COMMISSIONER OF INCOME TAX AND WEALTH TAX, RAWALPINDI VS ZULFIQAR AHMED, 2015 PTD-LAHORE-HIGH-COURT-LAHORE 649 (2014)

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

----Ss. 138EE, 138C(2A), 138D & 136---Interpretation of Ss.138EE, 138C, & 138D of the Income Tax Ordinance, 1979---Income Tax Settlement Commission, powers of---Scope---Order of Income Tax Settlement Commission to withdraw appeal filed by Department, not binding on Income Tax Appellate Tribunal---Department had filed appeal before Appellate Tribunal whereafter in view of order of Income Tax Settlement Commission; Department sought withdrawal of said appeal, which was denied by the Appellate Tribunal---Contention of Department was that after order of the Income Tax Settlement Commission under S. 138EE of the Income Tax Ordinance 1979; the Appellate Tribunal could not have adjudged the appeal and request to withdraw appeal could not have been declined----Held, that perusal of S. 138EE of the Income Tax Ordinance, 1979 revealed that the said section envisaged only a direction to the Commissioner/Department to withdraw appeal preferred by it before the Appellate Tribunal; and it was not ascertainable from the same whether such order was binding on the Appellate Tribunal---Provisions of S. 138EE if read in the background of provisions of Ss. 138C & 138D of the Income Tax Ordinance, 1979 revealed that the Income Tax Settlement Commission was empowered to dispose of cases in second appeal by asking Commissioner to withdraw any appeal filed by the Department before the Income Tax Appellate Tribunal; however no provisions in the Income Tax Ordinance, 1979 were found which would make such order of the Income Tax Settlement Commission binding on the Appellate Tribunal---High Court observed that in the present case, the order of the Income Tax Settlement Commission did not disclose whether the taxpayer/assesee had approached the Income Tax Settlement Commission for settlement and therefore, participation of the taxpayer/assessee was found to be not voluntary, since the taxpayer did not request or support the request for withdrawal of appeal before Appellate Tribunal---Order of Appellate Tribunal was therefore, correct---Reference was answered, accordingly.

(b) Civil Procedure Code (V of 1908)---

----O. XXIII, R 1---Withdrawal of suit---Scope---Order XXIII, R.1 of C.P.C. allowed plaintiff to withdraw a suit, but such right was not absolute---Withdrawal of a suit could not be allowed if it resulted in perpetuating a fraud, injustice, or if such withdrawal would otherwise defeat ends of justice.

Javaid Iqbal Abbasi and Company v. Province of Punjab and

6 others 1996 SCMR 1433 and Haji Muhammad Boota and others v. Member (Revenue), Board of Revenue, Punjab and others PLD 2003 SC 979 rel.

Muhammad Irshad Chaudhary for Appellant.

Nemo for Respondent.

Date of hearing: 15th April, 2014.

JUDGMENT

SHAHID JAMIL KHAN, J.---This appeal under section 136(1) of the Income Tax Ordinance, 1979 ("the Repealed Ordinance") arise out of order dated 23-7-1998 passed by the erstwhile Income Tax Appellate Tribunal, ("the Tribunal") Islamabad in I.T.A. No.676/IB/1997-98. The questions of law proposed for opinion of this Court are reproduced hereunder:--

(1)"Whether on the facts and in the circumstances of the case, the learned ITAT was justified to refuse the department to withdraw the appeal? and

(2)"Whether on the facts and in the circumstances of the case, the learned ITAT was justified to adjudicate upon the case in the presence of ITSC decision?"

2.Facts briefly are that the respondent assessee filed return of income relating to assessment year 1996-97 under Self-Assessment Scheme ("the Scheme"). The return was excluded from the Scheme for the reason that assessee had claimed electricity bills under P&L expenses and the Assessing Officer was of the view that the expenses should have been claimed under trading account. On first appeal the order was cancelled and the return was directed to be accepted under the Scheme. Appellant Department filed appeal (second appeal) before the Tribunal. During arguments in second appeal, the departmental representative ("D.R.") requested for withdrawal of appeal for the reason that Income Tax Settlement Commission has passed an order dated 3-1-1998. As per said order, the respondent assessee and the department had arrived at an agreement. The request for withdrawal of appeal was declined by the Tribunal observing that question whether assessee's return qualified under Self Assessment Scheme had not been decided by the Commission. On merits appeal by the department was dismissed and the order of first appellate authority to accept the return under the Scheme was maintained.

3.Learned counsel for the department has argued that after an order by the Income Tax Settlement Commission under Section 138EE of the Repealed Ordinance, the Tribunal could not have adjudged the appeal. He has also submitted that request for withdrawal of the appeal by the departmental representative could not have been declined by the Tribunal. None is present on behalf of the respondent. However, a reply in writing is filed, wherein, findings of the Tribunal as well as the first appellate authority are supported.

4.Heard. Record perused.

5.Before answering the proposed questions, it is necessary to examine provisions of Section 138EE of the Repealed Ordinance, which are reproduced;

"138EE. Disposal of second appeal cases.---(1) The Commission may, by an order, direct the Commissioner to withdraw an appeal preferred by him before the Income Tax Appellate Tribunal.

(2)The Commission may, before making an order under subsection (1), call for such particulars, records or report as it may require or cause further enquires to be made by the Commissioner.

(3)No order under subsection (1), shall be made unless the Commissioner has been given a reasonable opportunity of being heard."

6.Perusal of the section 138EE ibid envisaged only a direction to the Commissioner to withdraw the appeal preferred by him before the Tribunal. It is not ascertainable from its exclusive reading that such order was binding on the Tribunal.

To understand the intent behind this provision, a collective reading of the Sections under Chapter XIIIA (SETTLEMENT OF CASES) is required, as the Section 138EE is its part. This Chapter was inserted by Finance Act, 1993 to establish "INCOME TAX SETTLEMENT COMMISSION", various sections under it provide for its Appointment, Constitution, Power, Function and Procedure. Functions of the Settlement Commission are provided under sub-section (2-A) of section 138C, the same is reproduced: --

"138C. Powers and functions of the Commission.--

(2A) The functions of the Commission shall be-

(a)to proceed and decide applications filed by assessees declaring income not hitherto declared;

(b)to process and decide applications filed by the assessees regarding tax disputes arising out of an assessment order or an order passed by an Appellate Additional Commissioner;

(c)to process departmental appeals filed before the Income Tax Appellate Tribunal for settlement or withdrawal thereof; and

(d)any other function specifically assigned by the Federal Government to the Commission:

Provided that this Commission shall not perform its functions referred to in clause (c) after the 30th day of June, 2000. (emphasis supplied)

Under clauses (a) & (b) assessee used to approach the Commission, whereas clause (d) dealt only with the settlement and withdrawal of departmental appeals before Income Tax Appellate Tribunal. It is important to notice that under clause (d) assessee was not required to approach the Commission. Provisions of section 138D provided procedure to decide applications filed by the assessee under the clauses (a) & (b) of section 138C (2A), however, section 138EE ibid was meant to provide procedure for settlement or withdrawal of departmental appeals before the Tribunal. The provisions of section 138EE, if read in this backdrop would reveal that Commission was empowered to dispose of cases in second appeal by asking the Commissioner to withdraw any appeal filed by department before the Tribunal. No provision under the Chapter XIIIA is found which could make the order of the Commission binding on the Tribunal.

7.The order dated 3-1-1998 passed under section 138EE is also examined. Though a settlement was arrived at with the assessee under this order, yet it did not disclose that assessee had approached the Commission for settlement. Under paragraph No.(5) of this order a letter, requesting withdrawal of appeal, addressed to the Tribunal was directed to be obtained. It may be observed here that participation of the assessee in settlement, under this order, is not found voluntary, for the reason also that he did not support the request for withdrawal of appeal before the Tribunal. We have already observed that there was no provision under the Chapter XIIIA to make an order by the Commission binding on the Tribunal, therefore, in our opinion Tribunal was justified to adjudicate upon the appeal despite request of withdrawal by the department.

8.Refusal by the Tribunal to withdraw appeal was also correct under the circumstances of this case, because the permission to withdraw appeal was detrimental to the rights of the assessee.

It is true that procedure given under Code of Civil Procedure does not apply to the proceedings under Income Tax law, but principles of universal acceptance enshrined in it can be applied where procedure under any special law is silent. Order XXIII, rule 1 of the Code of Civil Procedure allows the plaintiff to withdraw its suit, but this right is not absolute, as is held by the august Supreme Court of Pakistan in the case of Javaid Iqbal Abbasi and Company v. Province of Punjab and 6 others (1996 SCMR 1433), relevant para at page 1441 is reproduced:--

"9. It is true that under Order XXIII, Rule 1, C.P.C. the respondent No.3/petitioner had the right to withdraw his Writ Petition No.11880/95 unconditionally at any time after its institution and the Court normally could not decline such prayer. It is, however, not correct to argue that the right to withdraw suit unconditionally under Order XXIII, Rule, 1, C.P.C. is absolute in nature and that under no circumstances the Court would refuse such prayer. The Court may decline the request for unconditional withdrawal of a suit/proceeding where the nature of suit/proceeding is such that both plaintiff and defendant may be entitled to relief in the case. For instance in a suit for administration, for a suit for accounts or a suit for partition of the property the plaintiff cannot claim absolute right to withdraw the suit unconditionally, if the defendants opposed the prayer. Similarly, in cases where the defendant after filing of the suit acquires a right in respect of the subject-matter of the suit, the plaintiff could not be allowed to withdraw the suit where the right acquired by defendant is likely to be defeated by withdrawal of the suit " (emphasis supplied)

In the case of Haji Muhammad Boota and others v. Member (Revenue), Board of Revenue, Punjab and others" (PLD 2003 SC 979) the apex Court held that withdrawal would not be allowed if it results in perpetuating a fraud or injustice or the withdrawal would otherwise defeat the ends of justice.

9.For the reasons given above, our answer to both the questions is in affirmative. The appeal is decided against the department.

10.Office shall send a copy of this order under the seal of the Court to the learned Appellate Tribunal as per section ¹136(5) of the Repealed Ordinance.

KMZ/C-5/LQuestion answered.