COMMISSIONER INCOME TAX VS GULF EDIBLE OILS (PVT.) Ltd., 2006 PTD-KARACHI-HIGH-COURT-SINDH 2854 (2006)

Income Tax Ordinance (XXXI of 1979)---

---Ss. 80-D, 134, 136 & 156---Protection of Economic Reforms Act (XII of 1992), S.6---Rectification of mistake---Assessee filed application before Income Tax Officer under S.156 of Income Tax Ordinance, 1979 to rectify orders passed and to extinguish liabilities created under S.80-D of Income Tax Ordinance, 1979 as his case being covered by notification mentioned in Schedule to S.6 of Protection of Economic Reforms Act, 1992, he was not liable to minimum tax under S.80-D---Said application was rejected by Income Tax Officer and appeal against order of Income Tax Officer was also dismissed by Commissioner Income Tax---Appellate Tribunal, however, accepted appeal filed by assessee against concurrent impugned orders of Income Tax Officer and Commissioner Income Tax, holding that claim of assessee which required factual enquiry, could be given under provisions of S.156 of Income Tax Ordnance, 1979---Validity---Mistake being floating on the surface of record, Tribunal had rightly found that no factual enquiries to establish errors were needed and that case of assessee fell within four corners of 5.156 of Income Tax Ordinance, 1979---Tribunal had rightly opined that order passed by Income Tax Officer would achieve finality only after appellate and other proceedings by which said order could be disturbed, modified or amended had been resorted to or had become time-barred; and till the period of limitation provided under S.156 of Income Tax Ordinance, 1979 during which rectification could be made, had not expired, proceedings could not be called closed and shut---Opinion of Law and Justice Department had no binding force and Government Departments including the Law and Justice Department and Central Board of Revenue, did not figure in the hierarchy of the forum whose opinion or interpretation of law could be considered binding.

Jawaid Farooqui for Appellant.

Arshad Siraj for Respondent.

ORDER

MUHAMMAD ATHER SAEED, J.---These Income Tax appeals have been filed by the Commissioner of Income Tax against the order of the Income Tax Appellate Tribunal in ITAs Nos. 1950/KB and 1951/KB of 1997-98, dated 31-8-1998 pertaining to the assessment years 1995-96 and 1996-97.

2. Brief facts of the case are that the respondent a private limited company engaged in manufacturing of Ghee and Edible Oil enjoyed exemption under clause 118-E of the Second Schedule to the Income Tax Ordinance, 1979. The assessments for both the assessment years were finalized by the Assessing Officer by allowing the exemption under section 118-E and creating income-tax liability under section 80-D of the Income Tax Ordinance, 1979 amounting to Rs.25,26,001 and Rs.15,33,876 for the assessment years in question respectively. No appeals were preferred by the respondent assessee against the above orders and no constitutional petitions were filed challenging the vires of section 80-D and the liabilities created by the Income Tax Officer were discharged.

3. However, a number of other assessees had challenged the viries of sections 80-C, 80-CC and 80-D and other sections relating to presumptive tax regime by way of writ petition in various High Courts of the country. After dismissal of these petitions by the Lahore High Court, the petitioners preferred petitions for leave to Appeal before the Honorable Supreme Court of Pakistan. Leave was allowed and after exhaustively hearing the appeals, the same were dismissed by the Honourable Supreme Court on 4th June, 1997. The judgment of the Honourable Supreme Court of Pakistan is reported as Messrs Ellahi Cotton Mills v. Federation of Pakistan (PLD 1997 SC 582). In this judgment the Honourable Supreme Court also made certain observations and gave findings regarding the applicability of section 80D. The Honourable Supreme Court also gave finding on the question whether the provisions of Mt XII of 1992 shall prevail over the provisions of section 80D of the Ordinance. This finding has been given in para. 54 of the judgment, which reads as under:

"(54) In our view, since the provisions of Act XII of 1992 are subsequent in time and as they are contained in a special statute, they shall prevail over the provisions of section 80-D of the Ordinance, which was enacted through Finance Act, 1991, which was an earlier statute and which was part of a general statute. In this view of the matter, assessees who fulfil the conditions of the notifications referred to in the Schedule to section 6 of Act XII of 1992, are entitled to the protection. The question as to whether a particular assessee fulfils the conditions of the above notifications, is a question of fact, which will have to be determined by the hierarchy provided under the Ordinance and not by this Court. However, in order to eliminate multiplicity of litigation and to avert element of harassment to assessees, we have dealt with the legal aspect of the above contention though apparently it was not urged before the High Court as we do not find any mention in any of the judgments under appeal.

4. The Honourable Supreme Court Further clarified the findings in para 57 of the said judgment as under:

"The assessees who are covered by the notification mentioned in the Schedule to section 6 of the Protection of Economic Reforms Act, 1992 (Act XII of 1992) are entitled to the protection in terms thereof as per paras. 52 to 54 hereinabove. They may approach the Income-tax Department."

5. After the announcement of the above judgment of the Supreme Court, the present respondent approached the Income Tax Officer by filing application under section 156 of the Income Tax Ordinance, 1979 requiring the Income Tax Officer to rectify the orders passed and extinguish the liabilities created under section 80(D) as their case was covered by Notification mentioned in schedule to section 6 of the Protection of Economic Reforms Act, 1992 and, therefore, they were not liable to minimum tax under section 80(D) as per the judgment of the Honourable Supreme Court.

6. These applications were however, rejected by the Income Tax Officer by stating that the position has been clarified in the light of C.B.R. Circular No. II(98)ATJ/94 Islamabad, dated 11th December, 1997, on the basis of opinion of Law and Justice Department. The Income Tax Officer was also of the view that the respondents were not entitled to seek rectification and claim refund of minimum tax already paid under section 80-D as they had neither filed any constitutional petition or appeal before any of the appellate Courts challenging the levy of tax under section 80(D).

7. The appeal of the respondent before the CIT(Appeals) was dismissed by the CIT for the reason that the assessment orders had attained finality as no appeal was pending against such assessment orders and, therefore, the applicant could not be provided the benefit in the light of above judgment of the Honourable Supreme Court.

8. Being aggrieved by the order of the CIT Appeals, the present respondent filed an appeal before the Income Tax Appellate Tribunal wherein, inter alia, it was pleaded that since the period of limitation prescribed for rectification under section 156 had not expired, the matter was not closed and shut matter and the respondent was entitled to have the assessment order rectified, the liability under section 80(D) extinguished and tax paid under this section refunded. The Income Tax Appellate Tribunal after exhaustively examining the judgments of the Supreme Court of Pakistan India and various Pakistani and Indian High Court allowed the appeal with the following remarks.

(34) For the foregoing reasons and conclusions drawn by us it is held that the levy of tax under section 80-D on the appellant in the two assessment years under appeal is a mistake apparent on record and the learned two officers below fell in error in not allowing the rectification. The impugned orders of the learned two officers below are hereby vacated and the rectification applications are allowed. The tax levied under section 80-D on the appellant's turnover are hereby declared to be without legal authority and without sanction in law. The taxes paid under section 80-D in pursuance of invalid and illegal orders are hereby directed to be refunded. The appeals are allowed as above.

9. Against this order of the Tribunal, the Commissioner has filed these appeals before this Court and sought the opinion of this Court on the following questions:---

"(1) Where on the facts and in the circumstances of the case the learned Tribunal was justified in holding that the assessee who were not a party to the proceedings before the Honourable Supreme Court and even did not file appeal against the assessment order, by which it had become past and closed transaction, can claim relief under that judgment?

(2) Whether on the facts and in the circumstances of the case the learned Tribunal was justified in holding that claim of assessees which requires factual enquiry can be given under the provisions of section 156?

(3) Whether on the facts and in the circumstances of the case the learned Tribunal was justified in holding that the order under section 156 can be passed in the cases involving factual enquiry and no mistake was apparent from the record?

(4) Whether on the facts and circumstances of the case the learned Tribunal was justified in holding that the circular of Law and Justice Division has no binding force in spite of the facts that it has not been quashed and is on the surface?

10. We have heard Mr. Jawaid Farooqui, Advocate for the appellant and Mr. Arshad Siraj, Advocate for the respondents and have carefully perused the question referred for the opinion of this Court in the light of the records and the orders passed by the Income Tax Officer, the CIT(Appeals) and the Tribunal. We have also perused the relevant extract of the order of the Honourable Supreme Court of Pakistan.

11. The learned counsel for the respondent has contended that the questions Nos. 1, 2 and 3 do not arise out of the order of the Tribunal whereas the question No.4 has already been adjudicated upon by the Superior Courts wherein it has been held that even the Federal Government cannot curtail judicial adjudicative powers vested forums under the relevant law by interpreting a particular provision of relevant law.

12. On this point he relied on the following judgments of the Honourable Supreme Court of Pakistan:--

(1) Central Insurance Co. v. C.B.R. (1993 SCMR 1232)

(2) C.B.R. v. Shaikh Spinning Mills Ltd. (1999 SCMR 1442)

13. On an examination of the 'questions referred in the memo. of appeal, the arguments of the learned counsel for the respondent appear to be correct. The Tribunal has nowhere held that where the assessment .orders had become final and could be treated as past and closed transactions relief under the judgment of the Honourable Supreme Court of Pakistan could be claimed by the assessee. On the other hand, the Tribunal has held that if the time period provided for rectification had not expired, the matter was not a closed and past transaction and a mistake apparent from the record, could be rectified under section 156. On an examination of the facts of the case and the judgments of the superior Courts examined by them, the Tribunal held that chargabilty of tax under section 80(D) was a mistake apparent from record and could be rectified.

14. Proposed questions Nos. 2 and 3 are almost identical and seek opinion of the Court as to whether the errors which involve factual enquiry, can be rectified under section 156. However, the admitted position in the case is that the respondents were entitled to exemption under Clause 118-E of the Second Schedule, which exemption was granted by Notification No. S.R.O. 1283(1)/99, dated 13-12-1990 which is mentioned in schedule 2 to section 6 of the Production of Economic Reforms Act, 1992 (Act XII of 1992) and the Honourable Supreme Court of Pakistan has held that provisions of Act prevail over section 80-D of the Ordinance. The Honourable Supreme Court also held that whether a case of particular assessee falls under the said Notification is a question of fact which will be determined by the Department and admittedly the Department has already allowed exemption under Clause 118-E. We, therefore, concur with the Tribunal that no factual enquiries to establish the errors were needed and the mistake was floating on record and, therefore, the case fell within the four corners of section 156 of the Income Tax Ordinance, 1979.

15. We also concur with the opinion of the Tribunal that the order passed by the Income Tax Officer achieves finality only after the appellate and other proceedings by which the order can be disturbed, modified or amended have been resorted to or have become time barred and, therefore, till the period of limitation provided under section 156 during which the rectification can be made has not expired the proceedings cannot be called closed and shut.

16. We have examined the judgment of the Honourable Supreme Court relied on by the applicant in support of his contention that the opinion of law and Justice Department has no binding force and agree with the contentions of the learned counsel for the respondent that it is well settled law that the government departments including the Law and Justice Department and the Central Board of Revenue do not figure in the hierarchy of the forum whose opinion or interpretation of law can be considered binding.

17. Mr. Jawaid Farooqui, learned counsel for the appellant, has not been able to controvert the reasons elaborated by the Tribunal in the impugned order nor the arguments of the learned counsel for the respondent.

18. In view of the foregoing reasons, we are of the opinion that the questions sought to be referred do not require any adjudication by the Court and the appeals carry no weight and were accordingly dismissed by us by our short order on 15-2-2006.

H.B.T./C-23/KAppeal dismissed.