LAHORE: A Lahore High Court division bench has allowed a 19-year-old appeal of Sharif family against ‘incorrect’ assessment of income tax by the Income Tax Department and subsequent decisions of IT appellate tribunal upholding the tax assessment for the year 1988-89.

The appellants included Nawaz Sharif, Shahbaz Sharif, Farooq Barkat, Iqbal Barkat, Hasan Barkat, Husain Barkat, Zahid Shafi, Javed Shafi, Tariq Shafi, Pervez Shafi, Idrees Bashir, Aslam Bashir and Ittefaq Textile Mills.

The appellants pleaded that the tax department assessed the liability of the Ittefaq Group and its directors at Rs20 million, but the tax was raised to Rs400m during the first Benazir (late) government. They said, on an appeal before the IT commissioner (appeals), the amount was reduced to Rs20m.

However, they said during Benazir’s second tenure as premier the department moved a second appeal and the tax amount was raised to Rs650m. They said objection to the assessment was raised after over 40 months on Dec 19, 1994, instead of the normal 60-day period and as such the decision on face of it was illegal.

IT tribunal verdicts set aside

They requested the court to declare the assessment made by the department after an inordinate delay as illegal.

The tribunal by the impugned judgment condoned the delay and proceeded to hear the matter on merit and accepted the appeals filed by the department on July 16, 1995. The appeal of the Sharif family was admitted to regular hearing on June 9, 1996. The bench comprising Justice Abid Aziz Sheikh and Justice Shahid Karim heard arguments of all parties concerned on the point that whether the tribunal was justified in condoning the delay in filing of the appeals before it.

Tax department’s counsel defended the condoning of the delay by the tribunal taking a plea that the appellants (Sharif family) exercised political influence and successfully manoeuvred to escape the liability.

In its detailed order, the bench observed that the department failed to establish that any action was taken against any of the functionaries of the department for recalcitrance and negligence shown by those officials. Moreover, the counsel for the department was not in a position to rebut that no evidence with regard to the political influence was produced nor was any material placed before the tribunal, which would establish the plea of political influence.

The bench observed: “The law stands crystallised on the aspect of the reasons which should weigh with the court while considering the application for condonation of delay.”

It ruled: “The rule is settled that the law of limitation runs against void order, too, which like an illegal order, is liable to be set aside. The law of limitation confers a substantive right and is not a mere technicality to be treated casually.”

It said in matters of inordinate delay, courts should be slow to condone delay as rights had come to vest in the other party.

It noted that the question of limitation was a mixed question of law and fact and reasons must be clearly spelt out to seek an entitlement for condonation. It seems settled too that in matters of condonation, the government or its departments were not entitled to a different treatment and no preference is due to them.

The bench allowed the appeal and set aside the impugned decisions of the income tax tribunal passed on July 16, 1995, and Dec 2, 1995.

Published in Dawn, August 4th, 2015

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