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1

Index
FEDERAL TAX OMBUDSMAN
Judgments of the Supreme Court and High Courts
of Pakistan
S.
No
Citation Relevant
Section
(FTO
Ordinance)
Page

01
Hafiz Muhammad Arif Dar v. ITO
NO: CP 788YEAR: 1984 DECIDED ON 07/11/1988
CITATION: DTPSC0147; 60TAX52; 1989PTD485; 1990PTCL755
[The FTO forum offers an effective alternate remedy for
taxpayers against dept'l excess]

2(3)


02

02
CIT v. Media Network and others
NO: WPs 4320 4786 YEAR: 2003 DECIDED ON 28/02/2006
CITATION: DTPSC0270; 94TAX293; 2006PTD2502;
2007PTCL12006PLD787
[AUDI ALTERAM PARTEM - No one to be condemned
unheard]

2(3)

05

03
Eastern Leather Company Ltd. V. Federation of Pakistan
NO: WP 5893 YEAR: 2003 DECIDED ON 28/10/2003
CITATION: DTPHC1659; VOL7/12TF52
[Jurisdiction vested in the President and by implication, the FTO-
is quasi judicial and not administrative
The petitioner cannot be condemned unheard]

9

33

04
Suleman Spinning Mills Limited v. IACIT Lahore
NO: WP 20218YEAR: 2002 DECIDED ON 27/02/2003
CITATION: DTPHC1624; 88TAX147; 2003PTD1343;
[ Federal Tax Ombudsman holding action of revenue in non-
recovery of Govt. funds as maladministration, recommended
reference to Legal Advisor for prosecution proceedings against
them ]

2(3)

38

05
Farid Ullah Khan v. Federal Tax Ombudsman
NO: ICA 51 YEAR: 2005 DECIDED ON 01/02/2005
CITATION: DTPHC1738; 2005PTD1797;
[Maladministration in the Central Board Revenue or any of its
establishment can be taken notice of by Federal Tax Ombudsman]

2(3); 9

46

06
Sahib Jee v. RCIT
NO: WP 11983YEAR: 2005 DECIDED ON 20/03/2009
CITATION: DTPHC2041; 100TAX274; 2009PTD955;
[No extension in time permissible for filing representation before
President against FTOs order]

32

48

07
Lone Cold Storage v. Revenue Officer LESCO
NO: WP 7754 YEAR: 2010 DECIDED ON 15/07/2010
CITATION: DTPHC2104; 103TAX5; 2010PTD2502
2011PTCL305;
[Whether order where Court has not been properly assisted and
main legal questions have not been raised, deliberated or

2(3)

54
2

discussed does not constitute binding precedent -- Held yes]
08 Muhammad Saleem V Federal Tax Ombudsman etc.
No: WP 11545-2012
[The FTO exercises concurrent jurisdiction without restraint
in deciding complaints u/s 9 of FTO ord

Maladministration is a condition precedent for exercise of
jurisdiction by the FTO]

9;14;2(3);29 75
09








10


[When special circumstances exist (such as involvement in
bribery and corruption), any delay in filing complaint before FTO
stands condoned].



IN THE ISLAMABAD HIGH COURT
WP No. 1238 OF 2013

1. When invoking jurisdiction u/s 16 of FTO Ordinance, the FTO
exercises powers of a judge of the Supreme Court of Pakistan and
the High Court is not competent to hear a writ petition challenging
FTO's jurisdiction u/s 16. Any such writ must be filed before the
Supreme Court.

2. No writ petition lies against a SCN.

10(3)









16
79









82








SUPREME COURT OF PAKISTAN
---------------------------------------------------------------------------

Hafiz Muhammad Arif Dar v. ITO
NO: CP 788YEAR: 1984 DECIDED ON 07/11/1988
CITATION: DTPSC0147; 60TAX52; 1989PTD485; 1990PTCL755

---------------------------------------------------------------------------
Constitution of Pakistan, 1973 -- Section 65 -- Article 199 --

Writ jurisdiction -- Alternate remedy -- Relief -- Assessee filed appeal before
A.A.C. against the order of additional assessment made by the Income Tax
Officer -- During appeal assessee filed writ petition which was dismissed as
3

the petitioner had already availed alternate adequate remedy -- Relief refused
by the High Court -- Whether according to technicalities of procedural nature -
- Held yes --

Constitutional jurisdiction of High Court -- Grant of relief -- Alternate
adequate remedy -- Where a remedy by way of appeal was available, no relief
could be granted to the petitioner under article 199 -- If petitioner was not
allowed any relief by the departmental authorities (despite the observations by
the Supreme Court), it would not mean that the petitioner would have no
immediate remedy at all against the highhandedness of the department --
Petitioner could, among other reliefs, file a complaint and grievane
application before the Federal Ombudsman, who could also provide effective
redres, and provide the alternate effective and adequate remedy to the
petitioner in such cases --

---------------------------------------------------------------------------


IN THE SUPREME COURT OF PAKISTAN}

HAFIZ MUHAMMAD ARIF DAR

v.

INCOME TAX OFFICER

Present: MUHAMMAD AFZAL ZULLAH and JAVAID IQBAL, JJ.

Civil Petition No. 788 of 1984, decided on 7-11-1988.

(On appeal from the judgment and order of the Lahore High Court, Lahore passed
in Writ Petition No. 2382 of 1984, dated 30-5-1984).
Syed Fayyaz Hussain Qadri, Advocate (absent) and S. Abid Nawaz, Advocate-on-
Record, for the Petitioner.
Nemo for Respondent.
Date of hearing: 7-11-1988.
---------------------------------------------------------------------------
ORDER

{Order of the Court was passed by MUHAMMAD AFZAL ZULLAH, J.}.---Writ Petition
against an Income-tax Assessment by Income Tax Officer was dismissed by the
High Court by the following short order:

``The petitioner is aggrieved with the order of additional
assessment made in pursuance of the provisions of Section 65 of
the Income Tax Ordinance by an Income Tax Officer. He has already
filed an appeal before the Appellate Assistant Commissioner. As he
had already availed of the alternate remedy this writ petition is
dismissed in limine.''
4

Leave to appeal having been sought, this Court passed interim orders on 23rd
July, 1984, 29th July, 1984, 9th August, 1984, 12th August , 1984, 16th August,
1984, 21st August, 1984, 28th August, 1984 and 29th August, 1984.
They are very instructive in so far as the attitude of respondent department is
concerned.
They are, therefore, reproduced below:--
``23-7-1984: Notice to the A.G. for the 29th of this month
29-7-1984: Adjourned to the 5th of August, 1984, to enable the
petitioner to produce the person from whom he had purchased the
shop which has been made the basis of enhancement of the
assessment.
9-8-1984: Hafiz Muhammad Arif Dar petitioner has been
assessed to Rs. 1,93,000 as his income on the ground that he had
enough money to purchase a shop on the Sarwar Road in Lahore
Cantt. and on investigation the relevant Income-tax Inspector
found that the vendors were fictitious persons and that this had
been done to avoid levy of income-tax. I required the
petitioner to produce the vendors namely Muhammad Ashfaq
son of Haji Sardar Muhammad and Muhammad Mushtaq son of
Ibrahim, so as to ascertain whether the finding of the
Income-tax Inspector that the vendors were fictitious, was
correct.

The petitioner has produced both the above-noted vendors whose
identity has been verified through their Identity Cards which bear
their photographs. Prima facie, it appears that the report of
the Income-tax Inspector, is wholly incorrect.
Mr. M.Z. Khalil, Advocate, appeared on behalf of Mr. Muhammad
Ilyas, Standing Counsel for the Income-tax Department to submit
that he (Mr. Ilyas) has left for U.S.A. and the case may therefore
be adjourned to a date after the vacations.
Petitioners counsel, however, submits that in view of the fact
that the allegation against the petitioner has been prima
facie proved to be incorrect, the case may not be adjourned.
Let notice be issued to respondent for the 12th of this
month, who may appear through a counsel engaged by the
Department alongwith the relevant Inspector who had submitted the
report on which action was taken against the petitioner.
No action shall be taken against the petitioner in the
meanwhile. Mr. M.Z. Khalil, Advocate is directed to advise the
respondent of the proceedings before this Court.
12-8-1984 : No one has turned for the respondent. Adjourned to the
16th of this month.
16-8-1984 : The matter was adjourned to be taken up at 1-30 p.m.
Learned counsel for the petitioner is present alongwith the
petitioner. Learned counsel for the respondent is, however,
absent. The case is, therefore, adjourned to 21-8-1984.
5

21-8-1984 : An official of the Cantonment Board be ordered to
bring the latest PTI Form pertaining to property No. 326-Sarwar
Road Sadar, Lahore, on the next date of hearing, in order to
enable this Court to ascertain the annual rent at which the said
property is assessed.
To come up on 28-8-1984.
28-8-1984 : Adjourned to tomorrow (29-8-1984) to enable the
Inspector of the Cantonment Board to explain how the value of the
place in question was calculated to be Rs. 1,50,000 when the
monthly rent of the house was Rs. 100 per month.
29-8-1984: On instructions from the I.T.O. the learned
counsel for the respondent submitted that the tax had been levied
according to the value of the property as calculated by the
Cantonment Board. However, I find that the property in question
is assessed by The Cantonment Board at Rs. 100 per month and as
such the value of Rs. 1,50,000 as determined appears to be
excessive and arbitrary. It would have been appropriate if, for
fixing the vaue of the property, the Cantonment Board had followed
the formula of ``10 years rent'', as done by the Wealth Tax Dept.
In this view of the matter the recovery of the tax amount is
stayed till the decision of the main petition.''

It is possible that in view of the aforequoted observations redress might
have already been provided to the petitioner.

One of the conditions for grant of relief in writ jurisdiction of the High
Court is that the petitioner before it should not have any alternative adequate
remedy. In this case, a remedy by way of appeal, as mentioned in the impugned
order, was such remedy. Therefore, it is correct that no relief could be
granted to the petitioner under Article 199 of the Constitution.

But that does not mean that, in case the petitioner has not been allowed any
relief by the departmental authorities (despite the observations by the Supreme
Court) the petitioner would have no immediate remedy at all against the
highhandedness of the department.

Amongst others he can file a complaint and grievance application before the
Federal Ombudsman, who can provide effective redress, in a case like the
present one. That forum has several attributes of a Court in many aspects of
its powers. It can also move in a matter promptly whenever so needed. At the
same time it does not suffer from some of the handicaps, due to the
technicalities of procedural nature, which operate as impediments or thwart
such like action by the Courts. For example the limitation of non-availability
of an alternate remedy in this case for the High Court under Art, 199 of the
Constitution, is not applicable to the said forum. Besides, the same being
quasi-judicial it is also headed by a Judge of the Supreme Court; with similar
powers to punish for contempt. In this context therefore, it can be safely
concluded, that it can provide the alternate effective and adequate remedy to
the petitioner also.
6


With the foregoing observations and remarks, leave to appeal is refused in the
circumstances of this case, due to the technical hurdle faced by the petitioner
in the High Court. He may file a complaint before the Ombudsman.

Leave refused.

SUPREME COURT OF PAKISTAN
-----------------------------------------------------------------
CIT v. Media Network and others
NO: WPs 4320 4786 YEAR: 2003 DECIDED ON 28/02/2006
CITATION: DTPSC0270 ; 94TAX293 ; 2006PTD2502 ; 2007PTCL12006PLD787
-----------------------------------------------------------------
Income Tax Ordinance, 1979 -- Sections 4A, 55, 59, 59(1A), 59(3),62, 63 --

C.B.R. Circular No. 7 of 2002, dated 15th June, 2002 --

C.B.R. Letter No. 7(7) Self Assessment /2002, dated 17-12-2002 --

Self Assessment Scheme, (2002-2003), paras. 9 and 10 --

Constitution of Pakistan, 1973 -- Articles 25, 185 --

Law Procedure Ordinance, 1972 -- Section 3

Words and phrases -- Word ``any'' -- Definition, amplitude and meaning --
Whether word ``any'' according to stroud's Judicial Dictionary exclude
limitations and qualifications and, therefore, ``any order'' would include both
interim as well as final order -- Held yes -- Whether word ``any'' used in
context of section 59 of Income Tax Ordinance, 1979 was word of expansion
indicative of width and amplitude sufficient to bring within scope and ambit of
words it governed and that could possibly be included in them -- Held yes --

Appeal to Supreme Court -- Self Assessment -- Issuance of policy guidelines by
C.B.R. to all Regional Commissioners of Income Tax -- Selection of case for
total audit -- Commissioner of Income Tax -- Selection of cases for total audit
-- Quashment of judgments by High Court -- Appeal against -- Principle of audi
alteram partem -- Canons of natural justice -- Departure -- Validity -- Whether
no prejudice was shown to have been caused for respondents on account of non-
specification of percentage of cases to be selected by C.B.R. through computer
balloting or by Regional Commissioners and as such paragraph 9 and 10 of scheme
could not be said to be ultra vires of provisions of section 59 or any other
provision of ordinance -- Held yes Whether discretion of Regional
Commissioners in selecting cases for total audit was restricted and they could
select only those revenue potential cases where there was evidence, information
or reason to believe that true particulars of income had been suppressed -
Held yes -- Whether objections as to non-publication of guidelines in official
gazette is concerned, there was no statutory obligation on part of C.B.R. to
have published guidelines in official gazette because they were in nature of
administrative instructions meant for internal consumption of Regional
Commissioners issued in aid of carrying out purpose of Self-Assessment Scheme -
- Held yes -- Whether rules of natural justice are not inflexible, they yield
to and change with exigencies of different situations and do not apply in same
7

manner to situations which are not alike -- Held yes Whether opportunity of
hearing was not required to be afforded by Commissioners to respondents at
preliminary stage of making proposals for recommendations of their cases to
Regional Commissioners for total audit -- Held yes

Self Assessment Scheme -- Filing of income tax return under the scheme --
Scope -- Assessee was not under statutory obligation to file his return of
total income for any year in terms of provisions of Section 59 of Income Tax
Ordinance, 1979 under Self Assessment Scheme -- Person who otherwise was
required to file a normal return under Section 55 of Income Tax Ordinance,
1979, was given option to file his return under Section 59 of Income Tax
Ordinance, 1979, for its acceptance in accordance with the provisions of Self
Assessment Scheme made by Central Board of Revenue for that year-Deputy
Commissioner of Income Tax would then assess, by order in writing, the total
income of the assessee on the basis of such return and determine the tax
payable on the basis of such assessment

Self Assessment Scheme -- Total audit -- Selection of case -- Procedure -- By
non-obstante clause of Section 59(1-A) of Income Tax Ordinance, 1979, it was
provided that Central Board of Revenue or any authority subordinate to it, if
so authorized by Central Board of Revenue could select out of returns, any
cases or class of oases or persons or class of persons howsoever determined for
assessment under Section 62 of Income Tax Ordinance, 1979, and Deputy
Commissioner would proceed to make the assessment under that section or if the
circumstances so warranted, under Section 63 of Income Tax Ordinance, 1979,
accordingly -- In such situation, the procedure provided under S.62 or S.63
of Income Tax Ordinance, 1979, as the case might be, would be followed by the
Deputy Commissioner

Total audit -- Procedure -- For total audit, under paragraph 9 of Self
Assessment Scheme, (2002-2003), twenty per cent. returns were to be selected,
through computer ballot which might be random or parametric as deemed fit by
Central Board of Revenue or/and by Regional Commissioners of Income Tax on the
recommendations of the Commissioners concerned in the light of guidelines
issued by Central Board of Revenue in that behalf -- Assessing Officer would
make necessary adjustments under Section 59(3) of Income Tax Ordinance, 1979,
if so required, after givinga notice in writing to the assessee and considering
his explanation if any -- Cases selected for total audit would be scrutinized
in detail, under paragraph 10 of Self Assessment Scheme, (2002-2003), including
field audit by departmental officers or by professional auditors
authorized under Section 4-A of Income Tax Ordinance, 1979, by utilizing the
information collected from available sources for determining income of the
taxpayer and tax payable thereon by observing the procedure of paragraphs 9 and
10 of the Scheme -- No limitation or restriction was imposed by Section 59(1-A)
of Income Tax Ordinance, 1979, as "any cases or classes of cases or person or
class of persons" could be selected for the purpose of total audit

8

Words and phrases -- `Any' -- Connotation -- Word ``any'' has diversity of
meaning and may be employed to indicate ``all'' or ``every'' as well as
``some'' or ``one'' -- Meaning of word ``any'' in a given statute depends upon
the context and subject matter of the statute

Total audit -- Selection of cases -- Non-specification of percentage of cases
to be selected for total audit -- Returns of assessees filed under Self
Assessment Scheme, (2002-2003), were selected for total audit -- Plea raised
by assessees was that Central Board of Revenue did not specify percentage of
cases to be selected for total audit and paragraphs 9 and 10 of Self Assessment
Scheme, (2002-2003), were ultra vires the provisions of Section 59 of Income
Tax Ordinance, 1979 -- Validity -- No exception could be taken to the selection
of cases of assessees in respect of their returns filed under Self Assessment
Scheme,(2002-2003) -- Final selection of case or cases were made by Regional
Commissioners of Income Tax, after affording fair and adequate opportunity of
hearing to assessees, who were issued show cause notices and their replies
to the same were duly considered -- For total audit, under Self Assessment
Scheme, (2002-2003), maximum of 20% of returns filed by assessees could be
selected -- Percentage of selected cases through computer ballot or by Regional
Commissioners of Income Tax was not squarely laid down with precision -- No
prejudice was shown to have been caused to assessees on account of non-
specification of percentage of cases to be selected by Central Board of Revenue
through computer balloting or by Regional Commissioners -- Paragraphs 9 and 10
of the Self Assessment Scheme were not ultra vires the provisions of Section 59
or any other provision of Income Tax Ordinance, 1979

Selection of cases for total audit -- Policy guidelines -- Scope -- Policy
guidelines were administrative in nature meant for internal consumption of
Income Tax functionaries, which did not create any rights nor did they impose
any obligations -- Such instructions did not take away any vested right of
assessees and did not govern the adjudicatory proceedings of quasi-judicial
nature -- Guidelines were not, in any way, extraneous, irrelevant or unfair to
the object to be achieved by the process of selection of cases for
total audit --

Total audit -- Selection of cases -- Reasonable classification --Non-issuance
of policy guidelines before promulgation of Self Assessment Scheme, (2002-
2003), -- Assessees were aggrieved of their selection of cases for total audit,
by Regional Commissioners of Income Tax -- Such order passed by Income Tax
Authorities, was set aside by High Court -- Plea raised by the authorities was
that policy guidelines had not become invalid for the reason of not having been
issued either before or contemporaneously with the promulgation of Self
Assessment Scheme -- Validity -- Held, there was no requirement of Section 59
of Income Tax Ordinance, 1979, or any other provision of the Ordinance or rule
for issuance of guidelines either before or along with the Scheme -- Very
object of the provisions of Section 59(1-A) of Income Tax Ordinance, 1979,
would have been frustrated if income tax payers were informed, before hand, of
the categories of cases or persons which would be selected for total audit --
9

If that was done, the possibility of tax evasion under the scheme at the
massive scale could not be ruled out -- Assessees were required to file their
true returns under the Scheme as far as possible -- Previous publication of the
guidelines would have been a hay-day for all the tax evaders as they would be
knowing before hand that their cases were not going to be selected or
scrutinized -- As long as the income tax Authorities acted within the
four corners of Section 59 of Income Tax Ordinance, 1979, and the Self
Assessment Scheme and did not abuse their power or authority, the objection as
to the provisional or/and final selection of cases for total audit was not
sustainable -- Guidelines for selection of cases by Regional Commissioners
would not suffer from any taint of invalidity merely because certain categories
had been identified for total audit based on reasonable classification, which
was not violative of Article 25 of the Constitution -- No requirement of law
existed for issuance of guidelines by Central Board of Revenue, side by side
with the announcement of the Scheme as they were to follow the Scheme after its
announcement and not to precede it -- Judgment passed by High Court was set
aside -- Appeal was allowed by the Supreme Court --

Policy guidelines -- Non-publication in official Gazette -- Effect -- No
statutory obligation on the part of Central Board of Revenue to have published
the guidelines in official Gazette -- Such guidelines were in nature of
administrative instructions meant for internal consumption of Regional
Commissioners issued in aid of carrying out purpose of Self Assessment Scheme -
- Policy guidelines did not enjoy the status of statutory rules, which were
required to be notified through .publication in official Gazette

Notification -- Publication of notification in official Gazette -- Principle --
Held, it all depends on the nature and context of statute whether the
provisions requiring publication of a notification in official gazette would be
construed as directory only or mandatory, so as to invalidate a notification or
instructions on account of non-publication in official Gazette,

Natural justice, principles of -- Preliminary inquiries or investigations
-- Opportunity of hearing-Principles-Rules of natural justice are not
inflexible, which yield to and change with the exigencies of different
situations -- Such rules do not apply in the same manner to situations which
are not alike-Said rules are not cast in a rigid mould nor can they be put in a
legal strait-jacket; these are not immutable but flexible and can be adopted
and modified by the statutes -- Need to act in an emergency may also exclude at
least a prior hearing or where a decision affects so many people that a
hearing would be impracticable -- In some cases there may be collective right
of hearing or to be consulted although not necessarily a hearing in individual
cases -- Depending upon the facts and circumstances of each case, there is no
mandatory requirement of natural justice that in every case the other side must
be given a notice before preliminary steps are taken -- It might suffice if
reasonable opportunity of hearing is granted to a person before an adverse
action or decision is taken against him -- However, it is not possible to lay
down an absolute rule of universal application governing all situations as to
10

the exclusion or otherwise of the audi alteram partem rule during the course of
preliminary inquiries or investigations --

Total audit -- Selection of cases -- Principles of natural justice --
Applicability -- Assessees were aggrieved of non-providing of opportunity of
hearing to them, before finalizing their cases for total audit -- Validity
Opportunity of hearing was not required to be afforded by Commissioners to the
assessees at preliminary stage of making proposals or recommendations of
their cases to Regional Commissioners for total audit -- Before final selection
of cases, the policy guidelines seemed to have been faithfully observed by the
Regional Commissioners of Income Tax, who were required to confront the
assessees with the material, provide them due opportunity of being heard and
communicate them the basis of their proposed selection -- In none of the cases,
any allegation of personal bias, mala fide or other unfair treatment by
Regional Commissioners or other officers of Income Tax Department were
specifically levelled or substantiated by the assessees-No exception could be
taken to the selection of the cases of assessees by Regional
Commissioners made after due process of law --

Direct appeal to Supreme Court -- Non-filing of Intra-Court Appeal --
Principles -- Ordinarily, Supreme Court insists the petitioner or appellant to
avail the remedy of Intra Court Appeal, in the first instance; however, this
is a rule of practice for regulating the exercise of discretion which does not
oust or abridge the Constitutional jurisdiction of Supreme Court -- Supreme
Court, in certain exceptional circumstances can entertain petitions, or as the
case may be, direct appeals even where the remedy of Intra -- Court Appeal
under Section 3 of Law Reforms Ordinance, 1972, has not been availed by a party


No prejudice caused on account of non-specification of the percentage of cases
to be selected by C.B.R. through computer balloting or by the Regional
Commissioners, paragraphs 9, 10 of the Circular No. 7 of 2002, dated 15th June,
2002 (Self Assessment Scheme for the Assessmenr year 2002-2003) is not ultra
vires the provisions of section 59

The procedure of selection of cases for total audit as provided paragraphs 9
and 10 of the Circular No. 7 of 2002, dated 15
th
June, 2002 (Self Assessment
Scheme for the Assessment year 2002-2003) was not nullified or whittled down by
the policy guidelines issued vide C.B.R. Letter No. 7(7) S. Asstt/2002, dated
17-12-2002 --

Guidelines issued vide C.B.R. Letter No. 7(7) S. Asstt/2002, dated 17-12-2002
were administrative in nature meant for the internal consumption of the Income
Tax functionaries which did not create any rights nor did they impose any
obligations

11

Instructions issued vide C.B.R. Letter No. 7(7) S.Asstt/2002, dated 17-12-2002
had not taken away any vested right of the assessees and would not govern the
adjudicatory proceedings of quasi-judicial in nature

It could not be said that the guidelines issued vide C.B.R. Letter No. 7(7)
S.Asstt/2002, dated 17-12-2002 were, in any way, extraneous irrelevant or
unfair to the object to be achived by the process of selection of cases for
total audit --

Supreme Court in certain exceptional circumstances can entertain petitions, or
as the case may be, direct appeals even where the remedy of Intea-Court appeal
under section 3 of the Law Reforms Ordinance, 1972 has not been availed by a
party

An assessee was not under any statutory obligation to file his return of total
income for any year in terms of provisions of section 59 --

There was no limitation or restriction imposed by section 59(1-A) of the
Ordinance as ``any cases or classes of cases or person or class of persons''
could be selected for the purpose of total audit --

Issuance of guidelines by C.B.R. were to follow the Self Assessment Scheme
after its announcement and not to precede it

There was no statutory obligation on the part of the C.B.R. to publish the
guidelines in the official Gazette as they were in the nature of administrative
instructions in aid of carrying out the Self-Aassessment Scheme

Opportunity of hearing was not required to be afforded by Commissioners
at preliminary stage of making proposals or recommendations of their
cases to the Regional Commissioners for total audit

Publication of Notification in official Gazette depends on nature and context
of statute

Natural Justice -- The rules of natural justice are not inflexible --

Words and phrases -- ``Any'' -- ``Any order'' -- ``Any law'' --

-----------------------------------------------------------------
IN THE SUPREME COURT OF PAKISTAN
COMMISSIONER OF INCOME TAX and others
v.
Messrs MEDIA NETWORK and others

Present: IFTIKHAR MUHAMMAD CHAUDHRY, C.J., FAQIR MUHAMMAD KHOKHAR and MIAN
SHAKIRULLAH JAN, JJ

Civil Appeals Nos.233 to 315 of 2004
12


On appeal from the judgment and order of the Lahore High Court, Lahore, dated
24-9-2003, passed in W.Ps. Nos. 4320, 4786, 5320, 5033, 6786, 4551, 5397, 4648,
4407, 6843, 4055, 7764, 6344, 6827, 6797, 6477, 6883, 5975, 5978, 5973, 7235,
5976, 6641, 6342, 7228, 10328, 5977, 7238, 5317, 4691, 4144, 7026, 4546, 4654,
4651, 4545, 4877, 6523, 4054, 7293, 4861, 4358, 4583, 5396, 4874, 7022, 5318,
5717. 4470, 4699, 4429, 5376, 5461, 4056, 4954, 5368, 4582, 929, 6971, 4862,
4319, 4875, 6230, 4682, 4639, 4476, 6521, 4700, 16879, 16003, 6370, 16079,
12338, 15374, 6490, 4688, 6345, 9016, 6478, 4683, 6343, 5974 and 9015 of 2003)

Civil Appeals Nos.833 to 848 of 2004
-------------------------------------
REGIONAL COMMISSIONER OF INCOME TAX and others
v.

M. YOUSAF ACADEMY QUICK FILL CNG. and others

(On appeal from judgments dated 10-6-2004, 31-3-2004, 4-5-2004, 12-4-2004, 10-
6-2004, 13-11-2003, 19-11-2003, 19-11-2003, 17-11-2003, 29-1-2004, 18-11-2003,
29-1-2004, 24-9-2003, 26-2-2004, 26-2-2004, 17-3-2004, passed by the Lahore
High Court, Lahore in W. Ps. Nos. 11719, 14047, 11306, 15467 of 2002, 15942,
16002, 16000, 16081, 8899, 16197, 12124, 6808, 17875, 17876 of 2003, 618 of
2004 and 17056 of 2005).

Civil Appeals Nos. 1041 to 1046 of 2004
---------------------------------------

REGIONAL COMMISSIONER OF INCOME TAX and others

v.

SADAQAT RAHIM and others

On appeal from judgment and order of the Lahore High Court, Lahore dated 10-10-
2003, 10-10-2003, 1-4-2004, 2-4-2004, 24-9-2003, 31-5-2004, 24-9-2003, passed
in W. Ps. Nos. 13516, 13517 of 2003, 3632, 616 of 2004 and 16540 & 9979 of
2003).

Civil Appeals Nos. 1211 to 1214 of 2005
---------------------------------------

COMMISSIONER OF INCOME TAX and others

v.

Messrs Haji MUHAMMAD TANVIR and others

(On appeal from the judgments and orders of the Lahore High Court, Lahore dated
24-9-2003, 5-8-2003, 31-3-2004, 29-6-2005, passed in W.Ps. Nos. 4653/2003,
4721/2003, 66/2004 and W.P. No.11614/2005).

13

Civil Appeals Nos. 1641 and 1704 of 2005
----------------------------------------
REGIONAL COMMISSIONER OF INCOME-TAX and others
v.


Messrs MIAN COLD STORAGE MEWA MANDI, SIALKOT and others

(On appeal from the judgments and orders of the Lahore High Court, Lahore dated
7-9-2005 and 29-9-2005, in W.Ps. Nos. 11847/2005 and 11948/2005).

Civil Appeals Nos. 233 to 315, 833 to 848, 1041 to 1046 of 2004, 1211 to 1214,
1641 and 1704 of 2005, decided on 28
th
February, 2006.

Makhdoom Ali Khan, Attorney General for Pakistan, Muhammad Ilyas Khan, Senior
Advocate Supreme Court, Muhammad Aslam Chatha, Advocate-on-Record, assisted by
Shahid Jamil Khan, Advocate, Khurram M. Hashmi, Advocate and Danish Zuberi for
Appellants.

Shahid Hamid, Senior Advocate Supreme Court for Respondents (in C.A. No. 1046
of 2004).

Shahbaz Butt, Advocate Supreme Court for Respondents (in C.As. Nos.233, 241,
243, 256, 261, 271, 274, 275, 279, 283, 286, 293, 296, 301, 304 of 2004).

Siraj-ud-Din Khalid, Advocate Supreme Court for Respondents (in C. As. Nos. 238
of 2004 and 1212 of 2005).

Muhammad Iqbal Hashimi, Advocate Supreme Court for Respondents (in C. As.
Nos.248 to 251, 256, 259, 303 and 1041 of 2004).

Mian Ashiq Hussain, Advocate Supreme Court for Respondents (in C. As. Nos.262,
265, 266 to 269, 294, 298, 835, 844 of 2004 and 1214 of 2005).

Muhammad Qamar-uz-Zaman, Advocate Supreme Court for Respondents (in C. A. No.
263 of 2004).

Muhammad Naeem Shah, Advocate Supreme Court for Respondents (in C. As. Nos.
276, 288, 315 of 2004 and 1213 of 2005).
Dr. Ilyas Zafar, Advocate Supreme Court for Respondents (in C. As. Nos. 841
and 843 of 2004).

M.S. Khattak, Advocate-on-Record for Respondents (in C.As. Nos.248 to 251, 259,
303 of 2004).

Raja Abdul Ghafoor, Advocate-on-Record for Respondents (in C.A. No.263 of
2004).

Dates of hearing: 27th and 28th February, 2006.

14


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JUDGMENT

FAQIR MUHAMMAD KHOKHAR, J.-The Central Board of Revenue (C.B.R.) announced
Self-Assessment Scheme for the assessment year 2002-2003 through Circular No.7
of 2002, dated 15-6-2002 in exercise of powers under section 59 of the Income
Tax Ordinance, No.XXXI of 1979 (since repealed) (hereinafter referred to as the
Ordinance). The last date for filing the returns for non-company cases was
fixed as 30-9-2002 (subsequently extended to 15-10-2002) and for company cases
31-12-2002. Thereafter, the Board issued policy guidelines to all the Regional
Commissioners of Income Tax vide letter, dated 17-12-2002 for selection of
cases for total audit with the direction to finalise the process by 10-1-2003.
By letter, dated 31-1-2003, the C.B.R. informed the Regional Commissioners that
in view of a small number of returns of companies, the holding of ballot for
selection of 20% cases out of each category was not logical. Therefore, they
were directed to select the returns for audit up to 20% at their own level
under para. 9(2)(ii) of the Scheme and the guidelines, dated 17-12-2002.

2. The respondents, who were individual firms and companies limited by shares
filed their returns under the Scheme for the year, 2002-2003, Their cases were
selected by the concerned Regional Commissioners of Income Tax on the
recommendations of Commissioners of the Income Tax after following the
procedure laid down in the scheme and the policy guidelines, dated 17-
12-2002. The respondents felt aggrieved and filed writ petitions in the Lahore
High Court Lahore, which were allowed, by the impugned judgments and the
selection of their cases by the Regional Commissioners of Income Tax was
quashed. Hence, these appeals under Article 185 of the Constitution of Islamic
Republic of Pakistan, by leave of the Court.

3. Mr. Makhdoom Ali Khan, the learned Attorney General for Pakistan submitted
that Self-Assessment Scheme as announced on 15-6-2003 by Circular Letter No.7
and the policy guidelines issued by the Board vide letter, dated 17-12-2003
were not ultra vires any of the provisions of the Constitution and the law.
They were issued in conformity with letter and spirit of section 59 (1-A) of
the Ordinance and section 177 of the Income Tax Ordinance, 2001. There was no
violation of the principles of natural justice. It was further contended that
during the preliminary stage of the process of selection of cases through in-
house mechanism in the light of the scheme and the guidelines, the respondents
were not entitled to any show-cause notice or hearing as no adverse decision
had yet been taken. However, they were issued notices by the Regional
Commissioners before making a final selection. He referred to a Textbook titled
Administrative Law by Sir William Wade Ninth Edition pages 547-548. He also
relied on the cases of R V. Saskatchewan College of Physicians and Surgeons et
al, ex parte Samuel (1966) 58 Dominion Law Reports (D.L.R.) (2nd) 622 at pages
638-640), Parry Jones v. Law Society (1969) 1 Ch Division 1 at pages 8 and 10),
Norwest Hoist Ltd. v. Secretary of State for Trade (1978) 1 Ch. D 201),
Christopher John Moran v. Lloyd's (1981) 1 Lloyd's Law Reports (Volume-1) 423
15

at page 427) and Rees and others v. Crane (1994) 1 All E.R. 833 at P.P. 842-
845), in support of his submission that hearing was not required to be afforded
at preliminary stage of investigation or inquiry when no adverse action was
taken. Under section 59 of the Ordinance, once a case was selected for total
audit, the normal process as contemplated by section 62 was to take place. In
any case, even under the guidelines, dated 17-12-2002 a definite, fair and
reasonable procedure had been provided for to enable an income tax assessees to
place his point of view before the final selection of a case. The discretion of
the Regional Commissioners of the Income Tax and the Commissioner's of Income
Tax had been further curtailed by the C.B.R. through the scheme and the
guidelines.

4. It was further argued that it would have certainly created more
complications including the evasion of income tax if the guidelines were made
known either simultaneously with, or immediately after, the announcement of the
Self-Assessment Scheme. In such a case, all the assessees would have known
before hand as to who were going to be selected or left out. A prior warning
would have produced undesirable results detrimental to the Revenue and the
public interest. The course adopted by the C.B.R. had resulted in minimizing
the evasion of the income tax as everybody could expect that his case might be
scrutinized. If the C.B.R. had Mentified the classes or categories of cases or
persons and laid down guidelines before, the very purpose of provisions of
section 59 of 1979 Ordinance and the Self-Assessment Scheme announced
thereunder would have been defeated. The guidelines issued by the C.B.R. vide
circular letter, dated 17-12-2002 did not contravene the provisions of
section 59(1-A) of the Ordinance or the Self-Assessment Scheme. The guidelines
could not be considered to be an amendment to the Self-Assessment Scheme as
originally announced on 15-6-2002. The Self-Assessment Scheme and the
guidelines issued by letters, dated 17-12-2002 and 22-3-2003 were valid in all
respects.

5. It was next contended by the learned Attorney General that although certain
appeals of the appellants were barred by limitation but the delay ought to be
condoned by this Court for the grounds stated in the applications for
condonation of delay and in view of the law laid down in the cases of Ch.
Manzoor Elahi v. Federation of Pakistan and others (PLD 1975 SC 66 (100),
Mehreen Zaibun Nisa v. Land Commissioner, Multan and others (PLD 1975 SC
397) at P. 413), Fazal Ilahi and others v. P.T.C. and others (2001 SCMR 768) at
P. 770) and Sheikh Muhammad Rashid v. Majid Nizami, Editor-in-Chief, The Nation
and Nawa-e-Waqt, Lahore and another (PLD 2002 SC 514) at P.521).

6. It was further argued that in view of the substantial questions of law of
public importance involved in these cases, failure to avail the alternate
remedy of Intra-Court Appeal under section 3 of the Law Reforms Ordinance, 1972
was not an absolute bar for invoking the constitutional jurisdiction of this
Court. He referred to the case of Province of Punjab through Secretary, Excise
and Taxation, Government of Punjab and others v. Sargodha Textile Mills Ltd.,
Sargodha and others (PLD 2005 SC 988). It was emphasized that mala fide against
16

a public functionary was not to be assumed but the same was required to be
proved through positive evidence and material. The case of The Federation of
Pakistan through Secretary Establishment Division, Government of Pakistan,
Rawalpindi v. Saeed Ahmad Khan and others (PLD 1974 SC 151) was referred.

7. On merits, it was stated by the learned Attorney General that the selection
of the cases of the respondents was made after issuance of show-cause notices
and receipt of the replies of the assessees who were afforded reasonable
opportunity of hearing. The learned Attorney General referred to the case of
Muhammad Asghar and others v. Income Tax Officer and others (1986 PTD
357)(Lahore) in that the selection of cases for scrutiny by Income Tax
Authorities could not be objected to as the assessees were required to file
true income tax returns under the Self-Assessment Scheme. The guidelines laid
down an intelligible criteria with specificity which could not be said to be
capricious or arbitrary. The respondents were disentitled to invoke the
constitutional jurisdiction of the High Court conferred by Article 199
of the Constitution of Islamic Republic of Pakistan in the presence of
availability of adequate remedies provided by the Income Tax Ordinance.
Reliance was placed on the cases of Al-Ahram Builders (Pvt.) Ltd. v. Income Tax
Appellate Tribunal (1993 SCMR 29),-Khalid Mehmood v. Collector of Customs,
Customs House, Lahore (1999 SCMR 1881) at P. 1887). It was lastly submitted
that in cases in which notices had not been issued, the same would be issued by
the relevant authorities before making a final selection for proceeding further
in accordance with law.

8. On the other hand, Mr. Shahid Hamid, Senior Advocate Supreme Court, the
learned counsel for the respondent (in Civil Appeal No. 1046/2004) submitted
that the appeal filed by the appellants was hopelessly barred by the time and
no sufficient cause was shown in their application for condonation of delay. He
referred to the cases of Muhammad Hussain and others v. Muhammad and others
(2000 SCMR 367) and Ali Muhammad through Legal Heirs and others v. Chief
Settlement Commissioner and others (2001 SCMR 1822) to impress upon that the
delay in filing an appeal could not be condoned merely because some connected
appeals filed within time were to be heard on merits. It was next contended
that the remedy of Intra-Court Appeal provided by section 3 of the Law Reforms
Ordinance, 1972, against the impugned judgment, passed by a learned Single
Judge in Chambers of the Lahore High Court had not been invoked by the
appellants in these cases. Therefore, a petition or an appeal before this
Court under Article 185 of the Constitution was not competent in view of the
law laid down by this Court in the case of Imtiaz Ali Malik v. Mst. Surrya
Begum and others (1979 SCMR 22).

9. He further argued that the guidelines issued by the C.B.R. were over-broad
and went beyond the scope of section 59(1-A). They were ex facie discriminatory
in nature and were also capable of arbitrary application. They conferred
uncanalised power on the Regional Commissioners and the Commissioners of Income
Tax to pick and choose. There was no method to ascertain as to how many cases
were to be selected for computer balloting by the C.B.R. or by the Regional
17

Commissioners on the recommendations of the Commissioners. An unfettered
discretion had been conferred on them. He pointed out that in the Self-
Assessment Scheme for the year, 1998-99 a provision was made to outsource the
selected cases for audit purpose under sections 4 and 4-A of the Ordinance and
the C.B.R. was required to specify classes/categories of cases for special
audit through a separate circular. However for the assessment years 2002-2003,
the assessees were entrapped through the Self-Assessment Scheme and the
guidelines. The conduct of the C.B.R. was unconscionable, non-transparent and
discriminatory in nature.

10. Mr. Siraj-ud-Din Khalid, Advocate Supreme Court, learned counsel for the
respondents (in C.As. No.238 of 2004 and 1212 of 2005), adopted the arguments
advanced by Mr. Shahid Hamid, Senior Advocate Supreme Court and further stated
that the appeals were also liable to be dismissed on the point of limitation as
no sufficient cause was shown for condonation of delay.

11. Mian Ashiq Hussain, Advocate Supreme Court, the learned counsel for the
respondents (in Civil Appeals No.262, 265, 266, 269, 294, 298, 835, 844/2004
and 1214/2005) highlighted the history of the Self-Assessment Scheme in a
chronological order. He submitted that selection of cases through random ballot
as well as by the Regional Commissioners of Income Tax was not only against the
basic concept and purpose of the scheme but the same also suffered from the
vice of uncertainty. Para-9 of the Scheme was not clear as to the exclusion of
cases from the Scheme on the basis of computer balloting and the ratio out of
total of 20% of cases which were to be selected by the Regional Commissioners
of Income Tax. No justification was spelt out by the C.B.R. while issuing the
letter, dated 31st January, 2003 permitting the Regional Commissioners to
select such cases at their own level. A long arm was given to the Revenue
Officers to take advantage of the ambiguity of the Scheme as to'the percentage
to be allocated for computer balloting and Regional Commissioners of Income
Tax. It was argued that the guidelines were required to be issued either before
or at least simultaneously with the announcement of the Scheme so that the
assessees were not kept in dark to. Exercise their option for the Scheme or
otherwise before the period provided under section 59(4) of the Ordinance had
run out. It was very unfair on the part of the C.B.R. to adopt a mechanism of
laying a bobby trap for the assessees. The C.B.R. was not expected to be
secretive in the matter of identifying each category of cases to be selected
for total audit or scrutiny till the last date of submission of returns. It
would have been just and 'fair that the guidelines were made known to the
assessee well in time and not to hold them back for considerable period even
after filing of the returns. It was not the intention of law to give wide
discretion to the C.B.R. to issue the guidelines as contemplated in para.
9(a)(2) of the Scheme at its sweet will whenever it thought fit. It was
further urged that Assessing Officer had no discretion but to make assessment
under section 59(1) of Ordinance, 1979, in accordance with the returns once the
requirements of the Scheme was satisfied. The guidelines, dated 17-12-2002 were
in the nature of a bill of attainder i.e. pains and penalties and the net was
so widened that no taxpayer could feel safe even if all the codal formalities
18

were fulfilled. The parameters laid down by the guidelines were exhaustive in
nature as if those were an independent Scheme. The hunt for cases involving
``Revenue Potential'' would give a licence and unbridled discretion to the
Commissioners/Regional Commissioner of Income Tax to pick and choose anyone on
unreasonable grounds. The guidelines could be invoked in a selective manner
without providing any intelligible differentia and the same were hit by the
equality clauses laid down by Article 25 of the Constitution of Islamic
Republic of Pakistan, 1973. Reliance was placed on the case of Messrs Novitas
International v. Income Tax Officer (Films Circle) and others (1991 PTD 968).
It was lastly submitted that exclusion of cases from benefit of the scheme by
itself amounted to an adverse order which could not be done without affording
adequate opportunity of hearing by the relevant authorities during the process
of selection of cases by the Commissioners and Regional Commissioners of Income
Tax.

12. Mr. M. Naeem Shah, Advocate Supreme Court, learned counsel for the
respondents (in Civil Appeals No.276, 288, 315/2004) submitted that Circular
No.7 of 2002, dated 15-6-2002 and the guidelines, dated 17-12-2002 issued by
the C.B.R. purportedly under section 59 of the Ordinance, 1979, were violative
of Article 4 of the Constitution and the principles of natural justice. It was
an inalienable right of every citizen to enjoy the protection of law and no
action detrimental to reputation or property of any person could be taken
except in accordance with law. He argued that under the provisions of section
59(1) once a return filed under the Scheme qualified for acceptance, the Deputy
Commissioner of Income Tax was under an obligation to assess the total income
of the assessee on the basis of such return and to pass an order of
determination of the tax accordingly.

13. Dr. Ilyas Zafar, Advocate Supreme Court, the learned counsel for the
respondents (in Civil Appeals No.841 and 843/2004) submitted that the
guidelines issued by the Board were required to be published in the official
Gazette as required by section 165 of the Ordinance where-under the C.B.R. was
empowered, by notification in the official Gazette, to make rules and prescribe
the manner and the procedure by which the income, profits and gains liable to
tax and the tax payable under the Ordinance, would be determined in the cases
of persons to whom section 59 was applicable. Since the guidelines, dated (?)
therefore, they were not enforceable at law. It was next contended that the
guidelines vested the Income Tax Authorities with the powers of reopening the
cases for total audit in an arbitrary manner and without recording any reasons.
Therefore, those were invalid ineffective for non-compliance of the
requirements of section 24-A of the General Clauses Act, 1897, where under
every authority, officer or person making any order or issuing any direction in
exercise of powers conferred by or under any law was required to give reasons
for such an order or direction. The guidelines also ran counter to and
nullified the effect of section 59 ibid and those were an encroachment of
quasi-judicial functions of the Income-tax Authorities. Reliance was placed on
.the case of Messrs H.M. Abdullah v. Income Tax Officer Circle v. Karachi
and 2 others (1993 SCMR 1195) in which it was held that the C.B.R. exercising
19

administrative control or supervision could not give any directions or
instructions to the Assessing Officer, Appellate Assistant Commissioners,
Income Tax Appellate Tribunal or the Commissioners of Income Tax vested with
quasi judicial powers. He also made a reference to the case of Messrs Central
Insurance Company and others v. Central Board of Revenue and others (1993 SCMR
1232) wherein it was held that although the C.B.R. had administrative
control over the functionaries discharging their functions under the Ordinance,
but it did not figure in the hierarchy of the forums provided for adjudication
of cases of assessees as to the income-tax. It was further held therein
assessees as to the income-tax. It was further held therein that interpretation
placed by the C.B.R. on a statutory provision could not be treated as a
pronouncement by a forum competent to adjudicate upon such a question judicial
or quasi-judicial. Therefore, it was contended that the C.B.R. could not issue
any directions of the nature which would interfere with the judicial or quasi-
judicial adjudicatory functions entrusted to various functionaries under a
statute.

14. Messrs Muhammad Iqbal Hashmi, Advocate Supreme Court, and Shahbaz Butt,
Advocate Supreme Court, the learned counsel for the respondents (in Civil
Appeals No.248-251, 256, 259, 303, 1014/2004) and (Civil Appeals No.233, 241,
243, 256, 261, 271, 274, 275, 279, 283, 286, 293, 296, 301, 304 of 2004)
submitted that the C.B.R. was not empowered to issue guidelines having the
effect of modification of the Scheme already announced by it or to extend the
date for scrutiny of cases for total audit unilaterally.

15. We have heard the learned Attorney General for Pakistan and the learned
counsel for the respondents at length. Section 55 of the Ordinance required the
filing of Income Tax return by every person whose total income or the total
income of any other person in respect of which he was assessable for any income
year exceeded the maximum amount which was not chargeable to tax under the
Ordinance or who had been charged to tax for any of the four income tax years
immediately preceding the said income year. Section 59 of the Ordinance made a
provision for self-assessment of the income tax as under:--
59. Self-assessment: (1) Where the return of total income for any
income year furnished by the assessee (not being a public company
or a company engaged in the business of banking leasing and
modaraba), under section 55 qualifies for acceptance in accordance
with the provisions of a scheme of self assessment made by the
Central Board of Revenue for that year or under any instructions
or orders issued thereunder the (Deputy Commissioner) shall
assess, by an order in writing, the total income of the assessee
on the basis of such return and determine the tax payable on the
basis of such assessment
(Explanation: For the removal of doubt it is hereby declared
that a return of total income furnished under section 55 does
not include a return of total income furnished under section
57)

20

(1-A) Notwithstanding anything contained in subsection
(1), the Central Board of Revenue or any authority
subordinate to it if so authorized by the Central Board of Revenue
in this behalf, may in accordance with a scheme referred to in
subsection (1), select out of returns referred to in that
subsection any cases or classes of cases or persons or classes
of persons howsoever determined, for assessment under section 62,
and the (Deputy Commissioner) shall proceed to make the assessment
under that section or, if the circumstances so warrant, under
section 63 accordingly).

(1-B)

(2)

(3) In (assessing the total income and determining the tax
payable under subsection (1)) (Deputy Commissioner) may make such
adjustments as may be necessary, including any adjustment under
sections 34, 35, 36, 37, 38, 50, 53 or 54, the rules made under
section 165, the First Schedule and the Third Schedule.
(4) No order under subsection (1) shall be made in any cases after
the thirtieth day of June of the financial year next following the
income year in respect of which a return of total income has been
furnished under section 55:

(Provided that if such order is not passed by such date, the
acknowledgement issued under section 55A in respect of the return
of total income shall be deemed to be the assessment order
and notice of demand referred to in section 85)

16. However, section 59-A of the Ordinance laid down that if the Deputy
Commissioner was satisfied without requiring the presence of the assessee or
the production by him of any evidence that a return furnished under section 55
was correct and complete, he would by an order in writing assess the total
income of the assessee and determine the tax payable on the basis of such
return. It was further provided therein that the provisions of subsection (3)
of section 59 would apply to an assessment and determination under section 59-A
as they applied to an assessment and determination under section 59.

17. The C.B.R. by Circular No.7 of 200*2 (Income Tax), on 15
th
June, 2002
announced the Self-Assessment Scheme (S.A.S.) for the Assessment year 2002-2003
under section 59 of the Ordinance. Paragraphs 1.1, 9 and 10 thereof are
reproduced below for the sake of convenience:-

1.1 All returns filed by taxpayers, other than those that are
ineligible under para. 7 of this Scheme, shall qualify for
acceptance subject to the fulfilment of the following conditions,
namely:-
21


(a) tax has been fully paid under section 54 of the Ordinance and
proof of such payment is attached with the return;

(b) Return of income for the assessment year 2002-2003 has been
filed under section 55 of the Ordinance, within due date as
defined in this Scheme;

(c) Returns of Public Limited companies quoted stock exchange,
where tax payable on the income declared is equal to or more than
the tax payable on the income last declared or assessed, whichever
is higher;

(d) Returns of other Companies where tax payable on the income
declared is higher by ten percent (10%) or more compared to the
tax payable on the income last declared or assessed,
whichever is higher;

(e) Returns of Registered Firms of Professionals not liable to pay
Super Tax under clause (2B) of para (A) of Part-IV of 1st Schedule
to the Ordinance, where the tax computed, under Part-II of the 1st
Schedule to the Ordinance, on income declared is higher by twenty
per cent. (20%) as compared to the similar tax computed on the
income last declared or assessed, whichever is higher; and

(f) Return of Persons not being Companies or Registered Firms of
Professionals, as indicated in sub-paras (c) (d) & (e) above,
where tax payable to income declare is higher by twenty per
cent. (20%) or more as compared to the tax payable on the
income last declared or assessed, whichever is higher;

(9) SELECTION OF CASES FOR AUDIT:
---------------------------------

(a) From amongst the returns filed under the Self-Assessment
Scheme (excluding salary and only property income cases), twenty
per cent. (20%) returns may be selected for total audit in the
following manner:-

(i) through computer ballot which may be random or parametric, as
deemed fit by C.B.R.

(ii) by Regional Commissioners of Income Tax on the
recommendations of Commissioners concerned, in the light of
guidelines issued by the Central Board of Revenue in this behalf.

(b) Returns qualifying for self-assessment shall be expeditiously
processed either manually, or through computer, after the
22

selection of cases for total audit. The Assessing Officer shall
make necessary adjustments under section 59(3) of the Ordinance,
if so required, after giving a notice in writing to the assessee
and considering his explanation, if any, These adjustments may
include add-backs on account of:-

(i) expenses claimed which are legally inadmissible;

(ii) any sum(s) deemed to be income under the Ordinance; and

(iii) adding agricultural income to the chargeable income for rate
purposes in terms of Proviso to Clause (1), Part-1 of the Second
Schedule to" the Ordinance.

(10) PROCESSING OF CASES SELECTED FOR AUDIT.
--------------------------------------------

The cases selected for total audit, shall be scrutinized in
detail, including field audit by departmental officers or by
professional auditors authorized under section 4A of the
Ordinance. The investigation and assessment proceedings shall be
monitored and completed under guidance of supervisory officers
within the meaning of section 7 of the Ordinance. Information
collected from available sources shall be utilized for determining
income of the taxpayer and tax payable thereon.

18. The C.B.R. Islamabad vide Letter No.7(7) S. Asstt/2002, dated 17-12-2002
issued policy guidelines to all the Regional Commissioners of Income Tax for
selection of cases for total audit under para-9 (a)(ii) of the Self-Assessment.
Scheme for the assessment year 2002-2003 Paragraphs 2, 3 and 4 thereof, being
relevant, read as under:-

``(2) In order to fulfil the above obligation of the Scheme
regarding issuance of the guidelines, it has been decided that the
Resit shall select only those revenue potential cases, where there
is an evidence, information or reasons to believe that the true
particulars of income have been suppressed. Such selection may
be based upon factors including an evident decline in income and
disparity in expenses on utilities vis-a-vis income declared.
Besides, cases of taxpayers acquiring new assets or incurring a
liability of Rs.50,000 or more through a non-institutional loan,
as declared in their wealth statements or where Department is
otherwise in the knowledge of some investments made by them, also
need to be considered for selection, it is felt that sources of
such acquisition/investment require detailed examination. In order
to identify such cases the tax profiles of survey and Registration
may also be consulted.

23

(3) Further, the RCsIT may poee recall that last year a number of
taxpayers lodged complaints before he learned Federal Tax
Ombudsman that their cases were selected on frivolous grounds.
This time it must be ensured that selection is based on material
evidences and a fair and just treatment is accorded to all
taxpayers. Before making a final selection, the RCsIT must
confront the assessees, provide them due opportunity of being
heard and must indicate the basis of their proposed selection in
the notices to be communicated to them.

(4) Board would like to further add that powers to set apart cases
for total audit must not be indiscriminately used and be
restricted to only those revenue potential cases where there is a
sound basis. Board desires that the process of selection of cases
for total audit must be finalized by 10th of January, 2003 and
thereafter be favoured with Zone-wise list of cases so selected.
It may be reiterated that selection of cases for total audit must
be carried out in a judicious and transparent manner.''

By another directive, dated 22-3-2003, the C.B.R. extended final date of
selection of non-company cases for total audit up to 31-3-2003 in order to
allow sufficient time to the taxpayers to submit their replies to the show
cause notices to the Regional Commissioners of Income Tax. The same date was
also extended in respect of company cases.

19. A number of issues have been raised by both sides with regard to the
validity and scope ofthe Circular No.7 of 2002, dated 15-6-2002 and policy
guidelines, dated 17-12-2002 of the C.B.R. together with extension in fixing
dates for completion of total audit of cases. An assessee was not under any
statutory obligation to file his return of total income for any year in terms
of provisions of section 59 under the Self-Assessment Scheme. A person who
was otherwise required to file a normal return under section 55 of the
Ordinance was given the option to file his return under section 59 for its
acceptance in accordance with the provisions of self-assessment scheme made by
the C.B.R. for that year, The Deputy Commissioner of Income Tax would then
assess, by an order in writing, the total income of the assessee on the basis
of such return and determine the tax payable on the basis of such assessment.
By non-obstante clause of section 59 (1-A) it was provided that the C.B.R. or
any authority subordinate to it if so authorized by the C.B.R. could select out
of returns any cases or class of cases or persons or class of persons howsoever
determined for assessment under section 62 and the Deputy Commissioner would
proceed to make the assessment under that section or if the circumstances so
warranted, under section 63 accordingly. In such a situation, the procedure
provided under section 62 or section 63, as the case might be, would be allowed
by the Deputy Commissioner. Under paragraph 9 of the scheme, 20% returns were
to be selected for total audit through computer ballot which may be random of
parametric as deemed fit by the C.B.R. or and by Regional Commissioners
of Income Tax on the recommendations of the Commissioners concerned in
24

the light of the guidelines issued by the C.B.R. in that behalf. The Assessing
Officer would make necessary adjustments under section 59(3) of the Ordinance,
if so required, after giving a notice in writing to the assessee and
considering his explanation C if any. Paragraph 10 of the Scheme further laid
down that the cases selected for total audit would be scrutinized in detail
including field audit by departmental officers or by professional auditors
authorized under section 4-A of the Ordinance by utilizing the information
collected from available sources of determining income of the taxpayer and tax
payable thereon by observing the procedure of paragraph 9 and 10. There was no
limitation or restriction imposed by section 59(1-A) of the Ordinance as "any
cases or classes of cases or person or class of persons" could be selected for
the purpose of total audit.

20. The word `any' used in subsection (1-A) of section 59 of the Ordinance was
not without significance. In the case of Ch. Zahoor Ellahi M.N.A. v. The State
(PLD 1977 SC 273) the import of the word `any' was considered in the context of
section 13(1)(b) of the Defence of Pakistan Ordinance (XXX of 1971) whereunder
it was provided that.... ``no Court would have authority to revise such order
or sentence..... or to transfer any case from a Special Tribunals.... or have
any jurisdiction of any kind in respect of any proceedings in a Special
Tribunal.'' It was held that word `any' was of very wide amplitude and was
defined in Stroud's Judicial Dictionary as a word which excluded limitations or
qualifications and, therefore, "any order" would include both interim as well
as final orders. Similarly, in N.-W.F.P. v. Muhammad Irshad (PLD 1995 SC 281),
this Court took the view that the expression `any law' was used to enlarge the
amplitude of the term to which it was attached and there seemed to be no reason
why expression 'any law' occurring in Article 8(1) of the Constitution
would be so narrowly construed as to exclude from its purview a regulation
which possessed the efficacy of law in a part of Pakistan. In Inam-ur-Rehman v.
Federation of Pakistan (1992 SCMR 563) (at page 587) it has been stated that
the term 'any' according to the Black's Law Dictionary (Fifth Edition) page 86
means "one out of many; an indefinite number; one indiscriminately of
whatsoever kind or quantity. The word "any" has a diversity of meaning and may
be employed to indicate "all" or "every" D as well as "some" or "one" and its
meaning in a given statute depends upon the context and the subject-matter of
the statute. In M. Amjad v, Commissioner of Income Tax and 2 others (1992 PTD
513), it was held by a learned Division Bench of the High Court of Sindh that
the word `any' used in the context of section 59 of the Ordinance was a word of
expansion indicative of width and amplitude sufficient to bring within the
scope and ambit of the words it governed, all that could possibly be included
in them.

21. Therefore, no exception could be taken to the selection of cases of the
respondents in respect of their returns filed under the Self-Assessment Scheme.
It goes without saying that final selection of a case or cases had been made by
the Regional Commissioner of Income Tax after affording fair and adequate
opportunity of hearing to the assessees/respondents who were issued
showcause notices and their replies to the same were duly considered. It may be
25

observed that under the scheme a maximum of 20% of the returns filed by the
assessees could be selected for total audit. The percentage of the selected
case? Through computer ballot or by the Regional Commissioners of Income Tax
had not been squarely laid down with precision. However, no prejudice was shown
to have been caused to the respondents on account of the non-specification
of the percentage of cases to be selected by the C.B.R. through computer
balloting or by the Regional Commissioners. In our view, paragraphs 9 and 10 of
the Scheme could not be said to be ultra vires the provisions of section 59 or
any other provision of the Ordinance.

22. As regards the policy guidelines, dated 17-12-2000 issued by the C.B.R. to
the Regional Commissioners of the Income Tax, it seems that discretion of the
Regional Commissioners in selecting the cases for total audit was thereby
restricted. They could select only those revenue potential cases where there
was an evidence, information or reason to believe that the true
particulars of income had been suppressed. Under the Scheme, the number of
selected returns could not exceed the maximum limit of 20%. However, the
Regional Commissioner's were further directed to identify and select the
revenue potential cases only based upon factors including an evident decline in
income and disparity in expenses on utility vis-a-vis income declared. Besides,
cases of taxpayers acquiring new assets or incurring a liability of Rs.50,000
or more through a non-institutional loan, as declared in their wealth
statements or where Department was otherwise in the knowledge of some
investments made by them, could also be considered for selection. If it was
felt that sources of such acquisition/investment required detailed
examination. In order to identify such cases, the tax profiles of Survey and
Registration might also be consulted. The C.B.R. specifically directed that
before making a final selection, the Regional Commissioners of Income Tax must
confront ihe assessees, provide them opportunity of being heard and must
indicate the basis of their proposed selection in the notices to be
communicated to them. These guidelines were administrative in nature meant for
the internal consumption of the Income Tax functionaries which did not create
any rights nor did they impose any obligations. Those instructions had not
taken away any vested right of the assesses and would not govern the
adjudicatory proceedings of quasi-judicial in nature. However, it could not be
said that the guidelines were, in any way, extraneous, irrelevant or unfair to
the object to be achieved by the process of selection of cases for total audit.
In our view, the procedure of selection of cases for total audit as provided by
paragraphs 9 and 10 of the Scheme was not nullified or whittled down by the
policy guidelines, dated 17-12-2002.

23. Now, we have to examine whether the policy guidelines, dated 17-12-2002
were invalid for the reason of not having been issued either before or
contemporaneously with the promulgation of the Self-Assessment Scheme. There
was no requirement of section 59 or any other provision of the Ordinance or
rule for issuance of guidelines either before or along with the Scheme. The
very object of the provisions of section 59(1-A) would have been frustrated if
the income taxpayers were informed, before hand, of the categories of cases or
26

persons which would be selected for total audit. If that was done, the
possibility of tax evasion under the scheme at a massive scale could not be
ruled out. The assessees were required to file their true return under the
Scheme as far as possible. The previous publication of the guidelines would
have been a hay-day for all the tax evaders as they would be knowing before
hand that their cases were not going to be selected or scrutinized. As long as
the Income-tax Authorities acted within the for corners of section 59 of the
Ordinance and the Self-Assessment Scheme and did not abuse their power or
authority, the objection as to the provisional or/and final selection of cases
for total audit was not sustainable. The guidelines for the selection of cases
by the Regional Commissioners would not suffer from any taint of invalidity
merely because certain categories had been identified for total audit based on
the reasonable classification which was not violative of Article 25 of the
Constitution. There was no requirement of law for issuance of the
guidelines by the C.B.R. side by side with the announcement of the Scheme as
they were to follow the Scheme after its announcement and not to precede it.

24. The objection of Dr. Ilyas Zafar, Advocate Supreme Court, as to non-
publication of guidelines in the Official Gazette also needs to be attended.
There was no statutory obligation on the part of the C.B.R. to have published
the guidelines in the Official Gazette. They were in the nature of
administrative instructions meant for the internal consumption of the Regional
Commissioners issued in aid of carrying out the purposes of Self-
Assessment Scheme. They did not enjoy the status of statutory rules which were
required, by section 165 of the Ordinance, to be notified through publication
in the Official Gazette. Moreover, it all depends on the nature and context of
statute whether the provisions requiring publication of a notification in the
Official Gazette would be construed as directory only or mandatory so as
to invalidate a notification or instructions on account of non-publication in
the Official Gazette. The purpose of publication and the legal effect of non-
publication of a Gazette Notification in the Official Gazette has been examined
by the superior Courts in a number of cases. In Jalal Din v. Natha Ram and
another (AIR 1922 Lahore 474), a learned Division Bench of the High Court
observed that a notification was a method implied for communicating orders,
rules, etc. to the general publ'ic. In Pakistan through Secretary, Ministry of
Defence and others v. late Ch. Muhammad Ahsan through legal heirs and others
(1991 SCMR 2180), certain lands had been requisitioned under the Defence of
India Act, 1939 and the owners of the land were paid yearly lease money
thereunder. But the notification of the acquisition/requisition of land had not
been published in the official Gazette. It was observed that depending upon the
circumstances of each case, the mere fact that publication in the official
Gazette was delayed could neither invalidate the notification nor would make
its operation retrospective as such vis-a-vis the date of actual signing
it. It was found that factual acquisition of land had been acted upon for
nearly 50 years and there was an air field in the land for such a long time.
Notice/notification although had been signed and issued to all concerned but
had not been gazetted. In other words, the purpose of the publication in the
ordinary sense was practically served almost contemporaneously when the
27

acquisition took place and in fact it was more substantial publication insofar
as the owners were concerned than if it would Lave been in the official
Gazette. Mere fact that publication in the gazette was delayed, could not
invalidate the notification. A somewhat similar view was taken in the case of r
Muhammad Siddiquie v. Market Committee, Tandlianwala (1983 SCMR 785). In the
case of Saghir Ahmed through legal heirs v. Province of Punjab through
Secretary Housing and Physical Planning, Lahore and others (PLD 2005 SC 261), a
housing scheme had been approved and notified by the Government. There was no
stipulation of publication of such an approval in the official Gazette as a
mandatory condition. It was held that the non-publication of the Government's
approval of the scheme in the official gazette would not invalidate the
approval. It was further observed that the official acts performed by public
authorities deserved due regard by the Courts and every possible explanation
for their validity should be explored and the whole gamut of powers in
pursuance of which they acted or performed their function and discharged their
duties should be examined. In Mazur-ul-Haq v. Controlling Authority, Local
Councils, Montgomery and others (PLD 1963 SC 652), the names of the official
members were not notified in the official Gazette as provided by Article 26 of
the Basic Democracies Order, 1959, and section 17 of Municipal Administration
Ordinance, 1960. It was held that unless there be something in the language of
a statute which showed that the person concerned would not commence to hold
office till there was a notification in the Gazette, a provision for a
notification should not be interpreted as a condition precedent to the holding
of an office.

25. The learned counsel for the respondents also took a strong exception to the
preliminary selection of cases for total audit by the Commissioners of Income
Tax without affording prior opportunity of hearing to the assessees. We find
that the C.B.R. through policy guidelines had clearly directed the Regional
Commissioners of Income Tax to ensure that the selection was based on
material evidence and that a fair and just treatment was given to all
taxpayers. Before making final selection, they were required to issue notices
to the assessees indicating therein the basis of their proposed selection, to
confront them with relevant material and provide them due opportunity of being
heard. Therefore, the interests of the taxpayers were adequately safeguarded by
the policy guidelines of the C.B.R. in the process of final selection of their
cases by the Regional Commissioners even though they were not heard by the
Commissioners at an early stage.

26. The rules of natural justice are not inflexible. They yield to and change
with the exigencies of different situations. They do not apply in the same
manner to situations which are not alike. These rules are not cast in a rigid
mould nor can they be put in a legal strait-jacket. They are not immutable but
flexible. They can be adopted and modified by the Statutes. The need to act in
an emergency may also exclude at least a prior hearing or where a decision
affects so many people that a hearing would be impracticable. In some cases
there may be collective right, of hearing, or to be consulted although not
necessarily a hearing in individual cases. Depending upon the facts and
28

circumstances of each case, there is no mandatory requirement of natural
justice that in every case the other side must be given a notice before
preliminary steps are taken. It might suffice if reasonable opportunity of
hearing is granted to a person before an adverse action or decision is taken
against him. However, it is not possible to lay down an absolute rule of
universal application governing all situations as to the exclusion or otherwise
of the audit alteram partem rule during the course of preliminary inquiries or
investigations.

27. The application or otherwise of the principles of natural justice at
preliminary stage of administrative proceedings was examined in various
jurisdictions by way of judicial review. In Pearlberg v. Varty (Inspector
Taxes) (1972) 2 All England Reports 7) the Income-tax Authorities made an
application to the Commissioner under the provisions of section 6(1) of the
Finance Act of 1964 for leave to make assessment on a taxpayer for the years
1946-47 and 1950-51. The permission was granted without giving the taxpayer an
opportunity to be heard. The taxpayer claimed that those assessments were
invalid on the ground that the Commissioner had acted ultra vires in granting
leave without giving him an opportunity of hearing. The House of Lords observed
that the Commissioner was not required to give the taxpayer an opportunity to
be heard as his decision to give leave would not tantamount to any final
determination of the rights of the taxpayer.

28. In the case of Regina v. Saskatchwan College of Physicians and Surgeons
(supra) it was held that the preliminary inquiry committee had no power to
decide whether Dr. Samuels had been guilty of misconduct; it had no power to
affect any of his legal rights in any way whatever; and it had no power to
impose any penalty or obligation upon him. Having no power to adjudicate
anything, it was not, when conducting its investigation, acting in a judicial
or quasi-judicial capacity. In R. v. Church Assembly Legislative Committee
(1972) All England Reports 696) it was observed that the Church Assembly of the
Church of England and its Legislative Committee were bodies that set in motion
in a preliminary way, proposals for legislation, and they did not exercise
judicial functions for determination judicially questions affecting the
rights of subjects. In the case of Parry Jones v. Law Society and others,
(supra), the Court of Appeal took the view that where the only inquiry was as
to whether there was prima facie evidence, natural justice did not require that
the party should be given notice of it. In Norwesi Hoist (supra), the company
had moved the Court for a declaration that the view of the Inspectors to
investigate the affairs and submit report to the department was unlawful and
ultra vires as the information and the material had not been disclosed to the
company. The Court of Appeal held that under section 165(b) of the Companies
Act, 1967, the department had wide discretion to appoint inspector to
investigate and report to it which was exercised at a preliminary stage for the
purpose of good administration and carried with it no implication that there
was any case against the company. Accordingly, the principles of natural
justice were at that stage inapplicable.

29

29. In Christopher John Moran (supra), the Court of Appeal observed that it was
no good for the tactician to appeal to the rules of natural justice. They had
no application to a preliminary inquiry of that kind. The inquiry was made with
a view to seeing whether there was a charge to be made. It did not do anything
which adversely affected the man concerned or prejudiced him in any way.
It was simply a preliminary hearing to see if there was going to be a charge.
If there was, there should be a hearing in which an impartial body would look
into the rights and wrongs of the case. In all such cases, all that was
necessary was that those who were holding the preliminary inquiry should be
honest men-acting in good faith doing their best to come to the right decision.
In that case, a Committee had been appointed to investigate dealings of the
plaintiff Christopher John Moran who was an insurance broker and a member of
Loyd's auditors.

30. In Rees and others (supra). It was held by the Privy Council that there
were many situations in which natural justice did not require that a person
must be told of the complaints made against him and given a chance to answer
them at the particular stage in question. Essential features leading the Courts
to that conclusion had included the fact that the investigation was purely
preliminary, that there would be a full chance adequately to deal with the
complaints later, that the making of the inquiry without observing the audit
alteram partem maxim was justified by urgency or administrative necessity, that
no penalty or serious damage to reputation was inflected by proceeding to the
next stage without such preliminary notice, that the statutory scheme properly
construed excluded such a right to know and to reply at the earlier stage.
However, their Lordships did not lay down an absolute rule to that effect.

31. In Liberty Oil Mills v. Union of India (AIR 1984 SC 1271), an order of
investigation was challenged on the ground of non-compliance with the
principles of natural justice. The Supreme Court of India observed that
procedural fairness embodying natural justice was to be implied whenever action
was taken affecting the rights of parties. An opportunity to be heard might not
be predecisional; it might necessarily have to be post-decisional where the
danger to be averted or an act to be prevented was imminent or where the action
could break no delay. In Union of India v. Tuisi Ram Patel (AIR 1984 SC 1416),
it was observed that right of prior notice could be excluded where the same
would obstruct the taking of prior action. In Lewis v. Heffer and others (1978
(3 All E.R. 354), the National Executive Committee of Labour Party had
suspended the Constituency Officers and Committee pending inquiry without
affording opportunity of hearing or issuance of show-cause notice. Lord Denning
(as he then was) speaking for the Court of Appeal held that there had been no
breach of rules of natural justice. It was only where the suspension was to be
effected by way of punishment that natural justice demanded that the persons
concerned should be given an opportunity of being heard before the suspension
was imposed. Where the suspension was made as a holding operation pending
inquiries, the rules of natural justice did not apply, because the suspension
was merely done as a matter of good administration in a situation where prompt
action was necessary.
30


32. In Paul Wallis Furnell v. Whangarei High Schools Board (1973) (P.C.) Appeal
Cases 660), the Privy Council dealt with the challenge of a school teacher
against whom sub-committee of the school conducted a preliminary investigation
without giving him opportunity to make a representation. The Supreme Court of
New Zealand had set aside the suspension of the school teacher by the school
board on the ground that the principles of natural justice had not been
followed by the subcommittee and by the board before conducting preliminary
investigation or passing the suspension order. It was held that one of the
principles of natural justice was that a man should not be condemned and the
teacher knew that under the terms of his employment he might be suspended
pending the determination of charges against him. In Wednesbry Corporation v.
Minister of Housing and Local Government (1965 1 All E.R. 186), the Minister's
action to issue instructions to the Inspectors as regards scope of inquiry was
held to be not subject to hearing. In Hardutt Mull Jute Mills v. State of Bihar
(AIR 1957 Patna 21), a learned Division Bench of the Patna High Court while
dealing with a wealth tax case held that as a matter of law it was not correct
to say that the party adversely affected should be heard at each and every
stage of administrative process.

33. In Muhammad Hayat v. the Chief Settlement and Rehabilitation Commissioner
and another (PLD 1970 Lah. 679), the registration of criminal case and
commencement of police investigation before hearing the accused were held to be
not violative of principles of natural justice. In that case the investigation
into a case of bogus claim of a refugee by Police Officer was challenged on
the plea that the said Officer before making a report, had not afforded an
opportunity of hearing to the accused.

34. We are inclined to agree with the learned Attorney General for Pakistan
that the opportunity of hearing was not required to be afforded by the
Commissioners to the respondents at the preliminary stage of making proposals
or recommendations of their cases to the Regional Commissioners for total
audit. However, before the final selection of cases, the policy guidelines,
dated 17-12-2002 seem to have been,. faithfully observed by the Regional
Commissioners of Income Tax, who were required to confront the assessees with
the material, provide them due opportunity of being heard and communicate them
the basis of their proposed selection. In none of these cases, any allegations
of personal bias, mala fide or other unfair treatment by the Regional
Commissioners or other officers of the Income Tax Department were
specifically levelled or substantiated by the respondents. Therefore, no
exception could be taken to the selection of the cases of the respondents by
the Regional Commissioner made after due process of law.

35. Some of these cases such as Civil Appeals No.282, 299 to 309, 312 to 315,
835, 837, 840, 842, 844/2004, 1211, 1212, 1213, 1214, 1641, 1704/2005 have been
filed after the expiry of limitation period. They are accompanied by the
applications for condition of delay. Since the other appeals were filed within
limitation period, therefore, we aondone the delay in all such appeals for
31

the reasons stated in the applications for condonation of delay and the
following principles laid down in the cases of Sheikh Muhammad Rashid (supra),
Ch. Manzoor Elahi (supra), Mahreen Zaibun-nisa (supra), Fazal Elahi and others
(supra) and Province of Punjab v. Muhammad Tayyab and others (1989 SCMR 1621).
The cases of Muhammad Hussain and others (supra) and Ali Muhammad (supra)
referred to by Mr. Shahid Hamid, Senior Advocate Supreme Court are
distinguishable from the facts of these cases.

36. The objection as to filing of these appeals without availing remedy of
Intra-Court Appeals has been taken by the respondent at a brlated stage of
final hearing of these appeals. Ordinarily, this Court does insist the
petitioner or appellant to avail the remedy of Intra-Court appeal, in the first
instance, as was done in the case of Imtiaz Ali Malik (supra) treferred to by
Mr. Shahid Hmaid, Senior Advocate Supreme Court. However, this is a rule of
practice for regulating the exercise of discretion which does not oust or
abridge the constitutional jurisdiction of this Court. Therefore, in certain
exceptional circumstances, this Court can entertain petitions, or as the case
may be, direct appeals even where the remedy of Intra-Court appeal under
section 3 of the Law Reforms Ordinance, 1973 has not availed by a party.
Rference may usefully be made to the cases of \mst. Shohrat Bano v. Ismail Dada
Adam Soomar (1968 SCMR 574), Province of Punjab through Secretary Excise and
Taxation, Government of Punjab and others v. Sargodha Textile Mills Ltd.,
Sargodha and others (PLD 2005 SC 988) and Punjab Employees Social Security
Institution Lahore and others v. Manzoor Hussain Khan and others (1992 SCMR
441). The present appeals involve important question of law of great public
importance having fr-reaching consequences. Thereafter, the objection of the
respondents is not tenable in the peculiar facts of this case.

37. For the foregoing reasons, these appeals are allowed and the impugned
judgments of the High Court are set aside with no order at as to costs.


Appeals allowed.
















32











HIGH COURTS OF PAKISTAN
-----------------------------------------------------------------
Eastern Lather Company Ltd. v. Federation of Pakistan
NO: WP 5893 YEAR: 2003 DECIDED ON 28/10/2003
CITATION: DTPHC1659; VOL7/12TF52
-----------------------------------------------------------------
Income Tax Ordinance, 1979 -- Section 32 --

LAW APPLICABLE --


Establishment of Office of the Wafaqi Mohtasib Order, 1983 Representation
before the President against the decision of Mohtasib --

FACTS --

Complaints was filed before the Wafaqi Mohtasib seeking damages on account of
demurrages paid to Karachi Port Trust by the Complainant on account of
late clearance due to delay in issuance of exemption certificate under section
50(5) of the Income Tax Ordinance, 1979 Mohtasib vide order dated 10.02.2001
ordered the Department to pay amount of Rs. 1,281,782 so that the complainant
is compensated for the monetary loss suffered. Department filed representation
before the President which was decided against the Complainant -- The
Complainant filed writ petition in the High Court challenging the order of the
President passed against him without giving opportunity of hearing

RESULT --

Writ accepted -- Representation on the point in issue would be deemed pending
before President which would be decided after hearing the parties --

RATIO

THE PETITIONER CANNOT CONDEMNED UNHEARD --

Petitioner has admittedly been denied notice and the right of hearing on the
respondent's representation against it -- The Petitioner has been condemned
unheard --
33


VESTED RIGHT OF PARTICIPATION --

The impugned order adversely affects the petitioner but has been passed without
opportunity of hearing to the petitioner who was vested with a right of
participation in the proceedings against it as a party thereto --

JURISDICTION VESTED IN PRESIDENTS IS QUASI JUDICIAL AND NOT ADMINISTRATIVE --

The President exercises the same nature of functions as are performed by the
Ombudsman -- Thus visualized, the president while performing his functions
under Article 32 of the Order acts in quasi judicial and not in administrative
capacity --

LAW AND PRINCIPLE OF LAW ON OPPORTUNITY OF HEARING --

The law and the principle of natural justice oblige the honourable President to
decide a representation before him after an opportunity of hearing to the
parties before him --

ORDER WITHOUT HEARING -- WITHOUT LAWFUL AUTHORITY --

Under the above explained circumstances, the impugned order conveyed to the
petitioner through Memo No. 257/200 Law (WM) dated 17.01.2002 is declared to be
without lawful authority and of no legal effect --

----------------------------------------------------------------------
[IN THE LAHORE HIGH COURT, LAHORE]

EASTERN LEATHER COMPANY (PVT.) LTD.

v.

FEDERATION OF PAKISTAN

Present: MR. MUHAMMAD SAIR ALI, J.

W.P. No. 5893 of 2003, decided on 28th October 2003.

Petitioner by: Raja Amir Khan, Advocate.

Respondent by: Mr. Shahid Jamil Khan, Advocate.

Date of hearing: 20-10-2003.

Date of Order: 28-10-2003.

----------------------------------------------------------------------
34

JUDGMENT

MUHAMMAD SAIR ALI, J. - M/s Eastern Leather Company (Pvt.) Limited (the
petitioner) as manufacturer imported chemicals for manufacturing and processing
of leather and leather products. Respondent No. 2 i.e. Commissioner of Income
Tax issued certificate of exemption from deduction of income tax at source at
import stage, on 06.12.1995 for a period of six months ending on 30.06.1996. In
the meanwhile, petitioner opened certain. L.C s to import goods and machinery
etc. Renewal of certificate was requested by the petitioner, but his
application/representation to respondent remained unresponded whereupon
petitioner filed a Writ Petition No.15740/1996 before this Court. This petition
was however decided on 06.10.1996 through directions to release the goods on
furnishing of Bank guarantee by the petitioner. Owing to delay in release of
the imported consignment, the petitioners had to pay demurrage charges
amounting to Rs. 12,81,782.

2. Petitioner thereupon filed a complaint before the Hon,ble Wafaqi Mohtasib to
seek refund of the demurrage charged from and paid by the petitioner. The
grounds of complaint were that the petitioner had to suffer the above referred
payment of demurrage charges owing to delay caused by non-issuance of exemption
certificate by the respondents. The petitioner's complaint before the Hon'ble
Wafaqi Mohtasib succeeded through order dated 10.02.2001. The Hon'ble Wafaqi
Mohtasib observed and recommended as under:--

``In view of the above facts of the case it is established
that the complainant had to pay the amount of
Rs.12,81,782/- as demurrage charges due to negligence and
mal-administration of the Agency, as the Agency failed to
issue Exemption Certificate inspite of various applications
submitted by the complainant in this regard. Therefore,
amount of Rs.12,81,782/- may be refunded to the complainant
is compensated for the monetary loss it has suffered.
Compliance be reported to this Secretariat within 30
days.''

3. Against the above order, the respondents filed representation before the
Hon'ble President of Pakistan under Article 32 of the Establishment of Office
of Wafaqi Mohtasib (Ombudsman) Order, 1983. The same was accepted by Hon'ble
the President of Pakistan on the ground that the Hon'ble Wafaqi Mohtasib
appointed under the Order of 1983, was divested of the jurisdiction to hear the
petitioner's complaint dated 23.02.2000 upon promulgation of Federal Tax
Ombudsman Ordinance, 2000 w.e.f. 11.08.2000 as provisions of the said Ordinance
were applicable retrospectively and thus affected proceedings pending before
the Hon'sble Wafaqi Mohtasib qua federal taxes. The findings and recommendation
dated 10.02.2001 were thus set aside and petitioner was intimated of the above
decision through Memo No. 574/2001-Law (WM) dated 17.01.2002 by a section
officer. Hence the present constitutional petition.

35

4. On pre-admission notice, report and para wise comments were filed on behalf
of the respondent.

5. Upon joint request of the learned counsel for the parties, this case is
decided as an admitted/pacca case.

6. The case came up for hearing before this Court today. The learned counsel
for the petitioner drew my attention to the impugned order conveyed to the
petitioner through the above referred memo dated 17.01.2002 and stated that the
order was void a-for having been passed without notice and without opportunity
of hearing to the petitioner. Reliance was placed upon a number of judgments to
contend that the impugned order of Hon'ble the President of Pakistan was
unsustainable for having been passed in absence of the petitioner.

7. Learned counsel for the respondent faced with above situation, had no
answer to offer. He however tried to build his defence on merits.

8. Having heard the learned counsel for the parties, this Court has no option
but to accept this constitutional petition. Petitioner has admittedly been
denied notice and the right of hearing on the respondents' representation
against it. The petitioner has been condemned unheard. The impugned order
adversely affects the petitioner but has been passed without an opportunity of
hearing to the petitioner who was vested with a right of participation, in the
proceedings against it as a party thereto. Question of absence of proper
hearing on a representation to the Hon'ble the President of Pakistan was
settled by the august Supreme Court of Pakistan in the cases of "Federation of
Pakistan vs. Muhammad Tariq Pirzada and two others (1999 SCMR 2744) and
"Federation of Pakistan vs. Muhammad Tariq Pirzada and two others (1999 SCMR
2189). In case reported as 1999 SCMR 2189, the Hon'ble Supreme Court of
Pakistan was pleased to settle the law on the nature of the jurisdiction
vesting in the President under Article 32 of the above referred Order of 1983.
It was held that:-

``the jurisdiction vested in the President under Article 32
partakes of appellate jurisdiction...''

And that:

``Under the scheme of the Order, the President exercises
the same nature of functions as are performed by the
Ombudsman. Thus visualized, the President while performing
his functions under Article 32 of the Order acts in quasi-
judicial and not in administrative capacity, which is
totally distinguishable from administrative actions.''

9. Cumulative reading of the above referred two judgments of the august.
Supreme Court of Pakistan reveals that the law and the principles of natural
36

justice oblige the Hon'ble President to decided a representation before him
after an opportunity of hearing to the parties before him.

10. The law as above pronounced was followed by this court in the cases of
"Muhammad Saleem Vs Federal Tax Ombudsman etc." (Writ Petition No.
16946/2002)and "Muhammad Hussain and another Vs. Federation of Pakistan (2003
YLR 2793) to set aside orders passed on representations without hearing the
party represented against.

11. Under the above explained circumstances, the impugned order conveyed to the
petitioner through Memo No. 257/2001-Law (WM) dated 17.01.2002 is declared to
be without lawful authority and of no legal effect.

12. This constitutional petition has been decided on the ground of absence of
hearing to the petitioner therefore the questions of law and facts involved in
the present constitutional petition have not been dealt with and decided. These
questions are left to be re-decided in the representation filed by the
respondents before Hon'ble the President of Pakistan. The representation shall
be deemed to be pending and shall be re-decided in accordance with law after
due notice and opportunity of hearing to the parties.
HIGH COURTS OF PAKISTAN
-----------------------------------------------------------------
Suleman Spinning Mills Limited v. IACIT Lahore
NO: WP 20218YEAR: 2002 DECIDED ON 27/02/2003
CITATION: DTPHC1624; 88TAX147; 2003PTD1343;
-----------------------------------------------------------------
Income Tax Ordinance, 2001 -- Section 239(6) --

Income Tax Ordinance, 1979 -- Sections 50, 86, 117, 124 --

Income Tax Rules, 1982 -- Rule 50 --

Constitution of Pakistan (1973) -- Article 199 --

Constitutional petition -- Prosecution for non-compliance of statutory
obligations -- Payment of deducted tax not deposited in Govt. treasury within
prescribed time -- Imposition of additional tax and prosecution -- Notice u/s
117 -- Validity -- Petitioner deducted tax u/s 50(4)(a) from payments made to
supplier and did not pay same in Govt. treasury for about period of four years
-- As result thereof supplier was not given credit on account of tax so
deducted and department failed to refund all deducted if amounts excess in
their assessed liability -- Suppliers filed complaints before Federal Tax
Ombudsman who took serious view of non-timely payment of deducted amounts by
petitioners to credit of Govt. and termed such action as unlawful retention,
embazzlement and misuse of government money by withholding agents like
petitioners who had deducted huge sum from payment of said complainant but did
not deposit same for period of about four years -- Reply to show cause notice
by petitioners that supplier verbally requested them not to deposit deducted
37

tax as they had obtained exemption certificate from C.l.T. (Companies), but it
was upon non-production of certificate that amount was deposited after
condiderable delay could not findfavour -- Notice -- Challenge to -- Whether
Federal Tax Ombudsman holding action of revenue in non-recovery of Govt. funds
as maladministration recommended reference to Legal Advisor for prosecution
proceedings against them -- Held yes -- Whether it has not been denied by
petitioners that prior of issuance of notice for proceedings of prosecution u/s
117, legal advice was also sought and it was so given by Legal Advisor of
department -- Held yes -- Whether petitioners thus cannot say that notifying
authority mechanically served notice upon mere recommendation of Federal
Tax Ombudsman -- Held yes -- Whether bare reading of sub-section (6) of section
239 shows that proceedings for prosecution in respect of income year ending on
or before 30th June, 2002, have specifically been permitted by above said
provision of Income Tax Ordinance, 2001 to be taken and continued as if this
ordinance has not come into force -- Held yes -- Whether provision of section
50(8) mandate payment within prescribed time in prescribed manner by person
making deduction -- Held yes --

Whether applicable rule prescribing time and manner in rule 50 of Income Tax
Rules, 1982 which provides for one week's time for crediting amount so
deducted in Govt. treasury -- Held yes -- Whether cumulative reading of
section 50(8)(c) and section 52 of repealed Income Tax Ordinance, 1979 and Rule
50 of Income Tax Rules, 1982, does show that petitioners are also assessees in
default having violated express provisions of section 50(8) of ordinance and
rule 50 by deposit of deducted tax years after prescribed time of one week --
Held yes -- Whether petitioner's action attracted provisions of section 86 as
well as those of section 117(a) of repealed Ordinance, 1979 -- Held yes --
Whether section 86 itself provides that imposition of additional tax for
violation of section 50 ``shall be without prejudice to any other liability''
which such person may incur -- Held yes -- Whether provisions of section 86 and
124 read together show that imposition of additional tax or prosecution for an
offence are independent actions which do not, in any way, affect or prejudice
or exclude each other and can both be resorted to at same time in appropriate
cases -- Held yes -- Whether impugned notices for initiation of proceedings
against petitioners u/s 117 of late Income Tax Ordinance are valid and proper -
- Held yes Whether no additional notice was required to be given to
petitioners as assessee in default -- Held yes --

Constitutional petition -- Interpretation, scope and application of Sections
50, 117, 124 and 86, Income Tax Ordinance, 1979 -- Tax was deducted by the
petitioner and payment of the deducted tax was not made in compliance with the
requirements of Section 50(8)(c) of the Income Tax Ordinance, 1979 which
mandated the payment of such deducted tax within the prescribed time and manner
by the person making the deduction -- Effect -- Petitioner's action attracted
provisions of Section 86 as well as those of Section 117(a) of the Income Tax
Ordinance, 1979 -- Imposition of additional tax or prosecution for an offence
were independent actions, which were not mutually exclusive and did not, in any
way, affect prejudice or exclude each other and could both be resorted to at
38

the same time in appropriate cases --Notice for initiation of proceedings
against the petitioner under section 117 of the Income Tax Ordinance, 1979 was
valid and proper -- No additional notice was required to be given to the
petitioner as assessees in default -- Principles --

Proceedings for prosecution in respect of an income-tax year ending on or
before 30-6-2002 have specifically been permitted by Section 239(6), Income Tax
Ordinance, 2001 to be taken and continued as if the Ordinance of 2001 has not
come into force -

-----------------------------------------------------------------
{IN THE LAHORE HIGH COURT, LAHORE}

Messrs SULEMAN SPINNING MILLS LTD., LAHORE
through Manager Finance

v.

INSPECTING ADDITIONAL COMMISSIONER

ON INCOME-TAX, LAHORE and another

Writ Petitions Nos. 20218 to 20221 of 2002, heard on 27
th
February, 2003.

Shahbaz Butt for Petitioners.

Shahid Jamil Khan for the Resopondents.

Date of hearing: 27th February, 2003.

----------------------------------------------------------------------
JUDGMENT

This judgment shall deal with and decide Writ Petition No. 20218 of 2002, Writ
Petition No. 20219 of 2002, Writ Petition No. 20220 of 2002 and Writ Petition
No. 20221 of 2002, raising identical questions of law and facts and filed by
Companies belonging to the same group against same respondents.

2. The grievance purportedly arose to the petitioners upon service of notice by
the respondent No. 1 in July, 2002 for contravention of provisions of section
50 of repleaded Income Tax Ordinance, 1979 and to initiate prosecution under
section 117 ibid. Reply thereto was filed by petitioners. Upon withdrawal of
the notice by respondent No. 1 present Constitutional petitions were filed.

3. The admitted facts as emerging from the plea of the parties raised in the
Constitutional petitions and reply/parawise comments of respondent No. 1
thereto, concisely are that petitioner-companies, during the period relevant to
assessment year 1998-1999, deducted tax at source under section 50 of repealed
39

Income Tax Ordinance, 1979 from the payments to Messrs Zafar Farhat Industries
(Pvt.) Ltd. i.e. suppliers. The amount so deducted was not deposited/paid
within one week as per provisions of Rule 50 of Income Tax Rules, 1982. In the
meanwhile, upon complaint of Messrs Zafar Farhat Industries (Pvt.) Ltd., to
learned Federal Tax Ombudsman, following observations were made by learned
Federal Tax Ombudsman in his order, dated 10-6-2002:--

``Sh. Ghulam Asghar, Advocate, counsel of the complainant
pointed out that the Department was not addressing the
problem seriously because allegedly, the intention was to
drag on so as to delay the refund as long as possible. He
produced the original letter of ACIT, Circle 33, Multan
addressed to one ``Hakim-ud-Din, Karachi'' but wrongly
delivered by the postal authorities at complainant's
address. The fact that complete address of Mr. Hakim-ud-Din
was not noted on the letter clearly betrays the unfair
motive. It was pointed out that even the withholding agents
whose offices were at a walking distance from the Income
Tax Office, Multan were not approached and the treasury
challans of Rs.110,657, Rs.112,582, Rs.52,781 and
Rs.178,315 relating to Arain Mills Limited, Suleman
Spinning Mills Limited, Arain Textile Mills and Arain
Fabres Limited, Multan were obtained by the complainant
through his own efforts without any assistance from the
department.

(5) It transpires that the functionaries deal with the tax
withholding agents very casually nd quite obviuosly, do not attach
due importance to the fact that millions of rupees deducted on
behalf of the State by the textile mills and several others are
unlawfully retained by them for indefinite periods to be employed
in their own business at the cost of public.

(6) This amounts to embezzlement of Government funds by the
withholding agents. In the case in hand the above mentioned four
mills among them had deducted Rs.45,43,675 only from one
complaint as far back as 1997-98 and paid these into Government
treasury after almost four years, on 8-2-2002 and that too when
the complainant persuaded them to give copies of the reasury
challans. The complainant claims to have furnished a long list
of other tax deducting agencies who deliberately did not deposit
amounts into the exchequer. Sh. Ghulam Asghar, the learned
counsel, furnished photocopy of letter, dated 3-3-2002 written
by him to the CIT, Multan pointing out this embezzlement.

(7) In Complaint No.250 of 2002 where similar issues were
involved, a detalied decision has been rendered with
recommendations amongst which following are incorporated and made
40

in this case as well. The only difference betweenthe facts of
instant complaint with the facts in Complaint No.250 of 2002 is
that here refund was delayed by denying credit claimed on account
of taxes withheld while in the other case not only demand was
created bt refusing to allow credit against such claims but such
dubious demand was collected from the complainant under duress.

4. In para 9, learned Federal Tax Ombudsman held that maladministration in that
case was established and in para 10 of the orders. recommendations were made.
The recommendations relevant to the case regarding initiation of prosecution
against the petitioners are also reproduced hereunder:--

(ii) ``That the additional tax be charged under section 86
of the Income Tax Ordinance on the delayed deposits
discussed in Para.4 and 6 supra.

(iii) That notices are issued to all the four defaulters
under section 116 for default under section 108 for non-
filing of statement prescribed under the Rules framed in
pursunace of section 51 of the Ordinance and initiate
proceedings for imposing penalties chargeable under the
law.

(iv) That RCIT to direct the CIT concerned to refer the
matter of default committed by the four mills to the legal
advisor for prosecution proceedings to be filed against
them.''

It was upon this recommendation that respondent-Department sought legal advice
of the Legal Advisor under section 117 of the repealed Income Tax Ordinance.
Learned Legal Advisor, through legal advice, dated 27-7-2992, advised
prosecytion under section 117 ibid as was recommeded by learned Federal Tax
Ombudsman, hence the present Constitutional petitions.

5. Since cases were throughly and fully argued, therefore, the same are
disposed of as admitted/`Oacca' cases.

6. The arguments of the learned counsel for the petitioners are that upon
repeal of Income Tax Ordinance, 1979 and promulgated and consequent
effectiveness from 1-7-2002 of Income Tax Ordinance, 2001, proceedings for
prosecution of the petitioners through a notice under section 117, after repeal
of Income Tax Ordinance, 1979, were ultra vires and without jurisdiction.
Further argued that respondent No.1 acted upon the recommendation of Federal
Tax Ombudsman and did not apply his mind to serve show-cause notice for
prosecution. He also submitted that the learned Fwederal Tax Ombudsman's order
was also void a initio as petitioners were not a party and were, as such.
condemned unheard. And that section 50(4) of late Income Tax Ordinance, 1979
only provided for deduction of the tax at source and did not visualize deposit
41

wherefor, action, at maximum, could be taken under section 52 ibid by serving a
prior notice declaring the non-paying person as assessee in default in respect
of non-paid amount. And further that effect of non-obstante clause of
subsection (4) of section 50 ibid, is that no further action under section 117
could be taken over and above invocation of section 86 ibid for charging
additional tax, which in the case of the petuitioners has laready been impose.

Contrarily, learned counsel for respondent No.1 by reference to section 239(6)
of newly-promulgated Income Tax Ordinance, 2001, stated that proceedings for
any income year ending on or before 30th June, 2002, had been saved and thus
notice for prosecution was validly served upon the petitioners in mid July,
2002, as the same related to the period prior to 39th June, 2002. He further
answered the contention of the learned counsel for the petitioners by stating
that petitioners delayed deposit of the amount deducted, for a period of four
years, despite mandate contained in subsection (8)(c) of section 50 of late
Income Tax Ordinance, 1979 to pay deducted amount within the prescriberd time
and in the prescribed to be seven days in Rule 50 of the Income Tax Rules,
1982. And any violation thereto attracted additional tax under section 86
ibid without prejudice to any other liability including that of prosecution
under section 117 ibid for non-compliance with the provisions of section 50
ibid, as has been mandated in the provisions of section 124 ibid. He further
stated that provisions of section 52 have no applicability in the present case
because the same applied to failure to pay the tax deducted, but in the present
case, the tax was paid but with a delay of four years. The impugned notice was
thus supported by the learned counsel for respondent No.1.

7. Hearing the learned counsel for the parties, the record annexed with the
petitions as well as the provisions of law referred to were examined with able
assistance of the learned counsel for the parties. The chronology of events and
facts re-counted above shows that the facts in the present case are not
disputed. Petitioners specifically admit having deducted tax under section
50(4)(a) of repealed Income Tax Ordinance, 1979 for the assessment year 1998-
1999 from the payment made to Messrs Zafar Farhat Industries (Pvt.) Ltd., who
had supplied goods to the petitioners and that the petitioners did not pay the
same in the Government treaury for about a period of four years. As a result
of this non-payment of the deducted amount, Zafar Farhat Industries (Pvt.)
Ltd. was not given the credit on account of the tax so deducted from their
proceeds and Department delayed or failed to refund all the deducted amounts in
excess of their assessed liability. Zafar Farhat Industries (Pvt.) Limited thus
filed Complaint No.1596 of 2001 before learned Federal Tax Ombudsman.
Proceedings upon this complaint were initiated. These proceedings ultimately
culminated in order, dated 10-6-2002, relevant parts of which have been
reproduced in para 3 above. Adequate to state here that learned Federal Tax
Ombudsman taking serious view of non-timely payment of the deducted amount by
the petitioners to the credit of the Government, termed such action as
unlawful retention, embezzlement and misuse of Government money by
withholding agents like petitioners, who were observed to have deducted a huge
42

sum of Rs.45,43,675 from the payment of the said complainant in 1997-98, but
did not deposit the same till 8-2-2002 i.e. for a period of about four years.

8. Learned Federal Tax Ombudsman holding action of the Recenue in non-recovery
of Government funds as maladministration, recommended reference of the matter
by CIT ''to the Legal Advisor for prosecution proceedings.....against them'',
(the petitioner) it was upon this recommendation that respondent No.1 referred
the matter to Legal Advisor under section 117 of the repleaded Ordinance, 1979
for advice, who, on the basis of facts and law, recommended proceedings for
recovery of additional tax under section 86 and also for prosecution under
section 117 read with section 124 of the repealed Ordinance. Company copy of
the advice has been placed on record during hearing.

9. Upon receipts of such advice, respective show-cause notices were issued by
respondent No.1 to the petitioners in the second week of July, 2002. Reply was
given by each of the petitioners. Their defence was that Zafar Farhat
Industries (Pvt.) Lyd. verbally requested not to deposit the deducted tax they
obtained Exemption Certificate from the Commissioner of Income Tax (Companies),
Multan, but it was upon non-production of the Certificate that the amount was
deposited and delay so caused, was because of the verbal request and non-
production by Zafar farhat Industries of the Exemption Certificate.

10. Since the plea of defence so taken is not under adjudication by this Court,
therefore, no opinion need be expressed upon the same. However, examination of
the contents of the show-cause notice shows that although reference has been
made in recopmmendation of learned Federal Tax Ombudsman, yet the facts leading
to delayed deposited deposit of the deducted amount on 8-2-2002 have been
specifically stated in the notice as foundation for the allegation of
contravention of provisions of section 50 of the repealed Ordinance read with
Rules 61 and 200 of the Income Tax Rules, 1982 to invoke petitioner's liability
to additional tax under section 86 as well as prosecution under section 117 of
the said Ordinance, for the purposes of sekking a reply from the petitioners.
It has not been denied by the petitioners that prior to issuance of notice for
proceedings of prosecution under section 117 ibid, legal advice was also
sought by respondent No.1 and was so given by the learned Legal Advisior of the
Department. Petitioners thus cannot say that the Notifying Authority
mechanically served the notice upon mere recommendation of the learned Federal
Tax Ombudsman. The contents of the notice itself demonstrate due and proper
applications of mind to the facts of the case and provisions of law by CIT.

11. Even otherwise, show-cause notice contains prima facie allegation of facts
and law and not final adjudication through process of trail. Such notice is
obviously for the purposes of determining prima facie existence of a case with
reference to the offended provisions of law. And upon receipts to reply
thereto, if Notifying Authority tentatively finds commission of default of
offence, proceedings are initiated for prosecution, wherein, accused person
obviously has an alienable right to defend himself and disprove allegations
through evidence. In case, the learned Federal Tax Ombudsman only recommended
43

reference of the matter to learned Legal Advisor for advice as tp prosecution
of petitioners in view of their admitted delay in depositing the deducted
amounts. As such, learned Federal Tax Ombudsman was not obliged to grant a
hearing to the petitioners as a party for kind of recommendations made by him
in order, dated 10-6-2002.

12. Another serious objection of the learned counsel for the petitioners is
that after repeal of the Income Tax Ordinance, 1979 and promulgation of new
Income Tax Ordinance, 2001 with effect from 1-7-2001, show cause notice of mid-
July, 2002 could not be issued and proceedings thus could not be initiated
after 1-7-2001. This objection would have of course been very valid and
forceful, had such proceedings for prosecution not been saved in subsection (6)
of section 239 of the Income Tax Ordinance, 2001, which being pertinent is
reproduced hereunder:---

``Any proceeding for prosecution in respect of an
assessment for an income year ending on or before the 30
th

day of June, 2002 shall be taken and continued as if this
Ordinance has not come into force.''

Bare reading of the above said reproduced provision shows that proceedings for
prosecution in respect of an income tax year ending on or before 30th June,
2002, have specifically been permitted by the above said subsection (6) of
section 239 of Income Tax Ordinance, 2001 ''to be taken and continued as if
thisOrdinance has not come into force.''

13. In the present case, deduction and non-payment of the deducted tax by
petitioners relates to income tax year 1997-98 as per pleadings of the
petitioner in Para. 2 of the petitions. The periodpreceds 30th June, 2002.
Proceedings for prosecution under the late Income Tax Ordinance, 1979, have
been specificially saved and kept alive in respect of assessment upto 30th
June, 2002 disregarding repeal of Income Tax Ordinance, 1979 and promulgation
of Income Tax Ordinance, 2001. The impugned notices have although been served
in mid-July, 2002, yet the same relate to assessment period prior to 30th June,
2002, wherefor, petitioner's objection of repeal of Ordinance, 1979 cannot
succeed.

14. There is no substance in the proposition advanced by the learned counsel
for respondent-Revenue that provisions of section 52 are not applicable to the
present case. Reason thereof is that the said section applies ``where any
person falls of deduct or collect, or having deducted or collected......failto
pay the tax as required by or under section 50.....``The provisions of this
section thus apply to person failing to deduct the tax under section 50 or
having deducted such tax, fails to pay the same under or as required by section
50 ibid. In the present case, tax was admittedly deducted and was also paid by
the petitioners. The payment of the deducted tax was, however, with a delay of
four years, which obviously was not in compliance with the requirements and
provisions of subsection 8(c) of section 50 of
44

repealed Ordinance, 1979, which reads as under:---

(8) ``Any sum deducted or purported or collected
under this section shall be-

(a) deemed in cases to which subsections (1)(2) and
(3) apply, to be income received by the assessee'

(b) treated as payment of tax on behalf of the
assessee;
and

(c) paid within the prescribed time and in the
prescribed manner by the person making the deduction
or collection, as the case may be, to the credit of
the Federal Government.''

The above reproduced provisions of section 50(8) ibid thus mandate payment
within the prescribed time in the prescribed manner by the person making the
deduction. The payable rule prescribing time and the manner isd Rule 50 of
Income Tax Rules, 1982. This rule provides for one week's time for crediting
the amount so deducted in the Government treasury. The cumulative reading of
section 50(8)(c) and section 52 of repleade Income Tax Ordinance, 1979 and Rule
50 of the Income Tax Rules, 1982, does show that petitioners are also assessees
in default having violated the express provisions of section 5(8) ibid of the
Ordinance and Rule 50 ibid by deposit of deducted tax years after the
``prescribed time'' of one week.

15. The petitioners' action attracted provisions of section 86 as well as those
of section 117(a) of the repleaded Ordinance, 1979. Section 86 relates to
imposition of additional tax on the amount not paid, Additional tax has been
imposed upon the petitioners. Additional tax is admittedly in the nature of
interest for delayed payment of the amounts due and is a civil liability. Such
imposition does not, in any way, affect the liability of the petitioners to be
criminally prosecuted under section 117 ibid. Section 86 itself provides that
imposition of additional tax for violation of the provisions of section 50
``shall be without prejudice to any other liability'' which such person may
incue. Furthermore, section 124 of repealed Income Tax Ordinance, 1979 caters
for a converse situation. It stated that a prosecution for an offence against
the Ordinance may be instituted ``without prejudice to any other liability
incurred by any person under this Ordinance. ........'' As such, provisions of
section 86 and 124 ibid read together show that imposition of additional tax or
prosecution for an offence are independent actions which do not, in any way,
affect or prejudice or exclude each other and can both resorted to at the same
time in appropriate cases.

16. Furthermore, subsevtion (4) of section 50 ibid no doubt begins with a non
obstante clause mandatorily providing for relevant persons liability to deduct
45

tax ``notwithstanding anything contained in this Ordinance''. No such clause
was added to any other subsection except subsection (5) of section 50. The
nature of notwithstanding clause of subsection (5) was also different and
begins with the words ``notwithdtanding anything contained in any law for the
time being in force'', while the provisions of subsection (4) have been made
applicable ``notwithstanding anything contained in the Ordinance.'' Such rider
was neither placed upon entire section 50 nor were provisions of section 86
and 14 meant to become superfluous, redunant or inapplicable upon deduction of
tax under subsection (4) of section 50 ibid. Plain reading of provisions of
this subsection reveals than an intendment, construction of provision in the
Ordinance; contrary to the purpose/scope of aforesaid subsection (4), was
negatived by insertion of ``notwithstanding'' clause in the said subsection.
The object was to achive deduction of tax imperatively as per the said
provision. It is thus fallacious to argue that such non obstante clause
excludes liability of person violating provisions of said subsection, to be
prosecuted under section 117 ibid. Such construction would not only render the
provisions of section 117 ibid redundant but
would essentially detract from purpose of section 50(4); for violation of which
prosecution under section 117(a) has been prescribed. Such construction being
patently contrary to the settled principles of interpretation of statutes,
cannot be accepted.

17. In view of what has been held above, the imougned notices for initiation of
proceedings against the petitioners under section 117 of the late Income Tax
Ordinance, are held to be valid and proper. Furthermore, no adfditional notice
was required to be given to the petitioners as assessees in defaults. In view
thereof, these petitions have no merit and are accordingly dismissed with no
order as to costs.

Petitions dismissed.


















46





















HIGH COURTS OF PAKISTAN
----------------------------------------------------------------------
Farid Ullah Khan v. Federal Tax Ombudsman
NO: ICA 51 YEAR: 2005 DECIDED ON 01/02/2005
CITATION: DTPHC1738; 2005PTD1797;
----------------------------------------------------------------------
Income Tax Ordinance, 2001 --

Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000) --
Sections 2(3), 9, 14 --

Constitution of Pakistan (1973), Article 199 --

Law Reforms Ordinance (XII of 1972) -- Section 3 --

Constitutional petition -- Intra Court appeal -- Observation of Federal Tax
Ombudsman with regard to ``maladministration'' -- View expressed by High Court
while dismissing Constitutional petition with remarks that ``maladministration
in the Central Board of Revenue or any of its establishments could be taken
notice of by Federal Tax Ombudsman'' was not unjustified --
Ombudsman could suggest measures to curb maladministration in view of the facts
of particular case -- If appellant had any grievance, he could have agitated
the matter by filing representation before President of Pakistan, even if
Department was not recommending any such representation -- Single Judge was
justified to take view that Constitutional petition was not entertainable --

----------------------------------------------------------------------
[IN THE LAHORE HIGH COURT, LAHORE]
47


FARID ULLAH KHAN

v.

FEDERAL TAX OMBUDSMAN,
REGIONAL OFFICE, LAHORE and others

Present: SYED ZAHID HUSSAIN and SYED SAKHI HUSSAIN BOKHARI, JJ

Intra-Court Appeal No.51 of 2005 in W.P. No. 1150 of 2005, decided on 1st
February, 2005.

Dr. Ehsan-ul-Haq Khan and Abdul Latif Chishti for Appellant.

Date of hearing: 1st February, 2005.

---------------------------------------------------------------------
ORDER

While disposing of a complaint on 13-12-2004, the Federal Tax Ombudsman
observed that "Mr. Fariq Ullah (ITI) has been dragged in the dispute because
his brother is a practising Advocate at Pakpattan. He should therefore be
posted out in the same manner as Rao Abdul Qayyum (III)". It was assailed by
Farid Ullah, appellant, through the petition under Article 199 of the
Constitution of Islamic Republic of Pakistan, 1973 which petition has been
dismissed by a learned Single Judge of-this Court on 25-1-2005, This is Intra-
Court Appeal thereagainst.

2. The prime contention of the learned counsel is that the Federal Tax
Ombudsman had no jurisdiction to make any such observation in exercise of his
jurisdiction under the, law i.e. Establishment of the Office ofFederalTax
Ombudsman Ordinance, 2000.

3. Suffice it to observe that the view taken by the learned Single Judge while
dismissing the petition of the appellant that "Malaministration in the Central
Board Revenue or any of its establishment can be taken notice of by Federal Tax
Ombudsman" is not unjustified. The Ombudsman could suggest measures to curb the
maladministration in view of the facts of a particular case. Moreover, if the
appellant had any grievance, he could have agitated the matter by filing
representation before the President of Pakistan, even if the Department was not
recommending any such representation. In such view of the matter, the learned
Single Judge was justified to take the view that the Constitutional petition
was not entertainable. In the circumstances, we find no valid basis to take a
different view of the matter or to interfere with the order, passed by the
learned Single Judge. The appeal is accordingly dismissed in limine.

Appeal dismissed.
48






HIGH COURTS OF PAKISTAN
-----------------------------------------------------------------



Sahib Jee v. RCIT

NO: WP 11983YEAR: 2005 DECIDED ON 20/03/2009

CITATION: DTPHC2041; 100TAX274; 2009PTD955;
-----------------------------------------------------------------
Income Tax Ordinance, 2001 --

Establishment of Office of Federal Tax Ombudsman Ordinance, 2000
-- Section 32 --

Represident to President -- Performing of functions u/s 32 by President --
Scope -- Whether section 32 of Ordinance provides that aggrieved party, by
recommendation of F.T.O. may, within 30 days of recommendation, make
representation to President Who may pass such order thereon as hee msy deem
fit -- Held yes -- Whether President, being head of state has to discharge
numerous functions -- Held yes -- Whether representationist had not challenged
final order within prescribed time, same had thus attained finality,
therefore, representation before President was liable to rejection -- Held yes
-- Whether findings of President that where law provides for review, limitation
for further remedy shall berekoned from date when review is decided, cannot be
sustained on ground that if period of limitation is not provided under law,
President can neither grant such time nor provide under Ordinance, 2001 -- Held
yes --

Administration of Justice -- Similarly placed in similar circumstances --
Judicial notice -- Scope -- Whether similarly placed identically without any
discrimination unless there be differentiation -- Held yes -- Whether court can
take judicial notice of changed situation/circumstances of case which have
taken place after institution of case and can mould relief accodingly --
Held yes --

President, while performing his function under Section 32 of the Establishment
of Office of Federal Tax Ombudsman Ordinance, 2000, acts in quasi judicial and
not in administrative capacity -- Scope of such function of the President --
Section 32 of the Ordinance provides that aggrieved party, by recommendation of
the Federal Tax Ombudsman may, within 30 days of the recommendation, make
representation to the President who may pass such order thereon s he may deem
49

fit -- Recording of reasons while setting aside the recommendations of
Ombudsman is minimum requirement under the law which is in consonance with the
principles of natural justice -- Representation under Section 32 of the
Ordinance can be made against the recommendations and not against the order on
review application -- Principles --

Administration of Justice -- Similarly placed persons in similar circumstances
have to be treated and dealt with identically without any discrimination unless
there be any differentiation --

Administration of Justice -- Judicial notice -- Scope -- Court can take
judicial notice of the changed situation/circumstances of the case which have
taken place after the institution of the case and can mould relief accordingly
--

---------------------------------------------------------------------------

[IN THE LAHORE HIGH COURT, LAHORE]


Messrs SAHIB JEE

v.

REGIONAL COMMISSIONER OF INCOME TAX and OTHERS


Present: SYED ZAHID HUSSAIN, C.J. and RAJA MUHAMMAD SHAFQAT KHAN ABBASI, J.

Writ Petition No. 11983 of 2005, decided on 20th March, 2009.

Siraj-ud-Din Khalid for Petitioner.

Shahid Jamil Khan, Legal Advisor for Income Tax Department.

Aamir Rehman, Deputy Attorney-General for Pakistan for Respondent.

Date of hearing: 13th March, 2009.

---------------------------------------------------------------------------
JUDGMENT

[RAJA MUHAMMAD SHAFQAT KHAN ABBASI, J.].-- Through this writ petition, the
petitioner has assailed order, dated 9-6-2005 passed by the President of
Islamic Republic of Pakistan under section 32 of Establishment of the Office of
Federal Tax Ombudsman Ordinance, 2000 (hereinafter called as ``F.T.O.
Ordinance, 2000'') against the recommendation of the Federal Tax Ombudsman
(F.T.O.), dated 26-11-2002 and order, dated 26-1-2004 on a review application
filed by respondent No.1/Regional Commissioner of Income Tax, Lahore.

50

2. Precise facts of the case are that the petitioner who is in the business of
readymade garments, filed Income Tax Return for the year, 2001-2002 on 1-10-
2001 and declared income of Rs.1,503,204 under the Self-Assessment Scheme.

3. The petitioner filed Complaint No.786-L of 2002 under section 11 of F.T.O.,
Ordinance, 2000 on 28-6-2002 before respondent No.4/Faderal Tax Ombudsman,
Islamabad against action of respondent No.1 qua selecting the case for total
audit under para. 9(a)(ii) of Circular No.4 of 2001 (Income Tax) alleging
maladministration. The complaint of the petitioner was accepted by the
respondent No.4/Federal Tax Ombudsman, Islamabad on 26-11-2002 with the
recommendations that ``the preconditions for a selection order by the R-CIT,
inter alia, include suppression of income, evidence of revenue potential of the
case, clear evidence of decline in income, creation of new assets not covered
by the declared income and disparity in expense on utilities. As none of the
conditions/factors were found in complainant's return of income, there was no
valid reason or justification for the R-CIT to select the case for Total Audit.
This infirmity has rendered his decision arbitrary, unreasonable and illegal.''
It is further recommended that ``return be accepted under Self-Assessment
Scheme and compliance reported within 30 days of the receipt of this Order.''

Respondent No.5/Revenue Division filed Review Application No.74 of 2003 under
section 14(8) of the F.T.O. Ordinance, 2000 against the recommendation of
F.T.O., dated 26-11-2002. The same was rejected on 26-1-2004 by respondent
No.4/F.T.O. Respondent No.6/Federation filed representation under section 32 of
F.T.O. Ordinance, 2000 against findings of the F.T.O., dated 26-11-2002 on
Complaint No.786-L/2002, and order, dated 26-1-2004 on Review Application No.74
of 2003. The petitioner took objection of limitation as well as maintainability
of the representation in his reply/comments before the President of Islamic
Republic of Pakistan.

However, the representation of respondent No.6/Federation of Pakistan was
accepted on 9-6-2005 by the President whereby recommendation of F.T.O., dated
26-1-2004 in Review No.74 of 2003 (in Complaint No.786 of 2002) was set aside.

4. The learned counsel for the petitioner contends that if a person is
aggrieved by recommendation of F.T.O., he can file representation within 30
days of the recommendation whereas in the present case, representation was
filed on 27-2-2004 which was hopelessly time-barred as the same was filed after
lapse of more than 15 months. He further submits that against the
recommendations of Federal Tax Ombudsman, dated 26-11-2002, review application
under section 14(8) of Federal Tax Ombudsman Ordinance, 2000 was dismissed on
26-1-2004. He further submits that right of representation is available under
section 32 of the Ordinance only against the recommendations of the Federal Tax
Ombudsman and not against any order passed by him on review application,
therefore, the impugned order, dated 9-6-2005 passed by the President of
Islamic Republic of Pakistan is without
jurisdiction. He further submits that the impugned order indicates that the
same has been passed in the name and on behalf of the President of Islamic
51

Republic of Pakistan by a Section Officer (Rana Qamar Sultan) who is not the
competent authority to pass such an order. He further submits that the
petitioner was not personally heard. Further states that F.T.O. Ordinance, 2000
was promulgated by the President of Islamic Republic of Pakistan, therefore,
personal hearing under section 32 of the F.T.O. Ordinance, 2000, should have
been given.

Conversely the learned counsel for the respondents submits that the order
passed by the President is legal and correct. The petitioner was given hearing
in the form of written reply/comments to the representation which are available
on the file as Annex-D which was sufficient hearing. He further submitted that
as per scheme of law, it was not possible for the President to provide personal
oral hearing to each of the party. Regarding limitation issue, he states that
limitation will be reckoned from the date when reasons for non-compliance are
rejected by the Ombudsman. He further states that the review application was
dismissed on 26-1-2004 which was dispatched to the parties on 30-1-2004,
therefore, representation was filed on 27-2-2004 within time. He further states
that the review is provided under section 14(8) of the F.T.O. Ordinance,
2000; although no time limit is provided under the F.T.O. Ordinance for filing
review. He further states that the Hon'ble Supreme Court has finally decided
the question involved in the present lis regarding Self-Assessment Scheme under
sections 4-A, 59(3) and 59(1-A) of Income Tax Ordinance (XXXI of 1979) in a
case reported as Commissioner of Income Tax and others v. Messrs Media Network
and others (2006 PTD 2502), therefore, if the impugned order is set aside even
then the petitioner will not get benefit of the order of the F.T.O.

5. The contentions of the learned counsel have been considered and record
perused.

6. Contention of learned counsel for the petitioner regarding non-hearing by
the President himself, has no force. It is not possible for the President to
give opportunity of personal hearing in each case. President being head of the
State has to discharge numerous functions. The petitioner had filed
comments/reply to the representation which is sufficient compliance of
law as held in Federation of Pakistan through Secretary Education, Islamabad v.
Prof. Dr. Anwar and 2 others (2006 SCMR 382) and Commissioner of Income Tax,
Faisalabad Zone, Faisalabad and another v. Akhlaq Cloth House, Faisalabad and
another (2008 PTD 965) (ibid).

7. The President, while performing his function under section 32 of the
Ordinance acts in quasi judicial and not in administrative capacity. Reliance
is placed on Hafiz Muhammad Arif Dar v. Income Tax Officer (PLD 1989 SC 109)
and Federation of Pakistan through Secretary, Establishment Division,
Government of Pakistan, Islamabad v. Muhammad Tariq Peerzada and 2 others (1999
SCMR 2744). Recording of reasons while setting aside the recommendations of
Ombudsman is minimum requirement under the law which is in consonance with the
principles of natural justice. Reliance is placed on Federation of Pakistan
52

through Secretary, Establishment Division, Government of Pakistan, Islamabad v.
Muhammad Tariq Peerzada and 2 others (1999 SCMR 2189).

8. There is consensus that issues of like nature were considered by a learned
Division Bench of this Court comprising one of us (Sayed Zahid Hussain, C.J.)
in ICA No.296 of 2004 and the judgment rendered therein is reported as
Commissioner of Income Tax, Faisalabad Zone, Faisalabad and another v. Akhlaq
Cloth House, Faisalabad and another (2008 PTD 965). The operative part of the
judgment is as follows:--
``In view of the preceding discussion, it follows that all such
cases where the person/party concerned had notice/opportunity of
filing comments/reply to the representation, the decision
of the President cannot be annulled simply for the reason that
personal/oral hearing was not afforded. But where the person/party
concerned had no notice/opportunity of filing comments or reply
and decision was made without affording such opportunity, the
representation need to be considered and decided after notice
and affording an opportunity of filing reply/comments to the
same.''

9. Right of representation has been given to the aggrieved person against the
recommendation of F.T.O. under Article 32 of the Ordinance, 2000. Although
power of review has been given to the Ombudsman under Article 14(8) of the
Ordinance, 2000. Neither the period of limitation for filing review is provided
nor any further remedy against the rejection of review has been provided under
the Ordinance, 2000, hence the President or the Court cannot fix or prescribe
any period of limitation. In the present case, the representationist assailed
the order, dated 26-11-2002 of the F.T.O. through representation under section
32 of the F.T.O. Ordinance, 2000 on 27-2-2004 after a delay of about fifteen
months whereas limitation for filing of representation under Article 32 of the
Ordinance, 2000 is provided as 30 days. The representationist had not
challenged the final order, dated 26-11-2002 within the prescribed time. The
same had, thus, attained finality. Therefore, the representation before
the President was liable to rejection. The legislature has not provided any
remedy against the rejection of review. Intention of the legislature is that if
any different recommendations were made in review than the original one then
the aggrieved party will have right to file representation within 30 days.
Against the order of rejection of review, no further remedy has been provided
under the Ordinance, 2000. Thus, the right of representation was not available
to the Revenue Division under Article 32 of the Ordinance, 2000 against the
order on review application. The representation made on 27-2-2004 against
recommendation, dated 26-11-2002 was time-barred whereas against order, dated
26-1-2004 passed on review, no representation was maintainable. Revenue
Division had wrongly challenged both orders through single representation which
were liable to be rejected. Finding of the President that where law provides
for review, limitation for further remedy shall be reckoned from the date when
review is decided, cannot be sustained on the ground that if period of
limitation is not provided under law, the President can neither grant such time
53

nor provide under the Ordinance, 2000. In the identical issue, the same view
was taken by the President in
Case No.1743 of 2001 of Specialty Printers (Pvt.) Ltd., in which the President
had rejected the recommendations on the ground of being time barred and
representation can only be made against the recommendations and not against the
order of review. The relevant view of the President is as under:--
``Section 32 of the Establishment of Office of Federal Tax
Ombudsman Ordinance, 2000 provides that the Revenue Division
or any person aggrieved by the recommendation of the Federal Tax
Ombudsman may, within 30 days of the recommendation, make
representation to the President who may pass such order thereon as
he may deem fit. The Federal Tax Ombudsman made his recommendation
on February 28, 2002. The agency instead of making representation
against the FTO's recommendation has been made against the FTO's
order of June 26, 2002 rejecting the review application. Under
section 32 ibid representation can be made against the
recommendations and not against the order on review application.
This representation made on July 23, 2002 against the
recommendation of February, 28, 2002 is time barred. Accordingly,
the President has been pleased to reject the representation of
Revenue Division as time-barred''.

It is established principle of law that similar placed personin similar
circumstances has to be treated and dealt with identically without any
discrimination unless there be any differentiation. The case of the present
petitioner was to be dealt with accordingly as of the above cited case (Case
No.1743 of 2001). Reliance is placed on Nizamuddin and another v. Civil
Aviation Authority and 2 others (1999 SCMR 467), Shrin Munir and others v.
Government of Punjab through Secretary Health, Lahore and another (PLD 1990 SC
295) and Aman Ullah Khan and others v. The Federal Government of Pakistan,
through Secretary, Ministry of Finance, Islamabad and others (PLD 1990 SC
1092).

10. Copy of the representation is available on the file which indicates that
during the pendency of the complaint before F.T.O., Assessing Officer finalized
the assessment proceedings under section 62 of the Income Tax Ordinance. The
petitioner had availed the remedy of appeal against assessment order, dated 30-
10-2002. It is also established principle of law that Court can take judicial
notice of the changed situation/circumstances of the case which have taken
place after the institution of the case and can mould the relief accordingly.
Reliance is placed on Mst. Amina Begum and others v. Mehar Ghulam Dastgir (PLD
1978 SC 220), Federation of Pakistan through Secretary, Ministry of Law,
Justice and Parliamentary Affairs, Islamabad and others v. Aftab Ahmad Khan
Sherpao and others (PLD 1992 SC 723) and Prof. (Retd.) Masoodul Hassan v.
Muhammad Iqbal (PLD 1998 Lahore 177). However, we are not called upon to dilate
on this aspect of the matter any further as the order which was assailed before
us was of respondent No.6 passed on the representation under section 32 of the
Ordinance.
54


In view of the above discussion, we declare order of respondent No.6, dated 9-
6-2005 as of no legal effect and disposed of the writ petition with no order as
to costs.

Order accordingly.











HIGH COURTS OF PAKISTAN
---------------------------------------------------------------------------
Lone Cold Storage v. Revenue Officer LESCO
NO: WP 7754 YEAR: 2010 DECIDED ON 15/07/2010
CITATION: DTPHC2104 ; 103TAX5 ; 2010PTD2502
2011PTCL305 ;
---------------------------------------------------------------------------
Income Tax Ordinance, 2001 -- Sections 147, 159, 168, 235 --

Income Tax Rules, 2001 -- Rule 40 --

Constitution of Pakistan (1973) -- Article 199 --

Constitutional petition -- Electricity consumption -- Demand of transitional
advance tax -- Controversy revolving around conflict between Section 147 and
235 -- Demand of transitional advance tax after payment of advance tax u/s 147
-- Validity -- Order of Court -- Condition precedent to have binding force
Whether order where Court has not been properly assisted and main legal
questions have not been raised, deliberated or discussed does not constitute
binding precedent -- Held yes -- Whether advance tax is estimated amount of
proposed income tax to be paid by taxpayer at close of tax year -- Held yes --
Whether estimate is to be made by taxpayer and is not for authorities to
question or object till close of taxpayer when law authorities, tax authorities
to verify advance tax paid and impose additional tax if advance tax paid has
been less than 9% of total income tax liability of tax year -- Held yes --
Whether once liability of advance tax as estimated by tax payer is discharged
during currency of tax year, transtitional advance tax must also come to an
end, however, present legislative layout of Ordinance does not provide this and
transitional Advance Tax continues subjecting taxpayer/petitioner to Advance
Tax in disregarded of fact that such tax already stands paid -- Held yes --
Whether nil tax certificate can be issued for taxpayer in case where advance
55

tax u/s 147 had already been paid -- Held yes -- Whether payment of
transitional advance tax u/s 235 which has been suspended by High Court through
interim orders shall remain suspended till such time that concerned
Commissioner decides application u/s 159(1) of petitioner and also petitioners
in connected cases -- Held yes --

Interpretation of Statutes -- Literal approach and purposive approach --
Preference -- Functions of Court -- Tool of reading down -- Concept of --
Whether where literal construction or plain meaning causes hardship, futility,
absurdity or uncertainty, then purposive or contextual construction would be
preferred to arrive at more just reasonable and sensible result -- Held yes

Whether function of Court is to expound law and not to legislate but in case of
difficulty court must interpret, same liberally to advance it cause -- Held yes


Whether where purpose of statute was clear, then interpretation tool of reading
down such provisions would be restored to -- Held yes --

Order of court -- Main legal question neither raised nor did court discuss same
nor was court properly assisted -- Effect -- Such order would not constitute a
binding precedent --

Constitutional petition -- Demand of transitional advance tax under Section 235
of Income Tax Ordinance, 2001 during currency of same Tax Year after payment of
advance tax under Section 147 thereof -- Validity -- Transitional advance tax
not an independent tax, but a separate collection point of receiving advance
tax estimated by taxpayer for same tax year under Section 147 of the Ordinance
-- Payment made under Section 235 of the
Ordinance would be adjusted under Section 147 read with Section 168 thereof,
thus, total collection of advance tax could not be more than estimated amount
of advance tax under Section. 147 for same Tax Year -- Word ``transitional''
used in Section 235 of the Ordinance, would mean process change from one
condition to another signifying fluctuating chargeability there under Once
liability of advance tax as estimated as estimated by taxpayer discharged
during currency of tax year, then transitional advance tax would come to an end
-- Commissioner under Section 159(1) of the Ordinance, upon application
writing, by taxpayer could issue a lower arte certificate (i.e. 0% rate or nil
rate certificate) in case of full payment of advance tax -- After issuance of
such certificate, chargeability of Section 235 of the Ordinance, would remain
intact, but the rate tax would be reduced making some ineffective -- High Court
directed petitioner to approach Commissioner, who after verifying full payment
of advance tax under Section 147 of the Ordinance, would issue him nil rate
certificate, otherwise not -- Principles --

Interpretation of statutes -- ``Literal approach'' and ``purposive approach'' -
- Preference -- Where literal constitution or plain meaning causes hardship,
56

futility, absurdity or uncertainty, then purposive or contextual construction
would be preferred to arrive at a more just,
reasonable and sensible result --

Interpretation of statutes -- Function of court to expound law not to
legislate, but in case of difficulty must interpret same liberally to advance
its cause -- Principles --

Interpretation of statutes -- Conflict between two provisions of a statute --
Effect -- Where purpose of statute was clear, then interpretative toll of
``reading down'' such provision would be restored to --

Concept, nature and scope of advance tax -- Application of Sections 147 and 235
-- Section 235 to be integrated and co-extensive with the liability under
section 147 of the Ordinance rather than a stand alone liability --

Section 235 is not independent tax but a separate collection point for
receiving advance tax that has been estimated for the tax year by the taxpayer
under Section 147 -- The transitional advance tax under section 235 continues
subjecting the taxpayer/petitioner to advance tax in disregard of the fact that
such a tax already stand paid -- When the liability to pay advance tax stands
discharged, there is a transition in the chargeability under section 235, which
is effect comes to nil such is the nature of transitional advance tax
Commissioner under Section 159(1) upon application in writing by taxpayer could
issue a lower rate certificate in case of full payment of advance tax, after
issuance of such certificates chargeability of section 235 would remain intact,
but rate of tax would be reduced making same ineffective --

Where literal construction or plain meaning causes hardship, futility,
absurdity or uncertainty purposive or contextual construction is preferred to
arrive at a more just, reasonable and sensible result --

Every law is designed to further the ends of justice and not to frustrate it on
mere technicalities -- Though the function of the courts is only to expound the
law and not to legislate, nonetheless the legislature cannot be asked to sit to
resolve the difficulties in the implementation of its intention and the spirit
of the law -- It is duty of the court to nould or creatively interpret
the legislation by the liberally interpreting the statute -- The statutes must
be interpreted to advance the cause of statute and not to defeat it --

The intention of the legislature does not appear to authorize or sanction
continuous charge of advance tax under section 235, once it is paid under
section 147, for any such interpretation would render the scheme of advance tax
under section 147 meaningless, hollow and otiose -- In order to resolve the
conflict between the two provisions, after the purpose of the ordinance is
clear, is to rely on the interpretative tool of reading down -- Where main
legal question was neither raised nor court discuss the same nor
57

the court was properly assisted such court order would not constitute a binding
precedent --

---------------------------------------------------------------------------
[IN THE LAHORE HIGH COURT, LAHORE]

LONE COLD STORAGE, LAHORE

v.

REVENUE OFFICERS, LAHORE ELECTRIC POWER CO. and others

Present: SYED MANSOOR ALI SHAH, J

Writ Petition No. 7754 of 2010, decided on 15th July, 2010

Sirajuddin Khalid, Ch. Anwar-ul-haq and Shahzad Ahmad Durrani for Petitioners.

Muhammad Ilyas Khan, Muhammad Asif Hashmi, Sajjad Hussian Jafferi and Mansoor
Usman Awan for Respondents.

Dr. Ikram-ul-Haq and Asim Zulifqar, amici curiae.

Dates of hearing: 19th April, 7th , 24th May and 4th June,
2010

---------------------------------------------------------------------------
JUDGMENT

SYED MANZOOR ALI SHAH, J-This consolidated judgment shall also decide writ
petitions mentioned in Schedule A to this Judgment as common questions of law
and facts arise in these cases.

2. Brief facts are the petitioner are taxpayers under the Income Tax Ordinance,
2001 (``the Ordinance'') and are also liable to pay advance tax under section
147 of the Ordinance. They are also subject to transitional advance tax under
section 235 of the ordinance, being commercial or industrial consumers of
electricity.

3. The main controversy in these cases revolves around the conflict between
sections 147 and 235 of the Ordinance. The precise grievance that when the
taxpayers (petitioners) have paid advance tax for the Tax Year under section
147 of the Ordinance, can be subjected to pay transitional advance tax under
section 235 of the Ordinance, over and above, the advance tax paid under
section 147 during the currency of the same Tax Year.

4. Messrs Ch. Anwar-ul Huq, Siraj-ud-din Khalil, Javed Iqbal Qazi and Shahzad
Ahmad Durrani Advocates appeared for the petitioners. It has been vehemently
58

argued that the petitioner in some cases have paid their advance tax for the
Tax Year, in others they have no liability of advance tax to start with at the
beginning of the Tax Year and finally in some cases refund is outstanding in
their favour. Therefore, further charge of advance
tax under section 235 is confiscatory besides being against the legislative
scheme and intent of the Ordinance.

5. Dr. Ikram-ul-Haq, Advocate Supreme Court of Pakistan and Asim Zulifqar,
Chartered Accountants and adjunct faculty in tax laws at the School of Law and
Policy. Lahore University of Management and Sciences (LUMS) were appointed as
amici curiae to assist the court. Notice under order XXVII-A of the C.P.C., was
also issued on 5-4-2010 to the Attorney General of Pakistan as question
involving interpretation of constitutional law was involved.

6. Dr. Ikram-ul-Haq, amicus curiae argued that there are three regimes running
through the Ordinance namely; tax on total income (direct tax); presumptive tax
and minimum tax. He further submitted that under section 147 of the Ordinance a
formula is provided and on the basis of said formula advance tax has to be
worked out at the end of the quarter (first quarter starting from July till
September and ending on 15 October, 2010). He then referred to section 147
(4)(A) and 147 (4)(AA) of the Ordinance and submitted that advance tax is based
on the concept of ``pay as you earn.''

7. The learned amicus curiae argued that the Ordinance already provides a
mechanism to ensure that if advance tax is paid under section 147 of the
Ordinance, the taxpayer is not saddled with additional advance tax under
section 235 of the Ordinance.

8. Explaining the legislative scheme of the Ordinance that provides a solution
to the current impasse, he submitted that the first component for such
adjustment is provided in the formula itself as component ``D'' provided in
section 147(4) i.e., (A x B/C)-D. All the tax paid during the quarter is
deducted from rest of the formula thereby reducing the amount of tax to be
paid. He then submitted that is case ``D'' is equal or more than the remaining
part of the formula, assessee can approach the Commissioner concerned under
section 159(1) of the Ordinance for issuance of a nil rate certificate. He also
referred to Rule 40 and the form of the application for the certificate under
section 159(1) of the Ordinance as specified in part VI of the First Schedule
to the Rules, to contend that the said form clearly provides for such a
situation.

9. It is submitted that subsequently the order of the Commissioner can be
challenged before the Regional Commissioner/ Chief Commissioner Inland Revenue
under section 122(B) of the Income Tax Ordinance, however against the said
order assessee can either approach the FTO or invoke the jurisdiction of this
Court.

59

10. The learned amicus curiae submitted that efforts should be made to
harmonize the provisions of the Ordinance. He further submitted that at best
section 235 can be read down in order to resolve the conflict created by the
two provisions. Learned amicus also argued that exemption provided under
section 235(3) does not come to the rescue of the petitioner as exemption is a
concept juxtaposed to income. In the present case the issue does not pertain to
income but to advance tax which is an estimated deposit made by the taxpayer.
Exemption certificate will mean that the income of the taxpayer is not liable
to tax which is not the case here. In the present case, the learned amicus
reiterated that issuance of lower or nil tax rate certificate is the answer.

11. Mr. Asim Zulifqar, Chartered Accountants amicus curiae submitted that the
other mechanism provided under the law is under section 159(3) of the
Ordinance, where the Federal Board of Revenue can grant exemption. Thereafter,
the parties can recourse to section 159(1) and obtain an exemption certificate.
He also supported the contention of Dr. Ikram-ul-Haq, regarding issuance of nil
rate certificate under section 159(1) of the Ordinance.

12. He further submitted that any payment under section 235 after the advance
tax has been paid for the Tax Year is actually a refund, standing in favour of
the taxpayer. To keep taxpayers' money for almost a year (from the date of
collection till refund) is confiscatory and unconstitutional. It burdens the
taxpayers with additional cost as the companies do business on borrowed finance
and the financial cost of having is to be paid by the taxpayer. He argued
that advance tax charged under section 235, knowing well that it has to be
refunded, amount to double taxation and is therefore, patently confiscatory.

13. Mr. Muhammad Ilyas Khan, Advocate appearing for respondent submitted that
the question raised in this petition has already been settled in an unreported
case of Messrs Riaz Bottlers (Pvt.) Ltd. case (Writ Petition 38 of 2010)
decided by this court on 4-2-2010. He also placed reliance on Indus Jute Mills
Ltd. v. Federation of Pakistan (2009 PTD 1473) and the leave granting order
dated 1-3-2010 of the august Supreme Court of Pakistan passed in C.P. 149
to 154 of 2010 arising out of I.C.A. 462 of 2009 [reported as ``Messrs Al-
Khalil Cold Storage v. Federation of Pakistan through Secretary Finance,
Islamabad and 3 others'' (2010 PTD 1260) arising out of the above mentioned
Indus Jute Mills case. He also referred to an order of learned Single Judge of
this court passed in Writ Petition No. 1583 of 2010 dated 4-3-2010 and
contended that the present question cannot be re-agitated or re-opened by the
petitioners in the light of the above judgment and order.

14. He however,, supported the submissions made by Dr. Ikram-ul-Haq, amicus
curiae that under section 159(1) read with Rule 40, a nil tax certificate can
be obtained by the petitioners and submitted that law should be protected as
laid down in Elahi Cotton Mills Ltd. (PLD 1997 SC 582): He further submitted
that section 159(3) is not applicable to the present case.

60

15. Mr Asif Hashmi, advocate for the respondent department also relied on the
judgment of the unreported case of Messrs Riaz Bottlers (Pvt.) Ltd. (ibid). He
pointed out that section 236A (2) provides that the said transitional advance
tax at the time of sale by auction is subject to section 147 but sections 235
and 236 are not subject to section 147. His argument was that petitioner can
always get refund and placed reliance on the judgment of this court given in
Messrs Riaz Bottlers case (supra).

16. Arguments heard. Record Pursued.

17. The question that requires determination in this case is whether a taxpayer
who has discharged his liability of advance tax under section 147 of the
Ordinance can be subjected to transitional advance tax under section 235 of the
Ordinance during the currency of the same Tax Years?

18. Before reviewing the legislative lay out of the Ordinance regarding advance
tax and the scope of its chargeability section 147 and 235 of the Ordinance, I
would first like to address the preliminary objections of the respondents.

19. It has been argued by the respondents that the present issue has already
been decided in Indus Jute Mills case (ibid). The issues for consideration
before this Court in the aforesaid case are set out in paras. 4 to 9 of the
said judgment in the following manner:--

``(4) It was contended on behalf of the petitioners that's ction
235 of the Income Tax Ordinance, 2001 as amended offends against
Article, 142(c) of the Constitution of Islamic Republic of
Pakistan, 1973. It is the case of the petitioners that by virtue
of the impugned provisions purportedly the tax, which is levied
and is being collected on electricity bills of the assessee in
pith and substance is a tax imposed upon the consumption of
electricity which is an expenditure incurred by the assessee for
carrying on business, and such tax on expenditure does not
fall within the pale of any of the terms of the Federal
Legislative List of the Constitution. Hence, Mjlis-e-Shoora was
not vested with the legislative competence to impose the said tax
in view of Article 142(c) of the Constitution of Islamic
Republic Pakistan, 1973. It is contended that legislative
competence in this behalf at best would best in the Provincial
Legislature subject to the other contentions raised on behalf of
the petitioners. It is added that the said tax does not come
within the parameters of item 47 of the Federal Legislative List
of the Constitution, hence cannot be levied thereunder or in lieu
thereof under item 52 of the said Legislative List. In this
behalf, it is further contended that it is not the nomenclature
employed which is relevant but rather the pitch and substance of
the tax.

61

(5) In the alternative it was further contended that any
expenditure incurred may at best be used as a measure for
determining the capacity of an assessee to pay the income tax.
However, in such circumstances there must necessarily be a direct
nexus between the subject-matter of tax, (in the instant case
income) and the levy. And by virtue of section of 235 of the
Ordinance, the collection is effected in respect of the
electricity consumption bill from a great variety of business
concerns including both commercial and industrial (other than
those exempted there from) and the cost of electricity as a
proportion of the cost of production in case of industrial units
and cost of business in case of commercial units is of incredible
variation ranging from negligible to overwhelming, hence, no
logical and rational nexus can be drawn between the cost of
consumption of electricity and the income generated by consumers
thereof.

(6) It is next contended on behalf of several of the petitioners
that the cost of electricity consumption as a total cost of
production is extremely high if industrial activity being
undertaken is power intensive as for example foundries. While in
other cases, the cost of electricity consumption as a total cost
of business may be very low say for commercial activities, and the
same rate of tax has been levied on both sets of
consumers/assesses. Two assessee in an unequal situation have been
treated equally which is the worst form of discrimination. Hence,
section 235 of the Ordinance under challenge offends against
Article 25 of the Constitution of Islamic Republic of Pakistan,
1973. Furthermore, the said provision is also discriminatory
inasmuch as the collection made from companies is refundable while
in the respect of persons other than companies, the same is only
adjustable but not refundable. There is no rationale basis for
such discrimination. It is added that there is no intelligible
differentia to sustain the claim of valid classification in this
behalf.

(7) It is also the case of the petitioners that in fact provision
of section 235 of the Income Tax Ordinance, 2001 is confiscatory
in nature, hence, offend against Article 24 of the Constitution of
Islamic Republic of Pakistan, 1973. In this behalf it is contended
that with reference to power intensive industrial concerns the tax
levied and collected under section 235 of the Ordinance is in fact
more than the normal profit/income that can be earned from such
business, as a consequence whereof such business have not only
become uneconomical, but also it is impossible to pay the tax
liability from the income of the business necessitating disposal
of its capital to pay such liability, hence the impugned levy is
62

confiscatory and expropriatory, and thus, violative of Article 24
of the Constitution of Islamic Republic of Pakistan, 1973.

(8) It is further added that tax under Ordinance, 2001 can only
be levied on income and not expenditures, in the instant case
the cost of power or energy cannot be treated as income especially
in the absence of any deeming clause or a changing section. It is
further contended that even otherwise section 235 is vague and
ambiguous.

(9) It is also contended that several of the petitioners are
also being dealt with under various presumptive tax regimes
and deductions effected thereunder are a final discharge of
their tax liability, hence provision of section 235 of the
Ordinance cannot be pressed into service as would constitute
double taxation.''

20. The question in hand is the constitutionality, legality, utility and equity
of charging transitional advance tax under section 235 of the Ordinance when
taxpayer has fully paid advance tax under section 147 of the Ordinance for the
Tax Year. This question has not been dealt with in the above cited judgment of
this Court. It is pointed out that the Para. 9 of the Indus Jute Mills Case
raises an issue regarding final discharge of the tax under presumptive tax
regime under the Ordinance but does not take into account the question raised
in the petition i.e., the effect of the continued and constant chargeability
under section 235 irrespective of the final discharge of liability of advance
tax under section 147 of the Ordinance.

21. The counsel for the respondents also placed on record leave granting order
of the august Supreme Court of Pakistan dated 1-3-2010 passed in C.P Nos. 149
to 154 of 2010 which arises out of the order of the Intra Court appeal reported
as ``Messrs Al-Khalil Cold Storage v. Federation of Pakistan through Secretary
Finance, Islamabad and 3 others'' (2010) 102 Tax 58 (H.C. Lah.) (2010 PTD
1260), which arise out of the Indus Jute Mills case (supra). Therefore, for the
reasons given above, the matter pending before the august Supreme Court of
Pakistan is not the one raised here.

22. Reference was made to another unreported Order dated 4-3-2010 passed in
Writ Peition No. 1583 of 2010 titled Flying Paper Industries v. Lesso. Similar
question was raised in the said petition. From the Order it appears that the
Court was not properly assisted as this was also noted in the said order:--

``Learned Counsel for the petitioners have been unable to point
out any Article of the Constitution or any Principle of law,
whereby, if Advance Tax required to be collected under a
particular provision of the Income Tax Ordinance, the Legislature
is barred or estopped from directing the collection of advance tax
or levy withholding tax a different transaction under any
other provision and that too through a latter section of the same
statute.''
63

(emphasis supplied)

23. I am of the view that real gravity of the legal proposition advanced before
this court was neither canvassed before the learned Judge in Chambers nor was
the Court properly assisted besides the legal question was not considered in
the said brief order. The present case pertains to fundamentals rights of the
petitioners pertaining to property and to carrying out a lawful business and
requires deeper probe into the tax legislation. An order where the court
has not been properly assisted and main legal question have not been raised,
deliberated or discussed does not constitute a binding precedent.

24. My judgment in Messrs Riaz Bottlers (Pvt.) Ltd. v. Lesco (Writ Petition No.
38 of 2010) was also referred and submission made by the counsel for the
respondents was that the instant issue has already been decided in the said
case. The said case was an offshoot of an earlier litigation where during the
pendency of the writ petitions interim relief was granted and recovery of
the advance tax under section 235 of the Ordinance was stayed. The said interim
orders continued for little more than a year and during the currency of the
stay orders, the taxpayer paid their income tax for the tax year. The petitions
were finally dismissed vide judgment reported as Indus Jute Mils Ltd., (supra),
as a result LESCO billed the petitioners with the entire advance tax,
accumulated due to the interim orders passed in the said case, for the period
October, 2008 till December, 2009, Messrs Riaz Bottlers case (supra), allowed
relief to the taxpayers against the advance tax for year ending 30th June,
2009. As the tax year ending 30th June, 2010 was still running it was held that
the tax paid for the two quarters of the new tax year could be easily adjusted
under sections 147 and 168 of the Ordinance against payments to be made against
the next two quarters. The issue was about adjustment of advance tax paid
in the first two quarters of the tax year and not about the continuous charge
of advance tax under section 235 if the advance tax for the tax year stood
paid. The issue in hand is therefore totally different.

25. For the above reasons, the judgment and order cited by the respondents
above does not address the question raised in the instant petition. The
preliminary objection of the respondents is therefore rejected.

26. Now coming to the main question raised in this petition. Survey of sections
147, 159, 235 of the Ordinance (reproduced in Schedule B to this judgment for
ready reference) reveals that section 147 provides the main scheme of advance
tax under the Ordinance. The concept of advance tax has been explained in my
judgment in Mrs. Riaz Bottlers (supra) dated 4-2-2010 as hereunder:

(18) ...... The concept of "advance tax" and the mechanism of its
payment need to understood before the issue in hand can be
adjudicated. Advance tax as a concept has been explained in Kanga,
Palkhivala and Vyas's, The Law and Practice of Income Tax (Ninth
Edition Volume-II page 2135) in the following manner:--

64

``Under the basic scheme of this Act, the subject of charge
is the income of the previous year and not the income of the
assessment year; in other words. The tax is assessed and paid in
the next succeeding year upon results of the year before. These
sections mark a departure from that basic scheme. They rest on the
principle of `pay as you earn', i.e. paying tax by installments in
respect of the income of the very year in which the tax is paid.''
(Reliance Purshottamdas v. CIT 48 ITR (SC) 206,211).

(emphasis supplied)

(19) Provisions dealing with advance tax under the Ordinance are
section 4, 127, 168, 170, and 231A to 236 (relevant provisions
are reproduced in Schedule A to this judgment for ready
reference). Section 4 is the charging section which imposes income
tax, for each tax year, on every person who has a taxable income
for the tax year. Section 4(6) provides that where by virtue of
any provision of the Ordinance income tax has to be paid in
advance, it shall as the case may be paid accordingly.

(20) Advance Tax is preliminary a procedure of collection of tax
Under Section 147 the amount of the advance tax to be paid in four
quarters is an estimated amount determined by the tax payer
himself for the tax year. As held in Call Tell and another
Federation of Pakistan and others (2005 PTD 833) "the collection
of advance tax does not amount to levy of tax advance is payment
made by merely on account to be adjusted against the charge of
income tax as finally ascertained. It is not a tax but merely a
provisional payment on an amount towards tax due. The said amount
does not become the property of the Central Government but remains
vested in the assessee." While hearing the appeal in the same case
the august Supreme Court of Pakistan held that: "Advance tax
collected from buyers shall be merely credited with the Government
which can be utilized and adjusted to the extent found necessary
towards the ultimate liability of income tax due, after it has
been determined and excess amount, if any, is to be refunded to
the purchasers of the pre-paid telephone cards.'' Call Tell (Pvt.)
Limited v. Federation of Pakistan (2004 PTD 3032.)

(21) Advance tax due is be computed by a tax payer according to
the formula provided in section 147(4) of the Ordinance.
Thereafter the tax payer is to estimate the tax payable for the
relevant tax year at any time before the last installments
advance tax is due. After determining whether the estimated amount
of tax payable by the taxpayer is more or less than advance tax
collected, the taxpayer is to move the Commissioner concerned with
the estimated amount after making adjustment for the amount (if
any) already paid under section 147(4). The payment of the advance
65

tax is split into four quarters and deposited by the tax payer
accordingly as mentioned in section 147(5). Under section 147(8)
tax payer paying advance tax during the year is allowed tax credit
in computing the tax due. Under section 147(10) in case advance
tax is not able to be credited the taxpayer is entitles to refund
in accordance with the section 170. This shows that advance tax is
a computed amount, which is paid through running installments in
the current tax year and before its last installments is due the
tax payer has the facility to adjust it against the estimated
amount of the tax due and pay the balance amount. Advance tax,
therefore, is a supplementary collection system, which is
finally in the tax payable by the taxpayer.

(22) Advance tax is also collected through Chapter XII of the
Ordinance which provides for Transitional Advance Tax, wherein,
advance tax is collected on the basis of the cash withdrawal from
a bank (section 231A), purchase of motors cars and jeeps (section
(231B), brokerage and commission (section 233), collection of tax
by a stock exchange registered in Pakistan (section 233A), tax on
motor vehicles (section 244), CNG Stations (section 234A),
Electricity consumption (section 235) and Telephone users (section
235). Under section 168 an amount of advance tax paid under the
above provisions including section 235 is allowed tax credit in
computing the tax due by the taxpayer on the taxable income for
the tax year in which the tax was collected or deducted.

(23) The Scheme of the advance tax under sections 147 and under
Chapter XII of the Ordinance clearly shows that the
intention of the legislature is to ensure that a computed amount
of advance tax [as per formula given in section 147(4)] is
collected from the taxpayer during the subsistence of tax
year. Payments advance tax under the Ordinance is so scheduled
that the last installments is to be paid on 15th June of the Tax
Year, which proceeds the filing of the tax return for the same tax
year. Advance Tax, therefore, has a specific stage and timing in
the tax year and is no more than a quarterly contribution towards
the final payment o tax due/payable by the taxpayer. For the sake
of arguments, if for some reason the advance tax is not paid and
the tax due/payable is duly paid by the taxpayer at the end of the
Tax Year, the taxpayer and the collection agent may be penalized
for the act of not paying or collecting the tax but are not bound
under the law to pay advance tax for the tax year that has come to
a close (reference section 161(B) and 205 of the Ordinance).
Obligation to pay advance tax, therefore, can survive only till
the payment of the tax due for the tax year and not beyond. After
the tax due has been paid, the provision of advance tax loses its
purpose and legal force. In fact, advance tax has to be paid
contemporaneously with the running tax year and cannot be demanded
66

if the tax due or tax payable for the tax year has been duly paid.
The liability of advance tax, therefore cases once the tax tax
due has been paid. An irresistible conclusion is that id tax is
payable for the tax year it is but a obvious that no advance tax
for the that tax year is payable. It might not be handy to refer
Union Bank Ltd. V. Federation of Pakistan (1998 PTD 2116) wherein
it was held: "if a person is not liable to pay a certain kind of
tax he cannot be assessed to pay that tax in advance." In Elahi
Cotton Mills v. Federation of Pakistan (PLD 1997 SC582) it is held
that: "where there is exemption from the payment of tax it would
equally apply to advance tax.

(24) Other than the estimated amount of advance tax under
section 147, the ordinance provides, inter alia, for
collection or deduction of advance tax in the electric bills.
The purpose remain the same i.e. collection of tax in advance
during tax year. Even in these cases, "if the said advance tax is
collected on the electric bills for any reason and finally the tax
due is paid, the chargeability of tax under the said provision
(section 235) loses its mischief.''

27. In Indus Jute Mills Case (supra) it has been held:--

``The legal status of advance tax has been held by the Hon'ble
Supreme Court in the case reported as 1993 PTD 343 Commissioner of
Income Tax v. Asbestos Cement Industrial Ltd. and others to be;

The said amount does not become the property of the Central
Government but remains vested in the assesee company
undoubtedly; it is an amount which must be paid in advance in
respect of tax before it becomes due. But if (the tax) becomes
nothing or a lesser amount is found due and payable, the
Government in that even shall have to return the amount paid of
the sum Paid in excess with interest from the date of payment to
the date of such assessment, Thus the amount of advance tax in
fact and in law is the property of the assessee..''

28. Advance Tax is, therefore, an estimated amount of proposed income tax to be
paid by the tax payer at the close of the Tax Year. After the said estimation
the law requires the tax payer to pay the said estimated amount during the
currency of the Tax Year in four quarter. The estimate to be made by the
taxpayer and is not for the tax authorities to question or object till the
close of the Tax Year when the law authorizes the tax authorities to verify the
advance tax paid and impose additional tax if the advance tax paid has been
less than 90% of the total income tax liability of the taxpayer (section 205 of
the Ordinance).

29. While the tax payers pays the estimated amount of tax, section 235 provides
for collection of transitional advance tax at the rates specified in Part-IV of
67

the First Schedule in the manner electricity consumption charges are charge.
Section 235 of the Ordinance further facilitates the payment/collection of
advance tax by monthly deduction of the same in the electricity bills of the
taxpayer. The said payment gets adjusted as component "D" in the
formula, mentioned above, in section 147(4) of the Ordinance. All the
calculations, assessment and adjustments of advance tax are made under section
147 of the Ordinance, even the payment under section 235 is adjusted under
section 147 read with section 168 of the Ordinance.

30. While section 147 of the Ordinance deals with the Advance Tax, section 235
deals with the Transitional Advance Tax. Section 235 is not an independent tax
but a separate collection point for receiving Advance Tax that has been
estimated for the Tax Year by the taxpayer under section 147. The total
payment/collection of Advance Tax cannot be more than the estimated
amount of Advance Tax under section 147 for the Tax Year. The Ordinance guards
against excess payment of advance tax under the head of advance tax in
subsections (4), (5) and (6) of section 147. Therefore, once liability of
advance tax as estimated by the tax payer Is discharged during the currency of
the Tax Year, the Transitional Advance Tax must also come to an end, however,
the present legislative layout of the Ordinance does not provide this and the
transitional advance tax under section 235 of the Ordinance continues
subjecting the tax payer/petitioner to Advance Tax is disregard of the fact
that such a tax already stands paid.

31. Sections 147 and its purpose comes to a naught if a taxpayer is asked to
pay more advance tax once the liability of advance tax has been estimated and
settled for the Tax Year. The formula under section 147(4) is as under:--
(Ax B/C)-D
Where D means tax paid in the quarter for which a tax credit is allowed under
section 168) which includes section 235). Therefore, the advance tax estimated
for the Tax Year by the taxpayer factors in the transitional advance tax and if
"D" is more than the rest of the formula the overall payment goes into negative
i.e., over and above what a taxpayer is liable tp pay, which does not appear to
be intention of the legislature.

32. The arguments of the revenue that advance tax under section 235 can be
refunded to the tax payer at the end of the Tax Year and therefore, it should
be paid, confirms that no advance tax is actually due from the tax payer. Why
should a taxpayer or a citizen of this country part with his property or
deprived of holding property unless law creates such a liability?

33. On the face of it the constitutionally of section 235 of the Ordinance in
the present situation when the taxpayer has no further liability under section
147 of the Ordinance is seriously suspect. It prima facie, appears that
fundamentals rights of the petitioners guaranteed under Articles 10A, 18, 23
and 24 read with the concept of economic justice provided in the Objectives
Resolution read with Article 2A and Article 4 of the Constitution are under
threat. However, instead of gauging the constitutionality of the afore
said provision, there is another route available, sections 147 and 235 of the
68

Ordinance can be harmonized. This harmonization can be effectively achieved
through purposive interpretation of the Ordinance.

34. It is settled law that where literal construction pr plain meaning causes
hardship, futility, absurdity or uncertainty, purposive or contextual
construction is preferred to arrive at a more just, reasonable and sensible
result. "Every law is designed to further the ends of justice and not to
frustrate it on mere technicalities. Through the function of the courts is only
to expound the law and not to legislate, nonetheless the legislature cannot be
asked to sit to resolve the difficulties in the implementation of its
intention and the spirit of the law. In such circumstances, it is the duty of
the court to mould or creatively interpret the legislation by literally
interpreting the statute. The statutes must be interpreted to advance the cause
of the statute and not to defeat it." Reliance is placed on Introduction to
Interpretation of Statutes by Dr. Avtar Singh (Reprint Edition 2007).

35. Lord Denning in his book Discipline of Law wrote that "the literal approach
is now completely out of date. Although Lord Denning did not have in mind
taxing statutes when he made the observation, it may modify the rigour of the
literal approach in interpreting taxing statutes.

36. In Kammins v. Zenith Investment Ltd. (1971) AC 850, Lord Diplock drew a
distinction between the `literal approach' and the `purposive approach' of
which the last-mentioned is the modern method of interpretation. "The Courts
now increasingly tend to enquire into the intention of the legislature and seek
to further that intention. As Maxwell on the interpretation of Statutes says:
`The tendency of modern decisions upon the whole is narrow materially the
difference between what is called a strict and beneficial construction."

37. "The Court must proceed on the premise that the law making authority
intended to make a valid law to confer power validity or which will be valid.
The freedom therefore, to search the spirit of the enactment or what is
intended to obtain or to find the intention of the Parliament gives the Court
the power to supplant and supplement the expression used to say what was left
unsaid. This is a power which is an important branch of judicial power, the
concession of which if taken to the extreme is dangerous, but denial of that
power would be ruinous and this is not contrary to the expressed intention of
the legislature or the implied purpose of the legislation." Delhi
Transportation Corporation v. D.T.C. Mazdoor Congress" (AIR 1991 SC 101)

38. Applying the purposive approach, the intention of the legislature does not
appear to authorize or sanction continuous charge of advance tax under section
235, once it is paid under section 147, for any such interpretation would
render the scheme of advance tax under section 147 meaningless, hollow and
otiose.

39. Further, the word "transitional" employed in section 235 of the Ordinance
means the process o change from one condition to another. The "transitional"
69

nature of section 235 signifies the fluctuating chargeability under the said
section. It means that when the liability to pay advance tax stands discharged,
there is a transition in the chargeability under section 235, which in effect
comes to nil. Such is the nature of transitional advance tax.

40. In order to resolve the conflict between the two provisions, after the
purpose of the Ordinance is clear, is to rely on the interpretative tool of
reading down. In Indus Jute Mills Case, Sh. Azmat Saeed, J speaking for this
Court held:--

``(37) In view of above, this court is confronted with two
possible options; either us to strike down impugned section
235, Income Tax Ordinance, 2001 being ultra vires the Constitution
and fundamental rights of the citizens or in the alternate, to
resort to the time honored rule of interpretation of employing
the theory of reacting down and looking beyond the literal meaning
of the provision) see Elahi Cotton Mill's case supra)

41. Mittal in Interpretation of Taxing Statutes writes:--
``The theory of reading down is a rule of interpretation restored
to by the Courts where a provision, read literally, seems to
offend a fundamental right, or falls outside the competence of the
particular legislature. In interpreting the provision of a statute
the courts will presume that the legislation was intended to be
inter vires and also reasonable.

42. Dr. Avtar Singh in Introduction to interpretation of Statutes (Reprint
Edition 2007) writes:--

``Similarly, for upholding any provision, if it could be saved by
reading it down, it should be done, unless plain words are so
clear as to be in defiance of the Constitution. These
interpretations spring out because of the concern of courts to
always let a legislation to achieve its objective and not to let
it fall merely because of a possible ingenious interpretation. The
words are not static but dynamic. This infuses fertility in the
filed of interpretation. This equally helps to save an Act but
also the cause of attack on the Act. Here the courts have to play
a cautions role of needing out the wild from the crops, of course,
without infringing the constitution. For doing this, courts have
taken help from the Pre-amble, objects, the scheme of the Act ,
its historical background, the purpose of enacting such a
provision., the mischief, if any which existed, which is sought to
be eliminated. The principle of reading down, however, will
not be available. Where the plain and literal meaning from a bare
reading of any impugned provisions clearly shows that it confers
arbitrary, uncanalised or unbridled power.''

70

43. The Supreme Court of India in Delhi Transport Corporation v. D.T.C. Mazdoor
Congress (AIR 1991 SC 101) held:

``.It was settled that the court would sustain the presumption of
constitutionality by considering matters of common knowledge and
to assume every state of facts which could be conceived and could
even read down the section, if it became necessary to uphold the
validity of the provision., that the underlying rationale of this
rule of interpretation, or the doctrine of reading down of a
statute being that when a legislature, whose powers were not
unlimited, enacted a statute, it was aware of its limitations, and
in the absence of express intention or clear language to contrary,
it must be presumed to have implied into the statute the requisite
limitations and conditions to immunize it from the virus of
unconstitutionality, that sice every legislature intended to act
within its powers, in within its limited powers and it would not
be expected to have or intended to transgress its limits. The
doctrine of reading down or of recasting the statute can be
applied in limited situations. It is essentially used, firstly,
for saving a statute from being struck down on account of its
unconstitutionality. It is an extension of the principle that when
two interpretations are possible -one rendering it constitutional
and the other making it constitutional the former should be
preferred. The unconstitutionality may spring from either the
incompetence of the legislature to enact the statute or from its
violation of any of the provisions of the Constitution. The second
situation which summons its aid is where the provisions of the
statute are vague and ambiguous and it is possible to gather the
intention of the legislature from the object of the statute,
the context in which the provisions occurs and the purpose of for
which it is made. The Doctrine of Reading Down is, therefore, an
internal aid to construe the word or phrase in a statute to give
reasonable meaning, but not to detract, distort or emasculate the
language so as to give the supposed purpose to avoid
unconstitutionality. Thus, the object of reading down is to keep
the operation of the statute within the purpose of the Act and
constitutionally valid. It cannot be accepted that the Courts, in
process of interpretations of the Statute, would not make law but
leave it to the legislature for necessary amendments. In an
appropriate case, judges would articulate inarticulate major
premise and would give life and force to Statute by reading
harmoniously all the provisions ironing out the creases. The
object is to elongate the purpose of the Act. The Courts, though,
have no power to amend the law by process of interpretation, but
do have power to mend it so as to be in conformity with the
intendment of the legislature, Doctrine of reading down is one of
the principles of interpretation of statute in that process. But
when the offending language used by the legislature is clear,
71

precise and unambiguous, violating the relevant provisions in the
constitution, resort can not be had to the doctrine of reading
down to blow life into the void law to save from
unconstitutionality or to confer jurisdiction on the legislature.
but where the statute is silence or not expressive or
inarticulate, the Court must read down in the silence of the
statute and in the in-articulation of its provisions, the
Constitutional inhibitions and transmute the major inarticulate
premise into a reality and read down the statute accordingly.''

44. In Calcutta Guj. Education Society and another v. Calcutta Municipal
Corporation and others (AIR 2003 SC 4278) the Indian Supreme Court held:

``The rule of "reading down" a provision of a law is now well
recognized. It is a rule of harmonious construction in a different
name. It is restored to smoothen the crudities or ironing the
creases found in a statute to make it workable. In the grab of
`reading down', however, it is not open to react words and
expressions not found in it and thus ventire into a kind of
judicial legislation. The rule of reading down is to be used for
the limited purpose of making a particular provisions workable and
to bring it in harmony with other provisions of the statute. It is
to be used keeping in view the scheme of the statute and to
fulfill its purposes.''

45. In BR Enterprises v. State of UP [1999(9) SCC 700]:

``First attempt should be made by the courts to uphold the
provision and not invalidate it merely one of the possible
interpretation leads to such a result, howsoever activate it may
be. Thus, where there are two possible interpretations, one
invalidating the law and the other upholding the latter should be
adopted. For this, the courts have been endeavoring, sometimes to
give restrictive or expansive meaning keeping in view the nature
of legislation, may be beneficial, penal or fiscal etc.
Cumulatively, it is to sub-serve the object of the legislature,
that they are aware of the law and would wisdom of legislature
that they are aware of the law and would never have intended for
an individual legislation. This also keeps courts within their
track and checks individual zeal of going wayward. Yet in spite of
this, if the impugned legislation cannot be saved the courts shall
not hesitate to strike it down.''

46. Under section 159(1) of the Ordinance (See Schedule-B) the Commissioner
upon application in writing by the taxpayer can issue a lower rate certificate
or a nil rate certificate in theory can also be a 0% rate certificate or a nil
rate certificate. Rule 40 the Income Tax Rules 2001, provides as under:-


CERTIFICATES, STATEMENTS AND PROCEDURE FOR PAYMENT OF ADVANCE TAX
72

PART I- SECTION 159 CERTIFICATE

40. Exemption or lower rate certificate under section 159---

(1) An application for a certificate under subsection 159 shall be
made in the form specified in Part-VII of the First Schedule to
these rules.

(2) A certificate issued by Commissioner under subsection (1) of
section 159 shall be in the form specified in Part VIII of the
First Schedule to these rules.

(3) .............

(4) ..............

The form of application to be made to the Commissioner under section 159(1) of
the Ordinance is specified in Part-Vii of the Schedule of the Rules in the
following manner:--

PART VII OF THE FIRST SCHEDULE

GOVERNMENT OF PAKISTAN

DEPARTMENT OF INCOME TAX OFFICE OF THE---Application for certificate of
exemption from deduction at a lower rate under section 159.

(1). An application for a certificate under the section 159 shall be in the
following form, namely


APLICATION FOR CERTIFICATE UNDER

SECTION 159 OF THE INCOME TAX ORDINANCE, 2001

The Commissioner,

I____of_____hereby declare that I am entitles to nil/reduce rate withholding
tax certificate, on the following basis, in accordance with the provisions of
the Income Tax Ordinance, 2001 for the tax year_____

(i) was less than the minimum liable to tax;

(i) amounted to Rs. ____ on which tax is chargeable at the
rate of ____

(ii) is under the Agreement of Avoidance of Double Taxation
signed by Government of Pakistan with the Government of
73

____the country of my residence, not liable to Pakistan
tax/chargeable to Pakistan at the rate of ____

(iii) was held exempt under clause ____ of the Second
Schedule or is exempt under clause _____of the Second
Schedule.

(iv) That income is not likely to be chargeable to tax in
view of tax credits or unabsorbed loses, or

(v) Or, in any case, since advance tax under section 147
has been duly paid already, or

(vi) The goods imported are for manufacturing purposes at
own factory/ mills/unit.

(vii) For any other reasons (to be specified).

I therefore, request that certificate may be issued to the
person responsible for paying profit on
securities/dividends/royalties/other amounts particulars of
which are given in the Schedule annexed thereto, or to a
person responsible for collecting tax at source,
authorizing him not to deduct tax at the rate of ____at the
time of payment of such amount or to exempt from
withholding tax at source.

Signature ------------

Name ------------

Nationality ------------

Address ------------

Date ------------

47. The said application clearly shows that nil tax certificate can be issued
for the taxpayer, in case where advance tax under section 147 had already been
paid. Once the nil tax certificate is issued under section 235, the
chargeability of section remains intact but the rate of the tax is reduced
resulting in reading down section 235 and making it ineffective when the
advance tax has been fully paid. Nil rate tax certificates does not opened
section 235(3) of the Ordinance and can easily co-exist with the same. This
reconciles both the provisions and there is no need too declare section
unconstitutional.

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48. For the above reasons petitioners are directed to approach the concerned
Commissioners under section 159(1) of the Ordinance and the concerned
Commissioners are directed to decide the said application for the issuance of
NIL RATE CERTIFICATES within a period of ONE MONTH from the date of receipt of
application of the petitioner(s) after verification of the payment of advance
tax under section 147 of the Ordinance. The direction for expeditious disposal
of the application of the taxpayer under section 159(1) of the Ordinance is
because of the recurring and continuous nature of transitional advance tax
under section 235 of the Ordinance. While deciding the application for nil tax
rate certificate the concerned Commissioner will keep the ratio of this
judgment in mind and will consider the chargeability of section 235 to be
integrated and co-extensive with the liability under section 147 of the
Ordinance rather than a stand alone liability in these circumstances.

49. Before parting with the judgment, respondent Federal Board of Revenue is
directed to find a permanent solution to this issue by either issuing
appropriate exemption under section 159(3) of the Ordinance or bring about
necessary legislative amendment so that the taxpayer is not saddled with this
liability. It is also expedient that in the larger interest of good and
effective tax governance in the country, Federal Board of the Revenue addresses
this issue at its earliest.

50. This court is indebted to the valuable assistance rendered by the amici
curiae namely: Dr Ikram-ul-Haq, Advocate and Asim Zulifqar, Chartered
Accountant. Their rich contribution is acknowledged.

51. For the above reasons, these writ petitions are allowed. In case
Petitioners file applications under section 159(1) of the Ordinance before the
concerned Commissioners for the issuance of nil tax certificate along with the
necessary documentation establishing the discharge of liability under section
147 of the Ordinance, the Commissioners concerned shall decide the said
application within ONE MONTH of the receipt of the said
application.

52. The amount and payment of transitional advance tax under section 235 which
has been suspended through interim orders passed by this court shall remain
suspended till such time that the concerned Commissioner decides the
application under section 159(1) of the petitioner in the concerned cases. In
case application of the petitioner(s) is rejected after verification by the
Commissioner, the petitioner(s) shall be liable to pay advance tax, the
concerned electricity company shall raise and said consolidated amount in the
next electricity bill due to the petitioner(s). In case no application received
from the petitioner(s) within a fortnight from the date of the announcement of
this decision, the said petitioner shall be liable to pay advance tax under
section 235 and the amounts suspended by this court shall stand received in the
next electricity bills of the petitioner(s). In case application succeeds the
petitioner will not liable to pay advance tax under section 235 and the amount
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stayed during the pendency of this case or a portion therefore, as the case may
be, shall not be charged from the petitioner.

53. All these writ petitions are allowed in the above terms.

Petitions allowed.









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