REEM RICE MILL (PVT.) LTD. VS FEDERATION OF PAKISTAN
2002 P T D 381
[Lahore High Court]
Before Nasim Sikandar and Mansoor Ahmad, JJ
COMMISSIONER OF INCOME-TAX/ WEALTH TAX, ZONE-B, LAHORE
Versus
Makhdoom Zada Syed HASSAN MEHMOOD through Legal Heirs and 81 others
P.T.R. Nos. 20 to 33 of 1998, heard on 11/10/2001.
(a) Income Tax Ordinance (XXXI of 1979)---
----Ss. 136(1) & 135---Income Tax Appellate Tribunal Rules, 1981 R.21---Reference to High Court---Question of law---Reference---Subject matter---Question arising out of an order of the Tribunal on the reference application made under S.136(1) of the Income Tax Ordinance, 1975 could not be entertained by the. High Court---Question of law which could possibly be a moot point before High Court must have arisen out of an order of the Tribunal recorded under S.135 of the Income Tax Ordinance, 1979.
(b) Income-tax Act (XI of 1922)---
----S.28(3)---Income Tax Ordinance (XXXI of 1979), Ss. 108 & 115-- Failure to furnish return of total income---Penalty---Notice---Criminal proceedings against assessee---Stay by the Supreme Court in respect of such proceedings---Any stay of criminal proceedings against assessee by the Supreme Court was not applicable to proceedings under S.28 of the Income-tax Act, 1922.
(c) Income Tax Ordinance (XXXI of 1979)---
----Ss. 108 to 115 & 117 to 122---Income-tax Act (XI of 1922), Ss. 28 & 51---Penalty proceedings---Nature---Penalty proceedings both under the Income-tax Act, 1922 or Income Tax Ordinance, 1979 are not strictly criminal in nature but can best be called quasi-criminal in nature---Only provisions of S.51 of the Income-tax Act, 1922 and those contained in Ss. 117 to 122 of the Income Tax Ordinance, 1979 can properly be said to be criminal in nature---Distinction also lies in the fact that both penalty provisions as well as prosecution provisions could be initiated and carried out side by side---Penalty proceedings under S.28 of the late Act, 1922 as also those under Ss. 108 to 115 of the Income Tax Ordinance, 1979 are in addition to criminal prosecution provided for in the provisions of Income-tax Act, 1922 as well as the Ordinance-- Penalty provisions both under late Act as well as under the Income Tax Ordinance, 1979 were more in nature of civil liability of an assessee or any other individual rather than a criminal offence to be charged and dealt with under the criminal law.
Mian Yousaf Umar for Petitioner.
Nemo for Respondents.
Date of hearing: 11th October, 2001
JUDGMENT
NASIM SIKANDAR, J.---The Commissioner of Income tax/Wealth Tax, Zone-B, Lahore through this application under section 136(2) of the Income Tax Ordinance, 1979 has proposed following two questions which are stated to have arisen out of a common order recorded by a Division Bench of the Income-tax Appellate Tribunal, Lahore on 10-3-1990 in as many as fourteen departmental appeals:---
(1) Whether on the facts and in the circumstances of the case the learned Income-tax Appellate Tribunal was justified in dismissing the reference application, as same was against the procedure for decision of reference application as per Income tax Appellate Tribunal Rule 20 of 1981?
(2) Whether on the facts and in the circumstances of the case the learned Income-tax Appellate Tribunal was justified in maintaining that the stay order in criminal proceedings pending against the assessee in the Civil Court was also applicable to the penalty proceedings pending under the repealed Income-tax Act, 1922?
2. It appears that the Assessing Officer while proceeding under section 28(1-A) of the late Income-tax Act, 1922 issued a show-cause notice under subsection (3) thereof to the assessee/individual late Makhdoomzada Syed Hassan Mehmood. Earlier it was noted that the Tribunal had maintained the additions made on account of inadmissible interest expense as also his income from petrol pump at Karachi which was not disclosed by the assessee.
3. In reply to the notice under section 28(3) of the late Act, 1922 the assessee inter alia pleaded for stay of penalty proceedings on the basis of the following:---
"The assessee has challenged the entire action of the department and the appeals against the orders of the High Court have been admitted before the Supreme Court of Pakistan. You are requested to take notice of the fact that the highest Court of the country has fount a prima facie case against the treatment given out by the department to the assessee. As such the finalization of the 28(3) proceedings to the assessee only a measure to coerce the assessee.
You are requested to kindly stay the proceedings until the disposal by the Supreme Court of Pakistan
You are also requested to take notice of the Supreme Court order. All. criminal proceedings have been stayed since these proceedings are also of quasi-criminal nature they all fall in the category and in my humble submission are attracted by the stay order."
4. The Assessing Officer however disagreed. It was noted that civil appeals pending before the Supreme Court of Pakistan were directed against the orders of the High Court which had earlier dismissed Constitutional petitions in which the assessee had challenged the legality of proceedings carried out by the Income-tax Department and the action of the Tribunal in upholding these proceedings. In the view of the Assessing Officer the stay of criminal 'proceedings by the Hon'ble Supreme Court of Pakistan was not attracted to an action under section 28(1A) inasmuch as these proceedings were not criminal in nature. Also, in the view of the Assessing Officer, the Hon'ble Supreme Court had not granted the assessee any stay in respect of the proceedings in hand, nor these in any manner clashed with the stay of criminal proceedings as stayed by the Hon'ble Supreme Court. Thereaftdr, he proceeded to impose various penalties in fourteen assessment years
5. The learned First Appellate Authority/C.I.T. (Appeals) through his order, dated 18-11-1979 found the penalties imposed under section 28 of the late Act, 1922 to be null and void. According to Mr. Nasim Sabir Appellate Assistant Commissioner, A-Range, Lahore no penalty could be imposed in the presence of the direction of the Supreme Court, dated 21-10-1975 directing-stay of criminal proceedings against the assessee. It was also observed by the learned A.A.C. that proceedings under section 28(3) without an iota of doubt were criminal proceedings. Accordingly the penalties imposed in all the assessment years were cancelled.
6. Learned Tribunal by way of the impugned order, agreed with the findings of the A.A.C. though it was also noted that the Department was not possessed with the stay order of the Hon'ble Supreme Court.
7. Thereafter, a reference application made by the, Revenue proposing a question of law which was refused by another Division Bench of the Tribunal on 27-3-1998.
8. After hearing the learned counsel for the Revenue, we are of the view that Question No. 1 as framed cannot be entertained in an application under section 136(2). It will be seen that a question of law which can possibly be a moot point before this Court must have arisen out of an order of the Tribunal recorded under section 135 of the Ordinance while in the present case Question No. 1 as framed has arisen out of an order of the Tribunal on the reference application made under section 136(1) of the income Tax Ordinance, 1979. Therefore, it cannot be entertained.
9. Question No. 2 as framed, however, certainly needs to be answered in the negative. The Assessing Officer was evidently correct in his view that any stay of criminal proceedings against the assessee by the Hon'ble Supreme Court was not applicable to proceedings under section 28 of the Act, 1922. These provisions provided for penalty for 1 failure to file returns etc. or to furnish required particulars and concealment of Income or improper distribution profits. The Assessing Officer had served a notice under subsection (3) of section 28 on the assessee after concluding that he had failed to disclose income from a petrol pump at Karachi and also that uptil the stage of the Tribunal the addition on account of inadmissible interest expense had been upheld. The penalty proceedings both under the late Act, 1922 or Income Tax Ordinance, 1979 are not strictly criminal in nature. These at best be called quasi-criminal in nature. It were only the provisions of section 51 of the late Act and those contained in section 117 to section 122 of the Income Tax Ordinance which can properly be held to be criminal in nature. Their distinction also lies in the fact that both penalty provisions as well as prosecution provisions can be initiated and carried out side by C side. The penalty proceedings under section 28 of the late Act, 1922 as also those under sections 108 to 115 of the Income Tax Ordinance are in addition to criminal prosecution provided for in the aforesaid provisions of the late Act as well as the Ordinance. The penalty provisions both under late Act as well as under the Income Tax Ordinance, 1979 are more in nature of civil liability of an assessee or any other individual rather than a criminal offence to be charged and dealt with under the criminal law. The provisions for prosecution of an assessee or any other person, contemplate trial like any other criminal trial which could culminate in punishment for imprisonment or with a fine or with both.
10. The impugned order of the Tribunal whereby it had maintained the findings of the learned A.A.C. does not betray a serious application of mind. If at all the D.R. was not possessed with the order of the Hon'ble Supreme Court of Pakistan then he ought to have given an opportunity.
11. Question No. 2 is answered in the negative.
12. This judgment will also dispose of P.T.R. Nos. 21 to 33 of 1998.
C.M.A./M.A.K./C-125/L Reference answered.