Syed WAQAR HAYDER ZAIDI VS FEDERATION OF PAKISTAN through Secretary/Chairman, 2016 PTD-KARACHI-HIGH-COURT-SINDH 1783 (2016)

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

----S. 129 (4)---Decision in appeal---Order passed in appeal beyond the prescribed statutory period---Effect---Plaintiff contended that impugned order, having been passed beyond the statutory period in terms of S. 129(4) of Income Tax Ordinance, 2001, was invalid---Validity---Impugned order passed by the Commissioner (Appeals) was admittedly beyond the period of 120 days and even beyond the extended period of 60 days thereafter---Section 129(4) of Income Tax Ordinance, 2001 although specified a period for passing appellate order by the Commissioner (Appeals), however, no consequences had been provided for non-passing of such appellate order within the prescribed period of limitation---Provision, wherein, some time limit was provided for performing an act and no consequence for such failure was provided, had always been termed as "directory" and not mandatory, and if a provision was directory in nature then even if any act was done or order passed beyond the period of any such limitation, that order would not, ipso facto, be an order without lawful authority---Appeal filed by the plaintiff, therefore, could not be deemed to have been allowed as prayed---Suit was dismissed in circumstances.

Super Asia Muhammad Din Sons (Pvt.) Ltd. v. Collector of Sales Tax Gujranwala 2008 PTD 60; Niaz Muhammad Khan v. Mian Fazal Raqid PLD 1974 SC 134 and Messrs Gold Trade Impex v. Appellate Tribunal of Customs and Excise and Sales Tax 2012 PTD 377 rel.

(b) Interpretation of statutes---

----Time limit prescribed in provision---Effect---Provision, wherein, some time limit was provided for performing an act and no consequence for such failure was provided, had always been termed as "directory" and not mandatory, and if a provision was directory in nature then even if any act was done or order passed beyond the period of any such limitation, that order would not, ipso facto, be an order without lawful authority.

Super Asia Muhammad Din Sons (Pvt.) Ltd. v. Collector of Sales Tax Gujranwala 2008 PTD 60; Niaz Muhammad Khan v. Mian Fazal Raqid PLD 1974 SC 134 and Messrs Gold Trade Impex v. Appellate Tribunal of Customs and Excise and Sales Tax 2012 PTD 377 ref.

Mushtaq Hussain Qazi for Plaintiff.

Syed Irshad-ur-Rehman for Defendants Nos. 4 to 6.

Ghulam Hyder Shaikh for Defendant No.7.

Date of hearing: 14th March, 2016.

JUDGMENT

MUHAMMAD JUNAID GHAFFAR, J.---Through this Suit, the plaintiff has primarily impugned Order dated 29.05.2015, passed by defendant No.2 on the ground that since the same was passed admittedly after lapse of statutory period provided in Section 129(4) of the Income Tax Ordinance, 2001 ("Ordinance, 2001"), therefore, the same is illegal, without jurisdiction and of no legal effect. The plaintiff has also impugned another Order dated 30.06.2014.

2.Briefly the facts, as stated are that the plaintiff had filed his Income Tax Return the for tax year 2009 on 08.06.2010, whereafter on 3.3.2014 a Show Cause Notice was issued by defendant No.4 under Section 122(9) read with section 122(5A) read with section 122(1) of the Ordinance, 2001 which was replied by the plaintiff on 11.03.2014. Thereafter a second Show Cause Notice followed on 18.3.2014 which was also replied by the Plaintiff vide letter dated 26.3.2014; however Order dated 30.6.2014 was passed, whereby, certain liabilities were created. Such Order was impugned by the plaintiff before defendant No.2 and during pendency of such appeal, recovery proceedings were initiated, vide notice dated 27.5.2015 compelling the plaintiff to file Suit No.990 of 2015 before this Court and vide Order dated 12.06.2015, the recovery proceedings were suspended. Thereafter, it transpired that defendant No.2 had already passed the impugned Order dated 29.05.2015, which was received by the Plaintiff vide TCS Receipt No. 30055586112 dated 12.6.2015, whereby, the amended assessment order dated 30.6.2014 was confirmed, which has now been impugned by the plaintiff through this Suit on the ground that the order passed by defendant No.2 is beyond the statutory period prescribed under Section 129(4) of the Ordinance, 2001.

3.Counsel for the plaintiff has argued that Section 129(4) of the Ordinance, 2001 provides that the Commissioner (Appeals) shall pass order not later than 120 days from the date of filing of appeal or within an extended period of 60 days, which in the instant matter stood expired on 25.01.2015 and therefore anyorder passed by defendant No.2 beyond the statutory period as above is a nullity in the eyes of Law and cannot be acted upon, whereas, on failure of defendant No.2 in passing such appellate order within the prescribed time, the appeal filed on behalf of the plaintiff stands allowed as prayed. Per Learned Counsel it is the case of the plaintiff that such order, which is passed after expiry of the stipulated period is a mala fide order and in fact there is no order in field.

4.On the other hand the Counsel for the defendant/department has contended that the provision of Section 129(4) of Ordinance, 2001 and proviso thereto are directory in nature and not mandatory. Per Learned Counsel since no consequence for not passing the appellate order within the said time has been provided in the Ordinance, therefore, any order passed beyond such period cannot be termed as mala fide or non-existent. In upport of his contention he has relied upon the case reported as Super Asia Muhammad Din Sons (Pvt.) Ltd., v. Collector of Sales Tax Gujranwala [2008 PTD 60].

5.On 14.3.2016 at the joint request of all the learned Counsel the Suit was taken up as a short cause in terms of Rule 22(7) of the Sindh Chief Court Rules (Original Side) read with Order XIV, Rule 2, C.P.C. for deciding the following legal Issue settled with their consent.

i.Whether the impugned Order dated 29.05.2015, passed by the Commissioner (Appeals) after lapse of statutory period provided in subsection (4) of Section 129 of the Income Tax Ordinance, 2001 is illegal without jurisdiction and of no legal effect?

ii.What should the decree be?

6.I have heard both the learned Counsel and perused the record. To have a better understanding of the controversy in hand it would be advantageous to refer to the provision of Section 129(4) of the Ordinance, 2001, which reads as under:--

"(4) As soon as practicable after deciding an appeal, the Commissioner (Appeals) shall serve 1[* * *] his order on the appellant and the Commissioner2[:]

3[Provided that such Order shall be passed not later than one hundred and twenty days from the date of filing of appeal or within an extended period of sixty days, for reasons to be recorded in writing by the Commissioner (Appeals):

Provided further that any period during which the hearing of an appeal is adjourned at the request of the appellant or is postponed due to any appeal or proceedings or stay order, remand or alternative dispute resolution proceedings or for any other reason, shall be excluded in the computation of the aforementioned periods.]

1(5)* * *

(6)* * *

(7) * * *

7.Perusal of the aforesaid provision reflects that as soon as practicable after deciding an appeal, the Commissioner (Appeals) shall serve his orders on the appellant and the Commissioner provided that such order shall be passed not later than 120 days from the date of filing of appeal or within an extended period of 60 days for reasons to be recorded in writing by the Commissioner (Appeals). Insofar as the period of 120 days as well as the further extended period of 60 days is concerned, the same has not been disputed before me by the Counsel for the defendants, whereas, even otherwise perusal of the record reflects that in this matter the appeal was preferred by the plaintiff before defendant No.2 on 08.08.2014, whereas, the impugned order was passed on 29.05.2015 and therefore it is admittedly beyond the period of 120 days and even beyond the extended period of 60 days thereafter. Therefore, the question is as to whether if any order which has been passed by the Commissioner (Appeals) after passing of statutory period as provided under Section 129(4) (ibid) can be termed as an Order without any lawful authority or a non-existent order. The other question, which arises in consequent to such non-passing of an appellate order by the Commissioner (Appeals) within the statutory period, is that as to whether as a consequence the appeal filed by the plaintiff stands allowed as prayed.

8.It would not be out of place to state that under the repealed Income Tax Ordinance, 1979, ("Ordinance, 1979") the procedure and decision in appeal was regulated under Section 132 of the said Ordinance, and the relevant provisions in respect of deciding an appeal within the statutory period was governed by subsections (5) & (6) of the Ordinance, 1979, which reads as under:--

⁷⁸[(5) Where no order under subsection (1) is made before the expiration of three months from the end of the month in which the appeal is presented, the relief sought through the said appeal shall be deemed to have been given and all the provisions of this Ordinance shall have effect accordingly:

Provided that, where the hearing of appeal is adjourned for any period on the request of the appellant, the said period shall be excluded while computing the aforesaid period of three months;

Provided further, that nothing contained in this subsection shall apply to any appeal presented before the first day of January, 1992.

(6) The provisions of subsection (5) shall not apply unless a notice by the appellant stating that no order under subsection (1) has been made is, personally served by the appellant on the Appellate 79[Additional Commissioner] not less than thirty days before the expiration of the period of three months.]

When the provision of section 132 of Ordinance, 1979, and 129 of the Ordinance, 2001, are read in juxtaposition, it appears that in the Ordinance, 1979, it was provided that if no order under subsection (1) of Section 132 is made before expiration of three months from the end of month, in which the appeal was presented, the relief(s) sought through the said appeal shall be deemed to have been given and all the provisions of the Ordinance shall have effect accordingly, whereas, it was further provided that when the hearing of appeal is adjourned for any period on the request of the appellant, the said period shall be excluded. However, the provisions of subsection (5) were linked with the provisions of subsection (6) of the said Ordinance, which provided that subsection (5) shall not apply unless a notice by the appellant stating that no order under subsection (1) has been made is personally served by the appellant on the Appellate Additional Commissioner not less than thirty days before the expiration of period of three months. It is, therefore, clear that insofar as the Ordinance, 2001, is concerned, there is no consequence provided for not deciding the appeal within the period of limitation prescribed therein, and on the contrary in the Ordinance, 1979, it was provided subject to subsection (6) and the requirement of notice being fulfilled that if the appellate order is not passed within three months, the relief sought through the appeal shall be deemed to have been given. In the circumstances, it appears to be a very clear and intentional deviation by the Legislature while enacting the Ordinance, 2001, wherein, no such analogous provision has been incorporated as it was available in 1979 Ordinance, whereby, consequential relief was provided if no order was passed by the Appellate authority within the stipulated period of time.

9.The question that what provisions are to be construed as directory and what as mandatory, came for scrutiny before the Hon'ble Supreme Court in the case of Niaz Muhammad Khan v. Mian Fazal Raqid [PLD 1974 SC 134] and the Hon'ble Supreme Court has been pleased to hold that:--

It is true that no universal rule can be laid down for the construction of statutes as to whether mandatory enactments shall be considered directory only or obligatory, with an implied nullification for disobedience. It is the duty of the Courts to try to get at the real intention of the Legislature, by carefully attending to the whole scope of statute to be construed. As a general rule, however, a statute is understood to be directory when it contains matter merely of direction, but not when those directions are followed up by an express provision that, in default of following them, the acts shall be null and void. To put it differently, if the Act is directory, its disobedience does not entail any invalidity; if the Act is mandatory, disobedience entails serious legal consequences to the invalidity of the act done in disobedience to the provision.

10.Perusal of Section 129(4) of the Ordinance, 2001, clearly reflects that though a period has been specified for passing of an appellate order by the Commissioner (Appeals), however, it also reflects that there is no consequence provided for non-passing of such appellate order within the prescribed period of limitation. It has been the consistent view of the Hon'ble Supreme Court as well as this Court that in such provisions, wherein, some time limit is provided for performing an act and no consequence for such failure is provided, then such provisions have always been termed as directory and not mandatory and if a provision is directory in nature then even if any act is done or an order is passed beyond the period of any such limitation that order would not ipso facto, be an order without lawful authority. In a more or less similar situation a learned Division Bench of this Court in the case of Messrs Gold Trade Impex v. Appellate Tribunal of Customs and Excise and Sales Tax, [2012 PTD 377], had the occasion to answer the following question in a Custom Reference Application under the Customs Act, 1969.

"Whether the impugned orders are passed in violation of Sections 179, 193(a) and 194(b) of the Customs Act, 1969?"

11.The provisions of Section 194(b) of the Customs Act, 1969 is more or less similar and analogous to the provisions of Section 129(4) of the Income Ordinance, 2001, in that, in terms of Section 194(b) of the Customs Act and first proviso thereto, an appeal preferred before the Customs Appellate Tribunal is to be decided within 60 days from the filing of the appeal and in the aforesaid case this issue was dealt with by the learned Division Bench in the following manner:--

"15. In terms of proviso to section 194-B(1) of the Customs Act, 1969, it is provided that the appeal filed before the Customs Appellate Tribunal shall be decided within sixty days of filing of appeal or within such extended period as the Tribunal may, for reasons to be recorded in writing.

16. However, on examination of the entire provisions of section 194-B and other provisions of the Customs Act, it is noted that neither any consequence of such default nor any penal provision has been provided which may attract in case of default in compliance of such directions. In the case of Niaz Muhammad Khan v. Mian Fazal Raqib PLD 1974 SC 134, the Full Bench of Hon"ble Supreme Court while interpreting the directory and mandatory provisions in statute has held as under:--

"As a general rule however, a statute is understood to be directory when it contains matter merely of direction, but not when those directions are followed up by an express provision that, in default of following them, the facts shall be null and void. To put it differently, if the Act is directory, its disobedience does not entail any invalidity; if the Act is mandatory disobedience entails serious legal consequences amounting to the invalidity of the act done in disobedience to the provision."

17. Recently a Division Bench of this Court in First Appeal No.24 of 2009 (Sajjad Gondal v. Orix Leasing Pakistan Limited), while interpreting the purported effect of the provision of section 10(6) of the Financial Institutions (Recovery of Finances) Ordinance, 2001, by respectfully following the dicta laid down by the Honourable Supreme Court in the above cited case has reiterated the said proposition of law. Accordingly, we are of the view that since there is no penal consequences in case of default in passing the order within the time as mentioned in proviso subsection (1) of Section 194B of the Customs Act, such provision is directory and not mandatory hence, its non-compliance would not vitiates the proceedings of the order passed by the Appellate Tribunal.

12.Since the controversy, as raised in this Suit already stands decided by a Learned Division Bench of this Court in the aforesaid case by holding that since there is no penal consequence for non-passing of an Order under the Customs Act, 1969, which provision is analogous to Section 129 of the Income Tax Ordinance, 2001, whereas, in the Ordinance, 2001, there is no consequence provided for not passing of an appellate order within the statutory period provided therein, the appeal filed by the plaintiff cannot be deemed to have been allowed as prayed, in such circumstances. Therefore, such provision is to be regarded as directory and not mandatory. In view of hereinabove discussion and the circumstances of the case, I am of the view that the plaintiff's Suit is liable to be dismissed by answering Issue No.1 in negative.

13.Accordingly the Suit stands dismissed along with pending application.

SL/W-8/SindhSuit dismissed.