Al Wakeelo
Your Digital Lawyer, Always on Duty
Initializing Secure Chambers
Your Digital Lawyer, Always on Duty
Initializing Secure Chambers
Petitioner: ESSENTIAL INDUSTRIES, MODEL TOWN, LAHORE VS Respondent: CENTRAL BOARD OF REVENUE, GOVERNMENT OF PAKISTAN, ISLAMABADHonorable Justice WAHIDUDDIN AHMEDSyed Amjad Ali Andrabi and M. S. Baqir,Sh. Abdul Haq
1968 P T D 746
1968 P T D 746
[Lahore (Pakistan)]
Before : Wahiduddin Ahmed, C. J. and Mohammad Fazle Ghani Khan, J
ESSENTIAL INDUSTRIES, MODEL TOWN, LAHORE
Versus
CENTRAL BOARD OF REVENUE, GOVERNMENT OF PAKISTAN, ISLAMABAD
Writ Petition No. 13 of 1968, decided on 9th May 1968.
(a) Income‑tax Act (XI of 1922), S. 30 (1), proviso 1 [as amended by Finance Act (XII of 1967), S. 6(19)]‑Appeal‑Amended proviso subjecting right of appeal to prepayment of 50 percent. of tax assessed‑Cannot have retrospective effect‑Appeals in respect of assessment made for the period prior to the amendment in proviso‑Governed by un-amended proviso.
(b) Income‑tax Act (XI of 1922), S. 30(1), proviso 2‑Discretion to modify or waive requirements of proviso 1 vested in Central Board of Revenue‑Matter of quasi judicial nature‑Applications for exercise of such discretion rejected by Central Board of Revenue without notice and opportunity being given to be heard in defence Order of Board, held, against principles of natural justice and liable to be quashed.
Hoosein Kasam Dada v. The State of Madhya Pradesh and others A I R 1953 S C 221 rel.
Colony Sarhad Textile Mills Ltd. v. The Central Board of Revenue, Pakistan (1966) 13 Taxation 224 distinguished.
Colonial Sugar Refining Company v. Irving 1905 A C 369, Delhi Cloth and General Mills Co. Ltd. v. Income‑tax Commis sioner A I R 1927 P C 242 ; Muhammad Ishaq v. The State P L D 1956 S C (Pak.) 256 ; Ghazi and others v. The State and another P L D 1962 Lab. 662 and Sardar Ali v. Dolimuddin A I R 1928 Cal. 640 ref.
Syed Amjad Ali Andrabi and M. S. Baqir for Appellants.
Sh. Abdul Haq for Respondent.
JUDGMENT
WAHIDUDDIN AHMED, C. J.‑This judgment will dispose of Writ Petitions Nos. 13, 175,283, 310,364 and 365, all of 1968, filed under Article 98 of the Constitution; in which common questions of law are involved.
2. Writ Petition No. 13 of 1968 has been filed on behalf of the Essential Industries, Model Town, Lahore, which is a firm carrying on the business of manufacture of pencils, having its factory in the Industrial Area, Tejgaon, Dacca, and is an assessee with the Income‑tax Officer, Special Circle, Dacca. The firm submitted a Return in respect of the assessment year 1962‑63, showing a net loss of Rs. 11,326.00 but taking into account the inadmissible items the total income came to Rs. 28,033.00 instead of the loss shown in the Return and the super‑tax payable on this amount came to Rs. 802.00. It is alleged that the Income‑tax Officer, by an arbitrary and mala fide assessment order dated 30th of June, 1967, communicated to the petitioner‑firm on 29th of July, 1967, enhanced the total income to Rs. 1,47,833.00, without taking into consideration the evidence and books of accounts produced before him and by misconstruing certain entries in the books of accounts and also disallowing certain items without any justification. The petitioner‑firm, thereupon, filed an appeal before the Appellate Assistant Commissioner, Dacca, against the Assessment order dated the 30th of June 1967, men tioned above, and by letter dated the 28th of June 1967, informed the Income‑tax Officer that the petitioner‑firm was prepared to pay the undisputed tax demands and, in fact, deposited a sum of Rs. 400.00, praying further that the balance of the tax demands being disputed, an appeal was pending against the assessment order and that action thereon should be held in abeyance. It appears that an amendment in section 30 of the Income‑tax Act (XI of 1922) (hereafter referred to as the Act), which gave a right of appeal to the assessee, was introduced by the Finance Act of 1967, which came into force on the 30th of June 1967. By the said amendment, the proviso to subsection (1) of section 30 of the Act was substituted by a new proviso, whereby the entertainment of an appeal was subjected to a pre‑requisite of payment of the tax demands. The petitioner‑firm, in view of the provisions of the amended proviso to section 30(1) of the Act, approached the Central Board of Revenue, respondent, by application dated the 26th of August 1967, requesting to waive the requirement of the first proviso on the ground of its inapplicability to the case of the petitioner‑firm and also being harsh and unjust. It is alleged that before any decision could be taken by the respondent, the Income‑tax Officer concerned issued a challan for Rs. 2,000.00 and the same was paid in the State Bank of Pak istan, without prejudice, on the 21st of September 1967. The respondent, however, by order dated the 7th of December 1967, communicated to the petitioner‑firm on the 14th of December 1967, without assigning any reason, refused to modify or waive the requirement of the first proviso to section 30(1) of the Act. The petitioner‑firm challenges the impugned order on the ground that, besides being harsh and unjust, it is illegal and without lawful authority.
3. Writ Petition No. 175 of 1968 has been filed on behalf of Mian Allah Bakhsh of the Premier Cloth Mills Limited, Lyallpur, who is an income‑tax assessee and owns property, both real and in' the form of shares in several companies. He filed a Return on the 8th of October 1962, for the assessment year 1962‑63 and declared a profit of Rs. 7,850.64. Later on the petitioner filed a revised return on the 2nd of October 1963, and declared his income at Rs. 59,620.00. The returns bled by the petitioner were examined on the 30th of June 1967, and the petitioner was assessed on the income of Rs. 3,01,828.00, being the total taxable income. The allegation of the petitioner is that the total taxable income was inflated without having due regard to the evidence and the books of accounts produced before the Income‑tax authorities and further that the Income‑tax authorities arbitrarily disallowed certain allowances to which, under the law, the petitioner was entitled. The petitioner, thereupon, filed an appeal against the order of respondent No. 3 before the Appellate Assistant Commissioner, Lahore, which is still pending adjudica tion. In this case also, the petitioner in view of the amendment introduced by the Finance Act of 1967 in section 30(1) of the Act which requires that before an appeal can be filed, the tax payable under section 29-A or one half of the sum demanded under section 29 after regular assessment under section 23, whichever is greater, should be deposited, moved the Central Board of Revenue to modify or waive the requirement of the first proviso to that section, but this application was rejected on 23rd of December 1967. The petitioner's case is that the above mentioned order is against law, harsh and oppressive and merits to be set aside for the reasons given in the petition.
4. Writ Petition No. 283 of 1968 has been filed on behalf of Mst. Safia Kalsoom, who is also an income-tax assessee and owns property in the form of shares in some companies. She filed a return on the 5th of October 1962, for the assessment year 1962‑63 and declared an income of Rs. 3,041.75. In a revised return she declared a further income of Rs. 713.00 received by way of dividends. The Income‑tax Officer concerned, after examining the returns submitted by the petitioner, on the 30th of June 1967, assessed her at a total taxable income of Rs. 61,530.00. The petitioner challenged this order before the Appellate Assistant Commissioner in appeal which is still pending adjudication. As a precautionary measure, she also moved an application under the provisions of section 30(1) of the Act, as amended, before the Central Board of Revenue, to modify or waive the requirement of the first proviso, requiring deposit of 50% of the sum demanded under Section 29 after regular assessment under section 23, or the tax payable under section 22‑A, whichever is greater. Her request to the Central Board of Revenue was turned down on the 18th of August 1967, giving rise to the filing of the present petition which impugns the order of respondent No. 1, being patently against law, harsh and oppressive.
5. Writ Petition No. 310 of 1968 has been filed on behalf of Mian Muhammad Shafi who, being an income‑tax assessee, also filed a return for the assessment year 1962‑63 and declared an income of Rs. 20,741.00. In his case too, the Assistant Income-tax Officer, G‑Ward, Lahore, on the 22nd of June 1967, assessed the petitioner at a total taxable income of Rs. 1,53,569.00. The petitioner, thereupon; filed an appeal before the Appellate Assistant Commissioner on the 5th of July 1967, which is still pending adjudication. He then moved an application before the Central Board of Revenue for exemption from depositing 50%. of the tax demand, as required by the amended provisions of section 30(1) of the Act, but his request was also turned down on the 27th of January 1968.
6. Writ Petition No. 364 of 1968 has been filed by Begum Tahira Fazal Ahmad who, being an assessee, filed a return for the assessment year 1962‑63 and declared her income at Rs. 3,041.75. In her revised return she further declared her income at Rs. 998.00, but the Income‑tax Officer concerned assessed her at a total taxable income of Rs. 85,891.00. The petitioner, thereupon, filed an appeal before the Appellate Assistant Commissioner which is still pending adjudication. She also moved an application before the Central Board of Revenue for exemption of the deposit of 50% of the tax demands as a condition precedent to the filing of an appeal, but her request was turned down on 18th of August 1967, giving rise to the present petition before us.
7. Writ Petition No. 365 of 1968 has been filed on behalf of Begum Sureyya Hameed who, being an income‑tax assessee, filed a return for the assessment year 1962‑63 and declared an income at Rs. 341.00. In a revised return submitted by her, she disclosed her income at Rs. 4,146.00. On the 30th of June 1967, the Income‑tax Officer concerned assessed the petitioner at a total taxable income of Rs. 61,456.00. The petitioner challenged this order of the Income‑tax Officer in appeal before the Appellate Assistant Commissioner and later moved the Central Board of Revenue for exemption from depositing 50% of the tax demand before an appeal could be filed, but her request was turned down by respondent No. 1 on the 18th of August 1967, necessitating the filing of the present writ petition before us.
8. By means of the above writ petitions, the petitioners, one and all, seek to challenge the orders of the Central Board of Revenue, whereby, in the case of each one of them, the Board refused to relax the rigours of proviso to section 30(1) of the Act which requires that "no appeal shall lie against any order under this subsection unless the tax payable under section 22‑A or one‑half of the sum demanded under section 29 after regular assessment under section 23, whichever is the greater, has been paid". The petitioners case is that under section 30, as it originally stood, an appeal lay to the Appellate Assistant Commissioner in certain cases and the Appellate Tribunal under section 33 of the Act in some other cases. The effect of the newly inserted proviso is that in all cases the appeal shall lie to an Appellate Assistant Commissioner, but no appeal shall be competent unless the tax payable under section 22‑A or 50% of the sum demanded under section 29 after regular assessment under section 23, whichever is the greater, has been paid. Their case is that the new proviso, introduced by the Finance Act of 1967, has virtually taken away the right of appeal which is in the nature of a vested right. They contend that the assessments in question relate to year 1962‑63 and the amendment introduced in section 30(1) of the Act is the creation of the Finance Act, 1967 and can not relate back to the assessment year of 1962‑63. In other words, the amended provision cannot be pressed into service with retrospective effect. They further allege that the C. B. R. (respondent No. 1) has proceeded to adjudicate the applications moved by them ex parte and has condemned the petitioners unheard which is not only against the law and spirit of some of the recent judicial pronouncements by the highest Tribunals of this country wherein it has been laid down that opportunity to show cause must be afforded even if it is not provided in the statute which should be read into it, but also offends against the principles of natural justice. They have, therefore, prayed that the orders passed by respondent No. 1, as communicated to them separately, may be declared as illegal and inoperative, with a direction to respondent No. 1 to waive the requirements of the first proviso to section 30(1) of the Act and to respondent No. 2 to hear the, appeals on merits without the requisite deposit.
9. The respondents have opposed these petitions on the ground that the mere fact that the petitioners were
required to deposit 50% of the tax demands before getting redress before the authorities mentioned in the Act is no ground for their taking recourse to the extraordinary jurisdiction of the High Court vested in it by Article 98 of the institutions of the Republic of Pakistan, and that the right of appeal accrued to the petitioners under the law as it existed after the promulgation of the Finance Act of 1967. Their case is that the amendment introduced into section 30(1) of the Act by the Finance Act of 1967 is neither against the law, nor it affects the vested rights of the petitioners. They contend that the appeals were filed after the amendment of section 30(1) of the Act had come into force and, therefore, the requirement of the said amendment should be complied with before the appeal is admitted and decided on merits. According to them, the amendment introduced by the Finance Act of 1967 has not put an end to the right of appeal reserved to the petitioners and that it is merely a procedural change inasmuch as it is provided in clear language that 50% of the tax demands should be deposited before the appeal is filed. It is further contended that the petitioners have got adequate remedy under the Act and, therefore, the writ petitions are liable to be dismissed on‑this ground alone.
10. The fate of these writ petitions, therefore, depends on the question whether the petitioners had any vested right of appeal under section 30(1) of the Act, as it originally stood, and whether the amendment of 1967 has, in any way, taken away or curtailed their right of appeal and the provision to deposit 50%. of the tax demands before an appeal is filed is in the nature of a procedural change. In order to decide this question, it is necessary to reproduce the provisions of section 30 of the Act, as it originally stood, which are as under :‑
"30. (1) Any assessee objecting to the amount of income assessed under section 23 or the amount of loss computed under section 24 or the amount of tax determined under section 23, or denying his liability to be assessed under this Act, or objecting to his assessment being made under sub section (4) of section 23 or objecting to the cancellation by an Income‑tax Officer of the registration of a firm under sub section (4) of section 23 or subsection (4) of section 26‑A or to a refusal to register a firm under subsection (4) of section 23 or section 26‑A, or objecting to any order under subsection 26 or section 25‑A or subsection (2) of section 26 or section 28 made by an Income‑tax Officer or objecting to any penalty imposed by an Income‑tax Officer under subsection (6) of section 44‑E, or subsection (5) of section 44‑F or subsection (1) of section 46, or objecting to a refusal of an Income‑tax Officer to allow a claim to a refund under section 48, or 49‑F, or to the amount of the refund allowed by the Income‑tax Officer under any of those sections, and any assessee, being a company, objecting to an order made by an Income‑tax Officer under subsection (1) of section 23‑A, may appeal to the Appellate Assistant Commissioner against the assessment or against such refusal or order ;
Provided that no appeal shall be filed under this section in any case in which the total income of an assessee or in the case of partners of a registered firm, the total income of the firm, exceeds two lakh rupees:
* * * * * * * * * *
Now the Finance Act of 1967 has substituted the first proviso to section 30(1) of the Act, quoted above, by the following two provisions :‑
"Provided that no appeal shall lie against any order under this subsection unless the tax payable under section 22‑A or one‑half of the sum demanded under Section 29 after regular assessment under section 23, whichever is the greater, has been paid ;
Provided further that the Central Board of Revenue may, upon an application made in this behalf, in any case,‑
(a) modify or waive the requirement of the first proviso; and
(b) extend the period within which an appeal is required to be presented under subsection (2)."
It will thus be noticed that the amendment introduced by the Finance Act of 1967, reproduced above, has placed a restriction on the assessee's right of appeal, for under the amended section the deposit of 50% of the tax demand is a condition precedent to the admission of the appeal. It is a well‑settled rule of law that a right of appeal existing on a day on which a proceeding or a lis commences is a vested right and this right is governed by the law prevailing on that day and not on the law prevailing on the date of its decision and that this vested right can be taken away only by a subsequent enactment if it so provides expressly or by necessary intendment. It is also a well‑established principle of interpretation of statutes that a right of appeal is not merely matter of procedure but is one of substantive right, that there is no vested right in procedure and that alterations in the form of procedure are always retrospective but amendment in the substantive law has no retrospective effect. This question was considered at length by the Judicial Committee in Colonial Sugar Refining Company v. Irving (1905 A C 369). In that case the Collector of Customs, acting under an Act, called the Excise Tariff, 1902, required the appellants to pay 20,100 excise duty on 6,700 tons sugar. The appellants disputed the claim. The appellants deposited the amount with the Collector and then brought action by issuing a writ. On a special case being stated for the opinion of the Supreme Court, judgment was given for the Collector. In the mean time, the Judiciary Act of 1903 was passed and received Royal assent on 25th of August 1903. By section 39(2) of that Act the right of appeal from the Supreme Court to the Privy Council was taken away and the only appeal there-from was directed to lie to the High Court of Australia. The appellants filed an appeal to the Privy Council. It was urged on behalf of the respondents that no appeal lay to the Privy Council as the right of appeal was abolished by section 39(2) of the Act. The appellant's contention was that as the appeal lay to the Privy Council at the time when the lis commenced, the abolition of the right of appeal from the Supreme Court to the Privy Council will have no effect as it affected their vested right. This contention prevailed with the Privy Council. In this connection, the Judicial Committee observed at page 372‑373 of the report as under :‑
"As regards the general principles applicable to the case there was no controversy. On the one hand, it was not disputed that if the matter in question be a matter of procedure only, the petition is well founded. On the other hand, if it be more than a matter of procedure, if it touches a right in existence at the passing of the Act, it was conceded that, in accordance with a long line of authorities extending from the time of Lord Coke to the present day, the appellants would be entitled to succeed. The Judiciary Act is not retrospective by express enactment or by necessary intendment. And there fore the only question is, was the appeal to His Majesty in Council a right vested in the appellants at the date of the passing of the Act, or was it a mere matter of procedure? It seems to Their Lordships that the question does not admit of doubt. To deprive a suitor in a pending action of an appeal to a superior tribunal which belonged to him as of right is a very different thing from regulating procedure. In principle, Their Lordships see no difference between abolishing an appeal alto gether and transferring the appeal to a new tribunal. In either case, there is an interference with existing rights contrary to the well‑known general principle that statutes are not to be held to act retrospectively unless a clear intention to that effect is manifested."
This view was followed by the Privy Council in a later decision reported as Delhi Cloth and General Mills Co. Ltd., v. the Income‑tax Commissioner (A I R 1927 PC 242). The question was also considered by Supreme Court of Pakistan in Muhammad Ishaq v. The State (P L D 1956 S C (Pak.) 256), wherein Their Lordships held that where a statute affects a substantive right, in the absence of express words or necessary intendment it has to be construed prospectively and not retrospectively. The right of appeal in this country being the creation of statute is a substantive right and it can only be conferred or taken away retrospectively by express words or necessary implication. A similar view was also expressed by a Full Bench of this Court in Ghazi and others v. The State and another (P L D 1962 Lah 662).
11. It is not disputed that the above‑mentioned amendment made in Section 30(1) of the Act has not been made with retrospective effect. Sheikh Abdul Haq, learned counsel appear ing for the respondents, has only urged that he does not dispute the proposition that the forum of appeal is determined by the law in force when the suit is filed. This, according to him, is a well‑settled principle. If the forum available to a party when the lis is commenced is available at the time of filing the appeal, the mere fact that some procedural changes have been made, prescribing the manner in which the appeal should be filed, cannot be said to have affected the vested right of that party to file an appeal. In this connection, he contended that no litigant can claim that his appeal filed in the High Court should be heard by two Judges because that was the law when the lis commenced and that it should not be heard by one Judge. The learned counsel also referred us that if some other period for filing the appeal is prescribed, that will be a mere change in procedure. He added further that if the court‑fee is raised for filing an appeal, that will also be a mere procedural change. He, therefore, strongly urged that there is a marked distinction between a procedural change and a change in the substantive law. The right of appeal, according to him, is a substantive right, but the manner in which it is to be filed, the time within which it is to be filed the forum in which it is to be presented etc., are all matters of procedure. In support of his contention the learned counsel has relied on Holland on Jurisprudence, Chapter VII, page 90, and Manual of Law Terms by Mitra. p. 484.
12. The sole question, therefore, for consideration in these matters is whether the provision as to the deposit of 50%, of the tax demand before an appeal under section 30(1) of the Act can be filed is in the nature of a procedural amendment or it affects the vested right of appeal secured to the petitioners. In this connection, it will be noticed that section 30(1), as it originally stood, imposed no condition on an assessee to deposit any tax as a condition precedent to the filing of an appeal under section 30(1) of the Act. Under the amended provision now no appeal lies from an order of an Income‑tax Officer to the Appellate Assistant Commissioner until and unless the assessee deposits 50% of the tax demand created as a liability against him. It is, therefore, quite clear that the amended provision has definitely curtailed the right of appeal enjoyed by an assessee at the time when the lis in the present cases commenced, namely, on various dates in the year 1962. In our opinion, the imposi tion of such a condition cannot be considered to be of a procedural nature or prescribing the manner in which the appeal has to be filed. In effect, it takes away the right of appeal if, for some reason or other the assessee is unable to deposit 50% of the tax de manded. These are, therefore, the cases in which the vested rights of appeal of the petitioners have definitely been substantially affected. We are fortified in this view by a decision of the Indian Supreme Court in Messrs Hoosein Kasam Dada v. The State of Madhya Pradesh and other (A I R 1953 S C 221). In that case, which arose under the Central Provinces and Berar Sales‑tax Act, the assessee, on the 28th of November, 1947, submitted to the Sales‑tax Officer, Ackola, a Sales‑tax Return in…
Read the unabridged text and precedent citation network on Al Wakeelo Legal Research Platform.