2008 P T D (Trib.) 1312
[Income-tax Appellate Tribunal Pakistan]
Before Ehsan ur Rehman, Judicial Member and Naseer Ahmad, Accountant Member
I.T.As. Nos.308/LB to 310/LB of 2007 and M.As. Nos.308/LB to 310/LB of 2007, decided on 28/07/2007.
(a) Income Tax Ordinance (XLIX of 2001)---
----Ss. 224 & 176---Income Tax Ordinance (XXXI of 2001), S.158---Qanun-e-Shahadat (10 of 1984), Art. 1(2) & 146---Income Tax Appellate Tribunal Rules 1981, R.13---Proceedings under the Income Tax Ordinance to be judicial proceedings---Notice to obtain information or evidence---Filing of affidavit---Summoning the First Appellate Authority in person by the Appellate Tribunal---Validity---Associating the two officers of the First Appellate Authorities by the Appellate Tribunal was quite legal, fair, just which was required as per law as well as under doctrine of natural justice---Non-compliance by the First Appellate Authorities was against the law and also official conduct which was required as a government functionary---Attempt for associating the two First Appellate Authorities in the proceedings were quite just, legal, fair, proper, important and judicious---Non-compliance had not only caused a serious prejudice to the interest of Revenue but had given a vested right to the aggrieved party (the applicant) to claim the correctness of its duly substantiated stance/contentions with affidavits, giving legal justification to Appellate Tribunal to draw adverse inference from the conduct/ expressions of the two First Appellate Authorities and to allow the necessary relief by accepting what had been stated by duly corroborated affidavits.
(b) Income Tax Ordinance (XLIX of 2001)---
----S. 224---Income Tax Ordinance (XXXI of 2001), S. 158---Judicial proceedings---Proceedings under the Income Tax Ordinance to be judicial proceedings---Appellate Tribunal is vested with power/authority to call for any evidence and summon any person when particularly prayed for by another contending party on its own for reaching to a proper conclusion for holding a judicious view---Calling for affidavit and or counter -affidavit which authority could be exercised as Appellate Tribunal is empowered under specific provisions of Qanun e-Shahadat, 1984 and Income Tax Ordinance, 1979---Facts which could not be borne out from record were to be supported by affidavit and to challenge the contents of such affidavit, counter-affidavit could be submitted do its own by opposing party or on specific directions of the Appellate Tribunal for arriving at just conclusion, so Appellate Tribunal could also order for submission of counter-affidavit---Such powers were vested in the Appellate Tribunal firstly by drawing force from the provisions of Qanun-e-Shahadat, 1984 which had specifically been made applicable to the Appellate Tribunal---Proceedings under the erstwhile and also under the Income Tax Ordinance, 2001 were judicial proceedings as per provisions contained in S.158 of the Income Tax Ordinance, 1979 and Income Tax Ordinance, 2001.
(c) Income Tax---
----Affidavit---Proceedings before the Appellate Tribunal were judicial proceedings and without submitting the counter-affidavit contradicting the appellant/assessee's assertion, counter-claim/contention could not be accepted as true of the other party opposing it.
PLD 1957 SC Pak. 91; 2001 PTD 1002; 2001 MLD 1257; 1991 MLD 1243; 2005 PTD (Trib.) 1364 and 2001 PTD 3545 rel.
(d) Income Tax Ordinance (XLIX of 2001)---
----S. 129(7)---Decision in appeal---Despite putting initials on application filed in terms of S.129(7) of the Income Tax Ordinance, 2001, not recording entry in the order sheet was an attempt just to deprive the assessee of his legal right and cover own faults.
(e) Income Tax Ordinance (XLIX of 2001)---
----S. 129(7)---Decision in appeal---Glaring deficiencies/discrepancies in the order sheet amount to flouting with impunity norms of judicial propriety/decency which warrants acceptance of the contentions taken by the assessee that the authority at the first appeal stage failed to be exercised in a judicial manner rather speaks of vindictiveness.
1996 PTD 279; 2000 PTD 39 and 2005 PTD 862 rel.
(f) Income Tax Ordinance (XLIX of 2001)---
----S. 129(5), (6), (7)---Decision in appeal---Service of notice---Proceedings of appeal in a casual manner by not fixing the appeal within the stipulated time and on being becoming aware of assessee's vested right---Validity---Relief became due to the assessee because it was refusal to receive prescribed applications that these were duly sent through Registered Post as well as through private courier---Applications were available on record bearing the initials of First Appellate Authority---By putting up signatures on such applications, it had manifestly been made clear that notices were served personally and failure to take cognizance of such notices by both the predecessor viz. the successor in office, had made the assessee entitled to relief under the provisions of S.129(5)(6), (7) of the Income Tax Ordinance, 2001 by acceptance of appeal as per prayers contained in appeals---Predecessor in office had not refuted in her affidavit that she refused to receive the applications under S.129(7) of the Income Tax Ordinance, 2001 and that the receipt through postal AD/Courier/by Dak through special messenger of the assessee---Successor in office preferred to proceed in a similar casual manner by not fixing the appeal within the stipulated time and on being becoming aware of assessee's vested right, still had not allowed relief by-operation of law, such negligence was not pardonable at the level of appellate forum---Prior to proceedings, for exercising the authority/jurisdiction over it the First Appellate Authority, was legally beyond to take serious notice of vested right created in favour of assessee by operation of law in terms of S.129(7) of the Income Tax Ordinance, 2001 debarring not only issuance of call notices resultantly intimating the fixation but also passing the order by adjudicating the grounds or in other words deciding the appeals on merits as relief sought was treated to have been given under S.129(6)(7) of the Income Tax Ordinance, 2001---Order had become illegal, which merited cancellation; to make it further clear, firstly issuing the notice intimating the fixing of appeal by the First Appellate Authority was illegal, thereafter adjudicating grounds of appeal, deciding the appeal was also illegal because relief sought in appeal was treated to have been given in terms of S.129(5) of the Income Tax Ordinance, 2001---By another manner assessee had been denied another vested right by betrayal by adjourning the appeals still same had been disposed of by marking, 'non-appeared' on exactly the same dates the Authorized Representative marked present by the First Appellate Authority in other cases---Order passed under S.122(5A) of the Income Tax Ordinance, 2001 stood vacated and orders subjected to action under S.122(5A) of the Income Tax Ordinance, 1979 stood restored to its original position and statement filed under S.143-B of the Income Tax Ordinance, 1979 and under S.115(4) of the Income Tax Ordinance, 2001 stood accepted---Such was a matter of concern for higher ups in the administrative structure of the department to take cognizance of lapses and of such attitude of both the First Appellate Authorities who happened to be first appellate forum importantly should not have allowed to take place unjust, illegal acts at their own level as well as in its office and making assessee victim of such discrepancies when vested legal right was brought to the notice of First Appellate Authority by the assessee---Negative relation to it, however, had been shown whereby the assessee had been made to suffer loss which was unbecoming of judicial officer.
(1978) 114 ITR 19; PLD 1966 Lah. 16; PLD 1987 Quetta 141; 1993 PTD 206; 2001 PTD 1002; 2001 MLD 1257; 1991 MLD 1243; 2005 PTD (Trib.) 1364; 2001 PTD 3545; 1996 PTD 279; 1996 PTD (Trib.) 282; 2000 PTD 39; 2005 PTD 862; 2005 PTD 872; 2006 PTD 2439; PLD 1957 SC 91 and 2001 MLD 1257 rel.
(g) Income Tax Ordinance (XLIX of 2001)---
----S. 129(7)---Decision in appeal---Remarks of Appellate Tribunal on not allowing relief by the First Appellate Authority became due by operation of law---Order passed by the First Appellate Authority at the best could be described as worst shape of violation of, non-adhering to, non-compliance with, the expressed legal provisions as well as implementation of judgments of High Courts, further adding to the worst in allowing the adjournment, but still on the fixed date concluding the proceedings for deciding the appeals by marking the Authorized Representative as not present, this speaks so badly of personal behaviour of a judicial officer---Such behaviour was unbecoming of a judicial officer as well as of administration, it was unforgivable conduct, even in an uncivilized set-up this would not be permitted---Judicial officers were to establish high moral standards in their conduct which in the present case was totally absent---Conducting in such a way the judicial proceedings was in fact to circumvent the confidence building measures/steps taken by the Government of Pakistan viz. the Revenue Division; at the highest level these required to be probed into sabotaging the confidence-building steps even by the higher officers who were associated for policy making by Central Board of Revenue---Assessee through his Authorized Representative had set an excellent example of pursuing for a legal right steadfastly with perseverance and endurance---Assessee had been forced to face this ordeal simply on seeking a legal relief in a legal manner---Assessee's miscellaneous applications and appeal succeeded.
Shahbaz Butt for Appellant.
M. Akram Tahir, D.R. for Respondent.
ORDER
EHSAN-UR-REHMAN (JUDICIAL MEMBER).---The main appeals as titled above are taken up which are directed against the single combined order, dated 28-2-2007.
2. The facts in brief of the case are that by an order under section 221 of the Income Tax Ordinance, 2001 that refund determined by rectification order under section 221 of the Income Tax Ordinance, 2001 when was claimed to be refunded that proceedings were initiated under section 122(5A) of the Income Tax Ordinance, 2001. Undisputedly the assessee is liable to tax under the presumptive tax regime for deriving income by working as commercial importer as well as the supplier of the same products. The appellant/assessee claimed refund of tar deducted under section 50(4) (of the Repealed Income Tax Ordinance, 1979) by Messrs Concepts (Pvt.) Limited on account of supply of goods imported by it. The entire supplies were made solely to Messrs Concepts (Pvt.) Limited. It is of vital importance that the request for refund voucher was firstly dealt with by an order under section 221 of the Income Tax Ordinance, 2001 by determining the amount of refund became due as a result of deduction of tax at source under section 50(4) of the Repealed Income Tax Ordinance, 1979 by Messrs Concepts (Pvt.) Limited. The facts which have been stated by the assessee, before the Honourable Supreme Court as well as before the Honourable Lahore High Court in a constitutional remedy to challenge the issuance of notice under section 122(5A) of the Income Tax Ordinance, 2001 are that refund voucher for the three impugned years was prepared vide voucher, one Book No.12755 along with advice. After the approval of it by the Commissioner vide letter No.109/J, dated 31-8-2005 the refund voucher was ordered to be issued vide letter No.311, dated 5-9-2005. Such issuance of refund voucher after approval by the Commissioner concerned was never denied. It is quite relevant to mention here that appellant/assessee took up the matter for the refundable amount before the learned F.T.O. who ordered for refunding the claimed amount by the appellant/assessee. On a representation. from the department, the Honourable President of Islamic Republic of Pakistan set aside the learned F.T.O's. recommendation, with the direction that appellant/assessee to prove to the satisfaction of the Commissioner that the goods supplied were the same on which the tax has been collected by the Collector of Customs at the import stage for admissibility of the income tax refund claimed. The learned F.T.O's. recommendations are, dated as 17-8-2005 whereas its setting aside are vide directions, dated 12-5-2006. The matter when was agitated through a constitutional petition on the issuance of notice under section 122(5A) of the Income Tax Ordinance, 2001 when pursued up to the level of the Supreme Court of Pakistan upheld the judgment of the Honourable Lahore High Court that no interference by constitutional jurisdiction is called for and alternate remedy as prescribed in Income Tax Ordinance are found available for the appellant/assessee.
3. Now before us it is upholding of a single combined order passed under section 122(5A) by the learned 'First Appellate Authority that appellant has come in appeal in this Tribunal. The Assessing Officer for assessment year 2002-03 has contended that supporting evidence against the claim has not been provided. For tax years 2003 and 2004, it has commonly been contended by the Assessing Officer by quoting three instances of variation in dates at three occasions where the sales tax invoices bear a date which is three days after the date of entry as per stock-register, showing the sale of material. Importantly in all the years it has been contended by the Assessing Officer that value of goods supplied declared was much higher than the value as declared for the imports under the requisite statutory statement. The Assessing Officer concluded the order with the following paras:---
"It has been observed that in the assessment year 2002-03 a deduction of Rs.1,145,792 is appearing whereas the return is silent about the corresponding import. The deduction it worked back gives an import of Rs.32,736,914 which is not appearing on the return. In the Tax Year 2004 a deduction at Rs.3,317,310 has been claimed but no corresponding import has been shown. It worked back this amount comes to Rs.94,780,286 which is not appearing in one return.
Apart from the above said discrepancies a vital point in this case is to reconcile the supplies with the imported material. The taxpayer was required to reconcile the same on a pro forma provided in the notice under section 122(5A) of the Income Tax Ordinance, 2001 but instead of providing a detailed reconciliation which is required by law, the taxpayer has given only 4 to 5 examples which are not sufficient to support the claim. The taxpayer has provided copies of Stock Register and other details just to camouflage the true facts of the case. Had the taxpayer's claim been transparent there is no reason not to prove reconciliation which is required by law or as demanded vide notice under section 122(5A) of the Income Tax Ordinance, 2001.
Since the taxpayer failed to fulfil the requirement of law as intimated by the notice referred above, therefore, it is established that the orders passed under sections 221 and 120/169 of the Income Tax Ordinance, 2001 for the assessment year 2002-03 and tax years 2003 and 2004 are erroneous insofar as it is prejudicial to the interest of Revenue within the meaning of section of 122(5A) of the Income Tax Ordinance, 2001 and needs alteration/amendment so as to compute the correct income and tax thereon according to the provisions of law. Hence the assessments are finalized under section 122(5A) of the Income Tax Ordinance, 2001 as final discharge of tax liability."
4. This order under section 122 was agitated before the learned First Appellate Authority. As recorded in the impugned order, dated 28-2-2007 that all the three appeals were instituted on 14-10-2006. The learned First Appellate Authority has simply confirmed without dilating upon such a hotly contested matter when reached at the first appeal stage. The learned First Appellate Authority on the issue of seeking relief by a notice under section 129(7) of the Income Tax Ordinance, 2001 recorded the following findings prior to summarily disposing of appeal on merit:---
"Later on the A. R. of the appellant sent notice under section 129(7) of the Income Tax Ordinance, 2001 to this office through registered A.D. and through TCS on 9-12-2006 requiring this office to decide appeal judiciously and in accordance with statutory stipulation. The notice sent by the A.R. under section 129(7) is not entertained as the AR of the appellant has not fulfilled the basic requirement of notice as laid down in section 129(7) of the Income Tax Ordinance, 2001. For sake of reference, the same is reproduced as under:---
Section 129(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."
During the course of hearing of the main appeals that through the titled applications it has been prayed that both the learned Commissioners Income Tax/Wealth Tax (Appeals), Zone-I, the predecessor in office as well as the successor in office may be summoned in person so as to verify the facts which are connected to the both in person, (enclosed with applications are Annex-A to E along with Furd Talbana affixed with requisite Court Fees). The detail of enclosures of the application are:-
| Annex-A | Letter, dated 22-2-2007 for affixation of power of attorney and court-fees. |
| Annex-B | Letter, dated 28-2-2007 for Issuance of certified copies of order sheet. |
| Annex-B/1 | Copy of Return. . |
| Annex-C | Notice for Appeal No.1061-1062. |
| Annex-C/1 | Notice for Appeal No.1095. |
| Annex-C/2 | Notice for Appeal No.1091. |
| Annex-D | Notice for Appeal No.781. |
| Annex-E | Order, dated 19-6-2007. |
5. The common facts in brief giving rise to filing of titled applications are that during the course of hearing of main appeals it was argued by the learned A.R. that attempts to serve the notice in terms of section 129(7) of the Income Tax Ordinance, 2001 when failed on refusal to entertain personal service by the learned C.I.T./WT(A) that copies of the same were sent through TCS, Registered Post and by a Special Messenger in the office of the learned C.I.T. (A). Duly sworn in affidavits to substantiate it were filed also by the learned A.R., which are reproduced verbatim as under:--
"Affidavit of Mr. Shahbaz Butt Advocate Supreme Court of Pakistan son of Muhammad Hussain Butt Peoples Building, 5-Farid Kot Link Road, Lahore.
I the above named deponent, do hereby solemnly declared and depose as hereunder:---
(1) That the deponent and his real son Mr. Khurram Shahbaz Butt, Advocate Lahore High Court are the counsel in the cases of Messrs Dynamic Engineers, Allama Iqbal Town, Lahore.
(2) That the consolidated notice of hearing of Income Tax Appeals for the assessment years 2002-03, tax years 2003 and 2004 (Income Tax Appeals Nos.1083 to 1085) was issued on 13th February, 2007 by the learned Commissioner of Income Tax (Appeals), Zone-I, Lahore under section 131 of the Income Tax Ordinance, 1979 (Copy Annex-A).
(3) That the appeals referred supra were fixed for hearing on 27th February, 2007 and notice (Annex-A) was served on Mr. Liaqat Ali Chaudhary, Advocate (An associate of the Deponent) on 15th February, 2007.
(4) That the deponent, through .letter No.BC/D-8/12105 dated 22nd February, 2007 requested the learned Commissioner for inspection of appeal record. The said application was served in the office of the Learned Commissioner on 22nd February, 2007 (Copy of letter is Annex-B).
(5) That the inspection of the appeal record was allowed on 27th February, 2007, when the deponent and his son both were present before the learned Commissioner of Income Tax (Appeals) was requested to adjourn the- hearing of the appeals for 12th of March, 2007 which was granted. The son of the deponent recorded following observation in the margin of the order sheet.
"File inspected on 27th February, 2007.
(Signed 27th February, 2007)
"Noted for 12-3-2007
(signed 27-2-2007)"
(6) That the office of the deponent applied for certified copies of order sheet entries vide letter No.BC/D-8/12108, dated 28-2-2007 along with copying charges of Rs.100 deposited into State Bank of Pakistan on the above said date. The said application and paid challan were submitted in the office of the learned Commissioner on 28th February, 2007 (Copies of application showing receipt of application and paid challan are Annex-C and C/1 respectively).
(7) That the copies of order sheet entries, prayed for, have not been provided by the learned Commissioner till to date on one or the other pretext despite repeated requests and visits.
(8) That the deponent appeared before the same Commissioner of Income Tax (Appeals) on 27th February, 2007 in the following appeals:---
Messrs Ajwa Centre
Income Tax Appeals No.1061/1062
Assessment year 1998-99 and 1999-2000
Messrs Qadria Board Mills
Income Tax Appeal No.1095
Tax Year 2005
Messrs Ravi Flour Mills
Income Tax Appeal No.1091
Assessment year 2001-02
(Copies of notices of hearing are Annex-D, D/1 and D/2 respectively, which leave no shadow of doubt or reason for non-appearance in the appeals of Messrs Dynamic Engineers).
(9) That the deponent appeared before the same Commissioner Appeals on 12th March, 2007 in the appeal of Messrs Latif Rice Mills (Income Tax Appeal No.781 Tax Year 2005) (Copy of notice in later case is Annex-E).
(10) That the hearing of both the appeals referred above were verbally adjourned to 19th March, 2007 on the ground that, the appeal files were not traceable. Anyhow, the appeal of the later was heard on 19th March, 2007.
(11) That astonishingly the deponent's office (through Ch. Liaqat Ali Advocate) was served on 20th March, 2007 with impugned appellate order, stated to have been passed on 28th February, 2007.
VerificationDeponent
Verified on oath at Lahore, on this 15th day of April, 2007 that what is stated above is true to the best of the knowledge of the deponent and nothing has been stated to be incorrect, untrue or concealed.
Deponent
Affidavit of MR. KHURRAM SHAHBAZ BUTT, ADVOCATE HIGH COURT SON OF SHAHBAZ BUTT, PEOPLES BUILDING, 5-FARID KOT LINK ROAD, LAHORE.
I the above named deponent, do hereby solemnly declare and depose as hereunder:---
(1) That the deponent and his father Shahbaz Butt, Advocate Supreme Court of Pakistan are the counsel in the case of Messrs Dynamic Engineers, Allama Iqbal Town, Lahore.
(2) That the deponent personally served notice under section 129(7) of the Income Tax Ordinance, 2001 on the then learned Commissioner of Income Tax (Appeals), Zone-I, Lahore Ms. Fiza Muzaffar on 9th December, 2006.
(3) That the consolidated notice of hearing of Income Tax Appeals for the assessment years 2002-2003, tax years 2003 and 2004 (Income Tax Appeals Nos.1083 to 1085) was issued on 13th February, 2007 by the learned Commissioner of Income Tax (Appeals), Zone-I, Lahore under section 131 of the Income Tax Ordinance, 1979.
(4) That the appeals referred supra were fixed for hearing on 27th February, 2007 and notice was served on Mr. Liaqat Ali Chaudhary Advocate (An Associate of Deponent) on 15th February, 2007.
(5) That the deponent, through Fetter No.BC/D-8/12105, dated 22nd February, 2007 requested the learned Commissioner for inspection of appeal record. The said application was served in the office of the learned Commissioner on 22nd February, 2007 (Copy of letter is Annex-A).
(6) That the inspection of the appeal record was allowed on 27th February, 2007, when the deponent and his father both were present before the learned, Commissioner of Income Tax (Appeals) in the case of appellant as well as in appeals of three other taxpayers. The appellate record was inspected by the deponent and an entry to this effect was also made on the order sheet with the following words:---
"File inspected on 27th February, 2007.
(Signed 27th February, 2007)"
The case of the appellant was adjourned by the learned Commissioner of Income Tax (Appeals) for 12th March, 2007 this fact was also recorded on the order sheet in the following words:---
"Noted for 12-3-2007
(Signed 27-2-2007)"
(7) That the office of the deponent applied for certified copies of order sheet entries vide letter No.BC/D-8/ 12108, dated 28-2-2007 along with copying charges of Rs.100 deposited into State Bank of Pakistan on the above said date. The said application and paid challan were submitted in the office of the learned Commissioner on 28th February, 2007 (Copies of application showing receipt of application and paid challan are Annex-B and B/1 respectively).
(8) That the copies of order sheet entries, prayed for, have not been provided by the learned Commissioner till to date on one or the other pretext despite repeated requests and visits.
(9) That the deponent appeared before the same Commissioner of Income Tax (Appeals) on 27th February, 2007 in the following appeals:---
Messrs Ajwa Centre
Income Tax Appeals No.1061/1062
Assessment year 1998-99 and 1999-2000
Messrs Qadria Board Mills
Income Tax Appeal No.1095
Tax Year 2005
Messrs Ravi Flour Mills
Income Tax Appeal No.1091
Assessment year 2001-02
(Copies of notices of hearing are Annex-C, C/1 and C/2respectively, which leave no shadow of doubt or reason for non-appearance in the appeals of Messrs Dynamic Engineers).
(10) That the deponent appeared before the same Commissioner Appeals on 12th March, 2007 in the appeal of Messrs Dynamic Engineers along with appeal of Messrs Latif Rice Mills (Income Tax Appeal No.781 Tax Year 2005) (Copy of notice in latter case is Annex-D).
(11) That the hearing of both the appeals referred above were verbally adjourned to 19th March, 2007 on the ground that the. appeal files were not traceable. Anyhow, the appeal of the latter was heard on 19th March, 2007 (Copy of the order is Annex-E).
(12) That astonishingly the deponents office (through Ch. Liaqat Ali, Advocate) was served on 20th March, 2007 with impugned appellate order, stated to have been passed on 28th February, 2007.
Deponent
Verification
Verified on oath at Lahore, on this 23rd day of June, 2007 that what is stated above is true to the best of the knowledge of the deponent and nothing has been stated to be incorrect, untrue or concealed.
Deponent
6. On taking notice , of the contents of affidavit as well as submissions as per application that the opportunity was afforded to the learned DR for necessary participation in the proceedings by the learned both C.I.T:/W.Tax (Appeals), so the case was adjourned to 29-6-2007 and then re-fixed for 25-7-2007 enabling the department to bring on record, the point of view of both the learned C.I.T./W.Tax (A) against whom affidavits ibid have been filed duly supported by verbally submitting the same on oath before us on 23-6-2007 by the learned AR Mr. Shahbaz Butt. It was on 27-6-2007 that the titled applications have been filed by taking common grounds in respect of identical issues. To meet the ends of justice the office under the instructions from this Bench vide official letter, dated 28-6-2007 brought into the notice of both the learned C.I.T./W.Tax (A), the filing of tilted applications by providing the Photostat copies of the same and also of the affidavit filed. Mr. Saleem Atta the learned C.I.T. (A) has preferred to reply in manner which is reproduced as under:---
Office of the
Commissioner of Income Tax
(Appeals Zone-I, Lahore.
Dated: 28-6-2007
Mr. Muhammad Ghiyasuddin,
Assistant Registrar (Roster), I.T.A.T.,
Lahore.
Subject: PERSONAL APPEARANCE BEFORE DB-VII IN THE CASE OF MST. NUSRAT SULTANA PROP: MESSRS DYNAMIC ENGINEERS, 33-NEELAM BLOCK, ALLAMA IQBAL TOWN, LAHORE.
Refer to your letter No. M.As. Nos.308 to 310/LB of 2007, dated June, 28, 2007 on the subject cited above.
The I.T.A.T is not empowered under the Income Tax Ordinance, 2001, Income Tax repealed Ordinance, 1979 and I.T.A.T. Rules to require the personal attendance of the C.I.T. (Appeal).
Regarding the issues raised in the miscellaneous application, the appellate order passed by the undersigned is a speaking order, wherein all the relevant issues have been dealt with judiciously. However, if the DB-VII requires any further elaboration on any issue, the same may be referred to the undersigned in writing.
(Sd.)
(SALEEM ATTA)
Commissioner of Income Tax/W.Tax
(Appeals) Zone-1, Lahore.
Copy to:
The DR Bench-VII, I.T.A.T., Lahore for information.
7. Whereas the official letter even dated addressed to the predecessor officer namely Madam Fiza Muzaffar remained unanswered because her Private Secretary refused to receive the same. It is pertinent and important to mention that Madam Fiza Muzaffar being predecessor in office was holding charge on 8-12-2006 when notice in terms of section 129(7) was stated personally refused to be accepted by her, as per statement of learned AR. On re-listing the case for 25-7-2007 an affidavit was filed by her which is again verbatim reproduced as under:--
AFFIDAVIT OF FIZA MUZAFFAR, COMMISSIONER OF INCOME TAX, REGIONAL TAX OFFICE, LAHORE.
I the above named deponent do hereby solemnly affirm and declare as under:---
(1) That the deponent worked as C.I.T.(A), Appeal Zone-II, Lahore till 31-12-2006 when the office of C.I.T.(A), Appeal Zone-II, was abolished and all the cases were transferred to the office of C.I.T.(A) Appeal Zone-I, Lahore.
(2) That, as per subsection (7) of section 129 of the Income Tax Ordinance, 2001, the notice intimating the Commissioner that no order under subsection (1) has been made, is required to "be personally served by the appellant on the Commissioner". It may be added that it has been repeatedly held by the Superior Courts that if a particular thing is required to be done by law, it must be done in the same manner as laid down in the law or not done at all.
(3) That, this is a counter affidavit against averment made in paragraph No.2 of affidavit submitted by Mr. Khurram Shahbaz, Advocate High Court before this Honourable Tribunal in the captioned case. I hereby categorically and completely deny the contents of paragraph No.2 of the above said affidavit. It is submitted with responsibility that neither Mr. Khurram Shahbaz Advocate nor his father Mr. Shahbaz Butt, Advocate served notice under section 129(7) personally on me.
Deponent
Verification
Verified on oath that contents of this affidavit, are true and correct to the best of my knowledge and belief.
Deponent
8. Again on re-fixing the case, the appeal record was also summoned telephonically and the Record-keeper produced the same before the Bench. The receipt of application under section 129(7) of the Income Tax Ordinance, 2001, dated 9-12-2006 had not been recorded in the order sheet despite the fact that same application was bearing the signature of the predecessor Commissioner of Income Tax (Appeals), this fact could not be denied by the learned DR. The application seeking request as well as the inspection of record were also available on the record with Receipt No. DSRL.40004140 as well as bearing the initials of the Appellate Commissioner were also not getting any entries in the order sheet. This all has a very negative effect on the veracity of the record maintained and importantly it is indicator of very casual and careless exercise of the authority at the first appeal stage:
9. Before us the learned AR has firstly argued in favour of maintainability of the titled applications and in this regard he has contended that the facts stated in this duly sworn affidavit could only be challenged by submitting the counter-affidavit by both the learned C.I.T.(A)s which has not been done nor any official record has been firstly produced before this Tribunal so as to disclose the authenticity of facts appearing in the duly sworn in affidavit. The learned AR has further argued in support of it that Qanoon-e-Shahadat specifically provides submission of affidavit in such like situation, which is evident from the Article 146 of Qanoon-e-Shahadat Order, 1984. To corroborate the facts of the affidavit of Mr. Shahbaz Butt, that Mr. Khurram Shahbaz were filed by this learned AR has further strengthened his stance that legal requirements to have thus been fully complied with for making the stance legally acceptable.
10. The learned DR to counter such arguments has produced before us a copy of official letter, dated 26-6-2007 issued by Mr. Saleem Atta the learned C.I.T. (A). The text of which being verbatim is reproduced as under:---
Office of the
Commissioner of Income Tax
(Appeals) Zone-I, Lahore.
Dated: 26-6-2007
Mr. Muhammad Akram Tahir,
Additional Commissioner of Income Tax/
D.R. (Bench-VII), I.T.A.T.,
Lahore
Subject: PERSONAL ATTENDANCE BEFORE BENCH-VII, I.T.A.T., LAHORE
Reference is invited to your letter No.379/VII, dated 23-6-2007 wherein you have stated as under:
"The Honourable Members of I.T.A.T. have desired your personal attendance on 29-6-2007 in Bench-VII, I.T.A.T., Lahore in this connection.
It is surprising to note that a senior officer of your standing could not point out to the Members of Bench-VII Lahore that neither by virtue of any section of Income Tax Ordinance, 2001 nor under any rule of I.T.A.T. Rules they, neither have the jurisdiction nor the competence to "DESIRE" MY "PERSONAL ATTENDANCE".
The Members "DESIRING" my PERSONAL ATTENDANCE may be informed accordingly.
(Sd.)
(SALEEM ATTA)
Commissioner of Income Tax/Wealth Tax
(Appeals) Zone-I, Lahore.
Copy to;
(1) The Member (Legal) C.B.R., Islamabad.
(2) The R. C . I. T. , Eastern Region, Lahore.
11. The learned DR supported the contention taken by the learned C.I.T.(A) but when his attention was drawn that by not firstly sending the official appeal record through some officials and also not filing the counter affidavit the required assistance have not been extended, in reply to it no reason has been given for not firstly/initially providing the official appeal record of C.I.T. (A) office and importantly no reason for not submitting by both the counter-affidavits to challenge the veracity of facts given by the learned AR. The learned DR has also submitted that for the required assistance in this regard, office of the RTO have also requested the concerned both the learned C.I.T./W. Tax (Appeals) but still no assistance has been extended by both the learned officers for the reasons best known to them.
12. On failure to prove the appeal record by the C.I.T./WT (A) through learned DR, it was, therefore, requisitioned telephonically by us and was examined. The order sheet entries on prescribed IT.39 are reproduced as under:---
14-10-2006 Appeal received and POF
C.I.T.
13-2-2007 Fix for 27-2-2007 issue I.T.30
C.I.T. (A)
22-2-2007 Application for inspection of file received and POF.
C.I.T.
22-7-2007 None attended for orders
C.I.T.
Appellate order passed
C.I.T.
Even a cursory book at the order sheet entries reproduced supra makes crystal clear that the predecessor learned C.I.T./WT (A) has not recorded even the receiving of application in terms of section 119(7) what to mention of any findings on it despite the fact that the application/notice under section 129(7) ibid, dated 8-12-2006 was sent by two independent modes i.e. TCS and Registered AD bearing C.I.T./WT (A) respectively Official stamp with Receipt Numbers 84 and 89, noticeably bear the initials of the learned C.I.T./WT (A). So also the successor the learned C.I.T./WT (A) has not recorded applications seeking adjournment, although it was filed on the day i.e. 22-2-2007 when the application for inspection of file was submitted, and entry for it has duly been recorded by the learned C.I.T./WT (A) the successor as well as the author of the impugned order. No entry has been recorded on inspection of file by the learned ARs, similarly no entries have been made regarding application for attested copies of order sheet, notices and for the adjournment to 12-3-2007 which was duly allowed.
13. It should not go unnoticed that predecessor in office of C.I.T./WT (A) in her affidavit has not denied the submitting of application/notice in terms of section 129(7), still firstly no entry in respect of it appeared in the order sheet further and secondly which is quite important no findings on the fate of it were recorded. The successor in office has failed to comment on the application for inspection of appeal filed even on acknowledging its filing. On 27-2-2007 it has also been recorded that none attended. Regarding the inspection of file the learned AR has solemnly affirmed that despite its inspection by him that attested copies of order sheet with letters or one pretext or the other. However on 27-2-2007 in other cases where the learned A.R. has been marked as attending the proceedings, which stance has duly been substantiated by producing the photostat copies of the orders in other cases heard on 27-2-2007. The text has been given in affidavits as well as in the application.
14. Even at the cost of repetition that on specific request from the learned AR, the submissions are reproduced as under in the sequence these were adduced:---
The taxpayer a proprietary entrepreneur, is a commercial importer cum-supplier of electronic parts, used in manufacturing of payphone sets. The goods imported are supplied in the condition in which these are imported, without any kind of value addition by means of any process. The goods are supplied in the shape and condition of import. The tax was being collected at import stage under section 50(5) of the Income Tax Ordinance, 1979 during the pre-repeal period viz uptill 30th June, 2002, while tax was collected on imports under section 148 of the Income Tax Ordinance, 2001, during post repeal period viz after 1st July, 2002.
Similarly, the supplies were subjected to tax deduction by the "Payers" at the time of making payments, in terms of section 50(4) of the Income Tax Ordinance, 1979 in the pre-repeal period and under section 153 of the Income Tax Ordinance, 2001 in the post-repeal period.
In the above legal background, the imports cum-suppliers were not required to file regular returns under both the enactments. Prior to repeal of Income Tax Ordinance, 1979 a statement under section 143-B was required to be filed, while after repeal a statement under section 115(4) of the New Ordinance was to be filed.
The tax collected under section 50(5) and deducted under section 50(4) of the Repealed Income Tax Ordinance, 1979 and tax collected under section 148 and deduced under section 153 of the Income Tax Ordinance, 2001 constituted final discharge of tax liability as provided under section 80(7) of the Repealed Ordinance and sections 148(8) and 153(6) of the New Ordinance.
It is important to mention here that where the imported goods were subjected to incidence of tax at import stage, no further tax was chargeable/deductible under section 50(4) of the old Ordinance or section 153 of the New Ordinance provided the imported goods, were supplied in the state in which they were imported. It is also important to point out here that superior Courts in number of judgments have held that since the taxpayer had paid the tax at import stage, which constitutes final discharge of tax liability in respect of imported goods, no further tax can lawfully be charged/deducted when, the same goods in the same state in which they were imported are supplied reference in this behalf can be made to----
In the above backdrop the taxpayer submitted statement under sections 143-B and 115(4) respectively in the following manner: --
| Year | Statement under section | Imports | Collection under section | Amount of collection | Supplies | Deduction under section | Tax deducted |
| Assessment year2002-2003 | 143-B | 80,73,536 | 50(5) | 4,89,514 | 327,37,877 | 50(4) | 11.45,792 |
| Tax year 2003 | 115(4) | 1,28,15,218 | 148 | 7,73,055 | 6,13,16,923 | 153 | 21,46,092 |
| Tax year 2004 | 115(4) | 1,51,28,283 | 148 | 9,07,697 | 9,47,80,285 | 153 | 33,17,310 |
Since the imported goods had been supplied in the state in which, the same, were imported and the taxpayer had undergone the incidence of tax at import stage in respect of such goods, and tax collected constituted final discharge of tax liability, no further tax could have been deducted at the time of making payment on account of supply of such goods and any tax, if deducted in terms of section 50(4) of the repealed Ordinance or under section 153 of the new Ordinance, was in excess of the final tax liability, which stood already' discharged at import stage. Thus, in the present circumstances the tax collected under sections 50(4) and 153 from the present assessee/taxpayer was over and above its tax liability and therefore, the excess amount.
so collected/deducted was claimed refundable viz refund 11,45,792, 21,64,092 and 33,17,310 was claimed in assessment year 2002-2003, tax year 2003 and 2004 respectively.
In this view of the matter, the taxpayer submitted refund applications on 13th April, 2005 to the concerned Taxation Officer in the prescribed manner as envisaged under section 170(4) of the New Income Tax Ordinance.
It is important to point out here that the Taxation Officer while completing assessment for assessment year 2002-2003, did not allow credit of tax deduction under section 50(4) of the Income Tax Ordinance, 1979. Subsequently be passed an order under section 221 of the Income Tax Ordinance, 2001 on 6th June, 2005 and after verification regarding supply of same goods and authenticity of tax deduction and satisfying himself on all fours, created a refund of Rs.11,45,792 in favour of the taxpayer. During the rectification proceedings for assessment year 2002-2003, he also made necessary verification in respect of tax year 2003 and 2004. The refunds for tax years 2003 and 2004 stood already created in favour of the taxpayer by operation of law as envisaged under section 120 read with section 169(3) of the Income Tax Ordinance, 2001,
Despite the above stated' exercise, verification and passing of order under section 221, the applications filed under section 170(4) remained unattended (despite expiration of period of 45 days provided under the above said provision of law) and the Taxation Officer was reluctant to issue refund vouchers in favour of the taxpayer on one pretext or the other. Such indolent behavior pushed and compelled the taxpayer to knock at the doors of the learned Federal Tax Ombudsman in terms of section 9 of the Establishment of Office of Federal Tax Ombudsman Ordinance, 2000.
The learned F.T.O. decided the complaint vide order, dated 17th August, 2005, in favour of taxpayer. The learned F.T.O. vide recommendation contained in decision in Complaint No.1174/I of 2003 directed the Revenue to issue refunds to the petitioner in respect of all the three years within 15 days of order, dated 17th August, 2005.
Instead of issuing refunds as per direction of the learned F.T.O., the learned Taxation Officer issued Notice No. 0165466-II, dated 27th June, 2005, asking the, taxpayer to establish with evidence that she had supplied the same imported goods to Messrs Concept (Pvt.) Limited.
The taxpayer supplied all necessary details asked for vide letter No.NAC/195/2005, dated 28th June, 2005 despite the fact that the details asked for and evidence requisitioned stood already submitted during the rectification proceedings for assessment year 2002-03.
Consequent upon filing rather refiling of the above stated details the learned Commissioner of Income Tax, Zone-C, Lahore vide letter No.1029/, dated 31st August, 2005 accorded approval for issuance of refund to the taxpayer; order for issuance for refund was passed on 31st August, while the concerned Additional Commissioner vide letter No.311, dated 5th September, 2005 directed the concerned Taxation Officer 'vide letter No.311 to issue refund. Subsequent refund voucher No.1, Book No.12755 along with advice was prepared by the Taxation Officer and was countersigned by the Additional Commissioner.
From this juncture, the Officers of the Revenue delayed in handling over the refund to the taxpayer for their ulterior motives. The taxpayer refused to oblige them and to fulfil their illegitimate demands, which resulted into initiation of proceedings under section 122(5) of the Income Tax Ordinance, 2001vide notices, dated 27th September, 2005 besides initiation of proceedings, the revenue also filed a representation before President, in terms of section 32 of the Establishment of the Office of Federal Tax Ombudsman Ordinance, 2000 on 10th September, 2005 impugning that proceedings under section 122(5A) were initiated subsequent to representation before the President and without waiting for the outcome, the taxpayer was stepped from another side.
Since the very initiation of proceedings under section 122(5A) of the Income Tax Ordinance, 2001, were based on mala fide therefore, the same were challenged in the Lahore High Court through Writ Petition No.17496 of 2005. The learned High Court dismissed the writ petition vide order, dated 20th October, 2005 on the ground that petitioner had various remedies in this hierarchy of the, Revenue.
The order of the Lahore High Court was further impugned before the Supreme Court of Pakistan vide C.P.L.A. No.248 of 2006. The Honourable .Supreme Court vide order, dated 17th April, 2006 upheld the order of Lahore High Court.
The President decided the representation of the Department vide order, dated 2006 and set aside the recommendation of F.T.O. in the following manner:---
"There is no cavil with legal principle, if the goods that were sold by the complainant to the company were in the same condition they were in when imported on which the Collector had collected the tax at the time of import. The company was not required to deduct the tax. Ordinarily, the company was not required to deduct the tax from the payments made to the complainant, if it was satisfied that the goods purchased by it were in the same condition they were in when imported on which the Collector had collected the tax. But when the company has deducted the tax without demurrer from the complainant and the satisfaction of the Commissioner that the goods sold were the same on which the tax had been collected by the Collector at imports stage. The F.T.O's. recommendation thus, cannot be sustained.
It is interesting to point out here that despite, orders of the High Court, Supreme Court of Pakistan and President of Pakistan, the revenue kept sitting on proceedings under section 122(5A), therefore, the "Assessee" again filed a writ petition in the Lahore High Court requesting to direct the Revenue to proceed in the pending proceedings. The Lahore High Court vide order, dated 18th July, 2006 passed in Writ Petition No.7723 of 2006 directed the respondents to promptly decide the issue within a period of ten weeks.
It is also important to point out here that:--
(a) Notices under section 122 were issued on 27th September, 2005 stating that as per Clause of Part-V of Second Schedule to Income Tax Ordinance, 2001 provisions of section 153 shall not apply in respect of payments received for supply of such goods as were imported by the same person and on which tax has been paid under section 148. Since assessee did not give detail of items supplied although specifically requisitioned, especially when the supplies made were of higher value than the imports resulting high difference between the imports and supplies out of the same. Alleging upon Boards Circular No.5 of 2002, dated 11th April, 2002. The taxpayer was asked to reconcile the position.
(b) The taxpayer vide letter, dated Ist November, 2005 objected to the initiation of proceedings on the basis of mala fide on merits it was pleaded that reconciliation stood made during the rectification proceedings.
(c) The taxpayer vide letter, dated 15th November, 2005 and filed following information:---
(i) Complete bills of entries for all the three years.
(ii) Complete sales tax invoices for all the three years.
(iii) Complete details of tax deduction under section 50(4) for all the three years.
(d) The Additional Commissioner issued a further show cause on 7th September, 2006 (subsequent to order of Lahore High Court) asking the taxpayer to reconcile the imports with the supplies in the format provided.
(e) The taxpayer submitted reply on 8th September, 2006 and besides raising preliminary objection following details and documents:---
(i) Items description of imports and supplies.
(ii) Folio of stock register.
(iii) Opening stock.
(iv) Quantity of items imported.
(v) Import value.
(vi) Availability for sale/supply.
(vii) Quantity sold.
(viii) Total amount of sale of respective items.
(ix) Closing balance.
(x) Bills of entries.
(xi) Sales tax invoices.
(xii) Copies of sales tax returns.
(xiii) Copies of item-wise stock register showing opening balance of each item imported during each year along with item sold and closing balance.
(f) Again a reply was submitted on 29th September, 2006, explaining position giving examples and quoting instances and explaining rout of goods through maintained account.
The main issue before Additional Commissioner was to check as to whether the goods supplies were the same as were imported or not? He without looking into the evidence and explanation provided by the assessee, he decided the case against the assessee. He only objected that there is a huge difference between the sale price and import value, but without establishing or objecting that the goods sold were not the same as were imported ruled against the taxpayer.
The consolidated order, dated 29th September, 2006 passed under section 122(5A) of the Income Tax Ordinance, 2001 was challenged in appeal on 14th October, 2006 before the Commissioner of Income Tax (Appeals).
The provisions of section 129(5) requires a Commissioner to pass an order on an appeal before the expiration of three months from the .end of the month in which the appeal was lodged. In case the Commissioner fails to make such order within the stipulated period the relief sought by the appellant in the appeal shall be treated as having been given and all the provisions of Ordinance shall have effect accordingly. At the same time the provisions of subsection (7) require an appellant to personally serve on the Commissioner (Appeals) a notice not less than thirty days before the expiration of period of three months, stating that no order under section 129(1) has been made and unless such notice is not served personally on the Commissioner (Appeals), the provisions of section 129(5) shall not be effective.
In view of the above legal stipulation the counsel of the taxpayer "Mr. Khurram Shahbaz Butt Advocate" appeared in person before .the then Commissioner (Appeals) Zone-2 (Non-Corporate), Lahore Mrs. Fiza Muzaffar and personally served her with a notice under section 129(7) of the Ordinance on 8th December, 2006. The notice fulfils all the requirements of the above statutory provisions of law. Since the learned Commissioner did not issue acknowledgement of notice under section 129(5), therefore; all other modes of service viz service through post (with AD), TCS and by peon book were utilized. The said notices were served in the office of Commissioner of Income Tax admittedly on 9th December, 2006.
Subsequently the office of C.I.T. (Appeals), Zone-2 (Non-corporate) was abolished by the Central Board of Revenue and the appeals were transferred to the office of the C.I.T. (Appeals), Zone-I, Lahore, who later on issued notice of hearing of appeals on 13th February, 2007 in terms of section 131 of the Repealed Income Tax Ordinance, 1979, fixing the hearing of all the three appeals on 27th February, 2007. However, on 22nd February, 2007 the AR of the assessee/appellant filed an application for inspection of appeal record vide a Letter No.BC/D-8/12105. The inspection of appellant record was allowed on 27th February, 2007. It is important to point out here that 27th February, 2007, was the date for which the appeals were also fixed for hearing. It is also important to point out here that three other appeal viz:---
(a) Messrs Ajwa Centre (ITA#1061/1062 assessment years 1998-99 and 1999-2000)
(b) Messrs Qadria Board Mills Ltd. (ITA#1095 Tax Year 2005), and
(c) Messrs Ravi Flour Mills Ltd. (ITA#1091 assessment year 2001-2002) .
were also fixed for hearing. The counsel of the appellant attended all the cases/appeals on the fixed date of hearing viz. 27-2-2007. The case at serial (a) was adjourned by the concerned Commissioner on the ground that the matter is pending before the Supreme Court of Pakistan and leave to appeal has been granted, while the other cases detailed at serial (b) and (c) were heard and decided on the above said date as is apparent from the appellate order issued by the concerned Commissioner showing presence of the counsel on 27th February, 2007. It is important to point out here that as stated earlier the counsel of the present appellant/assessee was allowed inspection on 27th February, 2007. Therefore, according to the co-counsel, the following order sheet entry was passed on the order sheet:---
"File inspected on 27th February, 2007. Signed: 27th February, 2007"
After inspection of the file/appeal,record on 27th February, 2007, the learned Commissioner was requested to adjourn the hearing of the present appeals for 12th March, 2007, which was graciously granted. The co-counsel of the appellant/assessee recorded following entry in the order sheet:---
"Noted for 12th March, 2007. Signed 27th February, 2007"
Subsequently the counsel of the assessee applied for certified copies of the order sheet entries vide letter No. BC/D-8/2108, dated 28th February, 2007 and copying fee for this purpose was deposited in the State Bank of Pakistan, Lahore on 28th February, 2007. The copy of challan was annexed with the application referred above. It is important that uptill now the copies of order sheet entries requested for have not so far been provided to the counsel on one or the other pretext despite repeated requests.
It is also important to point out here that the counsel of the appellant appeared before the Commissioner on 12th March, 2007 on the adjourned date of hearing of appeals along with another appeal of Messrs Latif Rice Mills (ITA#781 Tax Year 2005). The appeal of the latter was heard on 12th March, 2007 and the order of even date passed in the case of said appellant shows presence of the counsel before the Commissioner. It is pointed out that the case of the present appellant was not heard on 12th March, 2007 for' the reason that according to the Commissioner the file of the appellant was not traceable. However, the case was verbally adjourned till 19th March, 2007. The appeal was, however, heard on 19th March, 2007. To the complete dismay of the counsel of the present appellant, was served with the impugned appellate order statedly having been decided ex parte on 28th February, 2007for the reason that non-attended on the date of hearing viz. 27th February, 2007.
The order alleged to have been passed on 28th February, 2007 was served on Mr. Liaqat Ali, Advocate of Messrs Butt and Company on 20th March, 2007."
15. The learned AR has further argued in support of application as well as the main appeals by firstly pointing out that the proceedings before the Tribunal attract the provisions of section 1(2) of Qanoon-e-Shahadat Order of 1984 and read out the relevant portions The learned AR also referred to Rule 13 of ITAT Rules regarding filing of affidavit which reads as under:---
"Rule-13. Filing of Affidavit
Where a fact which cannot be borne out by or is contrary to the record, is alleged, it shall be stated and concisely by the duly sworn affidavit."
Thirdly Rule-2 Chapter-I-E High Court Rules and Order Vol-V which reads as under was also quoted by the learned AR.
"An assertion, contrary to or outside the record or not supported by evidence already on record should be supported by an affidavit."
The learned AR in support of his arguments has submitted that affidavit was a valid piece of evidence in the given circumstances by referring to (1978) 114 ITR 19 (Page-20). The learned AR in the sequence of these arguments submitted further that Income Tax Appellate Tribunal performs a judicial function and in deciding the appeals has to consider With due care all the material facts/evidence adduced and to record its findings on the contentions taken by the parties in light of it so as to conclusively determine and dilate upon questions of fact and law raised before it. The learned AR by referring to the provisions of sections 224 and 176 of the Income Tax Ordinance, 2001 and section 158 of the Repealed Income Tax Ordinance, 1979 has also submitted that proceedings before the Tribunal in the light of it are judicial were powers to take evidence on oath could be exercised by the Income Tax Appellate Tribunal accordingly for it, summoning in person as well as official record are permitted. The learned AR supported the arguments that the proceedings before the Tribunal are judicial in nature has referred to citation PLD 1957 SC Pak. 91 and read out relevant page-98. Other citations relied upon were PLD 1966 Lah. 16 where relevant page-23 was read out, PLD 1966 Lah. 16 relevant page-26 was read out, PLD 1987 Quetta HC 141 relevant page 161 was read out, (1992) 66 Tax (HC Lah.) = 1993 PTD 206 Lhr. relevant page-208 was read out, with these submissions the learned AR has attempted to support the contents of applications for summoning the learned two Commissioners of Appeals. Secondly that Tribunal is vested with the powers/authority for so doing. Such arguments were adduced with the intention to counter what has been submitted in the form of letter by Mr. Saleem Atta, learned C.I.T. (A), challenging the authority of this Tribunal on the issue of summoning in person, vis the maintainability of applications filed. Secondly, the learned AR has explained by giving the relevant provisions of law as well as the case-law that the proceedings before the Tribunal are judicial in nature where this Tribunal is vested with power/authority in the proceedings to sift out the facts as well as settle the legal controversy.
16. The learned AR then argued on the point of necessity of filing of counter affidavit as in the presence of it, the averments supported by an affidavit are presumed to be true, in support of it referred to the following citations:---
(2001) 83 Tax 521 (HC Kar.) = 2001 PTD 1002 (Relevant page-1014), 2001 MLD 1257 (Relevant page-1259), 1991 MLD 1243' (Relevant page-1247), (2005) 91 Tax 188 (Trib.) = 2005 PTD (Trib.) 1364 (Relevant page-1367) and 2001 PTD 3545 (Relevant Page-3549).
17. In support of his arguments the learned AR has also produced case laws which are as under:--
1996 PTD 279, 1996 PTD (Trib.) 282, (2000) 81 Tax 220 (HC Lah.) = 2000 PTD 39, (2005) 91 238 (HC Lah.) = 2005 PTD 862, (2005) 91 Tax 83 (Trib.) = 2005 PTD 872, (2006) 95 Tax 48 (HC Kar.) = 2006 PTD 2439 and C.B.R. C. No.1(10) WHT/2001, dated 11-4-2002
18. We have heard both the parties and have also perused the available record and also have gone through the citations supra. Due to extraordinary reaction in respect of purely legal and judicial issue that inflexibility has been expressed by both the learned Commissioners of appeals. This Tribunal with a view to form a judicious view has duly brought into notice of each of the two Commissioners about the entire proceedings but despite being made fully aware of the legal consequences of such attitude has still opted not merely a non-cooperative style but avoiding a process of law, thus not fulfilling the official responsibilities which rested on both of them firstly to bring on record the reasons for so proceeding against the assessee. Plainly, it was not a question of summoning up the two learned C.I.Ts. (Appeals) but was to bring on record the factual position after knowing their point of view in contrast to what was given in the affidavits. It was a simply judicial exercise of authority for forming a judicious view that both the learned Commissioner (Appeals) were called upon to associate in a manner so as to serve the cause of justice. It was a matter of great concern and also beyond the stretch of any imagination that persons posted at the first forum of appeal have firstly refused to receive a notice in terms of section 129(7) and secondly while passing the order by the successor in office proper cognizance of it has not been taken as instead of purely performing the legal duty, the proceedings have been undertaken in a manner which smelt of vindictiveness. Associating the learned C.I.T./Wealth Tax (A) by this Tribunal is quite legal, fair, just which is required as per law as well as under Doctrine of Natural Justice, whereas its non-compliance by the learned two officers, is against the law and also official conduct which is required as a Government functionary. To sum up the discussion we do not feel any hesitation that the attempt for associating the two learned officers in the proceedings as a result of titled applications are quite just, legal, fair, proper, importantly and judiciously non-compliance has not only caused a serious prejudice to the interest of revenue but has given a vested right to the aggrieved party the applicant to claim the correctness of its duly substantiated stance/contentions with affidavits, thus giving legal, justification to this Tribunal to draw adverse inference from the conduct/expressions of the learned' two C.I.T./W.T. (A) and to allow the necessary relief by accepting what has been stated by duly corroborated two affidavits.
19. As far as the titled applications are concerned we do not have any hesitation in holding that these are maintainable where we are duty bound to record our findings by dilating upon the contents of the applications.
20. Further before us the learned AR has argued for seeking relief under section 129(7) of the Income Tax Ordinance, 2001 by referring to the affidavit submitted at the time of filing of appeals in the Tribunal wherein on solemn affirmation facts have been stated. It was upon refusal to receive the prescribed notice, dated 8-12-2006 in terms of section 129(7) of the Income Tax Ordinance, 2001 that the same was sent through registered acknowledgment due, secondly by TCS and thirdly in the office of the learned C.I.T. /W.T. (A) through a delivery book of AR's office. The learned AR after describing the facts has submitted that even then the appeals were not disposed of in terms of notice under section 129(7) but by an order, dated 28-2-2007 with a date of hearing as 27-2-2007 were disposed of by marking "Nemo" for assessee/appellant. The learned AR pointed out the following sentences appearing in the opening para. of the impugned order:---
"On the due date neither anybody attended the appeal proceedings nor any application for adjournment was received. The appeals of the appellant are disposed of in the light of the grounds of appeal".
21. After so pointing out as reproduced supra it has been submitted that prior to the date fixed for hearing i.e. on 22-2-2007 request for adjournment of appeal proceedings was filed before the C.I.T. (A). Adjournment was allowed for 27-2-2007 by duly recording on the proceedings sheets that file inspected on 27-2-2007 and secondly also that adjourned date of the appeal noted for 12-3-2007. It was by an application, dated 28-2-2007 that request for providing a certified copy of order sheet entries by completing the legal requirements was also submitted on the same day in the office of the learned C.I.T. (A). On 27-2-2007 appearance was also made by the learned AR before the learned First Appellate Authority to present the following appeals namely:
Messrs Ajwa Centre
Income Tax Appeal No.1061/1062
Assessment year 1998-99 and 1999-2000
Messrs Qadria Board Mills
Income Tax Appeal No.1095
Tax Year 2005
Messrs Ravi Flour Mills
Income Tax Appeal No.1091
Assessment year 2001-2002
On the adjourned date i.e. 12-3-2007 when appearance was made that appeal was verbally adjourned to 19-3-2007 by the learned C.I.T. (A) on the ground that appeal record in office were not traceable, here the learned AR has substantiated his claim of appearance firstly by submitting affidavit stating the happening of both events in like manner, secondly specifically titles of appeals which were represented and disposed of firstly on 27-2-2007 and thereafter on 19-3-2007 to strengthen it further also provided the Photostat copies to substantiate the contention that appearance before the learned C.I.T. /W.T. (A) was duly made on 27-2-2007 as well as specifically on 19-3-2007 but the learned first appellate authority for the reason best known to him has yet disposed of the appeals with the remarks none attended against the column meant for name of authorized representative. The learned AR has submitted that attested copy of order sheet entries was not provided by the learned C.I.T. (A) despite submitting the prescribed application with requisite fees before him. The learned AR has also filed affidavit on solemn affirmation from Mr. Khurram Shahbaz Butt in order to corroborate the statement already given, so argued that facts and contention as given merit reliance being proper piece of evidence permissible under law. The learned AR has argued that impugned order by the learned first appellate authority has duly acknowledged the availability of notice under section 129(5)(7) of the Income Tax Ordinance, 2001 received in the office on 9-12-2000.
22. It is to be held in an unequivocal manner that the Tribunal is vested with power/authority to call for any evidence and summon any person when particularly prayed for by another contending party or on its own for reaching to a proper conclusion for holding a judicious view. Calling for affidavit and or counter affidavit which authority could also be exercised as Tribunal is empowered under specific provisions of Qanoon-e-Shahadat Order, 1984, Income Tax Ordinance (repealed and alive) as held by the Honourable Supreme Court judgment in the case law cited by learned AR. The facts which cannot be borne out from record are to be supported by affidavit and to challenge the contents of such affidavit, counter-affidavit could be submitted on its own by opposing party or on specific directions of the Tribunal for arriving at just conclusion, so Tribunal can also order for submission of counter affidavit. Such powers are vested in the Tribunal firstly by drawing force from the provisions of Qanoon-e-Shahadat which have specifically been made applicable to the Tribunal. The proceedings under the erstwhile and also under 'the present Ordinance, 2001 are judicial proceedings as per provisions contained in section 158 of the erstwhile Income Tax Ordinance, 1979 and section 224 of the Income Tax Ordinance, 2001 which for convenience are also reproduced as under:---
"Section 158 of Income Tax Ordinance, 1979
Any proceedings under the Income Tax Ordinance before Deputy Commissioner, Commissioner of Income Tax or the Appellate Tribunal shall be deemed to be judicial proceedings within the meaning of sections 193 and 228 and for the purposes of section 196 of the P.P.C.
Section 224, Proceedings under the Ordinance to be judicial proceedings:---
Any proceedings under this Ordinance before the Commissioner, Commissioner (Appeals) or Appellate Tribunal shall be treated as judicial proceedings within the meaning of sections 193 and 223 of Pakistan Penal Code, 1860 (Act XLV of 1860), and for the purposes of section 196 of the Pakistan Penal Code, 1860 (Act XLV of 1860)."
For conducting the proceedings as judicial and for exercising such powers sections 144 and 148 in the Repealed Income Tax Ordinance, 1979 were given there in the statute book whereas it is under section 176 of the Income Tax Ordinance, 2001 whereby notices can be issued. As per Article 1(2) of the Qanoon-e-Shahadat Order, 1984 this law has been made applicable to Tribunals as well as income tax proceedings which for convenience is reproduced as under:---
Article 1(2) of Qanoon-e-Shahadat Order, 1984
1. Short title, extent and commencement:---
(1) This order may be called the Qanoon-e-Shahadat, 1984.
(2) It extends to the whole of Pakistan and applied to all judicial proceedings in or before any Court, including a Court Martial, a Tribunal or other authority exercising judicial or quasi-judicial powers or jurisdiction, but does not apply to proceedings before an arbitrator.
(3) It shall come into force at once.
23. Judicial proceedings as defined in citations as PLD 1957 SC Pak. 91 (Relevant page-98, Marked-N) has made the proceedings before this Tribunal as judicial and without submitting the counter affidavit, contradicting the appellant/assessee's assertion, counter claim/contention cannot be accepted as true of the other party opposing it, strength for these submissions has been drawn from citations as:---
(2001) 83 Tax 521 (HC Kar.) = 2001 PTD 1002 (Relevant page-1014), 2001 MLD 1257 (Relevant page-1259), 1991 MLD 1243 (Relevant page-1247), (2005) 91 188 (Trib".)=2005 PTD (Trib.) 1364 (Relevant page-1367) and 2001 PTD 3545 (Relevant page-3549).
24. Further the order sheet maintained at the first appeal stage necessitated that adverse inference is to be drawn from the inept workings duly reflected by irregular/improper maintenance of order sheet by the learned first appellate authority which under law lend support to the contentions of the assessee that firstly despite putting the initials on application filed in terms of section 129(7), dated 8-12-2006 no entry regarding it has been recorded in the order sheet which is an attempt just to deprive the legal right and cover own faults. Then on 22-2-2007 application for inspection of file though recorded in the order sheet but adjournment application received is not appearing. As per order sheet entry about the disposing of both such applications again the order sheet is totally silent. The last entry is of 27-2-2007 where it has been recorded that "none attended for orders" whereas on the same date the appellant/assessee has produced the copies of the learned C.I.T./WT (A)'s orders where the learned AR has been marked present in other cases. These are not merely glaring deficiencies/discrepancies in the order sheet but amount to flouting with impunity norms of judicial propriety/decency which warrants acceptance of the contentions taken by the learned AR that the authority at the first appeal stage failed to be exercised in a judicial manner rather speaks of vindictiveness. The learned AR has referred before us following citations dilating upon the matter:---
(i) 1996 PTD 279, (ii) (2000) 81 Tax 220 (H.C. Lah.) = 2000 PTD 39, (iii) (2005) 91 Tax 238 (H.C. Lah.) = 2005 PTD 862.
The citations at Sr. No.i and ii are in reference to the provisions of section 132(5) and (6) of the Repealed Income Tax Ordinance, 1979 which are in pari-materia with section 129(5) to (7) of the Income Tax Ordinance, 2001. In the citation at Sr. No.iii ibid. Mr. Justice Ali Nawaz Chohan in writ petition has dealt with applicability of section 129(5) to (7) and allowed the petition by granting relief and laid down the principles which are binding on us. By commenting upon the conduct of C.I.T. (A) Honourable his lordship has expressed in the judgment with citation as (2005) 91 Tax 238 (H.C. Lah.)=2005 PTD 862 as under:
"Procedures, are even otherwise, not meant to defeat the ends of justice or to put traps for the litigation as if a game of chess was being played in which the consequences were related only to the movies 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.
Ineptitude, 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 fully 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 this judgment it has further been held that section 129(7) contains the mandatory provisions further relief has been allowed by recording the findings which have been reproduced verbatim relevant paras. 21, 22, 23 and 24 as under:---
"(21) So it is obvious that the petitioner did fulfil there 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) to (7) 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. 199F 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 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. Morrice [(1834) 2AA, E. 84, 96)] it was said that a clause is directory where the provisions contain a mere direction and nothing more, but 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.
(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 mandatory and not directory or regulatory."
By following the principles as laid down in these three cited judgments the relief becomes due to the appellant/assessee under the provisions of section 129(5), (6) and (7) because firstly it was refusal to receive the prescribed applications that these were duly sent through Registered Post as well as through private Courier, both these AR's applications were available on record bearing the initials of the learned C.I.T. (A), so by putting up signatures on it, it has manifestly been made clear that notices were served personally and failure to take cognizance of such notices by both the predecessor viz the successor in office, has made the appellant/assessee entitled to relief under the provisions of section 129(5) to (7) by acceptance of appeal as per prayers contained in the appeals. The predecessor in office namely Ms. Fiza Muzaffar the learned C.I.T./Wealth Tax (A) has not refuted in her affidavit, firstly the learned A.R.'s contention that she refused to receive the applications under section 129(7) ibid and secondly the receipt through postal AD/Courier/ by Dak through special messenger of learned A.R. So the relief as sought as per ground stood allowed. Here the learned Successor in office namely Mr. Saleem Atta, the learned C.I.T./WT (A), has preferred to proceed in a similar casual manner by not fixing the appeal within the stipulated time and on being becoming aware of assessee's vested right, still has not allowed relief by the operation of law, such negligence is not pardonable at the level of appellate forum. Prior to proceedings in this case, for exercising the authority/jurisdiction over it the learned C.I.T./ Wealth Tax (A), namely Mr. Saleem Atta, was legally bound to take serious notice of vested right created in favour of appellant/assessee by operation of law in terms of section 129(7) ibid debarring not issuance of, call notices resultantly intimating the fixation but also passing the order by adjudicating the grounds or in other words deciding the appeals on merits as relief sought was treated to have been given under section 129(6)(7). With this backdrop the impugned order has become illegal, which merits to cancellation. To make it further clear, firstly the issuing the notice intimating the fixing of appeal by learned C.I.T./ Wealth Tax (A) is illegal, thereafter adjudicating grounds of appeal, thus deciding the appeal was also illegal because relief sought in appeal was treated to have been given in terms of section 129(5). The matter is not ending here as also by another manner assessee/appellant has been denied another vested right by betrayal by adjourning the appeals still same have been disposed of by marking 'none appeared', although on exactly the same dates the learned A. R. has been marked present by the learned C.I.T. (A) in other cases.
25. As a result of findings supra at the end of para 24 ibid the impugned orders passed under section 122(5A) of the Income Tax Ordinance, 2001 pertaining to assessment year 2002-03 and for tax years 2003 and 2004 stood vacated. As a result of it the orders which have been subjected to action under section 122(5A) of the Income, Tax Ordinance, 2001 stood restored to its original positions. To elaborate it further so as to shed shadows of doubts, we hereby declare: thus the statement filed under section 143-B of the Repealed Income Tax Ordinance, 1979 for assessment year 2002-03 and both the statements under section 115(4) of the Income Tax Ordinance, 2001 stood accepted. It is also be clarified further that rectification order under section 221 which was subjected to an action under section 122(5A) should become alive. Here we have been compelled to express that it is a matter of concern for the higher ups in the administrative structure of the department to take cognizance of lapses and of such attitude of both the C.I.T. (A) who happened to be first appellate forum importantly should not have allowed to take place unjust, illegal acts at their own level as well as in its office and making assessee/appellant victim of such discrepancies when vested legal right was brought into the notice of the learned C.I.T. /WT (A) by the learned A.R. But negative retaliation to it has been shown whereby the assessee has been made to suffer loss which is unbecoming of a judicial officer. This clearly spelt out judgment of Honourable Lahore High Court with citation as (2000) 81 Tax 220 (H.C. Lah.) = 2000 PTD 39 Lahore High Court have not been implemented simply for the best reasons known to both of the officers who behaved without realizing the harm which has been caused till this time to the judicial forum's working as well as to appellant/assessee, thus leaving it to be determined as to how such loss caused could be madee. up, what could be the transparently compensation, importantly what could be the fate of the wrong doers, and how and where are to be made accountable.
26. How the wrong doer should be held accountable by the competent authority. Finally we deem legally bound to express that the impugned order passed by Mr. Saleem Atta the learned C.I.T. /WT (A) which at the best could be described as worst shape of violation of, non-adhering; to, non-compliance with, the expressed legal provisions as well as judgments of Honourable High Court's implementation, further adding to the worst situation is allowing the adjournment, but still on the fixed date concluding the proceedings for deciding the appeals by marking the learned A.R. as not present, this speaks so badly of personal behaviour of a judicial officer. Which is unbecoming of a judicial officer as well as of administration, it is unforgivable conduct, even in an uncivilized set up this would not be permitted. Judicial officers are to establish high moral standards in their conduct which in the instant case before us are totally absent. Conducting in such a way the judicial proceedings is in fact to circumvent the confidence-building measures/steps taken by the Government of Pakistan viz. the Revenue Division. So at the highest level these required to be probed for sabotaging the confidence-building steps even by the so higher officers who are associated for policy making by C.B.R. The assessee/appellant through his learned A.R. has set an excellent example of pursuing for a legal right steadfastly with perseverance and endurance. The appellant/ assessee has been forced to face this ordeal simply on seeking a legal relief in a legal manner.
27. All the assessee's miscellaneous applications and appeals succeed.
C.M.A./32/Tax(Trib.)Appeals and applications accepted.