SUB-DELEGATION OF POWERS

SUB-DELEGATION OF POWERS <!--[if gte mso 10]> SUB-DELEGATION OF POWERS By Mr. Abdul Razak, Advocate, Karachi Sections commented: 210, 122, 111 & 184 of Income Tax Ordinance, 2001 with reference to the sections 65, 66A, 13(1) & 111 of the repealed Income Tax Ordinance, 1979 Killing virus .."32. Sub-delegation of powers.---In accordance with maxim delegatus non potest delegare, a statutory power must be exercised only by the body or officer in whom it has been confided, unless sub-delegation of the power is authorized by express words or necessary implication. There is a strong presumption against construing a grant of legislative, judicial or disciplinary power as impliedly authorizing sub-delegation; and the same may be said of any power to the exercise of which the designated body should address its own mind". Halsbury's Laws of England (Vol. 1, 4th Ed., para. 32). The absence of standards or guidelines in a statute would not necessarily render the statute un-Constitutional, while the conferment of uncontrolled and arbitrary power on the delegate would render the statute void. PLD 1975 SC 397. "While an administrative function can often be delegated, a judicial function rarely can be. No judicial tribunal can delegate its functions unless it is enable to do so expressly or by necessary implication. Court of Appeal Barnard v. National Dok Labour Board, (19-53) 1 All ER\1113, as observed by Denning L.J., (at pp. 1118 and 1-119). Ambiguous statutory provisions lies only with legislatures or its delegatee under specified conditions 230 ITR 622 (Kar.). Willis J. Huth v. Clarke (1890) 25 Q.B.D. 295 (Q.B.) has stated that delegation is not the complete handing over or transference of a power from one person or body of persons to another. Delegation may be defined as the entrusting, by a person or body of persons, of the exercise of power residing in that person or body of persons, to another person or body of persons, with complete power of revocation or amendment remaining in the granter or delegator. It is important 'to grasp the implications of this, for, much confusion of thought has unfortunately resulted from assuming that delegation involves, or may involve, the complete abdication or abrogation of power. Since promulgation of Income Tax Ordinance, 2001; w.e.f. 1st July, 2002 (hereinafter; the Ordinance) repealing Income Tax Ordinance, 1979 (hereinafter, repealed Ordinance), having existence of 23 years, the Ordinance has been and is being commented by lawyers, experts, tax practitioners. and business community, so and so that its masters have made 322 plastic surgeries at various spots of its face and body by virtue of Finance Ordinance, 2002. Inter alia to the provisions of various sections, provision of section 122 of the Ordinance is under severe attack. Since I was associated with the department for about 26 years therefore, in the light of the experience I would like to submit my opinion on .the provisions of sections 210 Delegation (new section) read with the provisions of sections 122, 111 & 184 of the Ordinance. Comparison of the sections of the Ordinance with the repealed Ordinance is as under:-‑ The Ordinance Repealed Ordinance 122(1) Amendment of assessments 65 read with 62 & 63. 122(2) 65(3) Pro. 122(3) 122(4) 122(5) Condition to obtain the 65(2) Note: under this subsection previous approval is no more proceedings for additional assessments required to initiate action under could not be initiated unless definite section 122 of the Ordinance. information .has come into the possession of DCIT and he has obtained the previous approval of the Inspecting Additional Commissioner of Income-tax in writing to do so. 122(6) 122(7) 122(8) 65 (2) Exp. 111(1) Unexplained income or assets. 13(1) under second proviso to Condition for approval of the clause (e) income shall not be IAC is not mandatory. chargeable to tax unless approval of the IAC has been obtained. 111(2) 1st proviso to 13(1) 111(3) 1 11(4) 13(2A) 111(5) 13(3) 184(1) Penalty for concealment of 111(1) income. 184(2) 111(2) 184(3) 111(2A) 184(4) 111(3) Note: Under section 116 of the repealed Act no penalty shall be imposed except with the prior approval in writing of the IAC. Such mandatory provision is not made part of section 111 of the Ordinance. Section 210 Delegation.---Wills, J., in Huth v. Clarke, (1890) 25 QBD 391 P.395, means "Delegation, as the word is generally used, does not imply a parting with powers by the person who grants the delegation, but points rather to the conferring of an authority to do things which otherwise that person would have to do himself. The best illustration of the use of the word is afforded by the maxim, Delegatus non potest delegare, as to the meaning of which it is significant that it is dealt with in Broom's Legal Maxims under the law of contracts: it is never used by legal writers, so far as I am aware, as implying that the delegating person parts with his power in such a manner as to denude himself of his rights". Under the provisions of the section the Commissioner has been made competent to delegate, by an order in writing to any Taxation Officer all or any of the powers or functions conferred upon or assigned to the Commissioner under this Ordinance, other than the power of delegation. Under the provisions of subsection (2) of the section of the Ordinance further speaks that such delegation of power may be in respect of all or any of the persons, classes of persons or areas falling in the jurisdiction of the Commissioner. Joint reading of both the subsections reveal that the Commissioner has not been bound to delegate the powers appreciating necessary implications and therefore, such delegation of powers are absence of standards or guidelines. Delegation of powers is not the new term/provision, as provided in the Ordinance. However, the judiciary has emphasized upon the criteria and the importance of the powers should be or should not be abdicated/transferred/delegated to others. In the case 295 US 495 SC of USA Mr. Justice CARDOZO has emphasized that the delegated power should be canalized so that it should be within banks that keep it from overflowing. A perusal of the provision of section 210 delegation shows that the Commissioner could delegate powers to any of his subordinate `taxation officer' to take action under' section 122 amendment of assessments on the basis of his (taxation officer's) consideration and taking view that the Ordinance or the repealed Ordinance has been incorrectly applied. Obviously the delegated power is not canalized within banks that keep it from overflowing. It has further been emphasized that the delegation should not run riot and it should be in the circumstances as borne of the necessities of the occasion. Hence, in the light of Halsbury's Laws of England and the Supreme Court of Pakistan, supra, delegation of power should be controlled by appreciating facts so that it may be canalized in a way that it should he within banks that keep it from overflowing. If we are to resort to the definition of `taxation officer' as given under subsection (65) of section 2 of the Ordinance we find -that it means `Additional Commissioner' (officer of Grade-19), `Deputy Commissioner' (officer of Grade-18), Assistant Commissioner' (officer of Grade-17), `Income Tax Officer' (officer of Grade-16) and `Special Officer' (officer of Grade-14). Hence, prima facie it appears that the statute devoid provisions of mandatory express words or necessary implication according to each of the cases on the basis of which the delegation of powers for specifically taking action under section 122 of the Ordinance, by any of his subordinate officers of any of the grade from 14 to 19. From the language of section 210 it is quite clear that the delegatee is being confirmed with uncontrolled and arbitrary powers. Hence, in the light of the decision of the Supreme Court, supra, such statute stands void. Section 122. Amendment of assessments. Before going into the provisions of the section it is necessary that we should have a look of the provisions of section 65 and 66A of the repealed Ordinance. A perusal of the provisions of section 65 shows that the action could not be initiated unless definite information has come into the possession of the Deputy Commissioner and has obtained the previous approval of the Inspecting Additional Commissioner of Income Tax in writing to do so. The provision was made as a built-in-safeguard for the assessee. Due to mandatory provision in the section, powers of delegating authority were controlled and he was required to grant previous approval to re-open already finalized assessment after due consideration of the facts as well as legal aspects before such approval was granted with expressed words and necessary implication. Whereas under the provisions of section 122 of the Ordinance the Assessing Officer is not required to associate his senior officer in taking such a drastic action. So and so that the basis of his consideration necessary to take the action is not required to be perused by his any of the senior officers. Furthermore, the statute has emphasized upon the term `view', i.e. action under section 122 could only be taken where the Commissioner (the delegatee officer, i.e. `taxation officer') is of the view that this Ordinance or the repealed Ordinance has been `incorrectly' applied in making the assessment. Again the term `incorrectly applied' or `erroneous under the law' has been highly controversial and is being repeatedly agitated at the different appellate forums. The statute of the Ordinance therefore, shows that the taxation officer has been made competent to decide independently complexities of facts as well as the law. The term `opinion' as described in the case; PLD 2000 Lah. 216, means a view, judgment or. appraisal formed in the mind about a particular matter, a brief stronger than impression and less strong than positive knowledge; a generally held view; 'a formal expression of judgment or advise by an expert, opinion is synonymous with view, belief, conviction, persuasion, sentiment. In the case of Messrs Vimal Chandra v. ITO-TC51R. 273, TC10R. 290, TC56R 1192; the High Court of Rajistan has entertained the arguments regarding delegation of powers to the ITO even in the presence of sections 147 and 148 of Indian Income Tax Act, 1961, (similar to the provisions of section 65 of the repealed Ordinance). According to the provisions of section 147 and 148 of the Ordinance the Court has held that the delegation of powers could not be said as arbitrarily and uncontrolled because both the sections contain all the necessary safeguards, ensuring fairplay to, the assessee. Whereas under the provisions of section 122 of the Ordinance, the `taxation officer' 'after conferment of the powers as delegated by .the Commissioner becomes solo authority to decide all the issues, i.e. as to whether his `consideration' as made and `view' as observed are not perfect in all respects on the basis of which the Ordinance or the repealed Ordinance has been incorrectly applied in making the assessment warranting amendment of the assessment. If the provision is scanned in the light of the decision of the High Court of Rajisthan, supra, the action of the taxation officer on the basis of powers delegated to him otherwise than `checks and control' such delegation of powers are arbitrary and uncontrolled and therefore, could be said as `void' without shadow of doubt. The provision of previous approval of the Additional Inspecting Assistant Commissioner, was made mandatory because the `discretion' and formation of the `opinion', of course are `subjective' yet these have to be based on facts and reasons which are objective realities. The 'discretion' or formation of `opinion' cannot be based on illusion, fancy or whim, hence, such mandatory safeguard/protection was provided to the assessee/taxpayer for any action could be taken otherwise of objective realities. There seems therefore, no prima facie cogent reasons to vacate such provisions providing safeguard/protection to the taxpayer keeping in view the account of litigation specifically on the issues, `erroneous under the law and prejudicial to the interest of Revenue', `concealment', `furnishing of untrue, inaccurate particulars of the income' by the assessee/taxpayer', `wilful default in declaring untrue facts of income' tantamounting to concealment of income justifying levy of harsh penalties. The opinion is inter alia to the provisions of `definite information acquired from an audit' that the income has been concealed. The taxation officer is no more bound to seek such mandatory previous approval of the IAC in imposing penalty alleging concealment of income. Subsection (4) of section 122 of the Ordinance. This is new provision of the Ordinance, i.e. such provision was not available in the repealed Ordinance. Through this subsection it is provided that where an original assessment order has been amended under subsection (1) or (3) the Commissioner may further amend, as many times as may be necessary, the original assessment within the prescribed period. The words `as many times as may be necessary' have been inserted by Finance Ordinance, 2002, by substituting for `to claim tax relief'. The provision as made is contrary to what has been held by the Apex Courts of Pakistan and India because, once a definite information is acquired from an audit tantamounting to income concealed or furnishing of inaccurate particulars of income, or by applying conscious mind it is found that the Ordinance or the repealed Ordinance has been incorrectly applied, the assessment could be amended. But once it is amended it could not be further amended without discovering new facts not declared by the. assessee. 61 Tax 105 SC Pakistan, 61 Tax 46, 45 Tax 116, 1371 ITR 20, 193 PTD 766, 71 Tax 193. (Trib.), 63 Tax 113 HCK, 83 Tax 359 HCK. 61 Tax 105 Where all the facts have been fully disclosed by the assessee and considered by the Income Tax Authorities and the assessment has been framed consciously and no new facts have been discovered the assessment could not be re-opened under section 65 of the Income Tax Ordinance, 1979. 45 Tax 116 This is a simple case whereon a reappraisal of the very same material, which he had earlier obtained, the Assessing Officer thought of taking a different view and initiated the proceedings. The action of the Assessing Officer was clearly without legal warrant in view of the well-settled position regarding action under section 147(b). Subsection (4A) of section 122 of the Ordinance. A perusal of the subsection shows that amended assessment could be made within `six years' of the date, of original assessment. A perusal of first proviso to subsection 3) of section 65 of the repealed Ordinance has provided a period, of `five years' for invoking action of re-opening of already completed assessments. Obviously the provision of the Ordinance has usurped the vested rights of the taxpayers in a way that a period for reopening/amendment of the assessments has been retrospectively enhanced to six years from five years. Since this retrospective action has not expressly been mentioned by the legislature and therefore, the provision is void to the extent of enhancing the period of the re-opening of the assessment. In the case 1998 PTD 2769 (QHC), after due consideration of the decisions, PLD 1964 SC 266, PLD 1969 Lah. 786, PLD 1969 SC 187, PLD 1965 (WP) Lah. 308 and AIR 1927 Cal. 748, it has been held that it is well-settled now that `if some rights have accrued to a party under a law which is subsequently amended or if substantive rights of the parties are concerned, the amendment made in the existing law or the enforcement of a new law will not affect such rights and the effect of such an amendment would be generally prospective'. Section 239 savings of the Ordinance read with the section 166 repealed and savings of the repealed Ordinance. A perusal of subsection (1) of section 122 shows that the provision for amendment of assessments made under sections 59, 59A, 62, 63 or 65 of the repealed Ordinance is inserted by Finance Ordinance, 2002. Clause (a) of subsection (4) of the section has also been inserted with the words `or the repealed Ordinance' by Notification No. S.R.O. 633(I)/2002, dated September 14, 2002. The words inserted have been commented by various experts in a way that in absence of a clear provision section 239 savings of the Ordinance if compared with the provisions made in section 166 repealed and savings of the repealed Ordinance the Legislature has considered that the assessments completed under the repealed Ordinance are passed and closed transactions and do not fall within the ambit of section 122 of the Ordinance. Inter alia, it has `also been expressed that it is cardinal principle of law that in absence of a clear provision to the contrary, a statute must not be construed as disturbing existing rights and orders that have become final. With due respect of the opinion, I would like to submit that inter alia to the broad rules of interpretation; the Mischief Rule; the Lateral Rule; the Golden Rule, the United Contextual Approach, a recent origin as stated by Smith and Bailey (in the English Legal System, Third Edition, page 363) referred in the case Attorney-General v. Prinvr Ernest Augustus Hanover (1957 AC 436) as; "Words, and particularly general words, cannot be read in isolation, their colour and. content are derived from their context. So, it is that conceived it to be may right and duty to examine every word of, a statute in its context, and I use context in its widest, sense which I have already indicated as including not only other enacting provisions of the same statute, but its preamble, the' existing state of the law, other statutes in pari materia, and the mischief which I can by those and other legitimate, means, discern the statute was intended to remedy". On basis of 'the Rule a perusal of the provisions of section 238--Repeal and section 239 savings read with the words inserted by Finance Ordinance, 2002 and by Notification. No. S.R.O. 633(I)/2002, dated September 14, 2002 of the Ordinance, in my opinion, the legislature has 'considered that the assessment completed under the repealed Ordinance are not passed and closed transactions but very much fall in the ambit of section 122 of the Ordinance. What does mean by killing virus.---Due to consideration of taxation officers tantamounting to incorrect application of the Ordinance and repealed Ordinance, inter alia to the evidence considered as concealment of income, the assessment amended under section 122 of the Ordinance would always be challenged as suffering from the term `maladministration' as given at subsection (3) of section 2 of the FTO Ordinance, 2000. For perusal and ready reference the definition is reproduced as under:-- - `maladministration' include (i) a decision, process, recommendation, act of omission or commission which-- (a) is contrary to law, rules or regulations or is a departure from established practice or procedure; unless it is bona fide and for valid reasons; (b) is perverse, arbitrary or unreasonable, unjust, biased, oppressive, or discriminatory; (c) is based on irrelevant grounds. (d)------------------ Due to non-availability of the provisions in the Ordinance requiring mandatory previous approval of senior officers in invoking action under section 122, 111 and 184 of the Ordinance by taxation officer of Grade-14 to 18, creditability of the officers would always be at risk and the tax payers would also remain unsatisfied from the treatment given in connection with amendment of the assessments making additions of unexplained investment and levying penalty for concealment of income. The assessments amended without involvement of senior officers would lack quality of assessments. Obviously is will increase volume of work with the appellate forums at least up to CIT appeals and Income Tax Appellate Tribunals. Such situation will tantamount to the killing virus for officers of the department as well as for the taxpayers. It is therefore, proposed that sections 210, 122, 111 & 148 of the Ordinance may be suitably amended in a way that action for amendment of assessments could only be taken on the basis of powers delegated by the Commissioner subject to that the particulars of the case are perused and appreciated by the Commissioner and in his opinion/consideration the assessment already finalized needs amendment on the basis of incorrect application of the Ordinance, or the repealed Ordinance tantamounting to concealment of income and working out correct amount of tax for the tax year to which the assessment order relates. It should also be ensured that penalty on the pretext of concealment of income could only be levied if it is appreciated by the Commissioner. Furthermore, if powers for amendment of already completed assessments are delegated to the taxation officer of Grade-19 such powers should be delegated by appreciating the facts of the case by the 'Commissioner and amount of tax liable to be paid by the taxpayer and penalty if any must be determined after seeking previous approval of the Commissioner. If necessary amendments in the sections are not made it will jeopardize harmonious atmosphere of the working of the department.