' ALI NAWAZ CHOWHAN, J.---This criminal appeal is filed against the judgment dated 6-8-2004, passed by Mr. Shafqat Ahmed Sajid Judge, Accountability Court No,II, Lahore, whereby the appellant was convicted for commission of offence of corruption and corrupt practices under section 9(a) (vi) read with section 10 and para.7 of Schedule-II of the National Accountability, Bureau Ordinance, 1999 ("NAB Ordinance") and sentenced to imprisonment for five years with a fine of Rs,70,16,384. In consequence of his conviction the appellant has also been subjected to disqualification provided under section 15 of the NAB Ordinance.
2. The case against the appellant is precisely set out in the charge-sheet framed by the learned trial Court vide its order dated 4-9-2002, the material contents whereof are reproduced below:-- "That you being Mayor of Municipal Corporation, Multan, during the period from 1988-92 misused your authority as holder of such public office in capacity of Local Body Authority and as withholding Agent of the said Corporation, by wilfully failing to exercise the following authority, to prevent undue benefit to the tune of Rs,70,16,384 to favour the contractors namely Messrs Khan Brothers, Ali Hussain and Co., Qazi Ghulam Abbas and Co., Punjtan Pak Corporation, Friends Corporation, Khan and Co., Mirza and Co., causing corresponding loss to Municipal Corporation, Multan, as the said amount was deducted by the Income Tax Department from the account of the Corporation:-
(a) Advance income tax at the rate of 3% of lease amount was required to be recovered from the Contractors for Octroi, Toll Tax, Licence Fee, Animal Import and Mini wagon, under section 50(7A) of the Income Tax Ordinance, 1979 read with Business Rules, 1980 and Local Council Contract Rules 1981, for the contracts for the year 1989-90 and 1990-91 for remittance to Income Tax Department but deliberately failed to do so, in spite of repeated notes sent to you by the staff of Municipal Corporation.
(b) That you gave charge of collection of Octroi and Toll tax to Khan Brothers for the year 1989-90 commencing from 1-8-1989 without execution of agreement which agreement was later on executed on 7-12-1989, and the agreement for the year 1990-91 was executed on 6-8-1990.
(c) That you failed to take recourse of abrogation/cancellation of contract and confiscation of security deposits of contractors, even after the contractors failed to get said advance income tax deduction, Which you could have prevented by exercising your authority in legal manner, and, thus, you committed the offence of corruption and corrupt practices punishable under section 10 read with section 9(a)(vi) and para (7) of Schedule of NAB Ordinance, 1999 and triable by this Court."
3. The prosecution produced seven witnesses and the defence side produced three witnesses. Both sides also relied on documents.
4. Abdul Hameed Malik (P.W.2), was the Staff Officer IV to the Regional Commissioner, Income Tax, Central Region Multan, who gave us the ackground of the case and as to how the Income Tax Department recovered from the Municipal Corporation, Multan the income tax allegedly evaded by the Contractors, who had failed to deposit the same at the rate of 3% advance tax with the Municipal Corporation which was supposed to be deposited with the Income Tax Department. He stated:- "Municipal Corporation, Multan gave different leases but 3% income tax was not deducted from the lessees for financial years 1989-90 and 1990-91, except from Mirza & Co. And Khan & Brothers (Pvt.)
Ltd. In this way there was evasion of income tax to the tune of Rs,29,95,293 in the year 198990 and Rs,40,57,003 in the financial year 1990-91. When the Income Tax Department learnt of such evasion, a notice under section 92 of the Income Tax Ordinance was issued for seizure of accounts of Municipal Corporation, Multan in the National Bank Ltd. M.C. Branch, Habib Bank Ltd., Ghantaghar Branch and UBL Chowk Fawwara Branch. We thus recovered a total sum of Rs,70,57, 439 from the funds of Municipal Corporation, Multan.
' The following relevant excerpts from his cross-examination being relevant are reproduced below:- - "The Income Tax Department recovered an amount of Rs,66,63,538 from the account of Municipal Corporation Multan in respect of Khan & Brothers (Pvt.) Ltd. And Friends Corporation Lahore. It is correct that it is the same amount, which was shown "Nil" regarding the income tax of Khan & Brothers (Pvt.) Ltd. And Friends Corporation, by the Income Tax Department. It is correct that Municipal Corporation, Multan has submitted an application for the refund of deducted income tax mentioned above. With respect to the other Lessees, I have not brought the record with me. Due to the non-availability of record before me, I cannot say if Municipal Corporation, Multan has also claimed refund of income tax pertaining to the other lessees."
"I do not know if a deduction was made by the Income Tax Department in case of Husnain & Co.
During the year 1984-85 and the deducted amount was refunded with interest. Amount of tax relating to Friends Corporation and Khan & Brothers (Pvt.) Ltd. Is now legally required to be refunded to Multan Corporation because when final returns were filed by the said two Organizations they showed loss and hence final assessment was made that no tax was made out from them."
"Qazi Ghulam Abbas & Co. Had filed Income Tax return for their income in the year 1989-90, which is called assessm ent year 1990-91. Assessment was made and proceedings were filed on 28-6-1999, declaring that it was a case of "No demand". Messrs Ali Hussain and Co., Mirza & Co. And Punjtan Pak Corporation are not on tax roll nor they are existing assesses, because they never filed income tax returns. A sum of Rs,1,09,600 was the amount deducted from the account of Municipal Corporation, Multan for not having deducted Tax from lessee Qazi Ghulam Abbas & Co. Now the said amount is refundable To Municipal Corporation Multan."
' Which means that a sum of Rs,66,63,538 were recovered against two Companies, i.e, Khan & Brothers (Pvt.) Ltd. And Friends Corporation, Lahore, who had, later on, been issued certifications from the Income Tax Department showing that there was no income tax outstanding against these Companies. It is further revealed that similar position emerged with respect to Messrs Ali Hussain and Companies, Mirza and Companies, Punjtan Pak Corporation as no income tax was said to be due from them and from the statement of abovementioned officer of the Income Tax Department it has transpired that a sum of Rs,1,09,600 alone pertained to lessee Qazi Ghulam Abbas and Company.
5. Khalid Naseer (P.W.3), Chief Officer of the Municipal Corporation, Multan at the relevant time stated:-- "I served as Taxation Officer Municipal Corporation, Multan during the period from 1988 to 1991.
Lease for Octroi Posts for the year 1989-90 and 1990-91 was given to Messrs Khan Brothers through private negotiations but I was not associated in such negotiations. Octroi Superintendent, Mayor and Councillors gave such lease. Octroi Superintendent had the main role in it. Advance income tax was not deducted from the lessee for which I had also requested the Mayor, through Chief Corporation Officer, to do so. Salaud Din Dogar accused was Mayor in those days."
' The following excerpts from his cross-examination being relevant are also reproduced below:-- "The Minutes of Meeting show that Abdul Haleem Khan Octroi Superintendent disclosed that Messrs Khan Brothers had obtained clearance certificate from the Income Tax Department regarding the said tax."
"There is no reference of deduction of 3% income tax in Exh.D.E. Ex.h.D.E. Relates only to the acceptance or otherwise of the contract. Exh.D.E. Does not bear signature of Mayor."
"I had given recommendation that the lease of the lessee be cancelled as he was not paying the requisite income tax. However, I cannot produce any such letter or its copy.
' I cannot say as to whether copy of any such letter is kept at my residence or not. It is wrong to suggest that I never made any recommendation in this regard or that I am telling lie."
6. Allah Ditta (P.W.4), was the former Superintendent Tax who stated:- "I have also served as Superintendent Octroi Posts in Municipal Corporation Multan. As per files, all the formalities of lease were observed in the two contracts relating to the said files. Taxation Officers and Superintendent Octroi Posts are responsible for collection of the lease money and other taxes. It is correct that Municipal Corporation, Multan had written to the concerned quarters for refund of income tax deducted from their account. In reply the Tax Officers disclosed that the deducted amount was lying in their custody which will be refunded only in accordance with the rules."
7. Muhammad Ikhlaq Qureshi (P.W.5) was the Divisional Director Local Funds Audit, Multan, at the relevant time whose report became the basis of the present complaint. Who had also given report through his letter Exh.P.1/1. He had also issued Pre-Surcharge Certificate in respect of the transaction under reference.
8. Muhammad Iqbal Cheema (P.W.6) at the relevant time was working as Director Local Government, Multan. It is he who had held inquiry regarding the correctness of Pre-Surcharge Certificate. He stated:-- "Taxation Officer was the Incharge of said Branch and overall Incharge of the same was Mayor.
There is a Superintendent posted on the Octroi under the Taxation Officer. I do not remember the detail of the statutory obligations of the Superintendent Octroi and the Taxation Officer at present.
The job of the Taxation Officer is to look after all the sections/Taxation office under him and to ensure that no pilferage or leakage of public funds is made. It is correct to suggest that it is the duty of Taxation Officer to collect tax from the Contractors. Volunteered that the officers over and above the Taxation Officer have also to ensure the same."
"I do not know who receives the monthly tax paid in the Bank by the contractors. I do not know whether Superintendent Octroi receives the monthly tax from the contractors. It is incorrect to suggest that I am suppressing above said fact under the pressure of NAB. I do not know who receives said tax and then deposits the same in the Corporation. Volunteered I do Not know said clerical requirements. I do not know whether Superintendent Octroi receives said tax by the 30th of every month and then deposits the same in the Corporation Funds. It is correct to suggest that in case there is a report by any contractor in the payment of tax each month to the Superintendent Octroi, the Superintendent then reports the matter to the Taxation Officer. It is correct to suggest that if some contractor does not pay the monthly tax, the Taxation Officer recommends for the confiscation/ forfeiture of the contract to the Chief Officer. I have not examined any recommendation of the Taxation Officer during the enquiry on the non-payment of said tax to the Chief Officer. I have seen that the Chief Officer had reported the matter to the Mayor about nonpayment of tax by the contractors."
"It is incorrect to suggest that said certificate was available on record and I have deposed falsely.
The Mayor could order for the recoveries of any default of the income tax from the contractors through Collector through Revenue Recovery Proceedings. I do not remember that the Mayor accused had written to the Collector for recovery of Income Tax from the contractors under the Land Revenue Act. Until and unless the recovery is effected of the default income tax; the Mayor is not absolved of his duty."
9. Jehangir Anwar (P.W.7), Assistant Director ACE, Lahore, was the Investigating Officer in this case and some relevant excerpts from his statement are reproduced below:-- "I did not come across any writing on any document made by Salahud Din accused on the basis of which I could gather that he was against the collection of Octroi Tax from the Contractors. I do not know that Salahud Din accused had any friendship with said contractors, however, it is correct to suggest that they were not related to him. It is incorrect to suggest that Salahud Din accused had not given concession to the contractors in the recovery of Octroi Tax. It is correct to suggest that when matter of collection of the recovery of Octroi tax was brought into the notice of the Mayor accused, he had ordered for the recovery of the same. Volunteered that document for the recovery of Rs,4 lacs from the contractor vide an order passed by the Mayor, the same is placed on record as Exh. H . "
" I had come across a letter written by Mayor accused to the Collector for recovery of Income tax from the contractors. I do not know that when the Collector started proceedings of recovery against the contractors, they filed civil suit and got stay order on the basis of clearance certificate. I had come across a letter written by Mayor accused to the Income Tax Department claiming refund of confiscated amount of the Corporation by the Income Tax Department."
"I did not record the statements of The contractors in the investigation. "
"No evidence came forward to say that the Mayor accused or any of his relatives gained illegally from the non-collection of Income Tax out of the contracts given to them."
"It is correct to suggest that I had come to know that the amount in question was with Income Tax Department and confiscated. I do not know whether said amount is refundable."
10. In his statement under section 342, Cr.P.C. The case of the appellant was one of denial. He pleaded his innocence and stated that he has been involved because of his political activities opposed to the Government. He went on to say that he did discharge his responsibilities by asking for action against the Contractors and for recovery of the income tax which have forcibly been deducted.
11. Masood Ahmed Javaid (D.W.1) dealt with this case when he was Director Investigation, ACE, Multan. The following excerpt from his statement being relevant is reproduced below:-- "I held inquiry on the allegation. The allegation was about nonpayment of three per cent income tax. The enquiry result was that I recommended action against Abdul Aleem Superintendent Octroi and for droppage of allegation against Salahud Din and Haji Nasrullah. The Additional Director ACE, Multan, Region then ordered for registration of case against Haji Nasrullah and Abdul Aleem and dropped the allegation against Salahud Din accused. I was Assistant Director, Investigation, ACE, Multan, at the relevant time. The No, of said case against Haji Nasrullah and Abdul Aleem was 163/94 under sections 409, 420, 467, 468, 471, P.P.C. Read with section 5(2) of the PCA 1947. Later on I was transferred and was again posted in ACE and carried out investigation of said F.I.R. After investigation I again submitted report with the same result as was in the enquiry. Haji Nasrullah contractor had died during the investigation. The Additional Director, Anti-Corruption Establishment agreed with my result and directed me to submit challan against Abdul Aleem and the trial against Abdul Aleem is pending in the Anti-Corruption Court. I had carried out the investigation for about a year. During the investigation I had also come to know that on the reference of Additional Secretary Local Government a case F.I.R. No,25 of 1996 was also registered.
The allegation in F.I.R. No,25 of 1996 was not that as the allegation in F.I.R. No,163 of 1994. I had come across a letter of the accused Mayor written to D.C., Multan, for recovery of Income Tax from the contractor."
12. Muhammad Sadiq (D.W.2) was Tehsil Officer (Finance), T.M.A., Multan City, who produced Clearance Certificate of Khan Brothers (Pvt.) Ltd., Friends Corporation and the letter of the appellant for recovery of the income tax amount so recovered by the Income Tax Department.
13. Rao Ashfaq Ahmed Khan (D.W.3), Ex-Chairman, Local Government Board, Inspection Team, Punjab, has given his views about the accused in this case.
14. So, what happened in this case was that upon failure of the Municipal Corporation, Multan to deduct 3% income tax from different lessees/Contractors, an action was proceeded under section 92 of the Income Tax Ordinance, 1979 and the compulsory deductions were made from the Bank Accounts of the Municipal Corporation, Multan. As there was an obligation on the part of the Municipal Corporation, its officers and staff to have made deduction of three per cent. It has abundantly come on record that it was not only the Mayor, who was responsible for any negligence in this connection, rather other officers who later came and joined as witnesses had also roles to play. The Mayor of course, having an overall responsibility in this connection did write a letter to the Income Tax Department for recovery of the amount. But it was with a lukewarm interest. That the matter was agitated with the Income Tax Authority. According to Abdul Hameed Malik (P.W.2), Income Tax Officer, this amount was refundable and was pending with the Department.
15. The strangest thing which happened in this case was that the Contractors who may have benefited from the non-payment of 3% advance tax were not made accused nor charge-sheeted.
The Investigating Officer when questioned on this, could not give any cogent reply. After all they had wrongfully gained if they had in the absence of any allegation against the appellant for pocketing the money himself.
16. A careful reading of the prosecution evidence makes this a very strange case. On one hand, we are told that the Contractors, who did not pay 3% tax, later obtained Clearance Certificates from the Income Tax Department to show that they have been absolved from the payment of any income tax during the year under reference.
17. The prosecution could have asked the Income Tax Authority to explain as to why they forfeited this amount or were withholding it in view of NIL tax liability certification issued by the Department in favour of those Contractors. These acts are contrary to each other.
18. It has come on record through the mouth of the Investigating Officer that the appellant alone was not responsible for inaction against the Contractors. The other staff of the Municipal Corporation too had hand in the same. According to the Investigating Officer, the appellant had not gained from these Contractors nor were they related to him and that when an information was given to him, he ordered for recovery of the amount so forfeited by the Income Tax Department.
19. So on one hand, the Income Tax Department issued assessment orders showing no tax against the Contractors, who had to deposit 3% Income Tax in advance with the Municipal Corporation. But the same amount of 3% Income Tax was nevertheless compulsorily taken from the accounts of the Municipal Corporation and not only this the present appellant was also tried under the NAB Laws while the Contractors were conveniently left out.
20. The money under reference has gone to the Federal Government while the loss was suffered by an agency that pertains to the Provincial Government whose money was confiscated. There is no evidence to suggest that this money was pocketed by the Mayor. In case, the Mayor acted negligently and did not pursue the case for refund properly, he should have been burdened accordingly and not as harshly as has happened in the present case.
21. There is not an iota of evidence on record to suggest any mens rea or criminal intention on the part of the appellant except that he was negligent and failed to take proper action against the Contractors.
22. But while calculating what may be recoverable from the appellant, it had to be anyhow seen who amongst the Contractors were issued assessment orders for nil tax liability. Because of these orders and corresponding certificates of the Income Tax Department, no tax payment was actually due from the Contractors. Even if any deduction was made on that account it was refundable without the bar of limitation under the principle laid down in Messrs Pfizer Laboratories Limited v.
Federation of Pakistan and others PLD 1998 SC 64.
23. It, therefore, appears that a sum of Rs,66,63,538 were notionally due from Khan Brothers and Friends Corporation and Rs,1,09,600 from Qazi Ghulam Abbas and Company. Messrs Ali Hussain and Company, Mirza and Company as well as Punjtan Pak Corporation had been given clearance certificates by the Income Tax Department. So, any amount deducted on their behalf was refundable after the issuance of certificates. From the total amount of Rs,70,57,439 so deducted, the amount refundable or non-taxable comes to Rs,67,73,138 and thus after subtracting the amount covered by the Clearance Certificates the remaining amount is reduced to Rs,2,84,301 which could have been the amount that will not be refundable to the Municipal Corporation.
24. So, the negligence of the appellant Under these circumstances while arithmetically calculating cannot be beyond Rs,2,84,301. This cannot be construed more than a civil wrong which can be made good through recovery of the amount due.
25. There is no explanation as to why The actual beneficiaries, i.e, the Contractors, who were liable to pay the income tax, were not made party to the charge and this aspect of the case remained unanswered. We take it as a failure on the part of prosecution. Anyway, we are of the view that the criminal intention (Mens rea), an essential part of the commission of an offence has not been fully established against the appellant.
26. We have heard the parties and seen the record. We feel that the order of conviction and sentence of the appellant was not correct in law. This is set aside. However, under the circumstances of the case as the amount that is non-refundable from the tax authorities represents loss suffered by the Municipal Corporation which under the circumstances is to the extent of Rs,2,84,301 that was not recovered from the Contractors, who had not been exempted from taxation for that year, unlike the others who were given a clean chit by the Department against tax due from them, we, therefore, direct that the appellant should arrange for making good this loss to the Municipal Corporation and recover the same from the Contractors in accordance with law.
27. There may be a question of limitation. But it can be argued that it is only after one action ends that the other starts making a case for the condonation of delay.
28. Anyway, upon failure of the appellant to pay this amount to the Municipal Corporation within a period of two months from today as a price for his supervisory negligence, he shall not be contesting future elections until this amount is paid.
29. So far as the remaining amount, i.e, Rs,67,73,138 recovered by the Income Tax Office, Multan, is concerned, this in view of the assessment orders/certifications issued by the same Department in favour of the lessees/Contractors was refundable to the Municipal Corporation and consequently, this could not be retained by the Income Tax Department. What that department, therefore, has done with money of the Municipal Corporation, notwithstanding application for refund made to it, was an illegal act. As a functionary of Government the Income Tax Department should refund this amount under the Circumstances to the Municipal Corporation. In case of this failure, the Municipal Corporation should approach the Honourable Federal Tax Ombudsman or may seek a constitutional remedy through a writ of mandamus or otherwise. This appeal is, therefore, disposed accordingly.