2019 PLP (Trib (PTD)

SHAHID MASOOD MANZAR (JUDICIAL MEMBER).

These appeals have been filed at the instance of taxpayer against the impugned consolidated Order Nos.199 and 200 dated 19.09.2016 passed by the learned Commissioner Inland Revenue (Appeals), Peshawar for the Tax years 2012 and 2013 respectively. The appellant agitates on the following grounds:-- GROUNDS FOR APPEAL TAX YEAR 2012 "..

2. That neither the case of the appellant was selected for Audit under sections 214C/I77 of the Income Tax Ordinance, 2001 nor existed any definite information in the hands of assessing officer which could help legitimate the amendment of assessment, hence the conduct of enquiries/amendment of assessment is without any basis and a nullity in the eye of law. 3. (a) That the exercise of jurisdiction under section 176 of the Income Tax Ordinance, 2001 is a patent illegality by virtue of jurisdiction order No.2634 dated 14/10/2014 . (b) That the case record/order sheet is silent regarding grant or jurisdiction under section 176 rendering the while proceedings a nullity in the eye of law. (c) That the order sheet is also silent regarding issuance of notices under section 176 to the banks which is another incurable illegality. (d) That the grant of jurisdiction vide letter No.4576 dated 10/12/2015 is neither mentioned in any of the notices issued during the proceedings amended assessment order nor the entries as per order sheet help legitimate the grant of any such powers. (e) That at the time of hearing before Commissioner Inland Revenue (Appeals) Peshawar Zone Peshawar the L/DR was specifically asked to produce evidence as to grant of jurisdiction under section 176 but the L/DR failed to produce the requisite evidence even after perusal of the whole records for over 20 minutes. (f) That even neither any proceedings were in hand for tax year 2012 as on 10/12/2015 nor there existed any definite information in the hands of assessing officer which could lead justification of these proceedings. (g) That even otherwise, the grant of jurisdiction by virtue of letter No.4576 dated 10/12/2015 court of generalized. 4. (a) That the filing of revised wealth statement along with proper wealth reconciliation is a legal and vested right of the taxpayer garneted under section 116(3) of the Income Tax Ordinance, 2001, (2001 PTD Trib. 170) (b) That the appellant was condemned unheard as the appellant was not confronted on the defects in the revised wealth statement which may well be adjudged in the light of order sheet entry dated 28/06/2016 which is produced hereunder:-- "Reply Received from the taxpayer along with submissions of revised wealth statements for the tax years 2011, 2012, 2013 and 2014 put up for orders. 28/06/2016. 5. (a) That alternatively, additions made on account of bank credit entries to the tune of Rs.11465532/- without bifurcating the nature and strength of credit entries like opening cash balances as at 01/07/2011 amounting to Rs.5550143/- bank profits at Rs. 19012/-returned /disband cheques of Rs.6,00,000/- term deposit encashment at Rs.2,00,0000/- sale of Motor Vehicles Rs.9,00,000/- settled law on the itself is a nullity in the eye of law. (b) That even otherwise, the law settled law on the issue suggest confronting of PEEK ENTRIES whereas in the instant case the whole credit entries were added back which is an incurable illegality.

6. That it is an admitted position in the body of the order that appellant was having the following valid sources in hand. a) Opening Cash Balances 01/07/2011 Rs.10697770/- b) Salary Income. Rs. 1846978/- c) Hospital Receipts Rs. 1602060/? Total Rs.14146808/- Then the placement of these sources in the shape of TDR's amounting to Rs. 11200000/- is not a crime, hence the addition made on this account amounting to Rs.4558656/- is patently illegal and highly unjustified." GROUNDS OF APPEAL FOR TAX YEAR 2013 "

2. That neither the case of the appellant was selected for Audit under sections 214C/177 of the Income Tax Ordinance, 2001 nor existed any definite information in the hands of assessing officer which could help legitimate the amendment of assessment, hence the conduct of enquiries/amendment of assessment is without any basis and a nullity in the eye of law. 3. (a) That the exercise of jurisdiction under section 176 of the Income Tax Ordinance, 2001 is a patent illegality by virtue of jurisdiction order No.2634 dated 14/10/2014 . (b) That the case record/order sheet is silent regarding grant or jurisdiction under section 176 rendering the while proceedings a nullity in the eye of law. (c) That the order sheet is also silent regarding issuance of notices under section 176 to the banks which is another incurable illegality. (d) That the grant of jurisdiction vide letter No.4576 dated 10/12/2015 is neither mentioned in any of the notices issued during the proceedings amended assessment order nor the entries as per order sheet help legitimate the grant of any such powers. (e) That at the time of hearing before Commissioner Inland Revenue (Appeals) Peshawar Zone Peshawar the L/DR was specifically asked to produce evidence as to grant of jurisdiction under section 176 but the L/DR failed to produce the requisite evidence even after perusal of the whole records for over 20 minutes. (f) That even neither any proceedings were in hand for tax year 2012 as on 10/12/2015 nor there existed any definite information in the hands of assessing officer which could lead justification of these proceedings. (g) That even otherwise, the grant of jurisdiction by virtue of letter No.4576 dated 10/12/2015 court of generalized. 4. (a) That the filing of revised wealth statement along with proper wealth reconciliation is a legal and vested right of the taxpayer garneted under section 116(3) of the Income Tax Ordinance, 2001/2001 PTD (Trib.) 170) (b) That the appellant was condemned unheard as the appellant was not confronted on the defects in the revised wealth statement which may well be adjudged in the light of order sheet entry dated 28/06/2016 which is produced hereunder: - "Reply Received from the taxpayer along with submissions of revised wealth statements for the tax years 2011, 2012, 2013 and 2014 put up for orders. 28/06/2016.

5. That alternatively, additions made on account of bank credit entries to the tune of Rs.63093889/- without bifurcating the nature and strength of credit entries like opening cash balances as at Rs.7534271/- encashment of TDR's/replacement at Rs.8200000/- disbound cheques amounting to Rs. 16575000/- bank profits Rs. 1089732/- etc is in itself illegal and highly unjustified. That even otherwise, the law settled law on the issue suggest confronting of PEEK ENTRIES whereas in the instant case the whole credit entries were added back which is an incurable illegality.

6. That the amendment of assessment on the basis of 2nd show-cause notice under section 122(9), Dated 09/06/2016 was illegal as the assessing officer had indulged in fishing and roving enquiries become no such issue was raised in original show-cause notice issued under section 122(9), Dated: 30/11/2015, (2015 PTD (Trib.) 2271)."

2. Brief facts of the case are that the taxpayer is a Neuro Surgeon declaring income from salary and private practice. The returns of income were filed but the wealth statements were not filed, therefore, notices under section 116(1) were issued. In response thereto, the wealth statements were filed vide letter dated 06.08.2013. On scrutiny, it was noted by the DCIR that the taxpayer did not declare any bank account in his wealth statements, whereas the information collected from banks suggested that the taxpayer was maintaining five bank accounts two in Dubai Islamic Bank and three in Meezan Bank Ltd. The DCIR found that the taxpayer concealed the bank accounts as well as amount credited during the tax years under consideration, therefore, notices under section 122(9) read with sections 122(5) and 111 of the Income Tax Ordinance, 2001 were issued for making amendment of already completed assessment. After seeking some adjournments, the taxpayer submitted the reply accompanied with two new wealth statements for the tax years 2011, 2012 and 2013. DCIR perused the wealth statement and observed that no reason was given that why earlier declaration was not correctly filed. As a result, the DCIR passed order under section 122(1) read with sections 122(5)/111 of the Income Tax Ordinance, 2001. Taxpayer challenged the said order before the learned CIR(A), who vide his impugned consolidated order dated 19.09.2016 disposed off the appeals. Taxpayer again being dissatisfied with the order of learned CIR(A), filed appeals before this Tribunal.

3. During the course of hearing, learned AR of the appellant reiterated the grounds of appeals whereas the Departmental Representative opposed the contention of learned AR.

4. Heard the parties and perused the record. Our findings are as under:-- At first we take up appeal for the Tax Year 2012: - TAX YEAR 2012

5. As regards Ground No.1 of appeal, it is formal in nature, needs no adjudication.

6. In Ground No.2 of appeal, the learned AR contended that neither the case of the appellant was selected for Audit under sections 214C/177 of the Income Tax Ordinance, 2001 nor existed any definite information in the hands of assessing officer which could help legitimate the amendment of assessment, hence the conduct of enquiries/amendment of assessment is without any basis and a nullity in the eye of law. 6(a). In this regard, the learned Departmental Representative supported the order of DCIR by submitting that she has rightly dealt with the matter in accordance with law. 6(b). We have considered the submissions of both the parties. The DCIR while dilating upon the matter observed that: "...The objection of the taxpayer is ill found for the reason that scheme of the Ordinance does not restrict amendment of the completed assessment only to the cases selected for audit. Section 122(5) clearly states that the amendment can be made on the basis of definite information acquired for the audit or otherwise, section 122 of Ordinance is reproduced here below: - "122.(5) An assessment order in respect of tax year, or an assessment year, shall only be amended under subsection (1) and an amended assessment for the year shall only be further amended under subsection (4) where, on the basis of definite information acquired from an audit or otherwise, the Commissioner is satisfied that-- (i) any income chargeable to tax has escaped assessment; (ii) total income has been under-assessed, or assessed at too low a rate, or has been the subject of excessive relief or refund; or (iii) any amount under a head of income has been mis-classified.] Since the department has definite information for non declaration of the closing balances/TDR and the credit entries therefore, the proceedings are legally initiated." 6(c). Perusal of the above shows that the DCIR has acted in accordance with law. In our view, the taxpayer failed to declare the closing balances/TDR and the credit entries. We find the taxpayer's version that the Assessing Officer had no definite information as incorrect. Therefore, we do not find any room to interfere the order of DCIR on this issue. Thus, the taxpayer's appeal fails on this count.

7. In Grounds Nos.3(a) to 3(g) of appeal, the learned AR has challenged the exercise of jurisdiction by the DCIR under section 176 of the Income Tax Ordinance, 2001. 7(a). In this regard, the learned Departmental Representative supported the orders of the officers below. 7(b). We have considered the submissions of both the parties. The learned CIR (A) while dilating upon the matter observed that:-- "As regard ground No.3 regarding acquisition of information under section 176 of the Income Tax Ordinance, 2001 from various banks, the learned AR pleaded that the assessing officer had acted beyond her jurisdiction as neither in the body of the notices issued nor in the amended order, the grant of permission to call information under section 176 ibid by concerned CIR was mentioned. The stance of the learned AR is not correct as the assessing officer was properly given permission under section 176 by the Commissioner Inland Revenue Zone-I/II, RTO Abbotabad vide letter No.4576 dated 10-12-2015." 7(c). Perusal of the above shows that the proper permission under section 176 was given by the CIR, RTO Abbotabad vide letter No.4576 dated 10-12-2015. The DCIR collected the information of the taxpayer under section 176 because the information obtained did not match with declared results, therefore, it was obligation of the department to initiate the proceedings and ask clarification from the taxpayer for discrepancies. We are in full agreement with the officers below on this count; hence the appeal also fails on this count.

8. In Grounds Nos.4(a) and 4(b) of appeal, the learned AR submitted that the filing of revised wealth statement along with proper wealth reconciliation is legal and vested right of the taxpayer garneted under section 116(3) of the Ordinance, 2001. In this regard, he placed reliance on a reported judgment of the Tribunal i.e. 2001 PTD (Trib.)

170. He further submitted that the appellant was condemned unheard as the appellant was not confronted on the defects in the revised wealth statement. 8(a). In this regard, the learned Departmental Representative supported the orders of the officers below. 8(b). We have considered the submissions of both the parties. The DCIR while meeting the treatment in the following manner:-- ".... The wealth statement was not filed along with the return therefore, a notice under section 116(1) was issued. In response there to the wealth statement as filed vide letter dated 6.08.2013 received in this office on 21.08.2013 .. It was noted that the taxpayer did not declare any bank account in his wealth statement whereas the information collected from the banks suggested that the taxpayer was maintaining five bank accounts, two in Dubai Islamic Bank and three in Meezan Bank Ltd. Since an incontrovertible evidence was available with Department that the taxpayer concealed the bank accounts, as well as the amount credited during the year therefore a notice under section 122(9) read with sections 122(5) and 111 of the Ordinance, 2001 was issued vide this office letter No.305074-1. dated 09.06.2016 for making amendment of already completed assessment ..... The taxpayer after seeking some adjournments submitted the reply vide his letter no nil dated 28.6.2016, accompanied with two NEW wealth statements for tax years 2011 and 2012. In new wealth statements the cash equivalent to bank balances and TDRs were declared as confronted in the notice. The reply submitted by the taxpayer is perused " 8(c). Perusal of the above shows that the taxpayer served with notice under section 116(1) for not filing the wealth statement along with return and in response thereto the taxpayer filed the wealth statements for the tax years under consideration. On scrutiny, it was found by the DCIR that the taxpayer did not declare any bank account(s) in his wealth statement, however, the information with Department suggested that the taxpayer was maintaining five bank accounts in different banks, therefore, this DEFECT was confronted to the taxpayer through a notice under section 122(9) read with sections 122(5) and 111 of the Ordinance, 2001 was issued vide letter No.305074-1, dated 09.06.2016 for making amendment of already completed assessment. The taxpayer did seek some adjournments and then submitted the reply vide his letter No. Nil dated 28.6.2016, accompanied with two NEW wealth statements for tax years 2011 and 2012. On its scrutiny, it was found by the DCIR that in new wealth statements the cash equivalent to bank balances and TDRs were declared as confronted in the notice. The reply submitted by the taxpayer was properly perused by the DCIR and consequently, he passed the order. 8(d). The learned CIR (A) also upheld the above findings of DCIR in the following manner:-- "As regard ground No.4 regarding non-consideration of the revised wealth statement along with wealth reconciliation statement, the same was considered by the assessing officer but since the appellant could not explain his point of view by citing plausible reasons, the assessing officer rejected his stance. ..the appellant had not declared his true particulars of assets/income and had concealed bank balances/TDRs etc for which no plausible explanation was offered by him regarding which he was properly confronted. Even in the revised wealth statement these bank accounts were not mentioned ." 8(e). We have examined the above findings of the officers below and are of the view that the taxpayer's argument that the filing of revised return under section 116(3) was his legal and vested right, is no doubt correct but the taxpayer's argument that his wealth statement's defects were not confronted to him and he was condemned unheard, is not supported from the record. The order of DCIR shows that the taxpayer was properly confronted with regard to the defects in the wealth statement, even taxpayer filed new wealth statements, which were properly perused by the DCIR. So the question of condemned unheard does not arise as the taxpayer was given ample opportunities and was heard properly but he failed to offer plausible explanation. Therefore, we do not find any merit in this argument of the taxpayer that he was condemned unheard, hence the appeal fails on this count.

9. In Ground No.5 learned AR objected that the additions made on account of bank credit entries to the tune of Rs.11465532/- without bifurcating the nature and strength of credit entries like opening cash balances as at 01/07/2011 amounting to Rs.5550143/- bank profits at Rs.19012/-returned/disband cheques of Rs.600000/- term deposit encashment at Rs.2000000/- sale of Motor Vehicles Rs.900000/- settled law on the itself is a nullity in the eye of law. 9(a). Learned DR on the other hand opposed to the contention of learned AR. 9(b). We have considered the submissions of either sides and perused the relevant record. The learned CIR(A) on this score observed as under:-- "In ground No.7 the appellant claimed that the addition made on account of bank credit entries amounting to Rs. 11,465,532/- was astonishing especially when the OIR herself admitted valid cash balances of Rs. 10,667,108/-. This plea of the learned AR is valid upto some extent but since the assessing officer had already given credit of the cash balances of Rs. 10,667,108/- and the balances unexplained addition has been made at Rs.4,558,656/-, the contention of the appellant on this score is not accepted as the assessing officer has rightly added the balance amount to income of the appellant." 9(c). Perusal of the above shows that the learned CIR(A) in his order himself admitted that the plea of the learned AR regarding the issue in question is valid upto some extent but since the Assessing Officer had already given credit of the cash balances and the balances unexplained addition has been made, the contention of the appellant is not accepted on this score. This observation of the learned CIR(A) is doubtful, as on the one hand he admits that the appellant's plea is valid upto some extent and on other hand upholds the action of Assessing Officer. In our view, to arrive at the fair conclusion, we deem it appropriate to remand the case on this score to the Assessing Officer for considering the plea of appellant afresh and decide it in accordance with law. The appellant is strictly directed to avoid from seeking any adjournments and present his case on this score with evidences/documents and necessary submissions as and when called/noticed by the Assessing Officer.

10. In Ground No.6 learned AR submitted that it is an admitted position in the body of the impugned order that the appellant was having the following valid sources in hand: - a) Opening Cash Balances 01/07/2011 Rs.10,697,770/- b) Salary Income. Rs.1,846,978/- c) Hospital Receipts Rs.1,602,060/- Total Rs.14,146,808/- 10(a). Learned AR further submitted that the placement of above mentioned sources in the shape of TDR's amounting to Rs.11,200,000/- is not a clime, hence the addition made on this account amounting to Rs.4,558,656/- is patently illegal and highly unjustified. 10(b). Learned DR on the other hand opposed to the contention of learned AR. 10(c). We have considered the submissions of either sides and perused the relevant record. The learned CIR(A) on this score observed as under:-- "As regard grounds Nos.5 and 6, regarding the net income assessed at Rs.I7,871,166/- against the declared income of Rs.1,846,978/-, the same was rightly assessed as the appellant had not declared his true particulars of assets/income and had concealed bank balances/TDRs etc for which no plausible explanation was offered by him regarding which he was properly confronted. Even in the revised wealth statement these bank accounts were not mentioned and cash in hand was shown at Rs.4,178,908/-. The holding TDRs is not a cognizable offence but its non-declaration/concealment is an act cognizable under the law. The appellant had concealed the same for which he had rightly been assessed." 10(d). We have perused the above findings of learned CIR(A) on the score and found that the learned CIR(A) has discussed the issue in detail by observing that the appellant had not declared his true particulars of assets/income and had concealed bank balances/TDRs etc for which no plausible explanation was offered even he was properly confronted. The learned CIR(A) further observed that even in the revised wealth statement these banks accounts were not mentioned. The learned CIR(A) also observed that holding TDRs is not a cognizable offence but its non-declaration/concealment is an act cognizable under the law. We concur with the findings of learned CIR(A) and do not find any room to interfere with his order on this score. Hence, the appeal also fails on this score. Now we take up the appeal for the Tax Year 2013: - TAX YEAR 2013

11. As regards Grounds Nos.1, 2, 3, 4 and 5 of appeal, the same are already decided while disposing the appeal for Tax Year 2012 at paras Nos.5, 6, 7, 8 and 9 respectively. Therefore, again discussion on the same issue will be nothing but recurrence of order.

12. In Ground No.6 learned AR submitted that the amendment of assessment on the basis of 2nd show-cause notice under section 122(9) dated 09/06/2016 was illegal as the Assessing Officer had indulged in fishing and roving enquiries because no such issue was raised in original show-cause notice issued under section 122(9) dated 30/11/2015. In this regard, he relied upon a case law reported as 2015 PTD (Trib.) 2271. 12(a). Learned DR on the other hand opposed to the contention of learned AR. Learned DR submitted that the appellant was provided sufficient opportunity of hearing and the allegation of appellant that the Assessing Officer indulged in fishing enquiries, is baseless. 12(b). We have considered the submissions of either sides and perused the relevant record. We have also examined the case law relied upon by the taxpayer's counsel. The learned CIR(A) while dealing with matter observed that: "As regard ground No.4, there is no bar on issuing reminders subsequent to show-cause notice under section 122(9) as in the instant case first show-cause notice was not complied with. The assessing officer can issue so many reminders, he/she thinks fit and until he/she is not satisfied that the taxpayer has been properly confronted/informed regarding the actions to be taken." 12(c). We concur with the above findings of learned CIR(A) and do not any reason to interfere. The appellant's version on this score is not accepted. Hence, appeal fails on this count.

13. Resultantly, both the appeals are disposed off in above manner. HBT/54/Tax(Trib.) Order accordingly.