COMMISSIONER INLAND REVENUE vs Maj. Gen. (R) Dr. C.M. ANWAR and 2

' SHAHID JAMIL KHAN, J.---This reference application is moved by Department against order of Appellate Tribunal, Inland Revenue, Islamabad Bench ("the Tribunal") dated 1-8-2012 passed in I.T.A.

No.431/IB/2011 relating to tax year 2004 on the following questions of law:-

(1) "Whether on the facts and circumstances of the case, the ATIR was justified to accept the appeal of the taxpayer by ignoring CIR (Appeals) judgment holding departmental action in line with law to compute limitation period for amending assessment for Tax Year 2004 within "5" years in terms of amendment brought in subsection (2) of section 122 of the Income Tax Ordinance, 2001 through Finance Act, 2009?",

(2) "Whether on the facts and circumstances of the case, the amendment brought in subsection

(2) of the section 122 being procedural in nature, shall not operates retrospectively?"

(3) "Whether on the facts and circumstances of the case, the act of the Taxation Officer to amend the assessm ent for Tax Year, 2004 during pendency of audit proceeding when the amendment in subsection (2) of section 122 was brought through the Finance Act, 2009, is within the vires of Law, thereby allowing the Taxation Officer to finalize the amendment of assessment within "Five" years ending on 30-6-2010?"

2. The facts are that income tax return .Filed for tax year, 2004 attained status of an assessment order by operation of law under section 120 of the Income Tax Ordinance, 2001 ("the Ordinance") on 29-9-2004. Case of the respondent taxpayer was selected for audit under section 177(4) of the Ordinance on 5-1-2009. Notice under section 122(9) of the Ordinance was issued on 13-5-2010, proposing amendment under section 122(1) of the Ordinance. In reply, the taxpayer took an objection that the said notice was barred by time as the period of five years lapsed on 28-9-2009 under section 122(2) of the Ordinance as it stood at the time. The Taxation Officer having found the reply as unsatisfactory passed amended assessment order under the section 122(1) of the Ordinance on 30-6-2010.

3. Taxpayer's .Appeal could not succeed before First Appellate Authority. The Commissioner (Appeals) while upholding the amended assessment order observed that amendment brought in subsection (2) of section 122 of the Ordinance, through Finance Act, 2009 was applicable retrospectively.

4. The order of Commissioner (Appeals) dated 19-5-2011 was challenged before the Tribunal and was contested mainly on the point of limitation. Learned Tribunal accepted taxpayer's appeal and held the amended assessm ent order under section 122(1) of the Ordinance was barred by time.

Relevant excerpt from the order of the Tribunal is reproduced to determine whether the proposed questions arise from this order:-- "In view of the above discussion, factual and legal position, it will be found that a right of amendment of assessm ent of the case upto 29th September, 2009 had accrued to the appellant consequent upon filing of return/deemed assessment on 29-9-2004 as per law then prevailing.

The Department could, therefore, complete the amendment upto the above date only. As against this position, proceedings for amendment of assessment under section 122 of the Ordinance were initiated on 13th May, 2010 by issuance of notice under section 122(9) i.e. After lapse of the above stated limitation period and as such the proceedings could not be said to be even pending on the promulgation of the Finance Act, 2009 i.e. On 1-7-2009.

' In view of the foregoing, we have no hesitation to hold that the impugned amendment order is barred by time and therefore, void ab initio. In consequence the appeal is accepted."

5. After examining the proposed questions, in light of the facts found and decision made by the Tribunal, we are of the opinion that only questions Nos. 1 and 2 arise out of the order of the Tribunal, the same are therefore being answered. Since the law point raised in question No.3 was neither raised nor decided by the Tribunal therefore we decline to answer the same. Reliance in this regard is place on the judgment by A Apex Court in Messrs Nida-i-Millat (Pvt.) Ltd., Lahore v. Commissioner of Income-Tax, Zone No.1, Lahore (2006 SCM R 526).

6. Learned counsel for the applicant department has supported the reasons given and law relied upon by the Commissioner (Appeals) and argued that the amendment in subsection (2) of the section 122 of the Ordinance by Finance Act, 2009 was procedural in nature, therefore, was applicable retrospectively.

7. Before embarking upon the discussion to answer the admitted questions, scrutiny of the repealed and repealing provisions of section 122(2) of the Ordinance is imperative, the same are reproduced therefore: "(2) An assessm ent order shall only be amended under subsection (1) within five years after the Commissioner has issued or is treated as having issued the assessment order on the taxpayer."

(Emphasis supplied)

' This subsection was substituted by the following subsection (2) by Finance Act, 2009:-- "(2) No order under subsection (1) shall be amended by the Commissioner after the expiry of five years from the end of the financial year in which the Commissioner has issued or treated to have issued the assessm ent order to the taxpayer." (Emphasis supplied)

8. The substituted section 122(2) of the Ordinance requires the limitation to run after the expiry of five _years from the end of the financial year which in this case could be 1-7-2005, i.e., from the end of the financial year ending on 30-6-2004. As a consequence the deemed assessment under section 120 dated 29-9-2004 shall expire on 30-6-2010 instead of 28-9-2009 under the law before substitution.

9. Show-Cause Notice has been issued on 13-5-2010 when limitation under the substituted law had expired on 28-9-2009, therefore, assessment under section 120 had attained finality under the repealed subsection (2). Reference is made under section 6(1)(c) of the General Clauses Act, 1897, which reads:- "Where this Act, or any Central Act or Regulation made after the commencement of this Act, repeals any enactment hitherto made or hereafter to be made, then, unless a different intention appears, the repeal shall not: (a)...............................................

(b)...............................................

(c) "Affect any right, privilege, obligation or liability acquired, accrued or incurred under any enactment so repealed".

Limitation as it stood at the time of filing of the return will apply to the case of the petitioner.

Reliance is placed on Messrs Fawad Textiles Mills Ltd. Through Director, Lahore v. Pakistan through Secretary, Ministry of Finance and 3 others (2005 PTD 14) and Commissioner of Income Tax v.

Dharamchand Dalchand [1 ITC 264 (Nagpur)]

10. It is therefore, trite law that even procedural law cannot take away vested and existing rights by applying it retrospectively, unless such intention of the legislature is expressed in unequivocal terms.

11. In light of the discussion made and law referred, answer to question No.1 is in the affirmative and the answer to question No.2 is in the negative. On the whole reference filed by the department is dismissed.

12. Office shall send a copy of this judgment under the seal of the Court to the learned Appellate Tribunal Inland Revenue as per section 133(5) of the Ordinance.