P L D 1973 Supreme Court 98 (PLP)

Thereafter the respondent applied to the Tribunal for referring the above‑mentioned question of law to the High Court in the exercise of its advisory jurisdiction under section 19 of the Business Profits Tax Act read with section 66 of the Income‑tax Act. The application was allowed and a reference made to the High Court which was answered in the negative and the assess ment order was quashed as beyond time under section 14 of the Business Profits Tax Act. In the opinion of the learned Judges section 14 of the Business Profits Tax Act which prescribed a period of four years to assess escaped business profits remained In force till 31st March 1957, on which date the assessee acquired a vested right which could not be taken away by the subsequent application of section 34 of the Income‑tax Act with effect from 1st April 1957. At the instance of the Revenue Department, a certificate was granted under section 66‑A(2) of Income‑tax Act for appeal to this Court. The short question involved in the case is whether the provisions of section 12 of the Finance Act of 1957 by which section 14 of the Business Profits Tax Act was replaced by section 34 of the Income‑tax Act, came into force on 4th March 1957, when the Act received the assent of the President or that It became operative from the 1st day of the ensuing financial year which fell on the 1st April 1957. Under section 14 of the Business Profits Tax Act if for any reason profits for any chargeable accounting period chargeable to business profits had escaped assessment, the Income‑tax Officer could at any time within four years of the end of the chargeable accounting period 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 proceed to assess the assessment of such profits liable to business profits tax. It was not disputed that if these provisions of the Business Profits Tax Act were applicable to the assessment in question the order of the Income tax Officer passed on the 31st March 1958 was beyond time and illegal. On the contrary if section 34 of the Income‑tax Act had replaced section 14 of the Business Profits Tax Act with effect from 4th March 1957, the period of limitation for completing assessment on escaped business profits was enlarged to beyond four years and the order passed by the Income‑tax Officer was well within time and perfectly legal. Let us first examine the provisions of the Finance Act, 1957. It was passed by the Parliament and received the assent of the President on the 4th March 1957. It was published in the Gazette of the 6th March 1957. The Act comprised of 18 sec tions, Section 1 provided that the Act may be called the Finance Act, 1957, and it extended to the whole of Pakistan. Sections 2 to 10 made provision for duty on salt. Inland postage rtes, Additional duties of customs, Alteration of duties of excise, Alteration of duty of customs on cigarettes, ale, beer, porter, brandy, gin, whisky, and Additional duty of excise on motor spirit and cigarettes. The succeeding two sections made certain amendments in the Income‑tax Act, 1922, and the Business Profits Tax Act, 1947. Sections 13, 14 and 15 made amendments in the Finance Act, 1942, Excess Profits Tax Ordinance, 1943, and the Sales Tax Act, 1951. Section 16 made amendment in the Urban Immovable Property Tax Act, 1948 while section 17 made provision for rates of income‑tax and super tax specified in Fart I of the Third Schedule. The last section 18 continued certain provision of the Finance (Supplementary) Act, 1950 and imposed new taxes and duties for the purpose of rehabilitation of displaced persons. The Finance Act of 1957 was thus a composite statute which besides making provision for rates of Income‑tax, Super Tax, Salt Tax, Postage and Excise Duty also amended certain fiscal laws and in one case continued the provisions of an existing Act (Finance Supplementary Act, 1950). Though the Act is called the Finance Act of 1957, it did not purport to come into force with effect from the 1st day of the financial year. In majority of sections dealing with imposition of taxes and duty the Act specifically provided that these pro visions will come into force from the 1st April 1957. But this did not mean that the operation of the Act itself was postponed to that subsequent date. The Act came into force immediately, but the imposition of taxes became operative from 1st April 1957, by virtue of the Act which took immediate effect. The remaining sections of the Act in which no date was prescribed for operation thus came into force immediately, f e., from 4th March 1957, when the Act received the assent of the President. Section 12 reads: "The following amendments shall be made in the Business Profits Tax Act, 1947, namely :‑

5. Section 14 shall be omitted.

7. For section 19 the following section shall be substituted, namely: "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, 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 tae said provisions were provisions of this Act . . . The operative words "shall be made" do not lend to the meaning that the repeal of section 14 and its replacement by section 34 of the Income‑tax Act was postponed till the levy of Business Profits Tax Act with effect from 1st April 1957. On the contrary as will be seen presently the words used by the Parliament left no doubt that the amendments made in the Act took immediate effect. The Finance Act, 1957, did not appoint any date for its com mencement. Under section 5 of the General Clauses Act where any Central Act is not expressed to come into operation on any particular day, then it shall come into operation on the day on which it receives the assent of the President. The only time which is thus material is the day on which the President gave the assent. If publication was necessary to give it a legal effect then the day on which the Act was published would have been the day of commencement, but no such condition was laid down in the Act. Sometimes the law may require that the Act may be deferred to the date when its provisions are duly notified, but that is also not the case here. In law commencement of a statute may vary as regards its various provisions. For example, under Article 224, some provisions of the 1962‑Constitution came into force on 1st March 1962, when the Constitution was enacted, while the commencing day for the rest of the Constitution was appointed as the day on which the first meeting of the National Assembly is held i.e. 8th day of June 1962. Similarly, the Partner ship Act IX of 1932 came into force on 1st October 1932, except section 69 which came into operation on 1st October 1933. Another instance is provided by section 320 of the Government of India Act, 1935, which provided as under :‑ "320.‑(1) Part II of this Act shall come into force on such date as His Majesty may appoint by the Proclamation establish ing the Federation and the date so appointed Is the date referred to in this Act as the date of the establishment of the Federation. (2) The remainder of this Act shall, subject to any express provision to the contrary, come into force on such date as His Majesty in Council may appoint and the said date is the date referred to in this Act as the commencement of Part III of this Act. (3) If it appears to his Majesty in Council that It will not be practicable or convenient that all the provisions of this Act which are under the foregoing provisions of this section to come into force on a date therein mentioned should come into operation simultaneously on that date, His Majesty in Council may, notwithstanding anything is this section, fix an earlier or a later date for the coming into operation, either generally or for particular purposes, of any particular provisions of this Act." Unless similar provisions were made by the Parliament in the Finance Act, 1957, postponing its operation its provisions came into force on the 4th March 1957, when the Act received the assent of the Governor‑General. Under section 12 of the Act, section 14 of the Business Profits Tax Act stood repealed and section 34 of the Income‑tax Act replaced it with immediate effect. The contention raised by the respondent's counsel that the Finance Act, 1957, came into force on 1‑4‑1957 has, therefore, little force. It was next contended that section 34 of the Income‑tax Act did not become operative until necessary amendments were made by rules as provided in section 12, clause

7. The words used in clause 7 are: "shall apply with such modifications, if any, as may be prescribed". Certain modifications were made by Rules which were notified on a later date. This, however, 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 was repealed with immediate effect. The bar of four years' limitation provided in this section, therefore, did not operate with effect from 4th March 1957. Simultaneously section 34 of the Income‑tax Act became part of the Business Profits Tax Act which provided a larger period for completion of Business Profits Tax assessments as will be seen presently. No vested right, therefore, accrued to the assessee which could not be taken away by the Finance Act, 1957, with retrospective effect. Lastly it was urged that even if it be held that section 34 of the Income‑tax Act became applicable with effect from 4th March 1957, the assessment completed in this case on 31st March 1958, was beyond time. At the relevant time section 34(1) provided as under :‑ "34.‑‑(1) If for any reason income, profits or gains chargeable to income‑tax have escaped assessment in any year, or have been under‑assessed, or have been assessed ate too low a rate, or have been the subject of excessive relief or refund under this Art, the Income‑tax Officer may, serve on the person liable to pay tax on such Income, profits or gains, or, in the case of on the principal officer thereof, a notice containing all or any of the requirements which may be included in a '"notice under subsection (2) of section 22, and may proceed to assess or re‑assess such income, profits or gains, and the pro visions of this Act shall, so far as may be, apply accordingly as if the notice were a notice issued under that subsection." Assuming that the case falls under the category of any other case as contended by the learned counsel for the respondent, assess ment on escaped profits was to be completed within four years of "the end of that year". The chargeable accounting period in the present case ended on 31st March 1953. Tax was to be assessed on the profits earned during this period in the year ending F 31‑3‑1954. The four years' period thus extended up to 31‑3‑1958. The impugned assessment completed on the last mentioned date was, therefore, within time. There is a marked difference between the provisions of the repealed section 14 of the Business Profits Tax Act and section 34 of the Income‑tax Act in this respect. Under section 14 the Income‑tax Officer could call for a return and assess business profits within four years of the end of the charge able accounting period. The time limit would thus have expired on 31‑3‑1957 had section 14 remained in force up to 31‑3‑1957. However, as the section was repealed on 4‑3‑1957 and replaced by section 34 of the Income‑tax Act, the time limit was extended up to 31‑3‑1958 as brought out above. The assessment made on that day, was, therefore, not beyond time as has been held by the High Court. It follows that the answer given by the High Court to the reference made by the Income‑tax Appellate Tribunal is incorrect. The appeal is, accordingly, allowed and the reference is answered in the affirmative. The respondent shall pay the costs of these proceedings throughout. K. B. A. Appeal accepted.