I.T.A. No.2948/LB of 2002, decided on 28th January, 2005. VS I.T.A. No.2948/LB of 2002, decided on 28th January, 2005.
2005 P T D (Trib.) 1061
[Income-tax Appellate Tribunal Pakistan]
Before Rasheed Ahmed Sheikh, Judicial Member and Javed Tahir Butt, Accountant Member
I.T.A. No.2948/LB of 2002, decided on /01/.
28th January, 2005. (a) Workers Welfare Fund Ordinance (XXXVI of 1971)---
----S. 4(2)---Income Tax Ordinance (XXXI of 1979), S.156---Illegal levy of Workers Welfare Fund---Appeal was not filed against such levy---Refusal to rectify---Validity---Held, it would certainly amount to mockery of justice to call illegal levy to be valid merely on the pretext that the assessee could not file appeal when Workers Welfare Fund was charged in the IT-30 Form at the time of finalization of assessment---Non filing of appeal against an unlawful levy could not create any hurdle in the assessee s way to seek legal remedies as were provided under the law.
(b) Income Tax Ordinance (XXXI of 1979)---
----S. 156---Rectification of mistake--- Doctrine of rectification applies in caseswherethemistakeissomanifest,soclearandsoevidentthat it would not require chain of arguments to establish the mistake .Â
(c) Income Tax Ordinance (XXXI of 1979)---
----S. 156---Rectification of mistake--- Mistake does not mean a mistake in figures or calculation; it also circumscribes a mistake or an error of law which must be self-evident and floating on surface of the record---Such mistake must have a material bearing on the fate of the case.
(d) Income Tax Ordinance (XXXI of 1979)---
----S. 156---Rectification of mistake---Scope---Illegal levy---Rectification of---Any levy which is ab initio illegal and void is a mistake which is floating on the surface of record to which the provisions of S.156 of the Income Tax Ordinance, 1979 are applicable---Scope of rectification is not so limited that an unlawful charge could not be rectified in terms of S.156 of the Income Tax Ordinance, 1979.
(e) Income Tax Ordinance (XXXI of 1979)---
----S. 156---Rectification of mistake---Where a mistake of law or fact is appearing on the face of the record, the provisions of S.156 of the Income Tax Ordinance, 1979 are duly attracted.
(f) Income Tax Ordinance (XXXI of 1979)---
----S. 156---Workers Welfare Fund Ordinance (XXXVI of 1971),S.4(2)---Rectification of mistake---Illegal levy of Workers Welfare Fund is a mistake apparent from record which is definitely rectifiable under S.156 of the Income Tax Ordinance, 1979.
(g) Income Tax Ordinance (XXXI of 1979)---
----S. 156---Workers Welfare Fund Ordinance (XXXVI of 1971), S.4(2)---Rectification of mistake---An illegal or unlawful act cannot be clothed with legality under thegarb of provisions of S.156 of the Income Tax Ordinance, 1979.
(h) Income Tax Ordinance (XXXI of 1979)---
----Ss. 156, 62 & Second Sched., Cl. (118-E)---Workers Welfare Fund Ordinance (XXXVI of 1971), S.4(2)---Rectification of mistake---Income was not chargeable to tax under Cl. (118-E) of the Second Schedule to the Income Tax Ordinance, 1979---Workers Welfare Fund was not charged at the time of order passed under S.62 of the Income Tax Ordinance, 1979 but that was charged in the IT-30 Form---Appeal against such levy was not filed by the assessee---Rejection of rectification application was maintained by the First Appellate Authority on the ground that since assessee had not called in question levy of Workers Welfare Fund in appeal while the order under S.62 of the Income Tax Ordinance, 1979 was passed, no mistake whatsoever was apparent from record which could be rectified and rectification application was not liable to be entertained---Validity---Provisions of S.156 of the Income Tax Ordinance, 1979 were duly attracted where illegal charge of Workers Welfare Fund had been created under S.4(2) of the Workers Welfare Fund Ordinance, 1971 on an industrial establishment whose income was exempt from levy of income tax or its income was not to be computed by operation of law or its income had been assessed at a loss---Neither the First Appellate Authority was legally justified in maintaining nor the Assessing Officer had acted within the law to levy illegal charge of Workers Welfare Fund and this being a mistake apparent from record was liable to be rectified under S.156 of the Income Tax Ordinance, 1979---Since, Workers Welfare Fund had not been charged lawfully being the assessee s income same was not chargeable to tax---Appellate Tribunal deleted the said charge.
(1996) 13 Tax 203; 1971 PTD 204;1993 PTD 964; PLD 1997 SC 582 = 1997 PTD 1555; Civil Petitions Nos. 38, 156 to 180 and others of 2000, dated28-3-2000; 2000 PTD 2182; 1998 PTD 2776; 2002 PTD 14 and 1989 PTD (Trib.) 1004 rel.
(i) Workers Welfare Fund Ordinance (XXXVI of 1971)---
----S. 4(2)---Income Tax Ordinance (XXXI of 1979)---Charge of Workers Welfare Fund in the IT-30 Form---Validity---No Workers Welfare Fund could be charged in the IT-30 Form, reasonbeingthatIT-30 Form was merely a sheet of computation of tax and nothing else which could not take place of an order---IT-30 Form follows the order but it could not be other way round---Proper course available with the Assessing Officer was to pass a separate order under S.4(2) of the Workers Welfare Fund Ordinance, 1971.
(j) Income tax---
----Appeal---Limitation---Order without lawful jurisdiction---No limitation for filing appeal runs against an order, which has been passed without lawful jurisdiction. Â
(k) Workers Welfare Fund Ordinance (XXXVI of 1971)---
----S.4(2)---Income Tax Ordinance (XXXI of 1979), Ss. 129 & 156---Charge of Workers Welfare Fund in the IT-30 Form---Appeal---Limitation---Since no order under S.4(2) of the Workers Welfare Fund Ordinance, 1971 had been passed, creation of Workers Welfare Fund in the IT-30 Form was without lawful authority and no limitation for filing the appeal would run in this situation---Appeal filed against certificatory order was treated to have been filed against the illegal charge of Workers Welfare Fund in the IT-30 Form---Even on this score levy of Workers Welfare Fund was liable to be deleted.
Sajid Ijaz Hussain for Appellant.
Dr. Shahid Siddique Bhatti, D.R. for Respondent.
Date of hearing: 5th January, 2005.
ORDER
The assessee s sole objection in this case pertains to levy of Workers Welfare Fund (hereinafter referred to WWF). The facts which emerged to institute this appeal are that the appellant s income was not chargeable to tax under clause 118-E part-1 of the Second Schedule to the Income Tax Ordinance No WWF was charged at the time of the order passed under section 62 of the Ordinance. Nevertheless that was charged by the Assessing Officer in the IT-30 Form which amounted to Rs.81,451. No appeal against such levy was filed by the assessee. Subsequently, vide an application, in terms of section 156 of the Ordinance, a request was made praying that the impugned charge may be deleted being illegal. This request could not find favour from the Assessing Officer s side. When the rectificatory order passed under section 156, dated 28-8-1999 was challenged before the CIT(A) Zone-I Lahore, she by virtue of her order, dated 7-4-2002 maintained the Assessing Officer s action observing the charge of WWF to be justified. While doing so it wasconcludedthatsincetheassessee-appellanthasnot called in question levy of WWF in appeal while the order under section 62 was passed, thus no mistake whatsoever is apparent from record which could be rectified. It was, therefore, held that the rectification application was not liable to be entertained. A detailed discussion in this regard was made in the impugned appellate order. Reference was also made to three cases; one decided by the apex Court of Pakistan in re: (1996) 13 Tax 203, the other by Dacca High Court 1971 PTD 204 and the third one by the Tribunal bearing citation 1993 PTD 964; whereby scope of rectification of order has been explained at a great length. This has compelled the assessee-appellant to come up in further appeal before the Tribunal.
2.A question arises as to whether in the circumstances narrated supra application for rectification in terms of section 156 of the Ordinance is liable to be entertained or not? We have given anxious thought to the divergent views expressed by the rival parties in appeal. Admittedly the appellant s company s income is exempt fromcharge of income tax under clause 118-E of Part-1 of the Second Schedule to the Income Tax Ordinance. Till to date the issue relating to chargeability of WWF under section 4(2) of the Workers Welfare Fund Ordinance, 1971 on an industrial establishment whose total income which is not subjected to tax or its income is not open to determination by operation of law or where in the cases losses have been assessed, has been set at naught by the higher Appellate Authorities. It was categorically held in those judgments that levy of WWF is not sustainable in law in all the three eventualities mentioned ante. One may refer to thecases reported as PLD 1997 SC 582 = 1997 PTD 1555 unreported judgment of Supreme Court of Pakistan in Civil Petitions Nos. 38, 156 to 180 and others of 2000, dated 28-3-2000, 2000 PTD 2182, 1998 PTD 2776, 2002 PTD 14 (Kar. H.C.) and 1989 PTD (Trib.) 1004 which are only for the purposes of consumption.
3.However, the facts narrated supra gives rise to another question as to whether levy of WWF can be held to be legally justified wherein a case the assessee could not call in question such charge in appeal when the assessment was formulated and whether WWF can be deleted subsequently within the purview of section 156 of the Ordinance. We are stunned to have taken regard to the findings recorded by the Appeal Commissioner on this question as how come an illegal levy can be held to be valid/justified. It would certainly amount to mockery of justice to hold illegal levy to be valid merely on the pretext that the assessee could not file appeal when WWF wascharged in the IT-30 Form at the time of finalization of assessment. By no stretch of imagination, non-filing of appeal against an unlawful levy can create any hurdle in the assessee s way not to seek legal remedies as are provided under the law.
4.Before dilating upon further on this issue, it would be necessary to touch true concept of Doctrine ofRectification . This Doctrine obviously applies in the cases where the mistake is so manifest, so clear and so evident which does not require chain of arguments to establish the mistake . It is also imperative to mention here that mistake does not mean a mistake in figures or calculation. It also circumscribes a mistake or an error of law which must be self evident and floating on surface of the record. Such mistake must have a material bearing on the fate of the case. When viewed in this context we have come to an unescapable conclusion that this important legal aspect escaped notice of the Appeal Commissioner while rendering judgment in this regard.
5.In the context of the case in hand. We are convinced that any levy which is ab initio illegal void is a mistake which is floating on the surface of record to which the provisions of section 156 of theOrdinance are convincingly applicable. The scope of rectification is not so limited whereby an unlawful charge cannot be rectified in terms of section 156 of the Ordinance. In no way rectifying such mistake would mean that the Judge is sitting on his own judgment. This fact cannot be brushed aside that creating an illegal or unlawful charge, whether intentionally or mistakenly, will remain illegal or unlawful whether or not the assessee could challenge such levy in appeal when the assessment was finalized under section 62. Asregard the case-law relied upon to reject the application for rectification, we find that the Appeal Commissioner waspredetermined not to entertain this application. It is so because all those cases in fact support the assessee s point of view and not the departmental. The myth and substance of those case-law is thatwhere a mistake of law or fact is appearing on the face of the record, the provision of section 156 are duly attracted in suchcircumstances. Since levy of WWF illegally is a mistake apparent from record which is definitely a rectifiable under section 156 of the Ordinance. We are of the firm belief to hold that an illegal or unlawful charge cannot be clothed with legality under the garb of provisions of section 156 of the Ordinance. It is therefore concluded that the provisions of section 156 of the Income Tax Ordinance, 1979 are duly attracted where illegal charge of WWF has been created under section 4(2) of the WWF Ordinance, 1971 on an industrial establishment whose income is exempt from levy of income tax or its income is not to be computed by operation of law or its income has been assessed at a loss. Hence, the rectificationapplication is liable to be entrained.
6.We have also examined this issue from another angle. To our mind no WWF can be charged in the IT-30 Form. Reason being IT-30 Form is merely a sheet of computation of tax and nothing else which cannot take place of that of an order. Moreover, IT-30 Form follows the order but it cannot be other way round. In fact appropriate course available with the Assessing Officer was to pass a separate order under section 4(2) of the Workers Welfare Fund Ordinance, 1971 instead of creating a charge in the IT-30 Form. It is almost a settled dictum of law that no limitation for filing appeal runs against an order which has been passed without lawful jurisdiction. Since no order under section 4(2) of the WWF Ordinance, 1971 has been passed, therefore, creation of WWF in the IT-30 Form was certainly without lawful authority and no limitation for filing the appeal would run in this situation. In this view of the matter, the appeal filed against rectificatory order is hereby treated to have been filed against the illegal charge of WWF in the IT-30 Form. Even on this score levy of WWF in the instant case is liable to be deleted.
7.In the given scenario we are inclined to observe that neither the First Appellate Authority was legally justified in maintaining nor the Assessing Officer has acted within the law to levy illegal charge of WWF and this being a mistake apparent from record is liable to be rectified under section 156 of the Ordinance. Since, WWF has not been charged lawfully being the assessee s income was not chargeable to tax, therefore, we are persuaded to delete the said charge in respect of assessment year 1995-96. 8.Consequently, the assessee s appeal succeeds.
C.M.A./371/Tax (Trib.)Appeal accepted.