COMMISSIONER INLAND REVENUE VS MACCA CNG GAS ENTERPRISES, 2015 PTD-LAHORE-HIGH-COURT-LAHORE 515 (2014)

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

----Ss.132, 133 & 221---Reference to High Court---Limitation---Order passed by Appellate Tribunal Inland Revenue was assailed by authorities beyond the period of 90 days---Effect---Authorities had assailed the order rejecting application filed under S. 221 of Income Tax Ordinance, 2001, and not the one from the order under S. 132 of Income Tax Ordinance, 2001---Reference was required under S. 133(1) of Income Tax Ordinance, 2001, to be filed within 90 days from communication of order under S. 132(7) of Income Tax Ordinance, 2001---Appellate Tribunal was bound to communicate its order under S.132(7) of Income Tax Ordinance, 2001, to taxpayer and Commissioner---No reference could be filed on question arising from order passed under S. 132 of Income Tax Ordinance, 2001---Question was answered in negative in circumstances.

Commissioner Inland Revenue v. Messrs Khan CNG and Filling Station and others 2013 PTD 884; Commissioner of Income Tax Company's II, Karachi v. Messrs National Food Laboratories 1992 PTD 570; Commissioner of Income-Tax Companies No.1, Karachi v. Messrs Hassan Associates (Pvt.) Ltd., Karachi 1994 PTD 1256; The Lungla (Sylhet) Tea Co. Ltd., Sylhet v. Commissioner of Income-Tax, Dacca Circle, Dacca 1970 SCMR 872; The Commissioner of Income Tax v. Messrs Smith, Kline and French of Pakistan Ltd. and others 1991 PTD 999 and 1991 SCMR 2374 ref.

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

----S.133---Reference to High Court---Jurisdiction of High Court---Scope---High Court has to decide reference application on fact and circumstances founded by Appellate Tribunal, which is the last fact finding forum---High Court cannot change finding of facts arrived at by Appellate Tribunal---Opinion of High Court under S. 133 of Income Tax Ordinance, 2001, is binding on it.

Sheikh Anwar-ul-Haq for Applicant.

Atif Waheed for Respondent No.1.

ORDER

This order shall decide instant reference application along with I.T.R. No.16 of 2013 (relating to tax years 2004 and 2005), arising out of a common order dated 2-7-2011, passed by the Appellate Tribunal Inland Revenue.

2.Facts briefly are that respondent No.1 (tax payer) drew income from running a CNG station. The returns filed, for the relevant tax years, were taken to be the assessment orders under section 120 of the Income Tax Ordinance, 2001 ("Ordinance of 2001"). Cases for both the years were selected for audit under section 177(4) of the Ordinance of 2001. As a consequence, show cause notices under section 122(9) of the Ordinance of 2001 were issued. Meanwhile, selection of cases for audit under section 177(4) of the Ordinance was challenged before this Court through Writ Petition No.816 of 2009, which was decided on 8-6-2009 with the following directions:--

"Accordingly the respondents are hereby directed to forthwith provide and give the petitioners a notice containing detailed and firm basis in addition to the one already contained in the impugned notices which would fall within the parameters of section 177(4) to the Ordinance. The petitioners will be allowed an opportunity of being heard and to justify that the criteria applied to them vis- -vis conduct of audit as per section 177(4)(a) to (d) is attracted. However, if the matter falls within the given statutory criteria and requires audit for justifiable reasons, audit of the petitioners in accordance with the provisions of the aforesaid Ordinance will be conducted fairly and expeditiously."

The notices under section 122(9) of the Ordinance of 2001 were repeated after the order by learned single bench this Court. Objections raised before the Taxation Officer, regarding selection of cases for audit, in presence of the above quoted direction, were ignored and amended assessment orders for both the years were passed. Appeals filed against amended assessment orders under section 122(9) were dismissed by the Commissioner (Appeals) on 24-2-2011. Being dissatisfied, the respondent (tax payer) approached the Appellate Tribunal. Learned Tribunal accepted the appeals; for the reason that the notices issued under Section 177(4) were no more in field, in view of the direction (quoted above) by learned single judge of this Court, therefore, the superstructure (order under section 122) made thereon was bound to fall. Second reason for accepting the appeals was that the OGRA formula employed by the Taxation Officer for the purpose of amending assessment under section 122(5) was not definite information. These reasons were authored by learned Judicial Member of the Appellate Tribunal, however, learned Accountant Member wrote a dissenting note to the extent of findings on OGRA formula, by opining that the OGRA formula was a definite information. Nevertheless, he specifically noted that this dissent would not change the fate of case decided on the basis of first reason. The applicant department filed an application under section 221 of the Ordinance of 2001 for rectification of the order dated 2-7-2011. The application for rectification was also dismissed.

3.The department has now approached this Court under section 133(1) of the Ordinance of 2001 by formulating twelve questions, as available on the application. Ten out of twelve questions are on the second finding; i.e. whether the OGRA formula was definite information for the purpose of section 122(5) of the Ordinance, 2001? No question is formulated on the first reason.

However, question No. (vi) is formulated from the order, whereby application for rectification under section 221 of the Ordinance of 2001 was rejected, the same is reproduced hereunder:--

"vi. Whether in the facts and circumstances of the case, the Learned ATIR was under a legal duty to request for a larger Bench and accept the application of the department keeping in view the requirements of due process?"

In this context, following question is also proposed:--

"x. Whether the learned Tribunal has misinterpreted Article 201 of the Constitution of Islamic Republic of Pakistan, 1973?"

4.Learned counsel for the applicant has vehemently argued that the Tribunal was not justified to hold that OGRA formula was not definite information. He also argued that on dissent the Appellate Tribunal was bound to refer the case for larger Bench.

Learned counsel was confronted with the judgment by learned Single Judge of this Court in the case of Commissioner Inland Revenue v. Messrs Khan CNG and Filling Station and others (2013 PTD 884) where the following question of law was answered in negative (against the department), in exercise of its power under section 133 of the Ordinance of 2001:--

"Whether OGRA formula constitutes "definite information" for determination of sales and, therefore, deemed assessment order passed under section 120 of the Income Tax Ordinance, 2001 could be amended under section 122(5) of the Income Tax Ordinance, 2001?"

He could not deny that the judgment holds field.

5.Learned counsel for the respondent/tax payer was present in Court on watching brief. He argued the case with permission. He submits that the questions raised in the application are only on one finding, which even if answered would not change the fate of the appeal dismissed by the Tribunal. Also submits that the question regarding OGRA formula has already been answered by this Court against the department.

6.Heard, record perused.

7.For the sake of brevity, the ten questions proposed on "OGRA FORMULA" are not reproduced, suffice it to observe that all the ten questions if reframed; (as allowed by the Apex Court in the case of Commissioner of Income Tax Company's II, Karachi v. Messrs National Food Laboratories (1992 PTD 570), would be encompassed by the question, already answered, in Khan CNG case (supra).

Since, admittedly, answer to the ten questions on OGRA formula would not change the fate of impugned judgment by the Appellate Tribunal, therefore, these are declined to be considered under the facts and circumstances of this case. We are fortified by two judgments of the Hon'ble Supreme Court of Pakistan. First is Commissioner of Income-Tax Companies No.1, Karachi v. Messrs Hassan Associates (Pvt.) Ltd., Karachi (1994 PTD 1256 Supreme Court), wherein, it is laid down that "general and abstract questions for seeking guidance, which were purely academic, the Court may refuse to answer them". The second is The Lungla (Sylhet) Tea Co. Ltd., Sylhet v. Commissioner of Income-Tax, Dacca Circle, Dacca (1970 SCMR 872) where, it is enshrined that "every question need not be referred to High Court; only question having some substance can be referred".

8.Answer to question No.(vi) is declined; for the reason that it is raised out of the order of rejecting application filed under section 221 of the Ordinance of 2001 and not from the order under the section 132. Under subsection (1) of the section 133, reference is required to be filed within 90 days from communication of order under subsection (7) of section 132. Under subsection (7), the Appellate Tribunal is bound to communicate its order (passed under section 132) to the taxpayer and Commissioner. Therefore, in our opinion, no reference can be filed on a question arising from an order not passed under the section 132 of the Ordinance of 2001.

9.Question No. (x) is misconceived and proposed due to ignorance of law; Jurisdiction of High Court under section 133 of the Income Tax Ordinance, 2001 is advisory in nature, exercised only on a proposition or question of law, under the facts and circumstances of a particular case. Hon'ble Supreme Court of Pakistan in case, The Commissioner of Income Tax v. Messrs Smith, Kline and French of Pakistan Ltd. and others (1991 PTD 999=1991 SCMR 2374) while explaining the phrase "on the facts and circumstances of the case' has held that High Court is not entitled to decide the reference on the facts and circumstances found by it. In other words, the High Court has to decide reference application on the fact and circumstances found by the Appellate Tribunal. The Appellate Tribunal is the last fact find forum and High Court cannot change the finding of facts arrived at by it. Yet opinion of the High Court under section 133 of the Ordinance of 2001 is binding on it. In support of this opinion, we may refer to subsection (5) of the section 133; Appellate Tribunal's order stands modified according to the opinion of High Court and a copy of the judgment is required to be sent to the Appellate Tribunal under this subsection. Legislative intent is to ensure trickled down effect of the opinion of High Court through Appellate Tribunal. Besides Article 201 of the Constitution of Islamic Republic of Pakistan, 1973, the opinion of High Court is also binding under section 133 on the Appellate Tribunal and on all authorities under Income Tax Ordinance, 2001 as well.

For the reasons ibid, answer to question No. (x) is in Negative.

10.Necessary corollary is that reference applications are decided against the department.

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

MH/C-13/LOrder accordingly.