Huzaima Bukhari & Dr. Ikramul Haq

In the Finance Bill 2020, presented along with federal budget 2020-21, a highly lamentable—rather unconstitutional amendment is proposed—to the effect that for availing right to appeal the aggrieved taxpayer will have to deposit 10 percent of the demand upheld and certified by the Commissioner of Appeals (CIR) prior to filing appeal before Appellate Tribunal Inland Revenue (ATIR). In 2003 & 2004, on the dictates of the International Monetary Fund (IMF), the then Central Board of Revenue (CBR), now renamed as Federal Board of Revenue (FBR), in the new income tax law [Income Tax Ordinance, 2001] made right to appeal conditional on payment of certain amounts before the first appellate authority [Taxpayers’ right to free and fair justice,Business Recorder, February 21, 2002]. Now, after 18 years, under the IMF’s programme, such unconstitutional condition has resurfaced. An enormous raise is also proposed in appeal fee [500% in company and 250% in non-company cases for first appeal and 250% for second appeal]. These measures in Finance Bill 2020 amount to denying the fundamental right of free and unfettered access to justice!

It is well-established that mostly harsh, arbitrary, illegal and excessive orders are passed to show “performance” and/or “collection” (sic) by adjudicating officers that ultimately are quashed in Tribunal or by higher courts—only those sustained that are legal and based on reasons and evidence. However, at the level of CIR, it becomes difficult in majority of the cases to get relief as they work directly under the administrative control of FBR that by itself is travesty of justice [Draft law on National Tax Tribunal—I, Business Recorder, November 3, 2017].

It is also against the command of the Supreme Court of Pakistan that no appellate forum should work under the administrative control of Executive. This principle was laid down by the Supreme Court of Pakistan in Government of Baluchistan v Azizullah Memon PLD 1993 SC 31 that “separation of judiciary from executive is the cornerstone of independence of judiciary”.

The proposed amendment, if approved, not only would be violative of supreme law of the land but will also give a free hand to the officers of Inland Revenue Service (IRS) to collect 10% of disputed tax demand upheld by the CIR by pressurizing him/her—their promotions and transfers remain in the hands of FBR high-ups! It will also be in utter violation of Article 10A of the Constitution of Islamic Republic of Pakistan [“the Constitution”], which says: “For the determination of his civil rights and obligations or in any criminal charge against him a person shall be entitled to a fair trial and due process”. Demanding 10% of disputed tax before adjudication by an independent appellate forum is gross violation of fundamental right guaranteed by the Constitution of free access to justice. Therefore, the proposed amendment is against the Constitution and binding judgements of Supreme Court and High Court under Article 189 and 201, respectively, that unfettered right of appeal before an independent court/tribunal cannot be denied or made conditional.    

The proposed amendment through Finance Bill 2020 intends to insert the following sub-section in section 131 of the Income Tax Ordinance, 2001:

(2A) No appeal under sub-section (1) shall be admitted by the Appellate Tribunal unless ten percent of the amount of tax upheld by the Commissioner (Appeals) has been deposited by the taxpayer.

The above suggestion, if given by the IMF, which we doubt very much, confirms that people sitting in Washington DC, who want to reform our system, do not know even the fundamental laws and factual situations of Pakistan what to speak of peculiar tax culture and social milieu. It is a reality that through unbridled and unchecked power, taxation officers raise unlawful demand that hardly stand the test of appeals/references in ATIR, High Court and Supreme Court but taxpayers suffer and incur heavy costs of litigation without getting any damages in the end, even when orders are held arbitrary/unlawful.

The right to unfettered justice is a constitutional guarantee for every citizen of Pakistan, which the Parliament and/or Government cannot curtail. The Finance Bill 2020, prepared by a team of FBR approved by the cabinet, exposes their level of competence in understanding the Constitution! This condition of payment of disputed demand amounts to curtailment of fundamental right of citizens and would be extensively abused to collect tax through capricious orders creating exorbitant demands. It proves that the Government of Pakistan Tehreek-i-Insaf (PTI), like its predecessors has no respect for the supreme law of the land (the Constitution) and judgements of the superior courts; violating with impunity Article 189 and 201 of the Constitution. In Mehram Ali and Others v. Federation of Pakistan and others PLD 1998 SC 1445, the Supreme Court held:

“That the right of “access to justice to all” is a fundamental right, which right cannot be exercised in the absence of an independent judiciary providing impartial, fair and just adjudicatory framework i.e. judicial hierarchy.  The Courts/Tribunals which are manned and run by executive authorities without being under the control and supervision of the High Court in terms of Article 203 of the Constitution can hardly meet the mandatory requirement of the Constitution.”

All judicial/quasi-judicial organs and appellate authorities as a matter of principle and in consonance with the Constitution should be totally separated from the Executive to ensure their independence in the true sense of the word. On this issue, many articles appeared in this newspaper, namely, ‘Draft law on National Tax Tribunal’, Business Recorder, November 3 & 4, 2017, Platinum jubilee of Tax Tribunal, Business Recorder, January 22, 2016, Revamping tax justice system, Business Recorder, December 19 & 20, 2014,  Recuperate tax justice system, Business Recorder, November 29, 2013, Hoodwinking Dar, Business Recorder, August 23 & 24, 2013 and Tax Appellate System: Need for paradigm shift,Business Recorder, June 2, 2009.

Tax policies like above, if really dictated by IMF, are reminiscent of the British period when East India Company’s henchmen used to go to the peasant abodes and snatch most of their produce. According to many historians, the East Indian Company’s tax collectors used to take away one-half to two-thirds of the crops. Therefore, the peasants’ life was most miserable during the colonial period. The present government of PTI by proposing condition of depositing 10% upheld tax by CIR prior to filing of appeal in ATIR has resurrected the days of East India Company. IMF needs to clarify its position.

In seeking justice, no preconditions can be imposed. Amendment suggested in Finance Bill 2020 is violative of the well-established principles of free and fair justice guaranteed under the Constitution of Pakistan. It should be recalled immediately. Passage of this amendment by Parliament would amount to violating Article 10A of the Constitution. Any law repugnant to fundamental right is ultra vires and void ab initio. The FBR, Ministry of Law and Justice, if vetted it, and the Cabinet have obviously overlooked that in a number of reported cases, such as Sonia Silk v. CBR 2001 PTD 1789 and Chenab Cement Products (Pvt.) Ltd v Banking Tribunal, Lahore and others PLD 1996 Lah.672, the superior courts held that condition to deposit a portion of tax to avail the right of appeal, if mandatory, would be violative of fundamental rights of free and unfettered justice guaranteed under the Constitution of Pakistan.

This amendment and rise in appeal fee, if not withdrawn and passed by National Assembly will certainly be challenged in the High Court(s) under Article 199 of the Constitution of Pakistan being an impediment in the way of seeking unfettered justice. In fact, conditions of payment of disputed demand when imposed earlier [2002 and 2003] led to a number of writ petitions challenging their constitutionality and ultimately the same had to be withdrawn by the Parliament through Finance Act 2004.

The Government of PTI, instead of even making ATIR free from clutches of Executive as per directions of the Supreme Court, is further muzzling it by giving right of appointment of members to the Prime Minister—see details in Subverting Tax Tribunals, Business Recorder, January 24, 2020.

One wonders if the PTI Government, contrary to its claims, really believes that “it holds the superior court in the highest esteem”. The Parliament, in approving such an amendment in the past was a sad reflection on its competence and oath of every member to not only act according to the Constitution but also protect it. Needless to point out that obedience to Constitution is even otherwise an obligation of all citizens, as provided in Article 5(2) that says: Obedience to the Constitution and law is the inviolable obligation of every citizen wherever he may be and of every other person for the time being within Pakistan.  

It is high time that the PTI Government and all members of Opposition in Parliament take note of the proposed amendment. It should not only be withdrawn, but a stern action should also be taken against those who drafted it to show IMF how they intend to achieve the unreasonably fixed revenue target through such unconstitutional measures! One hopes that the brilliant Attorney General of Pakistan, who himself is a recognised scholar of the Constitution, after reading this article, will advise the PTI Government to immediately take remedial measure of withdrawing the proposed amendment, and abide by the Constitution and judgements of the superior courts as narrated above.

________________________________________________________________________

The writers, lawyers and partners in Huzaima, Ikram & Ijaz, are Adjunct Faculty at Lahore University of Management Sciences (LUMS)