The department through this Appeal has impugned the order dated 15-10-2010 passed by the learned CIR(A) on the following grounds:-
(i) That the order of the Commissioner (appeals- I), Islamabad is bad in law and contrary to the facts of the case.
(ii) That the learned Commissioner (Appeals-I), Islamabad has annulled the order passed by the OIR u/s. 122(1) dated 29-06-2012 on the ground of limitation, ignoring the amended provisions of (2) of Section 122 of the Income Tax Ordinance, 2001.
(iii) That the Commissioner (Appeals-I), Islamabad has not adjudicated on the grounds of appeal at S. No. 3, 4 & 5.
(iv) That the case-law cited and relied upon by the Commissioner (Appeals-i) is not relevant, distinguishable, parallel and distinguishable.
2. We have heard the learned counsel for both sides. The impugned order of the learned CIR(A) and the order of the OIR under Sections 122(1)/177 of the Income Tax Ordinance, 2001 (hereinafter called the Ordinance) and other relevant record of the case perused.
3. We have found that the main thrust of the Department is that the learned CIR(A) was not justified to annul the assessm ent order passed by the Taxation Officer on the point of limitation in view of the amendment made in sub-section (2) of Section 122 of the Ordinance. Considering the facts of the case, we have found that the taxpayer for the year under review filed its return on 12-02-2007 which constituted to be the assessment order within the meaning of Section 120-B of the Ordinance on the day in which return was filed. Subsequently, the case was selected for audit, accordingly statutory notices were issued from time to time in order to amend the assessment already finalized but as according to the Taxation Officer, the taxpayer failed to respond the notices, he proceeded to amend the assessment order on 29-06-2012 in term of above-referred Section 122(1)/177 of the Ordinance. Felt aggrieved against the impugned order, the first appeal was filed by the taxpayer pleading therein that the Taxation Officer debarred to amend the already completed assessm ent order in view of period of limitation provided in sub-section (2) of Section 122 of the Ordinance before its substitution. The learned CIR(A) after having gone through Section 122(2) before its substitution vis-ct-vis and keeping in view the facts available on record annulled the impugned amended order being not maintainable in the eyes of law as that has been passed beyond the limitation of 5 years as has provided in subsection (2) of Section 122 of the Ordinance prior to its substitution. Now the Department has challenged the impugned order.
4. The learned D.R. Representing the department has contended that the learned CIR(A) was not justified in annulling the amended assessment order particularly when sub-section (2) of Section 122 was substituted by the legislature. According to the learned D.R. The period of 5 years has to be recorded from the end of the Financial year in which the Commissioner had issued or treated to have issued the assessm ent order to the taxpayer within the period of that tax year. After this the learned D.R. Has been contended that the amendment made in sub-section (2) of Section 122, the order passed by the Taxation Officer on 29- 06-2012 which is within the stipulated period as income tax return was filed on 12-02-2007 and the Financial year ends on 30.06.07 whereas the period of 5 years expires on 30-06- 2012. He has further argued that the learned CIR(A) fell in . Grave error to annul the assessm ent order. He has, therefore, prayed that the order passed by the learned CIR(A) may kindly be vacated and the amended order may please be restored.
5. On the other hand the learned representative appearing on behalf of the taxpayer has supported the impugned order of the learned CIR(A). He has contended that sub-section (2) of Section 122 of the Ordinance was substituted on 30-06-2009 and is effective from 01-07-2009. By this substitution the amendment under Section 122(2) of the Ordinance has been enlarged which by no way would be applicable to the assessments finalized prior to tax year 2009 because this substitution does not have retrospective effect. According to the learned counsel of the taxpayer the assessm ent finalized before 01-07-2009 could not be reopened/revised/amended by virtue of sub-section (2) of Section 122 through Finance Act, 2009 dated 30-06-2009 being the substantive law. He has argued that the taxpayer in this case has acquired vested rights before the substitution of sub-section (2) of Section 122 of the Ordinance, hence the assessing officer having no lawful authority to amend the close and past transaction, In this respect he has acquired strength on the case-law cited as 2009 PTD 1392 (S.C.) in the case of Commissioner of Income Tax v. Eli Lilly Pakistan (Pvt.) Ltd. & others, 2005 PTD 1316 (Honda Shahra-e-Faisal (AOP) & others v. Commissioner of Income Tax), 2005 PTD 1621 (H.C.) Kashmir Edible Oil Limited v. Federation of Pakistan, 1984 PTD 137 (H.C.) (United Builders Corporation, Mirpur v. Commissioner of Income Tax), 1992) PTD 549 (S.C.)
(Galaxo Laboratories Limited v. Inspecting Assistant Commissioner of Income Tax), 1993 PTD 1113 & 1232 (H.C.) (Mrs. Anjum Shaheen v. Inspecting Assistant Commissioner of Income Tax), 2001 PTD 1525 (H.C.) (Monnoo Industries Limited v. CIT), (1963 PTD 633 (S.C.) (M/s. Nagina Silk Mills v. ITO), 1995 PTD 259 (H.C.) Gulshan Spinning Mills Limited v. Government of Pakistan and 2008 PTD (Trib)
1146 (ITA No. 14/IB/2008, decided on 08-03-2008. The learned counsel of the taxpayer placing reliance on all these decisions has requested to uphold the order of the learned CIR(A) being well- reasoned and well- based.
6. We have considered the submissions made by both the sides and have also gone through the amendment made in sub-section (2) of Section 122 of the Ordinance as well as case-law referred at the bar. We do not find any substance in the pleading taken by the learned D.R. Because sub- section (2) of Section 122 of the Ordinance before its substitution provided that the assessment order shall only be amended under Section 122(1) of the Ordinance within 5 years after the Commissioner had issued order or treated to have issued the assessment order on the taxpayer.
This sub-section was substituted by Finance Act, 2009, dated June 30, 2009 and after its substitution this reads that no order under sub-section (1) of Section 122 shall be amended by the Commissioner after the expiry of 5 years after the Commissioner had issued assessment order or treated to issue the assessm ent order to the taxpayer. We find that prior to sub-section (1) the limitation for amending the assessme nt order was to be worked out with reference to the date of passing of the assessm ent order by the Commissioner. After its substitution the period to amend the assessm ent order has been extended from the date of passing of the assessment order by the Commissioner i.e. From the end of the Financial year in which the Commissioner has issued the order or treated to be issued the assessment order. Now the question arises as to whether the substitution made in sub-section (2) of Section 122 of the Ordinance by way of Finance Act, 2009, dated 30- 06-2009 whereby limitation for amending the assessment order has been enlarged i.e. After the expiry of 5 years from the end of Financial year in which the assessment order has been issued or treated the assessm ent order to be issued instead of within 5 years after the Commissioner has issued or having issued the assessment order on the taxpayer would be applicable for 2006 or not? We are mindful of the fact that principle pinpointed in the above eventuality that law prevailing at the time when the income tax return were filed would be applicable but in this case the deemed assessment order has been amended by invoking the provision brought in the statute by subsequent legislation. Actually, the taxpayer acquires vested right of amending the assessm ent before its substitution which clearly provides that the assessm ent order can only be amended by exercising powers under Section 122(2) of the Ordinance within 5 years after the Commissioner has issued assessment order. Thus we are of the view that such rights could not be snatched by subsequent legislation made on 30-06-2009 through Finance Act, 2009. On going through the amendment made in subsection (2) of Section 122 before its substitution, we are confined that the legislature has extended the time limit which was within 5 years from the date of issuance of assessment order by the Commissioner till after the expiry of 5 years from the end of the Financial year in which he treated to have issued the assessm ent order. This certainly pointed its enlargement any period of time for amending the assessm ent order would express the penal consequences, hence the substitution fall flat in the domain of substantive law mere procedural and as such had no retrospective effect. It is settled principle of interpretation of statute that this substantive law would always be prospective and where procedural law close transaction or existing accrued, concluded vested or substantive right, the same would not be retrospective unless and until the statute expressly restoratively of the law.
We are, therefore, of the considered view that the amendment made in sub-section (2) of Section 122 of the Ordinance through Finance Act, 2009 is prospective/restrictive in its application do not apply to the assessm ent order passed/issued by the Commissioner upto the tax year '2009 being the substitution, is operative from 01.07.2009.
7, Now reverting to the facts of the case that the taxpayer filed its return on 12-02-2007 which was taken to be assessm ent order issued to the taxpayer by the Commissioner on the day in which the return was furnished i.e. 12-02-2007, .The reckoning period of 5 years the Commissioner may amend the assessm ent order by 12-02- 2012 whereas in this case the amended order has been passed by the Taxation Officer on 29-06-2012 which is hit by limitation and as such not sustainable in the eyes of law being passed beyond the period of limitation i.e. 5 years after passing the assessm ent order. We are, therefore, of the view that the learned CIR(A) has rightly annulled the amended assessm ent order which calls for no interference.
8. Appeal of the department fails.