The Tax Laws (Amendment) Act, 2024, which was passed by the National Assembly on April 29, 2024, and received assent from the President of Pakistan on May 3, 2024, and later amended by Finance Act 2024, amounts to the murder of the inalienable, fundamental right of unfettered right to justice in tax disputes.
The tax laws, namely, Income Tax Ordinance, 2001, Sales Tax Act, 1990, and Federal Excise Act, 2005, presently provide a direct appeal to the high court against the order of the first appellate authority (Commissioner of Appeals) who can adjudicate cases where demand is up to Rs20 million. Beyond this amount, the appeal goes directly to the Tribunal. In the high court, for availing a stay order, the law stipulates there is a mandatory payment of 30% of the disputed amount. This is patently against Articles 4, 10A, 18, and 25 of the Constitution of Pakistan.
The first appellate authorities i.e. Commissioner Inland Revenue (Appeals) or Collector (Appeals) are not independent judicial forums as they operate under the administrative control of the Federal Board of Revenue (FBR) and can be transferred at any time to become a part of the field formation assigned for revenue collection targets. The Supreme Court of Pakistan and High Courts, in several cases, held that recovery of demand without a decision by an independent authority should not be made. Some of the cases where such a ruling to this effect were made are:
- Mehram Ali and Others v. Federation of Pakistan and others PLD 1998 SC 1445
- Sunrise Bottling Co. (Pvt.) Ltd v Federation of Pakistan and 4 others (2006) 94 TAX 140 (H.C. Lah.)
- Punjab Provincial Cooperative Bank Ltd, Lahore v DCIT 2002 PTD 2799
- Dawood Textile Printing Industries (Pvt.) Ltd, Faisalabad v Federation of Pakistan and 4 others PTCL 2010 CL.460
The amendments by the Tax Laws (Amendment) Act, 2024, that have been reinforced through the Finance Act 2024, violate the unfettered right of appeal, which is now bridled with heavy fees and a colossal payment of 30% of the disputed demand for availing stay at the high court level.
The right to unfettered justice is a constitutional guarantee for every citizen of Pakistan, which even the Parliament cannot curtail. Tax Laws (Amendment) Act, 2024, prepared by a team at FBR, vetted by the Ministry of Law, approved by the Cabinet, and finally adopted as law by the National Assembly, exposes their level of competence in understanding the Constitution.
The condition of heavy appeal/reference fee and payment of 30% of disputed demand to avail stay at high court level amounts to curtailment of the fundamental rights of citizens. The pecuniary limits of hearing appeals at the levels of Commissioners of Appeals and Tax Tribunal are, as expected, being widely abused by the FBR officials for collection of taxes through capricious orders, creating exorbitant demands.
It proves that the existing government, like its predecessors, has no respect for the supreme law of the land and judgments of the superior courts. It has violated with impunity Article 189 and Article 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 separated from the executive to ensure their independence in the true sense of the word
It needs to be reminded to all that in the wake of the Constitution (Eighteenth Amendment) Act, 2010 right to a fair trial is guaranteed under Article 10A of the Constitution. This fundamental right should be given the widest possible amplitude to cover the well-established principle that all judicial/quasi-judicial organs and appellate authorities as a matter of principle and in consonance with the Constitution should be separated from the executive to ensure their independence in the true sense of the word. By keeping the Appellate Tribunal Inland Revenue and Customs Tribunal (Tax Tribunals) under the administrative control of the Ministry of Law and Justice, the Legislature is committing utter violation of binding judgments of the Supreme Court of Pakistan in terms of Article 189 of the Constitution.
In a detailed article, written at the time of passage of the Tax Laws (Amendment) Act, 2024, it was pointed out: “There is still time for the Attorney General of Pakistan to advise the government to table an amending Bill to remove/amend the following provisions contained in Tax Laws (Amendment) Act, 2024 as these are patently against the fundamental rights enshrined in the Constitution, inter alia, for the following:
- Sub-section (2) of substituted section 130 of the Income Tax Ordinance, 2001 reads: “The Appellate Tribunal shall consist of members who shall be appointed by the Federal Government in such numbers, by such procedure and on such terms and conditions as the Federal Government may prescribe by rules, which shall be made and take effect notwithstanding anything contained in section 237 of this Ordinance or the Federal Public Service Commission Ordinance, 1977 (XLV of 1977) or any other law or rules, for the time being in force”.
The right of appointment of members to the Tax Tribunal by the federal government is unconstitutional. It is also against the command of the Supreme Court of Pakistan that no appellate forum should work under the administrative control of the executive that is Ministry of Law and Justice. 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 the executive is the cornerstone of independence of the judiciary”. It is shocking to see how this clear command under Article 189 of the Constitution was ignored by the Ministry of Law and the Attorney General of Pakistan, who also briefed the legislators on the importance of this amendment. It is a very serious matter and the Supreme Court should take note of the violation of its order, binding under Article 189 of the Constitution.
- Subsection (3) of substituted section 131 of the Income Tax Ordinance, 2001 says: “The prescribed fee shall be twenty thousand rupees in case of a company and five thousand rupees in case other than a company’. In the same manner, subsections (10) and (12) of the substituted section 133 (relating to reference before the High Court) reads as under:
“(10) On an application filed in a particular reference and after affording an opportunity of being heard by the Commissioner, the high court may stay the recovery of tax, subject to deposit with the assessing authority of not less than thirty percent of the tax determined by the Appellate Tribunal or, as the case may be, the Commissioner (Appeals)]. Where recovery of tax has been stayed by the High Court by an order, such order shall cease to affect the expiration of a period of six months following the day on which it was made unless the reference is decided or such order is withdrawn by the High Court earlier”.
“(12) An application under sub-section (1), by the aggrieved person other than the Commissioner, shall be accompanied by a fee of fifty thousand rupees”.
The enormous enhancement in the quantum of fees for filing appeals/references and compulsory payment of 30% of disputed demand for stay by the high court is unconstitutional, amounting to denying the fundamental right of free and unfettered access to justice! It is a well-established fact that mostly harsh, arbitrary, illegal, and excessive orders are passed to show “performance” and/or “collection” (sic) by adjudicating officers that ultimately are quashed by higher courts—only those sustained that are legal and based on reasons and evidence. However, at the level of Commissioner of Appeals, it becomes difficult in the majority of the cases to get relief as they work directly under the administrative control of FBR, by itself is an extreme travesty of justice [Draft law on National Tax Tribunal—I, Business Recorder, November 3, 2017].
- Subsection (5) of the substituted section 133 (relating to reference before the High Court) says: “The Special Bench shall decide a reference within six months from the date of its filing”.
Giving directions to the high court, which is also a constitutional court, is a blatant violation of the Constitution, and an encroachment on the independence of judiciary. Since there is no mention as to what would happen in case a court does not decide the reference within six months of the date of its filing, this provision is directory in nature and not mandatory”.
East India Company’s tax collectors used to take away one-half to two-thirds of the crops. Therefore, the peasant’s life was most miserable during the colonial period. By imposing exorbitant fees and conditions of depositing 30% disputed tax, the present government has resurrected the days of the East India Company
It may be recalled that in 2003 and 2004, on the dictates of the International Monetary Fund (IMF), the then Central Board of Revenue (CBR), later renamed as FBR under the Federal Board of Revenue Act, 2007, in the 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, Dawn Business & Economic Review, March 25-31, 2002]. Now, after 22 years, such unconstitutional conditions have resurfaced.
The amendments through the Tax Laws (Amendment) Act, 2024, are in utter violation of Article 10A of 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 a heavy fee for filing an appeal/reference, even if the demand is less than the said amount, and 30% of disputed tax upheld by the Commissioner of Appeals or Tax Tribunal, is a gross violation of a fundamental right guaranteed by the Constitution of free access to justice.
It is a reality that through unbridled and unchecked powers, taxation officers raise unlawful demands that hardly stand the test of appeals/references in the High Court and Supreme Court, but taxpayers suffer and incur heavy costs of litigation without getting any cost/damages in the end, even when orders are held arbitrary/unlawful.
Tax policies of successive governments like the above 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 India Company’s tax collectors used to take away one-half to two-thirds of the crops. Therefore, the peasant’s life was most miserable during the colonial period. By imposing exorbitant fees and conditions of depositing 30% disputed tax, the present government has resurrected the days of the East India Company.
In seeking justice, no preconditions can be imposed. All amendments made through Tax Laws (Amendment) Act, 2024 and Finance Act 2024 are in clear violation of the well-established principles of free and fair justice guaranteed under Article 10A of the Constitution. Any law repugnant to fundamental right is ultra vires and void ab initio. The FBR, and Ministry of Law and Justice, prepared and vetted these respectively, and the Cabinet overlooked the command in several reported cases 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. Two such are Sonia Silk v. CBR 2001 PTD 1789 and Chenab Cement Products (Pvt.) Ltd v Banking Tribunal, Lahore and others PLD 1996 Lah.672 held.
Needless to point out that obedience to the Constitution is, even otherwise, an obligation for all citizens, as provided in Article 5(2) which 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.
Unfortunately, while passing the Tax Laws (Amendment) Act, 2024, our legislators (sic) ignored clear commands of the supreme law of the land—the Constitution. Now the matter will go to high courts of provinces by way of writ petitions under Article 199 of the Constitution and finally to the Supreme Court of Pakistan, being the final custodian of protecting fundamental rights of the citizens.