Suppression of purchases

Taxpayer contended that provision of S.111(1)(d) of the Income Tax Ordinance, 2001 pertained to concealment of income or furnishing of inaccurate particulars of income which was not the subject-matter of proceedings under S.122(5A) of the Income Tax Ordinance, 2001; that addition under S.111(1)(d) of the Income Tax Ordinance, 2001 to total income was without lawful jurisdiction as the same had been made on account of alleged suppressed or understated purchases; that suppressed or understated purchases were not covered by the provisions of S.111(1)(d)(i) and (ii) of the Income Tax Ordinance, 2001; that S.111(1)(d) of the Income Tax Ordinance, 2001 dealt with suppression of production, any item of receipts or sales or any amount chargeable to tax; and that it did not deal with suppressed purchases; and addition being covered by the provision of S.111(1)(d)(i) and (ii) of the Income Tax Ordinance, 2001 was void ab initio and illegal

Validity

Section 111(1)(d) of the Income Tax Ordinance, 2001 pertained to concealment or furnishing of inaccurate particulars of income and had a nexus with the provision of S.122(1) of the Income Tax Ordinance, 2001 read with subsections (5) and (8) of S.122 of the Income Tax Ordinance, 2001

Federal Board of Revenue itself had clarified that by virtue of insertion of S.111(1)(d) of the Income Tax Ordinance, 2001 by Finance Act, 2011, any production, sale or any amount chargeable to tax and suppression of any item of receipt liable to tax in whole or in part had to be treated as "concealed income" whereas S.122(5A) of the Income Tax Ordinance, 2001 dealt with the orders which were found erroneous and prejudicial to the interest of revenue but the orders involving concealment had to be dealt with under S.122(1) read with S.122(5)(8) of the Income Tax Ordinance, 2001

Action of Assessing Officer to invoke provision of S.111(1)(d) of the Income Tax Ordinance, 2001 in his order under S.122(5A) of the Income Tax Ordinance, 2001 was not sustainable in the eyes of law

Addition was not maintainable even otherwise, the taxpayer was not required to explain the nature of source of investment in purchases

Besides, Assessing Officer had chosen to ignore the written explanation offered by the taxpayer that the amount was pertained to FTR portion of sales and corresponding sales were declared

In the presence of explanation furnished by the taxpayer in response to the query under S.111(1)(d) of the Income Tax Ordinance, 2001 and Assessing Officer's inability to rebut the same, there was no justification for addition under S.111(1)(d) of the Income Tax Ordinance, 2001

Addition was deleted by the Appellate Tribunal accordingly.