2022 PLP 413 (PTD)

AAMER FAROOQ, J.

The present judgment shall decide instant writ petition as well as W.P. No.1694-2011, as common questions of law are involved.

2. Pakistan Oilfield Limited (the petitioner) is a Company incorporated under the laws of Pakistan and is engaged in the business of oil exploration. It is an assessee for payment of tax within the purport of Income Tax Ordinance, 2001 (the Ordinance); it is aggrieved of show-cause notices dated 24.05.2011 (the notices) issued to it by the respondents.

3. The controversy, in hand, pertains to the tax years 2005 and 2006. The petitioner filed income tax returns for the said years which were deemed to be the 'assessment orders', however, show-cause notices were issued on 14.02.2008 with respect to the issue of 'depletion allowance' and assessments for the tax years 2005 and 2006 were revised/amended under section 122(5A) of the Ordinance vide order dated 17.03.2008. The petitioner, feeling aggrieved, filed appeals before Commissioner (Appeals), which were turned down, however, appeals were filed before Appellate Tribunal Inland Revenue which are still pending. Another set of show-cause notices was issued with respect to the same tax years, however, assessment orders amended pursuant thereto, were annulled by the Commissioner (Appeals) vide order dated 06.06.2009. The petitioner has been served now with the notices with respect to same tax years for further amending the assessments and the same have been challenged through the instant petitions.

4. Learned counsel for the petitioner inter alia contended that it is trite law that second show-cause notice, on the same subject, is not maintainable. It was contended that with respect to tax year 2005, show-cause notice is barred by limitation, as the limitation is five years and the same expired on 31.12.2010. Reliance was placed on cases reported as 'Additional Commissioner Inland Revenue Audit Range, Zone-I and others v. Messrs Eden Builders Limited and others' (2018 SCMR 991), 'Federal Board of Revenue through Chairman, Islamabad and others v. Abdul Ghani and another' (2021 SCMR 1154), 'Federation of Pakistan through Secretary Finance, Islamabad and 4 others v. Messrs Ibrahim Textile Limited and others' (1992 SCMR 1898), 'Nasrullah Khan and another v. Mst. Khairunnisa and others' (2020 SCMR 2101), 'Khushi Muhammad through LRs and others v. Mst. Fazal Bibi and others' (PLD 2016 Supreme Court 872), 'Messrs Pakistan Oilfields Limited through General Manager v. Federation of Pakistan through Ministry of Finance and 4 others' (2020 PTD 110) and 'ENGRO VOPAK Terminal Limited through Manager Finance and Corporate Service, Karachi' (2012 PTD 130).

5. Learned counsel for the respondents inter cilia contended that there is no bar on issuance of second notice, as the same is permissible under the law; that in the case of tax year 2005, the period of limitation ends in 2013, as the assessment order was passed on 17.03.2008.

6. Arguments advanced by both the learned counsel have been listened most carefully and the documents, placed on record, examined with their assistance.

7. As noted above, the petitioner is aggrieved of notices issued to it for further amendment in the assessment orders for the tax years 2005 and 2006.

8. The challenge has been made to the notices on the basis that same are untenable under the law inasmuch as earlier notices issued and proceedings arisen there-from, are under adjudication before Appellate. Tribunal Inland Revenue.

9. In response to the query of the Court regarding maintainability of the petitions, learned counsel for the petitioner placed reliance on the judgment of this Court reported as 'Messrs Pakistan Oilfields Limited through General Manager v. Federation of Pakistan through Ministry of Finance and 4 others' (2020 PTD 110). In the referred judgment, this Court laid down the principles for maintainability of a petition under Article 199 of the Constitution challenging a show-cause notice. For the ease of convenience, relevant paragraph of the judgment is reproduced below:- "

9. The upshot of the above case is that the exceptions under which writ petition against a show-cause notice is maintainable are as follows:- (A) Where the impugned notice is without jurisdiction/lawful authority:- (B) Where the impugned notice is non est in the eye of law; (C) Where the impugned notice is patently illegal; (D) Where the impugned notice is issued with premeditation or without application of mind for extraneous reasons; (E) Where the aggrieved person does not have adequate and efficacious remedy; (F) Where the issues of show-cause notice violate any fundamental rights of the aggrieved person' (G) Where there is an important question of law requires interpretation of any fiscal law or any other substantive law".

10. On the touchstone of above principles, since a legal question has been raised as to the vires of the notices, hence instant petitions are maintainable.

11. Since the controversy revolves around amendment and further amendment of the assessment orders by income tax authorities, hence careful examination of section 122 of the Ordinance is required, as the same empowers the amendment(s) to be made in the assessment orders. For the sake of brevity, relevant section is reproduced below:- "

122. Amendment of assessments.

(1) Subject to this section, the Commissioner may amend an assessment order treated as issued under section 120 or issued under section 121 by making such alterations or additions as the Commissioner considers necessary . (2) No order under subsection (1) shall be amended by the Commissioner after the expiry of five years from the end of the financial year in which the Commissioner has issued or treated to have issued the assessment order to the taxpayer. (3) Where a taxpayer furnishes a revised return under subsection (6) or 6A of section 114-- (a) the Commissioner shall be treated as having made an amended assessment of the taxable income and tax payable thereon as set out in the revised return; and (b) the taxpayer's revised return shall be taken for all purposes of this Ordinance to be an amended assessment order issued to the taxpayer by the Commissioner on the day on which the revised return was furnished. (4) Where an assessment order (hereinafter referred to as the "original assessment") has been amended under subsections (1), (3) or (5A), the Commissioner may further amend, [as many times as may be necessary,] the original assessment within the later of - (a) five years [from the end of the financial year in which] the Commissioner has issued or is treated as having issued the original assessment order to the taxpayer; or (b) one year [from the end of the financial year in which] the Commissioner has issued or is treated as having issued the amended assessment order to the taxpayer. (4A) In respect of an assessment made under the repealed Ordinance, nothing contained in subsection (2) or, as the case may be, subsection (4) shall be so construed as to have extended or curtailed the time limit specified in section 65 of the aforesaid Ordinance in respect of an assessment order passed under that section and the time-limit specified in that section shall apply accordingly. (5) An assessment order in respect of tax year, or an assessment year, shall only be amended under subsection (1) and an amended assessment for that year shall only be further amended under subsection (4) where, on the basis of 2 [audit or on the basis of definite information] the Commissioner is satisfied that- (i) any income chargeable to tax has escaped assessment or (ii) total income has been under-assessed, or assessed at too low a rate, or has been the subject of excessive relief or refund; or (iii) any amount under a head of income has been mis-classified. (5A) Subject to subsection (9), the Commissioner may amend, or further amend, an assessment order, if he considers that the assessment order is erroneous in so far it is prejudicial to the interest of revenue. (5AA) In respect of any subject matter which was not in dispute in an appeal the Commissioner shall have and shall be deemed always to have had the powers to amend or further amend an assessment order under subsection (5A). (5B) Any amended assessment order under subsection (54) may be passed within the time-limit specified in subsection (2) or subsection (4), as the case may be. (6) As soon as possible after making an amended assessment under [subsection (1), subsection (4) or subsection (5A), the Commissioner shall issue an amended assessment order to the taxpayer stating - (a) the amended taxable income of the taxpayer; (b) the amended amount of tax due; (c) the amount of tax paid, if any; and (d) the time, place, and manner of appealing the amended assessment. (7) An amended assessment order shall be treated in all respects as an assessment order for the purposes of this Ordinance, other than for the purposes of subsection (1). (8) For the purposes of this section, "definite information" includes information on sales or purchases of any goods made by the taxpayer, receipts of the taxpayer from services rendered or any other receipts that may be chargeable to tax under this Ordinance, and on the acquisition, possession or disposal of any money, asset, valuable article or investment made or expenditure incurred by the taxpayer. (9) No assessment shall be amended, or further amended, under this section unless the taxpayer has been provided with an opportunity of being heard." Under subsection (1) of section 122 ibid, the Commissioner has the power to amend an assessment order issued under section 120 or under section 121, of the Ordinance by making such alternations or additions as the Commissioner considers necessary. In this behalf, under subsection (2), the assessment cannot be amended by the Commissioner after expiry of five years from the end of financial year, in which, the Commissioner has issued or treated to have issued the assessment order to the taxpayer. Subsection (4) permits the Commissioner to further amend the original assessment as may be necessary within the period of five years from the end of financial year, in which, the Commissioner has issued or treated to have issued the original assessment order to the taxpayer, or within one year from the end of financial year, in which, the Commissioner has issued or treated to have issued the amended assessment order to the taxpayer. The grounds, for further amendment/alternation, as provided in subsection (5) of section 122 ibid are where the income chargeable to tax has escaped assessment; total income has been under-assessed or assessed at too low a rate, or has been the subject of excessive relief or any account under a head of income has been misclassified. Section 5-A provides an additional ground that where the Commissioner feels that after inquiries, it is appropriate to amend or further amend the assessment order, if the same is erroneous being prejudicial to the interest of the revenue. Under subsection (5AA), the Commissioner retains the power to amend or further amend an assessment order provided the dispute is not in appeal.

12. The above analysis of section 122 of the Income Tax Ordinance, 2001 clearly divulges that amendment in the assessment order is not restricted to one amendment, as the words used consistently in the above provision, are `amendment' and/or 'further amendment', however, this power to amend or further amend is subject to limitation of five years in total and under subsection (4), further amendment or amendments made within one year of the same. Moreover, where the subject matter is in appeal, the power of the Commissioner to amend or further amend has been restricted (section 5AA), however, this amendment only pertains to where the amendment or further amendment is being made under section 5A ibid. The impugned notices show that respondents have invoked the power under subsection (5A) of section 122 of the Income Tax Ordinance seeking further amendment in the assessment order with respect to tax years 2005 and 2006.

13. It is the case of the petitioner that with respect to amendment made in the assessment order dated 17.03.2008, the matter is pending in Appellate Tribunal Inland Revenue, which fact has not been denied by learned counsel for the respondents; if such is the case, no notice for further amendment could have been issued and/or amendment made, as the same is barred under subsection (5AA) of section 122 of the Ordinance. In view of above position of law and facts, the notices are not maintainable, as the same are barred.

14. For the referred reasons, instant petitions are allowed and impugned notices are set aside. KMZ/282/Isl. Petition allowed.