2020 PLP 799 (PTD)

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 order dated 06.11.2018, 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 learned Appellate Tribunal was justified to dismiss the departmental appeal holding that while making addition under section 111(1)(b) of the income Tax Ordinance, 2001 the department was not in possession of definite information and no specific notice under section 111 was issued?"

2. Brief facts of the case are that respondent-taxpayer, an AOP, filed income tax return for the year 2006 by declaring income at Rs.400,000/-, which was treated as an assessment order in terms of Section 120(1) of the Ordinance of 2001. Subsequently, the Taxation Officer observed that taxpayer was maintaining five bank accounts, deposits of which did not commensurate with the declared income. On the basis thereof, show-cause notice under Section 122(9) was issued to respondent taxpayer, which culminated in passing assessment order dated 30.06.2012, making addition under section 111(1)(b) of the Ordinance of 2001 amounting to Rs.786,156,388/-. Being aggrieved, respondent taxpayer preferred appeal before CIR (Appeals), Lahore, which was allowed and addition made by assessing authority was deleted. 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 disputed amounts appearing in the account of respondent-taxpayer were on account of advances relating to succeeding year, interbank transfer entries / reversal entries and cheques dishonored. The relevant part of impugned order is reproduced hereunder:- "

5. Income for the tax year under consideration was declared at Rs.400,000/- by the taxpayer but the same was assessed at Rs.786,556,388/- by the taxation officer by making addition under section 111(1)(b) of the Ordinance amounting to Rs.786,156,388/- on account of credit entries lying in five bank accounts maintained by the taxpayer as detailed in the body of impugned amended assessment order. However, careful perusal of the impugned appellate order reflects that on examination of bank statements as well as certificates regarding credit entries, it was observed by the learned CIR (Appeals) that out of total credit entries of Rs.786,556,388/-, an amount of Rs.324,252/- was on account of advances relating to succeeding year and the other amount of Rs.170.300,888/- presented interbank transfer entries, reversal entries and cheques dishonored leaving behind balance deposits of Rs.553.915,838/-. In view of such like observations made by learned CIR (Appeals) being supported by plausible reasons, we are also of the considered opinion that while making addition under section 111(1)(d) of the Ordinance, the department was not in possession of definite information. Furthermore, before making the addition in question, non-issuance of specific notice under sections 111 of the Ordinance has also rendered the action of the assessing authority legally infirmed. In view of the foregoing discussion, we find no plausible reason to interfere in the impugned appellate order, which is upheld by way of dismissal of instant departmental appeal. We order accordingly." [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).

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

8. 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-5/L Reference dismissed.