(a) Income Tax Ordinance (XXXI of 1979)---

----Ss. 59 & 61---Constitution of Pakistan (1973), Art. 199-- Constitutional petition---Making of assessment order in respect of return--- Petitioner, who was an Association of Persons filed return for assessment year 2000-01---Case of petitioner initially was not selected for total audit, but notice was issued to petitioner under S.61 of Income Tax Ordinance, 1979 for its compliance till 30-12-2001---Issuance of said notice was challenged by petitioner/assessee on ground that subsection (4) inserted in S.59 of Income Tax Ordinance, 1979 through Finance Ordinance, 2001 had provided that no order would be made in any case after thirtieth day of June of financial year next following income year in respect of which a return of total income had been furnished---Provisions of S.59(4) were very clear that no order under subsection (4) of S.59 of Income Tax Ordinance, 1979 could be made after 30th day of June of financial year next following income year-- Service of notice under S.61 of Income Tax Ordinance, 1979 after 30-6-2001 on petitioner was not legally justified as newly added provision had barred framing of assessment on expiry of certain period.

(b) Interpretation of statutes---

---- Fiscal statute---Where two equally acceptable interpretations of a provision of law were possible, one favouring taxpayer needed to be adopted.  

Siraj-ud-Din Khalid for Petitioner.

Shahid Jamil Khan for Respondent.

Date of hearing: 23rd July, 2004.

JUDGMENT

The petitioner is an association of persons. For the Assessment year, 2000-2001 a return was filed by the petitioner under Self-Assessment Scheme notified through Circular No. 21 of 2000, dated 11-9-2000. After filing of the return a short document notice was served upon the petitioner, which is stated to have been complied with as the required information was duly supplied. Thereafter, it is claimed that the case of the petitioner along with others was sent to computer for balloting for total audit in terms of clause 6(a) of the aforesaid circular. The case of the petitioner was not selected for total audit. However, on 26-11-2001 the petitioner is claimed to have received a notice under section 61 of Income Tax Ordinance, 1979 for compliance till 30-12-2001.

2. It is the case of the petitioner that the aforesaid notice under section 61 could not be issued by the Assessing Officer, respondent No.2, inasmuch as through Finance Ordinance, 2001, subsection (4) of section 59 was inserted to read as under:--

"59(4) No order under subsection (1) shall be made in any case after the thirtieth day of June of the financial year next following the income year in respect of which a return of total income has been furnished under section 55. "

According to the petitioner no assessment order in respect of the return filed by it could be made under section 59(1) after expiry of 30th June, 2001 in view of the aforesaid amendment made in the late Ordinance, 1979.

3. On the other hand, the Revenue contends that the aforesaid amendment having been introduced by Finance Act, 2001 was prospective in operation and was applicable to the returns filed for the Assessment year, 2001-2002. On the other hand, as per Revenue, the time limit prescribed in the aforesaid newly-inserted provision was not applicable to the returns filed for the Assessment year, 2000-2001 before the insertion of the aforesaid subsection (4) to section 59 of the late Ordinance. It is also alleged that there was no bar for selection of a case for regular assessment even if that case had earlier escaped selection through random ballot.

4. After hearing the learned counsel for the parties, I am persuaded to agree that the service of notice under section 61 of the late Ordinance after 30-6-2001 was not legally justified. It is correct that subsection (4) was inserted by Finance Ordinance, 2001 and obviously was effected from 1st July, 2001. It is also a fact that these provisions having exactly similar words used in subsection (4) were part of the statute but were omitted by Finance Act, 2000. It means that the provisions of subsection (4) were part of the statute till 30-6-2000 and were re introduced w.e.f. 1-7-2001. It is also correct that no parallel or similar provision existed in the late Ordinance for the period 1-7-2000 to 20-6-2001.

5. That fact, however, does not mean that newly-inserted subsection (4) of section 59 .was not applicable to returns filed, under Self-Assessment Scheme for the year, 2000-2001. A bare reading of the newly-inserted provision shows that no exception was made in respect of either a pending return filed earlier to the insertion of subsection (4) or otherwise with reference to any assessment year. The provisions are very clear that no order under subsection (4) to section 59 could be made after 30th day of June of the financial year next following the income year in respect of which a return of total income had been furnished under section 55 of the late Ordinance. In case the interpretation of the Revenue is accepted then certain words will halve to be read into the provision, which hardly appears justified when the language of the statute is quite clear. No exception having been made in respect of the previous assessment year, previous income year or the pending returns filed in respect thereof, a pending return pertaining to previous assessment year could only be processed and an assessment framed if one could read that exception in the newly-added subsection (4) to section 49 of the late Ordinance. The legislature having used simple words to bar framing of any assessment after 30th day of June of the financial year next following the income year in respect of which that return was filed, the framing of an assessment against the provision irrespective of the assessment year in respect of which that assessment was being framed would be clearly violative of the provision of law.

6. Even if the interpretation of the Revenue is accepted as partly correct, the result would not be different. The golden principle interpretation of fiscal statute being that where two equally acceptable interpretations of a provision of law are; possible, then the one favouring the subject/taxpayer needs to be adopted.

7. The newly-added provision having barred framing of an assessment on expiry of a certain period and no exception with regard to pending assessments or the previous assessment year having been made, in my view the interpretation of the petitioner if not better than the one advanced by the Revenue is at least equally acceptable. And keeping in view the aforesaid principle of interpretation I will accept the same and allow this petit' ion to hold that after 30-6-2001 no assessment under section 59(1) of late Ordinance could legally be made.

H.B.T./H-44/LPetition allowed.