Amendment of assessments

Initiating and concluding proceedings under S. 111 of the Income Tax Ordinance 2001 (the Ordinance) before taking any steps under S. 122 of the Ordinance, requirement of

Scope

Proceedings under S. 111 are mandatory and sine qua non before any action under S. 122 of the Ordinance

Brief facts were that the Commissioner Inland Revenue filed a reference application under S. 133 of the Income Tax Ordinance, 2001, challenging the order of the Commissioner (Appeals-I) who had annulled an earlier assessment order passed by the Deputy Commissioner Inland Revenue

Original order was based on definite information that the respondent taxpayer had acquired immovable properties worth Rs. 33 million while declaring a taxable income of only Rs. 1.25 million

Show-cause notice was issued under Ss. 122(9) and 111(1)(b) of the Ordinance, but due to the taxpayer's non-response, a tax demand of over Rs. 11 million was raised

Appellate authority allowed the taxpayer's appeal, leading the department to file the reference

Legal point for determination before the High Court was as to "Whether proceedings under S. 122(9) of the Income Tax Ordinance, 2001, for amendment of assessment could be validly initiated without the prior initiation and culmination of proceedings under S. 111 of the Ordinance?"

Held: The proceedings under S. 122(9) of the Ordinance could not be launched unless the proceedings under S. 111 of the Ordinance were initiated and completed

Before taking any steps in terms of S. 122(9) of the Ordinance, the requirement of S. 111 of the Ordinance was mandatory

As a result, the present appeal failed and questions of law raised therein were answered accordingly.

Whether proceedings under S. 122 of the Income Tax Ordinance 2001 (the Ordinance) for amendment of assessment can be initiated without the prior initiation and culmination of proceedings under S. 111 of the Ordinance

Initiation and culmination of proceedings under S. 111 of the Ordinance before taking any action under S. 122 of the Ordinance

Significance, object and scope

From the bare perusal of S. 111 of the Ordinance it becomes clear that whenever the department has any information resulting into an impression or understanding that grounds in S. 111(1)(a to d) relating to unexplained income or assets are attracted, calling explanation from the taxpayer becomes necessary, as till that stage, information available with the department is mere information

If any explanation offered by the taxpayer is not satisfactory in response thereto, in the opinion of the Commissioner, the said liability becomes unexplained income and is to be added to the income of the taxpayer chargeable to tax

However, if the explanation offered seems to be satisfactory, the said proceedings can be dropped and no further action is then warranted

The prime object of the above noted provision of law is to provide an opportunity of explanation to the taxpayer to contest the allegations confronted to him with regard to any of the grounds mentioned in S. 111 (a to d) where-after an opinion is to be formed by the commissioner on the basis of said information, if any

Whereas, from the bare reading of S. 122 of the Ordinance, it becomes obvious that the commissioner has been empowered to amend an assessment order, treated as issued under S. 120 or 121 of the Ordinance by making such alterations or additions, as the Commissioner considers necessary

However, under S. 122(5) of the Ordinance, an assessment order in respect of a tax year, or an assessment year, shall only be amended under subsection (1) and an amended assessment for that 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 any of the grounds in the said provisions are sufficient enough to make amendments

Section 122(8) of the Ordinance provides what constitutes definite information for the purposes of this provision

On the other hand, subsection (9) of S. 122 of the Ordinance stipulates that no assessment shall be amended, or further amended, under this section unless the taxpayer has been provided with an opportunity of being heard

From the joint analysis of both the above provisions of law (i.e. Ss. 111 and 122), it becomes crystal clear that initiation and culmination of the proceedings under S. 111 of the Ordinance are sine qua non before taking any action in terms of S. 122 of the Ordinance to amend the assessment on the basis of proceedings undertaken under S. 111 of the Ordinance.

Section 122(5A) deals with amendment of assessment in a detailed manner and provides different eventualities as to when and how the Commissioner may amend any assessment order treated as issued under S. 120 or under S.121

Minimum requirement of the law is the satisfaction of the Commissioner who considers it necessary and may initiate an inquiry as he deems that the assessment is erroneous in so far as it is prejudicial to the interest of revenue.

Section 122 only imposes a single restriction that no assessment shall be amended, or further amended, under this section unless the taxpayer has been provided with opportunity of being heard in terms of its subsection (9).

Powers exercised by the Commissioner under section 122(5A) of the Ordinance to amend or further amend an assessment order, if he considers that the assessment order is erroneous in so far as it is prejudicial to the interest of the revenue, could be delegated to the Additional Commissioner Inland Revenue under section 210 of the Ordinance.

Powers exercised by the Commissioner under section 122(5A) of the Ordinance to amend or further amend an assessment order, if he considers that the assessment order is erroneous in so far as it is prejudicial to the interest of the revenue, could be delegated to the Additional Commissioner Inland Revenue under section 210 of the Ordinance.

Any addition made to the income of the assessee without giving reasons and justification for the same is not warranted under the law and is liable to deleted.

Provisions of Ss.121 & 122 cannot be invoked simultaneously.

Authorities amended assessment order of respondent taxpayer on the plea that it was erroneous and prejudicial to the interest of revenue

Appellate authority annulled amended assessment order which was maintained by Appellate Tribunal Inland Revenue

Validity

Jurisdiction under Ss.122(5A) & (9) of Income Tax Ordinance, 2001, was assumed while treating assessment of taxpayer under S.120(1) of Income Tax Ordinance, 2001, to be erroneous

Assessment of taxpayer could not be prejudicial to the interest of revenue merely on the ground that figure of total cash withdrawal when worked back on the basis of tax deduction under S.231-A of Income Tax Ordinance, 2001, did not commensurate with declared net sales/gross profit

Assumption that such worked back figure reflected sales or gross profit of taxpayer was nothing more than a conjecture and surmise based on arithmetic calculation of Taxation Officer

High Court declined to interfere in orders passed by two forums below as it was rightly held in appeal that it was not sufficient for treating Assessment Order under S.120(1) of Income Tax Ordinance, 2001, to be erroneous in so for as prejudicial to the interest of revenue

Reference was dismissed, in circumstances.

Assessing officer by considering the difference between declared receipts and Bank credit entries as suppressed income had added the income without proving exact nexus of the transactions

Neither the assessing officer nor the CIR (Appeals) had made any observation on the explanation of the taxpayer that the disputed transactions were made for personal use

Only information for the purpose of 'definite information' that the assessing officer possessed was the difference in amount between declared receipts and credit entries

Requirements of S.122(5) of Income Tax Ordinance, 2001, were not met

After completion of audit, the authority had to issue an audit report, containing all the issues raised in audit and to provide an opportunity to settle the said issues prior to commencement of amendment proceedings

Language of subsection (6) of S. 177 was express, explicit and mandatory to the effect that the Commissioner could amend the assessment only after obtaining taxpayer's explanation on all the issues raised in the audit report

Confrontation on the issues raised in audit was mandatory and sine qua non, in absence whereof the judicial proceedings could not be triggered or commenced

Assessing officer had failed to comply with the mandatory provisions relating to audit proceedings and amendment, therefore, the additions and disallowances were annulled

Appeal was allowed.

It is a right of the taxpayer to know as to under what provision of law the officer is intended to make assessment so that he may get an opportunity to defend the proposed action accordingly.

Taxpayer assailed order passed by assessing officer whereby he had amended the deemed assessment order and the dismissal of his appeal

Validity

Show-cause notice issued to the taxpayer did not reflect the addition proposed under S.21(m) rather the allegations contained in the notice confronted to the taxpayer proposed the addition under S. 111(1)(b)

Non-mentioning of S. 21(m) and the proposed addition under the said provision could not be condoned as it tantamounted to denial of statutory right of the taxpayer

If the taxpayer did not know as to under what provision of law the addition in the income was going to be made, he would not be able to come up with his view to the legality of jurisdiction and would not be able to take objections against the proposed action

Order passed by the officers below suffered from legal infirmity and were not sustainable in the eyes of law

Second appeal was allowed.

Without specifically confronting the specific provision of law and without issuance of any notice in respect of the proposed addition/action, the proceedings initiated are defective and nullity in the eyes of law.

Power of Commissioner to further amend / alter assessment in terms of Ss.122(5), 122(5A) & 122(5AA) of Income Tax Ordinance, 2001

Time-barred amendment in assessments not sustainable

Scope

Petitioner/taxpayer impugned notice for further amendment in assessment issued by Department under S.122(5AA) of Income Tax Ordinance, 2001 issued in 2011, for tax years 2005 and 2006, inter alia, on ground that such further amendment in assessment was time-barred

Validity

Amendment in assessment order was not restricted to one amendment, however power to further amendment was subject to limitation of five-years in total and under S.122(4) of the Ordinance, further amendment or amendments had to be made within one year of the same

Where subject-matter was under appeal, power of Commissioner to further amend an assessment had been restricted under S.122(5AA) of the Ordinance, and only pertained to where amendment or further amendment was being made under S.122(5A) of the Ordinance

Impugned notices had been issued invoking power of S.122(5A) of Income Tax Ordinance, 2001 seeking further assessment with respect to tax-payers 2005 and 2006 while the matter was pending before Appellate Tribunal, and thus no notice for further amendment could have been issued or amendment made, as same was barred by time under operation of S.122(5AA) of Income Tax Ordinance, 2001

Impugned show-cause notices were set aside

Constitutional petition was allowed, accordingly.

Assessing authority has to establish that the declared version of the taxpayer is not correct and that too based on substance and material satisfying the judicial conscience.

Commissioner Inland Revenue assailed order passed by Commissioner (Appeals) whereby he had disagreed with the additions made by taxation officer under S.174(2) of Income Tax Ordinance, 2001, for the taxpayer's failure to submit any evidence with regard to the expenses claimed under the heads of accounts 'commission paid on wheat purchase', 'mobil oil consumed' and 'market fee'

Validity

Taxpayer had not submitted any evidence with regards to the expenses claimed

Taxation officer had went on to observe that the taxpayer had not even bothered to offer any explanation with regard to the expenses

Taxation officer was justified in disallowing the expenses claimed by the taxpayer as the expenses claimed were not verified

Commissioner (Appeals) was not justified in deleting the additions made by the taxation officer

Appeal was disposed of accordingly.

Obligation of Departmental officer to issue notice to taxpayer under S.122(5) of Income Tax Ordinance, 2001 specifying relevant clause of S.122(5) sought to be invoked with clarity

Scope

Section 111(1)(d) of Income Tax Ordinance, 2001 did not warrant taxation of whole of the credit entries/ deposits in a Bank account maintained by taxpayer by treating same to be "net income" chargeable to taxpayer; and only such part of total Bank deposits was chargeable to tax which could be termed as "total income"

Such credit entries represented "sales" which after defraying "cost of sales" gave rise to "gross profit" which after deductions of profit and loss account expenses, yielded "net profit", which was the item of receipt liable to tax wholly or in part

When Departmental officer came across such undisclosed credit entries deposits in a Bank account, only course available to him was to confront taxpayer under S.122(9) of the Ordinance, after ensuring that notice under same was duly served upon taxpayer

Said S.122(9) made it obligatory upon tax officer to confront in sufficient detail all material facts which led him to take action thereunder

Non-issuance of such notice rendered whole superstructure of amended assessment as void ab initio and illegal and same also applied to mandatory notice to be issued under S.122(5) the Ordinance

Departmental officer, after receiving reply under said S.122(9) was duty bound to issue notice under S.122(5) of the Ordinance, specifying the specific clause of S.122(5) which he sought to invoke

Non-specification of relevant clause in notice under S.122(5) of Income Tax Ordinance, 2001 was fatal for any amended assessment and any action to be taken under said S.122(5) had be specified with clarity and such mistake by Departmental officer of non-issuance of notice under S.122(5) without precisely specifying relevant clause thereof was incurable.

Appellant attacked the order-in-original on the ground that mandatory show-cause notice was posted one day after the date fixed for appearance of appellant

Validity

Section 122 of Income Tax Ordinance, 2001 provided that the assessment could only be amended if it was found that the deemed order was erroneous and prejudicial to the interest of revenue subject to affording an opportunity of being heard to the taxpayer

Appellant was not provided fair opportunity of hearing

Appellant ought to have been given 15 days time for submitting reply

Only three days time, as per department, was given to the appellant for submitting reply to the notice, which in fact was not received by the appellant till finalization of the proceedings

Orders passed by Additional Commissioner Inland Revenue and Commissioner Inland Revenue (Appeals) were vacated by the Tribunal.

Taxpayer filed normal returns for the tax years 2013 to 2017 which were deemed to have been assessed under S.120(1), Income Tax Ordinance, 2001

Assessing authority observed that the taxpayer was engaged in the business of supply of medicines, therefore, normal returns were illegal and unlawful as the taxpayer was under legal obligation to file statement under S.115(4) of Income Tax Ordinance, 2001

Show-cause notices were issued confronting the taxpayer with proposed rectification, in response to which the taxpayer filed reply which was found unsatisfactory by the assessing authority

Assessments were amended by creating demands for the tax years 2013 to 2017

Taxpayer, being aggrieved, filed appeal before the Commissioner Inland Revenue (Appeals), who vide impugned order rejected the appeals of the taxpayer

Validity

Taxpayer himself had declared income under normal tax regime as well as under final tax regime which stood subjected to withholding provisions of 153(1)(a) of Income Tax Ordinance, 2001

Assessing authority without any basis presumed that all the sales declared under normal tax regime also fell under final tax regime without pointing out any instance to support such an assumption

Order of assessing authority was silent as to how he had presumed that all sales were made to the "prescribed person" as defined in S. 153(7) of Income Tax Ordinance, 2001

Assessing authority had not given even a single instance of any sale out of sales subject to normal tax regime to draw any adverse inference with regard to the declaration made by the taxpayer

Assessing authority had failed to point out any of the customers of the taxpayer who was found to be the "prescribed person" as per S.153(7) of Income Tax Ordinance, 2001

Invoking the provisions of S.122(5) without any material "definite information" was not justified

Orders passed by assessing authority and those passed by Commissioner (Appeals) were also consequently vacated

Appeals were disposed of accordingly.

Taxpayer, having failed to file wealth statement along with income tax returns, notices under S.116(1) of the Income Tax Ordinance, 2001 were issued

Taxpayer filed wealth statements and Assessing Officer noted that taxpayer did not declare any Bank account in the wealth statement

Assessing Officer finding that taxpayer had concealed the Bank accounts as well as amount credited during the tax years under consideration, issued notices under Ss.122(9)(5) & 111 of the Income Tax Ordinance, 2001 for making amendment in the assessment

Assessing Officer observed that no reason was given by the taxpayer as to why declaration was not correctly filed earlier and passed order for amendment of assessment

Appellate authority maintained order of Assessing Officer

Contention of taxpayer was that neither his case was selected for audit under Ss.214/177 of the Income Tax Ordinance, 2001, nor there existed any definite information in the hands of Assessing Officer which could legitimise the amendment of assessment, therefore, conduct of enquiries/amendment of assessment was without any basis and a nullity in the eye of law

Validity

Assessing Officer had acted in accordance with law, because taxpayer had failed to declare the closing balance/TDR and the credit entries

Version of the taxpayer that Assessing Officer had no definite information, was incorrect

No room existed to interfere with the order of Assessing Officer on that issue

Appeal of taxpayer failed on that account

Order accordingly.

Assessing officer amended assessment on the basis of material recovered as a result of raid conducted on the premises of assessee

Appellate Tribunal Inland Revenue set aside the order passed by authorities on the ground that there was no definite information available with authorities for making amendment of Assessment order under S. 122(4)(5) of Income Tax Ordinance, 2001

Validity

Entire information on which authorities relied upon was contained in the record seized from assessee

Vouchers, sale invoices, cheque books and Bank statements were loudly telling that assessee's income chargeable to tax had escaped assessment

Assessing officer had given gist of information gleaned from such records in order-in-original; there could not be a better example of 'definite information' than the one in the present case

High Court answered question framed, in the negative.

Assessing Officer noticed certain discrepancies which warranted action and considered the deemed assessment erroneous in so far as prejudicial to the interest of revenue within the meaning of S. 122(5-A) of the Income Tax Ordinance, 2001

Assessing Officer, initiated the proceedings and issued show-cause notice confronting the taxpayer with alleged discrepancies and sought its explanation in that regard

Reply tendered by the taxpayer, being not satisfactory for the Assessing Officer, deemed assessment was amended

Appellate authority below upheld the order of the Assessing Officer

Taxpayer had declared rate of sale of re-rolled items, which was even lesser than the rate of ingots/billets which was raw material of re-rolled items

Assessing Officer had concluded that the taxpayer had suppressed/concealed sales which attracted the provisions of S.111(1)(d)(i) of Income Tax Ordinance, 2001 and said amount was added to the total income of taxpayer

Held, that orders passed by the authorities below on the issues of suppressing of sales were not in accordance with law and the order was vacated

Action initiated by Assessing authority in exercise of its powers under S.122(5-A) of the Income Tax Ordinance, 2001 and confirmed by appellate authority were not maintainable in the eyes of law.

Taxpayer being aggrieved with amendment order filed appeal before appellate authority, which vide impugned order was disposed of

Validity

Claim of taxpayer of written off of provision for bad debt and that of stores and spares were also disallowed to the taxpayer

Recovery proceedings having not been initiated, debts could not be held to be bad as irrecoverable

Taxpayer had also not fulfilled the condition of S.29 of the Income Tax Ordinance, 2001, for claiming written off bad debts

Action of Departmental Officer was confirmed by the Tribunal and appeal of the taxpayer in that respect was dismissed

Claim of obsolete stock and spares was allowed by the Tribunal

Claim for turnover/stock holding, having not been thrashed out properly through investigation to ascertain the allowability of the same for arriving at proper and justifiable conclusion, Tribunal remanded the case to Assessing Officer with direction to decide the same within sixty days from receipt of present order after giving proper and adequate opportunity of being heard and after considering all the details and aspects of the case and arguments of the taxpayer and pass judicial and speaking order after application of conscious mind.

Interest income on maintenance of 25% of paid up capital as statutory liquidity reserve (SLR) with State Bank of Pakistan

Rate difference income

Assessment under the head "income from other sources"

Taxpayer contended that as per rules/regulation issued as State Bank Circular FE 9 of 2002, the taxpayer company was mandatorily required to maintain 25% of its paid up capital as statutory liquidity reserve with the State Bank in the form of un-encumbered approved Government Securities and State bank would extend current account and SGLA facilities to it, along with interest amount accrued to the taxpayer on such deposit maintained with the State Bank of Pakistan; and as per Circular FE 9 the taxpayer company could not do any other business except the business authorized by the State Bank of Pakistan which were enumerated in the Memorandum and Articles of Association of the company; and without maintenance of statutory liquidity reserve with State Bank of Pakistan, company could not even conduct business of currency exchange; and since, interest accrued and arose to the taxpayer as well as "Rate Difference Income" was an integral part of its business activities permitted by the State Bank of Pakistan, being a regulatory authority, such income was its business income and could not be assessed under the head 'income from other sources' under S.39 of the Income Tax Ordinance, 2001; and its income from all sources fell under the head "income from business"; and any business loss incurred to the taxpayer could not be denied to him to be set off against its interest income as well as 'rate difference' income; taxpayer was also entitled under S.57 of the Income Tax Ordinance, 2001 to carry forward and set off said loss against income arising and accrued in the succeeding tax year

Validity

Income from interest driven by the taxpayer from statutory liquidity reserve as well as "rate difference income" was business income of the tax payer for all purposes like other normal business income derived by the foreign exchange company

Such income could not be deemed as mere investment in approved government securities

Interest income earned from statutory liquidity reserve /government securities and from "rate difference income" was its business income and not income from other sources

Since it was held that taxpayer derived business income only which fell under the head "income from business" and not under any other head of income as specified under S.11 of the Income Tax Ordinance, 2001, Appellate Tribunal directed that loss set off as claimed by the taxpayer was to be allowed against income from interest on securities statutory liquidity reserve and "rate difference income" and that assessed losses for the tax years 2004 and 2005 should be carried forward to the succeeding tax years i.e. tax year 2006 and onward and brought forward losses should be allowed to be set off against the assessed income of the taxpayer as stipulated under Ss.56 & 57 of the Income Tax Ordinance, 2001.

Provision of S.34A of the Income Tax Act, 1922 and that of S.66A of the Income Tax Ordinance, 1979 and also S.122(5A) of the Income Tax Ordinance, 2001 are in pari materia but while dilating upon powers and the basis of review by Additional Commissioner, condition precedent was that, the order should be erroneous as well as prejudicial to the interest of revenue

Both such conditions were required to be fulfilled simultaneously and if either of the conditions is not fulfilled, the order could be reviewed or amended.

Department had obtained an internal formula of Oil and Gas Regulatory Authority under S. 176 of the Income Tax Ordinance, 2001 and using said formula, had worked out the monthly sales of the assessee (CNG station)

Contention of the Department was that the said internal formula namely, the "OGRA formula" amounted to "definite information" for the purpose of amendment of assessment under S.122(5) of the Income Tax Ordinance, 2001 as it determined the quantum of sales of the assesse taxpayer

Validity

Said formula, which did not enjoy the backing of law, simply demonstrated an in-house, self styled methodology adopted or evolved by the Department to arrive at the total sales of the assessee taxpayer hence the said information passed for an opinion or estimate rather than "definite information" made available through audit or otherwise

Term "definite information" used in S. 122(5) of the Income Tax Ordinance, 2001 was not just an information, but information that was definite enough to satisfy a concerned officer that income chargeable to tax of an assessee had escaped assessment or total income of an assessee had been under-assessed

"Definite" meant indisputable, known for certain, explicitly precise, clearly defined, leaving nothing to implication, established beyond doubt and cut and dried

Information in a definite, final and conclusive form must already exist in some document or record at the time of acquisition and any information which was incomplete or required further processing fell outside the domain of "definite information" and could at best pass for a departmental opinion, judgment, approximation or estimate

Word "otherwise" used in S. 122(5) of the Ordinance meant methodology akin or similar to audit, where some determined, final, certain, indisputable, and calculated information was picked up from any available record of the assessee

Word "otherwise" used in said section did not mean putting information through further process of calculation by the department

Word "acquired" used in S. 122(5) of the Income Tax Ordinance, 2001, which literally meant "gain possession of" connoted that the information already existed and had to be picked up from the records or documents and provided no margin for incomplete, imprecise, and inexact information to be completed through further calculation or processing as that would not be acquiring information but analyzing it

Said formula, in the present case, required that the department complete the information by working out total sales which exercise, required feeding of different variables and then arriving at a figure of total sales made by assessee ; and therefore, it did not constitute "definite information" acquired through audit or otherwise but was rather a departmental opinion

High Court observed that the OGRA Formula was not "definite information" upon which amendment could be made in the assessment of taxpayer, and accordingly, answered the reference in negative.

First Appellate Authority observed that no appeal was filed against order under S.177 of the Income Tax Ordinance, 2001 and since it was the amendment order under S.122(1) of the Income Tax Ordinance, 2001 regarding which the appeal was filed by the taxpayer, Appellate Authority could only examine whether or not the requirements of the provisions of S.122 of the Income Tax Ordinance, 2001 were fulfilled by the concerned officer

Taxpayer contended that any superstructure raised on illegal foundation would crumble and be set at naught and will be equally illegal as very foundation was not in accordance with law; and that since there was no disagreement that the High Court had already declared the selection to be null and void then on what basis could the amendment order passed in pursuance of such selection be allowed to hold the field, particularly when it had also been noted by the High Court in the said order, that all audit proceedings held there under or in consequence thereof remained of no legal effect

Revenue contended that since order of High Court had already been challenged before Supreme Court, the same did not constitute to be considered as a final decision on the matter of selection and may not be followed

Validity

Decision of any High Court, on point of law, remained binding unless overruled by the Supreme Court

Subject decision having not been overruled by the Supreme Court, the same constituted as binding precedent

No exception could be taken from what had been held by the High Court in the said judgment, especially when no contrary decision had been given by any other High Court of the country

Having said decision operative and valid in the field, there remained no complexity or complication to resolve the controversy involved in the appeal

Reason advanced by the First Appellate Authority for rejecting the appeal was incorrect, improper, unlawful, illegal and without substance and the same could not be approved on any basis whatsoever

Orders of the authorities below were vacated and assessment finalized by the Taxation Officer was without jurisdiction and its confirmation by the First Appellate Authority was null and void

Both the orders were cancelled by the Appellate Tribunal.

Taxpayer contended that First Appellate Authority erred in holding that O.M. No.5010-M(IT)/18 dated 23-8-1980 could not overrule express provisions of Income Tax Ordinance, 2001 whereas the fact was that the said O.M had binding effect on the functionaries of Income Tax Department

Validity

Finding of First Appellate Authority had force since O.M being relied on was issued in 1980 which now stood repealed by Income Tax Ordinance, 2001

Even otherwise Federal Board of Revenue could not intervene in quasi-judicial functions of the Assessing Officer

Objection regarding referring case to Federal Board of Revenue had no force since taxpayer was supposed to make request for referring his case to Federal Board of Revenue; which it did not

No reason existed to interfere with the findings of First Appellate Authority on the issue which was accordingly upheld and appeals filed by the taxpayer was rejected.

Such contention of taxpayer was not relevant on the ground that the taxpayer itself had admitted that notice under S.122 (9) of the Income Tax Ordinance, 2001 was issued to it, which itself was an opportunity of being heard provided to the taxpayer.

Taxpayer contended that declaration was filed on 30-10-2008 and the limitation provided was one month from the date of receipt of declaration; that he had acquired the amnesty; that condition laid down for taking any action by the department was one month which had expired on 30-11-2008; and after lapse of limitation the notice was issued on 13-1-2009, therefore, issuance of such notice after passing of limitation period was ab initio void and illegal

Validity

Federal Board of Revenue Circular No.3 of 2008 dated 1-7-2008 prescribed a time limit of one month to inform the declarant

Time limit of one month had been prescribed in the said circular for taking action

Declarations had been filed on 31-10-2008 and first notice was issued on 13-1-2009 after a lapse of more than one month

Very purpose of introduction of the scheme in question was to provide free passage to the taxpayer without asking any question and doors of investigation and probe had been closed

Circular in question itself stated that "Scheme of Invest Tax-2008 was a voluntary scheme through which government had reposed trust in the taxpayers", therefore all subsequent notices issued from time to time and indulging in investigation, probe, fishing/roving inquiry and pressuring taxpayer to file returns of income was tantamount to frustrating the very purpose of the scheme and as such, were without any lawful jurisdiction having no legal effect

Appeal was disposed of accordingly.

Where giving of notice was provided for in the Statute itself then failure to given such a notice would be fatal and could not be cured.

Taxpayer contended that after change of jurisdiction it was incumbent upon the Deputy Commissioner to issue fresh notice for initiating proceedings; that no fresh notice was issued, therefore, order passed under Ss.122(1)/122(5A) of the Income Tax Ordinance, 2001 was liable to be quashed

Validity

Taxation officer had not issued fresh notice instead he confronted the taxpayer on order sheet which was nullity in law

Appeal was disposed of accordingly.

Taxpayer contended that audit proceedings were illegally initiated on the basis of bank statement obtained from the bank; that Revenue authority was not in possession of any new information as information was already available at the time of first audit proceedings which were dropped; that permission was granted by the Commissioner, Income Tax only for ascertaining the factum of pay order from only one bank, but taxation officer travelled beyond his jurisdiction and asked for all sorts of information from two banks; that no notice under S.122(5) or 122(5A) of the Income Tax Ordinance, 2001 was issued before making additions and notice under S.122(9) of the Income Tax Ordinance, 2001 was issued when the audit proceedings had already been dropped

Validity

No fresh information was available with the department at the time of passing order under Ss.122(1)/122(5) of the Income Tax Ordinance, 2001 as at the time of drop of audit proceedings the department was in possession of alleged bank statement which was acquired on 17-2-2009 and after that proceedings were dropped on 22-9-2009

Initiation of proceedings on the basis of past and closed matter was unjustified and unlawful

While initiating action under S.122(5) of the Income Tax Ordinance, 2001 the department should be in possession of definite information

No definite information was in possession of the department for initiating proceedings under S.122(5) of the Income Tax Ordinance, 2001

Taxation Officer threatened penalty proceedings against the tax payer and forced him to file returns of income and called information from the bank

Fishing and roving inquiries were conducted by the department, and entire proceedings on the basis of such inquiries were disapproved by the higher appellate fora.

Taxpayer contended that orders passed under S.120 of the Income Tax Ordinance, 2001 were deemed to be the order of the Commissioner and powers of revision could not be entrusted to any authority below the rank of functionary whose order was sought to be revised which in the present case was Additional Commissioner

Validity

Additional Commissioner under delegated authority could perform the functions and exercise the powers of the Commissioner with specific reference to S.122(5A) of the Income Tax Ordinance, 2001

Appeal was disposed of accordingly.

Initiation of proceedings for amendment of assessment on the ground that assessments were finalized under normal procedure treating the complainant/assessee as manufacturer and tax deducted at import stage was adjustable which resulted in claimed refund, whereas income was to be assessed under Presumptive Tax Regime

Assessee contended that assessments for years 2000-01, 2001-02 and 2002-03 were finalized on 11-2-2002, 6-1-2003 and 28-6-2003 respectively, which could not be reopened under S.122(5A) of the Income Tax Ordinance, 2001

Contention of assessee in respect of tax years 2003, was that order dated 12-4-2004 under S.122 of the Income Tax Ordinance, 2001 had created refund and under S.122(4)(b) of the Income Tax Ordinance, 2001 it could be amended within one year after the Commissioner had issued the amended assessment, but notice to further amend the assessment was issued on 3-5-2005 and the re-assessment was not completed up to 30-6-2005 i.e. within the prescribed time and it could not be done now

Contention of assessee, in respect of tax year 2004, was that refund had been determined vide order dated 15-7-2005 which means that the notice under S.122 of the Income Tax Ordinance, 2001 for amendment of assessment stands withdrawn/cancelled and proceedings initiated under S.122 of the Income Tax Ordinance, 2001 amounted to maladministration

Validity

Complainant had submitted valid arguments

Ratio of decision of the President of Pakistan in C.No.36 of 2003 that refund could not be withheld on account of expected tax liability was applicable

Federal Tax Ombudsman recommended that the refund of Rs.1,03,71,247 pertaining to assessment years 2000-01, 2001-02, 2002-03 and tax years 2003 and 2004 be issued as per law.