2010 P T D (Trib.) 142
[Income-tax Appellate Tribunal Pakistan]
Before Ch. Munir Sadiq, Judicial Member and Mazhar Farooq Shirazi, Accountant Member
I.T.As. Nos. 199/LB to 202/LB of 2008, decided on 31/08/2009.
Income Tax Ordinance (XLIX of 2001)---
----Ss. 131, 143-B & 221---Assessment order---Cancellation of assessment order---Appeal to Appellate Tribunal---Assessee, private limited company, filed statements under S.143-B of Income Tax Ordinance, 2001 which were deemed to be accepted as such---Assessment Officer had observed that assessee-company had received interest from the Banks and deducted tax thereon 10%, and by so doing assessee-company had failed to deduct tax by applying normal rate applicable to private limited company on interest which was 43% for assessment of first two years and 45% for next two years---Assessee, being aggrieved with the treatment meted out by the Assessing Officer filed appeal before Appellate Authority, who cancelled the order passed by the Assessing Officer under S.221 of Income Tax Ordinance, 2001 treating same to be ab initio null and void---Revenue had come up in appeal before Appellate Tribunal---Action taken by Appellate Authority/ Commissioner Income Tax (Appeals) in cancelling the assessment order for the first three years (1999-2000, 2000-01 & 2001-02) was perfectly justified because said assessments could not be rectified under S.221 of Income Tax Ordinance, 2001 after lapse of five years from passing of assessment order---Order of Commissioner Income Tax (Appeals) to the extent of said assessment of first three years, was maintained and appeal to that extent was dismissed being devoid of merits---Regarding assessment of year 2002-03, assessee/respondent had filed statement under S.143-B of Income Tax Ordinance, 2001 and tax deducted was final discharge of liability---Commissioner Income Tax (Appeals) had wrongly cancelled the order regarding assessment year 2002-03 on the grounds; that firstly, assessment completed for the assessment years 1999-2000, 2000-01, 2001-02 and 2002-03 would be deemed to have been accepted under S.59-A of repealed Income Tax Ordinance 1979 and could not be rectified under S.221(1-A) of Income Tax Ordinance, 2001; secondly order passed under repealed Income Tax Ordinance, 1979 and could not be rectified after expiry of 4 years by invoking provisions of S.221 of Income Tax Ordinance, 2001---Appeal filed in respect of fourth assessment by Revenue was accepted and case for assessment year 2002-03 was remanded to the Commissioner Income Tax Ordinance (Appeals), for passing an appropriate order after providing a reasonable opportunity of hearing to the parties on all available grounds.
2005 PTD 1316, 2006 PTD 734 and 2005 PTD 14 ref.
Khalid Latif, D.R. for Appellant.
Yousaf Ali Ch. I.T.P. for Respondent.
ORDER
The titled appeals have been preferred by the Revenue for the assessment years, 1999-2000 to 2002-2003 against consolidated order dated 31-10-2007 passed by learned CIT(A) Zone 1, Lahore to agitate the cancellation of assessment order passed under section 221 of the Income Tax Ordinance, 2001.
2. Brief facts of the case are that the assessee, a private limited Company, filed statements under section 143-B which were deemed to be accepted as such. From the perusal of assessment order the assessing officer observed that the assessee-Company had received interest from banks and deducted tax therein @ 10%. It was further observed by the Assessing Officer that the assessee-Company failed to deduct tax by applying normal rate applicable to private limited Company on interest. The assessing officer, therefore, issued show-cause notice and later a reminder to which no compliance was made. Hence the assessing officer raised total tax demand to Rs.111,199, Rs.865,899, Rs.981,658 and Rs. 1,408,449 respectively for the assessment years, 1999-2000 to 2002-2003 for the reason that the assessee has received interest from Banks and deducted tax thereon @ 10% whereas tax should have been deducted at normal rate which was 43% for assessment years 1999-2000, 2000-2001 and 45% for assessment years, 2001-2002 and 2002-2003. The assessee being aggrieved with the treatment meted out by the assessing officer went in appeal before the first appellate authority who vide order dated 31-10-2007 cancelled the order passed by the assessing officer under section 221 of the Income Tax Ordinance, 2001 treating it as ab initio null and void. Being dissatisfied with the treatment accorded by the first appeal authority the Revenue has come up in appeal before this Tribunal.
3. The learned DR for the Revenue contended that the learned CIT(A) was not justified in cancelling the consolidated assessment order passed under section 221 of the Income Tax Ordinance, 2001 as it was made in accordance with the provisions of law and as per facts of the case. The learned AR for the assessee, on the other hand, has reiterated the same arguments as were taken before the first appellate authority.
4. We have heard both the sides and perused the available records. A chart is reproduced hereunder to show the date of original order, date of order under section 221 and the period of limitation:--
| Assessment year | Date of original order | Date of order under section 221 | Whereas period of limitation expired on |
| 1999-00 | 18-11-1999 | 18-6-2007 | 17-11-2004 |
| 2000-2001 | 29-12-2001 | -do- | 28-12-2006 |
| 2001-2002 | 12-2-2002 | -do- | 11-2-2007 |
We have observed that the action taken by the learned CIT(A) in cancelling the assessment order for the years, 1999-2000, 2000-2001 and 2001-2002 was perfectly justified because the assessments could not be rectified under section 221 of the Income Tax Ordinance, 2001 after lapse of five years from passing of assessment order. Hence order of CIT(A) to the extent of above said assessment years is maintained and I.T.As. Nos.199 to 201 are dismissed being devoid of merits.
5. As regards the assessment year, 2002-2003 the learned AR has pointed out that the assessee/respondent had filed statement under section 143-B which was the deemed order under section 59(a) and tax deducted under section 143-B was final discharge of liability. Without commenting upon the merits of the case we are, of the opinion that CIT(A) has wrongly cancelled the order regarding assessment year, 2002-2003 on the two grounds:--
(1) Assessment completed for the assessment years, 1999-2000, 2000-2001, 2001-2002 and 2002-2003 (deemed accepted under section 59-A) before 30-6-2003 cannot be rectified under section 221 of the Income Tax Ordinance, 2001 after 1-7-2003 as section 221 (IA) was inserted through Finance Act, 2003. Reliance in this regard is placed on case-law reported as (2005) 92 Tax 133 SC Pak, 2005 PTD 1316, 2006 PTD 734.
(2) According to judgment of Lahore High Court, Lahore reported as 200.5 PTD 14 in case of Messrs Fawad Textile Mills Limited bearing Writ Petition No.16021 of 2003, 'order passed under the repealed Ordinance, 1979 cannot be rectified after expiry of 4 years by involving the provisions of section 221 of the Income Tax Ordinance, 2001.
6. We have observed that head note in case of Fawad Textile Mills Limited v. Pakistan through Secretary, Ministry of Finance and 3 others cited as 2005 PTD 14 which reads as under:--
"Constitution of Pakistan, (1973), Art, 199---Constitutional petition---Rectification of mistake-Limitation-Order under S.65, Income Tax Ordinance, 1979 or any other provision of the said Ordinance could not be rectified after expiry of four years by invoking the provisions of section 221 of the Income Tax Ordinance, 2001---Principles.
is misleading rather erroneous. In fact what was held in that case was that although the provisions relating to limitation are procedural in nature yet these cannot be invoked or made use of where a longer limitation is brought on statute by way of an amendment when the act sought to be touched had already attained finality on expiry of the limitation under the previous legislation. (emphasis is ours). Judgment cited as 2005 PTD 1316 Honda Shahrah-e-Faisal AOP v. RCUT and 2 others 2006 PTD 736, Fuji Oil Terminal and Distribution Co. Ltd. v. ACTO deals with section. 122(5A) and not with section 221(1A) of the Income Tax Ordinance, 2001. Needless to say that requirements and nature of these two provisions is quite distinct to each other. Furthermore the conditions precedent for the exercise of two jurisdiction are also entirely different and distinct, therefore, these judgments/case-law has no relevance and cannot be used as a precedent in the present case. Keeping in view the principles of interpretation of statutes and the case-law cited by the learned AR we are of the opinion that subsection (IA) of section 221 of the Income Tax Ordinance, 2001 though operating retrospectively, does not have the effect of destroying or reopening the past and closed transaction. Although word rectify or rectification is not used yet a similar intent is expressed in section 239(5) of the Income Tax Ordinance, 2001 which reads as under:--
"Where the period prescribed for any application, appeal reference or revision under the repealed Ordinance had expired on or before the commencement of this Ordinance, nothing in this Ordinance shall be construed as enabling such application, appeal reference or revision to be made under this Ordinance by reason only of the fact that a longer period is specified or provision for an extension of time in suitable cases by the appropriate authority."
We are fortified in our view by a case from Indian jurisdiction reported as (1997)227 ITR 873 titled as Commissioner of Income Tax v. Mrs. Manjula Sood and relied upon by the Lahore High Court in Fawad Textile Mills case (supra). Their Lordships of the Punjab and Haryana High Court summarized the effect of changes in procedural law in the following words:--
"The law prescribing the period of limitation is to be considered as procedural rather than substantive. This proposition' of law would have, only one exception, i.e. if under the existing law of limitation the right to initiate a proceeding has already become time-barred then a subsequent enlargement of time by _ an amendment of law cannot be availed of. In such a case, the matter.' having attained finality, would vest a party with substantive right which has already accrued. This accrued right cannot be taken away by a subsequent amendment. Substantive laws determine the rights and liabilities of the parties concerned, whereas procedural laws govern the manner in which such rights or obligations are to be enforced or realized."
7. For what has been discussed above we are of the considered view that the judgment relied by the CIT(A) is applicable to cases which have attained finality due to passing of four years before 1-7-2003 and not to cases which had not attained finality on 1-7-2003. To the later cases provisions of section 221(4) were fully applicable and CIT was competent to rectify the mistake apparent from record within five years from the date of order sought to be rectified.
8. The Income Tax Appeal in ITA No.202/LB/2008 filed by the Revenue is accepted and the case for the assessment year, 2002-2003 is remanded to the CIT(A) for passing an appropriate order after providing a reasonable opportunity of hearing to parties on all available grounds.
H.B.T./142/Tax(Trib.)Order accordingly.