COMMISSIONER INLAND REVENUE VS PAK ARAB PIPE LINE COMPANY LTD., 2014 PTD-KARACHI-HIGH-COURT-SINDH 982 (2014)

(a) Income Tax Ordinance (XLIX of 2001)---

----Ss. 133, 132(10) & 122---Reference to High Court---Jurisdiction of High Court under S.133 of the Income Tax Ordinance, 2001---Scope---Adjudication on issues not framed as questions of law---Limitation---Department impugned order of Appellate Tribunal in favour of respondent taxpayer and framed only one question of law with regard to interpretation of S. 57 of the Income Tax Ordinance, 2001---Contention of respondent taxpayer was that in addition to finding in favour of taxpayer with regard to S. 57 of the Income Tax Ordinance, 2001 the Tribunal had also held that assumption of jurisdiction by officer of the Department who passed amended assessment order under S.122 of the Income Tax Ordinance, 2001 was without lawful authority; and said finding of Appellate Tribunal had not been challenged by Department in the present reference, therefore, the same had attained finality---Held, that Appellate Tribunal had dealt with the merits of the case and had arrived at a definite finding in favour of the taxpayer, which had been challenged by the Department by proposing the question of law regarding S. 57 of the Ordinance, however, the Appellate Tribunal also held that the officer who had assumed jurisdiction in terms of S. 122(5A) of the Income Tax Ordinance, 2001 to amend the assessment order had no lawful authority to do so under the Ordinance hence, the amended assessment order stood vacated---Since the question of assumption of jurisdiction by officer who had passed the amended assessment order had been decided against the Department, which per se seemed to be accepted by the Department by not referring to the issue in any question of law in this regard in the present reference; therefore, finding of Appellate Tribunal in regard to issue of jurisdiction had attained finality in terms of S. 132(10) of the Income Tax Ordnance, 2001---By not referring to said issue in any question of law, the Department had therefore waived its right under the Income Tax Ordinance, 2001---Contention that the Department be allowed to raise the issue of jurisdiction at such this stage to meet ends of justice, could not be entertained at such belated stage of proceedings as no additional questions could be entertained after expiry of limitation period for filing the reference expired---Since question of jurisdiction which went to the roots of the case, had not been raised by the Department, any exercise of answering the question with regard to S.57 of the Income Tax Ordinance, would be futile---High Court refused to answer question referred to it under S. 133 of the Income Tax Ordinance, 2001.

Messrs Lasani Brothers v. Commissioner of Income Tax PLD 1985 SC 387; CIT, Lahore Zone v. S.H. Muhammad Ismail and Co. Ltd. 1986 SCMR 968; K. Ravindranthan Nair v. Commissioner of Income Tax 247 ITR 178 SC Ind and Commissioner Inland Revenue-II, v. Royal International Exchange Company Ltd. 2013 PTD 1614 rel.

(b) Income Tax Ordinance (XLIX of 2001)---

----S. 133---Reference to High Court---Jurisdiction of High Court under S. 133 of the Income Tax Ordinance, 2001---Scope---Jurisdiction of High Court under S. 133 of the Income Tax Ordinance, 2001 being advisory in nature was very limited and not plenary; unlike its ordinary appellate jurisdiction.

Amjad Javaid Hashmi for Applicant.

Arshad Siraj for Respondent.

Date of hearing: 6th February, 2014.

JUDGMENT

MUHAMMAD JUNAID GHAFFAR, J.---Through this common judgment we intend to dispose of the above mentioned Income Tax Reference Applications ("ITRAs") filed by the Commissioner Inland Revenue against the order dated 11-12-2010 passed by the Appellate Tribunal, Inland Revenue, Karachi, ("Tribunal") in I.T.As. Nos.836/KB of 2010 (Tax year 2006),837/KB of 2010 (Tax year 2007), 838/KB of 2010 (Tax year 2008) and 839/KB of 2010 (Tax year 2009). The applicant has proposed the following common question of law:--

"Whether in the facts and circumstances of the case, the learned Tribunal has correctly interpreted the scheme of set-off of business loss on account of unabsorbed depreciation under section 57(1) and (4) of the Income Tax Ordinance, 2001?"

2.At the outset, the learned counsel appearing on behalf of the respondent has raised a preliminary objection regarding the question of law raised in the instant I.T.R.As. Per learned Counsel, the Tribunal in addition to its finding on the proposed question in favour of the respondent has also held that the amended assessment order which was passed under section 122(5-A) of the Income Tax Ordinance, 2001 ("Ordinance") to the extent of the question raised in the instant I.T.R.As. was without jurisdiction as the original deemed assessment order under section 120 of the Ordinance was neither erroneous nor prejudicial to the interest of revenue. Learned counsel further submitted that the applicant has failed to raise any such question regarding assumption of jurisdiction by the officer who had passed the said order and the findings of the learned Tribunal on this issue has attained finality. The learned counsel for the applicant has been unable to satisfactorily reply to this preliminary objection, that as to how the question raised in the instant I.T.R.As. could be answered by this Court.

3.We have perused the record and gone through the impugned order passed by the Tribunal and we tend to agree with the contention raised by the learned counsel for the respondent. It appears that though the Tribunal has dealt with the merits of the case in a very elaborate manner and has arrived on a definite finding in favour of the respondent which has been challenged by proposing the above question of law; however, the Tribunal has also held that the officer who had assumed the jurisdiction in terms of section 122(5A) of the Ordinance to amend the deemed assessment order, had no lawful authority under the Ordinance to do so as the assessment order was neither erroneous nor prejudicial to the interest of revenue, hence the amended assessment order was vacated, at least with regard to the issue raised through the proposed question of law. It seems to us that the question of assumption of jurisdiction by the officer, who had passed such order, has been decided against the applicant, which per se seems to be accepted by the applicant by not referring any question of law in this regard in the instant I.T.R.As. The finding of the learned Tribunal on this issue has attained finality in terms of subsection (10) of section 132 of the Ordinance which provides that save as otherwise provided under section 133 the decision of the Tribunal shall be final, hence a vested right has also accrued in favour of the respondent. It was incumbent upon the applicant at the time of filing of the instant I.T.R.As. in terms of section 133 of the Ordinance, to prefer the references in the prescribed format along with a statement of case, to this Court, stating therein any questions of law arising out of the Order of the Tribunal. By not doing so, the applicant has waived its right as provided under the Ordinance. It is provided under subsection (3) of section 133 of the Ordinance that where on an application made under subsection (1) ibid, this Court is satisfied that the questions of law arise out of the Order of the Tribunal, it may proceed to hear the case and in terms of subsection (5) upon hearing the reference shall decide the questions of law raised in the reference and pass judgment thereon specifying the grounds on which such judgment is based and the Tribunal's order shall stand modified accordingly. It is a settled proposition of law that the jurisdiction of this Court under section 133 of the Ordinance being advisory in nature is very limited and not plenary unlike its ordinary appellate jurisdiction. It would be advantageous to refer to the case of Messrs Lasani Brothers v. Commissioner of Income Tax reported in PLD 1985 SC 387, wherein a penalty was imposed by the Taxation Officer and thereafter the appeal filed by the assessee was allowed. The department then preferred further appeal before the Tribunal which was accepted and the imposition of penalty was upheld. The assessee being aggrieved, preferred a reference under section 66(1) of the Income Tax Act, 1922, by raising the question, whether on the facts and circumstances, the penalty imposed under section 28(1)(b) of the Income Tax Act is sustainable in law, on which the learned High Court dismissed the reference application by holding that the power to impose penalty was not questioned before it. The assessee assailed the finding of the High Court before the Hon'ble Supreme Court which was also dismissed with the following observations:--

"6. No doubt one of the grounds on which the High Court dismissed the reference was that the appellant's Counsel had failed to give reasons as to why very reasonable order of the Tribunal should be set aside, but we notice that the High Court has also observed that the power to impose penalty by the Income Tax Officer had not been questioned before it by the counsel representing the appellant. It cannot therefore be said that the impugned judgment suffers from any infirmity or mis-apprehension as observed in the Leave Granting Order. The High Court cannot be expected to decide a question referred to it in the Reference Application if the party concerned does not choose to press it before High Court." (Emphasis supplied)

Similar view has been expressed by the Hon'ble Supreme Court in the case of CIT, Lahore Zone v. S. H. Muhammad Ismail and Co. Limited reported in 1986 SCMR 968, whereby the Hon'ble Supreme Court held that the function of the High Court in cases referred to it under section 66 is advisory only and is confined to considering and answering the actual question referred to it. In the case of k. Ravindranthan Nair v. Commissioner of Income Tax reported in 247 ITR 178 SC Ind the Supreme Court of India has held that the only jurisdiction of the High Court in a reference application is to answer the questions of law that are placed before it.

4.It may also be observed that the learned counsel for the applicant, faced with this situation, contended that the applicant may be allowed to raise the additional question of jurisdiction to meet the ends of justice. We are afraid; such request of the learned counsel cannot be entertained at this belated stage of the proceedings, as no additional questions could be entertained after the limitation period for filing of the reference application has expired. In this regard reference may be made to the case of Commissioner Inland Revenue-II, v. Royal International Exchange Company Limited reported in 2013 PTD 1614, wherein a Learned Division Bench of this Court held that insofar as additional questions sought to be subsequently raised by the learned counsel for the department, in our view it is impermissible to raise these questions in such a manner and at such a belated stage. Finally, though, the learned Counsel for the applicant attempted to argue the case on the merits of the question raised as above, but since any such exercise of answering the said question would be futile, for the reason that the question of jurisdiction which goes to the roots of the case has not been raised by the applicant, and stands decided against the applicant and has also attained finality, therefore, we are of the view that question which has been proposed by the applicant is misconceived and does not require any opinion from this Court. Therefore, we refuse to answer the said question.

5.In view of the above discussion all the listed Income Tax Reference Applications being devoid of merits are hereby dismissed.

KMZ/C-4/SindhReference applications dismissed.