MESSRS KARIM AZIZJNDUSTRIES LIMITED, HASANABAD VS COMMISSIONER OF INCOME-TAX, RAWALPINDI ZONE, RAWALPINDI
1996 P T D 1192
[Lahore High Court]
Before Mian Allah Nawaz and Ahmed Saeed Awan, JJ
Messrs KARIM AZIZJNDUSTRIES LIMITED, HASANABAD
Versus
COMMISSIONER OF INCOME-TAX, RAWALPINDI ZONE, RAWALPINDI
Civil Tax Reference No. 6 of 1987, heard on 28/02/1995.
Income Tax Ordinance (XXXI of 1979)---
----S. 135(5)---Civil Procedure Code (V of 1908), O.XLI, R.33---Appeal before Appellate Tribunal---Powers of Appellate Tribunal---Scope---Powers of Appellate Tribunal under S. 135, Income Tax Ordinance, 1979 are of wide amplitude and are almost analogous to the powers of Civil Court under O. XLI, R. 33, C.P.C.---If the Appellate Tribunal is not satisfied with the order passed by the forum below, it has the powers to cancel or vary such order and can press necessary consequential directions as the situation may warrant---Such powers being of a wide sweep arm the Tribunal with powers to pass an order of remand if it comes to a finding that the order of the authority below was illegal and there was an occasion for fresh proceedings before the first authority.
If the Appellate Tribunal is not satisfied with the orders passed by the forum below, it has the power to cancel or vary such orders and can pass necessary consequential directions as the situation may warrant. The language of section 135, Income Tax Ordinance, 1979 clearly, indicates that the powers of the Tribunal under this section are of very wide amplitude and are almost analogous to the powers of Civil Courts under Order XLI, rule 33, C.P.C.
The power of Appellate Income Tax Tribunal under section 135 of the Ordinance are almost analogous to the powers of Civil Court under Order XLI, Rule 33, C.P.C. These powers are of a wide sweep and arm the Appellate Court with power to pass an order of remand if it comes to a finding that the orders of the Courts below are illegal and there is an occasion for fresh proceedings before the first Authority/Court. This power is expressly embodied in the language of section 135 and even it can be exercised as an inherent jurisdiction.
Messrs Koduri Pulleswara Rao and another v. Commissioner of Income-tax, Madras AIR 1948 Mad. 170; Sri Gajalakshmi Ginning Factory Ltd. Palladam v. The Commissioner of Income Tax, Madras AIR 1953 Mad. 343; Chatturam Horilram, Ltd. v. Commissioner of Income Tax AIR 1954 Pat. 457; Periannan v. Income Tax Commissioner AIR 1960 Mad. 406; Hukumchand Mills Ltd. v. CIT (1967) 63 ITR 232 (SC); Abdul Karim Abu Ahmad v. Allahabad Bank Ltd. AIR. 1917. Cal. 44; Gorakh Prasad Srivastava v. Jhari Shanker Sadar AIR 1934 Pat. 284; Mst. Dharmon and others v. Ran Singh etc. AIR 1939 Lah. 563 and Mst. Khando and others v. Yousuf and others PLD 1982 Pesh- 151 ref.
Ali Bin Abdul Qadir for Applicant.
Muhammad Ilyas Khan for Respondent.
Date of hearing: 28th February, 1995.
JUDGMENT
MIAN ALLAH NAWAZ, J.---The only question, referred to us under section 136(1) of the IncomeTax Ordinance"(XXXI of 1979) by Income Tax Appellate Tribunal in this tax reference is as follows:
"Whether on the facts and circumstances of the case on account of failure of the Income Tax Officer to provide opportunity of being heard to the assessee in accordance with the provisions of subsection (2) of section 16 of the Income Tax Ordinance, 1979, the Appellate Tribunal should have annulled the proceedings initiated there under, instead of setting aside the same and remanding the case back to first assessing authority for de novo proceedings?
2. The facts, briefly stated, giving rise to this reference are that Mrs. Karim Aziz Industries (Pvt.) Limited/applicant, had been in the business of steel casting and forging. It was assessed to income-tax for the years 1979-80 to 1981-82. The Income Tax Officer, thereafter, found that the applicant had failed to deduct tax from the salaries of its Directors within the terms of subsection (1) of section 15 of the Ordinance No. XXXI of 1979 (shortly stated as Ordinance) and he so initiated proceedings against the applicant/company under section 156 ibid. The learned Income Tax Officer, however, did not agree with the, applicant and he, so, passed an order wherein additions in the earlier assessed income were made. These additions were made under section 24(C) of the Ordinance. Feeling dissatisfied, applicant filed appeal, which was dismissed by the First Appellate Authority vide order dated 13th May, 1983. Against this order the applicant filed second appeal which was allowed by the Appellate Income Tax Tribunal/holding that the applicant was not provided with opportunity of hearing under subsection (2) of section 156 of the Ordinance and on this conclusion, the case was remitted to First Assessing Authority with a direction to decide the matter afresh after affording opportunity of hearing to applicant.
3. The above order did not satisfy the applicant and so it moved an application under subsection (1) of section 136 of the Ordinance and prayed for referring to this Court following questions:---
(i) Whether the omission of the Tribunal to decide upon the question, whether in the circumstances of the case proceedings under section 156(1) could be validly initiated?; amounted to holding that the proceedings could be validly initiated?, and if so, whether the Tribunal was right in so holding?
(ii) Whether the order by the Tribunal setting aside the order under section 156(1) is legally right in the circumstances of the case, and within its jurisdiction? and whether the order under section 156(1) should have been annulled?
(iii) Whether the order of the Tribunal setting aside the order under section 156(1) is in contravention of the provisions of section 135(5)? and there was no jurisdiction in the Tribunal to pass a setting aside order?
(iv) Whether the Tribunal was right in directing a fresh order under section 1560), without the cancellation of the assessments on the Directors and whether the order under section 156(1) amounts to double assessment on the same sum of money in one passage?,
(v) Whether in the circumstances of the case the Income Tax Officer had made his election to assess the Directors independently on receipt of their remuneration and thereby waived his option to assess the company on the amounts in question and was estopped from doing so?" `
4. The learned Tribunal, after hearing the appellant, came to the conclusion that questions Nos. l and 3 were not the question of law. However, it felt that questions Nos.4 and 5 were actually the same and one question and on these findings, referred the above-noted questions to us.
5. Learned counsel for the applicant, in support of this Reference, contended that the learned Appellate Tribunal had no jurisdiction, whatsoever, to remit the case to Income Tax Officer; that part of order passed by Appellate Tribunal dated 13-9-1986 was wholly illegal and merited to be set aside. No other point was urged. Mr. Muhammad iIlyas khan, learned counsel for Income Tax Department, supported the impugned order.
6. We have heard the learned counsel for the parties at a considerable length and have attended to their rival contention;- with great care. On our analysis, we find substance in the argument advanced by the learned counsel for the respondent. In order to answer the question, it is useful to reproduce section 135 of the Ordinance. It is as follows:---
S. 135.---(1) The Appellate Tribunal may, before disposing of any appeal, call for such particulars as it may require respecting the matters arising in the appeal or causes further enquiry to be made by the Deputy Commissioner.
(2) The Appellate Tribunal shall give both parties to the appeal an opportunity of being heard either in person or through an authorised representative.
(3) If the Appellate Tribunal is not satisfied that the assessment or the order which is the subject of the appeal ought to be interfered with it shall reject the appeal.
(4) If the Appellate Tribunal is satisfied that an assessment which is subject to appeal---
(a) ought to be reduced or annulled, it shall reduce or annul the assessment accordingly; or
(b) is insufficient, it shall enhance the assessment accordingly; or
(c) ought to be set aside, it shall set aside the assessment and direct the Deputy Commissioner to make a fresh assessment.
(5) If the Appellate Tribunal is satisfied that an order which is the subject of appeal, ought to be interfered with, it shall cancel or vary the order accordingly and shall issue such consequential directions as the case may require."
A careful reading of subsection (5) of the above provision, clearly shows that if the Appellate Tribunal is not satisfied with the orders passed by the forum below, it has the power to cancel or vary such orders and can pass necessary consequential directions as the situation may warrant. The language of this section clearly indicates that the powers of the Tribunal under this section A have very wide amplitude and are almost to the power of Civil Court under Order XLI, rule 33, C.P.C. This aspect of the matter came up for consideration as back as 1948 when Madras High Court in Messrs. Koduri Pulleswara Rao and another v. Commissioner of Income Tax, Madras (AIR 1948 Madras 170) said:---
"(8) The powers conferred upon the Appellate Tribunal are in no way restricted by the statute. The general authority to pass such orders as it thinks fit is very wide one. There is no substance in the suggestion made by learned counsel for the assessees that the powers of the Tribunal are limited to allowing or rejecting an appeal. What is the full extent of the power conferred upon the Tribunal it is unnecessary to go into in detail in this reference; but clearly they must include the same powers which are conferred upon the Appellate Assistant Commissioner who has authority to direct the Income-tax Officer to hold a further enquiry. That is what the Tribunal has done here."
The view taken therein was followed by same Court in Sri Gajalakshmi Ginning Factory Ltd., Palladam v. The Commissioner of Income Tax, Madras (A.I.R. 1953 Madras 343). This question again engaged attention of Patna High Court in Chatturam Hariram Ltd. v. Commissioner of Income Tax (AIR 1954 Patna 457) in somewhat different circumstances and that. Court followed the above view. The Madras High court again reiterated the above view in Periannan v. I.T. Commissioner (AIR 1960 Madras 406). Speaking for the Bench Ramachandra Iyar, J. said:---
"(12) The finding of the Appellate Assistant Commissioner was that there was no remittance of foreign profits during the year of account. Although that was the only question in the appeal before the Tribunal, there has been no adjudication on it. It was the duty of the Tribunal to have decided that question. In the exercise of its jurisdiction, the Tribunal has, no doubt, the powers granted to it under Rules 28 and 29 to remand the case back to the Appellate Assistant Commissioner, or direct him or the Income Tax officer, to take fresh evidence.
Those powers could not be exercised even before deciding the appeal, for that would amount to a refusal, or evasion of jurisdiction. A remand would imply a setting aside of the order of the Appellate Assistant Commissioner, and therefore, it could be made only when the Tribunal has decided that it is necessary to set aside the order, and that could be done only, if there is material, and after considering that material, decided that the Appellate Assistant Commissioner was wrong, e.g. that the order was erroneous, or was based on insufficient materials, or that some fresh evidence had to be considered.
Rule 28 is no doubt couched in general terms; but the power granted thereby would be analogous to that given to a Civil Appellate Court under Order 41, Rule 23, C.P.C. and should not be exercised without the Tribunal coming to the conclusion that the order of the Appellate Assistant Commissioner was wrong, illegal and had to be set aside as unsustainable either for some reason appearing on the order itself or outside it. In a. case where it was open to the Tribunal, to direct a revised assessment in the manner directed by it, there would undoubtedly be a power to remand.
But we have held that the Tribunal had no jurisdiction to direct a fresh assessment in this case on the ground, that it was the family and not the individual that had to be assessed. It would follow that the order of remand could not be made, unless the Tribunal set aside the order of the Appellate Assistant Commissioner as wrong, or unsustainable. This, the Tribunal has not done, as it did not consider the only question raised in the appeal. "
The afore enunciated view was upheld by the Supreme Court of India in Hukumchand Mills Ltd. v. C.I.T. (1967) 63 ITR 232 (SC).
7. The survey of the case-law will not be complete without noticing of Abdul Karim Abu Ahmad v. Allahabad Bank Ltd. (AIR 1917 Cal. 44). In this case, a Full Bench of Calcutta High Court held that an appellate Court has inherent power to remand the case for retrial where circumstances so require; but it was pointed out that this jurisdiction could be only exercised in exceptional cases. This rule was followed by Patna High Court in Gorakh Prasad Srivastava v. Jhari Shanker Sardar (AIR 1934 Patna 284), Mst. Dharmon and others v. Ran Singh etc. (AIR 1939 Lah. 563) and Mst. Khando and others v. Yousaf and others (PLD 1982 Pesh. 151).
8. The ratio, deducible from the foregoing discussion is that the power of Appellate Income Tax Tribunal under section 135, of the Ordinance are almost analogous to the powers of Civil Court under Order XLI, rule 33, C.P.C. These powers are of a wide sweep and arm the Appellate Court with power to pass an order of remand if it comes to a finding that the orders of the Courts below are illegal and there is an occasion for fresh proceedings before the first authority/Court. This power is expressly embodied in the language of section 135 and even it can be exercised as inherent jurisdiction. On this conclusion, we find that question referred to by the Tribunal is of academic nature and need no further examination. On the above conclusion, we find that the Appellate Income Tax Tribunal had jurisdiction to remand the case of applicant-company to the Income Tax Officer for de novo proceedings under section 156 of the Ordinance. This Reference is accordingly answered in the above terms.
M.B.A./K-8/LReference answered.