Shahid Jamil Khan, J. This judgment interprets Sections 124 and 226 of the Income Tax Ordinance, 2001 ("Ordinance of 2001") to hold that an order , having attained finality , has to be given appeal effect under the Section 124. Commissioner 's plea of pending application for rectification before Appellate Tribunal Inland Revenue ("Appellate T ribunal") is held against the provisions and scheme of the Ordinance of 2001.
2. Petitioner has assailed order dated 22.10.2021 which is passed on an earlier direction by this Court in Writ Petition No.55590 of 2021. Operative part of impugned order is reproduced:- "6. Further , the sole reason to avail the full statutory limit in giving the appeal effect is that the instant case involves ascertainment of a vital factual/legal issue i.e. adjustability of the Income tax deducted u/s 148(7) of the Income Tax Ordinance, 2001 for the taxpayer under consideration. It would be worthwhile to mention here that on the exact same issue in Tax Year 2013 for the same taxpayer , leave to appeal has been granted to the department by the Honorable Supreme Court of Pakistan and the CPLA No. 3498-L/2019 is pending before the apex court . Therefore, it would only be in the fitness of things to avail the time limitation so provided to the department by the Statute i.e. as per provisions of Section 226(b)(ii) of the Income T ax Ordinance, 2001.
7. The matter is thus decided as above in compliance to the directions by the Honorable Lahore High Court, Lahore."
[Emphasis supplied]
3. Petitioner had approached this Court for implementation of order dated 01.12.20 21 by Appellate Tribunal against which, assertively , Reference Application was not filed and limitation for this purpose had expired. Direction was given for providing an opportunity of being heard and to inform the petitioner if any stay was granted by Learned Division Bench. The petitioner was directed to be treated strictly in accordance with law, if Appellate Tribunal' s order was holding field.
It is an admitted position that Reference Application was not filed against Appellate Tribunal' s order and Commissioner , present in Court stated that non-filing of Reference Application was a conscious decision. It was, however , pleaded that an application for rectification of the order dated 01.12.2021 was filed before the Appellate Tribunal on 10.01.2022, which is pending, therefore, limitation of two months, for giving appeal effect under Section 124(4) would stop running till its decision. It is apprised, on query , that no interim relief is granted by the Appellate Tribunal, hence, the order , sought to be implemented is intact and holds the field.
4. Learned counsel for the petitioner submitted that the matter is being delayed on one pretext or the other with malafide intention. He apprised, on facts, that an order , favorable to the petitioner-taxpayer , was passed by the Commissioner (Appeals). Appeal was filed before Appellate Tribunal, by respondents-department, which was dismissed being barred by time. The plea for condonation of delay was also declined for not filing any application.
The order by Commissioner (Appeals) has attained finality , in absence of a Reference Application. Filing of application for rectification is, with malafide intent of not implementing the order .
Learned counsel for the respondents-department has reiterated that a rectification application to seek redetermination of certain factual issues, is filed in the Appellate Tribunal. He argued that Section 124(4) is to be read with Section 226(b)(ii) of the Ordinance of 2001, therefore, the period, in which any proceeding is pending, has to be excluded, while calculating the limitation of two months for giving appeal ef fect.
In response, learned counsel for the petitioner has opposed the interpretation to submit that provisions of Section 226 of the Ordinance of 2001 are not applicable.
5. Heard. Record perused.
6. This Court is often seized of the issue, in Constitutional jurisdiction, when the judgment/order by Appellate Tribunal is not implemented by a Taxation Officer/Commissioner . Generally , this Court does not pass any order for implementation if limitation for filing of Reference Application is available to the department. If Reference Application is filed, the case is normally referred to the Commissioner for providing opportunity of being heard and intimation of an interim order , if so passed against the order sought to be implemen ted. Under the latter scenario, a similar direction was given. However , a legal question has arisen, on passing of the consequential impugned order , which needs determination.
7. No cavil that an order or judgment competently passed by a Court or Tribuna l, is to be implemented unless reversed by a higher Appellate Court or is suspended during proceedings before it. In this case, undeniably the order , in favour of petitioner taxpayer , by the Commissioner (Appeals), has attained finality , as Appellate Tribunal' s order , dismissing appeal, was consciously not challenged under Section 133 of the Ordinance of 2001, before Division Bench of this Court.
Perusal of the record compels this Court to observe that inactions in discharge of statutory obligations, like filing of appeal before Appellate Tribunal within time and non-filing of reference, apparently , is being covered up by moving rectification application, which is not a regular proceeding. The application under Section 221 of the Ordinance of 2001 is meant to rectify a mistake, legal or factual, floating on record, where no interpretation or long drawn arguments are required to rectify it, for which limitation is five years. At times the remedy of rectification under Section 221 of the Ordinance of 2001 is misused by both sides, therefore, in numbe r of judgments, Superior Courts have trimmed the jurisdiction to bring it in conformity with the intent of legislature. The judgment by August Supreme Court of Pakistan in Commissioner of Income Tax Company' s II, Karachi v. Messrs National Food Laboratories (1992 PTD 570) enshrines the contours for exercising the jurisdiction. Though the observations, ibid, are not relevant to the merits of case but are necessary for further discussion.
8. The legal proposition before this Court is very simple, whether Commissioner can delay implementation of an order which has attained finality under the Ordinance of 2001 by filing a rectification application before Appellate Tribunal and pleading it as a pretext that limitation of two months under the Section 124(4) would continue until the application for rectification is pending. Relevant part from both Sections, ibid, are reproduced for quick reference:- "124. Assessment giving effect to an order .-
(4) Where direct relief is provided in an order under section 129 or 132, the Commissioner shall issue appeal effect orders within two months of the date the Commissioner is served with the older ."
"226. Computation of limitation period.- In computing the period of limitation, shall be excluded-
(a) ....
(b) in the case of an assessment or other proceeding under this Ordinance,-
(i) ...
(ii) the period, if any, for which any proceeding for the tax year remained pendin g before any Court, Appellate Tribunal or any other authority ."
[Emphasis supplied] Applicability of two months limitation for giving appeal effect under Section 124(4) of the Ordinance of 2001 is not in dispute. Perusal of Section 226(b)(ii) of the Ordinance of 2001 envisages exclusion of the period spent during proceeding "pending before any Court, Appellate Tribunal or any other authority". The period, sought to be excluded in clause (b), is of "assessment or other proceeding" . The appeal effect order envisaged under 124(4), does not come within the phrase, "an assessment or other proceeding" as no proceedings in shape of hearing etc., are required for this purpose.
9. To determine whether Subclause (ii) of Clause (b) to Section 226 of the Ordin ance of 2001 can be read with subsection (4) of the Section 124, wholistic examination of the Section 124 is necessary . The provisions under the Section 124 deal with every conceivable situation, after an order by the forums superior to the Commissioner . Two months limitation is provided to impleme nt an order giving "direct relief" under subsection (4). It is important to understand the situation, how direct relief is different from other relief for the purpose of Section 124, to examine it, provisions under subsection (1) to (4) , are reproduced: "124. Assessment giving effect to an order . -- (1) Except where sub-section (2) applies, where, in consequence of, or to give effect to, any finding or direction in any order made under Part III of this Chapter by the Commissioner (Appeals), Appellate Tribunal, High Court, or Supreme Court an assessment order or amended assessment order is to be issued to any person , the Commissioner shall issue the order within two years from the end of the financial year in which the order of the Commissioner (Appeals ), Appellate Tribunal, High Court or Supreme Court, as the case may be, was served on the Commissioner .
(2) Where, by an order made under Part III of this Chapter by the Appellate Tribunal, High Court , or Supreme Court, an assessment order is set aside [wholly or partly ,] and the Commissioner or Commissioner (Appeals), as the case may be,] is directed to [pass] a new assessment order , the Commissioner [or Commissioner (Appeals), as the case may be, shall [pass] the new order within [one year from the end of the financial year in which] the Commissioner [or Commissioner (Appeals), as the case may be,] is served with the order Provided that limitation under this sub-section shall not apply , if an appeal or reference has been preferred, against the order passed by Appellate T ribunal or a High Court.
(3) Where an assessment order has been set aside or modified , the proceedings may commence from the stage next preceding the stage at which such setting aside or modification took place and nothing contained in this Ordinance shall render necessary the re-issue of any notice which had already been issued or the re-furnishing or re-filing of any return, statement, or other particulars which had already been furnished or filed."
(4) Where direct relief is provided in an order under section 129 or 132, the Commissioner shall issue appeal effect orders within two months of the date the Commissioner is served with the order .
[Emphasis supplied] Subsection (2): Subsection (1) excludes a situation under subsection (2) so it is examined first. subsection (2) provides one year's limitation , where an assessment order is set aside, by Appellate Tribunal, High Court or Supreme Court and the Commissioner or Commissioner (Appeals) is directed to pass a new order . More importantly , proviso to the subsection provides that the limitation under it, shall not apply if appeal or reference is filed against such order by Appellate Tribunal or High Court.
In other words; implementation of such direction cannot be sought or suspension of such order by Appellate Tribunal or High Court is not necessary if appeal or reference is filed, which shall operate as automatic stay.
Rational behind the automatic stay is to avoid multiplicity of proceedings or litigation, in case appeal effect order under Section 124(2) is passed during proceedings, pending appeal or reference.
The order by the Appellate Tribunal or High Court envisaged under subsection (2), is not providing direct relief , but disposing of a matter with direction to pass a new assessment order . In legal Jargo n we call it a remand order , with direction for passing fresh order after proceedings afresh.
Subsection (1): The situation under subsection (1) is slightly different, where no order or direction for fresh assessment order or denovo proceedings is passed, but as a consequence of any finding or direction and to give effect to findings or directions, an assessment order or amended assessment is to be issued to a person, the Commissioner shall issue the order within two years .
No direct relief is provided by the orders envisaged under subsection (1) nor filling of an appeal or reference against such order would operate as automatic stay order .
Subsection (3): Subsection (3) deals with a situation where an assessment order is set aside witho ut any direction or is modified in a way that proceeding can be reinitiated. Such proceeding would recommence without issuance of fresh notice, refurnishing of or refilling of return, statement or other particulars, which had directly been furnished or filed.
Importantly , no limitation is provided in this subsection for completion of re-initiated proceeding and passing of an appeal effect order . Provisions of Section 226(b)(ii) shall apply in this situation, which excludes the period, for which proceedings remained pending before a higher Appellate forum or Court.
The orders envisaged, in subsection (3) are also not providing any direct relief , because after the setting aside or modification, same proceeding are required to be undertaken again.
Subsection (4): Subsection (4) to Section 124 is the only subsection, which envisages the orders giving direct relief and limitation for implementation of such orders is minimum i.e. two months . Filing of reference or appeal against such order does not stop the limitation, therefore, it is imperative that interim relief be sought for suspending the operation of such order , from the Tribunal or Court, where Appeal or Reference is pending.
Complete understanding of Section 124, ibid, clarifies the concepts of automatic stay, or where limitation would stop running and where stay is to be sought in an Appellate or Reference Jurisdiction.
10. Provisions of Section 226 are general in nature and are providing a method of calculating a period from the limitation provided under different provisions of the Ordinance of 2001. For better understanding, provisions under the Section need to be read collectively:- "226. Computation of limitation period.- In computing the period of limitation, shall be excluded-
(a) In the case of an appeal or an applica tion under this Ordinance, the day on which the order complained of was served and, if the taxpayer was not furnished with a copy of the order when the notice of the order was served on the taxpayer , the time requisite for obtaining a copy of such order ; and
(b) in the case of an assessment or other proceeding under this Ordinance,-
(i) the period , if any, for which such proceedings were stayed by any Court, Appellate Tribunal or any other authority; or
(ii) the period, if any, for which any proceeding for the tax year remained pending before any Court, Appellate Tribunal or any other authority ."
[emphasis supplied] Under clause (a) the time spent in obtaining copy of an order , sought to be complained against, is to be excluding from the limitation provided to challenge such orders.
Clause (b) deals with assessment or other proceedings under the Ordinance of 2001. Its Subclause (i) envisages the period for which assessment or other proceedings were stayed by a Court, Tribunal or an Authority .
Subclause (ii) excludes period, for which any proceeding for a tax year remained pending before a Court, Tribunal or Authority . This Subclause appears to be in conflict with Subclause (i), but a careful reading would show that in Subclause (i), the Court, Tribunal or Authority is approached during an assessment or other proceedings, which were stayed. Whereas, under Subclause (ii) proceedings before the Court, Tribunal or Authority , relating to a tax year are envisaged, which are pending after completion of an assessment or other proceeding. In case of remand, if Court, Tribunal or the Authority directs to proceed again, as contemplated in the Section 124(3), without issuance of fresh notices etc., the period consumed in proceedings before the Court, Tribunal or Authority shall be excluded from the period of limitation, to complete the assessment or other proceeding.
The difference is that under Subclause (i), existence of stay order is a prerequisite, whereas under Subclause (ii) the period consumed in proceedings before the Court, Tribunal or Authority shall be excluded even in absence of any stay order .
11. For what has been discussed, it is held that proceeding in an application for rectification before Appellate Tribunal does not fall under Section 226(b)(ii) of the Ordinance of 2001, therefore, the Commissioner is bound to issue appeal effect order under the Section 124(4), within two months, as the order by Commissioner (Appeals) has attained finality .
12. It may be observed that Commissioner has ample power , after implementation of order under the Section 124(4), if the rectification application is accepted, to take a remedial action for recovery of tax while giving effect to the Appellate Tribunal' s order under relevant provisions of the Section 124.
The excuse and grounds for non-implementation raised by learned counsel for the respondents-department have no force, therefore, this petition is allowed.