COMMISSIONER INLAND REVENUE, LAHORE vs MILLAT TRACTORS LIMITED, LAHORE Ss — 2024 PTD 483 SUPREME-COURT

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COMMISSIONER INLAND REVENUE, LAHORE VS MILLAT TRACTORS LIMITED, LAHORE Ss. 111, Explanation & 122---Explanation introduced in Section 111 of the Income Tax Ordinance, 2001 ('Ordinance') pursuant to the Finance Act, 2021---Effect---On a plain reading of the said Explanation, it appears that it is couched in clarificatory and declaratory terms for "removal of doubt"---However, the intention behind the Explanation and the effect of adding the Explanation is to take away the right to a separate notice and proceedings under Section 111 if the grounds under Section 111(1)(a) to (d) are confronted to the taxpayer through a notice under Section 122(9) of the Ordinance---Therefore, in essence, it abridges the right to a separate notice and proceedings under Section 111 of the Ordinance, which was the requirement of the law---As a consequence, the Explanation takes away a substantive right of separate proceedings of the taxpayer, which otherwise existed prior to the introduction of the Explanation in Section 111---Explanation added in Section 111 of the Ordinance divests and affects a substantive right of the taxpayer to a separate notice and proceedings under Section 111, thus, the same would not have retrospective effect and would apply prospectively---Effect of the Explanation, therefore, is only to dispense with the requirement of a separate notice under Section 111, however, it cannot subsume two different and distinguishable proceedings under Sections 111 & 122---As such, while the Explanation dispenses with the requirement of a separate notice under Section 111, it does not dispense with the requirement that in case proceedings are initiated under Section 122(5) on the basis of definite information to be provided through Section 111, the proceedings under Section 111 are to be concluded first in the manner provided under the law and till such time, the proceedings under Section 122(9) cannot be given effect to---Therefore, as far as the cases prior to the Explanation are concerned, a separate notice is required to be issued under Section 111 before proceedings can be initiated under Section 122---Simultaneity of notices issued under Sections 111 & 122(9) is not of much consequence and the proceedings under Section 111 have to proceed first and be finalized before proceedings under Section 122 are formally taken up---After the introduction of the Explanation in Section 111 in the year 2021, a notice encompassing both the grounds under Section 111(1) and Section 122(5) can be issued under Section 122(9), however, the proceedings under Section 111 still have to be concluded first and thereafter the remaining part of the notice under Section 122(9) can be given effect to.

COMMISSIONER INLAND REVENUE, LAHORE vs MILLAT TRACTORS LIMITED, LAHORE Ss — 2024 PTD 483 SUPREME-COURT

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