I.T.A. NO.84/KB OF 1996-97 VS I.T.A. NO.84/KB OF 1996-97
1997 P T D (Trib.) 2171
[Income-tax Appellate Tribunal Pakistan]
Before Muhammad Mujibullah Siddiqui, Chairman and
Nazeer Ahmad Saleemi, Accountant Member
I.T.A. No.84/KB of 1996-97, decided on 21/06/1997.
(a) Income-tax---
----Appeal---Res judicata, rule of---Applicability---Application of rule of res judicata in income-tax case---Extent---Principles.
Where there is no statutory provision barring reopening of a matter the applicability of the principle of res judicata depends on the necessity of giving finality to litigation and the injustice of vexing a person twice in respect of the same matter and these being only general considerations relating to administration of justice with no technical and defined limits, the applicability of res judicata in such cases will be governed by considerations arising in respect of the 'particular statutes under which a matter has been determined. The dominant consideration always being that the cause of justice be advanced. The principle of res judicata can be applied with strictness to the cases before Courts or before Judicial Tribunals where there are two contesting parties each trying to substantiate its own case. It cannot, however, be applied with the same strictness to decisions of Income-tax Authorities. The I.-T.O., is not a Tribunal that-decides a question between the Income Tax Commissioner and the assessee. The Income Tax Commissioner does not lead evidence before the I.-T.O., and-no appeal lies from the order of the I.-T.O. at the instance of Income Tax Commissioner. The right of appeal being vested in the assessee only The position of I.-T.O., is that of an agent of the Income Tax Commissioner or an officer authorised by the Income Tax Commissioner to determine the amount of tax payable. The assessee files a return as to his liability to pay tax and the I.-T.O. on behalf of the Income Tax Commissioner either accepts the return or rejects it wholly or partly. The acceptance of an explanation or plea or statement of accounts by the I.-T.O., though in sense a decision, is more like an acceptance by the I.-T.O., of the plea taken up by the assessee or an admission that the plea is correct. It is true that so far as the order of the A.A.C. is concerned there is a right of appeal in the Income Tax Commissioner, but the foundation of the proceedings is the order of I.-T.O. The provision which permits the I-T.O. himself to reopen the assessment when some income has escaped assessment etc., also supports the conclusion that the position of the Income Tax Officer is not that of judicial Tribunal deciding a matter between the contending parties, rather that of a person acting on behalf of the department who is charged with the duty of seeing the persons pay the amount of income-tax to which they are in fact liable. Under the circumstances, the ends of justice will be served by confining the bar of res judicata in relation to decisions of Income-tax Authorities to cases where the decision is not clearly open to some objection. It should be a decision which is reached after proper enquiry; which is such as could reasonably have been reached on the material before the authority and which does not suffer from such a defect as would render it liable to be set aside under section 100, C.P.C., in second appeal if it was a decision of a Civil Court. Also a matter can always be re-opened on the ground that fresh evidence having a material bearing on the point is available.
The dominant consideration should always be the advancement of the cause of justice and that the ends of justice will be served by confining the bar of res judicata in relation to decisions of Income-tax Authorities to' cases where the decision is not clearly open to some objection and it should be a decision which is reached after proper enquiry and is such as could reasonably have been reached on the material before the authority.
PLD 1965 SC 171 fol.
(b) Income Tax Ordinance (XXXI of 1979)---
----Ss. 65, 129 & 134---Re-opening of assessment---Appeal which was originally preferred by the assessee was dismissed as in fructuous for the reason that original assessment order was no more in the field with the initiation of proceedings under S.65, Income Tax Ordinance, 1979.---When the proceedings under S.65 of the Income Tax Ordinance were dropped, thereby restoring the original assessment order, the consequential effect was that the appeal filed which was not finally decided on merits also stood restored, the appeal being continuation of original assessment proceedings-- Appellant having been made victim of the circumstances, doors of justice should not be closed on him---Impugned order of Commissioner Income Tax dismissing the appeal in limine was vacated and case remanded to him for disposal of the same on merits after giving reasonable opportunity of being heard to the appellant.
(c) Income-tax---
----Administration of justice---Principles---Proper place of procedure in, any system of administration of justice is to help and not to thwart the grant to the people of their rights---All technicalities have to be avoided unless same be essential to comply with them on grounds of public policy---Any system which by giving effect to the form and not the substance defeats substantial rights is defective to that extent.
Imtiaz Ahmed v. Ghulam Ali PLD 1963 SC 382 fol.
(d) Income-tax---
Of justice---Principles---Sublime principle in view should always be to render justice to the people and the right to seek justice should not be sacrificed on the altar of technicalities-- -No party should be made to suffer on account of circumstances beyond his control and on account of acts and omissions on the part of Authorities administering justice---Justice should never fall prey to the use or misuse of authority vested in the State functionaries.
Irfan Saadat Khan and Khalil Waggan, C.A. for Appellant.
Ali Nasir Bukhari, D.R. for Respondent.
Date of hearing: 21st June, 1997.
ORDER
MUHAMMAD MUJIBULLAH SIDDIQUI (CHAIRMAN). ---The above appeal is directed against the order dated 25-5-1996 by the learned C.I.T.(A), Zone-1, Karachi in I.T.A. No.377 of 1993 relating to the assessment year 1991-92.
2. Heard M/s. Irfan Saadat Khan, Advocate and Khalil Waggan, C.A. learned representatives for the appellant and Mr. Ali Nasir Bukhari, learned representative for the department.
3. The main objection raised on behalf of the appellant is that the learned C.I.T.(A) was not justified in not entertaining the appeal holding the same to be ab initio invalid, frivolous and defunct and dismisses the same in limine. The impugned order of the learned C.I.T. (A) is reproduced below:
"The present appeal against the order passed under section 62 for this year appears to have been filed under some confusion or serious misconception of the law. The fact of the matter is that the appellant had also filed an appeal for the same assessment year earlier which had been dismissed by the learned CIT Appeals-I1, Karachi, who then held jurisdiction over the case, vide his order in Appeal No.578 of 1993 dated 19-4-1993.
No convincing reason for filing the appeal once again against the same order of assessment under section 62 of the Income Tax Ordinance, 1979 had been advanced, except for claiming that since the original appeal had been dismissed on the ground that proceedings had been initiated for re-opening the assessment under section 65, and that since such proceedings had been ultimately dropped, the appellant's right of appeal against the original order had been restored.
In my opinion, the only merit this argument enjoys is that it is novel. However, it is neither valid in law nor any precedent or authority has been quoted in support of this attempt to resurrect a dead horse. It is trite law that once an appeal has been disposed of by competent Authority through an order in writing, it cannot be heard by the same authority on the same grounds. In the present case, the appeal had been dismissed by my learned predecessor after allowing the appellant opportunity of hearing and after considering all facts of the case. It stands disposed of for all intents and purposes and this renders me functus officio in respect of the same grounds of appeal.
I, therefore, refuse to entertain the appeal for being ab initio invalid, frivolous and defunct. It is accordingly dismissed in limine."
3. The learned representatives for the appellant have submitted that the original assessment order was completed under section 62 on 30-9-1992 by the Assistant Commissioner of Income-tax, Range-IV, Companies-1, Karachi. The appellant being aggrieved with the assessment order preferred appeal on 21-10-1992 before the learned C.I.T.(A-II), Karachi being I.T.A. No.578 of 1993. The first appeal came for hearing before the learned C.1.T. (A-II), Karachi on 19-4-1993 when the learned I.A.C. Range. IV; Companies-1, Karachi informed vide letter dated 2nd of May, 1993 that action has been taken under section 65 in respect of the aforesaid assessment year and proceedings were in progress. The learned C.I.T. (A) dismissed the appeal by holding as follows:
"In view of the above the present appeal has become in-fructuous which is, therefore, dismissed as premature. The assessee is, however, at liberty to file fresh appeal as a result of re-assessment under section 65 covering the grounds now agitated as well as on other grounds. The appeal with the above observation is accordingly dismissed.
4. Subsequently, the learned I.A.C., Range. IV, Companies-1, Karachi vide order dated 31-7-1993 dropped the proceedings initiated under section 65, the concluding part whereof is as follows:
"Proceedings initiated as a result of section 65 of the Income Tax Ordinance, 1979 are dropped. The original assessment order dated 13-9-1992 will remain operative, where total business income was assessed at Rs. 1,20,72,227 besides, income covered by section 80-C was separately taxed. Net tax payable was determined at Rs.61,36,693 The assessee will have right to file appeal again against the original assessment order 1991-92."
5. The learned I.A.C. forwarded the copy of order dropping the proceedings initiated under section 65 to the appellant vide letter dated 31st of July, 1993 which reads as follows:
"OFFICE OF THE
ADDITIONAL COMMISSIONER OF
INCOME TAX RANGE IV
COMPANIES I KARACHI
No.IAC%R-IV/Cos.l/93-94July 31, 1993
M/s. Greaves Cotton Pakistan
(Pvt.) Ltd., Karachi.
Sub: ASSESSMENT YEAR 1991-92
Dear Sir,
After examining your contention on the point of reconciliation of indenting commission declared as reported by COTECNA for the period from January, 1991 to June, 1991 and after examining the records produced and explanation tiled and based on Worthy Commissioner of Income Tax, Cos. 1, Karachi approval vide his Letter No.Jud-1/Cos.I/93-94/500, dated 31-7-1993 the proceedings initiated under section 65 are dropped on '' this issue. A copy of order is also enclosed. The dropping of proceedings restores the original order passed under section 62 for the assessment year 1991-92 on 30-9-1992, at business income other than 80-C income of Rs.1,20,72,227
Approval of learned C.I.T. to drop the proceedings also gives you right to file appeal against the original order for 1991-92 again.
(Mumtaz Ahmad)
Add. Commissioner of Income Tax
Range. IV Cos. 1, Karachi
Copy submitted to the Commissioner of Income Tax, Cos.l, Karachi for information."
6. The above letter was received by the appellant on 2-8-1993 and thereafter a fresh appeal was tiled on 19-8-1993. The learned C.I.T. (A) did not entertain the appeal vide order reproduced above. Learned representatives for the appellant has submitted that though the learned C.I.T.(A) while holding that the appeal was not maintainable, has not referred to the principle of res judicata but in fact he has applied the same principle which is evident from his observation that, "it is trite law that once an appeal has beets disposed of by competent authority through an order in writing it cannot be heard by the same authority on the same grounds." The learned representatives for the appellant have further submitted that the learned C.I.T. (A) has fallen in error by observing that, "in the present case the appeal has been dismissed by my learned predecessor after allowing the appellant opportunity of hearing and after considering all facts of the case. It stands disposed of for all intents and purposes and this renders me functus officio in respect of the same grounds of appeal". According to learned representatives for the appellant the above observation is belied by the earlier order of CIT (A) dated 19-4-1993 which clearly contains that because of the initiation of proceedings under section 65 the appeal has become in-fructuous with further observation that after re-assessment under section 65 appellant shall be at liberty to tile fresh appeal covering the grounds now agitated as well as any other ground. This observation of the learned C.I.T. (A) in his order dated 19-4-1993 clearly shows that to the first instance the appeal filed by the appellant was not heard on merits and grounds of appeal were neither adverted to nor considered and disposed of on merits and to. say that the appeal was decided earlier after consideration of all facts and the appeal was disposed of for all intents and purposes is travesty of justice. They have further contended that in fact the earlier appeal was dismissed because, according to the learned C.I.T. (A), the assessment order appealed against was no more to field because of initiation of proceedings under section 65 and, therefore, he had observed that after fresh assessment order under section 65 the appellant shall be at liberty to agitate all the grounds. They have further submitted that the learned I.A.C. Range-IV, Companies-1 Karachi and the Commissioner of Income-tax, Companies-1, Karachi were also cognizant of the situation and, therefore, the learned I.A.C., in his order dated 31-7-1993 whereby the proceedings under section 65 were dropped specifically made observation, that "the assessee will have right to file appeal against the original assessment order 1991-92" and has further observed in the covering letter that, "approval of learned C.I.T.(A) to drop the proceedings also gives you right to file appeal against the original order for 1991-92 again". The learned representatives for the appellant have, therefore, submitted that in the interest of justice the case be remanded back to learned C I.T. (A) with the direction to hear the appeal on merits.
7 The learned D.R., has conceded that in the facts and circumstances of the case injustice has been done to the appellant for the circumstances beyond their control and that the appellant has been made victim of the circumstances.
8. We have carefully considered the, peculiar circumstances of the present case and the contentions raised by the learned representatives for the parties. We are persuaded to agree with the submissions, of learned representatives for the parties that while observing that once an appeal has been disposed of by competent Authority through an order in writing it cannot be heard by the same authority on the same grounds, the learned C.I.T. (A) has impliedly applied the rule of res judicata. However, the learned C.I.T. (A) failed to consider that even in civil proceedings, where the rule of res judicata is more strictly applied, the condition precedent is that in the subsequent proceedings the same issues are raised which have been heard and finally decided by the Court of competent jurisdiction in the earlier proceedings. In the present case it is admitted by the learned D.R., that while dismissing the earlier appeal on 19-4-1993 the issues raised in appeal were neither heard on merits nor they were finally disposed of and as such the condition precedent for invoking the rule of res judicata was (sic)'Although there is no specific provision in the law relating to income-tax proceedings in respect of the applicability of the principle of res judicata. However, in order to give finality to litigations the principle has been held to be applicable by the superior Courts, under certain conditions. The point in issue has been considered by Hon'ble Supreme Court of Pakistan in the case of C.I.T. v. Wahiduzzaman, (PLD 1965 SC 171) and Hon'ble Justice B. Z. Kaikaus speaking for the Supreme Court laid down the following dictum:
"Having examined the decision of the Appellate Assistant Commissioner we proceed to consider the principle applicable for determining the bar which may be created by a previous decision of an income-tax authority. Where there is no statutory provision baring reopening of a matter the applicability of the principle of res judicata depends on the necessity of giving finality to litigation and the injustice of vexing a person twice in respect of the same matter and these being only general considerations relating to administration of justice with no technical and defined limits, the applicability of .res judicata in such cases will be governed by considerations arising with respect of the particular statutes under which a matter has been determined. The dominant consideration always being that the cause of justice be advanced. The principle of res judicata can be applied with strictness to the cases before Courts or before Judicial Tribunals where there are two contesting parties each trying to substantiate its own case. It cannot, however, be applied with the same strictness to decisions of Income-tax authorities. The I.T.O. is not a Tribunal that decides a question between the Income Tax Commissioner and the assessee. The Income-tax Commissioner does not lead evidence before the I.T.O. and no appeal lies from the order of the I.T.O., at the instance of Income-tax Commissioner. The right of appeal being vested in the assessee only. The position of I.T.O., is that of an agent of the Income Tax Commissioner or an officer authorised by the Income tax Commissioner to determine the amount of tax payable. The assessee files a return as to his liability to pay tax and the I.T.O. on behalf of the Income Tax Commissioner either accepts the return or rejects it wholly or partly. The acceptance of an explanation or plea or statement of accounts by the I.T.O., though in sense a decision is more like an acceptance by the I.T.O., of the plea taken up by the assessee or on admission that the plea is correct. It is true that so far as the order of the A.A.C. is concerned there is a right of appeal in the income-tax Commissioner, but the foundation of the proceeding is the order of the I.T.O. The provision in section 34 which permits the I.T.O., himself to reopen the assessment when some income has escaped assessment etc., also supports the conclusion that the position of the Income-tax Officer is not that of judicial Tribunal deciding a matter between the contending parties, but rather that of a person acting on behalf of the department who is charged with the duty of seeing the persons pay the amount of income-tax to which they are in fact liable. Under the circumstances the ends of justice will, be served by confining the bar of res judicata in relation to decisions of income-tax authorities to cases where the decision is no, clearly open to some objection. It should be a decision which is reached after proper enquiry, which is such as could reasonably have been reached on the material before the authority, and which does not suffer from such a defect as would render it liable to be set aside under section 100, C.P.C. in second appeal if it was decision of a civil Court. Also a matter can always be re-opened on the ground that fresh evidence having a material bearing on the point is available."
9. A perusal of the above authoritative pronouncement by the Hon'ble Supreme Court of Pakistan shows that the ratio decided is that the dominant consideration should always be the advancement of the cause of justice and that the ends of justice will be served by confining the bar of res judicata in relation to decisions of income-tax authorities to cases where the decision is not clearly open to some objection and it should be a decision which is reached after proper enquiry and is such as could reasonably have been reached on the material before the authority. Applying the above principles to the' facts of the present case, it is hardly possible to contend that the conclusion reached by the learned CIT (A) in his impugned order dated 25-5-1996 could be reached by a person acting reasonably. Apart from other defects, the order of C.I.T. (A) dismissing the appeal as in-frictions is an order on consideration of merits and, therefore, his. observation that the appeal was dismissed by his predecessor after allowing opportunity of hearing and after considering all facts of the case and that it stands disposed of for all intents and purposes is absolutely perverse and unsustainable in fact and law. A perusal of material available on record shows that the learned C.I.T. (A) failed to apply his mind that the learned I.A.C., while dropping proceedings under section 65, held that with the dropping of proceedings the original assessment order dated 30-9-1992 will remain operative and that the assessee will have right to file appeal again. In the covering letter addressed to the appellant the learned I.A.C. reiterated that the approval of learned C.I.T. to drop the proceedings also gives you right to file appeal against the original order for 1991-92 again. In fact, the A.R. of the appellant also failed to conceive that the appeal which was originally preferred by the appellant was dismissed as in-fructuous for the reason that the original assessment order was no more in the field with the initiation of proceedings under section 65 of the Income Tax Ordinance and, therefore, when the proceedings under section 65 were dropped, thereby restoring the original, assessment order as rightly observed by the I.A.C., the consequential effect was that the appeal filed on 21-10-1992 which was not finally decided on merits also stood restored, the appeal being continuation of the original assessment proceedings. The learned C.I.T. (A) also failed to appreciate this legal position and, therefore, fell in serious error causing miscarriage of justice. The Hon'ble Supreme Court of Pakistan in the case of Wahiduzzaman cited above has outlined the principles, which will govern the applicability of principle of res judicata and has held that the dominant consideration should always be the advancement of the cause of justice. The learned A.R., for the assessee after dropping of proceedings under section 65 ought to have submitted an application before the learned C.I.T. (A) for restoration of appeal on record and hearing of the same on merits and disposal thereof accordingly. 1f the A.R. of the appellant instead of applying right course as observed above, preferred fresh appeal it was incumbent on the learned C.I.T. (A) to pass the appropriate order restoring the appeal on record for the simple reason that the circumstances under which appeal was rendered infructuous were removed restoring the original assessment order and thereby restoring the appeal also. It is a matter of common sense and common prudence that when the cause is removed the effect is automatically removed. The cause of rendering the appeal infructuous was the initiation of proceedings under section 65 and when such proceedings were dropped the effect i.e. rendering of appeal infructuous was also removed. We are of the opinion that all the judicial authorities, Tribunals and quasi-judicial authorities should always keep in view the dictum laid down by the Hon'ble Supreme Court of Pakistan in the case of Imtiaz Ahmed v. Ghulam Ali PLD 1963 SC 382 as follows:
"The proper place of procedure in any system of administration of justice is to help and not to thwart the grant to the people of their rights. All technicalities have to be avoided unless it he essential to comply with them on grounds of public policy.
.........Any system which by giving effect to the form and not the substance defeats substantive rights is defective to that extent."
10. In the light of principles laid down by the Hon'ble Supreme Court of Pakistan and consequent to the discussion above we are of the considered opinion that a gross injustice has been done to the appellant and; miscarriage of justice has taken place because, of imprudent use technicality and losing sight of the fact that dispensation of justice must always be [lie dominant consideration. The sublime principle in view show always be to render justice to the people and the right to seek justice should not be sacrificed on the altar of technicalities. Another principle should also be kept in view that no party should be made to suffer on account of circumstances beyond his control and on account of acts and omission on the part of authorities administering justice. The justice should never fall prey to the use or misuse of authority vested in the State functionaries. As the appellant has been made victim of the circumstances in the present case, therefore, tic doors of justice should not be closed on him and consequently the impugned findings of the learned C.I.T. (A) dismissing the appeal in limine is hereby vacated and the appeal is remanded back to the learned C.I.T. (A) for disposal according to law on merits after giving reasonable opportunity of being heard to the appellant.
11. The appeal is allowed as above.
C.M.S./361/Trib. Appeal allowed.