BEFORE SYED MASOOD UL HASSAN SHAH, JUDICIAL MEMBER AND SAEED AHMAD ZAIDI, ACCOUNTANT MEMBER VS BEFORE SYED MASOOD UL HASSAN SHAH, JUDICIAL MEMBER AND SAEED AHMAD ZAIDI, ACCOUNTANT MEMBER
2002 P T D (Trib.) 373
[Income-tax Appellate Tribunal Pakistan]
Before Syed Masood ul Hassan Shah, Judicial Member and Saeed Ahmad Zaidi, Accountant Member
M.A. (R) No. 3/IB of 2001-2002 in I.T.A. No. 676/IB of 1997-98, decided on 04/09/2001.
Income Tax Ordinance (XXXI of 1979)---
----Ss. 156, 135 & 12(18A)---Rectification of mistake---Disposal of appeal by the Appellate Tribunal---Reported case of Income-tax Appellate Tribunal in a reference application---Rectification on the basis of said reported case----Obiter dictum of the Tribunal in a reported case of a reference application could not be made basis for settling a proposition of law by way of rectification application aimed at rectifying an order passed in the main appeal dealing with that proposition---No apparent mistake liable to be rectified within the ambit of provisions of S.156 of the Income Tax Ordinance, 1979 existed---Rectification application was rejected by the Tribunal.
2001 PTD (Trib.) 2065 and I.T.A. No. 497/IB of 1999-2000 ref.
Bashir Ahmed for' Appellant.
Nadir Mumtaz Warraich, D.R. for Respondent
Date of hearing: 4th September, 2001
ORDER
SYED MASOOD UL HASSAN SHAH (JUDICIAL MEMBER).---The assessee through this miscellaneous application under section 156 of the Income Tax Ordinance, 1979 (hereinafter called the Ordinance) has sought rectification of the order of the Tribunal, dated 20-6-2001 passed in I.T.A. No. 676/IB of 1997-98 in the case of the assessee for the assessment year 1995-96.
2. The assessee has sought rectification of the order on the averments as under:--
(1) That amounts of loan for Rs. 600,000 and Rs. 1,000,000 were received by the applicant during assessment years 1988-89 and 1989-90 while provisions of section 12(18A) were introduced in the Income Tax Ordinance, 1979 subsequently through Finance Act, 1992. Although year of assessment involved is assessment year 1995-96 but at the time of assessment on 30-8-1997, the said provisions of law stood omitted through Finance Act, 1996. This aspect did not receive due attention of the learned Bench.
(2) That the applicant did not admit the liability for the year ended 30-6-1995 as by excluding the liability the applicant declared net wealth at Rs. 19,304,365 which was not objected to by the Assessing Officer. When no liability was declared by the applicant, application of section 12(18A) in the given situation is incorrect.
(3) That in an identical case reported as 2001 PTD (Trib.) 2065, decided on 14-3-2001 a Division Bench of the I.T.A.T. at Lahore has already held that at the time of receipt of loan the provision of section 12(18A) was not in existence while at the time of re-assessment the provisions of section 12(18A) stood deleted vide Finance Act, 1996 and relief allowed by the CIT(A) for this reason was confirmed. In the case of applicant, the law has not been considered and held applicable in the same perspective by the learned Bench.
(4) That section 12(18A) was procedural in its nature and in view of the law pronounced in various judgments by the higher appellate fora, it was deemed to be applicable retrospectively in the course of its operation to all the pending assessment years and irrespective of the fact as to which particular class or person is affected. Now that its operation came to nullity in the eyes of law by its deletion through Finance Act, 1996, the procedure laid down in it cannot be held applicable to pending assessments in the same manner as it affected the cases indiscriminately and retrospectively during the currency of its operation. For the similar reasons, another Division Bench of the I.T.A.T. at Islamabad while contemplating on subsection (18) of section 12 in unreported cases in I.T.A. No. 497/IB of 1999-2000 for the assessment year 1997-98 has held that `subsection (18) of section 12 has been replaced by fresh provision through Finance Act, 1998 and after amendment in section 12(18), the provisions of this section would apply only to loans, advances and gifts which are received on or after 1-7-1998.'
Since provisions of section 12(18) are procedural and declaratory, the Legislature has set a date i.e. 1-7-1998 so that transaction prior to that date are not hit by section 12(18) for the reasons that provision being procedural is applicable retrospectively. The learned Bench of the Tribunal did not take note of the foregoing finding of the I.T.A.T. although it was expressly stated in Ground No. 2 of the written arguments presented before the Bench. The foregoing enunciation of law has neither been reversed or changed by any higher Appellate Authority so far and as such it is squarely applicable to the case of applicant. Accordingly, relief admissible cannot be denied on the basis of mere presumption.
(5) That in presence of the findings given by other Benches of the I.T.A.T. in the identical circumstances as referred to in the preceding paragraph, the learned Bench in present case cannot adopt a different view-point as a principle of I.T.A.T.'s policy.
3. Hence the assessee prayed that in view of the facts that neither liability was outstanding on 30-6-1995 nor was section 12(18A) in existence at the time of receipt of loan or even assessment and as such, the order passed by the Bench being erroneous may be rectified accordingly.
4. We have heard Mr. Bashir Ahmed, Advocate for the applicant/assessee and Mr. Nadir Mumtaz Warraich, D.R. for the respondent/department and perused the respective orders.
5. Briefly the relevant facts are that the Tribunal vide order, dated. 20-6-2001 in I.T.A. No. 676/IB of 1997-98 has affirmed the order, dated 30-3-1998 passed in appeal by the learned Appeal Commissioner whereby the action of the Assessing Officer of applying the provisions of section 12(18A) of the Ordinance to the case of the assessee for the assessment year 1995-96 and further action of the Assessing Officer for levying of the additional tax under section 88 of the Ordinance was maintained.
6. In this case, the assessee being an individual and a director of a private limited company deriving income from salary declared net income at Rs. 363,700 under BBSAS for the asses: tent year under consideration and his return as per assessment order 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 found that the assessee had obtained loan amounting to Rs. 600,000 and Rs. 1,000 from his father and Major (Retd.) Shujat Ali Shah during the assessment years 1988-89 and 1989-90 respectively 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(18-A) of the Ordinance. The Assessing officer issued show-cause notice to the assessee who filed written explanation by mainly stating that subsection (18A) of section 12 stood deleted from the assessment year 1996-97 as it was causing hardship to the assessees and as such the provisions were not applicable to the case of the assessee because no finding was made in the case up to June 30, 1996 and that disallowance of said loan shown in the wealth statement of assessment years 1994-95 and 1995-96 by increasing net wealth and as such no loan was outstanding on 30-6-1994 and 30-6-1995 since the same had been excluded from the liabilities and that since subsection (18A) has been omitted 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 amount of loan may not be treated as deemed income for the assessment year 1995-96. The Assessing Officer, however, did not accept the explanation of the assessee and concluded that the said loan was deemed income for the income year 1994-95 assessment year 1995-96 because the loan was not paid up to 30-6-1994. Accordingly, the Assessing Officer also levied additional tax under section 88 of, the Ordinance at Rs. 31,203.
7. The learned Appeal Commissioner, in appeal filed by the assessee maintained the action of the Assessing Officer and then the assessee assailed the matter before the Tribunal. This Tribunal vide order, dated 20-6-2001 considered the contentions of the parties at length and finally through detailed reasoning affirmed the action of the forums below. In order to have a clear view of the findings of the Tribunal, we may like to reproduce the relevant paras. 12 and 13 of the order of the Tribunal which are as under:---
"12. Manifestly, the main question as to whether the repeated 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 though the Finance Act, 1992 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 of affect of-repeal and we would specifically refer to clause (c) of the said section relating to effect 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 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 be 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 because proceedings can continue for a longer period and then finalized and till that time there can be many changes in the law. It will create a complex situation if the law at the time of framing of assessment is made applicable irrespective of the fact as to what law was in force or prevalent during the assessment year under consideration. It will obviously create difficulty in the machinery and mechanism of assessment if we apply the interpretation of the said provision of law in manner as put forth by the learned A.R of the assessee. Even otherwise, the plea of learned A.R. of the assessee was not tenable.
13. Accordingly, we see no justification to interfere with the impugned order which is hereby affirmed."
8. Now the assessee through this miscellaneous application has sought for rectification of the said order of the Tribunal on the grounds indicated above.
9. The learned A.R. appearing on behalf of the applicant/assessee mostly reiterated the same contentions which he raised earlier before' this Tribunal by mainly stating that the loan was advanced during the period relevant to assessment years 1988-89 and 1989-90 and at that time the provisions of subsection (18A) were not on the statute book which were later on inserted through Finance Act, 1992 but omitted through Finance Act, 1996 and the assessment of the assessee was finalized on 30-8-1997: when the provisions of section 12(18A) stood already omitted. He then referred a case decided by the Lahore Bench of the Tribunal reported as 2001 PTD (Trib.) 2065 to support his contention that the provision of subsection (18A) could not be made applicable to the case of the assessee and the said case was a direct case for the proposition in hand wherein, according to him, it has been held that the provisions of section 12(18A) would not be applicable in such-like cases. He at this moment, explained that the said case-law was not referred at the time of earlier arguments advanced before the Tribunal during hearing of the main appeal because the main appeal was heard on 20-6-2001 whereas the said case-law was reported in July Part of the PTD 2001. He further explained that the date of passing of order of the Lahore Bench in the said reported case was 24-3-2001 whereas the date of passing the order of the Islamabad Bench was 20-6-2001 and hence the cited case was squarely applicable to the case of the assessee. He again stressed on the point that the provisions of section 12(18A) were procedural and were applicable retrospectively also in the context of omission of the same from the statute book.
10. On the other hand, the leaned D.R. firstly raised a preliminary objection in respect of "Form" of miscellaneous application and contended that the assessee has not complied with rules 10 and 11 of the I.T.A.T. Rules, 1981 and given argumentative and narrative grounds. He further contended that rectification can only be made if the mistake apparently appears to be glaring one from the face of Me record but cannot be made by reappraisal of the facts or through fresh investigation which would amount to change of opinion if it is one in that way. While dealing with the point of retrospectivity of the provisions of its being procedural in nature in the context of its omission as contended by the A.R. of the assessee, the learned D.R. stated that it was not a procedural provision because it was creating a vested and substantive right of the department by declaring the loan as deemed income of the assessee if not paid for a certain length of period. He further contended that the pending assessment of the assessment year during which the said provision of law was applicable will not at all be affected by the omission of the said provisions through Finance Act, 1996 because the rights and liabilities created under the said provisions of law during its existence cannot be taken away by later omission of the said provisions from the statute book. He then contended that the omitted law continues to remain in force for the relevant assessment- year for which it is enacted.
11. We have considered the respective contentions of the parties at length and have gone through the respective orders. We have already reproduced the relevant portion of the order of the Tribunal with regard to findings of the Tribunal on the issue in question. Obviously, from the narration of arguments of the learned A.R. of the assessee as reproduced above nothing new has been brought to our notice with regard to the contention as raised by the learned A.R. at the time of arguments before this Tribunal except citation of a case-law reported as 2001- PTD (Trib.) 2065 which was reported in the July Part of PTD and the order was passed by the Tribunal in June, 2001. The learned A.R. of the assessee in order to convince us about the applicability of ratio of the said reported case to the case in hand contended that the reported case was decided by the Lahore Bench on 24-3-2001 whereas the Tribunal decided the case on 20-6-2001 and as such the ratio of the reported case can be made applicable to the case in hand because reported case- was decided earlier in time than the case; in hand.
12. We have given due consideration to the proposition raised by the learned A.R. of the assessee from the aspect of case-law cited by him. We may like to state here that the case-law was reported in fact in June Part of PTD and the case in hand was heard and decided on 20-6-2001 but no reliance was placed on the said reported case by the learned A.R. during his arguments for which perhaps he could not lay hands on account of being the same month of hearing of the instant case and reporting of the said case., However, leaving aside the aspect of time factor of decision of the main case by this forum and reliance of learned A.R. on a reported case, of the same month for giving consideration for applying the ratio of the reported case, we may like to mention here that the reported case was in fact a decision of a Reference Application filed by the department and basic issue was to determine that as to whether proposed questions were questions of law or questions of fact. We are afraid that the ratio of the said decision in reported case would in any way be applicable to a case wherein main appeal has been decided on a question of interpretation of certain provisions of law. From the facts of the reported case referred to above, it was clear that there was decision of the Tribunal (Lahore Bench) on a Reference Application with regard to questions as to (i), whether under law and circumstances of the case the learned Tribunal was justified in holding that the firm and individual partners are not two separate legal entities and (ii), whether under the law and circumstances of the case the learned Tribunal was justified in holding that loan received from husband of a partner can be treated as loan received from the partner of the firm. In the said reported case, the observations and findings of the Tribunal given in para. 9 at page 2068 are reproduced which have also been referred by the learned AR, as under:---
"9. We have heard the rival arguments of the parties and examined the records available before us. From examination it has been rioted that the loan was a foreign remittance which was received during-the period from 13-6-1981 to 14-6-1988 and at that time the provisions of section 12(18A) was not in existence. Moreover, at the time of re-assessment the provisions of section 12(18A) stood deleted vide Finance Act, 1996. In view of the said position we are of the considered view that the order of the Tribunal cited supra does not hit the provision of section 12(18A) of the Income Tax Ordinance, 1979. Therefore, the question raised by the department at Serial No. 2 is a question of fact. No question of law arises out of the order of the Tribunal which can be referred to the Honourable High Court for their consideration."
13. Obviously, the above observations of the Tribunal in the reported case related to the fact that the order of the Tribunal does hit the provisions of section 12(18A) of the Ordinance. Moreover, in fact the reported case relied upon was a case of reference application filed by the department for making a reference on proposed questions indicated above for decision by the Honourable High Court in terms of section 136(1) of the Ordinance. The said reference application has been rejected by the Tribunal because the questions proposed as indicated above have been termed as questions of fact and not referable to the Honourable High Court. Moreover, the facts to the extent of nature of loan also appeared to be different in the case of the reported decision and there were foreign remittances received as loan during the period from 13-6-1988. The point for determination was about the question of law or question of fact and not of interpretation of any provisions of law. Hence such a case cannot be made applicable to the proposition-with us.
14. In the light of above circumstances, we are of the considered view that there appeared no apparent mistake liable to be rectified within the ambit of provisions of section - 156 of the Ordinance. Moreover, obiter dictum of the Tribunal in a reported case of a reference application cannot be made basis for settling a proposition of law on that basis by way of rectification application aimed for rectifying an order passed in main appeal dealing with that proposition. There was no question of review or reconsideration of the order of the Tribunal as prayed by the department. Therefore, we see no merits in the instant application which as such is liable to be rejected.
15. Consequently, the application shall stand rejected.
C. M. A. /M. A. K./169/Tax (Trib.) ??????????????????????????????????????????????????? Application rejected.