2012 PLP (Trib (PTD)

This appeal has been filed by the Department for the assessment year 2004 against the order passed by the learned CIR(A-I), Islamabad dated 15-9-2011 on the following grounds:-- (1) That no such documents were provided by the Taxpayer before the Assessing Officer and the learned CIR(A) was not justified to admit the new evidence in terms of section 128(5) of the Income Tax Ordinance, 2001. (2) That the learned CIR(A) has not given any cogent reasons for vacating the order of Assessing Officer.

2. Brief facts of the case are that Taxpayer filed Income Tax Return for the Tax year 2004 with declared Net loss of Rs.12,689,806 under section 120 of the Income Tax Ordinance, 2001. The Assessing Officer issued and confronted the appellant with the original show-cause notice under section 122(9) read with section 111(1)(a) of the Income Tax Ordinance, 2001 to assume the proceedings for amendment of assessment order for tax year but the reply of show-cause notice given by assessee being considered not satisfactory, the case of the appellant for the tax year under appeal was amended by invoking subsection (5) of section 122 of the Income Tax Ordinance, 2001 with addition of Rs.168,154,163 by treating the credit transactions appearing in three account numbers of Standard Chartered Bank limited as suppressed receipts in the name of Messrs Haseeb Estate and Builders and Mrs. Naheeda Begum Awan the member of firm which are mentioned as under:-- S.No. Accounts No. Addition (Rs.) 1 6063-033099-001 41,840,499 2 6063-271232-090 138,569,374 3 0636-120579-001 1,500,000 Total Credit Transactions 181,909,873 Less: Declared Receipts (13,755,710) Assessed as Suppressed Receipts 168,154,163

3. Being dissatisfied with the treatment given by the Taxation Officer, the Taxpayer preferred appeal before the learned CIR(A-I), Islamabad who after considering the facts observed as under:-- "I have observed that there is considerable force in the arguments with reference to evidence and case-law provided by the learned AR the addition of Rs.168,154,163 as suppressed receipts by the Assessing Officer is not sustainable in the eyes of law which is hereby deleted and the impugned order is vacated."

4. Feeling aggrieved with the treatment given by the learned CIR (A-I) the department has come up in appeal before this Tribunal on the grounds raised supra.

5. On factual side, the main thrust is the amendment of the impugned order with addition of Rs.168,154,163 on the basis of bank deposits as suppressed receipts is without considering the nexus of declared financial amounting to Rs.320,269,

964. The reconciliation statements with regard to correlate the amounts of cheques received against declared financial recourses with the bank credit transactions amounting to Rs.168,154,163 appeared in Accounts No.6036-271232-00, 6036-033099-001 and 6036-120579-001 of standard Chartered Bank Ltd. Islamabad have been stated in order to identify the exact amount of bank deposits crested out of said financial resources amounting to Rs.320,269,964 which were credited through cheques received directly from creditors, inter-bank transfers of cheques and cash within three bank accounts under review. ACCOUNT-6063-271232-090 STANDARD CHARTERED BANK LTD. ISLAMABAD ADDITION OF R.138,590,968 AS SUPPRESSED INCOME That the bank deposits amounting to Rs.152,996,451 appeared in the said bank account vide sources and inter transfer bank entries mentioned below have been taken into consideration by the learned CIR(A). Audited balance sheet of the firm ended on 30-6-2004.

1. Cheques received as investment from Saeed Bajwa against sale of share in plot No. 13-A, F-7 markaz, Islamabad. 35,000,000

2. Cheques received as Advances against sales 44,700,000

3. Amount withdraw from bank account No. 6036-033099-001 of Standard Chartered Bank Ltd. Islamabad that was maintained to meet the contingency of the firm with having complete transactions of inflow and outflow of borrowed money from bank. It is mentionable here that debit entries amounting to Rs.170,964,345 appeared in the loan account was being diverted and utilized to meet the financial affairs of the firm that is evidently established from bank statement. The credit transactions amounting to Rs.6,177,468 were realized out of the opening balance Rs.18,283,451 standing as on 1-7-2003 in the Account No. 6036-271232-090. 52,713,000 52,713,000 Total Deposits 138,590,468 ACCOUNT NO.6036-033099-001 ADDITION RS.31,840,499 The said account was being operated as bank loan facility account. The credit transactions affected deposits of cheques, cash and by inter-bank transfers were just to pay the instalments of principal amount and markup to the bank. The amount credited has not been considered in its true perspective by Assessing Officer being treated suppressed receipts that are stated as under:-

1. Cheques No.020660 dated 16-6-2001 received from Telenor on account of Advance rent effective from October 2004 (as declared in Tax year 2005). 14,592,000

2. The credit transactions amounting to Rs.27,248,495 appeared in the said account are in consequences of (a) The cheque No.0344666 dated 2-7-2003 received from Mr. Atiq Ahmed Qureshi/ Sheikh Imran as "Advances against sales" (b) The deposits of Rs.24,948,495 arised on various dates out of declared sales of Rs.13,755,710 of the tax year 2004 and the amount withdrawn Rs.2,000,000 vide three Cheques Nos.4618710, 4618711 and 4618714 from bank Account No.6036-271232-090 of Standard Chartered Bank Ltd. Islamabad plus Bank Alfalah (Loan Account) made during the year under appeal. 2,300,000 24,948,495 Total Deposits 41,840,495 ACCOUNT NO.6036-120579-001: The credit amount of Rs.1,500,000 as per said bank account created through receiving of two cheques Nos. 1346052 and 5616346 amounting to Rs.1,400,000 and Rs.100,000 respectively as part payment against sales from Major Gen. Ali Baaz that is declared in the tax year 2004. The learned first appellate authority has deleted the addition by appreciating and analyzing the evidence on facts and also on the legal grounds that assessment under section 122(5) was without definite information. Hence he vacated the order passed by the Officer Inland Revenue.

6. We have heard the arguments and perused the relevant record available on file. Action of OIR to make total of credit transactions as suppressed receipt on presumptive basis without any corroborative evidence has rightly been deleted by learned first Appellate Authority. Total circulating/revolving capital of the taxpayer is Rs.320,269,

964. He is a builder. If he withdraws some money from any of his account for any of expense. If after spending a fraction or some of the amount, rest is again deposited into bank, whether it will be treated as suppressed receipt, certainly not. It is not the case in which there is any of transaction exceeding limit of the total capital declared by the Taxpayer. In case of suppressed receipt, heavy burden lie upon the tax officer to point out specific facts of transaction i.e. from whom and in what connection it was received, whether it was a sale proceed. It is not the case of revenue that Bank Accounts are not appearing in the statement of Taxpayer and were also not shown in the wealth statement of the directors Balance Sheets and Bank statements, both are available on record. Revenue failed to prove any nexus whatever between the amount lying in Bank through credit entry and sale receipts of taxpayer. Learned AR stressed upon the fact that requisite ingredients of definite information were altogether missing. In support of this contention he relied upon various judgments of court as well as High Courts which are as under:-- 1997 SCMR 1256 = 1997 PTD 1485 (S.C. Pak), 2003 PTD 1885, 1986 PTD 37, (1989) 59 Tax 112 (H.C. Lah.)(sic), 1997 PTD (Trib.) 2037 and (1941) 9 ITR. In this case department issued various notices under section 122, one after the other, all of these were well responded. Department kept on going for inquiries. In this scenario, the proceeding under section 122(5) was void as held in I.T.A. No. 1210/LB/06 dated 26-7-2008 and 2008 PTD (Trib.)

491. In both of the cases it is held that fishing inquiries are not allowed while exercising the jurisdiction under section 122(5) of Income Tax Ordinance, 2001. Taxpayer is not to be put under fear that he has to remember scenario of each and every entry at the end of year. Rather he has to work freely and concentrate upon his projects to earn money. If he will earn something, he will pay to government exchequer. Such like attitude of Tax department to show the muscle neither serve the public exchequer nor the economy of the country.

7. Learned AR has contended that a perusal of the impugned order shows that in this case the OIR has not amended the deemed assessment on the basis of any definite information as required by the law. Rather he has made an open ended assessment by issuing three notices one after other for making fishing inquiries which is not permissible under the scheme of Ordinance, 2001. In first notice dated 8-5-2008 OIR confronted an amount of Rs.303,839,380 for addition with the remark that most of payments have been made through Banking instruments including cheques/clearing pay order etc. and asked the Taxpayer to explain nature and source of each and every credit transaction. 2nd show-cause notice was issued on 11-5-2010 for compliance by 18-5-2010, third notice No. 249 dated 11-5-2010 was issued and in all the notices inquiries were being made without confronting definite information that you sold a shop/office to "X" against this consideration and credit entry exist in your record. Officer has taken easy approach just by making total of entries and added the amount without proving exact nexus of sale transaction. Main difference between information and definite one is that in case of definite information officer has not to probe. He does not need fishing inquiries that too from the Taxpayer. Learned CIR(A) has rightly satisfied himself by analysing same record which was produced by OIR. Addition of such amount without concrete evidence of proving nexus with business receipts neither play any positive role in economy nor add into government exchequer. Result is flight of capital from the country. The officer has not tried to mature the information into definite one by relating it with the person from whom receipts came and whether it was connected with business. Merely by saying that this is an arrangement of cash transaction to avoid addition of credit entries into Account No. 6036-271232-090 which are deliberately tried to cover up from Account No. 6036-0330.99.001 which is not acceptable. Such types of remarks based on conjecture and surmises neither fall under the head of definite information nor can become basis for invoking section 122(5). We fail to understand that an amount of Rs.1,600,000 was confronted for addition under section 13(i)(a) for tax year 2004. How section 13(i)(a) of repealed Ordinance has been invoked that too in tax year 2004. Some of cheques returned unpaid. In some of entries bank has charged mark up. Taxpayer has bank borrowing of Rs.190,964,354 in this year. His explained sources are as under:-- 1 Sales declared. 13,755,710

2. Advances rent from Pakistan Telenor effective from Oct, 2004 vide Cheque No. 020660 dated 16-6-2004 credited in Account No. 6036-033099-001 as declared in tax year 2005 14,592,000

3. Opening balance as on 1st July, 2003 18,957,900

4. Investment from Jawad Saeed Bajwa against sales of shares of plot 35,000,000

5. Bank borrowing Account No. 6036-033099-001 170,964,354

6. Adavnces against sales 47,000,000

7. Bank loan Alfalah bank 20,000,000 Total transactions 320,269,964 Strange enough that out of total bank borrowing Rs.190,964,354 an amount of Rs.180,843,969 has been taxed as deemed income just by totalling bank entries in 2008. i.e. after four years without proving the nexus of business receipts from where it came whether there were business receipts. A business man has to meet his exigencies of business, sometimes from the money kept in saving, sometimes asking someone in trade to meet his immediate requirement. This stance that each and every entry is business income without proving the exact nexus that "A", "B", "C" purchased which of structure built by taxpayer. The assessing authority is groping/probing in the dark and fishing through issuing notices again and again and therefore make open ended assessment by making fishing inquiries. The learned counsel has therefore, contended that as the taxation officer has not amended the deemed assessment in accordance with law, the learned CIR(A) has therefore, rightly vacated the order.

8. This legal flaw in the assessment is in addition to the facts mentioned in the order of CIR(A) which is clear and unequivocal. The assessee has explained all the deposits and the so-called discrepancies in its accounts to the satisfaction of the CIR(A) against which no mentionable arguments has been advanced before us. In addition thereof the assessment is not in strict compliance of the provision and the procedure provided in law which has already been explained by us in a number of our judgments as well as the superior Courts. With these observation order passed by learned first Appellate Authority is not open to any exception. So, the deletion, therefore, is unexceptional and the departmental appeal is considered of no merit.

9. Same is upheld and maintained. CMA/137/Tax(Trib.) Appeal rejected.