Mst. SHAGUFTA ABDULLAH VS COMMISSIONER INLAND REVENUE, 2015 PTD-LAHORE-HIGH-COURT-LAHORE 1855 (2015)

(a) Words and phrases---

----"Hardship"---Defined.

Black's Law Dictionary by Bryan A., Garner, Ninth Edition and Oxford Advanced Learner's Dictionary of Current English by A.S. Hornby, Eighth Edition rel.

(b) Words and phrases---

----"Undue"---Meaning---Undue is something greater or more extreme than is wanted, expected or thought to be reasonable.

Prestige Lights Ltd. v. Custom, Excise and Service Tax Appellate Tribunal (Uttaranchal) (D.B.) 2004 (2) U.D. 265 rel.

(c) Interpretation of statutes---

----Taxing statute---Scope---Taxing statute is to be construed literately in sense in which it has been provided---Intent of Legislature should be clear from words in the legislation---Court must look squarely at words of statute and interpret them in the light of what has been clearly expressed---If there is any ambiguity caused by language, the benefit of that ambiguity goes to taxpayer.

Sohail Jute Mills Ltd. and others v. Federation of Pakistan through Secretary, Ministry of Finance and others PLD 1991 SC 329 and Messrs Elahi Cotton Mills Ltd. and others v. Federation of Pakistan through Secretary M/o Finance, Islamabad and 6 others PLD 1997 SC 582 rel.

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

----Ss. 128 & 131(5)---'Undue hardship'---Proof---Taxpayer must show its absolute inability to pay tax and must establish that under existing financial circumstances his income and expenses do not allow to pay required tax---Not about inability to pay tax or inconvenience to pay the tax nor is it about commercial viability or profit making; it is a financial disability to pay tax making it virtually impossible for taxpayer to pay tax---Taxpayer must plead "undue hardship" based on its income and expenses so that it can be evaluated---"Undue hardship" can also include situations where taxpayer is able to show a strong prima facie case.

Messrs L.G. Electronics India (Pvt.) Ltd. v. Commissioner of Central Excise Nodia (Allahabad) 2009 (6) ADJ 246 rel.

(e) Sales Tax Act (VII of 1990)---

----Ss. 11(2) & 33(13)---Income Tax Ordinance (XLIX of 2001), Ss.128 & 131(5)---Constitution of Pakistan, Art.199---Constitutional petition---Conditional stay---Undue hardship, non-pleading of---Assessee was aggrieved of order passed by Income Tax Appellate Tribunal granting stay with a condition to deposit 30% of disputed tax---Validity---Grant of stay as per Income Tax Ordinance, 2001, was not granted as of right---Stay was subject to discretion of appellate forum when considering undue hardship---Deposit of 30% of disputed tax as a precondition to stop recovery of assessed tax fell within the discretion of Income Tax Appellate Tribunal---Tribunal had given taxpayer a concession by requiring him deposit a small part of disputed tax and not entire tax because he did not plead undue hardship but emphasized on irreparable loss caused to him---Under S.131 of Income Tax Ordinance, 2001, purpose of providing one hundred and eighty days stay from recovery of tax was to ensure that appeal would be decided in a timely manner thereby ensuring that revenue was paid at the earliest---High Court declined to interfere in condition imposed by Income Tax Appellate Tribunal while granting conditional stay order---Petition was dismissed in circumstances.

Z.N. Exports (Pvt.) Ltd. v. Collector of Sales Tax 2003 PTD 1746; Messrs Pak Saudi Fertilizers Ltd. v. Federation of Pakistan and others 2002 PTD 679; Muhammad Asif Nawaz v. Additional Sessions Judge/Justice of Peace Multan and 2 others 2014 CLD 45; Messrs Askari Leasing Ltd. through Chief Manager v. Presiding Officer and another 2015 CLD 196; Pakistan Mobile Communication Ltd. v. Judge District Consumer Court, Gujranwala and 3 others PLD 2015 Lah. 204; Balochistan Glass Limited through Authorized Representative and 2 others v. Bank Alfalah Limited and 2 others 2015 CLD 52 and Mahmood Barni v. Inspecting, Additional Commissioner of Income Tax, Gujranwala and another 2005 PTD 165 ref.

Mirza Bilal Zafar for Petitioner.

Sarfraz Ahmad Cheema for Respondents.

Date of hearing: 14th May, 2015.

JUDGMENT

MRS. AYESHA A. MALIK, J.---Through this petition, the petitioner has impugned order dated 9-4-2015 issued by respondent No.4 which requires the petitioner to deposit 30% of the impugned tax for grant of stay against the recovery of the assessed tax.

2.The facts of the case are that respondent No.3 issued a show cause notice to the petitioner on 28-6-2014 with respect to inadmissible input tax and its recovery under Section 11(2) of the Sales Tax Act, 1990 ("Act") along with default surcharge. The petitioner appeared before respondent No.3 and sought adjournments as the record was not available. Respondent No.3 passed an assessment order on 12-9-2014 directing the petitioner to deposit the principal amount of sales tax of Rs.4,989,459 along with default surcharge (to be calculated at the time of recovery) under Section 34(1)(c) of the Act. A penalty of Rs.4,989,459 (equal to 100% of principal amount of sales tax) under subsection (13) of Section 33 of the Act was also imposed. Aggrieved of this order, the petitioner filed an appeal before respondent No.2 which was dismissed on 27-11-2014. The petitioner challenged the said order before respondent No.4 which has not been fixed for hearing so far. In the meantime, respondent No.3 initiated recovery proceedings against the petitioner vide recovery notice dated 25-2-2015. The petitioner moved an application for grant of stay against the recovery proceedings initiated by respondent No.3. Respondent No.4 vide order dated 9-4-2015 passed the following order:--

"Therefore, we are inclined to grant stay against recovery of impugned tax demand for a period of 60 days subject to payment of 30% of the impugned tax demand, which will be deposited in the Treasury within 5 days of the receipt of this order otherwise this order will not hold the field."

Learned counsel for the petitioner argued that respondent No.4 failed to consider that the appeal of the petitioner is pending, therefore grant of conditional stay against recovery is wholly unwarranted and is without authority. It is their case that the petitioner is entitled to interim relief until adjudication of its dispute by one independent judicial forum. Learned counsel argued that the demand in dispute has yet to be settled by an independent judicial forum, hence the petitioner is entitled, as of right, to interim relief. He argued that in this regard respondent No.4 could not impose any condition on the petitioner for deposit of the disputed tax. Learned counsel further argued that no coercive measures for recovery of the disputed tax can be taken pending a decision in appeal. He also urged that in similar cases, no deposit was sought yet in his case deposit of 30% has been ordered which is discrimination.

3.Learned counsel for the respondents submits that the petitioner was given sufficient time to defend his case but he failed to do so and kept delaying the matter. The petitioner did not respond to the show cause notice, therefore, an assessment order was issued. He stated that the conduct of the petitioner before the respondents does not entitle him to any discretionary relief. Further argued that under the law, it is the discretion of respondent No.4 to grant interim relief and in this case no delay has been caused by respondent No.4 in hearing the stay application. He explained that each case will be seen in the light of its own facts and circumstances, so there is no question of discrimination.

4.Heard and record perused.

5.The basic issue is whether respondent No.4 can impose a condition to deposit a certain percentage of the tax when granting interim relief thereby preventing recovery of the tax under the Ordinance. The relevant Section for the purposes of this petition is Section 131(5) of the Income Tax Ordinance, 2001 ("Ordinance") which reads as follows:-

Notwithstanding that an appeal has been filed under this section, tax, shall, unless recovery thereof has been stayed by the Appellate Tribunal, be payable in accordance with the assessment made in the case:

Provided that if on filing of application in a particular case, the Appellate Tribunal is of the opinion that the recovery of tax levied under this Ordinance and upheld by the Commissioner (Appeals), shall cause undue hardship to the taxpayer, the Tribunal after affording opportunity of being heard to the Commissioner, may stay the recovery of such tax for a period not exceeding one hundred and eighty days in aggregate:

Provided further that in computing the aforesaid period of one hundred and eighty days, the period, if any, for which the recovery of tax was stayed by a High Court, shall be excluded.

It is noted that the same provision exists in Section 128 of the Ordinance which reads as follows:--

128. Procedure in appeal.---(1) The Commissioner (Appeals) shall give notice of the day fixed for the hearing of the appeal to the appellant and to the Commissioner against whose order the appeal has been made.

[(1A) Where in a particular case, the Commissioner (Appeals) is of the opinion that the recovery of tax levied under this Ordinance, shall cause undue hardship to the taxpayer, he, after affording opportunity of being heard to the Commissioner against whose order appeal has been made, may stay the recovery of such tax for a period not exceeding thirty days in aggregate.]

(2)The Commissioner (Appeals) may adjourn the hearing of the appeal from time to time.

(3)The Commissioner (Appeals) may, before the hearing of an appeal, allow an appellant to file any new ground of appeal not specified in the grounds of appeal already filed by the appellant where the Commissioner (Appeals) is satisfied that the omission of the ground from the forum of the appeal was not wilful or unreasonable.

(4)The Commissioner (Appeals) may, before disposing of an appeal, call for such particulars as the Commissioner (Appeals) may require respecting the matters arising in the appeal or cause further enquiry to be made by the Commissioner.

(5)The Commissioner (Appeals) shall not admit any documentary material or evidence which was not produced before the Commissioner unless the Commissioner (Appeals) is satisfied that the appellant was prevented by sufficient cause from producing such material or evidence before the Commissioner.

As per Section 131(5) of the Ordinance, the tax must be paid in accordance with the assessment order unless its recovery has been specifically stayed by the Appellate Tribunal. The Appellate Tribunal can stay the recovery of the tax in hardship cases where deposit of the tax shall cause undue hardship to the taxpayer. A bare reading of the Section shows that stay against recovery of tax is not a matter of right. It is subject to the discretion of the Appellate Tribunal who has to hear the taxpayer and decide upon the question of hardship. The same condition exists in Section 128 of the Ordinance which clearly provides that irrespective of the filing of an appeal and the pendency of an appeal, the tax must be paid. There is no ambiguity in the words of the statute in this regard. The Appellate Tribunal or the Commissioner (Appeals) at its discretion can stop the recovery of tax if it finds that it is a case of undue hardship for the taxpayer. The appellate forum will by exercising its discretion decide whether it is a fit case of undue hardship. For proper evaluation the taxpayer has to specifically plead its undue hardship.

6.The word 'hardship' has not been defined anywhere in the statute. As per the Black's Law Dictionary by Bryan A.Garner, Ninth Edition, hardship has been defined as suffering or adversity. In the Oxford Advanced Learner's Dictionary of Current English by A.S. Hornby, Eighth Edition 'hardship' is defined as a situation that is difficult and unpleasant because you do not have enough money, food, clothes etc. economic/financial, etc. The Ordinance does not require the taxpayer to show 'hardship' but requires it to be a case of undue hardship which means something more severe, harsher than simple difficulty, unpleasantness. "Undue" is something greater or more extreme than is wanted expected or thought to be reasonable. The meaning of undue hardship has been examined in the case titled Prestige Lights Ltd. v. Custom, Excise and Service Tax Appellate Tribunal (Uttaranchal) (D.B.) (2004 (2) U.D.265) as follows:--

The term 'undue hardship' is, however, not defined in any Law Dictionary. Reading the two words together the meaning would be 'unwarranted hardship'.

In order to appreciate the meaning of the word 'undue hardship' as used in sections 128 and 131(5) of the Ordinance the rules of construction in a taxing statute must be considered. A taxing statute is to be construed literately in the sense in which it has been provided. The intent of the legislature should be clear from the words in the legislation. The Court must look squarely at the words of the statute and interpret them in the light of what has been clearly expressed. If there is any ambiguity caused by the language, the benefit of that ambiguity goes to the taxpayer. Reliance is placed on the cases titled Sohail Jute Mills Ltd. and others v. Federation of Pakistan through Secretary, Ministry of Finance and others (PLD 1991 SC 329) and Messrs Elahi Cotton Mills Ltd. and others v. Federation of Pakistan through Secretary M/o Finance, Islamabad and 6 others (PLD 1997 SC 582).

7.Therefore the taxpayer must show its absolute inability to pay the tax. He must establish that under existing financial circumstances, his income and expenses do not allow him to pay the required tax. It is not about inability to pay the tax or inconvenience to pay the tax. Nor is it about commercial viability or profit making. It is a financial disability to pay the tax making it virtually impossible for the taxpayer to pay the tax. The taxpayer must specifically plead undue hardship based on its income and expenses so that it can be evaluated. The appellate forum must assess and evaluate whether it is a case of undue hardship. This evaluation is in the form of a concession available to the taxpayer under the Ordinance. The appellate forum in order to form an opinion as to whether the recovery of a tax would amount to undue hardship must consider the financial position of the taxpayer through its documents and ascertain whether on the basis of available assets and income, a taxpayer is prevented from meeting the required demand. Undue hardship can also include situations where the taxpayer is able to show a strong prima facie case. It was held in Messrs L.G. Electronics India (Pvt.) Ltd. v. Commissioner of Central Excise Nodia (Allahabad) (2009 (6) ADJ 246) while considering the case of 'undue hardship', the authority is required to examine the prima facie on merits of the dispute as well. Pleading of financial disability would not be the only consideration. Where the case is fully covered in favour of the assessee by a biding precedent like that of the judgment of the Supreme Court, jurisdictional High Court or a Special Bench of the Tribunal, then to still insist upon the deposit of duty and penalty levied would certainly cause undue hardship to the assesse. Therefore the appellate forum will also have to assess the nature of the case and ascertain if the taxpayer has a strong case in law. In each case, a determination has to be made as to whether the recovery will cause undue hardship to the taxpayer. Each order must reflect application of an objective and judicious mind. Each case must be decided on its own merits.

8.In this case, the Appellate Tribunal heard the stay application filed by the petitioner against the recovery proceedings initiated by respondent No.3 and passed a conditional order on 9-4-2015. The petitioner questions that condition of deposit on the ground that he is entitled to the stay from the recovery process until a decision is delivered by the independent forum. As already stated, the grant of stay as per the Ordinance is not granted as of right. It is subject to the discretion of the appellate forum when considering undue hardship. In this case, the deposit of 30% of the disputed tax as a precondition to stop the recovery of the assessed tax falls within the discretion of the Appellate Tribunal. Essentially the Appellate Tribunal has given the taxpayer a concession by requiring him to deposit a small part of the disputed tax and not the entire tax because he did not plead undue hardship but emphasized on irreparable loss caused to him. The petitioner has relied upon the case titled Z.N. Exports (Pvt.) Ltd. v. Collector of Sales Tax (2003 PTD 1746) which is not applicable to his case because in the said case, there was a delay in hearing the case, hence it was held that since the Tribunal as a forum of first appeal did not dispose of the appeal, the petitioner could not be blamed. In all fairness, equity and justice, an assessee should not be forced to pay a demand created by a Revenue Authority unless the order creating such demand has undergone the scrutiny of at least one independent forum. In this case, his stay application was heard and a conditional order was passed. There is no delay element at this point. The other cases relied upon by the learned counsel for the petitioners i.e. Messrs Pak Saudi Fertilizers Ltd. v. Federation of Pakistan and others (2002 PTD 679), Muhammad Asif Nawaz v. Additional Sessions Judge/Justice of Peace Multan and 2 others (2014 CLD 45), Messrs Askari Leasing Ltd. through Chief Manager v. Presiding Officer and another (2015 CLD 196), Pakistan Mobile Communication Ltd. v. Judge District Consumer Court, Gujranwala and 3 others (PLD 2015 Lahore 204), Balochistan Glass Limited through Authorized Representative and 2 others v. Bank Alfalah Limited and 2 others (2015 CLD 52) and Mahmood Barni v. Inspecting, Additional Commissioner of Income Tax, Gujranwala and another (2005 PTD 165) require a speaking order, which is not an issue in this case. Hence those cases are not relevant.

9.Another aspect of this case is the relevance of the time frame within which the case must be decided. The stay application was heard and decided but the appeal has yet to be heard. Since the matter pertains to fiscal obligations of the taxpayer and recovery of government revenue the appeal must be decided at the earliest and the stay of the recovery of tax must commensurate with the final decision by the appellate forum. Under Section 131 of the Ordinance, the purpose of providing one hundred and eighty days stay from recovery of tax is to ensure that the appeal is decided in a timely manner thereby ensuring that revenue is paid at the earliest. It has been seen that the Appellate Tribunal in particular, tends not to decide the appeals in a timely manner and exceeds the stay period of one hundred and eighty days of the taxpayer before even attending to the appeal. Therefore, numerous petitions are filed before this Court seeking a direction to the Appellate Tribunal to decide the appeal and the stay matter in a timely manner giving the taxpayer an opportunity to avail the benefit of Section 131(5) of the Ordinance. For this reason, it is imperative to ascertain if any delay has been caused during the pendency of the appeal and to whom that delay is attributed. If the delay is attributable to an act of the taxpayer, then the Appellate Tribunal cannot be blamed for the delay and the taxpayer is not entitled to any protection from this Court in constitutional jurisdiction. However, where the delay is not attributable to the taxpayer, who has filed his appeal and is waiting for the matter to be heard, he can, if the facts permit be protected. Where the Appellate Tribunal has essentially exhausted the stay period for no fault of the taxpayer it goes against the spirit of the Ordinance. In such cases, this Court has interfered and required the appellate forum to decide the appeal within a given time. This is because the intent of the legislature is very clear. Whenever a stay is granted in an appeal under the Ordinance, there is a corresponding duty on the appellate forum to decide the appeal within the stipulated time particularly where the payment of tax has been stayed. Hence the Appellate Tribunal has to ensure that appeals are decided, so as to ensure that no prejudice is caused to the taxpayer.

10.Under the circumstances, no case for interference is made out. petition is dismissed.

MH/S-74/LPetition dismissed.