C.I.R vs Mr. Rooh-ul-Amin, University Book Agency.

JUDGMENT SHEET

PESHAWAR HIGH COURT, PESHAWAR

JUDICIAL DEPARTMENT

Tax Reference No.39/2012 and 07 others.

JUDGMENT

Date of hearing......18.6.2014.................

Petitioner(s).........Commissioner Inland Revenue Respondent(s)...Mr. Rooh-ul-Amin University Book Agency...

YAHYA AFRIDI,J.- Through this single judgment, this Court proposes to dispose of eight Tax References, as common questions of law are involved therein. The particulars of which are as under:-

1.Tax Ref. No. 103-P of 2013 (Commissioner of Inland Revenue Zone-I, Regional Tax Office, Peshawar..Vs..Mr.

Taimur Khan C/O Imperial Garments, Saddar Road, Peshawar Cantt.).

2.Tax Ref. No. 104 of 2013 (Commissioner of Inland Revenue Zone-I, Regional Tax Office, Peshawar..Vs..Mr.

Taimur Khan C/O Imperial Garments, Saddar Road, Peshawar Cantt.).

3.Tax Reference N0-02 of 2014 (Commissioner of Inland Revenue Zone-I, Regional Tax

Office, Peshawar..vs..Mr. Imran Khan C/O Imperial Garments Saddar Road, Peshawar Cantt.)

4.Tax Ref. No. 12-P of 2014 (Commissioner of Inland Revenue Zone-I, Regional Tax Office, Peshawar..Vs..Dr.Abdur Rahim Khan C/O Alliance Health Care (Pvt) Ltd, Hayatabad, Peshawar).

5.Tax Ref. No.127-P of 2014 (Commissioner of Inland Revenue Zone-I, Regional Tax Office, Peshawar..Vs.. Mr.Imdadullah Durrani C/O Imperial Collection Saddar Road, Peshawar).

6.Tax Ref. No. 128-P of 2014 (Commissioner of Inland Revenue Zone-I, Regional Tax Office, Peshawar..Vs.. Mr.Imdadullah Durrani C/O Imperial Collection Saddar Road, Peshawar).

7.Tax Ref. No. 129-P of 2014 (Commissioner of Inland Revenue Zone-I, Regional Tax Office, Peshawar..Vs..M/S Muhammad Ali & Co, 132, Industrial Estate, Jamrud Road, Peshawar).

8.Tax Ref.No.39 of 2012 (Commissioner of Inland Revenue Zone-II, Regional Tax Office, Peshawar..Vs..Mr.Rooh- ul-Amin, University Book Agency, Bank Road, Mardan).

2.The learned counsel for the Revenue in the Reference stated hereinabove at Serial No.1 to 7,

restricted their arguments to only one question of law relating to;

“Whether the amendment introduced in sub-section (2) of section 122 vide Finance Act, 2009 would have retrospective effect or otherwise.”

3.Prior to the amendment introduced vide Finance Act, 2009, sub-section (2) of section 122 of the Income Tax Ordinance, 2001 (“Ordinance”), read as follows:-

An assessment 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 provided)

After amendment, the aforementioned sub- section was substituted with;

“(2) No order under sub-section

(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 assessment order to the taxpayer.”

4.Now, in case, the amended sub-section

(2)of section 122 of the Ordinance is taken to have retrospective effect, then the period of limitation for amendment of assessment orders would be for five

years commencing from the end of the financial year, in which the Commissioner had issued or treated to have issued the assessment order of the taxpayer. While previously, the five years period was to commence from the very date, the Commissioner had issued or treated to have issued the assessment order.

5.The Revenue is insisting to take the period of limitation to commence from the end of the financial year, while the respondent taxpayers insist that the period should commence from the date of assessment order passed in respect of the taxpayer under section 120 of the Income Tax Ordinance, 2001.

6.It is but a settled principle of interpretation of statutes, that legislation is prospective unless the legislature expressly or impliedly provides the same to have a retrospective effect. The Finance Act, 2009, through which the impugned amendment was introduced clearly provided the same to take effect from 1.7.2009.

Hence, the legislature did not expressly provide the said statute to have a retrospective effect.

7.In ‘Adnan Afzal’s case (PLD 1969 SC 187), the apex Court quoting with approval from

‘Construction of Statutes’(Crawford), the principle that:

“As a general rule, legislation which relates solely to procedure or to legal remedies will not be subject to the rule that statutes should not be given retroactive operation.

Similarly, the presumption against retrospective construction is inapplicable. In other words, such statutes constitute an exception to the rule pertaining to statutes generally. Therefore, in the absence of a contrary legislative intention, statutes pertaining solely to procedure or legal remedy may affect a right of action no matter whether it came into existence prior to, or after the enactment of the statute. Similarly, they may be held applicable to proceedings pending or subsequently commenced. In any event, they will, at least, presumptively apply to accrued and pending as well as to future actions.”

This aforementioned principle of statutory interpretation has thereafter been consistently followed by the superior Courts of our jurisdiction.

Similarly, the August Supreme Court in a case in Eastern Federal Insurance Company’s case (PLD 1982 SC 247), while dilating upon the amendment introduced in the Income Tax through the Finance Act, 1975, whereby the period of reopening of a

case, as in the present case, was extended from four years to six years. The apex Court went to the extent of holding that though the amendment introduced was ‘procedural’, still the same could not be given retrospective effect. The reason for the same was recorded that:

“There is no dispute between the parties that, but for the amendments, the business profits for the chargeable accounting period in question, were not liable to be assessed on 31.1.1958. On the expiry of the period of four years under section 14, the assessee had, therefore, clearly acquired a right and the assessment for the said period became a past and closed transaction. This right could not, therefore, be taken away by giving retrospective operation to the amended statutory provisions extending the period for assessment. The contentions advanced on behalf of the appellant are without substance. We, accordingly, agree with the judgment under appeal.”

8.The apex Court has cited with approval the “ratio decidendi” of the aforementioned case in Eli Lilly’s case ( 2009 SCMR 1279), wherein, while commenting upon the time period provided for amendment of assessment order under section 122 of the Ordinance and confirmed that:

“The introduction of time-limit within which an assessment can be amended in both the Ordinances (section 65 of the repealed Ordinance and section 122 of the Ordinance) is a statutory recognition of the protection against arbitrary power of reopening or amending an assessment after the expiry of the prescribed period. Therefore, it could not be said that in reopening the assessments already completed no right of the assessee / taxpayer was involved.”

(Emphasis provided)

9.No doubt, the changing provisions imposing taxes are to be strictly construed in favour of the taxpayer, so that if there is doubt or two interpretation, then it has to be resolved in favour of the taxpayer. While the provisions, which provide for the machinery by which taxes are assessed and recovered are to be liberally construed in favour of the Revenue, in order to ensure that the realization of proper taxes is made possible. The apex Court in Eli Lilly’s case (Supra), went on to impose a ‘rider’ to the later priniciple by stating that:

“However, in our view, the provision is impregnated with an essential attribute, which affects an accrued right of an assessee or a taxpayer that after efflux of a certain period of time, his assessment will not be opened or amended.

Thereafter, the section cannot be applied retrospectively unless the legislature has by express words or necessary implication intended to give it retrospective effect. Our burden, therefore, in the light of the contentions of the learned counsel for the parties is to find from the provisions of the Ordinance whether the legislature intended to apply provisions of section 122 retrospectively, either by express words, or by necessary implication, and what treatment the Ordinance envisaged to be given to the proceedings pending under the repealed Ordinance, including additional assessment under section 65, which, to an extent, is pari materia, with the provisions of subsection (5) of section

......Having anxiously considered the matter, the view we are inclined to take is that the provision is impregnated with the potential of adding to the liability of the taxpayer, therefore, the same is not a mere matter of procedure. It has already been held that the taxpayers/assesses have a right that their assessments will not be reopened after the expiry of the statutory period of five years.”

(Emphasis provided)

10.Thus in view of the clear enunciation of the apex Court that any amendment affecting the time period, in which amendment may be made in

closed and passed the original assessment orders, the same would have prospective effect and would not be retrospective.

11.Similarly, in the present case,

subsection (2) of section 122 of the Ordinance has extended the time period of reopening of an assessment order. The said amendment would not have retrospective effect and would apply to cases in which assessment orders are passed after the date of the said legislation. As far as, assessment orders, which are passed, or deemed to be passed under the enabling provisions of section 120 of the Ordinance, prior to 1.7.2009, the same would be ‘closed and past transaction’ ‘qua’ the applicability of the amended provisions, as valuable rights in favour of the taxpayer would have accrued. Accordingly, the amendment extending the time period to amend the assessment orders, in which ‘rights’ have matured into ‘vested rights’, could not be amended under the extended period provided under subsection (2) of section 122 introduced through Finance Act, 2009.

12.Accordingly, the above principle would also apply to the amendment introduced vide Finance Act, 2009 in subsection (4) of section 122 of the Ordinance, which was the question of law

raised by the Revenue in the Tax Reference No.39/2012 (CIR..Vs..Roohul Amin), stated hereinabove at Serial No.8.

13.Hence, the decision rendered by the worthy Tribunal is upheld and the Tax References under consideration are answered in the Negative.

The office is directed to send the copy of this judgment under seal of the Court to the Appellate Tribunal, Inland Revenue, Peshawar Bench, Peshawar.

Dt.18-6-2014.

JUDGE

JUDGE

*M.Gul*