The Board, it appears, is unable to evolve an undisputed and transparent policy for selection of cases for audit on parametric basis. Examination of impugned parameters shows that even minor variations, as compared to previous years declarations, are made basis for selection of cases. The plea of attaching stigma as raised in JDW Sugar Mills Case (supra), is also a matter of concern which is to be considered by the FBR.
7. Basic characteristic of State, as envisaged in Article 7 of the Constitution of Islamic Republic of Pakistan, 1973 is its power to impose tax or cess. Article 77 says that tax shall be levied by or under the authority of Act of Parliament. It is corresponding duty of every citizen or person (as defined in Article 260 of the Constitution) to pay tax in accordance with law (Act of Parliament). Universal Self-Assessment Scheme, under Ordinance of 2001, cannot be construed to have given a carte blanche to taxpayers, who may declare the tax payable as per their whims. A confidence is reposed on the taxpayer, presuming that payable tax declared in the income tax return is in accordance with law. It is right of the State to audit income tax affairs of a person, at least once in six years, hence his selection for audit cannot be termed as detrimental to his rights.

 

The principles propounded in the above judgments very much underlie the objects for which FOI Ordinance was promulgated. The application by the petitioner was not responded to by the Board contrary to the command of the FOI Ordinance, which prompted him to approach the Tax Ombudsman. The Board instead of complying with the direction of Tax Ombudsman rushed to the President to get its decision set aside even though the President had no authority to entertain the said representation under the applicable law. The Board and its Chairman did not pass any order on the petitioner’s application and the President did not furnish any reasons in his impugned order for claiming section 8 exclusion on the recommendations given by ADRC. The very purpose for which the FOI Ordinance was promulgated was thus defeated by the Board and the President and that too without application of mind and, it appears, for improper motives.

9. The net result of aforesaid repeal and amendment in section 113 of the Ordinance is that the period provided for carry forward of the tax credit was five years for tax years 2005 to 2008 and 2011 onward, whereas it was three years for the tax year 2010 and 2011. In the instant case, the excess amount of tax paid which was carried forward relates to tax years 2005 to 2008 and under the repealed section 113(2)(c) prevailing at the relevant time, the said amount was adjustable against tax liability for five years immediately succeeding the tax year for which the amount was paid. The subsequent change in law through re-enacted section 113(2)(c) where period was reduced to three years.

In a Suo Motu Case No.4 of 2010, reported as (PLD 2012 S.C. 553), Honble Supreme Court of Pakistan has held that right to free trail and due process is to be read as part of every statute; relevant excerpts are reproduced hereunder:-
27). ¦law, or custom or usage having the force of law, which is inconsistent with the right to a 'fair trial' would be void by virtue of Article 8 of the Constitution¦. 
¦Right to a fair trial has been associated with the fundamental right of access to justice, which should be read in every statute even if not expressly provided for unless specifically excluded¦
No proceedings were undertaken to show; first that tax was not recoverable from the company, secondly to hold the petitioner as liable to pay tax under section 139, after confronting and providing opportunity of being head. Petitioners right of due process and fair trial is found to have been violated. Therefore, the impugned notice under section 140 of the Ordinance is held as void.

In a Suo Motu Case No.4 of 2010, reported as (PLD 2012 S.C. 553), Honble Supreme Court of Pakistan has held that right to free trail and due process is to be read as part of every statute; relevant excerpts are reproduced hereunder:-
27). ¦law, or custom or usage having the force of law, which is inconsistent with the right to a 'fair trial' would be void by virtue of Article 8 of the Constitution¦. 
¦Right to a fair trial has been associated with the fundamental right of access to justice, which should be read in every statute even if not expressly provided for unless specifically excluded¦
No proceedings were undertaken to show; first that tax was not recoverable from the company, secondly to hold the petitioner as liable to pay tax under section 139, after confronting and providing opportunity of being head. Petitioners right of due process and fair trial is found to have been violated. Therefore, the impugned notice under section 140 of the Ordinance is held as vo

Now we shall advert to the merits of case, in light of provisions discussed above; the Assessing Officer first assessed the house in question at normal tax rate and thereafter it was also subjected to tax under Section 14C(1). The treatment given by the Assessing Officer is not in accordance with the law discussed supra. Tax under Section 14C could not had been charged without first confronting, through show cause notice, that the house fell in the immovable asset under Section 14(1)(d) and was chargeable to tax under Section 14C(1). There is no provision in the Act of 1963, which allows double taxation of an immovable asset. Section 14(1) is a non-obstante provision, but it excludes only other rates of tax on the immovable asset covered under it. Had it intended to tax the immovable asset, in addition to normal rate of tax, it should had been couched in the words, ˜Notwithstanding the levy of tax by any other provision. Charging of tax under Section 14C without show cause notice, after charging tax at normal rate was illegal.

“Whether under the facts and circumstances of the case, the Tribunal was justified to annul the assessment for the reason that Assistant Commissioner is not an Authority under section 2(1)(10) read with Section 8 of the Wealth Tax Act, 1963?”
“Deputy Commissioner” means a person appointed to act as a Deputy Commissioner of Wealth Tax, a Wealth Tax Officer, a Special Officer and a Tax Recovery Officer.”? Finding of Appellate Tribunal, in order under question, lacks collective reading of relevant provisions. The word ‘Deputy Commissioner’ was read in isolation and was misconstrued as a designation simplicator. Despite reproducing the definition of Deputy Commissioner in its order, Appellate Tribunal was swayed by the fact that Assistant Commissioner was not listed section 8 of the Act. Appellate Tribunal recorded concession of Departmental Representative that there was a lacuna in law. It may be observed; any concession on erroneous interpretation of law shall not operate as estoppel, as there is no estoppel against law. 9. For the above reasons, our answer to the legal proposition, in shape of reframed question, is in negative. The appeals are decided in favour of appellant department.

Immovable Property: Examination of the above quoted provisions shows that it envisaged only those assets which belonged to assessee on the valuation date. The word ownership is consciously not used in this section for the word belonging. Therefore, in our opinion the observations of the forums below on Section 17 of the Registration Act, 1908 are irrelevant. Clause (iii) to Section 2(16) was inserted through Finance Act, 1998 which postulated that in case right, title or interest, of more than one person, vested in an immovable property, such property was to be assessed under the status of an Association of Persons. The use of words the right, title or interest to or in any immovable property show that legislature has referred to an undivided immovable property. No inference can be drawn from the quoted provision that this clause empowers the department to brush aside an agreement for partition between the co-owners particularly after its implementation. Legislatures intention, for introducing concept of an AOP in wealth tax law, was to avoid hassle of identifying share of an individual in an undivided immovable property, for the purpose of charging wealth tax. It was not meant to charge higher rate of tax. If a jointly owned property is partitioned and share of each individual is undisputedly identifiable, it should have been included in net wealth of the individual and tax should have been charged accordingly.

Immovable Property: Examination of the above quoted provisions shows that it envisaged only those assets which belonged to assessee on the valuation date. The word “ownership” is consciously not used in this section for the word “belonging”.
Therefore, in our opinion the observations of the forums below on Section 17 of the Registration Act, 1908 are irrelevant. Clause (iii) to Section 2(16) was inserted through Finance Act, 1998 which postulated that in case right, title or interest, of more than one person, vested in an immovable property, such property was to be assessed under the status of an “Association of Persons”. The use of words “the right, title or interest to or in any immovable property” show that legislature has referred to an undivided immovable property. No inference can be drawn from the quoted provision that this clause empowers the department to brush aside an agreement for partition between the co-owners particularly after its implementation. Legislature’s intention, for introducing concept of an AOP in wealth tax law, was to avoid hassle of identifying share of an individual in an undivided immovable property, for the purpose of charging wealth tax. It was not meant to charge higher rate of tax. If a jointly owned property is partitioned and share of each individual is undisputedly identifiable, it should have been included in net wealth of the individual and tax should have been charged accordingly.

“The issue in appeals is the charge of additional tax u/s 87 for the years under appeal. The assessing officer passed orders u/s 87 for these years for default of payment of Advance Tax u/s 53. The department’s view point is that there is no time limit specified u/s 87, and, therefore, the learned CIT(A),
was not justified to delete the Additional Tax on the ground that the orders u/s 87 had been passed after more than four years from the date of assessment orders. The learned CIT(A) has relied on the provisions of section 156. It is, therefore, noted that the assessing officer has not invoked the provisions of section 156 but has in fact only passed order u/s 87. The learned AR of the assessee states that it has already been held by this Tribunal in a case reported as (1995) 72 Tax 165 (Trib.), that if Additional Tax u/s 87 is not charged at the assessment stage, then it be deemed to be a mistake apparent from the record and such order can be rectified, subsequently, by the provisions contained in section 156. In the present case, no orders u/s 156 were passed. Accordingly, the order of the learned CIT(A) is confirmed. The departmental appeal fails.” Ratio of the judgment is that no order to recover the advance tax could be passed under Section 53 because of the language used in it. A fiscal legislation, like the Repealed Ordinance, is a compendium of different kinds of provisions, some of which are ‘charging provision’, like Section 9 (for charging income tax), Section 53 (for charging advance tax) and Section 87 (for charging additional tax). Some are ‘machinery provisions’ like Section 62, 65 and 66A, which provide machinery for assessment or determination of the tax levied by charging sections. And last category is of ‘recovery provisions’ which provide mode of recovering the tax so determined.

The instructions/guidelines could not have overriding effect on the statutory provisions of law. The main function under Section 66A is supervisory, in order to ensure that on account of any error, there is no loss of revenue, caused to the Department. To ensure so he can enhance, modify, cancel or direct for fresh assessment to be made. It is also important to consider that both of these ingredient i.e. (i) if the order passed by the Assessing Officer is erroneous; (ii) if the same is prejudicial to the interest of the revenue;, should arise out of the assessment of the Assessing Officer simultaneously so that IAC could invoke the revisional jurisdiction under Section 66A. If any one of the above mentioned ingredient is not available, then the IAC could not invoke the jurisdiction under Section 66A. The provision of Section 66A which has given the supervisory jurisdiction to the IAC could not be made redundant or dormant because of the application of the word used as approval accorded or discussion or consultation but the same is meant to safeguard of the interest of the revenue. In our opinion the consultation with IAC, at assessment stage, was purely administrative or ministerial in nature, as it was not binding on the Deputy Commissioner. Subsequent exercise of powers under Section 66A by IAC cannot be termed as change of opinion.

Taking instructions from the said guideline in the case before us, in our humble opinion, the provisions of Section 65 ibid are substantial in nature and being penal provisions which will have a direct pecuniary affect on the parties, as such, in the absence of any one specific reason for re-opening of the case for assessment notice under Section 65 of Repealed Ordinance would cause a serious prejudice to the assessee and be an exercise in futility and a nullity in the eye of law. We have also considered the requirements laid down in sub-section (2) of Section 65 ibid which require that no proceedings under sub-section (1) are to be initiated without definite information coming into the possession of the Deputy Commissioner and without having previous approval of the Inspecting Additional Commissioner of Income Tax in writing to do so. It is, therefore, essential that the proceedings in sub-section (1) are to be initiated on some definite information with prior approval of the Additional Commissioner. This does not appear to be the case, otherwise, the notice would have been properly issued with specific allegation against the respondent, as such non-ticking of the relevant clause also gives the inference of non-compliance of the requirements of sub-section (2) of Section 65 ibid.

Pir Bakhsh represented by his Legal Heirs and others vs. The Chairman, Allotment Committee and others held as under:- “It is clear from the above that a general decision becomes an authority in like-case and the Judges are bound to follow the same so long as it stands unreversed.
There is another very strict condition that the binding effect would disappear if it is shown that the law was misunderstood or misapplied in that particular case. Now in the case in hand the Honourable Supreme Court has reversed the judgment of High Court, so nothing is left in the judgment of High Court to follow. The controversy as to ‘judgment in personam’ and ‘judgment in rem’ is, therefore, not relevant beyond this stage. In the case of Messrs Syed Bhais (Pvt.) (supra), while relying on 2005 CLD 1208 it has inter alia been held as under:- “I have given anxious consideration to the arguments and the precedents cited in this behalf and my opinion is that since petition has not been filed on the basis of resolution as the attached resolution is not for filing of this petition against the impugned letter in the petition and Mansoor Ahmad Khan has no authority to file this petition. There is no cavil to the proposition that when law requires a thing to be done in a particular manner, the same must be done accordingly and if prescribed procedure is not followed, it is presumed that the same has not been legally done. As regards the subsequent resolution, that will not resolve the issue as for that matter there should have been some powers vesting in the Directors to ratify the wrong. Since no power has been provided in the Memorandum and Articles of Association attached with the C.M. No.2301 of 2011 the Directors had no authority to issue this subsequent resolution. “For the purposes of the present discussion the law presumes a controversy to be a past and closed transaction where no appeal by either party is pending against the original order.” A bare reading of the afore-quoted portion of the judgment makes it more than clear that cases wherein no appeal has been filed against the original order would fall within the definition of past and closed transaction but in the instant matter the original order was passed in Writ Petition No.1914/2004 and the same was challenged before the Hon’ble Supreme Court of Pakistan and the order passed by this Court was set aside, thus the petitioner’s case does not fall within the meaning of past and closed transaction.

Pir Bakhsh represented by his Legal Heirs and others vs. The Chairman, Allotment Committee and others held as under:- “It is clear from the above that a general decision becomes an authority in like-case and the Judges are bound to follow the same so long as it stands unreversed.
There is another very strict condition that the binding effect would disappear if it is shown that the law was misunderstood or misapplied in that particular case. Now in the case in hand the Honourable Supreme Court has reversed the judgment of High Court, so nothing is left in the judgment of High Court to follow. The controversy as to ‘judgment in personam’ and ‘judgment in rem’ is, therefore, not relevant beyond this stage. In the case of Messrs Syed Bhais (Pvt.) (supra), while relying on 2005 CLD 1208 it has inter alia been held as under:- “I have given anxious consideration to the arguments and the precedents cited in this behalf and my opinion is that since petition has not been filed on the basis of resolution as the attached resolution is not for filing of this petition against the impugned letter in the petition and Mansoor Ahmad Khan has no authority to file this petition. There is no cavil to the proposition that when law requires a thing to be done in a particular manner, the same must be done accordingly and if prescribed procedure is not followed, it is presumed that the same has not been legally done. As regards the subsequent resolution, that will not resolve the issue as for that matter there should have been some powers vesting in the Directors to ratify the wrong. Since no power has been provided in the Memorandum and Articles of Association attached with the C.M. No.2301 of 2011 the Directors had no authority to issue this subsequent resolution. “For the purposes of the present discussion the law presumes a controversy to be a past and closed transaction where no appeal by either party is pending against the original order.” A bare reading of the afore-quoted portion of the judgment makes it more than clear that cases wherein no appeal has been filed against the original order would fall within the definition of past and closed transaction but in the instant matter the original order was passed in Writ Petition No.1914/2004 and the same was challenged before the Hon’ble Supreme Court of Pakistan and the order passed by this Court was set aside, thus the petitioner’s case does not fall within the meaning of past and closed transaction.

Question: (c) Whether Appellate Tribunal was justified to exclude the services provided under an agreement/contract from the transactions envisaged under clause (c) of Section 153(1) of the Income Tax Ordinance, 2001?


Answer: Department, while interpreting this clause in their own manner, is ignoring the grammatical rule that phrase other than a contract for shall also be read with the phrase the rendering of or providing of services, besides reading it with the phrase the sale of goods. In simple words ˜rendering of or providing of services under a contract shall be excluded from the clause (c). Our answer to Question No.(c) is also in Affirmative, i.e., against the applicant department.

And In Messrs Qadri Brothers vs. Assessing Authority (PLD 1969 Karachi 47) as

Now, what is a local fund? This term again has a technical meaning when used in any legislative provision. We may refer to the Sind Local Fund Audit Act of 1930.
This term has been defined by section 3, clause (d) of the said Act to mean any fund to the control or Management of which a local authority is legally entitled and includes the proceeds of any cess, rate, duty or tax which such authority is legally entitled to impose, etc. As far back as 1871, the term local authority and local fund was defined in the Cattle Trespass Act (1871) in section 2. Local authority was defined to mean any body of persons for the time being invested by law with control and administration of any matters within a specified local area, and local fund was defined to mean any fund under the control or management of a local authority. (emphasis supplied.)
21. From the above, it is clear that the Authority has a statutory status. It enjoys the powers of imposing fees and charges and is involved in developing and regulating housing in the area. The Authority also maintains a separate Fund by the name of Defence Housing Authority Fund (Fund) and all the moneys is received by the authority are credited to the said Fund. It also prepares its own budget which is placed before the Governing Body that comprises the Secretary, Ministry of Defence, Corps Commander, Lahore.

22. I, therefore, hold that DHA is a local authority and, therefore, is exempted from tax under Section 49 of the Income Tax Ordinance, 2001 (as the said section was prior to the Finance Act, 2008) for Tax Years 2003-2005. As a result, letter dated 07.04.2008 issued by respondent No.1, as well as, notices issued under Section 122 (1) (5) (5-A) of the Income Tax Ordinance, 2001 dated19.05.2008 for Tax Year 2003-2005 are set aside being illegal and without lawful authority.

And In Messrs Qadri Brothers vs. Assessing Authority (PLD 1969 Karachi 47) as

Now, what is a local fund? This term again has a technical meaning when used in any legislative provision. We may refer to the Sind Local Fund Audit Act of 1930.
This term has been defined by section 3, clause (d) of the said Act to mean any fund to the control or Management of which a local authority is legally entitled and includes the proceeds of any cess, rate, duty or tax which such authority is legally entitled to impose, etc. As far back as 1871, the term local authority and local fund was defined in the Cattle Trespass Act (1871) in section 2. Local authority was defined to mean any body of persons for the time being invested by law with control and administration of any matters within a specified local area, and local fund was defined to mean any fund under the control or management of a local authority. (emphasis supplied.)
21. From the above, it is clear that the Authority has a statutory status. It enjoys the powers of imposing fees and charges and is involved in developing and regulating housing in the area. The Authority also maintains a separate Fund by the name of Defence Housing Authority Fund (Fund) and all the moneys is received by the authority are credited to the said Fund. It also prepares its own budget which is placed before the Governing Body that comprises the Secretary, Ministry of Defence, Corps Commander, Lahore.

22. I, therefore, hold that DHA is a local authority and, therefore, is exempted from tax under Section 49 of the Income Tax Ordinance, 2001 (as the said section was prior to the Finance Act, 2008) for Tax Years 2003-2005. As a result, letter dated 07.04.2008 issued by respondent No.1, as well as, notices issued under Section 122 (1) (5) (5-A) of the Income Tax Ordinance, 2001 dated19.05.2008 for Tax Year 2003-2005 are set aside being illegal and without lawful authority.

And In Messrs Qadri Brothers vs. Assessing Authority (PLD 1969 Karachi 47) as

Now, what is a local fund? This term again has a technical meaning when used in any legislative provision. We may refer to the Sind Local Fund Audit Act of 1930.
This term has been defined by section 3, clause (d) of the said Act to mean any fund to the control or Management of which a local authority is legally entitled and includes the proceeds of any cess, rate, duty or tax which such authority is legally entitled to impose, etc. As far back as 1871, the term local authority and local fund was defined in the Cattle Trespass Act (1871) in section 2. Local authority was defined to mean any body of persons for the time being invested by law with control and administration of any matters within a specified local area, and local fund was defined to mean any fund under the control or management of a local authority. (emphasis supplied.)
21. From the above, it is clear that the Authority has a statutory status. It enjoys the powers of imposing fees and charges and is involved in developing and regulating housing in the area. The Authority also maintains a separate Fund by the name of Defence Housing Authority Fund (Fund) and all the moneys is received by the authority are credited to the said Fund. It also prepares its own budget which is placed before the Governing Body that comprises the Secretary, Ministry of Defence, Corps Commander, Lahore.

22. I, therefore, hold that DHA is a local authority and, therefore, is exempted from tax under Section 49 of the Income Tax Ordinance, 2001 (as the said section was prior to the Finance Act, 2008) for Tax Years 2003-2005. As a result, letter dated 07.04.2008 issued by respondent No.1, as well as, notices issued under Section 122 (1) (5) (5-A) of the Income Tax Ordinance, 2001 dated19.05.2008 for Tax Year 2003-2005 are set aside being illegal and without lawful authority.

In presence of aforesaid order passed by respondent No. 2, the respondent No. 3 was not justified to issue impugned notices. The tenor of the notices itself shows that they have been issued in violation of the order of Commissioner (Appeals), which has already set the controversy between the parties at naught and the order has, admittedly, remained unchallenged till to date. Respondents, for all intents and purposes, have accepted and acknowledged the finality of order dated 13.12.2006 passed by the Commissioner (Appeals) in favour of petitioner. No legal and moral justification exists to reopen the issue which has attained finality and is a past and closed transaction for all purposes. In this regard, reliance can also be placed on Zarai Taraqiati Bank Limited and others v. Mushtaq Ahmed Korai (2007 SCMR 1698) and Noor Muhammad and others v. Ghulam Rasul and others (1999 SCMR 705)
8. The argument of learned counsel for the respondents is that writ is not maintainable against impugned notices which are assailable before higher adjudicating authorities. This argument also is not of much substance for the reason that once a controversy is finally and conclusively settled by a forum of competent jurisdiction, the same cannot be restarted or reactivated on its own. Superior Courts of the country have already held that if the notice is palpably unlawful, ultra vires, without jurisdiction or with mala fide intent, such action is to be nipped in the bud. Reference, in this regard, can be made to Mughal-E-Azam Banquet Complex v. Federation of Pakistan and others (2011 PTD 2260) and Northern Power Generation Company Ltd. v. Federation of Pakistan etc. (2015 LHC 3623). Since, the impugned notices are not legally justified, therefore, the objection of maintainability of petition raised by learned counsel for the respondents is overruled and the constitutional petition is held to be maintainable..

In presence of aforesaid order passed by respondent No. 2, the respondent No. 3 was not justified to issue impugned notices. The tenor of the notices itself shows that they have been issued in violation of the order of Commissioner (Appeals),  which has already set the controversy between the parties at naught and the order has, admittedly, remained unchallenged till to date. Respondents, for all intents and purposes, have accepted and acknowledged the finality of order dated 13.12.2006 passed by the Commissioner (Appeals) in favour of petitioner. No legal and moral justification exists to reopen the issue which has attained finality and is a past and closed transaction for all purposes. In this regard, reliance can also be placed on Zarai Taraqiati Bank Limited and others v. Mushtaq Ahmed Korai (2007 SCMR 1698) and Noor Muhammad and others v. Ghulam Rasul and others (1999 SCMR 705)
8. The argument of learned counsel for the respondents is that writ is not maintainable against impugned notices which are assailable before higher adjudicating authorities. This argument also is not of much substance for the reason that once a controversy is finally and conclusively settled by a forum of competent jurisdiction, the same cannot be restarted or reactivated on its own. Superior Courts of the country have already held that if the notice is palpably unlawful, ultra vires, without jurisdiction or with mala fide intent, such action is to be nipped in the bud. Reference, in this regard, can be made to Mughal-E-Azam Banquet Complex v. Federation of Pakistan and others (2011 PTD 2260) and Northern Power Generation Company Ltd. v. Federation of Pakistan etc. (2015 LHC 3623). Since, the impugned notices are not legally justified, therefore, the objection of maintainability of petition raised by learned counsel for the respondents is overruled and the constitutional petition is held to be maintainable..

Question: “Whether under the facts and circumstances of the case learned Appellate Tribunal was justified to hold that provision 121(1)(d) of the Income Tax Ordinance, 2001 could not be invoked for non-submission of documents during audit proceedings, in presence of order under Section 120 of the Income Tax Ordinance, 2001?”
Answer: It is reiterated that we could answer the legal proposition in view of binding decision by Hon’ble Supreme Court of Pakistan, however, after re-examination of the judgment by learned Sindh High Court and learned Division Bench of this Court, in juxtaposition, we convincingly answer the legal proposition as couched in the resettled question (supra) in affirmative i.e., against the applicant department.

Comprehensive mechanism is given by legislature under the Act of 1990, both for expeditious issuance of refund and for protecting National Exchequer from any loss. Under sub-section (2) of Section 8B of the Act of 1990, refund is to be issued on fulfillment of the conditions and subject to restriction specified by law. At the same time, under sub-section (3) of Section 10; where there is reason to believe that a person has claimed a refund which was not admissible to him, the proceedings for recovery of same are to be completed within sixty days after due enquiry, audit or investigation regarding its admissibility. Chapter V of the Sales Tax Rules, 2006 (the Rules) provides a procedure for claiming refund, its scrutiny and issuance. Rule 36 of the Rules allows a post refund audit after issuance of refund. Section 66 of the Act also deals with the refund, which is required to be claimed within one year and Section 67 postulates further payment in shape of compensation if due refund is not made within time specified under Section 10. The Appellate Tribunal as well as Authorities under the Act of 1990 are to keep in mind the principle embodied in Section 8A of the Act. It enjoins, joint and several liability on registered persons, in supply chain; if a registered person, receiving a taxable supply from another registered person, has reasonable grounds to suspect that some or all of the tax payable in respect of the supplies would go unpaid.
Honble Supreme Court in Commissioner of Income-Tax, Companies Zone-II, Karachi v. Messrs Sindh Engineering (Pvt.) Limited, Karachi (2002 SCMR 527 = 2002 PTD 419) has held that non-exercise of jurisdiction by Appellate Tribunal is a question of law. Relevant excerpts from the judgment are reproduced for facility:-
10. ¦.Undoubtedly when a Tribunal declines to exercise jurisdiction for one or the other pretext then the basic question of law emerges for consideration whether the decision under challenge is legally justified or not. Here we are not confronted with the situation of counting the shares of the Government or private persons in the respondents organization but our problem is whether jurisdiction has been justifiably exercised by the Tribunal and High Court or not. There is no cavil with the proposition that non-exercise or mis-exercise of jurisdiction by a forum/Tribunal is relatable to the question of law. However, the forum/Tribunal seized with a proposition is free to form its opinion independently by exercising jurisdiction in a prescribed or settled manner. As it has been pointed out hereinabove that Income Tax Appellate Tribunal had not independently assigned any reason in holding that respondent organization was a public company because it has based its finding on some earlier decision referred to hereinabove and we were not aware that what reasons prevailed upon learned Tribunal while deciding those cases. Thus in such-like situation it was obligatory upon the Tribunal either to have disclosed the facts as well as reasons of earlier case on which reliance was placed or the respondents case should have been examined independently. As such, we are of the opinion that the Income Tax Appellate Tribunal did not exercise its jurisdiction in accordance with law. Therefore, question of non-exercising of jurisdiction properly by the Tribunal, being a question of law, was liable to be answered by the High Court in its appellate jurisdiction under section 136(2) of the Ordinance but it failed to do so.

Refund Payment Order Nevertheless, the Commissioner is bound under subsection (4), to make a refund order within sixty days from receipt of application for refund. His inaction is made appealable under subsection (5).
In our opinion, on expiration of sixty days, a negative order is presumed to have been passed. In case appeal is accepted, against the inaction, and refund is determined by Appellate Court, the refund shall be taken as due on the date when sixty days expired from receipt of application for refund. Courts would not allow the department to take advantage of its own inaction within the stipulated period of sixty days

Tax & Fee
27. Taxation is that inherent power of Government to raise fund with which it promotes general welfare and looks after the protection of citizens. State v. Kromarek 52, N. W. 2d 713, 715, 78 N.D. 769. In fact tax is a charge to pay the cost of Government without regard to special benefits conferred (In re Shurtz˜s will, 46 N. W. 2d 559, 562, 242 Iowa 448).
28. A fee on the other hand is distinguishable from a tax inasmuch as it is meant to defray the cost of particular services rendered to particular individuals. In an Australian case-60 CLC 263 and which has been recurringly quoted Latham, CJ defines both tax and fee in the following words:-
29. Therefore, the distinction between tax and fee lies primarily in the fact that tax is levied as a part of a common burden and constitutes general revenue, while fee is a payment for special benefit or privilege. This distinction between tax and fee was adopted in the case of Abdul Majid and others PLD 1960 Dacca 502 and in the case of Mahboob Yar Khan PLD 1975 Lah. 748. However, it should not be forgotten that there is no generic difference between a tax and fee. Both are compulsory exaction of money by public authorities. A tax is imposed for public purposes and is not supported by any consideration of service rendered in return. Whereas a fee is levied in view of services rendered. Consequently, there is an element of quid pro quo between the payer of the fee and the authority which imposes it.– (emphasis supplied)
I with respect disagree with reasoning of the above cited judgment of the Sind High Court. The cited judgment does not discuss the special beneficial purpose of the Fund given under WWF Ordinance. Second, both fee and tax can be collected under compulsion, therefore, nothing turns on this aspect. Third, WWF Ordinance is not a tax on income for the elaborate reasons given above in this judgment. Fourth, the term •financial amendment– is a generic term and requires qualification when applied to a money bill, as matters relating to fees, charges and penalties can also pass as •financial amendments– but do not constitute Tax for the purposes of Article 72(3) of the Constitution.

Tax & Fee “
27. Taxation is that inherent power of Government to raise fund with which it promotes general welfare and looks after the protection of citizens. State v. Kromarek 52, N. W. 2d 713, 715, 78 N.D. 769. In fact tax is a charge to pay the cost of Government without regard to special benefits conferred (In re Shurtz‘s will, 46 N. W. 2d 559, 562, 242 Iowa 448).
28. A fee on the other hand is distinguishable from a tax inasmuch as it is meant to defray the cost of particular services rendered to particular individuals. In an Australian case-60 CLC 263 and which has been recurringly quoted Latham, CJ defines both tax and fee in the following words:- 29. Therefore, the distinction between tax and fee lies primarily in the fact that tax is levied as a part of a common burden and constitutes general revenue, while fee is a payment for special benefit or privilege. This distinction between tax and fee was adopted in the case of Abdul Majid and others PLD 1960 Dacca 502 and in the case of Mahboob Yar Khan PLD 1975 Lah. 748. However, it should not be forgotten that there is no generic difference between a tax and fee. Both are compulsory exaction of money by public authorities. A tax is imposed for public purposes and is not supported by any consideration of service rendered in return. Whereas a fee is levied in view of services rendered. Consequently, there is an element of quid pro quo between the payer of the fee and the authority which imposes it.? (emphasis supplied) I with respect disagree with reasoning of the above cited judgment of the Sind High Court. The cited judgment does not discuss the special beneficial purpose of the Fund given under WWF Ordinance. Second, both fee and tax can be collected under compulsion, therefore, nothing turns on this aspect. Third, WWF Ordinance is not a tax on income for the elaborate reasons given above in this judgment. Fourth, the term ?financial amendment? is a generic term and requires qualification when applied to a money bill, as matters relating to fees, charges and penalties can also pass as ?financial amendments? but do not constitute Tax for the purposes of Article 72(3) of the Constitution.

Therefore amended assessment order passed on 31.05.2010 was obviously made without providing reasonable opportunity of explaining the position and thus the same was not tenable in law. The Department did not question the satisfaction of the Commissioner Inland Revenue (Appeals) when he entertained and examined the wealth statement as on 30.06.2009 furnished by the respondent. In the peculiar circumstances of this case since the respondent was not provided ample opportunity to explain his position through reply of the notices, therefore he could not be penalized for default on the part of the Assessment Officer. Learned Appellate Tribunal therefore has rightly observed that there was no valid reason with the Taxation Officer to amend the already completed assessment.

In view of the discussion, under the facts and circumstances of this case; since Appellate Tribunal has refused to rectify the order under section 132 the Ordinance,
therefore, this Reference Application, proposing questions from order under section 221 is not entertain-able hence, we decline to exercise jurisdiction under section 133 of the Ordinance.

6. Admittedly, independent notices were not issued for amendment of assessment orders, under Section 120, relating to tax years 2004 to 2008. The Taxation Officer, during proceedings for amendment of assessment order relating to tax year 2009, formed an opinion that household expenses claimed in tax years 2004 to 2008 were not allowable. He went on to disallow the expenses of other years, while making amendment for tax year 2009, which amounts to be a blatant disregard of the provisions of law and sanctity attached to assessment orders, treated to have been issued, under Section 120. 
7. Amendment under Section 122 of the Ordinance can be made on the grounds/reasons mentioned under sub-sections (5) & (5A) i.e. if Commissioner is in possession of ˜definite information, from audit or otherwise, or the order under Section 120 was erroneous and prejudicial to the interest of revenue. In this case; when the source to purchase the motor vehicle was explained by showing savings over the years, the Taxation Officer, in an over ambitious pursuit, not only over stepped his jurisdiction under the law, but had lost sight of the only issue confronted in the show cause notice. If, in opinion of the Taxation Officer, the explained source in shape of the savings was unjustified or unlawful, the right course for him was to issue independent notices under Section 122; proposing amendment of the assessment orders relating to tax years 2004 to 2008 also. Needless to say that an action under the law can be taken only in a way authorized by law. The action of Taxation Officer by overstepping the provisions of law certainly was quram non judice for want of jurisdiction and nullity in the eye of law.

6. Admittedly, independent notices were not issued for amendment of assessment orders, under Section 120, relating to tax years 2004 to 2008. The Taxation Officer, during proceedings for amendment of assessment order relating to tax year 2009,formed an opinion that household expenses claimed in tax years 2004 to 2008 were not allowable. He went on to disallow the expenses of other years, while making amendment for tax year 2009, which amounts to be a blatant disregard of the provisions of law and sanctity attached to assessment orders, treated to have been issued, under Section 120. 
7. Amendment under Section 122 of the Ordinance can be made on the grounds/reasons mentioned under sub-sections (5) & (5A) i.e. if Commissioner is in possession of ˜definite information, from audit or otherwise, or the order under Section 120 was erroneous and prejudicial to the interest of revenue. In this case; when the source to purchase the motor vehicle was explained by showing savings over the years, the Taxation Officer, in an over ambitious pursuit, not only over stepped his jurisdiction under the law, but had lost sight of the only issue confronted in the show cause notice. If, in opinion of the Taxation Officer, the explained source in shape of the savings was unjustified or unlawful, the right course for him was to issue independent notices under Section 122; proposing amendment of the assessment orders relating to tax years 2004 to 2008 also. Needless to say that an action under the law can be taken only in a way authorized by law. The action of Taxation Officer by overstepping the provisions of law certainly was quram non judice for want of jurisdiction and nullity in the eye of law.

12. Argument of Ch. Liaqat Advocate that explanation inserted through Finance Act 2012, shall have retrospective application has no force. Section 113 was inserted by Finance Act 2009 as a new provision after omission of earlier Section 113 in 2008. For tax year 2008 Section 113 was not available on statute book, hence its latter insertion cannot be said to be a continuity of the earlier Section.


13. Section 67 of the Ordinance read with Rule 13 of Income Tax Rules 2001 are also examined in light of arguments by learned counsel for the parties. Proration of expenses between FTR and Normal Law is not to attribute expenses to FTR, rather it is meant to arrive at an actual taxable income by allowing only those expenses, which should have been incurred under Normal Tax Regime. These provisions do not disturb the finality given to FTR, by other provisions under the Ordinance

14. For the reasons discussed above, we are of the opinion that Section 113 (before omission by Finance Act 2008) was a charging provision, which did not exclude receipts relating to FTR from turnover from all sources in clear words, hence it lead to more than one interpretations. Had Legislature intended to charge Minimum Tax on FTR, it could have been done by clear words. Our answer to the question of law, supra, is in Affirmative, i.e., against the Applicant Department in all the cases.

48. It is important to highlight that as under Income Tax Ordinance, 2001, FEA also separately provides invasive powers of investigation under section 45 read with Chapter XIII of the Federal Excise Rules, 2005.
These powers are distinct from the general power to Audit as discussed above in the context of the Income Tax Ordinance, 2001.
50. Section 25(1) of STA simply provides for calling of the record by the tax regulator from a taxpayer. It is section 25(2) which provides that the officer of the inland revenue on the basis of the record obtained under sub-section (1) may, once in a year conduct audit. With the insertion of section 72B through Finance Act, 2010, FBR has been empowered to select persons for audit of tax affairs through computer balloting which may be random or parametric. 
51. Section 25(2) of STA, taken independently, empowers the Commissioner to pick and choose from taxpayers whose record has been called under section 25(1). The said provision vesting the Commissioner with the power to pick and choose a taxpayer for audit, without any objective criteria, is ex facie discriminatory. Additionally, the scope of selection for audit is further restricted, as section 25(2) selects the taxpayers from amongst those taxpayers whose record has been earlier called under section 25(1). This alone is inconsistent with the concept of audit discussed above. Section 25(2) provides for unguided and uncanalised power to conduct audit which, for reasons given above, is ex facie discriminatory and hence unconstitutional and illegal. 
52. The constitutionality of section 25(1) of STA can be saved if it is read down, as discussed above, and read in tandem with section 72B of the STA. Hence, section 25(1) provides the machinery provision for conducting of audit of the tax affairs of a taxpayer, after it has been selected for audit by the FBR under section 72B. 
53. It is clarified that rest of section 25, including sub-section (1) remain intact and is not dependent on section 72B. Impugned Notice dated 14-12-2011 issued under section 25 of the STA by the Commissioner Inland Revenue (Zone-11) is therefore declared to be unconstitutional and illegal and hence set aside
54. As a conclusion, for the above reasons, Section 177(1) of the Ordinance, Section 46(1) of FEA and Section 25(2) of STA are read down and shall provide the machinery provision to conduct audit after the taxpayer is selected for audit of its tax affairs by the FBR through computer ballot which may be random or arametric.

10. It is therefore, trite law that even procedural law cannot take away vested and existing rights by applying it retrospectively, unless such intention of the legislature is expressed in unequivocal terms.
11. In light of the discussion made and law referred, answer to question No.1 is in the affirmative and the answer to question No.2 is in the negative. On the whole reference filed by the department is dismissed.

11. Another important dimension that requires to be highlighted and goes to the core of the case, is the difference between tax accounting and book or financial accounting.
Tax Accounting is ˜the method of accounting that focuses on tax issues; this includes all activities related to filing tax returns and planning for future tax obligations.1 While book or financial accounting follows the Generally Accepted Accounting Principles (GAAP) like IAS or International Financial Reporting Standards (IFRS), tax accounting follows the taxation policy under the law and prevails over financial accounting. It is for this reason that accounting principles employed for the purposes of computing the income chargeable to tax under section 32 are subject to the provisions of the Ordinance and are captioned as Tax Accounting under Division IV of Part IV of Chapter III of the Ordinance. The meaning of Tax Accounting in other jurisdictions also echoes this concept: accounting methods that focus on taxes rather than the appearance of public financial statements. Tax accounting is governed by the Internal Revenue Code which dictates the specific rules that companies and individuals must follow when preparing their tax returns. Tax principles often differ from Generally Accepted Accounting Principles.2 For all practical purposes, U.S. corporations must keep two sets of books: one set to comply with Generally Accepted Accounting Practices and the other to comply with the Internal Revenue Code. GAAP rules are intended to promote uniform statements that accurately convey the financial history, health, and prospects of a business, while the tax code is intended to generate revenues for the government but also achieve certain public policy goals. It is only natural that these two methods frequently produce very different results.1 In this case, tax accounting will be governed by Rule 4 of Part-II, 6th Schedule which takes preference over the Rules under the 7th Schedule. The lower forums have failed to appreciate this difference between tax accounting and financial accounting and have given undue importance to method of accounting over the principles of taxation under the Ordinance. Admittedly, the surplus has not been repaid to the bank, it cannot, therefore, be deemed to be the income of the petitioner bank and offered to tax.

The statute would be deemed to be applicable from date of its promulgation, unless retrospective effect was given thereto with expression provision. The said provision, was not specifically made applicable with retrospective effect, therefore same would not apply to assessment finalized prior to its addition w.e.f. 1-7-2003.

It can be seen from a reading of the provision reproduced above that section 120 has its genesis in and relates to the filing or failure thereof, of a return of income. It merely gives the Commissioner the power to issue notice to the taxpayer in case the return of income furnished is not complete. Obviously, it presupposes that a person is, in law, required to file a return of income in terms of section 114. Section 120 relates to the filing of return under section 114 and the consequences flowing therefrom. The provisions of section 120 are not relatable to the filing of the statement under section 115(4) of the Ordinance and thus the invocation of the provisions of section 120 by the Assistant Commissioner Inland Revenue was erroneous and ultra vires.

The language of Section 122(4) (a) and (b) is clear and unambiguous. Both the timelines deal with different period of limitation for amendment(s) in assessment orders.
The only difference is that both the timelines have a different reference/starting point for calculating the period of limitation. In sub-section (a) the period begins from the end of the financial year in which the Commissioner has issued or has treated as having been issued the original assessment order to the taxpayer while in sub-section (b) the period of one year begins from the end of the financial year in which the Commissioner has issued or has treated as having been issued amended assessment order. Sub-section (a) does not imply that only original assessment order can be amended for the first time within a period of five years. In fact, on the contrary, it refers to original assessment order as a reference point for the commencement of the period of limitation. Therefore, an original assessment order can be amended any number of times within a period of five years from the end of the financial year in which the Commissioner has issued or treated as having issued the original assessment order. Similarly, in sub-section (b) the start of the timeline of one year is from the end of the financial year in which the Commissioner has issued or is treated as having issued the amended assessment order. Theoretically, it is also possible that the two timeframes overlap for a certain period of time depending on the facts and circumstances of each case. The petitioner department has the option to invoke the available timeline, hence the term later of in sub-section 4 of Section 122. The importance of the term later of needs to be underlined. This term indicates that both the timelines under sub-sections (a) and (b) are available to the petitioner department and the department has the option to place reliance on the timeline which expires later in time.

10. According to the above section, it is clear that after the repeal of the Income Tax Ordinance, 1979 by Income Tax Ordinance, 2001 reference in any other enactment of the repealed Ordinance or its provisions will be read as the new Ordinance i.e., Income Tax Ordinance, 2001 alongwith the new provisions. Hence for all practical purposes the term Taxation Officer appearing in Section 2 (ha) will be read as Officer Inland Revenue as appearing in the Income Tax Ordinance, 2001. Therefore, the repeal of the Income Tax Ordinance, 1979 does not absolve the respondent-assessee of his liability under the WWF Ordinance, simply on the pretext that appropriate amendment was not made in the nomenclature of the Taxation Officer in section 2 (ha) or section 4 (4) of the WWF Ordinance.

Whether on the facts and in the circumstances of the case the learned Income Tax Appellate Tribunal was justified to hold that action u/s 66A cannot be initiated merely due to the reason
that order u/s 59(1) was not passed whereas the case stood entered in Demand & Collection Register and Demand Notice u/s 85 of the Income Tax Ordinance, 1979 was issued and served upon the assessee?

Since this case relates to the period prior to insertion of the proviso, therefore, our answer to the proposed question is in affirmative, i.e., against the appellant department.

Reference to High Court:- Since, admittedly, answer to the ten questions on OGRA formula would not change the fate of impugned judgment by the Appellate Tribunal, therefore, these are declined to be considered under the facts and circumstances of this case.
We are fortified by two judgments of the Hon?ble Supreme Court of Pakistan. First is Commissioner of Income-Tax Companies No.1, Karachi versus M/s Hassan Associates (Pvt.) Ltd., Karachi (1994 PTD 1256 Supreme Court), wherein, it is laid down that „general and abstract questions for seeking guidance, which were purely academic, the Court may refuse to answer them”. The second is The Lungla (Sylhet) Tea Co. Ltd., Sylhet versus Commissioner of Income-Tax, Dacca Circle, Dacca (1970 SCMR 872) where, it is enshrined that „ every question need not be referred to High Court; only question having some substance can be referred?. Jurisdiction:- 9. Question No. (x) is misconceived and proposed due to ignorance of law; Jurisdiction of High Court under Section 133 of the Income Tax Ordinance, 2001 is advisory in nature, exercised only on a proposition or question of law, under the facts and circumstances of a particular case. Hon?ble Supreme Court of Pakistan in case, The Commissioner of Income Tax versus M/s. Smith, Kline & French of Pakistan Ltd. and others (1991 PTD 999=1991 SCMR 2374) while explaining the phrase „on the facts and circumstances of the case? has held that High Court is not entitled to decide the reference on the facts and circumstances found by it. In other words, the High Court has to decide reference application on the fact and circumstances found by the Appellate Tribunal. The Appellate Tribunal is the last fact find forum and High Court cannot change the finding of facts arrived at by it. Yet opinion of the High Court under Section 133 of the Ordinance of 2001 is binding on it. In support of this opinion, we may refer to sub-section (5) of the Section 133; Appellate Tribunal?s order stands modified according to the opinion of High Court and a copy of the judgment is required to be sent to the Appellate Tribunal under this sub-section. Legislative intent is to ensure trickled down effect of the opinion of High Court through Appellate Tribunal. Besides Article 201 of the Constitution of Islamic Republic of Pakistan, 1973, the opinion of High Court is also binding under Section 133 on the Appellate Tribunal and on all authorities under Income Tax Ordinance, 2001 as well.

Whether OGRA formula constitutes definite information for determination of sales and, therefore, deemed assessment order passed under Section 120 of the Income Tax Ordinance, 2001 could be amended under Section 122 (5) of the Income Tax Ordinance, 2001?
12. The term definite information in Section 122 (5) of the Ordinance is not just any information but definite enough to satisfy the concerned officer that income chargeable to tax of an assessed has escaped assessment or total income of an assessee has been under-assessed, etc1[]. Definite means2[] indisputable, known for certain, explicitly precise, clearly defined, leaving nothing to implication, established beyond doubt and cut and dried. Definite information is, therefore, that select information which falls within the restrictive meaning of the word definite explained above. The law also provides that definite information must be acquired from audit or otherwise. Applying the interpretative tool/doctrine of ejusdem generis which literally means of the same kind or class and the doctrine provides that where general words follow an enumeration of two or more things, they apply only to persons or things of the same general kind or class specifically mentioned 3[] the word otherwise appearing next to the word audit in section 122(5) of the Ordinance on the basis of the above doctrine means a methodology akin or similar to audit where some determined, final, certain, indisputable, calculated information is picked up from any available record of the assessee.

5. In view of above arrangements arrived at between the parties, the impugned notices for selection of audit for the Tax Year 2011 are set aside. Respondent FBR will initiate the process of audit afresh in the light of the above guidelines and fully comply with the mandate given under Section 214C of the Income Tax Ordinance, 2001, Section 72B of the Sales Tax Act, 1990 and Section 42B of the Federal Excise Act, 2005.

10. Based on the above, the record shows that the Petitioner was a minor for the assessment year 1994, 1995 and 1996. The record also shows that the Petitioner ceased to be a shareholder of the Company for the assessment year 1997. Hence, he cannot be made liable for the tax of the Company for the assessment years 1994-2003. The only remaining issue is the argument raised by the Respondents that the Petitioner is liable for the tax of the Company upon attaining majority under Section 139 (1) (b) as the tax can be recovered from every person who was a shareholder, holding 10% shares in the relevant tax year. Learned counsel for the Respondents argued that this is a continuing liability meaning that the minor, upon attaining majority became liable for the tax default of the Company. This argument does not advance the case of the Respondents nor does it justify the arrest and detention of the Petitioner. The Petitioner has been arrested on account of the total default in the payment of income tax for the years 1994-2003, yet he cannot be made liable for the tax default from 1997-2003 since he was not a shareholder for the said period. As to the period 1994-1996, the Petitioner was a minor, and he cannot be made liable for the total income tax of the Company for the said period.

10. Based on the above, the record shows that the Petitioner was a minor for the assessment year 1994, 1995 and 1996. The record also shows that the Petitioner ceased to be a shareholder of the Company for the assessment year 1997.
Hence, he cannot be made liable for the tax of the Company for the assessment years 1994-2003. The only remaining issue is the argument raised by the Respondents that the Petitioner is liable for the tax of the Company upon attaining majority under Section 139 (1) (b) as the tax can be recovered from every person who was a shareholder, holding 10% shares in the relevant tax year. Learned counsel for the Respondents argued that this is a continuing liability meaning that the minor, upon attaining majority became liable for the tax default of the Company. This argument does not advance the case of the Respondents nor does it justify the arrest and detention of the Petitioner. The Petitioner has been arrested on account of the total default in the payment of income tax for the years 1994-2003, yet he cannot be made liable for the tax default from 1997-2003 since he was not a shareholder for the said period. As to the period 1994-1996, the Petitioner was a minor, and he cannot be made liable for the total income tax of the Company for the said period.

Question:- Whether assessment under Section 121(1) (d) of the Income Tax Ordinance, 2001 (Ordinance) can be made in cases where deemed assessment order has already been made under Section 120 of the Ordinance.
Answer:-
8. The question of law raised in this reference pertains to income years 2004 to 2006, therefore, the legislative scheme of the Ordinance prevalent at that time has been considered for the purposes of answering the said question of law.
13. For the tax period under discussion i.e., 2004 to 2006 the legislative scheme does not provide for cancellation or annulment or amendment of the deemed assessment order passed under Section 120 by an assessment order under Section 121(1) (d). The amendments brought about in Sections 121 and 177 (10) of the Ordinance, whereby deemed assessment is declared to have no legal effect if an assessment order under Section 121 is passed, establish that the un-amended version of these sections did not provide for cancellation or amendment of the deemed assessment order thereby identifying the lacuna in the law prior to the amendment.
15. Therefore, the question of law raised in these references is decided in the negative and in favour of the assessee and the instant references are disposed of accordingly.

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 Sections 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 tax payer is not saddled with additional advance tax under section 235 of the Ordinance.

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 tax is reduced resulting in reading down section 235 and making it ineffective when the advance tax has been fully paid. Nil rate tax certificate does not offend section 235 (3) of the Ordinance and can easily co-exist with the same. This reconciles both the provisions and there is no need to declare section 235 unconstitutional.

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 Sections 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 tax payer is not saddled with additional advance tax under section 235 of the Ordinance.

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 tax is reduced resulting in reading down section 235 and making it ineffective when the advance tax has been fully paid. Nil rate tax certificate does not offend section 235 (3) of the Ordinance and can easily co-exist with the same. This reconciles both the provisions and there is no need to declare section 235 unconstitutional.

1. Whether on the facts and in the circumstances of the case, the learned ITAT was justified to dismiss departmental appeal in limine when appeal was filed as per directions of ITAT under the old Income Tax Ordinance, however, section of new Ordinance was inadvertently mentioned?
2. Whether appeal of the department was liable to be dismissed merely for filing of the same under new Ordinance when Apex Court in a reported judgment cited as 1993 SCC 1011 (CIT Vs. Asbestos Cement Industries Limited Karachi & Others) has held that filing of appeal is a procedural matter?
15. In view of the aforesaid finding of the Honble Supreme Court of Pakistan, we are of the opinion that the Tribunal should have dealt with the appeal in accordance with the ITO 1979 even though the appeal was filed under the wrong provisions of law i.e. I.T.O., 2001. In this context we are also fortified by the following case law: Jane Margrete William vs. Abdul Hamid Mian (1994 SCMR 1555) Pakistan Fisheries Ltd. Karachi and others vs. U.B.L. (PLD 1993 SC 109) Usman Khan through attorney vs. Ayesha Naz and two others (2010 CLC 475).
16. It is also settled principle of law that adjudication of case should be on merits and technical knockout is not encouraged. In this respect we are also fortified by the law laid down in Jameel Ahmed vs. Late Saif-ud-Din through Lrs (1997 SCMR 260), Master Musa Khan vs. Abdul Haque and other (1993 SCMR 1304) and Jane Margrete William through her General Attorney Mr. M. Nawaz Kasuri vs. Abdul Hamid Mian (1994 PSC 996).
8. In view of above discussion, this Reference is allowed and the questions of law raised by the petitioner are answered accordinglty.