APPELLATE TRIBUNAL INLAND REVENUE, BENCH-I, ISLAMABAD
ITA No.934/IB/2019
(Assessment Year 2017)
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M/S Askari Guard (Pvt.) Limited;
71, Street # 2, G-11/1, Islamabad
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Appellant
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Vs
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Commissioner Inland Revenue, Zone-II, LTU, Islamabad
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Respondent
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Appellant by
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Mr. Muhammad Arslan, ITP
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Respondent by
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Mr. Faheem Sikader, DR
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Date of hearing
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16.10.2019
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Date of order
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16.10.2019
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M. M. AKRAM (JUDICIAL MEMBER): The titled appeal has been filed by the appellant/taxpayer against an Order in Appeal No.361/2019 dated 17.04.2019 passed by the learned Commissioner Inland Revenue (Appeals-I), Islamabad for the Tax Year 2017 on the grounds as set forth in the memo of appeal.
2. Briefly, facts giving rise to the appeal are that the appellant is a private limited company and is required to file its income tax return by 31st December of each year in terms of section 114 of the Income Tax Ordinance, 2001 (“the Ordinance”).Further, sub-section (2A) of section 114 of the Ordinance provides that the return of income has to be filed electronically on the web or any magnetic media or any other computer readable media otherwise the return would be considered invalid. Similarly sub-section (2) of section 118 of the Ordinance prescribed the limitation for filing the returns, according to which in case of a company with a tax year ending any time between the first day of January and the thirtieth day of June, the return has to be filed on or before 31st December next following the end of the tax year to which the return relates. In the instant case it is an admitted fact that the appellant on 31.12.2017 filed an application with the concerned Commissioner Inland Revenue seeking extension of 31 days’ time for filing of return on which no order was passed by the Commissioner Inland Revenue. The appellant filed its return for the tax year 2017 on 11.03.2018 whereafter notice dated 02.05.2018 was served on the appellant under section 182 of the Ordinance for imposing the penalty for late filing of return. In response to the notice, the appellant submitted its reply contending therein that the return of income could not be filed in time due to non-finalization of audited accounts for which an application for extension in time under section 119 of the Ordinance for filing of return had been filed before the concerned Commissioner IR which was pending for decision. The appellant further contended that since no order on the said application was passed therefore, it was presumed that the request for extension had been granted. Therefore, the appellant requested withdrawal of show cause notice. The assessing officer did not accept the explanation tendered by the appellant and passed the penalty order dated 22.10.2019 under section 182 of the Ordinance by imposing penalty of Rs.7,490,603/- for the defaulted period of 70 days. Felt aggrieved, the appellant preferred an appeal before the learned CIR(A) who vide his order dated 17.04.2019 confirmed the treatment meted out by the assessing officer. The appellant has now come up before this forum and has assailed the impugned appellate order on a number of grounds.
3. The case came up for hearing on 16.10.2019. The learned counsel of the appellant reiterated the contentions already submitted in the grounds of appeal as set forth in the memo of appeal. On the other hand, the learned DR opposed the appeal on the ground that learned Commissioner (Appeals) has passed a speaking order and there is no illegality or lacuna in his order. He, therefore, prays for dismissal of appellant’s appeal.
4. We have heard the rival parties, perused the record and the impugned order passed by the learned CIR(A) in the instant case, and have also examined the relevant provisions of law and the judgments delivered by the Courts on the subject matter. The following questions emerge from the record which need to be decided by this Tribunal to resolve the controversy arisen interse the parties.
i. Whether an application for extension in time for filing of income tax return in terms of section 119 has to be decided by the Commissioner IR through order in writing? Or
ii. Whether the aforesaid application, if not decided by the Commissioner IR, could it be deemed or considered as accepted or rejected after lapse of considerable time?
iii. Whether pending the aforesaid application before the Commissioner IR, the provisions of section 182 of the Ordinance could be invoked by the Assessing Officer?
The first two questions, almost similar in nature, came before the Hon’ble Sindh High Court and Lahore High Court whereby three judgments were delivered by their lordships. The Hon’ble Division Bench of Sindh High Court in the case reported as Commissioner Inland Revenue, Zone-II, LTU, Karachi VS M/S Independent Newspaper Corp. (Pvt.) Ltd [(2018) 117 TAX 527 (H.C Kar.)] has followed the view already given in I.T.R.No.654/2010, wherein it was held as under:-
"7. We are of the considered view that once the assessee had applied for extension of time under Section 119 of the Income Tax Ordinance, 2001, it was the duty of the concerned Commissioner to pass appropriate order on such application. Admittedly, no order of rejection for grant of extension of time was passed by the Commissioner. Under the circumstances, it cannot be presumed that the request for extension of time to file return of income, made by the taxpayer under the law stood declined by the Commissioner.No one can be allowed to take advantage of own default, omission and non-compliance of statutory provisions.”(Emphasis supplied)
The Hon’ble Single Bench of the Lahore High Court in W.P No.216521 of 2018 titled as Muhammad Mujahid Qureshi & 4 Others Vs Federation of Pakistan & others vide order dated 31.10.2018 has held that:-
“8. Be that as it may, clearly the terms of section 119 do not convey such an impression as is being argued by the learned counsel for the petitioners. If the Commissioner fails to decide the application, the necessary inference will be that the Commissioner has not granted the application for an extension in time and it cannot be implied by any stretch of imagination that the application for the grant of extension of time stands allowed. No presumption is attached to a statute and much less in a fiscal statute as there is no room for intendment in such matters. The legislature has clearly provided that the Commissioner shall make an order in writing while granting the application and if there is no order in writing the only inference is that the application has been rejected.”(Emphasis supplied)
In another judgment of the Hon’ble Single Bench of the Lahore High Court in W.P No.217647 of 2018 in the case titled as M/s Chang Hong Ruba Electric Company Ltd Vs Federation of Pakistan etc vide order dated 28.06.2018 has held that:-
“7. In this view of the matter, Commissioner Inland Revenue/respondent No.3 is directed to pass decision on the petitioner’s pending application seeking extension in time in filing the tax return.Till such time the decision is made, the audit against the petitioner shall remain suspended.” (Emphasis supplied)
Since all the aforesaid judgments are at variance, therefore, keeping in view, it would be advantageous to first reproduce hereunder the relevant provisions of law which will have an impact to resolve the controversy which are sections 119, 170, 214A, 221 and 114(6) of the Ordinance:-
119. Extension of time for furnishing returns and other documents.- (1) A person required to furnish-
(a) a return of income under section 114 or 117;
(b) ............................................
(c) a statement required under sub-section (4) of section115; or
(d) a wealth statement under section 116,
may apply, in writing, to the Commissioner for an extension of time to furnish the return, or statement, as the case may be.
(2) An application under sub-section (1) shall be made by the due date for furnishing the return of income, or statement to which the application relates.
(3) Where an application has been made under sub-section (1)and the Commissioner is satisfied that the applicant is unable to furnish the return of income, or statement to which the application relates by the due date because of-
(a) absence from Pakistan;
(b) sickness or other misadventure; or
(c) any other reasonable cause,
the Commissioner may, by order, in writing, grant the applicant an extension of time for furnishing the return, or statement, as the case may be.
(4) An extension of time under sub-section (3) should not exceed fifteen days from the due date for furnishing the return of income, employer's certificate, or statement, as the case maybe, unless there are exceptional circumstances justifying a longer extension of time:
Provided that where the Commissioner has not granted extension for furnishing return under sub-section (3) or sub-section (4), the Chief Commissioner may on an application made by the taxpayer for extension or further extension, as the case may be, grant extension or further extension for a period not exceeding fifteen days unless there are exceptional circumstances justifying a longer extension of time.
(5) ........................................................
(6) An extension of time granted under sub-section (3) shall not, for the purpose of charge of default surcharge under sub-section (1) of section 205, change the due date for payment of income tax under section 137.
170. Refunds.- (1) A taxpayer who has paid tax in excess of the amount which the taxpayer is properly chargeable under this Ordinance may apply to the Commissioner for a refund of the excess.
(1A)…………………………..
(2)……………………………
(3)……………………………
(4) The Commissioner shall, within sixty days of receipt of a refund application under sub-section (1), serve on the person applying for the refund an order in writing of the decision after providing the taxpayer an opportunity of being heard.
(5) A person aggrieved by-
(a) an order passed under sub-section (4); or
(b) the failure of the Commissioner to pass an order under sub-section (4) within the time specified in that sub-section, may prefer an appeal under Part III of this Chapter.
214A. Condonation of time limit.- Where any time or period has been specified under any of the provisions of the Ordinance or rules made there-under within which any application is to be made or any act or thing is to be done, the Board may, in any case or class of cases, permit such application to be made or such act or thing to be done within such time or period as it may consider appropriate.
Explanation,- For the purpose of this section, the expression "any act or thing is to be done" includes any act or thing to be done by the taxpayer or by the authorities specified in section 207.
Provided that the Board may, by notification in the official Gazette, and subject to such limitations or conditions as may be specified therein, empower any Commissioner or Chief Commissioner under this Ordinance to exercise the powers under this section in any case or class of cases.
221. Rectification of mistakes.- (1) The Commissioner, the Commissioner (Appeals) or the Appellate Tribunal may, by an order in writing, amend any order passed by him to rectify any mistake apparent from the record on his or its own motion or any mistake brought to his or its notice by a taxpayer or, in the case of the Commissioner (Appeals) or the Appellate Tribunal, the Commissioner.
(1A)………………………………
(2) ………………………………
(3) Where a mistake apparent on the record is brought to the notice of the Commissioner or Commissioner (Appeals), as the case may be, and no order has been made under sub-section (1) before the expiration of the financial year next following the date on which the mistake was brought to their notice, the mistake shall be treated as rectified and all the provisions of this Ordinance shall have effect accordingly.
(4) ……………………………………
114(6); Return of income:- Subject to sub-section (6A), any person who, having furnished a return, discovers any omission or wrong statement therein, may file revised return subject to the following conditions, namely:--
(a) it is accompanied by the revised accounts or revised audited accounts, as the case may be;
(b) the reasons for revision of return, in writing, duly signed, by the taxpayers are filed with the return;
(ba) it is accompanied by approval of the Commissioner in writing for revision of return; and
(c) taxable income declared is not less than and loss declared is not more than income or loss, as the case may be, determined by an order issued under sections121, 122, 122A, 129, 132, 133 or 221:
Provided that if any of the above conditions is not fulfilled, the return furnished shall be treated as an in valid return as if it had not been furnished:
Provided further that the condition specified in clause(ba) shall not apply if revised return is filed within 60 days of filing of return:
Provided also that condition specified in clause (ba) shall not apply and the approval required there under shall be deemed to have been granted by the Commissioner, if-
(a) the Commissioner has not made an order of approval in writing, for revision of return, before the expiration of sixty days from the date when the revision of return was sought; or
(b) ……………………..
It can be seen from the plain reading of section 119 of the Ordinance which provides the protection, facility to the taxpayer to get extension in time to file return of income. For getting this facility, an application has to be filed to the concerned Commissioner Inland Revenue by giving sufficient reasons for getting extension of time. The said application has to be filed on or before the last date of filing of return or certificate or statement as the case may be. The concerned Commissioner in terms of sub-section (3) of section 119 of the Ordinance shall have to pass an order in writing either by accepting or rejecting the application on being satisfied that the taxpayer/applicant is unable to furnish the return. However, the crucial concept behind section 119 is that the Commissioner Inland Revenue shall grant an extension of time or reject an application “by order in writing”. This is crucial because the Commissioner has, firstly, to form an opinion on being satisfied that the conditions precedent exist and, secondly, to specify the period of extension. In case the application is accepted, the extension of time to file return shall normally be up to 15 days. However, it might be enhanced in exceptional circumstances. Conversely, if the application is rejected, the taxpayer has a statutory remedy to file an application before the Chief Commissioner in terms of section 119(4) and thereafter, as the case may be, may approach to the Federal Board of Revenue under section 214A of the Ordinance for condonation of delay. The scheme of law makes it clear that it is an obligation on the part of the Commissioner Inland Revenue to decide the application of the taxpayer as soon as it is received so that the taxpayer could avail the remedy provided under sections 119(4) and 214A of the Ordinance. If the Commissioner fails to do so it cannot be presumed that the application is accepted or rejected for the reason that the legislature is conscious about this and has made its intention very clear by providing that in an eventuality where the Commissioner fails to exercise his powers, it will be deemed that the act would stand performed or otherwise. For instance, provisions of sections 221(3) and 114(6) of the Ordinance reproduced above are clear examples of an act having performed by fiction of law and if the legislature had done so in respect of the said sections then the legislature so intended. Whereas there is no such like provision available in section 119 of the Ordinance, therefore, without any deeming provision, it cannot be presumed that the application filed by the taxpayer is accepted or rejected. It is settled law that no presumption is attached to a statute and much less in a fiscal statute as there is no room for intendment in such matters. The legislature has clearly provided that the Commissioner shall make an order in writing while granting the extension or rejecting the same and if there is no order in writing, the application would stand considered as pending till such time it is not decided by the Commissioner. Further, we have noted that without passing of an order in writing, the taxpayer cannot avail the statutory remedy contemplated in sections 119(4) and 214A of the Ordinance. The said provisions when read with the provisions of section 170(5)(b) of the Ordinance which provides that a person aggrieved by the failure of the Commissioner to pass an order under sub-section (4) within the time specified in that sub-section, may prefer an appeal before the Commissioner Inland Revenue Appeals under section 127 of the Ordinance further clarify the intent of the provision of section 119 that without passing of an order in writing, the taxpayer cannot avail the remedy provided in section 119(4) and 214A of the Ordinance. Thus, giving effect to the provisions of sections 119(4) and 214A it is mandatory to pass an order in writing by the Commissioner under the provisions of section 119(3). It is a settled principle of interpretation that in order to ascertain the intent of the statute, various provisions are to be read together. The construction should not be such so as to make any part of the law as redundant or superfluous. It will be worthwhile to quote hereunder from Crawford's “Interpretation of laws'' under the heading “Source of the legislative intent, generals'':-
“Hence, the court should, when it seeks the legislative intent, construe all of the constituent parts of the statute together and seek to ascertain the legislative intention from the whole act, considering every provision thereof in the light of the general purpose and object of the act itself, and endeavoring to make every part effective, harmonious and sensible. This means, of course, that the court should attempt to avoid absurd consequences in any part of the statute and refuse to regard any word, phrase, clause or sentence superfluous, unless such a result is clearly unavoidable. The court must construe the statute in this manner for by failing to do so the statute is not considered in its entirely and the intention of the legislature is likely to be defeated.'' (Note 164).” (Emphasis supplied)
If the Commissioner does not decide the application under section 119(3) then the right, privilege, protection given by the statute under section 119(4) and 214A to the taxpayer shall be infringed, ineffective which is not permissible under the law for the reason that it is settled principle of interpretation of the statutes that each and every word appearing in a section is to be given effect to and no word is to be rendered as redundant or surplus. So was held by the Apex Court in the cases of (i) In the matter of Reference by the President of Pakistan under Article 162 of the Constitution of Islamic Republic of Pakistan PLD 1957 SC (Pak.) 219,(ii) Muhammadi Steamship Company Ltd Vs CIT, (Central) Karachi (PLD 1966 SC 828), (iii) M/s V. N. Lakhani and Company vs M. V. Lakatoi Express and 2 others (PLD 1994 SC 894) and (iv) Director General Intelligence and Investigation FBR Vs Sher Andaz and 20 Others (2010 SCMR 1746).
5. Be that as it may, it is clear that in terms of section 119 of the Ordinance if the request of the taxpayer seeking extension of time for filing return would have been declined by the concerned Commissioner, the taxpayer would be entitled to approach the Chief Commissioner Inland Revenue, for seeking extension of time in terms of section 119(4) of the Income Tax Ordinance, 2001 and thereafter may file an application for condonation of delay before the Federal Board of Revenue under section 214A of the Ordinance; by not doing so, the appellant was prevented from seeking the statutory remedy on account of inaction on the part of the concerned Commissioner. That inaction on the part of the Commissioner in deciding the pending extension application is in violation of Articles 2-A, 4, 10A, 18, 24 and 25 of the Constitution of Islamic Republic of Pakistan, 1973. It is the duty and obligation of state functionaries to decide the application of the citizens within a reasonable time which has not been done in the instant case and has deprived the appellant to avail the statutory remedy available to them under the Ordinance, 2001. Inaction on the part of Commissioner is in violation of the express provisions of section 119(3) and 119(4) of the Ordinance which provide that Commissioner is under legal obligation to pass an order in writing on the application filed by the appellant and also the provisions of section 24A of the General Clauses Act, 1897.That failure on the part of the Commissioner Inland Revenue in deciding the pending extension application is violative of Article 24 (1) of the Constitution which lays down that “no person shall be deprived of his property save in accordance with the law.”
6. Now we turn to the last question as to whether pending the application of extension in time before the Commissioner IR, the provisions of section 182 of the Ordinance could be invoked by the assessing officer? We are of the candid opinion that keeping in view the aforesaid provisions of law and the law laid down by the Apex Court, pending the application under section 119,the provisions of section 182 of the Ordinance cannot be invoked. The settled principle of "Actus curiae neminem gravabit" (an act of the Court shall prejudice none) would surely apply to the present case. In this regard, this Tribunal imports reliance on the celebrated judgments of the hon’ble Peshawar High Court in Mst. Baz Khana's case (PLD 2005 Peshawar 214) wherein it has been held that: -
“Assuming for a while that the appellants did not act with due diligence by prosecuting their remedy in a wrong forum, nonetheless, they, before it was too late, could be put on the right track by the learned District Judge, The day the memorandum of appeal was presented before him. This is what preliminary hearing stands for. In any case when it was entertained and even admitted by the learned Judge without adverting to its competency on account of his pecuniary jurisdiction, all the time so consumed from its entertainment to its return in his court, cannot be debited in the account of the appellants, and thus they cannot be allowed to suffer for the act of the Court. Had it been returned on the first date of hearing the appellants could have presented it in this court well within time. Since the time was consumed due to the act of the Court, it will certainly constitute a sufficient cause for condonation of delay as according to the principle enshrined in the maxim actus curiae neminemgavabit, “an act of the court shall prejudice none.' (Emphasis supplied)
This settled principle has been consistently upheld and annunciated in the subsequent decisions of the August Supreme Court of Pakistan in Mst. Razia Jafar's case (2007 SCMR 1256) and Akbar Shah's case(2010 SCMR 1408). While dealing with an act of the Court, the Privy Council, in the case of Jai Berhrm v. Kedar Nath (AIR 1922 P.C. 269) made the following observation: -
"One of the first and highest duties of all Courts is to take care that the act of the Court does not cause injury to any of the suitors and when the expression “the act of the Court”, is used, it does not mean merely the act of the Primary Court, or of any intermediate Court of Appeal, but the act of the Court as a whole from the lowest Court which entertains jurisdiction over the matter up to the highest Court which finally disposes of the case."
It is an admitted fact that the appellant well within time on 31.12.2017 filed an application with the concerned Commissioner Inland Revenue seeking extension of 31 days’ time for filing of return on which no order was passed so far by the Commissioner Inland Revenue. As stated above, it was obligation of the Commissioner Inland Revenue under section 119 of the Ordinance to consider and decide the application through order in writing but he failed to perform his statutory duty and in consequence thereof, the rights of appellant envisaged under the provisions of section 119(4) and 214A of the Ordinance have frustrated. It is a maxim of law, recognized and established, that Commodum Ex Injuria Sua Nemo Habere Debet (a wrongdoer should not be enabled by law to take any advantage from his actions) and the said maxim is based on elementary principles, is fully recognized in courts of law and of equity, and, indeed, admits of illustration from every branch of legal procedure. The law in this regard has been lucidly explained by the Chief Justice Chagla of the Bombay High Court in the case of All India Groundnut Syndicate Ltd, vs. Commissioner of Income Tax, Bombay City, reported in AIR 1954 Bombay 232 = 1954 25 ITR 90; it was held that it is the basic principles of law that one cannot take advantage of own wrong. Relevant portion of the judgment is quoted below:-
“But the most surprising contention is put forward by the Department that because their own officer failed to discharge his statutory duty, the assessee is deprived of his right which the law has given to him under Sub-section (2) of section 24. In other words, the Department wants to benefit from and wants to take advantage of its own default. It is an elementary principle of law that no person--we take it that the Income Tax Department is included in that definition--can put forward his own default in defence to a right asserted by the other party. A person cannot say that the party claiming the right is deprived of that right because "I have committed a default and the right is lost because of that default."
Considering the present case in view of the discussion above, this Tribunal is of the considered view that the Officers of Inland Revenue cannot take advantage of their own lapses in deciding the application of the appellant and if he failed to discharge his duty the right of appellant cannot stand forfeited. In this view of the matter, pending the application in extension of time for filing of return, proceedings initiated by the assessing officer under section 182 are pre-mature and therefore, are declared as void ab-initio and without jurisdiction.
7. We have observed that the appellant filed application for 31 days’ extension in filing of return within the due date on 31st December, 2017. The Commissioner is empowered under sub section (3) of section 119 read with sub section (4) ibid to grant 15 days’ extension unless there are exceptional circumstances justifying a longer extension of time. Similar powers are vested in the Chief Commissioner in case the Commissioner does not grant extension. Although, the appellant filed return for the tax year 2017 on 11.03.2018(after lapse of 31 days in respect of which, application for extension was pending before the Commissioner) but its right to seek extension for a longer period is protected by the statue. Without first deciding taxpayer’s pending application for extension of time in filing of a return, jumping over to the conclusion of late filing and invoking provisions of section 182 of the Ordinance for imposing penalty on alleged late filing is considered premature and violative of the prescribed procedure. We also hold that when the original application for extension of time was pending, penalty for late filing under section 182 could not have been imposed even if the period of delay in filing of return exceeded the period in respect of extension was sought; without first dislodging the application for extension, further punitive action is premature and violative of the prescribed procedure.
8. What has been stated above, the appeal of the appellant is accepted and the orders passed by the lower authorities are annulled. Let this order be sent to the learned Chairman Federal Board of Revenue for the purposes of issuing instructions to all officers adjudicating applications under section 119 of Ordinance to comply with the above said provisions of law and their mandatory nature. They should also be made aware of serious consequences which will visit those officers in case the said provision is not strictly adhered to.
9. This order consists of (12) pages and each page bears my signature.
Sd/-
(M. M. AKRAM)
JUDICIAL MEMBER
Sd/-
(NADIR MUMTAZ WARRAICH)
ACCOUNTANT MEMBER
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