SIEMENS AKTIENGESELLSCHAFT ("SIEMENS AG") VS PAKISTAN through Secretary Revenue Division, 2016 PTD-ISLAMABAD 1158 (2015)

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

----S. 122(5) & (9)---Constitution of Pakistan, Art. 199---Constitutional petition---Show cause notice---Scope---Petitioner company was aggrieved of initiation of proceedings under S. 122(5) read with 122(9) of Income Tax Ordinance, 2001---Validity---Jurisdiction of officer who issued notices in question was not disputed, therefore, it did not involve question of want of jurisdiction---High Court declined to doubt competence or bona fides of officer who issued notices in question---Entertaining constitutional petition in such circumstances and deciding merits would amount to bypassing and circumventing statutory forums as the same was undermining legislative intent as the powers and jurisdictions were vested in various forums under the Income Tax Ordinance, 2001---Provision of S. 122(9) of Income Tax Ordinance, 2001, provided that assessment would not be amended or further amended unless the taxpayer was provided with an opportunity of being heard---Mere issuance of notice in no manner caused any prejudice so as to give rise to a grievance---Notice in question could not be treated as an adverse order therefore, Constitutional petition was not maintainable---High Court observed that the petitioner would be at liberty to file its reply and submission before the authority which had issued the notice in question---High Court directed the Authority to afford proper opportunity of hearing and proceed in the matter in accordance with law---Constitutional petition was dismissed in circumstances.

Edulji Dinshaw Limited v. Income-Tax Officer 1990 PTD 155; Roche Pakistan Ltd. v. Deputy Commissioner of Income-Tax and others 2001 PTD 3090; Sitara Chemical Industries Ltd and another v. Deputy Commissioner of Income-Tax 2003 PTD 1285; I.C.I. Pakistan Ltd., through Chief Financial Officer, Karachi v. Federation of Pakistan through Secretary Ministry of Finance and 3 others 2006 PTD 778; Messrs Julian Hoshang Dinshaw Trust and others v. Income-Tax Officer, Circle XVIII South Zone, Karachi and others 1992 SCMR 250; Messrs Usmania Glass Sheet Factory Limited Chittagong v. Sales Tax Officer, Chittagong PLD 1971 SC 205; Nagina Silk Mill, Lyallpur v. Income Tax Officer and others PLD 1963 SC 322; Federation of Pakistan through Secretary, Finance, Islamabad and 4 others v. Messrs Ibrahim Textile Mills Ltd and others 1992 SCMR 1898; Messrs Central Insurance Co. and others Co. v. Central Board of Revenue, Islamabad and others 1993 5CMR 1232; Telecard Ltd. through Authorized representative v. Pakistan Telecommunication Authority through Chairman 2014 CLD 415 and Messrs Attock Gen Ltd. v. Additional Commissioner (Audit), Large Taxpayer Unit Islamabad and 3 others W.P. No.4066 of 2012 ref.

(b) Constitution of Pakistan---

----Art. 199---Constitutional petition---Disputed question of fact---Scope---Such question cannot be resolved while exercising powers and jurisdiction under Art. 199 of the Constitution.

Abdul Rab and others v. Wali Muhammad and others PLD 1980 SC 139; Ghulam Muhammad and another v. Mst. Noor Bibi and 5 others 1980 SCMR 933; Khawaja Muhammad Akhtar v. President, Cantonment Board, Sialkot Cantt Election Authority (Tribunal) and another 1981 SCMR 291; Benedict F.D Souza v. Karachi Building Control Authority and 3 others 1989 SCMR 918; Federation of Pakistan and 2 others v. Major (Retd.) Muhammad Sabir Khan PLD 1991 SC 476 and Muhammad Younis Khan and 12 others v. Government of N.W.F.P. through Secretary, Forest and Agriculture, Peshawar and others 1993 SCMR 618 rel.

Dr. Muhammad Farogh Naseem for Petitioner.

Muhammad Bilal, Babar Bilal and Shazia Bilal for Respondents.

Date of hearing: 12th November, 2015.

JUDGMENT

ATHAR MINAHLLAH, J.---The petitioner has invoked the jurisdiction of this Court under Article 199 of the Constitution of the Islamic Republic of Pakistan, 1973 assailing notices dated 03-10-2012, 08-11-2012, 04-42-2012 and 18-12-2012 issued under Section 122(9) read with Section 122 (5) of the Income Tax Ordinance, 2001 (hereinafter referred to as the "Ordinance").

2.The facts, in brief, are that the petitioner is a company incorporated in Germany and is engaged in the business of supply, construction, assembly, installation and maintenance in the engineering sector. The petitioner claims to be a non-resident for the purposes of the provisions of the Ordinance. The petitioner had performed contracts relating to supply, construction, assembly, installation and maintenance in Pakistan. The impugned notices have been issued for the tax years 2007 to 2011. This Court vide order dated 18-04-2013 had suspended the operation of the impugned notices.

3.The learned counsel for the petitioner has contended that; the initiation of the proceedings under Section 122(5) read with Section 122 (9) of the Ordinance are bad in law and without jurisdiction, mala fide, illegal; there is no concept under the Ordinance to issue a consolidated notice in respect of tax years 2007 to 2011; each tax year is independent and, therefore, the notices are without jurisdiction; notice to the extent of year 2007 has become barred by limitation; the petitioner through the instant petition has raised questions relating to inherent defect of jurisdiction; once the deemed assessment has been finalized the same cannot be reopened by resorting to the powers vested under Section 122 of the Ordinance; there is clear misapplication of law; no disputed questions of fact are involved; in the circumstances the Court must not shy away from assuming jurisdiction as even otherwise ultimately a question of law is to be decided by this Court while exercising its powers under Section 133 of the Ordinance; reliance has been placed on "Edulji Dinshaw Limited v. Income-Tax Officer", 1990 PTD 155, "Roche Pakistan Ltd. v. Deputy Commissioner of Income-Tax and others" 2001 PTD 3090, "Sitara Chemical Industries Ltd and another v. Deputy Commissioner of Income-Tax" 2003 PTD 1285, "I.C.I. Pakistan Ltd., through Chief Financial Officer, Karachi v. Federation of Pakistan through Secretary Ministry of Finance and 3 others" 2006 PTD 778, "Messrs Julian Hoshang Dinshaw Trust and others v. Income-Tax Officer, Circle XVIII South Zone, Karachi and others", 1992 SCMR 250, "Messrs Usmania Glass Sheet Factory Limited Chittagong v. Sales Tax Officer, Chittagong", PLD 1971 SC 205, "Nagina Silk Mill, Lyallpur v. Income Tax Officer and others", PLD 1963 SC 322, "Federation of Pakistan through Secretary, Finance, Islamabad and 4 others v. Messrs Ibrahim Textile Mills Ltd and others", 1992 SCMR 1898, "Messrs Central Insurance Co. and others Co. v. Central Board of Revenue, Islamabad and others" 1993 5CMR 1232; the precondition for exercise powers under Section 122(5) of the Ordinance is existence of definite information; perusal of the impugned notices makes it obvious that the department did not have any definite information.

4.The learned counsel for the respondents have argued that; the grounds raised in the instant petition are hypothetical in nature; the petitioner has failed to submit a Valid Board resolution and thus the petition is liable to be dismissed; reliance in this regard has placed on 'Telecard Limited through Authorized representative versus Pakistan Telecommunication Authority through Chairman" 2014 CLD 415; the petitioner is not an aggrieved person as no order has been passed and the notices merely require the petitioner to satisfy the issuing Authority regarding the matters raised therein; notices are not an adverse order; the petition is premature and, therefore, liable to be dismissed.

5.The learned counsel have been heard and the record perused with their able assistance.

6.The petitioner has impugned notices issued under Section 122 (5) read with Section 122 (9) of the Ordinance. It is not disputed that the officer who has issued notices was competent and vested with power and jurisdiction. Neither proceedings have been completed nor any order has been passed pursuant to the impugned notices. There is no allegation against the respondents or the officer who issued the notices to have acted on the basis of mala fide. The argument raised by the learned counsel for the petitioner relates to the merits of the case and nothing has been placed on record even to remotely suggest that the respondents have acted malafidely or have already decided the matter and, therefore, they are expected to pass an adverse order. The grounds raised by the learned counsel for the petitioner are yet to be considered by the competent authority, which has issued the impugned notices.

7.Admittedly, no order has been passed nor the proceedings have been completed pursuant to the impugned notices. The impugned notices by no stretch of the imaginations can be treated as adverse orders. This Court vide judgement dated 09-07-2015, passed in W.P. No.4066 of 2012 titled "Messrs Attock Gen Limited v. Additional Commissioner (Audit), Large Taxpayer Unit, Islamabad, and 3 others" examined the precedent law relating to maintainability of a petition under Article 199 of the Constitution, when a mere notice or a show cause notice has been assailed. In the said petition, notices had been issued under Section 122(9) read with Section 122(5) of the Ordinance. The relevant portion of the judgment is reproduced as follows:--

"While exercising jurisdiction under Article 199 of the Constitution, the powers of a High Court are circumscribed by certain limitations and trappings, as expressly provided therein. The petitioner invoking jurisdiction has to satisfy the Court that it comes within the fold of an 'aggrieved party'; there is no other adequate remedy provided by law; the person against whom relief is being sought satisfies the test laid down in sub-article (5) of Article 199 of the Constitution, and no disputed question of fact is involved.

A person is aggrieved if rights are infringed or an adverse order has been passed affecting or threatening to affect rights. The question for this Court to answer, therefore, is whether a show cause notice can be treated as an adverse order. If the answer is in the negative, then under what circumstances may a show cause notice make a person an aggrieved party for the purposes of Article 199 of the Constitution.

We may start with the determination of the nature of the instrument known as a 'Show Cause Notice'. The Black's Law Dictionary, 8th Edition, defines the 'show cause' as "to produce a satisfactory explanation or excuse, usu. in connection with a motion or application to a Court". Likewise, 'notice' is defined as "legal notification required by law or agreement, or imparted by operation of law as a result of some fact (such as the recording of an instrument); definite legal cognizance, actual or constructive, of an existing right or title. A person has notice of a fact or condition if that person (1) has actual notice of it; (2) has received information about if; (3) has reason to know about it; (4) knows about a related fact; or (5) is considered as official filing or recording". 'Due notice' is defined as "sufficient and proper notice that is intended to and likely to reach a particular person or the public; notice that is legally, adequate given the particular circumstance", 'Reasonable notice' is defined "notice that is fairly to be expected or required under the particular circumstances". Words and Phrases, Vol. 28-B, Permanent Edition, inter alia, describes a 'notice' as meaning 'intelligence by whatever means communicated; information; knowledge; a constitutional requirement of due process, which includes allegations, opportunity to answer, and trial according to some settled course of procedure'.

A show cause notice is essentially an instrument whereby an authorised person under the law informs a person regarding allegations, material or facts which may form the basis for proceedings against such person, and may eventually culminate in an adverse order. A show cause notice is indeed the first requirement of compliance with 'due process' to inform the person against whom proceedings are intended to be initiated. The purpose is to put the person to notice by giving sufficient information so as provide an adequate opportunity of submitting an explanation. An authorised person empowered under the law, after issuing a show cause notice, is under a mandatory obligation to provide a purposive and meaningful opportunity of hearing, depending on the facts and circumstances in each case, allow the person proceeded against to produce evidence and where necessary an opportunity of cross-examination. After incorporation of Article 10-A of the Constitution the aforementioned requirements have become an integral part of the fundamental right of 'due process'.

Show Cause Notice is, therefore, the first step of the proceedings in compliance with the mandatory requirements of due process. By no stretch of the imagination can a show cause notice be treated or construed as an adverse order, so as to make a person an aggrieved person or party within the context of Article 199 of the Constitution. It is, rather, to enable the person, the subject, to rebut the allegations contained in the show cause notice. If satisfied with the explanation, the authorised officer is under a statutory duty to vacate the show cause notice and terminate the proceedings. However, the only two exception which may give a cause of grievance and thus make a person an aggrieved person in the context of Article 199 of the Constitution are, firstly, when it is issued by a person who is nod authorised under the law or conferred with the power or jurisdiction and, secondly, when the powers and jurisdiction have been exercised by an authorised person for purposes alien to the empowering statute i.e. exercised for mala fide reasons. These are the only two exceptions ordinarily recognised in the precedent law which would make a person an 'aggrieved party' for the purposes of Article 199 of the Constitution, and thus invoke the jurisdiction there under. It is noted that difficulty may arise if the ground of challenge is mala fide as, unless the facts of a case are clearly admitted, a petition under Article 199 may still not be maintainable because of the settled law that disputed questions of fact cannot be resolved under the said jurisdiction. What if a show cause notice has been issued under a law, the vires whereof are challenged by invoking the jurisdiction under Article 199 of the Constitution? The petition, in the discretion of the Court, may be maintainable to the extent of the challenge to the vires, but what about the show cause notice? It is settled law that when the vires of a law are challenged then an injunctive order cannot be passed, and reliance in this regard is placed on "Federation of Pakistan v. Aitzaz Ahsan and another" [PLD 1989 SC 61]. In such an event the proceedings pursuant to the issuance of the show cause notice will continue. It would be pertinent to briefly examine the principles enunciated by the precedent law.

The jurisdiction under Article 199 of the Constitution can be exercised only if an aggrieved party can demonstrate that an adequate remedy under the law is not available, or that the same is illusory. Reliance in this regard is placed on 'Muhammad Hussain Kazi v. Govt. of the Punjab [PLD 1983 SC 187], 'Allah Warayo Chana v. Aijaz Ahmad Khan' [1999 SCMR 1880] and 'Collector of Customs, Customs House, Lahore v. S.M. Ahmad and Company (Pvt.) Limited, Islamabad' [1999 SCMR 138]. The august Supreme Court has consistently held and observed that the tendency to bypass statutory remedies, or to circumvent legislative intent by pressing into service the constitutional jurisdiction of the High Court is to be discouraged. Reliance is placed on Commr. of Income Tax v. Hamdard Dawa Khana (Waqf) Pak' [PLD 1992 SC 847] and 'Commissioner of Income Tax v. Eli Lilly Pakistan (Pvt.) Ltd.' [2009 SCMR 1279]. In 'Muhammad Akram v. The State' [PLD 1996 SC 246] it has been observed that the powers and jurisdiction under Article 199 of the Constitution must be used sparingly, particularly when the statute provides for alternate remedies. In 'Commissioner of Income Tax v. Eli Lilly Pakistan (Pvt.) Ltd. '[2009 SCMR 1279] the august Supreme Court has emphasised that the rule barring jurisdiction in the case of exercising powers under Article 199 of the Constitution when a show cause notice has been assailed is not an absolute rule, but rather a rule by which the jurisdiction is regulated, reference in this regard may be made to "Gatron (Industries) Ltd. v. Government of Pakistan and others" [1999 SCMR 1072] and "The Murree Brewery Co. Ltd. v. Pakistan through Secretary to GOP, Works and Division and 2 others" [PLD 1972 SC 279]. The exercise of jurisdiction in the case of a show cause notice would, therefore, be justified when the impugned show cause notice is palpably without jurisdiction and/or mala fide, or has been served in an oppressive manner. When the legislature has provided a machinery for enforcement of a right, the party complaining of a breach must first avail the remedy provided under the relevant statute. In the first instance the person, the tax payer, ought to approach the hierarchy and the forums provided for under the statute "The Tariq Transport Company, Lahore v. The Sargodha-Bhera Bus Service, Sargodha, etc." [PLD 1958 SC 437] and "Messrs Amin Textile Mills (Pvt.) Ltd. v. Commissioner of Income Tax and 2 others" [2000 SCMR 201]. What would be the extent of the question of jurisdiction and would any jurisdictional error, e.g. an erroneous interpretation of the law, also render a show cause notice amenable to the jurisdiction under Article 199 of the Constitution? The august Supreme Court in 'Muhammad Ismail v. Fazal Zada' [PLD 1996 SC 246] has divided jurisdictional errors into three categories i.e. want of jurisdiction', excess of jurisdiction and wrong exercise of jurisdiction. The difference has been succinctly illustrated in the said judgment, and, therefore, on the same analogy the jurisdiction under the Ordinance may be discussed. If an authority having no power to decide a case under the statute issues a show cause notice, it will tantamount to lack or want of jurisdiction e.g. the power vests in the Commissioner but a show cause notice is issued by an Assistant Commissioner. Where there is limitation of pecuniary jurisdiction and a show cause notice has been issued by an officer/authority in excess of his/her pecuniary jurisdiction, it will be termed as having acted in excess of jurisdiction. However, if an authority has both pecuniary as well as power to exercise jurisdiction, but misinterprets a law or provision of the statute, then it would be wrong exercise of jurisdiction. The latter category of jurisdictional error would not be amenable to the jurisdiction under Article 199. As a corollaty, not every jurisdictional error would make a show cause notice amenable to the jurisdiction of this Court under Article 199 of the Constitution. It could not be presumed that the authority vested with powers by the legislature under the relevant statute would act otherwise than in accordance with law. There is always a presumption that the authorities vested with powers under the statute shall exercise the same in accordance with the objects and purposes of the statute, and by strictly adhering to the settled principles. It could also not be assumed that the said authority would neither give a fair and reasonable hearing or would act in a manner prejudicial to the interests of a taxpayer.

This Court is also guided by the principles laid down in 'Tariq Transport Company Lahore v. Saroodha Shera Bus Service Sargodha [PLD 1958 SC 437] to the effect that the High Court, while exercising jurisdiction under Article 199 of the Constitution, ought to exercise restraint, so as not to create distrust in statutory forums and tribunals of competent jurisdiction, and avoid casting an undeserved reflection on the honesty and competence of the authorities vested with powers and jurisdiction, and thereby defeat the legislative intent.

It would be pertinent to refer to the precedent law expounded by the Supreme Court of India with regard to entertaining constitutional petition when the challenge is against a show cause notice. It is well settled principle propounded by the Court that ordinarily no writ lies against a show cause notice. It has been a consistent view of the Court in India that a mere show cause notice is not an adverse order and, therefore, the petition invoking jurisdiction against a show cause notice is considered premature. The rational or reason is discussed in various judgments. It is noted that the authority after hearing the subject and considering the explanation or reply, if satisfied, may drop the proceedings. The only two exceptions to the rule that ordinarily writ will not be issued against a show cause notice are, (a) when the Court is satisfied that the show cause notice is totally non est. i.e. want of jurisdiction of the issuing authority and (b) issued malafidely e.g. to merely harass the subject. Reference in this regard may be made to "Union of India and another v. Kunisetty Satyanarayana" (2006) 12 Supreme Court Cases 28, "Secretary, Min. of Defence and others v. Prabhash Chandra Mirdha" [AIR 2012 SC 2250], "Union of India v. Hindalco Industries" (2003) 5 Supreme Court Cases 194, "Special Director and another v. Muhammad Ghulam Ghouse and another" (2004) 3 Supreme Court Cases 440 and "Union of India and another v. Kunisetty Satyanarayana" [AIR 2007 SC 906].

In the light of the settled principles, it may be concluded as follows:--

(i)Show cause notice is not an adverse order unless it could be dearly shown to the satisfaction of the Court that it has been issued by an authority not vested with jurisdiction or it was issued for mala fide reasons.

(ii)The exception relating to want of jurisdiction does not include every jurisdictional error. A wrong exercise of jurisdiction or interpretation of the law cannot be treated as want of jurisdiction.

(iii)Constitutional jurisdiction is exercised if the Court is satisfied that the person is an 'aggrieved party' within the context of Article 199 of the Constitution and no adequate remedy is provided by law. If adequate statutory remedies are provided under the relevant statute, it is to be taken into consideration while exercising discretion under Article 199 of the Constitution.

(iv)By passing or circumventing statutory forums is to be discouraged.

(v)The approach should be to advance the object and purpose of a statute and every effort made to uphold the sanctity of the legislative intent rather defeating it."

8.In the instant petition, the jurisdiction of the officer who has issued the impugned notices is not disputed and, therefore, it does not involve the question of want of jurisdiction. There is no reason for this Court to doubt the competence or the bonafides of the officer who has issued the impugned notices. Entertaining the petition in the circumstances and deciding the merits would essentially amount to by passing and circumventing statutory forums. This Court would thus be undermining the legislative intent as the powers and jurisdiction has been vested in various forums under the Ordinance. Subsection (9) of Section 122 explicitly provides that the assessment shall not be amended or further amended unless the taxpayer has been provided with an opportunity of being heard. Mere issuance of the notice in no manner whatsoever cause any prejudice so as to give rise to a grievance. The case law relied upon by the learned counsel for the petitioner are distinguishable in the circumstances.

9.There is yet another important aspect i.e. the question as to whether the petitioner has a permanent establishment in Pakistan. The impugned notices raise allegations denied by the petitioner and, therefore, it raises disputed questions of fact. It is settled law that disputed questions of fact cannot be resolved while exercising powers and jurisdiction under Article 199 of the Constitution. Reliance in this regard is placed on "Abdul Rab etc. v. Wali Muhammad etc.", PLD 1980 SC 139, "Ghulam Muhammad and another v. Mst. Noor Bibi and 5 others", 1980 SCMR 933, "Khawaja Muhammad Akhtar v. President, Cantonment Board, Sialkot Cantt Election Authority (Tribunal) and another", 1981 SCMR 291, "Benedict F.D' Souza v. Karachi Building Control Authority and 3 others", 1989 SCMR 918, "Federation of Pakistan and 2 others v. Major (Retd.) Muhammad Sabir Khan", PLD 1991 SC 476 and "Muhammad Younis Khan and 12 others v. Government of N.W.F.P. through Secretary, Forest and Agriculture, Peshawar and others",1993 SCMR 618.

10.In view of the above, the impugned notices cannot be treated as adverse orders. Moreover, the petition is not maintainable. The petitioner shall be at liberty to the file its reply and submissions before the authority, which has issued the impugned notices. This Court experts that the latter shall afford a proper opportunity of hearing and proceed in the matter in accordance with law.

11.The petition is, therefore, accordingly dismissed.

MH/13/IslPetition dismissed.