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

----Ss.134 & 138---Appeal to Appellate Tribunal ---Revision---Assessee filed revision petition against Commissioner's (Appeal) order before Member, Judicial, C.B.R.---Competence---Interpretation and scope of Ss.134 & 138, Income Tax Ordinance, 1979---Both Ss. 134 & 138 of the Ordinance not only collide with each other but also create confusion and chaos and need attention of the Legislature to make necessary changes in the Ordinance in this regard-- Since by operation of law Member Judicial, C.B.R. has been prohibited to revise any order of First Appellate Authority in terms of S.. 138(2)(b) of the Ordinance, he therefore, rightly directed the assessee to file an appeal before the Income Tax Appellate Tribunal in circumstances.

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

----Ss. 134 & 138---Appeal to Appellate Tribunal---Limitation---Copy of Commissioner's (Appeal) order was served upon the assessee on 3-9-1994 and the last date of filing appeal before Income Tax Appellate Tribunal was 2-11-1994 whereas assessee had filed revision application on 3-10-1994 before Member Judicial, Central Board of Revenue, invoking the provision of S. 138, Income Tax Ordinance, 1979---Department, however, assailed said order before the Income Tax Appellate Tribunal on 18-10-1994---Central Board of Revenue vide its letter, dated 31-10-1994 refused to entertain the revision in view of the fact that the department had gone in appeal to the Tribunal ---Assessee on receiving such letter from C.B.R. on 6-11-1994 filed appeal before the Tribunal on 20-11-1994---Limitation---Delay in filing of appeal ,to Appellate Tribunal-- Condonation---Principles---Sufficient cause---Concept---Where two provisions of law are equally applicable, the provision which keeps alive the right of appeal be generally preferred---If two sections of law are wide enough to cover a given right of suit and it can be postulated of neither of them that the one applies more specifically than the other, then Court should lean in favour of the application of provision which would keep the right of suit alive in preference to that which would destroy it---Held, since the remedies were open to the assessee and he bona fide elected one of them, it meant that there was no negligence on his part to file the appeal after the stipulated time before the Income Tax Appellate Tribunal---Conduct of the assessee clearly established his claim of bona fides and he was entitled for the condonation of delay in filing the appeal before the Tribunal---Income Tax Appellate Tribunal while condoning the delay in filing appeal by the assessee, laid down guidelines to be observed by the C.B.R. in such like situations.

Theory of doctrine of waiver was applicable to the facts of present appeal. Succinctly, copy of C.I.T. (A)'s order was served upon the assessee on 3-9-1994 and the last date of filing appeal before the Tribunal was 2-11-1994 whereas assessee-appellant had filed revision application on 3-10-1994 before Member Judicial, C.B.R. It was, thus, established by evidence of facts that the act of the assessee by filing revision application before the Revisional Authority much earlier than the last date of firing of appeal to the Tribunal amounted to waiver, abandonment or acquiescence of his right of appeal. The doctrine of laches is not arbitrary or technical doctrine. In a case in which it would be practically unjust to grant remedy; either the party has by his conduct done that which might fairly be regarded as tantamount to waiver of the remedy or where he has by his conduct and neglect, though perhaps not waived the remedy, yet has rendered the situation as it would not be reasonable to render it: in both these cases lapse of time and delay are most material if afterwards the remedy is asserted by the party making delay. Principles of laches may be adopted to the facts of a particular case but limitation is a matter of inflexible law. In other words there is no special limit of time as to laches. But the determination of a case must depend upon the circumstances of each particular case and the conduct of the person who seeks condonation of delay after a long period, is a circumstance which must be taken into account.

The limitation as distinguished from the prescription merely bars the remedy but does not destory the right which remains available in other ways. It is also worth mentioning here that the limitation does not create any right but merely prescribes period of enforceability of such right. The intention of law of limitation is not to give a right where there is none but to interpose a bar after a certain period to a suit to enforce an existing right. The Legislature has also envisaged that for the purpose of condoning delay in filing appeal "sufficient cause" must be looked into. The expression "sufficient cause" must mean a cause which is beyond the control of the party invoking the aid of the section. A genuine or good cause or a cause which is beyond the control of a party or a cause which is unavoidable despite care and attention may constitute "sufficient cause". The words "sufficient cause" should receive a liberal construction so as to advance substantial justice. "Sufficient cause" being a question of fact, varies from case to case and ultimately it rests on the certificate of the Court. When the Court is satisfied that the circumstances or set of circumstances shown by a party, justified the act or omission of such party for not preferring appeal or application within the prescribed period, the Court can extend the time. The Court can condone the delay in filing an appeal where it is found that the carelessness in not filing it within time was not intentional. It is also wroth mentioning here that where two sections, for the redress of grievances, are equally applicable, the section which keeps alive the right of appeal, should generally be preferred. The well-settled principle of law of limitation is that where two sections of such law may be wide enough to cover a given right of suit and it can be postulated of neither of them that the one applies more specifically than the other, then the Court should lean in favour of the application of the provisions which would keep the right of suit alive in preference to that which would destroy it.

Since two remedies were open to the appellant and he bona-fidely elected one of them, therefore, it means that there was no negligence on his part to file the appeal after the stipulated time before the Tribunal. The conduct of the appellant clearly establishes his claim of bona fides and he is entitled for the condonation of delay in filing the appeal, same being not intentional. As the statute has not provided any remedy to the present situation, it was suggested that the moment it is intimated by the tax authorities to the Member Judicial, C.B.R. that the Department in a particular case has filed appeal before the. I.T.A.T against the order of the First Appellate Authority, the revision application filed by the applicant in that case be transferred to the office of the I.T.A.T. and be treated as an appeal filed before it. The time during which the office of the Member Judicial, C.B.R. holds up the revision application till the date the application is received by the I.T.A.T in its office, must be excluded for the purpose of computing period of limitation. There is also another alternate that revision application be handed over to the applicant and he may be directed to file an appeal before the I.T.A.T. in accordance with the provisions/rules of the Income Tax Ordinance, 1979 or I.T.A.T.'s Rules, 1981. In computing the period of limitation for filing of appeal the appellant should be entitled to exclusion of period during which revision application remained pending for disposal before Member Judicial, C.B.R. This is so because by virtue of clause (b) of subsection (2) of section 138 of the Ordinance, the Member Judicial, C.B.R. does not have any jurisdiction to pass any order on the revision application which is pending before him for disposal.

The appellant in circumstances was prevented by sufficient cause from presenting appeal within stipulated time and delay in filing it was condoned.

1995 PTD (Trib.) 1053 ref.

(c) Income Tax Ordinance (XXXI 1978)---

----S.63---Judgment---Estimate of sale of assessee by the Assessing Officer-- Proper course---Personal visit of the Income-tax Officer at the business premises---Effect---Any visit or enquiry conducted at the back of the tax-payer being not an approved method, I.T.O.'s personal visit to ascertain magnitude of assessee's business in circumstances was liable to be ignored---Income Tax Officer cannot compel the assessee to get his statement rendered in. earlier date than the date actually fixed for hearing in the case.

Personal visit of the ITO at the assessee's business premises would not be of any avail as he (ITO) all along proceeded against the assessee on conjectures and surmises. Merely to have look at the assessee s business premises by the I.T.O. would not justify to estimate his (assessee's) sales. The proper course of action with the ITO was that he should have recorded statement of the assessee as well as got prepared the stock inventory at the time of his visit to the assessee's business premises. Any visit or enquiry conducted at the back of the tax-payer is never looked upon favourably, therefore, the ITO's personal visit to ascertain magnitude of assessee's business was liable to be ignored for all purposes.

Mobeen Gul Khan, D.R. for Appellant.

Azim-ul-Qadar Mirza for Respondent.

Date of hearing: 12th December 1995

ORDER

Both the assessee as well as the department have assailed the order of the learned CIT(A), Rawalpindi dated 3-7-1994 in respect of assessment year 1993-94.

ASSESSEE'S APPEAL

The first objection of the assessee relates to condonation of delay in filing of his appeal before the Tribunal. The facts, which are necessary for the disposal of this very issue, are that the assessee has filed an appeal in this Tribunal against the Appeal Commissioner's order without complying with requirement of the proviso to subsection (3) of section 134 of the Ordinance. However, through a miscellaneous application it has been submitted that on the facts and in the circumstances, the delay in filing the present appeal may be condoned as sufficient cause existed which prevented the assessee not to institute its appeal within the stipulated time. Briefly, as per appeal record copy of the CIT (A)'s order was served upon the assessee on 3-9-1994. Against that order he filed revision petition on 3-10-1994 before the Member Judicial, C.B.R. by invoking the provisions of section 138 of the Ordinance. While the department assailed such order before the ITAT on 18-10-1994. The moment this fact came to the knowledge of the competent authority there and then Mr. Muhammad Anwar, Second Secretary (Income Tax Judicial), CBR, informed the assessee, vide Letter C.No.12 (80) M (IT. Jud)/94, dated 31-10-1994 that since the ITO has filed appeal against the order of the CIT (A), Zone-2, Rawalpindi before the ITAT, therefore, his revision application cannot be entertained by the Member Judicial (Income Tax) in terms of provisions of clause (b) of subsection (2) of section 138 of the Ordinance. It was also advised by the said authority that he may consider filing of his second appeal before the ITAT. After having received that letter on 6-11-1994, the assessee preferred appeal in the office of the ITAT on 20-11-1994 which was received as late as by 17 days.

On the date fixed for hearing, Mr. Azim-ul-Qadar Mirza, Advocate the learned AR of the assessee strenuously contended that since the assessee had filed his appeal at wrong forum, therefore, delay in filing instant appeal by 17 days may be condoned. In support of his contention he heavily placed reliance on a case-law reported as 1995 PTD (Trib.) 1053. Responding to the above contention Mr. Mobeen Gul Khan, the learned DR vehemently argued that the delay in filing present appeal should not be condoned for the reason that it was incumbent upon the assessee to file his appeal within the stipulated time as laid down under section 134(3) of the Ordinance and any appeal filed beyond the due date cannot be entertained.

After having given anxious thought to the averments of both the learned representatives appearing at the Bar, a question has arisen whether the assessee's appeal can be registered for hearing even if it has not been presented within stipulated period particularly when the assessee had waived his right of appeal by filing application for revision of the order of the first appellate authority before the Member Judicial, CBR. Before addressing to the point referred ante, we would like to observe that this is not the case of filing appeal at wrong forum as contended by the learned AR but in fact, Legislature has provided two separate forums in the statute book for redress of grievance(s) against order of the First Appellate Authority. According to subsection (1) of section 134 of the Income Tax Ordinance, 1979 where an assessee objects to an order passed by an Appellate Assistant Commissioner under any of the sections mentioned therein may appeal to the Appellate Tribunal. While subsection (2) of section 134 of the Ordinance provides that the Commissioner may, if he objects to any order passed by an Appellate Commissioner under section 132 direct the ITO to institute appeal to the Appellate Tribunal against such order. By virtue of section 13,8 of the Ordinance, the assessee has also been provided another remedy for redress of grievances and for that purpose Legislature has introduced clauses (a), (b) and (c) .to 'subsection (2) of the abovesaid section which on visage that the Commissioner shall not revise any order under subsection (1) where an appeal against the order lies to the AAC or to the Appellate Tribunal, the time within which such an appeal may be made has not expired, or the assessee has not waived his right of appeal; or the order is pending on appeal before the AAC or has been made the subject of an appeal to the Appellate Tribunal; or in the case of an application made by the assessee, the application has not been made within ninety days of the date on which such order was communicated to him, unless the Commissioner is satisfied that assessee was prevented by sufficient cause from making application within the said period.

A plain reading of the above para. clearly shows that one remedy relates to filing of appeal against the impugned order of the AAC/CIT(A) in terms of section 134 and the other is by way of filing revision application against that order before the Member Judicial, CBR, as laid down in section 138 of the Ordinance. For the purpose of filing appeal(s.), the proviso to subsection (3) of section 134 has provided that it shall be filed within sixty days from the date of service of order appealed against, whereas limitation of filing of revision application has been made within ninety days from the date of communication of such order as laid down in section 138(2)(c) of the Ordinance. In fact Legislature has not laid down any appropriate course to such eventuality where against 'one and the same order of the first Appellate Authority, the assessee after waiving his right of appeal, has opted revisional forum and Department on the contrary has filed appeal before ITAT. It leaves us in no ambiguity that not only both these provisions collide with each other but also create confusion and chaos and need attention of the Legislature to make necessary changes in the Ordinance in this regard. Since by operation of law, Member Judicial, CBR has been prohibited to revise any order of first Appellate Authority in terms of clause (b) of subsection (2) of section 138 of the Ordinance he, therefore, has rightly directed the assessee to file an appeal before ITAT of impugned order appealed against.

Coming to question that delay in filing the appeal, in such circumstances can be condoned or not? We would like to observe here that "theory of doctrine of waiver" is applicable to the facts of present appeal. Succinctly, copy of C.I.T. (A)'s order was served upon the assessee on 3-9-1994 and the last date of filing appeal-before the Tribunal was 2-11-1994 whereas assessee-appellant had filed revision application on 3-10-1994 before Member Judicial, C.B.R. It is, thus, established by evidence of facts that the act of the assessee by filing revision application before the Revisional Authority much earlier than the last date of filing of appeal to the Tribunal amounts to waiver, abandonment or acquiescence of his right of appeal. The doctrine of laches is not arbitrary or technical doctrine. In a case in which it would be practically unjust to grant remedy; either the party has by his conduct done that which might fairly be regarded as tantamount to wavier of the remedy or where he has by his conduct and neglect, though perhaps not waived the remedy, yet has rendered the situation as it would not be reasonable to render it: in both these cases lapse of time and delay are most material if afterwards the remedy is asserted by the party making delay. Principles of laches may be adopted to the facts of a particular case but limitation is a matter of inflexible law. In other words there is no special limit of time as to laches. But the determination of a case must depend upon the circumstances of each particular case and the conduct of the person who seeks condonation of delay after a long period, is a circumstance which must be taken into account.

The limitation as distinguished from the prescription merely bars the remedy but does not destroy the right which remains available in other ways. I~ is also worth mentioning here that the limitation does not create any right but merely prescribes period of enforceability of such right. The intention of the law of limitation is not to give a right where there is none but to interpose a bar after a certain period to a suit to enforce an existing right. The Legislature ha: also envisaged that for the purpose of condoning delay in filing appear "sufficient cause" must be looked into it. The expression "sufficient cause" must mean a cause which is beyond the control of the party invoking the aid of the section. A genuine or good cause or a cause which is beyond the control of party or a cause which is unavoidable despite care and attention may constitute "sufficient cause". The word "sufficient cause" should receive a liberal construction so as to advance substantial justice. "Sufficient cause" being a question of fact, varies from case to case and ultimately it rests on the certificate of the Court. When the Court is satisfied that the circumstances or set of circumstances shown by a party, justified the act or omission of such party for not preferring appeal or application within the prescribed period, the Court can extend the time. The Court can condone the delay in filing an appeal where it is found that the carelessness in not filing it within time was not intentional. It is also worth mentioning here that where two sections, for the redress of grievances, are equally applicable, the section which keeps alive the right of appeal, should generally be preferred. The well-settled principle of law of limitation is that where two sections of such law may be wide enough to cover a given right of suit and it can be postulated of neither of them that the one applies more specifically than the other, then the Court should lean in favour of the application of the provisions which would keep the right of suit alive in preference to that which would destroy it.

Since two remedies were open to the appellant and he bona-fidely elected to one of them, therefore, it means that there was no negligence on his part to file the appeal after the stipulated time before the Tribunal. For the foregoing discussion the conduct of the appellant clearly establishes his claim of bona fide and he is entitled for the condonation of delay in filing the present appeal, same being not intentional. As the statute has not provided any remedy to the present situation we, however, suggest that the moment it is intimated by the tax authorities to the Member Judicial, C.B.R. that the Department in a particular case has filed appeal before the I.T.A.T against the order of the First Appellate Authority, the revision application filed by the applicant in that case be transferred to the office of the I.T.A.T. and be treated as an appeal filed before it. The time during which the office of the Member Judicial C.B.R. holds up the revision application till the date the application is received by the I.T.A.T in its office, must be excluded for the purpose of computing period of limitation. There is also another alternate that revision application be handed over to the applicant and he may be directed to file an appeal before the I.T.A.T. in accordance with the provisions/rules of the Income Tax Ordinance, 1979 or I.T.A.T.'s Rules, 1981. In computing the period of limitation for filing of appeal the appellant shall be entitled to exclusion of period during which revision application has been pending for disposal before the Member Judicial, C.B.R. This is so because by virtue of clause (b) of subsection (2) of section 138 of the Ordinance, the Member Judicial, C.B.R. does not have any jurisdiction to pass any order on the revision application which is pending before him for disposal.

For the foregoing reasons we are satisfied that the appellant was prevented by sufficient cause from presenting appeal within stipulated time and delay in filing it is hereby condoned. Since we have admitted the assessee's appeal for regular hearing by condoning delay, therefore, the other issues regarding excessive estimation of sales and inadequate allowing of P&L expenses are disposed of hereunder.

Estimation of sales

Facts in brief are that the assessee-appellant, en individual, deals in hardware store inclusive of sales of vin boards, plywood etc. He filed his income tax return under the self-assessment scheme, declaring the following results: --

However, it was processed under the normal law as the tax paid for the year under appeal was less than the tax payable on the last assessed income. As per assessment order, assessee's statement was recorded by the ITO on 14-12-1994 in the order sheet wherein stock in shop was admitted at Rs. 50,000 average daily sales at 4,000/4,500, and shop rent at Rs.800 p.m. Net wealth as on 30-6-1993 was declared by the assessee at Rs. 65,000 in the wealth statement furnished to the ITO during the course of assessment proceedings. Besides, the ITO also mentioned in the assessment order that he made a personal visit to have a look at the business premises. On his visit he noticed that shop of the assessee is well stocked with different items and the stock available in the business premises is apparently not less than Rs, 1,50,000 to Rs.2.00.000. However, in the absence of any books of accounts maintained by the assessee, his declared trading version was rejected by the ITO and he keeping in view the location of the business premises and admission of the assessee (noted on the order sheet), adopted assessee's average daily sales at Rs.4,250. In this manner he computed total turnover at Rs.12,75,000 which were subjected to GP rate of 15% as was declared by the assessee. After allowing P&L expenses at Rs.11,175 against claimed at Rs.32,000 net income was-determined at Rs.1,80,075 by the ITO.

Feeling aggrieved by the order of the ITO the assessee instituted appeal before the learned CIT(A) who confirmed estimation of sales. He, however, enhanced the P&L expenses to Rs.45,000 on the reason that if sales are enhanced then expenses should have also been enhanced proportionately.

After having heard the respective submissions of both the learned representatives and after having perused the assessment record we do not feel persuaded that personal visit of the ITO at the assessee's business premises would be of any avail as he (ITO) all long proceeded against the assessee on conjectures and surmises. Merely to have a look at the assessee s business premises by the I. T. O. would not justify to estimate his (assessee's) sales to such an exorbitant figure. The proper course of action with the ITO was that he should have recorded statement of the assessee as well as got prepared the stock inventory at the time of his visit to the assessee's business premises. Any visit or enquiry conducted at the back of the tax-payer is never looked upon favourably, by the higher appellate forums, therefore, the ITO's personal visit to ascertain gniitude of assessee's business in the instant case is hereby ignored for all purposes.

As regards assessee's admission on the order sheet dated 14-12-1993, the learned AR vehemently contended that it should not be made basis for estimating sales because notices under sections 58 and 61 were issued for 18-12-1993 but on 14-12-1993 the assessee was kidnapped from his business premises and taken to the Tax Office for a forced statement and attending the proceedings.

Keeping all these facts in view we are of the considered opinion that the ITO has miserably failed to bring on record any substantial material or evidence to support his estimation of sales/income in the present case. We fail to understand as to what were the circumstance which compelled the ITO to record the assessee's statement on earlier date than the date actually fixed for hearing in that case. The learned DR after perusal of assessment record, also confirmed recording of assessee's statement on 14-12-1993. We would also like to mention I here that even the assessee's statement recorded by the ITO on 14-12-1993 does not relate to the year under appeal as such implicit reliance cannot be placed for the purpose of computing appellant's income on such statement. For foregoing reasons, we accordingly fix the assessee's sale to Rs.7,00,000.

So far as inadequate allowing of P&L expenses is concerned, we do not find any merits in the contention of the learned AR for the reason that the learned CIT(A) has already enhanced the profit and loss expenses to a considerable extent as warranted by the facts of the case. Hence no interference is called for on this score.

DEPARTMENTAL APPEAL

The ITO has assailed the order of the first Appellate Authority on account of enhancement in P&L expenses to Rs.45,000 against claimed at Rs.11,475. As we have already confirmed the order of the learned CIT(A) on this point the departmental appeal, therefore, stands automatically rejected.

Consequently, the assessee's appeal pertaining to assessment year 1993 94 succeeds to the extent indicated above while that of the department is rejected being bereft of any merits.

M.B.A./206/Trib.Order accordingly.