ZAKARIA H.A. SATTAR BILWANI VS INSPECTING ADDITIONAL COMMISSIONER OF WEALTH TAX, RANGE-II, KARACHI, 2003 PTD-SUPREME-COURT 52 (2002)

(On appeal from the judgment/order, dated 16‑10‑2001 passed by High Court of Sindh Karachi in Wealth Tax Appeals Nos.99‑100 of 2001).

(a) Interpretation of Statutes‑‑‑

‑‑‑‑ Retrospective effect of statute‑‑‑Scope‑‑‑Where any statute affects substantive right, it would operate prospectively unless by express enactment or necessary intendment retrospective operation has been given.

Malik Gul Hassan & Co. and 5 others v. Allied Bank of Pakistan 1996 SCMR 237 ref.

(b) Wealth Tax Act (XV of 1963)‑‑‑

‑‑‑‑S. 17‑B (as added by Finance Act (VII of 1992))‑‑‑Constitution of Pakistan (1973), Art. 185(3)‑‑‑Assessment order, cancellation of‑‑ Provisions of S. 17‑B of Wealth Tax Act, 1963 (as added by Finance Act (VII of 1992)) whether had retrospective effect‑‑‑Assessment orders for the years 1988‑89 to 1991‑92 were cancelled by Inspecting Additional Commissioner (Wealth Tax) under the provisions of S.17‑B. of Wealth Tax Act, 1963, vide order, dated 8‑11‑1993‑‑‑Plea raised by the assessee was that since the provisions of S.17‑B of Wealth Tax Act, 1963, were to take effect from 1‑7‑1992, the Commissioner had wrongly applied the said provisions retrospectively‑‑‑Validity‑‑‑Leave to appeal was granted by Supreme Court to consider, whether S. 17‑B of Wealth Tax Act, 1963, would be applicable retrospectively or prospectively:

Malik Gul Hassan & Co. and 5 others v. Allied Bank of Pakistan 1996 SCMR 237 ref.

Iqbal Naeem Pasha, Advocate Supreme Court and‑K. A. Wahab, Advocate‑on‑Record for Petitioners.

Nemo for Respondent.

Date of hearing: 1st July, 2002.

ORDER

IFTIKHAR MUHAMMAD CHAUDHRY, J.‑‑‑These petitions for leave to appeal have been filed against the judgment/order, dated 16th October, 2001 passed by High Court of Sindh, Karachi whereby Tax appeals filed by petitioners has been dismissed.

2. Precisely stating the facts of the case are that vide show‑cause notice issued by the Inspecting Additional Commissioner of Wealth Tax the assessment orders in favour of petitioners pertaining to the years 1988‑89 to 1991‑92 were cancelled in exercise of jurisdiction under section 17‑B of the Wealth Tax Act, 1963 vide order, dated 8th November 1993. Petitioners assailed this order before the Income‑tax Appellate Tribunal by filing four appeals pertaining to the assessment of each financial years for which assessment was cancelled. The Tribunal vide judgment, dated 20th September, 2000 dismissed all the four appeals. As such petitioner being dissatisfied from the order of the .Income‑tax Appellate Tribunal preferred appeals before the High Court under section 27 of the Wealth Tax Act, 1963.

3. It may be noted that although Income Tax Tribunal has disposed of all the four appeals by passing a common judgment but the petitioners filed separate appeals pertaining to each assessment year commencing from 1988‑89 to onward. Out of these tour appeals, Wealth Tax Appeals Nos.99 and 100 of 2001 came up for hearing before learned High Court alongwith C.M.A. No. 242 of 2001 which were, dismissed in limine vide impugned judgment, dated 16th October, 2001. As such instant petitions have been filed.

4. Learned counsel appearing for petitioners inter alia contended that before the Income‑tax Appellate Tribunal, petitioners have specifically raised the point that section 17‑B of the Wealth Tax Act, 1963 would not operate retrospectively. This question was attended to by the Income‑tax Appellate Tribunal, but it had recorded adverse findings against the petitioners. He also pointed out that the petitioners before the High Court inter alia raised three questions but petitioners have been non‑suited only on the point on the point of applicability of section 17‑B of the. Wealth Tax Act, 1963 retrospectively.

5. We have heard the petitioner's counsel and have also gone through the impugned judgment as well as the judgment, dated 20th September, 2000 passed by the Tribunal. Relevant para. therefrom is reproduced herein below:‑‑‑

"We have heard both the learned representatives appearing on behalf of the appellant and the Department and have also perused the impugned orders of the learned IAC under section 17‑B of the Act, and the judgments of the Hon'ble Supreme Court of Pakistan and Karachi High Court referred by the learned representative of the appellant. We have found that the learned IAC has cancelled the assessment orders for the assessment years 1988‑89 to 1991‑92 under section 17‑B of the Wealth Tax Act, 1963 on 8‑11‑1993 in respect of the orders passed within the prescribed time limit of four years. Section 17‑B had been inserted in the statute through Finance Act, 1992 with effect from 1st July, 1992. We have not found force in the arguments of the learned counsel for the appellant Mr. Salman Pasha that the learned IAC has misdirected himself in law‑by invoking provision of 17‑B of the Wealth Tax Act inserted on 1‑7‑1992. Section 17‑B of the Wealth Tax Act is machinery or procedural provision and not a substantive law. It only provides for a mechanism for correction, enhancement, modification, cancellation direction for fresh assessment etc. of the erroneous 'orders which are prejudicial to Revenue. It does not create any new charge of the tax or any enhancement or modification thereof. It is a settled law that procedural or machinery sections are retrospective in application to all matters covered by the sections while substantive laws are applied prospectively unless these are specifically given a retrospective effect. The judgment of the Hon'ble Supreme Court reported as PTD 1988 SC 161, referred by learned counsel also actually affirms this principle. A person has a vested right to be taxed at a given rate for a given period of time or in respect of given assets at certain values determine as per law which cannot be changed to a tax payer's determent etc., by any amending statute unless there is clear and explicit enhancement to this effect. However, no person has a vested right against correction of an error. It is, thus, in our opinion, not appropriate to infer such a things from the Supreme Court's judgment or that section 17‑B cannot be applied to erroneous and prejudicial to Revenue orders passed within the time frame laid down in the section (4 years) after enactment thereof. In our considered view section 17‑B after its insertion vide Finance Act, 1992, did cover the erroneous and prejudicial to Revenue orders, passed within 4 years of the date it was brought on statute book. Mr. Salman Pasha's arguments that section 17‑B is not a new law but substitution, alteration or modification of a law which already existed and time limit of one year provided in section 25 could not be altered to tax payer's determent ate not forceful in the context. Prior to enactment of section 17‑B Commissioners were empowered to correct the erroneous and prejudicial to Revenue order under section 25(2) of the Wealth Tax Act. However, this section, did not lay down a time limit for the purpose. Mr. Salman Pasha's arguments that the time limit laid down in subsection (1) of this section 25 should be considered as binding for the purposes of subsection (2) are also not forceful. Subsection (2) is not a continuation of subsection (1) of this section but is for a diametrically apposed function. Under subsection (1) of. section 25 Commissioners had revisional jurisdiction in respect of (AACs were also to be deemed as Authorities subordinate to CWT(A) for the purposes of subsection) the orders passed by the Authorities subordinate to him both suo motu as well as on application made by the petitioner. The time limit laid down for the purpose was one year and subject to condition that the assessee had either not filed appeal to AAC or CWT(A) was also debarred from passing order prejudicial to the assessee the only exception for the purpose being that his order declining ;o interfere was to be deemed not to be an order and prejudicial to the assessee. This section remained on statute till repeal of the Wealth Tax Act by the Finance Ordinance, 2000. However, subsection (2) provided for CWT(A) passing appropriate orders in respect of erroneous orders of the WTO insofar as the same were prejudicial to revenue. The provisions of subsection (1) and subsection (2) of section 25 as these stood before amendment in 1992 were not identical but for exactly opposite the other ends, functions, and exercise of powers‑one being for relief and the other for enhancing the tax liabilities. It is, therefore, illogical, irrational, and even absurd to assert that the time laid down for the purpose of revisional jurisdiction of the CWT(A) as per section 25(1) should be considered to be applicable for the purpose of action under subsection (2) of this section also. Section 17‑B was a new section gave this power to the IAC in the same manner as section 66‑A of the Income Tax Ordinance, 1979. We, therefore, do not see any logic or rationale behind assessee's A.R. arguments that as the alleged time limit of one year previously provided for the purpose had expired in this case the assessee had acquired a vested right in the‑matter, and therefore, its case could not be covered by the enhanced time limit of 4 years provided for in section 17‑B of the Wealth Tax Act, 1963. We are, therefore, rejecting appellant's plea and all. the appeals of the assessee on ground Nos. 1 to 3 are dismissed."

A perusal of above para. suggests us to hold that the Tribunal considered the application of section 17‑B of the Wealth Tax Act, 1963 with retrospective effect by advancing the reason that it is a machinery or procedural provision and not substantive law, therefore, from such observation one can infer that before the Tribunal, question of application with retrospective effect of section 17‑B of Wealth Tax Act, 1963 was very much agitated. Therefore, we are, prima facie, of the view that the High Court perhaps on account of an error in reading the above para. has concluded that the question in respect of the retrospective effect of section 17‑B of the Wealth Tax Act, 1963 was not raised before the Tribunal.

6. Admittedly, the question was of very important/vital nature, therefore, it may have been attended to, keeping in view the provisions of Finance Act (VII of 1992) in pursuance whereof section 17‑B was inserted after section 17‑A in the Wealth Tax Act, 1963 and the Finance Act was applied at once as per its section 1. The learned High Court may have examined the question of the application of section 17‑B Wealth Tax Act, 1963 concerning its effect retrospectively or prospectively by applying the principle of interpretation of statutes namely where any statute effects substantive right it would operate prospectively unless by A express enactment or necessary intendment, retrospective operation has been given. This Court elaborately examined identical question in respect of section 2 as amended by Banking Companies (Recovery of Loans) (Amendment) Act (,XVIII of 1992) in the case of Malik Gul Hassan & Co. and 5 others v. Allied Bank of Pakistan (1996 SCMR 237). Relevant para. therefrom is reproduced hereinbelow for convenience:‑‑‑

"7. It is well‑settled principle of interpretation of statute that where a statute effects a substantive right, it operates prospectively unless by express enactment or necessary intendment' retrospective operation has been given Muhammad Ishaq v. State PLD 1956 SC (Pak.) 256 and State v. Muhammad Jamil, PLD 1965 SC 681. This principle was affirmed in Abdul Rehman v. Settlement Commissioner (PLD 1966 SC 362). However, statute, which is procedural in nature, operates retrospectively unless it affects an existing right on the date of promulgation or causes injustice or prejudice to a substantive right "

Thus, to examine inter alia the question whether section 17‑B of the Wealth Tax Act, 1963 would be applicable retrospectively or otherwise, in the light of principle of interpretation of statutes noted above as well as the law laid down by this Court in above noted judgment, leave to appeal is granted.

Q.M.H./M.A.K./Z‑118/SC Leave granted.