COMMISSIONER INLAND REVENUE vs ZIA-UR-REHMAN Ss — 2024 PTD 1029 LAHORE-HIGH-COURT-LAHORE

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COMMISSIONER INLAND REVENUE VS ZIA-UR-REHMAN Ss. 120, 122 & 177(6a) [as substituted / inserted/ amended through Finance act, 2019]---audit---Substituted subsection (6) and newly inserted subsection (6a) of S. 177 of the Income Tax Ordinance, 2001, applicability of---Retrospective effect---Scope---Department filed reference against the judgment passed by the appellate Tribunal Inland Revenue in favour of the taxpayer/respondent, with the plea that the applicability of substituted subsection (6) and newly inserted subsection (6a) of S.177 of the Income Tax Ordinance, 2001, was retrospective---Validity---Taxpayer / respondent was selected for audit on 09.05.2019 whereas Show-Cause Notice proposing to amend assessment under S.122 of Income Tax Ordinance, 2001 ('the Ordinance 2001'), was issued to the respondent on 25.02.2021---Perusal of the Show-Cause Notice clearly indicated that audit proceedings were still pending and no audit report was issued by the Department till the amendments-in-question were made in S. 177 of the Ordinance, 2001 through Finance act, 2019---There was nothing available on record to show what substantive right, if any, had accrued in favour of the applicant / department on 01.07.2019 when the amendment made through Finance act, 2019, in S. 177 of the Ordinance, 2001 in the form of substitution of subsection (6) and insertion of subsection (6a) became effective which adversely affected the applicant / Department---Said provisions became effective from 01.07.2019; subsection (6) of S. 177 of the Ordinance 2001 made it mandatory for the Commissioner, upon completion of the audit, to obtain taxpayer's explanation on all the issues raised in the audit and after that issue an audit report containing audit observations and findings---There is nothing in the language of the said provision which suggests retrospective application of the same; it means that cases where vested rights have accrued or transaction has been closed because of completion of audit prior to the said amendment, the requirements stipulated through substituted subsection (6) cannot be pressed into service---However, there is nothing in the language of subsection (6) of S. 177 of the Ordinance, 2001, which restricts application of the said provision to cases where audit was pending completion or still underway on 01.07.2019, which is the case here---Likewise, there is nothing in the text of the said provision that restricts its application to the cases selected for audit after any particular tax year---Indeed, the date of selection for audit hardly provides any basis for regulating applicability of the amended subsection (6) of S. 177 of the Ordinance, 2001, which clearly would apply to all cases where audit was yet to be completed after the said enactment---Thus plea rendered by the applicant qua retrospective application of said subsection (6) was wholly misconceived and untenable---Questions raised by the applicant/department were answered against the applicant/department and in favour of the respondent / taxpayer---Reference application filed by the Department was dismissed.

COMMISSIONER INLAND REVENUE vs ZIA-UR-REHMAN Ss — 2024 PTD 1029 LAHORE-HIGH-COURT-LAHORE

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