2014 PLP (Trib (PTD)

MUHAMMAD AKRAM TAHIR (ACCOUNTANT MEMBER).

Through these miscellaneous applications the taxpayer has sought rectification of the Tribunal's order passed in I.T.A. No-849/LB/2011 and I.T.A. No. 840/LB/2011 dated 12-01-2012 on the following grounds:-- (i) "That the titled appeals in I.T.A. No.849/LB/2011 and I.T.A. No.840/LB/2011 were heard by Division Bench of this Honourable Court comprising Mr. M.A Javed Shahin, the Judicial Member and Madam Tabana Sajjad Naseer, the Accountant Member on 8-12-2011. (ii) That both the appeals were decided by the Honourable Court vide order dated 12-1-2012. (iii) That the Honourable Court accepted the Appeal of the Appellant/ Department with the following observation. "We have heard the rival arguments and have also gone through the orders of authorities below. The core issue involved in these appeals is whether the income from local sale is to be taxed under normal law or not. The A.R's. contention was that as per section 239(10) Circular No.20 of 1992 was not repealed, therefore, the Taxation Officer was not justified to amend the order on this ground. However, it has been observed that notifications, notices, orders or rules issued under the Repealed Ordinance which are inconsistent with the corresponding provision of the new Ordinance have been repealed. Since section 18 itself said that the local business is to be taxed under normal law the Circular relied upon under Repealed Ordinance being inconsistent has no application whatsoever. In such circumstances, we are of the considered opinion that the CIR(A) has erred in law to annul the amended orders. Consequently, the order of the CIR(A) for both the years is vacated and those of the Taxation Officer are restored." (iv) That the matter of inconsistency and provision of section 239(10) of the Income Tax Ordinance, 2001 were never discussed during the course of hearing and the learned DR could not make out any case for rejection of appeal of the respondent/applicant. (v) That at the conclusion of the proceedings the Honourable Court announced the decision of the Appeal in favour of the respondent/applicant, however, the decision received is otherwise. An affidavit to the effect is enclosed. (vi) That it is the duty of the Court to apply correct law while deciding the issues raised in Appeal before it. (vii) That the applicant/respondent may also please be allowed to take up additional grounds during the course of hearing of Miscellaneous Applications. PRAYER Under the circumstances, it is, most respectfully prayed that as an error of law has crept in the body of appellate order, therefore, an appropriate order may very kindly be passed to provide justice to the applicant/respondent for the redressal of his grievance."

2. Brief facts giving rise to the titled miscellaneous applications are that the returns relevant to the tax years under appeal were filed in the light of Circular No.20 of 1992 declaring local sale at 2% of the total sales with remaining 8% comprising of exports. The sales so declared were offered for taxation @ 1% being the presumptive tax charged on such sales and the returns so filed were attained the status of assessment order in the light of deeming 1clause (1) of section 120 of the Income Tax Ordinance, 2001. Subsequently, the ACIR, invoked the provisions of section 122(5A) of the, Income Tax Ordinance, 2001, passed the amended orders for both the years and determined the taxable income at Rs.2,53,63,029 and Rs.4,63,10,210 respectively. Being aggrieved, the taxpayer filed appeal before the learned C1T(A), Lahore who vide order dated 20-4-2011 annulled the amended order. Feeling dissatisfied with this treatment the department preferred appeal and the Tribunal vide order dated 12-1-2012 accepted the departmental appeals. The taxpayer challenged this order through the titled miscellaneous applications which were also dismissed by the Tribunal vide order dated 2-8-2012.

3. The taxpayer went in a writ before the Honourable Lahore High Court and their Lordships vide order dated 4-12-2012 in Writ Petition No.22335/12 set aside the Tribunal's order dated 2-8-2012 and remanded the case for fresh decision with the following observations:-- "The learned counsel for the respondent submits that before examining the question whether or not the benefit of Circular 20 could be given to the petitioner, it needs to be determined whether the petitioner is entitled to the benefit of the said circular. The said matter being question of fact cannot be determined by this Court. It would, therefore, be appropriate if this matter is remanded to the Tribunal to hear all concerned parties and decide the matter afresh. The learned counsel for the petitioner does not object to the same. In view of the foregoing, the order dated 2nd August, 2012 passed by the learned Appellate Tribunal Inland Revenue, Lahore is set aside. The matter is remanded to the Tribunal for a fresh decision after hearing all concerned parties in accordance with law. The aforesaid shall be done as expeditiously as possible. In deciding the matter, the Appellate Tribunal shall apply its independent mind to the facts and circumstances of the case without being influenced by its previous observation/ view/opinion. This petition is allowed in the aforenoted terms."

4. It was in this background the titled miscellaneous applications were refixed/reheard and after bearing both the representatives of the parties decided as under.

5. The main grievance of the applicant is that the taxpayer was denied the benefit of Circular No.20 of 1992 despite the fact that it was still intact and very much in existence. A clarification was also issued by the Federal Board of Revenue to this effect which was duly brought to the notice of the ATIR. It has been argued by the learned AR of the appellant that the Board Circular No.20 of 1992 regarding direction to treat 20% of local sales of exporters as export sales is still in field. Learned AR of the taxpayer relying upon the judgments reported as PLD 2004 SC 77 = 2004 PLC (C.S.) 34, 2002 SCMR 71 and 2006 CLC 1555 argued that constitution guarantees equal protection of law among persons who are equally placed and that persons similarly placed have equal rights and they cannot be treated differentially and discriminatorily. The learned AR continued to state that department itself has treated local sales of exporters as export sales in many cases, therefore, charging tax on local sales in this case would be nothing except a discriminatory treatment.

6. Learned DR on the other hand defended the departmental action by arguing that local sales should legally be assessed under the Head "Business Income" under section 18 of the Income Tax Ordinance.

7. Having considered the arguments of the rival parties and having perused the available record we have observed that the AR of the taxpayer has relied upon the following judgments:-- PLD 2004 SC 77 = 2004 PLC (C.S.) 34.

Relief having been granted to a respondent by laying down criteria strictly in accordance with principles enshrined in Article 25 persons which are equal protection of law among persons whish are equally placed, therefore all those persons who fall under that category to whish respondent belonged would also be entitled for the same benefits, judgment of court may be treated as judgment in rem. (para 20 page 175 sideline C." "2002 SCMR 71:

Two groups of persons similarly placed cannot be treated differentially dictates of law, justice and equity required exercise of power by all concerned to advance the cause of justice and not to thwart it. (para 12 page 81 sideline C.)" "2002 CLC 1555.

Persons similarly placed would have equal rights. When certain rights were declared to be available to one more of such persons, then all such persons similarly placed with them would stand declared entitled to such right. Denial of equal right to such persons would be sheer discrimination and contravention of Article 25 of Constitution. (para 21 page 1572 sideline M)". "2007 SCMR 410.

concept of equal protection of law envisages that a persons or class of persons should not be denial the rights, which are enjoyed by other persons in same situation. (para 7 pages 429 and 430 sideline F)." 2011 YLR 2705.

This is not the intention of law that dispute between the parties should not be decided on technicalities but the law is meant for advancement of justice and justice can be done only if both the parties are heard and case is decided on merits. Under Article 10-A of Constitution of Islamic Republic of Pakistan, it is the fundamental right of the parties to be heard and to provide an opportunity of fair trial. (para 13 page 2709 sideline H)".

8. Giving due consideration to the arguments as well as the case-laws cited supra we have no doubt that the circular having instructions to treat 20% of local sales of exporter as export sales is still in field. In number of cases it has been held that the circular instructions issued by the FBR (Old CBR) are not binding on the Tribunal. The circular in question embodied instructions which are quite contrary to law. Board has no authority to issue directions to treat 20% of local sales as export sales of exporters. This Tribunal cannot give any findings/directions on the basis of such unlawful instructions. However, we agree that departmental officers are under legal obligation to follow the instructions of the Board. In such situation, where departmental officer has not followed the Circular instructions, it is for the Board to hold such officer accountable.

9. At the same time we, however, agree with the arguments of the learned A.R. that on the same issue, similar treatment should be accorded to all the taxpayers. If the department on the basis of Circular instructions of CBR has treated less than 20% of local sales (of exporter) as exports, then similar treatment should also be given to the taxpayer in the years under appeal before this Tribunal. At this juncture we express our inability to decide the case in favour of the taxpayer on the basis of the Circular emanating from the Board which is contrary to law; however, we, on the same issue, cannot favour the discriminatory treatment to different taxpayers. In such situation we feel it quite appropriate to remand the case back to the taxation officer with the directions to settle the issue and give the same treatment as is given to the exporters in respect of their local sales in similar circumstances.

10. Accordingly, the orders passed in I.T.As. Nos. 849 and 840/LB/2011 dated 12-1-2012 and thereafter on M.As. Nos. 76 and 77/LB/2012 if dated 2-8-2012 are rectified/modified to the extent indicated above. CMA/48/Tax(Trib.) Order accordingly.