ISLAMABAD: The Federal Board of Revenue (FBR) has laid down strict conditions on the Commissioner (Legal) in Large Tax Offices (LTOs) or Regional Tax Offices (RTOs) for future filing of appeals before the high courts / apex court to avoid embarrassment and heavy penalties on filing of frivolous cases.
According to the FBR’s instructions received by the field formations, each field office should constitute a scrutiny committee to forward its recommendations to the relevant Commissioner (IR) for filing of appeals.
The FBR has put whole responsibility of appeal filing on Commissioner Legal in LTO/RTOs without realising the fact that several other key officials including the FBR Member Legal are practically involved in the decision making process of filing appeals before the High Courts/SC. There are only signatures of the concerned Commissioner Legal on the appeal to be filed before the higher courts.
As per the FBR’s instructions, the FBR is directed to refer to the order of the Supreme Court of Pakistan, dated September 15, 2022 in the subject case wherein it has been held as under: “2...We were once again faced with a petition for leave to appeal where the Commissioner Inland Revenue (petitioner) was not satisfied with three concurrent decisions and needlessly filed this petition considering this Court as an appellate forum. The Commissioner Inland Revenue is one of the biggest litigants before this Court. In matters involving important questions of law the Commissioner Inland Revenue can agitate a matter but to do so in every case and a matter of course is uncalled for.
The Commissioner Inland Revenue should seriously consider whether a matter needs to be brought before this Court by application of mind. If the Commissioner of Inland Revenue continues to waste the time of this Court by filing frivolous cases substantial costs may in future be imposed.”
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In view of the above, the FBR has further directed to convey the following instructions: (i) The proposed CPLA (constitutional petition for leave to appeal) shall not be forwarded to the Board as a routine matter and in a mechanical manner. The CPLAs shall only be forwarded to the Board after due diligence and application of mind in framing important questions of law that are required to be brought before the apex court.
(ii) While framing the questions of law it must be ensured that the issues raised therein have not been settled earlier by the Supreme Court of Pakistan in some other cases.
(iii) If a high court has passed a judgment on the basis of a case law or its earlier judgment or judgment of another higher court, it must be ensured, while preparing the CPLA, that the judgement/case law relied soon by the High Courts has not attained finality due to non-filing of appeals by the department or confirmation of the same by the Supreme Court. If the relevant Commissioner is of the opinion that the judgment relied upon by the High Court is distinguishable on factual and legal plane the same must be elaborated in the proposal for filing of CPLA.
In order to ensure the above and to avoid any embarrassment before the apex court as well as imposition of substantial costs by the supreme court on account of frivolous litigation in future, a scrutiny committee comprising of senior officers and relevant legal counsel be notified in each formation which shall forward its recommendations to the relevant Commissioner (IR) for filing or otherwise of a CPLA In a particular case. The relevant Commissioner (IR) may then forward the proposal for filing of CPLA to the Board through proper channel, the FBR’s instructions added.
When contacted, a legal expert told Business Recorder that the reference/appeal before high court and CPLA (constitutional petition for leave to appeal) is filed by concerned commissioner Inland Revenue. It is generally believed that Commissioner being the authority under law takes the decision of filing references to higher courts singularly.
However, it is a decision of collective wisdom through a system placed in different hierarchies of FBR. After the decision of the appellate tribunal, legal counsels on panel of the FBR give opinion for filing of further appeal to higher courts or not. In the next stage, the deputy commissioner and additional commissioner give their independent opinion.
Later, the Commissioner makes his own opinion of filing appeal against order of appellate tribunal or not.
Under the next phase, the proposed questions of law framed by legal counsel are forwarded to chief commissioner who sends those questions to Member Legal in FBR head quarters for approval. In the Board, a Second Secretary or Secretary examines the proposed questions of law and judges their suitability for filing before the court of law.
The second secretary or secretary has a depository of approved questions of law on various legal issues received all across the country from various tax offices and already filed in all five high courts and apex court. He takes help from approved questions of law on identical issues and sees whether a question of law is arising from impugned judgement of appellate tribunal or not. After doing this, he recommends approval of questions of law to the relevant FBR Chief Legal. The FBR chief Legal after considering proposal of second secretary forwards the proposal to FBR Member Legal who is the final authority to approve questions of law.
Following approval of FBR Member Legal, the concerned commissioner being the authority under the law and having jurisdiction over the case files the reference to high court or CPLA to supreme court. Therefore, this whole process of filing appeal to higher courts passes through eight persons and not a single person. Since the commissioner is the authority to file an appeal and appeal is filed with his signatures he is at the forefront to bear all the responsibility.
Seven other persons’ right from legal counsel to FBR Member Legal are in fact supporting the commissioner to reach the right decision to file appeal or otherwise and what questions should be put to test of higher courts for their judgement.
The higher courts have taken stern view of filing frivolous appeals to superior courts and in the case of a food product company warned the commissioners to avoid frivolous appeals to avert costs under Cost of Litigation Act 2017. In some cases, High Court has already imposed heavy costs on department for filing frivolous appeals.
FBR Legal Wing has also circulated this judgment to field offices on October 5, 2022 with directions to comply with the direction of court without taking into account that the legal wing itself gives approval on questions of law. This has put Commissioners into a difficult position as other seven persons who are part of the decision on filing of appeal to higher courts have been given immunity from the responsibility.
He further explained that except the legal counsel, all other seven persons right from Deputy Commissioner to FBR Member Legal are civil servants and they do not necessarily have law degrees. They are selected through competitive exams and undergo for two years of training in the academy. Training is also imparted by senior civil servants and chartered accountants.
After two years training a certificate is awarded to successful candidates and this certificate is the sole legal document making them eligible for posting and as an authority to interpret the laws which is subject to appeal up to the SC level.
With the introduction of Income Tax Ordinance, 2001 many changes were brought in FBR specifically old style assessment system was replaced with self assessment system and the return of income was made an assessment order.
The appeal system up to the level of tribunal remained intact in new Income Tax Ordinance 2001 whereas changes were made in filing of reference before high court and the SC.
In the repealed Income Tax Ordinance 1979, section 136 dealt with filing of reference to the high court. According to the old law, it was the appellate tribunal who framed questions of law on its own order upon application filed by the taxpayer or commissioner. If tribunal approved those questions then the tribunal itself referred those questions to high court for adjudication. If the tribunal refuses the questions, taxpayer or commissioner filed application to High Court for framing questions of law for adjudication.
He further explained that we can see a marked change in filing of reference to High Court under the old law when compared with the new law. Under old law the commissioner, appellate tribunal and high court themselves were involved in the process of framing questions of law. This process itself eliminated filing of frivolous cases before the high court. Now the decision-making process for filing a reference and framing questions of law has been handed over to bureaucrats and court involvement has been ousted and result is frivolous litigation.
In the old law there was section 137 which allowed filing of appeal to the SC after its fitness was certified by the high court. In this case also the court involvement was there.
Under the Income Tax Ordinance 2001, there is no section providing filing of appeal to the SC. For this reason, under Article 185(3) of the constitution, a constitutional petition for leave to appeal is filed which is first decided by the Supreme Court whether the appeal lies or not. No court is involved in decision making process of filing of CPLA to the Supreme Court.
There is a need to revive the old law on the filing of reference to the High Court and appeal to the SC, which is the only remedy available to curb the menace of frivolous litigation, the expert added.
Copyright Business Recorder, 2022
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