APPELLATE
TRIBUNAL INLAND REVENUE, BENCH-I,ISLAMABAD
MA(AG)
No.121/IB/2019
(Tax
Year 2017)
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M/s MOL Pakistan Oil and Gas Company B.V., 55000 International
Business Centre, Plot No.28 and 29, G-10/4, Mauve Area, Islamabad. |
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Appellant |
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Vs |
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Commissioner Inland Revenue, Unit-16, Zone-III, LTU,
Islamabad. |
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Respondent |
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Appellant By |
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Mirza Taqui Ud Din Ahmed, FCA |
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Respondent By |
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Mr. Muhammad Khurram, DR |
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Date of Hearing |
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17.12.2019 |
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Date of Order |
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17.12.2019 |
ORDER
M. M. AKRAM
(Judicial Member): The titled appeal has been
filed by the appellant/taxpayer against an Order in Appeal No.329/2019 dated
12.03.2019 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.
Subsequently, the appellant also filed the additional grounds as well.
2. Brief facts giving
rise to the appeal are that the appellant is a Permanent Establishment (PE) of
a non-resident company engaged in the business of exploration and production of
petroleum products in Pakistan. The
return for the tax year 2017 was e-filed on 31.10.2017 by declaring taxable
income of Rs.2,522,507,527. The Deputy Commissioner Inland Revenue (DCIR)
during the examination of return observed that the appellant did not pay the
super tax along with the return. Accordingly, a show-cause notice was issued
which was responded by the appellant, the reply was, however, found to be
unsatisfactory prompting the DCIR to pass the order 12.09.2018 under section 4B
of the Income Tax Ordinance, 2001 (“the
Ordinance”) whereby super tax u/s 4B along with default surcharge under
section 205 amounting to Rs.81,696,070/- has been held to be recoverable from
the appellant. Felt aggrieved, the appellant preferred an appeal before the
learned Commissioner Inland Revenue (Appeals) who vide order dated 12.03.2019
rejected the appeal and confirmed the treatment meted out by the DCIR. The
appellant assailed such impugned appellate order before this Tribunal on a number
of grounds.
3. The case came up for
hearing on 17.12.2019. The learned AR at the very outset contended that the
show cause notice and in consequence thereof the order passed by the DCIR under
section 4B of the Ordinance suffered from serious legal and jurisdictional
infirmities/flaws that go to the root of the case and must be considered and
settled first. He submits that the DCIR lacks the powers/jurisdiction which he
erroneously exercised in passing the order under section 4B of the Ordinance. The
learned Commissioner Inland Revenue, Zone-III, LTU, Islamabad has not delegated
his power conferred upon him under section 4B of the Ordinance for the purpose
of charging and collecting of the super tax to the DCIR who has passed the
order therefore, the basic order passed by the DCIR is illegal and without
jurisdiction, the superstructure built thereon automatically falls to the ground.
4. On the other hand, the
learned DR controverts the stance taken by the learned AR and has opposed the
jurisdictional issue by contending that this objection had not been taken by
the appellant before the learned CIR(A) and therefore, it cannot be allowed to
be raised at this belated stage. He further submits that the Commissioner
Inland Revenue had duly delegated his power to the DCIR under section 210 of
the Ordinance vide order No.CIR (ZONE-III)2016/52 dated03.08.2016 inter alia
for the purpose of charging and collection of super tax under section 4B of the
Ordinance. To substantiate his submission he placed on record the copy of the
jurisdictional order.
5. Arguments heard and record perused. The
objection of the learned DR that the appellant cannot take the jurisdictional issue
before this tribunal first time if the same has not earlier been taken before
the CIR(A), is misconceived and not tenable. Now, it is settled law that a plea
regarding assumption of jurisdiction can be taken at any stage even before
appearing in the highest Court in the Country. Reliance may be placed on the
judgment of the Hon’ble Supreme Court of Pakistan titled Shagufta Begum
Vs The Income Tax Officer, Circle-XI, Zone-B, Lahore(1989 PTD 544). For the
purpose of resolution of the controversy in hand, section 4B of the Ordinance will
have to be reproduced in order to understand the true crux of the contention
raised by the learned AR. Section
4B was inserted by the Finance Act, 2015 in the Ordinance and seeks to
impose a super tax on income for rehabilitation of temporarily displaced persons. It reads as under:-
“4B. Super tax for rehabilitation of temporarily
displaced persons:― (1) As super tax shall
be imposed for rehabilitation of temporarily displaced persons, for tax years 2015
and onwards, at the rates specified in Division II A of Part I of
the First Schedule, on the income of every person specified in the said Division.
(2)For the
purposes of this section, “income” shall be the sum of the following:—
(i)
Profit on debt, dividend,
capital gains, brokerage, and commission;
(ii)
Taxable income other than brought forward depreciation and brought
forward business losses under section (9) of this Ordinance, if not included in
clause(i);
(iii)
Imputable income as defined in clause (28A) of section 2 excluding amounts specified
in clause (i); and
(iv) income
computed
under Fourth, Fifth, Seventh and Eighth Schedules.
(3)The super tax payable under sub-section (1)
shall be paid, collected and deposited
on the date and in the manner as specified
in sub-section (1) of section
137 and all provisions of Chapter X of
the Ordinance shall apply.
(4) Where
the super tax is not paid by a person liable
to pay it, the Commissioner shall by an order
in writing, determine the super tax payable, and
shall serve upon the person, a notice of demand specifying the super tax payable and within
the time specified under section 137
of the Ordinance.
(5) Where
the super tax is not paid by a person liable
to pay it, the Commissioner shall recover the super tax payable under sub-section (1) and the provisions of Part IV, X, XI, and XII of Chapter X and Part I of Chapter
XI of the Ordinance shall, so far as may be, apply to the collection
of super tax as these apply to the collection
of tax under the Ordinance.
(6)The Board may, by notification in the Official Gazette, make rules for carrying out the purposes of this section.”
The plain reading of the above provisions of law makes it clear that
besides the imposition of a levy of super tax, the method of payment,
collection, and deposit of super tax has also been explained in sub-sections
(3), (4), (5) and (6). Sub-section (3) provides that super tax shall be payable
and collected in the manner as specified in section 137(1) and all the
provisions of Chapter X of the Ordinance shall apply. Chapter X relates to
procedure and includes the filing of the return, assessment, etc. Sub-section
(4) and (5) of section 4B however carve out a special procedure in respect of
payment of super tax and its recovery by a person liable to pay super tax and
who has failed to pay the same. It clearly provides that where the super tax
has not been paid by a person liable to pay, the Commissioner Inland Revenue by
order in writing determines the super tax payable and shall serve upon the
person a notice of payment for the super tax to be paid within a time specified
therein. If the super tax is not paid within that time, the Commissioner Inland
Revenue shall recover the super tax in terms of the provisions of Part-IV, X,
XI, and XII of Chapter X of the Ordinance. Therefore, clearly, the intention of
the legislature is to specify a special procedure in respect of levy and
collection of supper tax and, therefore, section 4B of the Ordinance is complete
code unto itself. Moreover, by sub-section (6) of section 4B, the Board may
make rules for carrying out the purpose of this section. This further gives the
powers to the Board to make rules by notification and which rules may provide
all matters for carrying out the purpose of section 4B. Therefore, although the
enumerations of section 4B do not clearly oust the other provisions of the
Ordinance, by necessary intendment the intention of the legislature is to
clothe the Commissioner with special powers for the assessment and recovery of
super tax. In our opinion, this procedure is distinct from the procedure laid
down in Part-II of Chapter X relating to assessments and confers the Commissioner
with special powers to circumvent the normal procedure and to make use of the
special procedure given by section 4B. This, in fact, unshackles the
Commissioner from the rigours of procedure prescribed in Chapter X of the
Ordinance, and although sub-section (3) of section 4B prescribes the
applicability of Chapter X stands modified to that extent and the Commissioner
while proceeding to recover super tax will have to take steps under section 4B.
Otherwise, the intention of the legislature will be set at naught and
jeopardized. It cannot be left to the discretion of the Commissioner to either
proceed under section 122 of the Ordinance or at his whim to proceed under the
provisions of section 4B. If the legislature intends for an act to be done in a
certain manner, it has to be done in that manner and not otherwise.
6. Now let
us see the jurisdiction order dated 03.08.2016 issued by the Commissioner
Inland Revenue Zone-III, LTU, Islamabad under section 210 of the Ordinance
keeping in view the controversy between the parties as to whether it covers the
assessment which is to be made under section 4B of the Ordinance for the
purpose of levy and collection of super tax? The relevant part of the
jurisdiction order is reproduced hereunder:-
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GOVERNMENT OF PAKISTAN OFFICE OF THE COMMISSIONER INLAND REVENUE), (ZONE-III) LARGE TAXPAYER UNIT ISLAMABAD |
No.CIR (ZONE-III)2016/52 Dated:
03.08.2016
ORDER INCOME TAX
DELEGATION OF POWERS
AND FUNCTIONS TO OFFICERS INLAND REVENUE (ZONE-III), LARGE TAXPAYERS UNITS,
ISLAMABAD
Consequent to CCIR
Order No.PF-31/Vol-3/LTU/Ibd/2016/202 dated 01.08.2016 and in suppression of
earlier orders, in exercise of the powers conferred by sub-section (1) of
section 210 of the Income Tax Ordinance, 2001, all the powers and functions
conferred or assigned to the undersigned under the said Ordinance, as specified
under Column (III) of Table-I hereunder (except the powers and functions
mentioned in Table-II which is an integral part of this order) are delegated to
the Officer of Inland Revenue mentioned in column-II of Table-I in respect of persons,
as specified in column-IV of Table-I, thereof in addition to persons already
assigned to them.
2. This order shall take
immediate effect.
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S# |
Authority |
Powers & Function |
Jurisdiction |
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1. |
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2. |
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3. |
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4. |
Officer Inland Revenue Unit-16 |
AUDIT: a)
Conduct audit of cases under Part-VIII of Chapter-X, amendment of
assessment under Part-II of Chapter-X, computation of taxable income under
Chapter-III, giving effect to an appeal order under Part-III of Chapter-X
arising out of such orders, rectification of orders related to audit and
exercise of powers and functions under any specific provision of law and
rules provided in the said Ordinance and Schedule thereto in respect of audit
and assessment. b)
Assessment under sections 143 and 144; c)
Computation of income chargeable to tax determining of tax
payable thereon, allowing credit for tax paid under Part-V of Chapter-X or
adjustment of refund due under Part-VI of Chapter-X, or under any other specific
provision of law and rules provided in the said Ordinance and Schedules
thereto; d)
Best judgment assessment under section 121 read with sub section
10 of section 177 in respect of cases under audit; e)
Exercise powers to determine income under “Anti-avoidance”
provisions contained in chapter-VIII; f)
Impose penalty under Part X of Chapter X against defaulters in
respect of case sunder audit. g)
Impost penalty charge default surcharge. h)
Perform any other function in determining and computing income
chargeable to tax and tax payable under the said Ordinance. i)
To process/finalize complaints in respect of existing taxpayers’
cases and j)
Disposal of internal and external audit observations/paras. ENFORCEMENT: a)
Broadening of tax base and exercise jurisdiction booking of new
taxpayers; b)
Conduct internal external survey; c)
Monitoring and enforcement of withholding taxes as conferred
under the Income Tax Ordinance, 20001. d)
Monitoring and recovery of taxes/levies under the;
I.
The Wealth Tax Act, 1963 (Repealed).
II.
Finance Act, 1989 (Act No.V of 1989) , as amended vide Finance
Act, 2010. e)
Ensure compliance of filing statutory returns, maintenance of
prescribed accounts, documents and records; impose penalty and take other
actions under the law against non-compliers; f)
Provisional assessment u/s 122C. g)
Effect collection and recovery of tax under Part-IV of Chapter-X. h)
Issue refunds under Part-VI of Chapter-X including refund
adjustments. i)
Giving effect to an appeal order under Part-II of Chapter-X
excluding order arising out of audit and assessment. j)
Rectification of cases not related to audit. k)
Launch prosecution under Part-XI of Chapter-X. l)
Disposal of internal and external audit
observation/objections/paras. m)
Recovery of tax not withheld u/s 161 of the Income Tax Ordinance,
2001, recovery of tax not withheld/collected u/s 162 of the Income Tax
Ordinance, 2001 and charging default surcharge and penalties. n)
Impose penalty charge default surcharge u/s 161/205 of the Income
Tax Ordinance, 2001. o)
Communicate orders and demand notices to Tax Facilitation
Division. p)
Reporting of Revenues and q)
Any other Enforcement function given by Commissioner Inland
Revenue, LTU, Islamabad or Chief Commissioner for achieving the purpose of
Income Tax Ordinance, 2001, and Rules thereof. LEGAL: a)
Prepare references and CPLA for approval of Board and ensure
timely filing before the High Court and Supreme Court. b)
Prepare second appeal papers and to file second appeals within
time limitation. c)
Assist DR/Legal Advisor in the cases before ATIR/High Court/Supreme
Court. d)
Submission of comments etc in ADRCs cases u/s 134A. e)
Prepare comments/review applications and represent department’s
cases before FTO. f)
Prepare representations for filing before the President of
Pakistan. g)
Submission of proposals/comments for grant of approval to non-profit
organizations u/s 2(36). h)
Submission of reports for the recognition of Provident Fund,
Pension Fund and approval of Superannuation Funds under Sixth Schedule to the
Ordinance. i)
Submission of reports for grant of approval to pension schemes
for the purpose of clause (12) of Part-I of Second Schedule to the Ordinance.
j)
Submission of reports for grant of approval to gratuity schemes
for the purpose of clause (13) of Part-I of Second Schedule to the Ordinance.
k)
Submission of reports for grant of approval to benevolent fund or
group insurance scheme for the purpose of clause (57) of Part-I of Second
Schedule to the Ordinance and l)
Any other work assigned. |
1. All cases of
persons mentioned in Schedule-IV 2. All cases of
Directors of Companies mentioned in Schedule-IV |
TABLE-II
1.
Revision/amendment of assessment u/s 122A & 122(5A) of the
Income Tax Ordinance, 2001.
2.
Exercise of powers under proviso (a)(b) of sub section (1) of
section 177 of the Income Tax Ordinance, 2001.
3.
Power of delegation u/s 210 of the Income Tax Ordinance, 2001.
4.
Power to enter and search premises u/s 175.
5.
Issuance of exemption and lower rate certificate.
6.
Allow changes in method of accounting.
7.
Allow changes in method of stock valuation.
8.
Receive and decide application to allow income years as difference
from fiscal year.
9.
Allow special year as income year.
10. Approval bank,
financial institution of leasing companies for the purpose of section 77(4) of
the Income Tax Ordinance, 2001.
11. (a) Receive notice from liquidators.
(b) Issue intimation to liquidators.
(c) Allow sale permission to liquidators.
(d) Allow lesser tax to be deposited after
sale.
12. Allow record to
be maintained otherwise than as prescribed.
13. Prescribed
period for NTN card.
14. All issues of
jurisdiction.
TABLE-II (LEGAL)
1.
(a) Receive CIR(A), ATIR,
High Court and Supreme Court orders.
(b) File appeal to appellate Tribunal Inland
Revenue (ATIR).
(c) File appeal/reference to High Court.
(d) File appeal to Supreme Court.
(e) Power to appoint Legal Advisor.
2.
(a) Receive notice from
Liquidators.
(b) Issue intimation to Liquidators.
(c) Allow sale permission to Liquidators.
(d) Allow lesser tax to be deposited after
sale.
3.
Approval u/s 2(36)(c) of the Income Tax Ordinance, 2001.
4.
Recognition of Employees Provident Funds, approval of Employees
Gratuity Fund and Pension Fund in terms of Sixth Schedule of the Income Tax
Ordinance, 2001.
5. Prosecution cases under section 203 of the Ordinance.
-Sd/-
(NASIR
KHAN)
Commissioner
Inland Revenue
(Zone-III)
The perusal of the above jurisdiction order clearly reveals that the
Commissioner Inland Revenue has not specifically delegated his power conferred
upon him under section 4B of the Ordinance to the DCIR for the purpose of levy
and collection of super tax under section 4B ibid. In
fact, the Assessing Officer had only been delegated the powers and functions as
specified under Column (III) of Table-I of the order
to proceed against the appellant. The express delegation of power to proceed
against the appellant under section 4B of the Ordinance is missing in the said
order. The Assessing Officer could only proceed under the law after an express
delegation of powers of the authority from the competent officer, the
Commissioner. This express and requisite authority are missing in the instant
case. Reliance may be placed on the judgment titled Commissioner Inland Revenue Zone-II, RTO,
Peshawar Vs M/s Saydon Pharmaceutical Industries (Pvt.) Ltd, (2015 PTD
374). In the said judgment the power was delegated by the Commissioner under
section 210 to the Audit Officer only for conducting and completing an audit of
the taxpayer but the Audit Officer passed the order under section 122 of the
Ordinance. In the reference application, the Hon'ble High Court declared the
proceedings illegal and void ab-initio. The Honourable Supreme Court of
Pakistan has held in the case titled as The Registrar of Trade Marks and other Vs
Walter Rau Neussor OI UND FATT AG (1993 SCMR 1503)that the delegation
of power should be specific and in the absence thereof, the delegation order is
a nullity in the eyes of law. Thus, the entire
proceedings initiated by the learned DCIR against the appellant were without
jurisdiction. When the foundation lacks legal mandate, the entire
superstructure built thereon would surely fall. Reliance may be placed
on the judgment titled as Moulana Atta Ur Rehman Vs Al-Hajj Sardar Umer
Farooq and others (PLD 2008
SC 663) wherein it was held that:-
“In the same string are the cases reported as Rehmatullah and others v. Saleh Khan and others (2007 SCMR 729), Punjab Workers' Welfare Board Government of Punjab and Human Resources Department, Lahore v. Mehr Din (2007 SCMR 13), Muhammad Tariq Khan v Khawaja Muhammad Jawad Asami (2007 SCMR 818) and All Pakistan Newspapers Society v. Federation of Pakistan and others (PLD 2004 SC 600). The learned High Court has not appreciated the law laid down in the above-reported cases. It is well settled that when the basic order is without lawful authority and void ab initio, then the entire superstructure raised thereon falls to the ground automatically as held in Yousaf Ali v. Muhammad Aslam Zia (PLD 1958 SC 104)”. (Emphasis supplied)
The
exercise of jurisdiction by an authority is a mandatory requirement and its
non-fulfillment would entail the entire proceedings to be “Coram non-judice”.
Any transgression of such jurisdiction for not being a technical defect would
render the entire exercise of authority to be ab-initio, void, and illegal. In
the case titled as Collector of Customs, Model Customs CollectorateVs M/s Kapron
Overseas Supplies Co., (Pvt) Ltd(2010 PTD 465), the question was
raised as to whether the passing of order without jurisdiction is a technical
defect and does not render the proceedings as ab-initio void. The Hon’ble High
Court dismissed the reference application while holding that any transgression
of such jurisdiction for not being a technical defect would render the exercise
of authority to be ab-initio, void, and illegal, without discussing the merit
of the case, which relates to the origin of imported goods and the Hon’ble High
Court further held that “the exercise of jurisdiction by an
authority is a mandatory requirement and its non-fulfillment would entail the
entire proceedings to be “coram non-judice”. The said defect renders
the show cause notice as well as Order-in-Original ab-initio, null and void by
virtue of suffering of lack of power/jurisdiction. Hence, coram non-judice and
needs to be struck down. It is settled law that no assessment can be made
unless the assessing officer has valid jurisdiction over the case of the assessee.
Reliance is placed on (1993) 68 Tax 149(H.C Dacca).
7. For the foregoing reasons, the mode and
manner of the exercise of jurisdiction by the Assessing Officer do not meet the
prescribed statutory criteria and as such the entire exercise of the assessing
officer is patently in violation of section 4B of the Ordinance and the law lay
down by the Apex Court. It is trite law that all the statutes are to be applied
fairly and justly, the public functionaries are under a constitutional mandate
to be just and fair. The assumption of jurisdiction under section 4B of the
Ordinance by the assessing officer is indeed incomplete negation thereto. It is
an immutable principle of law that defective assumption/exercise of
jurisdiction by the authorities is incurable. Reliance may be placed on Director
General Intelligence and Investigation FBR Vs Sher Andaz and 20 Others (2010 SCMR 1746), Director General
Intelligence and Investigation and others Vs M/s AL-Faiz Industries (Pvt.)
Limited and others PTCL 2008 CL 337(S.C) and Collector,
Sahiwal and 2 others Vs Muhammad Akhtar(1971 SCMR 681). In
all these judgments it was held by the Hon’ble Supreme Court of Pakistan that:
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i. Where essential feature of assumption of
jurisdiction is contravened or forum exercises power not vested in it, or
exceed authority beyond the limit prescribed by law the judgment is rendered Coram
non-judice and inoperative (2002 SCMR 122).
ii. If a mandatory condition
for the exercise of jurisdiction before the Court, Tribunal, or Authority is
not fulfilled, then the entire proceedings which follow become illegal and
suffer from want of jurisdiction. Any order passed in continuation of these
proceedings in appeal or revisions equally suffer from illegality and are
without jurisdiction (2008 SCMR 240)”
Since we have decided the appeal on the legal issues, therefore,
there is no need to dilate upon the other grounds of appeal which relate to the
merit of the case.
8. For what has been
stated above, the appeal of the appellant is accepted and the impugned orders
passed by the lower authorities are hereby annulled. It is made clear that the
Commissioner Inland Revenue may proceed in terms of section 4B for seeking the
payment and recovery of super tax from the appellant if the appellant is found
to be liable for its payment.
9. This order consists of
(10) pages and each page bears my signature.
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Sd/- (M.M. AKRAM) JUDICIAL MEMBER |
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Sd/- (NADIR MUMTAZ WARRAICH) ACCOUNTANT MEMBER |
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CERTIFICATE U/S 5 OF THE LAW REPORT ACT
This case is fit for
reporting as it settles the principles highlighted above.
(M. M. AKRAM)
JUDICIAL MEMBER
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