BEFORE SYED MASOOD UL HASSAN SHAH, JUDICIAL MEMBER AND MAHMOOD AHMAD MALIK, ACCOUNTANT MEMBER VS BEFORE SYED MASOOD UL HASSAN SHAH, JUDICIAL MEMBER AND MAHMOOD AHMAD MALIK, ACCOUNTANT MEMBER
2002 P T D (Trib.) 159
[Income-tax Appellate Tribunal Pakistan]
Before Syed Masood ul Hassan Shah, Judicial Member and Mahmood Ahmad Malik, Accountant Member
I.T.A. No. 676/IB of 1997-98, decided on 20/06/2001.
(a) Interpretation of statutes----
---- Fiscal statute---Where liability of the assessee was created under a law when that was in force during the assessment year under consideration such liability cannot be done away with if later on such law was repealed/omitted from the statute book and was not in existence at the time when the assessment was framed by the Assessing Officer.
(b) Interpretation of statutes---
-----Fiscal statute---Rights and liabilities accrued and created under a provision of law cannot be taken away when that law is repealed/ omitted subsequently.
(c) Income Tax Ordinance (XXXI of 1979)----
----S.12(18A)--C.B.R. Circular No. 14 of 1992, dated 1-7-1992-- C.B.R. Circular No. 10 of 1996, dated 16-7-1996---Deemed income-- Loan---Assessment year 1995-96---Assessee failed to repay loan within five years by 30-6-1994---Such loan was assessed as `deemed income' of the assessee for the assessment year 1995-96 which was confirmed by the First Appellate Authority ---Assessee's contention was that provision of S.12(18A) was not applicable to the assessee's case as such provision of law was not the part of law at the time of framing of assessment same having been deleted by Finance Act, 1996---Validity---Repealed/omitted S.12(18A) of the Income Tax Ordinance, 1979 would be taken to be as available and applicable to the case of assessee which was a case for the assessment year 1995-96 and the assessee failed to repay the said loan within the time as prescribed in the omitted provision of law-- Assessment was to be framed in accordance with the law which was applicable for the said assessment year---No concession was available if the assessment was not framed within the time when the law was in force because proceedings could continue for a longer period and then finalized and till that time there could be many changes in the law---Such position will create a complex situation if the law at the time of framing of assessment was made applicable irrespective of the fact as to what law was in force during the assessment year under consideration---Order of two Authorities below was confirmed by the Appellate Tribunal.
1992 PTD 1367; 2000 PTD (Trib.) 466; 1993 SCMR 73; I.T.A. No. 497/IB of 1999-2000; Messrs Elahi Cotton Mills Limited and others v. Federation PLD 1997 SC 582 = 1997 PTD 1555 and PLD 1970 SC 29 ref.
Bashir Ahmed for Appellant.
Abdul Jalil, D.R. for Respondent.
Date of hearing: 20th June, 2001.
ORDER
SYEDMASOOD UL HASSAN SHAH (JUDICIAL MEMBER).---The assessee through these appeals has contested the order, dated 30-3-1998 (hereinafter referred to as the impugned order) passed by the learned CIT(A), Islamabad whereby he upheld the, action of the Assessing Officer of applicability of provisions of section 12(18A) of the Income Tax Ordinance, 1979 (hereinafter called, the Ordinance) to the case of the assessee for the assessment year 1995-96 and further maintained the action of tile Assessing Officer for the levy of additional tax under section 88 of the Ordinance.
2. Besides terming the impugned order of both the forums below as bad in law and contrary to the facts of the case, the assessee has raised the following grounds:---
(1) That the learned CIT(A) was not right in law to confirm the addition of Rs. 16,00,000 made under section 12(18A);
(2) that submissions made by the assessee and provision of defunct clauses (a) & (b) of subsection 18A of section 12 to the Ordinance were not properly appreciated both by the Assessing Officer as well as the CIT(A), and
(3) that the learned CIT(A) was not justified to uphold the incorrect working of additional tax under section 88.
3. Hence the above appeal.
4. Present Mr. Bashir Ahmed, Advocate for the appellant/assessee and Mr. Abdul Jalil, D.R. for the respondent/department.
5. The learned representatives of the parties have been heard and respective orders of the forums below perused.
6. Briefly the relevant facts as arise from the assessment order are that the assessee being an individual and director of a private limited company deriving income from salary only declared net income at Rs. 363,700 under Broad Based Self-Assessment Scheme (BBSAS) for the assessment year 1995-96 and his return did not qualify for acceptance under BBSAS as tax under section 54 was not paid alongwith the return. The Assessing Officer processed the assessment under normal law and A.R. of the assessee attended and filed wealth statement, annual expenditure statement and reconciliation statement of net wealth. The assessee declared net wealth at Rs. 1,93,04,365 in the wealth statement alongwith reconciliation statement and the Assessing Officer did not draw any adverse inference on account of accretion in wealth having been reconciled satisfactorily. By perusing the assessment record, the Assessing Officer found that the assessee had obtained loan amounting to Rs. 6,00,000 and Rs. 1,000,000 from his' father and Major (Retd.) Shujat Ali Shah during the assessment years 1988-89 and 1989-90 which the assessee failed to repay within five years 'by 30-6-1994 and as such the entire loan became liable to - be taken as deemed income of the assessee under section 12(18A) of the Ordinance. Accordingly, the Assessing Officer issued show-cause notice to the assessee under section 12(18A) to explain his position and then the assessee submitted written explanation as detailed in the assessment order mainly stating that, (i) subsection (18A) of section 12 has been deleted from the assessment year 1996-97 by referring to C.B.R. Circular No. 10 of 1996 attributing reasons to the deletion as causing hardship to the assessee and as such the provisions not being applicable because no finding was made in the case up to June 30, 1996, (ii) disallowance -of said loans shown in the wealth statements of assessment years 1994-95 and 1995-96 by increasing net wealth and as no such loan was outstanding on 30th June, 1994 and 1995 since the same had been excluded from liabilities and (iii) omission of subsection (18A) and no such liability having been admitted by the assessee for the income years ended on June 30, 1994 and 1995 and as such the amounts of loan may not be treated as deemed income for the assessment year 1995-96. The Assessing Officer did not accept the above explanation of the assessee and came to the conclusion that the said loan was deemed income of the assessee for the income year 1994-95 (assessment year 1995-96) because the loan was not paid up to 30-6-1994. Then he added back an mount of Rs. 32,770 in the net income of the assessee on account of claim of conveyance allowance being in excess of Rs. 3,600 as per, entitlement and computed total income of the assessee at Rs. 19,964,420. The additional tax under section 88 at Rs. 31,203 was also levied against the assessee.
7. Feeling aggrieved with the above order, the assessee preferred appeal and the learned Appeal Commissioner maintained the action of the Assessing Officer by observing and finding as under:---
"It is observed that the Assessing Officer has given proper opportunity to the appellant and the learned A.R. of the appellant could not produce any fresh evidence or arguments in support of the grounds of appeal except the repetition of arguments given at the assessment stage. The grounds Nos. l and 2 of the appellant are contradictory to one another because the appellant wants that as section 12(18A) was deleted after the assessment year 1995-96 and therefore the deletion should be applied, on the other hand in case of additional tax under section 88 the appellant wants that the provisions of section should not be applied to the facts of the case prospectively. According to fair interpretation of statutes as the provisions of section 12(18A) were applicable in the year 1995-96 and these` have been rightly applied to the facts of the appellant case and upheld as such. In the same way the provisions of section 88 have been fairly applied to the facts of the appellant case at enhanced interest rate for the continued subsequent default of the appellant and the same is maintained accordingly and as result of this the appeal fails."
8. Now the assessee has assailed the matter before us on the grounds enumerated above.
9. The learned A.R. of the assessee stated that the only issue involved was as to whether section 12(18A) of the Ordinance was applicable to the case in hand or not. He contended that section 12(18A) was not applicable to the case of the assessee because the case of the assessee was finalized at the time when the provisions of sub section (18A) of section 12 stood omitted in the law through the Finance Act, 1996 and were no more on the statute book. He explained that subsection (18A) of section 12 was inserted in the Ordinance by the Finance Act, 1992 and- then was omitted by the Finance Act, 1996 for the reason that it was causing hardship to the assesses. He then stated that subsection (18A) was no more in existence at the time of assessment on 30-8-1997 and the said provision being procedural in nature and also of declaratory character cannot be held to be applicable to the pending cases after its omission. He then referred to the provisions of section 12(18A) providing for considering the amount of private loan or advance having not been paid back on or before 30-6-1994 or within the five years of the expiration of the income year in which it was obtained, whichever was later, to be the deemed income of the assessee in income year immediately next following or any subsequent year in which the finding is made. He then argued that the said provision was a fiction of law regulating a procedure for the repayment of loan and, at the same time declaratory as well. He then referred the following case-law with regard to the question of applicability of the said provision of law to the pending cases or not:---
(i) 1992 PTD 1367,
(11) 2000 PTD (Trio.) 466 and
(iii) 1993 SCMR 73.
He on the strength of the above case-law contended that there were two prerequisites for adjudging a provision of law as procedural or declaratory it nature and for that reason that it was applicable retrospectively or prospectively being (i) existence of a provision in the nature of procedure or a declaration on the statute book and (ii) continuity of its operation to affect the pending case. He then vehemently stressed that subsection (18A) was not a part of law at the time of framing of assessment on 30-8-1997 and hence the said provision of law cannot be held to be existing for its applicability to the facts and circumstances of the case and the operation of subsection (18A) came to an end by its repeal through the Finance Act 1996. He then referred to a case of the Tribunal i.e. I.T.A. No. 497/IB of 1999-2000 for the assessment year 1997-98 to support his contention. He then drew our attention to para. 29 of the judgment of Honourable Supreme Court of Pakistan in the case of Messrs Elahi Cotton Mills Limited and others v. Federation reported as 1997 PTD 1555 = PLD 1997 SC 582 wherein observations of the Honourable Supreme Court of Pakistan made in the case PLD 1970 SC 29 have been referred to the effect "But at the same time it cannot be denied that the Court has to determine the limit within which and the purposes for which the Legislature has created the fiction". He then further referred to C.B.R. Circular No. 14 of 1992 containing the object for introduction of subsection (18A) of section 12 as a measure to check avoidance generally noticed in cases where friendly loans were shown to have been received from a person not liable to pay income-tax. He, then with regard to omission of the provision through the Finance Act, 1996 referred to C.B.R. Circular No. 10 of 1996 explaining reasons for the omission of the said provision as causing hardship in the case of genuine loans. He then finally summed up his arguments by concluding that the repealed provision of subsection (18A) was not applicable to the case of the assessee and as such the addition of deemed income made under section 12(18A) was unjust and illegal. Then he also argued for a consequential relief with regard to the imposition of additional tax under section 88 of the Ordinance.
10. On the other hand, the learned D. R. for the department stated that, the orders of the forums below were proper and were not liable to be interfered with. He then contended that the legal proposition raised by the learned A.R. of the assessee was to be considered in the context of the orders passed by both the forums below.
11. We have considered the respective contentions of the parties at length and have gone through the orders of the forums below.
12. Manifestly, the main question as to whether the repealed provision of law i.e. subsection (18A) of section 12 was applicable to the case of- the assessee which was finalized by the Assessing Officer at the time when the said provision of law stood omitted by the Finance Act, 1996. There is no doubt that the assessment year 1995-96 involved in the case in hand was the assessment year when the said provision of law was existing on the statute. It has already been stated in the arguments of the learned A.R. of the assessee that the said provision of law was inserted through the Finance Act, 1922 and was omitted through the Finance Act, 1996: The learned A.R. has taken the plea that the said provision of law was procedural in nature and of declaratory character also and thus the omission will be having retrospective effect and would not be applicable to the cases which have not been finalized till the time the same was in existence to the cases of which the assessment was framed at the time when it stood already omitted through the Finance Act, 1996. We do not think the above point of view of the learned A.R. of the assessee with respect to interpretation of statute was having any force because the omission of a provision of law, to our mind, cannot absolve liability incurred or created during the subsistence/existence of the said provision of law if' it is a case relating to the time when the said provision of law was on the statute book. For this, we may refer section 6 of the General Clauses Act, 1897 dealing with the situation affect of the repeal and we would specifically refer to clause (c) of the said section relating to affect of repeal to any right. Privilege, obligation or liability acquired, accrued or incurred under any enactment so repealed shall have no effect by the repeal of law. We may pose a simple question to the effect that what would be the fault of a person/assessee whose case was finalized during the existence of the said provision of law on the statute book and he was penalized as such for non-repayment of loans. In the above circumstances, the case-law referred to by the learned A.R. of the assessee is not applicable to the facts and circumstances of the case in hand because where a liability of the assessee was created under a law when that law was in force during the assessment year under consideration and that liability then cannot be done away with for the simple reason that the law was later on repealed/omitted from the statute book and was not in existence at the time when the assessment was framed by the Assessing Officer. It is a cardinal principle of interpretation of statute that rights and liabilities accrued and created under a provision. of law cannot be taken away when that law is repealed/omitted subsequently because such rights and liabilities were the creation of law at the time of it was in existence and later omission or repeal of the law will not apply as if the rights and liabilities so created stood extinguished by the repeal or omission of the law. We may take an example of a right created by a provision of law in force and subsequent repeal of the said provision and whether the said right will be taken away by the 'subsequent repeal of the said provision of law. Of course the answer would be `no' because in this case the repealing or amending law did not specifically prescribe for retrospective application of the said repeal/omission and when the application of the same would be considered then the rights or liabilities created at the time when the law was in force will not be taken away by the repeal/omission of the said law. In the above circumstances, we are of the considered view that the repealed/omitted provision of subsection (18A) of section 12 would be taken to be as available and applicable to the case of the assessee which was a case for the assessment year 1995-96 and the assessee failed to repay the said loans within the time as prescribed in the omitted provision of law. Therefore, no exception can be taken to the view as adopted by both the forums below in that context. The assessment of the assessee was to be framed in accordance with the law which was applicable for the said assessment year. There can be no concession if the assessment is not framed within the time when the law was in force C because proceedings can continue for a longer period and then finalized be many changes in the law. It will create at the time of framing of assessment is made of the fact as to what law was in force or year under consideration. It will in the machinery and mechanism of the said provision of law in as put forth by the learned A.R. of the assessee. Even of the assessee was not tenable we see no justification to interfere with the
14. Consequently, the assessee's appeal shall stand rejected.
C.M.A./M.A.K./150/Tax(Trib.) Appeal rejected.