COMMISSIONER INLAND REVENUE (ZONE-I), R.T.O. RAWALPINDI VS AL-MEHDI INTERNATIONAL, 2013 PTD-LAHORE-HIGH-COURT-LAHORE 2125 (2013)

(a) Income Tax Ordinance (XXXI of 1979)---

----Ss.13(1), 62 & 136---Income Tax Ordinance (XLIX of 2001) Ss.239 & 210---High Court Reference---Taxpayer was assessed under S.62 of the Income Tax Ordinance, 1979 whereafter an addition under S.13(1)(aa) of the Ordinance was made to the income of the taxpayer---Such addition was deemed to be irregular by the Income Tax Appellate Tribunal on the ground that approval of the Inspecting Additional Commission ("IAC") was not properly obtained as required under S.13(1) of the Income Tax Ordinance, 1979---Question before the High Court was whether approval of IAC was valid considering that the Taxation Officer carrying out the assessment enjoyed powers of the Commissioner by virtue of S.239 of the Income Tax Ordinance, 2001---Validity----Wisdom behind Taxation Officer seeking approval of the IAC under S. 13 of the Income Tax Ordinance, 1979 was that the addition was further reviewed by an officer senior-in-rank to the Taxation Officer so that a more informed and deliberative evaluation was done before allowing the addition under S. 13 of the Income Tax Ordinance, 1979 and the law did not solely rely on the discretion of the Taxation Officer junior to the IAC in this regard---Taxation Officer, even by delegation, if he were enjoying powers of the Commissioner, did not stand absolved from seeking approval from the higher officer, the IAC, under the law---Said situation would however change if the Taxation Officer was the Commissioner himself, as then seeking approval of the IAC would tantamount to seeking approval from a junior officer---Section 13(1) of the Income Tax Ordinance, 1979 would be rendered redundant in the new scheme of things under the new Income Tax Ordinance, 2001 and would stand impliedly repealed if the assessment was carried out by the Commissioner himself in face of S. 239(2) of the new Income Tax Ordinance, 2001---Under the facts and circumstances of the present case, the Taxation Officer was to seek the approval of the IAC, which was done, therefore, findings of the Appellate Tribunal were not justified---Reference was answered in the negative, in circumstances.

Commissioner of Income Tax Zone-A, Lahore v. A.L. Hamidi Lahore 2001 PTD 2247 Messrs Metro (Pvt.) Ltd. v. Taxation Officer, Circle-18, Coys Zone Islamabad, dated 29-7-2006 and CIT/WT, MTU, Peshawar v. Haji Sarwar Jan, dated 20-5-2006 ref.

NS Bindra's Interpretation of Statutes-10th Edition (page 1506) rel.

(b) Interpretation of statutes---

----Conflict of laws---Principles---In cases of conflict, preference would be given to the new law and an implied repeal of an earlier law could be inferred only where there was enactment of a later law whichhad the power to override the earlier law and was totally inconsistent with theearlier law, that is where two laws; the earlier and the later law, could not stand together---Such is a logical necessity because two inconsistent laws could not both be valid without contravening the principle of contradiction---Later laws abrogate earlier contrary laws.

NS Bindra's Interpretation of Statutes-10th Edition (page 1506) rel.

Ms. Shaheena Akbar for Petitioner.

Farooq Ahmad Nasir, Additional Commissioner Inland Revenue.

Amir Sultan, Law Officer.

Muhammad Aslam, Inland Revenue Officer.

Shujaat Ali, Inland Revenue, Audit Officer.

Hafiz Muhammad Idrees, Muhammdad Naeem-ul-Haq and Zahid Shafiq for Respondents.

Date of hearing: 14th February, 2013.

JUDGMENT

SYED MANSOOR ALI SHAH, J.---This judgment will decide the instant, as well as, connected I.T.Rs. Nos.3 of 2009, 91 of 2011 and 94 of 2011. The instant reference raises the following questions of law:--

"(a)Whether onthefactsandinthecircumstancesofthecase,the learned Tribunal was justified to hold that the additionunder section 13(1)(aa)waslegallyincorrectplacingrelianceonjudgmentofTribunalinitsorderdated20-5-2006inI.T. Nos.1910 to 1913 of 2005 and holding that power of assessment as well as approval cannot be vested in one authority i.e. The Commissioner?

(b)Whether on the facts and in the circumstances of the case, the learned Tribunal was justified in holding that the power of approval having not been vested with the Commissioner under the Ordinance, 2001 could not be delegated to any authority ignoring the facts that the assessment was finalized under the provisions of repealed Ordinance, 1979?

(c)Whether on the facts and in the circumstances of the case, the learned Tribunal was justified to uphold that addition under section 13(1)(aa) is incorrect placing reliance on judgment reported as 2010 PTD (Trib.) 494 by ignoring the provisions of section 239 of the Income Tax Ordinance, 2001 as the Taxation Officer has sought approval from the Additional Commissioner for making addition under section 13(1)(aa) of the repealed Ordinance, 1979?

2.The primary question of law that emerges from the above formulation is: Whether approval of Inspecting Additional Commissioner ("IAC") under the second proviso to section 13(1) of the Income Tax Ordinance, 1979 ("Repealed Ordinance") was valid, considering that the Taxation Officer carrying out the assessment enjoyed the powers of the Commissioner by virtue of section 239 of the Income Tax Ordinance, 2001 ("New Ordinance") and as a consequence was the addition made in the income of the assessee under section 13(1)(aa) of the Repealed Ordinance valid?

3.Learned counsel for the petitioner department contends that the Income Years involved in these cases end on or before 30-6-2002, hence the assessment and the procedure thereof is regulated under the Repealed Ordinance read with section 239 of the new Ordinance. It is contended that joint reading of the two laws shows that the assessment has to be done by the Officer nominated under the new Ordinance, however, the procedure to be followed for assessment remains the same as prescribed under the Repealed Ordinance. She further contends that in the present case the assessment has been made by the Taxation Officer in terms of section 210 of the new Ordinance read with section 62 of the Repealed Ordinance. While making the assessment under section 62, the Taxation Officer made an addition under section 13(1)(aa) of the Repealed Ordinance, after obtaining approval of the Inspecting Additional Commissioner (IAC) as mandated by the second proviso to the said section. It is contended that the learned Tribunal has misread the law by cancelling the said addition on the pretext that the approval sought from the Inspecting Additional Commissioner was not in accordance with law because Taxation Officer enjoying the powers of Commissioner was, in effect, senior to the Inspecting Additional Commissioner, hence could not seek approval from a junior officer. The approval being illegal and irregular, the addition made under section 13(1)(aa) was not valid. Learned counsel for the petitioner submitted that the Taxation Officer does not become senior to the IAC by virtue of being a delegatee of the Commissioner.

4.Learned counsel for the respondent assessee, on the other hand, has referred to sections 210 and 239 of the new Ordinance to submit that the assessment under the new Ordinance is primarily to be made by the Commissioner and in the present case the Taxation Officer while making the assessment acts as a delegatee of the Commissioner. It is submitted that while complying with the procedure under Section 13 of the Repealed Ordinance no approval can be sought from the Inspecting Additional Commissioner because he is junior-in-rank to a Commissioner, whose powers are being enjoyed by the Taxation Officer. Therefore, the said approval is not an approval in the eye of law and in the absence of an approval under the proviso to section 13(1), the addition made under section 13(1)(aa) is without lawful authority. In support of his contention, learned counsel has placed reliance on COMMISSIONER OF INCOME TAX ZONE-A, LAHORE V. A.L. HAMIDI LAHORE 2001 PTD 2247 and unreported judgments of the learned Appellate Tribunal dated 29-7-2006 MessrsMetro (Pvt.) Ltd. Ghakhar Plaza, Saddar, Rawalpindi v. Taxation Officer, Circle-18, Coys Zone Islamabad and 20-5-2006 CIT/WT, MTU, Peshawar v. Haji Sarwar Jan, House No.264-K-1, Hayatabad Peshawar. As an alternative argument, he also referred to order dated 4-5-2006 passed under section 5(1)(a) of the Income Tax Ordinance, 1979 by the Regional Commissioner authorizing certain Additional Commissioners of Income Tax to grant approval under section 13 to submit that certain Inspecting Additional Commissioners were earmarked to exercise jurisdiction under section 13(2), hence the impugned addition has not been approved by the notified Inspecting Additional Commissioner.

5.We have given due consideration to the arguments made by the learned counsel for the parties.

6.Brief facts are that the assessee was assessed under section 62 of the Repealed Ordinance by the Taxation Officer and an addition was made under section 13(1)(aa) of the said Ordinance. The same was challenged and finally learned Tribunal held that as the approval of the IAC under the second proviso to section 13(1) of the Repealed Ordinance was irregular, hence the addition under section 13(1)(aa) was not sustainable.

7.Section 239 of the new Ordinance states that the assessment in respect of income years ending on or before 30-6-2002 will be made according to the procedure under sections 59, 59A, 61, 62 and 63 of the Repealed Ordinance, however, the difference is that the "Income Tax Authority" competent for executing the provisions of the Repealed Ordinance shall be officers competent under the new Ordinance i.e., the "Commissioner" or his delegatee in terms of section 210.

8.Taxation Officer, in this case, was delegated the powers of the Commissioner under section 210 of the new Ordinance to carryout the assessment in the present case under section 62 of the Repealed Ordinance. The Taxation Officer passed assessment order dated 19-6-2004 wherein he made additions under section 13(1)(aa) of the Repealed Ordinance after obtaining approval from the Inspecting Additional Commissioner.

9.The wisdom behind the Taxation Officer seeking approval of the Inspecting Additional Commissioner under the second proviso to section 13 of the Repealed Ordinance is that before any addition is made to the income of the assessee, the matter is further reviewed by an officer senior-in-rank to the Taxation Officer so that a more informed and deliberative evaluation is done before allowing the addition under section 13 of the Repealed Ordinance. In essence, the law does not solely rely on the discretion of the Taxation Officer junior to IAC in this regard.

10.The Taxation Officer being an Officer of Inland Revenue subordinate to the Commissioner has been delegated the powers of the Commissioner under section 239(2) read with section 210 of the new Ordinance to make the assessment under section 62 of the Repealed Ordinance. Mere delegation of powers of a senior officer to a junior officer does not enhance the rank and grade of the junior officer. In this case, the Taxation Officer/Officer of Inland Revenue remains junior to the Commissioner, as well as, to the Inspecting Additional Commissioner. Therefore, keeping in view the wisdom behind the second proviso, as discussed above, Taxation Officer, even though enjoying the powers of the Commissioner, does not stand absolved from seeking approval from his higher officer i.e., IAC under the second proviso.

11.The complexion of the above legal proposition would change if the Taxation Officer, in a particular case, is the Commissioner himself. In such a situation, seeking an approval of the Inspecting Additional Commissioner would tantamount to seeking approval from a junior officer. This would hardly achieve the purpose behind the second proviso because the Commissioner, being a senior officer, does not require further deliberation with a junior officer before making any addition, hence, the requirement of approval, in such a situation, will not be necessary. What then would be the status of the second proviso to section 13(1) of the Repealed Ordinance? The way forward in this legal impasse is to harmonize and reconcile the Repealed Ordinance with the new Ordinance. In case of conflict, it is settled law that preference will be given to the new Ordinance. It is now settled law that "an implied repeal of an earlier law can be inferred only where there is the enactment of a later law which had the power to override the earlier law and is totally inconsistent with the earlier law that is where the two laws-the earlier law and the later law-cannot stand together. This is a logical necessity because the two inconsistent laws cannot both be valid without contravening the principle of contradiction. The later laws abrogate earlier contrary laws"¹. Therefore, the second proviso of section 13(1) requiring an approval to be sought from Inspecting Additional Commissioner would be rendered redundant in the new scheme of things and stand impliedly repealed if the assessment is being carried out by the Commissioner himself. Only in such a situation, the approval of the IAC would not be required and the said proviso would stand impliedly repealed in the face of section 239(2) of the Ordinance.

12.However, as far as the facts of this case are concerned, the Taxation Officer is to seek the approval of the IAC, which has been done in this case. Hence, for the reasons given above, the questions of law raised in this reference are answered in negative and the instant reference is disposed of accordingly.

13.Office shall send a copy of this judgment under the seal of the Court to the learned Appellate Tribunal Inland Revenue as per Section 133(5) of the Income Tax Ordinance, 2001.

KMZ/C-19/LAnswered in negative.