A. T. AS. NOS.517/LB AND 518/LB OF 1990-91 VS A. T. AS. NOS.517/LB AND 518/LB OF 1990-91
1994 P T D (Trib.) 112
[Income-tax Appellate Tribunal Pakistan]
Before Abrar Hussain Naqvi Judicial Member and A.A. Zuberi Accountant Member
A. T. As. Nos.517/LB and 518/LB of 1990-91, decided on 28/03/1992.
Per A.A. Zuberi, Accountant Member, Abrar Hussain Naqvi, Judicial Member, agreeing-
(a) Income-tax Ordinance (XXXI of 1979)---
----Ss. 134 & 66-A---Appeal to Appellate Tribunal---No appeal lies to the Appellate Tribunal against the order passed by Inspecting Assistant Commissioner under S.66-A of the Ordinance where the order passed by him had only cancelled the assessment directing a fresh assessment to be made-- Only such order passed by Appellate Assistant Commissioner under S.156 of the Ordinance rectifying a mistake were appealable to the Tribunal as having the effect of enhancing the assessment or reducing a refund or otherwise increasing the liability of the assessee.
1985 SCMR 116; 1986 SCMR 1544; 1986 SCMR 1607; Chamber's Concise Dictionary, p.402; Law Terms and Phrases Legally Explained by Mr. M. Iqbal Mokal, p.338; (1956) 2 ITR 607; (sic) SCMR 166; PLD 1965 Kar.182; PLD 1972 Pesh (sic); 1991 PTD 850; In re: Highway Petroleum Service 1977 PTD 183; In re: National Food 1991 PTD 850; In re: Haji Abdullah Khan and others P L D 1965 SC 690 and P L D 1972 Lab. 142 ref.
Per Abrar Hussain Naqvi, Judicial Member.
(b) Interpretation of statutes--
---- Inaccurate phraseology of draftsman should not be allowed to nullify a provision made by the legislature if the phraseology is inconsistent with the legal norms.
The error (if any) in placing the coma (or colon) in the enactment is, to be ignored on the well-settled principles of interpretation of statutes, which permit that inaccurate phraseology of draftsman should not be allowed to nullify a provision made by the legislature if the phraseology is inconsistent with the legal norms.
In re: Highway Petroleum Service 1977 PTD 183 ref.
Per Abrar Hussain Naqvi, Judicial Member: --
(c) Maxim-
----Ubi jus ibi remedium---Every person affected by an order should have at least one right of appeal.
(d) Income-tax-
----Appeal---Appeal being a statutory right, appeal could only be filed if specifically provided in the statute.
Wahid Bux and another v. Afzal Transport Company P L D 1966 Lah.684 ref.
(e) Income Tax Ordinance (XXXI of 1979)---
----S. 134---Appeal to Appellate Tribunal---Right of appeal is not unqualified.
(f) Income-tax--
----Appeal---Right of appeal is statutory right and must be provided by the statute specifically ---Such right could not be assumed merely on the basis of wrong practice.
1963 PTD (Trib.) 113 distinguished.
(g) Income-tax--
----Practice---Practice, which is not supported by law cannot have any legal validity.
1963 PTD (Trib.) 113 distinguished.
(h) Income-tax Ordinance (XXXXI of 1979)---
----Ss.134 & 66-A---No appeal lies against the order of the I.A.C. passed under S.66-A where the assessment order has been simply cancelled---Appellate Tribunal, however, observed that there appeared to be genuine grievance of the assessee; the right of appeal may be provided to the assessee where the IA.C. has wrongly exercised the jurisdiction and the assessee was left with no remedy---Relevant Authorities were suggested to consider the expediency to make necessary amendment in law.
Shahbaz Butt for Appellant.
Qaiser Yahya, D.R. for Respondent.
Date of hearing: 28th March, 1992.
ORDER
AA. ZUBERI (ACCOUNTANT MEMBER).---These two appeals have been filed at the instance of a registered firm to agitate against order, dated 31-12-1990 passed by the learned Inspecting Assistant Commissioner, Range-I, Zone-A, Lahore in the exercise of jurisdiction under section 66-A of the Income-tax Ordinance in respect of assessment years 1988-89 and 1989-90. The appellant registered firm is engaged in flour milling.
The scrutiny of record with the help of the two representatives showed that the learned IA.C found that:
(i) the ratio of electricity consumed to the sales was highly under-stated.
(ii) The declared G.P. rate lower than confirmed by the Tribunal in other identical cases;
(iii) the sale of a track during the year had not been considered;
(iv) P&L expenses, besides being unverifiable and unvouched, had element of personal expenses.
He, therefore, held that the assessment under section 62 at "nil income" for the year 1988-89, and acceptance of the returned income under SA.P. at Rs.7,230 in 1989-90, erroneous and also prejudicial to the interest of revenue. After examining such aspects as: energy consumption bills, the appropriate G.P. rate, and the error in computing income in the year 1988-89 when it was accepted under S.A.P. instead of the assessment year 1987-88; the learned I.A.C. finally cancelled, both the assessments to be made de novo after due consideration of the points specified by him in respect of both the years. With this the appellant is aggrieved.
The learned Legal Advisor for the Department (Mr. M. Ishaq Chaudhry) at an earlier hearing on 18-7-1991 raised objection about the competence of the appeals by referring to the provisions of subsection (1) of section 134 of the Income-tax Ordinance. It was pointed by the learned Legal Advisor that section 134(1) provides appeals against an order under section 66 A only if such an order has the affect of enhancing the assessment or reducing a refund or otherwise increasing the liability of the assessee and not otherwise it was asserted by Mr. M. Ishaq Chaudhry (LA) that the impugned order simply cancelled the assessment to be made de novo, therefore, it should not be presumed that the I.A.C. has in any way enhanced the assessment or reduced the refund or otherwise, increased liability of assessee". Consequently, the learned LA. contended, no appeal against such order under section 66-A lies to this Tribunal. The learned LA. placed reliance on 1985 S C M R 116, 1986 S C M R 1544,1986 S C M R 1607. The learned counsel for the appellant on his turn submitted that the words referred to by the learned Legal Advisor do not specifically (or exclusively) relate to orders under section 66-A alone, and are to be read as applicable to the other orders also as were to be passed under section 111 or 132, or subsection (2) of section 148 as also to section 156 of the Ordinance with the result that all orders passed whether in appeal or revision, are appealable to the Tribunal. It was vehemently insisted that the appeal was competent. The learned counsel attempted to view a distinction by placing emphasis on the word as used in subsection (1) of section 134. Reference was made to Chambers Concise Dictionary p.402 this word has been explained as; "a result of product of some cause", "a substance of a statement" etc. The Law Terms and Phrases legally explained by Mr. M. Iqbal Mokal (p.338), according to the learned Counsel, explained the word an "effect" as "given full effect to an impression". In this connection, the learned counsel placed reliance on decisions reported as (1956) 2 ITR 607; (sic) SCMR 166; PLD 1965 Kar.182, PLD 1972 Pesh. (sic) and 1991 PTD 850.
The controversy generated before us by the two representatives is quite interesting but not intriguing. We are afraid, none of the case-law cited by the two side is directly on the point at issue. However, before directly going into the discussion for the resolution of the controversy, it may be advisable to hurriedly scan the history of the legislation as inherited by the Income Tax Ordinance, 1979 from the repealed Income-tax Act, 1922. The relevant section in the repealed Act relating to appeals to the Tribunal was section 33 which read as under:--
"Section 33. Anneals to the Appellate Tribunal.--
(1) Any assessee objecting to an order passed by.--
(a) Any Appellate Assistant Commissioner under section 28, section 30 or section 31.
(b) an Inspecting Assistant Commissioner under section 34-A, or
(c) an Inspecting Assistant Commissioner exercising the powers conferred on an Income-tax Officer under subsection (5) of section 5.
may appeal to the Appellate Tribunal within sixty days of the date on which such order is communicated to him."
(Here underlined for emphasis).
It is evident that appeal;' was provided: (s) against orders by the AA.C. in respect of penalty under section 28, in respect of decisions on appeals against the assessments under section 30, and in respect of matters relating to the competency of the appeals under section 31; (b) order by the I.A.C. under section 34-A in exercise of the powers to revise an order by the assessing officer, or (c) orders by the IA.C. exercising the functions of an I.T.O.
In other words, all orders by the first appellate authority (AXC.) were appealable to the Tribunal, and also orders of the executive authority (IA.C.) were appealable when he revised an assessment, or directly passed an order himself. This scheme underwent a change when the Income Tax Ordinance was promulgated in 1979 inasmuch as the orders by the IA.C. as at clauses (b) and (c) of section 33, were altogether omitted but an order by an AA.C. rectifying his own order was for the first time made appealable. The relevant section 134 of the Income Tax Ordinance, 1979 read as under:--
"Section 134. Anneal to the Appellate Tribunal (1) An assessee objecting to-an order passed by an Appellate Assistant Commissioner under section 111 or 132, or subsection (2) of section 148; or
an order made by the Appellate Assistant Commissioner under section 156 having the effect of enhancing the assessment or reducing a refund or otherwise increasing the liability of the assessee.
may appeal to the Appellate Tribunal against such order."
(underlined and paragraphed by us)
It is manifest that only such orders passed by the AA.C. under section 156 rectifying a mistake were appealable to the Tribunal as had "the effect of enhancing the assessment or reducing a refund or otherwise increasing the liability of the assessee". The 'wisdom of the legislature in deleting the provisions relating to appeals against orders by the IA.C. (under section 34-A or section 5) was a consequence of their decision to strip the IA.C. of the power of revision which was the reason why the Income Tax Ordinance, 1979 at its inception did not have a provision parallel to section 34-A of the repealed Act. Later on, when demands were made for restoring (to the IA.C.) revisionary powers. Section 66-A was inserted in the Income Tax Ordinance, 1979 vide Finance Ordinance, 1980. Therefore, a consequential amendment having become necessary, was actually made in section 134 also, making the order passed by an IA.C. under section 66-A appealable before the Tribunal. To this end initially Notification No.SRO-1163(1)/80, dated 20-11-1980 was issued by resort to section 167 of the Ordinance and, later on, the Finance Ordinance, 1981 inserted the words: or an order made by an Inspecting Assistant Commissioner under section 66-A" after the words and figures `section 156' and before the words `having the effect' in section 134, Consequently, the amended section came to be read as under:--
"Section 134. Appeal to the Appellate Tribunal.--
(1) An assessee objecting to
an order passed by an Appellate Assistant Commissioner under section 111 or 132, or subsection (2) of section 148; or
an order made by the Appellate Assistant Commissioner under section 156; or an order made by an Inspecting Assistant Commissioner under section 66-A having the effect of enhancing the assessment or reducing a refund or otherwise increasing the liability of the assessee.
may appeal to the Appellate Tribunal against such order."
(underline and paragraph spliting by us)
It appears necessary to clarify that the above reproduction of section 134 has split it into groups, which is a deviation from the Ordinance where the entire working is in a running matter. This has been done under a compulsion to facilitate comparison with section 33 of the repealed Act where the appellate orders passed by the AA.C and those by the IA.C. were separately indicated. Therefore, the liberty by us to group these on the pattern of the repealed Act for facility of understanding and comparison. It may be worthwhile to recall that at the time of the promulgation of the income Tax Ordinance, 1979 several notifications/circulars etc. were issued explaining the various provisions. One such communication was Circular No.4 of 1979, which related to section 129 and supports the grouping by us (as above) to read section 134 of the Ordinance.
"Circular No.4 of 1979, dated August 23,1979:
The provisions of the new section are similar to those of old section 30. However, the following orders of the Income Tax Officer have also been made appealable:
(1) Refusal to allow refund under section 98 or 99.
(2) levy of penalty on liquidator under section 114.
(3) Levy of penalty for obstruction under section 115.
(4) Levy of penalty for failure to give evidence under section 148.
(5) Treating a resident as agent of a non-resident under section 78.
(6) An order under section 156 rectifying the mistake apparent from record if the order enhances the tax or reduces the refund.
It may, be pertinent to point out that orders involving provisions of section 84 (sections 44-E and 44-F of repealed Act) are still appealable as which is appealable."
(Here underlined for emphasis).
There should be no doubt that the framers of the law from the very inception were clear in their mind that rectification under section 156 would be appealable if "the order enhances the tax or reduces the refund" and not otherwise. Therefore, the meticulousness with which the legislature inserted the word "or in order made by an IA.C. under section 66-A" after the words and figure "section L56" and before the words "having the effect" in Section 134: clearly demonstrates their intention to confine appeals only against those orders by the IA.C. which had the effect of enhancing the assessment or reducing the refund or otherwise increasing the liability of the assessee".
In order to carry the inquiry further it may advantageous to dissect the elements of subsection (1) of section 156 as also of section 66-A of the Ordinance against which appeals can be filed to the Appellate Tribunal. Taking up section 156 first it is at once discernible that under subsection (2) thereof it is necessary that the affected parties are given a reasonable opportunity of being heard in case the order of rectification is likely to have the effect of enhancing an assessment or reducing a refund or otherwise increasing the liability of the assessee", thereby clearly meaning that in other situations of rectification, opportunity may not be extended to the affected parties. Similarly, section 66-A authorizes an IA.C. to pass such orders as the circumstances of the case justify including the order (i) enhancing or modifying an assessment, or (ii) cancelling the assessment and directing a fresh, assessment to be made. What is to be firmly borne in mind is striking similarity of expression used in section 66-A and section 156 as also in section 134 of the Ordinance i.e. "enhancing, or modifying the assessment", or "enhancing an assessment or reducing a refund or otherwise increasing the liability of the assessee". The anxiety of the legislature is so clearly evident that at the time of the original order adversely affecting a party, an opportunity of hearing is to be extended by the authority passing the order (AA.C. and IAC) and again appeal may also be filed to the Tribunal impugning the order when the same is passed to the disadvantage of the party. It, therefore, flows from the preceding analysis that no appeal would lie where the A.A.C. makes an order which rectifies any mistake which does not result in enhancing the assessment or reducing a refund or otherwise increasing the liability of the assessee. Likewise, an order under section 66-A will be appealable only when it "enhances or modifies the assessment" but not those covered by the second limb of subsection (1) of section 66-A resulting in cancelling the assessment and directing a fresh assessment to be made". Had the legislature intended to make all orders under section 66-A appealable it could do so on the same pattern as in the repealed Income-tax Act, 1922, A different intention prevailed with the legislature is all the most manifest because this time in the Ordinance consciously classifies the orders to be passed under section 66-A into two grouping: (1) those "having the effect of enhancing the assessment or reducing the refund or otherwise increasing the liability of the assessee", and (2) those "cancelling the assessment and directing a fresh assessment to be made". While those falling in the former group are appealable, no such appeal lies against those falling in the latter group. This interpretation appears to us to be reasonable and in harmony with the scheme of the Ordinance besides being in conformity with the history of enactment. On the other hand the interpretation as placed by the learned counsel for the assessee would demand reading of section 134 in the following, manner;
"Section 134. Appeal to the Appellate Tribunal.
(1) An assessee objecting to:
an order passed by an Appellate Assistant Commissioner under section 111 or 132, or subsection (2) of section 148; or an order made by the Appellate Assistant Commissioner under section 156; or an order made by an Inspecting, Assistant Commissioner under section 66-A.
Having the effect of enhancing the assessment or reducing a refund or otherwise increasing the liability of the assessee may appeal to the Appellate Tribunal against such order."
The above reading would lead to absurd consequences inasmuch as this would result in restricting the appeals in respect of all orders (by the AA.C. and by the IA.C.) only if these had "the effect of enhancing the assessment or reducing the refund or otherwise increasing the liability of the assessee". Such a narrow and restricted view of the scope of section 134, would, in our view, so confine the remedy of appeal as to violate the principles of natural justice. The error (if any) in placing the coma (or colon) is the enactment is, in our view, to be ignored on' the well-settled principles of interpretation of statutes, which permit that inaccurate phraseology of Draftsman should not be allowed to nullify a provision made by the legislature if the phraseology is inconsistent; with the legal norms. If any authority is needed one may refer to Lahore High Court decision in re: Highway Petroleum Service 1977 PTD 183. If our interpretation of section 134 has in any way extended or enlarged its scope to give effect to the legislative intent, we draw support from the pronouncement by the Karachi High Court In re: National Food = 1991 PTD 850. We may recall that it is now well-settled by the highest authority that the right of appeal is always guaranteed by express enactment and cannot be implied or presumed. Therefore, when section 134 of the Ordinance restricts the parameters of the appeal only to those orders under sections 156 and 66-A as have "the effect of enhancing the assessment or reducing a refund or otherwise increasing the liability of the assessee", the same is to be confirmed to these contingencies alone and no objection can be allowed to be taken against those order by the I.A.C. whereby assessment is cancelled or direction given for fresh assessment. That we have applied the law as obtaining in section 66-A and section 132 of the Ordinance on the facts admitted (or proved) is in the discharge of the duty cast upon us as judicial officers for which we bank on the verdict by Supreme Court of Pakistan in re: Haji Abdullah Khan and others P L D 1965 SC 690 which the learned Judge of the Lahore High Court followed in P L D 1972 Lah.142.
Examining the present appeals on the threshold of the interpretation placed by us above, we adjudge that these could not be filed under section 134 of the Income Tax Ordinance, hence, are clearly incompetent for admission. Both the appeals are consequently dismissed.
ABRAR HUSSAIN NAQVI (JUDICIAL MEMBER): --I have gone through the well-written judgment of my learned brother, the Accountant Member, and I agree with the interpretation placed by the learned Accountant Member on section 134 of the Income Tax Ordinance, 1979 I am also in agreement with the conclusion that no appeal lies to the Tribunal against the order passed by an AA.C. under section 66-A of the Income Tax Ordinance where the order passed by the I.A.C. is only cancelling the assessment anddirecting a fresh assessment to be made.
There is no escape but to hold that under section 134 of the Income Tax Ordinance, only those orders of the AA.C. under section 66-A are appealable which have the effect of enhancing the assessment or reducing a G refund or otherwise increasing the liability of the assessee. Notwithstanding these conclusions I would like to make few observations. The history of the Legislation has been given elaborately by my learned brother in his order. Under the old Act i.e. the Income-tax Act, 1922 (now repealed) all orders of the IA.C. passed under section 34-A (corresponding to section 66-A of the Ordinance) were appealable. It is also to be noted that section 66-A of the Income Tax Ordinance was not part of the original Income Tax Ordinance, 1979, which replaced the repealed Income Tax Act. Since in the original Ordinance there was not provision for the revisional powers of the IA.C. as now provided under section 66-A brought in the Finance Ordinance of 1980, there was no question of making any mention of section 66-A. In Section 134 of the Ordinance. After adding section 66-A the Legislature thought it fit to include section 66-A in section 134 so as to make the orders of the IA.C. as appealable. Now the qualifying words in section 134 namely;
"having the effect of enhancing the assessment or reducing a refund or otherwise increasing the liability of the assessee may appeal to the Income-tax Tribunal against such order."
were already there in section 134 when the words "or an order made by an Inspecting Assistant Commissioner under section 66-A" were added. By placing these words before the qualifying words quoted above, the orders of the IA.C. under section 66-A automatically are also qualified which has resulted into a mischief to bar the remedy of an assessee against filing of an appeal except those orders which had the effect of enhancing the assessment etc. In other words the orders of the IA.C. under section 66-A which cancelled the assessments already framed by the I.T.O. are not appealable. Now a well -known principle of jurisprudence is that every person effected by an order f should have at least one right of appeal. The principle is ubi jus ibi remedium. It is noteworthy that some adverse effect is caused on an assessee if the IA.C. holds that the assessment order was erroneous and prejudicial to the interest of revenue and then the assessment is cancelled by the IA.C., though, it may not have the effect of enhancing the assessment or reducing a refund or otherwise increasing the liability of the assessee.
Taking for instance an extreme case where an assessment has been finalized under section 59(1) of the Ordinance and the assessee's declared income has been accepted by the I.T.O. but the IA.C. holds that the I.T.O: s order was erroneous (let us assume wrongly) then obviously the order of the IA.C. would be wrong and in certain cases may be illegal. For instance in a case of change of opinion where the I.T.O. had passed an order considering all the aspects of the case but the IA.C. wrongly assuming the jurisdiction holds that the order of the I.T.O. was erroneous, the assessee will not have any remedy of appeal because the order of the IA.C. is merely cancelling the assessment and that naturally does not have an affect of increasing the liability or enhancing the assessment etc. The assessee thus in such cases is left with no remedy though, certain prejudice is caused to him. In the history of the legislation this remedy was all along available to the assessee. It may not be out of place to mention here that Indian Income Tax Act, 1961, which also repealed the Income Tax Act, 1922, also repeated almost the same provisions providing remedy against the order of the revisional authority including those orders where the assessment are only cancelled. In these circumstances, to my mind, it was not the intention of the Legislature to restrict the remedy of the assessee of filing an appeal only to the orders of the IA.C. having the effect of enhancing the assessment etc. the mischief, to my mind, appears to have occurred because of the mistake on the part of the Draftsman inasmuch as in the original Income-tax Ordinance the qualifying words of having effect of enhancing the assessment etc. were for the orders by an AA.C. under section 156 of the Income Tax Ordinance. That was obviously correct because only those orders of the AA.C. could cause a grievance to the assessee where the rectification is made under section 156 but such an order has an effect enhancing the assessment etc. Every order of rectification passed under section 156 by the AAC could not be appealable for the simple reason that all orders may not be against the assessee. It was perhaps for this reasons that the qualification was laid down to the orders passed under section 156 of the Income Tax Ordinance. It appears, that the mistake had occurred while substituting the words "or an order made by an Inspecting Assistant Commissioner under section 66-A" after section 156. At the time of substituting these words the effect of mischief may not have been realized. If these substituted words had been added after the words increasing the liability of the assessee and before may appeal, the remedy of appeal would have been available to the assessee as was available before the promulgation of the Income Tax Ordinance, 1979. However, notwithstanding this impression on my part, since the appeal is a statutory right and an appeal can only be filed if it is specifically provided in the statute, we have no alternative but to interpret the law as it is and in that case the conclusion is the same as has been arrived at by my learned brother, the Accountant Member. If any authority is needed, one may refer to the judgment of Wahid Bux and Mails? Transport Company Limited v. ALA Transport Company reported as P L D 1966 Lah. 684 wherein it has been observed by the Lahore High Court that the right of appeal cannot be assumed unless expressly given by the Statute. No doubt in the same case the Court has also observed (as in many other cases also) that where there is a doubt about the existence or non-existence of right of appeal, the benefit of doubt must go in favour of person seeking appeal. However, as discussed IK above, we have not the slightest doubt about the interpretation of section 134 that the right of appeal is not unqualified.
Before parting with this judgment I would further like to deal with two points. Firstly, it has been argued that even after the promulgation of Income -tax Ordinance, 1979 the appeals have been filed against the order of the IAC where the assessments had been cancelled and this has been the practice of the Tribunal to entertain such appeals. This contention has no merit for two reasons. Firstly, a practice, which is not supported by law cannot have any legal validity. As stated above, a right of appeal is statutory right and must be provided by the Statute specifically and it could not be assumed merely on the basis of a wrong practice. Secondly, as discussed above, in the repealed Act the, right of appeal against the IAC's order was unqualified. When section 66-A was added in 1980 corresponding right of appeal against the order passed under section 66-A was also provided in section 134. It appears that everybody assumed that whatever shortcomings were in the Income-tax Ordinance, 1979 it was removed and it has been brought in line with the repealed Income-tax Act. Since, under the repealed Act all orders of the IA.C. were appealable and the appeals were being entertained this practice continued through a wrong practice.
The learned counsel for the assessee has relied upon the judgment of this Tribunal reported as 1963 PTD (Trib.) 113 to contended the cancellation of assessment and direction for making de novo assessment amounts to enhancement of the assessment. This case has, however, no relevancy as in that case, what happened was that the Appellate Assistant Commissioner while setting aside the assessment for making de novo assessment had made observation that the gross profit rate applied was thoroughly inadequate. It was in that context that the Tribunal held that this observation of the learned AA.C. had in effect and substance an order of enhancement. There is a clear distinction between the order of an IAC cancelling the assessment and an order where the Appellate Authority observed that inadequate G.P. rate had been applied. This case, therefore, having no application cannot be of any help to the assessee.
While concurring with the conclusion arrived at by my learner: brother, the Accountant Member that no appeal lies against the order of the learned IA.C. passed under section 66-A of the Ordinance where the assessment order has been simply cancelled, I would observe that there appears to be genuine grievance of the assessee. The right of appeal may be provided to the assessee as it will cause grave injustice to the assessee where the IA.C. wrongly exercises the jurisdiction and the assessee is left with no remedy. However, this is for the relevant authorities to consider the expediency to make such an amendment.
M.B.A./2597/TOrder accordingly.