2020 PLP 968 (PTD)

This order shall also dispose of ITR No.255493 of 2018 titled "Commissioner Inland Revenue v. Messrs Malik Usman" as common questions of law and facts are involved in these cases.

2. Through this Reference Application under section 133 of the Income Tax Ordinance, 2001 ("the Ordinance of 2001"), following question of law, arising out of impugned consolidated order dated 28.08.2018, passed by learned Appellate Tribunal Inland Revenue, Lahore Bench, Lahore ("Appellate Tribunal"), has been pressed and argued for our opinion:- "Whether on the facts and in the circumstances of the case, the Tribunal was justified to delete the addition made under section 111(1)(b) of the Income Tax Ordinance, 2001 on account of concealed closing bank balance which remained unexplained despite provision of ample opportunity of being heard?"

2. Brief facts of the case are that original deemed assessment in this case was amended under sections 122(1)/122(5) of the Ordinance of 2001, whereby net income for the year 2010 was re-computed at Rs.264,890,921/- and addition under section 111(1)(a) at Rs.259,734,177/- and addition under section 111(1)(b) amounting to Rs.4,981,744/- were made. Being aggrieved respondent-taxpayer preferred appeal before CIR (Appeals), Lahore, which was allowed. Feeling dissatisfied, applicant-department filed appeal before learned Appellate Tribunal, which was dismissed. Hence this Reference Application.

3. Learned counsel for applicant department was confronted with the operative part of impugned order that findings given therein are of facts. He could not rebut that findings are not of law.

4. Heard. Available record perused.

5. Learned counsel for applicant department, at the very outset, was confronted with the following underlined portion of impugned order passed by learned Appellate Tribunal, wherein findings of facts have been given that credit entries appearing in the hank accounts were treated as business receipts / sales for the tax year 2010 and assessing authority failed to establish that the taxpayer made any investment or found to be owner of money or valuable article. It has also been observed that without verification and examination of relevant record/ balance sheet, assessing authority hurriedly made the addition on presumption. The relevant part of impugned order is reproduced hereunder:- "

7. We have looked into the matter and after due consideration, we find that no exception can be taken to the treatment as accorded by the learned CIR(A) which is found to be fair and reasonable in the ambient circumstances of the case. The impugned addition under section 111(1)(b) was made on account of credit entries appearing in the bank accounts which was treated as business receipts / sales for the tax year 2010 in terms of section 111(1)(b) of the Ordinance. The assessing authority has wrongly invoked the provisions of section 111(1)(b) for tax year 2010 to make the said addition. For the sake of facility and ready reference, the provisions of section 111(1)(b) are reproduced hereunder:-

111. Unexplained income of assets:- (1) Where- (a) . (b) a person has made any investment or is the owner of any money or valuable article; A plain reading of subsection (b) transpires that unless it could be established that the taxpayer had made an investment or was found to be owner of money or valuable article, no addition could be made under section 111(1)(b). The amending authority failed to establish that the taxpayer made any investment or found to be owner of money or valuable article. Reliance in this behalf is placed on the reported judgment cited as 1988 PTD 117 (Trib), wherein it has been held that:- "Unless it could be shown that the assessee had made any investment or was found to be owner of money or valuable article, no addition could be made under section 13(1)(aa) of the Ordinance." 8. 9. 10. 11. 12. 13.

14. We have looked into the matter and after due consideration, we find that the assessing authority has made the impugned addition merely on presumption. As per law, the assessing authority was required to ascertain whether closing balances appearing in the bank account(s) were explainable or not and for this purpose he was required to call from the taxpayer his statement of business affairs / balance sheet to see that against these balances, apart from capital account what type of other liability has been declared on the liability side of balance sheet and thereafter he was required to verify and examine the liability which may be in the shape of creditors. After adopting such procedure, any amount which remained un-reconciled, can be added in terms of section 111(1)(b). In the instant case, the assessing authority has failed to follow the said procedure and hurriedly made the addition on presumption which action is not sustainable in the eye of law.

15. Here, we would like to observe that every information cannot be treated as the basis for reopening of the assessment but the information should be of the nature which should qualify as "definite information" could not be given a universal meaning. Any estimate, gossip, personal whims or surmises could not be termed as the definite information. Any information which creates doubts or provides reasons to suspect that the income has been concealed does not form a part of the term 'definite information'. Reliance in this regard can safely placed on the decisions reported as 1993 SCMR 1232 and 2010 PTD (Trib) 122.

16. Hon'ble Supreme Court of Pakistan in the case reported as 1993 PTD 1108, has interpreted the term "definite information" in the following manner:- "The expression definite information, and similar other expressions used in the above noticed provisions or other related provisions certainly meant much more than mere material so as to cause of reasonable belief of even such evidence which might lead to a definite belief. Unless there is direct information and there is no further need to put the said definite information to trial by putting in further supporting material the process of self assessment could not be reopened".

17. In view of the above, we are inclined to hold that the impugned addition made under section 111(1)(b) amounting to Rs.4,968,982/- is not sustainable in the eye of law which is hereby deleted. Orders of the authorities below in this regard are accordingly cancelled.

18. Taxpayer's appeal succeeds in the above manner." [emphasis supplied]

6. It has not been shown to us that above findings are perverse, contrary to record or suffer from any other legal infirmity or impropriety warranting interference in reference jurisdiction. This Court has to decide Reference Application in the exercise of its advisory jurisdiction, on facts and circumstances founded by the Appellate Tribunal, which is the last fact finding forum. High Court cannot change findings of facts arrived at by the Appellate Tribunal. Reliance in this regard can be placed upon Messrs F.M.Y. Industries Ltd. v. Deputy Commissioner Income Tax (2014 SCMR 907).

9. Since the decision by learned Appellate Tribunal is based on findings of facts, therefore, we decline to exercise advisory jurisdiction. This Reference Application, along with connected reference application, is decided against applicant department.

10. Office shall send a copy of this order under seal of the Court to learned Appellate Tribunal as per Section 133(5) of the Income Tax Ordinance, 2001. SA/C-14/L Reference dismissed.