Stereo. H C J D A 38.

Judgment Sheet
IN THE LAHORE HIGH COURT LAHORE
JUDICIAL DEPARTMENT

W. P. No. 10593 of 2022.

M/s Presson Descon Versus Federation of Pakistan, etc.
International (Pvt.), Ltd.
JUDGMENT
Date of Hearing: 20.04.2022

Petitioner by: M/s Shahbaz Butt, Ibrahim Hassan, Asad

Abbas Raza, Muhammad Usman Zia,
Muhammad Ahsan Mahmood, Muhammad
Adnan Afzal, Kashif Akbar Bandesha, Salman
Farooq and M. Irfan Arif Sheikh, Advocates.

Respondents by: M/s Barrister Ahmed Pervaiz and

Saffi-ul-Hassan, Advocates.
Mr. Asad Ali Bajwa, Deputy Attorney General
for Federation of Pakistan.
Mr. Ishtiaq Ahmad, Commissioner Inland
Revenue, LTO, Lahore.

Shahid Jamil Khan, J:- This judgment interprets Sections 124

and 226 of the Income Tax Ordinance, 2001 (“Ordinance of 2001”)
to hold that an order, having attained finality, has to be given appeal
effect under the Section 124. Commissioner’s plea of pending
application for rectification before Appellate Tribunal Inland
Revenue (“Appellate Tribunal”) is held against the provisions and
scheme of the Ordinance of 2001.

2. Petitioner has assailed order dated 22.10.2021 which is passed

on an earlier direction by this Court in Writ Petition No.55590 of
2021. Operative part of impugned order is reproduced:-

“6. Further, the sole reason to avail the full statutory limit in
giving the appeal effect is that the instant case involves
ascertainment of a vital factual/legal issue i.e. adjustability of the
Income tax deducted u/s 148(7) of the Income Tax Ordinance,
2001 for the taxpayer under consideration. It would be
worthwhile to mention here that on the exact same issue in Tax
Year 2013 for the same taxpayer, leave to appeal has been
Writ Petition No. 10593 of 2022 2

granted to the department by the Honorable Supreme Court of

Pakistan and the CPLA No. 3498-L/2019 is pending before the
apex court. Therefore, it would only be in the fitness of things to
avail the time limitation so provided to the department by the
Statute i.e. as per provisions of Section 226(b)(ii) of the
Income Tax Ordinance, 2001.
7. The matter is thus decided as above in compliance to the
directions by the Honorable Lahore High Court, Lahore.”
[Emphasis supplied]

3. Petitioner had approached this Court for implementation of

order dated 01.12.2021 by Appellate Tribunal against which,
assertively, Reference Application was not filed and limitation for
this purpose had expired. Direction was given for providing an
opportunity of being heard and to inform the petitioner if any stay
was granted by Learned Division Bench. The petitioner was directed
to be treated strictly in accordance with law, if Appellate Tribunal’s
order was holding field.

It is an admitted position that Reference Application was not

filed against Appellate Tribunal’s order and Commissioner, present
in Court stated that non-filing of Reference Application was a
conscious decision. It was, however, pleaded that an application for
rectification of the order dated 01.12.2021 was filed before the
Appellate Tribunal on 10.01.2022, which is pending, therefore,
limitation of two months, for giving appeal effect under Section
124(4) would stop running till its decision. It is apprised, on query,
that no interim relief is granted by the Appellate Tribunal, hence, the
order, sought to be implemented is intact and holds the field.

4. Learned counsel for the petitioner submitted that the matter is

being delayed on one pretext or the other with malafide intention. He
apprised, on facts, that an order, favorable to the petitioner-taxpayer,
was passed by the Commissioner (Appeals). Appeal was filed before
Appellate Tribunal, by respondents-department, which was
dismissed being barred by time. The plea for condonation of delay
was also declined for not filing any application. The order by
Commissioner (Appeals) has attained finality, in absence of a
Writ Petition No. 10593 of 2022 3

Reference Application. Filing of application for rectification is, with

malafide intent of not implementing the order.

Learned counsel for the respondents-department has reiterated

that a rectification application to seek redetermination of certain
factual issues, is filed in the Appellate Tribunal. He argued that
Section 124(4) is to be read with Section 226(b)(ii) of the Ordinance
of 2001, therefore, the period, in which any proceeding is pending,
has to be excluded, while calculating the limitation of two months
for giving appeal effect.

In response, learned counsel for the petitioner has opposed the

interpretation to submit that provisions of Section 226 of the
Ordinance of 2001 are not applicable.

5. Heard. Record perused.

6. This Court is often seized of the issue, in Constitutional

jurisdiction, when the judgment/order by Appellate Tribunal is not
implemented by a Taxation Officer/Commissioner. Generally, this
Court does not pass any order for implementation if limitation for
filing of Reference Application is available to the department. If
Reference Application is filed, the case is normally referred to the
Commissioner for providing opportunity of being heard and
intimation of an interim order, if so passed against the order sought
to be implemented. Under the latter scenario, a similar direction was
given. However, a legal question has arisen, on passing of the
consequential impugned order, which needs determination.

7. No cavil that an order or judgment competently passed by a

Court or Tribunal, is to be implemented unless reversed by a higher
Appellate Court or is suspended during proceedings before it. In this
case, undeniably the order, in favour of petitioner taxpayer, by the
Commissioner (Appeals), has attained finality, as Appellate
Tribunal’s order, dismissing appeal, was consciously not challenged
under Section 133 of the Ordinance of 2001, before Division Bench
of this Court.
Writ Petition No. 10593 of 2022 4

Perusal of the record compels this Court to observe that

inactions in discharge of statutory obligations, like filing of appeal
before Appellate Tribunal within time and non-filing of reference,
apparently, is being covered up by moving rectification application,
which is not a regular proceeding. The application under Section 221
of the Ordinance of 2001 is meant to rectify a mistake, legal or
factual, floating on record, where no interpretation or long drawn
arguments are required to rectify it, for which limitation is five years.
At times the remedy of rectification under Section 221 of the
Ordinance of 2001 is misused by both sides, therefore, in number of
judgments, Superior Courts have trimmed the jurisdiction to bring it
in conformity with the intent of legislature. The judgment by August
Supreme Court of Pakistan in Commissioner of Income Tax
Company’s II, Karachi v. Messrs National Food Laboratories (1992
PTD 570) enshrines the contours for exercising the jurisdiction.
Though the observations, ibid, are not relevant to the merits of case
but are necessary for further discussion.

8. The legal proposition before this Court is very simple, whether

Commissioner can delay implementation of an order which has
attained finality under the Ordinance of 2001 by filing a rectification
application before Appellate Tribunal and pleading it as a pretext
that limitation of two months under the Section 124(4) would
continue until the application for rectification is pending. Relevant
part from both Sections, ibid, are reproduced for quick reference:-

“124. Assessment giving effect to an order.-

(4) Where direct relief is provided in an order under section

129 or 132, the Commissioner shall issue appeal effect
orders within two months of the date the Commissioner is
served with the older.”

“226. Computation of limitation period.- In computing the period

of limitation, shall be excluded-
(a) ….
(b) in the case of an assessment or other proceeding
under this Ordinance,-

(i) …
Writ Petition No. 10593 of 2022 5

(ii) the period, if any, for which any proceeding for the
tax year remained pending before any Court,
Appellate Tribunal or any other authority.”
[Emphasis supplied]

Applicability of two months limitation for giving appeal effect

under Section 124(4) of the Ordinance of 2001 is not in dispute.
Perusal of Section 226(b)(ii) of the Ordinance of 2001 envisages
exclusion of the period spent during proceeding “pending before any
Court, Appellate Tribunal or any other authority”. The period,
sought to be excluded in clause (b), is of “assessment or other
proceeding”. The appeal effect order envisaged under 124(4), does
not come within the phrase, “an assessment or other proceeding” as
no proceedings in shape of hearing etc., are required for this purpose.

9. To determine whether Subclause (ii) of Clause (b) to Section

226 of the Ordinance of 2001 can be read with subsection (4) of the
Section 124, wholistic examination of the Section 124 is necessary.
The provisions under the Section 124 deal with every conceivable
situation, after an order by the forums superior to the Commissioner.
Two months limitation is provided to implement an order giving
“direct relief” under subsection (4). It is important to understand the
situation, how direct relief is different from other relief for the
purpose of Section 124, to examine it, provisions under subsection
(1) to (4), are reproduced:

“124. Assessment giving effect to an order. — (1) Except

where sub-section (2) applies, where, in consequence of,
or to give effect to, any finding or direction in any order
made under Part III of this Chapter by the Commissioner
(Appeals), Appellate Tribunal, High Court, or Supreme Court
an assessment order or amended assessment order is to be
issued to any person, the Commissioner shall issue the
order within two years from the end of the financial year in
which the order of the Commissioner (Appeals), Appellate
Tribunal, High Court or Supreme Court, as the case may be,
was served on the Commissioner.
(2) Where, by an order made under Part III of this Chapter by
the Appellate Tribunal, High Court, or Supreme Court, an
assessment order is set aside [wholly or partly,] and the
Commissioner or Commissioner (Appeals), as the case may
be,] is directed to [pass] a new assessment order, the
Writ Petition No. 10593 of 2022 6

Commissioner [or Commissioner (Appeals), as the case may

be, shall [pass] the new order within [one year from the
end of the financial year in which] the Commissioner [or
Commissioner (Appeals), as the case may be,] is served
with the order
Provided that limitation under this sub-section
shall not apply, if an appeal or reference has been
preferred, against the order passed by Appellate Tribunal or
a High Court.
(3) Where an assessment order has been set aside or
modified, the proceedings may commence from the stage
next preceding the stage at which such setting aside or
modification took place and nothing contained in this
Ordinance shall render necessary the re-issue of any notice
which had already been issued or the re-furnishing or re-
filing of any return, statement, or other particulars which had
already been furnished or filed.”
(4) Where direct relief is provided in an order under section
129 or 132, the Commissioner shall issue appeal effect
orders within two months of the date the Commissioner is
served with the order.
[Emphasis supplied]

Subsection (2): Subsection (1) excludes a situation under subsection

(2) so it is examined first. subsection (2) provides one year’s
limitation, where an assessment order is set aside, by Appellate
Tribunal, High Court or Supreme Court and the Commissioner or
Commissioner (Appeals) is directed to pass a new order. More
importantly, proviso to the subsection provides that the limitation
under it, shall not apply if appeal or reference is filed against such
order by Appellate Tribunal or High Court.

In other words; implementation of such direction cannot be sought or

suspension of such order by Appellate Tribunal or High Court is not
necessary if appeal or reference is filed, which shall operate as
automatic stay. Rational behind the automatic stay is to avoid
multiplicity of proceedings or litigation, in case appeal effect order
under Section 124(2) is passed during proceedings, pending appeal
or reference.

The order by the Appellate Tribunal or High Court envisaged under

subsection (2), is not providing direct relief, but disposing of a
Writ Petition No. 10593 of 2022 7

matter with direction to pass a new assessment order. In legal Jargon

we call it a remand order, with direction for passing fresh order after
proceedings afresh.

Subsection (1): The situation under subsection (1) is slightly

different, where no order or direction for fresh assessment order or
denovo proceedings is passed, but as a consequence of any finding or
direction and to give effect to findings or directions, an assessment
order or amended assessment is to be issued to a person, the
Commissioner shall issue the order within two years.

No direct relief is provided by the orders envisaged under subsection

(1) nor filling of an appeal or reference against such order would
operate as automatic stay order.

Subsection (3): Subsection (3) deals with a situation where an

assessment order is set aside without any direction or is modified in
a way that proceeding can be reinitiated. Such proceeding would
recommence without issuance of fresh notice, refurnishing of or
refilling of return, statement or other particulars, which had directly
been furnished or filed.

Importantly, no limitation is provided in this subsection for

completion of re-initiated proceeding and passing of an appeal effect
order. Provisions of Section 226(b)(ii) shall apply in this situation,
which excludes the period, for which proceedings remained pending
before a higher Appellate forum or Court.

The orders envisaged, in subsection (3) are also not providing any
direct relief, because after the setting aside or modification, same
proceeding are required to be undertaken again.

Subsection (4): Subsection (4) to Section 124 is the only

subsection, which envisages the orders giving direct relief and
limitation for implementation of such orders is minimum i.e. two
months. Filing of reference or appeal against such order does not
stop the limitation, therefore, it is imperative that interim relief be
Writ Petition No. 10593 of 2022 8

sought for suspending the operation of such order, from the Tribunal
or Court, where Appeal or Reference is pending.

Complete understanding of Section 124, ibid, clarifies the concepts

of automatic stay, or where limitation would stop running and where
stay is to be sought in an Appellate or Reference Jurisdiction.

10. Provisions of Section 226 are general in nature and are

providing a method of calculating a period from the limitation
provided under different provisions of the Ordinance of 2001. For
better understanding, provisions under the Section need to be read
collectively:-

“226. Computation of limitation period.- In computing the period

of limitation, shall be excluded-

(a) In the case of an appeal or an application under this

Ordinance, the day on which the order complained of
was served and, if the taxpayer was not furnished with a
copy of the order when the notice of the order was
served on the taxpayer, the time requisite for obtaining
a copy of such order; and

(b) in the case of an assessment or other proceeding under

this Ordinance,-

(i) the period, if any, for which such proceedings

were stayed by any Court, Appellate Tribunal or
any other authority; or

(ii) the period, if any, for which any proceeding for

the tax year remained pending before any
Court, Appellate Tribunal or any other authority.”
[emphasis supplied]

Under clause (a) the time spent in obtaining copy of an order,

sought to be complained against, is to be excluding from the
limitation provided to challenge such orders.

Clause (b) deals with assessment or other proceedings under

the Ordinance of 2001. Its Subclause (i) envisages the period for
which assessment or other proceedings were stayed by a Court,
Tribunal or an Authority.
Writ Petition No. 10593 of 2022 9

Subclause (ii) excludes period, for which any proceeding for a

tax year remained pending before a Court, Tribunal or Authority.
This Subclause appears to be in conflict with Subclause (i), but a
careful reading would show that in Subclause (i), the Court, Tribunal
or Authority is approached during an assessment or other
proceedings, which were stayed. Whereas, under Subclause (ii)
proceedings before the Court, Tribunal or Authority, relating to a tax
year are envisaged, which are pending after completion of an
assessment or other proceeding. In case of remand, if Court, Tribunal
or the Authority directs to proceed again, as contemplated in the
Section 124(3), without issuance of fresh notices etc., the period
consumed in proceedings before the Court, Tribunal or Authority
shall be excluded from the period of limitation, to complete the
assessment or other proceeding.

The difference is that under Subclause (i), existence of stay

order is a prerequisite, whereas under Subclause (ii) the period
consumed in proceedings before the Court, Tribunal or Authority
shall be excluded even in absence of any stay order.

11. For what has been discussed, it is held that proceeding in an

application for rectification before Appellate Tribunal does not fall
under Section 226(b)(ii) of the Ordinance of 2001, therefore, the
Commissioner is bound to issue appeal effect order under the Section
124(4), within two months, as the order by Commissioner (Appeals)
has attained finality.

12. It may be observed that Commissioner has ample power, after

implementation of order under the Section 124(4), if the rectification
application is accepted, to take a remedial action for recovery of tax
while giving effect to the Appellate Tribunal’s order under relevant
provisions of the Section 124.
 Writ Petition No. 10593 of 2022 10

The excuse and grounds for non-implementation raised by

learned counsel for the respondents-department have no force,
therefore, this petition is allowed.

(Shahid Jamil Khan)

Judge
Waqas*

Approved for reporting

Judge