SABIHA BEGUM VS FEDERAL BOARD OF REVENUE through Chairman, 2009 PTD-LAHORE-HIGH-COURT-LAHORE 1628 (2009)

(a) Income Tax Rules, 2002---

----Rr. 158 & 194---Income Tax Ordinance (XLIX of 2001), Ss. 237 & 239(7)---Constitution of Pakistan (1973), Art. 199---Constitutional petition---Tax payable by company demanded from its Director through recovery notice---Validity---Such company was a family company as husband, wife and other family members were sponsors-cum-Directors thereof---Entire management, assets, calculation and disbursement was in hands of petitioner-Director---Petitioner, unless protected by law, could not be allowed to run away from his liability to pay tax---Petitioner had alternate remedy of appeal under R.194 of Income Tax Rules, 2002 against recovery notice issued under S.158 thereof---Appellate Authority could look into validity of such notice and adjudge its legality and propriety---High Court dismissed constitutional petition in limine.

(b) Interpretation of statutes---

----Provision providing benefit and removing some apparent injustice would always be treated as welcome relief and generally would be treated retrospective in effect.

Imran Anjum Alvi, for Petitioner.

Afzaal Ahmed Hashmi for Respondents.

Date of hearing: 15th May, 2009.

JUDGMENT

KHAWAJA FAROOQ SAEED, J.---This writ petition has been filed against the attachment order, dated 27-1-2009 passed by respondent No.3 through which the Director of the company has been asked to pay the tax which basically is due against the company.

2. The brief facts of the case are that the petitioner was director of the company namely "Zeal Electric Industries Limited". It is a public limited company, though, not quoted. The Income Tax department has created certain taxes the payment of which is still outstanding against the said company. The Taxation Officer, therefore, has issued the notice to the director for the payment and has consequently shown its intention of attachment as well as sale of her personal property.

3. The claim of the petitioner is that the company is a separate legal entity which can obviously sue and be sued against. It is responsible for all its acts by itself and a demand created against the said legal entity cannot be enforced against any other being its Director. The demand in respect of assessment year 1980-81 under the provisions of Income Tax Ordinance, are enforceable only against company. The Income Tax Ordinance, 2001, having come much after cannot apply on the matters relating to the earlier assessment year.

4. Furthermore, the law at the time of creation of demand as already said being Income Tax Ordinance, 1979, none of the provisions thereof create any such impression which even otherwise have the support of the provision of Company Laws.

5. There is an exception with regard to a private limited company in terms of section 77 of the said Ordinance. The provision of said section 77 provides for a power of the Income Tax Department to recover the tax from the Director if his shares are more than 10% of the paid up shares of the company. Obviously, it cannot be applied on the public limit company being in respect of private limited company clearly and un-equivocally.

6. Further, this is a substantial provision. The charge under Income Tax Ordinance, 2001, cannot be enforced on an assessment which falls prior to the Income Tax Ordinance, 2001, even if any of its provision gives any such impression. The Income Tax Ordinance, 2001, has been made applicable w.e.f. 1-7-2002. It does provide saving provision in respect of recovery under section 239 of the said Act but that also is only enforceable against the taxpayer against whom the demand is created under erstwhile Income Tax Ordinance, 1979.

7. The case of the respondent, however, is otherwise. His argument is that the provision of the saving clause of new Ordinance in terms of Income Tax Ordinance, 2001, section 239 subsection (7) has shifted the burden of recovery to the Income Tax Ordinance, 2001. In consequence thereof, charge of additional tax, penalty, prosecution or other modes of recovery can also be used for recovery of the same.

8. Furthermore, the recovery proceedings initiated on the basis of strength of the above saving clause and consequent issuance of notices etc. to the respondents under the recovery rules is appealable under Rule 194 of the said Ordinance.

9. Since a specific right of appeal have been provided against the said recovery notice under rules approaching this Court directly is not legally justified. The company even otherwise is a family company, husband and wife and the other family members are its sponsors-cum-Directors, besides the entire management, assets as well as calculation of disbursement have been in the hands of the petitioner. They should not be allowed to run away from their liability of payment of tax as a result of demand created by the department of Income Tax' unless they are so protected by law.

10. So far as the issue with regard to enforcement and collection from the Director is concerned, no finding for the time being is given.

11. In this case the alternate remedy is provided in terms of Rule 194 against the proceedings started under the said Rules. Since notice has also been issued under Rule 158 of the Income Tax Rules, 2002, in continuation of section 239 (7) the argument of the learned Legal Advisor of the department appears to be as valid and justified.

12. The Federal Board of Revenue while exercising its power delegated by law under section 237 have provided a right of appeal through the above Rule 194. This has been come out as a remedy against the notices issued under Income Tax Rules, 2002. It is true that there is no appeal in the Income Tax Ordinance against issuance of such a notice. The addition of the same, therefore, is in the nature of a cure and a remedy. It has been provided a chance to look into the validity of such notices and to adjudge its legality as well as proprietary. The provision that provides benefit and is to remove some apparent injustice is always to be treated as a well come relief and generally treated as retrospective also.

13. Furthermore, it has not been provided as a remedy against the actions taken under the main law for which the said Statute has its in-built mechanism. It has only brought into operation a new relief in respect of such and similar other actions which are taken by the department in continuation to the proceedings under the main law and under the rules provided for the implementation of the said laws.

14. There is, therefore, no reason to call the same as against the powers available as even otherwise it remains rule for the benefit of general public in addition to the fact that the same has been promulgated by exercising the powers specifically provided to the Federal Board of Revenue by the main Statute under section 237.

15. This Court, therefore, dismiss this writ petition in limine with the directions to the petitioner to file appeal under Rule 194 of the Income Tax Rules, 2002.

S.A.K./S-130/LPetition dismissed.