' The Department through this appeal has objected against the impugned order of the learned CIR
(A) dated 15-2-2010 on the following grounds:-- "(2) The learned Commissioner Inland Revenue. (Appeals-II) was not justified in deleting the additions amounting to Rs,1,778,705 under section 111(1)(a) of the Income Tax Ordinance, 2001 as, un explained credits and Rs,695,667 made under section 111(1)(d) of the Income Tax Ordinance, 2001 as unexplained expenses without assigning any cogent reason.
(3) That the learned CIR(Appeals-II) erred in deleting the additions which were rightly made under section 111 of the Income Tax Ordinance, 2001 after due application of mind according to the provisions of subsection (2) of section 111 of the Income Tax Ordinance, 2001 which enumerates that the amount so discovered is to be included in the tax year preceding (not following/succeeding) the financial year in which it was discovered.
(4) That the learned CIR(A) vehemently admitted in his order that the appellant's case for the tax year 2004 was selected for audit under section 177(4) of the Income Tax Ordinance, 2001 on 7-5- 2008 that is the date of discovery and the addition was rightly made in tax year immediately preceding the financial year in which the discovery was made i,e, tax year, 2007.
(5) That without prejudice to the above the addition under section 111 of the Income Tax Ordinance, 2001 were made on the ground that the taxpayer failed to furnish any plausible explanation regarding the difference detected from the debit and credit entries of the Bank statement."
2. We have heard the learned representatives from both the sides and have also perused the impugned order of the learned CIR(A) and the order passed by the Taxation Officer under section 122(1) of the Income Tax Ordinance, 2001. We have found that the Taxation Officer has made additions under section 111(1)(a) of the Income Tax Ordinance, 2001 for un-explained credits and under subsection (d) for un-explained expenses. The learned CIR(A) has deleted the additions for the reasons that as the additions are not sustainable in terms of subsection (111) of the Ordinance, 2001 which reads as under:-- "(2) The amount referred to subsection (1) shall be included in person's income chargeable to tax in the tax year [immediately preceding the financial year] in which it was discovered by the Commissioner."
It is clear from plain and simple reading of the above provision of law that in case additions were warranted in which the act referred in subsection (a) to (c) of section 111 of the Income Tax Ordinance, 2001 is found, then addition can be made in the total income of the Taxpayer in the tax year relevant to immediately preceding financial year in which the said discovery is made. We are of the view that the above referred provisions of law has not given blanket powers to the Taxation Officer to make additions whenever he wants and/or in any tax year, but the legislation has restricted this addition in the tax year immediately preceding the financial year of discovery, provided the addition is made according to law. We have noted that the case of the present Taxpayer is for the tax year 2007 which was selected for audit under section 177(4) vide letter dated 7-5-2008. During the audit proceedings after examination of audited account and bank statement, the Taxpayer was confronted regarding difference of credit and debit entries through show-cause notice dated 5-3-2009 for compliance by 14-3-2009. The explanation offered by the Taxpayer was not found satisfactory. The said discovery in terms of possession of definite information as envisaged in subsection (5) of section 122 of the Income Tax Ordinance, 2001; which was duly communicated to the Taxpayer vide letter dated 5-3-2009, the period that relates to the tax year 2009. Suffice to say that unless the discovery is made during the period of tax year 2008, the addition under section 111(1)(a) and (d) of the Income Tax Ordinance, 2001, in the tax year under appeal i,e, 2008, will be without jurisdiction, illegal, invalid and not sustainable in law being void ab initio. We are of the view that the provision of Section 111(2) of the Income Tax Ordinance, 2001 has not been properly ad-hired by the Taxation Officer and addition made in this respect is not sustainable. In this regard the learned A.R. Of the Taxpayer referred the decisions of this Tribunal reported as 2009 PTD 1919 (Trib) and 2006 PTD (Trib) 2662. In this regard we also refer the settled preposition of law that acts, things, and deeds should be done in the manner prescribed or should not be done at all. The reference in this regard may also be made to the decision of the honorable High Court Lahore in the case reported as 2005 PTD 2229. In view of these facts and circumstances and the legal position, we find no warrant for interference in the impugned order which is upheld and the appeal filed by the department is dismissed.