Estimation of sales

2013 PTD 10 INLAND REVENUE APPELLATE TRIBUNAL OF PAKISTAN Judicial Precedent

Ss. 65 & 13Additional assessmentDefinite informationBank depositsEstimation of salesNo adverse inference was drawnAdditions

Taxpayer contended that although assessments were reopened on the basis of maintenance of bank accounts, yet, at the end of the day the Assessing Officer could not draw an adverse inference regarding bank deposits; and having failed to draw an adverse inference, the Assessing Officer resorted to estimation of sales as Assessing Officer observed in his order that "no adverse inference is drawn as far as the source of deposit is concerned and no action being taken under S.13 of the Income Tax Ordinance, 1979"; that in the absence of any adverse inference to the grounds of reopening, the Assessing Officer should have dropped the proceedings instead of continuing; and that notices under S.65 of the Income Tax Ordinance, 1979 had not been lawfully issued, since the relevant clauses of the notices were not ticked which was the statutory requirement

Validity

After being satisfied with the genuineness of deposits in accounts, the Assessing Officer had no jurisdiction to proceed further under S.65 of the Income Tax Ordinance, 1979

No action under S.13 of the Income Tax Ordinance, 1979 appeared to have been taken with reference to deposits except in one year which was again on altogether different grounds

Issuance of notices and culmination of proceedings initiated was held to be void ab initio and illegal and all subsequent proceedings were without jurisdiction and liable to be quashed

Assessing Officer was bound to let the assessee know as to precise basis warranting reopening of his already completed assessment by ticking appropriate clause and striking off the remaining clauses

In the absence of any such exercise inference would be that Assessing Officer was himself not sure as to the basis of reopening

Irrefutable inference in such like situations was that the information being utilized by the Assessing Officer did not fulfil the conditions of being a "definite information"

Such defect alone was sufficient to declare the whole proceedings as void ab initio

Notice under S.65 of the Income Tax Ordinance, 1979 was held as having been issued without lawful jurisdiction for lack of "definite information"

All the subsequent proceedings and whole series of orders passed on the basis of such notice were not allowed to hold the field

Orders passed by the lower authorities were vacated as having been passed without lawful authority

Proceedings initiated and orders passed thereunder having been declared to be without lawful authority, imposition of penalty was to crumble down.