MUHAMMAD ASLAM VS MUHAMMAD RAMZAN, 1994 PTD-KARACHI-HIGH-COURT-SINDH 581 (1993)

(a) Income Tax Ordinance (XXXIX of 1979)---

----S.134---Constitution of Pakistan (1973), Art.199---Appeal before Appellate Tribunal---Assessment order and demand notice had been issued to the assessee by Assessing Authority ---Assessee's appeal before Appellate Tribunal was pending---Constitutional petition under Art.199 of the Constitution before High Court---Maintainability---Application by assessee to restrain the Assessing Authority from collecting tax pending hearing and disposal of the Constitutional petition ---Assessee had contended that issuance of demand notice and assessment order under S.134 of the Ordinance was in fact a demand because the Assessing Authority had demanded payment of assessed amount plus surcharge---Assessee further contended that since he had challenged the vires of the relevant provision of Income Tax Ordinance, 1979, it was only High Court, which in its Constitutional jurisdiction could strike down a law on the ground of its being ultra vires---Held, while it was true that where alternative remedy was provided by a statute those remedies should first be resorted to before seeking relief under art.199 of the Constitution, in cases where action was alleged to be made mala fide or' was obviously without jurisdiction or where vires of legislation was in question, the petition under Art.199 of the Constitution would be maintainable. In the present case the assessee filed an application to restrain the Assessing Authority from collecting the demand pending hearing and disposal of the petition.

Assessee contended that as shown by the notice of demand and assessment order there was in fact a demand because the Assessing Authority had demanded payment of Rs.1,23,64,157 plus 10,55,831 and that the amount demanded by the notice of demand, in fact included the demand on account of tax on profits of the sale of the capital assets as shown by the assessment order; that assessment order mentioned profits on sale of assets; that the amount of such profit was Rs.14,996,420; that the demand for tax on that amount was at the ,rate of 40% and surcharge at the rate of 10% was also demanded so that the amount mentioned in the stay application was the equivalent of 40% tax and super tax plus 10% surcharge, on the account of sale of assets.

That the assessee had challenged the vires of the legislation in question and it was only High Court in its Constitutional jurisdiction, which could strike down a law on the ground of its being ultra vires. Held, the assessee was right in his submission. While it was true that where alternative remedy was provided by a statute those remedies should first be resorted to before seeking relief under Article 199 of the Constitution; in cases, however, where an action was alleged to be mala fide or was obviously without jurisdiction or where vires of legislation was in question, the petition under Article 199 would be maintainable.

The petition having been admitted to regular hearing, it was necessary that further action for recovery of the amount mentioned in the application be stayed. High Court, therefore, directed that no further action was to be taken for recovery of the tax on account of profits on sale of assets, to the extent of Rs.65,98,424 subject to the assessee furnishing security to the satisfaction of the Nazir of the Court to the extent of that amount plus profits thereon @24% per. annum from the date of the demand till payment.

(b) Constitution of Pakistan (1973)----

----Art.199---Constitutional petition---Maintainability---Held, while it was true that where alternative remedy was provided by a statute those remedies should first be resorted to before seeking relief under Art.199 of the Constitution, in cases where action was alleged to be made mala fide or was obviously without jurisdiction or where vires of legislation was in question, the petition under Art.199 of the Constitution would be maintained.

Muhammad Farogh Naseem for Appellant.

Nasrullah Awan for Respondents,

Date of hearing: 5th July, 1993.

JUDGMENT

G.H. MALIK, J.---This is an application filed by the petitioner to restrain the respondent from collecting the impugned demand to the extent of Rs.65,98,424 pending hearing and disposal of the petition.'

Mr. Nasrullah Awan, learned counsel for respondent opposes the grant of stay on the ground, firstly, that an earlier application for stay made by the petitioner was dismissed on 19th May, 1992 on the ground that there was no demand pending at that time and that even now there is no demand. Mr. Farogh Naseem, on the other hand, points out that as shown by the notice of demand and assessment order Annexure R-3 to the affidavit there is in fact a demand because the respondent had demanded payment of Rs.1,23,64,157 plus 10,55,831. He says that the amount demanded by the notice of demand, in fact includes the demand on account of tax on profits of the sale of the capital assets as shown by the assessment order. The assessment order mentions profit on sale of assets at page 8 thereof. The amount of such profit is Rs.14,996,420. According to Mr. Farogh Naseem the demand for tax on that amount is at the rate of 40% and surcharge at the rate of 10% is also demanded so that the amount mentioned in the stay application is the equivalent of 40% tax and super tax plus 10% surcharge, on the account of sale of assets. This position is not controverted by Mr. Nasrullah Awan.

The next ground on which Mr. Awan opposes the stay is that the petitioner has availed the relief provided for in the Income Tax Ordinance and that the proceedings are presently. pending before the Income Tax Tribunal and that, therefore, the petition is not maintainable. He has relied upon 'the cases reported in 1992 PTD 1671; PLD 1993 SC 434; and 1993 SCMR 1108. Mr. Farogh Naseem on the other hand submits that the cases-cited by Mr. Awan are not in point because in the present case he has challenged the vires of the legislation in question and it is only this Court in its Constitutional jurisdiction, which can strike down a law on the ground of its being ultra vires. It appears that Mr. Farogh Nasim is right in his submission. While it is true that where alternative remedy is provided by a statute those remedies should first be resorted to before seeking relief under Article 199 of the Constitution; in cues where an action is alleged to be mala fide or is obviously without jurisdiction or where vires of legislation is in question, the petition under Article 199 would be maintainable.

In the circumstances, we are of the opinion that the petition having been admitted to regular hearing, it was necessary that further action for recovery of the amount mentioned in the application be stayed. We, therefore, direct that no further action will be taken for recovery of the tax on account of profits on sale of assets, to the extent of Rs.65,98,424 subject to the petitioner furnishing security to the satisfaction of the Nazir of this Court to the extent of that amount plus profits thereon @24%,' per annum from the date -of the demand till payment. It may be noted that the rate of 24% was suggested by Mr. Farogh Naseem himself.

M.B.A./G-359/K Order accordingly.