ISLAMABAD: The Supreme Court declared that the change made to Section 127(1) of the Income Tax Ordinance 2001 by the Financial Act (FA) 2012 was discriminatory under Article 25 of the Constitution and thus, ultra vires to the Constitution.
A three-member bench, headed by Justice Umar Ata Bandial, heard the appeals of Commissioner Inland Revenue, Peshawar, against the Peshawar High Court (PHC), which held that there was a right of appeal in all cases.
The judgment authored by Justice Muneeb Akhtar said: "The change made to [Section] 127(1) by FA 2012 was discriminatory within the meaning of Article 25 and being in violation of the fundamental right so conferred liable to be struck down.
"The result is that at all times material for present purposes the right of appeal under s. 127(1) had the form that it took as a result of FA 2011, which meant that like the respondents in the first set of appeals, those in the second set also had such right."
The appeals arose under the Income Tax Ordinance, 2001 and raised a question: whether or not in the facts and circumstances of the case, the respondent taxpayers had a right of appeal to the Commissioner (Appeals) under s. 127.
In all the appeals before the High Court, provisional assessment orders were made against the respondents under s. 122C(1). In the first set of appeals those orders were made in 2011, and attained finality (in terms of subsection (2)) after FA 2011.
Thereafter, the respondents filed their appeals before the Commissioner (Appeals) under s. 127.
In the second set, the provisional assessment orders were made in 2013, attained finality on respective dates in that year and thereafter the respondents filed their appeals.
The appeals in the first set were filed before the change made by FA 2011.
However, in the second set, the appeals were filed after the change made by the latter. The High Court held that there was a right of appeal in all cases.
The issue before the apex court was regarding periods in which appeals were filed.
The Court noted prior to FA 2010 (period A), when s. 121 alone was in the field, there was a right of appeal against a best judgment assessment. Between FA 2010 and FA 2011 (period B), when s. 122C was brought in but s. 127 remained untouched, the right of appeal remained unaffected.
There was a right against either the provisional assessment order or the (deemed) final assessment.
The effect of FA 2011 (period C) was to take away the right of appeal against the provisional assessment order, but the right against the (deemed) final assessment remained unaffected. The purported effect of FA 2012 (period D) was to take away altogether the right of appeal against any order/assessment made under s.122C. Finally, FA 2017 (period E) restored the position to what it had been prior to FA 2010.
The first set of appeals was filed against the (deemed) final assessments and the matters lay within period C.
Therefore, the Court with regards to the first set, answered in the affirmative, i.e., in favour of the respondents and against the department.
Regarding the second set of appeals, as they all related to 2013, the Court said they lay in period D, when by virtue of the change made by FA 2012 the right of appeal stood wholly precluded.
It noted that it is well established that a right of appeal is a substantive right, which has to be conferred by statute.
The judgment observed that all the taxpayers had a right of appeal under s. 127 up to FA 2010 (the period A identified in para 11 supra), and from FA 2017 onwards (period E)).
In between, they also had a right of appeal between FA 2010 and FA 2011 (period B) and a curtailed right between FA 2011 and FA 2012 (period C). Between FA 2012 and FA 2017 (period D), within which the respondents now under consideration fell, there was no right of appeal at all.
It said that the second set of the respondents were lawfully denied a right of appeal and there was discrimination within the scope of Article 25, and the change made by FA 2012 in s. 127 was in violation of the Constitution.
The judgment said that an appeal under s.127 is a right and that an order by the Commissioner (Appeals) is appealable to the Appellate Tribunal and from there the matter can be taken to the High Court by way of a tax reference.
Copyright Business Recorder, 2021
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