2025 PLP 1596 (PTD)

This reference application in terms of section 133 of the Income Tax Ordinance, 2001 (the "Ordinance") emanates from the order dated 28.04.2025, whereby the Appellate Tribunal Inland Revenue (Division Bench-II), Islamabad (the "Appellate Tribunal") proceeded to dispose of appeals of the applicant being not maintainable.

2. Learned counsel for the Respondent, at the very outset, objected to maintainability of this reference application on the ground that the appeals filed by the applicant was maintainable before the "Appellate Tribunal" in view of second proviso to subsection (2) of Section 134A of the "Ordinance".

3. We have heard the counsel for the parties and perused the record.

4. Second proviso to subsection (2) of Section 134A of the "Ordinance" reads as under: "Provided further that SOE may file an appeal to the Appellate Tribunal or a reference to the High Court or a petition for leave to appeal to Supreme Court, as the case may be, where subsection (11) is applicable". The above said provision explicitly recognizes the right of a State-Owned Enterprise (SOE) to avail appellate remedies in appropriate forums. It stipulates that the SOE is legally competent to file an appeal before the Appellate Tribunal, or to file a reference before the High Court, or to submit a petition for leave to appeal before the Hon'ble Supreme Court of Pakistan, as the circumstances may warrant. However, this right is specifically exercisable in situations where subsection (11) is attracted. In other words, the appellate remedies provided therein are contingent upon the applicability of subsection (11), which is the triggering provision that confers the jurisdictional foundation for such proceedings. The phrase "as the case may be" signifies that the remedy to be pursued by the SOE depends upon the forum appropriate to the stage and nature of the dispute and the selection of the appellate forum must be in strict accordance with the statutory hierarchy and remedies provided under the law. In short, this proviso safeguards the right of appeal subject to the condition that the case falls within the ambit of subsection (11), thereby ensuring that such proceedings are not initiated arbitrarily but in accordance with the statutory framework. Said subsection (11) of Section 134A of the "Ordinance" reads as under: "If the Committee fails to decide within the period of sixty days under subsection (5), the Board shall dissolve the Committee by an order in writing and the matter shall be decided by the court of law or the appellate authority where the dispute is pending under litigation". The legislative scheme, as reflected from a conjoint reading of second proviso and subsection (11), envisages a structured dispute resolution mechanism with a defined timeline. The above said sub-section mandates that where the Committee, constituted under sub-section (5), fails to render its decision within a statutory period of sixty (60) days, the Board is duty-bound to dissolve the Committee through a written order. Upon such dissolution, the authority to adjudicate the dispute is transferred to the court of law or the relevant appellate forum where the matter is already pending or subsequently pursued under litigation. The proviso under examination further supplements this procedure by safeguarding the appellate rights of a State-Owned Enterprise (SOE). It provides that in cases where subsection (11) applies, that is, where the Committee stands dissolved due to inaction, the SOE retains an unequivocal right to file an appeal before the "Appellate Tribunal", or to submit a reference to the High Court, or to file a petition for leave to appeal before the Supreme Court, as may be appropriate to the stage of the proceedings. The expression "as the case may be" indicates that the choice of the appellate forum must strictly correspond with the statutory stage of the case and the forum designated by the applicable procedural laws. It is a well-established principle of law that when a statute or procedural framework prescribes a sequence of remedies, the parties are bound to exhaust such remedies in the order in which they are provided. The scheme of the law does not permit a party to bypass the statutory sequence or to approach a higher forum without first availing the remedy before the subordinate or initial forum. Second proviso to subsection (2) of Section 134A of the "Ordinance" evidently prescribes a sequence by first approaching the Appellate Tribunal, then to the High Court in a tax reference in terms of Section 133 of the "Ordinance" and then to the Supreme Court where subsection (11) is applicable. Admittedly, the Committee, appointed under subsection (5) of Section 134A of the "Ordinance" has failed to decide the matter within prescribed time thus, second proviso to subsection (2) of Section 134A of the "Ordinance" is squarely applicable as the applicant challenged the order of the Commissioner (Appeal-IV), Inland Revenue, CTO Islamabad before the "Appellate Tribunal" which is the next higher forum for deciding the issue keeping in view the sequence of hierarchy and procedure applicable in terms of above said proviso. This Court in the case of "Messrs National Logistics Cell v. Assistant/Deputy Commissioner and others" (2025 PTD 614) has dilated upon Section 134A of the "Ordinance"; relevant part reads as under: "First proviso to Section 134A(1) of the Ordinance clearly manifests that it shall be "mandatory" for an aggrieved state-owned enterprises (the "SOE") having limit of tax liability of fifty million rupees or above to approach the Board for the appointment of a committee for the resolution of any dispute. The ADR is the result of landmark pronouncements of the Supreme Court of Pakistan on the issue of mediation. In this regard, reference can be made to the judgments reported as Federation of Pakistan and others v. Attock Petroleum Ltd. Islamabad (2007 SCMR 1095), Commissioner Inland Revenue v. Messrs RYK Mills (2023 SCMR 1856), Province of Punjab through Secretary C&W, Lahore, etc. v. M/s Haroon Construction Company, Government Contractor, etc. (2024 SCMR 947). Recently, this Court has also expanded scope of the mediation in the case of Strategic Plans Division and another v. Punjab Revenue Authority and others (PLD 2024 Lahore 545), in which this Court, while dealing with an issue under the Punjab Sales Tax on Services Act, 2012, has discussed in detail the Anthology of the ADR by highlighting its importance.

3. In view of the above, this writ petition is disposed of with a direction to the Federal Government to establish the necessary committee of the ADR as per provisions of Section 134A(1) of the Ordinance on immediate basis so that the litigant may not suffer and the tendency of overburdening the Court with unnecessary litigation may also curtail. In the meanwhile, since the committee of the ADR has not been established so far and the Petitioner has no forum to get the dispute resolved by way of mediation, it is directed that no coercive measures shall be taken against it, till establishment of the ADR committee".

5. In view of above discussion, it is held that the appeals of the applicant before the "Appellate Tribunal" were maintainable. Thus, we inclined to allow this reference application by setting aside the impugned order. As a sequel, the appeal preferred by the applicant shall be deemed to be pending before the "Appellate Tribunal", who shall decide the same afresh after affording an opportunity of hearing to the applicant as well as respondent department, as per law.

6. Office to transmit copy of this order to the concerned quarters in terms of section 133(8) of the "Ordinance" MQ/P-9/L Reference Allowed.