VS, 2009 PTD-INCOME-TAX-APPELLATE-TRIBUNAL-PAKISTAN 696 (2007)

2009 P T D (Trib.) 696

[Income-tax Appellate Tribunal Pakistan]

Before S. Hassan Iman, Jawaid Masood Tahir Bhatti, Judicial Members and Shahid Azam Khan, Accountant Member

I.T.A. No.534/KB of 2005, decided on 23/01/2007.

Per S. Hasan Imam, Judicial Member

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

----S. 122(4A)---Income Tax Ordinance (XXXI of 1979), S.62---Finance Act (1 of 2003), Preamble---Amendment of assessment---Limitation---Assessment was finalized under S.62 of the Income Tax Ordinance, 1979 as on 19-5-1999---Additional Commissioner of Income Tax amended said order vide order dated 28-6-2004 within the meaning of S.122(1) of the Income Tax Ordinance, 2001 and for determining the limitation he took benefit of S.122(4A) instead of S.122 of the Income Tax Ordinance, 2001---First Appellate Authority while observing that S.122(4A) of the Income Tax Ordinance, 2001 was not attracted found that order under S.62 of the Income Tax Ordinance, 1979 passed on 19-5-1999 was amendable on or before 18-5-2004---Order dated 28-6-2004 passed under S.122(1) of the Income Tax Ordinance, 2001 being ab initio illegal was not sustainable in the eyes of law and was annulled being time-barred--Validity---Held, as assessment had been carried out on 19-5-1999, 5 years' limitation will start from 1-7-1999 and end on 30-6-2004--Notice issued on 11-5-2004 for compliance on 17-5-2004 was within time as prescribed in S.65(3) of the Income Tax Ordinance, 1979---Order of First Appellate Authority to the extent that "provisions of S.122(4A) of the Income Tax Ordinance, 2001 were not attracted as the order under S.62 of the Income Tax Ordinance, 1979 being issued on 19-5-1999 was barred by limitation on 18-5-2005 was not in accordance with the provisions of law; however, order could not be amended either by invoking S.122(1) or S.122(4A) of the Income Tax Ordinance, 2001, besides Sub-sec.(5) of S.122 of the Income Tax Ordinance, 2001 had been amended by Finance Act, 2003 and was available with effect fron3 1st July, 2003---Subsections (5) and (5A) of S.122 of the Income Tax Ordinance, 2001 had same effect so far as retrospectivity of the provision was concerned---Amended provision was not available to amend the order passed under S.62 of the Income Tax Ordinance, 1979 passed on 19-5-1999.

I.T.As. Nos.910 and 552, 553/KB of 2004; I.T.A. No.420/KB of 2005 rel.

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

----S.122---Income Tax Ordinance (XXXI of 1979), S.62---Amendment of assessment----Amendment by Assessing Officer instead of Commissioner---Validity---Section 122 of the Income Tax Ordinance, 2001 pertaining to amendment of assessments provides that Commissioner may amend assessment order issued under S.62 of the Income Tax Ordinance, 1979 by making such alterations or additions as the Commissioner considers necessary---Section 122(2) of the Income Tax Ordinance, 2001 restricts the powers to amend the assessments to orders passed by the Commissioner or wherein Commissioner had issued or was treated as having issued the assessment order on the taxpayer--Order under S.62 of the Income Tax Ordinance, 1979 was passed in 1999 and was served by the Assessing Officer and not by the Commissioner---Section 122 of the Income Tax Ordinance, 2001 invoked by Taxation Officer would not be helpful for making additional assessments under amending order under S.62 of the Income Tax Ordinance, 1979 although the said provision provides 5 years' period with effect from service of the order.

Per Shahid Azam Khan, Accountant Member.---[Minority view].

1980 PTD 69; 2004 PTD 1173; 1966 PTD 664; PLD 1994 SC 894 and PLD 1995 SC 423 ref.

Per Jawaid Masood Tahir Bhatti, Judicial Member (Agreeing with S. Hasan Imam, Judicial Member).

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

----S.122(1)-Income Tax Ordinance (XXXI of 1979), S.62---Amendment of assessment---Since the original order under S.62 of the Income Tax Ordinance, 1979 was passed on 29-5-2000 prior to July, 2003, the provisions of S.122(1) of the Income Tax Ordinance, 2001 having no retrospective effect were not applicable.

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

----S.122(1)---Amendment of assessment---Section 122 of the Income Tax Ordinance, 2001 was applicable in respect of "taxpayer" and "tax year" and not "assessee" and "assessment year".

2005 PTD 1621 rel.

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

----S.122 (4A)---Amendment of assessment---Section 122(4A) of the Income Tax Ordinance, 2001, is held, was vague, ambiguous and unnecessary.

Fauji Oil Terminal's case 2006 PTD 734 rel.

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

----S.122 (1)---Income Tax Ordinance (XXXI of 1979), Preamble---Amendment of assessment---Provisions of S.122 of the Income Tax Ordinance, 2001 were inapplicable on assessments concluded under the Income Tax Ordinance, 1979.

2008 PTD 1136 rel.

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

----S.122(1)---Amendment of assessment---Section 122 of the Income Tax Ordinance, 2001 applies only to assessment orders finalized by the Commissioner of the taxpayers for the tax year and not on assessment orders made by the Deputy Commissioner of Income Tax for the assessment year 2002-03 and earlier years.

2008 PTD 1420 rel.

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

----S. 122(4A)---Income Tax Ordinance (XXXI of 1979), Ss.62 & 65---C.B.R's. Circular No.7 of 2003, dated 11-7-2003, para.36---Amendment of assessment ---Assessment year 1998-99---Validity---Held, in order to apply the provisions of S.122 (4A) of the Income Tax Ordinance, 2001 assessments ought to have been made under S.65 of the Income Tax Ordinance, 1979---Para. 36 of C.B.R.'s Circular No.7 of 2003 provides that "where an assessment order was earlier passed under S.65 of the Income Tax Ordinance, 1979 the limitation contained in S.122 of the Income Tax Ordinance, 2001 shall neither be curtailed nor extended by the provisions of Sub-S.(2) or Sub-S.(4) of S.122 of the Income Tax Ordinance, 2001"-Original assessment had been finalized under S.62 of the Income Tax Ordinance, 1979 and not under S.65 of the Income Tax Ordinance, 1979---Provisions of S.122(1) or for that matter S.122(4A) of the Income Tax Ordinance, 2001 were not applicable in respect of assessment year 1998-99---Order of First Appellate Authority had rightly been upheld by the Tribunal and there was no justification for vacating the order of First Appellate Authority---Departmental appeal was dismissed.

I.T.A. No.1236/KB of 1995; Honda Shahrah-e-Faisal case 2005PTD 1316; Kashmir Edible Oil's case 2006 SCMR 109; 2005 PTD 1621; 2008 PTD 123; Fauji Oil Terminal's case 2006 PTD 734; 2008 PTD 1136 and 2008 PTD 1420 rel.

Rahematullah Wazir, D.R., Farrukh Ansari, D.R., Dr. Muhammad Ali Khan, D.R. and Ageel Abbasi L.R. for Appellant.

Dr. Muhammad Farogh Nasim for Respondent.

ORDER

The Department being aggrieved and dissatisfied from the CIT(A)'s order dated 1-3-2005 under section 122(1) pertaining to assessment year 1998-99 has taken objections to the order annulling the order passed under section 122(1) of the Income Tax Ordinance, 2001 and holding that the Provisions of section 122(4A) were not attracted in the assessee's case.

2. Assessee is an unlisted public company engaged in manufacturing of specialist oils and asfalt, mainly consumed by the transformer manufacturers. During the assessment under consideration on the basis of informations the Additional Commissioner/Taxation Officer-A, Audit Division Large Tax Payer Unit Karachi invoked section 122(1) of the Income Tax Ordinance. 2001 to modify the assessment in terms of "separate sales" based on contravention report, "claimed bogus purchases" "non-deduction of tax on payment of management petrol and executive petrol" and "salary paid to house-keeping staff".

3. Record further reveals that assessment order under section 62 of the repealed Ordinance was passed on 19-5-1999, the learned Additional Commissioner Income Tax, Large Tax Payer Unit amended the order under section 62 of the repealed Ordinance vide order dated 28-6-2004 within the meaning of section 122(1) of the Income Tax Ordinance, 2001 and for determining the limitation took benefit of section 122(4A) instead of section 122 of the Income Tax Ordinance, 2001. Before the learned CIT(A) the learned Counsel for the assessee urged that in accordance with provision of section 122 the assessment order dated 19-5-1999 could have been amended maximum by 18-5-2004, hence impugned order is barred by time limitation.

4. The learned CIT(A) while observing that provision of section 122(4A) are not attracted held that order under section 62 of the repealed Ordinance for the year under appeal, passed on 19-5-1999, was amendable on or before 18-5-2004, therefore, the impugned order dated 28-6-2004 under section 122(1) of the Income Tax Ordinance, 2001 being ab initio, illegal is not sustainable in the eyes of law and is hereby annulled, being time-barred, the order in verbatim is reproduced hereunder:--

"Provisions of section 122(4A) of the Income Tax Ordinance, 2001 were not attracted in the appellant's case. The order under section 62 of the repealed Income Tax Ordinance, 1979 Ordinance for the year under appeal being issued on 19-5-1999 was barred by time limitation on 18-5-2004. The learned Additional Commissioner of Income Tax erred in law and on facts of the case in invoking the provisions of section 122(4A) of the Income Tax Ordinance, 2001. The impugned order issued by him on 28-6-2004 under section 122(1) of the Income Tax Ordinance, 2001, being ab initio, illegal is not sustainable in the eyes of law and is hereby annulled."

5. We have heard the learned representatives of the two parties on the legal issue pertaining to limitation only, without touching the merits of the case.

6. The learned D.R challenged the verdict of learned CIT(A)'s urging that order under section 62 of the repealed Ordinance was passed on 19-5-1999. Notice under section 122(1) has been served on 21-5-2004, the present assessment relates to assessment year 1998-99, whereas subsection (4A) of section 122 of the Income Tax Ordinance, 2001 clearly mentions that assessment passed under the repealed Ordinance will be governed by limitation of 5 years as contained in section 65 of the repealed Ordinance and that such assessments may be modified and amended under section 122(1) of the Income Tax Ordinance, 2001 within 5 years of the end of the assessment year in which income was first assessable hence the assessment of the assessment year 1998-99 will be barred by time for the purpose of application of section 122(1) on 30-6-2004, whereas the assessment is rightly amended under section 122(1) on 28-6-2004.

7. The learned counsel for the assessee rebutting the arguments vehemently pleaded that the current proceedings are in respect of assessment year 1998-99, wherein assessment was carried out invoking section 62 of the Income Tax Ordinance, 1979 (Repealed) on May 15, 1999, the Income Tax Ordinance, 2001 promulgated w.e.f. 1st July, 2002, vide section 122(1) refers section 62 of the Income Tax Ordinance, 1979 but it would be, applicable to assessments pertaining to periods upto June 30, 2002 and finalized on or after July 01, 2002. Section 122 of the Income Tax Ordinance, 2001 and sections 65 & 66-A of the Income Tax Ordinance, 1979 are in pari materia and being not procedural, thus have to be applied proximately, in the present case the limitation period of 5 years under section 122(2) has lapsed on May 18, 2004 hence the order passed under section 122 on June 28, 2004 is barred by time. It is added that impugned orders under section 122 dated June 28, 2004 being in violation of expression provisions of law natural justice, therefore, liable to be annulled. Accordingly, it is stressed that order of the learned CIT(A) does not warrant interfere.

8. In the first instance it is important to mention that section 65 of the Income Tax Ordinance, 1979 which is the relevant section so far as order under section 122(1) is concerned is not saved in new Ordinance section 239 pertaining to savings, shows that proceedings to be earned out invoking section, 65 have not been saved vide subsections (1) to (17) of section 239 of the Income Tax Ordinance. 2001. Even if it is presumed for the sake of argument that section 65 has been saved, even then section 65 itself vide subsection (3) provides that notice under section 65 in respect of income year may be issued within 5 years from the end of the assessment year in which the total income of the said income year was first assessable, hence a notice under subsection (1) of section 65 can be issued within 5 years from the end the assessment year in which the total income of the said income year was first assessable. In the present case assessment has been carried out on 19-5-1999, hence 5 years limitation shall start from 1-7-1999 and end on 30-6-2004, whereas notice appears to have been issued on 11-5-2004 for compliance on 17-5-2004, hence in that case the notice is within time, as prescribed in subsection (3) of section 65. The order of the learned CIT(A) to the extent that "provisions of section 122(4A) of the Income Tax Ordinance, 2001 were not attracted in the appellants case, the order under section 62 of the (Repealed) Income Tax Ordinance, 1979 for the year under appeal being issued on 19-5-1999 was barred by time limitation on 18-5-2004" is not in accordance with the provisions of law and thus cannot be confirmed.

9. However, other arguments of the learned counsel of the assessee require detailed discussion. Section 122 of the Income Tax Ordinance, 2001 pertaining to amendment of assessments provides that Commissioner may amend assessment order issued under section 62 by making such alterations or additions as the Commissioner considers necessary. However, subsection (2) of section 122 restrict the powers to amend the assessments to orders passed by the Commissioner or wherein Commissioner has issued or is treated as having issued the assessment order on the taxpayer, whereas the present order under section 62 was passed in the year, 1999 and was served by the assessing officer and not by the Commissioner, hence section 122 invoked by the taxation officer would not be helpful for making additional assessments under amending order under section 62 although the aid provision provides 5 years period with effect from service of the order.

10. So far as subsection (4A) of section 122 is concerned, we find that it provides that whatever contained in subsection (2) or 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 and by virtue of subsection (4A) the time limit to amend the order within the ambit of section'65 of the Income Tax Ordinance, 1979 (Repealed) shall already expire.

Subsection (5) of section 122 provides that order shall be amended under subsection (1) or (4) on the basis of definite information acquired from an audit or otherwise if the Commissioner was satisfied that:

(i) any income chargeable to tax has escaped assessment; or

(ii) total income has been under-assessed, or assessed at too low a rate or has been the subject of excessive relief or refund: or

(iii) any amount under a head of income has been misclassified.

11. Subsection (5) is substituted by Finance Act, 2003 dated June 17, 2003 and before this subsection (5) was applicable only in cases, where it is found that the Ordinance, 2001 has been incorrectly applied, to meet the situation the Department issued S.R.O.633(I)/2002 and S.R.O. 608(I)/2003 but same have been declared not in accordance with Law and while introducing the S.R.O's the Board has exercise powers in excess which it could not be under the law. In view of the above facts, we are of the considered opinion that present order could not be amended either invoking section 122(1) or section 122(4 A), besides subsection (5) has been amended by Finance Act, 2003, hence could be available with effect from 1st July, 2003. In number of cases it is held that sub-sections (5) and (5A) have same affect so far as retrospectively of the provision is concerned. As such the amended provision was not available to amend the order period under section 62 of the repealed Income Tax Ordinance, 1979 passed on 19-5-1999. In this context reliance is placed on a case-law cited in deem dated 14-6-2006 in I.T.As. Nos.910 and 552, 553/KB of 2004, dated 7-9-2006 and I.T.A. No.420/KB of 2005.

12. In the circumstances supra, we find reasons to confirm the order of CIT(A) annulling the order passed by the learned Additional Commissioner/Taxation Officer-A, Audit Division, Large Taxpayers Unit, Karachi dated 5-6-2004.

(Sd.)

(S.HASAN IMAM)

JUDICIAL MEMBER

SHAHID AZAM KHAN (ACCOUNTANT MEMBER).---I have very carefully perused the order of my learned brother who has confirmed the learned CIT(A)'s order to annul the order passed by the learned Additional Commissioner/Taxation Officer (hereinafter referred to as the Taxation Officer) under section 122(1) of the Income Tax Ordinance, 2001 (hereinafter referred to as the new Ordinance) for the assessment year 1998-99. Recapitulating the facts briefly, the assessment for the assessment year under consideration i.e. 1998-99 was finalized on 19-5-1999 under section 62 of the repealed Income Tax Ordinance, 1979 (hereinafter referred to as the repealed Ordinance). The Taxation Officer came into possession of certain informations pointing, towards suppression of sales, claim of bogus purchase payment of salaries to the brothers of the company's directors, non-deduction of tax at source and payment of salaries to the house keeping staff. Accordingly the Taxation Officer proceeded to issue notice dated 11-5-2004 under subsection (1) of section' 122 of the new Ordinance for compliance on 17-5-2004 and finally passed the order under subsection (1) of section 122 of the new Ordinance on 28-6-2004 to amend the assessment already completed on 19-5-1999 under section 62 of the repealed Ordinance.

14. On first appeal, the learned CIT(A) has annulled the impugned order under section 122(1) on the point of law based on his following findings that:--

(i) Subsection (4A.) of section 122 of the new Ordinance was inserted to protect the assessments made under section 65 of the repealed Ordinance;

(ii) Section 122(4A) of the new Ordinance clearly refers to the orders passed under section 65 of the repealed Ordinance and excludes the provisions of section 122(2) of the new Ordinance so far as orders passed under section 65 of the repealed Ordinance;

(iii) The limitation prescribed in section 122(2) of the new Ordinance caters for the order passed or issued under sections 120, 121 of the new Ordinance or under sections 59, 59 A, 62, 63 of the repealed Ordinance;

(iv) Although an order under section 65 of the repealed Ordinance can be amended under section 122(1) of the new Ordinance, yet in order to determine the time limitation, section 122(4A) is to be referred instead of section 122(2);

(v) Since original assessment order was passed under section 62 and not under section 65 of the repealed Ordinance, the limitation ought to be determined under section 122(2);

(vi) Provisions of section 122(4A) were not attracted in the appellant's case and the order under section 62 being issued on 19-5-1999 was barred by time limitation on 18-5-2004; and

(vii) The learned Additional Commissioner erred in law and on facts of the case in invoking the provisions of section 122(4A) of the new Ordinance.

15. The Taxation Officer's said order was annulled by the learned CIT(A) and my learned brother has given his findings in paras. 8 to 11 of this order as follows:---

(i) The section 65 of the repealed Ordinance is relevant of the section 122(1) of the new Ordinance and section 65 of the repealed Ordinance has not been served vide subsections (1) to (17) of section 239 of the New Ordinance.

(ii) Presuming for the sake of argument that section 65 has been saved, the notice dated 11-5-2004 issued under section 122(1) of the new Ordinance is within the time as was prescribed in section 65(3) of the repealed Ordinance and the learned CIT(A)'s findings to the extent that "order under section 62 of the repealed Income Tax Ordinance, 1979 being issued on 19-5-1999 was barred by time limitation on 18-5-2004" is not in accordance with the provisions of law and thus cannot be confirmed.

(iii) The section 122(2) of the new Ordinance restricts the powers to amend the assessment order passed by the Commissioner or treated as having issued the assessment order on the taxpayer. The order under section 62 dated 19-5-1999 was passed by the Assessing Officer and not by the Commissioner and, hence, section 122 invoked by the Taxation Officer would not be helpful for making additional assessment amending the order under section 62 although the provision provides five years' period with effect from the service of the order.

(iv) The subsection (4A) of section 122 provides that whatever contained in subsection (2) or subsection (4) shall be so construed as to have extended or curtailed the time limit specified in section 65 in respect of the order passed under that section and the time limit specified in that section shall apply accordingly and by virtue of subsection (4A) the time limit to amend the order within the ambit of section 65 of the repealed Ordinance shall already expire.

(v) The present order under section 62 of the repealed Ordinance could, not be amended either invoking section 122(1) or section 122(4A).

(vi) The subsection (5) amended by the Finance Act, 2003 could be available with effect from 1-7-2003.

(vii) In number of cases it is held that subsections (5) and (5A) have same effect so far as the retrospectivity of the provision is concerned. Relying on a case-law dated 14-6-2006 in I.T.As. Nos.910, 552 and 553/KB of 2004, dated 7-9-2006 and I.T.A. No.420/KB of 2005, the amended provision was not available to amend the order passed under section 62 of the repealed Ordinance.

16. Before giving my findings, I find it appropriate to reproduce as follows the section 122 of the new Ordinance as it stood amended on 17-5-2004 when the notice under subsection (1) of section 122 was issued by Taxation Officer:--

"122. Amendment of assessments.---(1) Subject to this section, the Commissioner may amend an assessment order treated as under section 120 or issued under section 121, or issued under section 59, 59A, 62, 63 or. 65 of the repealed Ordinance, by making such alterations or additions as the Commissioner considers necessary.'

(2) An assessment order shall only be amended under subsection (1) within five years after the Commissioner has issued or is treated as having issued the assessment order on the taxpayer.

(3) Where a taxpayer furnishes a revised return under subsection (6) of section 114.

(a) the Commissioner shall be treated as having made an amended assessment of the taxable income and tax payable thereon as set out in the revised return; and

(b) the taxpayer's revised return shall he taken for all purposes of this Ordinance to be an amended assessment order issued to the taxpayer by the Commissioner on the day on which the revised return was furnished.

(4) where an assessment order (hereinafter referred to as the "original assessment") has been amended wider subsection (1) or (3), the Commissioner may further amend, as many times as may be necessary, the original assessment within the later of.

(a) five years after the Commissioner has issued or is treated as having issued the original assessment order to the taxpayer; or

(b) one year after the Commissioner has issued or is treated as having issued the amended assessment order to the taxpayer.

(4A) In respect of an assessment made wider 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 said Ordinance in respect of an assessment order passed under that section and the time-limit specified in that section shall apply accordingly.

(5) An assessment order in respect of a tax year or an assessment year, shall only be amended under subsection (1) and an amended assessment for that year shall only be further amended under subsection (4) where, on the basis of definite information acquired from an audit or otherwise, the Commissioner is satisfied that-

(i) any income chargeable to tax has escaped assessment: or

(ii) total income has been under-assessed or assessed at too low a rate, or has been the subject of excessive relief or refund; or

(iii) any amount under a head of income has been misclassified.

(5-A) Subject to subsection (9), the Commissioner may amend, or further amend, an assessment order, if he considers that the assessment order is erroneous in so far it is prejudicial to the interest of Revenue.

(5-B) Any amended assessment order under subsection (5A) may be passed within the time-limit specified in subsection (2) or sub-section (4), as the case may be.

(6) As soon as possible after making an amended assessment under section (1), subsection (4) or subsection (5A), the Commissioner shall issue an amen(ed assessment order to the taxpayer stating-

(a) the amended taxable income of the taxpayer

(b) the amended amount of tax due;

(c) the amount of tax paid, if any; and

(d) the time, place, and manner of appealing the amended assessment

(7) An amended assessment order shall be treated in all respects as an assessment order for the purposes of this Ordinance, other than for the purposes of subsection (1).

(8) For the purposes of this section, "definite information" includes information on sales or purchases of any goods made by the taxpayer, receipts of the taxpayer from services rendered or any other receipts that may be chargeable to tax under this Ordinance, and on the acquisition, possession or disposal of any money asset valuable article or investment made or expenditure incurred by the taxpayer.

(9) No assessment shall be amended, or further amended, under this section unless the taxpayer has been provided with an opportunity of being heard."

17. A bare reading of section 122 ibid shows that the Legislature has provided four schemes of law in section 122 of the new Ordinance for amendment and further amendment of assessment that is already completed viz. (i) amendment of assessment under section 122(1) of the assessment already completed under the new Ordinance and the assessment already completed under the repealed Ordinance within the time period specified in section 122(2) and section 122(4A.) respectively; (ii) amendment of assessment under section 122(3) of the assessment completed under the new Ordinance where a revised return has been filed under subsection (6) section 114 of the new Ordinance; further amendment under section 122(4), within the time limit specified in clauses (a) and (b) thereof, of the assessment amended us or under section 122(1) or under section 122(3) of the new Ordinance; and amendment and further amendment of an assessment order which is erroneous and prejudicial to the interest of Revenue within the time limit provided in section 122(5B). The amendment under section 122(1) and further amendment under section 122(4) can be made when, as provided in section 122(5), the Commissioner has acquired, through an audit or otherwise, definite information as defined in section 122(8). In the instant case, the scheme of law regarding amendment under section 122(1) only is relevant since it is neither a case of further amendment under section 122(3) or under section 122 (4) nor amendment or further amendment under !section 122(5A). By incorporating the assessment orders passed under sections 59, 59A, 62, 63 or 65 of the repealed Ordinance within the scope of section 122(1) of the new Ordinance, the Legislature has shown its intention to also include amendment of an assessment already completed under any of the said sections of the repealed Ordinance. The order to amend an assessment under subsection (1) or the order to further amend an assessment under Subsection (4) can be made on the basis of definite information acquired from an audit or otherwise as has been provided in subsection (5) and defined in subsection (8) of section 122. The time limits period provided in subsection (2) of section 122 for amendment of an assessment and the time limit provided in subsection (4) of section 122 for further amendment of an assessment are different from the time limit provided under section 65 of the repealed Ordinance. Accordingly, the Legislature added subsection (4A) to section 122 of the new Ordinance to protect the time limit provided in section 65 of the repealed Ordinance.

18. In view of the foregoing, I agree with my learned brother with his findings as given in para. 15(i) of this order only to the extent that section 65 of the repealed Ordinance is relevant to section 122(1) of the new Ordinance. As far as saving of section 65 of the repealed Ordinance is concerned, I am of the opinion that the same is in-built in section 122 and further saving was not required in section 239 of the new Ordinance.

19. I agree with the findings of my learned brother as given in para. 15(ii) of this order since the order under section 62 of the repealed Ordinance was passed on 19-5-1999 and the notice under section 122(1) of the new Ordinance was issued on 11-5-2004 which is within the time limit prescribed in section 65(3) of the repealed Ordinance and protected in subsection (4A) of section 122 of the new Ordinance i.e. upto 30-6-2004.

20. The result of my learned brother's findings as given, in sub paras. (iii) and (v) of para. 15 of this order would amount to examining section 122(2) in isolation and also to declaring subsections (1) and (4A) of section 122 of the new Ordinance as redundant surplus and of no legal effect which is to the findings of the Hon'ble High Courts and the Hon'ble Supreme Court of Pakistan as has been held in the following case-laws:-

(i) 1980 PTD 69

"B. Statutes-Interpretation of

........................................................................................

Whether redundancy can be attributed to the legislature---Held no."

(ii) 2004 PTD 1173 (Karachi High Court)

"From a bare perusal of the above provision of law, we find substance and force in the contention of Mr. Aqeel Ahmed Abbasi. We agree with the proposition that in order to arrive at the correct conclusion, a scheme of law is to be examined in its totality and no provision of law is to be considered in isolation

.."

(iii) 1966 PTD 664

"C. Statutes---Interpretation-

.Words in Statutes, whether can be treated as surplusage or redundant---Held no."

(iv) PLD 1994 Supreme Court 394

"(B) Interpretation of statutes ..Each

and every word of a statute has to be given its meaning and no part of the statute can be treated as redundant or surplus. (P.899) B."

(v) PLD 1995 Supreme Court 423

"35. Cardinal principle of interpretation of statutes is that a law should be interpreted in such a manner that it should be saved rather than destroyed. The Courts should lean in favour of upholding constitutionality of legislation and it is, therefore, incumbent upon the courts to be extremely reluctant to strike down laws as unconstitutional. This power should be exercised only when absolutely necessary, for injudicious exercise of this power might result in grave and serious consequences. In support of the proposition reference can be made in the case of Province of East Pakistan v. Sirajul Huq Patwari PLD 1966 SC 154. The same principle of interpretation shall apply to subordinate legislation including Regulations as in this case."

21. I am not in agreement with my learned brother's finding as given in para. 15(iv) of this order which is not only in contradiction to his finding as para. 15(ii) of this order but also contrary to the facts and interpretation of subsection (4 A) of section 122 of the new Ordinance. The it under section 62 of the repealed Ordinance was passed on 19-5-1999 and the notice under section 122(1) of the new Ordinance m was issued on 11-5-2004 which is within the time limit provided in section 65(3) of the repealed Ordinance saved in subsection (4 A) of the section 122 of the new Ordinance.

22. With regard to my learned brother's finding as given in para. 15(vi.) of this order, I am of the considered opinion that substitution of subsection (5) of section 122 of the new Ordinance through the Finance Act, 2003 has not changed the intent of the Legislature embodied in subsection (1) of section 122. The notice under section 122(1) was issued on 11-5-2004 which squarely fells within the scope of subsection (5) of section 122 inserted through the Finance Act, 2003.

213. I am not in a position to offer my comments with regard to my learned brother's finding as given in para 15(vii) of this order since citations and details of `number of cases' have not been given. However, I am of the considered opinion that subsection (5) and subsection (5A) of section 122 of the new Ordinance as inserted through the Finance Act, 2003 are not pari materia since subsection (5A) is a comprehensive provision to the extent it contains both the issuance of an order of amendment or further amendment and the situation in which such orders can be issued i.e. where an assessment order is established as erroneous in so far as prejudicial to the interest of revenue. Moreover, subsection (5A) makes no reference to the assessment order passed under the repealed Ordinance. Whereas, subsection (5) only circumstances in which an order of amendment under subsection (1) or an order of further amendment under subsection (4) can be made. The whole scheme of law as provided in subsections (1), (4) and (5) of section 122 in totality envisages amendment or further amendment also of an assessment order that was passed under the repealed Ordinance.

24. In view of the foregoing, I am also not in agreement with my learned brother's findings as given in para. 15 (viii) of this order to the effect that the amended provision was not available to amend the order passed under section 62 of the repealed Ordinance. I am of the considered opinion that the amended provision of subsection (5) of section 122 introduced through the Finance Act, 2003 has not altered the Legislature's intention embodied in subsections (1), (4) and (4A) of section 122.

25. In the circumstances supra, I find ample reasons to vacate the order of the learned CIT (A) and restore the order under section 122(1) dated 28-6-2004 passed by the learned Additional Commissioner/Taxation Officer. Large Taxpayers Unit, Karachi.

(Sd.)

(SHAHID AZAM KHAN)

(ACCOUNTANT MEMBER)

Farrukh Ansari and Rahematullah Wazir, D.R. for Appellants.

Riaz-ud-Din for Respondent.

Date of order: 14th January, 2009.

26. JAWAID MASOOD TAHIR BHATTI (JUDICIAL MEMBER).---This matter has been referred to me by the Hon'ble Chairperson to resolve the difference of opinion while deciding the above titled appeal between my brothers Mr. S. Hassan Imam, the learned Judicial Member (as he then was) and Mr. Shahid Azam Khan, the learned Accountant Member. The following question in this regard has been framed:--

"As to whether the order of the learned CIT (A) dated 1-3-2005 under section 122(1) annulling the order under section 122(1) of the Income Tax Ordinance, 2001 being ab initio illegal and not sustainable, therefore, liable to be annulled or is liable to be confirmed/maintained."

27. I have heard the learned Representatives from both the sides and have also perused the above referred orders of my both the learned Brothers. I am of the view that the learned Accountant Member in the above referred paras has raised the points while deciding the appeal in favour of the department while vacating the order of the learned CIT(A) and restoring the order passed by the Taxation Officer under section 122(1) without considering the fact that all these issues have already been decided by the Hon'ble Supreme Court of Pakistan and the decisions of the Hon'ble superior courts as well as of this Tribunal are binding decisions which are to be followed. There is plethora of judgments which support the view as has been given in the above said paras by my learned brother, the Judicial Member (as he then was).

28. The learned counsel representing the assessee in this case has referred the decision of this Tribunal in I.T.A. No.1236/KB of 1995 (Assessment year 1999-00) dated 27-1-2007 wherein the decision of the learned CIT (A) in favour of the appellant has been up-held by this Tribunal holding that since the original order under section 62 was passed on 29-5-2000 prior to July, 2003, therefore, the provisions of section 122(1) having no retrospective effect are not applicable. The department filed reference application before the Hon'ble High Court which has also been dismissed by the Hon'ble Sindh High Court in C.M.A. No. 194/07 with the observation that the decision of this Tribunal is covered by the earlier judgment of the same Hon'ble High Court in 2005 PTD 1316 (Honda Shahrah-e-Faisal) case. In this regard the decision of the Hon'ble Supreme Court in the Kashmir Edible Oil reported as 2006 SCMR 109, the decision of the Hon'ble Lahore High Court reported as 2005 PTD 1621 (Lahore High Court) have also been referred wherein it has been held that section 122 is applicable in respect of "taxpayer" and "tax year" and not "assessee" and "assessment year". Likewise in the latest decision of the Hon'ble Lahore High Court reported as 2008 PTD 123 (HC Lah.) wherein the special reference has also been made to section 122(4A) of the Ordinance, 2001 based on the judgment of the above referred Kashmir Edible Oil case and the Sindh High Court, the decision in the Fauji Oil Terminal case reported as 2006 PTD 734 has also been, referred and it has been held that section 122(4A) is vague, ambiguous and unnecessary.

29. In another decision of the Lahore High Court reported as 2008 PTD 1136 it has been held that the provisions of section 122 are in inapplicable on assessments concluded under the repealed Income Tax Ordinance, 1979. In another decision reported as 2008 PTD 1420 in the case of Idrees Cloth House it has been held that the language of section 122 apply only to assessment orders finalized by the learned Commissioner of the taxpayers for the tax year and not on assessment orders made by the DCIT for the assessment years 2002-03 and earlier years.

30. I am further of the view that in order to apply the provisions of section 122 (4A) assessments ought to have been made under section 65 of the repealed Ordinance, 1979. Para. 36 of C.B.R.'s Circular No.7/2003 provides that "where an assessment order was earlier passed under section 65 the limitation contained in section 122 shall neither be curtailed nor extended by the provisions of subsection (2) or subsection (4) of the section 122 of the Ordinance, 2001".

31. In the present case original assessment has been finalized under w section 62 and not under section 65 of the repealed Ordinance, 1979. I am, therefore, of the view that there is ample case law in support of the contentions of the assessee that the provisions of section 122(1) or for that matter section 122(4A) were not applicable in respect of assessment year 1998-99 and, therefore, my learned brother Judicial Member has rightly upheld the impugned order of the learned CIT(A) and I find no justification for vacating the impugned order of the learned CIT(A) by my learned brother, the Accountant Member.

32. Consequently, the above titled appeal filed by the Department is dismissed.

(Sd.)

(JAWAID MASOOD TAHIR BHATTI)

(JUDICIAL MEMBER)

C.M.A./15/Tax(Trib.)Appeal dismissed.