LAHORE - The Lahore High Court has accepted a 19-year-old appeal of Sharif family challenging incorrect assessment of income tax and subsequent orders passed by the appellate tribunal back in 1995.

A division bench comprising Justice Abid Aziz Sheikh and Justice Shahid Karim heard the lengthy arguments of all parties concerned on the point that whether the Income Tax Tribunal was justified in condoning the delay in filing of the appeals before the tribunal.

On July 16, 1995 and Dec 2, 1995, the income tax tribunal had passed orders regarding the tax assessment of Rs650 million by the income tax department, ordering the appellants to pay it back to the department. Mian Nawaz Sharif, Mian Shahbaz Sharif, Ittefaq Textile Mills and others had filed the appeal.

As the hearing commenced, the counsel of the Income Tax Department told the bench that the tribunal overlooked delay in filing appeal due to the political influence by the Sharif family.

However, the department’s counsel failed to establish that any action was taken against any of the functionaries of the department for recalcitrance and negligence shown by officials concerned. The counsel also could not prove the political influence before the bench. At this, the bench observed: “The law stands crystallised on the aspect of the reasons which should weigh with the court while considering the application for condonation of delay.”

It also ruled: “The rule is settled that the law of limitation runs against void order, too, which like an illegal order, is liable to be set aside. The law of limitation confers a substantive right and is not a mere technicality to be treated casually.”

The bench noted that the question of limitation was a mixed question of law and fact and reasons must be clearly spelt out to seek an entitlement for condonation. “It seems settled too that in matters of condonation, government or its departments were not entitled to a different treatment and no preference is due to them,” the bench ruled.

The appellants had submitted that the Income Tax department assessed first liability of Ittefaq group and its directors at Rs20 million and during the first government of Benazir Bhutto (late) in 1998 and 1990; the department raised this liability to Rs400m.

During the first government of Nawaz Sharif, they filed an appeal before the department concerned which accepted their appeal and reduced the liability again to Rs20 million, they submitted. However, during Benazir's second tenure the income tax department moved a second appeal and the tax amount was raised to Rs650m.

The appellants told the bench that it took 40 months to the department to raise objection about the assessment instead of the period of 60 days, the legal requirement, and such delay was illegal. They prayed the court to declare the assessment made by the department after an inordinate delay as illegal.