I.T.AS. NOS.1950/KB AND 1951/KB OF 1997-98, DECIDED ON 31ST AUGUST, 1998. VS I.T.AS. NOS.1950/KB AND 1951/KB OF 1997-98, DECIDED ON 31ST AUGUST, 1998., 1998 PTD-INCOME-TAX-APPELLATE-TRIBUNAL-PAKISTAN 3866 (1998)

(a) Income Tax Ordinance (XXXI of 1979)---

----Ss.80-D, 156 & Second Sched. cl. (118-E)---C.B.R. Circular No.2(98)/ITJ/94, dated 11-12-1997---S.R.0.1283(1)/90, dated 13-12-1990- Exemption---Rectification of mistake---Application for--Assessing Officer allowed exemption under cl. (118-E) but charged minimum tax on turnover under S.80-D of the Income Tax Ordinance, 1979---Subsequently, minimum tax on turnover was declared to be illegal and without lawful authority for those assessees who enjoyed exemption under cl. (118-E) of Second Sched., Income Tax Ordinance, 1979~--Assessee moved application for rectification under S.156, Income Tax Ordinance, 1979 within time limit of 4 years claiming refund being mistake apparent on record---Assessing Officer rejected application on the ground that the transaction had become past and closed matter and the judgment had no retrospective effect---Finding of Assessing Officer was confirmed by the First Appellate Authority-- Validity---Levy of income-tax under S.80-D, Income Tax Ordinance, 1979 was-without any sanction in law and was charged and received by the Revenue unlawfully and, therefore, Government had no moral and legal authority to retain the tax so illegally recovered/received---Levy was a mistake apparent on record and tax paid under mistake should be returned-- Orders of two Officers below were vacated by the Appellate Tribunal and rectification application was allowed.

PLD 1997 SC 582 = 1997 PTD 1555; Khalid Adamjee v. C.I.T. 1983 PTD 246; Batla & Co. v. S.T.O. 1983 PTD 221; C.I.T. v. Modern Mills Nagpur Ltd. (1967) 64 ITR 67 (SC Ind.); Pfizer Laboratories Ltd. v. Federation of Pakistan PLD 1998 SC 64; Union Bank Ltd. v. Federation of Pakistan 1998 PTD 2114; (1961) 3 Tax III 103 (Trib.); 1993 SCMR 1232 = 1993 PTD 766; Walchant Nagar Industries Limited v. Income-tax Officer (1962) 44 ITR 260; Parshram Pottery Works Co, Limited v. D.R. Trivedi, Wealth Tax Officer (1975) 100 ITR 6,51; Karamchand Premchand Private Limited v. Commissioner of Income-tax (1975) 101 ITR 46; Standard Radiators v. Commissioner of Income-tax (1987) 165 ITR 178 and Kil Kotagiri Tea and Coffee Estates Co. Limited's case (1988) 174 ITR 579 ref.

(b) Interpretation of statutes--

---- Retrospective legislation---Effect---Retrospective effect of a statutory legislation is that it takes effect and becomes operative even before the date of its promulgation and is applied to all the pending cases and such matters, which had not attained finality.

(c) Precedent---

---- Judicial pronouncement on interpretation of law ---Effect---Principles-- Retrospective effect of a judicial pronouncement in pursuance of the interpretation of law shall be from the interpretation of the law and not prior to that and shall be followed by all the judicial and quasi judicial forums sub ordinate to the Court pronouncing judgment and shall be applicable to all the pending cases as well as to the matters which had not attained finality and had not become past and closed matters.

Siraj-ul-Haque Memon for Appellant.

Mrs. Shaista Abbas, D.R. for Respondent.

Date of hearing: 29th August, 1998.

ORDER

MUHAMMAD MUJIBULLAH SIDDIQUI (CHAIRMAN). ---The above appeals at the instance of assessee are directed against the order, dated 11-5-1998 by the learned C.I.T.(A), Zone-V, Karachi in appeal Orders Nos.226 and 227/V relating to the assessment years 1995-96 and 1996-97.

2 Heard Mr. Siraj-ul-Haque Memon, learned counsel for the appellant and Mrs. Shaista Abbas, learned representative for the Department.

3.The appeals arise out of the following circumstances:---

4. The appellant is a private limited company engaged in manufacturing of Ghee and Edible Oil in the patent name of 'Marhaba' and 'Umda' Ghee and Oil. The appellant enjoyed exemption under clause (118-E) of the Second Schedule to the Income Tax Ordinance, 1979. In both the assessment years under appeal the Assessing Officer allowed exemption but applied section 80-D to the declared turnover and thereby created income-tax liability at Rs.25,26,001 in the assessment year 1995-96 and Rs.15,33,876 in the assessment year 1996-97. The assessment for the assessment year 1995-96 was completed on ,24-1-1996 and for the assessment year 1996-97 on 16-6-1997. No appeal was preferred by the appellant/assessee against the assessment orders under section 62 whereby tax was charged under section 80-D of the Income Tax Ordinance, 1979. A large number of assessees all over Pakistan had assailed the legality and validity of the presumptive tax regime and particularly the provisions contained in sections 80-C, 80-CC and 80-D of the Income Tax Ordinance, 1979 by way of writ petition in Lahore High Court, Karachi High Court, Peshawar High Court and Balochistan High Court. The Honourable Lahore High Court dismissed the petitions holding the provision contained in sections 80-C, 80-CC and 80-D of the Income Tax Ordinance, 1979 to be valid piece of legislation and intra vires the Constitution of Islamic Republic of Pakistan. It was held that the provisions contained in above sections suffered from no Constitutional infirmity on the ground of competence of the legislature or on account of being violative of any of the fundamental rights. The assessees whose writ petitions were dismissed by the Hon'ble Lahore High Court preferred petitions for leave before the Hon'ble Supreme Court of Pakistan. Leave was allowed and 194 appeals were heard by the Hon'ble Supreme Court of Pakistan from 1st to 4th of April and 7th to 10th April, 1997. The appeals were dismissed by the Hon'ble Supreme Court of Pakistan on 4th June, 1997 with certain clarifications including the following. findings:---

"54. In our view, since the provisions of Act XII of 1992 are subsequent in time and as they are contained in a special statute, they shall prevail over the provisions of section 80-D of the Ordinance, which was enacted through Finance Act, 1991, which was an earlier statute and which was part of a general statute. In this view of the matter, assessees who fulfil the conditions of the notifications referred to in the Schedule to section 6 of Act XII of 1992, are entitled to the protection. The question as to whether a particular assessee fulfils the conditions of the above notifications, is a question of fact, which will have to be determined by the hierarchy provided under the Ordinance and not by this Court. However, in order to eliminate multiplicity of litigation and to avert element of harassment to assessees, we have dealt with the legal aspect of the above contention though apparently it was not urged before the High Court as we do not find any mention in any of the judgments under appeal."

4-A. The Hon'ble Supreme Court of Pakistan in para. 57 of judgment in Ellahi Cotton Mills Limited summarized the findings and clarifications, which include the following clarification:

"The assessees who are covered by the notification mentioned in the Schedule to section 6 of the Protection of Economic Reforms Act, 1992 (Act XII of 1992), are entitled to the protection in terms thereof as per paras. 52 to 54 hereinabove. They may approach the Income-tax Department."

5. In pursuance of above clarifications by the Honourable Supreme Court of Pakistan the appellant approached the DCIT seeking rectification in the assessment orders in the two assessment years under appeal, whereby, section 80-D was applied and demand was created without any legal authority. The Assessing Officer rejected the rectification application stating, that the position has been clarified in the light of Circular No.2(98)/ITJ/94 Islamabad, dated 11th December, 1997 while referring the opinion of the Law and Justice Division. It was stated by the Assessing Officer that the appellant company is not entitled to claim refund of minimum tax already paid under section 80-D, as the appellant company filed no Constitution petition or appeal before the Honourable Court.

6. The appellant feeling aggrieved preferred first appeal contending that the appellant is admittedly exempt under clause (118-E) of the Second Schedule to the Income Tax Ordinance and in view of judgment of the Hon'ble Supreme Court of Pakistan reported as PLD 1997 SC 582 = 1997 PTD 1555, the tax paid under section 80-D should be refunded to the appellant. It was admitted position that the appellant's case was covered by Notification No.S.R.O. 1283(1)/90, dated 13th December, 1990 issued under subsection (2) of section 14 of the Income Tax Ordinance, 1979 which was referred to in the schedule to the Protection of Economic Reforms Act, 1992 and the Hon'ble Supreme Court of Pakistan had held that since the provision of (Act XII of 1992) are subsequent in time and as they are contained in a special statute, they shall prevail over the provisions of section 80-D of the Ordinance, which was enacted through Finance Act, 1991, which was an earlier statute and which was part of general statute. In view of these admitted facts it was contended in first appeal that the Hon'ble Supreme Court has used word 'assessee' in paras. 54 and 57 of the judgment in Ellahi Cotton Mills Limited and not the word 'appellant', therefore, irrespective of the fact whether any petition was filed or not or the matter was agitated in appeal or not by the appellant, it is entitled to refund of the tax paid under section 80-D as result of the decision of the Hon'ble Supreme Court of Pakistan. It was further contended that notwithstanding the fact that the appellant had not filed any appeal against the levy of tax under section 80-D and the assessment had attained finality, it is not a past and closed chapter because it can still be upset under section 156 of the Income Tax Ordinance, 1979 as the period of limitation provided in the said section has not expired. In support of this contention reliance was placed on the ratio of following decisions:---

(i)Khalid Adamjee v. C.I.T. 1983 PTD 246.

(ii)Batla & Co. v. S.T.O. 1983 PTD 221.

(iii)C.I.T.,v. Modern Mills Nagpur Ltd. (1967) 64 ITR 67 (SC Ind.).

(iv)Pfizer Laboratories Ltd. v. Federation of Pakistan PLD 1998 SC 64.

(v)Union Bank Ltd. v. Federation of Pakistan 1998 PTD 2114.

7. It was further contended that C.B.R. has no authority to interpret any law as held by the Honourable Supreme Court of Pakistan in the case of central Insurance Company 1993 SCMR 1232 and likewise the opinion of the Ministry of Law and Justice has no binding effect.

8. The learned C.I.T.(A) did not accept the contentions for the reasons that no appeal was pending against the assessment orders and, therefore, the assessment orders attained finality. According to learned C.I.T.(A) the action under section 156 would mean upsetting the closed chapter in the garb of rectification. The learned C.I.T.(A) cited various judgments dealing with the amendments made by the legislature .with retrospective effect. In the judgments cited by the learned C.I.T.(A) it was held that the amendments with retrospective effect shall not operate to destroy a past and closed chapter. The learned C.I.T.(A) ultimately held as follows:---

"In this view of the matter, when remedial amending law and declaratory legislation which are always to be applied retrospectively but which cover only the pending proceedings, the ratio of the decision of the Hon'ble Supreme Court of Pakistan is as such applicable retrospectively to those cases in which proceedings some how or other remain pending even if they stood decided prior to the amendment in law with retrospective effect or stood decided prior to the pronouncement of the said judgment. As such, the ratio of the said judgment, like the retrospective application of law, cannot be extended to past and closed cases without any pending proceedings. Both the appeals are, therefore, without substance and 'are dismissed accordingly."

9 Mr. Sirajul Haque Memon, learned counsel for the appellant has submitted that the learned C.I.T.(A) has not considered the relevant issue and has based his finding either on the consideration of irrelevant issue or on the basis of judgments which are not germane to the issue under consideration. He has submitted that the judgments explaining the extent of retrospective effect of the amendments are not relevant. In the facts and circumstances of the case neither any amendment in law is under consideration nor its retrospectivity was alleged by the appellant. Mr. Memon has contended that the Honourable Supreme Court of Pakistan has held that the cases covered under Economic Reforms Act, 1992 shall not be affected with the promulgation of section 80-D of the Income Tax Ordinance, 1979 because the provision contained in the Economic Reforms Act, 1992 shall override the provision contained in section 80-D. Thus, according to the judgment of Honourable Supreme Court of Pakistan no charge could be created against the appellant under section 80-D in accordance with the law as it stood in the two assessment years under appeal. The interpretation of law as given by the Honourable Supreme Court of Pakistan clarifies the extent of application of section 80-D to the appellant and other assessees like appellant and no question of retrospective effect of the judgment of the Hon'ble Supreme Court of Pakistan arises. He has submitted that for this reason the Hon'ble Supreme Court of Pakistan has observed in para. 57 of the judgment in Ellahi Cotton Mills Limited that the assessees who are covered by the notification mentioned in schedule to section 16 of the Protection of Economic Reforms Act, 1992 are entitled to the protection in terms thereof as per paras. 52 to 54. The Hon'ble Supreme Court of Pakistan has further observed that such assessee may approach the Income Tax Department. It is clear indication of the fact that the Hon'ble Supreme Court provided relief to all the assessees against whom charge was created under section 80-D without legal valid authority. Mr. Sirajul Haque has vehemently urged that the question of retrospectivity is not involved at all and the sole effect of the interpretation given by the Hon'ble Supreme Court of Pakistan is that the assessment years in which, the assessees enjoyed protection under the Economic Reforms Act, 1992 could not be saddled with the levy of tax under section 80-D of the Income Tax Ordinance, 1979, and the case of appellant is squarely covered under the legal position explained and interpreted by the Honourable Supreme Court of Pakistan.

10. Mr. Sirajul Haque has next contended that the learned C.1.T.(A) has wrongly held that the law as interpreted by the Hon'ble Supreme Court of Pakistan shall not be extended to the case of appellant because it is a past and closed case. Mr. Sirajul Haque has submitted that the assessment order can be upset by filing of appeal, filing of revision, and by submitting rectification application and so long period of limitation for any of the remedies has not expired it cannot be held to be past and closed chapter. He has further argued that the observation has been made without going through the judgment of Honourable Supreme Court of Pakistan. Mr. Memon has next contended that C.B.R. Circular No.2(98)ITJ/94, dated 14-12-1994 has no legal validity because it contains interpretation of law and moreover the opinion of law and Justice Division is riot correct and is contradictory as well. He has submitted that the question was referred by the C.B.R. as follows:---

"Whether the aforesaid judgment is retrospective in nature i.e. its application would be from the dates sections 80-C and 80-D were inserted in the Income Tax Ordinance, 1979. "

The opinion was given as follows:---

"The judgment of the Supreme Court is not retrospective in nature. "

11. Mr. Sirajul Haque has submitted that the question referred to the Law and Justice Division itself indicates lack of appreciation of the legal position. He has submitted that the question of retrospective application of the sections 80-C and 80-D were raised before the Honourable Supreme Court also and in para. 56 it has been held as follows:---

"Before concluding the above discussion, we may observe that the appellants' contention that the Central Board of Revenue has been enforcing the impugned provisions of the Ordinance retrospectively is not well-founded. It may be pointed out that an assessment is a charge in respect of the income of the previous year. In this behalf, it will be pertinent to reproduce the definition of the term 'assessment year' given in clause (8) of section 2 of the Ordinance which reads as under:---

(8) 'assessment year' means the period of twelve months beginning on the first day of July next following the income year and includes any provision of this Ordinance, to be the assessment year in respect of any income or any income year.'

None of the counsel demonstrated that the Central Board of Revenue is acting contrary to the above provision read with the relevant Finance Act. "

12. Mr. Sirajul Haque has submitted that the opinion of the Law and Justice Division is also uncalled for as no question of retrospectivity is involved as explained by the Hon'ble Supreme Court of Pakistan and so far the interpretation of the law is concerned it has to take effect from the commencement of the law which cannot be termedto be retrospective application of the law13. Mr. Sirajul Haque Memon has further submitted that another question which is relevant in the context of issues involved in this appeal was as under:---

"Where a tax payer did not file appeal or a petition would he be entitled to relief on filing application under section 156 for rectification in order to claim refund of minimum tax already paid under section 80-D. "

14. Mr. Memon has contended that the opinion of Law and Justice Division, which reads as follows is absolutely incorrect.

"The tax payers who had not filed appeal or petition are not entitled to claim refund or minimum tax already paid under section 80-D. "

15. In support of his contention Mr. Sirajul Haque has submitted that the first reason is that the Hon'ble Supreme Court of Pakistan in paras. 54 and 57 of the judgment in Ellahi Cotton Mills Limited has used expression 'assessees' and not appellant. Mr. Memon has submitted that the Hon'ble Supreme Court has consciously used the expression, "assessees" in contradistinction to the expression "appellant" used in the same judgment at several places. Mr. Memon has further contended that the intent and purpose of using the term, "assessee" has been explained by the Hon'ble Supreme Court, itself in the following passage:

"However, in order to eliminate multiplicity of litigation and the avert element of harassment to assessees, we have dealt with the legal aspect of the above contention though apparently it was not urged before the High Court as we do not find any mention in any of the judgments under appeal. "

16. The Honourable Supreme Court of Pakistan has further explained in para. 57 of the judgment that the assessees who are covered by the notification mentioned in schedule to section 6 of the Protection of Economic Reforms Act, 1992 (Act XII of 1992), are entitled to the protection in terms thereof as per paras. 52 to 54 hereinabove. They may approach the Income- tax Department. Thus, the direction is not confined to the appellants, before the Hon'ble Supreme Court of Pakistan but is generally in nature, which is applicable to- all the assessees who are entitled to relief in pursuance of the finding that the Economic Reforms Act, 1992 being special statute shall prevail over the provision of section 80-D of the Income Tax Ordinance. Mr. Sirajul Haque has submitted that the opinion of Law and Justice Division is contrary to the findings of Honourable Supreme Court of Pakistan because the Hon'ble Supreme Court has clearly held that the issue was decided by the Hon'ble Supreme Court on its own motion in order to eliminate multiplicity of litigation and to avert element of harassment to assessees although the question was not urged before the High Court and the issue was not decided in any of the judgment under appeal. According to Mr. Memon it clearly indicates that the direction of Hon'ble Supreme Court that the assessees may approach to Income-tax Department is not confined to the appellants before the Hon'ble Supreme Court. It is further pertinent to note that the Hon'ble Supreme Court decided appeals against the judgment of Honourable Lahore High Court only and the petitioners who filed writ petitions in Honourable Sindh High Court, Balochistan High Court and N. W.F.P. High Court were not before the Hon'ble Supreme Court in Ellahi Cotton Mills judgment which does not mean that they would not be entitled for the relief flowing from the judgment of Honourable Supreme Court of Pakistan.

17. Mr. Sirajul Haque Memon has further submitted that in view of the law as interpreted by the Hon'ble Supreme Court, in Ellahi Cotton Mills the appellant was not liable to pay any tax under section 80-D of the Income Tax Ordinance, 1979 in the assessment years under consideration and, therefore, charge was created by recourse to section 80-D without any sanction of law and in pursuance of an illegal and invalid assessment order. According to Mr. Sirajul Haque retention of such amount by the Income-tax Department is not justified in view of the law as laid down by the Hon'ble Supreme Court of Pakistan in a recent judgment (Pfizer Lab. Limited v. Federation of Pakistan PLD 1998 SC 64). Mr. Sirajul Haque Memon has submitted that both the judgments in Ellahi Cotton Mills and Pfizer Lab. Ltd. referred to above have been delivered by Hon'ble Justice Ajmal Mian, C.J. The Hon'ble Supreme Court of Pakistan has held in Pfizer Lab. Ltd. case supra as follows:---

"From the above case-law and the treatise, the following principles are deducible:---

(i)That if one party under a mistake, whether of fact or law, pays some money to another party (which includes a Government Department), which is not due by law or contract or otherwise, that must be repaid in view of section 72 of the Contract Act, 1872.

(ii)That the Customs duties and charges referred to in section 33 of the Act should be chargeable and payable by an importer or exporter and that due to inadvertence, error or misconstruction, more amount was paid or recovered than what was due and payable, the claim for the refund of such an excess amount should be made within six months as envisaged in above section 33, but where the duty or tax charged and recovered was not payable at all, above section 33 has no application.

(iii)That if the customs duty or any other levy was realised and its realization was outside the statutory authority, the provisions of section 27(I) of the Indian Customs .Act, 1982, providing limitation of six months was not attracted.

(iv)That when any excise duty is recovered which was not leviable, limitation of one year provided in Rule I 1 of the Central Excise and Salt Rules, 1944 is not applicable nor an alternate remedy by way of a suit will be a bar to a Constitutional petition.

(v)That payments of excise duty or any other tax without knowledge that the same is exempted under a notification is refundable on the same footing as if there was no lawful imposition.

(vi)To return what has been taken wrongly is as much a duty and grace of Government to levy relentlessly and fully what is due as remarked by V.R. Krishna Iyer, J.

(vii) That where some money is received by the Government not lawfully due, the plea of limitation by its departments is one, which the Court always looks upon with disfavour as it is violative of the principles of morality and justice.

(viii)That when moneys are paid to the State which the State has no legal right to receive, it is ordinarily the duty of the State, subject to special provisions of any particular statute or special facts and circumstances of the case, to refund the amount so received and in case of failure, a superior Court in exercise of its Constitutional jurisdiction can direct the refund of the same if no disputed questions of facts are involved.

(ix)That there may not be legal liability on the part of a Government functionary to refund any amount received by it as a tax or other levy by virtue of certain special provisions under the special law but keeping in view that we are living in a democratic society governed by the rule of law and every Government, which claims to have ethical and moral values, must do what is fair and just to the citizens regardless of legal technicalities.

(x)That as per Indo-Pak laws the fact that the amount of tax of which refund is claimed was voluntarily, paid, does not preclude the right to claim refund, if it was not lawfully payable.

(xi)That the money paid by a citizen to a public authority in the form of taxes or other levies paid pursuant to an ultra vires demand by the authority is prima facie recoverable by a citizen as of right. Lord Bridge of Harwich of the House of Lords in the case of Tower Hamlets Borough Council (supra) remarked 'that the retention of moneys known to have been paid tinder a mistake at law, although it is a course permitted to an ordinary litigant is not regarded by the Courts as a high-minded thing' to do but rather as a 'shabby thing' or a 'dirty trick'.

The above resume of the case-law of Indian, English and Pakistani jurisdictions indicates that the latest judicial trend is to deprecate and to discourage withholding of a citizen's money by a public functionary on the plea of limitation or on any other technical plea if it was not legally payable by him. It is also evident that claims for the refund of the amount paid as a tax or other levy on account of mistake as to want of Constitutional/legal backing or because of exemption are at par. It is also apparent that such payments are held to be not covered by Rule 11 of the Central Excises Rules, 1944, or section 27(1) of the Indian Customs Act, 1951, or section 33 of the Act etc. The refunds to such amounts are allowed by the superior Courts inter alia in India on the basis of section 72 of the Contract Act which provides that 'a person to whom money has been paid or anything delivered by mistake or under coercion must repay or return it. 'Such refunds can be claimed either by filing a suit for the recovery bf the amount for which the period of limitation applicable would be three years under Article 96 of the First Schedule to the Limitation Act (which provides period of three years from the date mistake becomes known to the plaintiff) or the same can be recovered through a Constitutional petition if no disputed act is involved. The Indian Supreme Court and the various Indian High Courts referred to in the cited case-law hereinabove had ordered the refund of the amounts involved in exercise of their Constitutional jurisdiction under Article 226 of the Indian Constitution. In Pakistan, Sindh and Lahore High Courts have also allowed the refund of such amounts under Article 199 of the Constitution in exercise of their Constitutional jurisdiction in the cases of Ghulam Abbas v. Member (Judicial), Central Board of Revenue (supra) and Kohinoor Industries. Ltd., Faisalabad v. Ministry of Finance (supra), respectively".

18. Mr. Sirajul Haque Memon, learned counsel for the appellant has submitted that in addition to the principles laid down by the Hon'ble Supreme Court of Pakistan in the case of Pfizer Laboratories Limited cited above the issue has been considered by the Hon'ble Lahore High Court in Constitution Petition No.2985 of 1998. Hon'ble Mr. Justice Syed Najamul Hasan Kazmi vide judgment, dated 24-4-1998, after considering the judgment of Hon'ble Supreme' Court of Pakistan in Elahi Cotton Mills Limited PLD 1997 SC 582 and Circular Letter No. 2(98)ITJ/94, dated 11-12-1997 issued by the Central Board of Revenue and opinion of the Law and Justice Division on which the C.B.R. has placed reliance observed, that the instructions issued by the C.B.R. can at best be treated as administrative interpretation and not judicial interpretation. Likewise; any clarification from the Justice and Law Division will not curtail the powers vesting in the adjudication authorities under the Income Tax Ordinance, 1979 for decision on the issue in accordance with law and in the light of the observations made by the Hon'ble Supreme Court of Pakistan. A prayer was made before the Hon'ble Lahore High Court that the matter may be kept open for decision by the Assessing Officer and, therefore, while allowing the petition it was declared that the act of the refusal of the Assessing Officer to consider the case' of petitioners for the waiver of tax demand and refund of the amount already deposited in view of Circular Letter No.2(98)ITJ/94, dated 11-12-1997 was illegal and without lawful authority. The Hon'ble Lahore High Court further directed the Assessing Officer to decide the question pertaining to the refund of tax demand already deposited without being influenced by the Circular and strictly in the light of observation made by the Hon'ble Supreme Court of Pakistan.

19. Mr. Sirajul Haque Memon, thus, submitted that the Assessing Officer was not justified in declining to exercise the jurisdiction vested in him because of the C.B.R. Circular No.2 of 1994, dated 11-12-1997 based on the opinion of Law and Justice Division. He has further submitted that the learned C.I.T.(A) has also failed to exercise proper jurisdiction as he has discussed the issue not relevant to the point under consideration and has further mis-directed in holding that the appellant is not entitled for the relief, for the reasons that the appellant was not one of the petitioners before the Hon'ble Supreme Court of Pakistan, the case of the appellant was past and closed matter and that the decision of Hon'ble Supreme Court of Pakistan is applicable retrospectively to those cases only in which proceedings were pending.

20. On the other hand learned representative for the department 'has fully supported the impugned findings of the learned C.I.T.(A). She has submitted that the rectification application was rightly rejected in pursuance of the opinion of Law and Justice Division contained in the C.B.R. Circular No.2 of 1994, dated 11-12-1997.

21. We have carefully considered the contentions raised by the learned representatives for the parties. So far by the opinion of the Law and Justice Division is concerned it already stands decided by this Tribunal as far back as 1961 that interpretation by the Ministry of Law has no binding effect of the Tribunal (1961) 3 Tax III 103 (Trib.). As far as the validity of the interpretation by the C.B.R. on the point of law is concerned, it already stands decided by the Hon ble Supreme Court of Pakistan in the case of Central Insurance Company vide judgment reported as 1993 SCMR 1232 = 1993 PTD 766, that it has no legal validity. The combined effect of the judgment of Hon'ble Supreme Court to Pakistan in the case of Elahi Cotton Mills and Pfizer Laboratories Limited referred to above should be that the tax admittedly recovered illegally and without sanction of law should not be retained by the Department and be returned to the assessee without any consideration of technicalities. However, since the learned C.I.T.(A) has assigned reasons for not allowing the refund which mainly are:---

(a)The appellant was not one of petitioner before the Hon'ble Supreme Court, therefore, is not entitled for relief;

(b)The ratio of judgment of Hon'ble Supreme Court was applicable to such cases only which were pending at the time of announcement of judgment; and

(c)shall not apply to the past and closed matters such as in the case of appellant who had not preferred any appeal against the assessment order creating the charge under section 80-D: we would, like to dilate on these issues so that the controversy is settled conclusively

22. In spite of my best efforts I was not able to lay hand on any judgment of the superior Courts in Pakistan dealing directly with the issues under consideration but the issues have been considered directly in various judgments by the superior Courts in Indian Jurisdiction. We will refer presently, few cases dealing with the similar facts and circumstances as in the present appeals. The first judgment is by the Maharashtra High Court at Bombay in the case of Walchant Nagar Industries Limited v. Income-tax Officer (1962) 44 ITR 260. Briefly stated the relevant facts in the case were that the petitioner was assessed to income tax vide order, dated 30-11-1954 The additional income-tax was charged in respect of dividend under proviso to para. B, Part I of Schedule I to the Finance Act. 1950. The levy of additional tax 'was ultimately confirmed by the Appellate Tribunal in July, 1955 and consequential order was made in November, 1956. The levy of additional tax was challenged in some other cases and the Bombay High Court declared the levy to be invalid. Subsequent to the decision of Bombay High Court the petitioner made an application under section 35 of the Indian Income-tax Act, 1922 (which is equivalent to section 156 of the Pakistan Income Tax Ordinance, 1979) in March, 1958 for rectification of the assessment order by deleting the charge of excess dividend tax and refund of the tax so recovered. The application was rejected by the Income-tax Officer. The petitioner moved revision application before the Commissioner and during the pendency of revision proceedings the Supreme Court of India affirmed the decision of Bombay High Court that the levy of excess dividend tax was bad in law. The C.I.T., however, dismissed the revision application for the reason that invalidity of the levy of excess dividend tax was not 'a mistake apparent from the record'. The petitioner, therefore, filed Constitution petition for a writ of certiorari to quash the order of the Income -tax Officer and the Commissioner. It was held by the Maharashtra High Court as follows:---

"The effect of the decision of the Supreme Court of India was that the levy of excess dividend tax was at no time good and, therefore, the assessment order made by the Income-tax Officer levying excess dividend tax was bad at its inception on the date it was made, notwithstanding that the decision of the Supreme Court was given subsequent to that date, and that was a mistake apparent from the record within the meaning of section 35 of the Indian Income-tax Act, 1922. The income-tax authorities were, therefore, clearly in error in refusing to rectify the mistake. "

23. The second judgment is from the Supreme Court of India in the case of S.A.L. Narayana Row, Commissioner of Income-tax v. Model Mills Nagpur Limited (1967) 64 ITR 67. In this case also additional tax on the excess dividend was levied for the assessment 'year 1952-53. No appeal was preferred by the assessee against the levy of such tax. After the judgment of Bombay High Court in 1956 the rectification application was submitted before the Income-tax Officer seeking the refund of tax unlawfully collected. The Income-tax Officer declined to accede to the request. He stated that the assessment for assessment year 1952-53 was completed a long time back and before the judgment of Bombay High Court, which was pronounced in 1956. The assessee submitted revision application which was dismissed by the Commissioner of Income-tax for the reason that the application for cancellation of levy of tax was barred and application against the refusal of rectification was not maintainable because the error was not apparent from the record but was one which could be discovered by a process of elucidation, argument and debate. The assessee filed Constitution petition before the Bombay High Court, which was granted. The Commissioner of Income-tax preferred appeal before the Supreme Court of India. The Supreme Court of India held that, "in our view, High Court was right in making the order, directing the Commissioner to refund the amount of tax which was illegally collected".

24. The third judgment is by the Gujarat High Court in the case of Parshram Pottery Works -Co. Limited v. D. R. Trivedi, Wealth Tax Officer (1975) 100 ITR 651. The relevant facts in the case were that in the course of assessment to wealth tax for the assessment years 1957-58, 1958-59 and 1959-60 the petitioner company claimed to deduct in the computation of net wealth .a certain amount each year in respect of provision for taxation but the claim was disallowed on the ground that the amount provided for tax liability did not constitute 'debt owed' from the petitioner on the relevant valuation dates within the meaning of section 2(m) of the Wealth Tax Act, 1957. The petitioner did not prefer appeals against the orders of assessments. Subsequently the petitioner came to know from a decision given by the Income-tax Appellate Tribunal that the amounts claimed by it in respect of provision for taxation were deductible in computing the net wealth of the petitioner. The petitioner, therefore, made applications to the Wealth Tax Officer for rectification of the orders of assessment on the ground that there was an error apparent on the face of the record. The applications were rejected by the Wealth Tax Officer on the ground that there was no error of law apparent on the face of the record in the assessment orders. The petitioners revision petitions to the Commissioner were unsuccessful. The petitioner thereupon applied to the High Court for writ to quash the order refusing to rectify the assessment orders and for a direction to rectify the assessment orders. It was contended for the revenue that there was no error apparent on the face of the record and also, as the assessee had not preferred appeals from the assessment orders, no writs could be issued. It was held by Justice P.N. Bhagwati, C.J., that it has been settled by the decision of Gujarat High Court in 1964 and by the Supreme Court of India in 1966 that the provision for taxation was a debt owed within the meaning of section 2(m) of the Wealth Tax Act, 1957 and, therefore, there was clearly an error of law apparent on the face of record, in the assessment orders in question. The submission for the revenue that the assessment orders were proper and valid when they were made and merely because the said orders were later found to be erroneous in. view of the subsequent judicial pronouncement, the provision of section 35 would not be attracted is not correct. It was further observed that the said decisions, in so far as they declared that the amounts claimed by an assessee in respect of provision for taxation are deductible in computing the net wealth of the assessee since they represent 'debt owed' by the assessee within the meaning of section 2(m) of the Act, merely stated what the raw had always been and must always be understood to have been. The fact that those decisions were not before the Wealth Tax Officer when he made the orders of assessment in the petitioner's cases has, therefore, no material bearing on the question whether the said orders disclose any mistake apparent from the record. Therefore, the assessment orders, in so far as they disallowed the claim of the petitioner for deduction in respect of the amount of provision for taxation, proceeded on a wrong view of the law and the said orders were bad at their very inception, on the date on which they were made. The orders of assessment thus disclosed a mistake apparent on record and were liable to be rectified under section 35 of the Act, and Wealth Tax Officer and the Commissioner committed an error in law in rejecting the petitioner's claim for rectification. In support of view that an order of assessment based upon an interpretation or application of law which is ultimately found to be wrong in the-light of judicial pronouncements rendered subsequently, discloses a mistake apparent from the record, reliance was placed on another decision of Bombay High Court in Bhagwandas Kavaldas .v. N.D. Mehrotra (1959) 36 ITR 538 (Bombay). In the cited case it was held by Bombay High Court as follows:---

"When the Court decides a matter it does not make the law in any sense but all it does is that it interprets the law and states what the law has always been arid must be understood to have been."

25. It was further urged before the Gujarat High Court on behalf of revenue that once an assessment proceeding has been completed by making an order of assessment which has become final by the assessee having not challenged the said order by adopting the statutory remedy of appeal, the finality of the order passed by the Assessing Authority cannot be impaired by subsequent judicial pronouncements which may have the effect of showing that the assessment was made on a wrong view of the law and further that the finality of the said order cannot in any event be taken away by invoking the power of rectification under section 35 of the Act on the basis. of the decision of the Court subsequently rendered. It was held as follows:---

"We are unable to accede to this submission. In our opinion, the order of assessment passed by the Wealth Tax Officer cannot be, said to be final in the literal sense of the word. The order was and continued to be liable to be modified under section 35 of the Act if the condition precedent for the exercise of the power under that section would be satisfied and the order would ordinarily be liable to be modified in exercise of the power conferred by the said section notwithstanding the fact that no appeal was preferred from the order of assessment. If as in the present case, the order of the Wealth Tax officer disclosed a mistake apparent from the record, the assessee would be entitled to invoke the jurisdiction of the Wealth Tax Officer to rectify the said mistake and the application cannot be thrown out either on the ground that the finality of the original assessment order cannot be taken away by invoking the power of rectification on the basis of the decision of the Court subsequently rendered or on the ground that the said order having become final since no appeal was preferred, therefore, the power of rectification cannot be exercised."

26. The fourth judgment is also from Gujarat High Court in the case of Karamchand Premchand Private Limited v. Commissioner of Income-tax (1975) 101 ITR 46, The relevant facts in this case were that for the assessment years 1961-62, 1962-63 and 1963-6if the assessee had incurred expenditure on account of stamp duty, registration charges etc. in connection with the issue of debentures secured on all the fixed assets of the petitioner. As such expenditure had been held by the Bombay High Court and certain other High Courts to amount to capital expenditure and not revenue expenditure, the petitioner did not specifically claim deduction of such expenditure from its gross income in the respective years and the Income-tax Officer did not allow the deduction during the course of assessment which were made in the years 1963 arid 1964. In 1966 the Supreme Court reversed the above view taken by the Bombay High Court and other High Courts and held that such expenditure must be treated as revenue expenditure and, therefore, deduction thereof-should be given from the gross income of the assessee. The petitioner on coming to know of the decision of the Supreme Court moved the Commissioner of Income-tax by revision application under section 33-A of the Income-tax Act, 1922 and section 264 of the Income Tax Act, 1961. Those sections provide for a period of limitation of one year from the date of the assessment and empower the Commissioner to excuse any delay for sufficient cause. The assessee requested the Commissioner to condone the delay in filing the revision petition for the reason that the decision of the Supreme Court had changed the whole law on the subject and on coming to know of that decision, it approached the Commissioner by the revision application. The Commissioner was of the opinion that the fact that the Supreme Court had taken a different view was not a valid ground for condoning the delay in filing the revision application and that if the petitioner had any doubt in the matter, he should have kept the matter alive by taking appropriate action in good time. Accordingly the Commissioner dismissed the revision application on the ground of limitation. The assessee preferred petition in High Court and it was held that the Commissioner was palpably wrong in holding that the change of legal situation brought about by the decision of the Supreme Court was hardly a valid ground for condoning the delay. It was further held that the decision of the Supreme Court amounted to a declaration of law as contemplated by Article 141 of the Constitution of India. This declaration of law had retrospective effect and rendered the assessment of the expenditure err connection with the debentures illegal because that assessment was passed on a wrong view that the expenditure in question was capital expenditure. This apparent illegality crept into the assessment and became quite apparent only because of the decision of the Supreme Court. It was, therefore, only after the decision of the Supreme Court that the petitioner had reason to move the Commissioner in revision. The fact that the petitioner did not keep the question alive by preferring the appeal is also does not detract from the situation that before the Supreme Court took the different view the legal position was practically settled. It was further contended on behalf of revenue that the real remedy for the petitioner was to move the Income-tax Authorities for rectification in view of the decision of Supreme Court and not to move the Commissioner in revision. It was held by the Gujarat High Court that, it is true that the more appropriate remedy for the petitioner was to undertake proceedings for which the limitation had not expired when he moved the Commissioner by preferring revision application. The petition was ultimately allowed.

27. The fifth judgment is also from the Gujarat High Court in the case of Standard Radiators v. Commissioner of Income-tax (1987) 165 ITR 178. In this case the Assessing Officer while framing the assessment for the assessment year 1966-67 included an amount of Rs.2,90,750 in the total income of the assessee as capital gains. However, the tax payable thereon was not computed. The Assessing Officer subsequently found that the tax payable by the assessee firm was not determined in the assessment order and sought to rectify the mistake. ,The assessee opposed the intended action, however. the Income-tax Officer rejected the objection and determined the tax payable on the capital gains. On appeal by the assessee the A.A.C. held that the I.T.O. could not have determined the tax payable on the capital gains The revenue did not prefer appeal against the order of A.A.C. After about two and half years of the order of A.A.C. the Gujarat High Court held that the registered partnership was liable to pay tax on the capital gains. The A.A.C., therefore, issued notice to the assessee firm proposing to amend his appellate order by which he had upheld the contention of the assessee firm that the tax was not to be paid on capital gains. The A.A.C. ultimately held that he had committed a mistake apparent on the face of record in allowing the assessee's appeal. The A.A.C., therefore, amended his order and restored the order of the Income-tax Officer. The Income-tax Appellate Tribunal upheld the order of rectification by A.A.C. At the instance of assessee a reference was made to the Gujarat High Court. The Gujarat High Court held that the A.A. C. was justified in rectifying his order on the basis of judgment of High Court, which was pronounced subsequently.

28. The last judgment is by the Kerala High Court in the case of Kil Kotagiri Tea and Coffee Estates Co. Limited (1988) 174 ITR 579. The relevant facts in this case were that the assessee claimed interest on the advance tax paid beyond the due date. The Assessing Officer not accept the plea, while C.I.T.(A) accepted the contention. In two appeals, the Income- tax Appellate Tribunal restored the Assessing Officer's finding by placing reliance on a Single Bench decision of the High Court reported as (1980) 122 ITR 587. The Tribunal decided appeal on 31-10-1981. The Single Bench decision on which ITAT had placed reliance and other decisions were assailed in Intra-Court Appeal and the Division Bench of the Kerala High Court reversed the judgment of Single Bench vide judgment reported w. (1982) 135 ITR 39. Thereafter, the assessee submitted application before the ITAT praying that in view of the Division Bench judgment the Tribunal may pass appropriate order and rectified the same. The ITAT dismissed the application holding that rectification under section 154 of the Indian Income-tax Act must be a mistake which is a mistake in the light of the law in force at the time when the order sought to be rectified was passed and that the subsequent decision of the High Court has no retrospective operation as in the case of subsequent legislation or the decision of the Supreme Court. In the above circumstances following question was referred to the High Court:---

"Where an authority has decided, on the basis of a decision of the High Court which is subsequently reversed, would there be a rectifiable mistake coming within section 154 of the Income-tax Act?"

29. The Honourable Judges of Kerala High Court cited a passage from Salmond on Jurisprudence. 10th Edition, page 189 as follows:---

"The theory of case-law is that a Judge does not make law; he merely declares it; and the overruling of a previous decision is a declaration that the supposed rule never was Law. Hence, any intermediate transactions made on the strength of the supposed rule are governed by the law established in the overruling decision. The overruling is retrospective, except as regards matters that are res judicata, or accounts that have been settled in the meantime."

30.The Kerala High Court further observed as follows:---

"An order of assessment, based upon an interpretation or application of law which is ultimately found to be wrong in the light of judicial pronouncements rendered subsequently, discloses a mistake apparent from the record. When the Court decides a matter, it does not make the law in any sense but all it does is that it interprets the law and states what the law has always been and must be understood to have been. Where an order is made by an- authority, on the basis of a particular decision, the reversal of such decision in further proceedings will justify a rectification of the order based on that decision."

31. The Honourable Judges of Kerala High Court further held that in the light of position in law explained by them the order of Tribunal relying on the decision of a learned Single Judge, discloses a mistake apparent on record in the light of subsequent overruling of the very decision on which reliance was placed. The Hon'ble Judges further explained that when the Division Bench of the High Court overruled the decision of a Single Judge, the law on the point at all times was as stated by the Division Bench. It was further observed that the rectification application was submitted within four years of the order and, therefore, the mistake apparent from the record ought to have been rectified. It was further held as under:---

"A binding decision rendered by a Court is always retrospective and the decision which is overruled was never the law. The overruling decision should be deemed to have been in force even on the day when the order sought to be rectified was passed. We are further of the view that the Appellate Tribunal was in error in holding that the subsequent decision of the High Court has no retrospective operation as in the case of subsequent legislation or the decision of the Supreme Court. The subsequent binding decision of the Supreme Court or of the High Court has retrospective operation and overruling is always retrospective."

32. After referring various decisions of the High Courts in India it was concluded that the Supreme Court does not make the law from the date the decision is pronounced, but the Supreme Court declares it to be so from the very inception.

33. In the light of above discussions we are of the opinion that the issues raised in the appeals before us stand settled by Superior Courts in India.. We respectfully agree with the views contained in the above judgments. As we have extensively cited from the judgments of Indian High Courts, with which we entirely agree we need not to discuss the points again. On a careful consideration of the judgments by the Supreme Court of Pakistan in Elahi Cotton Mills PLD 1997 SC 582 = 1997 PTD 1555 and Pfizer Laboratories Limited PLD 1998 SC 64, we conclude as follows:---

(i)It is admitted position that the Honourable Supreme Court of Pakistan has held in Elahi Cotton Mills that the provision of Protection of Economic Reforms Act, 1992 overrides and prevails over the provision of the section 80-D of the Income Tax Ordinance, 1979 and, therefore, the assessees who were covered by the notification mentioned in Schedule to section 6 of the Protection of Economic Reforms Act, 1992 (Act XII of 1992) are entitled to the protection and that such assessees may approach the Income-tax Department.

(ii) The Hon'ble Supreme Court of Pakistan has held in the judgment in - Elahi Cotton Mills that the assessees who fulfil the conditions of notification referred to in the Schedule to section 6 of Act XII of 1992 are entitled to the protection. The question as to whether a particular assessee fulfils the above conditions of the above notification, is a question of fact, which will have to be determined by the hierarchy provided under the Ordinance. During the proceedings culminating in the present appeals it has nowhere been denied that the appellant's case is covered by Notification No.S.R.O.-1283(1)/90, dated 13-12-1990 which is referred to in the Act, 1992. The exemption referred to in the above notification has already been allowed by the revenue and, therefore, it i5 admitted position that conditions for availing the protection were fulfilled.

(iii)It is admitted fact that appellant did not prefer any appeal or revision against the levy of income-tax under section 80-D of the Income Tax Ordinance, 1979 but after the pronouncements of judgment by the Honourable Supreme Court of Pakistan in the case of Elahi Cotton Mills submitted rectification applications under section 156 of the Income Tax Ordinance, 1979 within the period of limitation allowed in law. Thus, in the light of view held by us in pursuance of the legal position as explained by the Superior Courts in Indian Jurisdiction the assessments could be upset and modified in law by way of rectification and thus could not be treated as past and closed matters.

(iv)The Assessing Officer fell in error by not exercising jurisdiction vested in him under section 156 of the Income Tax Ordinance, 1979 and treating the interpretation given by the C.B.R. in Circular No.2(98)ITJ/94, dated 11-12-1997 as binding and acting on the interpretation of -C.B.R. taking it as legally valid opinion (see Central Insurance Company v. C.B.R. (1993 SCMR 1232).

(v)Opinion of the Justice and Law Division is not binding on the Income-tax Appellate Tribunal and will not curtail the powers vesting in the adjudicating authorities under the Income Tax Ordinance, 1979 for decision of the issues in accordance with law (Writ Petition No. 2985 of 1998 judgment, dated 24-4-1998, Lahore H. C.; .

(vi)In view of the judgment of the Hon'ble Supreme Court of Pakistan in the case of Elahi Cotton Mills, the levy of income-tax in respect of appellant in the two assessment years under appeal under section 80-D of the Income Tax Ordinance, 1979 was without any sanction in law and was charged and received by the Revenue not lawfully due and, therefore, the Government has no moral and legal authority to retain the tax illegally recovered/received. The tax paid by the appellant under mistake should be returned.

(vii) The Law and Justice Division, Central Board of Revenue and Commissioner of Income-tax (Appeals) have fell in error in holding that the judgment of Hon'ble Supreme Court of Pakistan is not retrospective in nature. Any judgment pronounced by a competent judicial Authority and particularly the Honourable Superior Courts containing interpretation of an existing law does not amount to making of law from the date of the pronouncement of the order but it amounts to declare as to what the law in fact is and has always been and should he treated to be from the very inception. Thus, the law as declared by the competent judicial forum and particularly the superior Courts whose judgments have the force of precedent, have the retrospective effect. However, the retrospectivity of a statute law differs from the retrospective effect of a superior Court judgment containing interpretation of law. The retrospective effect of a statutory legislation is that it takes effect and becomes operative even before the date of its promulgation and is applied to all the pending cases and such matters, which have not attained finality. On the other hand, the retrospective effect of a judicial pronouncement in pursuance of the interpretation of law shall be from the inception of the law and not prior to that and shall be followed by all the judicial and quasi judicial forums subordinate to the Court pronouncing judgment and shall be applicable to all the pending cases as well as to the matters which have not attained finality and have not become past and closed matters. It appears that the opinion of Law and Justice Division and the Commissioner of Income-tax (Appeals) that the judgment of the Supreme Court of Pakistan is not retrospective in nature is probably result of misreading or out of context reading of some judgments of Hon'ble Supreme Court of Pakistan. It would be appropriate to clarify the situation in order to remove the misunderstanding.

In the case of Muhammad Yousuf v. Chief Settlement and Rehabilitation Commissioner PLD 1968 SC 101. The Honourable Supreme Court of Pakistan while examining the effect of interpretation of law in the case of Jalal Din v. Chief Settlement Commissioner PLD 1965 SC 261 observed as follows:---

"This judgment was delivered on the 2-11-1964 and its consequence was that as from that date all Courts subordinate to the Supreme Court and all executive and quasi judicial authorities were obliged by virtue of the Constitution to apply the rule as laid down by the Supreme Court in cases coming up before them for decision. It did not have, and it cannot to be contended that it had, the effect of altering the law as from the commencement of the Act so as to render void of its own force all relevant orders of the Settlement Authorities or of the High Court made in the light of the earlier interpretation which was that the exercise of the delegated power was subject to the provisions in Chapter-VI of the Act."

In the cited judgment the interpretation earlier placed by the Settlement Authorities and High Court was reversed by the Hon'ble Supreme Court of Pakistan and subsequently the law was amended with retrospective effect and the Hon'ble Supreme Court of Pakistan held that the retrospective amendment obliged all Courts including Supreme Court to Act accordingly notwithstanding the contrary view expressed in Jalaldin case. Thus, it was held that the interpretation of Hon'ble Supreme Court shall not render all the orders of Supreme Court and High Courts void on its own force. The above judgment was delivered by Hon'ble Mr. Justice Cornelius, C.J. The issue again came for consideration before Hon'ble Supreme Court in the case of I.T.O. v. Cement Agencies Limited PLD 1969 SC 322. The relevant facts in this case were that notices were issued to the assessee under section 34(1) of the Income-tax Act, 1922. The assessee's income was subjected to tax' but the A.A.C. and ITAT held that the assessee's income was not taxable in Pakistan. After the judgment of ITAT Income-tax Department dropped the proceedings in all the relevant assessment years. Subsequently the Hon'ble Supreme Court took a different view in another case and thereafter, the department issued further notices reopening the assessments. The question arose whether the I.T.O. could reopen the assessments. The Hon'ble Supreme Court of Pakistan held that it was not permissible and such course was not sanctioned by law. It was held as follows:---

"I do not see how on the, basis of the judgment of this Court in Octavius Steel Company Ltd. case, past and closed transactions could be reopened. The proceedings in respect of the disputed years were finally disposed of in favour of the respondent and until they are set aside in accordance with law, no fresh proceedings could be initiated in respect of these years. "

The Hon'ble Supreme Court of Pakistan placed reliance on three judgments of Privy Council. In the judgment reported as PLD (1947) PC 247. It was held as follows:---

"An assessee, which was a trust, which had paid tax upto the year 1931-32, raised an objection in respect of assessment for the year 1932-33 on the ground that its income for that year was exempt by virtue of section 4(3)(i). In a reference High Court under section 66 held that the income was not exempt. The assessee appealed to the Privy Council and, the Board reversed the decision of the High Court. Meanwhile after the decision of the High Court and prior to the decision of the Privy Council the assessments for the year subsequent to the year 1932-33 were made and completed in accordance with the decision of the High Court. The assessee after the decision of the Privy Council made an application under section 33 praying that the assessments for the years subsequent to 1932-33 might be quashed. The Commissioner refused to cancel the assessments on the ground that the assessee had not availed itself of the procedure which the law provided including if necessary an appeal to the Privy Council in respect of assessments subsequent to the year 1932-33.

Held that the assessments were not a nullity.

A perusal of the above law laid down shows that a decision given by a higher Court in another case cannot be ground for reopening an issue which stood finally determined by a decision of subordinate Court or authority.

The issue again came for consideration before the Hon'ble Supreme Court of Pakistan in the case of Pir Bakhsh v. Chairman Allotment Committee PLD 1987 SC 145. In this judgment the passage from 'Treatise on the Constitutional Limitation.' by Coolly was cited with approval which reads as follows:--

"And as to the first, we understand the rule to be, that a decision once made in a case, by the highest Court empowered to pass upon it, is conclusive upon the parties to the controversy and their privies, who are not allowed afterwards to revive it in a new proceeding for the purpose of raising the same or any other questions. The matter in controversy has become res judicata, a thing definitely settled by judicial decision; and the judgment of the Court imports absolute verity. Whatever the question involved, whether the 'interpretation of a private contract, the legality of an individual act, or the validity of a legislative enactment, the rule of finality is the same. The controversy has been adjudged, and once finally passed upon is never to be renewed.

And further:

The rule of conclusiveness to this extent is one of the most inflexible principles of the law; in so much that even if it were subsequently held by the Courts that the decision in the particular case was erroneous, such holding would not authorise the reopening of the old controversy in order that the final conclusion might be applied thereto."

The Honourable Supreme Court of Pakistan further held as follows:---

"So, long this determination was not set aside in appeal the judgment remained in the field irrespective of the quality of determination as to whether it was incorrect on questions of fact or law. The rights of the parties thereunder assumed finality and took the colour of a 'past and closed transaction.' The fact that the Supreme Court in an appeal, titled Abdul Hafiz v. Rehabilitation Commissioner and others, against the judgment of the High Court set aside the same judgment in another writ petition would not reopen the concluded rights of the parties under the decision of the High Courts against which no appeal was filed nor could the appellants who were respondents in that writ petition avail the benefit of the law laid down by the Supreme Court under Article 189 of the Constitution. They can have, therefore, no grievance if the Settlement Authorities maintained the earlier allotments of the respondents by cancelling the allotments of the appellants to the extent of the lands sliced down from their holdings. The fact that the law laid down by this Court is prospective 'also cannot be doubted."

In this judgment the Hon'ble Supreme Court referred to the law laid down in the judgment reported as PLD 1958 SC 101 which has already been referred in the earlier part of this order. The Hon'ble Supreme Court of Pakistan considered the law as laid down in the case reported as I.T.O. v. Cement Agencies PLD 1969 SC 322 which has already been referred by us. Thus the observation of the Hon'ble Supreme Court that, 'the fact that the law laid down by this Court is prospective also cannot be doubted,' has been made in the context of facts under consideration where the point for consideration was if an interpretation given by the Hon'ble Supreme Court of Pakistan shall have the effect of reopening of past and closed transaction.

In yet another case Sakhi Muhammad v. C.D.A., Islamabad PLD 1991 SC 777, the petitioner was one of the effected landowner by Capital Development Authority Ordinance, 1960. His land was acquired and compensation was awarded in 1968. In 1983 he invoked the Constitutional jurisdiction of the High Court on the basis of a decision given by Hon'ble Supreme Court reported as PLD 1976 SC 752 whereunder the circular under which compensation were awarded to the landowners and which was not so beneficial to them was held to be without lawful authority. The petitioner contended that the effect of such a declaration was that he was entitled to a more beneficial treatment in accordance with law and the decision justified reopening of his claim to the due compensation according to the law as declared by Supreme Court. The petition was dismissed by the High Court for the reason that the High Court cannot help the petitioner after about 15 years of the award of compensation and seven years of the Supreme Court judgment. It was contended before Hon'ble Supreme Court that the judgment reported as PLD 1976 SC 752 amounted to a judgment in rein and was to ensure to the benefit even in those cases where the matter had concluded and was past and closed. It was further contended that the petitioner need not be a party to the adjudication in order to benefit from it. Leave was refused by the Hon'ble Supreme Court by placing reliance on the law as laid down in the case of Muhammad Yousuf v. Chief Settlement Commissioner PLD 1968 SC 101.

From the perusal of the above judgments of the Hon'ble Supreme Court, it can be clearly inferred that the law has been laid down to the effect that any interpretation of law by the Hon'ble Supreme Court or reversing/setting aside of the view held by High Court shall not have the effect of automatically rendering the earlier judgments void and shall not have the effect of reopening the past and closed transactions which have attained finality. The judgment of Hon'ble Supreme Court of Pakistan is prospective to that extent only and the persons not parties before the Hon'ble Supreme Court shall not derive benefit in such cases only. However, if any matter has not attained finality and has not become past and closed chapter and can be reopened in any appeal, revision, review or rectification in accordance with the law and during the period of limitation provided in law, such cases shall not be treated as past and closed transactions and the parties to such cases which have not attained finality shall have the right to reopen the same according to law and shall be entitled to the relief flowing from the judgment of the Hon'ble Supreme Court of Pakistan.

(viii) In view of the law as laid down by the Hon'ble Supreme Court the levy of tax on the appellant under section 80-D was without valid authority and sanction in law. Thus, it was mistake apparent on record by virtue of being violative of the legislative provision as interpreted by the Hon'ble Supreme Court of Pakistan. The mistake was committed when the assessment orders in this behalf were made and shall not be deemed to be a mistake from the date of pronouncement of the judgment by the Hon'ble Supreme Court of Pakistan. The period provided in law for rectification of mistake had not expired when the rectification applications were submitted, meaning thereby that the assessment orders can be upset/modified in accordance with the provision of law and, therefore, the assessments sought to be rectified were not past and closed matters. The Assessing Officer was, therefore, required to rectify the mistake and allow refund to the appellant.

(ix)The assessment orders to the extent of levy of tax under section 80-D in the case of appellant's were not rendered void ipso facto with the pronouncement of judgment by the Hon'ble Supreme Court of Pakistan because the appellant was not a party to the proceedings before Hon'ble Supreme Court of Pakistan. Nonetheless the orders being violative of the legislative provision and not having attained the status of past and closed matters, the appellant was within his right to seek rectification in the assessment orders in accordance with the provision contained in section 156 of the Income Tax Ordinance, 1979. 'thus, though the appellant could not seek relief on the basis of judgment of Hon'ble Supreme Court of Pakistan on its own force but could seek the relief flowing from the judgment of Hon'ble Supreme Court of Pakistan in accordance with the provision contained in the Income Tax Ordinance itself and within the limitation of period provided therein.

34. For the foregoing reasons and conclusions drawn by us it is held that the levy of tax under section 80-D on the appellant in the two assessment years under appeal is a mistake apparent on record and the learned two Officers below have fell in error in not allowing the rectification. The impugned orders of the learned two officers below are hereby vacated and the rectification applications are allowed. The tax levied under section 80-D on the appellant's are hereby declared to be without legal authority and without sanction in law. The taxes paid under section 80-D in pursuance of invalid and illegal orders are hereby directed to be refunded. The appeals are allowed as above.

C.M.A./575/Trib. Appeals accepted.