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[ROBERT PEEL] MUHAMMAD SAJID MEHMOOD SETHI, J. Through instant Reference Application under Section 133 of the Income Tax Ordinance, 2001 ("the Ordinance of 2001"), following questions of law, urged to have arisen out of impugned order dated 03.02.2014, passed by learned Appellate Tribunal Inland Revenue, Lahore Bench, Lahore ("Appellate Tribunal"), have been pressed and argued for our opinion:-
1. Whether an the facts and circumstances of the case, learned Tribunal was justified to delete amount payable to Fund on the ground that no written order was passed under section 4 of W.W.F Ordinance, 1971 whereas taxation officer assessed income vide written order under section 122(1) of Ordinance, 2001 and computed amount payable to Fund in the said Order?
2. Whether on the facts and circumstances of the case, the framework of W.W.F. Ordinance, 1971 requites independent adjudication of assessed income under Income Tax Ordinance followed by an independent separate order for determination of amount payable to fund under W.W.F.
Ordinance, whereas the said amount is to be computed on the basis of income assessed under income tax law and recovery of same is also to be made under said law?
2. Concise facts of the case are that respondent, an industrial establishment as per Section 2(f) of the Workers' Welfare Fund Ordinance, 1971 ("WWF Ordinance"), filed income tax return for the tax year 2006 along with a proof of payment of Workers Welfare Fund ("WWF"), which was taken as deemed assessm ent under section 120(1) of the Ordinance of 2001. Later on, respondent's case was selected for audit under section 177 of the Ordinance of 2001 and assessment was amended under section 122(1) of the Ordinance of 2001, whereby besides other additions, WWF amounting to Rs.11,885,126/- was charged. Feeling aggrieved, respondent filed appeal before CIR (Appeals), whereby matter to this extent was remanded to pass fresh order after providing opportunity of hearing to respondent, vide order dated 09.08.2011. Respondent agitated the matter by filing second appeal before Appellate Tribunal, which was accepted vide order dated 03.02.2014, whereby impugned demand was deleted. The said order has been assailed by applicant- department through instant Reference Application.
3. Learned Legal Advisor for applicant-department submits that income was assessed and amended through written order on the basis whereof WWF was charged, thus, no illegality was committed but this aspect of the matter was not taken into consideration by Appellate Tribunal while passing the impugned order.
4. Conversely, learned counsel for respondent submits that charging of WWF was neither confronted through show-cause notice nor respondent was provided an opportunity of defence inasmuch as no written order in this regard under the provisions of WWF Ordinance was passed, thus, impugned order is liable to be upheld.
5. Heard. Available record perused.
6. Dispute needs contextualization for the purposes of answering questions of law, raised in the context of peculiar facts of the case, where assessment was finalized upon agreement reached, between the taxpayer and the department, pursuant to the conduct of audit. The amended adjustment of amount of WWF already paid at the time of filing of return of income, deemed as assessm ent order under section 120 of the Ordinance of 2001. It was the case of the taxpayer, before the CIR (Appeals), whose order was affirmed by the Appellate Tribunal, that in wake of agreement reached there was no obligation to pay or justification to charge WWF on the assessed income, determined in terms of mutual settlement. In this state of circumstances, taxpayer pleaded the requirement of a separate notice and issuance of written order, confirming the obligation to pay the WWF. Agreement was not subject matter of adjudication but component of WWF liability.
7. Section 4 of WWF Ordinance deals with the mode of payment of WWF by, and recovery from industrial establishments. An industrial establishment, coming within the scope of subsection (1) of Section 4 of WWF Ordinance, is under legal duty to pay due amount of WWF 2% of its total yearly income and furnish a proof of such payment along with a copy of income tax return to the Taxation Officer having jurisdiction over the industrial establishment for the purposes of the Ordinance of 2001. However, as per subsection (4), if the Taxation Officer does not agree, he shall determine the actual payable amount through a written order, which shall be paid by the industrial establishment till expiry of time specified in such order. In the instant case, respondent's return was accompanied by proof of payment of WWF on the income declared by it, which was taken as deemed assessm ent under Section 120 of the Ordinance of 2001. Subsequently, the income of respondent was amended after audit and WWF was charged. This treatment was not approved by learned forums below, especially the Appellate Tribunal, against whose decisions the above mentioned proposed questions have been presented before us for determination. Section 4(4) of the WWF Ordinance governs the situation and needs interpretation by us, which is reproduced below for ease of reference:- "4. Mode of paym ent by, and recovery from, industrial establishments.-- (1)...
(2)...
(3)...
(4) Taxation Officer shall, by order in writing, determine the amount due from industrial establishment under subsection (1), if any, after taking into account the amount paid by the industrial establishment under subsection (3) in respect of the year and the industrial establishment shall pay the amount so determined on or before the date specified in the order."
8. The language of afore-referred provision, especially the word shall clearly binds the Taxation Officer, where he is not inclined to endorse the paid WWF as "due amount", to make determination of due amount of WWF by way of an order in writing requiring the industrial establishment to make up the deficiency by assigning a target date. Thus, the afore-referred provision is self-explanatory in comprehending that determination of due amount of WWF shall be made through a written order.
9. In legal usage, the word "determine" means to settle or decide a dispute, controversy or question conclusively. In order to comprehend definition and the scope of word "determine" or "determination", it will be advantageous to refer to various dictionaries as follows:-
(i) Merriam-Webster's Dictionary of Law (Revised and updated guide to the language of law determination: a decision of a court or administrative agency regarding an issue, case, or claim: determine: to make a determination regarding
(ii) Words and Phrases (Permanent Edition) Vol.12, Thomson/West determine: To "determine" is to settle a question or controversy. "Determine" means to come to a decision, to deckle, to resolve.
(iii) P Ramanatha Aiyar's Advanced Law Lexicon (4th Edition) Vol.2 determination: The expression, 'determination' signifies an effective expression of opinion which ends a controversy or a dispute by some authority to whom it is submitted under a valid law for disposal.
The 'word 'determination' presupposes application of mind and expression of the conclusion. It connotes the official `determination' and not a mere opinion of finding. determine: to settle; to ascertain definitely; to bring to a conclusion; to settle by judicial sentence; to decide to come to a decision; to lay down decisively or authoritatively; The word 'determine' has a much wider scope than the word `consider'.
(iv) Black's Law Dictionary (Ninth Edition)
Determination: A final decision by a court or administrative agency.
10. An order in writing must fulfill the requirements of a speaking decision / order for which it is essential that the party against whom such order is being passed must be given a proper notice confronting the relevant material and providing fair chance to explain its stance and raise all legal and factual objections.
11. Needless to say that minimum requirement` of principles of natural justice, especially principle of audi alteram partem i.e. no one should be condemned unheard, must be observed in all proceedings concerning determination of rights of a party, pertinently when certain liability is being created. This principle is premised on the concepts of natural justice and equity and it is followed throughout the world. Mr. Justice Frankfurter, Judge Supreme Court of United States, in case reported as "Caritativo v. California Et Al" (357 U.S. 549 (1958)) beautifully articulated this principle in following words: "Audi alteram partem--hear the other side!---a demand made insistently through the centuries, is now a command, spoken with the voice of the Due Process Clause of the Fourteenth Amendment, against state governments, and every branch of them--executive, legislative, and judicial-- whenever any individual, however lowly and unfortunate, asserts a legal claim. It is beside the point that the claim may turn out not to be meritorious. It is beside the point that delay in the enforcement of the law may be entailed".
Similarly in case "Mullane, Special Guardian v. Central Hanover Bank and Trust Co, Trustee, Et Al"
(339 U.S. 306 (1950)), the Supreme Court of US held that: "Many controversies have raged about the cryptic and abstract words of the Due Process Clause but there can be no doubt that at a minimum they require that deprivation of life, liberty or property by adjudication be preceded by notice and opportunity for hearing appropriate to the nature of the case".
Lord Denning in "Selvarajan v. Race Relations Board" ([1976] 1 All ER 12) also underlined the importance of this principle by observing: "The fundamental rule is that, if a person may be subjected to pains or penalties, or be exposed to prosecution or proceedings, or deprived of remedies or redress, or in some such way adversely affected by the investigation and report, then he should be told the case made against him and be afforded a fair opportunity of answering it."
The Superior Courts of Pakistan, through numerous decisions, have settled tie proposition that taxing authorities cannot demand amount without issuing a show-cause notice, and providing opportunity of hearing and fixing liability in terms of the relevant provisions of law. Needless to say that provision of notice to a person, who is being proceeded against, must be read in every statute, irrespective of the fact that whether or not such provision was incorporated therein. Reliance is placed on "Syed Ali Haider and 2 others v. Pakistan International Airline Corporation Limited through Company Secretary" (2021 PLC (C.S.) 221), "Messrs Resource Industries (Pvt.) Ltd.
Through General Manager v. Sarhad Development Authority, PIA Building, Peshawar Cantt through Chairman and 3 others" (2019 CLC Note 28 DB), "Rashid Ali Khan v. Government of Khyber Pakhtunkhwa and another" (PLD 2018 Peshawar 170), "Mehar Pervaiz Akhtar v. Director General Excise And Taxation, Lahore and others" (2017 PTD 1962), "lyazul Haq Chaudhry v. NIB Bank Limited through Authorized Attorney and 4 others" (2017 CLD 521 DB), Dr. Ashfaq Ahmad Khan v. Deputy Commissioner of Income Tax, Peshawar and others (2012 PTD 1329), and Messrs Kind Traders v. Dy. Collector and 2 others (2008 PTD 1551) and Messrs Bisma Textile Mills v.
Federation of Pakistan and others (2002 PTD 2780).
12. In the facts and circumstances of the case, it was imperative that amount of WWF due and obligation to pay, in the context of agreement, must be determined and communicated in writing, upon issuance of notice. Failure to fulfill the requirement of proper notice, observance of principles of natural justice and determination by way of order in writing, in the facts and circumstances of the case, has rendered the impugned demand unsustainable.
13. However, we are clear in our mind that an order in writing does not necessarily mean a separate order. The Taxation Officer is authorized under the law to make an order relating to WWF while finalizing the assessm ent proceedings through a written order and order relating to charge of WWF would be part of assessm ent order. Reference can be made to Commissioner of Income-Tax v.
Messrs Kamran Model Factory (2002 PTD 14).
14. In view of the above, our answer to question No.1 is in affirmative i.e. against applicant- department and in favour of respondent whereas question No.2 is answered in negative i.e. against respondent and in favour of applicant-department.
15. Office shall send a copy of this judgment under seal of the Court to learned Appellate Tribunal as per Section 133 (5) of the Ordinance of 2001. 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.