherwise than in accordance with their rights ...I know of no kind of error or mistake which, if not fraudulent or intended to overreach, the Court ought not to correct, if it can be done without injustice to the other party. Courts do not exist for the sake of discipline, but for the sake of deciding matters of favour or of grace."
In Gouri Kumari Devi v. Commissioner of Income-tax reported as (1959) 37 I T R 220 the memo. of appeal was not signed by the assessee. When objection was taken the Court held that it was merely an irregularity and not an illegality which could vitiate the appeal. Then in Sheonath Singh v. C.I.T. reported as (1958) 33 I T R 591 a similar view was taken when the appeal had not been signed by the appellant but was signed by his Authorised Representative. In that case the Court observed:--
"It will be clear from the uniform view of the Courts, as reflected in the decisions which I have cited, that the rule as to the signature of a plaint or a memorandum of appeal by the plaintiff or the appellant, although expressed in the relevant statute in the language of a mandatory provision has never been regarded as mandatory, but the rule being a procedural rule has been treated as only directory, non-compliance or defective compliance therewith being held to be irregularities, curable by the Court at its own instance and not illegalities affecting the jurisdiction of the Court."
15. Our own Courts have also laid down the same principle in Tariq Transport Company v. Sargodha-Bhera Bus Service reported as P L D 1958 SC (Pak.) 437. The Supreme Court in that case held that the violation of procedural rule regulating the hearing if results in a minor error and does not amount to denial of justice should not be a ground for quashing the proceeding. Then in Niaz Ahmed v. Ghulam Ali reported as P L D 1963 SC 382 Kaikaus, J. observed that proper place of procedure in any system of justice is to uphold and not to thwart the grant to the people of their rights. Then in Zain Noorani v. Secretary of National Assembly reported as P L D 1957 SC (Pak.) 46 it was held by the Supreme Court that non-performance of statutory duty within the prescribed time does not affect the ability of the duty performed. In that case even an Article of the Constitution was held to be directory and the following passage from Maxwell on the interpretation of Statute was quoted with approval:--
"on the other hand, where the prescriptions of a Statute relateto the performance of a public duty and where the invalidation of actsdone in neglect of them would work serious general inconvenience or injustice to persons who have no control over those entrusted with the duty without promoting the essential aims of the Legislature, such prescription seems to be generally understood as mere instructions for the guidance and Government of those on whom the duty is imposed, or, in other words, as directory only. The neglect of them may be penal, indeed, but it does not affect the validity of the act done in disregard of them. It has often been held, for instance, when an Act ordered a thing to be done by a public body or public officers and pointed out the specific time when it was to be done, that the Act was directory only and might be complied with after the prescribed time.
Thus, the 13 Hen. 4(C. 7), which required justices to try rioters within a month' after the riot, was held not to limit the authority of the justices to that space of time, but only to render them liable to a penalty for neglect.
To hold that an Act which required an officer to prepare and deliver to another officer a list of voters on or before a certain day, under a penalty, made a list not delivered till a later day, invalid, would, in effect, put it in the power of the person charged with the duty of preparing it to disfranchise the electors, a conclusion too unreasonable for acceptance."
It is, therefore, ob0ious that violation of a directory provision does not invalidate the proceedings.
16. Applying the above principles on the facts and the circumstances of the present case it would be seen that rule 12 has been made for convenience and its k non-compliance does not in any way cause prejudice to the other party nor it affects the jurisdiction of the Tribunal. This rule is, therefore, obviouslyregulatory by its nature and cannot be said to be mandatory. Now question here would be, as has been raised by some of the learned counsel, if the compliance of this rule is optional, will it not become redundant? To some extent the objection is valid. However, we have to reconcile the provision so that it can fit in the circumstances. Though, the rule is regulatory and is not of substance it does not mean that it is the sweet will of the appellant to comply or not to comply with it. In case the rule is not complied with, firstly the officers of the Tribunal have authority to return the appeal. If the non-compliance of the rule persists the appeal has to be placed before the Tribunal and the Tribunal has the power to pass `such order as it thinks fit'. To my mind the Tribunal at that stage can examine as to whether the violation of the rule was intentional or by way of inadvertent mistake or error. If the Tribunal finds that the non-compliance of the rule on the part of the appellant was intentional and to defeat the rule, the Tribunal has the power not to entertain the appeal as it has not been filed in accordance with the rules. However, if the Tribunal is of the opinion that the mistake was unintentional, the Tribunal can provide another opportunity to the appellant to comply with the rule and cure the defect. Where the respondent has already appeared or it is already in the knowledge of the respondent that the appeal has been filed, such a direction may not be necessary because that would be only a formality. In such cases on objection by the respondent, again the Tribunal has to see as to whether the rule has been intentionally violated. If the Tribunal is of the opinion that the rule has been violated intentionally it may refuse to entertain the appeal.
17. Another question which has been raised by some of the counsel was that supposing a `false certificate has been filed by an appellant in that case the officers of the Tribunal would not be able to invoke the provision of rule 15(1) of the Income-tax Appellate Tribunal Rules. The appeal will be admitted as a matter of course and it might be discovered only after an objection is taken by the respondent. In such cases it would be again for the Tribunal to decide as to whether an intentional fraud has been played on the Court or it was by way of mistake. If it is established that a fraud has been played on the Court then again the Tribunal is empowered to refuse to entertain the appeal of the appellant as fraud vitiates all proceedings.
18. Some of the learned counsel have also raised question in regard to the mode of compliance of rule 12. It was contended that it has been provided that notice shall be sent through registered post. Therefore, personal service is not a valid compliance of the rule. If we look at the intent of the rule the compliance in any form can be considered as sufficient compliance. The intention of the rule is that the respondent should know beforehand that the appeal has been filed against him. If this purpose is achieved it is immaterial as to what was the mode of service of notice. The rule cannot be interpreted strictly. The mode of service has been provided in order to resolve the controversy as to the service of notice. Once it is established that the respondent had the notice of appeal it would be a sufficient compliance of Rule 12 and the respondent is estopped from raising such a question. If any authority is needed P L D 1988 Quetta 9 may be referred. Another argument has been raised that Rule 12 requires two compliances. One is to file the certificate and the second that the service had been effected under rule 12. In other words where certificate had been filed without compliance of Rule 11, what is its effect?
This matter has already been dealt with, because, if it is proved that the certificate has been falsely filed knowingly and intentionally, in such cases the appeal may not be entertained on account of fraud played upon the Court.
19. The next question is in regard to the compliance of Rule 12 in case of reference applications. Rule 32 of the Tribunal Rules has made applicable, inter alia, rule 12 mutatis mutandis to an application under subsection (1) of section 136. This means that in an application for reference it is required that the copy of the application is to be sent to the respondent before filing of the application and a certificate thereof has to be appended with the application. Here Rule 32 of the Tribunal Rules may be reproduced below:-
"Procedure in respect of application for reference.---The provisions of rules 7, 8, 12, 13, 19, 20, 21, 25, 26, 27, 28 and 29 shall apply mutatus mutandis to an application under subsection (1) of section 136."
It has been argued that rule 11 and rule 15 are conspicuously absent in rule 32 meaning thereby that the Tribunal has not been empowered to dispense with the compliance of rule 12.
20. As has been discussed above, rule 12 is directory and for the purpose of convenience. The object of the rule was to expedite the proceedings and to cut short the time for disposing the appeals as the respondent is informed of the filing of the appeal beforehand. If we keep this object in view, we find that in reference applications the compliance of rule 12 is mere a formality inasmuch as section 136 of the Ordinance already provides that a reference application is to be decided by the Tribunal within 90 days of the receipt of such application. Rule 35 of the Tribunal Rules provides that on receipt of the notice of the date of hearing of the application, the respondent shall submit a reply to the application at least seven days before the date of hearing. Thus, we see that in normal conduct of the Court business a reference application is to be decided within 90 days from the date of the receipt of the application and the respondent is also entitled to file a reply seven days before the date of hearing. In the context of these provisions, the compliance of rule 12 as a matter of fact is only a formality and not of substance. If the respondent has to submit his reply seven days before the date of hearing, that would mean that he should have a notice of date of hearing at least a fortnight before 'the date of hearing, as the entire proceedings are to be concluded within 90 days of the filing of the reference application. Thus, even if the rule 12 is complied with, the respondent cannot do anything to expedite the reference application nor is it necessary. Conversely if the rule 12 is not complied with, the respondent cannot derive any benefit nor any prejudice or injury is caused to him. Thus, non-compliance of rule 12 cannot be regarded as fatal to the reference application. As a matter of fact, we feel that mention of rule 12 in rule 32 is by an inadvertence and no substantial object is achieved by compliance of rule 12 in reference applications.
CONCLUSIONS:
21. On the basis of the above discussion my conclusions are as under:--
(1) Rule 12 of the Tribunal Rules is not mandatory but directory.
(2) As the said rule is directory its non-compliance is curable when necessary.
(3) The Tribunal, in its discretion, can dispense with the compliance of the said rule.
(4) The said rule is not redundant as where the Tribunal is of the opinion that the rule has been intentinally and deliberately violated, it can refuse to entertain the appeal.
(5) Where the non-compliance is inadvertent or by mistake and the respondent has the knowledge of appeal, non-compliance will not be fatal to the appeal.
(6) Mode of service through Registered Post is not mandatory.
(7) In reference applications the non-compliance of rule 12 is not fatal to the reference applications.
22. The legal question is decided as above. All the above appeals may now be placed before the regular Bench for decision on merits.
MIRZA MUHAMMAD WASIM (ACCOUNTANT MEMBER).---I agree with the findings and conclusions in paras. 21 and 22.
23. JUNEJO M. IQBAL (ACCOUNTANT MEMBER): --I have had the privilege of going through the order passed by my learned brother, the Judicial Member, Lahore Bench, and have found myself in agreement with the reasoning and the conclusions drawn. However, I think it would be only appropriate to contribute my own views in areas where I feel that a proper stress has not been laid by him. The impression that I have gathered from the perusal of the order is that rule 12 is no doubt directory in character but is more of convenience than of substance, and that the objection against violation of such rule is merely of technical nature and does not, in any way, cause prejudice to the other party nor it affects the jurisdiction of the Tribunal. In other words, an element of redundancy has been attributed to the said rule which 1 am afraid, is not the correct position. To my mind, rule 12 safeguards the right of a respondent in an appeal. It is based on the well-known Roman maxim audi alteram pertem (no one should be condemned unheard). Unless the respondent to the dispute is aware of grounds on which the appeal has been preferred, it would not be possible for him to defend his position or his case. It has, therefore, been required that the memo. of appeal alongwith the grounds taken shall be sent to the respondent by registered post before the filing of appeal and a certificate to that effect appended with the memo. of appeal. After all, if the appellant has a substantive right of appeal, so has the respondent to defend himself. It cannot be termed as, "more of convenience than of substance,". It certainly has its own role to play in order to safeguard the interests of the respondent in an appeal. At para. 20, my learned brother, has further observed that in reference application, compliance with rule 12, is a mere formality; firstly, because section 136 of the Ordinance requires it to be disposed of within 90 days of its receipt in the Tribunal, and secondly, because rule 35 of the rules provides that on receipt of the notice of date of hearing of application, the respondent shall submit a reply to the said application at least seven days before the date of hearing, as required under rule 19. The point is that rule 19 is applicable both in the case of an appeal as well as a reference application, whereby a copy of appeal memo. and grounds or copy of reference application, is supplied to the respondent alongwith the notice of hearing before the Tribunal. If the intention was just to inform the respondent before the date of hearing, rule 19 was good enough and where was then the need for bringing in rule 12 and rule 32? I am of the view that this was done intentionally to alert the respondent immediately so that he could safeguard his interests by taking appropriate counter-measures in respect of pending assessment proceedings as well as appeals, if any. In fact, rule 32 has to be shown more respect in the case of reference application under section 136 than an appeal under section 134 of the Ordinance. Rule 12 has not been incorporated in rule 32 out of inadvertence but by design to provide adequate opportunity to the respondent of defending himself.
24. While interpreting the implications of rule 12, we have to keep in mind that appeal is an important step in the legal proceedings granting a substantive right to an appellant to pursue the course of justice to its logical end. The right of ', appeal has been granted by the legislature under section 134 of the Ordinance and it cannot be snatched away or extinguished by mere technicalities. A perusal 'w of the language of rule 12 indicates that no penalty has been prescribed for the failure to comply with it. It does not use any negative or prohibitory language. It is, therefore, safe to conclude that the rule is directory in nature and not mandatory. After all, the object and purpose of these rules is to grease the machinery of legal process and not to choke or obstruct the course of justice. That is precisely why rule 11(3) of the rules empowers the Tribunal to accept the memorandum of appeal even where it is not accompanied by all or any of the documents required to be furnished to the Tribunal. Rule 15(1) provides for the return of memorandum of appeal if it is not filed in the manner specified m the rules so that the defects, if any, may be removed to bring it in conformity with them. The purpose of relaxation, as provided under the rules is to safeguard the substantive right of, appeal to the Tribunal granted under section 134 of the Ordinance.
25. The sanctity of the right of appeal has been enshrined in the decision of the Lord Buckmaster in Montreal Street Railway Co. v Normandine (1917) A.C. 170(PC), wherein he has pointed out that all roes of this type are nothing but provisions intended to secure proper administration of justice. It is, therefore, essential that they should be made to serve and the subordinate to that purpose.
26. It would be worthwhile to refer to some decisions from the Indian jurisdiction. In the case of State of Gujarat v. Ram Prakash Puri (1970) S.C.R. 875(SC), the Supreme Court pointed out that a procedure is a hand-maid and not a mistress of law intended to sub-serve and facilitate the course of justice and not to govern or obstruct it. The Supreme Court of India in the famous case of C.I.T. v. Calcutta Discount Company, reported as (1973) 91 I T R (SC) has held that no specific form is necessary for seeking relief at the hands of any Court or Tribunal, if the necessary grounds are taken in the appeal memo. It was further held that the Tribunal instead of dealing with the substance of the matter, appeared to have been unduly influenced by procedural technicalities. Its conclusion that the appeal memo. was not in accordance with law, was also questionable.
27. A reference can also be made to yet another famous decision of the Supreme Court of India In re: Mela Ram & Sons v. C.I.T. reported as (1956) 29 I T R 607 (SC), where, referring to the right of appeal, it was held, "a construction should not be adopted, which deprives the parties of valuable rights. Contentions relating to preliminary issues are open to consideration at the time of hearing of appeal".
28. In another case, namely, C.I.T. v. S. Chenanippa Mudaliar reported as (1969) 74 I T R 41 (SC), while examining vires of rule 24 of the Income Tax Appellate Tribunal; Rules, 1946, as amended in 1948, it was observed that it came into conflict with section 33(4) of the Income Tax Act, 1922, and hence in so far as it enabled the Tribunal to dismiss the appeal for default of appearance, was held to be ultra vires.
29. In fact. n hearing an appeal, the Tribunal is empowered to permit an appellant to urge grounds not set forth in the memo, of appeal and in contesting the appeal, the Tribunal is not restricted to the grounds set forth in memo. of appeal or taken with the leave of the Tribunal. Views to this effect have been expressed by the Supreme Court of India in the case of C.I.T. v. S. Nelliappan reported as (1967) 66I T R (SC).
30. It would be worthwhile to refer to some cases in support of the view that any defect or failure to comply with the requirement of the rules falls within the category of an irregularity rather than an illegality which could be fatal to the fate of, an appeal. Such defects or irregularities are curable and rectifiable by an amendment taking effect from the date the documents were originally filed, and that the Tribunal can exercise its discretionary jurisdiction to condone such defects:--
(i) Sheonath Singh v. C.I.T. West Bengal, reported as (1958) 33 I T R 591 (Calcutta High Court).
(ii) Dhanpat Mal Diwanchand v. C.I.T. reported as (1954) 26 I T R 357 (Lahore High Court).
(iii) Gouri Kumari Devi v. C.I.T., Bihar & Orissa reported as (1959) 37I T R 220 (Patna High Court).
(iv) Chhotay Lal Kishn Lal v. C.I.T. reported as (1962) 45 I T R 490 (Allahabad High Court).
(v) Laxminarayan Behari Lal v. C.I.T., Sitapur reported as (1960) 39 I T R 649.
31. The upshot of the whole discussion is that the right of appeal granted to the appellant under section 134 of the Ordinance has been expressly granted by the legislature and it cannot be snatched way or sacrificed at the altar of procedural niceties dictated by the Income Tax Appellate Tribunal Rules. This, however, does not mean that rules have to be observed by default rather than by compliance. Each case has to be examined on its merits. No premium can be placed on any irregularity committed by an appellant. But at the same time, valuable right of appeal can also not be extinguished by an irregularity or an omission or defect\which was either unintentional or error committed unwittingly or inadvertently. Surely, the Income Tax Appellate Tribunal is vested with discretionary jurisdiction which could be exercised in appropriate cases where sufficiency of cause preventing timely compliance with rules is shown to the satisfaction of the Tribunal.
FARHAT ALI KHAN (CHAIRMAN).---I have gone through the ably written order of my learned brother, Mr. Abrar Hussain Naqvi, the Judicial Member at Lahore with whom my learned brother Mirza Wasim, the Accountant Member at Lahore has concurred. I have also the advantage of going through the laboriously and aptly written explanatory note added by my learned brother, Junejo M. Iqbal, the Accountant Member at Islamabad, with whom my learned brother, Syed Amjad Hussain Bukhari the Judicial Member has concurred. Since all the learned Members have come to the unanimous view that rule 12 of the Income Tax Appellate Tribunal Rules of 1981 though directory in nature yet its default was to be examined in each and every case under its facts and circumstances in order to determine as to whether the appeal should be rejected due to its violation or the default should be excused, I also, with due respect, subscribe to their conclusion. However, let me add that although my views as expressed in a decision reported as 1990 P T D (Trib.) 1042 have been approved by my learned brothers yet I feel that I should highlight some other features of the issue in dispute which have escaped notice but which definitely will help in appreciating the observations made by my learned brothers in their learned dissertations.
33. Starting with the history of rule 12 of Income Tax Appellate Tribunal Rules, hereinafter referred to as the rules of 1981, let me point out that in the Income Tax Appellate Tribunal Rules of 1948, hereinafter referred to as the rules of 1948, no such provision was made although its rule 10(2) vested in the Tribunal the power of admitting a memorandum of appeal which was not accompanied by all or any of the documents referred to in its sub-rule (1) and at the same time its rule 13 empowered the Tribunal to reject the memorandum of appeal if it was not in the prescribed form. The same rule also gave the power to the Tribunal of returning it for being amended within such time as was allowed. From perusal of sub-rule (3) of rule 11 and sub-rule (1) of rule 15 of the Rules of 1981 it appears that they are analogous to sub-rule (2) of rule 10 and later part of rule 13 of the Rules of 1948. My learned brother, the Accountant Member of Islamabad, has observed that rule 12 in the Rules of 1981 was based on the well-known Roman maxim of audi alteram partem. However, with due respect to him had it been so this rule would have found place in the Rules of 1948 also. In fact, rule 12 of the Rules of 1981 does not communicate the date of hearing hence does not meet the requirement of cardinal principle of natural justice that no one should be condemned unheard. From perusal of the Rules of 1948 it appears that its rule 20 complied with this requirement where it laid down that the Tribunal shall notify, to the parties the date and place of hearing of the appeal and send a copy of the memorandum of appeal to the respondent. Rule 19 of the Rules of 1981 has made the same provision. The question, therefore, arises as to why Rule 12 was introduced in the rules of 1981? Let me, therefore, answer it in some details.
34. In 1947 when this Tribunal came into existence m Pakistan it consisted of two Members, one of whom was the Judicial Member and the President and the other was an Accountant Member. Although its jurisdiction extended all over Pakistan which consisted of both the erstwhile East Pakistan and West Pakistan, yet it has not even a dozen appeals to hear. However, in 1981 when the Rules of 1981 were framed-the Tribunal has expanded itself four times whereas its work load had multiplied many times more with the result that the learned Members who enjoyed the leisure of waiting for the institution of the appeals in 1948 became over-worked in 1981 and the arrears of appeals started swelling up rapidly. Since the income tax is an annual incidence and since the income tax proceedings in one form or the other continue throughout the year, it was felt that if a second appeal was filed by either the department or the assessee in this Tribunal the other party must know immediately about the institution of such appeal. In other words when the appeals were heard and disposed of immediately on their institution no prejudice was likely to be caused either to the department or to the assessee but with the stretching of the muscles by the monster of the back-log both the department and the assessees became apprehensive of the prejudices which might be caused to their interest. It was at that stage that some necessary step was deemed necessary.
35. In Civil Courts also the monster of back-log had made its presence felt and consequently various reforms were introduced from time to time beginning from 1972 in order to remove the bottle-necks which I need not pause to dilate upon. However, let me mention that during the proceedings of civil suit there is a possibility of more than 25 types of interlocutory orders against which an appeal is provided for. Any party to a civil suit who wanted to drag on proceedings could have easily done so by filing appeals against appealable orders during pendency of suits. Consequently the legislature intervened and by adding rule 3 to Order 43 of the Civil Procedure Code by the Ordinance 10 of 1980 introduced the caveat system which was being successfully followed in the Supreme Court of Pakistan (Please see rules 2 and 3 of Order of Supreme Court Rules). Thus, after aforesaid Ordinance a party was required to serve a notice on the other party together with a copy of the memorandum and grounds of appeal and the copy of the impugned order if it intended to file an appeal during pendency of the suit. The idea was to provide the respondent an opportunity of contesting the appeal against an interlocutory order at the admission stage so that it could be got dismissed in limine if it was not sustainable in law for any reason. I think that it was this amendment in Order 43 of C.P.C. which prompted the framers of the Rules of 1981 to introduce rule 12. Here also the underlying idea was to inform the other party about the institution of second appeal in this Tribunal so as to enable it to take .such necessary steps promptly as it deemed fit because the regular hearing of appeal could take place after years together. The classic example of the advantage of introduction of rule 12 comes. from the issue regarding surcharge. A Division Bench of this Tribunal ' held in its decision reported as 1988 P T D (Trib.) 155 that the amount of income-tax and super-tax being working capital was to be reduced from total income in order to levy surcharge. However, the department in spite of this decision went on levying surcharge contrary to this decision and the appeals remained flowing in and the controversy went out to the High Court in shape of multitude of reference applications. The other example may be provided by decisions of this Tribunal reported as 1987 P T D 641 and 1987 P T D (Trib.) 116 by which the assessees felt aggrieved as the installation charges were not included in the cost while working out tax credit and the department felt aggrieved because the amount of tax credit was ordered not to be deducted from actual cost of an asset while working out depreciation allowance. Similarly the decisions of this Tribunal reported as (1988) 58 Tax 15 (Trib.) (setting off interest earned against interest payable), 1989 P T D (Trib.) 1004. (levy of workers welfare fund on exempt income), 1989 P T D 917 (property income of an employee of a bank) are those decisions in which the department has taken or intends to take the issue to the High Court. Similarly, the decisions reported as 1987 P T D 389 (publicity charges m violation of rule 33 of Drug Rules) and 1989 1- T D 10 'Trib.) 16 and 1989 P T D (Trib.) 16 (deduction of wealth tax and income-tax liability in current year) are the decisions the ratio of which have been taken to the High Court by the assessee. Thus, the purpose of introducing rule 12 m the rules of 1981 was to bury stillborn issues like those which have been mentioned above at the earliest and to provide an opportunity of removing the difficulties faced by the parties by early hearing of their appeals at their instance. As illustrated above the Department has stuck to its view and went on repeating the same view in each assessment year. In such cases the assessee learns about the institution of appeal and comes to us for early hearing. Similarly, in some cases the department also gets the opportunity of getting an order for early hearing of appeals for similar reasons. Let me also point out that the introduction of the preliminary hearing system has further enhanced the value and utility of rule 12. One of the purposes, inter alia, of the preliminary hearing system, as described in various circulars, is to decide the appeals arising out of decided issues immediately so that stillborn matters are buried without any delay. Thus, if a notice is served under rule 12 the assessee or the department may decide to turn up on the date of preliminary hearing, after obtaining necessary information s from the Tribunal, for which the notice is given only to the appellant, if they think that the appeal could be disposed of on the first date of hearing. However, on preliminary hearing if it is found that the appeal could not be disposed of on first hearing a date is fixed by the Tribunal for regular hearing and the notice, as provided by rule 19, is sent to other party. Thus, let me sum up that rule 12 was introduced in the Rules of 1981 purposely and its value has further been .enhanced by introduction of the preliminary hearing system. I am sure that if both the orders proposed by my learned brothers, the Judicial Member of Lahore and Accountant Member of Islamabad are read in context of and with reference to the discussion made above, their true and correct import would appear to be emerging out palpably obvious.
36. From perusal of both the orders of my learned brothers it further appears that both of them have made observations regarding the rules mentioned in rule 32 of the Rules of 1981. My learned brother, the Judicial Member of Lahore is of the view that rule 12 has been inadvertently mentioned in rule 32 of the Rules of 1981. On the other hand, my learned brother the Accountant Member of Islamabad is of the view that rule 12 has been purposefully mentioned in rule 32 of the Rules of 1981. Before proceeding further let me mention here that rule 32 lays down that the procedure in respect of application for reference shall be the same as provided in rules 7, 8,12,13,19, 20, 21, 25, 26, 27, 28 and 29.
37.' On cursory reading of section 136 of the Income Tax Ordinance, hereinafter referred to as the Ordinance, I felt that the learned Judicial Member was correct in his approach for the simple reason that if this Tribunal rejected the reference application filed in violation of the relevant Rules of 1981, the applicant would not suffer any irreparable loss as he could go direct to the High Court under subsection (2) of section 136 of the Ordinance. However, on deeper study it occurred to me that an applicant cannot go directly in reference to the High Court in each case of the rejection of his reference application by this Tribunal. If we read subsection (2) of section 136 of the Ordinance it appears that only in those cases where the Tribunal refuses to state the case on the ground that no question of law arises (emphasis added) a direct reference application could bemoved to the High Court. Since refusal on the ground that no question of law was arising is the only criterion the rejection of the reference application for non- compliance of rules of procedure of this Tribunal would not vest an applicant with the right of moving reference application directly to the High Court. Thus, it is clear that the case of an appellant stands on different footing than that of a case of an applicant moving reference application in violation of the rules for the simple reason that by virtue of rule 21(3) and rule 15(1) the Tribunal can either give an opportunity to the appellant to rectify mistake or to dispense with some omission which in case of reference application is not available for the simple reason that rules 11 and 15 of the Rules of 1981 do not find place in rule 32. The question, therefore, arises as to what shall happen if a reference application is filed in violation of rules? Since this aspect of the issue involved has not been considered by both the learned Members I would, therefore, offer my view on it.
38. The first conclusion which may be arrived at under the facts and circumstances as mentioned above would be to reject such reference application which is not moved in accordance with various rules of the Rules of 1981. However, in such case those applicants would suffer whose period of limitation has expired but those who are still within 90 days may file fresh application in accordance with rules as to my knowledge, there is no bar provided by any law for filing second application. However, in both the cases this anomalous position may be avoided if the Registrar or an officer authorised by him acts vigilantly and diligently by pointing out immediately the defect which he finds in the reference application. There may be cases in which the applicant may have enough time for rectifying the mistake. However, in those cases where the applicant comes on the last day of limitation he may face difficulty for the simple reason that though subsection (4) of section 134 has given the power to the Tribunal to enlarge the period of limitation in case of late filing of appeals on its satisfaction that the appellant was prevented by sufficient cause from presenting it within the prescribed period, yet no such power has been given to the Tribunal. However, subsection (2-A) of section 136 provides a remedy to an applicant whose application is rejected by the Tribunal for being time-barred; such party may move to the High Court. However, it is to be kept in mind that an application which is rejected for the reason that it is not in accordance with the Rules of 1981 shall not be deemed to have been rejected on the ground that it is time-barred and thus both an assessee or the department may suffer. I am, therefore, sincerely of the view that rules 11 and 15 should also be included in rule 32 of the Rules of 1981 and if it is done both the assessee and the department would receive same; benefit as they are entitled to get as appellant. In other words it' rules 11 and 15 are added in rule 32 of the Rules of 1981 the conclusion of my learned brothers arrived at regarding filing of the appeals in violation of the rules shall become at once applicable and every case would be decided under its own facts and circumstances by this Tribunal.
39. However, the amendment of rule 32 is not an easy affair. I am, therefore, of the view that meanwhile the Tribunal must ensure that the reference applications as and when presented should be scrutinized on the date of presentation and the defects if any should be pointed out to the applicants so that they may present fresh applications if they are still within period of limitation. Needless to say that in such case the applications with defects can neither be admitted in the discretion of the Tribunal nor can be returned back for removal of the defects for the reasons discussed above. On the other hand, it will be advisable to all the applicants that they should move their reference applications well before the expiry of the period of limitation so that if any defect is pointed out to them they may have enough time to resubmit the application according to the rules as the earlier would entail nothing but dismissal.
40. Now, before parting with these appeals I would like to mention here that for the reasons given so elaborately by both my learned brothers, the Judicial and Accountant Members, I am of the view that the word "may" as used in rule 15 of the Rules of 1981 should be taken to mean "shall" to make it obligatory on the part of Registrar or the officer authorised to return such appeal to the appellant' so as to resubmit it in conformity with the provisions of these rules. Thus, the Rules of 1981 provide a unique example of laying down such provisions of law in which the word "shall" is to be read as "may" and the word "may" is to be read as "shall" under the facts and circumstances of each case. Needless to say that when rule 15 is included in rule 32 its benefit would also be available to applicants of reference applications.
41. Before concluding let me touch one more issue which has been argued by one of the learned counsel. The question which was raised before the larger Bench was as to whether the Registrar can extend the period of 'limitation under rule 15? With due respect I am of the view that in those cases in which the appeal is presented within prescribed period of limitation and the Registrar returns it to the appellant for removal of some defects the presentation is taken on the date on which it was originally presented hence no question arises regarding enlargement of period of limitation by the Registrar. In this connection rule 8 of the Rules of 1981 lays down that the Registrar or the officer authorised shall endorse on memorandum of appeal the date either on which it is presented or deemed to have been under rule 7 and shall sign the endorsement. The endorsement of the date of presentation precedes its scrutiny and detection ofdefects for which it may be returned back and thus the date of presentation remains effective when the appeal is resubmitted within the prescribed time under rule 15.
42. Lastly, let me also mention that in a decision reported as 1990 P T D (Trib.) 1042 the argument was advanced by the department that service of notice by Registered Post should not be insisted upon. However. I repelled it with the following observation:
"The rule lays down the provision of service of notice by registered post to avoid this type of controversy which has arisen in this case. If we dispense with this requirement sometimes it may be because of the paucity of funds that notice would be served by the process-server but sometimes it may be because of slackness on the part of process-server that it is never served though it may purport to have been served. I am, therefore, firmly of the view that this provision must stand. Now as far as the insufficiency of funds is concerned the department would be better advised to approach the C.B.R. who have larger amount to spend at their discretion."
However, let me add hurriedly that this observation would be read in context of and with reference to the consensus of opinion arrived at by us that each case should be considered under its own facts and circumstances.
43. In my aforesaid decision I have referred to another cardinal principle of administration of justice. In that case the memorandum of appeal was filed on 11th July, 1990 without proof of service under rule 12 under registered post and the period of limitation was expiring 8 days afterwards. It was shown to us that the notice required under rule 12 was served through process-server. Since the Registrar or authorised officer has not raised any objection regarding non-compliance of rule 12 I considered this default and made the observation at page 1055 of paragraph 9 of 1990 P T D as follows:--
"It is pertinent to note that the memorandum and grounds of appeal were filed on 11th July, 1990 though the order appealed against was' communicated on 19th May, 1990. Thus, the department had eight good days at its disposal to comply with the requirement of serving memorandum and grounds of appeal under registered cover. It was all the more necessary for the Registrar or his authorised officer to return the memorandum for the purpose of sending copies of memorandum and grounds of appeal by registered post, as the department, as had been revealed subsequently, had already served them through its process-server, and thus had reason to believe that it had complied with the requirement of rule 12 at least in its spirit if not in letters. I, therefore, keeping into consideration the centuries old wisdom which has been crystallised in the cardinal principle of administration of justice that nobody should suffer because of the mistake of Court which includes its officers, find no force in submission of Mr. Abbasi."
I am, therefore, of the view that while this Tribunal of the C.I.T. (Appeals) are required to interpret such type of rules, they must always keep into consideration as to whether the mistake on the part of Court or its officer is or is not the cause of injury caused or to be caused to a tax-payer or the department.
44. Now before concluding I feel that in spite of the observation of the learned Judicial Member I should also place on record my deep appreciation and gratitude to the learned counsel who not only unhesitatingly followed the time honoured practice of responding to the call of the Bench but also came thoroughly prepared. It is because of their research and industry that we could explore the issue on such wider canvass. It is true that we had the advantage of hearing arguments for and against the issue involved but I do not think that in this case anybody has won or lost. In fact, everybody has won because the law on the subject has been made just and certain for posterity. I would be failing in my duty if I do not acknowledge the excellent arrangements which were made by the Rawalpindi/Islamabad Tax Bar, for this unprecedented occasion. It was actually at their instance that the larger Bench sat at Islamabad. They, therefore, deserve thanks equally from the Bench and the Bar.
45. Thus, in view of discussion made above I respectfully agree with unanimous conclusion of my learned brothers as discussed above.
ORDER OF THE COURT
Since all the learned Members have agreed it is held that rule 12 is directory in nature and its violation would not necessarily entail dismissal in each and every case but the facts and circumstances of each case would be examined in order to decide as to whether the violation thereof must lead to dismissal or be condoned.
Let all the appeals be decided in accordance with this decision of the larger Bench.
M.BA./1180/T Order accordingly.