SYED HAIDER ALI PIRZADA, J.---The petitioner through this petition has claimed the following reliefs:-- (a) To declare impugned order dated 29-8-1989 (Annexure-H) as of without lawful authority and of no Legal effect.
(b) Prohibit and restrain the respondents from giving effect to the order dated 29-8-1989 (Annexure -H) themselves or through any agency or it any manner whatsoever or use any coercive measure to enforce the same.
(c) Any other relief which this Hon'ble Court deems fit and proper in the circumstances of the case.
(d) Cost of petition.
2. The facts leading to the tiling of the above petition are that the petitioner is a registered firm constituted by three partners, namely: S.M. Naseem, S.M. Kaleem and MA. Hashim and is engaged in the business of transport contractors and carriers. The petitioner filed returns for the assessment years 1979-80 to 1983-84. The assessment for the years 1979-80 to 1983-84 were completed under section 59(1) of the Income Tax Ordinance, 1979 (hereinafter referred to as "the Ordinance"). The afore-mentioned assessm ents were reopened for reassessment under section 65 of the Ordinance on 10-2-1985. The reassessm ent orders under section 62 read with section 65 of the Ordinance were passed for all these assessm ent years on 15-6-1985. The petitioner preferred appeals before the Commissioner of Income Tax (Appeals) Zone-IV, Karachi being Income Tax Appeals Nos. 27, 28, 29, 31, 485, 486, 487, 488, 489/CIT (A)/Z-IV/86 dated 6-12-1986. The assessment orders were passed on 31-5-1988 with agreement of the petitioner on income noted below against each assessment years:-- Assessm ent YearIncome U/s 62/65 1979-80 Rs. 3,71,586 1980-81 Rs. 5,54,877 1981-82 Rs. 5,30,073 1982-83 Rs. 2,45,239 1983-84 Rs. 2,02,650
3. The above mentioned incomes were assessed as a consequence of the following additions which were maintained with agreement of the petitioner as noted against each assessment years:-- Assessment Year 1979-80Rs. 3,39,682 1980-81Rs. 1,85,333 1981-82Rs. 4,36,385 1982-83Rs. 1,52,789 1983-84Rs. 89,650
4. The case of the petitioner as set out in the petition that as the petitioner and its partners had purchased Special National Fund Bonds of the value noted below, a request was made to Income Tax Officer, Circle-IV, Zone-C, Karachi to set off these bonds against the additions as mentioned- above vide its letter dated 13-6-1988:-- Messrs Chanda Motors7,00,000 Mr. S.M. Naseem 1,00,000 Mr. S.M. Kaleem 1,00,000 Mr. S.M. Hashim 1,00,000
5. The Income Tax Officer, Circle-IV Zone-C, Karachi (then South Zone) refused to rectify the order by setting off Special National Fund Bonds against additions by relying on para III(d) of CBR Circular No.9 of 1985 dated 30-7-1985 through letter No. CIR-IV/IAC/R-1/SE/878 dated 16-5-1988. It is the further case of the petitioner that in accordance with the provisions contained in para.4 of CBR Circular No.9 of 1985 it is the Regional Commissioner of Income Tax, Karachi to clarify the matter in case of doubt. An application dated 31-7-1988 was filed which was acknowledged in his office vide Ref: No. 966 dated 31-8-1988 to seek correct interpretation of the matter. In response to the above application the Regional Commissioner of Income Tax, Southern Region, Karachi vide his Memo No. RCIT.Jud/108(173)/88/179 dated 1-4-1989 did not agree to set off Special National Fund Bonds as according to him the assessm ent in the case of petitioner were set aside on 6th December, 1986 and so not entitled to set off Special National Fund Bonds under para III(d) of CBR Circular No.9 of 1985. The petitioner again made a representation dated 9th April, 1989 to the Regional Commissioner of Income Tax, Southern Region, Karachi to reconsider the matter. In reply to the said representation dated 9th April, 1989 the Commissioner of Income Tax Headquarters, Southern Region, Karachi on behalf of the Regional Commissioner of Income Tax, Southern Region, Karachi intimated to the petitioner vide Ref: No. RCIT/Jud/108(173)/89/875 dates 15th June, 1989 that the representation made by the petitioner was referred to the CBR and they rejected the representation and the letter No.C.ITC/Co-ord/3/6/86(1) dated 1st June, 1989. The petitioner however again made a representation dated 21st June, 1989 to the Chairman, Central Board of Revenue, Government of Pakistan, Islamabad explaining more lucidly the legal position as believed by him. Finally the Central Board of Revenue vide their Memo No.C.ITC/Co-ord/3/6/86(1) dated 29th August, 1989 regretted to accede to the request of the petitioner and maintained their decision intimated vide No.ITC/Co-ord/3/6/80(1) dated 1st June, 1989. The petitioner being aggrieved by the impugned orders of the Central Board of Revenue has filed the above petition.
6. Mr. Rehan Hasan Naqvi, learned Counsel for the petitioner raised the following contentions:
(i) The original and appellate proceedings are steps in one proceedings. In support of this contention reliance is placed on the case of F.A. Khan v. The Government of Pakistan (PLD 1964 SC 520).
(ii) The legal pursuit of a remedy, suit, appeal, and second appeal are really but steps in a series of judicial proceedings all connected by an intrinsic unity and are to be regarded as one legal proceedings. In support of this contention reliance is placed on the case of Garikapati Veeraya v. N.
Subbiah Choudhry and others (PLD 1957 SC (India) 448).
7. On the other hand Mr. Nasrullah Awan, learned Counsel for the respondents submitted that the provisions of para III (d) of Circular No.9 of 1985 is attracted in the instant case. Mr. Awan, Advocate submitted that the appeals were pending on 31-3-1986, the date by which declarations were to be submitted to the State Bank of Pakistan. His submission is that as the appeals were pending at the relevant time the petitioner is not entitled to set off against the additions made by the Commissioner of Income Tax.
8. Mr. Naqvi, Advocate contended that appeal is merely a continuation of the original proceedings.
This point was considered by the Hon'ble Supreme. Court of Pakistan in the case of F.A. Khan v. The Government of Pakistan (PLD 1964 SC 520). The Hon'ble Supreme Court after referring to the case of Garikapati Veeraya v. Subbiah Choudhry and others (PLD 1957 SC (India) 448), The Supreme Court after an exhaustive review of cases held that " the legal pursuit of a remedy, suit, appeal and second appeal are really but steps in series of judicial proceedings all connected intrinsic unity and are to be regarded as one proceedings." In the case of Flour Mills Employees' Union v. Karachi Steam Roller Flour Mills (PLD 1964 (W.P.) Karachi 587), a Division Bench of the. Erstwhile High Court of West Pakistan Karachi Bench considered the word "Appeal" and held as follows:-- "The word "appeal" itself is an undefined expression, with the result that discussion is to be found in various decision given in exercise of several jurisdictions as to whether "appeal" means: (i) de novo trial, (ii) re-hearing, or (iii) merely a continuation of the original proceeding in which interference in its most proper sense should take place only when error is found in the decision from which the appeal has been preferred. The third view point appears to be the soundest as a general proposition as well as the most generally accepted one. There are five inter-connected reasons in its support. They are: Firstly, no appeal can be conceived without the decision of an authority of a lower jurisdiction which may or may not be an inferior jurisdiction in its nature, as for instance, with reference to Letters Paten! Appeals the jurisdiction of the Single Judge is not inferior in its nature: Secondly, the starting point of an appeal is the grievance of the appellant against the decision alone of the authority of that lower jurisdiction.
Thirdly, when an appellant prefers an appeal, as distinguished from a writ of error, he does not select anther forum of original or concurrent jurisdiction because such jurisdiction the appellate Courts very often cannot exercise, but climbs higher on a graded ladder to reach a different level of jurisdictions for obtaining redress in respect of or against the decision obtained by him.
Fourthly, if the decision that is under appeal was given in exercise of a vested jurisdiction, it cannot he treated as of scant value because it is authoritative including its preferences and cannot be slighted without showing disrespect for the lower jurisdiction or the lower hierarchy of Courts. The decision of every authority or Court of a legally established hierarchy is authoritative and there is neither factually nor in law a presumption of absolute wisdom in favour of any human being however so high, though finality is conferred on the decision of the last authority or Court which the litigation reaches in order to put an end to an indefinite continuation of the process. 1f a material mistake of law or fact or violation of a legally recognizable policy is not found by the appellate authority or Court in the decision which is under appeal, then the substitution of its own preferences for those of the authority or Court of a lower or inferior jurisdiction may be impressive as an equitable settlement of a particular dispute, but such preferences, at least while coming from a Court of record as a worthy precedent, are bound to spread confusion unless they emanate from the general or a special law and can be consistently enforced as the policy of law on the authority of such a Court itself.
Fifthly, the absence of sound reasoning is distinguishable from a sound view because poor reasoning may be a manifestation of unfamiliarity with technicalities or of poor use of logic only, unless the irrationality of the argument affects the soundness of the decision itself."
9. Applying the test laid down in the above decisions, we agree with Mr. Naqvi and hold that. Appeal is merely a continuation of the original proceedings.
10. The second contention of Mr. Naqvi is covered by the decision of Supreme Court of India reported in (PLD 1957 SC (India) 448) wherein the Supreme Court of India after an exhaustive review of cases held that the legal pursuit of a remedy suit, appeal and second appeal are really but steps in a series of proceedings all connected by an intrinsic unity and are to be regarded as one legal proceeding.
10-A.We are in respectful agreement of the reasons given in the above judgment and adopt the same.
11. The word "Assessm ent" is defined in subsection (8) of section 2 of the Income Tax Ordinance, 1979 in the following language. "Assessment" includes reassessment and additional assessment and the cognate expressions shall be construed accordingly.
12. In Commissioner of Income Tax, Bombay Presidency v. Khem Chand Ram Das (1938 VI ITR Page 414) Lord Roamer tried to explain the comprehensiveness of the word "assessment" under the now repealed Act of 1922 in the following language "one of the peculiarities of most of Income Tax Acts is that the word assessm ent is used as meaning sometimes, the computation of income, sometimes the determination of the amount of tax payable and sometimes the procedure laid down in the Act for imposing liability upon the tax payer. The Indian Income Tax Act is no exception in this respect."
13. The word "assessm ent" in para III(d) of Circular No.9 of 1985 must be given a vide connotation so as to include reassessm ent or revised assessment.
14. It is well settled legal position that an order of the original authority, when challenged in appeal or revision and the appellate or the revisional authority disposes of that appeal or revision, the original order is merged in the appellate. Or the revisional order, must also challenge the appellate or the revisional order are too elementary and admit and no doubt and formerly concluded by the superior Courts.
15. What was challenged in appeals, and dealt by the appellate authority was the orders of the I.T.O.
When that is so there would be a merger of the orders' that were challenged and decided by the appellate authority. It is admitted position in the instant case that the orders passed by the I.T.O.
Were set aside by the Commissioner of Income Tax (Appeals), Zone-IV, Karachi. Consequent upon giving effect to the appellate order assessment orders were passed on 31-5-1988 with agreement of the petitioner on income noted against each assessment order.
16. We have perused clause (172) of the Second Schedule to the Income Tax Ordinance, 1979 and find that the said clause deals with an income from whatever source derived, which has not been assessed in respect of any year including and upto the assessment year 1984-85 not exceeding such amount as is invested by the tax payer in the purchase of the Special National Fund Bonds issued under the Special National Fund Bonds Rules (1985). Proviso to clause (172) provides that the investors in the Special National Fund Bonds shall furnish to the State Bank of Pakistan by the 31st day of March, 1986 the particulars of the assets covered by the said bonds in the matter and form specified in the notice to the Central Board of Revenue on the 28th day of July, 1986. Clause (d) of para-III of Circular No.9 of 1985 provides that assessment already finalized would however, remain un-effected and the tax payer would not be entitled to clam any benefit for credit therein. Cases pending in appeal will likewise remain un-effective.
17. In the instant case the assessm ents were finalized under section 59(1) of the Ordinance. It is an admitted fact that the assessm ents were opened under section 55 of the Ordinance. The reassessm ent orders under section 62 read with section 65 of the Ordinance were passed on 15-6- 1983. It has come on record that the said orders were set aside by the appellate authority on 6-12- 1986. Consequent upon giving effect to the appellate order assessment orders were passed on 31st May, 1988 with agreement of the petitioner on income notice against each assessment orders.
These are the only assessm ent orders which are in the field. Applying the dictum laid down in PLD 1964 SC page 520, PLD 1964 Karachi 587 and PLD 1957 (India) S.C. 448 we hold that the original assessm ent orders, reassessm ent orders and the final assessment orders are really but steps in a series of judicial proceedings all connected by an intrinsic unity and are to be regarded as one legal proceeding. It would, therefore, be apparent that provisions of clause (172) and para III (d) of Circular No.9 of 1985 are attracted in the instant case and the petitioner is' entitled to set off Special National Fund Bonds against the additions made in the assessment order dated 6-12-1986 and 31- 5-1988.
18. For the foregoing reasons the constitutional petition must succeed. We, therefore, allow the petition, quash the impugned letters dated 1-6-1989 and 20-8-1989 of the Central Board of Revenue. We direct the Income Tax Officer, Circle IV, Zone-C, Karachi the respondent No.4 to rectify the orders by setting off Special National Fund Bonds against the additions and issue fresh demand after allowing the set off for the balance amount, if any, Consequently, Bank guarantee furnished by the petitioner stands discharged.
19. In the circumstances, we direct the parties to bear their own costs.