2005 P T D 862

[Lahore High Court]

Before Ali Nawaz Chowhan, J

DATA ELECTRONICS (PVT.) LTD., LAHORE

versus

FEDERATION OF PAKISTAN through Secretary Finance, Finance Division, Islamabad and 3 others

W.P. No. 4749 of 2003, decided on 19/01/2005.

(a) Income Tax Ordinance (XLIX of 2001)‑‑‑

‑‑‑‑S.129‑‑‑Decision in appeal‑‑‑Scope‑‑‑Where no notice under the provisions of S.129(7), Income Tax Ordinance, 200.1 is given, the benefits as prescribed ' by S.129(5) of the said Ordinance cannot be availed.

Section 129 (5) of the Income Tax Ordinance, 2001 enjoins upon the Commissioner of Appeals to take a decision in appeal before the expiration of 3 months from the end of the month in which the appeal was lodged and if he fails to act as law requires him and there is no delay through adjournment or otherwise caused by the appellant in this connection, the relief sought by the appellant was to be construed as having been granted to him under the Ordinance.

However, section 129 (7) of the Ordinance was stipulated to put the Commissioner on notice for purposes of fulfilment of his obligations under the provisions of section 129(5) and in case a notice is served to him informing him that the order which was required to be made within the periphery of time so prescribed has not been made, he should take action within the next 30 days of this notice for passing such an order in appeal.

Where no notice under the provisions of section 129(7) of the Ordinance is given, the benefits as prescribed by section 129(5) cannot be availed.

Messrs Aasmi Packages (Pvt.) Ltd. v. Commissioner of Income Tax (Appeals) Zone‑A, Lahore, and three others 2000 PTD 39 and Ch. Irshad Ahmad Virk v. Commissioner Appeals Income Tax and others 1996 PTD 279 ref.

(b) Income Tax Ordinance (XLIX of 2001)‑‑‑

‑‑‑‑S.129(5)(6) & (7)‑‑‑Constitution of Pakistan (1973), Art.199‑‑‑ Decision in appeal‑‑‑Provisions of 5.129(5)(6) & 7, Income Tax Ordinance, 2001, were mandatory‑‑‑Notice‑‑‑Format‑‑‑Benefit as prescribed under 5.129(5), Income Tax Ordinance, 2001 when a vested right of the assessee‑‑‑Letter addressed by the authorised representative of the assessee to the Commissioner making, request for an early hearing of appeal did mention the provisions of 5.132(6), Income Tax Ordinance, 1979 (S'.129(5) of the Income Tax Ordinance, 2001) which was sufficient enough to convey a warning to the Commissioner to act within the next 30 days as envisaged in law or suffer the consequences‑‑ Service which is a sine qua non, for the benefit to be given under the provisions of S.129(5), Income Tax Ordinance, 2001 was served in circumstances‑‑‑Contention of the department was that said letter ought to have been diarized according to the procedure laid down for filing the appeals, otherwise such letter was no notice in law and that the, letter having been given directly to the Commissioner, he might not have studied the same and understood its implications particularly, when the caption of the letter did not sufficiently carry‑the word "notice"‑‑ Validity ‑‑‑What ought to have been the format of the notice was not answered by the Income Tax Ordinance, 2001‑‑‑Law expects a notice as such to be couched in a reasonable language easily understandable conveying a warning if not acted upon‑‑‑Keeping such test and the fact that the Income Tax Ordinance, 2001 was destitute of prescribing any model of such a form and going through the letter itself it could be concluded that it sufficiently conveyed the intention of the assessee against the relief he was to ask upon failure of the Commissioner to act in accordance with law‑‑‑Where there was a failure to fulfil an explicit legal requirement and there was no default on the part of a tax‑payer, what the law proposed for him as a benefit as was the case of S.129(5) of the Ordinance, the same became a vested right‑‑‑Principles.

Letter addressed to the Commissioner shows that the provisions of the old Ordinance i.e. section 132(6) do find a mention in the last paragraph of the letter which was sufficient enough to convey a warning to the Commissioner to act within the next 30 days as envisaged in law or suffer the consequences.

So the service of notice which is a sine qua non for the benefit to be given under the provisions of section 129(5), Income Tax Ordinance, 2001, was served.

Department took the view that the notice ought to have been diarized according to the procedure as laid for filing the appeals, otherwise this is no notice in law and the letter having been given directly to the Commissioner, he may not have studied it and understood its implications particularly, when the caption of the notice did not sufficiently carry the word "notice".

What ought to have been the format of the notice is not answered by the Ordinance, whereas the Income Tax Ordinance, 2001 while referring to the appeals in section 127 lays down what were the requirements to be fulfilled before an appeal is lodged and mentions about a prescribed form to be used for filing the appeals, whereas no such form is prescribed by the provisions of section 129 of the Ordinance or 132 of the repealed Ordinance. Therefore, the law expects a notice as such to be couched in a reasonable language easily understandable conveying a warning if not acted upon. Keeping this test in view and the fact that the Ordinance was destitute of prescribing any model of such a form and g9ing through the notice itself, it sufficiently conveys the intention of the assessee about the relief he was to ask upon failure of the Commissioner to act in accordance with law.

Procedures, are even otherwise, not meant to defeat the ends of justice or to put traps for the litigants as if a game of chess was being played in which the consequences were related only to the moves made during the game and where the playing of the game was its own end nor can a cause be defeated merely because of any defect in the language and' as long as it is able to convey what is intended, to the authority concerned.

Inaptitude, laxity and careless working at the end of senior officers particularly working in the fiscal areas where the laws are to be stringently interpreted, cannot be pressed as an excuse for any lapse. Therefore, the contention of the department that unless the letter had been diarized it may have been then full attended to, has no impact.

The Commissioner in the present case immediately on the receipt of the letter should have opened the statute book to appreciate the implications showing a complete sensitivity which was required of him and if he has not done so, excuses are of no avail for defeating the benefits which the law has consciously given to the taxpayers.

In fact the rationale behind these provisions of law was based on a desire to activate the Tax Authorities so that they adjudicated the causes in appeal with convenient dispatch particularly when a taxpayer is required to pay the amount of tax due from him before he files an appeal and gives a due notice.

When there is a failure to fulfil an explicit legal requirement and there is no default on the part of a taxpayer, what the law proposes for him as a benefit, as is the case of section 129(5) of the Ordinance, it becomes a vested right.

The assessee did fulfil the requirements of section 132 of the old law and section 129 of the fresh law and no default on his part has been cogently pointed out and, therefore, a vested right accrues to him as is bestowed by the provisions of section 129(5) of the Ordinance and which is a right complete and consummate and of such a character that it cannot be divested without the consent of the person to whom it belongs and is no longer open to any controversy, therefore, the relief he sought in the appeal shall be deemed to have been given to him under the law without any further question.

In tax statutes those provisions, which are enacted for the benefit of a taxpayer are mandatory and those provisions enacted merely to secure the orderly transactions of business are directory.

Whenever the law requires a thing to be done for the protection of the taxpayer, it is usually mandatory.

A clause is directory where the provisions contain a mere direction and nothing more, bur in case they are followed by such words as "that anything done contrary to these provisions shall be of no effect" then they are no longer directory but mandatory. Where a mandatory provision is invoked, the Courts are left with no discretion in their administration except to enforce it.

When the given periphery of time is not followed, the department is then at a loss because his appeal in terms of the relief sought is to be accepted which obviously indicates that the failure in accomplishing what is envisaged by section 129 of the Ordinance results in penalizing the department through the statutory grant of relief sought. The provisions of section 129(5)(6) & (7) of the Income Tax Ordinance, 2001 are mandatory and not directory or regulatory.

Messrs Aasmi Packages.(Pvt.) Ltd. v. Commissioner of Income Tax (Appeals Zone‑A, Lahoie, and 3 others 2000 PTD 39; Ch. Irshad Ahmad Virk v. Commissioner .Appeals Income Tax and others 1996 PTD 279; 1993 PTD 332: 2000 PTD 2872 (AJK); PTD 1974 SC 134; 1995 SCMR 1249: 2000 SCMR 1305; 1992 ITR 548 (Ind. HC); 2003 CLD 1406; 2002 CLD 557: 2002 CLD 1431; 2002 CLD 1018; State ex rel. MilliganRitter's Estate, Ind. App.,4.6. N.E. 2d 736, 743; Corpus Juris Secundum Vol. 82 Pg. 875; U.S. Cohn' v. Little, D.C. Ark., 101 F. Supp. 683, affirmed, C.A. 199 F.‑ 2d 28; Cal. Skelly Estate Co. v. City and County of San Francisco, 69 P. 2d 171, 9'Ca1. 2d 28‑Rayan v. Byram, 51 P. 2d 872, 4 Cal. 2d 596; City of Scranton VO' Malley Mfg. Co. 19A. 2d 269, 341 Pa. 200 and Pears v. Morrice (1834) 2A, E. 84, 96 ref.

(c) Interpretation of Statutes‑‑‑

‑‑‑‑ Fiscal Statute ‑‑‑Mandatory/directory provisions‑‑‑Provisions which are enacted for the benefit of a taxpayer are mandatory and provisions enacted merely to secure the orderly transactions of business are directory.

Corpus Juris Secundum Vol. 82 Pg. 875; U.S. Cohn v. Little, D.C. Ark., 101 F. Supp. 683, affirmed, C.A. 1.99 F. 2d 28; Cal. Skelly Estate Co. v. City and County of San Francisco, 69 P. 2d 171, 9 Cal. 2d 28‑Rayan v. Byram, 51 P. 2d 872, 4 Cal. 2d 596; and City of Scranton VO' Malley Mfg. Co. 19A. 2d 269, 341 Pa. 200 ref.

Ch. Anwar‑ul‑Haq for Petitioner.

Shahid Jamil Khan for Respondents.

Date of hearing: 14th January, 2005

JUDGMENT

Through this writ petition, the petitioner is making the following prayer:

"In view of the circumstances narrated above, it is respectfully prayed that this Honourable Court may graciously declare that due to the failure on the part of the respondent No.3 to dispose of the appeals of the petitioner (filed on 30‑7‑2002 for the assessment years 1998‑99 and 1999‑2000) within three months ended on 31‑10‑2002 in terms of subsections (1), (5) and (6) of section 132 of the repealed Income Tax Ordinance, 1979, has given rise to a valuable right in favour of the petitioner that the relief sought through the appeals shall be deemed to have been given and all the provisions of the Ordinance shall effect

The matter, therefore, relates to an extraordinary relief provided by section 1.32 of the repealed Income Tax Ordinance, 1979, which has been now incorporated in section 129 of the Income Tax Ordinance, 2001.

2. The relevant provisions of section 132 of the repealed law read as follows:‑‑

"Decision in appeal: (1)--------------------------

(2) --------------------------

(3) --------------------------

(4)--------------------------

(5) Where no order under subsection (1) is made before the expiration of three months from the end of the month in which the appeal is presented, the relief sought through the said appeal shall be deemed to have been given and all the provisions of this Ordinance shall have effect accordingly:

Provided that, where the hearing of appeal is adjourned for any period on the request of the appellant, the said period shall be excluded while computing the aforesaid period of three months:

Provided further that nothing contained in this subsection shall apply to any appeal presented before the first day of January, 1992.

(6) The provisions of subsection (5) shall not apply unless a notice by the appellant stating that no order under subsection (1) has been made is,‑‑personally served by the appellant on the Appellate Additional Commissioner not less than thirty days before the expiration of the period of three months."

3. The relevant provisions of section 129 of the Income Tax Ordinance, 2001, read as follows:‑‑

Decision in appeal: (1) ------------------------

(2) ------------------------

(3) ------------------------

(4) ------------------------

(5) Where the Commissioner (Appeals) has not made an order on an appeal before the expiration of three months from the end of the month in which the appeal was lodged, the relief sought by the appellant in the appeal shall be treated as having been given and all the provisions of this Ordinance shall have effect accordingly.

(6) For the purposes of subsection (5), any period during which the hearing of an appeal is adjourned on the request of the appellant shall be excluded in the computation of the period of three months referred to in that subsection.

(7) The provisions of subsection (5) shall not apply unless a notice by the appellant stating that no order under subsection (1) has been made is personally served by the appellant on the Commissioner (Appeals) not less than thirty days before the expiration of the period of three months."

Hereinafter Income Tax Ordinance, 2001 shall be referred to as the Ordinance.

4. Section 129 (5) of the Ordinance enjoins upon the Commissioner of Appeals to take a decision in appeal before the, expiration of 3 months from the end of the month in which the appeal was lodged and if he fails to act as law requires him and there is no delay through adjournment or otherwise caused by the appellant in this connection, the relief sought by the appellant was to be construed as having been granted to him under the Ordinance.

5. However, section 129 (7) of the Ordinance was stipulated to put the Commissioner on notice for purposes of fulfilment of his obligations under the provisions of section 129(5) and in case a notice is served to him informing him that the order which was required to be made within the periphery of time so prescribed has not been made, he should take action within the next 30 days of this notice for passing such an order in appeal.

6. Obviously, where no notice under the provisions of sec tion 129(7) of the Ordinance is given, the benefits as prescribed by B section 129(5) cannot be availed. Reference in this connection may be made to the case of Messrs Aasmi Packages (Pvt.) Ltd. v. Commissioner of Income Tax (Appeals) Zone‑A, Lahore, and 3 others (2000 PTD 39) and Ch. Irshad Ahmad Virk v. Commissioner Appeals Income Tax and others (1996 PTD 279).

7. Therefore, the legal position being absolutely clear, we have now to see factually the eligibility of the petitioner in asking for the relief under the provisions of section 129(5) of the Ordinance.

8. The petitioner has placed on record a notice, dated 25th September, 2002, served by their Chartered Accountant on the Commissioner Income Tax (Appeals) Company Zone II, Lahore, saying as follows:

"On behalf of our above named client we refer to the captioned subject and in this connection we are pleased to submit as under: ‑‑

(1) We had filed an appeal under section 129 of Income Tax Ordinance, 1979 on 30‑7‑2002 in respect of assessment years, 1998‑99 and 1999‑2000 and so far, no date for hearing has been fixed.

(2) The assessee is being harassed by Deputy Commissioner of Income Tax adopting coercive recovery measure i.e. appointment of official receiver and seized of bank operation.

In view of the above facts and circumstances of the case you are kindly requested to fix an early hearing of appeal in term of section 132(6) of the Income Tax Ordinance, 1979, and oblige."

9. The caption of the notice says:‑‑

"Request for early hearing of appeal assessment years 1998‑99 and 1999‑2000."

10. This notice has a scribed note of the Zonal Commissioner Income Tax saying:‑‑

"Approach the Zonal Cr. T"

11. Learned counsel for the petitioner further refers to a letter which has been issued to the petitioner‑company by the Taxation Officer, Income Tax Circle 03, Company Zone II of Lahore on 22‑1‑2004 in the following words:

"Please refer to your letter No. Tax/03, dated 20‑5‑2003 on the above noted subject.

It is requested that your request for giving effect to deemed order in terms of section 132(5) of the Income Tax Ordinance, 1979 cannot be acceded to for the reasons that:‑‑

(1) No such instructions have been received from office of the learned CIT(Appeals). .

(2) Alleged notice under section 132(6) was in fact a request for early hearing. This is clear from the instructions of the learned CIT(Appeals) on the said application wherein you have been advised to approach the Zonal CIT for recommending your case for out of turn hearing as per practice of the Department."

This letter was placed on record to establish that the notice was received by the Commissioner.

12. Before this Court, the learned counsel appearing on behalf of the respondent's side took the view that the notice ought to have been diarized according to the procedure as laid for filing the appeals, otherwise this is no notice in law. He was categorically asked to accept or deny the factum of notice against which he could not take a very definite position especially after seeing the letter of the Taxation Officer of 22‑1‑2004, But went on to say that the letter having been given directly to the Commissioner, he may not have studied it and understood its implications particularly, when the caption of the notice did not sufficiently carry the word "notice".

13. But a perusal of the letter dated 25th September shows that the provisions of the old Ordinance i.e. section 132(6) do find a mention in the last paragraph of the letter which was sufficient enough to convey a warning to the Commissioner to act within the next 30 days as envisaged in law or suffer the consequences.

14. So the service of notice‑which is a sine qua non for the benefit to be given under the provisions of section 129(5) was served.

15. What ought to have been the format of the notice? This question is not answered by the Ordinance, whereas the Ordinance while referring to the appeals in section 127 lays down what were the requirements to be fulfilled before an appeal is lodged and mentions about a prescribed form to be used for filing the appeals, whereas no such form is prescribed by the provisions of section 129 of the Ordinance or 132 of the repealed Ordinance. Therefore, the law expects a notice as such to be couched in a reasonable language easily understandable conveying a warning if not acted upon. Keeping this test in view and the fact that the Ordinance was destitute of prescribing any model of such a form and going through the notice itself, this Court is of the view that it sufficiently conveys the intention of the appellant against the relief he was to ask upon failure of the Commissioner to act in accordance with law.

16. Procedures, are even otherwise, not meant to defeat the ends of justice or to put traps for the litigants as if a game of chess was being played in which the consequences were related only to the moves made during the game and where the playing of the game was its own end nor can a cause be defeated merely because of any defect in the language and as long as it is able to convey what is intended, to an authority concerned.

17. Inaptitude, laxity and careless working at the end of our senior officers particularly working in the fiscal areas where the laws are to be stringently interpreted, cannot be pressed as an excuse for any lapse. Therefore, the argument that unless this document had been diarized it may have been then fully attended to, has no impact.

18. The Commissioner immediately on the receipt of the letter should have opened the statute book to appreciate the implications showing a complete sensitivity which was required of him and if he has not done so, excuses area of no avail for defeating the benefits which the law has consciously given to the taxpayers.

19. In fact the rationale behind these provisions of law was based on a desire to activate the Tax Authorities so that they adjudicated the causes in appeal with convenient dispatch particularly when a taxpayer is I required to pay the amount of tax due from him before he files an appeal and gives a due notice.

20. According to the learned counsel, when there is a failure to fulfil an explicit legal requirement and there is no default on the part of a taxpayer, what the law proposes for him as a benefit, as is the case of section 129(5) of the Ordinance, it becomes a vested right. There is force in this argument. Reference in this connection may be made to the following case‑law:‑‑

1993 PTD 332, (2) 2000 PTD 2872 (AJK), (3) PTD 1974 SC 134, (4) 1995 SCMR 1249, (5) 2000 SCMR 1305, (6) 1992 ITR 548 (Ind: HC), (7) 2004 CLD 1406, (8) 2002 CLD 557, (9) 2002 CLD 1431 and (10) 2002 CLD.1018." .

21. So it is obvious that the petitioner did fulfil the requirements of section 132 of the old law and section 129 of the fresh law and no default on his part has been cogently pointed out and, therefore, a vested right accrues to him as is bestowed by the provisions of section 129(5) of the Ordinance and which is a right complete and consummate and of such a character that it cannot be divested without the consent of the person to whom it belongs and is no longer open to any controversy, therefore, the relief he sought in the appeal shall be deemed to have been given to him under the law without any further question. Reference may be made to the following case: State ex rel. Milligan v. Ritter's Estate, Ind. App., 46 N.E. 2d 736, 743.

22. It has also been argued that the provisions of section 129(5)(6)) were not mandatory. It must be understood that in tax statutes those provisions which are enacted for the benefit of a taxpayer are mandatory and that provisions enacted merely to secure the orderly transactions of business are directory. Reference in this connection may be made to the followings: Corpus Juris Secundum Vol. 82 Pg. 875; U.S. Cohn v. Little, D.C. Ark., 101 F. Supp. 683, affirmed, C.A. 199 F. 2d 28; Cal. Skelly Estate Co. v. City and County of San Francisco, 69 P. 2d 171, 9 Cal. 2d 28‑Rayan v. Byram, 51 P. 2d 872, 4 Cal. 2d 596; City of Scranton VO' Malley Mfg. Co. 19A. 2d 269, 341 Pa. 200,. it was held M that whenever the law requires a thing to be done for the protection of the taxpayer, it is usually mandatory.

23. In the case of Pears v. MOrrtce (1834) 2A, E.' 84, 96) it was) said that a clause is directory where the provisions contain a mere direction and nothing more, but to case they are followed by such words as "that anything done contrary to these provisions shall be of no effect then they are no longer directory but mandatory. Where a mandatory provision is invoked, the Courts are left with no discretion in their administration except to enforce it.

24. In this particular case, it is obvious that when the given periphery of time is not followed, the department is then at a loss because his appeal in terms of the relief sought is to be accepted which obviously indicates that the failure in accomplishing what is envisaged by section 129 of the Ordinance results in penalizing the department through the statutory grant of relief sought. I, therefore, hold that the provisions of section 129(5)(6) and (7) of the Ordinance are mandator, and not directory or regulatory.

25. The writ petition, under the circumstances, is accepted but there will be no order as to costs.

M.B.A./D‑23/L Petition accepted.