ISLAMABAD - Supreme Court of Pakistan on Monday ruled that the tax tribunals must proceed ex-parte to decide the cases on the basis of available records rather than dismissing them on the basis of non-prosecution.
It was declared in a seven-paged judgment authored by Justice Syed Mansoor Ali Shah while hearing an appeal in a tax matter and the court also noted that Section 132(2) does not encourage adjournments by the parties. The ruling said that the tribunal can proceed ex-parte if any of the parties is found to be “in default” on the date of hearing.
In this regard, the apex court struck down Appellate Tribunal Inland Revenue Rules, 2010 as being ultra vires section 132(2) of the Income Tax Ordinance 2001. The top court explained that “in default” meant the absence of a party without a sufficient cause on any date fixed for hearing.
A division bench of the apex court led by Chief Justice of Pakistan Justice Umar Ata Bandial conducted hearing in the matter.
The judgment mentioned that Section 132(2) of the ordinance said that the tribunal may proceed ex-parte to decide the appeal on the basis of the available record. On the other hand, Rule 22(1) stipulates that the tribunal may if it deems fit, dismiss the appeal or application in default.
Justice Shah noted 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.
Therefore, the order said, it is 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 encourages smart tax governance in the country.
The court also noted that the order of dismissal of the appeal on the ground of default gives rise to a new set of litigation on a technical issue totally unrelated to the tax controversy at hand.
It further explained that any further proceedings against the order of dismissal are 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 court said that 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 that these 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.
It maintained, “Section 132(2) of the Ordinance has no appetite for delays and penalizes 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 the default” means the absence of a party without a sufficient cause on any date fixed for hearing.
The court said, “For the reasons elaborated above, we hold and declare that Rule 22(1) of the Rules to the extent whereby it allows the tribunal to dismiss an appeal in default is ultra vires Section 132(2) of the ordinance and is, therefore, struck down to that extent.”
The apex court directed its office to dispatch copies of the judgment to the federal government through the Secretary Ministry of Finance, Revenue Division Islamabad and to the Federal Board of Revenue (FBR) through its chairman, for information and compliance.