Huzaima Bukhari & Dr. Ikramul Haq
“….the raison d’être of establishing special tribunals has been to dispense better quality of justice where people, better trained in particular fields and disciplines could provide quality decisions and resolution of disputes…. Appointing members to these tribunals on political basis or who are otherwise incompetent or have doubtful integrity would prove completely counterproductive…..”—2000 PTCL CL 515
January 25, 2016 is the platinum jubilee of Income Tax Tribunal [renamed as Appellate Tribunal Inland Revenue (ATIR) on October 28, 2009], an event that will go unnoticed in Pakistan. Neither the Ministry of Law nor All Pakistan Tax Bar has even taken notice of it. On the contrary in India, the event is going to be celebrated in a befitting manner with great fanfare. The two-day celebrations at Convention Hall, Ashok, Chanakyapuri, New Delhi on 24th & 25th January, 2016, will be honoured by President of India as chief guest. The event will be attended by Chief Justice of India, Union Minister of Finance, Corporate Affairs and Information & Broadcasting, Union Minister of Law & Justice and Union Minister for Communications & Information Technology. Where are our judiciary and government?
Ignoring an historic event shows how much importance we give to administration and dispensation of justice. The tax appellate system is at the brink of collapse in Pakistan. The present Chairman ATIR is facing litigation; his appointment is challenged in Lahore High Court. This is the way we celebrate platinum jubilee of an institution having quite a chequered history. ATIR is now in doldrums due to politicization and infighting. What a sorry state of affairs on its platinum jubilee!
The decadence of tax tribunals—Customs and Inland Revenue—in Pakistan, like many other institutions, is highly lamentable. In 2013, the Federal Board of Revenue (FBR) managed to hoodwink the government of Nawaz Sharif by including in the Finance Act 2013 a number of unconstitutional provisions relating to ATIR. The most serious violation of the supreme law of the land was amendment in section 130 of the Income Tax Ordinance, 2001 facilitating appointment of departmental officials as ‘Judicial Members’ in ATIR.
Our Finance Minister nodded to these tax proposals without realising what the bureaucrats of FBR were up to. The Cabinet and Parliament also acted just as a rubber stamp for passing the Finance Bill 2013. They were equally guilty of violating the Constitution and destroying an institution having cherished history. FBR used elected representatives as an instrument to destroy the independence of a judicial organ of the State. Allowing appointment of FBR officials as judicial members was in utter violation of the injunctions of the higher court disregarding Articles 189 and 201 of the Constitution of Pakistan. This violation persists even till today despite our indication.
FBR, cleverly taking benefit of the elected members’ ignorance of tax laws, got inserted in the Finance Act 2013 [earlier in 2012 as well], a number of amendments that crippled the already ineffective tax appellate system—appointment of tax officials as Judicial Members was aimed at converting ATIR into a ‘camp office’ of FBR. The officialdom of FBR merely wanted affirmation of arbitrary and unlawful orders passed by taxation officers to meet budgetary targets and they succeeded in it. Although the tax bars agitated against this amendment, they failed to file any public interest petition in Supreme Court under Article 184(3) of the Constitution.
Message on Income-tax Appellate Tribunal of India on completing its 60 years
On this historic day of 25th of January, the Income-tax Appellate Tribunal was constituted in 1941. It completes sixty years and celebrates its Diamond Jubilee today. The Income-Tax Appellate Tribunal (ITAT) is one of the oldest temples of justice in our country. It is said that the older the temple, the greater is its sanctity and reverence. On this solemn occasion rededicates itself to the lofty ideals which inspired its creation, namely, Sulabh Nyay & Satwar Nyay which means easy and quick justice. It has adopted the following criteria for its working:
Freedom from technicalities;
Expert knowledge of their particular subject
Throughout the 75 years of Tribunal’s existence in India, the qualification for appointment as Judicial Member has been the same as for the appointment of a High Court Judge. In Pakistan, not only a departure from this practice has been made but many political appointments were made of mediocre persons. In Pakistani scenario, platinum jubilee has little significance unless the Tribunal is made truly independent, effective and competent. The quality of Tribunal’s orders has substantially deteriorated in recent years.
Every time the courts or tribunals are seized with cases filed by the Department, it just goes to show that FBR really does not understand its role as a responsible agency. It is bent upon wasting hard earned taxpayers’ money on fruitless litigation. It is so obvious from scanning through the cases decided during the last five decades. FBR passes arbitrary and illegal orders and adding insult to injury forces taxpayers to costly and long-drawn litigation. Unfortunately, there is no accountability mechanism to check arbitrary powers of officers. They should be subjected to pecuniary damages where Supreme Court, High Courts, Tribunals observe that they transgressed and abused their powers. Tax bars should campaign for it and demand necessary amendment in tax codes.
For appointing Accountant Members, the Ministry of Law selects people nominated by FBR, mostly unwanted and undesired. Judicial Members have always been persons qualifying to become Judges of High Court, but in 2013 this legacy of 72 years was destroyed in Pakistan. FBR wanted both Accountant and Judicial Members from Inland Revenue Service. This was patently against Para 5 of the National Judicial Policy 2009 which says:
“All special courts/tribunals under the administrative control of Executive must be placed under the control and supervision of the Judiciary, their appointments/postings should be made on the recommendation of the Chief Justices of concerned High Court.”
Strangely, All Pakistan Tax Bar did not challenge the unconstitutional amendment in the Supreme Court. Historically, Account Members, coming from FBR, were officers in Grade 21 (Chief Commissioners) or Commissioners in Grade 20 with 5 years’ experience. The Finance Act 2012 reduced this condition to 3 years’ experience. This facilitated induction of junior officers who could easily be influenced by FBR in the hope of better postings on their return to the parent department. But the amendment by Finance Act 2013 to have Judicial Members in Grade 20 [Finance Bill 2013 proposed Grade 18 officers!] from FBR with law graduation was totally unlawful and shameful. It further destroyed the already ailing 4-tier tax appellate system—Need for National Tax Court, Business Recorder, May 6-7, 2011.
The setting up of the Tax Tribunal in 1941 brought about a paradigm shift in the system of redressal of grievance. The scheme of things in the Tribunal envisaged complete functional independence of the institution, a high degree of legal and technical expertise of the Members manning the benches, user friendly, simpler and informal procedures, and inexpensive and quick justice delivery.
In India, only Accountant Members are selected from amongst senior officers of Indian Revenue Service and from amongst Chartered Accountants having at least 10 years of practice in taxation. Thus, every bench has the unique advantage of examining issues from the point of view of a trained legal expert as also from the perspective of a mature revenue person or Chartered Accountant, who has knowledge and understanding of real life tax and business realities. Normally, one of the Members in the bench is sufficiently a senior person with reasonable exposure to the varied situations dealt with in different cases. While, on the factual aspects, a decision of the Tribunal is final, on substantive questions of law, jurisdiction of the High Court can be invoked. Interference by the High Court and the Supreme Court, however, is more of an exception than the rule.
The insertions of words in section 130 by Finance Act 2013: “and, except in special circumstances, the person appointed should be a judicial member” and amendment through Finance Act 2012 to lower the service period requirement of Commissioner to be Member of the Tribunal to three years [section 130(4)(ii) are against the principles of independence of judiciary. The original position of law that only a judicial member can be Chairman of the Tribunal must be restored. In fact, the ATIR and Customs Tribunal should not be under the control of Ministry of law and should be placed directly under the higher judiciary.
The tax reforms must start from making tax tribunals truly independent and effective judicial forums. The present pathetic state of tax administration can be measured from the fact that every year over 25,000 appeals/writ petitions are filed in Pakistan against the orders/actions of the tax authorities. Litigants have to wait for years to obtain orders. On the contrary, in civilized countries, very few cases go for litigation to higher courts. A case in point is the United Kingdom where the number of income tax payers alone is 30 million whereas appeals reaching the Lord Chancellor in a year number only around 30. This confirms the tremendous public satisfaction with the credibility of system and good governance by fiscal administration.
Appellate authorities, as a matter of law and principle, should be independent in the true sense of the word. The honourable apex court of Pakistan has elaborated this principle in Government of Baluchistan v Azizullah Memon PLD 1993 SC 31 by holding that “separation of judiciary from executive is the cornerstone of independence of judiciary.” The right of access to justice to all is a well-recognized inviolable right enshrined in the Constitution of Pakistan. It concludes “the right to be treated according to law, the right to have a fair and proper trial and right to have an impartial court or tribunal. Justice therefore can only be done if there is an independent judiciary which shall be separate from executive and not at its mercy or dependent on it”—PLD 1982 SC 146.
It is a matter of record that none of the governments in Pakistan, military and civilian alike have ever followed the directions of the honourable apex court for giving independence to tax tribunals. It is vital for judicial reform strategy that administration of the tax appellate system should be independent of executive. It is the duty of the government to undertake a significant programme of modernization of the tax appellate system, aimed at creating the best possible way of resolving disputes between taxpayers and tax collectors. In the given Pakistani political milieu, it is imperative that all the judicial and quasi-judicial authorities working in tax appellate system should be regulated and supervised by the High Court under whose territorial jurisdiction they work. This is the only way to ensure independence of judiciary in its true substance and constitutional requirement [Article 203].
The writers, lawyers and partners in law firm, Huzaima, Ikram & Ijaz, are Adjunct Faculty at Lahore University of Management Sciences (LUMS).