Tuesday, November 2, 2021

M/s Metro Guards (Pvt) Ltd Vs Commissioner Inland Revenue (Range-II), LTO, Islamabad

APPELLATE TRIBUNAL INLAND REVENUE, DIVISION BENCH, ISLAMABAD
 
ITA (Interim) No. 1913/IB/2021
MA (Stay) Interim No. 1713/IB/2021
(Tax Year 2017)

******

 

M/s Metro Guards (Pvt) Ltd. Flat No.507, Fifth Floor, Gulberg Empire, Civic Centre, Gulberg Green Islamabad

 

Appellant

 

Vs

 

Commissioner Inland Revenue
(Range-II), LTO, Islamabad

 

Respondent

 

 

 

Appellant By

 

Mr. Muhammad Imran, FCA

Respondent By

 

Mr. Kamran Ullah, DR

 

 

 

Date of Hearing

 

01.11.2021

Date of Order

 

01.11.2021

OOORO R D E R

M. M. AKRAM (Judicial Member):     The titled appeal along with the miscellaneous application for interim relief has been filed by the appellant against the order dated 27.10.2021 passed by the learned Commissioner Inland Revenue (Appeals), LTO, Islamabad for the tax year 2017 whereby he has refused to extend further stay already granted by him with the observation that in terms of sub-sections (1A) and (1AA) of section 128 of the Income Tax Ordinance, 2001 (hereinafter referred to as “the Ordinance”) he has possessed the power to grant a stay for a maximum period of 60 days which he had already granted to the appellant. The appellant has assailed the said impugned order before this Tribunal on a number of grounds. Thus, the following important question emerges from the record which requires consideration in the present case: -

“Whether in the facts and circumstances of the case, where the delay in the disposal of the relevant appeal is not attributable to the taxpayer, the Commissioner Inland Revenue (Appeals) can extend the stay already granted beyond the period of 60 days or it has possessed the power to extend the stay for more than sixty days as prescribed in sub-section (1A) and (1AA) of section 128 of the Ordinance during the pendency of the appeal of the taxpayer?

2.      Before coming to the provisions of the Ordinance and interpretation thereof, a brief look at the facts in which the present appeal arises would be necessary.

3.      Brief facts giving rise to the appeal are that the assessing officer passed the order dated 17.06.2021 under section 122(1) of the Ordinance against the appellant taxpayer creating thereby a tax demand of Rs.181,768,366/-. Aggrieved with the said order, the appellant filed an appeal before the learned Commissioner Inland Revenue (Appeals), LTO, Islamabad, for the tax year 2017, which is said to be still pending. The Appellant approached the appellate authority to get a stay in the recovery proceedings which was allowed in terms of sections 128(1A) and 128 (1AA) of the Ordinance. Thereafter, the appellant again went up to the learned CIR(A), Peshawar seeking an extension of the stay order till the decision of the appeal pending before him. The learned CIR(A) rejected the prayer of the appellant and such rejection was communicated to the appellant by order dated 11.10.2021. From such communication, it appears that the CIR(A) rejected the prayer of the appellant on the touchstone of sub-section (1A) and (1AA) of section 128 by observing that it was not empowered to extend the time beyond 60 days. Admittedly, the appeal preferred by the appellant is still pending before the learned CIR(A).

4.      This is how the appellant has come up to this Tribunal. It is submitted by learned counsel for the appellant that no power is vested in the Commissioner Inland Revenue (Appeals) to grant a stay order under the Ordinance after the expiry of 60 days and, therefore, the appellant has resorted to section 131 of the Ordinance. The appeal is nothing but a continuation of assessment proceedings. If in the absence of power to grant extension in stay after expiry of 6o days, the recovery is made during the pendency of the appeal and if the appeal is allowed in course of time, then that would cause avoidable inconvenience to the taxpayer. For effective adjudication of the matters and to obviate unnecessary inconvenience to the taxpayers, it is nothing but appropriate to confer power of granting extension in stay till decision on the appeal on the appellate authorities. Further, the learned AR contended that Sub-section (4) of Section 129 of the Ordinance states that where a taxpayer has presented an appeal under 127 of the Ordinance, the Appellate Authority shall pass an order not later than one hundred and twenty days from the date of filing of appeal or an extended period of sixty days. The rationale of this provision read with sub-section (1A) and (1AA) of section 128 is that a taxpayer should not be unnecessarily inconvenienced during the pendency of the appeal and, therefore, Sub-section (4) says that the CIR(A) has to decide the appeal within the stipulated time. Law does not require that once the assessment is made, recovery of tax should be made immediately, notwithstanding the remedy of appeal having been provided in the Ordinance. Rather, Sub-section (1A) and (1AA) of section 128 clearly provide that the taxpayer against whom an assessment is made should be entitled to get a stay from the appellate authority so long as his appeal remains undisposed of. If such is the intention of law, then it can hardly be said that the Commissioner Inland Revenue (Appeals) is vested with the powers of granting a stay order after the expiry of sixty days, which is not only necessary but expedient for effective adjudication of appeals. If a taxpayer establishes his, prima facie, case in appeal, then the appellate authority should be competent to grant a stay order, otherwise, the taxpayer would be put to a serious loss, which in certain cases maybe even irreparable. What is the use of remedy of appeal, if the irreparable loss is caused? The remedy of appeal is always provided to alleviate the sufferings and not to augment them and if the provisions of appeal are read in that spirit, then the only conclusion that can be reached is that the appellate authority does possess the power to grant stay order during the pendency of the appeal, even if it is not specifically conferred by any statutory provision.

5.      Further, the learned AR for the appellant explained that before sub-section (1A) and (1AA) of section 128 were inserted in the Ordinance through Finance Acts, 2012 and 2015 respectively with effect from 01.07.2012 and 01.07.2015 conferring power on the Commissioner Inland Revenue (Appeals) to grant a stay. Before that, a question came up before the Supreme Court that whether or not the Appellate Authority possessed the power to grant stay the interim relief is the part of the main appeal and it is an immutable principle of law which cannot be lightly brushed aside that where a Court is competent to allow final relief, it has also got the jurisdiction to allow interim relief. Reliance was placed on the judgment reported as Additional Collector-II Sales Tax, Lahore Vs M/s Abdullah Sugar Mills Ltd, (2003 SCMR 1026).

6.      Learned counsel for the appellant, therefore, urged that the entire disputed demand should be kept in abeyance till the first appeal filed by the taxpayer is decided on merits, which he submitted that was likely to succeed in toto. He, however, further submitted that till such appeal is decided and if no stay is granted against such recovery, the very purpose of filing the appeal would be frustrated. Learned counsel for the appellant was at pains to explain that if high pitched assessments are made by the Assessing Authority arbitrarily, the very purpose of filing of the first appeal for redressal of grievance, can be rendered nugatory and infructuous if upon a harmonious reading of various provisions in the scheme of the Ordinance they are not construed to mean that during the pendency of the first appeal normally demand at least under the high-pitched assessment orders should be kept in abeyance. He submitted that the present case is an outstanding and glaring example of such circumstances, which is repeated in numerous cases and, therefore a fair, reasonable, and harmonious interpretation of these provisions deserves to be made. 

7.      On the other hand, learned DR appearing for the Revenue vehemently submitted that in the absence of any specific provision conferring power to grant stay after expiry of 60 days upon the First Appellate Authority, namely, Commissioner Inland Revenue (Appeals), such powers cannot be extended and in view of later amendment in section 128 of the Ordinance, conferring such powers only to the extent of further stay of 30 days, by necessary implication, on the other hand, it should be construed that Parliament deliberately did not want to confer any such power upon the First Appellate Authority and, therefore, despite the decision of the Hon'ble Supreme Court in the case of Additional Collector-II Sales Tax, Lahore Vs M/s Abdullah Sugar Mills Ltd, (supra) no such inherent power can be inferred from the provisions of the Ordinance available with the first appellate authority. He, therefore, submitted that Commissioner Inland Revenue, (Appeals) may decide the pending appeal of the taxpayer in accordance with the law, however, as far as the stay application is considered, the matter stands decided at the hands of the departmental authorities and the said order being valid, they cannot be interfered with in the present case.

8.      The arguments were heard at length and this Tribunal feels persuaded to interpret the relevant powers of the first appellate authority under the Ordinance to grant a stay and to interpret the scope of application under sections 128/129(4) of the Ordinance. The relevant provisions, referred to above, are reproduced herein below for ready reference to the extent relevant: -

128. Procedure in appeal: (1) ………………..

(1A) Where in a particular case, the Commissioner (Appeals) is of the opinion that the recovery of tax levied under this Ordinance, shall cause undue hardship to the taxpayer, he, after affording opportunity of being heard to the Commissioner against whose order appeal has been made, may stay the recovery of such tax for a period not exceeding thirty days in aggregate.

(1AA) The Commissioner (Appeals), after affording opportunity of being heard to the Commissioner against whose order appeal has been made, may stay the recovery of such tax for a further period of thirty days, provided that the order on appeal shall be passed within the said period of thirty days.

 129. Decision in appeal: - (1)…………….

(2)     ……………….

(3)     ..……………..

(4)     As soon as practicable after deciding an appeal, the Commissioner (Appeals) shall specify in the order the amount of tax upheld and serve his order on the appellant and the Commissioner

Provided that such order shall be passed not later than one hundred and twenty days from the date of filing of appeal or within an extended period of sixty days, for reasons to be recorded in writing by the Commissioner (Appeals): -

Provided further that any period during which the hearing of an appeal is adjourned at the request of the appellant or is postponed due to any appeal or proceedings or stay order, remand or alternative dispute resolution proceedings or for any other reason, shall be excluded in the computation of the aforementioned periods.”

From a plain reading of sub-section (1A) and (1AA) of section 128 of the Ordinance, it obviously appears that the time specified for the validity of an order passed in relation to the stay of recovery of the tax is a directory in nature. It would give rise to an anomaly if the provision is interpreted in a manner that on the one hand the learned CIR(A) has been empowered to grant the stay after forming an opinion to the effect that the recovery shall cause hardship and on the other hand for the legislature to have intended that the taxpayer is exposed to the rigours of hardship merely because the appeal was not decided within a specified period and that too without any fault on part of the appellant. It is a settled principle of interpretation of a statutory provision that absurdity cannot be attributed to the legislature. It has been consistently held by the august Supreme Court that the determination, whether a provision is mandatory or directory, largely depends upon the “intention and language in which the provision is couched.” It is, however, settled law that “where the consequence of failure to comply with the provision is not mentioned the provision is a directory and where the consequence is expressly mentioned the provision is mandatory.” Reliance is placed on Malik Umar Aslam v. Mrs. Sumaira Malik and others, 2014 SCMR 45, Maulana Nur-ul-Haq v. Ibrahim Khalil, 2000 SCMR 1305, Ghulam Hassan v. Jamshaid Ali and others 2001 SCMR 1001, Human Rights Cases Nos. 4668 of 2006, 1111 of 2007 and 15283-G of 2010, PLD 2010 SC 759. In the instant case, the provision is couched in such language which renders the provision as a directory and not mandatory. As already noted above, the legislature could not have intended to cause undue hardship to a taxpayer. A reasonable interpretation of the aforesaid provisions obviously would be that the time specified therein is a directory and, therefore, if the appeal is not decided within the said period, the stay would continue till the disposal or decision of the appeal unless expressly recalled by the learned CIR(A). Any other interpretation would defeat the legislative intent of protecting a taxpayer against undue hardship.

         Almost a similar question was posed before the Hon’ble Islamabad High Court (IHC) whereby his lordship in the case titled M/s Shalimar Recording and Broadcasting Company Vs The Commissioner IR (Appeals), LTU, and two others, 2019 PTD 2082 has eloquently highlighted the principles and law in order to discern whether a provision is to be treated as mandatory or directory. In the said judgment while interpreting the provisos to sub-section (5) of section 131 of the Ordinance it was observed that no doubt these provisos expressly restricted the period of validity of an injective order passed by the Appellate Tribunal Inland Revenue are directory in nature and these provisions are to be read with section 132(2A) of the Ordinance. Similarly, the Hon’ble Lahore High Court in the case titled Shahnawaz Proprietor Tooba Traders vs Appellate Tribunal Inland Revenue and others, 2017 PTD 1134 directed the tribunal to decide the stay application on the principle articulated and annunciated by the Hon’ble Supreme Court in Imran Raza Zaidi Vs v. Government of Punjab, (1996 SCMR 645) wherein the Apex Court examined the provision of section 5 of Punjab Service Tribunal Act, 1974 wherein powers to grant stay were not provided; After observing that provisions of Civil Procedure Code could be invoked it was held: -

“Apart from this, the law is fairly well settled that even in the absence of an express provision for the grant of interim relief, the appellate Court/Tribunal having the power to grant the main relief can also grant the interim relief by suspending wholly or partially, the operation of the order under appeal before it as such a power is reasonably incidental or ancillary to the main appellate jurisdiction.” 

9.      Further, we have noted that Section 129 of the Ordinance describes the powers and procedure to be adopted while the learned CIR(A) deals with an appeal. The provisos to Sub-section (4) of Section 129, which were inserted through the Finance Act, 2009, provides that the learned CIR(A) shall decide the appeal within one hundred and twenty days or an extended period of sixty days of its filing. Section 129, therefore, cannot be read in isolation and has to be examined and interpreted in the context of other provisions relating to the Commissioner's Appeal so that the legislative intent and the scheme could be discovered. Both the sections i.e 128 and 129 have prescribed time limitations. If the time specified in sub-section (1A) and (1AA) of section 128 is treated as mandatory and otherwise in the case of sub-section (4) of section 129 then it would give rise to an anomalous and odd situation. The appeal may not have been decided within the time prescribed under section 129(4) because of the acts or omissions on the part of the Department or the learned CIR(A) and yet the taxpayer would be exposed to hardship by depositing the liability. Likewise, if the time prescribed under sub-section (1A) and (1AA) of section 128 is treated as mandatory then it would lead to an even more preposterous consequence because in such an eventuality the party which has exercised the statutory right of appeal will be left without a remedy because the proceedings would have abated on the lapse of time. The statutory right of appeal would become redundant. Losing the right of appeal before the CIR(A) is of greater significance having regard to the scheme of the Ordinance. 

10.      The scheme of the Ordinance especially after the amendment of section 128 of the Ordinance conferring powers of granting stay upon the appellate authority after insertion of sub-section (1A) and (1AA) in section 128 of the Ordinance by Finance Act, 2012 with effect from 01.07.2012 and further by Finance Act, 2015 with effect from 01.07.2015 respectively extending period of stay granted by the CIR(A) in the first instance for 30 days then extendable up to 30 days in sub-section (1AA), and this amendment purportedly having been brought on the statute book in pursuance of the decision of the Hon'ble Supreme Court in the case of Additional Collector-II Sales Tax, Lahore Vs M/s Abdullah Sugar Mills Ltd, (supra), the question is as to whether such powers to grant stay can still be implied as an inherent power of the first appellate authority, namely, CIR (Appeals) or not. The answer to this question, in the opinion of this Tribunal, has to be given in affirmative. The reasons are not far to seek. However, a perusal of the foregoing judgments it clearly emerges that: - 

i.       The power to grant a stay or interim relief has to be read as co-extensive with the power to grant final relief, the object being that in the absence of the power to grant interim relief, the final relief itself may be difficult.

ii.      Once an appeal is provided, it cannot be rendered negative in cases where the taxpayer was not at fault.

iii.     The object of the amendment made in Section 128 by the Finance Acts, 2012 and 2015 was not to defeat the vested right of an appeal in a taxpayer whose appeal could not be disposed not on account of any omission or failure on his part, but either the failure of the appellate authority or acts of Revenue resulting in non-disposal of the appeal within the extended period as provided. 

iv.     It would not be possible on one hand to hold that there is a vested right of appeal and on the other hand to hold that there is no power to continue the grant of interim relief for no fault of the taxpayer by divesting the incidental power of the appellate authority to continue the interim relief. Such a reading would result in such an exercise being rendered unreasonable and violative of Article 4 of the Constitution of the Islamic Republic of Pakistan, 1973.

           The powers of the appellate authorities are indisputably wider and superior in nature. Section 129 of the Ordinance clearly stipulates that in disposing of an appeal, the CIR (Appeals) can confirm, modify, reduce, enhance or annul the assessment. Section 129(1)(b) of the Ordinance further provides that in other cases, he may pass such order in appeal as he thinks fit. These words harmoniously read, definitely mean that powers of appellate authorities under the Ordinance are wide enough. Such powers could not be intended to be drained out or rendered meaningless if the power to grant stay against the recovery of disputed demand is to be confined only to the extent of sixty days. Such expressly, necessary and inherent power must necessarily be read into these provisions conferring the powers upon the appellate authority to modify the impugned assessment order in any manner. In specific terms, the first appellate authority can even enhance the taxable income, while he has the power to reduce or completely set at naught the assessment. The words "as he thinks fit" in section 129(1)(b) are not redundant, as no such redundancy can be attributed to the legislature. Therefore, the mere mentioning of power to grant a stay for a maximum period of 60 days in section 128 of the Ordinance cannot mean that stay cannot be extended further during the pendency of appeal particularly when the delay in deciding the appeal is not attributable to the taxpayer.

11.      In the landmark decision delivered on 11.03.1968, the three Judges Bench of the Hon'ble Supreme Court in the case of Income Tax Officer Vs. M.K. Mohammed Kunhi reported in (1969) 71 ITR 815 (SC): AIR 1969 SC 430, in a unanimous opinion authored by Grover, J, dealing with words "as he may think fit", which were available to the ITAT also while deciding appeals before it and in the face of absence of clear provisions for grant of stay against the disputed demand of tax, the Apex Court held that such power is inherent in the appellate powers and the Tribunal should be deemed to have such power under Section 254 of the Indian Income Tax Act, 1961. Quoting from Domat's Civil Law Cushing's Edition, Vol. 1 at page 88, the Hon'ble Supreme Court noted the following quotation: -

"It is the duty of the judges to apply the laws, not only to what appears to be regulated by their express dispositions, but to all the cases where a just application of them may be made, and which appear to be comprehended either within the consequences that may be gathered from it."

Further relying on the Maxim "Cui jurisdiction date est, ea quoque concessa essee videntur, sine quibus jurisdictio explicari non-potuit", which means "where an inferior court is empowered to grant an injunction, the power of punishing disobedience to it by commitment is impliedly conveyed by the enactment, for the power would be useless if it could not be enforced."

           Thus, any interpretation which eludes or frustrates the recipient of justice is not to be followed. Justice means justice between both parties. Justice is the virtue, by which the Court gives to a man what is his due. Justice is an act of rendering what is right and equitable towards one who has suffered a wrong. The underlying idea is of balance. It means to give to each his right. Therefore, while tempering the justice with mercy, the Court has to be very conscious that it has to do justice in exact conformity with the statutory requirements.    

12.    Thus, it is evident from the above-referred law and the judgments cited supra when on a similar question, the Appellate Tribunal was held to have the power to extend the stay of demand in an appeal pending before it beyond the period of 180 days even after the introduction of 2nd proviso to section 131(5), we see no reason why the same legal position should not follow in the case of the Commissioner Inland Revenue (Appeals), who is also an appellate authority like the Appellate Tribunal. In this situation, what holds good in the case of the Appellate Tribunal equally applies to the Commissioner Inland Revenue, (Appeals). By respectfully following the foregoing judgments and the statutory provisions, we hold that the Commissioner Inland Revenue, (Appeals) must be held to have the power to grant stay till decision on appeal, which is incidental or ancillary to its appellate jurisdiction. It is also pertinent to mention here that almost a similar view was taken by this Tribunal in the case titled International Enterprises, Karachi Vs. The Commissioner Inland Revenue, Zone-V, RTO-II, Karachi, (2019 PTD 1201). Thus, the answer to the question is in affirmative. Accordingly, the appeal of the appellant is accepted and the impugned order passed by the learned CIR(A) is annulled with the observations that the appellant may file a fresh application for an extension of stay before the learned CIR (A) alongwith this order within 07-days from the date of receipt of this order. If such application is made, then untill the decision of such application, no coercive measures will be taken for recovery of tax against the appellant. The miscellaneous application for an interim order is also accordingly disposed of.

13.      Before parting we may observe herein that of late, we have experienced a flood of such appeals, where the appellant has filed the application for an extension in a stay after expiry of sixty days before the appellate authority but the appellate authority has failed to give interim relief and, in the meantime, the assessing officer had proceeded to make recovery which causes in the filing of a number of appeals before this Tribunal. This can be avoided by the appellate authorities concerned showing more concern to their duties and by disposing of such stay applications expeditiously by considering binding judgments of the higher courts. In Barkat Ali vs Muhammad Ehsan, (2000 SCMR 556), the Hon’ble Supreme Court reiterated that the principal object behind all legal formalities is to safeguard the paramount interest of justice. Legal precepts were devised with a view to impart certainty, consistency, and uniformity to the administration of justice and to secure it against arbitrariness, errors of individual judgment, and mala fides. Unfortunately, disobeying or non-considering the binding judgments by the first appellate authorities, this Tribunal is being flooded with avoidable litigation which is causing more harm to the public at large who is awaiting for dispensation of justice within a reasonable time from the highest fact-finding authority in the State. This Tribunal is already burdened with thousands of cases awaiting their turn for disposal. The constraint in which this Tribunal is functioning is being added by this inaction of the authorities and is causing a delay in disposal of a huge number of cases. We do not propose to make this order an occasion to illustrate the various reasons for the delay but we will be failing in our duty if we refrain from showing our concern to such callousness on the part of the appellate authorities in sitting tight over the stay application compelling the taxpayer to run either to the High Court or Tribunal by filing writ petition or appeal respectively simply to get an order for an extension in the stay. We, therefore, recommend the Federal Board of Revenue to look into this aspect of the matter and, if necessary, to issue a circular to all the appellate authorities directing them to dispose of stay applications expeditiously in accordance with the binding judgments of the higher courts and so long the stay application is not disposed of, the Assessing Officer must be slow or reluctant in initiating the recovery process. Let a copy of this order be supplied to the learned Chairman, FBR, and learned Member Legal, for information and necessary action.

14.    This order consists of (14) pages and each page bears my signature.


        

Sd/-
 (M. M. AKRAM)
JUDICIAL MEMBER

Sd/-
 (MUHAMMAD IMTIAZ)
 ACCOUNTANT MEMBER

 

 

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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