VS, 2003 PTD-INCOME-TAX-APPELLATE-TRIBUNAL-PAKISTAN 2778 (2003)

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

‑‑‑‑S. 129‑‑‑Appeal to Appellate Additional Commissioner‑‑‑Remedy from higher forum ‑‑‑Limitation‑‑‑Condonation of delay‑‑‑Sufficient cause‑‑Meaning‑‑Words "sufficient cause" mean and include any reason able disturbance to the petitioner, which had prevented him from filing an appeal in time‑‑‑No one gains by losing right of appeal specially when' he was adversely affected by some order‑‑‑Presumption of law in fiscal matters was that whosoever was aggrieved from an order would lose no time, in going to the higher forum for seeking remedy.

Mst. Rehmat Bibi and otters v. Punnu Khan and others 1986 SCMR 962 rel.

(b) Income‑tax‑‑‑

‑‑‑‑Limitation‑‑‑Condonation of delay‑‑‑Principles.

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

‑‑‑Second Sched., Part I, Cl. (176) & Ss.80‑C, 143‑B, 50(4), 62‑‑ Exemption‑‑‑Import of power generation machinery‑‑‑Sale and lease back by the assessee‑‑‑Assessing Officer termed it as supply chargeable under S.50(4) of the Income Tax Ordinance, 1979 and asked the assessee to file statement under S. 143‑B of the Income Tax Ordinance, 1979‑‑ Validity‑‑‑Action of the Assessing Officer was arbitrary and illegal‑‑ Issue regarding sale and lease back having been settled by the Appellate Tribunal, order of the Assessing Officer was illegal on the face of it‑‑ Return filed under normal law should be assessed under S.62 or 63 of the Income Tax Ordinance, 1979 as the case may be, and not under S.80‑C of the Income Tax Ordinance, 1979‑‑‑Deduction of tax shall be adjusted against the normal tax if any.

Collector, Land Acquisition v. Mst. Katiji and others (1987) 56 Tax 130; Saleem Akhtar v. CIT 2002 PTD 1035; 1996 PTD (Trib.) 724; 1995 PTD (Trib.) 1053 and I.T.A. No.749/LB of 1997 ref.

2002 P T D 2210 rel.

Naeem A. Shaikh, FCA for Appellant.

Ashraf Ahmed Ali, D.R. for Respondent.

Date of hearing: 24th July, 2003.

ORDER

KHAWAJA FAROOQ SAEED (JUDICIAL MEMBER)‑‑‑--The assessee a public Limited Company is engaged in the business of power generation through its unit located at Faisalabad. His income is exempt under clause (176) of the Second Schedule of the Income Tax Ordinance, 1979. However, the Department found that the assessee imported power generating machinery for a consideration of Rs.150.995 (millions) for installation in its factory. The said machinery later was sold to National Development Leasing Company and Messrs Orix Leasing Company, Faisalabad and was leased back to the petitioner. This transaction was considered as a supply by the Department and the assessee was asked to file statement under section 143‑B of the Income Tax Ordinance, 1979. The assessee challenged the treatment however, the Assessing Officer considered the transaction as supply chargeable to tax under section 50(4) and consequently assessable under section 80C. The assessment in this case was finalized on 30‑5‑1996 while the order was served on 3‑7‑1996. The petitioner prior to the receipt of the order filed a writ petition on 2‑7‑1995 before the Hon'ble High Court challenging the virus of the notice issued by the Department. The writ petition was filed under the garb of the argument that the proceedings are illegal and mala fide. The High Court disallowed the writ petition and directed the assessee to avail the remedy available in judicial hierarchy. The assessee filed appeal before the Supreme Court of Pakistan where again the assessee was directed to file appeal against the order under the Income Tax Ordinance. While rejecting assessee petition the Hon'ble Apex Court also felt that the Appellate Court shall consider the issue of limitation sympathetically keeping in view the law of the land. The assessee filed appeal before the CIT who decided the case by giving the following findings:‑‑

The Hon'ble High Court clearly pointed out regarding alternate remedies available to the assessee but even at that point of time, appeal was not filed before the First Appellate Authority i.e. Commissioner (Appeals). I am not convinced that under these circumstances, explanation furnished regarding the delay in filing of appeal after one and half year of even that decision, constitutes `sufficient cause' for condonation of such delay. Moreso, when it was admittedly settled that appeal can be filed before the Commissioner (Appeals) against the orders passed under section 80C of the Ordinance.

Having regard to all the relevant facts and circumstances of the case, request regarding condonation of delay in filing of appeal for assessment year 1995‑96 is rejected being devoid of any merit.

Since the appeal is hit by time limitation, it is dismissed in limine:

Above para gives an impression that the learned First Appellate Authority had no objection on allowance of condonation of delay to the assessee up to the period of pendency of the writ petition before the High Court. He has only considered the remaining period as not condonable during which the appeal was pending before the Supreme Court of Pakistan. In his opinion having failed at the stage of High Court the assessee was under compulsion to avail the forum of the First Appellate Authority if so advised and his going to the Supreme Court deprives him from the right of condonation.

The AR has taken a long line of arguments in support of his contention that he had "sufficient cause" for the delay in filing appeal. He said that the law has developed tremendously on this point and section 5 of the Limitation Act coupled with section 133 of the Income Tax Ordinance gives a vast authority to the appellate forums in this regard. He referred (198.7) 56 Tax 130 (S.C. Ind.) in the case of Collector Land Acquisition v. Mst. Katiji and others which he remarked is the landmark judgment on the subject. The Supreme Court of India while deciding the case has held that the "Legislature has conferred the power to condone delay by enacting section 5 of the Limitation Act 1963 in order to enable the Courts td do substantial justice to the parties by disposing of their matters on "merits". The expression "sufficient cause" employed by the legislature is adequately elastic to enable the Courts to apply the law in a meaningful manner which sub‑serves the ends of justice. He further referred a judgment by the Lahore Court reported as 85 Tax 225. In the referred judgment which is in the case of Mr. Saleem Akhtar v. CIT learned J. Mr. Naseem Sikandar has attached a very wide meanings to the words `sufficient cause'. The approach of the Courts while deciding the words every day delay, the learned Court has held should not be pedantic. The doctrine must be applied in a rational and pragmatic manner. Substantial justice and technical consideration should not be considered as at par and the petitioner should be allowed to get their cases decided on merit of the issue. The A.R. also referred 1996 PTD 724 (Trib.) and 1995 PTD (Trib.) 1053. This case has also been decided by Mr. Naseem Sikandar as Member Income Tax Appellate Tribunal as the then he was. In this case he relied upon the judgment of the Supreme Court of India mentioned above and many others on 'the subject. The honourable Member taking due from the Limitation Act has further held that the word `sufficient cause' in fiscal laws should be given still wider meanings than the other enactments. The reason being that in such cases one party is Government while the other is person responsible for paying tax or other levies etc. The honourable member have even gone to say that what do a persons gains if the delay in his case is condoned' It will at best result in decision of the case on the merits of the issue. There is, therefore, no favour if somebody is allowed condonation. The learned AR however, added that the issue is the one on which the legislature has ultimately considered the Department's point of view as incorrect. He said that the Courts have held the amendment in section 50(4)(b) to be as curative and remedial hence retrospective besides even otherwise some judgments decided on the issue of sale and lease back has attained finality having not been challenged before the higher Courts in terms of Messrs Chanab Fabrics decided vide I.T.A. No. 749/LB of 1997, dated 27‑8‑1998. The sale and lease back arrangement is no more a dispute issue. A recent judgment of the ITAT which has been reported as 2002 PTD 2210 has given a new meanings to the transaction. In the earlier cases said transaction was considered as not, a `supply' but in the now referred judgment it has been held that it is not even a `sale'. The deal of sale and buy back through lease agreement is a financial transaction, which is a substitute of pledge of property for loan. This is a security against the amount of loan given by this company to the leasing company. Thus it does not even fulfill the requirements of a sale transaction. In view of this patent illegality on the part of the Department of taxing the sale and lease back transaction as a commercial supply, no limitation can run against the same. The fact that the order is patently illegal, learned AR repeated, is covered by the amendment in section 50(4)(b) that speaks as follows;‑‑

(b)the Commissioner may, on an application made by any such recipient and after making such inquiry as he thinks fit, allow, by an order in writing, any person responsible for making such payment not to deduct any tax from any payment or payments made to such recipient in any financial year; and where such order is made, the person responsible for making any payment shall thereafter, and until such order is cancelled, make such payment without deduction tax under clause (a) (and)

In support of the argument that no limitation runs against an illegal order, he referred the famous case of Mst. Rehmat Bibi and others v. Punnu Khan and others reported as 1986 SCMR 962 which speaks as follows:‑‑

(b) Limitation------

‑‑Principles of limitation‑Not applicable when order is nullity in law‑if an impugned order has been passed without hearing and notice to a party whose presence is otherwise necessary before Authorities concerned, such order will be a nullity in eye of law, and no question of limitation would arise.

The learned AR than added that the case on merit also stands covered through his above arguments and prayed for a clear relief on the issue.

The learned DR said that assessee's act of approaching a wrong forum in itself deprives him from the right of appeal before CIT(A). He should have filed appeal in time. Furthermore, once he was told that his case cannot be, decided by the honourable High Court as alternative remedy was available he should not have further wasted his time by going to the Supreme Court. He said the assessee has 'supplied the machinery to leasing companies on which tax was' deducted by the leasing company which is full and final settlement of the accounts. He now therefore, cannot say that his appeal is within time after wastage of almost 6 years in between.

We have discussed in detail the arguments of the two parties. As far as the delay in filing appeal is concerned the honourable High Court has taken a very liberal view on the subject. The old concept of justifying the condonation on daily basis is no more being appreciated. The Courts have considered the word `sufficient cause' to mean and include any reasonable disturbance to the petitioner, which has prevented him from filing an appeal in time. No one gains by losing right of appeal specially when he is adversely affected by some order. In the case of A fiscal matters the presumption of law is that whosoever is aggrieved from an order would never waste time in going to the higher forums for seeking remedy. In this regard the principle laid down in the case of Mst. Katiji and others and subsequently followed and further elaborated by various Judges in Pakistan requires mentioning once again. The principles laid therein are as follows:‑‑

(1)Ordinarily, a litigant does not stand to benefit by lodging an appeal late.

(2)Refusing to condone delay can result in a meritorious, matter being thrown out at the very threshold and cause of justice being defeated. As against this, when delay is condoned, the highest that can happen is that a cause would be decided on merits after hearing the parties.

(3)"Every day's delay must be explained" does not mean that a pedantic approach should be made. Why not every hour's delay, every second's delay? The doctrine must be applied in a rational, common sense and pragmatic manner.

(4)When substantial justice and technical considerations are pitted against each other, the cause of substantial justice deserves to be preferred for the other side cannot claim to have vested right in injustice being done because of a non‑deliberate delay.

(5)There is no presumption that delay is occasioned deliberately or on account of culpable negligence, or on account of mala fides. A litigant does not stand to benefit by resorting to delay. In fact, he runs a serious risk.

(6)It must be grasped that the judiciary is respected not on account of its power to legalize injustice on technical grounds but because it is capable of removing injustice and is expected to do so.

Now keeping above principles in view the assessee did invoke the jurisdiction of Honourable High Court which cannot be called as a wrong forum as commented by the learned A.R. The writ jurisdiction of High Court is sought because decision therein is immediate and prompt. However, the superior Courts ordinarily do not entertain the issues against which adequate remedy of appeal is available. This is what has happened in this case. The Hon'ble High Court as well as the Supreme Court both have not decided the main issue. However, during the period of pendency before the High Court as well as the Supreme Court the assessee appeal remained pending. The matter during the entire period remained sub judice and obviously filing an appeal would have practically meant withdrawal of the petition before the High Court or the Supreme Court as the case was. Even otherwise the Supreme Court has through an obiter dicta said that the matter of limitation shall be considered in the light of the available case‑law. The obiter dicta of the Supreme Court is equally binding upon the Courts and Tribunals in the country as the ratio decidendis. Furthermore, the issue of sale and lease back has been considered as neither a supply nor a sale by this Tribunal through a number of a cases, which include 2002 PTD 2210.

The amendment referred by learned AR also supports the contention that action of the Assessing Officer is rather arbitrary, than illegal. There is therefore, ample justification for us to hold that the appeal in this case was not barred by time and the fact that the issue regarding sale and lease back having been settled by the ITAT the order of the ITO was illegal on the face of it.

The circumstances of the case and the nature of issue not being controverted by the either side on facts we have no hesitation in holding that the orders of the subordinate officers are not maintainable and both are hereby vacated. The return filed by the assessee for the impugned year under normal law shall be assessed under section 62 or 63 as the case may be and not under section 80‑C. The deduction of tax in this case shall be adjusted against the normal tax if any for the impugned year or for the subsequent years as the case may be.

This results in acceptance of assessee appeal in the manner and to the extent as mentioned above.

C.M.A./866/Tax (Trib.)Appeal accepted.