COMMISSIONER OF INCOME-TAX Versus ANSAR TEXTILE MILLS, LAHORE

MUHAMMAD FAZLE GHANI, J . ‑By an application under section 17(1) of the Sales Tax Act, 1951, the Commissioner of Saps Tax, North Zone, West Pakistan, Lahore, required the Appellate Tribunal to refer the following question of law for the opinion of this Court arising from the order of the Tribunal dated the 10th of December 1963, in S. T. A. No. 19 of 1962‑63, relating to the chargeable accounting period 1957‑58: -

"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 11‑4‑1962 under section 10(3) of the Sales Tax Act was barred by the period of limitation?"

2, The brief facts are that the Sales tax assessment in this case was made on the 11th of April 1962, for the chargeable accounting period 1957‑58. In appeal the assessee contested the assessment before the Appellate Assistant Commissioner on merits only but his appeal was dismissed. On second appeal before the Tribunal the question of limitation was taken up for the first time of arguments and it was contended that although the assess ment is expressed to be under section 10(3) of the Sales Tax Act, 1951, but in fact, it is a case of escaped assessment and should, have been completed within four years of the last date of the financial year to which it related. The Tribunal disposed of the appeal by a short order and held that the assessment should have been completed before the 11th April 1962, relying on a previous judgment of their own.

3. In their statement of the case the Tribunal explained "that from the reasoning adopted by their Lordships of the Supreme Court in Nagina Silk Mill v. Income-tax Officer PLD 1963 SC 322, it is manifest chat the word "year" in suction 34 subsection (2) of Income‑tax Act means a period of 365 days, is not the same thing as an assessment year nor the definition of year brought in by clause (17) to section 2 fitted in section 34 and some other sections like sections 33-A and 35 and so on of that Act, which merely denote length of time'. In fact their Lordships, in order to strengthen the view, they were taking, relied on the method of amending legislation followed in the Sales Tax Act and in that connection referred to the proviso to section 28 of that Act which alone validly enlarge the period of limitation for the specified period of 1954‑55. "On this parity of reasoning the Tribunal explained that" proviso to section 2(20) of the Sales Tax Act was also enacted for Government accounting purposes in the same way as was found in clause (17) of the Income‑tax Act by the Supreme Court and did not affect the limitation period whenever provided in the Act. According to the Tribunal section 28 of the sales tax was analogous to section 34 of the Income-tax Act and, therefore, section 2(20) of the Sales Tax Act adding a proviso to the definition of "year" was construed as clause (17) was done by the Supreme Court in the above noted case.

4. Section 28, of the Sales 'Fax Act, 1951 reads: ‑

"If for any reason any tax payable under this Act 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 notice to the assessee and making such inquiry as he considers necessary."

5. The learned counsel for the assessee has argue ha in t e case of the Sales Tax Act, tire definition of the "year" should also be considered to have be considered corporate' into the Sales Tax Act for governmental accounting purpose and for this construction he relies on the following passage of the Supreme Court judgment at page 322 of P L D 1963 S C 331: ‑‑

"Where the Legislature indeed contemplated the extension of a limita tion period it apparently makes an expressed enactment to that effect. Reference in this connection may be made to the following amendment affected in the Sales Tax Act of 1951 by section 5 of the newly inserted Third Schedule to the Act to section 28 of that Act .........

`Provided that for the purposes of making any assessment in dais section or the year beginning on the first day of April, 1954 and ending on the 31st day of March 1955, the period beginning on the first day of April, 1958 and ending on the 30th day of June, 1959 should be deemed to be one year.'

Here limitation seems to have been extended by three months but only in respect of one assessment year viz 1954‑55 for the purposes of that Act. If the Legislature had intended a similar extension as regards the period of limitation prescribed by subsection (2) of section 34 of the Act an identical devise could have been here adopted."

6. From the above observations it is quite apparent that provisions of subsection (2) of section 34 are not in pari materia with the provision of section 28 of the Sales Tax Act of 1951. Moreover, the word "year" was not defined in trite Income‑tax Act till the promulgation of the Finance Ordinance XXV of 1960 on the 30 th of June 1960, which added a new cause after clause (16) of section 2 of that Act. Under the Sales Tax Act Tax of 1951, the definition of the year was enacted right from its inception and under clause (20) of section 2 it has been defined to mean the financial year. Clause (19) of section 3 of General Clauses Act of 1897 defined financial year as the year commencing on the first day of April before its amendment. By General Clauses (Amendment) Ordinance. 1959, the definition of "year" given by clause (19) of section 3 of the General Clauses Act of 1897 was amended as follows: ‑

"(a) as respect the period before the first day of April, 1959, the year commencing first day of April and ending on the 31st day of March;

(b) as respect the period from the first day of April 1959 to the 30th day of June 1959 (both days inclusive) that period; and

(c) thereafter the year commencing on the first day of July and ending on the 30th day of July."

By Finance Ordinance of 1959, the following proviso was added to the definition the year as given in clause (20) of section 2 of the Sales Tax Act of 1951:‑

Provided that as respect the period beginning on the first day of April 1959, and ending on the 30th day of June 1960, shall be deemed to be a financial year and all the provisions of this Act shall be construed accordingly.

It is thus apparent that there is a clear departure in the language of section 2(17) of the Income‑tax Act and the proviso to clause (20) of section 2 0, the Sales Tax Act of 1951, therefore, while reading the word "year" under section 28 or under any other section of the Sales Tax Act of 1951, it has to be construed subject to the definition clause while no such provision `tae been made for the definition of the "year" under the Income‑tax Act of 1922.

The Supreme Court in Nagina Silly Mill's case while interpreting the pro vision of section 34(2) of the Income‑tax Act, held‑‑ "that the definition of the year was probably incorporated into the Act for governmental accounting purposes." but this argument will cot be available to the assessee because under the Sales Tax Act the period commencing on the first day of April 1959 and ending on the 30th day of June 1960, which comprises of IS months shall constitute one financial year whereas under the General Clauses Act the period from first day of April 1959, to 30th day of June 1959, comprising of three months only constitutes one financial year. The proviso to clause (20) of section 2 of the Sales Tax Act makes it clear that the definition of the "year" must yield to the context and on account of this expressed pro vision of the law the period of limitation mentioned in section 28 has to be construed accordingly. Their Lordships of the Supreme Court have re marked in Nagina Silk Mill's case that the limitation seems to have extended by three months but only in respect of one assessment year i: e. 1954‑55 but the attention of the Supreme Court was not invited to the definition of the "year" as amended by Finance Ordinance; of 1959 which governs the definition of the "year" in section 28 also, nor the definition of terns "year" was subject‑matter of interpretation before their Lordships. The proviso to section 28 is not an independent provision but has to be read subject to the definition clause where the year beginning on the first day of April 1959, and ending on the 30th day of June, 1960 has been defined as a financial year. No doubt the proviso to section 28 has extended the period of limitation by 3 months in respect of the assessment year 1954‑55 but a similar extension for subsequent year was not necessary because by virtue of the proviso t section 2(20) the financial year 1959‑60 ended on the 30th day of June instead of 30th day of March 1960. Therefore, the next finan cial year became the year beginning on the first day of July 1960 and end ing the 30th day of June, 1961. In the case of the financial year 1959‑60 it will be deemed to have been extended to a year of 15 months ending on the 30th of June 1960. On a careful perusal of the two provisos, already referred to, we are of the opinion, that the Legislature has expressed in clear terms their intention that the year of 1959‑60 will be a year of 15 months The "year" under section 28 of the Sales Tax Act on the simple construction: of the language is "financial year" the limitation, therefore, stands automatically extended by three months and as such the assessment of the respondent for the charge year 1957‑58 made on the 11th of April 1962, was within the period of four years. We answer the question accordivg1y but in view of the complicated question of law we leave the parties to bear their own costs.

Question answered accordingly.