M/s Bestway Cement Limited VS Additional Commissioner Inland Revenue

Form No: HCJD/C.

JUDGMENT SHEET.

IN THE ISLAMABAD HI H COURT, ISLAMABAD.

JUDICIAL DEPARTMENT.

Writ Petition No. 67 of 2016.

M/s Bestway Cement Limited Vs.

Additionol Commissioner lnlond Revenue, etc.

Petitioner's by, M/s Hafiz Muhammad ldrees, Muhammod Mohsin Nazir, Midn Tauqeer Aslam, Usman Shaukat, Ch.

Naeem Ul Hoq ond Mazhar Ul Haq Hashmi, Advocotes in their respective petitions.

Respondent's by. Hafiz Munawar lqbal, Babar Bilal and Riaz Hussain Azam Boparo, Advocotes.

Date of heoring. 07.77.2077.

AAMER FAROOQ, J.- This judgment shal! decide the instant petition as well as petitions mentioned in the schedule ttAD attached herewith as common questions of law and facts are involved.

02.The petitioners, in all the petitions, are the lncome Tax assesses. ln this behalf they are aggrieved of notices issued by the respondent department under section 122(9) read with section 122(5A)of the lncome Tax, Ordinance, 2001., whereby information has been sought alongwith record and documents with respect to the tax returns for year 2OtO-71-12.

03.Learned counsel for the petitioners, inter alia, contended that the notices have been issued under section 122(5A) of lncome Tax Ordinance, 2001 and certain information has been sought with Writ Petition No.67 of 2016 Paple 1

respect to the tax returns for various years (Tax years 2010,2011 & 2OL2l. In this behalf it was contended that amendment was made in Section 122(5Al ibid in the year 2012, through Finance Act,2O!.2 whereby, the assessment could be modified or changed after making inquiries as necessary; that prior to the said amendment Commissioner could only modify the assessment on the basis of available record if it appeared that the assessment is erroneous or prejudicial to the interest of revenue. lt was further contended that retrospective effect cannot be given to the amendment made regarding conducting of inquiry. Reliance was placed on cases reported as "The Commissioner of lncome tax v. M/s Eli Lilly Pakistan (Pvt.) Ltd.o (Civil appeal No. 778 of 2OO5), " Messrs Allied Engineering Services Ltd v. Commissioner of lncome tax " (2015 PTD 2562) and "The Commissioner lnland Revenue v. Moj.Gen (R) Dr. C.M. Anwar etc " (PTCL 2Ot4 CL. 608).

3.Learned Counsel for the respondent department, inter olio, contended that the amendment made is procedural in nature therefore, shall operate retrospectively. Reliance was placed on cases reported as "Commissioner of lncome Tox, Companies-ll and onother v. Homdord Dowakhona (Waqf) Karachi " (PLD 1992 SC 847), ' S.M tunoid v. President of Pdkistan " (PLD 1981 Supreme Court !2), "Commissioner of lncome Tax v. Olympio " (1988) 57 Tax aG (H.C. Kar).

4.The petitioners are aggrieved of notices issued uls L22 (5A) of lncome Tax Ordinance, 2001, to the extent that they are seeking information and record to examine whether the returns filed and assessment orders passed are erroneous and I or prejudicial to revenue. Section 122 (5Al in its original form did not provide the Competent Authority with any power to make inquiries or call for information but could only examine the returns and the assessment order to determine if the same is erroneous or prejudicial to the interest of revenue. ln 201,2 amendment was Writ Petition No.67 of 2016 Page 2

made and the Competent Authority was provided with power to make inquiries as deemed necessary. ln its present form section 122(5Al ibid reads as follows:

'KSrt) Subject to sub-section (9), the Commissioner may after making, or causing to be macle, such enquiries as he deems necessaryrJamend, or further amend, an assessment order, if he considers that the assessment order is erroneous in so far it is prejudicial to the interest of revenue.J

5.The sole question for determination before this Court is whether the amendment made in said section in 2Ot2 through Finance Act, 2012 regarding making of inquiries shall operate prospectively or retrospectively. The amendment incorporated in Section 122(5Al ibid is procedural in nature as it provides power to the Competent Authority to make inquires as it deems necessary, however, it affects the substantive rights of the assessee regarding the modification or change in the assessment order. ln such like cases where any amendment impacts the substantive rights it is an established principle that the amendment/ law operates prospectively. The Hon'ble Lahore high court in case reported as "The Commissioner lnland Revenue v. Maj.Gen (R) Dr. C.M. Anwar etc " (PTCL 201,4 CL. 608) held that it is a trite law that even procedural law cannot take away vested rights by applying it retrospectively unless such intention of legislature is expressed in unequivocal terms; similarly the Hon'ble Sindh High Court in case titled as" Messrs Allied Engineering Services Ltd v. Commissioner of lncome tax' (20!5 PTD 2562) while examining the operation/ applicability of section 122(5Al ibid, held that the same operates prospectively and not retrospectively. ln case reported as "The Commissioner of lncome tdx v. M/s Eli Lilly Pakiston (Pvt.) Ltd " (2009 SCMR L2791, it was held that section 122 operates prospectively, while reaching the conclusion the august Apex Court relied upon passage from Maxwel on lnterpretation of Statutes 10th edition 1953, in which it was provided that where rights and procedure are dealt with together; the intention of the Writ Petition No.67 of 2016 Page 3

legislature may well bp that old rights are to be determined by the old procedure and that only new rights under the constituted section are to be dealt with by the new procedure. Similarly in case reported as 'Zakaria H.A. Sattar Bilwani v. I.A.C of Wealth Tox, Korochi (2003) 87 Tax 773 (S.C Pak) it was observed that where any statute effects substantive rights it would operate prospectively unless by expressed enactment or necessary intendment retrospective operation has been given. Similar view was expressed in cases reported as tt Board ol Revenue, lslamabad v. New Ammur lndustries, Lahore' (2070) 707 Tax 793 (S.C Pak), "Coltex Oil (Pak) Ltd v. Commissioner of lncome Tox, Companies-ll Korachi' (2007) 95 Tox 47 (H.C Kar.). Reliance is also placed on case reported as "Monnoo lndustries Ltd v. Commissioner of lncome Tax, Lahore" (2007) 84 Tax 86 (H.C Loh.). In case reported as "Dr. Hobib ur Rehman v. Quaid-e-Azam University'' (20L2 CLC 533), it was observed as follows:- oln fact, the regulations operote retospectively unless there is specific bor against it. The only exception to the retrospective operotion of o procedural law is that iI by giving it o retrospective operation, the vested right of a partly is impoired then to that extent it operates prospectively. lt hos repeotedly been held thot the courts while interpreting a ldw do not legislote or creote o new law or omend the existing law. The Courts through interpretotion only declare the two meanings of low which olready existed'.

6.Similar view was expressed by the Division Bench of Hon'ble Sindh in case reported as "Nioz Muhammad v. Federotion of Pakistan" (2008 PTD 1517) and it was observed that in certain cases if procedural law affects vested right it operates prospectively and not retrospectively. ln case reported as "Hokim Ali Zordari v. The Stote'(PLD 1998 SC L) the august apex Court observed that procedural statute operates retrospectively unless Writ Petition No.67 of 2016 Page 4.

the same affects an existing right on the date of promulgation or causes prejudice to a substantive right. lt was also observed that a vested right is to be protected in all situations. The Hona'ble Supreme Court of Pakistan in case reported as "Adnon Afzal v. Capt. Sher Afzafl' (PLD 1959 SC 187) observed as follows:- "The general principle with regarcl to the interpretation of statutes os laid down in the well known case of the Colonial Sugar ReJining Company Limited v. Irving 1901 A C 369 is thot "if the matter in question be a matler of procedure only", lhe provisions would be retrospective. 'ton the other hand, if it be more than o matter of procedure, if it touches a right in existence ot the passing of the Acl", then ?'in accordance with a long line of authorities ertending from the time of Lord Coke to the present doy"', the legislotion would not operate retrospectively, unless the Legisloture had either "by express enoctment or by necessary intendment" given the legislation retroactive effect. To the some effect are the observations of Jessel, Moster of the Rolls, in the case of In re : Joseph Suche & Co. Limiled (1875) I Ch. D. 48 where it was observed that as "o general rule when the Legisla ture alters the rights of parties by taking oway or conferring ony right of action, its enactmenls, anless in express terms they opply to pending actions, tlo not affect them. It is said that there is one exception to lhut rule, namely, thot, lhese enuctments merely alfcct procedure und do not extend to rights of action, they have been held to apply trt existing rights." The nert question, therefore, that arises Jbr consideration is as to what are matters of procedure. It is obvious that mutters relating to the remedy, the mode of triol, the monner of taking evidence and forms of action are all matters relating to procedure. Crawford too takes the view thot questions relating to jurisdiction over .o couse of action, venue, purties, pleadings and rules of evidence also pertain to procedure, provided the burden of proof is not shifted. Thus a stotute purporting to transfer jurisdiction over certain causes of action may operote retroactively. This is whot is meant by soying that a change of forum by a law is retrospective being a mutter of procedure only. Nevertheless, it must be pointed out that if in this process any existing rights are offected or the giving oJ' retrooctive operation couse inconvenience or injustice, then the Courts will not even in the cose of a procedural slatute, favour on interpretstion giving retrospective effecl to the statute. On the other hand, if the new procedural statute is of such o charac ter that its retroactive opplication will tend to promote justice without ony consequential emborrassment or detriment to ony Writ Petition No.67 of 2016 Page 5

of the parties concerned, the Courts would favorahly incline towards giving elfect to such procedurol statutes retroactively".

7.ln view of the above case law it is clear that any amendment even though procedural in nature which affects the vested rights of any person operates prospectively and not retrospectively. The amendment made in section t22(5Al ibid provides power to the Commissioner to make inquiries as he deems fit. The consequence of these inquiries is that assessment order can be revised/modified which is a substantive right of an assessee. Prior to amendment in 2Ot2 the assessment could only be revised only if the same appeared to be erroneous or prejudicial to the revenue and no information could be sought to determine the same. The new procedure which allows Commissioner to make inquiries directly affects the existing right of an assessee regarding modification or revision in assessment, hence it shall operate prospectively.

8.!n view of the above, the instant petition as well as the petitions mentioned in the Schedule ttA" are allowed and the impugned notices are set-aside however, lt is observed that respondent authority may proceed against the petitioners under section 122 (5A') in accordance wittr the procedure as it existed prior to the amendment made in 20\2.

(AAMER FAROOQI

JUDGE

Announced in open Court on thea?6*t^ day of Decembe r,2OL7.

*Shakeel Afzal*

Writ Petition No.67 of 2016 Page 6

Nro*,-.-t k Cf*%

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