PAK GULF CONSTRUCTION (PVT.) LTD. VS COMMISSIONER INLAND REVENUE, 2016 PTD-ISLAMABAD 1061 (2016)

(a) Interpretation of statutes---

----Intention of legislature---Principle---In order to discover intention of legislature, provision has to be read as a whole.

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

----Ss. 127, 131 & 133---Reference---Interim injunction, grant of---Principle---Assessee was aggrieved of order passed by Appellate Tribunal Inland Revenue rejecting application for interlocutory relief when no stay was granted in appeal pending before Commissioner Inland Revenue (Appeals)---Validity---Ingredients to be determined to decide an application seeking injunctive order were that a prima facie case was made out; that irreparable loss would be suffered to the taxpayer; and the balance of convenience or inconvenience---Appeal before Commissioner Inland Revenue (Appeals) was a statutory right provided under S.127 of Income Tax Ordinance, 2001---Refusal to grant an injunctive order, while the appeal was pending, had the effect of upholding the 'recovery' of tax---Appellate Tribunal Inland Revenue did not properly appreciate first proviso to S.131 of Income Tax Ordinance, 2001, in its true perspective---Consolidated order passed by Appellate Tribunal Inland Revenue could not be held as a legal order therefore, the same was set aside---High Court remanded the matter to Appellate Tribunal Inland Revenue for decision afresh---Reference was disposed of accordingly.

Saad M. Hasmi for Applicant.

M. Irshad Chaudhry for Respondent.

ORDER

NOOR-UL-HAQ N. QURESHI, J.---Since above titled Reference Applications involve common questions of law and facts therefore same are being decided through this consolidated order.

2.The applicant, while assailing consolidated order dated 09.09.2014 of learned Appellate Tribunal Inland Revenue, Islamabad Bench, Islamabad passed in MA (Stay) Nos.527 to 531/IB/2014 for assessment years 2008 to 2012, has filed above numbered Tax References for Tax Years 2009 to 2012, framing following questions of law said to have arisen out of said consolidated oder referred above for consideration of this Court:-

Whether the learned ATIR erred by failing to appreciate that the applicants appeal against the order of the Commissioner Inland Revenue (Appeals) CIR (A) rejecting the application for interlocutory relief is separate and independent from an appeal against an order of CIR (A) upholding the assessment?

Whether the learned ATIR has erred in law by failing to consider the merits of the applicant's appeal and application for interlocutory relief before passing the impugned order?

Whether the learned ATIR has the power to grant stay in appeal under section 131(1) read with Section 131(5) of the Ordinance against the order of the Commissioner (Appeals) refusing to grant stay to the applicant while the appeal of the applicant against the assessment order is pending before the CIR (A)?

Whether the learned ATIR erred in law by failing to read Section 131(1) in consonance with Section 131(5) of the Ordinance?

Whether the learned ATIR erred in law by restricting the term 'order' in proviso to section 131(5) of the Ordinance to simply mean an order of the CIR (A) upholding the assessment order?

Whether the CIR (A) could have rejected the applicant's application for interlocutory relief without giving reasons?

Whether the recovery made by the Department through the so-called settlement or otherwise was without lawful authority and of no legal effect?"

3.Facts, necessary for disposal of these References, are that when Income Tax Department started coercive measures for recovery of tax demand against the applicant company, it preferred application for interlocutory relief, which were dismissed by the CIR(A) on 03.09.2014 holding that as major issues involved in the case are assigning of status as construction contractor and add back under section 21(c) needed to be looked into detail, therefore it would not appropriate to grant stay at the moment. Against the said order of the CIR(A) the applicant preferred stay applications before learned Appellate Tribunal Inland Revenue, Islamabad Bench, Islamabad which were also disposed of vide consolidated order dated 09.09.2014 holding that as tax demand has not yet been upheld by the CIR (A) therefore the learned Tribunal was not legally competent to grant stay against recovery. Being aggrieved, the applicant has now preferred these Income Tax References against said treatment meted out by the learned Appellate Tribunal Inland Revenue, Islamabad Bench, Islamabad, with the request to answer above questions of law.

4.We have heard the learned counsel for the parties and have perused the record.

5.The main issue involved in these References is that whether learned Appellate Tribunal Inland Revenue was competent to grant stay to the applicant against the order of Commissioner Inland Revenue (Appeals), whereby he declined request made by the applicant for stay against recovery of tax demand for the reason that as major issues with regard to assigning of status as construction contractor to the applicant company as well as add backs under section 21(c) of the Income Tax Ordinance, 2001 are yet to be looked into detail.

6.On the other hand, learned Appellate Tribunal Inland Revenue disposed of the stay applications filed by the applicant company for above mentioned Tax Years holding that the power of the learned Tribunal to grant stay against the recovery is restricted to the cases, where the tax levied under the Ordinance has been upheld by the Commissioner (Appeals). In the cases in hand, as tax has not been upheld by the CIR (A) while rejecting stay applications filed by the applicant company therefore learned Tribunal is not legally competent to grant stay against recovery.

7.We are of the opinion that Section 131(1) of the Income Tax Ordinance (referred to as Ordinance) provides the taxpayer the right to appeal against any order passed by the CIR(A). The term 'order' in the proviso to section 131(5) of the Ordinance cannot be restricted merely to an 'order' upholding the assessment order, as opined by the learned Tribunal while disposing of stay applications of the applicant company, because Section 131(5) of the Ordinance must be read in consonance with section 131(1) of the Ordinance. For convenience, said Section 131(1) is reproduced herein below:--

"131. Appeal to the Appellate Tribunal.---(1) Where the tax payer or Commissioner objects to an order passed by the Commissioner (Appeals), the taxpayer or Commissioner may appeal to the Appellate Tribunal against such order"

From above proposition, it is clear that appeal before the learned Appellate Tribunal is provided against 'any order' of the Commissioner (Appeals) and not against the order only whereby the CIR (A) upholds the tax demand made by the assessing officer.

8.It is further held that learned Tribunal was not justified in holding that applicant company's appeals for above Tax Years filed before it cannot be entertained for the reason that appeals against the assessment orders are pending before CIR (A), because the order passed by CIR (A) while declining relief to the applicant company against recovery of tax demand was a 'separate and independent order', thus appeal against it was maintainable before learned Tribunal.

9.It is settled principle of interpretation of a statute that in order to discover the intention of the legislature, a provision has to be read as a whole. Section 131 of the Income Tax Ordinance, 2001 consists of five subsections. As already noted above, subsection (1) determines the scope of the right of appeal and is not restricted to a final order passed by CIR (Appeals). Subsection (5) of Section 131 of the Ordinance exclusively relates to the power of the learned Tribunal to grant a stay in relation to recovery of the tax. The first proviso contemplates that it is within the discretion of the learned Tribunal to stay the recovery of the tax, if it is of the opinion that the recovery shall cause undue hardship to the taxpayer. In forming the said opinion, the learned Tribunal is required to take into consideration that the recovery of tax has been levied under the Ordinance and that it has been upheld by the CIR(A).

10.In the instant case, the applicant had preferred an appeal before CIR (A). The latter rejected the application filed for seeking stay of recovery of the tax. Obviously, in order to consider an application seeking an injunctive order, three ingredients have to be determined so as to decided an application, which are as under: -

i)a prima facie case is made out;

ii)an irreparable loss would be suffered to the taxpayer;

iii)the balance of convenience or inconvenience.

The appeal before the CIR(A) is a statutory right provided under section 127 of the Income Tax Ordinance, 2001. Refusal to grant an injunctive order, while the appeal is pending, has the effect of upholding the 'recovery' of the tax. It is emphasized that the first proviso of subsection (5) of Section 131 of the Ordinance expressly mentions 'recovery' of tax and the same is upheld by the Commissioner, when a stay a refused. The first proviso, therefore, is only to the extent of power vested in the learned Tribunal to grant or refuse a stay in respect of recovery of the tax and does not determine the scope of the appeal. The right of appeal and its scope is provided under subsection (1) of section 131 of the Ordinance. Subsection (1) extends the right of appeal to an order and not a final order. We are, therefore, of the opinion that the learned Tribunal has not properly appreciated the first proviso of Section 131 of the Ordinance in its true perspective.

11.In view of above, we are of the opinion that impugned consolidated order passed by learned Appellate Tribunal Inland Revenue cannot be held as a legal order. Therefore, the questions of law reflecting at Sr. Nos. (a), (b), (c), (d), (e) & (g) are answered in 'affirmative', whereas question of law appearing at Sr. No.(f) is answered in `negative'. Consequently, impugned consolidated order passed by the learned ATIR is hereby set aside. The case is remanded back to the learned Tribunal for decision afresh. The stay applications filed by the applicant company before learned Tribunal shall be deemed to be pending which shall be decided in accordance with law after providing opportunity of being heard to both the parties. It is, however, expected that till decision upon the same afresh, the department shall not proceed further with regard to recovery of tax demand for above tax years.

12.Let a copy of this judgment, under the seal of this Court and with the signature of the Registrar of this Court, be sent to the Appellate Tribunal Inland Revenue, Islamabad Bench, Islamabad.

13.Above titled Income Tax References are hereby disposed of in above term.

MH/32/IslOrder accordingly.