COMMISSIONER INLAND REVENUE, MUZAFFARABAD VS MUHAMMAD ABBAS QADRI, 2016 PTD-SUPREME-COURT-AZAD-KASHMIR 2874 (2016)

(a) Limitation Act (IX of 1908)---

----S. 4---Suit, appeal and application---Limitation---Computation of period---Public holiday----If the day of termination of limitation was a public holiday, the same had to be excluded while computing limitation.

(b) Income Tax Ordinance (XLIX of 2001)---

----S. 133---Reference to High Court---Direct reference to High Court under S. 133 of the Income Tax Ordinance, 2001 after amendment vide Finance Act, 2005---Effect of such amendment on references pertaining to tax-years before said amendment took effect---Scope---Reference filed by Department directly to the High Court under provisions of the amended S. 133 of the Income Tax Ordinance, 2001 was dismissed on ground that said reference pertained to a tax-year before the said amendment took effect, therefore direct reference to the High Court, under post-amendment S. 133 of the Income Tax Ordinance, was not competent---Validity---Statutory provisions applicable at the time of order of Appellate Tribunal and filing of references in the present case had to be considered and the tax year was not relevant---Relevant amendment to S. 133 of the Income Tax Ordinance, 2001 was made with effect from 1st July, 2005 and at the time of filing of the references in the year 2011, according the enforced statutory provisions of S. 133 of the Income Tax Ordinance, 2001; the taxpayer or Department had a right to prefer an application, directly to the High Court stating any question of law, whereas before the amendment of S. 133 of the Income Tax Ordinance, 2001, in year 2005, such direct reference under S. 133 of the Income Tax Ordinance, 2001 was not competent, rather the taxpayer or Department had to submit application along with documents to the Appellate Tribunal requiring it to refer to the High Court a question of law arisen out of an appellate order---After amendment to S. 133 of the Income Tax Ordinance, 2001 vide Finance Act, 2005, no such requirement remained in force---Impugned order of High Court was therefore not sustainable and was accordingly recalled and the matter was remanded to the High Court for decision on merit---Appeals were allowed, accordingly.

Syed Nazir Hussain Shah Kazmi for Appellant (in Civil Appeal No.339 of 2015).

Syed Shahid Bahar for Respondent (in Civil Appeal No.339 of 2015).

Syed Nazir Hussain Shah Kazmi for Appellant (in Civil Appeal No.340 of 2015).

Respondent in person (in Civil Appeal No.340 of 2015).

Syed Nazir Hussain Shah Kazmi for Appellant (in Civil Appeal No.341 of 2015).

Mir Abdul Latif for Respondent (in Civil Appeal No.341 of 2015).

Syed Nazir Hussain Shah Kazmi for Appellant (in Civil Appeal No.342 of 2015).

Syed Shahid Bahar for Respondent (in Civil Appeal No.342 of 2015).

Syed Nazir Hussain Shah Kazmi for Appellant (in Civil Appeal No.343 of 2015).

Syed Shahid Bahar for Respondent (in Civil Appeal No.343 of 2015).

Syed Nazir Hussain Shah Kazmi for Appellant (in Civil Appeal No.344 of 2015).

Syed Shahid Bahar for Respondent (in Civil Appeal No.344 of 2015).

Syed Nazir Hussain Shah Kazmi for Appellant (in Civil Appeal No.345 of 2015).

Ch. Muhammad Manzoor for Respondent (in Civil Appeal No.345 of 2015).

Syed Nazir Hussain Shah Kazmi for Appellant (in Civil Appeal No.346 of 2015).

Syed Shahid Bahar for Respondent (in Civil Appeal No.346 of 2015).

Syed Nazir Hussain Shah Kazmi for Appellant (in Civil Appeal No.347 of 2015).

Syed Shahid Bahar for Respondent (in Civil Appeal No.347 of 2015).

Date of hearing: 9th June, 2016.

JUDGMENT

CH. MUHAMMAD IBRAHIM ZIA, J.---These appeals by leave of the Court have arisen out of the common judgment of the High Court dated 07.04.2015 through which the References filed by the appellant, herein, have been dismissed.

2.The facts involved in all these appeals are that the respondents filed the return of total income for the tax year, 2004 before the Income Tax Department. The competent authority i.e. the Commissioner Income Tax, under section 177(4) of Income Tax Ordinance, 2001 (hereinafter to be referred as Ordinance, 2001) selected the cases for audit and issued amended assessment orders. Feeling aggrieved from the amended assessment orders the respondents filed appeals before the Commissioner Income Tax (Appeals), Mirpur. The learned Commissioner accepted the appeals and while modifying the assessment orders reduced the assessed income. Against the orders of Commissioner Income Tax (Appeals), the respondents filed appeals before the Azad Jammu and Kashmir Council Income Tax Appellate Tribunal (ITAT). The ITAT vide consolidated judgment dated 21.09.2016 set-aside the amended assessment orders as well as appellate orders. Appeal No. 68/2010 titled Commissioner Income Tax v. Mahboob-ur-Rehman Tareen was dismissed. The References filed against the judgment dated 21.09.2016 have been dismissed through the impugned judgment being time barred and incompetently filed.

3.Syed Nazir Hussain Shah Kazmi, Advocate, the learned counsel for the appellant in all the appeals after narration of necessary facts submitted that the learned High Court disposed of all the references on two technical grounds; one that the references are one day time barred and the other that no direct reference is competent before the High Court. He forcefully argued that both the conclusions drawn by the learned High Court are result of misconception of facts and law. So far as the question of limitation is concerned, as according to the statutory provisions, if the day of termination of limitation is public holiday then it has to be excluded while computing the limitation. As 25th December of every year is a public holiday in relation to the birthday of Quaid-e-Azam Muhammad Ali Jinnah, thus, the references have been filed within limitation on the next working day i.e., 26.12.2011. The conclusion drawn by the learned High Court on the point of limitation is incorrect. So far as the other proposition is concerned, it is also misconceived. The learned High Court has wrongly opined that for determination of the proposition the tax year is relevant. According to the statutory provisions, neither the tax year 2004 is cut-off year for the purpose of enforcement of law nor it is relevant for the purpose of appeal or reference before the High Court. The cut-off date is 1st July, 2002 with effect from which the old Income Tax Ordinance, 1979 was repealed and the new Ordinance, 2001 was enforced and adapted in Azad Jammu and Kashmir. However, keeping in view the propositions involved in this case the tax year has no relevance. Only the date of order of the appellate Tribunal is relevant for filing a reference before the High Court. As the reference is filed against the order of the appellate Tribunal dated 21.09.2011 and the notice was served upon the appellants on 26.09.2011, thus, the limitation has to be computed from the date of notice and for filing reference the law at the time of decision of the appellate Tribunal has to be applied. According to the enforced law, in the year 2011 direct reference before the High Court was competent, therefore, these appeals are liable to be accepted.

4.Conversely, Syed Shahid Bahar, Mir Abdul Latif and Ch. Muhammad Manzoor, Advocates, the learned counsel for the respondents forcefully defended the impugned judgment and submitted that the High Court has rightly dismissed the references. While arguing on the question of limitation, they submitted that according to the record, the notice was served upon the appellant on 26.09.2011 and from the said date the references were time barred. So far as the other ground is concerned, the learned High Court has applied the correct law and also made proper appreciation of it. In the references, the date of service of notice is mentioned as 28.09.2011 and if the limitation is computed from this date even then the references were timed barred.

5.We have considered the arguments of the learned counsel for the parties and also examined the record made available. Firstly, we would like to attend the question of limitation. The references Nos. 32, 33, 34, 35, 36, 37, 38 and 38 of 2011 have been filed on 26.12.2011 before the High Court. In all the above references the appellant has averred that notice under subsection (3) of section 132 of Ordinance, 2001 was served on 28.09.2011, whereas, the respondents have categorically taken the stand that the same were served on 26.09.2011. The learned High Court while treating the version of the respondents that the notice was served upon 26.09.2011 as correct, declared that the references are time barred. The counsel for the appellant has rightly pointed out that the learned High Court has skipped the fact that on 25.12.2011 it was public holiday which according to the provisions of section 4 of the Limitation Act, 1908 has to be excluded while computing the limitation. On 25th December the Court was closed and on the very next day i.e., 26.12.2011 the references have been filed. This aspect has not been considered by the High Court, therefore, according to the statutory provisions after deduction of one day the references were within time. The observation of the High Court that the references are one day time barred is not correct, hence, not sustainable.

6.The Reference No. 11/12 titled Commissioner Inland Revenue v. M/s. Insurance Company Ltd. Muzaffarabad, was filed on 13.01.2012 against the order dated 18.10.2011 which was allegedly served upon the appellant on 20.10.2011. Thus, the said reference has been filed within limitation even from the date of order. Perhaps, these facts remained out of sight from the learned High Court.

7.The next proposition is competency of filing direct reference before the High Court according to the provisions of section 133 of Ordinance, 2001. The observation of the High Court that as the cases have been selected for audit under the provisions of section 177(4) of Ordinance, 2001 pertaining to the tax year 2004, thus, according to the provisions of un-amended section 133 direct references are not competent; appears to be misconceived as the tax year 2004 in this context is not material. The material date is that of the order of appellate Tribunal which with reference to the instant case are 21.09.2011 and 18.10.2011. The statutory provisions applicable at the time of order of appellate Tribunal and filing of references, have to be considered. Under the provisions of section 239 of the Ordinance, 2001 the provision of law relating to assessment of the year ending on or before 30th day of June, 2002 has been saved which relates to the procedure of assessment and not the references or appeals before the appellate Tribunal. The Ordinance, 2001 was adapted in the Azad Jammu and Kashmir vide Act IV of 2002 with effect from 1st July, 2002 while repealing the Azad Jammu and Kashmir Council (Amendment) Act, 1979. Thus, the Ordinance, 2001 has to be deemed to be enforced and applicable with effect from 1st July, 2002.

8.In this context, there is also a legislative development. Before the year 2005 according to the provision of enforced section 133 of Ordinance, 2001 against the appellate Tribunal's order made on appeal under section 132, the taxpayer or Commissioner may, by application in such form and accompanied by such documents as may be prescribed, require the appellate Tribunal to refer any question of law arising out of such order to the High Court, but vide Finance Act, 2005 (Act No. VII of 2005) among others some material amendments in the Ordinance, 2001 were also made. With reference to this case section 133 of Ordinance, 2001 was also substituted with effect from 1st day of July, 2005. In the Azad Jammu and Kashmir this amendment became operative through Azad Jammu and Kashmir Income Tax (Adaptation) Act, 2005 (Act III of 2005). This adaptation Act has special reference in this context but even otherwise such Acts are repeated every year like Act IV of 2003, Act I of 2004, Act II of 2006, Act I of 2007, Act II of 2008, Act IV of 2009, Act I of 2010 and the last one of this series available is Act I of 2014. In these routine adapted Acts the identical language is applied according to which all the amendments made in the Ordinance, 2001 and all the rules made, notifications, circulars, statutory rules and orders (S.R.Os.) and orders issued thereunder as enforced in Pakistan on or after first July of every year shall be deemed to have been so made and issued at the same time in Azad Jammu and Kashmir by virtue of the Azad Jammu and Kashmir Income Tax (Adaptation, Enforcement and Validation) Act, 2002. Thus, in the year 2011 at the relevant time of filing of references according to the enforced statutory provisions of section 133 of Ordinance, 2001 the tax payer or Commissioner have a right to prefer an application, in the prescribed form to the High Court directly stating, any question of law. Whereas, before substitution of section 133 in the year 2005 a direct reference was not competent rather the tax payer or Commissioner, as the case may be, has to submit application along with documents to the appellate Tribunal requiring to refer to the High Court the question of law arisen out of title appellate order. After amendment introduced in the year 2005 no such requirement remains there. In our opinion, in the impugned judgment the appreciation made by the High Court is not proper. Regarding the filing of reference or appeal the time relevant is the order to be challenged or called in question and the law providing remedy of reference at the relevant time has to be applied not the law which has been removed from the Statute book years' prior to arising the need of filing of appeal or reference. Thus, the High Court's opinion that the direct reference against the order of appellate Tribunal passed in the year 2011 was not competent is not correct approach. Under the provisions of subsection (1) of section 133 of Ordinance, 2001 a directed reference was competent.

9.Hence, on both proposition; i.e., limitation and incompetency of references being directly filed, the observations of the High Court are not sustainable. The same are hereby recalled. Consequently, while accepting these appeals the references are remanded to the High Court for decision on merit.

These appeals stands accepted in the above terms. No order as to costs.

HBT/20/SC(AJ&K)References remanded.