I.T.As, Nos. 777/LB and 778/LB of 2000, decided on 21st May, 2002. VS I.T.As, Nos. 777/LB and 778/LB of 2000, decided on 21st May, 2002., 2002 PTD-INCOME-TAX-APPELLATE-TRIBUNAL-PAKISTAN 2948 (2002)

(a) Income-tax---

---Refund‑‑‑Adjustment of‑‑‑Principle‑‑‑Refund created in the subsequent assessment year could not be adjusted against the non -existing demand.

(b) Interpretation of statutes‑‑‑

‑‑‑‑ Provision of law cannot be read in isolation but is to be seen in conjunction with other provisions of law.

(c) Income Tax Ordinance (XXXI of 1979)‑‑‑

‑‑‑‑S.104‑‑‑Adjustment of refund against tax‑‑‑Refund‑‑‑Adjustment of refund against the demand raised subsequently from the date of refund created‑‑‑Validity‑‑‑When refund was created for the assessment year 1984‑85 on 25‑6‑1985, there was no tax payable on behalf of the assessee‑‑‑Adjustment of tax demand raised on 16‑2‑1989 under an order passed under Ss. 62/65 of the Income Tax Ordinance, 1979 against such refund was absolutely illegal and could not be sustained.

1999 PTD (Trib.) 3516 ref.

(d) Income Tax Ordinance (XXXI of 1979)‑‑‑

‑‑‑‑‑S.102(2)(a)‑‑‑Additional payment for delayed refunds‑‑‑Adjustment of the refund created for the assessment years 1984‑85 and 1985‑86 against the demand created subsequently under Ss. 62/65 of the Income tax Ordinance, 1979 for the assessment year 1983‑84‑‑‑Assessment for the assessment year 1983‑84 was annulled by the Appellate Tribunal‑‑ Application for issuance of additional refund/compensation was rejected by the Assessing Officer and reckoned the period to compute the amount of additional refund from the date of receipt of order from the Appellate Tribunal‑‑‑Validity‑‑‑If the refund was required to be made in consequence of any order on any appeal or a revision or an appeal to the High Court or an appeal to the Supreme Court on the date of receipt of such order which meant that receipt of order of higher forum became relevant only when the refund was required to be made as a consequence of any order by that particular high forum‑‑‑Refund in the present case was not created as a result of any Court order, nor was it challenged before any higher judicial forum, so the Assessing Officer misled himself while reckoning the period, to compute the amount of additional refund from the date of receipt of order from the Appellate Tribunal‑‑‑Appellate Tribunal vacated the assessment order as well as the impugned order and directed the Assessing Officer to compute the additional refund/compensation after lapse of 4 months from the date when refunds were originally created i.e. 25‑6‑1985 up till the date, of original refund was issued i.e. 11‑4‑1998.

1999 PTD (Trib.) 3516 rel.

S. A. Rauf, I.T.P. and Faisal Zaman for Appellant.

Mehboob Alam, D.R. for Respondent.

Date of hearing: 5th March, 2002.

ORDER

SYED NADEEM SAQLAIN (JUDICIAL MEMBER)‑‑‑Titled two appeals at the instance of the asses see/appellant for the assessment years 1984‑85 and 1985‑86 have been directed against the combined impugned order dated 7‑12‑1999. passed by the learned CIT(A), Zone‑IV, Lahore. Common ground for both the assessment years argued at the bar is that the learned 1st appellate authority erred while holding that the adjustment of refund for 1984‑85 and 1985‑86 made against demand of assessment year 1983‑84 was justified:

2. Briefly stated facts of the case are that assessee is an individual deriving income from commercial import. Assessment for the assessment year 1983‑84 was framed on 19‑10‑1983 under section 59(1) of the Income Tax Ordinance, 1979. (hereinafter called the Ordinance) at the total income of Rs.54,000 which was subsequently reopened and additional assessment under sections 62/65 of the Ordinance was framed on 16‑2‑1986 at the total income of Rs.14,80,924 determining tax demand of Rs.6,91,140. Later on, refund was created as a result of assessment framed for the assessment years 1984‑85 and 1985‑86 which was adjusted against the tax demand of 1983‑84 in the following manner:

3. It is pertinent to mention that the assessee succeeded at the Appellate level and, ITAT vide order dated 16‑2‑1986 annulled the Assessment Order passed under sections 62/65 of Ordinance pertaining to the assessment year 1983‑84. Consequently, the refund determined for the assessment years 1984‑85 and 1985‑86 and later adjusted against demand raised through the annulled order became due to the assessee. In response to an application moved by the assessee for issuance of refund, a refund of Rs.3,49,357 was issued vide voucher No.38 dated 11‑4‑1998. However, assessee demanded .additional refund/compensation on the plea that since order pertaining to additional assessment for the assessment year 1983‑84 was cancelled, the resulted demand being non existent, assessee was entitled to additional refund from the dates refunds for the assessment years 1984‑85 and 1985‑86 were originally, created. The Assessing Officer calculated the refund at Rs.59,461 and issued a voucher in this regard. However, the assessee returned the, voucher under protest agitating that he is entitled to have additional/refund/ compensation amounting to Rs.6,34,149 claiming as under:

Assessment .year 1984‑85

Assessment year 1985‑86

4. It will also be worth stating that assessee was constrained to approach Honourable High Court on the issue vide Writ Petition. No.8839 of 1999 whereby the Honourable High Court directed to decide the matter within one month of the direction of the Court. The assessee applied for the issuance of additional refund/compensation which was rejected by the Assessing Officer. The assessee also failed at the 1st appellate level, hence the instant appeals.

5. Both the parties have been heard and relevant orders perused. The learned A.R. has vehemently argued the case and contended that adjustment of refund against the alleged demand for the assessment year 1983‑84 was illegal since there was no demand outstanding against the appellant for the said year on the date of adjustment. He contended that assessment for the assessment year 1983‑84 was annulled by the Tribunal vide I.T.A. No. 155/LB of 1989‑90 through order dated 9‑4‑1996. Reference application filed on behalf of the department also failed. It was stressed by the learned A.R. that department was compelled to issue refund only after the. Honourable High Court directed to do so, otherwise, the department still might have' been looking for the excuses to delay the payment of additional refund, proceeding with the arguments the learned A.R. pleaded at the bar that adjustment could only be made in pursuance of valid demand, since original demand was cancelled, all the actions in pursuance thereof are also nullity in the eye of law. It was also pointed out by the learned A.R. that no permission for withholding the said tax was sought from the Commissioner by the Assessing Officer. In support of his contention, the learned A.R. has relied upon the judgment reported as 1999 PTD (Trib.) 3516.

6: Conversely, the learned D.R. has opposed the arguments advanced by the learned A.R. and submitted that there is nothing wrong with the impugned order passed by the learned CIT (A).

7. We have paid due consideration to the submissions made by the learned counsels for both the parties. Both the parties are in unison on one issue that the demand created through assessment order dated 16‑2‑1986 under sections 62/65 of the Ordinance was annulled by the Tribunal vide I.T.A. No.155/LB of 1989-90 on 9‑4‑1996 which resulted in wiping off demand for the assessment year 1983‑84. There are no two opinions that refund of Rs.1,60,614 created vide order dated 16‑2‑1985 was got adjusted on 25‑6‑1985 against a demand raised on 16‑2‑1986. We do not have an iota, of doubt in our mind that refund created in the subsequent assessment year could not be adjusted against the non‑existent demand. The fact that there was no demand outstanding against the assessee has also been admitted by the learned CIT(A) while observing that:

"It may be true that there was no demand outstanding against the appellant when refund for the year 1984‑85 was adjusted. But later on demand emerged on 16‑2‑1986 and thus the refund ipso facto assimilated therein.'"

8. After having conceded by the learned CIT(A) we are unable to comprehend how a demand emerging later on could be assimilated into a thing which was not there at all. In this regard it will not be out of place here to reproduce relevant provisions of law, and which incidentally have been relied upon by the Assessing Officer:

"S.102. Additional Payment for delayed refunds.‑‑‑(1) Where a refund due, or deemed under subsection (5) of section 99 to be due, to an assessee is not paid within three months of the date on which it becomes compensation at the rate of fifteen per cent per annum of the amount of refund from the expiration of the said three months up to the date on which the refund order is made.

(2) For the purpose of this section, a refund shall be deemed to have become due;

(a) in any case where the refund is required to be made in consequence of any order on an appeal or a revision or (an appeal) to the High Court or an appeal to the Supreme Court, on the date of receipt of such order by the (Deputy Commissioner);

(b) _________________________________________.

(c)_________________________________________.

(3) _________________________________________.

S.103. Power to withhold refund in certain cases.‑‑‑Where an order giving rise to a refund is the subject‑matter of an appeal or further proceedings under this Ordinance, the (Deputy Commissioner) may, with the prior approval of the Commissioner, withhold the refund till such time as the Commissioner may determine.

S.104. Adjustment of refund against tax.‑‑‑(1) Where, under the provisions of this Ordinance, the repealed Act, (the Central Excises Act, 1944 (1 of 1944), the Sales Tax Act, 1951 (III of 1951), the Gift‑tax Act, 1963 (XIV of 1963), the Wealth Tax, 1963 (XV of 1963), [or the Customs Act, 1969 (IV of 1969), any refund is due to any person, the amount to be refunded or any part thereof, may be set off against the tax payable by that person under' this Ordinance, or the repealed Act.

(2) Where any refund is due to any person under the Ordinance, the amount to be refunded or any part thereof, may be set off against the tax payable under any Act referred to in subsection (1)."

9. It is trite law that any provision of law cannot be read in isolation but is to be seen in conjunction with other provision of law. Undoubtedly, it has been provided under section 102(2)(a) that a refund shall be deemed to have become due on the date of‑receipt of such order by the DCIT, but section 104(2) of the Ordinance provides that the amount to be‑refunded or any part thereof, may be set off against the tax payable. Now in our opinion, it is very much clear that refundable amount could be adjusted/set off against the tax payable‑but as is evident that on 25‑6‑1985 when refund amounting to Rs.1,60,614 was created for the assessment year 1984‑85, there was no tax payable on behalf of the assessee. So, adjustment of tax demand raised on 16‑2‑1986 under an order passed under sections 62/65 of the Ordinance was absolutely illegal and cannot be sustained.

10. As regards issue of additional refund, we also do not tend to agree with the findings recorded by the learned CIT(A) that refund for 1984‑85 and 1985‑86 was adjusted against the demand of said year and, on annulment of assessment for 1983‑84 the entire tax paid in the shape of adjustment of refund for this year transferred into refund. In this regard we would like to observe that department has wrongly invoked section 102(2)(a) because in the instant case validity with regard to creation of refund was never in dispute at any forum. Rather, the issue which remained subject of adjudication before the Tribunal was as to whether additional assessment framed under sections 62/65 relating to assessment year 1983‑84 was justified or not, and admittedly the issue was decided in favour of the assessee when said assessment was annulled by the ITAT. Even the issue of legality of refund was not subject‑matter in the writ petition filed in the Lahore High Court. The Honourable High Court was approached by the assessee to seek a direction for the expeditious disposal of his application claiming additional refund. It is also worth noting that department moved in that direction, and though reluctantly only after it was asked by the Honourable High Court to do so.

12. Reverting back to section 102(2)(a), wherein it is clearly mentioned that if the refund is required to be made in consequence of any order on any appeal or a revision or an appeal to the High Court or an appeal to the Supreme Court on the date of receipt of such order which means that receipt of order of higher forum becomes relevant only when refund is required to be made as a consequence of any order by that particular high forum (under lining is ours). We have already dilated upon the issue and observed that refund in the instant case was not created as a result of any Court Order, nor was it challenged before any higher judicial forum, so the Assessing Officer misled himself while reckoning the period to compute the amount of additional refund from the date of receipt of order from the ITAT.

13. Scope of section 102 of the Ordinance also came for adjudication before the Tribunal in a case reported as 1999 PTD (Trib.) 3516 wherein it was observed as under:

"A State functionary cannot be allowed to circumvent and defy a mandatory provision of law to the detriment of a subject/tax payer. A relief granted by Legislature cannot be taken away by a State functionary who is required to execute the law as enacted and not to distort the law‑ at his discretion fraught with mala fide. "

14. For the foregoing reasons and in the light of above mentioned discussion and provisions of law, we hereby vacate the assessment order as well as the impugned order and direct to the Assessing Officer to compute the additional refund/compensation from 25‑6‑1985 uptil the date, original refund was issued i.e. 11‑4‑1998.

15. It is ordered accordingly.

C.M.A./M.A.K./424/Tax(Trib.) Order accordingly.