Al Wakeelo
Your Digital Lawyer, Always on Duty
Initializing Secure Chambers
Your Digital Lawyer, Always on Duty
Initializing Secure Chambers
Petitioner: The COMMISSIONER INLAND REVENUE, ZONE-I, R.T.O., HYDERABAD VS Respondent: Messrs D.S. MOTORS, HYDERABAD
Court Name: Appellate Tribunal Inland Revenue Judge(s): Muhammad Jawed Zakaria, Syed Ayaz Mehmood Title:The COMMISSIONER INLAND REVENUE, ZONE-I, R.T.O., HYDERABAD vs Messrs
D.S. MOTORS, HYDERABAD Case No.: I.T.A. No.1000/KB of 2014 Date of Judgment:2018-06-01 Reported As: 2019 P.C.T.L.R. 26, 2018 PTD (Trib.) 2235 Result: Appeal dismissed Judgment ORDER MUHAMMAD JAWED ZAKARIA, JUDICIAL MEMBER.---By this order, we intend to dispose of above titled appeal filed by the appellant/department against the impugned order No. 1050 dated 14-10- 2014 pertaining to tax year 2108 on the following grounds. "1). That the learned CIR(A) fell in error in observing the provisions of section 120(4) provided for time limitation for amendment of assessment. 2). That the learned CIR(A) failed to appreciate that provision of section 122(4) of Income Tax Ordinance, 2001 provide for limitation for further amendment of orders amended passed under section 122 of Income Tax Ordinance, 2001. 3). That the learned CIR(A) failed to appreciate that impugned order under section 122(5A) was first amendment to the original assessment under section 120 of the Income Tax Ordinance, 2001." 2. Brief facts of this case as gathered from the record are that the taxpayer/respondent is a motorcycle assembler as well as importer of motorcycle parts for self manufacturing and having status of AOP. The return of income was filed at Rs.10,188,184/- for the year under appeal on 30-10- 2008. Assessm ent in terms of Section 120(1)(b) of the Income Tax Ordinance, 2001, treated to have been finalized/passed on 30-10-2008 for the tax year 2008, was considered erroneous and prejudicial to the interest of revenue by the concerned Additional Commissioner Inland Revenue, Audit Range-A, Range-I, RTO Hyderabad, the ACIR initiated proceedings under section 122(5A) on 29-03-2011 and deemed order has been amended on taxable income at Rs.114,462,483/- in which impugned addition was made in pursuance of sections 111(1)(b)/111(3) of the Income Tax Ordinance, 2001 at Rs.104,274,299/- and as per record order under section 122(5A) was passed on 19-06-2014.
---
## Page 2
3. Being aggrieved and dissatisfied with the treatment meted out by, the Addl. Commissioner-IR, taxpayer preferred appeal before learned Commissioner (Appeals), who vide impugned order cancelled the order passed by the ACIR under section 122(5A) the learned CIR(A) while cancelling the order has observed as appended below:-- "After considering the arguments and perusal of the record I am of the view that section 122(5A) was inserted by the Finance Act, 2009 and being substantive in nature and even is applicable to tax year 2010 and onward and not retrospective to tax year 2008. My this point of view is further strengthened by the judgment of the ATIR reported as 2013 PTD (Trib.) 1169 which subscribes as under: "Statutes are presumed to be only prospective in their operation, according to the authorities on the question, rather than retrospective or retroactive, unless the contrary appears, or is very clearly, plainly and unequivocally expressed or necessary implied. Under the presumption that a statue is intended to apply alike and equally to all persons unless the contrary clearly appears, a statute cannot be retroactive as to some persons and prospective as to others unless the legislature has indicated a manifest intention that it should be so." Beside, before the insertion of section 122(5), section 122(2) of the Ordinance, 2001 were applicable into the year under review i.e. tax year 2008, which for convenience is reproduced as under:-- "(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." As is evident from the above that limitation is to be reckoned form the date of return or issuance of assessment order under section 120 of the Ordinance by the Commissioner. In the case in hand, taxpayer has filed return on 29-09-2008(*) from which is clearly emanates that deemed assessment order under section 120 was passed on 29-09-2008 and it could be reopened under section 122(4) by 28-09-2013 i.e. within five years from the date of filing of return or issuance of deemed assessment order; whereas the taxation officer has passed the amended order on 19- 06-2014 and following the same ratio decided as taken by the learned ATIR in the case reported as (2014) 109 Tax 127 (Trib) therefore, is badly hit by limitation and order under section 122(5A) is hereby cancelled on legal ground" (*). Wrongly typed. Correct date to be read as 30-10-2008. 4. Feeling aggrieved and dissatisfied with the impugned order now the department has come up in appeal before this Tribunal. 5. On the date of hearing, Mr. Iqbal Ahmed Shaikh appeared on behalf of the Appellant/Department as D.R. while Messrs A.S. Jaffri, Advocate and Mr. Kamran Rizvi, Advocate appeared on behalf of the Respondent/Taxpayer. 6. Learned D.R. at the very outset, contended that the order passed under section 122(5A) of the Income Tax Ordinance, 2001 vide No.31/03 dated 19.06.2014 was the first amendment of assessment of the original assessm ent/deemed assessment order issued under section 120(1) of the Income Tax Ordinance, 2001. Therefore, provisions of section 122(4) of the Income Tax Ordinance, 2001 do not apply on the above order passed under section 122(5A) of the Income Tax Ordinance, 2001. He vehemently asserted that the order under section 122(5A) is not barred by limitation and duly framed within limitation, therefore, he prayed that order under section 122(5A) of Addl. Commissioner Inland Revenue be upheld. 7. On the other hand, learned counsel for the taxpayer has strongly opposed the contentions made by the learned D.R. and supported the order passed by the learned CIR(A). Learned counsel for the taxpayer apprised that the income tax return in the case was filed on 30-10-2008 which was taken to be an assessm ent order in terms of section 120(1) of the Income Tax Ordinance, 2001 and amended order under section 122(5A) was finalized on 19-06-2014 which is beyond five years. Learned counsel for the taxpayer further pointed that at the time of filing of return, the limitation of amending the assessm ent framed under section 120(1) was provided by statute as five years
---
## Page 3
before amendments in subsection (4) of Section 120 of the Income Tax Ordinance, 2001, therefore, assessm ent framed under section 122(1) of the Ordinance could only be amended upto 30-10-2013, but in the case the amended assessment order under section 122(5A) of the Income Tax Ordinance, 2001 has been recorded/passed on 19-06-2014 which is absolutely time barred being after the time limitation of five years. Learned counsel for the taxpayer stressed that the extended time limitation will not be applicable in the instant case of the taxpayer, who filed income tax return on 30-10-2008, when time limitation of five years was prevailing. He has contended that the impugned order passed by the learned CIR(A) is legal, lawful and in accordance with law. In support of his arguments he has relied upon the following reported precedents/case law: (i) 2015 PTD 424 (ii) 2015 PTD (Trib.) 434 (iii) 2015 PTD 772 (iv) 2013 PTD (Trib.) 159 8. We have considered the rival arguments and the synopsis furnished by the learned AR. 9. It is an undisputed fact that when the return for the tax year 2008 was filed, the provisions of section 122(2) before amendment through Finance Act, 2009 were applicable. The maximum time mandate under section 122(2) as it stood at the time of filing of return was five years from the date of the order sought to be revised. The provisions of section 122(2) of 2001 Ordinance (before amendment by Finance Act, 2009) are reproduced below for convenience:-- "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." 10. The order under section 120 of the 2001 Ordinance was treated to have been passed on the date of filing the return viz.30-10-2008. If the limitation period is computed as per the provisions of section 122(2) as the same stood at the time of filing the return (which remained unamended until Finance Act, 2009 was passed effective July 1, 2009), the period of limitation would be considered to have been expired on 29-1-2013. 11. The provisions of section 122(2) were, however, amended through Finance Act, 2009 effective July 1, 2009 whereby the substituted provision stated as under:- "No order under subsection (1) shall be amended by the Commissioner after the expiry of the financial year in which the Commissioner has issued or treated to have been issued the assessment order to the taxpayer." 12. Thus, if section 122(2)'s time limitation after amendment by Finance Act, 2009 is applied to the instant case, then the time limitation expires on reaching five years from 30-10-2008 (being the end of the financial year in which the assessment was treated to have been issued on the taxpayer) i.e. 30-10-2008. The controversy that needs to be resolved is thus, whether or not the assessm ent order issued in the year in appeal dated 19-6-2014 was time barred under section 122(2) as it stood at the time of deemed assessment under section 120(1); or not time barred under section 122(2) as was amended through Finance Act, 2009. 13. At this point of time, we feel it appropriate to refer few settled principles of interpretation of fiscal statutes relating to limitation of time enunciated and consistently followed by our Superior Judiciary. It is important to do so because it is the duty of the court seized of the matter to apply the correct law to meet the ends of justice. 14. It is the primary duty of Courts and other adjudicating forums to decide matters lie before them in accordance with law. The Courts would not be relieved of such duty on account of fact or mean of litigation or of a lawyer. In a judgment in the case of Gatron Industries Ltd., reported as 1999 SCMR 1072 it was held by the Hon'ble Supreme Court of Pakistan that:-- "Even when leave is not granted on a point, the same can be allowed to be canvassed in appeal if it is necessary for doing complete justice in a case or a matter pending before the Court as
---
## Page 4
contemplated by sub-article (1) of Article 187 of the Constitution. Reliance can be placed on the judgment of the Hon'ble Supreme Court of Pakistan in the case of Caltex Oil (Pakistan) Ltd. v. Collector Excise and Sales Tax and others reported as 2006 SCMR 1519." 15. It is well-known maxim that judge must wear all the laws of the country on the sleeve of his rob and failure of the counsel to properly give assistance is not a complete excuse in the matter. This principle of law was laid down by the Hon'ble Supreme Court in Muhammad Sarwar's case reported as PLD 1969 SC 278. It is the obligation of the Court to look into the point of limitation even when there being objection of any party. 16. As regards the statute of limitation, it might be useful to refer certain decisions from Indian jurisdiction (which are persuasivein nature but provides some guiding principles). The Supreme Court of India in the case of State of Kerala and others v. V.R. Kalliyanikutty and another rendered its judgement on April 1, 1999 wherein the important of statute of limitation was expressed in following words:-- "The law of limitation itself rests on the foundations of public interest. The courts have expressed at least three reasons for supporting the existence of statutes of limitation: (1) that long dormant claims have more cruelty than justice in them; (2) that a defendant might have lost the evidence to disprove a stale claim; (3) that persons with good causes of action should pursue with reasonable negligence. (See Halsbury 4th Edn. Vol. 28 paragraph 605). In New Rattanmal and others v. State of Rajhastan (AIR 1961 SC 1704), the Statutes of Limitation have been considered of Statutes of Repose and Statutes of Peace." 17. A similar observation as regards the importance of statute of limitation particularly in the context of income tax cases was made by the Gauhati High Court in the case of Smt. Savitri Rani Malik v. Commissioner of Income Tax decided on June 14, 1990 reported as (1990) 186 ITR 701. The relevant excerpt is as under: "In Courts where British jurisprudence prevails, statutes of limitation are jurisprudential necessities. See the American case, Bell v. Mormon (1828) 1 Peters 351 at page 360. Limitation is said to be "a statute of repose". Corpus Juris Secundum, Vol 53, at page 901: "Statutes of limitation are statutes of repose, the object of which is to suppress fraudulent and stale claims from sprining up at great distances of time and surprising the parties or their representatives when all the proper vouchers and evidences 'are lost or the facts have become obscure from the lapse of time or the defective memory or death, or removal of witnesses the statute (of limitation) is for the benefit and repose of individuals and not to secure general objects of policy and morals." In the UK, the most ancient case is that of A' Court v. Cross [1825] 3 Bing 329 at page 360, in that limitation was described as "an act of peace". In an opinion expressed in Ampthill Peerage's case [1976] 2 All ER 411 at p. 423, the House of Lords observed: "Truth may be shut out (by operation of limitation) but society considers truth may be bought the fundamental principle (is) that there should be some end to litigation " We find solace in what is stated to be eternal verity of life and law that statutes of limitation achieve peace and good administration but do not advance morals and poor conduct." 18. The Income Tax Appellate Tribunal - Ahemedabad of India in the case of Shri Arvindhbhai H. Shah v. The Assistant Commissioner of Income Tax, reported as (2004) 270 ITR 125 observed as under:-- "Story in his Conflicts of Laws, 8th Edition page 794 observed thus - "Statutes of Limitation are statutes of repose, to quiet title, the suppress of frauds and to supply the deficiency of proofs. Arising from the ambiguity and obscurity or the antiquity of transactions. They proceed on the presumption that claims are extinguished or ought to be held extinguished where they are not litigated within the prescribed period. They quicken diligence by making it in some measure equivalent to right. They discourage litigation by bringing in one common receptacle all the accumulations of past times which are unexplained and have now from lapse of time become
---
## Page 5
inexplicable. It has been said by John Voet that controversies are limited to a fixed period of time, lest they should be immortal while men are mortal". It is a trite law that a statute of limitation is a statute of repose, peace and justice. 30. The Privy Council in White v. Paruthe 1 Kanapp's Privy Council Reports 179 enunciated the principle that if a person is insensible to the value of civil remedies and he is not alert enough to make his claim with promptitude, such a person should not be aided by the State in the enforcement of his claim. This is in keeping with the other Latin maxim Vigilantibus non dormientibusjurasubsvenient. In the instant case it was further pointed out that statutes of limitation serve to ensure private justice, suppress fraud and perjury, quicken diligence and prevent oppression. 31. The object of providing limitation in a statute is to expect litigants to be diligent in seeking remedies in Courts of Law or from statutory authorities. It is to secure the quiet and repose of the community that litigation should not be in a state of constant uncertainty, doubt and suspense. "Interest reipublicaeut sit finis litium". The interests of the State require that a period should be put to terminate all litigation. Yet another consideration is that a party who is insensible to the value of civil remedies and who does not assert his own claim with promptitude has little or no right to require the aid of the State in enforcing it. "Vigilantibus - non dormientibus jure subveniunt". The law assists the vigilant not those who sleep over their rights. These principles are not mere Iechnicalrules of procedure but based on principles of public policy aiming at justice, the principles of repose and peace. Long dormant claims have often more of cruelty than of justice in them. We do not find ourselves in agreement of enlarging the scope of the principles of justice beyond limitation of time. It should be restricted to the claim made within statutory period as otherwise it may amount to cruelty than justice to violate the statutory period and attempting granting relief beyond statutory period itself would be contrary to rendering justice rather dong injustice." 19. Similarly, Rajhastan High Court in Commissioner of Income Tax v. Ramesh Chand Soni on September 21, 2004, reported as 194 CTR 84 referred to the following principles:-- 15. In taxing statutes, though the period of limitation has not been considered to be statute of repose, but somewhat same position has been accepted. It will be apposite to recall what justice Hidatullah, as his Lordship then was, had said in S.C. Prashar, I.T.O. v. Vasantsen Dwarkadas and others AIR 1963 SC 1356: "...........We wish to say a few words about well known principle that subsequent changes in the period of limitation do not take away an immunity which has been reached under the law as it was provisionally. In this sense, statutes of limitation have been picturesquely described as "statutes of repose"... in our opinion, it is somewhat inapt to describe Section 34 with its amendments and validity as a section of repose. Under that section, there is no repose till the tax is paid or the tax cannot be collected. What the law does by prescribing certain periods of time for acting is to create a bar against its own officers administering the law. It tries to twin between recovery of tax and possibility of harassm ent to an innocent person and fixes a duration for action from these two points of views. These periods are occasionally readjusted to cover some cases which would otherwise be left out and hence, amendments. An assessment can be said to become final and conclusive if no action can touch it, but where the language of the statute clearly reopens closed transactions, there can be no finality." The Court emphasised that to reopen the closed transaction, there must be clear mandate of statute, otherwise the period of limitation acts as repose." 20. Similar views have been taken by our own Supreme Court bf Pakistan in a recent judgement reported as Khushi Muhammad v. Fazal Bibi (PLD 2016 SC 872) wherein at para 4 (i) and (vi) it has been held as under:--
---
## Page 6
"(i) The law of limitation is a statute of repose, designed to quieten title and to bar stale and water-logged disputes and is to be strictly complied with. Statutes of limitation by their very nature are strict and inflexible. The Act does not confer a right; it only regulated the rights of the parties. Such a regulatory enactment cannot be allowed to extinguish vested rights or curtail remedies, unless all the conditions for extinguishment of rights and curtailment of remedies are fully complied with in letter and spirit. There is no scope in limitation law for any equitable or ethical construction to get over them. Justice, equity and good conscience do not override the law of limitation. Their object is to prevent stale demands and so they ought to be construed strictly. (vi) The intention of the Law of Limitation is not to give a right where there is not one, but to interpose a bar after a certain period to a suit to enforce an existing right" 21. We are also seized of the view that the provisions providing limitation are mandatory and cannot be waived. Reliance is placed on the judgement in the case of The Collector of Sales Tax, Gujranwala, and others v. Super Asia Mohammad Din & Sons and others, reported as 2017 SCMR 1427 wherein it has been held by their Lordships that:-- "...when a statute requires that a thing should be done in a particular manner or form, it has to be done in such manner. But if such provision is directory, the act done in breach thereof would not be void, even though non-compliance may entail penal consequences. However, non-compliance of a mandatory provision would invalidate such act. In this context, reference may be made to the case of Rubber House v. Excellisor Needle Industries (Pvt.) Ltd. (AIR 1989 SC 1160). Thus, having held the first proviso to section 36(3) supra to be mandatory, the natural corollary of non-compliance with the terms would be that any order passed beyond the stipulated time period would be invalid." 22. The principles laid down by the Hon'ble Supreme Court of Pakistan in the above judgment are based on a legal maxim "Expressiouniusest exclusion alteris" meaning thereby that if a statute provides for a thing to be done in a particular manner, then it has to be done in that manner and in no other manner and following other course is not permissible. 23. We also refer to the judgment in the case of Commissioner Income Tax v. Mst. Khursheed Begum reported 1995 PTD 1085 wherein it has been held as under:-- "The law, therefore, does not leave the matter of limitation to the pleadings of the parties as it imposes a duty in this regard upon the court itself. The limitation being a matter of statute and the provisions being mandatory cannot be waived and even if waived can be taken up by the party waiving it-and by the Courts themselves." 24. Besides, in another case reported as Pakistan Ordinance Factories (POF) Wah, Cantt. v. Collector of Customs, Sales Tax and Central Excise Adjudication., Islamabad and others 2012 PTD 1016 (H.C.Isl.), the Hobn'ble Islamabad High Court held as under: "Government departments could not be put at Higher pedestal in matter of limitation, rather they would be supposed to act within statutory period. Order was barred by limitation in circumstances." 25. Having said that it is our duty to view whether the law relating to limitation has properly been applied, we now turn to a main principle of limitation that limitation to assess tax becomes a past and closed transaction as soon as it runs out. 26. But before we dilate upon this principle in detail, it will be pertinent to specify what retrospective or retroactive law is? A retroactive law is a law that, in respect of past transaction or consideration, does one of the following:-- i. takes away or impairs vested rights acquired under existing laws, ii. creates a new obligation and imposes a new duty/liability, or iii. enhancement/extending of existing obligations, or duties/ liabilities. iv. attaches a new disability.
---
## Page 7
27. Here, it may be useful to take guidance from the principles regarding prospective and retrospective statutes as discussed by the eminent Jurist of Pakistan, S.M. Zafar in his treatise - Understanding Statutes (third revised edition of 2008). In the said treatise, the concepts have been discussed in Chapter X, which are reproduced hereunder for the ready reference. "The word retrospective is somewhat ambiguous. Retrospective means looking backward; having reference to a state of things existing before the Act in question. A retrospective statute contemplates the past and gives to a previous transaction some legal effect from that what it had under the law when it occurred or transpired. Corpus Juris defined it as: "Literally defined, a retrospective law is a law which looks backward or on things that are past; a retroactive law is one which acts on things that are past. In common use, as applied to statutes the two words are synonymous, and in this connection may be broadly defined as having reference to a state of things existing before the Acts in question..........." A statute which operates upon acts and transactions which have not occurred when the statute takes effect, that is, which regulates the future, is a prospective statute. On the other hand, a retrospective or retroactive law is one which takes away or impairs vested rights acquired under existing laws or creates new obligations and imposes new duties or attaches new disabilities in respect of transactions already past. Courts regard as retrospective any statute, which operate son cases or facts coming to existence before commencement of the statute. Where the legislature expressly takes away vested rights from some and correspondingly bestows privileges on others by legislation, the latter is always retrospective." 28. As regards the scope and extent of retrospective legislations, it was explained as under. "The general principle with regard to the interpretation of statutes is that if a matter in question be a matter of procedure only,…
Read the unabridged text and precedent citation network on Al Wakeelo Legal Research Platform.