COMMISSIONER OF INCOME-TAX, CENTRAL ZONE, LAHORE VS CRESCENT TEXTILE MILLS LTD., LAHORE
2001 P T D 874
[Lahore High Court]
Before Nasim Sikandar and Jawwad S. Khawaja, JJ
THE COMMISSIONER OF INCOME-TAX, CENTRAL ZONE, LAHORE
versus
Messrs CRESCENT TEXTILE MILLS LTD., LAHORE
C.T.R. No.78 of 1991, heard on 18/12/2000.
Income Tax Ordinance (XXXI of 1979)---
----S.65---Income-tax Act (XI of 1922), S.34---Re-opening of assessment under S.65, Income Tax Ordinance, 1979---Limitation---Extended time of limitation after enforcement of the Income Tax Ordinance, 1979 under S.65 could not be made applicable to assessments in respect whereof the proceedings under S.34, Income-tax Act, 1922 had already become barred by limitation---Principles.
After statutory period of two years from the end of the relevant assessment year as provided for under section 34 of the late Act, 1922 had expired, vested rights had been created in the assessees. Therefore, the time limitation of 10 years as envisaged under the corresponding provision of section 65 of the Income Tax Ordinance, 1979 had no application.
On the date of enforcement of the Income Tax Ordinance, 1979 on 1-7-1979 the right to re-open even the latest assessment framed for the year 1976-77 had become barred by limitation. Therefore, it was a past and closed transaction and the comparable provisions of section 65 of the Ordinance could not have been resorted to as the asses see had by that time acquired a vested right. All the moreso when there was no provision in the Income Tax Ordinance, 1979 which could directly or by necessary implication indicate application of the provisions of section 65 of the Ordinance to the time-barred cases under section 34 of the late Act of 1922.
Re-assessments for the aforesaid assessment years when those had already become barred by time for the purpose of re-opening as contemplated under section 34 of the late Act, 1922, were rightly cancelled by the Tribunal.
New Jubilee Insurance-Co. Ltd. v. Special Officer, Central Zone-A, Karachi and another 1990 PTD 1 and J.P. Jani, I.T.O. v. Induprasad Devshanker Bhatt (1969) 72 ITR 595 fol.
Shafqat Mehmood Chauhan for Appellant.
Muhammad Iqbal Khawaja for Respondent
Date of hearing: 18th December, 2000.
JUDGMENT
NASIM SIKANDAR, J.---The Lahore Bench of the Income-tax Appellate Tribunal at the instance of the Commissioner of Income-tax, Central Zone, Lahore has stated this case. The following question has been framed for our answer and reply:---
"Whether on the facts and in the circumstances of the case the Tribunal was right in holding that the assessments for 1971-72 to 1976-77 had become time-barred before coming into force of the Income Tax Ordinance, 1979. "
2. The facts in brief are that the respondent is a public limited company and at the relevant time derived income from general insurance business. The original assessments in its receipt for the aforesaid six years were framed respectively on 30-5-1974, 30-6-1975, 31-5-1976, 31-5-1976 and 27-6-1977. However, the Assessing Officer after enforcement of the Income Tax Ordinance, 1979 issued notice under section 65 expressing his intention to re-open these assessments. Before the Tribunal it was contended that the period of limitation under which the cases could be re-opened and reassessment could be made under section 34 of the Income-tax Act, 1922 was only two years from the end of the year in which the income was first assessable. the Tribunal agreed that for these assessment years re-assessments under section 34 of the late Act could be made only before 30th June, 1979. Further it was found that extension in period by 10 years as provided for in section 65 of the Income Tax Ordinance, at the relevant time, was not applicable as two years time limit under the late Act had already expired when the Ordinance was enforced on 1-7-1979.
3. After hearing the learned counsel for the parties, we will readily agree with the learned counsel for the respondent that an affirmative answer has to be returned. The issue if the extended time of limitation after enforcement of the Income Tax Ordinance under section 65 could be made applicable to assessments in respect whereof the proceedings under section 34 of the late Act had already become barred by limitation came up for hearing before a Division Bench of the Karachi High Court in re: New Jubilee Insurance Co. Ltd. v. Special Officer, Central Zone-A, Karachi and another 1990 PTD 1. Their Lordships expressed the view that after statutory period of two years from the end of the relevant assessment year as provided for under section 34 of the late Act, 1922 had expired, vested rights had been created in the assessees. Therefore, the time limitation of 10 years as envisaged under the corresponding provision of section 65 of the Income Tax Ordinance, 1979 had no application. Learned counsel for the respondents has relied on a case from Indian Jurisdiction in re: J.P. Jani, I.T.O. v. Induprasad Devshanker Bhatt (1969) 72 ITR 595. In that case the Hon'ble Court held that an Assessing Officer could not issue a notice under section 148 of the Income Tax Act, 1961 in order to re-open the assessment of an assessee in a case where the right to re-open the assessment was barred under the 1922 Act at the date when the new Act came into force.
4. Learned counsel for the revenue has not denied that on the date of enforcement of the Income Tax Ordinance, 1979 on 1-7-1979 the right to re open even the latest assessment framed for the year 1976-77 had become barred by limitation. Therefore, it was a past and closed transaction and the comparable provisions of section 65 of the Ordinance could not have been made resort to the assessee had by that time acquired a vested right. All the more so when there was no provision in the Income Tax Ordinance, 1979 which could directly or by necessary implication indicate application of the provisions of section 65 of the Ordinance to the time-barred cases under section 34 of the late Act of 1922.
5. Therefore, being in respectful agreement with the view adopted by our learned brothers of the Karachi High Court and the Supreme Court of India we will hold that the Tribunal was right in cancelling assessments framed under section 65 of the Income Tax Ordinance, 1979.
6. Re-assessments for the aforesaid assessment years when these had already become barred by time for the purpose of re-opening as contemplated under section 34 of the late Act, 1922 were rightly cancelled by the Tribunal.
7. Answered in the affirmative.
M. B. A./C-31/LReference answered.