COMMISSIONER INLAND REVENUE, LAHORE vs MILLAT TRACTORS LIMITED, LAHORE Retrospective and prospective applicati

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COMMISSIONER INLAND REVENUE, LAHORE VS MILLAT TRACTORS LIMITED, LAHORE Retrospective and prospective application of law---Principles---A change in substantive law which divests and adversely affects vested rights of the parties shall always have prospective application unless by express word of the legislation and/or by necessary intendment/ implication such law has been made applicable retrospectively---As a cardinal principle of interpretation of statutes, tax statutes operate prospectively and not retrospectively unless clearly indicated by the legislature, therefore, retrospectivity cannot be presumed---Where an insertion or deletion of any provision in the rules or the law is merely procedural in nature, the same would apply retrospectively but not if it affects substantive rights which already stood accrued at the time when the un-amended rule or provision was in vogue---A provision curtailing substantive rights does not have retroactive operation unless the legislature elects to give it retrospective effect---Thus, where existing rights are affected or giving retroactive operation causes inconvenience or injustice, the Court will not favour an interpretation giving retrospective effect even where the provision is procedural. Citation Name: 2024 SCMR 700 SUPREME-COURTBookmark this Case 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. Citation Name: 2024 SCMR 700 SUPREME-COURTBookmark this Case COMMISSIONER INLAND REVENUE, LAHORE VS MILLAT TRACTORS LIMITED, LAHORE Ss. 111 & 122 (as it existed prior to amendment by the Finance Act, 2020)---Unexplained income or assets---Amendment of an assessment---Notices issued under Sections 111 & 122(9) of the Income Tax Ordinance, 2001 ("Ordinance")---Whether a separate notice is required under Section 111 of the Ordinance or whether a notice under Section 122(9) is enough to initiate proceedings for amendment of the assessment on the grounds mentioned in Section 111 of the Ordinance---Held, that the proceedings under Sections 111 & 122 of the Income Tax Ordinance, 2001 ("Ordinance") are different and distinguishable in nature and cannot be subsumed---Before an assessment can be amended under Section 122 on the basis of Section 111, the proceedings under Section 111(1) are to be initiated, the taxpayer is to be confronted with the information and the grounds applicable under Section 111(1) through a separate notice under the said provision, and then the proceedings are to be culminated through an appropriate order in the shape of an opinion of the Commissioner---This then becomes definite information for the purposes of Section 122(5), provided the grounds mentioned in Section 122(5) are applicable---The taxpayer is then to be confronted with these grounds through a notice under Section 122(9) and only then can an assessment be amended under Section 122. Citation Name: 2024 SCMR 700 SUPREME-COURTBookmark this Case COMMISSIONER INLAND REVENUE, LAHORE VS MILLAT TRACTORS LIMITED, LAHORE Explanation to an enactment---Rationale and scope---Purpose of an Explanation is ordinarily to explain some concept or expression or phrase occurring in the main provision---It is not uncommon for the legislature to accord either an extended or restricted meaning to such concept or expression by inserting an appropriate Explanation---Such a clarificatory provision is to be interpreted according to its own terms having regard to its context and not as to widen the ambit of the provision---As a general rule, an explanation added to a statutory provision is not a substantive provision in any sense of the term but as the plain meaning of the word itself shows, it is merely meant to explain or clarify certain ambiguities which may have crept in the statutory provision---Object of adding an Explanation to a statutory provision is only to facilitate its proper interpretation and to remove confusion and misunderstanding as to its true nature---It is relied upon only as a useful guide or in aid to the construction of the main provision---It is in this view of its effect that courts have normally given retrospective effect to such clarificatory or declaratory provisions in the shape of an Explanation---However, where the effect of the Explanation warps out of its normal purpose explained above, and acts as a substantive enactment or deeming provision, or enlarges substantive provisions of law or creates new liabilities, such an Explanation cannot be given retrospective effect unless the express language of the Explanation warrants such an interpretation.

COMMISSIONER INLAND REVENUE, LAHORE vs MILLAT TRACTORS LIMITED, LAHORE Retrospective and prospective application of law — 2024 SCMR 700 SUPREME-COURT

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