' Yahya Afridi, J.--M/s. Rehman Cotton Mills Ltd., petitioner seeks the constitutional jurisdiction of this Court praying that: "It is humbly prayed that the impugned notice purportedly issued under Section 177 of the Ordinance may graciously be declare illegal, without lawful authority and without jurisdiction."
2. In essence, the grievance of the petitioner is that the audit of the petitioner's company could not be initiated by the worthy Commissioner under Section 177 of the Income Tax Ordinance, 2001 ("Ordinance") without the balloting carried out by the Federal Board of Revenue ("FBR") under Section 214-C of the ibid. The main thrust of the learned-counsel for the petitioner's company was the law laid down in decision of Chen One's case (2012 PTD 1815) and the reliance thereon by this Court in its decision in M/s. Northern Bottling's case (W.P. No, 1232 of 2012) decided on 17.01.2013, wherein this Court had held that:- "From the bare reading of the above noted provision of law as it was at relevant point of time it is to be noted that at original stage the power to select and conduct audit of the tax affairs of any person or _class of persons was available with the concerned Commissioner alone. Subsequently, the Board was required to lay down criteria for selection of the cases for audit by the Commissioners and after selection of the case in the light of the criteria issued by the Board the Commissioners were to conduct audit. In addition to selection of the cases for audit in the light of the criteria issued by the Board, the Commissioners were also entitled to select cases in the light of the parameters provided in sub-section (4) of Section 177 of the Income Tax Ordinance, 2001.
However, even after substitution of Section 177 vide Finance Act, 2004 the commissioners again started acting according to their own intents and without waiting for issuance of any criteria by the FBR and without completing the first phase of selection of cases for audit as per criteria to be laid down by the FBR started selecting the cases for audit. The matter was settled by the superior Courts and all actions taken by the commissioners were declared as not in accordance with law.
Keeping into consideration the above referred facts the legislature again substituted Section 177 and inserted Section 214-C in the Income Tax Ordinance, 2001 vide Finance Act, 2010. After substitution of Section 177 vide Finance Act, 2010 the power to select a case for audit of tax affairs of any person earlier available to the commissioners were taken away and now only the Board is empowered to select any person or class of persons for audit of tax affairs through computer ballot. The Commissioner is only empowered to conduct audit of the cases selected by Board through computer ballot. It would not be out of place to mention here that after substitution of Section 177 vide Finance Act, 2010 the Commissioners are again misreading the provision by self- assumption of jurisdiction to select and conduct cases of the tax payers for audit. The learned counsel for the department has failed to show that any computer ballot has been conducted by the FBR. The intent of the legislators to select cases for audit through computer ballot on random or parametric basis by the FBR is very clear that there should be no discrimination or misuse of power by any tax official. In this background, how it can be expected that the FBR would hold any computer balloting at the back of the taxpayers.
(emphasis provided)
3. This Court has no cavil to the dicta laid down in Ws. Northern Bottling's case. However, the crucial point remains that the said case dealt with the action of the worthy Commissioner seeking audit of the said company for the Tax Year 2009, whereafter the legislature has introduced an amendment in Section 214-C of the Ordinance by inserting an 'Explanation' therein vide Finance Act, 2013. The said amendment clarifies the authority of the worthy Commissioner to carry out an audit by exercising its powers under Section 177 of the Ordinance vis-a-vis the authority of the FBR as provided under Section 214-C ibid. After the amendment, Section 214C now reads as follows:- "214-C. Selection for audit by the Board.---
(1) The Board may select persons or classes of persons for audit of Income Tax affairs through computer ballot which may be random or parametric as the Board may deem fit.
(1A) Notwithstanding anything contained in this Ordinance or any other law, for the time being in force, the Board shall keep the parameters confidential.
(2) Audit of Income Tax affairs of persons selected under sub-section (1) shall be conducted as per procedure given in Section 177 and all the provisions of the Ordinance, except the first proviso to sub-section (1) of Section 177, shall apply accordingly.
(3) For the removal of doubt it is hereby declared that Board shall be deemed always to have had the power to select any persons or classes of persons for audit of Income Tax affairs. Explanation.- For the removal of doubt, it is declared that the powers of the Commissioner under Section 177 are independent of the powers of the Board under this section and nothing contained in this section restricts the powers of the Commissioner to call for the record or documents including books of accounts of a taxpayer for audit and to conduct audit under Section 177.
(emphasis provided)
4. Before this Court passes any findings on the 'Explanation' introduced in Section 214-C of the Ordinance, it would be appropriate to first understand the rationale behind introducing an Explanation in an enactment. For guidance, let us review the discourse rendered by eminent jurists on the issue in hand. Firstly, while placing reliance on and citing various precedents, M N Rao and Amita Dhanda in N S Bindra's Interpretation of Statutes (Tenth Edition), provide that: "The purpose of an Explanation is often to explain some concept or expression or phrase occurring in the main provision and it is not uncommon for the legislature to accord either an extended meaning or a restricted to such concept or expression or phrase by inserting appropriate explanation. But is not a substantive provision. Explanations are keys to the Sections to which they are appended. They explain the heart of the matter with a purpose. An explanation does not enlarge the scope of the original section that it is supposed to explain."
' On the object of an 'Explanation', Vepa P. Sarathi, in 'Interpretation of Statutes', writes: "(a) The object of an Explanation is to understand the Act in the light of the Explanation.
(b) It does not ordinarily enlarge the scope of the original section which it explains, but only makes the meaning clear beyond dispute."
' Moreover, also shedding light on the issue of 'Explanations', M.P. Tandon's in 'Interpretation of Statutes', provides: "An explanation is sometimes added to a section to elucidate what is enacted and not to add or subtract from it. It is part and parcel of the enactment. An explanation should be read with a view to harmonise and clear up the ambiguity in the main provisions of the section. The explanation should be interpreted according to its own terms having regard to its context and not so as to widen the ambit of the section."
' Finally, on instances of statutory examples i.e, where a particular Act includes an example of its operation, Lord Denning MR, in the case of Escoigne Properties Ltd. v. IRC [19581 AC 549 at 565-566, said: "... One of the best ways, I find, of understanding a statute is to take some specific instances which, by common consent, are intended to be covered by it. This is especially the case With a Finance Act. I cannot understand it by simply reading it through. But when an instance is given, it becomes plain. I can say at once: "Yes, that is the sort of thing Parliament intended to cover".
5. Now moving on to precedents of our jurisdiction, it is noted that the august Supreme Court relying upon its previous decision in Colony Sarhad's case, dilated upon the object and the legal effect of inserting an Explanation in a statute in Muhammad Hussain Patel's case (PLD 1981 SC 1) wherein it was stated that: "the object of adding an Explanation to a statutory provision has been considered in the case of Colony Sarhad Textile Mills vs. Collector, CE&LC (1). It may be mentioned that the present Chief Justice of the Supreme Court (Mr.Justice S.Anwarul Haq), was a party to the said judgment. We respectfully agree with the observations made by the Court in that case which are as follows: "The object of adding an Explanation to a statutory provision is only to facilitate its proper interpretation and to remove any possible confusion or misunderstanding about its true meaning.
It does not per se create or extinguish any liability which has to be spelled out only from the main provision sought to be interpreted with the assistance of the Explanation. In other words, the Explanation is to be relied upon only as a useful guide or in aid to the construction of the main provision."
' The object of the Explanation in the present case is obviously the same, namely to remove any doubt as to the meaning of the term 'rent due' as used in clause (i) of Section 13(2) and to clarify that in addition to the amount of 'rent simpliciter it could also include other charges and taxes agreed to by the parties. And even in the present case, the Explanation does not create or add anything to the main section but merely illustrates as to what the term 'rent due' may include.
Obviously, therefore, the Explanation does not place any limitation on the type and the number of other charges the payment of which the tenants may agree to pay and which would thus become due from him."
' The principle laid down in the aforementioned case's has been consistently followed by the superior Court of our jurisdiction. Some of the leading cases include Naveed Textile Mills Ltd's case (PLD 1984 SC 92), Chief Administrator of Auaaf, Punjab's case (PLD 1991 SC 596) and Sardar Farooq Ahmad Khan Lashari's case (PLD 1999 SC 57).
6. It would also be appropriate to note that the legislature has, in certain cases employed an Explanation as a deeming provision in a fiscal statute and thereby create chargeability. This issue was explained by the apex Court in Bismillah & Co's case (2006 SCM R 652), wherein it explained that: "A bare reading of the afore-referred provision would indicate that the law envisages levy of advance income tax on the basis of sale price of the property in question and by yirtue of the Explanation added to sub-section (7-A) of Section 50 of the Ordinance, the awarding of any lease to any person, "including a lease of the right to collect octroi duties, tolls, fees or other levies, by whatever named called' have been included in "sale". This Explanation was inserted by Finance Ordinance, 1984 through a Presidential Order. It is a deeming provision and it is a settled principle of law that a deeming provision in a taxing statute has the effect of bringing within the mischief of chargeability on income which may not have actually accrued but by fiction of law is supposed to have accrued. The rationale appears to be that a person who has been awarded a contract would earn income that the advance tax would be a security and would be adjusted when the final liability is determined."
(emphasis provided)
7. Similarly, Explanation in an enactment was also addressed by the Supreme Court of India in S. Sundaram Pillai's case (AIR 1985 SC 582), wherein the worthy Court after discussing its previous discussion in Burmah Sheel Oil Storage's case (AIR 1961 SC 315), First Income Tax Officer Salem's case (AIR 1967 SC 81), Bihta Cooperative Development Cane Marketing Union's case (AIR 1967 SC 389), Hiralal Rattanlal's case (AIR 1973 SC 1034) and D.G.Mahajan's case (AIR 1977 SC 915) explained the objects thereof in terms: "It is now well settled that an Explanation added to a statutory provision is not a substantive provision in any sense of the term but as the plain meaning of the word itself shows it is merely meant to explain or clarify certain ambiguities which may have crept in the statutory provision.
' The object of an Explanation to a statutory provision is,--
(a) to explain the meaning and intendment of the Act itself.
(b) where there is any obscurity or vagueness in the main enactment, to clarify the same so as to make it consistent with the dominant object which it seems to subserye.
(c) to provide an additional support to the dominant object of the act in order to make it meaningful and purposeful.
(d) an Explanation cannot in any way interfere with or change the enactment or any part thereof but where some gap is left which is relevant for the purpose of the Explanation, in order to suppress the mischief and advance the object of the Act it can help or assist the Court in interpreting the true purport and intendment of the enactment and right with which any person under a statute has been clothed or set at naught the working of an Act by becoming an hindrance in the interpretation of the same."
8. Keeping in view, the ratio-decidendi of the pronouncements of the superior Courts and the legal discourse by eminent jurist on the issue in hand, as discussed hereinabove, it would be safe to note that the Explanation introduced in Section 214-C of the Ordinance vide Finance Act, 2013 has been introduced to clarify the extent of the authority of the worthy Commissioner to carry out audit of assessees under Section 177 and that of the FBR under Section 214-C. The careful reading of the provision makes it finally clear that the two authorities are independent and can initiate the audit independently.
9. Now moving on to the principle laid down in Chen One's case (supra) and endorsed by this Court in its decision rendered in Northern Bottling's case (supra), it may be noted that the Explanation was introduced in Section 214-C of the Ordinance after the said judgments were rendered. It is by now settled that the legislature has the authority to clarify the law or even nullify the effect of a judicial decision through legislation. This issue has been discussed by the apex Court in Mian Nazeer's case (1992 SCM R 883), Amjad Hussain Dilawari's case (1992 SCMR 1272), Molasses Trading's case (1993 SCM R 1905) and Punjab Steel's case (1993 SCM R 2267) and were elucidated in detail in M. Y. El ectronics Industries (Pvt.) Ltd's case (1998 SCM R 1404), wherein while deliberating upon the legal effect of the insertion of Section 31-A of the Customs Act, 1969 upon the decision already rendered by the apex Court in Al-Samrez Enterprise's case (1986 SCM R 1917), the Hon'ble Court come to the conclusion: "The contention of the appellants that Section 31-A was inserted in the Act with the sole object of doing away with the effect of the judgment of this Court in Al-Samrez's case and therefore, the exemptions granted by the Government after insertion of Section 31-A are not controlled by Section 31-A does not appear to be correct. Section 31-A was inserted in the Act by Section 5(2) of Finance Ordinance, II of 1988 which provided that Section 31-A shall be deemed always to have been so inserted in the Act, meaning thereby that it was given retrospective effect from the date the Customs Act, 1969 came into effect. There is nothing in the language of Section 31-A (ibid), to justify the interpretation that this section applied only to the cases only, which did not acquire the character of past and closed transaction on the date of insertion of Section 31-A in the Act. The language of Section 31-A (ibid) is wide enough to include within its ambit all those cases where exemptions have been withdrawn after the insertion of Section 31-A in the Act, as well."
(emphasis provided)
' The above principle, therefore, has been consistently followed by the superior Courts of our jurisdiction. Some of the leading cases are Gatron Industries Ltd's case (1999 SCM R 1072) and Zaman Cement Company (Put.) Ltd's case (2002 SCM R 312).
10. Finally, what is also to be kept in mind is that while interpreting fiscal statutes, charging provisions are to be strictly construed and in case of two possible interpretations, the one in favour of the assessee is to be applied. However, it is also settled that provisions in a fiscal statute, which provides the procedure for collection of taxes and duties, the same are to be interpreted in favour of the Revenue. This principle was very aptly explained in Asbestos Cement's case (1992) 66 Tax 140 (SC.Pak), and thereafter, followed in Trustee of Port of Karachi's case (1989 PTD 1048) wherein it was explained in terms: "A taxing statute usually contains charging and machinery provisions. The former fixes the liability to pay tax and has to be construed strictly and where two reasonable interpretations are possible one which favours the subject should be accepted. Once the liability to tax is fixed the machinery provision comes into play. This has to be construed liberally and in a manner that the recovery is ensured. Where more than one reasonable interpretation of such provision is possible one which favours recovery should be adopted. Such extended meaning can be given only on the basis of reasonable construction of the language of the statute. Section 50(7-A) contemplates sale by public auction by a person who may be an auctioneer, the property belonging to Government, local authority, a public company and other specified persons. The sub-section fixes the responsibility of the person selling such goods by public auction to collect advance tax. In case of failure to deduct tax under Section 52, he shall be deemed to be an assessee in default...."
(emphasis provided)
11. Accordingly, for the reason stated above, to sum up, this Court holds:-- ' That the object of an Explanation to a statutory provision is:-- (i)- to explain the meaning and internment of the Act itself.
(ii) where there is any obscurity or vagueness in the main enactment, to clarify the same so as to make it consistent with the dominant object which it seems to sub serve.
(iii) to provide an additional support to the dominant object of the act in order to make it meaningful and purposeful.
(iv)- an Explanation cannot in any way interfere with or change the enactment or any part thereof but where some gap is left which is relevant for the purpose of the Explanation, in order to suppress the mischief and advance the object of the Act it can help or assist the Court in interpreting the true purport and internment of the enactment and right with which any person under a statute has been clothed or set at naught the working of an Act by becoming an hindrance in the interpretation of the same."
II- The legislature may employ an Explanation, as a deeming provision in a fiscal statute and thereby create changeability.
III- That the effect of a judicial decision c an be nullified through valid legislation.
IV- That the provision relating to the recovery of taxes and duties have to be interpreted liberally in a manner to ensure the recovery thereof by the Revenue.
V- That after Finance Act, 2013, the legislature had expressed its clear intent regarding the powers of carrying out audit by the worthy Commissioner under Section 177 of the Ordinance, and for the same to be independent of the authority of the FBR under Section 214-C ibid.
12. In view of the above, this writ petition is devoid of legal merit and hence, dismissed.