Instant Reference Application, on behalf of the Revenue, is directed against order of 30.07.2010, by Appellate Tribunal Inland Revenue (Appellate Tribunal), whereby taxpayer's appeal was allowed, simplicitor, by holding that notice under section(s) 161/205 of the Income Tax Ordinance, 2001 (Ordinance, 2001) were beyond limitation.
2. Matter pertains to Tax year 2004. Following question of law is pressed for determination.
"Whether on the facts and circumstances of the case the learned Tribunal was justified to prescribe a limitation of 5 years for passing order under section 161 of the Income Tax Ordinance, 2001 on the basis of judgment of the Karachi High Court reported as "2003 PTD 1571" tiled as CIT v.
Pakistan Mobile Communication (Pvt.) Limited?"
3. Appellate Tribunal held that since no limitation was provided for invoking section 161 of the Ordinance, 2001 - equivalent whereof in the Repealed Income Tax Ordinance of 1979 was section 52 - therefore limitation of four years would be attracted, while borrowing limitation provided under section 156 of the Repealed Ordinance.
4. Determination by the Appellate Tribunal is patently erroneous. How would section 156 of Repealed Ordinance be attracted, which envisages remedy of seeking rectification. Learned counsel for the taxpayer 'could not offer any plausible explanation qua justifiability of the order. No limitation, for the purposes of issuing notice, was prescribed under section 161 of the Ordinance, which otherwise does not suggest that time for invoking said clause is infinite. In the case of "Habib Bank Ltd v. Federation of Pakistan through Secretary, Revenue Division and 5 others" (2013 PTD 1659), learned division bench of Sindh High Court adjudged the question of limitation qua notice issued under section 161 of the Ordinance in the context of subsection (3) of section 174 of the Ordinance, and dismissed the notice which was beyond the period of five years, issued after the end of the tax year to which the accounts and documents relate - limitation of five years was provided, which was enhanced to six years through Finance Act, 2010 [for the purposes of this case limitation of five years was available with reference to Tax year, 2004]. The ratio laid down in the case of Habib Bank Ltd. (supra) was reiterated in the case of "Commissioner Inland Revenue Zone-I, LTU V. MCB Bank Limited" (2021 SCMR 1325), relevance whereof is to the extent of question of limitation for issuing notices under section 161 of the Ordinance, 2001 - factual details are provided in paragraph 4 and findings are recorded in paragraph 9.
5. The question is whether notice under section 161 of the Ordinance, 2001, in the case at hand, was issued within the period of five years or beyond the period for which the taxpayer was not obligated to maintain the record. In this case the notice was issued on 18A0.2008, hence, it was within limitation.
6. In view of the above, Appellate Tribunal erred in law while allowing appeal, holding that notice was beyond limitation.
7. Question supposedly framed seeks explanation, which even does not bear any proximity to the order under reference - wherein question of limitation was decided in the context of section 156 of the Repealed Ordinance, 1979. We, for the sake of clarity, re-formulate the question in following terms, "Whether in view of the facts and circumstances of the case learned Tribunal was justified to invoke limitation regarding notice under section 161 of the Ordinance, 2001, and rightly so invoked section 156 of the Repealed Ordinance, 1979 for determining period of limitation for the purposes of section 161, ibid."
8. Question is answered in the negative. This Reference application is decided in favour of the department. Matter is remanded to the Appellate Tribunal - since it decided the appeal simplicitor on the question of limitation - which shall decide the matter afresh, upon hearing the parties.
Appeal of the taxpayer shall be deemed pending, to be treated as continuity of Notice dated 18.10.2008.
9. Office shall send a copy of this order, under seal of the Court, to learned Appellate Tribunal, in terms of subsection (5) of section 133 of the Ordinance.