COMMISSIONER OF SALES TAX, LAHORE Versus HILAL TANNERIES, LAHORE

1. MUSHTAQ HUSSAIN, J.‑Sales Tax assessment of Messrs Hilal Tanneries, Lahore, for the chargeable accounting period 1957‑58 beginning on the 1st April 1957 and ending on the 31st March 1958, was completed by the Sales Tax Officer concerned on the 20th May 1962. The assessee then unsuccessfully filed an appeal against this aecision before the Appellate Assistant Commissioner. A second appeal was filed before the Tribunal. In the memoranda of both the appeals the impugned orders were convassed on merits. When the case came up for hearing before the Tribunal a fresh objection was taken challenging the vires of the assessment on the ground that the last date for making the assess ment was the 31st March 1962, i.e. 4 years from the end of the chargeable accouning period. As against this, the assessment had, in fact, been completed on the 20th May 1962. It was beyond the period of limitation by a month and twenty days.

2. The case was mainly fought on this question of limitation before the Tribunal where the Department maintained that the word "year" occurring in section 28 of the Sales Tax Act signified a financial year as defined in the

3. Act. By the addition of a proviso by the Finance Ordinance, 1959, this period of assessment was extended by the three months. It was, therefore, contended that the assessment had been completed within time and that the period of limitation had not expired.

4. The Tribunal, however, came to the conclusion that the word "year" means only a period of twelve months and the amendment made in 1959 which ran as follows did not apply to the present case because the period of limitation having started on the 31st of March 1958, i.e., before the amend ment came into force, the same could not be stopped except by an express enactment in that regard.

5. The Tribunal, therefore, found against the Department and allowed the appeal. At the instance of the Commissioner of Sales Tax the Tribunal has referred the following question of law to us for opinion

6. "Whether on the facts and in the circumstances of the case, the Tribunal was right in holding that the assessment for the charge year 1957‑58 made on the 20th May, 1962, was barred by the period of limitation."

7. Section 28 ran as follows :‑

8. "28. Tax not assessed.‑If for any reason any tax payable under this Act has escaped assessment or has not been paid in any year, the Sales Tax Officer may at any time within four years of the end of that year assess the tax payable, after issuing a notice to the assessee and making such .enquiry as he considers necessary.

9. Provided that for the purposes of making any assessment under this section for the year beginning on the first day of April 1934, and ending on the thirty‑first day of March 1955 the period beginning on the first day of April 1958 and ending on the thirtieth day of June 1959 shall be deemed to be one year."

10. ‑Section 2 (20) of the Act as amended by the Finance Ordinance read as follows

11. "(20) "year" means the financial year. Provided that as respects the period beginning on the first day of Aprit 1959 and ending on the thirtieth day of June 1960, the said period shall be deemed to be a "financial year" and all the provisions of this Act shall be construed accordingly."

12. The Tribunal had based its decision on the interpretation of this section `by the Supreme Court in M/s. Nagina Silk Mills. Lyallpur v. The Commissioner, Income‑tax Officer, A‑ Ward, Lyallpur and another ( P L D 1963 S C 323 ).

13. The conclusion was considered in Hossein Brothers (Pak.) Ltd.. Dacca v. Sales Tax Officer, Companies Circle 1, Dacca and others (10 Taxation105) and their Lordships observed as follows

14. "In the present case, as we have already seen, four years mentioned in section 28 began from the Ist of April 1956 and before the period had run out the amendment to section 2 (20) of the, Act Came into effect on the 31st of March 1959. In this view of the matter the contention of Mr. Asrarul Hossain that since there is nothing in the Finance Ordinance to indicate that the amended provision would have retros pective effect, the amendment cannot be pressed into service in the instant case, cannot be accepted. He has in this connection also drawn our attention to the proviso to that section which was also introduced by the Ordinance and the observations of the Supreme Court thereon. We shall reproduce the two provisos and thereafter indicate our conclusions on the argument advanced by Mr. Asrarul Hossain. The two provisos read as follows

15. Proviso to clause (20) of section 2 :

16. "Provided that as respects the period beginning on the first day of April 1959 and ending on the thirtieth day of June 196'0 the said period shall be deemed to be a "financial year" and all the pro visions of this Act shall be construed accordingly."

17. Proviso to section 28

18. "Provided that for the purposes of making say assessment under this section for the year beginning on the first day of April 1954 and ending on the thirty‑first day of March 1955, the period beginning on the first day of April 1958 and ending on the thirtieth day of June 1959 shall be deemed to be one year."

19. The learned counsel has argued that, if there was any intention to extend the period of limitation under section 28 of the Act for assess ment in connection with the year 1955‑56, the first proviso would have been worded similarly as the second one which clearly extended the period of limitation by three months in regard to the yeir 1954‑55. We, however, on a careful reading of the two provisos and giving our anxious consideration to the observation of the Supreme Court in the case already referred to, find that the clear indication by introducing these two provisos is that the period of limitation in regard to both the years 1954‑55 and 1955‑56 would be extended by three months. We, therefore, find no substance in the first contention of Mr. Asrarul Hossain, namely, that the assessment was made without jurisdiction.

20. Since the Dacca High Court interpreted the judgment in the Nagina Silk Mill's case in a manner wholly oppsite to the view expressed by the Tribunal in the case before it, it decided to refer the question of Law to us.

21. The question, therefore, before us is whether their Lordships of the Dacca High Court have correctly appreciated the import of the gagina Silk Mill's case. With utmost repect we beg to differ with the opinion expressed by their Lordships of the Dacca High Court for which they have not assigned any reason. The reasons for our difference are contained in the Nagina Silk. Mill's case itself and the observations made by their Lordships at page 371 of the judgment which run as follows :‑

22. "Where the Legislature indeed contemplated the extension of a period of limitation it apparently made an enactment to that etTect. Reference in this connection may be made to the amendments effected in the Sales Tax Act, 1951, by section 5 of the newly inserted III Schedule to the Act. In section 28 of that Act, the following proviso was added :‑

23. (Here their Lordships have quoted the proviso)

24. Here limitation seems to have been extended by throe nioiitt, but Aiy in respect of one assessment year, i.e. 1954‑55 for the purposes of that Act. If the Legislature had intended similar extention as regards the period of limitation prescribed by subsection (2) of section 34 of the Act an identical device could have been here adopted."

25. In the present case the year involved was 1957‑58 and not 1954‑55, and since according to the view of their Lordships of the Supreme Court reproduced above, the extension of limitation by three months is only in respect of one' assessment year, i.e. 1954‑55 the same is not applicable to the year 1957‑58.

26. Referring to this very observation, the Income‑tax Appellate Tribunal opined in (1963) 8 Taxation 79 (Trib.) ):‑

27. "(5) In our opinion the above observations clinch the whole issue before us. The word 'year' in the instant case means only a period of 12 months as it means similar period in section 27 (3), section 29 and section 30 (1) of the Sales Tax Act. The new definition of the word 'year' as introduced by the Finance Ordinance, 1959 also does not help the Department for the reasons that firstly section 28 does not speak of a financial year and secondly once the period of limitation started under that section with a specific meaning of the word 'year' the same cannot be interrupted to destroy a vested right except by express words of the Legislature as was done in relation to the year 195 4‑55 by adding a proviso to the said section 28. On this view of the matter we hold that the assessment framed in this case was out of time and, therefore, without jurisdiction."

28. We wholeheartedly agree with this exposition of the law.

29. Our answer to the question referred to us by the Tribunal, therefore, is in the affirmative and we are of the view that the assessment for the charge year 1957‑58 made on 20‑5‑1962 was barred by limitation.

30. In the circumstances of the case, there will be no order as to costs. s. Q. Reference answered in affirmative.