1. SARMAD JALAL OMSMANY, J.---This is an application under Order 39, Rules 1 and 2 read with section 151, C.P.C. praying that the defendants Nos.1 to 3 be restrained from acting upon or giving any effect to the impugned order, dated 21-5-1998 passed by the defendant No,2 under section 78 of the Income Tax Ordinance or from recovering the liabilities of the defendant No,4 from the plaintiff directly or indirectly itself or through any other agency or in any manner whatsoever.
2. The brief facts of the case are that the plaintiff-company entered into a contract, dated 1-1-1995 with the defendant No,4 whereby the said defendant agreed to carry out work for the plaintiff's oil pipeline from Zulfiqarabad to Hub in Balochistan. The grievance of the plaintiff is that the defendant No,2 as per the impugned order, dated 21-5-1998 has declared the plaintiff to be an agent of the defendant No,4 under section 78 of the Income Tax Ordinance, 1979 (hereinafter Ordinance) based upon clause 22.2.4 of the Agreement between the said parties, and thus, responsible for payment of tax on behalf of the defendant No,4 for the assessment year 1996-97.
3. The said order has been challenged on various grounds inter alia; that no hearing has been given to the plaintiff before passage of the impugned order; the defendant No,2 has no jurisdiction to issue the said impugned order as he has not been officially assigned to assess the plaintiff; that clause 22.2.4 of the Agreement between the plaintiff and defendant No,4 nowhere mentions that the plaintiff had agreed to become an agent of the defendant No,4 in terms of section 78 of the ordinance; that as the agreement between the plaintiff and defendant No,4 had come to an end on 26-3-1998, the defendant could not rely upon the same in passing the impugned order; that the entire exercise is mala fide and colorable inasmuch as an attempt has been made to unlawfully recover the alleged tax from the plaintiff. In reply to the application a counter-affidavit has been filed on behalf of the defendant No,2 wherein it has been firstly maintained that the jurisdiction of this Court is ousted under section 162 of the Ordinance and further that the Ordinance being a special statute which provides a special forum for adjudication of all disputes relating to the levy and payment of income-tax to that extent also no recourse can be made to this Court. It is further stated in the said counter-affidavit that there was some dispute between the Department and the defendant No,4 regarding the rate of withholding tax, which had been decided by the Income Tax Appellate Tribunal vide order, dated 2-4-1998 whereby the plaintiff was required to deduct such tax from payments to defendant No,4 at the rate of 6% and such order had attained finality. It is further submitted in the counter-affidavit that on 10-3-1998 the plaintiff wrote a letter to the defendant No,2 informing him that this Court in Suit No,101 of 1998 had ordered that all payments to the defendant No,4 by the plaintiff will be subject to withholding tax at the rate of 4% upon which the defendant No,2 wrote back on 20-3-1998 that in case the matter is decided in favour of the Department by this Court in the said suit as well as by the Income Tax Appellate Tribunal then the responsibilities for payment of the difference in tax shall lie with the plaintiff. Thereupon the plaintiff repelled this contention vide letter, dated 25-3-1998 informing the Department that they had already settled their outstanding payments with defendant No,4 on 20-3-1998, and therefore, they could not agree that the plaintiff would be responsible for payment of the difference if any as regards the rate of withholding tax in case the matter is decided in favour of the Department.
4. Finally it has been averred in the counter-affidavit that the impugned order has been passed after giving ample opportunity to the plaintiff for filing its objection if any to the same.
5. In view of the above pleadings it would, therefore, follow that two issues have to be decided namely
(a) whether this Court has the jurisdiction to entertain the suit and (b) whether, prima facie on the facts averred in the pleadings, an interim injunction can be granted to the plaintiff as prayed for.
6. As regards the issue of jurisdiction Mr. Muhammad Sharif has vehemently argued that the ouster clause contained in section 162 of the Ordinance would not apply in view of the fact that no opportunity of full hearing in the matter was afforded to the plaintiff before passage of the impugned order and that the impugned order had been passed mala fidely, that all the conditions of section 78 not have been satisfied; that the defendant No,2 has no jurisdiction to pass the impugned order. Consequently it is contended that the impugned order can be challenged under these proceedings.
7. In support of the above contention learned counsel has relied upon the case of Federation of Pakistan and others v. Ghulam Mustafa Khar (PLD 1989 SC 26), M/s. Arif Builders v. Government of Pakistan (PLD 1997 Karachi 627), Abbasia Cooperative Bank v. Hafiz Muhammad Ghaus and others (PLD 1997 SC 3), Mian Muhammad Latif v. Province of West Pakistan (PLD 1970 SC 180), Sawan and others v. Abdullah and others (PLD 1998 Karachi 111), M. Jamil Asghar v. Improvement Trust (PLD 1965 SC 698), Abul A'la Moudoodi and others v. Government of West Pakistan and another (PLD 1964 SC 673), University of Dacca v. Zaki Ahmed (PLD 1965 SC 90), Basharat Ali v. Director, Excise and Taxation (1997 SCMR 1543) and Safi-ud-Din v. Secretary, Social Welfare Department (PLD 1958 (W.P.) Peshawar 157). In reply to Mr. Muhammad Sharif's arguments as regards the first issue Mr. Jawaid Farooqi for the defendants Nos.2 and 3 has contended that on the facts of the case the bar contained in section 162 of the Ordinance applies as the said section clearly states that no suit shall be brought in any Civil Court against any order made under the Ordinance. In support of this contention learned counsel has relied upon the case of Ravi Paint Colour and Varnish Ltd. v.
8. Federation of Pakistan (PLD 1954 Lahore 551) Karachi Textile Dyeing and Printing Works v. CIT 1985 PTD (Trib.) 458 and K.L. Sethi v. CIT (1974) 29 Tax 226.
9. Mr. Rehan Hassan, amicus curie, has also supported Mr. Farooqi and argued that the impugned order was correctly passed under section 78 and this Court has no jurisdiction by virtue of section 162 of the Ordinance to which no exception can be taken in the circumstances of the present case.
10. In this regard he has relied upon Batala Engineering Co. Ltd. v. I.T.O., Lahore (1973 SCMR 282) and the unreported cause of Abbas Shroff v. Miss Farzana and others decided by my learned brother Rasheed A. Razvi, J. in Suit No,1118 of 1998 as well as the cases cited by Mr. Jawaid Farooqi.
11. As to the issue of the jurisdiction of this Court it would be beneficial to refer to the observations of the Honourable Supreme Court in the case of Abbasia Cooperative Bank and another v. Hakeem Hafiz Muhammad Ghous and 5 others (PLD 1997 SC 3) which in my view very succinctly sums up the law with regard to the effect of clauses ousting the jurisdiction of Civil Courts viz. " It is a well- settled principle of interpretation that the provision contained in a statute ousting the jurisdiction of Courts of general jurisdiction is to be construed very strictly and unless the case falls within the letter and spirit of the barring provision, it should not be given effect to. It is also well-settled law that where the jurisdiction of the Civil Courts to examine the validity of an action or an order of executive authority or a special tribunal is challenged on the ground of ouster of jurisdiction of the Civil Court, it must be shown (a) that the authority or the tribunal was validly constituted under the Act; (b) that the order passed or the action taken by the authority or tribunal was not mala fide; (c) that the order passed or action taken was such which could be passed or taken under the law which conferred exclusive jurisdiction on the authority or tribunal; and (d) that in passing the order or taking the action, the principles of natural justice were not violated. Unless all the conditions mentioned above are satisfied, the order or action of the authority or the tribunal would not be immune from being challenged before a Civil Court. As a necessary corollary, it follows that where the authority or the tribunal acts in violation of the provisions of the statute which conferred jurisdiction on it or the action or order is in excess or lack of jurisdiction or mala fide or passed in violation of the principles of natural justice, such an order could be challenged before the Civil Court in spite of a provision in the statute barring the jurisdiction of Civil Court". Consequently, it remains to be examined whether the impugned order passed by defendant No,2 suffers from any such defect as would, as per the formulation of the Honourable Supreme Court, allow the plaintiff to approach this Court for relief despite the bar contained in section 162 of the Ordinance.
12. Mr. Muhammad Sharif has submitted that unless the impugned order is within the four corners of section 78 of the Ordinance i,e,, unless all the conditions of the said section have been satisfied, the bar contained in section 162 of the Ordinance would not be applicable. In this connection learned counsel has contended that section 78(4)(a)(iv) of the Ordinance assumes that before a person/company can be declared or treated to be an agent of a non-resident, he/it must hold or control the receipt or disposal of any money belonging to the non-resident on the date the order declaring/treating such person/company as the agent of the other was passed. In this respect it is contended that on the date of the impugned order i,e,, 21-5-1998, the plaintiff had severed all business connections with the defendant No,4 as per the correspondence on the record, and thus, to this extent the impugned order not having complied with an essential condition of section 78 of the Ordinance, this defect entitles the plaintiff to file the suit notwithstanding the bar contained in section 162 in terms of the Honourable Supreme Court's formulation in Abbasia Cooperative Bank v.
13. Hafiz Muhammad Ghaus. It is similarly contended that as sections 78(4)(a)(ii) and (iii) also assume a business connection between the agent and non-resident and receipt of any income by the non-resident from or through the agent respectively on the date of the impugned order, on this score too the same is defective, and thus, open to challenge in these proceedings. In this regard learned counsel has taken me through the correspondence on record between the plaintiff and the defendant No,2 i,e, copies of various withholding tax certificates issued under section 50(4) of the Ordinance and other letters whereby the plaintiff has been required by the Department to deduct tax from the payments made to defendant No,4 at varying rates ranging between 4% to 8% which have been filed as Annexures A/1 to A/7 to the plaint; copies of Challans evidencing a deposit of Rs,87,593,824 by the plaintiff pursuant to its obligations under the withholding tax certificates (Annexures D/1 to D/17). Copy of cheque, dated 8-8-1997 in the sum of Rs,10,000,000 (Rupees Ten Million), payable to the State Bank of Pakistan (Annexure E/3) in settlement of the Department's further demand of Rs,53,527,905 based on tax to be deducted at source from payments made by the plaintiff to the defendant No,4 (Annexures E/1 and E/2); copy of a letter, dated 10-3-1998 from the plaintiff to the Department; a copy of the reply, dated 24-3-1998 (filed as Annexures B and C to the counter-affidavit of defendant No,2); a copy of the plaintiff's letter, dated 25-3-1998; a copy of the settlement and release deed between plaintiff and defendant No,4, dated 21-3-1998 (Annexures F and G to the plaint); copies of the show-cause notice, dated 15-5-1998 served by the Department on the plaintiff as to the factum of agency, dated 15-5-1998 and reply filed on behalf of the plaintiff, dated 19-5-1998 (Annexures H & Ito the plaint) and finally copies of letter, dated 18- 6-1998 (Annexures C/2 and D to defendant No,2's counter-affidavit). Learned counsel has consequently submitted that the impugned order was not in accordance with section 78(4)(a)(ii)
(iii) and (iv) as much before the same was passed the Department had been informed in March, 1998 that the plaintiff had severed all its business connections with defendant No,4 and did not have any amounts under its control belonging to said defendant whereby the demand of tax upon it could be satisfied through the plaintiff by declaring it an agent of the said defendant.
14. 'Further, it is submitted that the word "assessee" as defined in section 2(6)(a) of the Ordinance can only mean, as appearing in section 78(1), a person against whom any proceeding has been taken for the assessm ent of his income in terms of said section. Consequently according to learned counsel as the first proceeding taken in the matter for assessment of the plaintiff's income as an agent of defendant No,4 was on 16-5-1998 when the plaintiff was put on notice that it would be treated as an agent for defendant No,4, it was on that day alone when the plaintiff could be lawfully considered to be an assessee as an agent of defendant No,4. And as previously mentioned on that day no funds were available with the plaintiff belonging to defendant No,4, therefore, there could be no question of any relationship of principal and agent between the defendant No,4 and the plaintiff respectively. In order to fully appreciate this argument it would be beneficial to reproduce section 2(6)(a) of the Ordinance which defines an assessee as--- "every person in respect of whom any proceeding under this Ordinance has been taken for the assessm ent of his income or the income of any other person in respect of which he is assessable or of the amount of refund due to him or to such other person."
15. Further section 78(1) enjoins that: "Every agent shall, in respect of the income for which he is, or is declared to be, or is treated as, an agent, be deemed to be an assessee for the purpose of this Ordinance and be subject to the same obligations and liabilities as if he were the assessee, and shall be liable to assessment in his own name in respect of that income."
16. Finally section 78(4) defines an agent as per subsection (1)(ii)(iii) and (iv) as: "Any person in Pakistan who has any business connection with the non-resident; or from or through whom the non-resident is in receipt of any income, whether directly or indirectly; or who holds, or controls the receipt or disposal of, any money belonging to the non-resident...."
17. From a cumulative reading of the above provisions it would therefore, appear that in the first instance section 78(4)(a)(iii) and (iv) cannot be interpreted to mean that in all cases, if the declared agent could show that on the date when proceedings were taken under section 78 of the Ordinance no funds of the non-resident principal were available, this would be an adequate defence available to him. On the other hand perhaps, as submitted by Mr. Farogh Naseem, if the declared Agent could show that before proceedings were taken against him under section 78 he had lawfully parted with the money of his non-resident principal which was under his control, this would be a sufficient defence against such proceedings. If this were not the case, then the intention of the Legislature in enacting section 78 would be defeated as any prospective Agent could, as soon as a notice were sent to him under section 78 declaring the Revenue's intent to treat him as an agent, part with his principals' money in his control and thereafter, claim that he no longer "holds" or "controls" the same. In this context it would be further seen that the process of assessm ent under section 78 is at best two-fold; in the first instance the Assessing Officer declares a person to be a statutory agent after giving such person a hearing and this is then followed by an assessm ent of such statutory agent. Consequently, the intention of the Legislature seems to be that once notice is served upon a person under section 78, this would allow him the time and opportunity to withhold the funds of his non-resident principal in order to meet the prospective tax demand. If then the agent fails to withhold the funds then he would bear the consequences of this lapse and would not be heard to say that as the provisions of section 78 (4) (a)(ii) (iii) and (iv) are all couched in the present tense, therefore, he could not be held liable as he does not "hold" or "control" his principal's money any more. However, as, held previously where upon receipt of notice under section 78, the proposed Agent has already parted with his principal's funds this factum would be a complete defence available to him under section 78. It is only in this context that the provisions of section 78(4) can be rationalized as it would be quite unreasonable to put a person on notice under section 78 when he no longer possesses the funds of his principal. Such an interpretation would not only be oppressive but would also be against the intention of the Legislature which is to tax the principal although through the Agent. Reverting to the facts of the matter at hand, it would be seen that the entire controversy revolves around the rate of withholding tax which is to be applied by the plaintiff on its payments to defendant No,4. The Department had varied the same from 4% to 8% and finally when the concerned Officer (in this case the Deputy Commissioner of Income-tax) applied the rate of 4% the defendant filed an appeal with the Income-tax Appellate Tribunal which has fixed the rate at 6% vide its order, dated 4-4-1998. Earlier the defendant No,4 had obtained order, dated 6-2-1998 in Suit No,101 of 1998 whereby the plaintiff had been directed not to deduct an amount more than 4% from payments being made to the defendant No,4 on the basis of the earlier order of the Deputy Commissioner, Income-tax holding that the 4% rate would apply. Apparently none of the parties have filed any appeal against the orders of the Tribunal whereby the rate of 6% was fixed. Apart from the other controversy i,e,, whether the defendant could proceed against the plaintiff under section 78 once having decided to apply section 50 of the Ordinance (which is discussed in a separate part of this order), the documents on the record establish prima facie that vide letter, dated 10-3-1998 the plaintiff had informed defendant No,2 who is the Deputy Commissioner of Income-tax that it had been restrained by this Court vide order, dated 6-2-1998 in Suit No,101 of 1998 that the rate of withholding tax should not be more than 4% and that the plaintiff proposes to apply the said rate to which the defendant No,2 replied vide letter, dated 24-3-1998 that as said rate was sub judice both before this Court as well as the Income-tax Appellate Tribunal, the plaintiff would be responsible to pay the difference in case a higher rate i,e,, more than 4% was decided by any of these forums. The plaintiff protested at this view as per its letter dated 25-3-1998 and informed the defendant No,4 that once having been enjoined by a superior Court to withhold tax at a certain rate, it could not be bound to make up the difference if at the end of the day, it were adjudicated that a higher rate applied. The defendant No,2 was also informed in the same letter that the plaintiff had already reached a full and final settlement with Prompt Engineering (Pvt.) Ltd., i,e,, defendant No,4 on which the requisite 4% withholding tax was deducted. Thereafter, apparently, there was no further response from the defendant No,2 on this issue until the issuance of letter dated 15-5-1998 demanding the difference in withholding tax i,e,, 2% which apparently was on the basis of the Tribunal's decision dated 4-4-1998. This demand was made on the basis that the plaintiff had already agreed to be the Agent of defendant No,4 on the basis of the prior agreement between the parties. This letter was replied to on behalf of the plaintiff by M/s. A.F. Ferguson & Co., vide their letter, dated 19-5-1998 whereby the particular clause 22.2.4 in the agreement between plaintiff and defendant No,4 was disputed as being an equivocal assent by the plaintiff to be appointed as an agent of defendant No,4 under section 78 of the Ordinance as the clause opened with the words "In the event that A.P.L. agrees to be appointed as an Agent". Such contention was repelled by defendant No,2 vide the impugned order, dated 21-5-1998 whereby the plaintiff was appointed the Agent of defendant No,4 and required to deposit the requisite tax alongwith penalties etc. In these circumstances, in my view it cannot be said that on the date when notice was served upon the plaintiff by defendant No,2 i,e,, 16-5-1998 of his intention to treat the plaintiff as an agent of the defendant No,4 the plaintiff had any moneys belonging to said defendant under its control which it was bound to withhold in order to satisfy any demand raised by the Revenue. The plaintiff had in fact already informed the defendant No,2 on 25-3-1998 that it had reached a full and final settlement with defendant No,4 on 21-3-1998 and as of that date it did not have any money of said defendant under its control. Consequently, I hold that as on the day when for the first time the plaintiff was put on notice by defendant No,2 as to the latter's proposed assessment under section 78, the plaintiff had already reached a full and final settlement with defendant No,4 after withholding 4% from payments made to said defendant as per directions of this Court in Suit No,101 of 1998, the plaintiff cannot be made liable under section 78 of the Ordinance as an Agent of the defendant No,4 and consequently said defendants' taxes be recovered from the plaintiff. It is another matter whether the plaintiff could be proceeded against under section 52 of the Ordinance for having allegedly failed to deduct tax and in my view in the peculiar circumstances of the case this was the most appropriate provision of the Ordinance which should have been utilized by defendant No,2.
18. The second limb of Mr. Muhammad Sharif's argument is that in any event the law does not allow the Revenue to tax the Agent under section 78 once the principal is taxed under section 50 of the Ordinance as this would in fact amount to double taxation. Learned counsel has further explained this contention by submitting that initially the plaintiff was required to deduct tax at source on various rates by defendant No,2 from payments made to defendant No,4 and accordingly such deduction was made and deposited in the Government Treasury. Thereafter, the matter went into litigation between the Revenue and defendant No,4 and was then decided by the Income-tax Appellate Tribunal whereby the rate of deduction was fixed at 6%.- Hence it was only after such decision that the difference in the rates i,e, 4% and 6% was sought to be recovered from the plaintiff under section 78 as a statutory Agent of defendant No,4. According to the learned counsel this cannot be done and the only option open to defendant No,2 was to proceed against the plaintiff under section 52 of the Ordinance. Dr. Farogh Nasim, learned amicus has fully supported learned counsel's view-point and both have relied upon a number of Indian decisions as well as a few from our own jurisdiction. Amongst the Indian decisions to which reference has been made are Trustees of Chaturburgh Trust v. C.I.T. (50 ITR 693) and Bawa Sitya Paul Singh v. The Income-tax Officer, New Delhi and others (62 ITR 147) in the former of which it was held by the respective High Court that section 41 of the Indian Income-tax Act, 1922 provided for two alternative methods namely, either to tax income in the hands of the Trustees or to tax it directly in the hands of the person on whose behalf the income was receivable under the trust. Consequently where one such option was availed of by the defendant, it was estopped in law from resorting to the other. In the latter case of Bawa Satya Paul Singh again the principle of section 41 was applied and it was held that where a receiver has been appointed by a Court the Department could either assess him directly or assess the person on whose behalf the receiver had been appointed but not both. However, the cases more to the point are Abdul Azeez Dawood Marzook v. C.I.T., Madras (1958 ITR 154) where it was held that under section 42 of the Act, the I.T.O. had a choice to either assess the non-resident principal or the resident agent. So also in C.I.T. v. Alfred Herbert India (Pvt.) Ltd. the same view was taken by the Calcutta High Court. In CIT v. M/s. Pakistan Petroleum Ltd. 1984 PTD 171 a Division Bench of the Court also held that in terms of section 43 read with section 42 of the erstwhile Income-tax Act of 1922 the Revenue Authorities had the choice to either tax the Principal or the Agent and once this option had been exercised for a particular income the same income could not be reassessed against the Agent as well. In M/s. Noon Sugar Mills Ltd. v. C.I.T., Rawalpindi 1990 PTD 768 the Hon'ble Supreme Court also reached the same conclusion although for different reasons. The brief facts of that case were that the appellant purchased certain machinery for installing a Sugar Mill from M/s. Mitsubishi Heavy Industries Ltd., Japan under the terms of an agreement which stipulated inter alia that the foreign Company would also provide engineers to erect and install the machinery on payment. Consequently the I.T.O. after putting the appellant on notice of his intention to appoint them as the agent of the foreign company did so and asked the appellant to file a return on behalf of the foreign company which was never done. However, notwithstanding the above position the concerned I.T.O. completed the assessment against the foreign company for the assessment years 1966-67 and 1967-68. Thereafter, the I.T.O. again passed an order under section 18(2) read with section 18(3-B) of the Income-tax Act, 1922 (which corresponds to sections 50(3) and 52 respectively of the 1979 Act) raising a demand allegedly due from the foreign company in respect of the above assessm ent years as well as imposed penal interest on that amount. The appellant filed three appeals against all three orders, two against the orders regarding the foreign company and one against itself. The Income-tax Appellate Tribunal held that the first two appeals were incompetent on the grounds that the appellant had no locus standi whereas the third appeal was accepted on the basis that once the appellant had been declared to be an agent of the foreign company it was liable to pay taxes itself, and thus, could not be treated as having defaulted in deducting these taxes as provided in section 18(3-B) of the 1992 Act.. The department sought the High Court opinion on the issue whether the Tribunal was justified in cancelling the I.T.O.'s order in spite of the fact that the Tribunal did not admit the appellant to be an agent of the foreign company? The Hon'ble Lahore High Court answered this query in the negative on the basis that merely because the appellant had been appointed an agent of the foreign company in accordance with section 43 of the 1992 Act does not necessarily mean that the appellant was personally, liable to pay any tax due from the non-resident and this liability would only arise after the assessm ent has been completed in its name as an agent. Consequently until such completion that agent is charged with the continuing duty to deduct tax at source from payments to the non- resident and upon failure to do so he would be deemed to be an assessee in default with all consequences to follow as prescribed by law. The Hon'ble Supreme Court, however, differed with this interpretation of the relevant sections and after dilating at length upon the same as well as to the factual aspects of the case come to the conclusion that the effect of sections 42 and 43 read with section 18(3-B) of the 1992 Act was that once a person/company has been declared to be an agent of another non-resident person/company under section 43, the latter was under no liability to deduct tax at source from payments made to such non-resident under section 18(3-B) and hence could not be penalized under section 18(2) of the 1922 Act. In my opinion this case is then adequate authority for the coverse i,e,, the proposition that once the Revenue has elected to tax the non-resident through the mechanism of section 18(3-B) (which corresponds to section 50 of the 1979 Ordinance) then recourse cannot be taken to section 42 (section 78 of the 1979 Ordinance) in order to treat the resident company as an Agent of the nonresident. In my view, therefore, as per settled law, right up to the Hon'ble Supreme Court, the defendant No,2 erred in law while issuing the impugned order, dated 21-5-1998.
19. As to the last issue regarding the bar of jurisdiction Mr. Muhammad Sharif has submitted that the plaintiff has been condemned unheard since no personal hearing was given in the matter. In this respect he has drawn my attention to the documents on record i,e,, letter, dated 15-5-1998 from defendant No,2 to the plaintiff inviting objections to the plaintiff being treated as an agent of defendant No,4; M/s. A.F. Ferguson & Co.'s reply, dated 19-5-1998 filing such objections and requesting for a personal hearing and the impugned order, dated 21-5-1998 rejecting such objections. In support of his contentions learned counsel has relied upon Basharat Ali v. Director, Excise and Taxation 1997 SCMR 1543, Pakistan and others v. Public-at-Large and others 1987 PLD SC 304, Abdus Shakoor Khan v. Karachi University and another PLD 1966 SC 536. The University of Dacca v. Zakir Ahmed PLD 1965 SC 90, Chief Commissioner, Karachi v. Mrs. Dina Sohrab Katrak PLD 1959 SC (Pak.) 45, M/s. Farid Sons Ltd. v. The Government of Pakistan and another PLD 1961 SC 537, Abdur Rahman v. Collector and Deputy Commissioner, Bahawalnagar PLD 1964 SC 461 and Hashmatullah Khan v. Karachi Municipal Corporation PLD 1971 Kar. 515 (D.B.). Learned-counsel has also relied upon proviso (b) to section 78 which states that no person shall be declared or treated as an agent without having been heard. On the other hand Mr. Jawaid Farooqui and Mr. Rehan Naqvi have both argued that on the facts of the case sufficient opportunity has been given to the plaintiffs and that it is not necessary to give a personal hearing in the matter and have relied upon the case decided by the Income-tax Appellate Tribunal reported in 1985 PTD (Trib.) 458 and Syed Akbar Ali Bukhari v. State Bank 1981 SCMR 81.
20. In this respect it would be beneficial to refer to the latest observation of the Hon'ble Supreme Court in the case of Basharat Ali v. Director, Excise and Taxation 1997 SCMR 1543 whereby it has been laid down that the right of personal hearing is to be read into every statute even when there is no such particular provision, before any action to the detriment of a citizen can be taken and further such right does not mean a hearing simpliciter but a fair hearing which would depend on the circumstances of each case. In the cited case the Hon'ble Supreme Court laid down that where serious allegations are made against a civil servant and he denies the same, a regular enquiry could not be dispensed with which would entail the civil servant right to lead evidence as well as to cross-examine the prosecution's witnesses. Similarly the right of a citizen to be heard in his case has been upheld in Pakistan and others v. Public-at-Large and others PLD 1987 SC 304 which was a case decided by the Hon'ble Shariat Appellate Bench of the Supreme Court. Their lordships in that case were of the view that no one could be condemned without making a proper enquiry. Similar pronouncements have been made by the Hon'ble Supreme Court in Abdus Shakoor Khan v.
21. Karachi University and another and Hashmatullah v. Karachi Municipal Corporation, (supra). In Commissioner, Karachi v. Mrs. Dina Sohrab Katrak (supra), the Hon'ble Supreme Court while upholding this cardinal principle of law also laid down that mere consideration of the Memorandum of Appeal alongwith the Report of the Rent Controller was not sufficient for deciding the appeal and that such principle applies to judicial as well as administrative proceedings. It would, thus, be seen that the Hon'ble Supreme Court has been of the consistent view that the principle of audi alteram partem is of universal application and as per its observation in Basharat Ali v. Director, Excise and Taxation (supra) the right to a personal hearing should not be a hearing simpliciter but a fair hearing which would depend on the facts of each case. In the case at hand, the facts are that the plaintiff has been declared an agent of the defendant No,4 in terms of section 78 of the Ordinance for assessment year 1996-97 which is based upon the agreement between the said parties whereby it has been held that the plaintiff had agreed to become such agent. This was contested by the plaintiff who requested to be personally heard in the matter which request was denied and the impugned order passed after rejecting the plaintiff's explanations and objections had been overruled.
22. In these circumstances I am satisfied that where an amount of Rs,22,700,928 was being demanded of the plaintiff by the department treating it to be an agent of the defendant No,4 the plaintiff should have been heard in person before passing the impugned order particularly when this request was made. Consequently I hold that as a basic judicial principle has been violated i,e,, the plaintiff was not given a fair hearing in the matter and that as the provisions of the relevant laws not applied, the bar of section 162 of the Ordinance would not apply, and thus, to that extent the suit is maintainable.
23. Having answered the first issue in the positive regarding the maintainability of the suit the next issue is whether an interim stay as prayed for in the application should be granted? The considerations for such a stay are only too well-known i,e,, a prima facie case, irreparable damage and balance of convenience. In my opinion all these essential elements are present on the facts of the matter. The case is one of further enquiry as prima facie I have come to the conclusion that a fundamental principle of law has been violated by the Department while issuing the impugned order; irreparable damage would result for the plaintiff where it is required to pay a huge demand of Rs,22,700,928 on behalf of the defendant No,4 particularly when it has severed all business connections with the said defendant and finally the balance of convenience is also in the plaintiff's favour as obviously such a huge payment would have a very big impact on its financial position.
24. In these circumstances C.M.A. No,5851 of 1998 is granted and the defendants are restrained from acting upon or giving effect to the impugned order, dated 21-5-1998 till further orders of this Court.
25. Before parting with the matter it would also be relevant to refer to the observations of the Hon'ble Supreme Court in M. Jamil Asghar v. Improvement Trust PLD 1965 SC 698 wherein their Lordships have held that although an Administrative Tribunal is not the final arbiter of the facts based upon which an order is passed by it (in which respect the Civil Courts could always make an enquiry), however, in certain exceptional cases, such a Tribunal may be made a judge of its own jurisdiction in relation to such facts; nonetheless with respect to mala fides, the jurisdiction of a Civil Court can never be taken away. In the said case the question was whether certain property was evacuee property which came to be vested with the Central Government, and thus, could be transferred under the provisions of the Displaced Persons Act and whether a suit could be filed with respect to the said property despite the bar contained in section 25 of the Act. The Hon'ble Supreme Court answered the second part of this question in the affirmative as stated in the foregoing terms and held that as regards the nature of the property i,e,, whether in fact it was evacuee or not, is purely an issue which only the Civil Courts could determine whereas the Settlement Authorities could exercise quasi-judicial functions i,e,, whether possession of a party exists, whether a person is a claimant and what is his date of possession and so on. Consequently, in my view the Income Tax Ordinance is a complete code in itself providing for the imposition of tax and all disputes relating thereto and in this respect as regards the department and its functionaries their jurisdiction extends to findings of fact as to imposition of such taxes etc., provided, however, that they act within the four corners of the law. Of course, where they act mala fidely, or in excess of their jurisdiction of flout the fundamental principles of judicial procedures or the relevant law the bar of section 162 would not apply and in these circumstances the Civil Courts could always interfere.
26. As observed by the Privy Council long ago in State v. Mask & Co. AIR 1940 PC 105 "It is also well- settled that, even if jurisdiction is so excluded, the Civil Courts have jurisdiction to examine cases where the provisions of the Act have not been complied with or the Statutory Tribunal has not acted in conformity with the fundamental principles of judicial procedure."