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ISLAMABAD: The Supreme Court held and declared that Rule 22(1) of Appellate Tribunal Inland Revenue Rules, 2010 to the extent, whereby, it allows the Tribunal to dismiss an appeal in default is ultra vires Section 132(2) of Income Tax Ordinance and is, therefore, struck down to that extent.

A two-judge bench, headed by Chief Justice Umar Ata Bandial, and comprising Justice Syed Mansoor Ali Shah decided this on the appeal of Farrukh Raza Sheikh against the Lahore High Court (LHC)’s verdict.

The petitioner taxpayer challenged the amendment in the assessment order passed against him under Section 122(1) of the Ordinance before the CIR (Appeals), Lahore. Remaining unsuccessful, he challenged the order passed by the CIR (Appeals) before the Tribunal. The appeal of the petitioner was dismissed for non-prosecution vide order dated 09.2.2021 and thereafter, the applications for restoration of the same were also dismissed for non-prosecution vide order dated 17.6.2021.

The petitioner challenged both the orders through a constitutional petition challenging the vires of Rule 22(1) of the Rules before the LHC, which was dismissed on 03.03.2022.

The judgment authored by Justice Mansoor states that Section 132(2) of the Ordinance is far more detailed, explicit, direct, and clear compared to Section 33(4) of the Income Tax Act, 1922. It is; therefore, underlined that the logic and rationale behind Section 132(2) of the Ordinance and the consistent jurisprudence evolved over the years around Section 33(4) of the erstwhile tax law is to promote and support an efficient tax administration and encourage smart tax governance in the country.

The judgment said: “Re-engineering the litigative process and procedure by removing dilatory steps in the dispute resolution mechanism is a welcome development. The order of dismissal of appeal on the ground of default, gives rise to a new set of litigation on a technical issue totally unrelated to the tax controversy in hand.”

It also said any further proceedings against the order of dismissal is a futile exercise for a tax collector, as well as, the taxpayer, as the real tax dispute goes unattended till such time that the parties settle the issue of dismissal in default from the highest court in the land. The parties, if successful have to start all over again before the Tribunal on merits. Section 132(2) avoids this double exercise and mandates that the appeal be decided on merits so that any further proceedings before a higher forum lead to a decision on merits.

The judgment said unnecessary delays in tax dispute resolution seriously impair the overall tax governance in the country, which rests on efficient tax management and speedy tax collection. Section 132(2) of the Ordinance has no appetite for delays and penalises the indolent party by empowering the Tribunal to proceed ex-parte on the basis of the available record. It is also to be noted that Section 132(2) does not encourage adjournments by the parties. The Tribunal can proceed ex-parte if any of the parties is in default on the date of hearing. “In default” means absence of a party without a sufficient cause on any date fixed for hearing.

The apex court held that the appeal of the petitioner shall be deemed to be pending before the Tribunal and shall be decided by the Tribunal within a period of three months from the receipt of the judgement.

Copyright Business Recorder, 2022

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