MUHAMMAD MUJAHID QURESHI VS FEDERATION OF PAKISTAN, 2019 PTD-LAHORE-HIGH-COURT-LAHORE 535 (2018)

Oct. 31, 2018 LAHORE HIGH COURT LAHORE 2019 PTD 535

2019 PTD-LAHORE-HIGH-COURT-LAHORE 535

MUHAMMAD MUJAHID QURESHI VS FEDERATION OF PAKISTAN

2019 P T D 535

[Lahore High Court]

Before Shahid Karim, J

MUHAMMAD MUJAHID QURESHI and 4 others

Versus

FEDERATION OF PAKISTAN and others

Writ Petitions Nos. 216521 and 210777 of 2018, heard on 31/10/2018.

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

----Ss. 119, 214D, 118 & 177---Audit---Automatic selection of audit under S.214D of the Income Tax Ordinance, 2001---Selection for audit after taxpayer applies for extension in time for filing of income tax return---Petitioners/ taxpayers impugned notice under S.214D(a) for selection for audit on basis of income tax return not filed within time---Contention of petitioners' inter alia was that they applied for an extension in time under S. 119 of the Income Tax Ordinance, 2001 and filed the returns within such extended time, and were therefore not liable to be selected for audit---Validity---Crucial concept underpinning S.119 of the Income Tax Ordinance, 2001 was that the Commissioner shall grant extension in time "by order in writing" and the same was crucial since the Commissioner had to form on an opinion on being satisfied that condition precedent existed and to specify a period for whichsuch time was granted---Petitioners, in the present case, could not be given leeway of assuming both such aspects were in their favour and they were not conveyed in writingany extension in time and their implication that same was granted was misplaced and untenable---Failure of Commissioner to decide an application for extension of time by necessary inference would mean that the extension in time sought, was not granted---Constitutional petitions were dismissed, in circumstances.

(b) Interpretation of statutes---

----No presumption could be attached to a statute and much less in a fiscal statute as there was no room for intendment in such matters.

M. Ajmal Khan, Farhan Shahzad, Mustafa Kamal, Aamer Iqbal Basharat, Syed Zia Haider Rizvi, Khurram Awais Butt, M. Zafar Iqbal, Khalil ur Rehman, Hamza H. Rashid, Ch. Shahid Pervaiz, Fazal Elahi Khubaib Ahmad and Zahid Imran Gondal for Petitioners.

Ch. M. Zafar Iqbal, M. Shahid Usman, Ijaz Mahmood Ch., Liaqat Ali Ch., Raheel Ahmad Khan, Sarfraz Ahmad Cheema, Hafiz Shahzad Ahmad Cheema, Syed Zain ul Abedeen Bukhari, Abdul Waheed Khan, Shaigan IjazChadhar, Sardar Kalim Ilyas, Anas Sheikh, M. Akram Saqi, Zafar Iqbal Bhatti, Saeed ur Rehman Dogar, Ahmad Wazir Warraich, Fozia Bukhsh, Omer Wahab, Azhar Khan Joiya, Mian Abdul Ghaffar and Rai Amir Ejaz Kharal for Respondents.

Tahir Mahmood Ahmad Khokhar, D.A.G. with Dr. Ishtiaq Ahmad Khan, Director Law, FBR for Respondents.

Date of hearing: 31st October, 2018.

JUDGMENT

SHAHID KARIM, J.---This order shall decide the captioned petition as well as connected petitions at Appendix-I with this judgment, which raise a common question of law. In a nub, the petitioners challenge the issuance of a notice issue under section 214-D read with section 177 of the Income Tax Ordinance, 2001, ("the Ordinance") being ultra vires the powers of the respondents. However, the first ground of challenge is to the retrospective application of section 214-D and on that basis it has been contended that the impugned notices are without lawful authority and have no legal basis in law. This question has already been determined by this Court in W.P. No.112029 of 2017 in the following terms:-

"3. Having heard the learned counsel for the parties, I do not find any substance in the contentions raised by the learned counsel for the petitioner. Admittedly, the audit is sought to be done for the tax year 2015 as also that section 214-D was added by the Finance Act, 2015. However, by its very terms, the said provision was intended to be applied retrospectively to the past tax years as an audit can only be carried out in respect of past tax years and not for the future. Moreover, the last date for the filing of the return by the petitioner was 31.12.2015 and which was in any case after the promulgation of the Finance Act, 2015 which came into effect in July, 2015. Be that as it may, the petitioner filed its return on 27.9.2016 i.e. much after the insertion of section 214-D in the Ordinance, 2001 and in any case at the time when the return was filed by the petitioner, the amendment had already been brought in the Ordinance, 2001 and section 214-D was already on the statute book. Thus, the selection of the case for audit is without exception and does not suffer from any illegality."

2.Since the question of law already stands decided by this Court, the challenge on the basis of retrospectivity has no legal legs to stand upon and is repelled and the petitions in which the challenge to the impugned notices is merely on the basis of retrospective application of section 214-D are hereby dismissed.

3.However, in a number of petitions i.e. W.P 210777 of 2018, W.P. No.211755 of 2018, W.P No.182135 of 2018 and W.P No.182201 of 2018, the challenge has been raised on the further ground that the impugned notices issued under Section 214-D read with section 177 of the Ordinance, 2001 are unlawful, in that, the petitioners in these petitions had duly applied for extension in time in terms of section 119 of the Ordinance to the Commissioner concerned and thus the case of the petitioners is covered by one of the exceptions given in clause 'a' of section 214-D of the Ordinance. On the basis of this argument, the learned counsel for the petitioners seek the impugned notices to be nullified and set aside as having been issued under a mistake of fact. In order to comprehend the precise submission of the learned counsel for the petitioners, it would be relevant to reproduce section 214-D, which provides that:

214D. Automatic selection for audit---(1) A person shall be automatically selected for audit of its income tax affairs for a tax year, if--

(a) the return is not filed within the date it is required to be filed as specified in section 118, or, as the case may be, not filed within the time extended by the Board under section 214A or further extended for a period not exceeding thirty days by the Commissioner under section 119; or

(b) the tax payable under subsection (1) of section 137 has not been paid

(2) Audit of income tax affairs of persons automatically selected under subsection (1) shall be conducted as per procedure given in section 177 and all the provisions of this Ordinance shall apply accordingly:

Providedthat auditproceedingsshallonlybeinitiatedalterthe expiry of ninety days from the date as mentioned in subsection (1).

4.A reading of section 214-D shows that a person shall be automatically selected for audit of its income tax affairs for a tax year if, amongst others, an extension is granted by the Commissioner concerned for the filing of the return within the period specified in section 118 and the assessee does not file the return within the extended period of time. In these cases however, admittedly the petitioners applied for an extension on 31.12.2016 (it needs to be emphasised that the tax year in respect of the petitioners is 2016) and the returns were filed on 12.01.2017 (the date of the filing of the return for other petitions may be slightly different, however that does not have any bearing on the outcome of the instant petitions). It is also conceded by the learned counsel for the petitioners that the Commissioner did not convey any order in writing for extending the time to furnish the return or the statement to the petitioners. The petitioners however under a presumption filed the return on the date mentioned above and now contend that they are not liable to be selected for audit under Section 214-D of the Ordinance since it will be deemed that an extension has been granted by the Commissioner if a Commissioner fails to grant an extension within the prescribed period of time.

5.The contention raised by the learned counsel for the petitioners is nuanced and does not comport with the legislative scheme. Section 119 which gives powers to the Commissioner for extension of time for furnishing returns states that:

"119, Extension of time for furnishing returns and other documents.---(1) A person required to furnish---

(a) a return of income under section 114 or 117;

(b) an employer's certificate under section 115;

may apply, in writing, to the Commissioner for an extension of time to furnish the return, or statement, as the case may be.

(2) An application under subsection (1) shall be made by the due date for furnishing the return of income, or statement to which the application relates.

(3) Where an application has been made under subsection (1) and the Commissioner is satisfied that the applicant is unable to furnish the return of income, or statement to which the application relates by the due date because of--

(a) absence from Pakistan;

(b) sickness or other misadventure; or

the Commissioner may, by order, in writing, grant the applicant an extension of time for furnishing the return, or statement, as the case may be.

(4) An extension of time under subsection (3) should not exceed fifteen days from the due date for furnishing the return of income, employer's certificate, or statement, as the case may be, unless there are exceptional circumstances justifying a longer extension of time

(5) [ ]

(6) An extension of time granted under subsection (3) shall not 10[, for the purpose of charge of 11[default surcharge] under subsection (1) of section 205,] change the due date for payment of income tax under section 137".

6.Thus, by the tenor of section 119, a person may apply for extension of time to furnish the return and that application should be made by the due date for furnishing the return of income. Although the applications were made by the petitioners on 31.12.2016, they shall be deemed to have been filed by the due date and thereafter it was for the Commissioner to have proceeded on the said applications. The Commissioner shall pass an order on being satisfied that the applicants are unable to furnish the return of income. However the crucial concept underpinning section 119 is that the Commissioner shall grant an extension of time "by order in writing". This is crucial because the Commissioner has, firstly, to form an opinion on being satisfied that the conditions precedent exist and, second, to specify a period for which extension of time is granted. The applicant cannot be given the leevay of assuming both these aspects in their favour. Doubtless the petitioners were not conveyed any order in writing by the Commissioner and the implication that the petitioners had been granted an extension of time is misplaced and untenable. The learned counsel for the petitioners argued that the Commissioner is under a bounden duty to pass an order either granting or rejecting the application and if he fails to do so the necessary implication will be that the applicant has been granted an extension of time. This argument of the learned counsel looses sight of the various provisions which permeate the Ordinance, 2001 and where the legislature has made its intention clear by providing that in an eventuality where an officer tasked with the exercise of powers fails to do so, it will be deemed that the act would stand performed or otherwise. Dr. Ishtiaq Ahmad Khan, Director Law, FBR has referred to section 221(3) to illustrate the point. Section 221(3) provides that:

221(3) Where a mistake apparent on the record is brought to the notice of the Commissioner or Commissioner (Appeals), as the case may be and no order has been made under subsection (1) before the expiration of the financial year next following the date on which the mistake was brought to their notice, the mistake shall be treated as rectified and all the provisions of this Ordinance shall have effect accordingly

7.The above provision is a clear example of an act having performed by fiction and if the legislature had done so in respect of section 221(3) of the Ordinance, then the same could have been provided in section 119(2) if the legislature so intended. Plainly, this was not done.

8.Be that as it may, clearly the terms of section 119 do not convey such an impression as is being argued by the learned counsel for the petitioners. If the Commissioner fails to decide the application, the necessary inference will be that the Commissioner has not granted the application for an extension in time and it cannot be implied by any stretch of imagination that the application for the grant of extension of time stands allowed. No presumption is attached to a statute and much less in a fiscal statute as there is no room for intendment in such matters. The legislature has clearly provided that the Commissioner shall make an order in writing while granting the application and if there is no order in writing the only inference is that the application has been rejected. Further the petitioners have not been able to substantiate the claim that the application was duly made to the Commissioner and was received at the office of the Commissioner. Therefore, this ground of challenge made by the petitioners does not have any merit as well.

9.In view of the above, these petitions are without force and are, therefore, dismissed.

Appendix-A

Sr. No.	W.Ps. Nos.	Title
1.	227558 of 2018	M/s. Quetes International v F.O.P.
2.	210418 of 2018	M/s. BTL OOH v. F.O.P etc.
3.	210459 of 2018	M/s. Toffico Foods. v. F.O.P. etc.
4.	211561 of 2018	M/s. Geoconsult Asst. v F.O.P etc.
5.	211554 of 2018	M/s. Infinity Media v. P.O.P. etc.
6.	211484 of 2018	M/s. Bilal Asghar v. F.O.P. etc.
7.	213000 of 2018	M/s. Hammad v. F.O.P. etc.
8.	214092 of 2018	M/s. Direct Consumer v. F.O.P. etc.
9.	214498 of 2018	M/s. Punjab Mineral v. P.O.P. etc.
10.	215832 of 2018	M/s. Vita Flour Mills v. P.O.P. etc
11.	218538 of 2018	M/s. City Nocktel v. F.O.P. etc.
12.	219771 of 2018	M/s. MEC Tech. v. F.O.P etc.
13.	219500 of 2018	M/s. Rising Sun v. P.O.P. etc.
14.	219499 of 2018	M/s. Lahore Medical H. Sch. v. F.O.P.
15.	216604 of 2018	M/s. Shalimar Steel v. F.O.P etc.
16.	216605 of 2018	M/s. Hyberd Tech. v. P.O.P. etc.
17.	216603 of 2018	Al-Shaukat Foundation v. F.O.P. etc.
18.	226686 of 2018	M/s. Cardex Clinic v. F.O.P. etc.
19.	226687 of 2018	M/s. Cardex Pvt. Ltd. v. F.O.P. etc.
20.	226777 of 2018	Rubina Sadaf v. F.O.P. etc.
21.	226778 of 2018	Sadaf Farman v. F.O.P. etc.
22.	226775 of 2018	Kashif Farman v. P.O.P. etc.
23.	227032 of 2018	Farman Tijarat v. F.O.P. etc.
24.	211984 of 2018	M. Irfan v. F.O.P etc.
25.	182206 of 2018	Umar Farooq v. F.O.P. etc.
26.	171293 of 2018	Al-Karam Asst. v. F.O.P. etc.
27.	218564 of 2018	M/s. Adsells v. F.O.P. etc.
28.	216523 of 2018	M. Mujahid v. F.O.P. etc.
29.	224368 of 2018	Kh. M. Nadeem v. F.B.R. etc.
30.	227011 of 2018	Kb. M. Nadeem v. F.B.R. etc.
31.	227457 of 2018	Kh. M. Nadeem v. F.B.R. etc.
32.	234871 of 2018	M/s. Time Clothing v. F.O.P. etc.
33.	211656 of 2018	M/s. Tara Imperial v. F.B.R. etc.
34.	211657 of 2018	M/s. Tara Imperial v. F.B.R. etc.
35.	211658 of 2018	M/s. Tara Crop Sc. V. F.B.R. etc.
36.	211675 of 2018	M/s. Tetra Crop Sc. v. F.B.R. etc.
37.	232692 of 2018	Hamza Daud v. F.O.P .etc.
38.	228462 of 2018	Aftab Soap Fact. v. F.B.R. etc.
39.	212237 of 2018	M/s. Reshma Tax v. F.B.R. etc.
40.	220133 of 2018	Qamur Rashid v. F.O.P. etc.
41.	220747 of 2018	M/s. Fast Transward v. P.O.P. etc.
42.	231222 of 2018	M/s. Pak Hero v. F.O.P. etc.
43.	213355 of 2018	Lah. Med. Inst. v. P.O.P. etc.
44.	213761 of 2018	M/s. Umer Tissues v. F.O.P. etc.
45.	213763 of 2018	M/s. Angora Textile v. POP etc.
46.	232679 of 2018	Shahida Perveen v. F.O.P. etc.
47.	239832 of 2018	Rafique Confectioners v. F.O.P. etc.
48.	214788 of 2028	M/s. Imran Ali Lub. V.. EO.P etc.
49.	215403 of 2018	Jillani Packages v. F.O.P. etc.
50	169214 of 2018	Punjab Industrial v. F.O.P. etc.

KMZ/M-184/LPetitions dismissed.

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