COMMISSIONER OF INCOME TAX/WEALTH TAX VS MUHAMMAD NASEEM KHAN, 2013 PTD-LAHORE-HIGH-COURT-LAHORE 2005 (2013)

(a) Income Tax Ordinance (XXXI of 1979)---

----S. 133---Reference to High Court---Question of law, reframing and resettling of---Jurisdiction of High Court---Scope---High Court could reframe and resettle such question.

Commissioner of Income-Tax Company's II, Karachi v. Messrs National Food Laboratories 1992 PTD 570; Ch. Haq Nawaz Chohan v. Ch. Tariq Azam and 43 others 1994 CLC 1530; Commissioner of Income Tax v. Metal Forming Ltd. 2009 PTD 75 and MessrsAmerican Express Bank Ltd. Karachi Commissioner of Income Tax, Companies-I, Karachi 2009 PTD 1791 rel.

(b) Income Tax Ordinance (XXXI of 1979)---

----S. 156(1)---Expression "mistake apparent on record" as used in S.156(1) of Income Tax Ordinance, 1979---Scope---Error of fact or law, if having nexus with rights of parties, would not be a mistake apparent on record---Principles.

The expression "mistake apparent on record" as used in section 156(1) of the Income Tax Ordinance, 1979 means that error or mistake is so manifest and clear, which if permitted to remain on record may have material affect on the case. Whereas an error of fact or law, which has direct nexus with the question of determination of rights of parties, affecting their substantial rights or causing prejudice to their interest is not a mistake apparent on the record to be rectified under section 156 of the Income Tax Ordinance, 1979.

(c) Income Tax Ordinance (XXXI of 1979)---

----Ss. 131, 133, 134 & 156---Reference to High Court---Order of Tribunal directing appellant to refile appeal under S. 134 of Income Tax Ordinance, 2001 instead of under S. 131 thereof---Refiling of appeal under S.131 of Income Tax Ordinance, 2001 instead of S.134 thereof---Respondent's application under S. 156 for recalling order whereby appellant was directed to refile appeal under S. 134 thereof---Acceptance of such application and dismissal of appeal by Tribunal---Validity---Tribunal could not rectify its order of refiling of appeal, which could be examined by next higher authority---Tribunal while passing impugned order had re-assessed the matter and formed an opinion different from its earlier order---Tribunal was not justified to recall its order of refiling appeal, which was not suffering from any mistake apparent on record---Impugned order was beyond scope of rectification---Tribunal was not justified to dismiss appeal for mentioning wrong provision of law, rather was obliged to decide appeal in accordance with law---High Court accepted reference application in circumstances.

Commissioner of Income Tax, Regional Tax Officer Multan v. Muhammad Siddique (Civil Petitions Nos.1109-L and 1110-L of 2010); Commissioner of Income Tax v. Asbestos Cement Industries Ltd., Karachi and others 1993 SCC 1011 and Home Service Syndicate v. Commissioner of Income Tax, 2003 PTD 1109 ref.

Commissioner of Income Tax Karachi v. Messrs Shadman Cotton Mills Ltd. Karachi through Director 2008 SCMR 204; Commissioner of Income Tax Karachi v. Abdul Ghani PLD 2007 SC 308; Baqar v. Muhammad Rafique and others 2003 SCMR 1401; Commissioner of Income Tax Companies II, Karachi v. Messrs National Food Laboratories 1992 SCMR 687; Sh. Muhammad Iftikhar-ul-Haq v. The Income Tax Officer Bahawalpur PLD 1966 SC 524; Pakistan River Steamers Ltd. v. Commissioner of Income Tax Dacca 1971 PTD 204; Commissioner of Income Tax Regional Tax Office, Multan v. Muhammad Siddiqui C.Ps. Nos.1109-L and 1110-L of 2010; Jane Margrete William v. Abdul Hamid Mian 1994 SCMR 1555; Pakistan Fisheries Ltd. Karachi and others v. U.B.L. PLD 1993 SC 109and Usman Khan through Attorney v. Ayesha Naz and 2 others 2010 CLC 475 rel.

(d) Appeal (Civil)---

----Mentioning of wrong provision of law would not render appeal incompetent---Principles.

Mere mentioning of wrong provisions of law does not render the appeal non-maintainable or fatal to grant of relief to which the appellant otherwise was entitled under the law. The decision on merits is the most cherished goal of law and the Courts/Tribunals administering justice are not slaves to technicalities, where wrong mentioning of the provisions of law would be a hurdle in doing justice between the parties, particularly when one is otherwise found entitled to it under the law.

(e) Administration of justice---

----Adjudication of case should be on merits and technical knock-out is not to be encouraged.

Jameel Ahmed v. Late Saif-ud-Din through L.Rs. 1997 SCMR 260; Master Musa Khan v. Abdul Haque and others 1993 SCMR 1304 and Jane Margrete William through her General Attorney Mr. M. Nawaz Kasuri v. Abdul Hamid Mian 2004 SCMR 1555 rel.

Agha Muhammad Akmal Khan for Petitioner.

Malik Mumtaz Hussain Khokhar for Respondent.

Date of hearing: 20th May, 2013.

JUDGMENT

ABID AZIZ SHEIKH, J.---Through this single judgment we intend to decide this Reference, as well as, Tax Reference No.T.R.109 of 2008 to T.R.114 of 2008 and T.R.147 of 2008, as common questions of law are involved in all these Tax References.

2.Questions of law raised in this Reference are as follows:--

(1)"Whether on the facts and in the circumstances of the case, the learned ITAT was justified to dismiss departmental appeal in limine when appeal was filed as per directions of ITAT under the old Income Tax Ordinance, however, section of new Ordinance was inadvertently mentioned?

(2)Whether appeal of the department was liable to be dismissed merely for filing of the same under new Ordinance when Apex Court in a reported judgment cited as 1993 SCC 1011 (CIT v. Asbestos Cement Industries Limited Karachi and others) has held that filing of appeal is a procedural matter?"

3.Brief facts leading to the above questions of law are that the petitioner-department filed appeal against order dated 15-6-2005 passed by the Commissioner of Income Tax (Appeals) Multan pertaining to assessment years 1994-1995 to 1997-1998, before the Tribunal under the provisions of section 131 of the Ordinance, 2001 ("Income Tax Ordinance, 2001") whereas it should have been filed under section 134 oftheIncome Tax Ordinance, 1979 ("ITO 1979"). Vide orderdated28-5-2007 the learned Income Tax Tribunal, Islamabad Bench, Islamabad, Camp at Multan directed that the appeal may be refiled after fulfilling requirement of section 134 of Income Tax Ordinance, 1979, inasmuch as, to file an appeal under section 134, the Commissioner had to direct the Deputy Commissioner to file an appeal against the order of the Appellate Additional Commissioner under section 134 of Income Tax Ordinance, 1979. The Tribunal allowed the petitioner-department to get the memorandums of appeal signed by the competent officer and to re-file the same within one month from the receipt of the said order. The said appeal was re-filed by the petitioner-department after having duly rectified the error i.e., that the new appeal was signed by the Deputy Commissioner (the person competent to file the appeal). However, the only lacuna that remained was mis-description regarding the section under which the appeal was filed i.e., reference was made to section 131 of Income Tax Ordinance, 2001 instead of section 134 of Income Tax Ordinance, 1979. In the meanwhile the respondent-assessee also filed application under section 156 of Income Tax Ordinance, 1979 for rectification of order of the learned Appellate Tribunal dated 28-5-2007, which also came up before the learned Appellate Tribunal and was decided through the impugned judgment dated 13-3-2008. While deciding the application under section 156 of the Income Tax Ordinance, 1979, it was held that order dated 28-5-2007 wherein the petitioner-department was directed to rectify the error by getting the appeal signed by the competent officer were based on mistake apparent on the face of the record and hence the said order was recalled. After recalling order dated 28-5-2007 the learned Tribunal dismissed the appeal of the petitioner-department on the sole ground that the appellant should have filed the appeal under section 134 of Income Tax Ordinance, 1979 instead of section 131 of Income Tax Ordinance, 2001.

4.Learned counsel for the petitioner submits that the application for rectification under section 156 of Income Tax Ordinance, 1979 did not lie as there was no mistake apparent on the face of the record as provided under section 156 and, therefore, the impugned judgment to this extent is without lawful authority. He further submits that the only lapse committed in the appeal filed before the learned Appellate Tribunal was that the section mentioned in the memorandum of appeal was incorrect which was not a fatal mistake as the appeal already stood rectified and was duly signed by the Deputy Commissioner concerned as required under section 134 of the Income Tax Ordinance, 1979.

5.Learned counsel for the respondent, on the other hand, submits that mention of the wrong section and the inability of the petitioner to comply with the requirement there-under is fatal, hence the order passed by the learned Appellate Tribunal is lawful and justified. He has placed reliance in the case of Commissioner of Income Tax, Regional Tax Officer Multan v. Muhammad Siddique (Civil Petitions Nos.1109-L and 1110-L of 2010) and Commissioner of Income Tax v. Asbestos Cement Industries Ltd., Karachi and others, (1993 SCC 1011), and Home Service Syndicate v. Commissioner of Income Tax, 2003 PTD 1109.

6.We have given our anxious consideration to the contentions of the learned counsel for the parties and also perused the record.

7.In order to answer the questions of law referred, we have to briefly reiterate the admitted facts. The petitioner-department filed appeal in respect of assessment years 1994-1995 to 1997-1998 before the Tribunal under section 131 of Income Tax Ordinance, 2001 whereas the appeal should have been filed under section 134 of Income Tax Ordinance, 1979. The Income Tax Tribunal vide order dated 28-5-2007 directed the Commissioner to re-file appeal under section 134 of Income Tax Ordinance, 1979 within a period of one month from the receipt of said order. In compliance of the order, the appeal was filed within prescribed period, signed by the competent officer, however, again in the memorandum of appeal the petitioner mentioned section 131 of Income Tax Ordinance, 2001 instead of section 134 of Income Tax Ordinance, 1979. The respondent filed application under section 156 of Income Tax Ordinance, 1979 for rectification of order dated 28-5-2007. The Tribunal vide impugned order dated 13-3-2008 accepted the application under section 156 of Income Tax Ordinance, 1979 and recalled the order dated 28-5-2007 and dismissed the appeal on the ground that the same has been filed under section 131 of Income Tax Ordinance, 2001 instead of section 134 of Income Tax Ordinance, 1979.

8.In the aforesaid background it is to be seen whether application under section 156 of Income Tax Ordinance, 1979 for rectification was maintainable against order dated 28-5-2007 and appeal could be dismissed for mentioning wrong provision of law. In order to decide the real controversy between the parties, we intend to resettle the first question of law. It is settled principle of law that this Court can reframe and resettled the question of law as held by the Hon'ble Supreme Court in Commissioner of Income-Tax Company's II, Karachi v. Messrs National Food Laboratories (1992 PTD 570). In this context reference is also made to Ch. Haq Nawaz Chohan v. Ch. Tariq Azam and 43 others (1994 CLC 1530), Commissioner of Income Tax v. Metal Forming Ltd. (2009 PTD 75) and MessrsAmerican Express Bank Ltd. Karachi Commissioner of Income Tax, Companies-I Karachi (2009 PTD 1791).

9.We accordingly reframe and resettle the question of law mentioned at Sr.No.1 in para 2 of this reference as well as in connected references as under:--

"Whether in the facts and circumstances of the case, the learned ITAT was justified under section 156 of Income Tax Ordinance, 1979 to recall the ITAT's earlier direction under which the petitioner was allowed to file appeal under the old Income Tax Ordinance?"

10.We have read the earlier order dated 28-5-2007 passed by the learned Tribunal, the concluding para of said order is reproduced hereunder:--

"So in these circumstance we hereby think that better course would be to admit and entertain pending appeal signed by the Commissioner. However, concerned Commissioner is directed to get signed memorandum of appeal verification and grounds of appeal by the officer competent to file the appeals within one month from receipt of this order. In case this mistake is not rectified within stipulated period of time. File be presented before the bench on a suitable date for passing an order dismissing appeals being filed by an incompetent authority."

11.The aforesaid order was passed after detailed discussion, deliberation and interpretation of provisions of law and does not carry any mistake apparent on the record justifying recall of order through rectification application under section 156 of Income Tax Ordinance, 1979. The expression "mistake apparent on record" as used in section 156(1) of the Income Tax Ordinance, 1979 means that error or mistake is so manifest and clear, which, if permitted to remain on record may have material affect on the case. Wherein an error of fact or law which defect has direct nexus with the question of determination of rights of parties, affecting their substantial rights or causing prejudice to their interest is not a mistake apparent on the record to be rectified under section 156 of the Income Tax Ordinance, 1979. The perusal of impugned order dated 13-3-2008 shows that the learned Tribunal had reassessed the matter and after interpreting provision of law formed an opinion different from earlier order dated 28-5-2007 which goes outside the scope of rectification.

12.We feel that order dated 28-5-2007 could not be recalled under section 156 of the Income Tax Ordinance, 1979 and if the respondent was aggrieved against order dated 28-5-2007 due to some legal defect could only be examined by the next higher authority and could not be rectified under section 156 of the Act ibid. In this context we have been guided by the law laid down in Commissioner of Income Tax Karachi v. Messrs Shadman Cotton Mills Ltd. Karachi through Director (2008 SCMR 204) Commissioner of Income Tax Karachi v. Abdul Ghani (PLD 2007 SC 308), Baqar v. Muhammad Rafique and others (2003 SCMR 1401), Commissioner of Income Tax Companies II, Karachi v. Messrs National Food Laboratories (1992 SCMR 687) Sh.Muhammad Iftikhar-ul-Haq v. The Income Tax Officer Bahawalpur (PLD 1966 SC 524) and Pakistan River Steamers Ltd. v. Commissioner of Income Tax Dacca (1971 PTD 204). The question of law resettled by this Court is, therefore, answered in the affirmative.

13.Coming to the second question of law, after re-filing the appeal in pursuance of order dated 28-5-2007 under the signature of the competent authority, the only lacuna which was left in the appeal was that it was filed under section 131 of Income Tax Ordinance, 2001 whereas it should have been filed under section 134 of the Income Tax Ordinance, 1979. The impugned order of the Tribunal dated 5-6-2005 dismissing the appeal on this sole ground is not justified for the reasons that mere mentioning of wrong provisions of law does not render the appeal non maintainable or fatal to the grant of relief to which the petitioner otherwise was entitled under the law. The decision on merits is the most cherished goal of law and the Courts/Tribunals administering justice are not slaves to technicalities where wrong mentioning of the provisions of law would be a hurdle in doing justice between the parties, particularly when one is otherwise found entitled to it under the law.

14.In the similar situation, the Hon'ble Supreme Court in C.Ps. Nos.1109-L and 1110-L of 2010 titled "Commissioner of Income Tax, Regional Tax Office, Multan v. Muhammad Siddique" vide order dated 13-7-2011 held as under:--

"We have heard learned counsel for the petitioner-revenue and have also gone through the impugned judgment. The Tax References filed by the petitioner-revenue were dismissed in limine on the short ground that the appeal before Tribunal and References before the High Court ought to have been filed under the Repealed Income Tax Ordinance, 1979 and not under the Ordinance of 2001. The merits of the Reference filed by the petitioner were not touched.

Learned counsel for the revenue has cited the case titled Commissioner of Income Tax v. Messer Eli Lilly (Pvt.) Ltd. (2009 SCMR 1279). In the said case it has been stated that References in respect of assessment year proceeding 2002 shall be dealt with in accordance with the provisions of the Income Tax Ordinance, 1979. To this extent, there is no cavil with the findings of the High Court that the Tax Reference by the Revenue ought to have been filed under the Income Tax Ordinance, 1979 and not under the Ordinance of 2001. This, however, is not an omission of a material nature because the High Court should have dealt with the Reference in accordance with the Income Tax Ordinance, 1979 even though the incorrect provision of law had been cited.

In view of the foregoing discussion, these petitions are converted into appeal and are allowed. The impugned order is set aside. The matters are sent to the High Court for decision afresh on the merits of the References"

15.In view of the aforesaid finding of the Hon'ble Supreme Court of Pakistan, we are of the opinion that the Tribunal should have dealt with the appeal in accordance with the Income Tax Ordinance, 1979 even though the appeal was filed under the wrong provisions of law i.e. Income Tax Ordinance, 2001. In this context we are also fortified by the following case-law: Jane Margrete William v. Abdul Hamid Mian (1994 SCMR 1555) Pakistan Fisheries Ltd. Karachi and others v. U.B.L. (PLD 1993 SC 109) Usman Khan through Attorney v. Ayesha Naz and 2 others (2010 CLC 475).

16.It is also settled principle of law that adjudication of case should be on merits and technical knockout is not encouraged. In this respect we are also fortified by the law laid down in Jameel Ahmed v. Late Saif-ud-Din through L.Rs. (1997 SCMR 260), Master Musa Khan v. Abdul Haque and others (1993 SCMR 1304) and Jane Margrete William through her General Attorney Mr. M. Nawaz Kasuri v. Abdul Hamid Mian 2004 SCMR 1555.

17.The case-law cited by the learned counsel for the respondent is of no help to his case as it proceeds on a different set of facts and circumstances.

18.In view of above discussion, this Reference is allowed and the questions of law raised by the petitioner are answered accordingly.

19.Office shall send a copy of this judgment under the seal of the Court to the learned Appellate Tribunal Inland Revenue as per section 133(5) of the Income Tax Ordinance, 2001.

20.Disposed of.

SAK/C-17/LReference accepte