2025 PLP (Trib (PTD)

FAKHAR-UL-ZAMAN AKHTAR, MEMBER.

Above captioned appeal has been filed by the appellant/taxpayer against the impugned order dated 29.06.2024, passed by the Deputy Commissioner-IR, Zone AEOI, Unit-4, Range-B. Karachi, on the following grounds:- "1) That the Order of the learned DCIR is bad in law and on facts. 2) That the Order of learned DCIR is illegal, ultra vires, void and without any justification. 3) That the learned DCIR had, without considering the various documents filed by the AR of the taxpayer went on to erroneously hold in paragraph 4 of the impugned order "that the taxpayer failed to prove any explanation or money trail of the foreign asset in light of documentary evidence". 4) That the impugned order is riddled with contradictory statements as on the one hand it reflects acknowledgment of the fact that the source of the concerned asset emanated from the investment made by the late father of the taxpayer during his employment abroad. However, the connections to the confronted bank account to the aforementioned asset was conveniently ignored. 5) That it is a documented fact that the late father of the taxpayer was a distinguish bureaucrat who after his stint with the government served for numerous years in institutions like Asian Development Bank, the Islamic Development Bank and Charles Schwab & Co. and this fact was duly communicated to the DCIR during the course of the proceedings. For this purpose various newspapers clipping and letter from Asian Development Bank was shared in support of these submissions and the same are being shared here as Annexure "A" to the instant Appeal. 6) That in addition to the above, a letter from the Asian Development Bank was shared with the DCIR which confirmed that the father of the taxpayer uptill 1999 was in receipt of income amount to approximately USD 350,000 in the 3 years that he was working with the Asian Development Bank. A Copy of the said letter is enclosed herewith and is marked as Annexure B to the instant appeal. 7) That assuming that the late father of the taxpayer earned similar incomes from other international agencies; then it is not unreasonable to conclude that consistent reinvestment of these proceeds led to the late father of the taxpayer accumulating USD in the forms of investment and liquid cash as at the time of his death in a bank account ("Bank Account 1") that he opened in the joint name of himself his wife and his son who is the taxpayer in the instant case. A copy of the statement of the Bank Account 1 is enclosed herewith and is marked as Annexure C to the instant appeal. 8) That furthermore, it is the case of the taxpayer that the investments which were subsequently re-invested who formed the final figure in the foreign bank account of the late father of the taxpayer were subjected to deduction of foreign tax Reliance in this regard is placed on the email received from the representative of Deutsche Bank which confirm that tax was deducted on the returns earned from the amounts invested by the bank account of the taxpayer's father. 9) That as per the data that the taxpayer could gathered in limited time reflected that the investments comprise mainly of various profit bearing bonds which is always subject to the deduction of applicable tax. 10) That as per various double taxation treaties the profit on debt is often taxable in the country in which such profit on debt has been paid. 11) That it is the case of the taxpayer that the amounts; mentioned in his confronted bank accounts were transferred from the bank account of his father; this was done from transferring this amount into a joint bank account opened by the taxpayer in the name of himself and his mother ("Bank Account 2") and then this amount was subsequently transferred from this Bank Account 2 into the Bank Account that was opened in the Bank of Singapore ("Bank Account 3"). This is established by a printout of numerous email exchanges that took place between the taxpayer and the representative of the Deutsche Bank in which Bank Account 2 was being maintained and a letter of the Bank of Singapore which provides that the amount in Bank Account 3 was indeed transferred from Bank Account

2. Annexed to these Grounds as Annexure D and Annexure E respectively. 12) That all of the above information was shared with the DCIR who did not consider any of these explanations despite reproducing the same in the impugned order Instead the learned DCIR went on to include the proceeds into the income of the taxpayer on the grounds that the above mentioned account was not the bank account for which the taxpayer was confronted. This is evidenced by the letters that were submitted by the AR of the Taxpayer which are annexed as Annexure F/1 and F/2 of the instant appeal. 13) That the above was notwithstanding the fact that the learned DCIR was made aware that the proceeds in the confronted bank account came from the above mentioned bank account of the father of the taxpayer. For this purpose, a letter was shared with the learned ACIR in which this was confirmed. 14) That for this purpose the taxpayer shared with the learned DCIR various documents which show the flow of the funds from the bank account of the taxpayer's father to joint account opened in the name of the taxpayer and his mother and then subsequently to the confronted bank account. That mentioned documents the learned DCIR still went on the hold that "No compliance was made in true sense" and that "No evidence has been provided regarding flow of funds". 15) That on the basis of the above it is evident that the impugned order is based on mis-appreciation of the relevant facts and misapplication of the relevant law pertaining to cross border taxation. 16) That the appellant further prays to plead additional grounds at the time of hearing of the appeal. PRAYERS: Based on the grounds mentioned above, it is therefore prayed that this Hon'ble Tribunal is pleaded to

1. Set aside the impugned order dated: 29 June, 2024 and cancel the demand being raised as a result of the said impugned order;

2. Declare that the funds in the confronted bank account of the taxpayer emanated from the bank account of the father of the taxpayer;

3. Declare that the non-declaration of the bank account by the father of the taxpayer does not disallow the application of section 79 of the Income Tax Ordinance, 2001;

4. Declare that the DCIR erred in not allowing the taxpayer to revised has wealth statement of tax year 2018;

5. Any other relief that this Hon'ble Forum may deem just and fit in the circumstances."

2. Brief facts of the case are that the appellant is an individual who file income tax return for the tax year 2018 on 26.09.2018 declaring tax chargeable of Rs.1,673,272/- along with wealth statement under section 116(2) of Income Tax Ordinance, 2001. On the basis of definite information received under OECD's Multilateral Convention on Mutual Administrative Assistance in tax matters and automatic exchange of information to the Government of Pakistan that the appellant owned off-shore assets during the tax year 2018 i.e. maintaining bank account in Bank of Singapore Ltd. having PKR converted amount at Rs. 272,654,009/- which was not declared in tax year 2018. In this regard, taxpayer was issued notice under section 176(4). In response thereto, the reply was submitted, examined by the DCIR but found unsatisfactory. Therefore, a notice under section 122(9) read with section 122(5) and section 111(1) of the Income Tax Ordinance, 2001 was issued to the taxpayer but no reply was submitted on due date. Multiple opportunities were provided. Accordingly, taxpayer filed response vide letter dated 27.04.2022 along with details, which was examined and for further clarification reminder notice was issued. In response, the counsel attended hearing and explained but the same was found unsatisfactory that no evidence provided regarding amount received by the taxpayer as inheritance and his father had declared in its tax declaration, no evidence regarding flow of funds was provided, therefore, the DCIR finalized the proceedings and passed order by computing the income which resulted in addition of Rs.272,654,009/- being unexplained investment under section 111(1)(b) of the Income Tax Ordinance, 2001. Being dissatisfied with the order of AdCIR, appellant has filed this appeal before the Tribunal in pursuance of Tax Laws Amendment Act, 2024.

4. On the date of hearing, Mr. Faiz Ahmed, Advocate attended on behalf of the appellant/taxpayer and argued as per grounds of appeal. Later submitted written arguments along with documentary evidence including bank statements, copy of return for tax year 2018. On the other hand, Mr. Imran Falak Sher, DR vehemently opposed to the arguments of taxpayer's counsel and supported the order of DCIR.

5. We have heard both parties and perused relevant record of the case. The core issue involved in the instant case that the appellant failed to declare asset in off-shore jurisdiction in the wealth statement for the tax year 2018, therefore, it escaped from tax. Admittedly, the asset is a foreign account in Bank of Singapore Ltd. having USD 2,245,914.41 (at Rs.272,654,009.37 converted @ 121.60 as on 30.06.2018). Perusal of impugned order shows that the opportunity was approved for submission of relevant supporting evidence but taxpayer could not submit required documents which culminated into passing of order by the DCIR who added the amount of Rs. 272,654,009/- by treating it as unexplained investment under section 111(1)(b) of Income Tax Ordinance, 2001. The taxpayer took stance that the said bank account was maintained by his late father who was a beaurocrate and during his official visits on behalf of Government of Sindh and Government of Pakistan he had opened the said account and the appellant was not known about that account but after the demise of his father in 2015. Before the lower forum, he statedly failed to produce the relevant documents to substantiate his version with evidence to describe the source and nature of investment in the said bank. While agitating before us, the appellant has taken ground that no separate notice under section 111 was issued before making addition. We observe that only one issue is involved i.e. addition, therefore, independent notice under section 111 was not required. As regards the concealment of said amount the taxpayer has submitted that after issuance of notice by the department, it was requested to allow the appellant to revise wealth statement but same was not considered. It is to be noted that wealth statement cannot be revised after the expiry of five years from the due date of filing of return of income for that tax year or after issuance of notice the return or wealth statement cannot be revised, therefore, the action of Department is right. During the proceedings before DCIR, the appellant was asked by the officer to provide bank statement and other documents however he failed to provide but before us, the taxpayer's counsel has furnished the copies of bank statement of foreign account maintained by his deceased father and other substantial documents, which are examined but to ascertain veracity of its genuineness, in our view it must be scrutinized at the assessment stage. To reach at just and fair conclusion, we deem it appropriate in the interest of justice to annul the impugned order and remand back the case for de novo consideration with direction to verify the bank statement of the alleged foreign account produced by the appellant and accordingly pass fresh order in accordance with law within 30 days of receipt of this order after providing proper opportunity of hearing to the taxpayer whereas the appellant is directed to join the proceedings and submit required documents without any fail.

6. Consequently, the appeal is disposed off in above manner. MQ/17/Tax(Trib) Order accordingl