ORDER: M. M. AKRAM (JUDICIAL MEMBER).--( 1). The titled appeal has been filed by the appellant/taxpayer against an Order No. 621 dated 04.06.2021 passed by the learned Commissioner Inland Revenue (Appeals-IV), Islamabad for the tax year 2014 on the grounds as set forth in the memo of appeal.
2. Brief facts called out from the record are that the taxpayer filed an income tax return for Tax Year 2014 declaring loss at Rs. 21,785,436,089/-. The return so filed by the appellant was treated to be an assessment order under section 120(1)(b) of the Income Tax Ordinance, 2001 (hereinafter referred to as "the Ordinance ") subsequently , the Additional Commissioner Inland Revenue (Add CIR) examined the income tax return and observed that the deemed assessment was erroneous in so far as prejudicial to the interest of revenue. Resultantly , a notice under section 122(5A) read with section 122(9) of the Ordinance was issued on 22.12.2020 whereby the taxpayer was confronted with that the unpaid finance cost and exchange loss on revaluation of loans and interest were not added in the income as required under the law resulting into the determination of loss which deprived the National Exchequer of the rightful revenue. The Authorized Representative (AR) for the appellant taxpayer attended the proceedings on 28.12.2020 and also furnished a reply to the notice whereby proceedings were contested. In light of the reply of the taxpayer , the issues were reframed and the amount of unpaid finance cost was computed at Rs.
23,788,132,528/- from Rs. 23,763,046,4 77/- confronted with earlier . The taxpayer was confronted that unpaid finance cost was to be added back under section 34(5) of the Ordinance and excha nge loss on revaluation of loans and interest was liable to be added as income under section 34(3) of the Ordinan ce. The taxpayer did not furnish any reply to the notice and proceedings were ultimately finalized whereby the assessment deemed to be finalized under section 120 was amended vide order dated 31.12.2020. The unpaid finance cost amounting it) ERs.
23,788,132,528/- and exchange loss on revaluation of loans and interest amou nting to Rs. 12,154,825/- were added in the declared loss and income was assessed at Rs. 2,014,851,264/-. Being aggrieved, the appellant filed an appeal before the learned Commissioner Inland Revenue (Appeals) who decided the appeal of the taxpayer vide Order No. 621 dated 04.06.2021 against them. Aggrieved with this order , the taxpayer has preferred an appeal before this forum and assailed the impugned order on a number of grounds.
3. The case was heard on 17.02.2022. Learned AR at the very outset contended that the show cause notice dated 22.12.2020 issued under section 122(5A) read with section 122(9) of the Ordinan ce and in consequence thereof the amended order passed by the Add CIR under section 122(5A) of the Ordinance suffered from serious legal and jurisdictional infirmities/flaws that go to the root of the case and must be considered and settled first. He submits that undisputedly , before issuance of show cause notice dated 22.12.2020, the proceedings in respect of the tax years 2014 were neither pending nor sub-judice before any authority under the law. Therefore, the order under section 122 of the Ordinance could have only been passed within the stipulated time prescribed under the said section which has expired on 30.06.2020 . However , he contended that after the expiry of the statutory period i.e. 30.06.2020, the proceedings initiated by the Add CIR and concluded by amending the deemed order on 31.12.2020 are void ab-initio, illegal, and without jurisdiction. Therefore, it has been contended that the basic order passed by the Add CIR is illegal and without jurisdiction, the superstructure built thereon automatically fails to the ground. On the other hand, learned DR opposed the contention of the AR on the ground that the aforesaid plea was not raised before the lower authorities and therefore, he is not entitled to raise this objection at this belated stage. Notwithstanding the aforesaid, the learned DR apprised that due to the situation created by COVID-19 across the country resulting in lockdowns and slowdown in the economy , the Federal Board of Revenue (FBR) in the exercise of powers conferred upon it under section 214A of the Ordinance had granted general condonation of limitation up to 31.12.2020 for finalization of proceedings in respect of the tax year 2014 vide letter C. No. 3(22)S(IR-Operations)/2020 dated 30.06.2020. He, therefore, vehemently asserted that the Add CIR had passed the amended order well within the time allowed by the FBR under the aforesaid letter . Further argued that the learned Commissioner (Appeals) has passed a speaking order and there is no illegality or lacuna in his order . He, therefore, pleaded that the appeal be dismissed.
4. Upon hearing the learned AR appearing for the appellant taxpayer and the learned DR for the Department; the following pivotal questions arise for consideration:-- i. Whether any time limit specified for completion or compliance of the action and where such completion and compliance had not been made within the time then the time limit for such purpose notwithstanding anything contained in the Income Tax Ordinance, 2001, Sales Tax Act, 1990 and Federal Excise Act, 2005 could have only been extended through proper legislation under "Relaxation Ordinance" or "Relaxation Act" by the Government? ii. Whether under the purported exercise of the power conferred by section 214A of the Income Tax Ordinance, 2001, the Federal Board of Revenue has possessed the power to extend the limitation prescribed in section 122 of the Ordinance?
The preliminary objection of the learned DR that the appellant cannot take the jurisdictional issue before this tribunal first time if the same has not earlier been taken before the lower autho rities, is misconceived and not tenable. Now, it is settled law that a plea regarding assumption of jurisdiction can be taken at any stage even before appearing in the highest Court in the Country . Reliance may be placed on the judgment of the Hon'ble Supreme Court of Pakistan titled Shagufta Begum Vs. The Income Tax Officer, Circle-XL, Lone-B, Lahore (PTCL 1989 CL. 695).
5. The admitted facts are that the appe llant filed its income tax return under section 114 of the Ordinance on 17.04.2015 and such return was accepted by the fiction of law under section 120(1)(b) of the Ordinance. To amend such deemed assessment for the tax year 2014, the Add CIR issued a show-cause notice on 22.12.2020 under section 122(5A) read with section 122(9) of the Ordinance which was ultimately culminated by passing the amended order dated 31.12.2020. The case of the appellant taxpayer is that the show cause notice and the amended order which has been passed and issued under provisions of section 122 of the Ordinance for amendment of assessment is void ab-initio and without jurisdiction. According to the appellant, indisputably the initiation of proceedings and amended order was passed on after the expiry of the statutory limitation prescribed in section 122(2) and 122(4) of the Ordinance. Thus, the case of the appellant was barred by time after the expiry of 30.06.2020. As an extension of the limitation of time prescribed in the aforesaid provisions of law, the appellant contends that the extension in time could not be extended through a letter issued by the FBR under the purported exercise of the power conferred by section 214A of the Ordinance.
6. As is well known, Chapter X of the Ordinance pertains to the procedure for assessments. This Chapter also contains provisions for amendment of assessments which permits the department to amend the deemed assessments under certain circumstances. As per section 122, if the Commissioner Inland Revenue had reason to believe that any income chargeable to tax had escaped assessment, total income had under-assessed or assessed at a too low a rate or had been subjected to excessive relief or refund, or any amount under a head of income had been misclassified or any assessment had erroneous in so far as prejudicial to the interest of revenue and for any tax year, he could subject to the provisions of sections 120 to 126 of the Ordinance assess or amend such income. Subsections (2) and (4) of section 122 of the Ordinance provide the time limit for the completion of the amendment of assessments. This in nutshell is the scheme of amendment of assessments under the Ordinance.
7. As apprised by the department that around the second or third week of March 2020 the country was hit by the spread of coronavirus which led to nationwide strict lockdowns which put the lives of citizens and even the Government machinery totally out of gear. It became virtually impossible for individuals as well as Government authorities to adhere to several statutory time limits which in many cases were inflexible. To overcome these difficulties in the context of tax collections, the FBR under the purported exercise of the powers conferred by section 214A of the Ordinance, section 74 of the Sales Tax Act, 1990, and sectio n 43 of the Federal Excise Act, 2005 had issued a letter/notification dated 30.06.2020 whereby the statutory limitation provided in these fiscal statutes were generally condoned up to 31.12.2020 for finalization of proceedings in those cases where the proceedings had to be concluded by 30.06.2020. This so-called notification and the relevant provisions of law is reproduced hereunder:-- Government of Pakistan Revenue Division Federal Board of Revenue Inland Revenue * C.No. 3(22) S (IR-Operations)/2020 Islamabad, the 30th June, 2020 All Chief Commissioners IR LTUs/CR TOs/R TOs Subject: General Condonation of Limitation U/S 214A of Income Tax Ordinance, 2001 Section 74 of Sales Tax Act, 1990 and Section 43 of Federal Excise Act, 2005 - Amid Lockdowns And Rise in Corona Virus Cases.
I am directed to refer to the subject and to state that due to the situation created by COVID-19 across the country resulting in lockdowns and slowdown in the economy , the Competent Authority has been pleased to grant general condonation of limitation U/S 214A of Income Tax Ordinance, 2001, section 74 of Sales Tax Act, 1990 and section 43 of Federal Excise Act, 2005 up to 31-12-2020 for finalization of proceedings in cases involving matters such as:- -
(i) Finalization of issues pertaining to tax year 2014;
(ii) Cases set aside by appellate fora;
(iii) Cases where notices in pursuance of section 122 of the Income Tax Ordinance, 2001 were issued prior to 30- 06-2019 and are to be hit by limitation on 30-06-2020;
(iv) Sales Tax cases where the mandatory period for issuing notices under sub-section 11 of the Sales Tax Act, 1990 is also expiring on 30-06-2020.
(v) Finalization proceedings under Federal Excise Act, 2005 in cases which are going to be hit by limitation on 30- 06-2020.
Sd/- (Tariq Javed)
Secretary (IR-Operations)
214A. Condonation of time limit.--Where any time or period has been specified under any of the provisions of the Ordinance or rules made there-under within which any application is to be made or any act or thing is to be done, the Board may, in any case or class of cases, permit such application to be made or such act or thing to be done within such time or period as it may consider appropriate.
Explanation .--For the purpose of this section, the expression "any act or thing is to be done" includes any act or thing to be done by the taxpayer or by the authorities specified in section 207.
Provided that the Board may, by notification in the Official Gazette, and subject to such limitations or conditions as may be specified therein, empower any Commissioner or Chief Commissioner under this Ordinance to exercise the powers under this section in any case or class of cases.
8. In the background of such facts and statutory provisions applicable, we now turn to the questions. At the outset, we may note how the higher Courts have viewed such like situation. In the case titled Sobho Gyanchandani v.
Crown the Federal Court of Pakistan considered the scope and validity of subsection (3) of section 1 of the Pakistan Public Safety Ordinance No. XIV of 1949 by which the Ordinance was to remain in force for a period of one year. However , the Central Governme nt was empowered, to direct, from time to time, that the Ordinance would remain in force for such further period specified in a Notification. On 16th October 1950, the Central Government issued a notification extending the operation of the Ordinance for a further period of one year i.e. from 8th October 1950 to 8th October 1951. Yet another notification was issued on 1st October 1951, extending the operation of the Ordinance, for a further period of one year from 8th October 1951. Late Sir Abdur Rashid, former Chief Justice of Pakistan, observed that:- "It is necessary to determine what constitutes conditional legislation. When a law is made to take effect on the happening of a certain event, the Legislature in effect declares the law but leaves it to an external agency to bring it into force, whenever it considers it expedient to do so. A law may be regarded as inexpedient in certain events but expedient if certain events should take place. In passing conditional legislation, the Legislature completely performs the duties which are imposed by the Constitution upon it. That is, it places legislation on the Statute Book, and the only function that it delegates to an external authority is to bring the legislation into force if certain events should happen and the enforcement of the legislation should be considered necessary . The Federal Court of India in the case of Jatindra Nath Gupta v. The Province of Bihar and others AIR 1949 FC 175 also held that the power to extend the operation of the Bihar Maintenance of Public Order Act, for a furthe r period of one year with such modifications, if any, as may be specified was a legislative power; and that the proviso to section 1(3) which delegated such power to an authority other than the Provincial Legislature was not a conditional legislation and such a delegation of the legislative power was ultra vires. It was further observed that "a Legislature could not delegate its powers of making modifying or repealing any law to an external authority . If it did so it would be creating a parallel Legislature. The power of extending the duration of an enactment, which would have terminated but for the interference of the external authority , was invalid. Extension of the life of an act was tantamount to re-enactment ...It was not a correct proposition that the delegation of legislative powers by a Legislature to an external authority was invalid or ultra vires only if it amounted to self-effacement and abdication. If any Legislature delegated legislative functions to an external authority such delega tion would be invalid" (Emphasis supplied)
9. The Supreme Court of India gave its advisory opinion to the President in Delhi Laws Act, on the scope of adaptation of the statutes by the executive. Late Fazal Ali, J., observed that:-- "the power of introducing necessary restrictions and modifications in the provisions in question was incidental to the power to apply or adapt the law. The modifications were to be made within the framework of the Act and they could not be such as to affect its identity or structure of the essential purpose to be served by it. The discretion1 2 given to modify a statute was by no means absolute or irrevocable in the strict legal sense. The Legislature could not abdicate its legislative functions, and therefore, while entrusting power to an outside agency, it must see that such agency acted as a subordinate authority and did not become a parallel Legislature."
Similarly , in the case of Commissioner of Income Tax, Zone-C Lahore and others Vs. M/s Kashmir Edible Oils Ltd and others , whereby the Hon'ble Supreme Court observed that even the Federal Government under the delegated legislation cannot amend the statutory provisions of the Ordinance.
10. Moreover , in the case of Additional Commissioner Inland Revenue, Audit Range, Zone-I and others versus Messrs Eden Builders Limited and others, the Hon'ble Supreme Court of Pakistan held that:-- "law of limitation in so far as it regulated the period in which one party could avail a remedy against another was not to be lightly disturbed as the certainty created by limitation was necessary for the success of trade and business, more so when such limitation governed tax matters Learned counsel, lastly , argued that the matter belongs to a past and closed transaction which cannot be agitated at this stage."
In the judgment titled Federal Board of Revenue through its Chairman, Islamabad and others Vs. Abdul Ghani and another the Hon'ble Supreme Court while interpreting the provision of section 74 of the, Sales Tax Act, 1990 which is the pari materia provisions of section 214A of the Ordinance observed that:-- "It is also noted that Section 74 of the Act neither specifically envisages nor provides guidance, criteria or parameters for overriding any limitation period prescribed by the Act for initiating action against a taxpayer Consequently , on the facts of the present case. we are not inclined to interpret the said provision as authorizing the unchecked reversal of a statutory limitation period and cons equential legal rights created by it. It the circumstances, the show-cause notice issued by the petitioner department suffers from fatal defects that float on the face of the record. Accordingly, we are not inclined to Interfere with the impugned judgment"
(Emphasis Supplied)
11. To our mind, the sentence "No order under sub-section (1) shall be amended" used in subsection (2) of section 122 of the Ordinance is of broad significance and cannot be lost sight. Negative language has been used which itself provides that the said provision is mandatory . It imposes an embargo upon the tax authorities that the order has to be passed within the stipulate d time. This is the contrast to the language used in section 214A of G the Ordinance. We may also observe that the letter/notification dated 30.06.2020 issued by the Board cannot co-exist with the original provisions of the Ordinance which were sought to be amended. The Federal Board of revenue exceeded its powers of delegated legislation as contemplated by section 214A of the Ordinance. The extension in time is beyond the power delegated to the FBR, as the Ordinance does not give power to FBR to extend the statuary time limit provided in section 122 of the Ordinance. After all, it is settled law that the Executive cannot make or change law of the land without specific Authority from Parliament to do so.
12. A taxing statute must be interpreted strictly . Equity has no place in taxation nor while interpreting taxing statute intendment would have any place. In the case of Engineer Iqbal Zafar Jhagra and another Vs. Federation of Pakistan and others referring to Article 77 of the Constitution which provides that no tax shall be levied or collected except by authority of law, it was observed that in interpreting a taxing statute, equitable considerations arc entirely out of place. Taxing statutes cannot be interpreted by any presumption or assumption. A taxing statute has to be interpreted in light or what is clearly expressed; it cannot imply anything which is not expressed; it cannot import provisions in the statute to supply any deficiency . Before taxing any person it must' be shown that he falls within the ambit of charging section by clear words used in the section and if the words are ambiguous and open to two interpretations, the benefit of interpretation is given to the subject.
There is nothing unjust in the taxpayer escaping if the letter of the law fails to catch him on account of the legislature's failure to express itself clearly.
13. In the case of St Johns Teachers Training Institute Vs. Regional Director , National Council For Teachers Education and Another , it was observed that it is well settled in considering the vires of subordinate legislation one should start with the presumption that it is intra vires and if it is open to two constructions, one of which would3 4 ,5 6 7 make it valid and another invalid, the courts must adopt that construction which makes it valid. However , it is equally well settled that the subordina te legislation does not enjoy the same level of immunity as the law framed by the Parliament or the State Legislature . The law framed by the Parliament or the State Legislature can be challenged only on the grounds of being beyond the legislative competence or being contrary to the fundamental, rights or any other constitutional provisions. The third ground of challenge which is now recognized in the judgment in the case of Shayara Bano Vs. Union of India is of legislation being manifestly arbitrary .
Subordinate legislation can be challenged on all these grounds as well as on the grounds that it does not conform to the statute under which it is made or that it is inconsistent with the provisions of the Act or it is contrary to some of the statutes applicable on the subject matter .
14. With this background of the matter and keeping in view the judgments of the Apex Courts cited supra it clearly establishes that the amendment in the statute is the only prerogative of the Legislature and it cannot delegate its legislative functions to the sub-ordinate authority . By applying the settled principle cited supra, it can easily be held that where any time limit had provided in the specified Acts or Ordinance for comple tion or compliance of the action and where such completion and complian ce had not been made within the time then the time limit for such purpose notwithstanding anything contained in the specified Act or PLD 1957 FC 29. AIR 1951 SC 332. 2006 SCMR 109. 2008 SCMR 1991. PTCL 2021 CL. 254. PTCL 2013 CL. 591. (2003)3 SCC 321. 2017 9 SCC 1.