M. M. AKRAM (JUDICIAL MEMBER). ---The titled appeal has been filed by the appellant Department against an Order No.04 dated 02.12.2013 passed by the learned Commissioner Inland Reve nue Appeals ("CIR(A)"), Zone-I, Lahore for the Tax Year 2007 on the grounds as set forth in the memo of appeal.
2. The facts in brief leading to the present appeal are that the respondent taxpay er, a private limited company is engaged in the business of manufacturing and making of soft drink concentrates of Pepsi Cola Products and manufacturing and sale of Frito-Lays Inc., products. The respondent taxpayer filed its income tax return for the tax year 2007 on 30.09.2007 , declaring an income of Rs.418,550,351/- (before charging WWF and brought forward losses). The return so filed by the respo ndent was deemed to be an assessment order by fiction of law under section 120(1)(b) of the Income Tax Ordinance ("the Ordinance"). However , the said assessment order was subsequently considered erroneous as well as prejudicial to the interest of revenue in terms, of section 122(5A) of the Ordinance on the grounds enumerated in the amended assessment order dated 30.06.2013 passed by the Additional Commissioner Inland Revenue ( ACIR ) Audit, Zone-II, L TU, Lahore.
3. The Respondent-company thereafter preferred an appeal before the Commiss ioner Inland Revenue Appeals, Zone-I, Lahore against the said order of the ACIR. The learned CIR(A) however by its order dated 02.12.2013, accepted the appeal on merits and deleted the addition made by the ACIR on accou nt of "Amortization of marketing expenses" by observing as follows: "I have considered the rival arguments, facts available on record and case laws cited supra. The arguments of the AR carry force. The findings of the Appell ate Tribunal in the above referred judgments are clear and relevant to the present matter . The additional CIR's treatment of amortizing the production cost of ads as intangibles was without fully appreciating the facts of the case as well as the applicable law. No instance was brought on record by the learned Additional CIR that any of the subject ads was aired for more than a period of one year Further , in own case of the appellant for tax year 2012, on similar issue the matter has been decided by this office in favour of the appellant through Order No.16 dated 16.09.2013. Accordingly , following the rule of consistency the Additional CIR's action cannot be sustained and the disallowance is deleted. The group succeeds."
However , the learned CIR(A) while decidi ng the appeal rejected the legal ground of the Respondent-company that whether the amended order passed under section 122(5A) of the Ordinance is time barred or not in terms of section 122(2) of the Ordinance.
4. Felt aggrieved of the said, order pass ed by the learned CIR(A), the Department has new come up before this tribunal and has assailed the impugned order on the following sole ground:- "That the learned CIR(A) was not justified to delete the addition made under the head "amortization of marketing expenses" of Rs.29,213,854/-. Out of the total expenses of Rs.2.288 billion claimed under the said head, only expenses of Rs.61.8 million was amortized over a period of two years as it involved expenditure of enduring nature incurred on production of Ad films/movies, which is duly covered under the definition of "intangibles" as envisaged under section 24(11) being "motion picture film". These constitute assets which are in permanent possession of the company and can be run again and again, Remaining expenditure which was of revenue nature relating to one year was fully allowed."
5. This case came up for hearing before this Bench on 30.06.2020. At the very outset the learned AR appeared on behalf of the Respondent-company apprised this tribunal that undisputedly the income tax return for the tax year 2007 was filed by the company on 30.09.2007 which was deemed to be an assessment order by fiction of law in terms of section 120(1)(b) of the Ordinance and the limitation to amend the deemed order was to be expired on 30.09.2012 in terms of section 122(2) of the Ordinance whereas the amended order under section 122(5A) was passed on 30.06.2013 which is time barred. Hence, the amended order passed by the ACIR is void ab-initio, illegal and without jurisdiction. Reliance was placed on the judgment of the Hon'ble Supreme Court of Pakistan titled as Additional Commissioner Inland Revenue, Audit Range, Zone-I and others v. Messrs Eden Builders Limited and others (2018 PTD 1474 ). Further contends that the learned CIR(A) has rejected the aforesaid contention while deciding the appeal and though the respondent-company has not filed an appeal before this tribunal against the rejection of the jurisdictional question, even then it is open to it to raise this jurisd ictional objection in the present appeal filed by the department. Even apart, the learned AR argues that since the question relates to the jurisdiction, it goes to the root of the matter and it can be raised for the first time before the tribunal provided the factual matrix is available on record. To substantiate his contention the learned AR relies on the judgment of the High Court of Kerala titled as Commissioner of Income Tax v. Cochin Refineries Ltd. (1996) ITR 220 ITR 398. On merits, the learned AR of the respondent contends that the learned CIR(A) has deleted the addition under the head "Amortization of marketing expenses" on the basis of own history of the Respondent for the tax year 2012 as well as the judgments of this tribunal. He also placed on record number of orders passed by the department itself on a similar issue in favour of the taxpayers. He further submits that the impugned order passed by the learned CIR(A) is a speaking order and there is no infirmity in the impugned order . He, therefore, prays for rejection of appeal of the Department.
6. On the other hand, no one appeared on behalf of the department despite proper intimation to them. Since the matter is being old, therefore, the appeal of the Department is decided ex-parte on the basis of the record available to this tribunal.
7. Arguments of the learned AR of the Respondent-company heard and record perused. The submissions made on behalf of the respondent have substance. The learned CIR(A) by order dated 02.12.2013, came to the conclusion that the ACIR was not justified in disallowing the amortization of marketing expenses as claimed by the respondent and deleted the addition on the basis of the judgments of this tribunal and the own history of the respondent for the tax year 2012. The CIR(A) took note of the contentions/submissions raised before the ACIR and also the submission in support thereof made before him. Inter alia considering the judgme nts of this tribunal on the issue, the learned CIR(A) observed that the findings of the tribunal are clear and releva nt to the present matter . It was observed that the Additional CIR's treatment of amortizing the production cost of ads as intangibles was without fully appreciating the facts of the case as well as the applicable law. No instance was brought on record by the learned Additional CIR that any of the subject ads was aired for more than a period of one year. Further , in own case of the respondent for tax year 2012, on similar issue the matter has been decided by this office in favour of the appellant through order No.16 dated 16.09.2013. The CIR(A) by relying on the decisions cited on behalf of the Respondent-company held that it was entitled to such allowance and deleted the addition made by the ACIR. We have also noted that the department itself in number of cases allowed the relief to the taxpayers on the similar expenses therefore, the respondent cannot be treated discriminately .
Further we have noted that for assuming the jurisdiction under section 122(5A) of the Ordinance, it is incumbent upon the taxing authority to prove the existence of erroneousness of the assessment to be amended in so far it is prejudicial to the interest of revenue and these two conditions must be co-exist. In the instant case, the ACIR has picked an expenditure namely "Amortization of marketing expenses" and has held that the same should have been amortized.
In doing so, the assessing officer has tacitly conceded to the admissibility of the expense. Had any part of the expense been amortized and allowed in the next year or years, it would have increased revenue of the Department in the first year of the claim and equally decreased the revenue in the subsequent year; in nutshell, there would hardly been any loss of revenue. Therefore, we are of the view that the condit ion prejudicial to the interest of revenue attached with section 122(5A) ibid is of wide import for the reason that amortization is merely an arrangement of allowing the total expense s in more than one years. We are of the view that the words "prejudicial to the interest of revenue" need to be interpreted and understood as irreparable loss to the revenue and not a momentary and temporary loss which is equally recouped or compensated in the subsequent years when amortized expense is allowed. Amortization is only a deferment of part of the expense to the next year and is purely an accounting treatment. Secondly , the expense of "advertisement" is not admissible in its nature and the assessing officer has erred in holding that the deemed assessment was erroneous in so far as it is prejudicial to the interest of revenue. There was nothing available on record to support such adverse finding. It is not open for a tax authority to pick any item of expense from the return of the taxpayer on the basis of a guesswork, seek explanation from the taxpayer or call records and then frame an opinion to amend an assessment under section 122(5A) of the Ordinance. The factum of erroneousness and loss of revenue must be afloat from records beyond any shadow of doubt or ambiguity in order to make a resort to section 122(5A). Therefore, on facts too, we hold that assumption of jurisdiction by the assessing of ficer was incorrect for the reasons discussed Supra.
8. With regard to the preliminary legal objection of the Respondent-company that the amended order passed by the ACIR under section 122(5A) of the Ordinance is void ab-initio, illegal and without jurisdiction being time barred in terms of section 122(2) of the Ordinance. To answer this jurisdictional objection, the following question may arise:- Whether in the absence of an appeal by the Respondent-company , can it take the question of jurisdiction which goes to the root of the case, requiring no further additional evidence for its adjudication and which is also not a subject matter of appeal?
A somewhat similar question was posed before the High Court of Kerala in the case titled as Commissioner of Income T ax v. Cochin Refineries Ltd. (1996) 220 ITR 398 wherein it was held that;- "14 It is well-known that a successful party can support the conclusion of the subordinate Tribiunal in an appeal filed against such decision on other grounds, even decided against him.
15. Here, in the instant case, the assessee had succeeded before the first appellat e authority and, therefore, when the Department took up the matter in appeal before the Tribunal, though the assessee has not filed any cross appeal against the non-consideration of the contention regarding the jurisdiction, it is open to him to support the order on the question of jurisdiction also. Even apart, since the question relates to the jurisdiction, it' goes to the root of the matter and it can be raised for the first time before the Tribunal provided the factual matrix is available on records."
At this place, we are required to consider the scope of the appellate powers of the Tribunal. The power conferred on the Tribunal under section 132 of the Ordinance does not debar or disentitle a party not filing an appeal to raise a point or a ground on the basis of which he could support the judgment. It may be true that by permitting a party not filing an appeal, the tribunal cannot enhance the tax. But, where such a party wants to take a ground which may be different from the one on which the judgment is given in his favour , there is no restraint on the power of the Tribunal by which it would refuse such a party to raise the ground. In New India Life Assurance Co. Ltd. v. CIT, (1957) 31 ITR 844, the Bombay High Court had occasion to deal with the scope of section 33(4) of the Indian I.T Act, 1922. Dealing with this, Chagla C.J observed (p. 855): "The position with regard to the respondent is different.' It is not open to him to urge before the court of appeal and get a relief which would adversely affect the appellant. If the respondent wanted to challenge the decision of the trial court, it was open to him to file, a cross-appeal or cross-objections. But the very fact that he had not done so shows that he is quite content with the decision given by the trial court. Therefore, under these circumstances, his only right is to support the decision of the trial court. It is true that he may support the decision of the trial court, not only on the grounds contained in the judgment of the trial Court but on any other ground. In appreciating the question that arises before us, one must clearly bear in mind the fundamental difference in the positions of the appellant and the respondent. The appellant is the party who is dissatisfied with the judgment, the respondent is the party who is satisfied with the judgment. Now what we have just said is nothing more than really a summary of the provisions with regard to appeals and cross-objections contained in Order XLI of the Civil Procedure Code; and as we shall presently point out, the position of the Appellate Tribunal is the same as a court of appeal under the Civil Procedure Code and the powers of the Tribunal are identical with the power s enjoyed by an appellate court under the Code."
In the present case, the subject-matter of the appeal before the Tribunal is the question as to whether the deleting of addition made under the head "Amortization of marketing expenses" was justified by the CIR(A). It is certainly open to the respondent-company , in the appeal, to justify the order passed by the CIR(A) on the ground that the addition was deleted on the basis of the judgments of this tribunal and on own history of the respondent, the impugned order of the CIR(A) cannot be interfered with. According to our opinion, the question of jurisdiction of the ACIR to pass the amended order after the expiry of five years prescribed in section 122(2) of the Ordinance is also a fundamental legal question which canno t be ignored for the reason that it is settle d law that if the order is void ab- initio the supper structure built thereon automatically falls to ground. Reliance may be placed on the judgment titled as Moulana Atta Ur Rehman v. Al-Hajj Sardar Umer Farooq and others (PLD 2008 SC 663) wherein it was held that:-- "In the same string are the cases reported as Rehmatullah and others v. Saleh Khan and others (2007 SCMR 729), Punjab Workers' Welfare Board Government of Punjab and Human Resources Department, Lahore v. Mehr Din (2007 SCMR 13), Muhammad Tariq Khan v. Khawaja Muhammad Jawad Asami (2007 SCMR 818) and All Pakistan Newspapers Society v. Federation of Pakistan and others (PLD 2004 SC 600). The learned High Court has not appreciated the law laid down in the above reported cases. It is well settled that when the basic order is without lawful authority and void ab initio, then the entire superstructure raised thereon falls to the ground automatically as held in Yousaf Ali v. Muhammad Aslam Zia (PLD 1958 SC 104)". (Emphasis supplied)
Hence, the two matters were inseparably connected. This is the settled position of the law that the power conferred by Order XLI, Rule 33, C.P.C, can be exercised by a court where a portion of the decree appealed against is so inseparably connected with the portion not appealed against that justice cannot be done unless the latter portion is also interfered with. As held by the Supreme Court in Nirmala Bala Ghosh v. Balai Chand Ghosh, AIR 1905 SC 1874, 1884 : "Order XLI, Rule 33, is primarily intended to confer power upon the appellate court to do justice by granting relief to a party who has not appealed, when refusing io do so would result in making inconsistent, contradictory or unworkable order ."
9. In the case titled as CIT v. Mahalakshmi Textile Mills Ltd., (1967) 66 ITR 710 (SC), the question regarding the jurisdiction of the Tribunal to allow a plea inconsistent with the plea raised before the Departmental authorities was canvassed. Interpreting section 33(4) of the Indian Income-T ax Act, 1922, the apex Court observed that there was nothing in the Act which restricted the Tribunal to the determination of questions raised before the Departmental authorities. It further observed that all questions whether of law or of fact which related to the assessment of the taxpayer may be raised before the Tribunal. The apex court further observed that if for reasons recorded by the Departmental authorities in rejecting the contention raised by the taxpayer , grant of relief to him on another ground is justified, it would be open to the Departmental Authorities and the Tribunal and indeed it would be their duty to grant that relief and that the right of the taxpayer to relief could not be restricted to the plea raised by him.
10. In the decision reported in National Thermal Power Co. Ltd. v. Commissioner of Income Tax, (1998) 229 ITR 383 (SC). It has been observed that the power of the Tribunal dealing with the appeals is expressed in widest possible terms and in the absence of any statutory provision, the appellate authority is vested with all the plenary powers which the subordinate authority may have in the matter . It further observed that the purpose of the assessment proceeding before the taxing authorities is to assess correctly the tax liability of a taxpayer in accordance with law and so long as the relevant facts are on record in respect of that item, and if as a result of a judicial decision given when the appeal is pending before the Tribunal, a non-taxable item is taxed or a permissible deduction is denied, there is no reason why a taxpayer should be prevented from raising that question before the Tribunal for the first time.
It need not be over-emphasized that the Appellate Tribunal Inland Revenue Rules, 2010 framed by the Tribunal in exercise of its power under section 130(12) of the Ordinance are wholly for the purpose of regulating its own procedure and the procedure of the Benches of the Benches of the Tribunal. The rules therefore embody the principles of procedure to be followed by the Tribunal and its Benches for the discharge of its functions. The scheme of the Rules read as a whole does not suggest that the Rules in any way have the effect of curtailing or circumscribing the power , authority and jurisdiction of the Tribunal in dealing with matters at its disposal. We have not been able to read any prohibition in the rules totally precluding the Tribunal from considering any ground beyond those mentioned in the memorandum of appeal filed by a party , whether the taxpayer or the Department, in the absence of an appeal by the other side projecting the new ground. It is a settled principle of law that procedural law is the hand maid of justice and has to be so interpreted to advance the cause of justice and not to thwart it.
11. We have also taken note that the purpose of the assessment proceeding before the taxing authority is to assess correctly the tax liability of a taxpayer in accordance with law. We consider it to be a solemn duty of the taxing authorities to correctly assess the tax liability of a taxpayer by duly following the relevant provision of law and therefore, do not countenance an inflexible and mechanical adherence to the law of procedure and in the process deny a taxpayer a benefit to which it is otherwise entitled in law. In our considered opinion, that there cannot be any estoppel against law. In this regard, we are reinforced by the observations of the apex court in Sang-ram Singh v.
Election T ribunal, AIR 1955 SC 425, with reference to the Code of Civil Procedure as under (page 429): Now a code of procedure must be regard ed as such. It is "procedure" something designed to facilitate justice and further its ends: not a penal enactment for punishment and penalties; not a thing designed to trip people up. Too technical a construction of sections that leaves no room for reasonable elasticity of interpretation should therefore be guarded against (provided always that justice is done to 'both' sides) lest the very means designed for the furtherance of justice be used to frustrate it."
The above principle of interpretation of statutes was followed and further developed by the Hon'ble Supreme Court of Pakistan. Reliance may be placed on the judgment titled as Pir Sabir Shah v. Shah Muhammad Khan (PLD 1995 SC 66 ) and CIT v . Ghazi Barotha Construction ( 2004 PTD 1994 ).
12. It has also been held in the case of M/s Squib Pakistan (Pvt.) Ltd. v. Com missioner of Income Tax and others (2017 PTD 1303 ) that a question of law arising out of the Tribunal's order , on the basis of which advisory jurisdiction of High Court under Section 133 may be invoked, includes a question, which has neither been argued or raised by either party in, nor decided by, the Tribunal. Now following the true import of this dictum, may assail the order of this Tribunal on a question of law without raising or arguing before this Tribunal in the first instance, then it would be unfair and as such against the mandate of Article 10-A of the Constitution of Pakistan, 1973 to disallow a party to bank its case on that premises before this Tribunal at or prior to date of hearing.
13. We are therefore, not in favour of granting such a primacy to the rules of procedure so as to wipe off a substantial right otherwise available to the Respondent-company in law. We find this view of ours also reinforced by the language of rule 14 of the Appellate Tribunal Inland Revenue Rules, 2010 which does not require the Tribunal to be confined to the grounds set forth in the memorandum of appeal or taken by leave of the Tribunal. We are therefore of the view that it is permiss ible on the part of the Tribunal to entertain a ground beyond those incorporated in the memorandum of appeal though the party urging the said ground had neither appealed before it.
We must however hasten to add that in order to enable either the taxpayer or the Department to urge a ground in the appeal filed by the other side, the relevant facts on which such ground is to be founded should be available on record. In the absence of such primary facts, in our opinion, neither the taxpayer nor the Department can be permitted to urge any ground other than those which are incorporated in the mem orandum of appeal filed by the other party . In other words, if the taxpay er or the Department, without filing any appeal seeks-to urge a ground other than the grounds incorporated in the memorandum of appeal filed by the other side, the evidentiary facts in support of new ground must be available on record. Notwithstanding the aforesaid, it is settled law that it is the duty of the Court to apply the correct law. Reliance in this regard may be placed on the judgment titled as Chairman, Nab v . Muhammad Usman and others ( PLD 2018 SC 28 ) wherein it was held that:- "................however , one cannot ignore the fundamental principle relating to administration of justice that law is written on the sleeves of the Judges and it is the primary duty of a Judge to apply the correct law to a case before it and even the party is not bound to engage a counsel for telling the Court how a particular law is to be applied and how the jurisdiction is to be exercised thus, the impugned judgment being not sustainable in law , is set at naught."
It is also immutable principle of law that the pure legal question going to the root of the case and requiring no further additional evidence for its adjudication may be raised at any stage of the proceedings. Reliance may be placed on the judgment of the Hon'ble Supreme Court of Pakistan titled as Caltex Oil (Pakistan) Ltd. v. Collector , Central Excise and Sales T ax and others, ( 2005 PTD 480 ) wherein it has been held that; "6. This is settled principle of law that a question of law arising out of the facts of the case relating to the fundamental issues involved therein, even if was not raised before the lower forum can be allowed to be taken before the higher forum and this Court for doing complete justice may, if the facts and circumstances of a case so demand, allow to raise a question of law which was not as such taken before the High Court. This is the duty of the Court seized of the matter , to apply the correct law to meet the ends of justice and this Court in Gatron (Industries) Ltd. v. Government of Pakistan (1999 SCMR 1072 ) held that "even when leave is not granted on a point, the same can be allowed to be canvassed in appeal if it is nece ssary for doing complete justice in a cafe or a matter pending before the Court as contemplated by sub-article (1) of Article 187 of the Constitution."
14. We are, therefore, of the view that it is permissible on the part of the Tribunal to entertain a ground on an established point of law going to the root of the jurisdiction of the authority passing the impugned Order . We, therefore, answer the question referred above, in the affirmative. It is the duty of the Authorities under the Ordinance to correctly assess and realize the tax payable in accordance with law and therefore assuming that as a result of some lapse, negligence or ignorance there is any omission on the part of the taxpayer , the same should not be exploited to the advantage of the Revenue by side-lining the relevant provisions of law. If technical considerations are pitted against substantial justice, the latter should prevail.
15. Now we dilate upon the jurisdictional legal objection of the learned AR appeared on behalf of the Respondent- company . We find that the issue of time limitation provided under subsections (2) and (4) of Section 122 of the Income Tax Ordinance, has already been decided by the Hon'ble Supreme Court of Pakistan in the case titled as Additional Commissioner Inland Revenue, Audit Range, Zone-I and others v. Messrs Eden Builders Limited and others ( 2018 PTD 1474 ), and para No.7 of this judgment reads as under: - "7. Because the terminal date of limitation is not changing through the amendment brought about through the Finance Act, 2009 and because the period of limitation is not being extended per se therefore the authorities cited by the learned counsel for the appellants are of no avail and are distinguishable. In this view of the matter , hold that the various respondents, who filed their tax returns before the section 122(2) of ITO, 2001 was amended through the Finance Act, 2009 will be governed by Section 122(2) ibid as it stood before the amendment brought about in the said section through Finance Act, 2009 dated 30.06.2009 will not be attracted to their cases."
16. Admittedly in the instant case, the taxpayer has furnished its return of income for tax year 2007 on 30.09.2007 i.e. prior to amendment made in section 122(2) vide Finance Act, 2009 through which limitation to complete assessment was extended from five year to six years. In view of the judgments of the Hon'ble apex Court, the deemed assessment was required to be amended up to 10.09.2012, whereas in the instant case the assessment was amended on 30-6-2013 which is clearly barred by time limitation B as provide d under the law. We, therefore, are inclined to hold that amended order passed on 30.06.2013 is not sustainable in the eye of law being barred by time. Consequently , the order passed by the assessing authority is hereby annulle d and that of the learned CIR(A) is vacated.
17. For what has been discussed above, the appeal of the appellant-department is disposed of in the above terms.
18. This order consists of (13) pages and each page bears my signature.