MUHAMMAD JAWED ZAKARIA, JUDICIAL MEMBER .---By this order , we intend to dispose of above titled Miscellaneous Application filed by the applicant seeking rectification in the order I.T.A. No. 53/KB of 2015 dated March 19th 2018 passed by this Tribunal, praying following submissions:
1. Through this application, the appellan t deems it necessary to bring to the notice of this Hon'ble Tribunal, the fundamental matter relating to the order 1. T.A. No. 53/KB of 2015 dated March 19, 2018 passed by the Hon'ble Division Bench in subject appeal.
2. The appellant considers that such an issue/ matter and its understanding is so. crucial that if the same is read in proper context then the decision made by the Hon'ble Bench would have been different. Such error on the issue is floating on the surface of the order and is thus rectifiable under section 221 of the Income Tax Ordinance, 2001 (the 'Ordinance').
3. The only issue in this appeal is of apportionment of expenses, for which the Hon'ble Tribunal has reproduced all our arguments yet concluded its order by agreeing with the observation of the Commissioner Inland Revenue (Appeals-I) in para 1 1 as under: "11 We tend to agree with the above observations given by the learned Commissioner Inland Revenue (Appeals) being based on merits of the case and also within all four corners of law. As no legal infirmity and irregularity is found in the order of learned Commissioner Inland Revenue (Appeals) which is hereby confirmed.
It is abundantly evident from the body of the order that the same cannot be regarded as a speaking order , having been passed after conscious application of mind. The ATIR has passed a cursory and groundless order without assigning any concrete reasons in supp ort of the adverse order . There are plethora of case laws, wherein the higher appellate forum have advanced the decisions that an appellate authority is bound to state the reasons for acceptance or rejection of the stance of the appellant. Any such order without any reason also violates section 24-A of the General Clauses Act, 1897.
4.1 We place reliance on the judgment of Islamabad High Court PLD 2017 Islamabad 19, wherein it has been held that: "12 It is now a settled law that where an authority makes an order in exercise of a quasi-judicial function it must record its reasons in support of the order it makes. Every quasi-judicial order must be supported by reasons. The giving of reasons is one of the fundamentals of good administration. The reasons for decisions make it possible to test the validity of these decisions by the machinery of appropriate writs. Since a statutory appellate authority acts as a quasi-judicial authority , it is also required to apply its mind and give reaso ns. Except in cases where the requirement has been dispensed by the statute expressly or by necessary implica tion, an administrative authority exercising judicial or quasi-judicial functions is required to record the reasons for its decisions."
"15 Public functionaries dealing with rights and obligations of persons are require d to give valid reasons in their orders which were likely to operate adversely against such persons. The respon dents were under obligation to justify as to why position taken by petitioner was not being accepted. It is the duty and obligation of public functionaries to decide the representations of the petitioners with reasons."
"18. The principles deducible from the law laid down by the Superior . Courts, on the requirement to give reasons for decisions, are as follows:- 0). Recording of reasons in support of a decision by a quasi-judicial authority ensures that the decision is reached in accordance with the law and is not the result of caprice, whim or fancy or reached on grounds of policy or expediency .
(ii) A party to the dispute is ordinarily entitled to know the grounds on which the authority has rejected his claim. If the order is subject to appeal, the necessity to record reasons is greater , for without recorded reasons the appellate authority has no material on which it may determine whether the facts were properly ascertained, the relevant law was correctly applied and the decision was just.
(iii) If the executive can make orders without giving reasons, the said power in the hands of unscrupulous or dishonest officers may turn out to be a potent weapon for abuse of power . But, if reasons for an order are to be given, it will be an effective restraint on such abuse, as the order , if it discloses extraneous or irrelevant considerations, will be subject to judicial scrutiny and correction.
(iv) The condition to give reasons introduces clarity and excludes or at any rate minimizes arbitrariness. It gives satisfaction to the party against whom the order is made. It also enables an appell ate or supervisory Court to keep the executive or a tribunal within bounds.
19. Although respondent No.1, as an appellate forum was not required to state the points arising for determination, and then give his decision thereon as required by Order X1,1, Rule 31, C.P.C. but reasons were nonetheless required to be given for the appellate order. The requirement to give reason is equally applicable to appellate orders. The order disposing the appeal must indicate that there has been proper application of mind by the authority to all the pleas raised and the reasons for the decision are also to be explicit in the order itself. On perusal of the appellate order dated 26.01.2016 one cannot but hold. that the said order of the appellate authority is cryptic and devoid of reasons. On that count the order of the appellate authority is found to be invalid and not sustainable."
(Emphasis ours)
5. We also place reliance on the judgment of Sindh High Court 2017 PTD 1 131. Wherein it has been held that: "3. From perusal of the impugned order passed by the Tribunal, the contention of the learned counsel for the applicant appears to be correct and reasonable, as it has been observed that the Appellate Tribunal in the impugned order has not addressed the legal grounds and questions as raised by the applicant in the Memo and grounds of appeal, as referred to hereinabove, nor the appellate tribunal has recorded its own findings while dismissing the appeal of the applicant and has, instead, simply concurred with the findings of the forum below .
Such practice by the highest appellate forum as provided under the statute would render such remedy as illusionary and would, in appropriate case, give a cause of action to an aggrieved person to challenge such order for being violate of express provisions of section 24-A of the General Clauses Act, 1897.
4. We may observe that Therefore, the appellate tribunal is required to record its finding on all the relevant facts and the law and decide the appeal throu gh a well-reasoned and speaking order , whereas, in the instant case, no reasons have been recorded while concurring with the order passed by the Collector (Appeals)."
(Emphasis ours)
6. In view of the judgments supra and to meet the ends of justice, it is prayed that the order of the Hon'ble Tribunal may kindly be recalled as the same has not been adjudicated on the basis of the facts of the instant case."
2. On the due date of hearing, Mr. Asif Haroon, FCA, appeared on behalf of the Appellant as Authorized Representative (AR) while Mr. Muhammad Akbar Mahar , learned D.R. represented the Tax Department/Respondent.
3. The learned AR argued that there has been an error and floating mistake on surface of the order which needs rectification under section 221 of the Income Tax Ordinance as per grounds already submitted. He submitted that the main controversy is basic misunderstanding of facts relating to the manner in which property income is earned by KPT. The AR explained that within the Port vicinity , services of cargo handling, storage and ship movement services are provided by KPT. If a customer utilizes temporary storage space in Port area, the income from the sarne is reported under the head 'Income from Business' as service income.
4. The AR further submitted that there is a difference between 'rent' and 'service'. In case of 'rent', the control of subject property is transferred whereas in case of 'services', the control of property remains with owner . KPT's estate management is related to the lands (property income) which have been leased out to commercial entities etc., whereas properties utilized for cargo handling, storage and ship movement services remain in control of KPT.
Income from estate management is repor ted under Income from property , which is not in any way interlinked with business income.
5. As per the AR, from the reading of the orders of Additional Commissioner Inland Revenue (ACIR) and Commissioner Inland Revenue - CIR (App eals), it can be noted that both have failed to consider the fact that rental income from property is different from temporary storage area provided to customers within the Port area from which service fee was earned, taxable as business income and not as rental income. The moot point, however is that the Appellant had allocated actual expenses to the relevant streams of income and common expenses to all streams of income, therefore further allocation of expenses by the ACIR is not a justifiable action.
6. The AR firmly agitated that the order passed by the Tribunal cannot be regarded as a speaking order , being cursory and groundless without assigning any concrete reasons in support of the same. The AR further agitated that the Tribunal did not give any findings and instead summarily held that there is no irregularity in the order of CIR (Appeals). The AR submitted that such an order of the Tribunal is in violation of section 24-A of the General Clauses Act, 1897 and needs to be recalled.
7. On the other hand, the learned D.R. submitted that this is not the case of rectification as there is no mistake apparent from the record. While supportin g the order of this Tribunal, he further submitted that the order is based on the pecuniary facts and circumstances of the case and that there is no need for rectification. He argued that miscellaneous application for rectification may be dismissed in limine as the same did not fulfill the conditions laid down in Section 221 of the Income Tax Ordinance, 2001.
8. We have heard both the parties and perused the records. Before we record our findings on the aspects of rectification put forth by the AR, we deem it pertinent to mention that the Appellant has also filed an Income Tax Reference Application ITRA No.182 of 2018 (Reference Application) for tax year 2012 against the order of the Tribunal, which is pending with the Sindh High Court (SHC).
9. We have also perused the copy of the said Reference Application, which was duly provided by the learned AR to this Bench. We reproduce the questions of law framed and the similar plea taken in the Reference Application against the order of the Tribunal as under: "QUESTIONS OF LA W:
(a) Whether the income of the Applicant is exempt under clause 58 of Part I of Second Schedule of the Income T ax Ordinance, 2001?
(b) Whether the income of the Applicant is exempt under section 49 of the Income T ax Ordinance, 2001?
(c) Whether the apportionment of expe nses made by the Applicant is in accordance with section 67 of the Income T ax Ordinance, 2001 read with Rule 13 of the Income T ax Rules, 2002?
PLEAS T AKEN That it is most respectfully submitted the order of the ATIR is incorrect on the facts and the law for, inter alia, the following reasons:
(i) The ATIR did not give any independent reasoning on the issue of tax rate, but followed the reasoning provided by the CIR(A) in its order 04.12.2014.
(ii) The ATIR was, required to look at the merits of the issue and decide the same through a speaking order .
The ATIR has ef fectively abdicated its duty and responsibility as a judicial tribunal.
10. We are of the view that the Appellant could not have the best of both worlds, as seeking relief simultaneously at two Appellate forums is not justified. Adverting to the main controversy of rectification, we are of the considered opinion that the issues highlighted in the miscellaneous application do not fall within the limited scope or mistake apparent from the record as envisaged under section 221 of the Income Tax Ordinance, 2001 and parameters of rectification as laid down by the Hon'ble Supreme Court of Pakistan. All highlighted issues require detailed discussion, re-investigation and re-appraisal of the matter . In our humble opinion, re-considering the issues would tantamount to review of the appeal order and not rectification of mistake apparent from record as the controversies which devolved on a process of arguments and counter arguments for their resolution clearly fall outside the purview of rectification. In a case reported as 2003 PTD (Trib) 2683 where rectification in the original order of this Tribunal was sought by citing certain decisions which were not quoted in the original proceedings, the Tribunal has been pleased to record following findings: "5. We have considered the grounds as well as the submissions made the learned AR. There is no dispute that cases now being cited by the learned AR were never relied upon by any of the parties when the original appeal was decided and the present applicant was duly represented by Mr. MZ Ansari. ITP. In view of the matter , the material now being relied upon does not find place on our records and therefore, by any stretch of imagination it cannot be presumed that there is mistake apparen t from the record of the Tribunal as available at the material time of deciding the appeal If this practice of accepting the request of re-calling the order is allowed on the basis of judgements on which a party subsequently lays its hands then there would be no end to the assessment or appellate proceedings.
6. It is trite law that jurisdiction is very limited under section 156 of the Ordinance and can be exercised only when the mistake is floating on the surface. Where an inquiry is required to be made or reappraisal of the facts or legal provision is necessary to deviate from the earlier findings, then that is not considered to be a mistake floating on the surface or rectifiable under the law. Also where an authority has given conscious finding on an issue then that authority is not empowered to review its own order on the basis of subsequent evidence . In the instant case had these orders on which the learned AR is now depending, been produced before the bench at the time of hearing of original appeal and the bench had not considere d these orders then there would have been a case for rectifications 156. In the present circumstances sub sequential evidence or explanation of law cannot be allowed to be brought on record so as to necessitate action under section 156."
11. We also find force that there could be no two opinions on the matter that resolution of once decided issue tantamount to "review", which is not allowed to this Tribunal and falls under the domain of Superior Courts as has been held. W e are fortified in our findings by the following judgments of the Hon'ble Supreme Court of Pakistan.
1. 2007 PTD 967 (SC Pak) (CIT v . Abdul Ghani)
"6. Viewed in the back ground of the above legal and factual position, it is observed that the Tribunal had decided the above issue after application of mind, consciously and giving plausible and satisfactory reasons for the same. It therefore, cannot be said to be a mistake or inadvertent finding or an error floating on the face of the judgment so as to be rectified under section 156 of the Ordinance. Rectification under section 156 is permissible if the error is apparent, obvious and floating on the face of the judgment and can be rectified without long drawn arguments and proceedings for appreciating facts and interpretation or application of any provision of law .
As observed above no error on the face of the judgment of Tribunal was identified, therefore, in the absence of any error apparent on record with regard to the impugned order the Tribunal ought to have refused to exercise jurisdiction under section 156 as an exercise of such jurisdiction only a mistake apparent on the record can be rectified but the Tribunal in fact had acted as appellate forum against its own order , which is not sustainable in law-- --."
12. Reliance in the above judgment has been placed on the landmark judgment of Hon'ble Supreme Court of Pakistan reported as 1992 SCMR 687 (CIT v. Messrs National Foods), 2000 PTD 306 (Islamuddin v. ITO) and 2003 SCMR 1401 (Maw v. Muhammad Rafique). The Hon'hle Supreme Court of Pakistan, in 1992 SCMR 687 (CIT v. Messrs National Foods) while defining the scope of rectification, has held that a mistake should be apparent from record, floating on surface and may not require any investigation or further evidence. It has been further held that "a mistake which is sought to be rectified must be so obvious and apparent from record that it may immediately strike on the face of it. It may not be something which may be established by a long drawn process of reasoning on issues on which there could be conceivably two views or opinions . "
"2008 PTD 253 (SC Pakistan) CIT v . Shadman Cotton Mills Ltd. .........................The expression "mistake apparent on record" Means the error or mistake so manifest and clear which, if is permitted to remain on record , may have material effect on the case. But an error of fact or law, which having direct nexus with the question of determination of rights of parties affecting their substantial rights or causing prejudice to their interest, is not a mistake apparent on the record to be rectified under section 156 (ibid).
The mistake must be of the nature, which is floating on the surface of record and must not involve, an elaborate discussion or detailed probe or process of determination.
The Tax Authorities or the Tribunal, as the case may be, cannot exercise jurisdiction under section 156(1) of the Ordinance in respect of an order , which due to some legal or factual defect, has to be examined by the next authority in exercise of powers under section 66-A of the Ordinance or appellate jurisdiction, as the case may be.
Similarly the Assessing Officer does not enjoy the power of review or recall its earlier order under section 156(1) of the Ordinance; rather he has limited power of rectifying the mistake on the face of the order without any material change. The tax liability of an assessee in the process of rectification cannot be altered on the basis of a consideration, which was not part of the original proceedings and concept of rectification of mistake to correct the error committed in the assessment order , which is found floating on the surface of the record, may not be beyond the assessment already made, therefore, the question as to whether certain expense can or cannot be deducted for the purpose of assessment of the income is a material question, which cannot be brought within the purview of section 156(1) of the Ordinance for the purpose of rectification of the order of assessment, rather in such a case the proper course for the concerned party is to invoke the provision of section 66-A of Income Tax Ordinance, 1979 or avail any other remedy provided under the law. The intention was not to provid e a regular or alternate remedy under section 156 of the Ordinance to re-open the assessment after it is finalized."
13. It is persistent view of the Tribunal that the scope of rectification is limited to the extent of rectification of an "error" or a "mistake" apparent from record. The provisions, as envisaged under section 221 of the Income Tax Ordinance, 2001 cannot be invoked as an alternative or substitute of an appeal, revision or a review .
14. In view of foregoing factual and legal position, the learned AR for the Appellant has not been able to point but any mistake that is apparent, obvious and floating on the face of original order passed by this Tribunal in I.T.A.
No.53/KB of 2015 dated March 19, 2018 for tax year 2012.
15. Resultantly , the Miscellaneous Application filed by the applicant IF is hereby dismissed being devoid of any merit. revisions by the competent authorities. Therefore, it is advisable to consult the official sources or legal professionals for the most up-to-date and accurate information.