2016 PLP (Trib (PTD)

CH. ANWAAR UL HAQ (JUDICIAL MEMBER).

These appeals have been filed by the taxpayer against consolidated order Nos. 4802 and 4803 dated 26-02-2013 passed by the CIR (A), Faisalabad, whereby he maintained the assessment order of the assessing officer passed under section 122(1) of the Income Tax Ordinance, 2001.

2. Brief facts of the case are that the department has come to know that the taxpayer is maintaining a bank A/c with Standard Chartered Bank, Railway Road, Faisalabad. The Bank statement was examined, and it was observed that the bank transaction/credit entries have not been matched with declared results and certain discrepancies were observed. This situation was confronted to the taxpayer by way of issuing a show cause notice dated 20-06-2012 under section 122 (9) of the Income Tax Ordinance, 2001 relevant portion of the same reads as under:-- "The bank transaction / credit entries have not been matched with declared results and certain discrepancies have been observed as under:-- Tax year Declared Receipts/ Sales Total Amount credited in bank account Difference 1 2 3 4 2006 189300 10329486 10140186 2007 1727805 32679006 30951201 Examination of your assessment record revealed that the declared receipts in the above years do not reconcile with the transactions as per your bank statement, meaning thereby , prima facie , you have not sufficient sources to own the amounts mentioned in column No.4 of the above tabulation and the amounts are to be included in your taxable income under the head "income from other sources" under section 111(1)(b) of the Income Tax Ordinance, 2001 in the relevant tax years. Hence, In view of the above mentioned facts and circumstances, deemed assessment made under section 120(1) of the Income Tax Ordinance, 2001 for the tax years, under consideration are showing suppression of income, which necessitates amendment of assessment under sections 122(1)/122(5) read with section 111(1)(b) of the Income Tax Ordinance, 2001."

3. In compliance the taxpayer filed reply, which was rejected being not tenable in the eye of law. Resultantly, already completed assessments in terms of section 120 of the Income Tax Ordinance, 2001 were amended under sections 122(1)/122(5) of the Income Tax Ordinance, 2001 for both the years in the following manner:-- Tax Year 2006 2007 Total Credits in the bank Account. 1,03,29,486 3,26,79,006 Less Gross Receipts declared. 1,89.300 17,27,805 Balance Credits 1,01,40,186 3,09,51,201 Un-explained Bank Credits adopted as Sales of Cement and Khall etc. 1,01,40,186 3,09,51,201 G.P @ 5% 5, 07,009 15,47,560 Less P&L Expenses on estimate basis. 1,50,009 4,50,560 Net Income. 3,57,000 10,97,000 Add income already declared. 84,046 50,000 Total taxable income. 4,41,046 11,47,000 Income Tax chargeable 52,762 2,40,870 Income tax already paid. 9,405 8.960 Balance income tax payable. 43,357 2,31,910

4. Having dissatisfied the taxpayer filed appeal before the first appellate authority, who maintained the orders passed by the adjudication officer for both the years. Accordingly, taxpayer has challenged the same before this forum. The learned AR of the taxpayer also filed following additional grounds:-- Assessment Year 2006 "That Order dated 28-06-2012 is liable to be cancelled as the same is barred by time." Assessment Year 2006 "That no notice under section 122(9) was issued for making addition amounting to Rs.1,097,000/- hence the same is liable to be deleted."

5. Since the additional grounds are going to the very roots of the case, hence the same are allowed for adjudication. Assessment Year 2006.

6. It is submitted by the learned AR that the Income Tax return for the assessment year 2006 was filed on 30-09-2006 and the same was treated as an assessment order in terms of section 120 of the Income Tax Ordinance, 2001, whereas, impugned assessment order has been passed on 28-06-2012, which is barred by limitation of five years and the same shall only be amended within five years of the filing of return, i.e. up till 29-09-2011. In this regard he placed reliance upon a judgment of Hon'ble Lahore High Court reported as 2015 PTD 424 titled as CIR v. Maj. Gen. (R) Dr. C.M. Anwar and 2 others, which subsequently was also upheld by the Apex court of Pakistan. On the other hand, learned DR was unable to rebut the arguments advanced by the learned counsel of the taxpayer. Accordingly the appeal filed by the taxpayer is accepted and the orders passed by both the authorities below are vacated. Assessment Year 2007

7. For this year notice under section 122(9) was issued on 20-06-2012, whereby intention was shown to add Rs.3,09,51,201/- as income from other sources under section 111(1)(b) of the Income Tax Ordinance, 2001. The said show cause was replied by the appellant as under:-- "That this is the case of an individual, carry on business of fertilizer and cement. That as regards bank a/c No. 7801-190317-033 is maintained with Standard Chartered Bank Kotwali Road, Faisalabad is concerned, it is Bank a/c of credit limit approved against our building owned by myself and my brothers namely Tariq Mehmood Aamer and Abdul Hameed. In this behalf, it is to be brought on record that I did not utilize this bank account, on the other hand this bank a/c was operated by my brother i.e. Tariq Mehmood Aamer for his own business. My brother is also regular taxpayer. He has utilized this limit. I will provide his affidavit in this behalf day after tomorrow". The reply of the taxpayer was rejected being unsatisfactory for the following reasons:-

1. Scrutiny of bank account statement/ other documents provided by Standard Chartered Bank, Railway Road, Faisalabad revealed that the bank account No.7801-190317-033 has been maintained under the titled M/s Hudabia Enterprises Godown No.24, Pul Jhal Khanuana, Faisalabad and bank loan/ limit has been obtained on the business of Hudabia Enterprises.

2. Scrutiny of income tax return for tax years 2006 and 2007 revealed that the return Messrs titled Hudabia Enterprises Godown No.24,Pul Jhal Khanuana, Faisalabad has been filed under the status of Individual by Mr. Abdul Rasheed.

3. Out of above discussion, it is evident that the loan/limit has been obtained in the name of Messrs Hudabia Enterprises and the amount was deployed in the business of Hudabia Enterprises.

4. With regard to the contention of the taxpayer that the account was utilized by his brother cannot be accepted as the bank loans/ limits are always non transferable liability. Further no document issued by the concerned bank branch indicate that the loan/ limit has been utilized by the brother of the taxpayer."

8. It is the contention of the learned AR before me that assessment framed is beyond the scope of show cause notice for the reasons that in show cause notice taxpayer was confronted for adding of Rs.3,09,51,201/-, whereas in the assessment order he has made addition of Rs.10,97,000/-, which was never confronted to the taxpayer. He further relied upon a judgment of the Apex Court cited as 1987 SCMR 1840 titled as The Collector Central Excise and Land Customs and Others v. Rahim Din. Relevant portion is reproduced for convenience:-- "However, we are of the opinion that it is not necessary to determine this question of law in the facts of the present case as this petition can be disposed of on the short ground that the order of adjudication being ultimately based on a ground which was not mentioned in the show cause notice, the order was palpably illegal and void on the face of it. We have carefully examined the show cause notice and find no reference whatsoever or necessary facts relating to the ground that the alleged contraband goods were imported into Pakistan from unauthorized rout. In view of this palpable legal infirmity, we do not consider it necessary to examine the other contentions raised by the learned counsel."

9. The learned AR further relied upon the judgment of the Lahore High Court in the case of Caretex v. The Collector Sales Tax and Federal Excise and others reported as PLD 2013 Lah. 634 = 2013 PTD 1536 wherein at para-8 it was observed as under:-- "

8. Show cause notice is a foundational document, which to comprehensively describe the case made out against the taxpayer by making reference to the evidence collected in support of the same. It is the narration of facts in the Show Cause Notice along with the supporting evidence which determines the offence attracted in a particular case. Show Cause Notice is not a casual correspondence or a tool or license to commence a roofing inquiry into the affair of the taxpayer based on assumption and speculations but is a fundamental document that carries definitive legal and factual position of the department against the taxpayer."

10. In alternative learned AR further submitted that if credit entries are appearing in the account or in the statement, the peak deposit which could be added as income from undisclosed sources under the provisions of section 111(1)(b) of the Income Tax Ordinance, 2001. In this regard he relied upon the judgment of this Tribunal reported as 2009 PTD (Trib.) 1919. However, he was unable to disclose the peak deposit amount before me.

11. On the other hand, learned DR supported the orders the authorities below and urged for maintenance of the same.

12. I have given due consideration of the arguments of both rival parties and found that through show cause notice dated 20-06-2012 under section 122(9) the appellant was confronted regarding straight addition of Rs.3,09,51,201/- under section 11(1)(b) of the Ordinance as un-explained income but at the time of passing of assessment order the assessing officer taken lenient view and treated the said amount as sales and applied GP @ 5% thereon and allowed expenses on estimate basis, resulting an addition of Rs.10,97,000/- only. The said treatment adopted although not confronted to the taxpayer but the same was beneficial to the taxpayer and it could not be said that the above addition of Rs.10,97,000/- was beyond the scope of show cause notice under section 122(9), whereby an addition of Rs.3,09,51,201/- was proposed. In my opinion, the assessing officer, while passing the order taken the fair view and instead of adding the huge amount of Rs.3,09,51,201/- only as un-explained income under section 111(1)(b) added Rs.10,97,000/- as per tabulation at Para 2 above. The case law quoted above relied upon by the learned AR having distinguishable features and not applicable on the facts of the case in hand. Accordingly I uphold the orders of both the authorities below for the assessment year, 2007 and reject the appeal of the taxpayer.

13. Both appeals are disposed of in the above manner. HBT/50/Tax(Trib.) Order accordingly.