Messrs SADIQ BROTHERS VS APPELLATE ADDITIONAL COMMISSIONER, INCOME-TAX/WEALTH TAX, RAWALPINDI, 2004 PTD-LAHORE-HIGH-COURT-LAHORE 122 (2003)

(a) Appeal----

---- Right of appeal was a substantive right which had to be conferred in express terms by an express enactment.

Hassan Bakhsh v.Settlement Commissioner, Rawalpindi and others PLD 1970 SC 1 and Muzaffar Ali v. Muhammad Shafi PLD 1981 SC 94 ref.

(b) Appeal----

----Right of appeal does not exist merely on the theory that an appeal is regarded as continuation of trial but has to be created and granted by a Statute.

(c) Constitution of Pakistan (1973)-----

----Art.227---Scope and application of Art.227 of the Constitution.

Article 227 of the Constitution enjoins upon the State to bring all existing, laws in conformity with the Injunctions of Islam as laid down in the Holy Qur'an and Sunnah and no law is to be enacted which is repugnant to the Injunctions of Islam. The effect to the provision of Article 227 is to be, given only in the manner provided in Part-IX of the Constitution. However, question arises as to what would be the mode of interpretation till such time that exercise envisaged in Part-IX of the Constitution is undertaken and completed. The point came up for consideration in the case of Commissioner of Income-tax, Peshawar v. Messrs Siemen A.G. PLD 1991 SC 368.

So long as the existing statutes are not brought in conformity with the Injunction of Islam (Article 227 of the Constitution), in their interpretation, application and enforcement wherein discretionary judicial elements are involved, only that course would be adopted which is in accord with the Islamic Philosophy, its common law and' jurisprudence.

Commissioner of Income-tax, Peshawar v. Messrs Siemen A.G. PLD 1991 SC 368 fol.

(d) Islamic Jurisprudence-----

---- Appeal---Barring a right of appeal offends against Injunctions of Islam.

PLD 1989 SC 6 and PLD 1988 SC 2002 ref.

(e) Income Tax Ordinance (XXXI of 1979)-----

----S.129(1)---Appeal---Right of appeal conferred by S.129(1), Income Tax Ordinance, 1979 is substantive right and further it is in consonance with Islamic Injunctions and its absence in the Statute or its taking away by any legislative exercise would be repugnant to the Injunctions of Islam.

Hafiz Abdul Waheed v. Miss Asma Jehangir and another PLD 1997 Lah. 301 ref.

(f) Income Tax Ordinance (XXXI of 1979)-----

----S.129(1)---Mere filing of appeal provided under S.129(1), Income Tax Ordinance, 1979 does not operate as stay of recovery of tax.

(g) Income Tax Ordinance (XXXI of 1979)---

----S.129(2) [as added by Finance Ordinance, (XXI of 2000), S.5(21)]-- Constitution of Pakistan (1973), Art. 199---Constitutional petition-- Provision of S.129(2), Income Tax Ordinance, 1979 prescribing precondition for appeal which, by all means, constitutes an abridgement of right of appeal and its exercise by the person in whom it is vested, cannot at all be said to be reasonable---Contention that right of appeal has been restricted in order to ensure smooth recovery, in presence of relevant recovery provisions in the Ordinance, itself, cannot at all be termed as a rationale for the same---Provision of S.5(21), Finance Ordinance, 2000 by which subsection (2) of S.129 of the Income Tax Ordinance, 1979 was amended was declared to be unconstitutional and as such without lawful authority by the High Court.

Elahi Cotton Mills Ltd. and others v. Federation of Pakistan PLD 1997 SC 582 distinguished.

Chanab Cement Products (Pvt.) Ltd. and others. v. The Banking Tribunal, Lahore and others PLD 1996 Lah. 672. Aashi Packages (Pvt.) Ltd. v. Federation of Pakistan 2002 PTD 2797; Chamman Milk Shake Ice Cream v. CIT, Lahore and others W.P. 5838 of 2002; Hassan Bakhsh v. Settlement Commissioner, Rawalpindi and others PLD 1970 SC 1; Muzaffar Ali v. Muhammad Shafi PLD 1981 SC 94; Pakistan through Secretary, Ministry of Defence v. The General Public PLD 1989 SC 6 Commissioner of Income Tax, Peshawar v. Messrs Siemen A.G. PLD 1991 SC 368; PLD 1989 SC 6; PLP 1988 SC 2002; Hafiz Abdul Waheed v. Miss Asma Jehangir and another PLD 1997 Lah. 301 and Messrs Eastern Rice Syndicate v. C.B.R. PLD 1959 SC (Pak.) 364 ref.

Hafiz Muhammad Idrees for Petitioner.

Ch. Sultan Mansoor D.A.-G., Malik Muhammad Nawaz and Ms. Shaheena Akbar for Respondents.

Date of hearing: 24^th October, 2003.

JUDGMENT

MAULVI ANWARUL HAQ, J.---This judgment shall decide Writ Petition No.1722 of 2002, Writ Petitions Nos. 1882, 2386, 2908 of 2002, 54 of 2003, 2585 to 2588 of 2003 and 2446 of 2002 as common questions are involved.

2. All, these writ petitions seek to challenge the vires of section 129(2) of section 129 of the Income Tax Ordinance, 1979 enacted vide Finance Ordinance, 2000. An appeal has been provided under section 129 of the Income Tax Ordinance against various orders mentioned therein to the Appellate Authority. The grievance being made out by the petitioners in all these cases is with regard to subsection (2) added to the said section 129 in the following terms:--

(2)No appeal under subsection (1) shall lie against any order of assessment unless tax payable under section 54 and not less than 15 % of the amount of tax assessed has been paid.

The grievance is with regard to said pre-condition to be read in the words "and not less than fifteen per cent of the amount of tax assessed has been paid". These words have been added in the said subsection (2) vide section 21 of the Finance Ordinance (XXI of 2000).

3. Hafiz M. Idrees, Mir Ahmad Ali, Mr. Khalil-ur-Rehman Abbasi, Mr. M. Jamshed, Mr. M. Ilyas Mian and Mr. Muhammad Ansar Awan, Advocates addressed us on behalf of the petitioners. Learned counsel contend that the said provision introduced in section 129(2) of the Income Tax Ordinance, 1979 is illegal and void and violative of the Constitutional provisions inasmuch as the same tend to negate the right of appeal vesting in the petitioners under the said law. They rely on the Full Bench judgment of this Court in the case of Chanab Cement Products (Pvt.) Ltd. and others. v. The Banking Tribunal Lahore and Others (PLD 1996 Lah. 672). Learned Deputy Attorney-General relies upon a judgment of learned Single Judge of this Court in Chamber in the case of Aashi Packages (Pvt.) Ltd. v. Federation of Pakistan (2002 PTD 2797) to urge that the said condition so enacted by the Federal legislature cannot be said to be ultra vires of the Constitution as it is reasonable restriction and does not render the right of appeal as illusory. Malik Muhammad. Nawaz and Ms. Shaheena. Akbar, learned counsel for respondent Department contend that since the right of appeal has been recognized with reference to Islamic provisions, this Court would not be having jurisdiction to examine the said law on the touch stone of Islamic Injunction and appropriate forum would be learned Federal Shariat Court. They also rely upon a judgment of this Court in the case of Chamman Milk Shake Ice Cream v. C.T.T., Lahore and others (W.P. 5838 of 2002) to further support the said contention of the learned D. A.-G.

4. We have duly considered the respective contentions of' the learned counsel for the parties and learned D.A.-G. who has addressed us in response to a notice issued to learned Attorney General for Pakistan. The right of appeal has always been considered by the superior judiciary as a substantive right which has to be conferred in express A terms by an express enactment. Reference be made to the case of. Hassan Bakhsh v. Settlement Commissioner Rawalpindi and others (PLD 1970 SC 1) later confirmed in the case of Muzaffar Ali v. Muhammad Shafi (PLD 1981 SC 94) wherein their lordships further observed that the jurisdiction or right of appeal does not exist merely on the theory that, an appeal, is regarded as continuation of trial but has to be created and granted by a Statute. In the present cases the right of appeal has been conferred by way of an express enactment in form of section 129 of the Income Tax Ordinance 1979. What we are required to determine in these cases is as to whether the said right so conferred can be abridged by making of a provision in the nature enacted by Finance Ordinance, 2000, requiring the aggrieved person to make a deposit of 15% of the tax liability assessed by the Assessing Authority.

5. Before we proceed further we deem it proper to deal with the said objection of the learned counsel for the respondent that this Court would not be having any jurisdiction to entertain these writ petitions as right of appeal is incident of Islamic Jurisprudence as held by Shariat Appellate Bench of the Hon'ble Supreme Court in the case of Pakistan through Secretary Ministry of Defence v. The General Public (PLD 1989 PC 6) To our mind the objection is wholly unfounded. Article 227 of the Constitution enjoins upon the State to bring all existing laws in conformity with the Injunctions of Islam as laid in the Holy Qur'an and Sunnah and no law is to be enacted which is repugnant to the Injunction of Islam. Now it is true that the effect to the provisions of Article 227 is to be given only in the manner provided in Part-IX of the Constitution. However, question arises as to what-would be the mode of interpretation till such time that exercise envisaged in Part-IX of the Constitution is undertaken and completed. The point came up for consideration in the case of Commissioner of Income Tax, Peshawar v. Messrs Siemen A.G. (PLD 1991 SC 368). Chief Justice Muhammad Afzal Zullah (as his lordship then was), thus observed at pages 272 and 373 of the report;--

"In this regard there is yet another important aspect which needs serious consideration. All the questions being examined in this case are relatable to interpretation of a Statute rather than admitted and direct statutory command. It was held in the case of Haji Nizam Khan by the Lahore High Court PLD 1976 Lah. 930; and subsequently affirmed in several legal fields, including criminal and fiscal, that so long as the existing statutes are not brought in conformity with, Injunction of Islam (Article 227 of the Constitution), their interpretation application and enforcement wherein discretionary judicial elements are involved, only that course would be adopted which is in accordance with the Islamic philosophy, its common law and jurisprudence. (see also the case of Muhammad Bashir PLD 1982 SC 139 and the case of Mian Aziz A. Shaikh PLD 1989 SC 613."

6. Now another aspect of the matter is that by virtue of Article 203-GG any decision of the Federal Shariat Court subject to Article 203-D and 203-E (reference is to exercise of appellate jurisdiction by the Shariat Appellate Bench of the Hon'ble Supreme Court) in exercise of its jurisdiction under Chapter 3-A of the Constitution shall be binding on a High Court and all Courts subordinate to a High Court. Now the Hon'ble Supreme Court in the said case reported as PLD 1989 SC 6 further confirmed the judgment reported as PLD 1988 SC 2002 while laying down that barring a right of appeal offends against Injunction of Islam. The said judgments so deciding the said question of Islamic law would, therefore, be binding upon this Court as held by the majority in the Full Bench judgment of this Court in case of Hafiz Abdul Waheed v. Miss Asma Jehangir and another (PLD 1997 Lahore 301).

7. We therefore, do hold that right of appeal thus conferred by said section 129(1) is substantive right and further is in consonance with Islamic Injunctions and its absence in the Statute or its taking away by any legislative exercise would be repugnant to the Injunctions of Islam as held by learned Federal Shariat Court and confirmed by the Shariat Appellate Bench of the Hon'ble Supreme Court.

8. Now coming to the precise question involved in these cases. We find that our learned brother in the said cases of "Aashi Packages (Pvt.) Ltd" and "Chamman Milk Shake Ice Cream" being relied upon by the learned D.A.-G. and learned counsel for the respondent, proceeded to observe that prior condition of deposit of 15 % of the amount of tax assessed is neither unreasonable nor confiscatory. It has further been observed that filing of frivolous appeals have been checked and consequently smooth recovery of tax already assessed has been ensured, as according to his lordship after assessment has been formed-liability of assessee becomes crystallized and generally it is the quantum which is contested and debated at the appellate forum. In response to contention that condition is likely to be misused by the Assessing Officer, his lordship observed that this Court in Constitutional jurisdiction can sufficiently deal with the said matter. Reference was then made to the case of Messrs Elahi Cotton Mills Ltd. and others v. Federation of Pakistan (PLD 1997 SC 582) to state that Apex Court has desired that laws relating to the economic activities should be viewed with greater latitude than the laws relating to civil right such as freedom of speech, religion etc, keeping in view of complexity of economic problems which do not admit a solution through any doctrinaive or strait jacket formula.

9. Some of these cases are of peculiar significance inasmuch as pursuant to the interim orders passed by the learned Single Judge, inter alia, in these cases the appeals were heard and decided. We may, therefore, note the facts of the Writ Petition No. 1722 of 2002. The petitioner in this case filed a return for assessment year 2001-2002 declaring net loss of Rs.1,72,92,320. The Assessing Officer proceeded to assess a net income of Rs.37,74,50,162 liable to payment of Income Tax amounting to Rs.14,97,11,913. After adjustment of payment made in various provisions of Income Tax Ordinance, 1979, net tax payable was Rs.13,79,29,601, the 15% required to be deposited under the said enactment came to Rs.2,06,89,440. Now it is admitted on all hands that the Appellate Authority after hearing of appeal proceeded to assess the income at Rs. 5,57,56,967. Tax payable comes to Rs.2,00,91,357. Thus the said petitioner was literally required to pay an amount much in excess than the liability assessed by Appellate Authority. A further appeal before the Appellate Tribunal is pending. Now in some what similar circumstances Mr. Justice A.R. Cornelius while delivering the leading opinion of the Hon'ble Supreme Court in the case of Messrs Eastern Rice Syndicate v. C.B.R. PLD 1959 SC 364. Thus observed at page 373 of the report:--

"Operated in the way in which these provisions have been operated in the present cases, they-are mere instruments and agencies of oppression, and it is with great regret that we observe that the Appellate Authority being cognizant of the very heavy penalties imposed should have regarded it as a sufficient discharge of its duty to dispose of the appeals on the bare ground of non-deposit of the full amount of the penalties:"

10. Now coming to the said Full Bench judgment of this Court in the case of "Chanab Cement Products (Pvt.) Ltd:" (PLD 1996 Lah. 672) the provisions of law under consideration was section 9 of the Banking Tribunal Act, 1984, first proviso whereof made the appeal subject to condition of deposit of the decretal amount. Learned Full Bench declared the, said first proviso to be unconstitutional and 'same was accordingly quashed.

11. Now the only question that remains to be seen is as to whether the said restriction is unreasonable or not. Learned Deputy-Attorney General and learned counsel for the respondent were asked as to what is rational behind the said enactment, particularly extent of deposit. The prompt reply is that over a period of time it has been observed that Appellate, Authority generally granted relief and as such the said enactment has been made so that only genuinely aggrieved person filed bona fide appeals and filing of frivolous appeals be restricted leading to the said result as observed by the Department. Second reason stated is that provision leads to smooth recovery of tax.

12. We are nor at all agreeable to the said reasoning of the learned counsel and learned- Law Officer. Now it is admitted position that mere filing of appeal provided under section 129(1) of the said Ordinance 1979, does not operate as stay of recovery of tax. We also find that vide section 22 of the said Finance Ordinance, 2000, subsection (7) was added to section 132 of the Income Tax Ordinance, 1979. This provision is as follows:---

"(7) Where an appeal has been preferred under section 129, the Appellate Additional Commissioner may, by an order in writing, stay the recovery upto eighty-five per cent of the amount of tax, up to a period of three months or till the decision of appeal, whichever may be earlier."

Now it will be seen that powers conferred on the Appellate Authority for staying the recovery stands restricted upto 85% of the amount of tax Further subject to time schedule' provided in said section 132(7). This will means that under no circumstances a stay of recovery of assessed tax can be granted upto 15% of the same. At the same time the Appellate Authority can by an order in writing stay the recovery upto 85% of the amount of tax and stay is to remain in force for time specified in the said subsection' (7) so added to section 132 of the Income Tax Ordinance, 1979. Now powers and procedure for recovery of the amount of tax are duly laid down in the said Ordinance, 1979 which powers are there to be exercised for recovery of tax upto 15 % in any case and regarding the remaining 85 % are subject to the stay order to be passed by an Appellate Authority. This being so, the said enactment prescribing the said pre condition which by all means constitutes an abridgment of right of appeal and its exercise by the person in whom it is vested, cannot at all be said to be reasonable. To say that right of appeal has been restricted in order to assure smooth recovery, in presence of said relevant recovery provision in the said itself, cannot at all be termed, as an rationale for the same.

13. In the said case of "Messrs Elahi Cotton Mills Ltd.", the presumptive tax imposed by the legislature in the form of section 80-C and 80-D and further amendment in the said provisions as also enactment of section 80-GG were questioned. In the present cases the imposition or levy of the tax, or power of legislature to impose or levy any tax has not been questioned. What is being questioned is the infringement of right vesting in the petitioner to challenge the correctness of decision of assessing authority by filing appeal before the competent Appellate Authority these cases thus involve a question absolutely different from the one involved in the said case of "Elhai Cotton Mills" and are, therefore, quite distinguishable.

14. For all that has been discussed above, all the writ petitions are allowed and said enactment made by section 5(21) of the Finance Ordinance (LII of 2002) is hereby declared to be unconstitutional as such without lawful authority. No order as to costs.

H.B.T./S-778/LPetitions allowed.