2010 P T D (Trib.) 12
[Income-tax Appellate Tribunal Pakistan]
Before Abdul Rauf, Accountant Member and Jawaid Masood Tahir Bhatti, Judicial Member
I.T.As. Nos. 868/LB, 869/LB and 870/LB of 2008, decided on 30/09/2009.
(a) Income Tax Ordinance (XLIX of 2001)---
----Ss.131 & 221---Rectification of mistake---Appeal to Appellate Tribunal---Taxation Officer 'noticed some mistakes in the calculation of tax charged and also in calculation of tax liability on income assessed, issued notice under S.221 of Income Tax Ordinance, 2001 confronting the taxpayer/respondent with the mistakes apparent on record---Taxation Officer after considering the reply of the taxpayer as unsatisfactory, proceeded to rectify the assessment under S.221 of Income Tax Ordinance, 2001---Assessee filed appeals before the Commissioner Income Tax (Appeals) who vide her order cancelled order passed under S.221 of Income Tax Ordinance, 2001---Validity ---Inadvertent mistakes of omission and commission in the orders/judgments of the Authorities entrusted with the administrative responsibilities and dispensation of justice was a common phenomenon and rectification thereof was an essential requirement of the principle of natural justice---Commissioner Income Tax (Appeals) had disposed of the appeals of the company only on the technical ground and had not touched the merits of the case as contained in other grounds--Order of Commissioner Income Tax (Appeals), was not sustainable---Order of First Appellate Authority was vacated and case was remanded with the direction to pass speaking order on the other grounds of appeal after taking into consideration the arguments of representative of the company.
2009 PTD 712 and 2009 PTD 1557 ref.
(b) Interpretation of statutes---
----No provision of law could be presumed to be redundant and superfluous---Principle of harmonious construction required that the provision of law should be construed and interpreted in such a way that the different provisions of law dovetail into each other in such a way that the entire statute remained a well-knit, integrated and workable piece of legislation.
Muhammad Asif, D.R. for Appellant.
Muhammad Iqbal Khawaja for Respondent.
ORDER
These three departmental appeals arise out of the order of the learned CIT(Appeals) RTO, Lahore, whereby she cancelled the orders for all the three years passed by the Taxation Officer Circle-5, Special Zone, Lahore under section 221 of the Income Tax Ordinance, 2001.
2. The facts of the case giving rise to the appeals under consideration are that the Taxation Officer noticed some mistakes in the calculation of tax chargeable under sections 80-C and 80-D of the late Ordinance of 1979 in all the years. In addition, mistake in calculation of tax liability on income assessed under section 30 of the late Ordinance of 1979 was also noticed in the year, 1999-2000. Accordingly, notice under section 221 of the Income Tax Ordinance, 2001 was issued confronting the taxpayer with the mistakes apparent on record. The Taxation Officer, after considering the reply of the taxpayer as unsatisfactory proceeded to rectify the assessments under section 221 of the Income Tax Ordinance, 2001. Being aggrieved the appellant-Company filed appeals before the learned CIT(Appeals) RTO, Lahore who vide her order dated 31-1-2008 cancelled the orders passed under section 221 of the Income Tax Ordinance, 2001 for all the three years with the following observation:--
"After having considered the additional ground and perused the relevant record, I am of the opinion that provisions of section 221 of the Income Tax Ordinance, 2001 did not come in force in respect of the assessment years prior to the assessment year falling on or before 30th June, 2002: The law is categorically clear in its application and, in fact, the law-makers by introducing terms and connotations like "tax year" as against "assessment year" and "taxpayer" as against "assessee" have made provisions of the Income Tax Ordinance, 2001 non-applicable for the earlier assessments. The issue has been discussed in detail in the famous judgment namely Honda Shahra-e-Faisal Karachi and Kashmir Edible Oils Mills etc. by the Honourable Sindh High Court as well as the Honourable Lahore High Court respectively. The ratio of the same is applicable on this case as well. I would therefore hold that the CIT(Appeals) had rightly annulled the assessments. In agreement with the findings of my predecessor and following the judgments of Superior Appellate Courts, the impugned assessment orders for all the three years having been passed without lawful jurisdiction are hereby cancelled the remaining grounds stand disposed of when the impugned orders have been quashed."
3. The department being dissatisfied has filed appeals against the order of the learned CIT(Appeals) agitating against the cancellation of order passed under section 221 of the Income Tax Ordinance, 2001. The learned DR appearing on behalf of the department referred to the judgment of Karachi High Court reported as 2009 PTD 712, wherein the implications of the introduction of subsection (1A) of section 221 of the Income Tax Ordinance, 2001 through Finance Act, 2003 were considered by the Honourable Court. He contended that the said provision of law was brought on the statute book to empower the Commissioner to rectify the mistakes in the orders passed under the late Ordinance of 1979. He explained that subsection (1A) of section 221, as held by the High Court, is a procedural provision because it provides a mechanism/procedure for altering the tax liability of a person if it has not been correctly worked out. He further argued that a procedural enactment applies to all the pending matters which had not become past and closed transactions before the said enactment came into force. He stated that as on 30-6-2003 the assessments in the case of the taxpayer for the years, 1999-2000 to 2001-2002 had not become past and closed transactions because they were not hit by limitation of four years laid down under section 156 of the Income Tax Ordinance, 2001 and as such the provisions of section 221 of the Income Tax Ordinance, 2001 were fully applicable to them in the light of judgment of the High Court referred to above.
4. The AR of the taxpayer on the other hand, supported the order of the learned CIT(Appeals) by placing reliance on the judgment of Lahore High Court, Lahore reported as 2009 PTD 1557 in the case of Messrs Rupafil Limited and two others, wherein the Honourable Court held as under:--
"Since the Commissioner was not an Assessing Authority in the old law and the order was passed by "Taxation Officer" it is not an order passed by him. The same, therefore, cannot be rectified by the Commissioner. This hardly needs any mentioning that even after delegation of power by him to a orders/judgments of the authorities entrusted with the subordinate officer, the said officer does not figure within the language of section 221 as he also was not an authority under erstwhile Income Tax Ordinance and the order is not passed by him".
Dilating upon the merits of the case the learned AR of the taxpayer argued that the Taxation Officer, by making rectification under section 221 of the Income Tax Ordinance, 2001 had charged tax under section 80-D of the late Ordinance of 1979 on local sales @ 0.5% in addition to the tax chargeable under section 80-C of the late Ordinance of 1979. He stated that the controversy with regard to separate' levy of tax under sections 80-C and 80-D of the late Ordinance of 1979 has already been resolved by this Tribunal in I.T.A. No.124/LB/2007 in the light of judgment of Honourable Lahore High Court in PTR No.218 of 2005 dated 27-5-2009 wherein the High Court held that:--
"A cumulative reading of the section D gives an impression that the said charge has been created in respect of person including company, a registered firm an individual etc. on his `turnover from all sources'. The provision does not end there. The charge is on the aggregate of declared turnover. The legislature has intendedly and advisedly used the word `aggregate' as it can only be of more than one sources. The legislature would have never used this connotation if intention was to charge it separately in respect of each source, of the individual or company etc.
5. We have given due consideration to the arguments of both the sides and feel persuaded to agree with the learned DR as far as applicability of the provisions of section 221 of the Income Tax Ordinance, 2001 to the mistakes falling within the domain of repealed .Ordinance of 1979 is concerned. It is pertinent to mention here that in the judgment of the Lahore High Court relied upon by the learned AR of the-taxpayer impact and implications of section 221(1A) of the Income Tax Ordinance, 2001 were not considered by the Court and as such the judgment of the Lahore High Court Lahore is of no help to the case of, the learned AR. Besides, it is also a well-settled principle of interpretation of law that no provision of law can be presumed to be redundant and superfluous. Further the principle of harmonious construction requires that the provisions of law should be construed and interpreted in such a way that the different provisions of law dovetail into each other in such a way that the entire statute remains a well-knit, integrated and workable, piece of legislation. We would like to emphasize that inadvertent mistakes of omission and commission in the orders/judgments of the authorities entrusted with the administrative responsibilities and dispensation of justice is a common phenomenon and rectification thereof is an essential requirement of the principles of natural justice. Precisely for this reason the Courts have held that principles of natural justice underlie every provision of law and absence of a rectificatory mechanism in any statute would thus not only militate against the principles of natural justice but would also tantamount to denial of justice. At the time of promulgation of Income Tax Ordinance, 2001 on 1st July, 2002, there was no provision in it for rectification of mistakes that might have occurred in different orders/judgments passed under the repealed Income Tax Ordinance, 1979 although the limitation of four years provided in section 156 of the repealed Ordinance had not expired when the new Ordinance of 2001 came into force. Realizing this lacuna in law S.R.O. 633(1)/02 dated 14-9-2002, was issued to cope with this anomaly and section 221(1A) was made part of the statute w.e.f. 1-7-2002. However, on being challenged in the Lahore High Court Lahore and Supreme Court of Pakistan it was declared to be of no legal effect. The S.R.O. was, therefore, rescinded through another S.R.O. No.608(1)/03 dated 24th June, 2003 and through Finance Act, 2003 section 221(1A) was inserted and mechanism for rectification of mistakes in the orders passed under the repealed Ordinance, 1979 was provided. The effect of insertion of section 221(1A) was examined by the Karachi High Court in the judgment reported as 2009 PTD 712 wherein the Honourable Court held that section 221(1A) was a procedural provision' which provided a mechanism for rectification of mistakes including the mistakes in the orders passed under the repealed Ordinance of 1979. Dilating upon, the applicability of the new piece of legislation to the mistakes falling within domain of the repealed Ordinance of 1979, the Court held that if the period of four years as provided in section 156 of the late Ordinance of 1979 for rectification of mistakes had not expired by 30th June, 2003, the new enactment which came into force on 1st July, 2003 would be resorted to for rectification of such mistakes. Respectfully following the judgment of the Honourable High Court we hold that the provisions of section 221(1A) are fully applicable to the assessments finalized under the late Ordinance, 1979 provided the limitation of four years had not expired when the new enactment i.e. 221(1A) became part of law.
6. From the perusal of the order of the First Appellate Authority it is evident that the learned CIT(Appeals) has disposed of the appeals of the appellant company only on the technical ground and has not touched upon the merits of the case as contained in other grounds. In view of our finding recorded hereinabove, we are of the considered opinion that the order of the learned CIT(Appeals) is not sustainable. We, therefore, vacate the order of the First Appellate Authority and remand the case to her with the direction to pass a speaking order on the other grounds of appeals after taking into consideration the arguments of the learned AR and judgment relied upon by him.
7. The departmental appeals are disposed of as above.
H.B. T./154/Tax (Trib.)Case remanded.