1. ORDER: MR. MUNSIF KHAN MINHAS, JUDICIAL MEMBER.--(1). This appeal has been filed by the department against the order No. 812/2012 dated 20.08.2012 passed by the learned CIR(A-II) for the assessment year 2005 on the following grounds:- 1.That the taxpayer himself admitted that company earned revenue from contract as well as senders.
2. 2.That the company has not offered revenue from contractual receipts and providing/rendering of services, separately.
3. 3.That services fall in the ambit of normal tax regime whereas contractual receipts covered under final tax regime.
4. 4.Without prejudice to the above, the Auditor has mentioned legal status of company being manufacturer.
5. 5.Learned CIR(A) has not given his finding on exact business nature of taxpayer company.
2. Brief facts of the case are that taxpayer is a limited company engaged in the business of manufacture and sale of digital exchanges and related equipments. That during inspection of record the ACIR observed that deemed assessments completed u/s 120 of the Income Tax Ordinance, 2001 for the tax years 2005 and 2006 were erroneous in so far as prejudicial to the interest of revenue. The assessee was confronted with related issues through show cause notice asking for various details/documents and after considering reply deemed assessments were amended u/s 122(5A) of the Income Tax Ordinance, 2001. Chronological order of events/orders is given below:- Event Date Remarks Filing of Return 02.02.2006 Time limitation ended on 1.2.201 1.
6. First Amendment in assessment u/s 122(5 A)31.12.2007 Appellate Order CIR(A) 09.05.2009 Amendment in assessment annulled, appeal of appellant accepted.
7. Appellate Order ATIR 05.01.2010 Departmental Appeal against order of CIR(A) dismissed, order of CIR(A) maintained.
8. Refund Order issued 31.03.201 1Case of the taxpayer accepted for issuance of refunds and partial refunds issued.
9. Second Amendment in assessment u/s 122(5 A)28.08.201 1Whereas time limitation ended on 1.2.201 1.
10. Appellate Order CIR(A) 15.11.201 1Appeal of appellant accepted. Order annulled and declared to have been hit by limitation.
11. Third amendment in assessment u/s 122(5A)30.06.2012 Appellate Order CIR(A) 20.08.2012 Appeal of appellant accepted. Order annulled and declared to have been hit by limitation.
12. Being dissatisfied with the treatment given by the Officer Inland Revenue the taxpayer preferred appeal before learned CIR(A-II) who after considering the facts, annulled the order passed by Officer Inland Revenue with following observations:- "the contentions of the AR have been considered and the written arguments advanced by the AR also examined. The records show that similar orders were passed by the AC1R for the tax years 2005 to 2010 on the same facts which were annulled vide appeal order No. 580, 583, 585, 587 & 596 dated 15.11.2011 but the ACIR again passed the orders u/s 122(5A) on the same grounds. The AC1R ignored the directions of the CIR(A) and passed these orders on his on. Whims which is not appreciated. It is worth to mention here that this issue was also settled by the C1R(A) vide his AO No. 386, 387 & 388/2009 dated 9.5.2009 which was also upheld by the learned ATIR in ITA No. 586, 587 and 588/IB/2009 dated 5.1.2010. Further the order for tax year 2005 was also hit by limitation and same order was also annulled on this ground earlier but the ACIR repeated the same order without considering the fate of his earlier order. The other contention of the AR that expenses which were never claimed in the returns were added to the income is also convincing. The expenses which were never claimed were added to the total income without appreciating that these expenses were not claimed in the returns.
13. During tax year 2006, the ACIR made following three additions u/s 111(a) of the Income Tax Ordinance, 2001:-- Loan from Holding Company Rs. 3,146,807/- Advances from customers Rs. 27,894,146/- Retention money Rs. 48,047,556/- The AR contended that all these amounts were trading liabilities and were appearing in the financial statements with clear sources and categorization as trading liabilities. The contention of the AR is found forceful as these amounts are appearing in the financial statements and identified in the accounts for previous years as well. The assessing officer did not proceed fairly as the addition u/s 111 is always made where source is not explained and the items pertaining to the balance sheet of the appellant company cannot be added u/s 111 without establishing the concealment in the relevant year. The ACIR made addition on account of balance sheet items without appreciating the fact that these payments were trading liabilities and against these liabilities some assets were appearing on the other side of balance sheet like equipment, stocks etc. In these circumstances the action of the ACIR is not found as per law. Hence in these circumstances the order passed for both the tax years i.e, 2005 and 2006 are found ultra vires and annulled."
3. Feeling aggrieved with the treatment given by the learned CIR(A-II) the department has come up in appeal before this Tribunal on the grounds mentioned above.
14. 4.We have heard the arguments and scrutinized the record. Learned DR states that as regard the time limitation in respect of tax year 2005, he is in complete agreement with the learned Taxation Officer that the amended assessm ent order is not barred by time. The arguments given by him in this regard in the impugned order are valid. Sub-section 2 of section 122 was substituted by the Finance Act, 2009. A comparison of the present provisions of sub-section 2 and the provisions of substituted, reveals that there is no change in any substantive provision of law. The provisions of sub-section 2 being not a change in substantive law would apply retrospectively.
5. Learned AR states that in this case assessment stood completed on 2.2.2006 in terms of section 120, when the return was filed after seeking extension in time limit for filing the return. Sub-section 2 of section 122 was inserted vide Finance Act, 2009. The period of five years will start from the end of financial year 2005 i.e. 31.12.2004 as per the provisions of sub-section 6. The impugned order has thus been passed on 30.06.2012 after the time limit of five years.
15. 7.Parties have been heard and record perused. The learned AR has vehemently questioned the same on the following authorities, among others:-
(i) In the case of Zakria H. A Sattar Bilwani vs IACWT/range~II, Karachi, decided on 1.7.2002 by Honourable Supreme Court of Pakistan reported as 2003 PTD 52 it is held:~ "it is well settled principle of interpretation of statute that where a statute effects a substantive right, it operates prospectively unless by express enactment or necessary intendment' retrospective operation has been given as is evident from the cases Muhammad Ishaq vs. State, PLD 1995 SC (Pak) 256 and State vs. Muhammad Jamil. PLD 1965 SC 681, this principle was affirmed in Abdul Rehman vs. Settlement Commissioner (PLD 1966 SC 362). However, statute, which is procedural in nature, operates retrospectively unless it affects an existing right on the date of promulgation or causes injustice or prejudice to a substantive right".
16. In the case of Nagina Silk Mill vs. 1TO decided on 2.5.1963 by Honourable Supreme Court of Pakistan reported as 1963 PTD 633, it was held as under:- "The courts must lean against giving a statute retrospective operation on the presumption that the Legislature does not intend what is unjust. It is chiefly where the enactment would prejudicially affect vested rights, of the legality of, past transactions, or impair existing contractors, that the rule in question prevails. Reference may be made in this connection to page 206 of Maxwell on the interpretation of statutes, eleventh edition. Even if to interpretations are equally possible, the one that saves vested right would be adopted in the interest of justice, especially where when we are dealing with a taxing statute".
17. Perusal of Act No. 1 of 2009 whereby the amendment under reference was brought about states that "it shall, unless otherwise provided, come into force on the lst July, 2009" further, no intention whatsoever is found to suggest that the amendment will be applicable retrospectively i.e. To acts committed, rights and liabilities accrued before 1st July, 2009 Section 6(c) of the General Clauses Act states that:- "Where this Act, or any (Central Act) or Regulation made after the commencement of this Act, repeals any enactment hitherto made or hereafter to be made, then, unless a different intention appears, the repeal shall not:
(a) ----------------------- (b)----------------------- "Affect any right, privilege, obligation or liability acquired, accrued or incurred under any enactment so repealed".
18. Rule of construction/interpretation about prospective operation also suggests 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 clearly appears, or is very clearly, plainly and unequivocally expressed or necessarily implied. Under the presumption that a statute, 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." In view of the above discussion of factual and legal position, it will be found that a right of amendment of assessment of the case ceases up to 1.2.2011 consequent upon filing of return /deemed assessment on 2.2.2006 as per the law then prevailing. The Department therefore could amend the assessment up to 1.2.2011 only. As against this position, deemed assessment was amended on 30.06.2012 which could be amended up to 1.2.2011.
19. 8.For Tax year, 2005, return was filed as on 2.2.2006 and amendment was made on 30.06.2012.
20. Taxpayer contended that assessm ent stood made on the date of filing of return and as per law prevailing at that point of time, amended assessment could only be made within five years i.e. Up to 1.2.2011 and that amendment made in sub-section (2) of section 122 of the Income Tax Ordinance, 2001 by Finance Act, 2009, whereby limitation was extended up to the expiry of five years from the end of the financial year in which the Commissioner had issued the assessment order to the taxpayer, would not be applicable. Taxation Officer had held that amendment was applicable retrospectively, it did not bring about change in any substantive provision.
21. Amendment had been made in procedural/machinery provision having applicability retrospectively. We do not agree with the contention of the learned DR because Tax liability has been enhanced through amendment which was barred by limitation. Vested right of finalized assessm ent of the case up to 01.02.2011 had accrued to the taxpayer consequent upon filing of return deemed assessm ent on 02.02.2006 as per the law then prevailing. Department could complete the amendment up to 01.02.2011 only.
22. 9.In view of the foregoing, we have no hesitation to hold that the impugned amendment order is barred by time and therefore, void ab initio. In consequence the appeal is dismissed.