I.C.I. PAKISTAN LTD., through Chief Financial Officer, Karachi VS FEDERATION OF PAKISTAN
2006 P T D 778
[Karachi High Court]
Before Anwar Zaheer Jamali and Mrs. Yasmin Abbasey, JJ
I.C.I. PAKISTAN LTD., through Chief Financial Officer, Karachi
Versus
FEDERATION OF PAKISTAN through Secretary Ministry of Finance, Islamabad and 3 others
C.P. No.D-658 of 2005, decided on 13/01/2006.
(a) Income Tax Ordinance (XXXI of 1979)---
----S.62---Constitution of Pakistan (1973), Art. 199---Constitutional petition---Mala fides---Notice under S.62 of Income, Tax Ordinance, 1979, was assailed by assessee on the pleas of mala fides and lack of jurisdiction---Notice issued by the authorities was a detailed notice, which carried opinion of Taxation Officer based upon the facts deduced by him from the record made available before him by the assessee---Taxation Officer had also made reference of some cases from Indian jurisdiction to gain support for his view and unfolded certain other points to seek explanation of assessee on them---Taxation Officer also invited the assessee to hear its view point with regard to the points unfolded by it---Validity---Such action, prima facie, seemed to be within the four corners of S.62 of Income Tax Ordinance, 1979 and did not show any mala fides or element of lack of jurisdiction of the concerned officer---Petition was dismissed in circumstances.
(b) Income Tax Ordinance (XXXI of 1979)---
----S.62---Constitution of Pakistan (1973), Art.199---Constitutional petition---Bona fides, lack of---In response to notice under S.62 of Income Tax Ordinance, 1979, issued by Taxation Officer, assessee sought adjournments for submission of its reply to such notice and instead of filing reply, assessee assailed the notice before High Court---Validity---Such conduct of assessee, prima facie, reflected lack of bona fides on its part in approaching the High Court.
(c) Constitution of Pakistan (1973)---
----Art.199---Constitutional petition---Fiscal matters---Alternate and efficacious remedy, non-availing of---Effect---Availability of alternate remedy had not been considered as an absolute bar for High Court, for' exercising its Constitutional jurisdiction under Art.199 of the Constitution in appropriate cases, despite non-availing such alternate remedy---In fiscal matters superior Courts have been more liberal in exercising their constitutional jurisdiction, keeping in mind financial constraints, which may be the compelling reason for the aggrieved party to bypass alternate remedy, as due to such financial constraints departmental remedy might lose its efficacy.
(d) Income Tax Ordinance (XXXI of 1979)---
----S.62---Constitution of Pakistan (1973), Art.199---Constitutional petition---Mala fides, plea of---Factual controversy---Rule of propriety--Applicability---Jurisdiction of Authority---Determination---Non-availing of departmental remedy---Assessee assailed notice under S. 62 of Income Tax Ordinance, 1979, on the plea of mala fides and lack of jurisdiction---Validity---Officer, who had issued notice under S.62 of Income Tax Ordinance, 1979, was seized of assessment case and thus had jurisdiction to call upon the assessee to give reply to the queries made in the notice---Queries made in the notice not only involved question of law but also included number of other factual queries, which could only be answered after examination of the relevant record and explanation by the assessee before Taxation Officer---By passing the stage of submission of reply to the notice by the assessee seemed to be a device to avoid facing proceedings before Taxation Officer, who had jurisdiction for the purpose in terms of S.62 of Income Tax Ordinance, 1979---High Court did not find any valid justification to proceed readily with the presumption of mala fides against Taxation Officer, merely for the reason that he had issued notice calling upon the assessee for its explanation/reply and affording it an opportunity of hearing in the matter---Exercise of Constitutional jurisdiction at such stage would amount to usurpation of powers of the departmental authorities to adjudicate the assessment case of assessee at their level in accordance with law, in more comprehensive manner after investigation of all factual and legal aspects of the case---Rules of propriety also demanded that if question of jurisdiction was involved in a matter, such objection in the first instance, should be raised before the Authority whose jurisdiction had been challenged and thereafter, it needed be, further course available under the relevant provisions of law should be followed by the aggrieved party instead of approaching High Court directly in its Constitutional jurisdiction on the pretext that the concerned Authority had no jurisdiction to issue notice or that available remedy was not adequate, efficacious or effective---High Court declined to interfere in the notice issued by Taxation Officer---Petition was dismissed in circumstances.
Ujala Cotton Mills Ltd. v. Income Tax Officer and others 1985 PTD 510; Marshal Sons and Co. (India) Ltd. v. Income Tax Officer ,(1997) 88 Comp. Cases 528; Reghubar Dayal v. The Bank of Upper India Ltd. AIR 1919 PC 9; Abdul Majid and others v. Abdul Ghafoor Khan and other, PLD 1982 SC 146; Bahandur Ali and another v. Haji Amirullah Khan PLD 1955 Lah 140; Abdul. Ghani and another v. Subedar Shoedar Khan Company and others PLD 1968 SC 131; Messrs Usmania Glass Sheet Factory Limited Chitagong v. Sales Tax Officer, Chittagona PLD 1971 SC 205; Pakistan and the Assistant Collector, Central Excise and Land Customs, Kohat v. Qazi Ziauddin PLD 1962 SC 440; Messrs Julian Hoshang Dinshaw Trust and others v. Income Tax Officer, Circle XVIII South Zone, Karachi and others 1992 PTD 1; Chairman C.B.R. v. Pak-Saudi Fertilizer Limited 2000 PTD 3748; Commissioner of Income Tax, Central Zone "B" Karachi v. Farrokh Chemical Industries 1991 SCC 805; Commissioner of Income Tax v. Pakistan Industrial Engineering Agencies Ltd. 1991 SCC 878; Commissioner of Income Tax, East Pakistan, Dacca v. Wahiduzzaman 1965 SCC 212; Hafiz Muhammad Arif Dar v. I.T.O. 60 Tax 52; Nagina Dal Factory v. ITO 18 Tax 1; Roche Pakistan Limited v. DCIT and others 2001 PTD 3090; Sitara Chemicals Industries Limited v. DCIT 2003 PTD 1285; H.M. Abdullah v. Income Tax Officer, Circle-V, Karachi 1993 SCMR 1195; Farrukh Chemicals Industries's case 1983 PTD 67; Standard Chartered Bank's case PLD 2001 Kar. 344; Shagufta Begum's case PLD 1989 SC 360; Income Tax Officer and another's case 1993 SCMR 1108; Hyderabad Chamber of Commerce and Industry's case 1998 SCMR 206 and Tariq Mehmood and another's case 2001 MLD 1494 ref.
Abdul Hafeez Pirzada, Abdul Sattar Pirzada and Ms Danish Zuberi for Petitioner.
A.R. Akhtar for Respondents Nos. 2 to 4 along with Dr. Tariq Masood, DCIT/Departmental Representative.
Dates of hearing: 7th, 8th and. 15th December, 2005.
ORDER
ANWAR ZAHEER JAMALI, J.---Petitioner ICI Pakistan Limited, a public limited company, incorporated in Pakistan, aggrieved by the action of respondent No. 4 in the form of notice, dated 26-5-2005, have preferred this constitutional petition with the following prayers:--
"(i) Declare that the notice; dated 26-5-2005 issued by the Respondent No.4 under section 62 of the Income Tax Ordinance, 1979 (Annex "O") is and has been issued without lawful authority and is of no legal effect or consequence.
(ii) Declare that as per order/judgment of this Hon'ble Court in J.M. 17/2000, dated 23-7-2001, that the PTA Business of the petitioner was demerged, transferred to and vested in a separate company, Pakistan PTA Limited with effect from 1-10-2000 and that the same is binding on the Respondents.
(iii) Declare that the issue/question of the Effective Date being 1-10-2000 is final and stands concluded by the assessment order, dated 29-5-2002 for the assessment year 2001-2002.
(iv) Restrain and prohibit the Respondents Nos.3 and 4 directly and indirectly and through their officers, subordinates and assigns from proceeding any further on the basis of the notice, dated 26-5-2005 issued by the Respondent No.4 under section 62 of the Income Ordinance, 1979 (Annex "O").
(v) Such other relief as may be deemed necessary in the circumstances of the case.
(vi) Costs."
2. As per contents of the petition, case of the petitioner-company is that they are engaged in the manufacture of polyester staple fibre, soda ash, paints and specialty chemicals. While previously they were also engaged in the manufacture of the pure terephthalic acid (PTA). In the year, 2000, they decided to re-organize their business, therefore, under a scheme of arrangement, duly approved by the shareholders and creditors of the petitioner-company and sanctioned by this Court in its company jurisdiction under sections 284 and 287 of the Companies Ordinance, 1984, vide order, dated 23-7-2001, the PTA business of the petitioner was de-merged, transferred and vested in a separate company Messrs Pakistan PTA Limited w.e.f. 1-10-2000. Accordingly, all arrangements were made and implemented as per scheme of re-structuring and de-merger, and a certified true copy of order, dated 23-7-2001 passed by this Court, regarding approval of de-merger was filed with the Registrar of Companies on 6-8-2001, which is the completion date of the scheme of arrangement. Further case of the petitioner is that the actual de-merger of PTA business from the petitioner-company took effect from 1-10-2000, as is reflected and confirmed from the actual accounts of the petitioner and other record produced with the petitioner, therefore, Income Tax Return of the petitioner-company for the assessment year 2001-2002 (financial year ending 31-12-2000) was filed with the Income Tax Department showing the position of the company after de-merger of PTA business from the petitioner company. The Return of the petitioner company so submitted, mentioning explicitly the factum of de-merger w.e.f. 1-12-2000, was scrutinized by the Assessing Officer and the assessment was completed accordingly. The petitioner aggrieved by such assessment, on a limited issue not relating to the transfer of PTA business, had filed appeal before the Commissioner of Income (Appeals), which was allowed vide order, dated 9-3-2004 and consequently the grievance of the petitioner to that extent was also redressed.
3. On 30-12-2002, the Taxation Officer-C (Audit Division), Large Taxpayers Unit, issued notice under section 122(5A) of the Income Tax Ordinance, 2001 to the petitioner in an attempt to alter/amend the aforesaid assessment of the petitioner for the year, 2001-2002. Through this notice, the respondent No.3 sought amendment in the assessment order of the petitioner for the year, 2001-2002 on the basis that the transfer of the PTA business of the petitioner to the PTA Company amounted to sell, transfer or disposal of its assets. This notice was duly replied by the petitioner through Messrs A.F. Ferguson and Co., Chartered Accountants vide their reply, dated 3-3-2005, whereafter no further action was taken by the respondents with regard to the said notice under section 122 (5A) of the Income Tax Ordinance, 2001. The petitioner also stated that on 30-9-2002, they had filed their Income Tax Return for the assessment year 2002-2003 along with the accounts for the year ending 31-12-2001 under section 55 of the Income Tax Ordinance, 1979, but subsequent to the filing of such Return of total income for the assessment year 2002-2003, the officers of respondent No.1 had issued notices, dated 28-1-2003, 10-12-2003, 19-2-2004 and 14-3-2004, which were separately replied by the petitioner. Despite all this, after lapse of more than one year to the last notice issued by the officers of respondent No.1. The petitioner have now received the impugned notice, dated 26-5-2005, under section 62 of the Income Tax Ordinance, 1979 to the effect that respondent No.4 has proposed assessment of the petitioner's income for the assessment year, 2002-2003 on the basis, as detailed in the said notice. It is the notice, dated 26-5-2005 issued by respondent No.4, which has given cause of grievance to the petitioner for filing of instant petition. The petitioner have narrated in detail various grounds on the basis of which, according to petitioner, the whole proposed action visualized in the notice, dated 26-5-2005 is illegal, without jurisdiction, male fide, and consequently, have sought reliefs through this petition, as reproduced above.
4. In their reply/comments to this petition, jointly submitted by respondents Nos. 2, 3 and 4, they have not disputed the assertions of the petitioner-company as regards the process of de-merger undertaken by the petitioner-company; approval of such scheme of de-merger by this Court in its company jurisdiction, vide order, dated 23-7-2001, and submission of certified true copy of such order with the Registrar of Companies on 6-8-2001. However, they have strongly disputed the assertion of the petitioner that the effective date of de-merger is 1-10-2000: The respondents have further asserted that looking to the facts and circumstances of the case, the record produced by the petitioner themselves, and the relevant provisions of the Companies Ordinance and Income Tax Ordinance, the completion date i.e. 6-8-2001, is the effective date of de-merger for the purpose of income tax assessment of the petitioner company, and consequently the issuance of impugned notice, dated 26-5-2005 is legal and justified on the basis of details disclosed therein. The respondents have also challenged invoking of writ jurisdiction by the petitioner at this stage and strongly denied the allegations of the petitioner that the proposed action through impugned notice is either without jurisdiction or mala fide. They, however, did not dispute the assertions of the petitioner as regards issuance of earlier notice, dated 30th December, 2004, under section 122 (5A) of the Income Tax Ordinance, 2001, its reply submitted by the petitioner through Messrs A. F. Ferguson and Co. Chartered Accountants, on 3-3-2005, as well as judgment of this Court in C.P. No. D-643/2004, wherein it has been held that the provisions of section 122 (5A) of the Income Tax Ordinance, 2001, are not retrospective in nature, therefore, the assessments which were concluded before the date of its enforcement, viz. 1-7-2003 could not be re-opened, revised or amended by invoking action under this provision of law.
5. On 1-7-2005, petitioners have submitted their reply to the comments filed by respondents Nos. 2, 3 and 4 wherein they have reiterated the facts and the grounds stated in the petition in more detail and stated that for all purposes the effective date of de-merger is 1-10-2000 and not 6-8-2001, as urged by the respondents. They have further stated that the rule of constructive res judicata is applicable to the facts and circumstances of the case, therefore, the issue of effective date of de-merger decided in the assessment case of the petitioner for the assessment year 2000-2001, which has already been finalized, is past and closed transaction and it cannot be re-opened on the grounds urged in the impugned notice under section 62 of the Income Tax Ordinance, 1979. To be more precise in legal phraseology, case of the petitioner is that the proposed action of respondents in the form of impugned notice is mala fide, illegal, tainted with malice, and coram non judice, thus, it has been rightly challenged in the writ jurisdiction of this Court, and the bar, due to availability of alternate remedy is not attracted to this case.
6. Mr. Abdul Hafeez Pirzada, learned Senior Counsel, representing petitioner in this petition, in his arguments, narrated in detail all the facts stated in the petition with reference to the bunch of documents produced with the petition, which include the record of Extraordinary General Meeting of petitioner-company for the year, 2001 regarding re-structuring of ICI Limited, spreading over 170 pages, order of learned Company Judge of this Court in J.M. 17/2001, dated 23-7-2001, Annual Report of the petitioner-company for the year, 2000 in the form of a booklet, spreading over 125 pages. Assessment Return of the petitioner-company for the year, 2001-2002, order of Commissioner of Income Tax (Appeals), dated 9-3-2004, copy of notice under section 122 (5A) of the Income Tax Ordinance, 2001, dated 30-12-2004 along with its reply and other correspondences made by the petitioner with the respondents/ Income Tax Department during the intervening period. Learned counsel made specific references from various parts of these documents more particularly relating to the scheme of de-merger and proceedings before the Company Judge regarding approval of scheme of de-merger, and emphasized that the record produced by the petitioner is more than sufficient to conclude that the whole action initiated by respondent No.4 in the form of impugned notice is not only without jurisdiction but the said officer is also acting in a mala fide manner to cause unnecessary harassment and inconvenience to the petitioner. He contended that in such circumstances availing of departmental remedy by the petitioner or submission of reply of impugned notice, was merely an illusory remedy in nature, thus, the petitioner-company is fully justified in directly invoking the constitutional jurisdiction of this court for striking down such illegal action of the respondents. He further added that the rule of constructive res judicata is squarely applicable after finalization of assessment case of the petitioner for the previous assessment year 2000-2001. To fortify his submissions, learned counsel has placed reliance on the following cases:
(1) Ujala Cotton Mills Ltd. v. Income Tax Officer and others 1985 PTD 510;
(2) Marshal Sons and Co. (India) Ltd. v. Income Tax Officer (1997) 88 Comp. Cases 528;
(3) Reghubar Dayal v. The Bank of Upper India Ltd, (AIR 1919 PC 9);
(4) Abdul Majid and others v. Abdul Ghafoor Khan and others (PLD 1982 Supreme Court 146);
(5) Bahadur Ali and another v. Haji Amirullah Khan (PLD 1955 Lah 140);
(6) Abdul Ghani and another v. Subedar Shoedar Khan Company and others (PLD 1968 Supreme Court 131);
(7) Messrs Usmania Glass Sheet Factory Limited Chittagong v. Sales Tax Officer, Chittagong (PLD 1971 SC 205);
(8) Pakistan and the Assistant Collector, Central Excise and Land Customs, Kohat v. Qazi Ziauddin (PLD .1962 SC 440);
(9) Messrs Julian Hoshang Dinshaw Trust and others v. Income Tax Officer, Circle XVIII South Zone, Karachi and others (1992 PTD 1)
(10) Chairman C.B.R. v. Pak-Saudi Fertilizer Limited (2000 PTD 3748).
7. Giving reply to the above submissions of Mr. Pirzada, in the first instance, with the permission of the Court, Departmental Representative Dr. Tariq Masood, D.C. Income Tax, has addressed the Court. In his arguments, he also made reference to various documents filed by the petitioner along with their petition, more particularly the scheme of arrangement forming part of annexure "B" to this petition, order of Company Judge of this Court, dated 23-7-2001 and the relevant provisions of Companies Ordinance 1984 to add force to his submissions that for the purpose of assessment of income tax of the petitioner-company the effective date of de-merger is 6-8-2001, when as per requirement of section 287(3) of the Income Tax Ordinance, 1984 and in terms of paragraph 29 of the scheme of arrangements read together with the definition of words "completion date' given in the scheme itself, the certified true copy of order of Company Judge, allowing de-merger to the petitioner-company with Pakistan PTA Ltd. was filed before the Registrar of Companies. He strongly contended that the Income Tax Department has nothing to do with the internal financial arrangement and paper work of the petitioner-company and the de-merged company Pakistan PTA Ltd. which they can manage as per their own suitability. The real test of judging the effective date of de-merger of the petitioner-company with Pakistan PTA Ltd. for income tax purposes, will be regulated by looking into the ground realities vis-a-vis the relevant provisions of the Income Tax Ordinance, 1979, which provide that the effective date of de-merger would be the date on which PTA Ltd. actually and physically separated from petitioner-company on filing of certified true copy of the order of Company Judge before the Registrar of Companies, i.e. 6-8-2001. Replying to the arguments of Mr. Pirzada, as regards applicability of rule of constructive res judicata the learned Departmental Representative made reference of following cases:
(1) Commissioner of Income Tax, Central Zone "B" Karachi v. Farrokh Chemical Industries (1991 SCC 805);
(2) Commissioner of Income Tax v. Pakistan Industrial Engineering Agencies Ltd. (1991 SCC 878) and
(3) Commissioner of Income Tax, East Pakistan, Dacca v. Wahiduzzaman (1965 SCC 212).
8. Departmental Representative also made reference to the relevant provisions of International Accounting Standard (IAS) which according to him, are internationally, recognized for regulating all accounting matters. He also made reference to the definition of word "transfer" from the Black's Law Dictionary, VII-Edition, page 1503 and news clipping in daily "Dawn" Karachi, dated 7-8-2001 to lay emphasis to his arguments that for the purpose of Income Tax assessment the actual physical transfer of assets of one, company .to another and independent 'working of de-merged company will determine the effective date of de-merger and not its de-merger only on paper. Relevant news clipping, referred above, not disputed by the petitioner's counsel, is reproduced as under:
"ICI. PTA de-merger gets under way Karachi, Aug 6: The Scheme of Arrangement for the Reconstruction of ICI Pakistan Limited would go into effect from August 6, following the sanction by the Sindh High Court vide its order of July 23. ICI Pakistan said in a notice to the Stock Exchanges on Monday adding: `As a consequence, the PTA business formerly carried on by ICI Pakistan Limited will now be carried on by Pakistan PTA Limited.'
ICI said that the Board of Directors of ICI Pakistan had fixed August 30 as the Record Date, the date with reference to which the entitlement of the shareholder of ICI Pakistan to shares of Pakistan PTA and to shares in the reduced capital of ICI Pakistan and subsequently to new shares of ICI Pakistan would be determined. Share Transfer Books of ICI Pakistan would be closed for a period of seven days from August 24 to August 30.
In accordance with the scheme, share certificates relating to the existing shares in ICI Pakistan would stand cancelled with effect from August 30. The company stated that it was agreed with the KSE that trading in shares of ICI Pakistan would remain suspended from August 24 to September 26. Trading would start in the shares in the reduced capital of ICI Pakistan and in shares of Pakistan PTA from September 27.
As regards the new shares of ICI Pakistan to be issued in lieu of the 25 per cent shareholding in Pakistan PTA to be allotted to ICI Pakistan, the determination of the number of new shares to be issued, and the entitlements of the shareholders to such new shares would be determined in accordance with the Scheme and in the manner provided therein. Such determination and allotment of shares would be made as soon as possible after November 4, 2001. ICI said, and that notices relating to the allotment of the new shares and the delivery of share certificates in respect of such new shares would be published in newspapers in due course.
Daily The Dawn, Karachi7 August 2001".
9. In the end, Dr. Tariq Masood also challenged the maintainability of this petition on the grounds that even if the question of jurisdiction is involved in a complexed manner, rule of propriety demands that this Court before straightaway exercising its constitutional jurisdiction, in the first instance, shall allow an opportunity to the concerned department/ authority to examine such aspect of the matter and give its own findings. Further the practice followed by the petitioner by not filing the reply of impugned notice before the respondent No.4 even after seeking several adjournments for this purpose, should be discouraged to repose confidence on the Government functionaries instead of doubting their actions readily with the presumption of mala fide. Further elaborating his arguments as regards availability of alternate remedy, he also made reference to the provisions of Federal Tax Ombudsman Ordinance and contended that if the grievance of the petitioner is regarding mere mal administration or mala fide on the part of respondent No.4 then remedy before the Federal Tax Ombudsman was also adequate, efficacious and appropriate. In this regard he made reference to the judgment reported as Hafiz Muhammad Arif Dar v. I.T.O. (60 Tax 52). He also made reference to following other cases:
(a) Nagina Dal Factory v. ITO (18 Tax 1);
(b) Roche Pakistan Limited v. DCIT and others (2001 PTD 3090);
(c) Sitara Chemicals Industries Limited v. DCIT (2003 PTD 1285) and
(d) H.M. Abdullah v. Income Tax Officer, Circle-V, Karachi (68 Tax 29) = (1993 SCMR 1195).
10. Mr. A.R. Akhtar, learned counsel for respondents Nos. 2 and 4 endorsed and adopted the arguments of Dr. Tariq Masood with the addition that the provisions of Company Law and Income Tax Law have their independent fields of operation with no overlapping, therefore, the de-merger of the petitioner-company with Pakistan PTA Ltd. is strictly regulated by the relevant provisions of the Company Law, while the assessment case of the petitioner-company for various years, is to be regulated by the provisions of Income Tax Ordinance, 1979. The authorities under the hierarchy of Income Tax Ordinance have, therefore, to follow strictly the provisions of Income Tax Ordinance and their actions are not to be regulated by the provisions of Company Law.
11. Mr. Abdul Hafeez Pirzada in his reply arguments, firstly, made reference to the order of Company Judge, dated 23-7-2001 and contended that it is the sanctity of this order, passed by the highest Court of the Province, which is to be maintained and honoured by the respondents, as it is Judge made law, which is binding on all subordinate Courts and Government functionaries. To add force, in the same context, learned counsel made reference of Article 4 of the Constitution, which provides that rights of individuals are to be dealt with in accordance with law as every citizen enjoys the protection of law.
12. Replying to the other submissions of departmental representa tive, regarding non-applicability of principle of constructive res judicata in income-tax cases, learned counsel also made reference to the case of Farrukh Chemicals Industries (1983 PTD 67). He read before us some paragraphs from this judgment to demonstrate that the rule laid down by the Supreme Court in this case supports the case of the petitioner. Making reference to other material available on record, he further contended that up to December, 2004 constantly the stand of the respondents/Income-tax Department was that the effective date of de-merger is 1-10-2000, and it is only subsequent to it that the respondents are now trying to change their stand and circumvent the things to the prejudice of petitioner, even contrary to their own admission made in para-6 of their reply/comments to this petition. To fortify his submission as regards the effective date of de-merger learned counsel again made reference to the case of Ujjala Textile Mills Ltd. 1985 PTD 510 and the other case of Marshall Sons and Co. (India) Ltd. (1997) 88 Law Cases 528 and contended that the view taken by the Indian Supreme Court in this judgment is fully attracted and applicable to the facts and circumstances of instant case to the extent of effective date of de-merger, as provisions of law referred therein from the Indian Companies Act are pari materia to sections 284 to 287 of the Companies Ordinance, 1984. Learned counsel emphasized that it is not within the statutory powers of DCIT or any other officer in the hierarchy of Income-tax Law to adjudicate the effective date of de-merger, which is the exclusive jurisdiction of Company Judge and in the instant case as per the order of the Company Judge, dated 23-7-2001 the effective date of de-merger is 1-10-2000, therefore, the whole action envisaged in the impugned notice, based on the premises contrary to it is without jurisdiction.
13. We have carefully considered the arguments advanced before us on behalf of the parties to this petition, perused the material placed on record and also the case-law cited in the preceding part of this judgment.
14. The first crucial point for determination arising out of this petition seems to be as under:
"Whether in the facts and circumstances of the case filing of Constitutional petition against impugned notice, dated 26-5-2005 is premature, and no other adequate, efficacious, alternate remedy is available to the petitioner, which should have been exhausted in the first instance?"
15. In the context of examining the point of maintainability of this petition and in order to understand more explicitly the view point of the respondents for issuance of impugned notice, dated 26-5-2005 under section 62 of the Income Tax Ordinance, 1979, it will be advantageous to reproduce the same in verbatim, which reads thus:
"The Principal Officer
M/s. ICI Pakistan Limited
ICI, House 5 West Wharf
P.O. Box # 4731
Karachi 740000
SUB: PROCEEDINGS FOR ASSESSMENT YEAR 2002-2003 NOTICE UNDER SECTION 62 OF THE INCOME TAX ORDINANCE, 1979.
Dear Sir,
On examination of the return of the total income for assessment year, 2002-2003 and the details filed by your good self this office has deduced some findings. One of the findings in this regard is that the effective date of the de-merger is the Completion date of the scheme of arrangement as envisaged in the definitions given in the same scheme. The said definition is reproduced below for the facility.
| Completion Date: | Means the day on which this Scheme becomes effective pursuant to paragraph 29 hereof. |
| Paragraph 29: | This Scheme shall become effective as soon as a certified copy of an order or orders of the Court under section 284 of the Companies Ordinance, 1984 sanctioning this scheme is filed with the Registrar of Companies, Karachi. Unless this Scheme shall have become effective as aforesaid on or before December, 31, 2001 or such later date (if any) as the Court may allow, this Scheme shall not become effective. |
The date of the order of Honourable Sindh High Court is 23rd July, 2001 and the same order was filed with the Registrar of the Companies, Karachi on the subsequent date. This makes it abundantly clear that effective date is the completion date falls in assessment year, 2002-2003. In view of the same all remaining findings rest on the very basis that the event of de-merger took place on the completion date which falls in the assessment year under consideration. In view of those findings this office intends to make following additions in your declared version of total income.
1. Capital gain on transfer of undertaking
In the year under consideration your company has transferred your PTA plant to another company which is incorporated with title of Pakistan PTA Ltd. This transfer of the plant is not a transfer of an asset but of a whole `undertaking' along with its all properties. and liabilities. In other words it is a transfer of a `Going Concern'.
Undertaking, a capital asset for purpose of section 27.
Since the definition of `capital assets' as given in the section 2(12) of the Income Tax Ordinance, 1979 is inclusive in nature hence `undertaking' is also a capital asset and any gain arising from its transfer is liable to tax under the head `capital gains' as laid down in section 27 of the Income Tax Ordinance, 1979. It is pertinent to clarify here that capital assets which are excluded from the definition of capital assets for the purpose of this section are those on whom depreciation is admissible under the Third Schedule and `undertakings' as such are not mentioned in any class of the assets listed down in Third Schedule to the Income Tax Ordinance, 1979.
Relevant case laws
(i) The Kerala High Court has held in Karvalves Ltd. v. CIT(1992) 197 ITR 95 that the definition of capital asset includes undertaking also. The facts of this case are that the assessee-company had a right to distribute the electricity in the Princely State of Cochin. Subsequently the assessee-company transferred the undertaking to Kerala Electricity Board. The consideration was fixed by the Board as a whole and solatium. One of the questions referred to Kerala High Court is that whether the definition of capital assets includes undertaking and whether transfer of undertaking will be subject to capital gains tax. The Kerala High Court after relying on the decision of Gujarat High Court .in various decisions and the decision of Madras High Court in West Coast Electric Supply Corporation Ltd. v. CIT (1997) 7 ITR 483 has held that the definition of capital asset includes the profit making apparatus and therefore the transfer of undertaking would be subject to capital gains tax.
(ii) The Karnataka High Court in Syndicate Bank Ltd. v. Addl. CIT (1985) 155 ITR 681 has held that the definition of capital asset under the Income Tax Act, 1961, is an inclusive definition. It was observed that the term capital asset has all embracing connotation and includes every kind of property except those that are expressly excluded from the definition. It includes every conceivable thing, right or interest or liability. The Karnataka High Court relied on the observation of Supreme Court in Rustom Cavasjee Cooper v. Union of India (1970) 40 Comp. Cas 325 wherein Supreme Court has observed that the expression, property in entry 42. list III, has a wide connotation and it includes not only assets, but also the organization, liabilities and obligations of a going concern as a unit. In view of this the Karnataka High Court has held that the undertaking is a capital asset.
(iii) In Indian Bank Ltd. v. CIT (1985) 153 ITR 282, the Madras High Court has observed that the expression capital asset includes undertaking also.
(iv) The Madras High Court in West Coast Electric Supply Corporation Ltd. v. CIT (1977) 107 ITR 483 has held that the word property in the definition of capital asset includes "undertaking" also.
Computation of capital gain
The cost of acquisition of `PTA undertaking' for the purpose of the computation of the capital gains is its net worth prior to revaluation of its assets. The consideration for the transfer, which ICI Pakistan should have received, must not have been less than the net worth of the undertaking after the revaluation immediately prior to the de-merger. It is therefore very, obvious that the shares required to be issued by Pakistan PTA as a consideration should have been equal to the net worth of the undertaking after re-valuation (which is the minimum reasonable consideration for the undertaking) irrespective of the arrangement for their distribution between ICI and its shareholders had been decided. The PTA instead of issuing shares of 12.555 B rupees have issued shares of only 5.047 B rupees, a value which is much less than its net worth as at the time of merger after re-valuation. The consideration given is much less than the reasonable basis which under the corporate prudence/law must be on proportionate basis. This has been done only with one purpose that is to avoid tax on the capital gains. The issuance of 12.555 B capital in favour of Pakistan ICI and its shareholders would have made this whole transaction as a taxable event under section 27 of the Income Tax Ordinance, 1979 but the same has been camouflaged by issuing less share capital. In view of this avoidance of tax arrangement this office intends to exercise the powers vested in this office vide section 27(3) and assess the consideration received in respect of the transfer of the undertaking at 12.555B which is its net worth on revaluation in order to lift veil' on capital gain arising from this arrangement. The resultant gain consequently would be added back in to your total income under the head `capital gains'. In case you have any explanation/defence against this intended addition please let this office know about it.
(2) Exchange of shares with Pakistan PTA Shareholders
Regarding exchange of 12.618.391 shares of Pakistan ICI, a de-merged company against 126.183.909 M shares of PPTA shares it is pertinent to mention that the face value and market value of these Pakistan ICI shares at that point of time was Rs.126.184.000 and Rs.167.824.600 (Rs.13.3 per share) respectively; where as the face value and the break-up value of the shares of the Pakistan PTA was Rs.1.261.840.000 and Rs. 1.955.000,000 respectively. This shows that de-merged company made a capital gain of Rs.1.787.175.400 on this exchange of shares. This office therefore intends to tax this gain under section 27 of Income Tax Ordinance, 1979. In case you have any explanation/defence against this intended addition please let this office know about it.
(3) Loans Subordinate to Pakistan PTA
Financial charges paid in respect of loans subordinate to PPTA would be disallowed being not incurred for the purpose of carrying out business of the de-merged company. Alternatively it is intended to tax the receipts of interest on the same loans from PPTA as `other income' as appears in the final statements of your company. In case you have any explanation/ defence against this intended addition please let this office know about it.
(4) Allocation of Expense Against Presumptive Income
There are various receipts of your company which fall in the ambit of the Presumptive Tax Regime. This office intends to allocate only those COGS sold, in respect of sale of imported finished goods, sale of locally purchased finished goods export of own manufactured goods, earning of indenting commission, which are actual costs as per cost flow chart of cost accounting.
This methodology of allocation of costs in respect of receipts of PTR would be in accordance with the section 67 of Income Tax Ordinance, 2001 read with rule 13 of Income Tax Rules, 2002. The financial and General and Administration expenses would be prorated in accordance with ratio of the receipts falling under the normal law and PTR. In case you have any explanation/defence against this intended addition please let this office know about it.
(5) Commission. Inadmissible under section 24(b)
Discount which does not appear in the invoices cannot be treated as reduction in the price as envisaged under the Sale Tax Act. The nature of such expense is nothing but a commission to encourage the sale by the distributors. You were required under the law to withhold tax under section 50(4A) of Income Tax Ordinance, 1979 and failure to do so makes this expense inadmissible under section 24(b) of the same Ordinance. In case you have any explanation/defence against this intended addition please let this office know about it.
(6) Transaction with associated undertaking
Transaction with associated undertaking Pakistan PTA is not at arms length. The price per metric tonne paid to this related party for purchase of PTA was much more as compared to the rates at which it was being sold in international markets. The excessive price cost in respect of purchase of PTA in your polyster business would be disallowed after lifting veil from this transaction with the associated party. In case you have any explanation/defence against this intended addition please let this office know about it.
(7) Inadmissible Provisions
Provisions created in respect of Bonus, Long term Bonus. Voluntary Severance Scheme, Local tax and Post Retirement Bonus Scheme are mere provisions and contingencies. Their quantum is also not ascertainable. In view of this fact these are inadmissible expenses under provisions of the Income Tax Ordinance. In case you have any explanation/defence against this intended addition please let this office know about it.
(8) Writing off Obsolete Stocks. Discount. Bebts Etc.
The provisions in respect of obsolete items, stock, doubtful debts and discount payable are not admissible under the law hence would be added back in your total income. In case you have any explanation/defence against this intended .addition please let this office know about it.
(9) Excess Perquisites
Excess perquisites including company maintained cars, interest free loans/advance and medical benefits would be added back under section 24(i) of Income Tax Ordinance, 1979. In case you have any explanation/defence against this intended addition please let this office know about it.
(10) Exchange gain and interest paid to ICI Japan
Interest/Financial charges paid in respect of loan obtained from ICI Japan is inadmissible under section 24(b) of Income Tax Ordinance, 1979 because no tax was withheld under section 50(3) at time of making the said payment. Similarly exchange gain arisen to ICI Japan on principle amount of loan is liable to tax in Pakistan and you were required to withhold tax on this amount while returning the principle amount under section 50(3). Since you have failed to deduct tax in respect of these two payments hence these expenses would be disallowed under section 24(b) of the Income Tax Ordinance, 1979. In case you have any explanation/defence against this intended addition please let this office know about it.
(11) Add Backs From P&L Account
Add backs from various heads of P&L account would be made as per history of the case because of their personal as well as unverifiable nature. In case you have any explanation/defence against this intended addition please let this office know about it.
(12) Claim of Accumulated BF Depreciation and Business Loss of PTA Undertaking
Regarding claim of brought forward unabsorbed accumulated depreciation and the business losses it is worthy to mention that the major part of it pertains to the PTA undertaking which is already transferred to Pakistan PTA. The said PTA undertaking represented one line of the business which is terminated/ extinguished by the de-merged company. Any line of the business which is no more continuing cannot carry forward its unabsorbed accumulated depreciation and the business losses. Moreover the transfer of an undertaking under scheme of arrangement is not a mere disposal. It is for the same reason that the transfer of PTA plant is not treated as a disposal as laid ' down in Third Schedule to of the Income Tax Ordinance, 1979.
It is also for the same reason that the accounting losses of the de-merged company are reduced accordingly by professional accountants and conformed by the auditors. In case of the disposal of the part or some of machinery of operating plant the accounting loss is netted off against the sale proceeds. In the instant situation no such netting off exercise has been undertaken but the whole accounting loss has been transferred to Pakistan PTA. It explains that when capital asset is transferred as a `going concern' the whole line of business ends and no netting off is needed and the depreciation which remains unabsorbed automatically vanishes. In view of these facts this office intends not to allow the claim of BF forward unabsorbed accumulated depreciation and the business losses. This treatment would also be in line with the relevant provisions of the Income Tax Ordinance, 1979. In case you have any explanation/defence against this intended addition please let this office know about it.
You are offered an opportunity of being heard through this letter, as envisaged under section 62 of Income Tax Ordinance, 1979, to put up any defence, if any, against the proposed assessment discussed hereinabove.
You are requested to send your response by 4-6-2005.
Looking forward to your cooperation in early completion of assessment in your case.
(Najeeb Ahmed)
Taxation Officer-X
Audit Division
Large Taxpayers Unit Karachi"
16. Since the impugned notice, dated 26-5-2005 (reproduced above) has been issued by respondent No.2 by invoking jurisdiction under section 62 of the Income Tax Ordinance, 1979 and the question of maintainability of this petition has also been raised, inter alia, in the same context, it will also be useful to reproduce hereunder section 62 of the Income-tax Ordinance, 1979, which reads thus:
"(62) Assessment on production of accounts evidence etc.---(1) The Deputy Commissioner, after considering the evidence on record (including evidence, if any, produced under section 61) and such other evidence as the Deputy Commissioner may require, on specific points, shall, by an order in writing, assess the total income of the assessee and determine the tax payable by him on the basis of such assessment:
Provided that where the assessee produces books of accounts as evidence in support of the return, the Deputy Commissioner shall, before disagreeing with such accounts, give a notice to the assessee of the defects in the accounts and provide an opportunity to the assessee to explain his point of view about such defect and record such explanation and the basis of computation of total income of the assessee in the assessment order.
(2) Where a person is authorized by the Central Board of Revenue under section 7 to assist the Deputy Commissioner in making an assessment and the Deputy Commissioner in making an assessment and the Deputy Commissioner disagrees with the opinion of such person on any point concerning assessment, the Deputy Commissioner shall record, in the order under subsection (1), the opinion of such person and the reasons for his disagreement with such opinion."
17. A plain reading of the above quoted provision of law shows that under subsection (1) the Deputy Commissioner is empowered to asses the total income of the assessee and determine the tax payable by him on the basis of such assessment, after considering the evidence on record and such other evidence as he may require on specific points from the assessee. The proviso to subsection (1) of section 62 requires the Deputy Commissioner that in case he intends to disagree with the books of accounts produced by the assessee as evidence then before doing so he has to give a notice to the assessee of the defects in the accounts and provide him an opportunity to explain his point of view about such defects and record necessary explanation and the basis of computation of total income of the assessee in the assessment order. Further, sub-section (2) of section 62 deals with the situation where under section 7 some person is authorized by the Central Board of Revenue to assist the Deputy Commissioner in making an assessment and the Deputy Commissioner disagrees with the opinion of such person on the point concerning assessment, then the Deputy Commissioner is required to record such opinion and also reasons for his disagreement with the opinion of such person.
18. Reverting to the contents of impugned notice, it will be seen that this detailed notice, in the first place, carries the opinion of respondent No.4 as regards the effective date of de-merger for income-tax assessment purposes, deduced by him from the record made available before him by the petitioner. He has also made reference of some cases from Indian jurisdiction to gain support for his view, and unfolded certain other points to seek explanation of petitioner on these points. In the end he has also invited them to hear their viewpoint in this regard. Such action, prima facie, seems to be well within the four corners of section 62 (ibid) and does not show any mala fide or element of lack of jurisdiction c: the concerned officer.
19. Before further scrutinizing the facts of the present petition it will be useful to scan some judgments of the superior Courts with reference to the controversy of maintainability involved in the present petition in the context of availability of other alternate remedy, but not availed by the petitioner.
(a) In the case of Pakistan and the Assistant Collector, Central Excise (PLD 1962 SC 440), the Hon'ble Supreme Court while examining the issue of maintainability of writ petition, despite availability of remedy of appeal before the Collector of Customs, held that if such ground regarding availability of other remedy of appeal was not raised before the High Court it will not be tenable before the Supreme Court for the first time.
(b) In the case of Abdul Ghani and another (PLD 1968 SC 131), it was held by the Hon'ble Supreme Court that anything done beyond or in excess of powers conferred by statute can be brought within the power of avoidance vested in the High Court. In such case High Court can examine, if the officer concerned has acted in accordance with the powers conferred upon him by the statute or has acted in excess of his power, in which case his order is susceptible to interference by the High Court in its writ jurisdiction.
(c) In the case of Messrs Usmania Glass Sheet Factory Ltd. Chittagong (PLD 1971 SC 205), it was held that where dispute arising between the parties is in respect of fiscal right based on statutory instruments, such controversy can be determined in writ jurisdiction.
(d) In the case of Messrs Julian Hoshang Dinshaw Trust and others (1992 PTD 1), it was held by the Hon'ble Supreme Court that Constitutional jurisdiction under Article 199 can be exercised in appropriate cases, involving fiscal rights, on the allegations of misapplication of law or abuse of power stepped in to examine whether or not public functionary concerned acted in accordance with the powers conferred on him by the statute.
(e) In the case of Standard Chartered Bank (PLD 2001 Karachi 344), the Division Bench of Sindh High Court dealing with the issue of maintainability of Constitutional petition in the wake of availability of alternate, adequate and efficacious remedy to the aggrieved party examined plethora of case-law on the subject and held as under:
"A rule has been established, by virtue of which a party aggrieved of any order' of a public functionary has to seek remedy through the forum provided under the Statute under which the public functionary was exercising powers, if a forum is provided thereunder. It is only after the legal remedy, available to an aggrieved party has been exhausted that he would have the right to invoke the Constitutional jurisdiction of High Court. However, an exception has been made to this general rule of resorting to alternate, adequate and efficacious remedy. This exception relates to an action and/or, order of a public functionary, which on the face of it appears to be illegal, unlawful and void. It was further held that bar for invoking the writ jurisdiction was not an absolute rule but a rule by which Court regulated its jurisdiction, thus, if the order of the authority, partials unjust and mala fide then the High Court would not refuse to exercise its jurisdiction in spite of the fact that the aggrieved party had appropriate or adequate remedy available to him for correction thereof."
(f) In the case of Pak-Saudi Fertilizer Limited (2000 PTD 3748) it was held by the Apex Court that where the impugned order of demand was without jurisdiction and unlawful then there would be no bar to the filing of constitutional petition under Article 199 of the Constitution.
(g) In the case of Ujjala Cotton Mills Ltd. (NLR 1980 Tax 30) examining the question of invocation of writ jurisdiction in Income Tax matters it was held by learned Single Judge of Lahore High Court that notice issued by the ITO conveying not only threat but also communicating his decision about re-opening of assessment would be open to challenge and interference in writ jurisdiction.
(h) In the case of Shagufta Begum (PLD 1989 SC 360), the Hon'ble Supreme Court while dealing with an order of High Court dismissing the writ petition filed by the petitioner against the issuance of notice under section 65 of the Income Tax Ordinance by the Income Tax Officer for reopening her earlier assessment case, so as to make reassessment vis-a-vis examining the question of maintainability of Constitutional petition under Article 199 of the Constitution, held that when the questions raised in the petition were not such which could not have been dealt with/commented upon the Income Tax Officer in a proper regular hearing on the purported assumption of jurisdiction under section 65, Income Tax Ordinance, 1979, departmental remedy being speedier, it was in the interest of litigants themselves to choose the speedier remedy with the departmental authorities and thereafter, if need be, invoke the extraordinary jurisdiction of High Court.
(i) In the case of Messrs H.M. Abdullah (1993 SCMR 1195), when the notice under section 65 of the Income Tax Ordinance, 1979 was challenged through Constitutional petition, it was held that the assessee was not entitled to invoke the Constitutional jurisdiction of High Court and bypass the remedy available under the Ordinance, as any decision taken by the Income Tax Officer could have been challenged through appeal before the high forum and then in second appeal before the Tribunal, more particularly when the questions urged in the Constitutional petition, could be raised before the Income Tax Officer.
(j) In the case of Income Tax Officer and another (1993 SCMR 1108), when the action of income tax authorities in the form of notice under section 65 of Income Tax Ordinance, 1979 was challenged before the High Court in its Constitutional jurisdiction under Article 199. Such practice was disapproved by the Hon'ble Supreme Court, and mode of availing of alternate remedy even in tax matters, was suggested.
(k) In the case of Hyderabad Chamber of Commerce and Industry (1998 SCMR 206), order of the High Court dismissing Constitutional petition on the ground of availability of alternate remedy to the petitioner was maintained by the Hon'ble Supreme Court with the observation that High Court had rightly dismissed the petition on the ground of alternate remedy available to the petitioner.
(l) In the case of Hafiz Muhammad Arif Dar (60 Tax 52) it was held by the Hon'ble Supreme Court that one of the conditions for grant of relief in writ jurisdiction of High Court is that the petitioner before it should not have any alternative adequate remedy, where remedy by way of appeal was available against the impugned order, then no relief could be granted to the petitioner under Article 199 of the Constitution. It was further observed that amongst others petitioner can file a complaint and grievance application before the Federal Ombudsman who can provide effective redress as that forum has several attributes of a Court in many aspects of its powers and it can also move in a matter promptly whenever is needed. Further it does not suffer from some of the handicaps, due to the technicalities of procedural nature, which operate as impediments or thwart such like action by the Courts.
(m) In the case of Nagina Dal Factory (18 Tax 1) it was held by the Hon'ble Supreme Court that when a statute, under which action is taken itself provides remedies, recourse must be had to those remedies first. Direct access to High Court for relief in its writ jurisdiction, thus bypassing the special forums, which are created by the special law itself, was considered riot permissible.
(n) In the case of Roche Pakistan Limited (2001 PTD 3090) when the question of maintainability of constitutional petition came up for consideration before a Division Bench of this Court with reference to notice under section 62 of the Income Tax Ordinance issued by the Deputy Commissioner Income Tax, it was held that such notice if in accordance with law and not without jurisdiction or mala fide cannot be assailed by filing of petition under Article 199 of the Constitution. It was further held that adequate alternate remedy by way of appeal before the Commissioner of Income Tax, a second appeal before the Income Tax Appellate Tribunal and thereafter reference to the High Court under section 136 of the Income Tax Ordinance, 1979 being available to the assessee, the petition under Article 199 of the Constitution was not maintainable.
(o) In the case of Tariq Mehmood and another (2001 MLD 1494) it was held that constitutional petition against show-cause notice was not maintainable.
(p) In the case of Sitara Chemicals (2003 PTD 1285) when notice under section 62 of the Income Tax Ordinance, 1979 was challenged through constitutional petition it was held by a Division Bench of this Court that availing of constitutional remedy, without exhausting statutory remedy was not warranted by law as by virtue of such provision of Income Tax Ordinance it was within the jurisdiction of the DCIT to seek clarification, explanation and point of view of the assessee on the questions which may arise in his mind before passing of order of assessment of income and determine the tax payable. Other learned Member of the Bench, concurring with such view, had made further reference to several other cases to add force to the conclusion recorded in the said judgment. The petition was dismissed as premature and without substance.
20. Reverting to the facts, when the other material available on record is carefully examined for the purpose of considering the question of maintainability of this petition vis-a-vis availability of any other alternate efficacious, and adequate remedy to the petitioner, it will be seen that in the impugned notice, dated 26-5-2005 the respondent No.4 has unfolded the details on the basis of which he intends to initiate proceedings against the petitioner-company. There is no denial of the fact from the petitioner side that after service of this notice they had twice/thrice taken adjournments from respondent No.4 for submission of their reply to such notice. But thereafter instead of submitting their reply to the impugned notice they have preferred this Constitutional petition. Such conduct of the petitioners, prima facie, reflects lack of bona fide on their part in approaching this Court. The learned counsel for the petitioner when particularly asked for any plausible explanation for non-submission of their reply to the impugned notice, before the respondent No.4 could not submit any satisfactory answer, except that since the petitioner have challenged the very jurisdiction of the respondent No.4 for initiating proceedings under section 62 of the Income Tax Ordinance, 1979, therefore, it was not necessary for them to have submitted their reply before him or to follow any further remedy before the departmental authorities.
21. Indeed availability of alternate remedy has not been considered as an absolute bar for this Court for exercising its Constitutional jurisdiction under Article 199 of the Constitution in appropriate cases, despite non-availing such alternate remedy. Further, in fiscal matters the superior Courts have been more liberal in exercising their Constitutional jurisdiction, keeping in mind financial constraints, which may be the compelling reason for the aggrieved party to bypass the alternate remedy, as due to such financial constraints the departmental remedy might loose its efficacy. However, in the present petition even the question of availability of alternate remedy by way of appeal and its efficacy or adequacy seems to be premature, as at this stage neither there is any adverse order against the petitioner nor the impugned notice has created any financial liability on the petitioner, but only some explanations have been sought and opportunity of hearing has been provided to them, which is in conformity to the spirit of proviso to subsection (1) of section 62 (ibid). In such circumstances, when instead of submitting their reply the petitioners have taken the course of filing this Constitutional petition. Such practice cannot be approved.
22. Moreover, there is no denial of the fact that the Officer who has issued the impugned notice under section 62 of the Income Tax Ordinance, 1979 is seized of the assessment case of the petitioner for the year, 2002-2003 and thus in that context has jurisdiction to call upon the petitioner company to give reply to the queries made in the impugned notice. We are, therefore, in full agreement to the submission of departmental representative Dr. Masood Tariq that there is no valid justification for us to proceed readily with the presumption of mala fide against the respondent No.4 merely for the reason that he has issued the impugned notice, dated 26-5-2005, calling upon the petitioner for their explanation/reply, and affording them an opportunity of hearing in the matter.
23. It is also pertinent to mention here that queries made in the notice not only involve the question of law, mainly agitated in the present petition, but also number of other factual queries, which could be answered only after examination of the relevant record and submission of explanation by the petitioner, before respondent No.4. In such circumstances, bypassing the stage of submission of reply to the impugned notice by the petitioner seems to be a device to avoid facing proceedings before the respondent No.4, who has jurisdiction for this purpose in terms of section 62 of the Income Tax Ordinance, 1979. After careful examination of the whole material placed on record by the petitioner, we feel that exercise of writ jurisdiction in the instant petition at this stage, will amount to usurpation of powers of the departmental authorities to adjudicate the assessment case of the petitioner at their level in accordance with law, in a more comprehensive manner after investigation of all factual and legal aspects of the case. The rule of propriety also demands that if question of jurisdiction is involved in a matter, in the first instance, such objection should be raised before the authority whose jurisdiction has been challenged and thereafter, if need be, further course available under the relevant provisions of law should be followed by the aggrieved party, instead of approaching this Court directly in its Constitutional jurisdiction on the pretext that the concern authority/respondent No.4 has no jurisdiction to issue impugned notice or that available remedy is not adequate, efficacious or effective.
24. In several cases discussed above this Court as well as Hon'ble Supreme Court had taken notice of the fact that mere issuance of notice would not furnish sufficient cause for invoking Constitutional jurisdiction instead of submitting reply of such notice, waiting for the decision of departmental authority and then, if necessary, following further statutory remedy. Further, the rule of bar of jurisdiction due to availability of alternate remedy provided under Article 199 of the Constitution should be given due weight, depending upon the facts and circumstances of each case.
25. Submission of Mr. Abdul Hafeez Pirzada that since the effective date of de-merger has been decided by the Company Judge of this Court vide his order, dated 23-7-2001, therefore, the whole action taken by the respondent No.4 in terms of impugned notice, dated 26-5-2005 is unwarranted by law, is one, which is debatable, particularly with reference to the submissions of Mr. A.R. Akhtar, thus it could also be agitated before respondent No. 4, thereby providing him an opportunity to decide the question of jurisdiction in that context. Apart from it this point alone will not make the whole action taken by the respondent No.4 in terms of impugned notice under section 62 of the Income Tax Ordinance, 1979 without jurisdiction.
26. For the foregoing reasons, we are of the view that this petition is F premature, not maintainable in law and is liable to be dismissed as such. Order accordingly.
27. Before parting with this order, we may observe that since we have dismissed this petition on the point of maintainability, therefore, we have refrained from commenting upon various other legal points argued before us, so that no prejudice is caused to the interest of either party during the proceeding before respondent No.4 in furtherance to the impugned notice. To avoid any prejudice to the interest of the respondents due to the passing of interim order, dated 14-6-2005, which remained in force since then, it is further observed that the period consumed during the operation of such interim order will stand excluded for the purpose of further proceedings in terms of the impugned notice.
M.H./I-2/KPetition dismissed.