This appeal has been filed by the Taxpayer against the order dated 25-7-2011 passed by the learned CIR (A-III), Islamabad for the tax year 2009 on the following grounds:--
(1) That learned CIR (A-I11), Islamabad erred in law by holding that order passed under section 122- C of the Income Tax Ordinance, is not appealable under section 127 of the Income Tax Ordinance, 2001.
(2) That order under section 122-C is appealable order due to the fact that any order which increases the monetary liability of taxpayer and causes prejudice to the taxpayer falls under the term "otherwise" as provided in section 127 of the Ordinance. 'Case-law reported at 1999 PTD 4061 (Messer PAK SAUDI FERTILIZER LTD. v. FEDERATION OF PAKISTAN)
(3) That in following parallel cases learned CIR(A) has entertained the appeal filed against order passed under section 122-C and second appeal filed by the department is also entertained and disposed of by the honorable ATIR:
(4) That section 122-C of the Income Tax Ordinance, 2001 was introduced through amended Finance Ordinance dated 28-10-2009 and is applicable from the tax year 2010 and onward so completion of assessm ent under section 122-C for the year under appeal is illegal, unjustified, without jurisdiction and void.
(5) That the assessm ent completed at net income of Rs.30,088,793 is illegal, unjustified, without jurisdiction and void.
2. Brief facts of the case are that Taxpayer is doing business in the name and style of Drug Services.
Order was passed under section 122-C. This section was inserted in the Income Tax Ordinance, 2001 through Finance Act, 2010.
3. Being aggrieved with the treatment given by the learned Officer Inland Revenue (Enf-VI), the taxpayer preferred appeal before learned CIR(A-III), who after considering the facts maintained the assessm ent order passed by the learned Assessing Officer with the following observation:-- "It is my considered opinion that the provisions of this section 122-C cannot be applied retrospectively to previous years. But since this section has not been specifically mentioned in section 127 for appealable orders, the instant appeal is disposed of in limine, being not appealable under section 127."
4. We have heard the arguments and perused the relevant record available on file. Learned first appellate authority himself has expressed the view that provision of section 122-C cannot be applied retrospectively to the previous year. We endorse his view through relying on following case-laws;-- Honourable Sindh Court in case of Honda Shahra-e-Faisal, cited as 2005 PTD 1316 held that provisions of subsection (5A) of section 122 which were inserted by the Finance Act, 2003 dated 17- 6-2003 effective from 1-7-2003 were not retrospective in operation and this view was upheld by the Honourable Supreme Court of Pakistan in re, "CIT v. Elli Lili cited as 2009 SCM R 1279 = 2009 PTD 1392 and it was held that the provisions of section 122 of the Ordinance are prospective in their application and do not apply to the assessment of a year ending on or before 30th June, 2002. It also needs mention that Honourable Sindh High Court in re "CIT v. Pakistan Tobaco Company limited cited as 1988 PTD 66 = (1998) 57 Tax 118 (HC Kar) has held that law applicable on the first day of assessm ent order will apply and not the one in existence during the next year. In yet another case titled "Rustam F. COWAS . JEE and others v. C.B.R. And 2 others cited as 1985 PTD 529 honourable High Court has held that for the purpose of assessment of income, the law applicable is that in force on the first day of the relevant assessment year. The same learned High Court in re "Harjina and Company Pakistan Limited v. CIT" cited as 1963 PTD 867 held that rights under existing laws are not to be supposed to have been repealed by implication unless intention becomes clear from language of law. It is a fact that section 122(c) of the Income Tax Ordinance, 2001 was introduced through Amended Finance Ordinance dated 28-10-2009 and clause (A) of subsection
(1) of section 121 was also omitted by the same Ordinance. By now it is well established that retrospective operation is not to be given to a statute so as to impair an existing right or obligation.
The main and primary rule is that every statutory provision is to be deemed prospective unless by express provision or by necessary intendment it is to have retrospective effect. Therefore, keeping in view the case-law cited above, we are of the view that the taxation officer was not correct in applying section 122(c) retrospectively in the taxpayer's case for the tax year 2009.
5. Coming to the next issue requiring answer is whether order passed under section 122(C) is appealable before CIR(A) keeping in view the provisions of section 127 of the Income Tax Ordinance, 2001. Learned DR has submitted that it is not an appealable order whereas learned AR has supported the view taken by the learned CIR(A) that provisional assessment order under section 122(C) of Income Tax Ordinance, 2001 is an appealable order because it has enhanced the assessm ent and increased the liability of the taxpayer/respondent. In order to properly appreciate the matter section 127 of the Income Tax Ordinance, 2001 is reproduced below:-- "127. Appeal to the Commissioner (Appeals) (1) Any person dissatisfied with any order passed by a Commissioner or a taxation officer under sections 121, 122, 143, 144, (162), 170, 182, 183, 184, 185, 186, 187, 188 or 189 or an order under subsection (1) of section 161 holding a person to be personally liable to pay an amount of tax, or an order under clause (I) of subsection (3) of section 172 [declaring] a person to be the representative of a non resident person, or an order under section 221 refusing to rectify the mistake, either in full or in part, as claimed by the taxpayer or an order having the effect of enhancing the assessm ent or reducing a refund or otherwise increasing the liability of the person, may prefer an appeal to the Commissioner (Appeals) against the order"
Perusal of section 127 reveals that an order having the effect of enhancing the assessment or reducing refund or otherwise increasing the C liability of the person is appealable. We are fortified in our view by the judgment of honourable Sindh High Court in re "Messrs Pak Saudi Fertilizer Ltd. v.
Federation of Pakistan and 4 others" cited as 1999 PTD 4061 wherein the import of the phrase "or otherwise increasing the liability of the person" has been discussed and it was held as under:--
(8) It is correct that section 129 does not specify section 53, however, the underlined portion of the said section 129 (as above) would read to the effect that any assessee objecting to an order made by a deputy Commissioner having the effect of enhancing the assessment or reducing a refund or otherwise increasing the liability of the assessee may appeal to the Appellate Additional Commissioner against such order," surely an order under section 53 demanding defaulting payment there under amounts to either enhancing the assessment or reducing the refund or otherwise increasing the liability of the assessee. In particular the omnibus clause in section 129 "or otherwise increasing the liability of the assessee" is of were import and there is nothing in the context to give it a restrictive interpretation. The term. "otherwise" in the said section 129 covers all eventualities of increase of liability and is not necessarily" to be interpreted as ejusdem generis with the preceding clauses. We are fortified to arrive at such conclusion on the basis of the following reference:--
(9) In the context of income tax we have been able to lay our hands on Hassan AH Kara Bhai v. CIT. PLD 19,74 Kar. 473 wherein Noorul Arfeen, J. Writing for the Court, held that notwithstanding that no specific appeal was provided under section 30, of the Income Tax Act, 1922 against an order under section 35, however, such appeal lay since the order under section 35 partook the character of a fresh assessm ent order referable to section 23 of the 1922 Act, and therefore such an order being in the nature of an order of assessm ent was appealable to the Appellate Assistant Commissioner under section 30 of the Act.
(10 The above discussion would amply confirm that the omnibus clause in section 129 i.e. Or otherwise increasing the liability of the assessee" covers every possible eventuality Where the tax liability or obligation to pay income-tax is increased or refunds reduced, making such orders appealable under section 129. We accordingly hold that the impugned order in this case i.e. The order under section 53 would be appealable under section 129."
Respectfully following the principle of law enunciated by the honourable Sindh High Court the order passed under section 122(c) is held to be appealable under section 127 of the Income Tax Ordinance, 2001.
6. Hence after filing the return even otherwise there is no scope to maintain the order passed under section 122(C). The department is at liberty to scrutinize the return filed by the taxpayer and proceed in accordance with law if they desire because limitation is still available with department.
Resultantly appeal succeeds accordingly. .