1. [The judgment of the court was delivered by Noorul Arfin J.].--The Income Tax Appellate Tribunal has stated the following question for the opinion of this Court under Section 17(1) of the Sales Tax Act read with Section 66(1) of the Income Tax Act : "Whether on the facts and in the circumstances of the case the Tribunal was right in holding that the assessment for the charge year 1957-58 made on the 18th June, 1962 under Section 28 of the Sales Tax Act, was barred by the period of limitation ?"
2. The assessee is manufacturer of neon signs, which goods were subjected to sales tax at the rate of 20 per cent, ln appeal, the Appellate Assistant Commissioner reduced the rate to 12J per cent, holding that the assessee's goods were bulbs. Both the assessee as well as the Sales Tax Department went in appeal to the Income Tax Appellate Tribunal, the Department contending that neon signs were pure and simple electric goods subjected to a sales tax rate of 20 per cent., whil? the assessee's stand was that neon signs were neither electric goods nor bulbs, and therefore the sales tax rate applicable to them was 10 per cent. During the hearing of the appeal before the 1 ribunal, an additional ground was permitted to be raised and argued to the effect whether the sales tax assessment was barred by limitation. The assessment relates to the year 1957-58, and during the relevant period, Section 28 of the Sales Act, 1951 prescribed the limitation period of four years for sales tax assessments. This period admittedly expired on 31st March, 1962, while the assessment was actually completed on 18th June, 1962. Accordingly, the Tribunal held that the assessment was made after the expiry of four years and was, therefore, barred by limitation and consequently cancelled the assessment. On the application of the Commissioner of Sales Tax, the Tribunal stated the question reproduced above for the opinion of this Court.
3. Before considering the arguments of the learned Advocates for the parties, Mr. S. A. Nusrat and Mr. Ali Athar, it will be convenient to refer to the relevant provisions of the Sales Tax Act, 1951, and to the legislative amendments made therein from time to time. Section 2(20) of the Sales Tax Act defines a "year" to mean a financial year. For Finance Ordinance, 1959 (XV of 1959), a proviso was added to this clause to the follow- ing effect: "Provided that as respects the period beginning on the first day of April, 1959 and ending on the thirtieth day of June, 1960, the said period shall be deemed to be a 'financial year' and all the provisions of this Act shall be construed accordingly."
4. This proviso was omitted by the Finance Act, 1973. The other relevant provision is Section 28 of the Sales Tax Act, which originally stood as follows: "28. If for any reason tax payable under this Act has escaped assessment or has not been paid in any year, the Sales Tax Officer may at any time within four years of the end of that year assess the tax payable after issuing a notice to the assessee and making such inquiry as he considers necessary."
5. By the Finance Ordinance, 1959, a proviso was added to Section 28, which read as follows: "Provided that for the purposes of making any assessment under this section for the year beginning on the first day of April, 1954 and ending on the thirty-first day of March, 1955, the period beginning on the first day of April, 1958 and ending on the thirtieth day ot June, 1959 shall be deemed to be one year."
6. By Finance Act, 1963, the period of four years mentioned in Section 28 was increased to five years, that is, the limitation for completing the assessment under Section 28 was extended from four years to five years. By Finance Act, 1964, the main Section 28 was renumbered as sub-section (1) of Section 28, the proviso which had been added to this section by Finance Ordinance, 1959, was omitted and anew sub-section (2) was added, which reads as follows :-- "(2) Notwithstanding anything to the contrary contained in sub-section (1), the assessment for the tax payable for any one quarter or more quarters than one of the period beginning on the first day of April, 1954 and ending on the thirtieth day of June, 1961 may be made at any time before the thirtieth day of June, 1965 after issuing a notice to the assessee and making such enquiry as the Sales Tax Officer considers necessary and no assessment or reassessment made, any other proceeding taken or notice issued shall be called in question by any Court, tribunal or any authority merely on the ground that at the time the assessment or re-assessment was made, proceeding taken or notice issued the time with such assessment or re-assessment should have been made, proceeding taken or notice issued under this section, as in force before its amendment, had expired."
7. Section 8(4) of the Finance Act, 1964, provided that the new sub-section (2) shall be deemed to have been added on the 31st day of March, 1955. By Finance Act, 1967, sub-section (1) of Section 28 was substituted by the following "28. Tax not assessed.--(1) If for any reason in any year tax has escaped assessment or has been under-assessed, or has been assessed at a rate lower than that provided under this Act, or excessive relief or refund has been allowed, the Sales Tax Officer may at any time within five years of the end of that year assess o re-assess the tax payable or the relief or refund allowed after issuing a notice to the assessee and making such enquiry as he considers necessary."
8. Finance Ordinance, 1971, added a new sub-section (3). But the Finance Act, 1973 omitted this new sub- section (3) as well as sub-section (2) of Section 28, presumably for the reason that both these sub- sections had served their purpose.
9. 1954- The question stated by the Tribunal to this Court, in effect, means whether the assessment made by the Sales Tax Officer on 18th June, 1962, was beyond the period of limitation, and this question has to be answered by reference to the amendments made in the Sales Tax Act from time to time, which amendments have been referred to above. At the first hearing of the case before us, the learned Advocates for the parties directed their arguments to the question whether the proviso added to the original Section 28 by the Finance Ordinance, 1959, extended the period of limitation only for one year, that is, the year commencing from the 1st day of April, 1954 and ending on the 31st day of March, 1955.
10. According to Mr. Ali Athar, it was only for this year that the time for making the assessment was extended up to 30th day of June, 1959. In support of his argument, Mr. Ali Athar placed reliance on the Supreme Court decision in Nagina Silk Mill, Lyallpur v. The Income Tax Officer, A-Ward, Lyallpur and another {PLD 1963 SC, 322] in which their Lordships referred to the definition of the "year" added by way of clause (I6) to Section 2 of the Income Tax Act, 1922, by Finance OrdinanceXXV of 1960, which provided that this addition shall be deemed to have been added on and from the 1st day of April, 1959.
11. This addition in the Income Tax Act as well as the additions of the provisos to Section 2(20) and Section 28 of the Sales Tax Act had become necessary by reason of the fact that the financial year had been changed from 1st day of April--31st day of March to 1st day of July--30th day of June and, for this purpose, the definition of the "financial year" in the General Clauses Act, 1897, underwent corresponding amendment by Ordinance XIV of 1959. Their Lordships were required to determine the meaning of the expression "four years" in sub-section (2) of Section 34 of the Income Tax Act, 1922, in the light of these amendments. Their Lordships held that "year" means a period of 365 days, and that the amendments made in the Income Tax Act, 1922, did not have the effect to convert the period of four years' limitation into years of unequal time, and that the altered definition of the word "year" seemed to have direct application only to the terminal point of the year of assessment commencing from the 1st day of April,'1958, which received an extension of three months, so as to end on the 30th day of June, 1959. Their Lordships also took note of the proviso added to Section 28 of the Sales Tax Act, referred to above, and held that limitation for sales tax assessment had been extended by three months only in respect of one assessment year, namely,
55. Mr. S.A. Nusrat, the learned Advocate for the Department, on the other hand, took his stand on a Lahore decision, The Commissioner of Sales Tax v. Messrs Ansar Textile Mills, Lahore {PLD 1966 Lah. 505] in which the decision of the Supreme Court in Nagina Silk Mills was distinguished on the ground that the word "year" should be construed in the light of the new definition added by the proviso to Section 2(20) of the Sales Tax Act.
12. However, the question whether the decision of the Supreme Court in Nagina Silk Mill is really distinguishable and was rightly distinguished in the Lahore case is only of academic interest in view of the amendment made in Section 28 by the Finance Act, 1964, by which sub-section (2) was added to Section 28, and which addition was provided to take effect from the 31st day of March, 1955, Under this new sub-section (2), the assessment for the sales tax payable for any one more quarters than one for the period beginning on the 1st day of April, 1954 and ending on the thirtieth of June, 1961 could be made at any time before the 30th day of June, 1965, It may here be noted that the figure "1965" was substituted successively by the Finance Acts, 1966, 1967 and 1968, the Sales Tax (Amendment)
13. Ordinance, 1969 and the Finance Ordinance, 1970, under which the period within which assessment could be made was extended ultimately up to the 30th day of June, 1971.
14. The amendment made in Section 28 of the Sales Tax Act which we consider relevant for the purpose of the present case is the one made by Finance Act, 1964 by which the new sub-section (2) was added to Section 28. This new sub-section was required to be deemed to have been added on 31st day of March, 1955. The question is what is the effect of the addition of this sub-section to Section 28 of the Sales Tax Act. In this connection, we will have to consider the effect of the words "deemed to have been added" used by the Finance Act, 1964, when it added the new sub-section (2) to Section
28. The effect of these words is that a legal fiction was created, that is, the Finance Act, 1964, enacted that something should be deemed to have been there in Section 28 of the Act on the 31st day of March, 1955 which, in fact, was not there at all. Nevertheless, the Court has to give full effect to this legal fiction, because the statute requires the Court to do so, even though, on the date the assessment in the present case was made, there was no sub-section (2) of Section 28 permitting assessments to be made for the period beginning on the 1st day of April, 1954, and ending on the 30th day of June, 1961 at any time before the 30th day of June, 1965 (and by successive amendments up to 30th day of June, 1971). The Court must hold that this sub-section was present when the assessment was made, in the present case. This view received support from the observations of the Judicial Committee of the Privy Council in Vellaswamy Servai and others v. L.
15. Sivaraman Servai [AIR 1930 PC 24] and the observations of their Lordships of the Supreme Court in Begum B.H. Syed v. Mst. AfzalJahan Begum and another [PLD 1970 SC 29]. In this latter case, the following observation of Lord Acquith in East & Dwelling Company Ltd. v. Finsbury Borough Council [LR 1952 AC 109-132] was approved : "If you are bidden to treat an imaginary state of afifairs as real, you must surely, unless prohibited from doing so, also imagine as real the consequences and incidents which, if the putative state of affairs had in fact existed, must inevitably have flowed from or accompanied it."
16. Their Lordhships of the Supreme Court in this judgment further referred to the following observation of James, L.J. In re : Levy ex parte Walton [17 Ch. D 756].
17. "When a statute enacts that something shall be deemed to have been done which in fact and in truth wasmot done, the Court is entitled and bound to ascertain for what purposes and between what persons the statutory fiction is to be resorted to".
18. We called upon the learned Advocates for the parties to address us on the purpose for which a legal fiction was created in the Sales Tax Act, 1931, ^hen the amendment introduced in 1964 by addition of sub-section (2) to Section 28 was deemed to have been added on the 31st day of March, 1955. It was not disputed that the purpose was to save the assessments which had been made beyond the limitation period originally fixed by the Act and to enable the Sales Tax Department to make assessments in cases which had become barred by limitation. This being the purpose of the amendment made by the Finance Act of 1964, we have to hold that the assessment made in the present Case on 18th June, 1962 was within the period of limitation prescribed by Section 28 of the Sales Tax Act.
19. 1954- Mr. Ali Athar, however, took his stand on another decision of the Supreme Court, The Income Tax Officer, Central Circle II, Karachi and another V. Cement Agencies Ltd., [P.L.D. 1969 S.C. 322] in which it was held, on the authority of the Privy Council decision in Lemn v. Mitchel [L.I?. 1912 A.C. 400] the decision of Chancery Division in/Eyre v, Wynn Mackenzie [{1896) 1 Ch. D. 135] and of the Privy Council in The Commissioner of Income Tax \. Tribune Trust [P.L.D. 1947 P.C, 247] that neither a legislative measure nor a decision of the Court could reopen with retroactive effect a closed and past transaction or annul a valid and existing judgment. As Mr. Ali Athar took his stand on the Supreme Court decision in Cement Agencies' case, we should refer briefly to the facts of this case upon which the decision of their Lordships of the Supreme Court was based. Cement Agencies Ltd , was a Company incorporated in India with its head office at Bombay, and was, therefore, a non-resident in Pakistan. The Company did not file any returns of incomeMn Pakistan, but continued to file returns in Bombay where it was assessed to income tax. On 30th January, 1956, the Income Tax Officer issued two notices under Section 34(1) of the Income Tax Act to the assesses for the years 1953-54 and 55 and another notice under Section 22(2) of the Act for the year 56. On the 18th of March, 1956 returns were filed by the assessee for the years 1951-52, 1952-53, 1953-54, 1954-55 and 1955-56. The Income Tax OflBcer assessed the Company to tax for the year 1951-52. But the assessee went in appeal, where the order of assessment was set aside by the Appellate Assistant Commissioner on the ground that the assessee being non-resident was not liable to income tax in Pakistan. This order was upheld by the Income Tax Appellate Tribunal. The assessment for the year 1952-53 was also set aside by the Assistant Commissioner. This decision was upheld, again by the Income Tax Appellate Tribunal. In view of the orders of the Appellate Tribunal, the proceedings in respect of the other years for which returns had been filed were dropped on 25th of June, 1958, and the Income Tax OflScer issued a certificate that the assesse,e was not liable for income tax in Pakistan. But the Department sought to reopen these cases in view of the decision of the Supreme Court in Octavius Steel & Company Limited v. The Commissioner of Income Tax, Dacca{p L.B. 1960 S.C. 371\. But their Lordships of the Supreme Court held that the cases of the assessee for all these years had become past and closed transactions and could not be reopened in consequence of the decision of the Supreme Court in Octavius Steel and Company Limited v. The Commissioner of Income Tax, Dacca. With regard to the assessment orders of 1951-52 and 1952-53, their Lordships took note of the fact after dismissal of the Department's appeal by the Income Tax Appellate Tribunal, the Income Tax Department did not take any further steps to challenge these orders which, therefore, became final. Since Mr. Ali Athar took stand on The Cement Agencies' case, we asked him whether the orders of the Assessing OflBcer, the Appellate Assistant Commissioner and the Income Tax Appellate Tribunal in the present case could be said to have become final notwithstanding the fact that reference proceedings were pending before the Appellate Tribunal. Mr. Ali Athar conceded, and rightly in our opinion, that since reference proceedings were pending before the Appellate Tribunal, the assessment order and the appellate orders in the present case could not be treated to have become final. If so, then the decision of the Supreme Court in The Cement Agencies' case would obviously not apply to the present case.
20. Thus, in view of the amendment by addition of sub-section (2) to Section 28 of the Sales Tax Act, 1951, made by the Finance Act, 1964, we have to hold that the sales tax assessment for any one quarter or more quarters than one of the period beginning on the 1st day of April, 1954 could be made before the 30th June, 1965, which figure was by successive amendments ultimately changed to 1971. In this view of the matter, the assessment made in the present case cannot be said to have been made beyond the limitation period. We, therefore, answer the question stated by the Appellate Tribunal as follows "The sales tax assessment for the charge year 1957-58 made on the 18th of June, 1962 was not barred by limitation.''
21. Question answered accordingly.