I.TA. NO.445/LB OF 1990-91, DECIDED ON 24TH MARCH, 1991. VS I.TA. NO.445/LB OF 1990-91, DECIDED ON 24TH MARCH, 1991., 1992 PTD-INCOME-TAX-APPELLATE-TRIBUNAL-PAKISTAN 440 (1991)

(a) Income Tax Rules, 1982---

-----R. 194---Income Tax Ordinance (XXXI of 1979), S. 130---Words "and"/"or'.' occurring in Form of Appeal, Note (ii) ---Connotation---Words "and/or" do not give option to the appellant to file or not to the demand notice alongwith petition for appeal---Where the demand notice was issued that had to be attached with the appeal---Where, however, the appeal was filed within limitation and demand notice was ultimately filed the defect in filing appeal stood cured and appeal could not be dismissed merely for non-filing of the -demand notice.

(1978) 115 ITR 503 and (1968) 21 STC 154 ref.

(b) Income Tax Rules, 1982---

----R. 194---Income Tax Ordinance (XXXI of 1979), S. 130---Notes given in the form of appeal being the rule of guidance and convenience and not a statutory rule and could not be regarded as part of the Form---Manner of filing appeal given in the said notes of the Form does not have the sanction of S. 130. Income Tax Ordinance, 1979.

The notes given in the Form are the guiding notes which cannot be regarded as part of the form. In these notes various guidelines have been given indicating the manner in which the appeal may be filed. Under section 130 the C.B.R. has only been empowered to prescribe the manner of verification alone. However, the manner given in the notes does not have the sanction of section 130 of the Income Tax Ordinance. Therefore, it is for these reasons that the C.B.R. conscious of its powers, did not make it as part of the form but has given the guidelines as footnote in the form which in other words is a rule of guidance and convenience and not a statutory rule. Therefore, it cannot be said to be a part of the rule which could be regarded as mandatory. Even if it could be regarded as a part of the rule even then it could be a directory rule and, therefore, curable.

(c) Income Tax Ordinance (XXXI of 1979)---

----S. 130---Income Tax Rules, 1982, R. 194---Appeal---Right of appeal being the substantive right of the assessee, assessee could not be deprived of his said right merely because of his failure to comply with any requirement of the footnotes to the Form of appeal.

(1978) 115 ITR 503 and (1968) 21 STC 154 ref.

Dr. Ilyas Zafar for Appellant.

Liaqat Chaudhary, D.R. for Respondent.

Date of hearing: 19th January, 1991.

JUDGMENT

ABRAR HUSSAIN NAQVI (JUDICIAL MEMBER).---This is an appeal filed by a private Limited Company against the dismissal of the appeal as time-barred by the learned CIT(A) relating to the assessment year 1988-89.

2. The facts of the case are that a penalty at Rs. 35,381 was imposed by the Panel vide order dated 30-10-1989 under section 110 of the Income Tax Ordinance for default of notice under section 61 of the Ordinance. The penalty order was served on the assessee on 23-11-1989 and the assessee filed appeal within time before the learned CIT(A) on 17-12-1989. The appeal was returned by the learned CIT(A) to the assessee on 18-12-1989 and-directed him to file the demand notice alongwith the appeal. The appeal was refiled without the notice of demand on 31-12-1989. This appeal was not returned to the assessee. On the same date i.e. 31-12-1989, the assessee filed an application to the ITO for a copy of the demand notice which was received by the assessee on 18-8-1990 and was duly filed before the learned CIT(A) on 19-8-1990. The learned CIT(A), however, dismissed the appeal in limine on 19-8-1990 as time -barred. According to him the appeal was incurably irregular. It was further observed by the learned CIT(A) as under:--

"Since no plausible explanation for the cause of delay in submitting the memo. of appeal suffering from an irregularity has been furnished, the appeal deserve to be dismissed on point of limitation as well."

3. The learned counsel for the assessee has argued the appeal at length and contended firstly that the submission of demand notice is not a statutory requirement and, therefore, the appeal was competently filed within time even without the demand notice. Secondly, it was contended that filing of demand notice is of directory nature and, therefore, curable. Since the demand notice had been filed before the decision of the appeal and the defect having been cured, the appeal should not have been dismissed in limine only for default of filing of demand notice.

4. We have considered the arguments of the learned counsel for the assessee. Under section 130 of the Income Tax Ordinance, 1979 an appeal has to be filed before the AAC and it has been provided that every appeal has to be filed "in the prescribed form and shall be verified in the prescribed manner, and shall be accompanied by a fee of Rs.25". The word "prescribed" has also been defined in section 2(33) of the Ordinance as under:--

"`Prescribed' means prescribed by Rules made under this Ordinance."

Rule 194 of the Income Tax Rules framed by the CBR has prescribed the "form of appeal". In the form the manner of verification has also been prescribed. Furthermore, at the bottom of the form the following notes have been given:--

"N.B.--(i) The appeal petition should be filed in duplicate.

(ii) The appeal petition should be accompanied by the Notice of Demand and/or a copy of order appealed against, as the case may be.

(iii) The form of appeal and verification form appended thereto shall be signed--

(a) in the case of an individual, by the individual himself;

(b) in the case of a company or local authority, by the Principal Officer;

(c) in the case of a firm, by a partner;

(d) in the case of any other association, by a member of the association; and

(e) in the case of a Hindu undivided family, by the manager of Karta."

5. The learned counsel for the assessee firstly contended that these notes are not part of the form but by way of guiding the assessee as a rule of convenience. Secondly, it was contended that the demand notice can be filed at the option of the assessee which is clear from the words "and/or". As for the second contention of the learned counsel for the assessee this is misconceived. The words "and/or" have been used as there are two situations visualized by these notes which is clear from the phrase used "as the case may be". The appeal can be filed either against an assessment or against an order. The distinction is necessary as in the case of an assessment the demand notice is also prepared. But there can be a simple order as well where the demand notice is not required to be prepared but such orders are also appealable. For instance an order under section 156 of the Ordinance where the assessing officer refuses to rectify his order. Therefore, it is for these reasons that the words "and/or" have been used. In a case where the demand notice is issued that has to be attached. However, where no such demand notice has to be issued naturally the demand notice is not required to be filed.

6. However, there is considerable force in the contention of the learned counsel for the assessee that these notes given in the bottom are not part of the form. Here, we would like to revert back to section 130 of the Ordinance. This section provides that appeal has to be filed:--

(i) in the prescribed form;

(ii) shall be verified in the prescribed manner; and

(iii) shall be accompanied by a fee of Rs.25.

Now what is required under section 130 of the Ordinance is that the appeal is to be accompanied by a fee of Rs.25 and it has to be in the prescribed form and verified in the prescribed manner. Thus, the CBR has the power to prescribe:--

(i) the form of appeal;

(ii) the manner of verification of appeal.

The CBR has prescribed the form.. It has also prescribed the manner of verification. Nothing more has to be prescribed by the CBR as envisaged under section 130 of the Income Tax Ordinance. Therefore, the notes given in the Form are the guiding notes which cannot be regarded as part of the form. In these notes various guidelines have been given indicating the manner in which the appeal may be filed. Under section 130 the CBR has only been empowered to prescribe the manner of verification alone. However, the manners given in the notes do not have the sanction of section 130 of the Income Tax Ordinance. Therefore, it is for these reasons that the CBR, conscious of its powers, did not make it as part of the form .but has given the guidelines as footnote in the form which in other words is a rule of guidance and convenience and not a statutory rule. Therefore, it cannot be said to be a part of the rule which could be regarded as mandatory. Even if it could be regarded as a part of the rule even then it could be a directory rule and, therefore, curable. Since the demand notice was ultimately filed by the assessee, the defect, if any, was cured. The appeal has been filed within limitation period as provided by section 130 of the Ordinance, the learned CIT(A) was not entitled to dismiss it as the right of appeal is a substantive right of an assessee. This is a statutory right and the assessee could not be deprived of this statutory right merely on ground that the demand notice had not been filed alongwith the appeal. The failure to file a demand notice being not the requirement of either the Income Tax Ordinance or the rules made thereunder, the assessee's appeal could not be dismissed merely for non-filing of the demand notice. In Additional Commissioner of Income Tax v. Prem Kumar Rastogi reported as (1978) 115 ITR 503, the Allahabad High Court has expressed the same view. Relying on Lakshmiratan Engineering Works Limited v. Assistant Commissioner, Sales Tax decided by the Supreme Court of India and reported as (1968) 21 STC 154 the Allahabad High Court at page 505 of the report observed as under:

"It is apparent that neither section 249 nor rule 45 makes it incumbent on the assessee to enclose the demand notice alongwith the memo. of appeal. The assessee may enclose the demand notice in order to demonstrate that the appeal is within time; but failure to do so could not render the appeal beyond limitation, if it is otherwise within time. We are fortified in the view that we take by the decision of the Supreme Court in Lakshmiratan Engineering Works Ltd. v. Assistant Commissioner (J) Sales Tax (1968) 21 STC 154."

It may be noted that the Indian provisions of the Income Tax Act and the rules made thereunder are substantially in the same wordings and in the same manner as of the Pakistani law.

7. For the foregoing reasons we set aside the order of the learned CIT(A) and hold that the assessee's appeal was within time and should have been disposed of on merits. Consequently, we remand the appeal back to the learned CIT(A) for disposing it on merits.

M.BA./1217/T Appeal allowed.