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Petitioner: Z. A. Sheikh for Appellant. VS Respondent: Sultan Mansoor, Legal Advisor for Respondent.
Court Name: Income Tax Appellate Tribunal Judge(s):Abrar Hussain Naqvi, Farhat Ali Khan, Junejo M. Iqbal, Sayed Amjad Hussain
Bokhari, Mirza Muhammad Wasim Title: Z. A. Sheikh for Appellant. vs Sultan Mansoor, Legal Advisor for Respondent. Case No.: I.TAs. Nos. 1158(IB) and 1159(IB) of 1986 Date of Judgment:1991-03-14 Reported As: 1991 PTD (Trib.) 583 Result: Order accordingly Judgment ORDER ABRAR HUSSAIN NAQVI (JUDICIAL MEMBER).---A question has arisen as to what is the scope of powers of the Tribunal vis-a-vis consequence of non-compliance of Rule 12 of the Income-tax Appellate Tribunal Rules, 1981 (hereinafter referred to as Rules). Since, there were conflicting views of various Benches of the Tribunal a larger Bench was constituted to resolve the controversy. Apart from the learned counsel for the parties some other eminent counsel named above from Karachi, Lahore, Faisalabad, Multan, Rawalpindi and from other places were also invited to address and to assist the Court. I must pay tribute to all the learned counsel as all of them took pains in studying the question and assisting the Court. Some of the learned counsel have also sent written arguments and I have benefited from the written arguments as well. Copious case-law has been cited in support of their respective views expressed by the various counsel. 2. The precise question before us to decide is as to whether Rule 12 is mandatory or directory in nature. Corollary to this question is another question as to what are the consequences if Rule 12 is not complied with. I shall try to be brief as far as possible so that a clear view is expressed and further confusion is not created. Before proceeding further it would be convenient to quote Rule 12 of the Rules which reads as under :-- Intimation of film of appeal to the respondent.--The appellant shall, before filing of appeal, send a copy of memorandum and grounds of appeal to the respondent by registered post. A certificate to this effect shall be appended with the appeal." It may be mentioned that Rule 11 of the Rules provides as to what documents are to be accompanied with the memorandum of appeal. One such document which is required to be filed
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under Rule 11 is a certificate as provided under Rule 12. Sub-rule (3) of Rule 11 empowers the Tribunal to dispense with any of the documents. This sub-rule is reproduced below:-- "The Tribunal may, in its discretion, accept a memorandum of appeal which is not accompanied by all or any of the documents referred to in this rule." 3. Normally, sub-rule (3) of Rule 11 quoted above should have been sufficient to set at rest the controversy. In this sub-rule the Tribunal has a discretion either to accept or reject the memorandum of appeal if the certificate as required by Rule 12 is not filed along with the appeal. However, the matter does not end here. There are certain other complications such as where, though a certificate has been filed but in fact the Rule has not been complied with in strict sense. For instance where the copy of memo and grounds of appeal had not been sent to the respondent by Registered Post as required by Rule 12 though the service is otherwise effected. Another Rule which may be reproduced is Rule 15 which reads as under:-- Return of memorandum of appeal. Etc.--Where a memorandum of appeal is not filed in the manner specified hereinbefore, the Registrar or the officer authorised under rule 7 may return it to the appellant or his authorised representative, if any, to bring it in conformity with the provisions of these rules within such time as. He may fix" 4. It may be noted that the appeal before the Tribunal is a statutory right under section 134 of the Ordinance. Subsection (5) of section 134 requires that the appeal is to be filed to the Tribunal:-- (i) In the prescribed form; (ii) to be verified in the prescribed manner; (iii) in case of an assessee it is to be accompanied by a fee of one hundred rupees. 5. Now by some of the counsel a great stress has been laid on the words "prescribed form" and "prescribed manner". Some of the counsel have gone to the extent that the Tribunal has exceeded its power to call the appellant to comply with Rule 12. Their argument was that the Ordinance has only provided that the appeal is to be filed in the `prescribed form' and to be verified in the prescribed manner. The worn `prescribed' has been dcfmed in the Ordinance in section 2(33) of the Ordinance as under:-- "Prescribed" means prescribed by Rules made under this Ordinance." According to these learned counsel the rule-making power is given to the C.B.R. By section 165 and the C.B.R. Has made the Rules for carrying out the purposes of this Ordinance. In section 165(2)(e) it has been laid down that such rules may "provide for anything which has to be or may be prescribed in this Ordinance". Rule 195 of the Income-tax Rules made by the C.B.R. Has prescribed the form of appeal to the Tribunal and the manner of verification. Similarly form of reference application under section 136(1) of the Ordinance has also been prescribed nude---s Rule 196 of the Ordinance. In the form prescribed under Rule 195 of the Income-tax Rules, two notes have also been given which are reproduced below for ready reference:-- "(1) The memorandum of appeal (including grounds of appeal when filed on a separate paper) must be in triplicate and should be accompanied two copies (at least one of which should be a certified copy of the ordeer' appealed, against and two copies of the order of the Income Tax Officer (2) The memorandum of appeal in the case of an appeal by the assessment be accompanied by a fee of one hundred rupees. The appeal fee must be credited in the treasury or a branch of the National Bank of Pakistan or the State Bank of Pakistan after obtaining a challan from the Income Tax Officer and the triplicate portion of the challans sent to the Tribunal with the memorandum of appeal. The Appellate Tribunal will not accept cheques, hundies or other negotiable instruments." From the above-quoted notes it is evident that these are reproduction of what is contained in subsection (5) of section 134 of the Ordinance. The only addition made in these notes is the manner in which the fee is to be paid. The C.B.R. Has the authority to make rules prescribing the
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form of appeal and the manner of verification. The form has been prescribed and the manner of verification has also been given. So far as section 134(5) is concerned the C.B.R. Was not required to do anything more than that. Now sortie of the counsel have asserted that for the procedure to the prescribed for filing of appeals before the Tribunal it was the C.B.R. Who was to frame Rules under section 165 and not the Tribunal. According to them for carrying out the purposes of the Ordinance the C.B.R. Had been given powers and not the Tribunal. Thus Rule 12 is ultra vires of the powers of the Tribunal. I am not prepared to contribute to this view on the principle of special bus non derogant i.e. Special provisions exclude the general provisions. The C.B.R. Has been given the rule- making powers under section 165 generally for carrying out the purposes of the Ordinance while the Tribunal has been . Given specific powers under subsection (8) of section 133 which is reproduced below:-- "Subject to the provisions of this Ordinance, the Appellate Tribunal shall have power to regulate its own procedure, and the procedure of Benches of the Tribunal in all matters arising out of the discharge of its functions, including the places at which the Benches shall hold their sittings." This subsection specifically provides that it is the Appellate Tribunal who has power "to regulate its own procedure". Now it has to be examined as to what the phrase "to regulate its own procedure" connotes. Some of the learned counsel have argued that this phrase only means that the Tribunal has to make rules to regulate its own procedure starting from the stage of filing of appeal. Before the filing of appeal what was to be done by the appellant, is outside the jurisdiction of the Tribunal and therefore, the Tribunal could not frame such rules to bind down an appellant to follow certain procedure before the filing of appeal. Before filing the appeal what was to be done by the appellant was to be prescribed by the C.B.R. 6. I have very carefully examined the contention. This objection to the jurisdiction of the Tribunal is more apparent than real. The phrase "to regulate its own procedure" is of much wider scope than has been contended to be by these learned counsel. We have not to go very far to understand the real meaning of this phrase. Under Article 191 of the Constitution regarding the regulation of the procedure of the Supreme Court it has been provided "subject to the Constitution and law, the Supreme Court can make rules regulating the practice and procedure of the Court". Similarly, Article 202 of the Constitution lays down subject to the Constitution and law the High Court may make rules regulating the practice and procedure of the Court or of any Court subordinate to it". We note that both the Supreme Court as well as the High Courts have prescribed rules of procedure inter alia, which also require from the petitioner/appellant to follow certain procedure and file certain documents before filing the appeals. It therefore follows that the phrase "to regulate its own procedure" is not restricted to only the conduct of the procedure in Court after filing the appeals/petitions. This includes a power to ask the person who approaches the Court or Tribunal to comply with certain requirements which is as a matter of fact rule of convenience and for orderly conduct of Court proceedings. Here I would also refer to section 122 of the Civil Procedure Code which reads as under:-- Power of certain High Courts to make rules--(The High Courts).....May, from time to time after previous publication, make rules regulating their own procedure and the procedure of the Civil Courts subject to their superintendence, and may by such rules annul, alter or add to ail or any of the rules in the First Schedule." It would therefore be seen that both the Constitution as well as the Civil Procedure Code have similar provisions and under those powers the Supreme Court and the High Courts have prescribed certain procedure including filing of certain documents along with the appeals/petitions. This is therefore fallacious to argue that phrase power to regulate its own procedure" is only restricted to the conduct of hearing of cases and the rules could be framed only for the procedure from the stage after filing the appeal. The law has given a right of appeal and the Tribunal has been
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constituted to hear these appeals. Certain basic prerequisites have been provided by the law itself as for instance the limitation and the payment of fee in case of filing of appeal by the assessee. The appeal is to be filed in the prescribed form and to be verified in the prescribed manner. Thus the C.B.R. Under its rule-making powers can prescribe the form of appeal which it has made under rule 195 of the Income-tax Rules and has also been given power to prescribe the manner of verification which has also been provided in the form of appeal. The fee has also been prescribed by the Ordinance. Apart from this the procedure for filing the appeals is to be laid down by the Tribunal under its power given in section 133(8) of the Ordinance. The phrase "power to regulate" its own procedure" encompasses in it the entire procedure for filing and hearing the appeals. 7. It may be, noted that in Indian Income-tax Act, 1961 there is similar provision empowering the Tribunal `to regulate its own procedure'. Under that provision the Tribunal has made the Rules prescribing certain pre-conditions before filing the appeals. This phrase vis-a-vis the power of the Tribunal to frame rules came under discussion in Chhotey Lal Kishan Lal v. Commissioner of Income-tax by the Allahabad High Court and reported as (1962) 65 I T R 490. At page 493 of the report the High Court observed as under:-- "The Income-tax Appellate Tribunal has answers under section 5-A(8) to regulate its own procedure and if the Tribunal makes rules regulating such procedure the rules would be valid so far as they are calculated to regulate the procedure in the Income-tax Appellate Tribunal. In our opinion, the institution of an appeal only marks the commencement of the procedure before the appellate authority, and in what form an appeal may be presented and who may be shown in the array of parties in the appeal is also a matter of procedure specially when the substantive rights of parties are not involved". Then at the same page it was further observed:-- "We are, therefore, of opinion that rule 14 (regarding impleading as party) of the Appellate Tribunal Rules cannot be assailed as invalid." 8. Now reverting back to Rule 12, it is purely a procedural rule and the Tribunal was empowered to frame such rule. Since, it is not in conflict with any of the provisions of the Ordinance it is intra vires of the Ordinance. 9. Reading the Tribunal's Rules, the Income-tax Rules framed by the C.B.R. And the Ordinance, together the following procedure is emerged for filing the appeals:- (i) The appeal is to be filed in the prescribed form and verified in the prescribed manner; (ii) it is to be accompanied by a fee of hundred rupees; (if the appeal is filed by assessee); (iii) the appeal is to be filed within 60 days of the date on which the impugned order is communicated to the assessee or to the Commissioner as the case may be; (iv) the appeal memo. Is to be accompanied with certain documents as required by Rule 11 of the Tribunal's Rules including a certificate as provided under Rule 12 i.e. a certificate that a copy of memorandum and grounds of appeal had been sent to the respondent by registered post. Sub-rule (3) of Rule 11 of the Tribunal's Rules provides that the Tribunal may accept the memorandum of appeal which is not accompanied by all or any of the documents referred to in Rule 11. Rule 15 of the Tribunal's Rules provides that where the appeal is not filed in the manner specified by the Tribunal's Rules, certain officers of the Tribunal have power to return the appeal of the appellant to bring it in conformity with the provisions of the said rules within such time as may be fixed. In case the appeal is returned and is not re-filed within the prescribed time or the appellant does not comply with the provisions of the aforesaid rule, the Officer of the Tribunal has to place the memorandum of appeal before the Tribunal for such order as it may deem fit. 10. The position which emerges after narrating the above procedure would he that in case certificate as required under Rule 12 is not filed, the Tribunal has tower in its discretion to accept the appeal without such a certificate under sub-rule (33) of Rule 11. Another power which is vested in
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the Tribunal is under sub-rule (33) of rule 15 where the memo. Of appeal is returned and it is either not filed again I or the shortcomings are not made up, the Tribunal has a discretion to pass such order as it may deem fit. In the face of these two discretionary powers with the Tribunal fail to see as to what could be possible difficulty in implement1ting the Rules. The learned counsel, broadly speaking, advanced two contradictory views. One group of the learned counsel was of the view that compliance of Rule 12 is mandatory and non-compliance of it would result in rejection of the appeal. The second group of the learned counsel was of the view that this is a directory provision and is a rule of convenience and the failure to comply with this rule cannot take away the statutory right of appeal. In any case it was pleaded that under the discretionary powers of the Tribunal it had the powers to condone such a non-compliance. 11. Both groups of the learned counsel have cited numerous cases of the superior Courts in support of their views. It is not possible for us to discuss each and every case cited before us. However, I would like to deal with certain group of cases where a common view has been expressed. First of all would like to take up the arguments of those learned counsel who hold the view that this is a mandatory provision. The main plank of their argument was that in Rule 12 the word `shall' has been used. Their second contention was that the rules of procedure made by the Tribunal are meant to be followed and if these rules arc not compiled with then these rules become redundant. Now it is settled law that the words `shall' and `may' are interchangeable depending on the nature of a particular provision in which the word has been used. Many cases have been cited on the subject which need not be discussed as the principle is too well-settled to need any authority. As to what is mandatory or a directory provision an elaborate discussion is found in Corpus Juris Secundum. Volume LXXXII. At page 376 of the book it has been observed as under:-- "In the application of subsidiary rules for the determination of the legislative intent in the respect there is no small confusion in the decisions, but certain principles have been recognized as established. Whether a statute is mandatory or directory depends on whether the thing directed to be done is of the essence of the thing required, or is a mere matter of form, and what is a matter of essence can often be determined only by judicial construction. Accordingly, when a particular provision of statute relates .To some immaterial, matter, as to which compliance with the Statute is a matter, of convenience rather than substance, or where the directions of a Statute are given merely with a view to the proper, orderly and prompt conduct of-business, it is generally regarded as directory unless followed by words of a solute prohibition: and a Statute is regarded as director where no substantial rights depend on it no injury can result from ignoring it, and the purpose of the legislature can be accomplished in a manner other than that prescribed, with substantially the same result." Black's Law Dictionary also gives almost the same meaning of the word `mandatory'. Some of the learned counsel have relied upon some recent decisions of the superior Courts to support the contention that non-compliance of the procedural rule' is fatal to the appeals. The following cases have been cited in support of this contention:-- (1) M/s. Sethi Brothers, Lahore v. C.I.T. Reported as 1987 PTD 703. (2) Government of Pakistan v. Niaz Muhammad reported as PLD 1967 SC 271. (3) C.I.T. v. Javed A. Sheikh reported as 1989 PTD 525. (4) C.I.T. v. Gulzar Muhammad reported as 1989 PTD 1008. (5) C.I.T. v. Kohinoor Trading Company reported as 1989 PTD 1047. 12. However, with utmost respect to the learned counsel none of these cases are relevant for the simple reason that in impugned order or decree had not been filed. It is obvious if the copy of the impugned order is not filed the Appellate Court cannot adjudicate the appeal. Some cases have also been quoted at the Bar where a similar certificate was to be filed under Order 43, Rule 3 of the Civil Procedure Code and as a consequence of non-compliance; the appeals were rejected. With
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utmost respect, these cases are also not applicable on the facts of the present case for two reasons. Firstly, the rules made under the Civil Procedure Code are part and parcel of the C.P.C. Itself. These Rules and Orders had been framed under section 122 of the Civil Procedure Code which has already been reproduced above. Section 121 of the Civil Procedure Code reads as under:-- Effect of rules in First Schedule-The rules in the First Schedule shall have effect as if enacted in the body of the Code until annulled or altered in accordance with the provisions of this Part." These Orders and rules are attached to the Civil Procedure Code as a Schedule and section 121 of the C.P.C. Has specifically laid down that these rules shall have effect as if enacted in the body of the Code. Obviously these Orders and rules are on much higher padestal than the subordinate legislation which is made under the delegated power of the Legislature. The Tribunal rules do not stand on the same padestal as part of the Ordinance though these have been framed under the powers given by the Ordinance. These rules have been made `to regulate its procedure' and are rules of convenience for the orderly and prompt conduct of business. Secondly, it would be pertinent to note, that Order 43 applies only to some interlocutory orders and not against the judgments passed on merits. Interlocutory orders against which the appeals can be filed have been enumerated in section 104 and rule 1 of Order 43, C.P.C. Thus, rule 3 of Order 43, C.P.C. Is not pari materia with rule 12 of the Tribunal rules. Thirdly, there is an important privilege to the respondent which is lost if the rule is not complied with. If the notice is given under rule 3 Order 43 the respondent is entitled to appear before the Court and can resist the admission of the appeal at the preliminary stage and can also resist the possible stay order to be granted. He can cut short the time for disposing of the appeal in getting the appeal dismissed in limine and can get costs also. It would be seen that violation of the Income-tax rule 12 does not entail any benefit or injury to the respondent. This rule is more of convenience than of substance. The objection against the violation of such rule is merely of technical nature and to insist on it would only to demand a pound of flesh. 13. The rules of procedure are made for the orderly conduct of Court business. In order to see whether a provision is mandatory of directory a number of considerations have to be kept in mind. On going through the case-law the considerations which are to be kept in mind as to whether a provision is mandatory or regulatory the following factors are to be kept in mind:-- (1) The intent of Legislature cannot be gathered from the use of the words `shall' or `may' as this is not conclusive and the words are interchangeable; (2) it has to be seen whether permissive interpretation is possible; (3) whether any consequence of the non-compliance has been provided; (4) whether any injury or prejudice has been caused to the opposite party because of the non- compliance of the provision; (5) the importance of the subject-matter of the provision and the effect of the non-compliance on the subject-matter is also to be seen; (6) what is the real intent of the Legislature; (7) whether the provision and its compliance is of substance or more of form and convenience; (8) whether there is any absolute prohibition. 14. There is enough case-law available to support the view that where small errors are made and no substantial injury or prejudice is caused to the opposite-party the rule is not to be regarded as mandatory. In Chhotey Lal Kishan Lays case referred to above, impleading a wrong respondent was held to be merely an error and curable and not fatal to the appeal. The Income-tax Appellate Tribunal Rules provided that the Income-tax Officer was to be impleaded as respondent but the appellant impleaded the Appellate Assistant Commissioner as respondent. The Tribunal in that case had refused to admit the appeal on the ground that the appeal was not maintainable
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because of the violation of the rule 14 of the Income-tax Appellate Tribunal Rules. When the question was referred to the High Court for opinion the High Court finally observed as under:-- "But we are of opinion that the opinion that the memorandum of appeal even as it stood was not invalid or illegal, and having regard to the other facts of the case relating to the procedure that was followed on the filing of this appeal by the Appellate Tribunal we are of opinion that it was a good appeal and should have been decided on merits:" In many cases the superior Courts have consistently held that mere error of procedure cannot be allowed to defeat justice. The English Courts have also held the same view. In Kendall v. Jamilton reported as (1879) 4 App. Cas. 504 it was observed as under:-- "Procedure is but the machinery of the law after all -- the channel and means whereby law is administered and justice reached. It strangely departs from its proper office when, in place of facilitating, it is permitted to obstruct, and even extinguish, legal rights, and is thus made to govern where it ought to sub-serve." In another case Cropper v. Smith reported as (1884) 26 Ch.D.700,710 Lord Bowen L.J. Said:-- "It is a well-established principle that the object of Courts is to decide the rights of the parties, and not to punish them for mistakes they make in the conduct of their cases by deciding otherwise than in accordance with their rights ...I know of no…
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