Messrs YAHYA TEXTILE MILLS LIMITED, MULTAN CANTT. VS FEDERATION OF PAKISTAN through Ministry of Finance, Islamabad and 3 others, 2006 PTD-LAHORE-HIGH-COURT-LAHORE 140 (2005)

Income Tax Ordinance (XLIX of 2001)---

----S.122---Income Tax Ordinance (XXXI of 1979), Ss. 156 & Second Sched., Cl. (118-C)---Constitution of Pakistan (1973), Art. 199---Constitutional petition---Amendment of assessment---Issuance of notice in year, 2003 to rectify assessment framed for year, 2001-2002 alleging that exemption allowable to assessee for assessment year 1993-94 was actually allowed for year, 1994-95, thus, assessee had started commercial production in year, 1992---Validity---Revenue in the guise of such notice wished to rectify assessment order recorded in year, 1995 in respect of assessment year 1993-94---Revenue had recorded twice clear findings in earlier assessment orders regarding date and period of commencement of business production by assessee---Proposed rectification could not be permitted under the law on account of stipulated limitation having long gone before issuance of impugned notice---High Court accepted constitutional petition and declared impugned notice as invalid.

Rana Muhammad Afzal for Petitioner.

Muhammad Ilyas Khan for Respondents.

Date of hearing: 29th August, 2005.

JUDGMENT

NASIM SIKANDAR, J.---This constitutional petition seeks to challenge a notice under section 122 (Amendment of assessments) of the Income Tax Ordinance, 2001, dated 11-12-2003 issued by the Taxation Officer, Circle-08 Special Zone, Lahore expressing his intention to rectify the assessment framed for the years, 2001-2002. In the notice it was, inter alia, observed that the petitioner as an assessee of the Income Tax Department claimed exemption under Clause (118-C) of the Second Schedule to the late Income Tax Ordinance, 1979, which was allowable to him for the assessment year 1993-94 in stead of year 1994-95 for which it was actually allowed. It was, in this regard observed that the assessee had actually started commercial production on 20-5-1992 as per its audited accounts.

2. It is the case of the petitioner that in the guise of above notice the Taxation Officer in fact intends to rectify the assessment order for the year, 1993-94 which is not possible either under the provisions of section 156 (Rectification of mistakes) of the late Income Tax Ordinance or the provisions of section 122 of the Income Tax Ordinance, 2001. The former provided a time limit of four years from the date of order sought to be amended while under the latter mentioned provision an order can only be rectified within five years of the issuance of the assessment order. In support of his submission that the matter pertaining to commencement of commercial production was duly considered by the Revenue a reference is made to the assessment order framed for the year 1993-1994 on 3-4-1995. Similar observation and findings in that regard were again made by the Assessing Officer in the assessment order recorded for the year 1997-98 on 4-4-2000.

3. On the other hand, it is the case of the Revenue that period of exemption was to be reckoned from the date of starting of the commercial production which in this case happened on 20-5-1992 as per account books of the petitioner.. It is, therefore, pleaded that the exemption allowed to the assessee from the assessment year 1994-95 was based on misrepresentation and therefore the assessment order for the year, 2001-2002 could validly be rectified to curtail and disallow exemption in that year.

4. Having heard the learned counsel for the parties I will readily agree with the learned counsel for the petitioner that in the guise of the aforesaid notice the Revenue, wishes to rectify the assessment order recorded on 3-4-1995 in respect of assessment year 1993-1994. In that order it was observed that no regular business production had commenced and therefore, the claim of the assessee of exemption under Clause 118-C of the Second Schedule to the late Income Tax Ordinance was intended to be probed during the first year of exemption i.e. 1994-95. Accordingly the declared `NIL' income by the assessee in that year was accepted. This observation and finding was repeated by the Assessing Officer in the assessment order framed on 4-4-2000 for the assessment year 1997-98. The relevant portion of that order reads as under:-.

"In the wake of this situation the case of the assessee qualifies for acceptance under Clause (118-C) of the Second Schedule to the Income Tax Ordinance, 1979. As per records the commercial production of the assessee company was started during the period relevant to the assessment year 1994-95. The exemption period under Clause (118-C) ibid is, therefore, reckoned from the 1-10-1992 relevant to the assessment year 1994-95, for eight years. The claim of exemption under the said Clause (118C) is, therefore, accorded for the assessment year 1997-98, being fourth year and the results declared by the company have not merit for discussion."

5. The Revenue having recorded clear findings with regard to the date and period of commencement of business production by the assessee not only once but twice the proposed rectification in the assessment order for the year, 2001-2002 is therefore not permissible under the law on account of stipulated limitation having long gone before the issuance of the impugned notice, dated 11-12-2003.

6. This petition is accordingly allowed and the impugned notice is declared to be invalid.

S.A.K./Y-14/L???????????????????????????????????????????????????????????? Petition accepted.