KARACHI ELECTRIC SUPPLY CORPORATION LTD. VS FEDERAL BOARD OF REVENUE through Chairman, 2013 PTD-KARACHI-HIGH-COURT-SINDH 851 (2013)

(a) Interpretation of statutes---

----Amendment in law---Presumption---When law is amended, it is assumed that a change is intended to be brought about.

(b) Income Tax Ordinance (XLIX of 2001)---

----Ss.161 & 235---Specific Relief Act (I of 1877), Ss.42 & 54---Civil Procedure Code (V of 1908), O.XXXIX, Rr.1 & 2---Suit for declaration and injunction---Interim injunction, grant of---Advance income tax, collection of---Concurrent jurisdiction---Second notification---Scope---Plaintiff company was aggrieved of notices issued by defendants for recovery of advance income tax collected by it---Validity---Federal Board of Revenue had no power or jurisdiction to issue second notification, whereby it had purported to confer concurrent jurisdiction in terms of S. 161 of Income Tax Ordinance, 2001, on Commissioner of another zone, in case of advance income tax collected under S. 235 of Income Tax Ordinance, 2001---Such jurisdiction vested only as originally conferred in terms of first notification i.e. alone in the Commissioner zone concerned---Plaintiff had made out a case for interim relief, as equities were in its favour and there was a prima facie case---To allow Deputy Commissioner of another zone to proceed on the basis of demand notices would be to encourage continuance of proceedings in a manner that was contrary to mandatory provisions of Income Tax Ordinance, 2001, and would be detrimental to rule of law and such act of defendants was prima facie without jurisdiction---Balance of convenience was in favour of plaintiff company and it might suffer irreparable loss and injury if on the one hand it continued to be deprived of huge sums by way of refund due to it and taken from it by State by way of tax revenue and on the other was required to hand over to the State amount that would comprise of tax revenue---Demand notices issued by Deputy Commissioner of another zone were suspended and Commissioner of that other zone was restrained from taking any action in terms of S. 161 of Income Tax Ordinance, 2001, in respect of advance tax collected by plaintiff under S. 235 of Income Tax Ordinance, 2001---Application was allowed accordingly.

ICI Pakistan Ltd. v. Federation of Pakistan and others 2006 PTD 778; Shagufta Begum v. Income Tax Officer PLD 1989 SC 360; H.M. Abdullah v. Income Tax Officer and others 1993 SCMR 1195; Roche Pakistan Ltd. v. Deputy Commissioner of Income Tax and others 2001 PTD 3090; Abbasia Cooperative Bank and another v. Hakeem Rafiz Muhammad Ghaus and others PLD 1997 SC 3; Tahir A. Khan v. Central Board of Revenue and others 2003 YLR 196 andHysons Sugar Mills Ltd. v. Market Committee Khanpur 1989 CLC 2000 ref.

(c) Constitution of Pakistan---

----Art.199---Constitutional petition---Adequate and alternate remedy---Scope---Existence of adequate alternate remedy does not bar jurisdiction of High Court under Art.199 of the Constitution but simply regulates.

Abid S. Zuberi and M. Umer Lakhani for Plaintiff.

Syed Shafqat Ali Shah Masoomi for Defendant No.3.

Habibullah Khan, Commissioner Inland Revenue, Zone-IV, RTO-IIandBadarAyub,DeputyCommissioner,InlandRevenue,Unit 2, Zone IV, RTO-II, Karachi.

Date of hearing: 21st January, 2013.

ORDER

MUNIB AKHTAR, J.---Three applications, all filed by the plaintiff, fall for determination. The first (C.M.A. 10305 of 2012), which was filed along with the suit, seeks interim injunctive relief. The second application (C.M.A. 11608 of 2012) seeks amendment of the plaint on account of certain developments that took place after the filing of the suit, and the third (C.M.A. 11609 of 2012) seeks interim injunctive relief on account of the said developments. The plaintiff is Karachi's electric supply company ("KESC"), which was previously a public utility but is now in private hands. The defendant No. 1 is the Federal Board of Revenue ("FBR") and the defendant No. 2 is the Chief Commissioner of Inland Revenue, Regional Tax Office (RTO)-II, Karachi. The defendant No. 3 is the Commissioner of Inland Revenue of Zone IV in the aforesaid RTO (herein after referred to as the "Commissioner Zone IV"), while the defendant No. 4 is a Deputy Commissioner in Unit 2, Zone IV (herein after, referred to as the "Deputy Commissioner Zone IV") (mistakenly identified as Unit 3 in the title of the plaint). The dispute arises in relation to the Income Tax Ordinance, 2001 ("2001 Ordinance").

2.Section 235 of the 2001 Ordinance (which is to be found in Chapter XII thereof) requires a person such as the plaintiff, supplying electricity to commercial or industrial consumers to collect advance tax along with the payment for electricity supplied. The manner in which the advance tax is collected is that in the electricity bills sent out by the plaintiff, along with the various amounts itemized therein for supply of electricity, there is also specified an amount being collected by way of tax, including or being advance tax under the 2001 Ordinance. Thus, while paying his bill, the consumer also pays the amount of advance tax. The latter amount goes into the plaintiffs account. Section 160 provides in material part as follows: "Any tax that has been collected ... under Chapter XII shall be paid to the Commissioner by the person making the collection ... within the time and in the manner as may be prescribed".

3.The grievance of the defendants is that although the plaintiff has been collecting advance tax from its consumers under section 235, it has failed to remit or has stopped remitting the same. It is stated that the amount of advance tax lying with the plaintiff is already in excess of Rs.One billion. In any case, it is an amount that continues to accumulate and increase on a monthly basis, as the plaintiff collects more and more of it along with the billings to its consumers for electricity consumed.

4.The plaintiff does not deny that it is bound to collect advance tax under section 235 or that it has done so but has not remitted the same. The reason why, according to the plaintiff, it has not remitted the amount collected will be stated shortly. During the course of submissions learned counsel for the plaintiff contended that a determination had yet to be made of the amount that had to be remitted in terms of section 160, and absent such determination, no recovery proceedings could be taken against it. However, on a query from the Court, learned counsel fairly (and quite correctly) conceded that since the amount being collected from each consumer by way of tax is specifically itemized in the bill, the plaintiff is aware of the amount that has been collected under section 235. Thus, the quantum of the amount is a fact peculiarly within the plaintiff's knowledge and it is not something that (other than as a formality) requires any specific determination by the income tax authorities. This then is not, and cannot be, the reason why the plaintiff has not remitted the amount collected as required of it under section 160.

5.Learned counsel for the plaintiff submitted that on 27-9-2012, the plaintiff received a letter (of the same date) from the Deputy Commissioner Zone IV. This letter referred to the advance tax collected by the plaintiff under section 235 but not paid over in terms of section 160. The plaintiff was called upon to "immediately discharge" its legal obligation and remit the tax collected for the months of July and August, 2012. The letter concluded in the following terms:--

"Please note that in case of non-remission of the said tax by 28th September, 2012, the same will be recovered through the recovery measures (including attachment of bank account) provided in the [2001] Ordinance along with default surcharge and consequential penal action."

This letter was clearly in the nature of a demand notice, which required payment by the next day. It prompted the filing of the present suit on 28-9-2012. C.M.A. 10305 of 2012 was filed along with suit, and an ad interim order made thereon on the same day whereby the operation of the demand notice was suspended and the defendants were restrained from initiating any coercive and/or punitive action against the plaintiff.

6.Learned counsel for the plaintiff took two primary objections to the demand notice. Firstly, it was contended that the Deputy Commissioner Zone IV had no jurisdiction in the matter. Learned counsel submitted that the jurisdiction of the various income tax authorities is specified by FBR in terms of section 209. Exercising its powers under that section, FBR had by meansofanotificationdated7-4-2012 (which was in supersession of a previous notification on the matter) specified the powers and functions of various Commissioners. Insofar as the plaintiff was concerned, the powers and functions under the 2001 Ordinance had been assigned to the Commissioner Inland Revenue Zone III, LTU Karachi. (LTU refers to the Large Taxpayers Unit.) The Deputy Commissioner Zone IV came under a different Commissioner altogether and hence had no jurisdiction to make any demand or seek to recover any amount from the plaintiff. Secondly, learned counsel submitted that if a person had collected advance tax but failed to remit it in terms of section 160 then a specific procedure was laid down for recovery of the same. In particular, section 161(1) empowered the Commissioner to make an order to the person to pay the amount and if he still failed or refused to do so, the Commissioner could proceed to recover the same. Subsection (1A) however specifically required that before action could be taken under subsection (1) the person had to be given an opportunity of hearing. Learned counsel submitted that this procedure had not been followed. No show cause notice had been issued nor had any opportunity of hearing provided. In such circumstances, the demand notice of 27-9-2012 was patently illegal and could not be acted upon.

7.Learned counsel proceeded further and submitted that after the filing of the suit and the ad interim order as above, FBR issued another notification dated 25-10-2012. This purported to confer concurrent jurisdiction on the Commissioner Zone IV with specific reference to theplaintiff, and empowered him in the following terms:--

"The Commissioner Inland Revenue [Zone IV, RTO-II] shall have the powers for concurrent jurisdiction under section 161 of Income Tax Ordinance 2001 in respect of section 235 in the case of Messrs Karachi Electric Supply corporation."

Theplaintiffthereuponreceivedanotherletter,dated30-10-2012, fromthe Deputy Commissioner Zone IV. This referred again to the matter of the advance tax collected but not remitted and made reference to the filing of the present suit. It was noted that the plaintiff had contended in the suit that "this office" did not have the jurisdiction to take action in terms of section 161. The Deputy Commissioner stated that "jurisdiction under the said section has now been assigned to this office by the competent authority i.e. [FBR]", and the notification was enclosed "for ready reference". It was also contended by the Deputy Commissioner that on account of the authority conferred the present suit had become infructuous "as the cause of action i.e. locus standi of [the plaintiff's] suit stands removed". It was stated that in view of the jurisdiction vested in him under section 161, "recovery proceedings will be taken as laid down in the Income Tax Ordinance including attachment of your bank accounts under section 140...." (Before proceeding further, I may note that it appears that on 24-10-2012, FBR had issued another order, which had (as presently relevant) conferred jurisdiction on the Commissioner Zone IV in exactly the same terms as the notification of 25-10-2012. Since reference throughout was made only to the latter, which was forwarded to the plaintiff, and the order and the notification are the same in all material respects, no further reference shall be made to the order of 24-10-2012.)

8.Learned counsel submitted that the foregoing developments forced the plaintiff to file the other two applications, C.M.As. Nos.11608 of 2012 and 11609 of 2012. These were presented on 31-10-2012 and another ad interim order was made on that date, suspending the second demand notice received by the plaintiff from the Deputy Commissioner Zone IV.

9.Learned counsel submitted that the second notification was invalid as no concurrent jurisdiction could be conferred in the manner as therein stated. His case was thus grounded on two points: a lack of jurisdiction of the income tax authority purporting to take action (the Deputy Commissioner Zone IV) and a complete failure to follow the prescribed procedure, i.e., issuance of a show cause notice and opportunity of hearing. On the merits, learned counsel submitted that in fact the plaintiff was owed huge sums of money by way of sales tax refunds and these claims more than offset the amount required to be remitted by the plaintiff on collection of advance tax. Learned counsel submitted that the plaintiff had on more than one occasion asked for thenetting off of the amount collected against the various amounts to which it was entitled under law, and referred to certain correspondence placed on the record in this regard. His case was that had the plaintiff been granted an opportunity of hearing as required by section 161(1A) this point would have been taken before the duly authorized and empowered Commissioner (of Zone III, LTU) on which a lawful order could have been made and then the matter dealt with in accordance with law. Since all of this had patently not been done and the defendants persisted in their flouting of mandatory statutory provisions, the plaintiff was plainly entitled to interim injunctive relief

10.Learned counsel for the defendant No. 3 (Commissioner Zone IV) (who is, effectively, contesting the case for all the defendants) strongly disputed the case put forward on behalf of the plaintiff. He submitted that there was no cause of action as could maintain the present suit and it was liable to be dismissed on this ground alone. Learned counsel submitted that the defendants, and in particular the Deputy Commissioner Zone IV had sufficient authority and jurisdiction, and were fully empowered to act in the matter. The plaintiff was unlawfully sitting on a huge sum of money collected for the State and that amount had to be remitted by it. Without prejudice to the foregoing, learned counsel submitted that in any case, all of the objections taken by the plaintiff could have been raised by it before the Deputy Commissioner Zone IV. He submitted that had the plaintiff applied to the last mentioned authority, sufficient time would have been granted to enable the plaintiff to make out whatever case it wished to and an appropriate order would have been passed thereafter in accordance with law. Learned counsel also relied on certain case law, including in particular ICI Pakistan Ltd. v. Federation of Pakistan and others 2006 PTD 778, a decision of a learned Division Bench of this Court. The cited decisions will be considered later. Learned counsel submitted that no case at all had been made out for interim relief and since the plaintiff was refusing to hand over State revenue that it had collected under mandate of law, it was not entitled to any equitable relief from the Court. He prayed that the applications be dismissed.

11.Mr. Habibullah Khan, the Commissioner Zone IV (i.e., the defendant No. 3) had remained present on previous dates of hearing and had earlier expressed great anxiety and requested for an expedited hearing of the applications under consideration. I gave him special permission to address the Court. The learned Commissioner submitted that there was in law a clear distinction between the plaintiff's position as a taxpayer under the various fiscal laws (including the 2001 Ordinance) and its duty as a collecting authority or agent in terms of section 235. The learned Commissioner contended that the plaintiff was erroneously conflating these two distinct and separate positions or roles. The question of whether (if at all) the plaintiff was entitled to a refund under any fiscal law was entirely separate and could not be linked with its obligations as a collecting agent. In particular, there could be no setting off of the amount collected against any refund being claimed by the plaintiff. The advance tax collected had to be remitted in its entirety by the plaintiff and there was no dispute that it had failed to do so. The learned Commissioner submitted that this was a clear breach of a legal duty and the plaintiff was liable accordingly.

12.On the issue of jurisdiction, the learned Commissioner submitted that he, as Commissioner Zone IV and his subordinate authority, the Deputy Commissioner Zone IV, had due and proper authority and jurisdiction to act in terms of section 161. In addition to the second notification issued by FBR referred to above (of 25-10-2012) the learned Commissioner contended that even otherwise the issue of jurisdiction did not arise. In this regard, he placed reliance on an order that had been issued by FBR on 28-12-2010, an order of the Chief Commissioner Inland Revenue, RTO-II dated 5-5-2012 and an office order issued by him (i.e., the learned Commissioner) dated 22-5-2012 on the basis of the order of 5-5-2012. The nature of these orders will be considered later, but the learned Commissioner contended that on this basis as well, the plaintiff had no case whatsoever. He prayed for dismissal of the applications and vacation of the interim orders since Government revenue was being stuck up on account thereof.

13.I have heard learned counsel and the Commissioner as above, examined the record with their assistance and considered the case-law relied upon. Before proceeding further, I may make one general observation. This is the interlocutory stage. The observations made below are only tentative in nature. I am only concerned with what appears prima facie to be the position. Whatever I say below should therefore be read and understood in the foregoing terms.

14.Section 207 specifies the income tax authorities for purposes of the 2001 Ordinance. At the apex is of course the FBR itself. It is followed (in descending order and as presently relevant) by the Chief Commissioner, the Commissioner and the Deputy Commissioner. Subsections (3) and (4) confirm the hierarchy by expressly providing that the Chief Commissioner shall be subordinate to the FBR, the Commissioner to the Chief Commissioner and the Deputy Commissioner to the Commissioner. Section 209 deals with the jurisdiction of the income tax authorities. This section will have to be examined in some detail, a consideration that is deferred to later in the decision. As presently relevant, section 209 provides as follows:

"209. Jurisdiction of income tax authorities.---(1) Subject to this Ordinance, the Chief Commissioners, the Commissioners and the Commissioners (Appeals) shall perform all or such functions and exercise all or such powers under this Ordinance as may be assigned to them in respect of such persons or classes of persons or such areas as the Board may direct:

Provided that the Board or the Chief Commissioner, as the case may be, may transfer jurisdiction in respect of cases or persons from one Commissioner to another.

(2)The Board or the Chief Commissioner may, by an order, confer upon or assign to any officer of Inland Revenue all or any of the powers and functions conferred upon or assigned to the Commissioner, under this Ordinance, in respect of any person or persons or classes of persons or areas as may the specified in the order.

(3)An order under subsection (2) by the Chief Commissioner shall be made only with the approval of the Board.

(4)The officer of Inland Revenue referred to in subsection (2) shall, for the purposes of this Ordinance, be treated to be the Commissioner.

(8A) The power to confer jurisdiction under this section shall include the power to transfer jurisdiction from one income tax authority to another."

Reference must also be made to section 210, which provides in material part as follows:--

"210. Delegation.---(1) The Commissioner subject to sub-section (1A), may, by an order in writing, delegate to any officer of Inland Revenue, subordinate to the Commissioner all or any of the powers or functions conferred upon, or assigned to the Commissioner under this Ordinance, other than the power of delegation.

(2)An order under subsection (1) may be in respect of all or any of the persons, classes of persons or areas falling in the jurisdiction of the Commissioner."

15.The obligation of a person to remit the advance tax collected by him to the State, and what is to happen if he fails to do so, is covered by sections 160 and 161. Reference must also be made to section 163. These provide in material part as follows:--

"160. Payment of tax collected or deducted.---Any tax that has been collected or purported to be collected ... under Chapter XII shall be paid to the Commissioner by the person making the collection ... within the time and in the manner as may be prescribed.

161. Failure to pay tax collected or deducted.---(1) Where a person (a) fails to collect tax as required under ... Chapter XII ...; or

(b) having collected tax under ... Chapter XII ... fails to pay the tax to the Commissioner as required under section 160 the person shall be personally liable to pay the amount of tax to the Commissioner who may pass an order to that effect and proceed to recover the same.

(1A) No recovery under subsection (1) shall be made unless the person referred to in subsection (1) has been provided with an opportunity of being heard.

163. Recovery of amounts payable under this Division.---The provisions of this Ordinanceshall apply to any amount required to be paid to the Commissioner under this Division as if it were tax due under an assessment order."

As already noted, section 235istobefoundinChapter XII.In my view, the following points emerge from a consideration ofsections 160, 161 and 163. Firstly, if there is a failure to pay the tax collected as required in terms of section 160, the Commissioner must make an order to this effect and then proceed to recover the same (section 161(1)). There has to be a specific order in this regard. Before such an order can be made, there must be an opportunity of hearing given to the person concerned: subsection (1A) categorically so, requires. Furthermore, recovery cannot be effected simultaneously with the order. The reason for this is section 163, which provides that the provisions of the 2001 Ordinance apply to the amount to be recovered as though it were tax due under an assessment order. Now, section 137(2) provides that where tax is payable under an assessment order or any other order of the Commissioner, he shall serve a notice on the taxpayer in the prescribed form specifying the amount payable and thereupon the said amount shall be paid within 15 days from the date of service of notice. All of these provisions are mandatory. Prima facie, failure to comply with the same renders any recovery exercise illegal as being contrary to the provisions of the 2001 Ordinance.

16.When the facts of the present case are examined in light of the foregoing, the first demand notice of 27-9-2012 was prima facie clearly illegal. Firstly, no opportunity of hearing was given to the plaintiff as required in terms of section 161(1A). Secondly, no order was made in terms of section 161(1) declaring that the plaintiff had failed to remit the amount of advance tax collected by it as required under section 160. Without such a specific order no recovery can be effected. Thirdly, the amount that the plaintiff had failed to remit was not specified. This was necessary on account of the combined effect of sections 163 and 137(2). The former makes the latter applicable, and the latter requires that the notice to be given in terms thereof must specify the amount payable. To this extent and in this context therefore, even though in the circumstances of the present case the requirement may be a mere formality (see para 4 above), learned counsel for the plaintiff is correct is stating that the amount to be paid over by the plaintiff has not been "determined". Of course, since the relevant data is especially within the knowledge of the plaintiff, it would be duty bound to provide in full the necessary particulars to the income tax authorities and not be allowed to shelter behind its own failure or refusal to do so. Fourthly, payment was demanded within one day (i.e., by 28-9-2012) whereas section 137(2) specifically requires that at least 15 days' time must be granted. I note that section 138(1) seems to provide in apparently general terms that for the purpose of recovering any tax due from a taxpayer, the Commissioner "may serve upon the taxpayer a notice in the prescribedform requiring him to pay the said amount within such time as may be specified in the notice". On an sensible interpretation, the time to be given even in terms of a notice under section 138(1) must be reasonable in the facts and circumstances of the case, and clearly, demanding that a sum of around Rs. One billion be paid within 24 hours hardly meets this requirement. Furthermore, even a notice under section 138(1) is required to be in the prescribed form, and the demand notice of 27-9-2012 did not meet this requirement. Even more importantly, this provision obviously cannot be applied in a manner so as to render section 137(2) nugatory. In my view, section 138(1) can be resorted to only after the notice required in terms of section 137(2) has been issued and served and not otherwise. (I note that other considerations may apply in respect of a case to which section 137(1) applies, but that is not the situation at hand.)

17.Fifthly, it was threatened in the demand notice that if the amount was not paid by the next day, then, inter alia, the plaintiff'sbank account would be attached. Subsection (2) of section 138 allows the Commissioner to attach and sell any moveable property of the taxpayer, but such action can only be taken if the amount is not paid within the period specified in subsection (1) (or such further time as the Commissioner may allow). Obviously, any attachment absent a notice under subsection (1), which itself has to be preceded by a notice under section 137(2) would be illegal. Section 140(1) appears to generally allow the Commissioner to, inter alia, require any person by notice in writing to pay to the Commissioner any amount owed to the taxpayer or held on or to the taxpayer's account. This section does not refer to any prior notice to the taxpayer or even specify any time. However, in my view, it would be incorrect to interpret and apply this section as though it were a standalone provision, which empowers the Commissioner to invoke it any time that he concludes that tax is due from the taxpayer. Section 140 is part of the recovery mechanism of the 2001 Ordinance, and can only be resorted to once the procedure laid down has been correctly followed. I also note section 146A, subsection (1) of which provides that "any proceedings for the recovery of tax under this Part may be initiated at any time", and subsection (4) of which states that "the several modes of recovery provided in this Part shall be deemed to be neither mutually exclusive nor affect in any way any other law for the time being in force relating to the recovery of debts due to the Government and the Commissioner may have recourse to any such mode of recovery notwithstanding that the tax due is being recovered from a taxpayer by any other mode". This section must also be interpreted in its proper perspective and applied in context. It is concerned with those sections of Part IV of Chapter X (which comprises sections 137 to 146B) which relate to recovery of tax. These, which may be referred to as the "recovery sections" all open with or use the words "for the purpose of recovering any tax due by a taxpayer" (or similar language) and of course include sections 138 and 140 considered above. In my view, section 137 must be regarded as the trigger for the recovery sections to become applicable. In other words, the recovery sections cannot be resorted to until and unless section 137 has become applicable and/or complied with (as the case may be). It is, as it were, the gateway through which the recovery sections can be accessed and the gateway will not open until its provisions have been complied with. Any other interpretation would render section 137 (and in particular subsection (2) thereofwith which I am presently concerned)nugatoryandsuper-fluous, permittingtheincometaxauthoritiestobypassitaltogetherandtoproceedstraightawaywithapplyingtherecoverysections.This cannot be correct. There is a scheme to the recovery mechanism andresorttotherecoverysections,andthatcannotbeallowedtobecircumvented.Itfollowsfromtheforegoingthatonanyviewofthe matter, the first demand notice dated 27-9-2012 was prima facie illegal.

18.Insofar as the second notice of 30-10-2012 is concerned, itstated that it was "in continuation ofthisofficeLetter No. 40dated27-9-2012", i.e., the first demand notice. The second notice was mostly concerned with the jurisdiction of the Deputy Commissioner Zone IV, who had issued both notices, and this is a matter that I take up shortly. Since it was in continuation of the earlier demand notice it essentially suffered from the same illegalities that have been found with regard to the former, save that no specific deadline has been given for remittance of the advance tax collected but not deposited under section 160. On an overall consideration of the two demand notices, in my view there has, prima facie, been a failure to follow the prescribed mandatory procedure.

19.I now take up the other aspect of the plaintiff's case, namely the contention that the Deputy Commissioner Zone IV lacked the jurisdiction toissuethetwodemand notices or take action in terms of section 161.I begin bynotingthatitiscommongroundthattheCommissioner,Zone III, LTU, Karachi at all materialtimesdidhavethejurisdictiontotakeaction under section 161, pursuant to FBR's notification dated7-4-2012 (referred to in para 6 above; herein after "the first notification"). Although this Commissioner appears not to have so far acted at all in the matter, it is not disputed that, e.g., a notice issued by him under section 161(1A) could not have been resisted by the plaintiff on the ground of lack of jurisdiction. The only dispute is with regard to the jurisdiction of the Commissioner Zone IV and in particular, the Deputy Commissioner Zone IV. Now, it is also not in dispute that the first notification did not empower, authorize or confer any jurisdiction on either of these income tax authorities. Their authority or jurisdiction, if at all conferred, must arise from elsewhere and it is this enquiry that now needs to be undertaken.

20.One basis for the jurisdiction of the Deputy Commissioner Zone IV is of course FBR's notification of 25-10-2012 (herein after "the second notification"), which has been referred to in para 7 above. Now, if the second notification were the only basis for the jurisdiction, then clearly the first demand notice of 27-9-2012 was without jurisdiction. This is because this notice preceded the second notification and the latter does not (even on the face of it) have retrospective effect. However, as noted in para 12 above, the Commissioner Zone IV also relied on certain other orders, all of which predated the demand notice of 27-9-2012. It will be convenient to consider these orders first. The first order is that of FBR, dated 28-12-2010. As pointed out by learned counsel for the plaintiff, this was a time bound order, which was operative only up to 30-6-2011. No reliance can therefore be placed on it and it need not be considered any further. The second is the order dated 5-5-2012, which is by the Chief Commissioner, RTO-II. This order was directed to the Commissioners of the four zones (I-IV) of RTO-II and allocation work among them, with matters relating to section 235 being allocated to Zone IV. On the basis of this order, the Commissioner Zone IV made the third office order relied upon, that of 22-5-2012, which specifically assigned work in relation to section 235 to the Deputy Commissioner Zone IV. Now, when the office order last mentioned is examined, it assignstothe(two) officers therein specified the task of"monitoringof ... withholding sections". Obviously, the power to "monitor" the collection of any tax does not include nor does it confer the power to "recover" any unpaid amounts. The office order of 22-5-2012 did not therefore, in my view, confer any jurisdiction on the Deputy Commissioner Zone IV to take action in terms ofsection 161 to recover any amount collected by the plaintiff under section 235. It only authorized this officer to monitor the collection of advance tax. This position is also borne out by the second demand notice itself, where the Deputy Commissioner Zone IV expressly stated that jurisdiction under section 161 had "now" been conferred by means of the second notification (see para 7 above). It is also pertinent to note that in the written statement filed by the defendants on 8-12-2012 (signed and sworn by the Deputy Commissioner Zone IV), it is expressly stated in Para (v) of the 'Preliminary Legal Objections' that "the defendants Nos. 3 and 4 were expressly assigned/delegated the powers of monitoring of withholding tax under section 235 of the Income Tax Ordinance, 2001 (ITO), well within the enshrined powers under the ITO". This statement is repeated in para 2 of the written statement as well. In my view, it is clear from the record that prior to the issuance of the second notification, neither the Commissioner Zone IV nor the Deputy Commissioner Zone IV had any jurisdiction to exercise any powers under section 161 or otherwise to recover any amount of advance tax collected under section 235. At most, their jurisdiction and competence was to monitor the collection of advance tax, which is something different from (and certainly did not include) recovery of the amount collected.

21.I turn therefore to examine the second notification and to consider whether it could, and if so whether it did, confer jurisdiction on the Commissioner Zone IV and/or, the Deputy Commissioner Zone IV. The first point to note with regard to the second notification is that it assigned concurrent jurisdiction under section 161 in respect of the amount collected by the plaintiff under section 235 expressly on the Commissioner Zone IV. No other income tax authority is mentioned or referred to in the second notification, save that its main paragraph expressly reinforced that the powers and functions "already assigned to any other RTO or LTU shall remain intact and this order shall not affect the powers and functions granted/assigned by the earlier orders". Thus, the FBR took some pains to highlight the point that the jurisdiction being conferred on the Commissioner Zone IV was in addition to, and not in derogation of, the authority already conferred on, e.g., the Commissioner Zone III, LTU, Karachi. The key question therefore is whether such concurrent jurisdiction can be conferred by FBR in terms of section 209? This is a question of general importance relating to the allocation of work by FBR under the Ordinance among the various Chief Commissioners and Commissioners.

22.A perusal of the second notification shows that it has been issued inpurportedexerciseofbothsubsections (1) and (2) of section 209and these willthereforehavetobeexamined.Itwillbeseenfromthese provisions that they confer two separate and distinct powers. Subsection (1) allows FBR to assign all or such functions and/or powers under the Ordinance in respect of such persons or classes of persons or such areas as it deems fit on Chief Commissioners, Commissioners and Commissioners (Appeals). Subsection (2) empowers both the FBR and the Chief Commissioner to assign to any officer of Inland Revenue all or any of the powers conferred upon the Commissioner in respect of any person or persons or classes of persons. (Subsection (3) states that the Chief Commissioner can exercise the power under subsection (2) only with the prior approval of FBR.) Subsection (4) states that the officer of Inland Revenue empowered under subsection (2) shall be regarded as the Commissioner. Now, section 2(38A) defines an "officer of inland Revenue" as follows:--

""Officer of Inland Revenue' means any Additional Commissioner Inland Revenue, Deputy Commissioner Inland Revenue, Assistant Commissioner Inland Revenue, Inland Revenue Officer, Inland Revenue Audit Officer or any other officer howsoever designated or appointed by the Board for the purposes of this Ordinance".

It will be seen that the definition lists the income tax authorities (as specified in section 207) other than those at the level of the Commissioner (Appeals) and higher, the Commissioner being higher than the appellate authority. These may be referred to as the "higher income tax authorities". It would of course, be perverse to conclude that the last part of the definition ("any other officer howsoever designated and appointed") refers to the higher income tax authorities. Such an interpretation would in effect stand the organizational structure on its head. The difference between subsections (1) and (2) is now clear. The first subsection may be regarded as the general power of the FBR to allocate work and confer jurisdiction upon the Chief Commissioners and Commissioners. This is the provision whereby work is allocated in the normal course. Subsection (2) may be regarded as an exceptional power, which allows FBR to directly assign powers and functions of the Commissioner on an officer of Inland Revenue, who is to then to be regarded as the Commissioner. Thus, subsection (2) does not confer any jurisdiction on FBR (or, as applicable, the Chief Commissioner) to assign functions or confer powers on the higher income tax authorities. Indeed, there would seem hardly to be any point to confer the powers on the Commissioner on someone who is already a Commissioner or Chief Commissioner. Either of these income tax authorities could be empowered under subsection (1). Now, the second notification does not list or specify any officer of Inland Revenue. It only mentions the Commissioner Zone IV. Two consequences flow from this. Firstly, the second notification did not confer any jurisdiction directly on the Deputy Commissioner Zone IV. Of course, under section 210(1), the Commissioner Zone IV could have delegated the power conferred upon him to the Deputy Commissioner Zone IV, who is an officer of Inland Revenue subordinate to him. However, no such delegation has been shown or relied upon. The Deputy Commissioner Zone IV has based his jurisdiction squarely on a direct conferment by FBR itself. This prima facie does not appear to be correct. Secondly, subsection (2) is irrelevant for purposes of conferring any jurisdiction on the Commissioner Zone IV and hence has no relevance for the key question presently under consideration, namely whether concurrent jurisdiction can be conferred by FBR. Such power, if at all vesting in FBR, must therefore exist in subsection (1) of section 209 and not elsewhere.

23.Before proceeding to consider subsection (1), subsection (8A) of section 209 may first be looked at. This subsection, which was added by the Finance Act, 2003, states that the power to confer jurisdiction includes the power to transfer jurisdiction from one income tax authority to another. The proviso to subsection (1) (added recently by the Finance Act, 2011) is in a similar vein, enabling the FBR or Chief Commissioner to transfer jurisdiction in respect of cases or persons from one Commissioner to another. Clearly, the power to (generally) transfer jurisdiction from one income tax authority to another or (more specifically) from one Commissioner to another in respect of specified cases or persons, is of a different nature from any power to confer concurrent jurisdiction. A transfer connotes the removal of jurisdiction from the first and conferment of it upon the other. Concurrent jurisdiction connotes the continued existence of jurisdiction in the first and the conferment of it also upon the other or the simultaneous empowerment of two or more income tax authorities in respect of the same matter.

24.In order to address the issue of concurrent jurisdiction, it will be necessary to refer to sections 209 and 210 as they stood at the time of the promulgation of the 2001 Ordinance. At originally enacted, these sections (along with section 211) were cast in an entirely different form. As presently relevant, they then provided as follows:--

"209. Appointment of Regional Commissioners of Income Tax and Commissioners of Income Tax.---(1) The Central Board of Revenue may appoint as many Regional Commissioners of Income Tax and Commissioners of Income Tax as may be necessary.

210. Jurisdiction of Regional Commissioners of Income Tax and Commissioners of Income Tax.---(1) Subject to this Ordinance, the Regional Commissioners of Income Tax and the Commissioners of Income Tax shall perform such functions in respect of such persons or classes of person, or such areas, as may be assigned to them by directions issued by the Central Board of Revenue.

(2)Where any directions issued under subsection (1) have assigned to two or more income tax authorities the same function in respect of the same persons or class of persons, or the same areas, they shall perform their functions in accordance with such orders as the Central Board of Revenue, or any other authority to whom they are subordinate, may make for the allocation of functions and the distribution of the work performed."

As will be seen the key income tax authorities (what are here referred to as the higher income tax authorities), in addition to the Central Board of Revenue ("CBR", the predecessor of the FBR) were the Regional Commissioners and Commissioners of Income Tax. (The office of Regional Commissioner was abolished in 2009 and in effect replaced with that of the Chief Commissioner). Section 210(1) empowered the CBR to assign such functions in respect of such persons or classes of persons or areas as it deemed fit on the Regional Commissioners and Commissioners. Crucially for present purposes, subsection (2) expressly empowered CBR to confer concurrent jurisdiction. It allowed the CBR to assign functions in respect of the same person or class of persons or areas on two or more income tax authorities, but provided that if this were done, then provision had to be made for the proper allocation of functions and distribution of work. Section 10(2) as originally enacted was in fact the successor to section 5(2) of the previous law, the Income Tax Ordinance, 1979 ("1979 Ordinance"), which itself followed subsections (4), (5) and (6) of section 5 of the earlier Income Tax Act, 1922 ("1922 Act"). It is pertinent to note that section 5(6) of the 1922 Act expressly used the word "concurrent" in respect of CBR's power to empower the various income tax authorities. These provisions were thus in pari materia. It is also pertinent to note that as originally enacted, the 2001 Ordinance did not confer any power on CBR to transfer cases from one income tax authority to another. However, the 1979 Ordinance and the 1922 Act did confer such powers (see section 5(1) of the former and 5(7A) and (7C) of the latter).

25.The position that emerges is as follows. The previous legislation, the 1979 Ordinance and the 1922 Act, empowered CBR (and/or any other relevant authority) to both confer concurrent jurisdiction and transfer cases. The 2001 Ordinance, as originally promulgated, empowered CBR to confer concurrent jurisdiction but not to transfer cases. However, shortly thereafter the relevant sections were radically altered and substituted such that the power to transfer cases was conferred but the power to confer concurrent jurisdiction was removed. It is a well settled principle of interpretation that when the law is amended it is normally to be assumed that a change is intended to be brought about. The conclusion therefore is inescapable. There is no longer any power in FBR to confer concurrent jurisdiction on the higher income tax authorities. To hold otherwise would be to conclude that the legislative changes have wrought nothing and the 2001 Ordinance, as presently relevant, continues to have the same shape and provisions as originally enacted. This is patently and on the face of it not the situation. It therefore follows from the foregoing that the FBR had no power or jurisdiction to issue the second notification whereby it has purported to confer concurrent jurisdiction on the Commissioner Zone IV in terms of section 161 in respect of the plaintiff in the case of advance tax collected under section 235. That jurisdiction vests only as originally conferred in terms of the first notification, i.e., in the Commissioner Zone III, LTU Karachi alone. Obviously, no jurisdiction could, likewise, be conferred on the Deputy Commissioner Zone IV, who is but an officer of Inland Revenue subordinate to the Commissioner.

26.It is now necessary to consider the case-law cited by learned counsel for the defendants. He placed reliance on Shagufta Begum v. Income Tax Officer PLD 1989 SC 360, H.M. Abdullah v. Income Tax Officer and others 1993 SCMR 1195, Roche Pakistan Ltd. v. Deputy Commissioner of Income Tax and others 2001 PTD 3090 (SHC; DB) and ICI Pakistan Ltd. v. Federation of Pakistan and others 2006 PTD 778 ("ICI Pakistan"). The first point to note is that all of these cases were or arose out of petitions filed under Article 199 of the Constitution and were in relation to the 1979 Ordinance. All, in effect, involved the question whether the petitions were maintainable when adequate alternate remedy was available by way of departmental/statutory remedies. As is well known, it is firmly established that the existence of an adequate alternate remedy does not bar the jurisdiction of the High Court under Article 199, but simply regulates it. In other words, it goes not to the existence of the High Court's jurisdiction but to its exercise. This distinction is fundamental and a principle of long standing. This was, e.g., expressly recognized in ICI Pakistan, the decision so strongly relied upon by learned counsel for the defendants (see para 21 at pg. 802). In a similar (though not identical) manner, the existence of the original civil jurisdiction of this Court remains unaffected even if the questions of jurisdiction and failure to follow mandatory provisions of the 2001 Ordinance could have been raised before the Deputy Commissioner Zone IV. Even if such remedies exist, they, at most, only affect whether and if so how the Court is to exercise its jurisdiction.

27.The second point to note is that in all the cited cases, notices under certain sections (62 and 65) of the 1979 Ordinance were challenged. Both these sections required that the assessee (as the taxpayer was then called) be given an opportunity of hearing. The allegation was that the notices were without jurisdiction. It was held that this (and all other points that the assessee cared to take) could be raised before the officerissuing the notice. This was, e.g., the conclusion arrived at in ICI Pakistan, where the observations at paras 23 and 24 (pg. 803) were specifically relied upon. Similar observations were made in all the other cases. Now, the crucial difference in the present case is that the Deputy Commissioner Zone IV failed to grant any opportunity of hearing at all. He proceeded straightaway to recovery (or threats thereof). No opportunity of hearing as required by section 161(1A) was at all given. The very first stage, which would initiate all subsequent steps and proceedings, was missing. In the cited cases, the first stage (the issuance of a notice granting an opportunity of hearing) was present. In my view, this difference is fundamental. The situation in the cited cases was materially different from the position at hand. With respect therefore, the cited case-law does not provide assistance to learned counsel for the defendants.

28.In this context, it is also pertinent to note the scope of jurisdiction of civil courts under section 9, C.P.C. The position is well established and was authoritatively reaffirmed by the Supreme Court in a decision relied upon by learned counsel for the plaintiff, reported as Abbasia Cooperative Bank and another v. Hakeem Rafiz Muhammad Ghaus and others PLD 1997 SC 3 in the following terms (pp. 8-9; emphasis supplied):--

"It is also well-settled law that where the jurisdiction of the Civil Court 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 statutes 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."

The original civil jurisdiction of this Court can hardly be less than that of ordinary civil courts. As is clear from the facts and circumstances of the present case, examined in the paras above, prima facie the Commissioner Zone IV and his subordinate officer, the Deputy Commissioner Zone IV did not have any jurisdiction in the matter and the mandatory provisions of the 2001 Ordinance were not at all complied with. In my view, the present suit cannot be regarded as not maintainable and beyond the jurisdiction of the Court. The present case is fully covered by the principles reaffirmed by the Supreme Court in Abbasia Cooperative Bank, especially the portion emphasized in the passage reproduced above. It is not necessary to consider in any detail the other cases cited by learned counsel for the plaintiff.

29.Learned counsel for the defendants also relied on Tahir A. Khan v. Central Board of Revenue and others 2003 YLR 196 (SHC; SB). In this case, a learned single Judge of this court declared a suit filed against the CBR and customs authorities as not maintainable since the Federation of Pakistan had not been joined as a party. The same position obtains in the present suit. In my view, the principle relied upon even if correct (as to which, with respect, I must record my reservations) ought not to be invoked in the present case at this stage. This is the stage of interlocutory applications. The plaintiff can easily file an application seeking to amend the title in order to implead the Federation. Even the Court itself has ample powers in this regard under Order I, Rule 10, C.P.C. In the cited case, in which the matter was heard in the absence of the plaintiff or his counsel, it was expressly noted that the plaintiff had failed to do the needful although the point was specifically brought to the attention of counsel (pg. 198). The position here is quite different. Learned counsel also relied on Hysons Sugar Mills Ltd. v. Market Committee Khanpur 1989 CLC 2000 (LHC; SB). It was there held by the Lahore High Court that an interim injunction ought not to be granted against the collection of a market fee in the facts and circumstances of the case. Obviously, the facts of each case have to be taken into consideration, as is the well known distinction between a fee and a tax. The facts and circumstances here are quite different. The cited decision does not, with respect, provide any assistance to learned counsel.

30.Insofar as the merits of the plaintiff's case are concerned, I refrain from any consideration of the same in view of what I am about to say in the operative part of the decision, lest it prejudice the case of either the plaintiff or the Department. The distinction drawn by the Commissioner Zone IV as to the position of the plaintiff as a taxpayer under the various fiscal laws on the one hand and its obligations as a collecting agent under section 235 on the other also goes to the merits of the case and, for like reason, I do not consider it appropriate to record any findings thereon.

31.In view of the foregoing analysis and discussion, I am satisfied that the plaintiff has made out a case for interim relief. The equities clearly lie in its favour. There is a prima facie case. To allow the Deputy Commissioner Zone IV to proceed on the basis of the demand notices dated 27-9-2012 and 30-10-2012 (or either of them) would be to encourage the continuance of proceedings in a manner that is contrary to mandatory provisions of the 2001 Ordinance and would be detrimental to the rule of law. It would also, prima facie, be without jurisdiction. The balance of convenience lies in favour of the plaintiff and it may well suffer irreparable loss and injury if on the one hand (as claimed by it) it continues to be deprived of huge sums by way of refund due to it and taken from it by the State by way of tax revenue, and on the other is required to hand over to the State amounts that comprise of tax revenue. Furthermore, the developments that took place after the filing of the suit were essentially in continuance of the matters already taken up in the plaint and therefore it would be in the interest of justice if the plaint is allowed to be amended in terms as prayed in the application made for this purpose.

32.Accordingly, the pending applications are disposed of in the following terms:--

(a)C.M.A. 11608 of 2012 is allowed as prayed. Amended plaint within three weeks and amended written statement within six weeks of supply of copy of amended plaint.

(b)C.M.A. 10305 of 2012 and C.M.A. 11609of 2012areallowed in terms that the demand notices dated 27-9-2012 and 30-10-2012 issued by the Deputy Commissioner Zone IV are suspended, and this officer and the Commissioner Zone IV (and any other officer of Inland Revenue subordinate to him) are restrained from taking any action in terms of section 161 of the 2001 Ordinance in respect of advance tax collected by the plaintiff under section 235.

(c)Nothing in this order shall prevent, or be construed as preventing, the Commissioner Zone III, LTU, Karachi from taking action or initiating any proceedings against the plaintiff in terms, inter alia, of section 161 of the 2001 Ordinance in respect of advance tax collected by the plaintiff under section 235, but strictly in accordance with law.

MH/K-8/KOrder accordingly.