IN THE SUPREME COURT OF PAKISTAN 
(APPELLATE JURISDICTION) 
 
PRESENT: 
MR. JUSTICE EJAZ AFZAL KHAN 
MR. JUSTICE SARDAR TARIQ MASOOD 
MR. JUSTICE FAISAL ARAB 
 
CIVIL APPEAL NO. 1086 OF 2009 
(On appeal against the order dated 29.1.2009 
passed by the Peshawar High Court, Peshawar 
in T.R. No. 48/2007) 
 
Commissioner of Income Tax, Peshawar 
 
… Appellant 
 
VERSUS 
 
M/s Islamic Investment Bank Ltd 
 
 
… Respondent 
 
For the Appellant: 
Mr. Ghulam Shoaib Jalley, ASC 
 
For the Respondent: 
Syed Mudassar Ameen, ASC 
 
Date of Hearing:  
16.12.2015 
 
 
JUDGMENT 
 
 
FAISAL ARAB, J.-  The controversy in this appeal relates to the 
income tax return that was filed by the respondent for the income 
year that ended on 30.6.2001. Corresponding to such income year, 
the assessment year was 2001-02. The assessment on the tax 
return was finalized by the taxation officer on 14.05.2003 under the 
provisions of Section 62 of the repealed Income Tax Ordinance, 
1979, on the strength of Section 239(1) of the Income Tax 
Ordinance, 2001, which states “in making any assessment in 
respect of any income year ending on or before the 30th day of June, 
2002, the provisions of the repealed Ordinance ….shall apply as if 
this Ordinance had not come into force.” We may mention here that 
the Income Tax Ordinance, 1979 was repealed with effect from 
30.06.2002 and replaced by Income Tax Ordinance, 2001 which 
came into operation on 01.07.2002.  
CIVIL APPEAL NO. 1086 OF 2009 
2
 
2. 
 
When the Additional Commissioner, Income Tax, Range 
II, Companies Zone, Peshawar considered the assessment order in 
question to be prejudicial to the interest of the revenue, so he, in 
order to amend it, served a notice dated 23.08.2004 on the 
respondent under Section 122(5A) of the Income Tax Ordinance, 
2001. After hearing the respondent, the original assessment order 
was amended vide order dated 08.04.2005 whereby the income 
earned by the respondent from the sale of membership card of 
Islamabad Stock Exchange was enhanced by two million rupees. 
The respondent preferred appeal against such order which was 
dismissed on 30.10.2006 by the Commissioner, Income Tax 
(Appeals), Peshawar. He held that notice under Section 122(5A) of 
the Income Tax Ordinance, 2001, was illegal and vacated the same 
on the ground that the original assessment was finalized on 
14.05.2003 i.e. at a time when Section 122 (5A) had not been 
inserted in the Income Tax Ordinance, 2001, therefore, it cannot be 
applied retrospectively. While reaching at such decision, the 
Commissioner (Appeals) placed reliance on the case of Honda 
Shahrah-e-Faisal Association of Persons, Karachi Vs. Regional 
Commissioner of Income Tax, Karachi (2005 PTD 1316). In the said 
case, the Division bench of the Sindh High Court had held as 
follows:- 
 
“the provisions contained in sub section (5-A) of Section 
122 of the Income Tax Ordinance, 2001, inserted with 
effect from 1.7.2003, is not retrospective in operation. 
Consequently, 
the 
assessments 
finalized 
before 
CIVIL APPEAL NO. 1086 OF 2009 
3
1.7.2003 cannot be reopened/revised/amended in 
exercise of jurisdiction under the above provisions. 
Admittedly, all the notices impugned in these petitions 
are in respect of the assessments finalized before 
1.7.2003, and consequently all the impugned notices are 
without jurisdiction, illegal, therefore, hereby quashed 
along with proceedings in pursuance thereof. The 
petitions are allowed accordingly.” 
 
3. 
 
The order of the Commissioner Income Tax (Appeals) 
was challenged by the department through the Commissioner 
Income Tax before the Income Tax Appellate Tribunal, Peshawar. 
The tribunal also concurred with the decision of the Commissioner 
Income Tax (Appeals) and dismissed the appeal vide order dated 
08.02.2007. In doing so it also placed reliance on the case of Honda 
Shahrah-e-Faisal. The concerned Commissioner, Income Tax then 
filed Tax Reference No. 48 of 2007 before the Peshawar High Court, 
which too was dismissed vide impugned order dated 29.01.2009. 
The Peshawar High Court also placed reliance on the case of Honda 
Shahrah-e-Faisal apart from placing reliance on judgments of the 
Lahore High Court reported in PTD 2008 Lahore 1420 and of the 
Peshawar High Court rendered on 22.10.2008 in Tax Reference No. 
61/2007. The tax department being aggrieved by the impugned 
decision of the Peshawar High Court dated 29.01.2009 filed CPLA 
No. 432/2009 before this Court, following which leave was granted 
on 05.01.2009 and the petition was converted into present appeal. 
While granting leave, this Court observed that where the 
Commissioner has been given the power to amend an assessment 
order, in case he considers the same to be erroneous to the extent 
CIVIL APPEAL NO. 1086 OF 2009 
4
that it was prejudicial to the interest of the revenue, then how could 
such a provision be held to be only prospective in nature? 
 
4. 
 
Learned counsel for the appellant argued that the 
assessment 
order was 
rightly 
amended 
by the 
Additional 
Commissioner Income Tax Range-II, Company Zone, Peshawar, on 
the basis of Section 239 (1) of the Ordinance of 2001, however on 
appeal filed by the respondent, the very notice issued under the 
provisions of Section 122(5A) of the Income Tax Ordinance, 2001, 
was considered to be unlawful and this decision was maintained up 
to the Peshawar High Court.  He contended that the main reason for 
rejection of appellant’s notice was the decision of the Sindh High 
Court rendered in Honda Shahrah-e-Faisal’s case, a decision which 
has also been affirmed by this Court in the case of Commissioner of 
Income Tax Vs. Eli Lilly Pakistan (Pvt) Ltd (2009 SCMR 1279). 
Appellant’s counsel next contended that as Section 239(1) of the 
Income Tax Ordinance, 2001, provides that for the purpose of 
assessing any income year ending on or before the 30.6.2002, the 
provisions of the repealed Income Tax Ordinance, 1979, shall apply 
as if the Income Tax Ordinance, 2001, had not come into force, 
therefore, even if the issuance of notice dated 23.8.2004 under the 
provisions of Section 122(5A) of the Income Tax Ordinance, 2001, is 
regarded as not maintainable, such notice, on the strength of 
Section 239(1) of Income Tax Ordinance, 2001, ought to have been 
treated as notice under Section 66A of the repealed Income Tax 
Ordinance, 1979, instead of its outright rejection. Based on this 
argument, he submitted that this Court may treat the notice in 
question as notice under Section 66A of the Income Tax Ordinance, 
CIVIL APPEAL NO. 1086 OF 2009 
5
1979, and remand the matter back to the Commissioner (Appeal) for 
his decision on merits.  
 
5. 
 
In rebuttal, learned counsel for the respondent 
contended that the issuance of notice under Section 122(5A) of the  
Income Tax Ordinance, 2001, was rightly declared as illegal as 
Section 122(5A) was incorporated in the Income Tax Ordinance, 
2001 on 01.07.2003 whereas the assessment of the tax return of 
the respondent was finalized on 14.05.2003, hence the provisions of 
Section 122(5A) were not even part of the Statute at the relevant 
time and thus could not have been invoked for any matter relating 
to a date prior to 01.07.2003. In addition to this argument, counsel 
for the respondent also contended that the respondent Company 
has gone into liquidation and in terms of Section 316 of the 
Companies Ordinance, 1984, before initiating any legal proceedings, 
permission ought to have been obtained from the Company Judge 
that is seized of the winding up proceedings. He submitted that this 
appeal may be dismissed. 
 
6. 
 
When a Statute repeals an earlier Statute and it is an 
unqualified repeal, then the effect of such repeal is that the earlier 
Statue gets repealed in its entirety. However, where the Legislature 
intends to preserve any power or inchoate right in relation to the 
repealed Statute, then a saving clause is incorporated in the 
repealing Statute whereby certain provisions are preserved from 
getting repealed to the extent and with regard to the subject 
mentioned in the saving clause.  The provisions of the repealed law 
that are so preserved are to be regarded as if the repealed Statute 
CIVIL APPEAL NO. 1086 OF 2009 
6
was still in operation. Now the Income Tax Ordinance, 1979, stood 
repealed with effect from 30.06.2002 and was replaced by the 
Income Tax Ordinance, 2001, which came into operation 
immediately thereafter i.e. with effect from 01.07.2002. Section 239 
(1) of the Income Tax Ordinance, 2001, provides that any 
assessment that was to be made for the income years ending on or 
before 30.06.2002, the same had to be made under the provisions of 
the repealed Income Tax Ordinance, 1979, as if Income Tax 
Ordinance, 2001, has not come into force. The question that arose 
before the forum below was whether the Commission Income Tax 
was justified in revising an assessment order relating the period 
covered under the repealed Income Tax Ordinance, 1979, by 
invoking the provisions of Section 122 (5A) of the Income Tax 
Ordinance, 2001, that was inserted on 01.07.2003 i.e. one year 
after the Income Tax Ordinance, 2001, came into operation. As per 
the interpretation put on Section 122 (5A) by the Sindh High Court 
in the case of Honda Shahrah-e-Faisal, the department could not 
have revised the assessment order in question by invoking Section 
122 (5A) of Income Tax Ordinance, 2001, that was inserted on 
01.07.2003 and being prospective in nature cannot be given 
retrospective application. In Honda Shahrah-e-Faisal case it was 
further held that as the provisions of Section 66A of the repealed 
Income Tax Ordinance, 1979, were also not saved under the Saving 
Clause i.e. Section 239 of the Income Tax Ordinance, 2001, the 
same also could not be applied to reopen the assessment order in 
question.  
 
CIVIL APPEAL NO. 1086 OF 2009 
7
7. 
 
When the Income Tax Ordinance, 2001, came into 
operation on 01.07.2002, Section 239(1) read as “239. Savings- (1) 
The repealed Ordinance shall continue to apply to the assessment 
year ending on the 30th day of June 2003”. On 01.07.2003, Section 
239 (1) was substituted by the Finance Act of 2002. It then onwards 
read “239. Savings- (1) Subject to sub-section (2), in making any   
assessment in respect of any income year ending on or before the 
30th day of June, 2002, the provisions of the repealed Ordinance, in 
so far as these relate to computation of total income and tax 
payable thereon shall apply as if this Ordinance had not come into 
force. A bare reading of the original provisions of Section 239(1) 
would show that it was confined to only one assessment year that 
ended on 30.6.2003, which corresponds to the income year that 
ended on 30.6.2002. On the other hand the expression “any income 
year” in the amended Section 239(1) covers more than one income 
year that had ended on or before 30.06.2002. In other words, the 
amended Section 239(1) covered all assessment years ending on or 
before 30.6.2003 instead of just one assessment year ending on 
30.6.2003 as provided in the original provisions of Section 239 (1). 
The expression “any income year” in the amended Section 239(1) 
clearly covers all assessment years that fall within the ambit of the 
repealed Income Tax Ordinance, 1979, which was not the case 
under the original provisions of Section 239(1) as under the original 
provisions the income tax department was not empowered to reopen 
any income year for scrutiny that fell prior to the income year that 
ended on 30.06.2002. As the lawmakers were not satisfied with this 
limited application of the original provision of Section 239 (1), hence 
they took corrective measure and altered it to the extent mentioned 
in the amended Section 239(1) whereby its scope, as discussed 
CIVIL APPEAL NO. 1086 OF 2009 
8
above, was made much larger than the original provisions of Section 
239(1). We shall now proceed to examine whether Section 239(1) as 
amended on 01.07.2003 on the basis of which notice under Section 
122 (5A) was issued is prospective in its application or has 
retrospective application.  
 
8. 
 
Section 239 of the Income Tax Ordinance, 2001, by its 
very nature, being a saving clause, was intended to preserve certain 
powers and procedures contained in the repealed Income Tax 
Ordinance, 1979. Several procedures for the correct assessment of 
income and determination of tax liability were devised in the 
repealed Income Tax Ordinance, 1979. These procedures are 
applied at various stages so that no income may escape from 
taxation on account of non-disclosure or miscalculation. When the 
amended Section 239 (1) of the Income Tax Ordinance, 2001, states 
“the provisions of the repealed Ordinance, in so far as these relates to 
computation of total income and tax payable thereon shall apply as if 
this Ordinance had not come into force”, it in fact saves the entire set 
of procedures prescribed under the repealed law through which the 
exercise of reaching at the correct calculation of total income and 
the tax payable thereon can be undertaken with regard to the 
periods covered under the repealed Income Tax Ordinance, 1979. 
Section 2(7) of the Income Tax Ordinance, 1979, describes the term 
assessment 
thus 
“assessment" 
includes 
re-assessment 
and 
additional assessment and the cognate expressions shall be 
construed accordingly”. Thus Section 239 (1) encompasses within its 
ambit all types of assessments that can be made to a tax return. In 
simple terms, assessment is relatable to all stages of assessments 
CIVIL APPEAL NO. 1086 OF 2009 
9
that could be made to a tax return under the provisions of the 
repealed Income Tax Ordinance, 1979. The replacement of old law 
with a new one was never intended to affect the right of the 
department to revise an assessment order that had been made 
under the provisions of the repealed Income Tax Ordinance, 1979, 
but was intended only to devise a new method and mechanism to 
determine income and the tax payable for the post repeal era. 
Hence, the whole purpose of incorporating Section 239 was to 
preserve certain powers and procedures laid down in the repealed 
Income Tax Ordinance, 1979, so that it can be subsequently 
enforced in the post repeal era only in matters that relate to the 
period covered under the repealed Income Tax Ordinance, 1979. 
Thus the provisions of Section 239 are purely procedural in nature. 
When a provision is incorporated in any statute through an 
amendment that is procedural in nature then the retrospective rule 
of construction is to be applied to such provision. Such a provision 
has to be construed as if it was incorporated on the date when the 
main enactment reached the statute book. Merely because the 
amended Section 239(1) was inserted in the Income Tax Ordinance, 
2001, on 01.07.2003 instead of 01.07.2002 when the parent statute 
came in operation, it cannot be said that a vacuum was created in 
giving effect to it from the date when the main enactment came into 
operation. By virtue of the amended Section 239(1), the powers or 
inchoate rights relating to income years covered under repealed 
Income Tax Ordinance, 1979, to the extent mentioned in Section 
239 of the Income Tax Ordinance, 2001, were to continue to be 
exercised/enforced on the basis of the procedures prescribed in the 
repealed law as if the repealed Ordinance, 1979 is still in operation. 
CIVIL APPEAL NO. 1086 OF 2009 
10
We are, therefore, of the opinion that the provisions of Income Tax 
Ordinance, 2001, cannot be interpreted in a manner so as to take 
away the powers of the Taxing Authority to revise, within the 
prescribed period of time, any assessment order that was passed 
under the provisions of the repealed Income Tax Ordinance, 1979. 
This intention of the legislature was not given primacy by the Sindh 
High Court while deciding the case of Honda Shahrah-e-Faisal. The 
learned Judges were simply swayed by the reasoning contained in 
CBR’s Circular No.1 (48) IT-I/79, dated 17.02.1981 and thus failed 
to apply the provisions of amended Section 239(1) retrospectively.  
 
9. 
 
In the case of Commissioner of Income Tax vs. Asbestos 
Cement Industries Ltd (1993 SCMR 1276) which was delivered in a 
tax matter almost in similar circumstances, this Court in paragraph 
8 stated as follows:-  
 
“8. A further aid to interpretation is available in the form of 
Explanation to section 136(1) of the Ordinance. That was 
added on 1-7-1985 by Finance Act I of 1985. It (the 
Explanation) reads as hereunder:---- 
 
"The period of ninety days within which an application is 
to be made shall apply notwithstanding that the 
application relates to an assessment year prior to the 
assessment year beginning on the first day of July, 
1979, if such application is made on or after the first day 
of July, 1979." 
 
This Explanation is not a substantive enactment but 
declaratory. 
A 
declaratory 
legislation 
has 
always 
a 
retrospective effect. In Balaji Singh v. Chakka Gangamma and 
another AIR 1927 Mad. 85 the following principle was, 
enunciated on good authority for construing such Acts:--- 
 
"In Attorney-General v. Bugett (2 Price 381 = 146 Eng. 
Rep. 130), it was held that an Act of Parliament made to 
correct an error by omission in a former statute of the 
same session, has relation back to the time when the 
first Act was passed. Even when mistakes in legislative 
CIVIL APPEAL NO. 1086 OF 2009 
11
enactments are corrected by a later amending Act, the 
amending Act should be read as part of the Act which it 
was intended to correct. Though the Act is not called a 
declaratory or explanatory Act, if from the words used in 
the Act the Court can come to the conclusion that it is a 
declaratory or an explanatory Act, retrospective effect 
will be given to such Act." 
 
 
This Court in the case of Commissioner of Income Tax vs. Asbestos 
Cement Industries Ltd (1993 SCMR 1276) has also held that the 
provisions of law which are procedural in nature are retrospective in 
their application. A passage from the said judgment of this Court is 
reproduced as under:- 
 
“4. The first legal proposition not open to question is that the 
law of limitation is by and large and substantially a procedural 
law. It was so held in S.M. Junaid v. President of Pakistan PLD 
1981 SC 12. The other principle equally well established is that 
a procedural law has a retrospective application and is 
attracted forthwith to the pending proceedings.  
 
The Supreme Court of Azad Jammu & Kashmir also in the case of 
Fazal dad Vs. Mst. Sakina Bibi and another (1997 MLD 2861) 
retrospectively applied procedural law after holding as follows:- 
 
“5. 
We have given our due consideration to the arguments 
raised at the Bar. There is no quarrel with the proposition that 
the law of limitation is a procedural law and generally it is 
given retrospective effect even if it is not so provided by the 
statute itself. However, there is one exception to it; if such 
retrospectively takes away, destroys or nullifies the vested 
rights of a litigant, the old law of limitation would govern the 
matter and new statute or provision of law introduced by an 
amendment or otherwise, would not affect the vested rights of 
a litigant. Even, the authorities relied upon by the learned 
counsel for the appellant support the aforesaid view. A 
CIVIL APPEAL NO. 1086 OF 2009 
12
reference may also be made to a case reported as Joshi 
Maganlal Kunverji v. Thacker Mulji Budha (AIR 1951 Kutch 15). 
While dealing with the proposition, it has been observed as 
under:-- 
  
"(4) ………………………… In the present case the plaintiff 
had a vested right under the repealed Limitation Act to 
bring his suit when the new Limitation Act was applied. 
The effect of the new Limitation Act was to destroy it 
outright. In such circumstances unless the Legislature 
has stated in unequivocal terms that 
the new 
enhancement should destroy the vested right it cannot 
be applied retrospectively so as to prevent the plaintiff 
from exercising his right to bring a suit which he had 
under the repealed Act. " 
 
 
10. 
 
There is no denying the fact that had the Income Tax 
Ordinance, 2001, not come into existence, the assessment in 
question could have been revised under the repealed Income Tax 
Ordinance, 1979, within five years of its finalisation i.e. within five 
years from 14.5.2003, when the initial assessment order in the 
present case was passed. This right to revise the assessment in 
question could be exercised under the provisions of the repealed 
Income Tax Ordinance, 1979, uptill 13.05.2008 which right was 
never given up under any provision of the Income Tax Ordinance, 
2001. It does not appeal to reason that the Legislature would intend 
to let go persons whose incomes for any reason have escaped 
taxation under the repealed Income Tax Ordinance, 1979, but 
would still pursue the persons who are liable to file tax returns 
under the Income Tax Ordinance, 2001, so that they may not 
escape the correct tax liability. As already discussed, the Income 
Tax Ordinance, 2001, has preserved the powers of the tax 
authorities to revise assessments orders pertaining to the period 
falling under the repealed Income Tax Ordinance, 1979, and for 
CIVIL APPEAL NO. 1086 OF 2009 
13
such purpose Section 239(1) was incorporated in the Income Tax 
Ordinance, 2001. In the present case, on the strength of Section 
239(1), the machinery provided under Section 122 (5A) the Income 
Tax Ordinance, 2001, was brought into play for the assessment year 
in question. This, in our view, was only a technical mistake because 
in terms of Section 239 (1) of the Income Tax Ordinance, 2001, 
notice for reopening the assessment in question could have been 
issued under Section 66A of the repealed Income Tax Ordinance, 
1979.  
 
11. 
 
From the above discussion it thus appears that the 
decision in the case of Honda Shahrah-e-Faisal was erroneous as it 
proceeded on the assumption that the right to revise an assessment 
made under the repealed law stands extinguished merely for the 
reason that the provisions of Section 122 (5A) of Income Tax 
Ordinance, 2001, were inserted with effect from 01.07.2003 and 
being prospective in nature cannot be applied retrospectively. This 
resulted in destroying the department’s right to revise, or amend or 
reopen an assessment order made under the repealed Income Tax 
Ordinance, 1979, irrespective of the fact that the time to revise such 
assessment under the repealed law had not even expired.  
 
12.  
 
At the time of seeking leave before this Court, the 
appellant’s counsel had referred to the case of Commissioner of 
Income Tax Vs. Eli Lilly Pakistan (Pvt) Ltd (2009 SCMR 1279) in order 
to point out that it has upheld the decision given in the case of 
Honda Shahra-e-Faisal. We therefore feel inclined to discuss the Eli 
CIVIL APPEAL NO. 1086 OF 2009 
14
Lilly case in some detail. This Court in paragraph 57 of the Eli Lilly 
case had held as follows:- 
 
“57. In the light of the above discussion, we uphold view of 
the Sindh High Court taken in Honda Shahra-e-Faisal and 
followed by the other High Courts as also the Income Tax 
authorities that the provisions of section 122 of the Ordinance 
are prospective in their application and do not apply to the 
assessment of a year ending on or before 30th June, 2002. On 
that account the appeals are bound to fail and the impugned 
judgments would be upheld. However, the learned High Courts 
have not adverted to the question of treatment of assessments 
of the period preceding the enforcement of the Ordinance. As 
already noted, section 65 of the repealed Ordinance provided a 
period of five years for additional assessment and such 
assessments were to be dealt with under the said provision in 
accordance with original section 239(1) of the Ordinance. The 
learned High Courts failed to take into consideration this 
aspect of the matter and did not direct that the assessments 
completed under the repealed Ordinance would be subject to 
the provisions of the said Ordinance, as originally provided in 
un-amended section 239(1), but not clearly and properly 
provided in the Ordinance at the amendment stage. We fill this 
lacuna in the impugned judgments and direct that the 
assessment of any year ending on or before 30th June, 2002 
would be governed by the repealed Ordinance and shall be 
dealt with as if the Ordinance had not come into force. In taking 
this view, we are fortified by a passage from the Maxwell on 
Interpretation of Statutes, 10th Edition (1953), p. 228, which 
reads as under:- 
 
"Where rights and procedure are dealt with together, the 
intention of the legislature may well be that the old rights 
are to be determined by the old procedure, and that only 
the new rights under the substituted section are to be 
dealt with by the new procedure." 
 
CIVIL APPEAL NO. 1086 OF 2009 
15
 
13. 
 
In Eli Lilly case referred to above this Court held that 
the assessment order under the repealed Income Tax Ordinance, 
1979, could have been reopened only under the provisions of 
Section 239(1) which were originally incorporated but as the same 
were substituted through amendment on 01.07.2003, the amended 
provision being prospective in its application cannot be applied to 
income years ending on or before 30.06.2002 thus concurred with 
the decision of the Sindh High Court in the case of Honda Shahra-e-
Faisal. In Honda Shahra-e-Faisal case, procedural provisions of 
Section 122(5A) of Income Tax Ordinance, 2001, were interpreted to 
be prospective in their application, such determination is contrary 
to the plethora of decisions of this Court wherein it has been held 
that where procedural provisions are incorporated through 
amendment then the same have retrospective application. We 
therefore treat such finding as per incuriam. In the case of 
Application by Abdul Rehman Farooq Pirzada and Begum Nusrat Ali 
Gonda Vs. Federation of Pakistan (PLD 2013 SC 829) the legal term 
per incuriam was extensively discussed in its paragraph 4 and 
applied to an earlier decision of this Court in the case of Accountant 
General Sindh Vs. Ahmed Ali U. Qureshi (PLD 2008 SC 522). 
 
14. 
 
We may also point out here that it was also observed in 
Eli Lilly case that Honda Shahrah-e-Faisal case has failed to address 
the question as to how the assessments relating to periods prior to 
Income Tax Ordinance, 2001, can be enforced. After observing so, it 
took the view that there was a lacuna which needed to be filled and 
this was done by holding that all assessments relating to the 
CIVIL APPEAL NO. 1086 OF 2009 
16
periods prior to Income Tax Ordinance, 2001, coming into force are 
to be undertaken in accordance with original provision of Section 
239(1) of the Income Tax Ordinance, 2001. Thus this Court in Eli 
Lilly case reached at the same conclusion, which we have reached in 
this case, albeit on a different set of reasoning.  
 
 
15. 
 
Apart from holding that provisions of Section 239(1) of 
the Income Tax Ordinance, 2001, have retrospective application, the 
controversy in the present case can also be looked at from distinct 
prospective. The tax laws are a body of rules and regulations under 
which the State has a claim on the taxpayers so that they may pay 
to the State a part of their incomes at the specified rates. This 
liability to pay income tax accrues on the taxpayer on the last day of 
the income year/accounting year, though the tax becomes payable 
after it is quantified in accordance with the procedures laid down in 
the Income Tax law. Thus a charge in favour of the State is created 
at the end of each accounting year, though the exercise of (i) making 
an assessment on the basis of ascertainable data of income and 
expenditure, or (ii) revising an assessment order where it is found 
that there is sufficient material to hold that the original assessment 
was prejudicial to the interest of the revenue, takes place at some 
later stage. These procedural exercises are undertaken only with the 
object of reaching at the correct calculation of yearly income but the 
real liability to pay tax had already accrued on the last day of the 
income year i.e. on the last day of the accounting year thereby 
creating a charge in favour of the State. It may be understood as an 
expense that has already accrued but is payable later. Reference 
can also be made to Section 9 of the Income Tax Ordinance, 1979, 
CIVIL APPEAL NO. 1086 OF 2009 
17
with regard to the creation of the charge on the basis of income 
year. Thus seeking revision of a tax return at any subsequent stage 
has nothing to so with the creation of charge on the tax-payer that 
has become absolute on completion of the income year/accounting 
year. 
 
16. 
 
In this regard reference can also be made to cases from 
Indian jurisdiction. In the case of Chatturam Vs. Commissioner of 
Income Tax (AIR 1947 FC 32) and in the case of Williams Vs Henry 
Williams Ltd it was held that the liability of Income Tax was 
definitely and finally created by the charging section and the 
provisions of assessment etc. were machinery provisions only for the 
purpose of quantifying the liability. In the case of Wallace Brothers 
& Co. Ltd. Vs Commissioner of Income Tax (AIR 1948 PC 118) also it 
was held ".... the rate of tax for the year of assessment may be fixed 
after the close of the previous year and the assessment will 
necessarily be made after the close of that year. But the liability to 
tax arises by virtue of the charging section alone, and it arises not 
later than the close of the previous year, though quantification of the 
amount payable is postponed." The Indian Supreme Court in the 
case of Kalwa Devadattam v. Union of India (AIR 1964 SC 880) also 
held the same in these words- “Under the Indian Income-tax Act 
liability to pay income-tax arises on the accrual of the income, and not 
from the computation made by the taxing authorities in the course of 
assessment proceedings; it arises at a point of time not later than the 
close of the year of account." 
 
CIVIL APPEAL NO. 1086 OF 2009 
18
17. 
 
In light of the discussion undertaken in the preceding 
paragraph, it is clear that charge is created on the last date of 
accounting year which under the repealed Income Tax Ordinance, 
1979, was created up till 30.06.2002. The power to recover tax 
cannot be taken away, even if there had been no saving clause in 
the Income Tax Ordinance, 2001. Such power gets automatically 
protected under the provisions of the general law i.e. Section 6 of 
the General Clauses Act, 1897. This claim on the basis of the charge 
already created could have been taken away if a specific provision to 
that effect had been incorporated in the Ordinance, 2001 but that is 
not the case in the present matter. Thus irrespective of any 
accounting discrepancy that is sorted out on the basis of the 
procedural provisions of the income tax law at any subsequent 
stage, the charge of income tax on the taxpayer stands established 
on the last day of the income year/accounting year. In the present 
case, the last day of the last income year covered under the repealed 
Income Tax Ordinance, 1979, was 30.6.2002, therefore, on all 
income years that ended on or before 30.6.2002 the charge to 
recover tax had already been created on or before such date. In the 
case of Muhammad Arif Vs. State (1993 SCMR 1589) it was held as 
follows:- 
 
“From the above cited cases, it is evident that there is judicial 
consensus that where a law is repealed, it will not inter alia 
affect any investigations, legal proceedings or remedy in 
respect of any right, privilege, obligation, liability, penalty, 
forfeiture or punishment, and any such investigation, legal 
proceeding or remedy may be instituted, continued or enforced, 
and any such penalty, forfeiture or punishment may be 
CIVIL APPEAL NO. 1086 OF 2009 
19
imposed as if the law had not been repealed. This is so, inter 
alia, because of section 6 of the General Clauses Act, 1897 
(which corresponds to section 4 of the West Pakistan General 
Clauses Act, 1956), in the absence of any contrary intention 
manifested in the relevant statute.”  
 
18. 
 
Following passages from Indian jurisdiction in the case 
of State of Punjab Vs. Mohar Singh Pratap Singh (AIR 1955 Supreme 
Court 84) can also be referred with considerable advantage:- 
 
“Whenever there is a repeal of an enactment, the consequences 
laid down in section 6 of the General Clauses Act will follow 
unless, as the section itself says, a different intention appears. 
In the case of a simple repeal there is scarcely any room for 
expression of a contrary opinion. But when the repeal is 
followed by fresh legislation on the same subject we would 
undoubtedly have to look to the provisions of the new Act, but 
only for the purpose of determining whether they indicate a 
different intention. 
 
 
The line of enquiry would be, not whether the new Act 
expressly keeps alive old rights and liabilities but whether it 
manifests an intention to destroy them. We cannot therefore 
subscribe to the broad proposition that section 6 of the General 
Clauses Act is ruled out when there is repeal of an enactment 
followed by a fresh legislation. Section 6 would be applicable in 
such cases also unless the new legislation manifests an 
intention incompatible with or contrary to the provisions of the 
section. Such incompatibility would have to be ascertained from 
a consideration of all the relevant provisions of the new law 
and the mere absence of a saving clause is by itself not 
material.” 
 
 
CIVIL APPEAL NO. 1086 OF 2009 
20
 
19. 
 
Thus the charge on the income of an assessee that 
accrues on the last date of an income year is also protected 
independently under the provisions of general law i.e. Section 6 of 
the General Clauses Act and no dependence on saving clause was 
required. 
 
20. 
 
In so far as the contention of the counsel for the 
respondent that leave was not obtained from the Court which is 
seized of the winding up proceedings, suffice is to state that Section 
316 of the Companies Ordinance, 1984, is attracted when winding 
up order is passed or provisional manager is appointed. In the 
present case, it has not been demonstrated that such an order has 
been passed. Mere filing of winding up proceedings does not attract 
the provision of Section 316. Even otherwise, we have decided the 
question of jurisdiction and propose to remand the case back to the 
Commissioner Income Tax (Appeals), Peshawar, for adjudication of 
the respondent’s appeal on merits. Hence, at this stage no useful 
purpose would be served to go into the question of whether the leave 
of the court that is seized of the winding up proceedings was to be 
sought first before proceeding further in the matter.  
 
 
21.  
 
In view of what has been discussed above, we are of the 
considered opinion that it was never intended by the lawmakers, 
even at the time of promulgating the Income Tax Ordinance, 2001, 
to destroy the charge on incomes that accrued under the provisions 
of repealed Income Tax Ordinance, 1979, in so far as such charge 
related to correct computation of total income and the tax payable 
CIVIL APPEAL NO. 1086 OF 2009 
21
thereon. Such a claim arising under the repealed law, which had 
not extinguished by afflux of time, was specifically made 
enforceable through legal fiction created in Section 239(1) as if the 
Income Tax Ordinance, 1979, had not been repealed. This was the 
sole object of incorporating Saving Clause in the form of Section 
239(1) in the Income Tax Ordinance, 2001. Therefore, it cannot 
be said that the income years which relate to the period covered 
under the repealed Income Tax Ordinance, 1979, cannot be 
brought under scrutiny under its provisions after 30.06.2002 on 
the strength of Section 239 (1) of the Income Tax Ordinance, 
2001. Additionally, this could be done even on the strength of 
the provisions of Section 6 of the General Clauses Act as the 
charge of tax stood created on or before 30.06.2002. As to the 
validity of the notice sent to the respondent under the label 
Section 122 (5A) of the Income Tax Ordinance, 2001, suffice is to 
state that merely because the notice was so labelled instead of 
Section 66A of the Income Tax Ordinance, 1979, it does not 
follow that it was invalid under the law. By virtue of Section 6 of 
the General Clauses Act as well as under Section 239(1) of the 
Income Tax Ordinance, 2001, powers under Section 66A could 
have been exercised to take same action as was contemplated in 
the notice in question. We therefore, treat the notice dated 
23.8.2004 issued under Section 122(5A) to be notice issued 
under Section 66A of the Income Tax Ordinance, 1979. For the 
foregoing reasons, the impugned order is set-aside. Resultantly, 
the appeal of the respondent filed before the Commissioner, 
Income Tax (Appeals), Peshawar stands revived. Let the 
Commissioner, Income Tax (Appeals), Peshawar after issuing due 
CIVIL APPEAL NO. 1086 OF 2009 
22
notice of hearing to the parties decide respondent’s appeal afresh on 
merits. Needless to mention that his decision shall be governed by 
this decision with regard to the retrospective application of Section 
239(1) of the Income Tax Ordinance, 2001. Let a copy of this 
judgment also be dispatched to the Chairman, Federal Board of 
Revenue for its implementation in cases involving similar 
controversy.    
 
22. 
 
The above are the detailed reasons of our short order 
dated 16.12.2015.    
 
JUDGE 
 
 
JUDGE 
 
 
 
Islamabad, the                                                             JUDGE 
16th of December, 2015 
 
Approved For Reporting 
Khurram 
