COMMISSIONER OF INCOME TAX, ISLAMABAD VS FAYYAZ AHMAD, 2008 PTD-LAHORE-HIGH-COURT-LAHORE 773 (2008)

(a) Income Tax Ordinance (XLIX of 2001)---

----S.122(4-A) [as inserted by Finance Act (I of 2003)] & (5-A)---General Clauses Act (X of 1897), S.6---Income Tax Ordinance (XXXI of 1979), Ss.65 & 66-A-7-Assessment finalized under S.65, of Income Tax Ordinance, 1979---Reopening of such assessment after promulgation of Income Tax Ordinance, 2001---Limitation---New legislation could extend a limitation, which had already expired prior to operation of new law---Where limitation in respect of matter under earlier law had not expired on date of operation of new law, such matter would be governed by S.6 of General Clauses Act, 1897---Limitation of five years provided under S.65 of Income Tax Ordinance, 1979 would remain unchanged while applying thereto provision of S.122 of Income Tax Ordinance, 2001---Provision of S.122 of Income Tax Ordinance, 2001 did not speak of limitation provided in S.66-A of Income Tax Ordinance, 1979---Provision of S.122 of Income Tax Ordinance, 2001 for being not retrospective in operation would not apply to assessment years of assessee assessed under Income Tax Ordinance, 1979 for being closed and finalized transactions---Principles.

Messrs Kashmir Edible Oil v. Federation of Pakistan 2005 PTD 1621 and Fauji Oil Terminal v. Commissioner of Income Tax 2006 PTD 734 rel.

(b) General Clause Act (X of 1897)---

----S.6---Expiry of a limitation provided under repealed law prior to operation of new law---Effect stated.

No legislation can extend a limitation, which has already expired prior to the operation of the new law, while if, on date of operation of new legislation, the limitation has not expired in respect of earlier laws, the matter would be governed by S.6 of General Clauses Act, 1897. Thus, there is no need for further emphasis through another amendment.

Muhammad Arshad Majeed for Appellant.

Date of hearing: 11th March, 2008.

JUDGMENT

KH. FAROOQ SAEED, J.---By this single judgment, we propose to dispose of T.R. No.87 of 2006, T.R. No.39 of 2006, T.R. No.70 of 2006, T.R. No. 71 of 2006, T.R. No.72 of 2006, T.R. No. 84 of 2006, and T.R. No.85 of 2006, as the common question of law and facts are involved.

2. In these appeals filed by the Department, the claim remains that the provisions of section 122 of the Income Tax Ordinance, 2001, are retrospective and shall apply even on the proceedings culminated under Income Tax Ordinance, 1979 repealed. The argument, which is claimed to be new is that provisions of section 122(4-A) in implied terms have declared application of the said section retrospective. The question proposed by the department, however, speaks as follows:--

"Whether on facts and circumstances of the case of Provision of section 122(4A) of the Income Tax Ordinance, 2001 brought into statute through Finance Act, 2003 is not applicable to the assessment finalized prior to 1-7-2003 whereas subsection (1) of section 122 extends the applicability of section 122 to the assessment completed under the provisions of the repealed Income Tax Ordinance, 1979 as well?"

Before proceeding, reproduction of section 122(4A) shall be of relevance. The same reads as follows:--

"Section 122(4A).---In respect of an assessment made under the repealed Ordinance, nothing contained in subsection (2) or, as the case may be, subsection (4) shall be so construed as to have extended or curtailed the time limit specified in section 65 of the aforesaid Ordinance in respect of an assessment order passed under that section and the time-limit specified in that section shall apply accordingly."

2-A. The above provision of law speaks of protection of the limitation provided under section 65 of the erstwhile Income Tax Ordinance, 1979 by saying that the cases which are to be re-opened, the limitation of five years provided therein shall not be extended or curtailed while applying the provisions of section 122. Moreover, it does not speak of the limitation provided in section 66(A) of repealed Ordinance wherein it was four years while section 122(5A) which is pari meteria to section 66(A), the limitation is five years.

3. The amendment like many such others is equally vague, ambiguous and unnecessary. This Court has already discussed in detail the various subsections of section 122 and their import in its judgment re: "Messrs Kashmir Edible Oil v. Federation of Pakistan" (2005 PTD 1621).

4. This is another example of the patch work for which learned Sindh High Court in the case of Fauji Oil Terminal v. Commissioner, Income Tax re: 2006 PTD 734 has expressed its displeasure.

5. The need of above comment is that it is a settled principle of law that no new legislation can extend a limitation, which has already expired prior to the operation of the new law, while if on the date of operation of the new legislation the limitation has not expired in respect of earlier laws, the matter is governed by section 6 of the General Clauses Act. There was, therefore, no need for further emphasis through another amendment. The intention appears to be the protection of limitation provided under section 65, which was five years from the end of the assessment year in which the case was originally finalized. As already said, there are already settled principles of law to deal with such situations. Moreover, the General Clauses Act also protects it in most of the cases. This amendment, which was brought by Finance Act, 2003, cannot give a jurisdiction for application of the provisions of section 122 on closed and finalized transactions. The provision even otherwise is more of an explanatory nature. The same, therefore, has only created ambiguity and has not improved anything or brought anything new so as to help the application and working of section 122. The law in its shape has been so discussed in a chain of judgments by this Court of which aforementioned two are very pertinent and clear. This Court in its various judgments including Kashmir Edible Oils (supra) has already held that section 122 for the reason of its construction even after insertion of new provisions like section 122(5) and 122(5A) by Finance Act, 2003, is not retrospective. The main reason is the use of terms like `tax-year' and 'taxpayer', which are new and do not figure in the old law of 1979. Obviously, when the new law wants to re-open a `tax year' of a `taxpayer', which means persons assessable under the Ordinance of 2001 as is clear in section 122(1), section 122(2) and other subsections, it cannot apply on `Assessment years' of the `assessee' assessed under Ordinance of 1979.

6. The outcome is obvious, there is no, reason before us to agree with the learned Legal Advisor that the above provisions of section 122 are retrospective.

7. Dismissed.

S.A.K./C-31/LReference dismissed.