Abdul.Hameed Dogar, CJ.--This petition for leave to appeal is filed against order dated 14.10.2008 passed by learned Single Judge of Lahore High Court, Lahore whereby Writ Petition No, 9851 of 2008 filed by petitioner was dismissed.
2. Briefly stated facts are that petitioner M/s Fazal Din & Sons (Pvt.), a private limited company engaged in the business of sale, purchase of medicines and medical equipment's and is a regular tax payer had filed its income tax returns for an the tax years. The returns so filed by the Company being complete were treated and taken by the department to be an assessment of taxable income for the relevant tax years. But subsequently, Income Tax Department initiated proceedings for tax years 2003-2007 so as to amend all the assessment orders by exercising power under Section 12(1) read with Section 122(5) of the Income Tax Ordinance, 2001 (hereinafter referred to as the Ordinance'). At the time of filing of Constitution petition before learned Lahore High Court, the assessm ent for the tax year 2005 stood amended by the department by virtue of an order dated 30-8-2007 and the same was challenged before concerned Commissioner of Income Tax '(Appeals) while in rest of the years the amendments proceedings were initiated and statutory notices were issued. During the pendency of these proceedings Section 120A was inserted in the Ordinance through Finance Act, 2008 whereby the Federal Board of Revenue (hereinafter referred to as "FBR") was empowered to make a scheme for payment of investment tax in respect of undisclosed income, representing any amount or investment made in moveable or immovable assets. Subsequently the FBR in exercise of power conferred under sub-section (1) of Section 120A of the Ordinance issued investment Tax Scheme, 2008 through Circular No, 3 of 2008 dated 01.7.2008.
In pursuance of which petitioner filed a declaration in respect of its years wise computed undisclosed, untaxed and unexplained income on 15.7.2008 in accordance with the terms and conditions of the Scheme and paid all the tax due thereon. After filing of declaration, FBR, issued a clarificatory Circular No, 7 of 2008 issued on 19.7.2008 whereby the Board explained that the Scheme is applicable to all undisclosed assets/income which could not be disclosed and remained unexplained and that issues pending in appeals or raised/detected by the department would be dealt with under normal law and not under the Scheme. It was also explained that the scope of the Scheme is limited to the proceedings covered by the Ordinance and the declaration made and tax paid under the Scheme, shall not absolve the declarant from any action under the provisions of other applicable law. Accordingly, the declaration filed by petitioner was rejected on the ground that pending proceedings does not qualify and are not covered under the Scheme for the reason that the notices under Sections 122(1) and (5) and 111(1)(b) read with S. 111(2) of the Ordinance for tax years, 2003, 2004, 2006 and 2007 have already been issued. Feeling aggrieved petitioner filed Writ Petition No, 11025 before learned Lahore High Court, Lahore. During pendency of writ petition FBR vide another clarification circular dated 08.8.2008 stated that the scheme shall not apply to the cases where proceedings are pending before the Department, Appellate Authority or any Court; and the figure 2008 was substituted with 2007. Afterwards, the Constitution petition was dismissed vide impugned judgment.
3. Learned counsel for the petitioner mainly contended that learned Judge in Chambers of Lahore High Court has neither mentioned the proper facts of the case nor has passed a speaking order with regard to the case of petitioner and also has not appreciated the provision of Section 120A of the Ordinance which was inserted through Finance Act. 2008 whereby the scope of investment tax on income was provided. According to him declaration was filed by petitioner strictly in accordance with the requirements of circular dated 01.7.2008 which being comprehensive in nature, the vested right has accrued under the said circular which is neither withdrawn nor denied by brining new amendments. He further contended that these amendment being in direct conflict with the provisions of Section 120A of the Ordinance and circular dated 01.7.2008, are liable to be set aside. Learned counsel contended that FBR has no authority to amend the circular retrospectively thus subsequent circular dated 08.8.2008 cannot be made applicable with retrospective effect to the case of petitioner who filed his declaration earlier to such amendment. According to him, the perusal of newly inserted provisions pertains to undisclosed income which has been explained in proviso (i) of sub-rule (4) of Section 120A of the Ordinance which means any investment to be deemed as income under Section 111 or any other deemed income, for any year or years, which was chargeable to tax but was not so charged. He further contended that scope of undisclosed income has been extended to cover the real income as well as all other incomes which are at the time under the fraction of law declared under Section 2(29) of the Ordinance. He submitted that only rider provided under the law is that such income must be chargeable to tax and if was not so charged under Section 4 of the Ordinance. He further submitted that there is no dispute that at the time of declaration made by the petitioner the same was not charged except for the year 2005 whereby assessm ent stood amended under Section 122(5) of the Ordinance and the same is pending adjudication before the appellate forum. In support he placed reliance on the cases reported as Al-Samrez Enterprise v. The Federation of Pakistan (1986 SCM R 1917), Federation of Pakistan and others v. Ch. Muhammad Aslam and others (1986 SCM R 916), Army Welfare Sugar Mills v. Federation of Pakistan (1992 SCM R 1652) and Nabi Ahmed and another v. Home Secretary, Government of West Pakistan, Lahore and others (PLD 1969 SC 599).
4. On the other hand learned counsel for the respondents controverted above contentions and supported impugned judgment. He contended that there was some obvious mistakes in Circular dated 1.7.2008 which were clarified through subsequent Circular No, 7 dated 19.7.2008 and Circular No, 8 dated 08.8.2008. He contended that returns for the tax year 2008 were not even due and FBR has no authority to grant immunity to undisclosed income as such Circular No, 7 was issued to clarify that the scheme is applicable to all undisclosed assets/income which somehow or other could not be disclosed and remained unexplained and issues pending in appeals or raised/detected by the department would be dealt with under normal law and not under specific provisions of scheme. Through Circular No, 8 it was clarified that the scheme would be applicable for the tax year 2007 and not 2008. According to him, undisclosed income shall include only that income which was chargeable as deemed income in the year or years but have escaped assessm ent and it is applicable only on that deemed income which has successfully been concealed by the taxpayer.
5. We have considered the contentions raised at the bar and have perused the record. First of all the question that whether impugned judgment is not speaking one and is contrary to the facts of the case of the petitioner is concerned. In fact, the petitioner filed declaration on 15.07.2008 in pursuance to Investment Tax Scheme dated 01.7.2008 (Circular No, 3 of 2008) in accordance with the policy and in good faith. Later on, FBR through Circular No, 7 dated 19.7.2008 clarified that the scheme is applicable to all undisclosed assets/income which somehow or the other could not have been disclosed and remained un-explained and issues pending in appeals or raised/detected by the department would be dealt with under normal law and not under specific provisions of scheme. Learned Judge of Lahore High Court has ignored that declaration was filed prior to the Circulars No, 7 and 8 and also failed to appreciate that show-cause notices were issued in respect of assessm ent years, 2003, 2004, 2006 and 2007 which were repelled and explained, and assessm ent was not amended by that time. The learned High Court while dismissing the writ petition has never discussed the complete facts of petitioner's case and wrongly mentioned that the assessme nt of the petitioner was subject matter of appeal whereas the appeal was pending with respect to assessment year 2005 only. Thus, we are of the view the impugned judgment is not in consonance with the case of petitioner.
6. So far as the question that whether a vested right has accrued in favour of petitioner and if so can be taken away through subsequent circular by applying the same retrospectively. It was held by this Court in the case of Army Welfare Sugar Mills (Supra) that if an exemption from payment of excise duty or any other tax has been granted for a specified period on certain conditions and a person who fulfills those conditions, acquires a vested right. So it can be said that vested right had accrued in favour of the petitioner the moment he had filed declaration in pursuance to Circular No, 3 of 2008. It was held by this Court in case of Al-Samrez Enterprises (supra) that an enactment which prejudicially affected vested rights or the legality of past transactions or impaired contract cannot be given retrospective operation. It was also held that it will be inequitable and unjust to deprive a person who acts upon such assurance of the right to exemption and expose him to unforeseen loss in the business transaction by suddenly withdrawing the exemption after he had made legal commitments. In this perspective, we are, inclined to hold that a right was created in favour of petitioner and a subsequent amendment in the original scheme cannot be given retrospective effect by a subsequent act of the department to destroy the said right. So the vested rights cannot be taken away by express words and necessary intendment. No doubt that the legislature is also competent to amend, vary or repeal the same but the right conferred through statute can only be taken away by legislative enactment and not by an executive authority through notification in exercise of the rule making power or the power to amend, vary or rescind an earlier order/notification in the proponed exercise of power conferred under Section 21 of the General Clauses Act, 1897.
7. Now coming to the scheme, it has been specifically mentioned in Section 120 of the Ordinance that where a taxpayer has furnished a return of income, the same shall be taken to be complete if it is in accordance with the provisions of sub-section (2) of Section 114 of the Ordinance. It clarifies that the income declared in the return stands assessed and what was not declared in the return shall escape assessm ent in the declaration. Therefore, any income, investment which remained undeclared in the return shall be an 'undisclosed income' covered under the provisions of Section 120A of the Ordinance. The amounts yearly declared by the petitioner in the declaration of investment tax being over and above the originally assessed income was undisclosed income which was chargeable to tax but remained uncharged because of non-declaration. This position prevails in all the tax year as on completion of an assessment the amount though charged to tax at the lowest level but the same having been impugned in appeals had not attained finality and until it is finally determined; it cannot be said that the amounts subject matter of declaration or assessm ent had finally been charged to tax.
8. Needles to mention here that FBR through Circular No, 7 dated 19th July 2008 clarified that scheme is applicable to all undisclosed assets/income which somehow or the other could not be disclosed and remained unexplained and that cases are pending in appeal or raised/detected by the department would be dealt under normal law and not under specific provisions of scheme. The second deviation took place when the FBR issued Circular No, 8 of 2008 whereby the scheme was restricted so as to exclude pending cases before the department, appellate authority or any Court, thus the state of law was changed. We are of the view that amendment brought through the referred circular is of substantive nature thereby restricting the scope of the original scheme and the state of law stood changed from the said date effecting the right and liabilities of those who have acted upon the scheme in good faith under its original scope. Therefore, Circular No, 8 of 2008 cannot apply retrospectively and show-cause notices are stand vacated.
9. Upshot of the above discussion is that the impugned judgment is not sustainable in law, resultantly, the petition is converted into appeal and is allowed.