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Petitioner: Messrs MUHAMMAD YASEEN VS Respondent: C.I.R., AUDIT ZONE-III, R.T.O.-III, KARACHI
Court Name: Appellate Tribunal Inland Revenue Judge(s): Zarina N. Zaidi, Syed Muhammad Jamil Raza Zaidi Title: Messrs MUHAMMAD YASEEN vs C.I.R., AUDIT ZONE-III, R.T.O.-III, KARACHI Case No.: I.T.As. Nos. 391/KB to 394/KB of 2012 Date of Judgment:2012-07-25 Reported As: 2013 PTD (Trib.) 87 Result: Order accordingly
Judgment ORDER ' The four appeal have been filed by the Taxpayer/Appellant out of which two appeals for the Tax years 2006 and 2007 have been filed against order passed under sections 122(1)/122(5) of the Income Tax Ordinance, 2001 while other two appeals pertain to imposition of penalty under section 182 of the Income Tax Ordinance, 2001. Through these appeals the appellant has challenged the consolidated order of learned CIR(Appeals) dated 30-5-2012 whereby the appeals of the appellant were dismissed. These are disposed of through this combined order taking the main appeal under sections 122(1)/122(5) of the Income Tax Ordinance, 2001. Grounds of Appeal for Tax Year 2006 "(i) The learned Commissioner of Income Tax (Appeals) has erred in approving and confirming the impugned additions and the assessment order while ignoring and failing in applying the facts correctly? (2) The Appellate Order framed throwing off the Investment Scheme 2008 vide Circular No, 3 of 2008 as per Investment Scheme dated 1st July 2008? (i) In violating the positive assurance of the FBR without any jurisdiction; (ii) as per Amnesty notified for the years prior to 1998; (iii) completely shutting the doors of any indulgence on the part of the hierarchy of the Income Tax Department after a lapse of one month since declaration was received which had expired on 30th November, 2008 while the first notice was issued on 13th Jan. 2009 and other notices issued for filing Returns of 2006 and 2007, (iv) Accordingly, the impugned assessment in violation of commands of Investment Scheme, 2008 was binding on the authorities and upon disobedience the entire assessment is rendered without
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lawful jurisdiction and liable to cancellation. (3) The learned CIT(Appeals) has erred in taking notice of the credit entries of Rs,71,13,650 in the Allied Bank account during the year 2006 while ignoring the debt entries:-- (i) That the entire credit was deposited in the year 2006 and the entire amount has been paid out through the same banking channel before 31-5-2007 leaving no balance to be carried over. (4) the learned CIT(Appeals) has erred in not inquiring into the facts of the case in accordance with law particularly the following:- (i) Taxation Officer's letter dated 13-1-2009, replied by the appellant letter dated 22-9-2009; (ii) Taxation Officer's notice under section 114(4) for the tax years 2005, 2006, 2007 and 2008 and reply dated 27-2-2009; (iii) Letter of Taxation Officer dated 24-3-2009 seeking compliance of filing returns and administering threats of imposing penalties and its reply dated 30-9-2009 explaining the facts of the case; (iv) Notice dated 14-4-2009 while threatening the appellants for filing of returns for 2005, 2006 and 2007, again threatening for coercive action for imposing penalties. The appellant filed returns for 2005, 2006 and 2007 showing NIL income. (v) The learned T.O's held no information, even the copy of the return for the year 2008 and payment of requisite tax under the Amnesty Scheme was not available which the appellant supplied in the replies under severe protest. ' The above all were fishing and roving inquiries while' the respondent's held no information with them at then to issue these incompetent notices and coercing the appellant to file the nil returns? (5) The orders of the Taxation Officer of CIT(Appeals) are ab intio unlawful since calling for any information from Allied Bank Ltd. Or Meezan Bank Limited in the year 2006 without a specific permission of the CIR. In that the TO exceeded his authority and jurisdiction while he wrote letters and called for information from the two banks as under?:-- (i ) Letters addressed to Manager, Allied Bank Lawrence Road Branch, dated 9-12-2010 the said letter, however, was not produced by the T.O. On the inspection of the record although it is mentioned in other correspondence; (ii) In the letter dated 18-12-2010 addressed to the Vice President Regional Head (ABL), the TO demanded bank account for the tax year 2006 while holding no permission as such from the Commissioner. (iii) The letters to the Bank and compliance by the Bank on the threats were all without lawful authority and jurisdiction. (6) The learned CIT(Appeals) has erred in not taking into consideration that the entire proceedings have been launched in dis-regard and in total abuse of Qanun-e-Shahadat Order, 2004 and the ground and facts thereof have been totally ignored e.g. (i) no one presented the so-called information and evidence under the Qanun-e-Shahadat Order, 1984? (ii) no opportunity of examination and cross-examination were granted to the appellant? (iii) the obtained information about debit and credit, at the back of the appellant or his counsel was in contravention of Qanun-eShahadat Order, 1984. The order as above could not have been initiated in an assessm ent for yet one more reason abusing the principle of burden of proof The above information was surreptitiously obtained and could not be relied upon in law? (iv) the whole proceedings of the TO were without lawful jurisdiction and information obtained was a nullity in law, reliance is placed on:- (a) Article 1 of Qanun-e-Shahadat Order, 1984; (b) 1993 PTD 206 (c) 1997 PTD (Trib.) 2209;
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(d) While the burden of proof on the part of the department was not discharged. There was no such burden on the appellant? (7) The powers under sections 120 and 122 have not been properly undertaken? (a) Under section 120 of the Income Tax Ordinance, 2001 (hereafter: the 2001 Ordinance) the moment tax return was filed, it was to be constituted as deemed assessment order having been passed by the relevant CIR. Section 122 of the 2001 Ordinance is couched in a language which clearly and categorically states that it is only the CIR who can carry out any amendment in the assessm ent order under section 120 of 2001 Ordinance. In view of this legal position the following consequences are imperative:-- "(i) No functionary below the rank of ACIR can carry out any amendment to the assessment order, otherwise a completely absurd state of affairs shall be brought about. In that a functionary (lower in rank to the CIR who is deemed to have passed the original assessment order under section 120) would be permitted to carry out amendment in the said assessment order under section 122. (ii) The power under section 122 of the 2001 Ordinance is provisional in nature. As per the settled general principle of law a provisional power can only be exercised a functionary higher in status than the one whose order is sought to be revised, at least the functionary in the same ran as the one who had passed the original order cannot in the least exercise such provisional power. By no connotation any functionary lower in the rank can be permitted to initiate proceedings or pass an order of amendment under section 122. Reliance is placed on 2010 PTD (Trib.) 472(a) and 2006 SCMR 1410(a). (iii) Indeed section 2(13) of the 2001 Ordinance defines the term: "Commissioner" to be a person appointed under section 208 and includes any other authority vested with all or any of the powers and functions of the Commissioner. Also in terms of Ss.209, 210 and 211 of the 2001 Ordinance the concept of delegation of powers and functions has been envisaged, however, it is respectfully submitted that such concept of delegation of powers and functions will be inapplicable to sections 120 and 122 of the 2001 Ordinance. (iv) As already stated above the power of revision cannot be entrusted to any authority below the rank of functionary whose order is sought to be revised otherwise the entire state of affairs would be totally absurd in nature. It is settled law that an interpretation is to be offered which would avoid any absurdity, failing which the law itself would be rendered invalid for the point that an interpretation in tax cases is to be offered so as to avoid absurdity. Reliance is placed on 1995 PTD 641, 2001 PTD 2484/2258 and 2008 PTD 182. (v) In that the burden of proof on the part of the Department has not been discharged. (vi) In that the powers assigned under sections 120 and 122 are relating to CIR and not Taxation Officer. The learned CIT (Appeals) has grossly erred in approving the action of the Taxation Officer without appreciating the facts of the case. (8) In this case selection of audit dated 22-6-2009 and the commencement of the proceedings by the TO vide letter dated 1-7-2009 and an all-around audit was carried out up to 21-9-2010. On 22- 9-2010 tie TO drop the proceedings vide his order communicated to the appellant arriving at the closure of Audit proceedings. The exercise on the said date became a past and closed matter. Without any fresh approval of the CIR and without issuing notices under section 122(5) of the Income Tax Ordinance, 2001 and to the contrary a notice under section 122(9) dated 22-12-2010 was issued and the assessm ent was completed without jurisdiction and lawful authority. In that the functionary had to first invoke notice under sections 122(5) and 122(5A) which had not been issued. Thus the entire proceedings had become null and void and without jurisdiction. The relevant case- law submitted has not been examined and repelled. (9) The order of TO as well as the CIR(Appeals) are invalid since the entire exercise on the part of the TO has been carried out without disclosing any reason which was violative of section 24-A of
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the General Clauses Act. The burden of proof vested upon the department which has not been exercised and the so-called credit was either not established and "peak credits"? (10) The original notice in this case for the year 2006 was given by Adeel Sikandar Yousafani, officer of the Inland Revenue. However, the jurisdiction was transferred from the said functionary to one Mr. S. Salahuddin Gilani, Mr. Gilani without issuing any fresh notice of assumption of jurisdiction passed a final order under sections 122(1)/122(5) of the Income Tax Ordinance, 2001 dated 18-4- 2001, which is completely without jurisdiction, mala fide, invalid, void ab-inito and of no legal effect. The point was raised before the CIR and the case of Siemens Pakistan 1999' PTD 1360 of Sindh High Court was relied upon. The other of non-issue of base notice for exercise of addition under section 122(5) was also taken which was not considered by the TO or the approving CIT(A) rendering the all additions void and without jurisdiction? (11) That the facts of the case appeals and the grounds in appeals have been furnished through an affidavit which have not been refuted or rebutted by counter affidavit? (12) The above named appeal along with three other appeals was argued before the learned CIT(Appeals) on 10-1-2012, again on 23-1-2012 along case-law and details and arguments, again on 20-2-2012 and finally on 29-2-2012. Every time the Assessing Officer was requested to attend the proceedings by the CIT(A) and on such questions raised and rebut case-law as observed by the CIT(A) himself. There was no compliance from the department. The CIT(A) sat on the order form February 2012 to May 2012 and the counsel of the appellant kept on reminding him for an order since the department was pressing hard for the payment of impugned unlawful dues/demands. In such circumstances the CIT(A) was not entitled to approve the order of the Taxation Officer in a cavalier fashion without looking into the facts, grounds and case-law? (13) The CIT(A) has erred in framing and constituting the arbitrary Appeal Order without even asking any question or stating any difference of opinion during the course of the arguments. Such a conduct on the part of the departmental officer amounts to a vindicative and arbitrary approach and in a judicious manner. The order of the CIT(A) is arbitrary, unlawful and without jurisdiction? (14) The learned CIT(Appeals) has grossly erred in not examining and considering the relevant case-law' cited without any comments thereon or without distinguishing facts in any manner. (15) The appellant craves permission for his counsel= to raise any other ground at the time of hearing. (16) The TO has grossly erred in recording observation in the order sheet on 26-3-2011 and treating it as compliance of notice. He was required to issue a fresh show cause notice and confirmation on order sheet is a nullity in law. Reliance is placed on 2011 (103) Taxation 125 (Trib.). PRAYER It is most respectfully submitted that upon consideration of the facts, grounds and questions as above this august Tribunal may be pleased to hold, decide and order:-- (i) That the impugned orders in assessment and appeal are coramnon-judice, based on change of opinion, beyond jurisdiction, are bad in law and contrary to the facts and circumstances of the case and liable to be so declared and liable to be annulled; any other relief which this august Tribunal may deem fit and proper under the circumstances of the case." Grounds of Appeal for Tax Year 2007 "(1) The learned Commissioner of Income Tax (Appeals) has erred in approving and confirming the impugned additions and the assessment order while ignoring and failing in applying the facts correctly. (2) The Appellate Order framed throwing off the Investment Scheme 2008 vide Circular No, 3 of 2008 as per Investment Scheme dated 1st July 2008. (i) In violating the positive assurance of the FBR without any jurisdiction; (ii) as per Amnesty notified for the years prior to 1998;
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(iii) completely shutting the doors of any indulgence on the part of the hierarchy of the Income Tax Department after a lapse of one month since declaration was received which had expired on 30th November, 2008 while the first notice was issued on 13th Jan. 2009 and other notices issued for filing Returns of 2006 and 2007; (iv) Accordingly, the impugned assessment in violation of commands of Investment Scheme 2008 was binding on the authorities and upon disobedience the entire assessment is rendered without lawful jurisdiction and liable to cancellation. (3) The learned CIT(Appeals) has erred in taking notice of the credit entries of Rs,20,698,335 in the Allied Bank account during the year 2007 while ignoring the debit entries. In that the entire credit as deposited in the year 2006/2007 has been paid of through the same banking channel before 31-5- 2007 leaving no balance to be carried over. (4) The learned CIT(Appeals) has erred in not inquiring into the facts of the case in accordance with law particularly the following:- (i) Taxation Officer's letter dated 13-1-2009, replied by the appellant letter dated 22-9-2009; (ii) Taxation Officers notice under section 114(4) for the tax years 2005, 2006, 2007 and 2008 and reply dated 27-2-2009; (iii) Letter of Taxation Officer dated 24-3-2009 seeking compliance of filing returns and administering threats of imposing penalties and its reply dated 30-9-2009 explaining the facts of the case; (iv) Notice dated 14-4-2009 while threatening the appellants for filing of returns for 2005, 2006 and 2007, again threatening for coercive action for imposing penalties. The appellant filed returns for 2005, 2006 and 2007 showing NIL income. (v) The learned TO's held no information, even the copy of the return for the year 2008 and payment of requisite tax under the Amnesty Scheme was not available which the appellant supplied in the replies under severe protest. The above all were fishing and roving inquiries while the respondent's held no information with them at then to issue these incompetent notices and coercing the appellant to file the nil returns. (5) For the year, however, while permission was granted only for ascertaining the factum of Pay Order No,962009 dated 11-1-2007 from the Allied Bank for the Tax Year 2007, the Taxation Officer exceeded his authority and jurisdiction while he wrote letter asking for all sorts of information from two Banks namely Meezan Bank Limited and Allied Bank Limited:- = vide letter addressed to Manager, Allied Bank Lawrence Road Branch, dated 9-12-2010 the said letter, however, was not produced by the T.O. On the inspection of the record although it is mentioned in other correspondence; = In the letter dated 14-12-2010 addressed to the Vice President Regional Head (ABL). The TO demanded bank account (not the Pay order as has permitted) for the tax year 2007 while holding no permission granted by CIR for obtaining of Bank statements etc. From 1-7-2005 to 30-6-2007 without any specific permission. = The letters to the Bank and compliance by the Bank on the threats were all without lawful authority and jurisdiction. (6) The learned CIT(Appeals) has erred in not taking into consideration that the entire proceedings has been launched in dis-regard and in total abuse of Qanun-e-Shahadat Ordinance, 2004 and the ground and facts thereof have been totally ignored e.g (i) no one presented the so-called information and evidence under the Qanun-e-Shahadat Order, 1984? (ii) no opportunity of examination and cross-examination were granted to the appellant? (iii) the obtained information about debit and credit, at the back of the appellant or his counsel was in contravention of Qanun-eShahadat Order, 1984. The order as above could not have been
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initiated in an assessm ent for yet one more reason abusing the principle of burden of proof. The above information was surreptitiously obtained and could not be relied upon in law? (iv) the whole proceedings of the TO were without lawful jurisdiction and information obtained was a nullity in law, reliance is placed on: (a) Section 1 of Qanun-e-Shahadat Order, 1984; (b) 1993 PTD 206 (c) (1993) 76 Taxation 111 (Trib.) Head Note (e); (d) While the burden of proof on the part of the department was not discharged. There was no such burden on the appellant? (7) The powers under sections 120 and 122 have not been properly undertaken? (a) Under section 120 of the Income Tax Ordinance, 2001 (hereafter: the 2001 Ordinance) the moment tax return was filed, it was to be constituted as deemed assessment order having been passed by the relevant CIR. Section 122 of the 2001 Ordinance is couched in a language which clearly and categorically states that it is only the CIR who can carry out any amendment in the assessm ent order under section 120 of 2001 Ordinance. In view of this legal position the following consequences are imperative:- "(i) No functionary below the rank of ACIR can carry out any amendment to the assessment order, otherwise a completely absurd state of affairs shall be brought about. In that a functionary (lower in rank to the CIR who is deemed to have passed the original assessment order under section 120) would be permitted to carry out amendment in the said assessment order under section 122. (ii) The power under section 122 of the 2001 Ordinance is provisional in nature. As per the settled general principle of law a provisional power can only be exercised a functionary higher in status than the one whose order is sought to be- revised, at least the functionary in the same ran as the one who had passed the original order cannot in the least exercise such provisional power. By no connotation any functionary lower in the rank can-be permitted to initiate proceedings or pass an order of amendment under section 122. Reliance is placed on 2010 PTD (Trib.) 472(a) and 2006 SCMR 1410(a). (iii) Indeed section 2(13) of the 2001 Ordinance defines the terms: "Commissioner to be a person appointed under section 208 and includes any other authority vested with all or any of the powers and functions of the Commissioner. Also in terms of Ss.209, 210 and 211 of the 2001 Ordinance the concept of delegation of powers and functions has been envisaged, however, it is respectfully submitted that such concept of delegation of powers and functions will be inapplicable to sections 120 and 122 of the 2001 Ordinance. (iv) As already stated above the power of revision cannot be entrusted to any authority below the rank of functionary whose order is sought to be revised otherwise the entire state of affairs would be totally absurd in nature. It is settled law that an interpretation is to be offered which would avoid any absurdity, failing which the law itself would be rendered invalid for the point that an interpretation in tax cases is to be offered so as to avoid absurdity. Reliance is placed on 1995 PTD 641, 2001 PTD 2484/2258 and 2008 PTD 182. (v) In that the burden of proof on the part of the Department has not been discharged. (vi) In that the powers assigned under sections 120 and 122 are relating to CIR and not Taxation Officer. The learned CIT(Appeals) has grossly erred in approving the action of the Taxation Officer without appreciating the facts of the case. (8) It is further pointed out that the Taxation Officer prepared preliminary Narrative Report (PNR) vide letter No,01R/UNIT- 01/AUDIT-V/2010/159 (159 being diary No,) dated 20-12-2010 and sent the same to the Additional Commissioner Inland Revenue-A through covering letter bearing No,01R/U01/AUDIT-DIV-V/RTO/KH1/2010/163 (163 being No,) dated 22-12-2010 for approval to issue the notice under section 122(9) of the Income Tax Ordinance, 2001. It is very surprising that the
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Taxation Officer issued notice under section 129(9) of the Income Tax Ordinance vide Letter No,01R/UNIT-01/AUDITV/20-10/160. (160 being diary No,). The diary entry serial dispatch No,163 shows that he sent letter for approval against this diary number to the Additional Commissioner and in the meanwhile the diary No,160 shows that he sent the notice under section 122(9) to the appellant before/without the approval of the IAC which is contrary and is quite unlawful. The above diary numbers are disputed. It seems that the Taxation Officer might have sent show cause notice against diary No,164 onward but he sent show cause against diary No,160 which number seems before the initiation of the case granted by the Additional Commissioner. (9) The order of TO as well as the approach of CIR (Appeals) are invalid since the entire exercise on the part of the TO has been carried out without disclosing any reason which was violative of section 24-A of the General Clauses Act. The burden of proof vested upon the department which have not been exercised and the so-called credit were either not established as "peak credits". Besides the credit which were already existing in the preceding year could not have been reckoned as cash credit again in this year? (10) The record shows an inspection that the CIR had issued an order for Audit dated 21st September, 2010 (Copy now furnished after Inspection of record on (10-1-2012) by the Taxation Officer. That the Taxation Officer seems to have issued his first notice after reopening of assessm ent dated 2-11-2010. The appellant wrote a letter dated 29-10-2010 to the Taxation Officer that he had not received any notice from the CIR. However, he kept on proceedings with the matter without asking the office of CIR for producing the service of notice. The copy was received as stated above on 10-1-2012. The whole proceedings without the service of notice by the CIR were invalid for this reason as well. (11) It is further pointed out that during the tax year 2007 there were various credit and debit entries in the Bank account of the appellant maintained with the Allied Bank Limited. The Taxation Officer himself constituted all the credit entries as the appellants' income liable to tax under Income Tax Ordinance and ignored all the debit entries of the said bank account maintained by the above named appellant which is against the fact of the case, against the accounting principles and against common sense. Since the advent of all funds which were received during the tax years 2006 to 2007 were paid back in the year 2007, leaving no balance in the A/C. The concept of peak credits was abused. (12) Vide letter dated 10-2-2011 the taxpayer duly informed the department that he did not possess any concealed/undeclared income in view of principle of "peak credits". No reference having been made by the department to the stand taken by the taxpayer would imply that the entire exercise of authority has been done without disclosing any reasons, which is violative of section 24-A of the General Clauses Act. The burden of proof rest upon the department which has to first come forward with plausible reason so as to reject the contention of the taxpayer with regard to "peak credits". (13) The original notice in this case for the year 2007 was given by Adeel Sikandar Yousafani, officer of the Inland…
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