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Petition No.3590 of 1982, decided on 3rd March, 1984.

‑‑‑S.65(3)(3‑A) [as added by Finance Act, 1982]‑‑.Additional assessment‑‑Limitation‑‑Retrospectively of enactment procedural in nature ‑Applicability of amendment on pending cases‑‑Section 65 of Ordinance dealing with addit 44onal assessment, held, was a machinery provision authorizing Department to take steps to determine total income of assessee or tax payable by him, as may have escaped assessment earlier‑‑Before amendment, period fixed for passing such order was 10 years from end of assessment year in which income was first assessable‑‑By amendment notice though could be issued within 10 years but order for additional assessment was to be passed within one year from end of financial year in which such notice was served‑‑Period during which after issuance of notice I.‑T.O. must pass order had thus been considerably curtailed ‑‑Amendment, held, was procedural in nature and applied to pending cases.

Koh‑i‑Noor Textile Mills Ltd. v. Commissioner of Income‑tax, Lahore P L D 1974 S C 284 and Commissioner of Income‑tax v. Eastern Federal Union Insurance Company P L D 1982 S C 247 rel.

Imtiaz Javed and Muhammad Iqbal Hashmi for Appellant.

Syed Iftikhar Ahmad Shah, D.A.G. and Muhammad Ilyas Khan for Respondent.

Date of hearing: 15th November, 1983.

This judgment will also dispose of Writ Petitions Nos. 1486/83, 1581/83, 2404/83, 2406/83 and 3627/83 as they all involve the same question of law, namely: whether subsection (3‑A) 3f section 65 of the Income‑tax Ordinance, 1979, as lately introduced by the Finance Ordinance, 1982, was applicable even to pending cases of assessments. .

2. Section 65 of the Income‑tax Ordinance, 1979, dealing with "Additional assessment" was in effect a machinery provision authorizing an Income‑tax Officer to take steps to determine the total income of an assessee or the tax payable by him as may have escaped assessment earlier. It could have been done by issuance of a‑notice under subsection (1) of section 65, and before the amendment, the maximum period fixed A for passing order in any such exercise was 10 years from the end of the assessment near in which the income was first assessable. In other words, hitherto the issuance of notice as such did not specifically attract to itself any limitation. The ceiling of 10 years was in fact fixed only for finalizing such proceedings. Conversely, neither the notice ‑could be issued nor orders could be passed beyond this period of 10 years.

3. The Finance Ordinance XII of 1982 replaced subsection (3) and added subsection (3‑A) to section 65 ibid. Subsection (3) now directs that the notice may be issued within those 10 years. In a way, it prescribes time for its issuance, though the period corresponds to the same length of 10 years. The added subsection (3‑A), however, seems to curtail the period of 10 years earlier prescribed for passing order:( to only one year from the end of the financial year in which such notice was served. It may be reproduced as under:

"(3‑A) Where a notice under subsection (1) has been issued no order under the said subsection shall be made after the expiration of one year from the end of the financial year in which such notice was served."

It will be appreciated that the powers of the income‑tax Officer to assess the escaped income now could not be exercised for a long period of 10 years but instead he had to pass orders in this behalf before the expiration of one year from the end of the financial year in which such notice was served.

The question was if this amendment applied or not to pending cases which were claimed to be many under the old dispensation when there was no idea of confronting the Income‑tax Authorities with such a limited period of exercising their powers. In my humble reading, the amendment is procedural inasmuch as it does not absolve the liability of an assessee in regard to his income, which may have escaped Assessment, nor does it curtail the powers of the Income‑tax Officer to assess the same for the purposes of charging income‑tax. It therefore does not bring any change in regard to the liability of one party and the powers of the other, and hence it cannot be conveniently styled as something of substantive character. What it does is to limit the time for determining the liability of an assessee in the exercise of powers conferred upon the authorities. Limitation is undeniably a matter of procedure and the amendment in question was out and out procedural There is no dearth of authority that any amendment in procedure or machinery provisions is applicable retrospectively affecting also the pending cases. See Koh‑i‑Noor Textile Mills Ltd. v. Commissioner of Income‑tax, Lahore P L D 1974 SC 284 which laid down as under:

"Even so this, by itself, would not have affected pending proceedings if this was not an amendment of a purely procedural or machinery provision but 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 retroactively and affected pending proceedings."

The same principle was reiterated in Commissioner of Income‑tax v: Eastern Federal Union Insurance Company P L D 1982 S C 247 although in a slightly different context when the period of determining the liability extending from 4 to 6 years was held not applicable to transactions past and closed during the original. period of 4 years.

4. The Amendment perhaps was intended to eliminate chances of misuse of the authority conferred upon the Income‑tax Officers. Indeed to allow them to wield it for a period of long 10 years was something extremely unusual. It had the effect of giving them a handle of oppression vis‑a‑vis the assessees. It appeared to be in public good to straighten the proceedings and provide a reasonable limitation to finalize the process. The year during which such a notice is issued and the next following were considered enough to constitute this period, if only the Income‑tax functionaries were vigilant about their job. If the idea was to provide relief to the public, there is little reason to deny the same to many people whose cases might be hanging fire for years together.

5. As an upshot of this discussion, I would candidly say that subsection (3‑A) referred to above would apply also to pending cases. Consequently, all the writ petitions are accepted and the impugned orders being in violation of subsection (3‑A) ibid are declared to be void and of no legal effect.

M. B. A. Writ petitions accepted.

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