Ayesha A. Malik J: This common judgment decides upon the issues raised in the petitions detailed in Schedule "A" appended with the judgment as all petitions raise common questions of law and facts. The Petitioners have challenged notices issued under Section 3B of the Punjab Agricultural Income Tax Act, 1997 ("Act") by the Respondents for recovery of agricultural income tax.
2. The basic case of the Petitioners is the same. They have received notices of recovery of agricultural income tax for the assessment years 2012, 2013, 2014, 2015, 2016, 2017 and 2018. The Petitioners' contention is that these notices are barred by time as the Respo ndents cannot recover agricultural income tax beyond the two year limit prescribed, meaning thereby that if notices are issued in the year 2019, the Respondents can only recover agricultural income tax for the assessment year 2016-17 and 2017-18. It is also their contention that the Respondents have issued recovery notices on the basis of which they seek immediate recovery which denies the Petitioners the right to appeal as prescribed under the law. It is also their case that the amount sought to be recovered is not in accordance with law and the Respondents have failed to take into consideration factors such as that the Petitioners have not declared agriculture income tax in the returns filed by them or that they have not filed any income tax return; exemptions granted to the Petitioners by the Government of Punjab on account of flood and drought have not been considered; the fact that the Petitioners to whom the notices have been issued are not the owners of the property , hence not liable to pay the agricultural income tax; that the tax has already been paid or simply that the amounts sought to be collected have been miscalculated and are excessive amounts than the actual liability , if any, of the Petitioners. Some of the petitions have also alleged lack of jurisdiction of the Respondents as the subject land is not located in the Province of Punjab or the district. It is their contention that under the Act, the Petitioners are entitled to the right of appeal in terms of Section 7 of the Act which right cannot be exercised if the Respondents issue recovery notices without passing an assessment order . It is also their case that in the very least, the Respondents must hear the objections of the Petitioners with respect to the amounts sought to be recovered so as to ensur e that if at all there is any liability for any assessment year, then the Petitioners are made liable to pay amounts that are due from them and not otherwise.
3. Report and parawise comments have been filed on behalf of the Respondents. Learned Law Officer stated that report and parawise comments filed in some of the petitions may be read into all the petitions as the grounds stated in the petitions are essentially the same. He stated that the Deputy Secretary (Recovery), Board of Revenue, Punjab vide letter dated 19.2.2019 and the Secretary (Taxes), Board of Revenue, Punjab vide letter dated 20.3.2019 brought to the notice of all Assistant Commissioners in Punjab that the august Supreme Court of Pakistan vide judgment dated 8.1.2019 titled Member (Taxes), Board of Revenue, Punjab, Lahore and others v. Qaisar Abbas and others (2019 SCMR 446) has allowed Assistant Commissioners to collect agricultural income tax from the persons who have declared agricultural income in their returns filed under the Income Tax Ordinance, 2001 ("Ordinance ") in terms of Section 3B of the Act. As per their understanding, Section 3B read with Section 4(4) of the Act allows the Respondents to recover agricultural income tax for the assessment year 2012 onwards. Learned Law Officer argued that in terms of the dicta laid down by the august Supreme Court of Pakistan in 2019 SCMR 446(supra ) the Respondents are not required to levy or assess agricultural income tax rather they can issue notices for direct recovery against income declared. Hence notices were issued for payment within 15 days. He further argued that after the expiry of 15 days amounts can be recovered as arrears of land revenue as provided under the Punjab Agricultural Income Rules, 2001 ("Rules "). In order to facilitate the objective to recover all amounts due as agricultural income tax, the Board of Revenue obtained a list of persons who have declared agricultural income in their returns for the tax year 2012-13 and 2013-14 onwards. The lists were consulted and on the basis of the data provided, district-wise lists were issued to the field formations for issuance of recovery notices. Hence he stated that the data provided in the notices is correct and as per the declarations made by the Petitioners in their income tax returns with respect to agricultural income tax. Therefore, the notices are not barred by time as the matter has just been decided by the august Supreme Court of Pakistan in 2019 SCMR 446 (supra ). The learned Law Officer argued that in terms thereof, the Respondents are entitled to recover agricultural income tax for the year 2012 onwards.
4. In terms of the arguments made from both sides, there are two issues which need adjudication. The first issue is whether the recovery notices issued are barred by time and secondly whether as a consequence of the recovery notices issued under Section 3B of the Act, the Petitioners are entitled to file an appeal/objections against the amounts sought to be recovered. With respect to the first issue, the august Supreme Court of Pakistan in 2019 SCMR 446 (supra ) considered whether notices issued for the assessment year 2014 for recovery of agricultural income tax under Section 3B of the Act could have been issued at that time, given that Section 3B was inserted through the Finance Act on 29.6.2013 and came into force on 1.7.2013. As per the judgment the relevant assessment year began on 1.7.2014, in terms of the definition of the assessment year given in Section 2(ac) of the Act. The august Supreme Court of Pakistan concluded that the Respondents could recover agricultural income tax for the past two years, being the assessment year 2012 and 2013. Hence in terms of the decision of the august Supreme Court of Pakistan, the Respondents are entitled to recover, as arrears of agricultural income tax for the assessment year 2012 and 2013. In this regard, it is noted that earlier notices were issued to the Petitioners including the Petitioner Qaisar Abbas in the instant petition, which were challenged before this Court in WP No.15628/2015 and ultimately the order of this Court dated 26.10.2015 was modified by the august Supreme Court of Pakistan to the extent that recovery for the year 2012 and 2013 was allowed. Hence it is clear that in terms of the decision of the august Supreme Court of Pakistan, the Respondents are entitled to recover agricultural income tax for the assessment year 2012 and 2013.
5. The dispute before the Court is due to the fact that the Respondents initiated a fresh process to recover agricultural income tax on the basis of which fresh notices were issued in 2019 for recovery of agricultural income tax for the year 2012 and 2013. Hence the Petitioners before the Court have raised the objection of limitation.
Essentially the Respondents were required to issue recovery notices for the year 2012 and 2013 based on the original notices issued in the year 2014 for the assessm ent year 2012 and 2013 which were challenged in WP No.15628/2015 and connected petitions and by referring to the decision of the august Supreme Court of Pakistan, notifying the Petitioners that they are now liable to pay the said amounts as the august Supreme Court of Pakistan has decided in favour of the Revenue Department. The fact that the Respondents did not mention the decision of the august Supreme Court of Pakistan in the notices issued in 2019 nor have they mentioned that the demand raised is as per the original demand raised in 2014 has led to confusion consequent to which so many petitions have been filed before the Court.
6. On this issue, the learned Law Officer was confronted with the notices issued in 2019 and was asked to explain whether the data contained in these notices are identical to the data contained in the original notices issued in 2014 for the assessment year 2012 and 2013. In terms of the detailed reply and list provided, he states that the data is the same and it is based on the information provided by the Petitioners in their income tax returns as obtained from the Federal Board of Revenue. Therefore it is his contention that for the purposes of the petitions before the Court, the Respondents are entitled to recover agricultural income tax for the assessment year 2012 and 2013 on the strength of the decision of the august Supreme Court of Pakistan. To this extent, the contention of the learned Law Officer is correct and the Respondents are entitled to recover agricultural income tax based on the original notices issued in 2014. However any recovery will be subject to the right of appeal under Section 7 of the Act. So far as to the recovery notices issued for the assessment year 2014, 2015 and 2016 the question of limitation has to be looked into in the first instance before any recovery can be made. It is also noted that since right of appeal is available under the Act, propriety demands that the objection of limitation be decided by the competent authority under the Act in order to streamline the process of recovering agricultural tax. Hence the second issue becomes relevant on whether the Petitioners can file objections/appeal against the recovery notices.
7. The Petitioners have a right of appeal against the amounts sought to be recovered under Section 7 of the Act which provides that for the purposes of appeal, review or revision, an order passed under this Act shall be deemed to be an order of a Revenue Officer within the meanings of Section 161, 162, 163 and 164 of the Punjab Land Revenue Act, 1967, provided that proceedings of suo motu , review or revision of an order in respect of any income year shall not be initiated after the expiration of two years from the end of the assessment year in which the total agricultural income of the said income year was first assessable. In any taxing scheme the right of appeal is provided under the law to resolve disputes of liability to pay tax. The right of appeal is a statutory right under the Act which means that any recovery is subject to the right of appeal.
8. In the cases before the Court several objections have been raised with respect to jurisdiction being that the notices issued have not been issued from the Assistant Commissioner of the relevant district where the agricultural property is located. By way of example in WP No.34758/19, the Petitioner is resident of District Sheikhupura whereas the notice has been issued by Assistant Commissioner , Lahore. In WP No.39480/19, the Petitioner is resident of District Narowal whereas the agriculture land is situated in North Wazirastan. In other cases objections have been raised that the Petitioners do not own any agricultural land nor have the Petitioners declared any agricultural income or that the Petitione r has never filed any income tax return. By way of example in WP No.40004/19, the Petitioner claims that she is a housewife with no source of income except for foreign remittance from a family member; that she has neve r filed any income tax return nor declared any agricultural income yet she has been served with a recovery notice. In another set of cases, the Petitioners claim exemption on the basis of notification issued by the Disaster Management Department declaring their area exempt from agricultural income tax for the relevant year 2012, 2013, 2014, 2015 and 2016. Hence on the strength of the notifications they claim that they are not liable to pay agricultural income tax. By way of example, the Petitioner in WP No.39556/19 states that he is entitled to exemption from agric ultural income tax on the basis of notificat ion dated 23.5.2012, 28.7.2016, 2.6.2017 and 21.1.2019. In another set of petitions, the Petitioners claim that they are not the owners of any agricultural land nor have they declared any agricultural income in their income tax returns yet they have been served with recovery notices. In WP No.36974/2019, the Petitioner claims that he has never filed any income tax returns, hence the question of applying Section 3B of the Act is totally without jurisdiction. In other cases, the Petitioners claim that they have already paid the total agricultural income tax yet notices have been issued. By way of example in WP No.36709/2019, the Petitioner claims that he has paid the total agricultural income tax for the years 2015, 2016, 2017 and 2018, hence he is not required to pay any amount. In another set of petitions, the Petitioner s' claim that they took the benefit of amnes ty scheme, 2018, hence they are not liable to pay agricultural income tax. These are all substantive issues which need resolution under the Act before any recovery can be initiated.
9. On the basis of the aforesaid, it is evident that notwithstanding the statement made by the learned Law Officer, that all amounts were correctly taken from the data provided by the Federal Board of Revenue is correct, there are discrepancies in the recovery notices that have been issued. The question is what is the effect of Section 7 of the Act when recovery notices are issued under Section 3B of the Act. In this regard, the august Supreme Court of Pakistan in its decision 2019 SCMR 446 (supra) held that for the purposes of Section 3B of the Act, where an assessee has declared agricultural income in its income tax returns, the Respondents can issue recovery notices directly and are not required to levy and assess agricultural income tax in terms of Section 3 of the Act. Essentially the august Supreme Court of Pakistan has held that the Respondents are entitled to recover agricultural income tax on the basis of the declaration given in the income tax returns, as per Section 3B of the Act. In a taxing statute an assessment order is necessary in order to support the demand raised and to ensure that the taxing officer has taxed a person as per the confines of the law. It ensures uniformity and equality in the demand raised in the absence of which doubt is raised and arbitrary exercise of jurisdiction is possible as there is no check on the taxing officer, and a citizen is substantially without protection from unequal and unjust demands. Under the Act Section 3 is the charging section which calls for the levy, assessment and collection of tax. Three important steps on the basis of which agricultural income tax can be recovered. In this regard Section 3B of the Act merely provides that a person is liable to pay agricultural income tax on the basis of agricultural income declared in the income tax return. Hence it imposes a liability to pay tax on the basis of an admission of earning agricultural income. Section 3 and 3B of the Act are the charging sections of the taxing statute which have to be enforced through the procedure prescribed under the Act.
The procedural machinery is provided for under Section 4, 4A, 4B, 4C and 4D read with the Rules. These sections set out the process on the basis of which the taxing officer will compute and collect agricultural income tax and the recovery notice is the final step that has to be taken once tax has been charged. A recovery notice means that the liability to pay tax has been determined, in this case based on the declaration given under Section 3B of the Act.
However it does not mean that the taxing officer cannot assess and levy agricultural income tax on the basis of the revenue record before it. Hence a recovery notice is premised on an assessment order which sets out the details of the tax liability. In the cases of agricultural income tax the august Supreme Court of Pakistan has held that an assessment order is not required under Section 3B of the Act and that the Respondents can initiate recovery on the basis of the declaration made in the income tax return. However it has not curtailed the right of appeal under Section 7 of the Act nor has it allowed the Respondents to ignore the procedure prescribed under the Act and the Rules especially with reference to computation of tax. In terms of the decision of the august Supreme Court of Pakistan, the judgment of this Court in WP No.15628/2015 was modified to the extent that an assessment order is not mandatory under Section 3B of the Act, however at the same time the august Supreme Court of Pakistan upheld the findings that the assessment order can be challenged under Section 7 of the Act which gives the right of appeal to the taxpayer and it has also upheld the findings that calculations must be provided of the tax levied. Therefore the Respondents are required to disclose the information taken from the Federal Board of Revenue, the rate applied and the tax sought to be recovered in the recovery notices so that the taxpayer is clear on what amount is due against agricultural income tax.
10. It is further noted that the Respondents must follow the procedure under the Act and the Rules to ensure that the rights of the land owners are protec ted and that the obligation to pay tax follows due process. There is a complete procedure provided under the Act and the Rules to collect agricultural income tax which requires the Respondents to issue notice to the taxpayer calling for payment and requires, as of right that the taxpayer be given time to file an appeal, review or revision against the order of Revenue Officer. It appears that the Respondents failed to bring these facts into the notice of the august Supreme Court of Pakistan while arguing in the case 2019 SCMR 446(supra ) and are now misinterpreting the judgment of the august Supreme Court of Pakistan by ignoring the statutory right of appeal, review or revision available under Section 7 of the Act.
11. The thrust of the Respondents' case before the Court is that they can make direct recovery on the strength of the agricultural income declared under Section 3B of the Act. There is no cavil to the statement because the law itself provides that the Respondents can recover agricultural income tax on the basis of declared agricultural income in the income tax returns for any assessment year filed under the Act in terms of the rates specified in the second schedule. However the taxpayer has a right to appeal against the amount sought to be recovered even if it is based on a declaration in the income tax return and direct recovery inflicted by the Respondents adversely affects the Petitioners' right of appeal under Section 7 of the Act. Furthermore the objections raised before this Court are substantive issues and necessitate a decision by the competent authority before agricultural income tax is recovered. In the cases before the Court objections with regard to limitation; objections with regard to jurisdiction; with regard to amount sought to be recovered; with regard to ownership and with regard to exemptions offered by the Government itself require due deliberation and entitle the Petitioners due process under the Act.
12. Under the circumstances, the recovery notices issued under Section 3B of the Act shall be deemed as assessment orders which are liable to appeal under Section 7 of the Act. The Respondents are obligated to hear the objections and decide the same in accordance with law. For the purposes of the cases pending before this Court and the recovery undertaken by the Respondents for agricultural income tax, the Petitioners should be granted thirty days' time to file their appeals/objections, if at all under Section 7 of the Act after which the cases shall be decided in accordance with law and subsequently if any amount is due the Respondents may recover the same under the Act and the Rules.
13. In view of the aforesaid, while partly allowing the Petitions, this Court finds as follows:
(i) The Petitioners' contention that demand for agricultural income tax for the year 2012 and 2013 is barred by time is without any merit given that the august Supreme Court of Pakistan has allowed recovery of agricultural income tax for that period. However , the amount sought to be recovered as agricultural income tax for the period 2012 and 2013 is subject to right of appeal/objections which may be availed by the Petitioners within 30 days' time from the date of release of this judgment.
(ii) It is also held that against the recovery notices issued under Section 3B of the Act, remedy of appeal is available to the Petitioners under Section 7 of the Act. In this regard, the recovery notices can be challenged within 30 days' time from the date of release of this judgment under Section 7 of the Act before the competent authority , who is directed to decide the appeals filed by the Petitioners within 30 days' time after which the Respondents can recover agricultural income tax from the Petitioners as per law .