1. HAMOODUR RAHMAN, C. J.-This appeal, by special leave, arises out of a, decision of the former High Court of West Pakistan, Lahore Seat, in a reference under section 66(1) of the Income-tax Act read with section 19 of the Business Profits Tax Act.
2. The circumstances in which this reference came to be made were as follows:- The appellant-Company, which was carrying on the business of manufacture of yarn and cloth, was called upon by the Income-tax Officer on the 13th January 1954, by a notice under section 11(1) of the Business Profits Tax Act to file its return for the period commencing 1st of January 1951 and ending on the 31st of December 1951, although no notice under section 14 of the above-mentioned Act was served on the said assessee. The assessee filed a nil return for the chargeable accounting period with a notice that it was not taxable to any business profits tax. A Notice under sub--section
(2) of section 11 was then also served, and the assessee was ultimately assessed on the 27th of November 1957, for the chargeable accounting period ending 31st of March 1951, to a total amount of Rs. 1,55,000 as business profits tax at the rate of 16 2/3 per cent.
3. The chargeable accounting period was held to have ended on the 31 st of March 1951, as, under the third proviso to section 4 of the-Business Profits Tax Act, the profits of industrial undertakings, to which section 15-B, of the Income-tax Act, 1922, applied, were exempt from business profits tax after the 31st of March 1951.
4. The assessee went up in appeal from this assessment order on the ground that the assessment had become barred by time long ago under the provisions of section 14 of the Business Profits Tax Act, particularly, since the provisions of section 14 had in the meantime been repealed and the provisions of section 34 of the Income-tax Act had been made applicable by section 12 of the Finance Act of 1957 with effect from the 4th March 1957, long before the final assessment was made on the 27th of November 1957.
5. The Appellate Assistant Commissioner came to the conclusion that,, under the Business Profits Tax Act, there is no time limit for the completion of an assessment either under section 11 or section 14, nor is there any time limit fixed for the issuance of a notice under section 11. The limitation under section 14 is only for the purposes of the issuance of a notice. In the instant case, therefore, because the notice under section 11(1) was issued on the 13th January 1954, well within the period of four years from the end of the chargeable accounting period, the assessment was valid, even though made in November 1957.
6. The assessee went on a further appeal to the income-tax Appellate Tribunal. The latter went into this question of the applicability of the amendments made during the pendency of the proceedings in the Business Profits Tax Act and came to the following conclusion:- "There can be no doubt that if section 34 applied to the facts of the present case and if it was operative for the purpose of the Business Profits Tax Act, the assessment would be bad as it was completed beyond the period of limitation envisaged in Section 34. It may be recalled that the Notification, for the purpose of adaptation and modification of section 34 vis-a-vis the Business Profits Tax Act, was. Made by the Central Board of Revenue on the 4th July 1958. Without this modification section 34 would remain dormant for the; purpose of the Business Profits Tax Act. The position, therefore, is that before the 4th July 1958, section 34 (of the Income---tax Act) remained dormant for the purpose of the Business Profits Tax Act and, therefore, there was no lime-limit prescribed for making an assessm ent under the Business Profits Tax Act."
7. The appeal was accordingly dismissed.
8. Thereafter, at the instance of the assessee the Income-tax Appellate Tribunal referred the following question of law to the High Court for its opinion:- "Whether, in the facts and circumstances of the applicant's case, the Tribunal was right in holding that the assessm ent under the Business Profits Tax Act in respect of the chargeable accounting period ending the 31st March 1951,. Made on the 27th November 1957, on the basis of service of notice under section 1 l of the Business Profits Tax Act was sustainable in law."
9. The High Court agreed with the view of the Income-tax Appellate Tribunal that the provisions of section 34 of the Income-tax Act could not be taken to have become operative for the purposes of the Business Profit Tax Act until the Central Board of Revenue had carried out the necessary modifications in this section by its notification of the 4th of July 1958, because, without such modification, this effect could not have been achieved. The answer returned to the reference was, therefore, in the affirmative.
10. Leave was granted in this case to consider whether the assessee was entitled to the benefit of the amendments made in the Business Profits Tax Act by the Finance Act of 1957 during the pendency of the assessm ent before the Income-tax Officer.
11. Learned counsel appearing in support of this appeal has contended that since the question of limitation is a question pertaining to procedure and, therefore, concerning not the liability to tax but only the machinery for the recovery of the tax, the provisions of section 34 of the Income-tax Act which repealed section 14 of the Business Profits Tax Act by reason of the amendments made by the Finance Act of 1957, should have applied to the assessment in question and the assessment should have been held to have become barred by time.
12. Learned counsel has also relied upon a decision of this Court in the case of Commissioner of Income-tax, East, Karachi v. Messrs Reyaz-o-Khalid Co.', Karachi (PLD 1973 SC 98), wherein it has been held that the provisions of the Finance Act of 1957 came into force on the day on which the President gave his assent and "unless provisions were made by the Parliament in the Finance Act, 1957, postponing its operation, its provisions came into fore on the 4th March 1957, when the Act received the assent." By section 12 of the said Finance Act, section 14 of the Business Profits Tax Act, 1947 stood repealed and section 34 of the Income-tax Act replaced it "with immediate effect". If this be so, then, learned counsel appearing in support of this appeal contends that the provisions of section 34 of the Income-tax Act became applicable and the assessment had to be completed within four years of the end of the year in which the profits were first assessable, i.e., by 31-3-56. An assessm ent made on 27-11-57 was, therefore, beyond time and illegal.
13. The learned counsel appearing for the Taxing Authority, on the other hand, contends that the amendment was not merely procedural, nor did it pertain purely to the machinery provisions for the realisation of the tax.
14. It sought to annihilate the liability for the recovery of the tax for which proceedings bad already been started and, therefore, it conferred a right. The amendment, therefore, could not take effect retrospectively and affect pending proceedings. Such pending proceedings had to be decided on the basis of the law prevailing on the date the proceedings were initiated.
15. Learned counsel has for this purpose placed reliance upon the decision of this Court in the case of Adnan Afzal v. Capt. Sher Afzal (PLD 1969 SC 187), to point out that even if by a purely procedural amendment "any existing rights are affected or the giving of retroactive operation causes inconvenience or injustice, then the Courts will not favour an interpretation giving retrospective effect to the amendment".
16. As regards provisions relating to limitation, learned counsel has referred to a decision of the Privy Council in the case of Mst. Allah Rakhi v. Shah Muhammad Abdur Rahim (AIR 1934 PC 77to show that the Judicial Committee of the privy Council did not make the provisions of the Limitation (Amendment) Act of 1929 applicable to suits brought before 1st January 1929.
17. Sections 11 and 14 of the Business Profits Tax Act, as they stood before 1957, read as follows:- "11. (1) The Income-tax Officer may, for the purposes of this Act,. Require any person whom he believes to be engaged in any business to which this Act applies, or to have been so engaged during any chargeable accounting period, or to be otherwise liable to pay business, profits tax, to furnish within such period, not being less than forty-five-- days from the date of the service of the notice as may be specified in the notice, a return in the prescribed form and verified in the prescribed manner setting forth (along with such other particulars as may be provided for in the notice) with respect to any chargeable accounting period specified in the notice the profits and taxable profits of the business or the amount of deficiency, if any, available for relief under section 6: Provided that the Income-tax Officer may, in his discretion, extend the date for the delivery of the return.
14. If, for any reason profits of any chargeable accounting period chargeable to business profits tax have' escaped assessm ent, or have been under-assessed, or have been the subject of excessive relief, the Income-tax Officer may at any time within four years of the end of the chargeable accounting period in question serve on the person liable to such tax a notice containing all or any of the requirements which may be included in a notice under section 11, and may proceed to assess or reassess the amount of such profits liable to business profits tax, and the provisions of this Act shall, so far as may be, apply as if the notice were a notice issued under that section 6 : Provided that unless definite information has come into his possession the Income-tax Officer shall not initiate proceedings under this section without obtaining the previous approval of the Inspecting Assistant Commissioner of Income-tax."
18. By section 12(5) of the Finance Act of 1957, however, the old section 14 of the Act stood deleted, and subsection (7) of the said section of the Finance Act provided as follows "For section 19, the following section shall be substituted, namely :-
19. Application of the provisions of Act XI of 1922.-(1) The provisions of sections 4-A, 4-B, 10, 13, 24-B, 29, 34, 36 to 44-C (inclusive), 45 to 48 (inclusive), 49-E, 49-F, 50, 54 and 61 to 63 (inclusive) and 65 to 67-A (inclusive) of the Income-tax Act, 1922 (XI of 1922), shall apply with such modifications, if any, as may be prescribed, as if the said provisions were provisions of this Act and referred to business profits tax instead of to income-tax, and every officer exercising powers under the said provisions in regard to income-tax may exercise the like powers under this Act in regard to business profits tax as he exercises in relation to income-tax under the said Act : Provided that reference in the said provisions to the assessee shall be construed as references to a person to whose business this Act applies.
(2) Any reference in this Act to the Income-tax Act, 1922 (XI of 1922),. Shall, in relation to the profits of any chargeable accounting period and to the state of affairs and all the circumstances necessary to determine the charge to business profits tax, mean the said Act as in force in the relevant period Provided that whatever be the relevant period, references to section 46, of the said Act shall be deemed to include reference to subsec--tions (8), (9) and (10) of that section."
19. It will be observed from the above that the provisions of the Income-tax --Act made applicable to the Business Profits Tax Act were to apply "with such modifications, if any, as may be prescribed".
20. Now the Central Board of Revenue prescribed the necessary modifications for the adap--tation of section 34 of the Income-tax Act by a notification issued only on the 4th of July 1958 but purported to give this notification retrospective effect from the 1st of April 1957. The notification was to the following effect :- "(Va) Modification of section 34.-(a) In section 34, before the word "Year", wherever it occurs (except the second proviso to sub--section (1) the word "financial" shall be inserted and the fol-- lowing Explanation shall be added at the end of this section,.. Namely Explanation.-The expression "financial year" as used in this section,. Means the financial year commencing next after the expiry of the accounting period which constitutes or includes the chargeable --accounting period the profits of which are chargeable to Business Profits Tax ;
(b) In subsection (1), for the words, figures and brackets "subsection (2), of section 22", the words, figures and brackets "subsection (1) of section 11" shall be substituted ; and
(c) In subsection (2), for the figures "23" the figures "12" shall be substituted and in the proviso to this subsection, after the words "an order under" for the existing words, figures, letters, brackets and commas, the words, figures, letters, brackets and commas, "section 16,. Section 17 or section 17-A of the Act or applied section 66 or applied section 66-A" shall be substituted.
21. These amendments shall be deemed to have been made on the 1st day of April 1957, and shall have effect accordingly."
22. The question, therefore, that arises for consideration is as to whether the provisions of section 34 applied of their own force without the modifica--tions or became applicable only after the modifications. If they were not applicable until such modifications were made, then, clearly, the notification of the Central Board of Revenue could not give them retrospective effect, for, a notification can never be made retrospective.
23. Now this Court has held, in the case of Commissioner of Income-tax, East, Karachi v. Messrs Reyaz- o-Khalid Co., Karachi that the word "shall apply ,with such modifications, if any, as, may be prescribed" in section 12(7) of the Finance Act, 1957, did not mean "that the repeal .Of section 14 of the Business Profits Tax Act and the application of section 34 ,of the Income-tax Act was postponed until modifications were made". --Section 14 of the Business Profits Tax Act, according to this decision, was repealed "with immediate effect" and "simultaneously section 34 of the Income-tax Act became part of the Business Profits Tax Act".
24. Even so this, by itself would not have affected pending proceedings if this was not an amendment of a purely procedural or machinery provi--sion but it appears that this Court in the above-cited case also took the view that "no vested right, therefore, accrued to the assessee in the case which could not be taken away by the Finance Act, 1957, with retrospective effect". This observation could only have been made on the basis that---the amendment was procedural in nature. Thus if the provisions of section 34 became substituted in the Business Profits Tax Act with effect from the date the Finance Act of 1957, came into force, and if they appertained to only the machinery provisions relating to the recovery of the tax then they also took effect retrospectively and affected pending proceed--ings, as held by this Court in the case of Messrs Reyaz-o-Khalid Co.
25. We have carefully re-examined the provisions of the Finance Act of 1957 and have come to the conclusion that the applicability of statutory amend--ments could not possibly have been made to depend upon modifications to be made by the executive, for, then, the executive could have rendered the statute nugatory by not making the necessary modifications, the use of the words "modifications, if any", clearly indicated that even if no modifications, were made the amendment would still be operative. The statute which had .Come into force by the will of the Legislature could not also remain "doe--mant" at the will of the executive. It operated of its own force and it became the duty of the executive to give effect to it as far as possible even without the modifications which could, at best, be only of a consequential nature. We are unable, therefore, to agree with the High Court that without the modifications the amendment was not applicable.
26. We are also unable to agree that the amendment did not apply to pending proceedings, because, the provisions of section 34 of the Income tax Act impose no charge on the subject but merely deal with the machinery of assessm ent as held by the Privy Council in the case of the Commissioner of Income-tax, Bengal v. Messrs Mahaliram Ramjidas ((1940) 8 1 T R 442). This was, therefore, an amendement of procedure in which no assessee has a vested right. Such procedural amendments operate retroactived and apply even to pending proceedings.
27. For these reasons we are of the opinion that provisions of section 34 as applicable in 1957-58, became applicable in the present case and after the expiry of four years from the end of the year in which the assessm ent had first to be made no further step could be taken to recover the tax which had escaped assessm ent or been under-assessed or been the subject of exces--sive relief even though the notice under section 11(1) was issued within the period prescribed in the original section 14 of the Business Profits Tax Act.
28. This appeal is, accordingly, allowed but there will be no order as to costs.