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Petitioner: Messrs M.F. & CO. Prop. Faisal, Karachi VS Respondent: The COMMISSIONER INLAND REVENUE, ZONE-I, R.T.O.-II, KARACHI
Court Name: Appellate Tribunal Inland Revenue Judge(s): Muhammad Jawed Zakaria, Syed Ayaz Mehmood Title:Messrs M.F. & CO. Prop. Faisal, Karachi vs The COMMISSIONER INLAND
REVENUE, ZONE-I, R.T.O.-II, KARACHI Case No.: I.T.As. Nos, 348/KB of 2017 and 790/KB of 2018 Date of Judgment:2018-10-17 Reported As: 2019 PCTLR 1206, 2019 PTD (Trib.) 1347 Result: Appeal allowed Judgment ORDER MUHAMMAD JAWED ZAKARIA, (JUDI CIAL MEMBER).-- -By this consolidated order , we intend to dispose of above titled appeals filed by the appellant/taxpayer against the impugned Orders No, 29 dated 12.2.2018 [order passed under section 122(1)] and the Order No, 34/2018 dated 30.4.2018 (against-order under section 161/2015). First we take up the main appeal agains t the order passed under section 122(1) of the Income Tax Ordinance, 2001. ITA No,348/KB/2018 (Appeal against order passed under section 122(1)) The Taxpayer agitated the following grounds: 1. "That the order of the learned CIR (Appeals-IV), is bad in law and against the facts of the case. 2. That the addition made under section 1 11 is baseless, unjustified and against the facts of the case. 3. That there was no notice of hearing on the date of passing the impugned order by the DCIR. 4. That the appellant has been condemned unheard which is against the principles of natural justice. 5. That the show-cause notices issued under section 122(9) of the Income Tax Ordinance is defective in nature and any super structure built on wrong foundation is also illegal. 6. That no specific notice under section 1 11(1) (b) was issued which is pre-requisite for making any addition. 7. That the learned Authorities below were not justified to ignore the explanation of the appellant. 8. That the impugned Order passed under section 122(1) and upheld by the learned CIR (Appeals) is without jurisdiction. 9. That issuing of show-cause notice under multiple Sections/ provisions of law is illegal, and as such impugned show-cause notice is void ab initio-and any super structure built on the basis of such illegal show-cause notice is also illegal, void ab initio.
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10. That the impugned order passed by the DCIR and endorsed by the learned CIR (A) is full of contradiction and completely in deviation from show-cause notice issued. 11. That the learned CIR (A) was not justified to ignore illegality of the impugne d order passed by the learned DCIR. 12. That the property in question has already been declared by the appellant and is fully explained. 13. That the additions made under section 1 11 may kindly be deleted. 14. That the Appellant may kindly be allowed to submit: any other additional ground of appeal at the time of hearing." FACTS 2. Brief facts of the case as gathered from the record are that the appellant is an individual, engaged in import and subsequent sale of textile items. Income tax return for the year 2016 was e-filed which attained the status of deemed assessment order under section 120 to have been issued by the Commissioner . Proceedings under section 122(5) were initiated against the tax payer appellant on the basis of inform ation received that the appellant has purchased a property worth Rs,23,000,000/- which was not declared in the wealth statement for the year ended 30-6-2016. During proceedings before DCIR copies of Conveyance Deed along with revised income tax return and wealth statement were filed which could not satisfy the DCIR and he made additions of Rs,23,000,000/- and 230,000/- by assuming jurisdiction under sections 111(1)(b)/1 11(1)(c) of the Income Tax Ordinance, 2001. Being aggrieved with the treatment awarded by the DCIR, an appeal was preferred before the learned CIR(A) which was also dismissed and order of the DCIR was confirmed. 3. Feeling aggrieved and dissatisfied with the impugned order passed by the learned CIR(A) now the Appellant has come up in appeal before this Tribunal. 4. On due date of hearing, Mr. Abdul Khaliq Khan, ITP appeared on behalf of the Taxpayer while Mr. Azhar Erum Memon appeared on behalf of the department. ARGUMENTS/SUBMISSIONS LEARNED A.R'S ARGUMENTS 5. The learned counsel for the taxpayer has strongly opposed the order of the learned CIR(A). The learned A.R. vehemently contended that both the impugned orders passed by the lower author ities are bad in law and against the facts. He contended that the property in question was actually purchased by Mrs. Shaista Begum and entire payment was deposited by her before Nazir of Hon'ble High Court of Sindh on different dates. An amount of Rs,4,600,000/- was paid on 1-10-2012 and Rs,41,400,000/- were paid on 10-12-2 013. The learned A.R. produced copy of Conveyance Deed which shows that entire amount was paid by Mrs. Shaista Begum and that too during the period relevant to tax years 2013 and 2014. The learned A.R. contended that the impugned orders of the authorities below are not maintainable on this sole factual ground. 6. The learned A.R. further contended that learned DCIR has not issued specific separate independent notice under section 111 which was mandatory before making any addition under section 111. In support of his contentions he also placed reliance on the judgments bearing I.T.A. No,51/KB/2014 dated 3.10.2014 CIR v. Dewan Steel Mills Karachi, I.T.A. No, 2505/LB/2015 dated 28.4.2016 and I.T.A. No, 373/KB-2012 dated 5.4.2017, Dr. Azeeem Alamani reported as 2015 PTD 1242 and on the reported judgment of Hon'ble High Court of Sindh reported as 2017 PTD 1839 (H.C. Sindh). 7. The learned A.R. drew our attention to another legal infirmity . He contended that the income tax return was revised on 15-12-2016. The return was filed manually as due to last date for e-filing of income tax returns for tax year 2016, E-portal was not functioning. He produced copy of Circular No, 17 of 2016 dated 30th November , 2016, according to which date for filing of annual income tax returns was extended till 15-12-2016. The learned A.R. contended that revised return filed by the appellant attained the status of amended assessment order to have taken place under section 122(3) and any order on the basis of deemed assessment Order under section 120 is totally illegal as the said deemed assessment Order under section 120 was no more in existence. He made reliance on reported judgment of Tribunal cited as 201 1 PTD (T rib.) 2389 and 2013 PTD 1749 .
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1. The learned A.R. while concluding his arguments stated that if for argument sake it is presumed that the investment was made by the appellant even then the appellant is a commercial importer and during the last 6 years has paid Income Tax to the tune of Rs, 54,109,510/- and has sufficient funds to make such investment. He produced copies of Income Tax Returns e-filed for tax years 2011 to 2016 which have been perused and are in conformity of the contention of the learned A.R. The appellant during last 6 years paid income tax under FTR as under:- TAX YEAR IMPOR TS DECLARED TAX P AID 2011 492,615,021/- 05,159,601/- 2012 517,491,320/- 05,454,982/- 2013 295,817,353/- 05,259,061/- 2014 423,368,883/- 12,829,584/- 2015 698,912,450/- 20,975,987/- 2016 300,387,681/- 09,070,303/- TOTAL TAXES P AID 54,109,510/- 7.1. The learned A.R. submitted that the Assessing Officer was confused with the payment of Rs,2,30,000/= under section 236K, it was paid by the appellant as a "Nominee" on behalf of Mst. Shaista. The whole controversy revolves around this misconception. This cannot be termed as "definite Information" rather it is "misinformation". It was clarified before the Assessing Officer and Conveyance Deed was also submitted which stands resolved who is the real investor. If the department wants to ascertain they ought to find out the real owner and investment made by such owner. 8. The other lengthy arguments of the learned counsel may be summarised as under: No definite information, neither furnished nor proved and no addition is based on definite information. Mandatory requirement of section 122 (5) was not fulfilled. Mandatory requirement of section 122(5) and Clauses (i), (ii) and (iii) of section 122(5) failed to fulfill. Before modification under section 122(5) the finalized deemed assessment/ amended deemed order must be cancelled for the purpose of modification. If deemed order existing in the field and not cancelled before invoking Section 122 (5), the alteration and modification is illegal. Before embarking upon proceedings under section 122, the requirements of section 122(5) are to be fulfilled in letter and spirit. That the DCIR/OIR has not given mandatory notice(s) under sections 122(5)(1), 122(5)(ii) and 122(5)(iii) read with section 122(5) and 122(8) of the Income T ax Ordinance, 2001. That on plain reading of section 122(5) for passing order under section 122(1) and 122(5) the availability of the "definite information" is the precondition and submitted that subsection 122(5) provides that an assessment order shall only be amended under sections 122(1) and 122(5) where "definite information" has been acquired without shadow of doubt. In the instant case no such definite information was acquired by the DCIR/OIR. That impugned assessment having been framed under sections 122(1)1 122(5) without fulfilling the requirement and without "definite information" as per provision of section 122(5). That no assessment could be made under section 122(1) alone without invoking subsections (4), (5) or (5A) of the Income T ax Ordinance, 2001. No definite information, neither furnished nor proved and no addition is based on definite information. Mandatory requirement of section 122(5) has not fulfilled. That the deemed order amended under section 120 was no more existed after filing within time revised return and wealth statement under section 114 and attained the status as amended assessment under section 122(3) and ought to have been further amended the same while the DCIR had amended the deemed order under section 120 which was no more in the field. In support he placed reliance on the judgment reported as 2011 PTD 2389 (Trib) and 2013 PTD 1749 .
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The taxpayer being the nominee of Mrs. Shaista Begum wife of Nafees Ahmed who deposited the entire amount of sale consideration of Rs,4,60,00,000/= before the Nazir of the Honorable High Court of Sindh in pursuance of compromise allowed the same vide order dated 22.12.2015. Therefore, the taxpayer being the nominee had not paid the amount and the entire amount was paid by Mrs. Shaista. Copy of the Registered sale Deed dated 25.4.2016 was produced before this bench also. No question of concealment of property or investment made by the Taxpayer arises and there is no reason to invoke section 1 11 of the Ordinance, 2001. That investment made by Mrs. Shaista in the tax years 2013 and 2014, no addition could be made in the hands of "NOMINEE" IN THE T ax Year 2016. That the mandatory independent sepa rate and specific notice under section 111 had not been issued to the taxpayer , therefore, the action of the DCIR is not within the parameters set by the superior courts. In support of his contentions he also placed reliance on the judgments bearing I.T.A. No, 51/KB/2014 dated 3.10.2014 CIR v. Dewan Steel Mills Karachi, I.T.A. No, 2505/LB/2015 dated 28.4.2016 and I.T.A No, 373/KB-2012 dated 5.4.2017, Dr. Azeem Alamani reported as 2015 PTD 1242 and I.T.A. 64/KB/2015 dated 6.6.2018 in the case of CIR v . Jawed Metal .-- D.R's Arguments 9. The learned D.R., on the other hand, supported the orders of the officers below and had strongly opposed the contention of the learned A.R. by reading Provisions of Section 114(6) of the Income Tax Ordinance; 2001 and contended that prior approval of the Commissioner was necessary before revising the income tax return. Rebuttal of the arguments of the D.R. by the A.R. of the Taxpayer 10. The learned A.R. while rebutting the contention of the learned D.R. drew our attention to the provisions of Section 1 14(6)(ba) and second proviso which reads as under:-- "Provided further that the condition specified in clause (ba) shall not apply if revise d return is filed within sixty days of filing of return" The learned A.R. contended that there was no need to obtain prior approval of the Commissioner as the revised return was filed before 60 days and that too within extended last date of filing of annual tax returns as announced by Federal Board of Revenue vide Circular No, 17 of 2016 dated 30th November , 2016. OPINION OF THE COUR T 11. We have heard both the learned representatives and have also gone through orders of the authorities below and perused the records of the case. 12. Perusal and examination of the amended order passed under sections 122(1) and 122(5) of the Income Tax Ordinance, 2001 reveals that the DCIR while passing the Order had not adhered to the requirements of law as envisaged under sections 122(5) and 111 which stipulates that the same is required to be amended on the basis of definite information then he may invoke subsection (1) of Section 122 for acquiring jurisdiction to amend the order under subsection (4) read with subsection (5) as the case may be. Hence, the amended assessment in this case has been framed in total ignorance of the law and in violation of the prescribed procedure and legal and mandatory requirements. The CIR/DCIR/OIR, in total oblivion of the mandatory requirement/ condition precedent has been set out for the amended assessment under the provisions of section 122(1). 13. The other aspect of the impugned order passed by the officers below that no definite information was found to have been available with the DCIR within the meaning of section 122 (5) read with section 122(8) of the Income Tax Ordinance, 2001. The Hon'able Lahore High Court in its recent decision 2013 PTD 884 (H.C.Lhr) on the subject of "definite information" with reference to section 122(5) of the Income Tax Ordinance, 2001 has held as under:-- "The term "definite information" in section 122(5) of the Ordinance is not just any information but definite enough to satisfy the concerned officer that income chargeable to tax of an assessee has escaped assessment or total income of an assessee has been under -assessed, etc. 'definite' means indisputable, known for certain, explicitly precise, clearly defined, leaving nothing to implication, established beyond doubt and cut and dried . Definite information is, therefore, that select information which falls within the restrictive meaning of the word "definite"
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explained above. The law also provides that definite information must be acquired from audit or otherwise. Applying the interpretative too/doctrine of ejusdem generis which literally means "of the same kind or class" and the doctrine provides that where general words follow an enumeration of two or more things, they apply only to persons or things of the same general kind or class specifically mentioned the word "otherwise" 'appearing next to the word "audit" in section 122(5) of the Ordinance on the basis of the above doctrine means a methodology akin or similar to audit where some determined final, certain, indisputable, calculated information is picked up from any available record of the assessee. "Otherwise," therefore, does not mean putting information through further process of calculation by the department . The word "acquired" used in section 122(5) of the Ordinance which literally means to "gain possession of" in the present context connotes that the information already exits and has to be picked up from the records or documents. This acquisition provides 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. Reading of Section 122(5) of the Ordinance, therefore, shows that information in a definite, final and conclusive form must already exist in some document or record at the time of acquisition. Any information which is incomplete or requires further processing falls outside the domain of definite information and can best pass for a departmental opinion, judgment, guesstimate, approximation or estimate." 14. We may also rely on the judgment reported as 2007 PTD (Trib.) 2601. The relevant extract of which is reproduced as under:-- "15. In most of the cases the Courts try to implement the provisions of law and avoid declaring it as redundant. It is obviously under the spirit that laws are always made for implementation and not to just remain as part of the statue without being of any benefit to the public at large. However , this Tribunal has in many cases not allowed issuance of notices in slipshod manner without indicating the actual reason of issuance thereof. The Hon'ble Lahore High Court has even gone to hold that issuance of a notice under section 65 without indicating the reason of issuance of notice in terms of subsections (1), (2) or (3) or (a), (b) or (c) of the said section to be as illegal. In this case notice under section 62 is statedly issued which provisions does not exist in the scheme of new law. There is a provision under the title "amendment of assessment" and the same is 122(1) and all other provisions are subject to the said section 122. In the earlier part of our discussion we have already held that section 122(1) is the mother provisions while all other subsections are helping and the same determine the fitness of the amendment of the assessment to be made under section 122(1). The Assessing Officer in this case has not even bothered to mention the subsection in its notice. Hence even if one is confident that section 122 could be enough for acquiring jurisdiction, non- mentioning of the other provision in terms of subsection (5) of subsection (SA) is fatal as the parameters for each of the said provisions are entirely different from the other . Besides, erroneousness of the assessment for determining prejudice to the interest of revenue in a deemed assessment order shall also need a good deal of dilation and discussion. There are certain more questi ons which would require answer in a case like this, The Assessing Officer has proceeded to make the assessment under section 120. The provision of section 122 which has been titled as assessments and as a sub-title as an amendment of assessment, provides full authority for making an assessment. These provisions in fact are para meteria to the assessments under sections 62 as well as 63 in addition to 65 and 66(A) etc. Section 120 does not come into picture for amendment of an assessment. It supplication is only upto the deemed assessment order and has no extension beyond the said language. 16. The upshot of the above discussion therefore is obvious. The jurisdiction in this case could only be acquired by the Taxation Officer after receiving of an information from the audit department by issuance of an notice under section 122(5). Since said notice have not properly been issued for acquiring jurisdiction over this case, one cannot agree with the department that the subsequent proceedings are justified". 15. We may further seek support from the judgment of Appellate Tribunal vide order 2013 PTD 1083 in the light of various cases decided by the Hon'ble Supreme Court on the subject of "Definite Information" has held as under:- "We are persuaded to agree with the arguments of learned AR that pre-requisite for invoking section 122(5) of the Ordinance was definite information with regard to escapement or under assessm ent of income or assessment at too low a rate or subjection of excessive relief or refund. Further , the definite information must have come in the possession of Department after completion of assessment this dictum is elaborated in detail by the honourable
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Supreme Court in CIT v. Eli Lilly Pakistan (Pvt.) Ltd. 2009 SCMR 1279 = 2009 PTD 1392 and Central Insurance Co. and others v. CBR, Islamabad and others 1993 SCMR 1232 = 1993 PTD 766. We are also in agreement with the arguments of learned AR that in the presence of favorable judgments of higher courts on the issue the department could not invoke section 122(5) as mere disagreement with the decisions of higher courts did not constitute definite information. The honourable Lahore High Court in Saitax Spinning Mills Ltd. v. Commissioner of Income Tax 2003 PTD 808 disapproved reopening of a completed assessment for want of definite information. Moreover , mere disagreement over legal interpretation of section 67 and estimation of life of computer software was not definite information as wrongly assumed by the Department. We therefore decide the appeal for this year in favour of taxpayer by declaring invoking of section 122(5) of above issues as unlawful" 16. We, therefore, hereby hold that it is a trite law that the provisions of subsection (5) of section 122 of the Income Tax Ordinance, 2001 allows amendment of any assessment only when the department is in possession of definite information and not otherwise, and in this context the DCIR was under legal obligation to specifically identify the nature of suppressed income and issue notice in terms of clauses (i), (ii) and (iii) of subsection (5) of section 122 of the Income Tax Ordinan ce, 2001 highlighting the fact under which categor y appellant's case falls. None issuance of such notice clearly meant that while passing the amended assessment order DCIR was not in possession of definite information and the reason assigned for additions/disallowances while passing the amended assessment order , cannot be termed as definite information. Thus the law has rendered the entire proceedings void ab initio, and illegal. Even otherwise the simple issuance of notice under section 122(9) even in this particular case before conducting audit of the taxpayer and what to speak of prior to confrontati on audit report/objection/charge sheet for obtaining rebuttal/Explanation by the taxpayer was not enough to further proceed in the matter for amending under section 122 already completed under law. Before making any additions and disallowances to the assessed income under the grab of audit under section 177 and amended assessment under sections 122(1)/ 122(5). The tax department is required to acquire legal jurisdiction under the provisions of section 122(5). This can only be done to modify or alteration or amend the already assessed income only by establishing that taxpayer's income is either under assessed or assessed at too low rate or subject to excessive relief or refund and to be based on definite information. However , we also find that there is no specific finding in terms of "definite information". It appears the findings of the learned CIR (A) are legally not valid as it appears that there was no grave error in deemed amended assessment. The IR Department has to qualify through audit that the deemed assessment is under assessed or as the case may be in terms of Section 122(5) [subject to definite information]. The requirement of section 122(5), are to be strictly fulfilled in letter and spirit. The initiation of conducting audit of assessment through notice under section 122(9) prior to audit tantamount to amend assessment before audit which is legally not justified and order is passed in consequence thereof being unlawful are not sustainable and ab-initio void. Unless any definite information acquired in the possession of the DCIR/OIR as a result/finding of audit conducted by the CIR under section 177 and the OIR/CIR is satisfied that on the basis of "Definite information" and not on the basis of "Mis-information" or "Doubtful information" that these further three pre-requisite requirement to be stretch in pursuance to definite information but these are not cumulative or to be established together: (i) Any income chargeable to tax has escaped; or (ii) Total income has been under-ass essed, or assessed at too low rate, or has been the subject of excessive relief or refund; or (iii) Any amount under a head of income has been mis-classified. 17. It is also opined that additions under Section 111 have been made without issuing specific and separate notice under Section 111 which is sine qua non and no addition under section 111 can be made without independent, specific and separate notice under section 111 with specification of relevant clauses and subsection of section 111 of the Income Tax Ordinance. Furthermo re, the "Definite Information" is missing from the amended order while making addition under sections 111(1)(b) and 111(c) therefore, the additions made under section 111 are hereby deleted . 18. The DCIR has not given independent specific, separate notice or disclosed his mind under separate notice which clause apply . Each clause has different eventuality . Hence the aforesaid additions under sections 111(1)(b)
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and 111(1)(c) [as envisaged in amended order under section 122(1)/(5)] are without filling the…
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