PLJ 2022 Quetta 168 (DB)
Present : MUHAMMAD EJAZ SWATI AND ZAHEER -UD-DIN KAKAR , JJ.
COMMISSIONER INLAND REVENUE ZONE -I, REGIONAL TAX OFFICE, QUETTA --Appellant
versus
M/s. SAINDAK METALS LTD. QUETTA, TAX YEAR 2006 --Respondent
ITA No. 1 of 2015, decided on 8.12.2021.
Income Tax Ordinance, 2001 (XLIX of 2001) --
----Ss. 122(2)(5A) & 133--Filing of tax return of total income --Amended assessment order --Show -cause notice--
Appeal --Allowed Prospective applicability --Past and closed transaction --Limitation --Challenge to --Limitation
period of five years remained unchanged--Availing date for commencement of limitation period, date of
commencement become “past and closed transaction” for respondent assessee and amended provision of
Ordinance could not be applicable retrospectively, unless legislature by express words or necessary implications
intended to give it retrospective effect --Where an amendment affects substantive rights that amendment law
operates prospectively --Impugned amendment of assessment order being after expiry of limitation after five
years from date of return was barred by time --Appeal dismissed. [Pp. 171 & 174]
A, B & C
2015 PTD 2562, 2009 SCMR 1279, PLD 1969 SC 187, 2018 SCMR 991 and PLD 2016 SC 872 ref.
Mian Badar -e-Munir , Assistant Attorney General along with Mr. Atta Muhammad Nasar , Deputy
Commissioner Inland Revenue for Appellant.
M/s. Syed Tauqeer Bukhari and Muhammad Riaz Ahmed Advocate for Respondent.
Date of hearing: 30.11.2021.
JUDGMENT
Muhammad Ejaz Swati, J. --This is reference application under Section 133 of the Income Tax Ordinance,
2001 (the Ordinance) filed by Commissioner Inland Revenue Zone -I, Regional Tax Office Quetta (the applicant)
against the order of the learned Appellate Tribunal Inland Revenue Karachi (the Tribunal) dated 23- 10-2014
(impugned order), whereby appeal filed by the respondent was allowed and notice/amended assessment order under
Section 122(5A) dated 30- 6-2012 of the Ordinance passed by the Commissioner / Additional Commissioner has
been declared being barred by time as under,
“Based on the above, we hold the amended assessment order passed under Section 122(5A) of the Income
Tax Ordinance 2001 by the Additional Commissioner on 30- 06-2012 is clearly time barred and not
sustainable in law and as such the same is annulled even on this score.”
2. The respondent (M/S Saindak Metals Ltd) (tax payer) is a private limited company duly registered under
the Companies Ordinance, 1984 on 15- 4-1974. Equity of the company is owned by the Government of Pakistan. The
above named company had leased out its main plant to MCC Resource Development Limited (MRDL). The tax
payer had filed tax returns of total income for the tax year 2006 on 30 -12-2006 loss at Rs. 1,277,298,867/ - (the
return). The return so filed was deemed as assessment under Section 120(1)(b) of the Ordinance. The deemed
assessment was considered by Inland Additional Commissioner (Audit Unit) as erroneous and prejudicial to the
interest of revenue on various grounds and ultimately the return was amended under Section 122(5A) of the
Ordinance and demand of Rs. 404.1 (Million) was created by the Additional Commissioner, vide order dated 30 -06-
2012. On appeal filed by the respondent, the learned Commissioner Inland Revenue (Appeals -III) Karachi
(IRA), vide order dated 14- 04-2014 dismissed the appeal. On appeal filed by the respondent, the Appellate Tribunal
Inland Revenue Karachi (ATIR), vide impugned order dated 23- 10-2014 allowed the appeal and set aside the
amended assessment order dated 30 -06-2012.
3. The learned Assistant Attorney General assisted by Deputy Commissioner Inland Revenue contended
that assessment order was in respect of tax year 2006 and in view of Section 122(2) (as amended), the financial year
ended on 01 -07-2007, therefore, the show -cause notice and amended assessment order dated 30 -06-2012 had been
issued within time. That amendment through Finance Act, 2009 in limitation period of Section 122(2) of the
Ordinance was introduced before expiry of five years limitation from assessment order, therefore, no vested right
accrued to the respondent and it was not a case of past and close transaction. That the amendment to Section 122(2) of the Ordinance was procedural in nature, therefore, shall operate retrospectively.
4. The learned counsel for the respondent contended that amended assessment order pertained to tax year
2006 and as per Section 122(2) (as it then stood) an assessment order shall only be amended within five years after the commissioner has issued or is treated as being issued the assessment order on the tax payer. That limitation once
it begins to run cannot be interrupted or extended unless expressly permitted by law and amendment brought in 2009 was prospective, therefore, amended assessment order was barred by time. The learned counsel for respondent placed reliance on cases reported in 2018 PTD 1474 and 2019 PTD 1912.
5. We have heard the learned counsel for the parties and perused the record. The show -cause notice and
amended assessment order dated 30 -6-2012 had been issued under Section 122(1) read with section (5A) of the
Ordinance for which limitation to amend or further amend the assessment order under Sections 122(2) and 122(4)
respectively both afore said provisions are more or less alike. However, through Finance Act, 2009 both these
provisions were amended, whereof limitation for amendment or further amendment of assessment order is to be
reckoned from the end of the financial year when the assessment order has been passed or treated to have been
passed. The relevant pre and post amended Sections of 122(2) and 122(4) of the Ordinance are reproduced herein below,
“Pre -amendment Section 122(2)
An assessment order shall only be amended under sub- section (1) within five years after the Commissioner
has issued or is treated as having issued the assessment order on the taxpayer.
Post amendment Section 122(2)
No order under sub -section (1) shall be amended by the Commissioner after the expiry of five years from
the end of the financial year in which the Commissioner has issued or treated to have issued the assessment
order to the taxpayer.
Pre-amendment Section 122(4)
Whether as assessment order (hereinafter referred to as the “original assessment”) has been amended under sub- section (1)[,][or(5A)], 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
Post-amendment Section 122(4)
Whether as assessment order (hereinafter referred to as the “original assessment”) has been amended under sub- section (1)[,][or(5A)], the Commissioner may further amend [, as many times as may be
necessary,] the original assessment within the later of --
(a) Five years (from the end of the financial year in which) the Commissioner has issued or is treated as
having issued the original assessment order to the taxpayer; or”
6. From the above (pre and post amendments) it reveals that the limitation period of five years remained
unchanged, however by the Finance Act, 2009 only the date of commencement of the limitation has been changed from the date of issuance of assessment order to the “end of financial year” in which assessment order was issued or
treated to have been issued. The Finance Act, 2009 was applicable from 1 -7-2009 when amendment was introduced.
The question for determination before this Court is whether the amendment made through Finance Act, 2009
regarding commencement of period of limitation regarding issuance of notice or amended assessment order shall operate prospectively or retrospectively. The commencement date has already been availed by the respondent assessee by filing his return in 2006, which was treated as an assessment order under Section 120 of the Ordinance on date of return and thus, the said commencement date cannot be changed by giving retrospective affect to
amended provision ibid. After availing date for commencement of limitation period, the said date of commencement
become “past and closed transaction” for the respondent assessee and the above amended provision of the Ordinance
could not be applicable retrospectively, unless the legislature by express words or necessary implications intended to give it retrospective effect. The amendment incorporated in Sections 122(2) and 122(5A) ibid is procedural in nature
as it provide commencement of period of limitation, however its affect the substantive rights of the assessee
regarding modifications or change in the assessment order. It is settled principle of law that where an amendment impacts/affects the substantive rights that amendment law operates prospectively.
7. In case title Messrs Allied Engineering Services Ltd. v. Commissioner of Income Tax and another (2015
PTD 2562) while examining the operative/applicability of Section 122(5A) observed that the same would operate
prospectively not retrospectively. In case title Commissioner of Income Tax v. Messrs Eli Lilly Pakistan (Pvt.)
Ltd. (2009 SCMR 1279) August Supreme Court observed that Section 122 operates prospectively. In case
title Hakim Ali Zardari v. The State and another (PLD 1998 SC 1) the August Apex Court observed that procedural
statute operates retrospectively unless the same affect an existing right on the date of promulgation. The Honorable Supreme Court of Pakistan in a case title Adnan Afzal v. Capt. Sher Afzal (PLD 1969 SC 187) observed as follows:
“The general principle with regard to the interpretation of statutes as laid down in the well known case of the Colonial Sugar Refining Company Limited v. Irving 1905 A C 369 is that “if the matter in question be a
matter of procedure only “, the provisions would be retrospective. “On the other hand, if it be more than a matter of procedure, if it touches a right in existence at the passing of the Act “, then “in accordance with a
long line of authorities extending from the time of Lord Coke to the present day”, the legislation would not
operate retrospectively, unless the Legislature had either “by express enactment or by necessary
intendment” given the legislation retroactive effect. To the same effect are the observations of Jessel, Master of the Rolls, in the case of In re: Joseph Suche and Co. Limited (1875) 1 CH. D. 48 where it was
observed that as “a general rule when the Legislature alters the rights of parties by taking away or
conferring any right of action, its enactments, unless in express terms they apply to pending actions, do not
affect them. It is aid that there is one exception to that rule, namely, that, these enactments merely affect
procedure and do not extend to rights of action, they have been held to apply to existing rights. “ The next
question, therefore, that arises for consideration is as to what are matters of procedure. It is obvious that matters relating to the remedy, the mode of trial, the manner of taking evidence and form of action are all
matters relating to procedure. Crawford too takes the view that questions relating to jurisdiction over a
cause of action, venue, parties, pleadings and rules of evidence also pertain to procedure, provided the
burden of proof is not shifted. Thus a statute purporting to transfer jurisdiction over certain causes of
action may operate retroactively. This is what is meant by saying that a change of forum by a law is
retrospective being a matter of procedure only. Nevertheless, it must be pointed out that if in this process any existing rights are affected or the giving of retroactive operation cause inconvenience or injustice, then
the Court will not even in the case of procedural statute, favour an interpretation giving retrospective effect
to the statute. On the other hand, if the new procedural statute is of such a character that its retroactive
application will tend to promote justice without any consequential embarrassment or detriment to any of the parties concerned, the Courts would favourably incline towards giving effect to such procedural
statutes retroactively”
8. In Khushi Muhammad through L.Rs. and others v. Mst. Fazal Bibi and others (PLD 2016 SC 872), the
Honorable Supreme Court of Pakistan elaborately signified the law of limitation.
9. Relying on the decision of Khushi Muhammad through L.Rs. and others v. Mst. Fazal Bibi and
others (PLD 2016 SC 872), the August Supreme Court in case title Additional Commissioner Inland Revenue, Audit
Range, Zone -I and others v. Messrs Eden Builders Limited and others (2018 SCMR 991) in respect of amendment
in Section 122(2) of the Ordinance observed as under:
“From the ratio of the above judgment it can be seen that the law of limitation in so far as it regulates the
period in which one party can avail a remedy against another is not to be lightly disturbed as the certainty
created by limitation is necessary for the success of trade and business, the more so when that limitation
governs tax matters. In the matters in hand, the respondents, at the time of filing their tax returns were
aware that these tax returns may be amended in terms of Section 122(5A) of the I.T.O., 2001 at any time up
to five years from the date of filing of the tax return itself. Thus, their planning in terms of their possible
amended and/or revised tax liability would extend for a period of five years from the date of filing of their
respective tax returns. After the said five years were up, they could be sanguine that their tax return was
now final and they could no longer be burdened with an additional demand. This means that a right related
to the law of limitation came to vest in the res pondents on the date of filing of their respective returns in
terms of the provisions of the original Section 122(2). However, the effect of the amendment brought about
through the Finance Act, 2009 was to change that original date of commencement of limitation. Instead of
limitation commencing on the date of filing of the tax return, 30.12.2008 in the case of appellant in C.A.
2148/2016, limitation was now to commence on the last day of the financial year in which the
Commissioner has issued or treated to have issued the assessment order to the taxpayer, which in this
particular appeal ibid would have been 1.7.2009. This means that the goal posts themselves were changed
by the amendment. It was not that the period of limitation was enhanced to for example 6 years. On the
contrary, post amendment too, the limitation period remained five years. Instead, the amended to Section
122(2) of the I.T.O., 2001 changed the commencement date for when limitation would begin to run. And
this was not permissible as certain rights had already come to vest in the respondents on the date on which
they had filed their tax returns under the original Section 122(2) ibid.”
In the judgment supra, it was concluded as under:
“In this view of the matter, hold that the various respondents, who filed their tax returns before the Section
122(2) of the I.T.O., 2001 was amended through the Finance Act, 2009 will be governed by Section 122(2)
ibid as it stood before the amendment and the amendment brought about in the said section through
Finance Act, 2009 dated 30.06.2009 will not be attracted to their cases.”
10. In the instant case the respondent filed income tax return for the year 2006 on 30 -12-2006, which
deemed to be an assessment in term of Section 120(1)(b) of the Ordinance. The above deemed assessment order
could have been amended as per Section 122(2) of the Ordinance as stood on 30- 12-2006 and its limitation
commenced on 01- 01-2007 and the said order could be amended within five years up till 1- 1-2012 instead of 30- 06-
2012. The impugned amendment of assessment order dated 30- 06-2012 being after expiry of limitation after five
years from the date of return was barred by time and could not be applicable retrospectively as per law laid down in
the judgment referred above. The question of law answered accordingly.
In view of above discussion, Income Tax Appeal Reference No. 1 of 2015 is dismissed. Office shall send
copy of this judgment under a seal of the Court to the learned Appellate Tribunal Inland Revenue as per Section 133
(5) of the Ordinance.
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