COMMISSIONER OF INCOME-TAX. ZONE-B, LAHORE VS MUHAMMAD SARWAR KHAN
2001 P T D 668
[Lahore High Court]
Before Nasim Sikandar and Jawwad S. Khawaja, JJ
COMMISSIONER OF INCOME TAX, ZONE-B, LAHORE
versus
MUHAMMAD SARWAR KHAN
C. T. R. No. 121 of 1991, heard on 18/10/2000.
(a) Constitution of Pakistan (1973)---
-----Art.12---Retrospective punishment, protection against---Scope---Under the provision of Art. 12 of the Constitution, no law providing for a greater or different punishment which was available at the time of commission of the offence or default can be held to be a valid law muchless to interpret a law which on the face of it appears prospective.
(b) Income Tax Ordinance (XXXI of 1979)---
----Ss. 13 & 111---Unexplained investment---Concealment of income-- Penalty---Retrospective effect of S.111(2)(c) of Income Tax Ordinance, 1979---Income Tax Authorities imposed penalty on the assessee for having concealed the assets for assessment year 1977-78---Penalty was imposed under S.111(2)(c) of Income Tax Ordinance, 1979---Income Tax Appellate Tribunal set aside the order of the Income Tax Authorities on the ground that the provisions of S.111 were not retrospective in nature---Validity---Penalty imposed was not permissible as the act of alleged concealment and furnishing of inaccurate particulars in terms of various provisions of S.13(1) of Income Tax Ordinance, 1979, occurred many years before the introduction of the provisions---Where the penalty was not made with reference to any other provisions of the Ordinance, the view adopted by the Tribunal that the provisions of S.111(2)(c) of Income Tax Ordinance, 1979, were not retrospective in nature, was correct---Reference was answered in affirmative.
Commissioner of Income-tax v. Olympia 1987 PTD 739 and Messrs Rippon's case PLD 1973 Lah. 849 ref.
Shafqat Mehmood Chohan for Petitioner.
Nemo for Respondents.
Date of hearing: 18th October, 2000.
JUDGMENT
NASIM SIKANDAR, J.---The Lahore Bench of the Income-tax Appellate Tribunal at the instance of the revenue has framed following question of law which is said to have arisen out of their order recorded on 27-9-1989:--
"Whether on the facts and in the circumstances of the case the learned Income Tax Appellate Tribunal was justified in not maintaining the order of the CIT (Appeals) whereby the penalty imposed under section 111 of the Income Tax Ordinance was confirmed. "
2. According to the petitioner-revenue the respondent an individual was intercepted on 29-8-1976 at new Ravi Bridge Lahore and was found to be in possession of huge quantity of Pak currency notes (Rs.1,07,67,705), gold (8,000 toles), wrist watches (8,539, in number) and three cars. In reply to statutory notice under section 56 of the Income Tax Ordinance, 1979 for the assessment year, 1977-78 the assessee returned "nil" income as statedly no business was carried out by him during the said assessment year. However, the Assessing Officer proceeded ahead after observing that before the Special Judge, Customs, Lahore. Learned counsel for the respondent accused had admitted the possession of the aforesaid valuable including currency. Also two mares and three cars besides house-hold goods worth Rs.85,000 were admitted before the Court to be available with the accused/ assessee. In reply to the show-cause notice regarding omission of the assets in his wealth statement, the assessee contended that since all these assets had been confiscated by the State, he was not in possession of any of them at the end of the assessment year and, therefore, was not liable for non-declaration of any of them. The Assessing Officer, however, did not agree with him and framed assessment at Rs.1,90,35,570 by making addition of the aforesaid sums by resort to various clauses of section 13 of the Income Tax Ordinance, 1979.
3. Subsequently, a notice under section 116 of the Ordinance was issued on 30-4-1981 asking the assessee to explain furnishing of inaccurate particulars of his income. The assessee repeated his earlier stance which was rejected and accordingly the Assessing Officer proceeded to impose penalty of Rs.1,22,93,882 through an order recorded on 28-1-1988. The Commissioner Appeals maintained the order. However, the learned Tribunal directed deletion of the penalty. The learned Judicial Member found it as a matter of fact that no concealment was successfully brought home by the revenue nor it had established mens rea on the part of the assessee. Also it was noted that a penalty for default or for additions enumerated in section 13 of the Ordinance was provided for by insertion of sub-clauses (c) (2) in section 111 of the Ordinance through Finance Ordinance, 1984. In the view of the Judicial Member, the default having been committed many' years earlier to the introduction of the said clause, it was not attracted to the case of the assessee. The learned Accountant Member by referring to a judgment of the Karachi High Court in re: Commissioner of Income Tax v. Olympia 1987 PTD 739 disagreed expressing the opinion that since the assessment in case of the assessee had not been completed, the said provision added to section 111 in the year, 1984 could very well be invoked. However, he agreed with the conclusion on the ground that concealment as a fact had not been proved by the revenue and, therefore, the penalty imposed was not exigible.
4. Learned counsel for the revenue though agrees that a penal provision in a fiscal statute like punishment in criminal offences cannot be applied with retrospective effect yet insists that the view adopted by the learned Accountant Member on the basis of the said reported judgment of the Karachi High Court was justified. However, we are not persuaded to agree. The law with regard to retrospectivity of statutes and statutory provisions is very much clear. First of all it will be seen that the said sub-clause (c) introduced in section 111 of the Ordinance making any Act or action covered by the provisions of section 13 of the Income Tax Ordinance, 1979 to be culpable as concealment was introduced in the year, 1984. It will be noted that the said addition was made to the provisions of section 111 on account of difference of opinion amongst Courts if addition made with reference to any sub-clause of section 13 amounted to concealment. Since no express provision to that effect or a reference to that section existed in section 111 providing for penalty for concealment of income, an air of uncertainty surrounded the penalty provision as a number of forums including the High Courts adopted the view that in absence of a specific reference to that effect a penalty for an addition under section 13 would at least amount to double jeopardy. It was only in order to clarify the situation that sub-clause (c) was added by Finance Act, 1984 in subsection (2) of section 111 which provided as to what concealment of the income or furnishing of inaccurate particulars of income would mean for the purpose of subsection (1) and section 119 of the Ordinance".
5. The act on the basis of which the assessee was found liable to addition under section 13 having occurred many years before the introduction of the provisions, these could not have been resorted to by the Assessing Officer. It appears that the revenue kept on lurking around the assessee for quite some time till the conclusion of his trial by Special Judge Customs, Lahore. Thereafter, the assessment proceedings were initiated and completed after the assessee had travelled through various forums. It was on 30-4-1981 that a notice for concealment under section 116 of the Ordinance was issued. Therefore, even at the time of issuance of notice the said provisions which were subsequently resorted to had not yet come on statute book. From the penalty order it also appears surprising that after the first notice served on 9-5-1981 under section 116 a reminder was issued on 23-4-1987. In reply admittedly the assessee put forth his explanation for the first time since year, 1976. Article 12 of the Constitution of Islamic Republic of Pakistan, 1973 protects the citizens against retrospective punishment. It provides that no law shall authorize the punishment of a person for an act or omission that was not punishable by law at the time of the act or omission or for an offence by a penalty greater than, or of a kind different from-the penalty prescribed by law for that offence at the time the offence was committed. In view of the clear words of Article 12 no law, providing for a greater or different punishment which was available at the time of commission of the offence or default can be held to be a valid law much-less to interpret a law which on the face of it appears prospective. There can hardly be any doubt that a provision providing for penalty is not procedural in nature and, therefore, will take care of the default only happening or committed after its birth on the statute book.
6. The interpretation of learned Accountant Member of the aforesaid judgment of the Karachi High Court re: CIT v. Olympia (Supra) also appears misplaced. In that case, the assessee before their Lordship contested chargeability of penal interest and the issue being if section 18A(6) was a procedural law. Their Lordships found the answer to be in the negative and held that the law amended by Finance Act, 1973 had retrospective operation to cover only pending cases. It was noted that prior to its amendment by the Finance Act, 1973 subsection (6) of section 18-A required an assessee to pay an additional tax at a rate of 2% per mensum upon the short fall for the period from first of April till the date on which regular assessment was made. If the regular assessment was delayed for any reason, the assessee was adversely affected because he was liable to additional tax till such time the regular assessment was completed. The remedial change brought about by the Finance Act, 1973 restricting the period to a maximum of 15 months was accordingly found to be applicable and retrospective to cover only pending cases. Earlier their Lordships sought support for their view from a judgment of this Court in M/s Rippon's case cited as (PLD 1973 Lahore 849) wherein it was observed that an amending law which was purely remedial and curative must be liberally construed in favour of the subject.
7. The situation in the present case is, however, totally different. The provisions of section 111 at the time of enforcement of Ordinance provided for two kinds of meaning to the words "concealment" and "furnishing of inaccurate particulars" of income as used in subsection (1) of section 111. Subsequently, the scope of their meaning was enlarged by introducing a third of sub-clause (c) which since its introduction reads as under:-
Section 111(2)(c)
(a)xxxxxxxxxxxxx
(b)xxxxxxxxxxxxx
(c) any act referred to in clauses (aa), (b), (c), (d) and (e) of subsection (1) of section 13.
8. Since the impugned addition in the income of the assessee was made by res6rting to the aforesaid provisions of section 13, the penalty imposed was clearly not exigible as the act of alleged concealment and furnishing of inaccurate particulars in terms of various provisions of subsection (1) of section 13 occurred many years before introduction of the provisions. It will also be noted that the impugned penalty was not made with reference to any other provisions of the Ordinance or any other sub-clause of section 111. The view adopted by the learned Judicial Member that provisions of sub clause (c) of section (2) of section 111 were not retrospective in nature appears correct.
9. Be that as it may, the Tribunal having found that the revenue had failed to prove concealment as a fact, our answer to the question is in the affirmative.
10. The Registrar shall send a copy of this judgment under the seal of the Court and his signature to the concerned Bench of the Income-tax Appellate Tribunal.
Q.M.H./M.A.K./C-27/LReference answered.