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Petitioner: Mian MUHAMMAD SHARIF VS Respondent: INCOME TAX APPELLATE TRIBUNAL, LAHORE
Court Name: Lahore High Court Judge(s): Abid Aziz Sheikh, Shahid Karim Title: Mian MUHAMMAD SHARIF vs INCOME TAX APPELLATE TRIBUNAL, LAHORE Case No.: P.T.R. No.17 of 1996 Date of Judgment:2015-07-06 Reported As: 2016 PTD 296 Result: Reference allowed
JUDGMENT
JUDGMENT SHAHID KARIM, J.---This is an application under section 136(2) of the Income Tax Ordinance, 1979 ('Ordinance') and relates to the assessment year 1988-89. 2. This judgment shall also decide connected reference applications a list of which has been attached with this judgment as Annex-A. Since these reference applications are being decided on a common question of law, it will suffice to refer to the facts in the PTR No.17/1996 and would not be necessary to advert to the facts of each reference application separately. 3. The petitioner is aggrieved of the rejection of the application under section 136(1) of the Ordinance (Assessm ent year 1988-89) by the respondent No.1 i.e. Income Tax Appellate Tribunal, Lahore ('Tribunal') passed in RA No.267/LB/95 by order dated 24.12.1995. The learned Tribunal declined to forward to this Court the questions of law which in the opinion of the petitioner arose out of the Tribunal's order passed in Appeal No.4535/LB/DB-94(88-89) dated 16.07.1995. The following questions of law were framed for being referred to this Court and on which the opinion of this Court is solicited. (a) Whether the order of the Tribunal is not sustainable for reasons of being a mala fide order, being due to political pressure and being in disregard of the norms of the legal procedure for enabling the petitioner's lawyer before it to represent the petitioner on the merits of the case? (b) Whether on the facts and in the circumstances of the case the Tribunal has acted in accordance with law and in the proper and legal exercise of its jurisdiction, in condoning the delay of about 3-1/2 years in the filing of the appeal in the total absence of any plausible material being brought on record and on mere unsustainable allegations?
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(c) Whether the Tribunal was right in law in the holding that the order of the CIT(Appeals) was a void order against which no limitation ran and whether there was material for the Tribunal to hold so? (d) Whether on the facts and in the circumstances of the case the restoration by the Tribunal was not right in law of the order of the Assessing Authority with regard to the following additions to the petitioner's income; (i) Income under section 30 read with Rs.2116572/- Section 2(20)e Income under section 16 read with Rs.113522/- Rule 15(1) of the Income Tax Rules (iii) Against Income under section 30 read Rs.50000/- with Sec.13 (1)e (iv) Income under section 13(1)(c) Rs.2116572/- In so far as the said deposits were neither loans nor advances to the petitioner nor any amount with the terms of section 2(20)e of the Ordinance or the other provisions of law cited. (e) Whether the addition of Rs. 50,000/- under section 13(1)(e) of the Ordinance to the petitioner's income was against law in so far as the requirements of section 13(1)(e) had not been complied with? (f) Whether in view of the fact of the deposits and the consequent accretion in wealth having been accepted and also its source as being from sale of land, the question of the passing of the title to the buyer was of any relevance for determining whether the deposit came within the purview of section 2(20)(e) of the Ordinance or not? (g) Whether there was any material before the Assessing Authority and the Tribunal for holding that the deposits in question came under the purview of section 2(20)(e)? (h) Whether the passing of consideration through entries in a running account in books of accounts was legally effectual in respect of the sales of shares in favour of the assessee and of the sale of land in favour of the Company? If so, whether the transaction resulted in a loan or advance to the assessee within the meaning of section 2(20)(e) of the Ordinance? (i) Whether the Tribunal was right in law in upholding the addition of Rs.113822/- under section 16 read with rule 15(1) of the Income Tax Rules? (j) Whether the addition of Rs. 2500000/- under section 13(1)(c) was in accordance with law after due fulfillment of the requirements of section 13(1)(c), and whether the Tribunal was right in upholding the addition as such? (k) Whether the ITO was empowered to write out a new account book for the assessee which he has done in this case and whether the assessment based on such modification by the ITO in the account books is bad in law and fit to be annulled? 4. This reference application was admitted to regular hearing on 09.06.1996. We have invited the learned counsel for the parties to address the arguments on the questions of law framed at (a), (b) and (c) which relate to the baseline question regarding the limitation viz. Whether the Tribunal was justified in condoning the delay in filing of the appeals before it and as to whether sufficient cause on which the said order was based was within the term as defined and expounded by the superior courts. HISTORICAL BACKGROUND 5. A synoptical resumption of the facts of PTR No.17/1996 is that the petitioner/assessee was a Director in several limited companies and in the year 1988-89 the assessee returned total income of Rs.936311/- (the original petitioner has since died and is being represented by his legal heirs). The returned income was made up of salary Rs.183600/-, share firm Rs.638/- dividends Rs.955000/-., Agricultural income Rs.40000/-. After deduction of zakat and taxes (Rs.242915/-) the net income was arrived at Rs.936311/-. The assessment was completed with regard to the assessse e under section 62 of the Ordinance on 26.09.1989 at a total income of Rs.5666705/- It is the case of the petitioner/assessee that the assessee's income was arrived at after making certain
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additions. It would not be necessary to refer to the intricacies of the income tax return filed by the petitioner/assessee. Suffice to say that a notice was issued to the petitioner/assessee in which the petitioner was called upon to explain certain items in the credit entry in the books of M/s Ittefaq Foundries Limited with regard to the purchase of share of assessee by M/s Ittefaq Sugar Mills ('the company') from the company. Also the Income Tax Officer ('ITO') did not accept the fact as shown in the account and these initial debits were balanced by subsequent credits on account of sale of land to the company by the assessee. In the opinion of the ITO there was in fact no sale of land. The reasons which weighed with the ITO was that the sale was effected by a simple agreement of sale and irrevocable power of attorney in favour of the assessee. In the opinion of the ITO since the provisions of section 5 4 of the Transfer of Property Act, 1882 ('TPA') had not been complied with and the sale was not evidenced by the execution of the sale deed duly stamped and registered, title of the irrunoveable property did not pass on to the purchaser. After prolonged and protracted inquiry the assessm ent was framed on 26.09.1999 and certain additions were made by the assessing officer. 6. The petitioner/assessee feeling aggrieved by the order of the ITO filed an appeal to the Commissioner of Income Tax (Appeals) ('CIT(A)') who decided the appeal on 13.06.1991 and deleted the additions made. (It is pertinent to mention here that in almost all of these references being decided by this judgment, the date of order is 13.06.1991 with slight variations of one or two days. 7. The order of the CIT(A) was served upon the department on 31.07.1991. This fact is not denied by the respondent department. The limitation for filing second appeal before Tribunal is 60-days which expired on 30.09.1991. Once again, this fact is not disputed by both the sides. The department filed an appeal before the Tribunal on 19.12.1994 i.e. Almost 3-1/2 years after the service of the notices of the order of the CIT(A) on 31.07.1991. The Tribunal by the impugned judgment condoned the delay and proceeded to hear the matter on merits and vide impugned judgment dated 16.07.1995 accepted the appeals filed by the respondent department and set aside the judgment of the CIT(A). 8. As stated above, we have required the learned counsel for the parties to confine their arguments to the question whether the Tribunal was within its jurisdiction to condone the delay in filing of the appeal before it, on the grounds which have been mentioned in the impugned order. There are two grounds which formed the basis for condonation of delay by the Tribunal; firstly, it was held by the Tribunal that since the order of the CIT(A) was a void order, therefore, no limitation would run against such a void order and thus the question of limitation being a bar would not arise. Secondly, the Tribunal considered the reasons put-forth by the respondent department in support of the condonation of delay in filing of the appeals and returned the findings that those reasons constituted sufficient cause to condone the delay. We shall take up these two issues separately and are dealt with in seriatim as follows: LIMITATION AGAINST VOID ORDER 9. The findings of the Tribunal on this aspect are reproduced as under:-- "On appreciation of the facts and the law referred by the parties, we find that order of CIT(Appeals) dated 13.6.1991 suffers from several infirmities on the legal plane. The learned CIT(Appeals) has failed to even consider the basic principle of the transfer of title of the property as envisaged in Section 54 of the Transfer of Property Act (IV of 1882). Then he has gone astray in seeking support from Section 53A of the ibid which is not at all applicable to the question involved in this case. The judgments referred by the learned counsel for the department makes us to lean towards the conclusion that the order being void and no period of limitation is to run in its way. Justice is not only to be done but appears to have been done and in this case the conduct of CIT (Appeals) reflects and makes us to disbelieve that he has applied his mind in passing the order. It is humanly impossible to pass orders in number of appeals in one day when peculiar
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facts/circumstances and question of law are involved. We have examined the order sheet which records the following: 9.6.1991----Hearing with AR. Case discussed. 13.6.1991---Discussed with ITO. For orders. The order was also passed on 13.6.1991. The above order sheet further reflects that hearing of both parties or their attendance on 9.6.1991 and 13.6.1991 was not made in the presence of each other. The CIT (Appeals) lastly proceeded to pass order and proper. The conclusion inevitably is that CIT (appeals) not only proceeded against law but also appears to have passed a dictatorial judgment and we cannot resist to observe that neither proper hearing was provided to the appellant nor mind was applied. It is settled procedure to make hearing of the case in the presence of both the parties or their Counsel so as to avail the opportunity to rebut the arguments of each other to support their respective pleas. In this count, we can safely infer that though the impugned orders were passed on different dates but Seventeen (17) orders were verbatim and ditto copies of each other and nothing but a fraud on the statue under which CIT (Appeals) purports to have acted. In view of above we hold that the impugned order of the CIT (Appeals) is void and a nullity to have been passed mala fide and no limitation is to run against such an order. 10. It will be seen that the basis for holding that the order of the CIT(A) is void was that the order ran counter to the basic principle of transfer of title of property as envisaged in section 54 of the TPA. Also that CIT(A) had wrongly relied upon section 53-A of the TPA which was not applicable to the facts of the case but the primary consideration for the Tribunal was that there was no limitation against a void order and therefore, the question of limitation was not relevant. Whether the judgment of the CIT(A) was void on any account is for the present purposes a secondary question. The primary question is whether the Tribunal was correct in laying down as a proposition of law that no limitation would run against a void order. The answer to this question would render the question regarding the judgment of the CIT(A) being void or not, redundant. In this regard, the learned counsel for the parties have called to their aid recent judgments of the Supreme Court of Pakistan. These judgements express a divergence of opinion on the subject. However, before we proceed to consider those judgments, the general observations of the Supreme Court of Pakistan with regard to law of limitation and its true nature may usefully be referred to. In Dr. Muhammad Javaid Shafi v. Syed Rashid Arshad and others (PLD 2015 SC 212) the Supreme Court of Pakistan had this to say regarding the law of limitation:-- "...Any how before proceeding further qua this proposition, we find it expedient to briefly touch upon the nature, the object and the significance of the law of limitation. From the various dicta/pronouncements of the superior court, it can be deduced without any fear of contradiction that such law is founded upon public policy and State interest. This law is vital for any orderly and organized society and the people at large, who believe in being governed by systemized law. The obvious object of the law is that if no time constraints and limits are prescribed or pursuing a cause of action and for seeking reliefs/remedies relating to such cause of action, and a person is allowed to sue for the redressal of his grievance within an infinite and unlimited time period, it shall adversely affect the disciplined and structured judicial process and mechanism of the State, which is sine qua non for any State to perform its functions within the parameters of the Constitution and the rule of law. The object of the law of limitation and the law itself, prescribing time constrains for each cause or case or for seeking any relief or remedy has been examined by the courts in many a cases, and it has been held to be a valid piece of legislation, and law of the land. It is "The Law" which should be strictly construed and applied in its letter and spirit; and by no stretch of legal interpretation it can be held that such law (i.e. Limitation law) is merely a technicality and that too of procedural in nature. Rather from the mandate of section 3 of the Limitation Act, it is obligatory upon the court to dismiss a cause/lis which is barred by time even
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though limitation has not been set out as a defence. And this shows that imperative adherence to and the mandatory application of such law by the courts. The said law is considered prescriptive and preventive in nature and is held to mean and serve as a major deterrent against the factors and the elements which would affect peace, tranquility and due order of the State and society. The law of limitation requires that a person must approach the Court and take recourse to legal remedies with due diligence, without dilatoriness and negligence and within the time provided by the law; as against choosing his own time for the purpose of brining forth a legal action at his own whim and desire. Because if that is so permitted to happen, it shall not only result in the misuse of the judicial process of the State, but shall also cause exploitation of the legal system and the society as a whole. This is not permissible in a State which is governed by law and Constitution. And it may be relevant to mention here that the law providing for limitation for various causes/reliefs is not a matter of mere technicality but foundationally of the 'LAW' itself. In the above context a judgment of this Court reported as'. Atta Muhammad v. Maula Bakhsh and others (2007 SCMR 1446) has thrown considerable light on the subject and has provided guidance, in the following words:-- "We may add that public interest require that there should be an end to litigation. The law of limitation provides an element of certainty in the conduct of human affair. Statues of limitation and prescription are, thus status of peace and repose. In order to avoid the difficulty and errors that necessarily result from lapse of time, the presumption of coincidence of fact and right is rightly accepted as final after a certain number of years. Whoever wishes to dispute this presumption must do so, within that period; otherwise his rights if any, will be forfeited as a penalty for his neglect. In other words the law of limitation is a law which is designed to impose quietus on legal dissensions and conflicts. It requires that persons must come to Court and take recourse to legal remedies with due diligence." 11. It is evident from reading of the paragraph reproduced above, that the Supreme Court of Pakistan has laid great emphasis on the importance and applicability of law of limitation as also that the said law confers a substantive right and is not merely a technicality to be brushed aside. Now we can advert to the question whether the limitation would run against a void order or not. This issue should not engage our attention for long and should receive a short shrift. But, firstly, a reference to the case law cited by the parties. The learned counsel for the petitioners relied upon Ghulam Hussain Ramzan Ali v. Collector of Customs (Prventive), Karachi (2015 PTD 107). It was held by the Supreme Court of Pakistan as under:- ".... It is now a well settled law that there is distinction between a void order and a voidable order and it has been held by this Court that party could not sleep over to challenge a void order and it was bound to challenge the same within the stipulated/prescribed time period of limitation from the date of knowledge before the proper forum in appropriate proceedings. In this connection reference may be made from the judgment of this Court reported as "Messrs Blue Star Spinning Mills Limited v. Collector of Sales Tax and others (2013 SCM R 587)" wherein this Court held as under:-- 'The Court specifically adverted to the arguments raised by the petitioner's that no limitation runs against a void order and held that this is not an inflexible rule; that a party cannot sleep over to challenge such an order and that it is bound to do so within the stipulated/prescribed period of limitation from the date of knowledge before the proper forum in appropriate proceedings. This is in line with the law .Laid down by this Court in Chief Settlement Commissioner v. Muhammad Fazil (PLD 1975 SC 331) wherein it is observed that "direct proceedings for having a decision invalidated or set aside may be either by way of appeal, revision or review, initiated by the affected party, in accordance with the relevant law or they may take the form of suo motu recall of the order by the Court or authority which made it or, lastly action to be taken by way of a regular suit
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before a Court of general jurisdiction for a declaration as to the invalidity of the order. "Similarly in Muhammad Raz Khan v. Government of N.W.F.P. (PLD 1997 SC 397) at page 400 this view was reiterated in terms as follows:-- "We earnestly feel that unless certain constraints apply against right of challenging void order specially relatable period of knowledge, the same may create complication leading to dangerous results. Principle of justice and fair play does not help those who were extraordinary negligent in asserting their right and despite becoming aware about alleged void order adverse to their interest remain in deep slumber. Therefore, according to our considered opinion, facility regarding extension of time for challenging order cannot be legitimately stretched to any length of unreason period at the whims, choices or sweet will of affected party. Thus, order termed as nullity or void could at best be assailed by computing period of limitation when he factually came to know about the same. When a period presumes that adverse order is a nullity or totally devoid of lawful authority and ignores it beyond the period specified by law of limitation, then he does so at his own risk. Therefore, in all fairness terminus a quo will have to be fixed, the date of knowledge alleged void order; which too must be independently established on sound basis. In this behalf we derive strength from the observations contained in PLD 1975 Baghdad-ul-Jadid 29 (Syed Sajid Ali v. Sayed Wajid Ali) and 1978 SCM R 367 (S.Sharif Ahmad Hashmi v. Chairman Screening Committee)." 12. In the cited judgment a reference has been made to the earlier judgment of the Supreme Court of Pakistan reported as Messrs Blue Star Spinning Mills Limited v. Collector of Sales Tax and others (2013 SCM R 587) and reliance was squarely placed upon the said judgment. It would be noticed that two other judgments of the Supreme Court of Pakistan have been referred to in the cited precedents. The observation of the Supreme Court of Pakistan made in Muhammad Raz Khan v. Government of NWFP (PLD 1997 SC 397) in fact encapsulated the true spirit of the law relating to the limitation viz-a-viz void order. The only facility and concession which has been extended to a person with regard to a void order is that at best it can be assailed by computing the period of limitation i.e. When a person factually came to know about the said order. Also that when a person presumes that an adverse order is a nullity or void, and ignores it beyond the period specified by law of limitation, then he does so at his own risk. It was held that terminus a quo will have to be fixed which would be the date of knowledge when the alleged void order came to the knowledge of the person. Finally, that the date and knowledge must be independently established on sufficient basis. 13. The learned counsel for the respondent has relied upon a cluster of case law and precedents from the Pakistani as well as Indian jurisdiction. We shall now proceed to deal with the judgments on which the learned counsel for the respondent relies upon. The learned counsel makes a reference to the separate note written by Ejaz Afzal Khan, J. In Dr. Muhammad Javaid Shafi (PLD 2015 SC 212) Supra. Suffice to say that the said judgment was a dissent and the majority judgment took a-different view of the issue relating to the limitation. Therefore, it is not relevant to refer to the said judgment cited by the learned counsel for the respondent. However, while writing the dissent the Hon'ble Member of the Bench relied upon certain judgments of the Supreme Court of, Pakistan which drew a distinction between the void and voidable order. We will refer some of those judgments in the proceeding paragraphs. 14. The learned counsel for the "respondent next relied upon Province of Sindh and others v. Ghulam Fareed and others (2014 SCM R 1189) and the following observations of the Supreme Court of Pakistan in particular:-- "10. We have also examined the view taken by this Court in the case of Furon Habib relied upon by the learned Law Officer, which judgment is distinguishable on facts. In the first place, section 6-A of the Sindh Service Tribunal Act, 1973 permits the application of the provisions of sections 5 and 14 of the Limitation Act to the appeals preferred before the Sindh Service Tribunal. Secondly in case
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of Furqan Habib the original order challenged before the Tribunal was neither a void order nor an order without jurisdiction, therefore, the bar of limitatton was applicable in such cases where in the case in hand as noticed in the preceding para the termination orders having been issued by an officer nor competent in law, therefore, such orders being void, would not attract the bar of limitation." 15. In the cited judgment the Supreme Court of Pakistan proceeded to condone the delay on the basis of section 5 and section 14 of the Limitation Act. Moreover, the view taken in the judgment is in contra distinction to the view taken in the subsequent judgment of Ghulam Hussain Ramzan Ali's case (2015 PTD 107) Supra. 16. The dissension and divergence of opinion between different benches of the Supreme Court of Pakistan has been laid to rest by a fourteen member bench of the Supreme Court of Pakistan in a case reported as Gen. (R.) Parvez Musharraf v. Nadeem Ahmed (Advocate) and another (PLD 2014 SC 585). It has emphatically been laid down by the Supreme Court of Pakistan that limitation runs against void orders, too, and did not endorse the view that void orders are free from the shackles of law of limitation. It was held that:-- "The contention that the delay be condoned since the petitioner was not heard or that the judgment on that count is void ab initio and that no limitation runs against a void order is not tenable because even against a void…
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