I.T.As. Nos.2823/LB and 3700/LB of 2004, decided on 31st January, 2006. VS I.T.As. Nos.2823/LB and 3700/LB of 2004, decided on 31st January, 2006., 2006 PTD-INCOME-TAX-APPELLATE-TRIBUNAL-PAKISTAN 2849 (2006)

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

---S. 56, proviso---Finance Ordinance (XXV of 2001), Preamble---Notice for furnishing return of total income---Retrospective effect of proviso to S.56, Income Tax Ordinance, 1979---Proviso inserted through Finance Ordinance, 2001 was procedural one as the same merely mentioned about filing of return of income for a certain period of time, meaning thereby that this was a machinery provision, therefore, its operation was retrospective and not prospective.

(b) Interpretation of statutes---

----Fiscal statute---Amendment---Once the amendment introduced in the existing law is held to be retrospective in its operation, it shall apply forcefully to all the cases which may be pending for adjudication at any stage starting from assessment to the apex Court of Pakistan.

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

---S. 56, proviso---Finance Ordinance (XXV of 2001), Preamble---Notice for furnishing returns of total income---Question of limitation of time for filing the return of income, was a matter of procedure and the amendment in S.56 of the Income Tax Ordinance, 1979 through Finance Ordinance, 2001 was out and out procedural.

1985 PTD 276; 2002 PTD (Trib.) 2609 and 2004 PTD (Trib.) 708 rel.

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

---S. 56, proviso---Finance Ordinance (XXV of 2001), Preamble---Finance Ordinance (XXI of 2000), Preamble---Notice for furnishing returns of total income---Assessment year 1986-87---Since, the

amendment made through Finance Ordinance, 2001 provided remedies and cures, therefore it had to be interpreted retrospectively---Case shall be governed by the proviso inserted in S.56 of the Income Tax Ordinance, 1979 through Finance Ordinance, 2001 and not by the explanation added to said section by Finance Ordinance, 2000.

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

----Ss. 56, proviso, 13(1)(aa) & 30(2)(e)---Finance Ordinance (XXV of 2001), Preamble---Finance Ordinance (XXI of 2000), Preamble---Notice for furnishing returns of total income---Period of limitation for issuance of notice---Assessment year, 1986-87---Action of Assessing Officer in issuing a notice under S.56 of the Income Tax Ordinance, 1979 on 9-3-1999 calling upon the assessee to file return of income in respect of assessment year 1986-87, was not sustainable in law having been issued beyond the period of five years from the end of the assessment year for which the return of income was due---Due date of filing the return of income for the assessment year 1986-87 was 30th September, 1987---When reckoned from this date, no notice under S.56 of the Income Tax Ordinance, 1979 could be issued after the assessment year 1992-93, whereas notice under S.56 of the Income Tax Ordinance, 1979 had been issued on 9-3-1999 which was relevant to assessment year 1999-2000---Notice under S.56 of the Income Tax Ordinance, 1979 dated 9-3-1999 for the assessment year 1986-87 was patently barred by limitation---Order passed under S.62 of the Income Tax Ordinance, 1979 was without any lawful authority which was annulled/cancelled by the Appellate Tribunal---Case should not have been set aside by the First Appellate Authority to be decided afresh, since legal infirmity was involved which went to the root of the assessment and was incurable.

2001 PTD 1998 rel.

(1998) 77 Tax 1991 Modified by 2001 PTD 1998.

Zafar Ali Ch. for Appellant (in I.T.A. No.2823/LB of 2004).

Dr. Shahid Siddique Bhatti, D.R. for Respondent (in I.T.A. No.2823/LB of 2004).

Dr. Shahid Siddique Bhatti, D.R. for Appellant (in I.T.A. No.3700/LB of 2004).

Zafar Ali Ch. for Respondent (in I.T.A. No.3700/LB of 2004).

ORDER

RASHEED AHMED SHEIKH (JUDICIAL MEMBER).---The assessee as well as the Revenue has called into question the order passed by the CIT(A) Zone-V, Lahore, dated 21-1-2004 in respect of assessment year 1986-87.

2. The assessee is aggrieved against initiation of proceedings under section 56 of the Repealed Income Tax Ordinance, 1979 for the assessment year 1986-87 to be without any lawful jurisdiction on account of limitation provided for issuance of notice under this section. Also agitated the addition made under section 13(1)(aa) of the Repealed Income Tax Ordinance amounting to Rs.4,00,000 to be ab initio illegal void for want of confrontation on this point. Further assailed that since no notice whatsoever under sections 61/62 of the Repealed Income Tax Ordinance was served upon the appellant meaning thereby he has been condemned unheard which is violative of canons of natural justice. Conversely, it was the contention of the Revenue that the learned Appeal Commissioner has fallen in grave error in setting aside the assessment to be finalized after issuance of proper statutory notices. It was stated by the learned D.R. that the judgment of the Tribunal relied upon by the learned Appeal Commissioner in a case cited as (1998) 77 Tax 1991, wherein it was held that notice under section 56 could only be issued for the current assessment year while the notice under section 65 is to be issued for previous assessment years, has been modified by the Lahore High Court Lahore in a case reported as 2001 PTD 1998. Also added that the proviso inserted through Finance Ordinance, 2001, whereby no notice under section 56 of the Repealed Ordinance shall be issued beyond the period of five years from the end of the assessment year for which the return of income was due, did not attract to the fact of the present case. Rather the explanation added through Finance Ordinance, 2000 shall apply with full force to the facts of the present case whereby a notice under 56 of the Repealed Ordinance may be issued in respect of any assessment year including the current assessment year any preceding assessment year. According to the learned D.R. this proviso was very much on the Statute book when the proceedings under section 56 of the Ordinance were invoked.

3. What happened in this case was that proceedings for the assessment year 1986-87 were initiated on 9-3-1999 by issuing a notice under sections 56 and 58(1) of the Repealed Ordinance. The reason for issuing these statutory notices was that the assessee had purchased an open plot measuring one kanal located at Lawrence Road, Lahore for a consideration of Rs.4,00,000 on 10-5-1986 and' he was not on the tax roll. On assessment, "NIL" business income was assessed by the Assessing Officer. Nevertheless Rs.4,00,000 were subjected to tax by the Assessing Officer in terms of section 13(1)(aa) of the Repealed Ordinance to be deemed income on account of unexplained investment. This amount was assessed under the head "income from other sources" under section 30(2)(e) of the Repealed Ordinance.

4. At the first appellate stage, legality of initiation of proceedings under section 56 of the Repealed Ordinance for the assessment year 1986-87 was challenged. The learned Appeal Commissioner, after taking cognizance to the judgment rendered by a Full Bench of the Tribunal, cited supra, came to the conclusion to remand the case for fresh decision to be made after issuance of proper statutory notices.

5. I have given anxious thought to the divergent views expressed by the rival parties and I have come to an inescapable conclusion that the proceedings under section 56 of the Repealed Ordinance in respect of assessment year 1986-87 have been initiated in absence of any lawful authority. It is imperative to mention here that this section remained under discussion enormously since its inception. The point in controversy was as to whether return of income can be required to furnish in terms of notice under section 56 of the Repealed Ordinance for the current assessment year or for the preceding assessment years starting from the date of promulgation of the Income Tax Ordinance, 1979. Anyhow in order to remove doubts, an explanation to section 56 of the Ordinance was added by virtue of Finance Ordinance, 2000. This explanation reads that a notice under section 56 of the repealed Ordinance may be issued in respect of any assessment year including the current assessment year and any preceding assessment year. Meaning thereby the notice under section 56 could be issued since promulgation of the Income Tax Ordinance, 1979. Later on, a proviso to section 56 of the Repealed Ordinance was inserted by Finance Ordinance, 2001, by omitting the said explanation. What does this proviso enunciate?. This circumscribes powers of the Assessing Officers not to issue notice calling upon the assessee to file the return beyond a period of five years. Now the question arises as to whether this proviso is retrospective in its character or not? There is no cavil to this proposition that proviso inserted through Finance Ordinance, 2001 is procedural one. It is so because this proviso merely mentions about filing of return of income for a certain period of time. Meaning thereby this is a machinery provision, therefore, its operation is retrospective and not prospective. This is cardinal principle that once the amendment introduced in the existing law is held to be retrospective in its operation, it shall apply forcefully to all the cases which may be pending for adjudication at any stage starting from assessment to the Apex Court of Pakistan.

6. As is evident the purport and the tenor of the amendment introduced in section 56 of the Repealed Ordinance is procedural inasmuch as it does not absolve liability of the assessee with regard to his income which may have escaped assessment nor does it curtails powers of the Assessing Officer to assess the income for the purposes of charging income tax thereon. It, therefore, cannot be conveniently styled as something of substantive character. What it does is to limit the period of time for filing the return of income and determination of liability of the assessee in exercise of powers conferred upon the authorities. Question of limitation of time for tiling the return of income, without any shadow of doubt, is a matter of procedure and the amendment in c question is out and out procedural. Strength in this regard may be acquired from the case-law reported as 1993 SCMR 73, 1985 PTD 276, 2002 PTD (Trib.) 2609 and 2004 PTD (Trib.) 708. In view of foregoing discussion, it is held that since, the amendment provides remedies and cures, therefore it has to be interpreted retrospectively. Thus, the case in hand shall be governed by the proviso inserted in section 56 of the Repealed Income Tax Ordinance through Finance Ordinance, 2001 and not the explanation added to this section by way of Finance Ordinance, 2000.

7. Reverting to the facts of the present case I have come to the conclusion that action of the Assessing Officer in issuing a notice under section 56 of the Ordinance on 9-3-1999 calling upon the assessee to file return of income in respect of assessment year 1986-87 was not sustainable in law being the said notice head been issued beyond the period of five years from the end of the assessment year for which the return of income was due. Due date of filing the return of income for the assessment year 1986-87 was 30th September, 1987. When reckoned from this date, no notice under section 56 could be issued after the assessment year 1992-93. Whereas notice under section 56 has been issued on 9-3-1999 which is relevant to assessment year 1999-2000. I am therefore convinced that the notice under section 56 of the Repealed Ordinance, dated 9-3-1999 for the assessment year 1986-87 has been issued patently barred by limitation. Thus the order under section 62, dated 21-6-2001 has been passed without any lawful authority which is hereby annulled/cancelled.

8. In fact this is not case which should have been set-aside by the first appellate authority to be decided afresh, reason being legal infirmity was involved in this case which went to the root of the assessment and was incurable. Corollary of all this discussion would be vacation of the Appeal Commissioner's order in its entirety. Since, the assessee's appeal has been accepted on one legal ground, therefore, the other pleas are not dilated upon hereunder.

9. In the result, the assessee's appeal succeeds while that of the department fails and is dismissed being bereft of any merit.

C.M.A./132/Tax (Trib.)Order accordingly.