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Petitioner: Messrs PAK-SAUDI FERTILIZERS LTD. VS Respondent: FEDERATION OF PAKISTAN and others
Court Name: Sindh High Court Judge(s): Zahid Kurban Alavi, Ghous Muhammad, S. A. Sarwana Title: Messrs PAK-SAUDI FERTILIZERS LTD. vs FEDERATION OF PAKISTAN and others Case No.: Constitutional Petition No. 283 of 1999 Date of Judgment:2001-01-29 Reported As: 2002 PTD 679 Result: Order accordingly
JUDGMENT
JUDGMENT Dr. GHOUS MUHAMMAD, J.---The petitioner is a company incorporated under law and is wholly owned by National Fertilizer Corporation, which works under the administration and control of the Ministry of Production, Government of Pakistan. The dispute relates to the assessment year 1998-99 for which -the petitioner, as a manufacturer had exercised its option to be assessed within the presumptive tax regime of section 80C of the Income Tax Ordinance, 1979 (hereafter referred to as the "1979 Ordinance"). The respondent No.5 (Deputy Commissioner of Income Tax), the Assessing Officer, rejected such exercise of option and proceeded to assess the petitioner under the normal law. The precise question which arises in the petition is whether the petitioner has correctly exercised such option and of course that corollary that whether the respondent No.5 was justified to decline such option available to the petitioner. Apart from this aspect, the more pertinent question which requires determination is whether the very petition is maintainable in view of the availability of alternate remedies provided under the 1979 Ordinance. 2. The petition does not raise complicated question of law of fact. However, as the same relates to the presumptive tax regime of the 1979 Ordinance, which by itself is very technical, it would perhaps be pertinent to first briefly look into the history of such regime, which is dilated upon in the paras. Appearing hereafter. 3. The power and authority of the Federal Parliament to legislate is governed by Article' 142 of the 1973 Constitution which, inter alia, provides that the Federal Parliament shall have the exclusive power to legislate in relation to matters enumerated in the Federal Legislatiec List, which is, contained in the Fourth Schedule to the Constitution. Entry 47 to the Fourth Schedule, provides for "taxes on income other than agricultural income". In this manner it was clear that the
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power to impose tax on income i.e. Income-tax, vested with the Federal Parliame ccordingly, the 1979 Ordinance, a Federal legislation, provide for imposition of the income-tax i.e. Tax on income, which can also be confirmed from the latter's section 9, the charging section. The Scheme originally envisaged in the 1979 Ordinance was that an assessee was to file a return of total income and tax under section 55; alongwith such return the assessee would also pay the income-tax according to his own declaration as provided in section 54; upon receipt of such return the Assessing Officer was to apply his mind and in case he had any enquiries he could issue a notice under section 61 and require the assessee to furnish details, materials and explanations. This process of enquiry was called "detailed scrutiny" or "the proceeding under normal law". After looking into all the explanations and details furnished by the assessee, the Assessing Officer then finalized the assessment and issued an assessment order under section 62. Thus, the assessm ent order under section 62 was called the "order under normal law after detailed scrutiny". It may be pointed out that in this process the Assessing Officer could reject the trading results, estimate the sales and profits and even add any concealed or suppressed income. However, the most pertinent aspect had been that the assessee in filing his return was allowed to set off expenses from sales and gross income/profit so as to arrive at the net income, which was the taxable income i.e. Income-tax was calculated thereon. It may also be noted that all withholding taxes i.e. Deductions of tax at source on accounts of supplies, imports etc. Were adjusted with the computation of income-tax so as to arrive at the actual liability of income-tax which was to be paid at the time of filing the return under section 54. In case the withholding tax was less than the computed income-tax for the year, the difference was paid with the return; whereas in cases where the figures of the withholding tax exceeded the amount of the computed income-tax, the difference was claimed as refund, by the assessee. This Scheme of income-tax underwent a complete metamorphosis upon the advent of the Finance Act, 1991 which inserted sections 80C and 80D in the 1979 Ordinance. Section 80C read with the corresponding Schedule created certain categories of assessees for whom a presumptive tax regime was introduced. One such classification was the category of suppliers. The way this operated was that persons i.e. Assessees who supplied goods to anyone were to pay income-tax at a particular percentage of the value of the supplies. This figure represented the income-tax of the assessee and constituted a final discharge of liability of tax. This meant that the assessee was not required to file any return under section 55 or be asked by the Assessing Officer any questions and explanations with regard to the declared version in the return. All that the assessee was required was to submit a statement under section 143-B giving details of the supplies and deductions of tax and the Assessing Officer was prohibited from raising any enquiries and had to accept the statements under section 143-B as it is. This meant that the Assessing officer has no power or authority to proceed under normal law or undertake detailed scrutiny of the statement under section 143-B. Also if there was any withholding tax i.e. Deduction of tax at source under section 50(4) on the supplies the same was also taken towards a final discharge of liability. The important aspect which is to be pointed out is that after the advent of section 80C, for the categories to which it applied, income-tax was being charged at a figure which represented supplies or in other cases commercial imports or contractual receipts, but not the net profit, which earlier was construed as the total income. Through 80C the figures of supplies, commercial imports etc. Were deemed to be income by fiction of law or presumption, hence the expression "presumptive tax regime". A number of. Constitutional petitions were filed in the High Court throughout the country, challenging the vires of sections 80C and 80D (also 80CC which was introduced by the Finance Act, 1992 on exports), inter alia, on the score that Entry 47 of the Fourth, Schedule of the Constitution only permitted the imposition of income-tax on income and not on supplies or commercial imports, which constituted sales and purchases . As such the very levy was beyond
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the power of the Federal Parliament. The matter was conclusively decided by. The Hon'ble Supreme Court in Elahi Cotton Mills Ltd. v. Federation of Pakistan PLD 1997 SC 582, wherein sections 80C, 80CC and 80D were held to be intra vires. 4. After Elahi Cotton, the position that emerges is that for categories to which the presumptive tax regime of section 80C, applies, the Assessing Officer cannot proceed under normal law and has to accept the statement under section 143-B. For categories to which section 80C does not apply, the Assessing Officer proceeds under normal law on the basis of return filed under section 55. 5. The facts giving rise to the present petition are that the petitioner entered into a Sale Agreement, dated 30-6-1997 with National Fertilizer Marketing Limited of Lahore. It is alleged by the petitioner that such an agreement was for the purposes of sale/purchase of its manufactured products i.e. Urea and its by/mid-products. In other words, through this agreement the petitioner was to sell/supply and National Fertilizer was to purchase goods on which National Fertilizer deducted withholding tax under section 50(4) (i.e. On the supplies made by the petitioner) at a particular percentage: At the time when section 80C was introduced by the Finance Act, 1991, through para. 9 of Part IV of the Second Schedule to the 1979 Ordinance, certain manufacturers were given the facility to opt out of the presumptive tax regime are to be processed under normal law provided the assessee exercised this option in writing. When such option was exercised the return was to be assessed under normal law. This position continued for the assessment years 1991-92 or 1997-98, whereafter the Finance Act, 1998 has brought about another amendment in para. 9 of Part IV of the Second Schedule to the 1979 Ordinance, whereby the opposite is provided i.e. In case a manufacturer desires to be assessed under the presumptive tax regime it has to exercise such option by a written declaration within three months of commencement of the income year and such option irrevocably subsists for three years. In other words now the manufacturer has to clearly exercise its option, opting in for applicability of the presumptive tax regime. In the present case, this option for opting in for assessm ent under the presumptive tax regime was duly exercised by the petitioner. It is pertinent to note that in earlier years the petitioner had opted out of the presumptive tax regime under section 80C but for the present, year it had opted in for such regime as provided under law. Accordingly, for this year the petitioner instead of filing a regular return under section 55 of the 1979 Ordinance submitted a statement under section 143-B furnishing the details of the deductions at source under section 50(4) in relation to supplies to National Fertilizer and the supplies themselves. It is the case of the petitioner that the deductions at source may be treated as a final discharge of, liability and the petitioner be assessed under section 80C. The respondent No.5 has rejected such contention on the premise that in terms of the Sale Agreement between the petitioner and National Fertilizer, dated 30-6-1997 no "Supplies" have taken place and the arrangement between parties is that of a principal and agent and not that of a seller and purchasers; and as such the commercial relationship between the petitioner and. National Fertilizer does not fall in one of the categories covered by section 80C. Thus, respondent No.5 proceeded with detailed scrutiny under normal law and also finalized the assessment order. The assessment order has been challenged in this petition. The petition has contended that the petition was filed on 17-2-1999 and since it could not be finally decided by 25-2-1999, the petitioner has also filed an appeal before the Commissioner Income-tax (Appeals) under section 129 of the 1979 Ordinance. 6. We have heard Mr. Muhammad Athar Saeed, the learned, counsel for the petitioner and Mr. Muhammad Farid, the learned counsel for the respondents and perused the record. 7. Mr. Athar Saeed has vehemently contended that the impugned order of assessment and the entire proceedings are completely without jurisdiction, unconstitutional, unlawful, mala fide, void ab initio and of no legal effect. He has contended that once the petitioner has exercised the option to opt in for the presumptive tax regime provided under law,
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no power or jurisdiction vested with the respondent No.5 to have proceeded under normal law and that the deduction at source under section 50(4) ought to have been accepted as a final discharge of liability and the assessment finalized under section 80C on the basis of the Statement under section 143-B. He has further contended that to challenge the impugned actions resort to departmental remedies would be totally inefficacious and even pendency of the departmental appeal would not be fatal to the maintainability of the writ petition. Mr. Saeed has stated that where orders are completely without jurisdiction and mala fide it is not necessary to avail alternate remedies provided under the statute. He has submitted copious case-law and has relied upon a number of authorities notably Kamran Industries v. Collector of Customs PLD 1996 Kar. 68, authored by one of us i.e. Dr. Ghous Muhammad, J. On the other hand, Mr. Muhammad Farid, the learned counsel for the respondents has emphatically urged that in view of the preponderant view of the Supreme Court and also the High Courts the present petition is not maintainable as adequate and efficacious remedies are available under the statute; the petitioner itself has availed such remedy and its appeal under section 129 before the 'Commissioner of Income Tax (Appeals) is pending adjudication. In this respect Mr. Farid has also referred to a number of judgments including the case of Income Tax Officer v. Hamdard Dawakhana (Waqf) PLD 1992 SC 847 and H.M. Abdullah v. Income Tax Officer 1993 SCMR 1195. Both sides have also tried to distinguish a number of judgments which would seemingly apply against them. 7-A. The principles of law which emerge from the various judgments of our superior Courts pertaining to writ jurisdiction can conveniently be summarized as follows:--- (a) The rule of availability of alternate remedies in non-suiting a petitioner in writ jurisdiction is not an absolute rule but merely a procedure through which the superior Courts regulate their jurisdiction; (b) normally, a writ petition is not maintainable where efficacious and alternate remedies are provided under a statute. The remedies should be specifically provided under law and not based upon any general principle of law; e.g. Where the statute does not provide for an appeal, the petitioner could not be non-suited on the ground of availability of alternate remedy on the general hypothesis that some representation could be filed; (c) where the alternate remedy is not efficacious, resort thereto would be immaterial; (d) where resort to alternate remedy would be illusory or an exercise in futility i.e. Where the highest appellate or revisional forum has taken a particular view it is not necessary to avail the alternate remedies provided under the statute; where the impugned actions are completely without jurisdiction, mala fide and unlawful, it is not necessary to avail alternate C remedies; where a person has already resorted to departmental remedies, he could not be allowed to bypass or abandon the same and file a writ petition; where the vires of a particular statute, notification or circular is challenged the only remedy is a writ petition under Article 199 or a suit before the Civil Court. In relation to the above there can be no cavil or dispute. However, the real problems arise upon the application of the above principles. In D relation to the application of principles (e) and (f) above there appears to be difficulties since each and every case is to be seen on its own merits. With regard to Kamran Industries (cited supra) it may be stated that the same was the case where the alternate remedy available was a revision and not an appeal. It is settled law that availability of a revision is not fatal to maintainability of petition since a revision in law is not reckoned E to be an efficacious or alternate remedy (see Mst. Hussain Bibi v. Muhammad Din, 1976 SCMR 395 and S. Mageshwani v. ALIT; 1995 PTD Note 27 at p.35 also cited and relied upon in Kamran Industries). Additionally, in Kamran Industries the petition had been admitted a long time earlier and relying thereupon the petitioner had filed a revision; accordingly, non-suiting the petitioner after such a
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long delay only on grounds of availability of an alternate remedy would have been completely against the norms of justice, equity, fairplay as also the due process provided for under Articles 3 and 4 of the Constitution. Coming back to the principles of law cited above, even the latest judgment of the Hon'ble Supreme Court in the case of Gatron (Industries) Ltd. v. Government of Pakistan 1999 SCMR 1072 confirms the principle(s) above viz., that where the impugned actions are completely without jurisdiction, mala fide and unlawful, resort to departmental remedies would be an exercise in futility. With regard to principle (d) above i.e. That resort to alternate remedies would be an exercise in futility and the remedies would be illusory where the highest appellate or revisional forum has already decided a question and taken a particular view, the Htrn'ble Supreme Court very recently has reaffirmed this principle in Collector of Customs v. S.M. Ahmed & Co. (Pvt.) Ltd. 1999 SCMR 138. Even this Court earlier in Tharparkar Sugar Mills v. Federation of Pakistan 1996 MLD 1220, had taken this line of reasoning. Perhaps to this extent the judgment in Citibank v. Pakistan and others, C.P. 1035 of 1998, dated 12-1-1998 may not be consistent with the settled law on the point, since in that case when the Income Tax Appellate Tribunal had taken a particular view resort to departmental remedies was an exercise in futility. The Gatron case furthers the Tharparkar line of reasoning as it suggests that the Assessing Officer in that case was acting under the dictate and control of his superiors and resort to departmental remedies would have been an exercise in futility. 9. In relation to alternate remedies being fatal to a writ petition there is another very important principle of law which has to be borne in mind. Where in cases the impugned actions are completely without jurisdiction or illegal and there is no immediate departmental remedy a petitioner cannot be non-suited on grounds that against the subsequent actions that are to follow the initial action the alternate remedy is provided under statute. Illustrations of these are the notices under section 65 of the 1979 Ordinance and the setting apart a case outside the purview of the self-assessm ent scheme and other like notice, since against such notices no appeal is provided under the statute. In case such notices are acted upon and the assessee goes through the round of cumbersome departmental proceedings culminating in assessment orders, the reopening of the cases and notices thereto in terms of section 65 or the notices of setting apart could be challenged in appeal alongwith the assessment orders- but at the stage of the initiate notices no appeal could be filed. In such circumstances a petitioner could not be non-suited from challenging such notices in a writ petition. This is amply supported by a number of decisions including Eduljee Dinshaw v. Income Tax Officer, 1990 PTD 155, where a Full Bench of our Supreme Court maintained a petition challenging a notice under section 65, reopening the case against the principle of change of opinion. Similarly, a Division Bench of this Court in Pakistan Educational Society v. Federation 1993 PTD 804, maintained a petition challenging the notices setting apart cases outside the purview of the Self-Assessment Scheme. This distinction is more pertinently brought out in two judgments from the Indian jurisdiction i.e. Banarsi Dass and another v. Income- tax Officer (1962) 46 ITR 633 (Punj.) and Mohindra Mohan Sirkar v. Income Tax Officer (1978) 112 ITR 47 (Cal.). In the first case it was held that the Income-tax Act itself provided remedies for wrong assessm ents and once the assessee chose to prefer his remedies under the Act, he could not invoke the extraordinary jurisdiction of the High Court for the issuance of a writ. It was further observed that reassessm ent proceedings could not be challenged in. Writ proceedings where the Income Tax Authorities had already assumed jurisdication and assessment orders,. Had bey' passed; there was a clear distinction in this respect between cases in which an assessee moved the High Court under Article 226 (equivalent to our Article 199) immediately after receipt of notice under section 34 (equivalent to section 65 of 1979 Ordinance) and where he waited till the assessing authorities had made assessments. It was held that in case where the notices was immediately challenged the petition would be maintainable but where the
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assessm ent order had been framed no such petition would lie. In the second case, it was held that the Income-tax Act did not contain any provision for any remedy which the petitioner had sought under Article 226; it was not possible to accept the contention of the Revenue that if the assessm ent was reopened and an order of assessment was passed, the appellant could have appealed against the order and, in that appeal, he could have questioned the jurisdiction of Income Tax Officer to issue the impugned notice and, therefore, the appellant had an alternate remedy. It was observed by the Court that the petitioner had challenged the jurisdiction of the Income Tax Officer to issue the impugned notices under section 148. The remedy referred to in Article 226(3) contemplated an immediate remedy for the redress of the injury complained of and not a remote or far-fetched remedy. The injury complained of was the reopening of the assessm ent and not the assessm ent orders that were to be passed after the assessments were reopened. There was no remedy in the Income Tax Act providing for the redress of the injury that would be caused to the petitioner if the assessments were allowed to be reopened and the proceedings carried on. The petition was found to be maintainable. Equally where the notice is challenged in a petition and during the pendency of the petition the assessment is finalized, the finalized assessm ent order will have to be ignored and struck down. In Central Insurance Co. v. C.B.R. 1993 SCMR 1232 the Hon'ble Supreme Court found the assessment orders in view of unlawful notices challenged in the petitions to be void when the very notices were found to be unlawful. Similar reasoning was adopted by the Lahore High Court in Shoaib Bilal Corporation v. CIT 1993 PTD 332 in annulling an assessm ent order which was finalized during the pendency of a petition challenging the notice reopening the case. Here it would not be out of place to mention that in relation to interlocutory reliefs in petitions challenging reopening of assessments, there is a growing tendency amongst Advocates appearing for the department to insist on passing orders that the department be allowed to complete the assessments, while no recoveries would be made till final disposal of the petitions. This is not a suitable interlocutory arrangement since where the petitioners challenge the very notices reopening the case or otherwise, the proceedings should be stayed and the Assessing Officer should not be allowed to complete the assessment. The reasons for this are that firstly the assessees would be subject to another round of cumbersome proceedings, which are under challenge; secondly, the petitioners would then be in a fix whether to pursue the departmental remedies or press the petitions. It is quite conceivable that for some technical defect the petition is dismissed in which case the petitioners would be without remedies as their prospective departmental appeal against the order of reassessment would become time- barred. Be that as it may in case the assessment or reassessment order is finalized after the petition has been filed i.e. During its pendency, whether through an interlocutory arrangement or otherwise, and whether by consent or otherwise, the department is precluded from raising the plea of availability of alternate remedies. 10. In the present case the petitioner has filed the petition after finalization of the assessment order. Even the first appeal was filed by it during the pendency of its petition. Pressing into service the principle of law enunciated in Banarsi Dass (cited supra) the petition is dismissed as not maintainable. As regards the challenge to framing of the main assessment order it is clarified that nothing in this judgment shall preclude the petitioner from pursuing his departmental remedies.. The appellate authorities are direpted to dispose of appeals strictly in accordance with law without any instructions or directions from any superior or other authdrity. 11. But this is not the end of the matter. The respondent No.5 after passing of the assessment order has pressed on for recoveries with tremendous haste. Even coercive actions have been taken by freezing the bank accounts under section 92 and funds withdrawn therefrom. While the disputes in the shape of appeals are pending, no coercive actions are to be taken. In Pakistan Pipe and Construction, v. City Mukhtiarkar PLD 1984 Karachi 28, a Division Beach of this Court struck down a
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notice under section 81 of the Land Revenue Act, 1967 on the score that the arrears were disputed and not 'established" or "determined". In this case the petitioner had exhausted, all alternate remedies to get a stay for recoveries without success. In or der to stay the recovery proceedings the only remedies available with t he petitioner were either a suit or a petition.…
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