' 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 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;
(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 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;
(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 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 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 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-initio 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 objection 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 as void and without jurisdiction?
(14) 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 an counter affidavit?
(15) The above named appeal along with three other appeals were argued before the learned CIT(Appeals) on 10-1-2012, again on 23-1-2012 along with case-law and details and arguments, again on 20-2-2012 and finally on 29-2-2012. Every time the Assessing Officer was requested by the CIT(Appeals) to attend the proceedings and answer all the facts and questions raised and rebut the copious case-law cited. However, as observed by the CIT(A) himself. There was no compliance from the department. The CIT(A) sat on the order from 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 demands. In such circumstances the CIT(A) was not to entitled to approve the order of the Taxation Officer in a cavalier fashion?
(16) 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 hearing and consideration of arguments, addressed on behalf of the appellant. Such a conduct on the part of the learned CIT(A) amount to a vindictive and arbitrary approach and a injudicious exercise. The order of the CIT(A) is arbitrary, unlawful and without jurisdiction.
(17) The T.O. 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 PTD (Trib.) 366.
(18) The learned CIT(Appeals) has grossly erred in not examining and considering the relevant case-law cited without any comments thereon or without distinguishing the facts in any manner.
(19) The appellant craves permission for his counsel to raise any other ground at the time of hearing."
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: - ' 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;
(ii) any other relief which this August Tribunal may deem fit and proper under the circumstances of the case."
1. Mr. Muhammad Naseem, Advocate, the learned counsel for the appellant at the very outset raised the legal objections against selection of the case for audit and order passed under section 122(5A) of the Income Tax Ordinance, 2001. As well as the powers of Deputy Commissioner to amend the deemed assessm ent order passed under section 120 by invoking section 122(5A) of the Income Tax Ordinance, 2001. He contended that the deemed orders passed under section 120 were deemed to be the order of the Commissioner and powers of revision cannot be entrusted to any authority below the rank of functionary whose order is A sought to be revised which in the instant case is Additional Commissioner. The powers delegated to the Additional Commissioner who is lower in rank in the hierarchy of income tax cannot revise the order of higher rank authority. In support of his arguments he placed reliance on the case-laws reported as 2010 PTD (Trib) 472(a), 2006 SCMR 1410 (a), 1995 PTD 641, 2001 PTD 2484/2258 and 2008 PTD 182. He, therefore, argued that the orders passed 122(1)1(5) of the Income Tax Ordinance, 2001 are not maintainable and without lawful jurisdiction.
2. On other factual and legal grounds of appeals he argued that in the instant case the appellant has availed the Investment Scheme, 2008 announced by the Federal Board of Revenue vide Circular No, 3 of 2008 dated 1st July, 2008. He submitted that in pursuance of the above Circular the appellant filed Declaration 30-10-2008 and as per above said Circular the limitation provided is one month of the date of receipt of declaration. He argued that the appellant filed the Declaration and paid B tax of Rs,80,000 on 30-10-2008 under the said Scheme and acquired the amnesty and the condition laid down for taking any action by the department is one month which has expired on 30th November, 2008 and after lapse of limitation the Notice was issued on 13th January, 2009.
He submitted that issuance of such notice after passing limitation period is ab initio void and illegal. He argued that if the very basis of any action is illegal then superstructure built on this is liable to be demolished. He argued that the learned CIR(A) has not taken into consideration this aspect of the case and instead of annulling the order passed by the Deputy Commissioner unjustifiably confirmed the order. He, therefore, submitted that the order passed by the CIR(A) may be vacated on this score only.
3. The learned counsel for the appellant next argued that for the Tax Years under appeal the audit proceedings were illegally selected on the basis of bank statement obtained from the Allied Bank.
He vehemently argued that the DCIR was not in possession of any new information as the said information was already available at the time of first audit proceedings which were dropped vide letter No OIR/unit01/Audit-V/RT0/2010 dated 22-9-2010. It was further contended by the learned counsel that the permission was granted by the Commissioner only for ascertaining the factum of Pay Order No,962099 dated 11-1-2007 from only one bank i,e, Allied Bank of Pakistan for the Tax Year 2007, however, the Taxation Officer travelled beyond his jurisdiction and asked for all sorts of information from the two Banks namely Meezan Bank and Allied. Bank Limited. He, therefore, argued that who exercise done by the Deputy Commissioner was nullity in the eyes of law. It was further argued that initiation of proceedings without any definite information is not sustainable in the eyes of law. It was further argued by him that no notice under section 122(5) or 122(5A) of the Income Tax Ordinance , 2001 was issued before making additions and notice under section 122(9) was issued when the audit proceedings for the charge year had already been dropped on 22-9-2010.
4. The learned counsel further went to argue that after change of jurisdiction it is incumbent upon the Deputy Commissioner to issue fresh notice for initiating proceedings however, no fresh notice was issued and he passed the Order under sections 122(1)1122(5A) of the Income Tax Ordinance, 2001, therefore on this score the order of the Deputy Commissioner is also liable to be quashed. In support of his version he placed reliance on the case-law reported as 1999 PTD 1360 (Siemen Pak) .
He contended that the learned CIR(A) neither discussed this case-law nor distinguished the same and maintained the order of the Deputy Commissioner which is not within the frame work of law as held by the superior court in the judgment cited supra.
5. The learned counsel for the appellant argued with vehemence that only the permission under section 176 was granted by the Commissioner vide his letter dated 9-12-2010 to ascertain the Pay Order No,1962099 dated 11-1-2007 however, the DCIR obtained the bank account of the ABL from 1- 7-2005 to 30-6-2006 for which there was no permission. He further argued that the alleged bank statement on the basis of which additions have been made under section 111(1)(b) was E not confronted to the appellant and hence violated the provisions of Qanun-e-Shahadat Order, 1984.
He submitted that the so-called evidence has been used at the back of the appellant and law provides that an opportunity be provided to a person to examine or confront the evidence purported to be used against him. This being not done so the evidence as used by the Deputy Commissioner is nullity in law, reliance in this regard was placed on the following:--
(a) Article 1 of Qanun-e-Shahadat Order, 1984;
(b) 1993 PTD 206
(c) 1997 PTD (Trib.) 2209;
(d) While the burden of proof on the part of the department was not discharged. There was no such burden on the appellant.
6. He submitted that the however, the learned CIR(A) has no passed the speaking inasmuch as the order of the learned CIR(A) did not mention any discuss in respect of above duly agitated by the learned counsel at the time of hearing before him.
7. Lastly, the learned counsel for the appellant submitted that the DCIR has taken all the credit entries although he must pick the peak deposits for making the addition. He further submitted that the entire amount of Rs,10,258,650 has been taken as unexplained income from other sources and added under section 111(1)(b) of the Income Tax Ordinance, 2001.. He submitted that there is no un- explained amount or income during Tax Years under appeal. He submitted for the Tax year 2006, the amount of Rs,10,258,650 deposited in the bank during the period relevant to Tax Year 2006 is the accumulation of total deposit during one financial year and not a single transaction; If for the sake of arguments it is presumed that there is concealed amount then only to the extent of The peak deposit in the case of the taxpayer as per bank statement was that of Rs,1,000,000 on 17-5- 2006 and further that this amount is covered by the taxpayer's amnesty declaration of Rs,3,145,000.
He further submitted that the entire proceedings had been launched in disregard and in total abuse of Qanun-e-Shahadat Ordinance, 2004 and more particularly, the same has not been confronted and no opportunity was provided to the appellant to examine the same.
8. Mr. Abdul Sattar Abbasi, the learned D.R. On the other hand supported the orders of the officer below. He submitted that non-issuance of notice is a curable and not fatal to the proceedings.
While rebutting the arguments of the learned counsel for the appellant he placed reliance on the judgments reported as 2009 PTD (Trib.) 1974 and 2007 PTD (Trib.) 2281. He further submitted that the impugned order of the DCIR has not touched the unexplained amount to the tune of the amount declared under the Scheme, and has only made addition of the amount over and above this amount.
9. We have heard the learned representatives of both, the sides at length and have also gone through the record of the case.
10. At the very outset we may point out that the controversy regarding legality/competency of the Additional Commissioner to invoke provisions of section 122(5A) has laid to rest by the Honourable Islamabad High Court in Writ Petition No,653 of 2009 dated 2-7-2001 which has been approved by the Supreme Court of Pakistan while deciding the Constitutional Petitions Nos.1664-1665 of 2009 dated 11-9-2009. The ratio of the above judgment is that the Additional Commissioner under delegated authority can perform the functions and exercise the powers of the Commissioner with specific reference to 122(5A) of the Income Tax Ordinance, 2001. This aspect also stands decided by the learned Appellate Tribunal Inland Revenue (ATIR) in the case of Messrs Karachi Port Trust Karachi vide I.T.As. Nos. 393 and 270/KB/2010 for the tax years 2008 and 2009 dated 18-6-2010. It has been held therein as follows:- ...:37. With regards to the legal issue of jurisdiction and invoking of provisions of section 122(5A) by an Additional Commissioner being lower in rank on an order treated to have been made by the Commissioner being the senior and higher authority, the matter has been decided by the honourable High Court in its judgment while deciding Writ Petition No,653 of 2009 dated 16-7-2009 (SME Bank Limited v. Additional Commissioner Income Tax Audit and 4 others) reported as 2010 PTD 1506 relied upon by the learned Counsel for the Department. Since no further appeal/reference was filed by the petitioner of Writ Petition No,653 of 2009 against the judgment of honourable Islamabad High Court we fully agree with the learned Counsel for the Department that matter has attained finality. We according hold that Additional Commissioner can invoke provisions of section 122(5A) under delegated authority on an order deemed to have been made by the Commissioner in terms of section 120 of the Ordinance, as this order is not actually passed by the Commissioner but only treated to have made by him..."
11. Therefore, in view of the above decided position, the arguments of the learned counsel regarding competency of the Additional Commissioner do not carry weight hence, the plea of the learned AR of the appellant, in this context, is hereby discarded. The appeals fail on these grounds.
12. On the other factual / legal grounds of appeals, the arguments of the learned counsel for the appellant carry much force. On the basis of arguments, case-laws, evidences produced before this Court, the orders passed by the DCIR for both the tax years 2006 and 2007 are not sustainable in the eyes of law for the following observations / findings and discrepancies rioted by this Court:--
(i) That the appellant has acquired amnesty by making declaration on 31-10-2008 and has paid investment tax of Rs,80,000. The following assets amounting to Rs,40,00,000 were covered under the Investment Tax Scheme, 2008 for the Tax year 2006:
(a) Cash / income upto the tax year 2008 31,45,000
(b) Honda City Car 08,55,000 40,00,000 ' Resultant income amounting to Rs,3,145,000 against credit entries in Bank Account No,01-200-3811- 7 from 12-5-2005 to 31-5-2007 has been declared in the Scheme 2008 and are not questionable for the reasons mentioned in the succeeding paras.
(ii) That the appellant further acquired amnesty by making declaration on 31-10-2008 and has paid the investment tax. The following assets amounting to Rs,18,218,899 were covered under the Investment Tax Scheme, 2008 for the Tax year 2007:
(a) Cash / income upto the tax year 2008 31,45,000
(b) Encashment of Foreign remittances 15,073,999 18,218,999 Resultant income amounting to Rs,3,145,000 against credit entries in Bank Account No,01-200-3811- 7 from 12-5-2005 to 31-5-2007 has been declared in the Scheme 2008 and are not questionable for the reasons mentioned in the succeeding paras.
(iii) That the Federal Board of Revenue vide its Circular No,3 of 2008 dated 1st July, 2008 prescribed the time limit for one month to inform the declarant. The said para 6(i) is reproduced as under: "(i) Where a declaration in respect of undisclosed / unexplained income/assets has been made and the tax due thereon has been fully paid, such declaration shall be accepted by the department and the declarant shall be informed within one month of the date of receipt of the declaration.
(iv) From perusal of the above said clause it is manifest that time limit of one month has been prescribed for taking action. In this case the Declarations have been filed on 31-10-2008 and first notice was issued on 13-1-2009 after lapse of more than one month.
(v) That very purpose of introduction of the above said Scheme was to provide free passage to the taxpayer without asking any question and the doors of investigation and probe have been closed through this Scheme.
(vi) That as the Circular itself speaks that "The Scheme of Invest Tax 2008 is a voluntary Scheme through which government has 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 are tantamount to frustrate the very purpose of the Scheme and as such, without any lawful jurisdiction having no I legal effect.
(vii) That in this very case no fresh information was available with the department at the time of passing order under sections 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 172-2009 and after that proceedings were dropped on 22-9-2009. Therefore, initiation of proceedings on the basis of past and closed matter is unjustified and unlawful.
(viii) It is held in many cases while initiating action under section 122(5) the department should be in possession of J definite information while in the instant case no definite information was in possession of the department for initiating proceedings under section 122(5). The DCIR after writing letters from time to time threatening penalty proceedings forced the appellant to file returns of income and further the department called information from the hank, hence above clearly establishes that fishing and roving inquiries were conducted by the department, hence the entire proceedings on the basis of fishing and roving inquiries have been disapproved by the higher appellate fora.
(ix) That the department has failed to prove that the credit entries constitute the income of the appellant. Hence, the department K has not discharged onus lies on his shoulders.
(x) That mandatory approval under section 176 of the Income Tax Ordinance was given to the DCIR for calling information from Allied Bank Lawrence Road Branch Karachi was in respect of Pay Order No,1962099 dated 11-1-2007. However, the DCIR travelled beyond his jurisdiction and called Bank statement for the L period 12-5-2006 to 31-12-2006 and also write the letter for which no approval was obtained by the Commissioner, hence the action of the DCIR is without legal sanctity and of no legal effect.
(xi) Further, the department has taken all the credit entries of Rs,20,698,335 in the Allied Bank Account during the year 2007 while ignored the debit entries, therefore, the entire credits 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 forward. Therefore, the learned CIR(A) was not justified in ignoring the debit entries and further not justified in observing that "The discovered bank account statement reflects credit entries only. No debit entries are reflected meaning thereby that there was no circulation or boomerang effect of M monies involved". A copy of the statement has been furnished before this bench by, the appellant showing debit entries.
(xii) That the DCIR has not issued fresh notice instead he confronted the appellant on order sheet on 26-3-2011 which is nullity in N law. Reliance is placed on 2011 PTD (Trib.) 366.
(xiii)That the said alleged bank statement was not confronted to the appellant and no opportunity was provided to him to examine the same. Hence, entire proceedings were held in utter disregard of Qanun-e-Shahadat Order, 1984. The qanun-e-Shahadat is applicable in all income tax proceedings. The Income Tax of authorities exercising quasi-judicial powers and jurisdiction.
Without affording an opportunity to the appellant no reliance could be placed on it particularly, when quasi judicial order was assailed. Reliance is placed on the case-law reported as 1997 PTD (Trib.) 2209.
(xiv)That admittedly no notice under section 122 (5) or (5A) was issued earlier before passing the order, hence principle of natural justice has been violated. The principle of natural justice has always been there in every statute. The higher appellate fora, however, taken the view that where the giving of a notice provided for the statue itself then the failure to given such a notice is fatal and cannot be cured. In arriving at this conclusion we are fortified by the judgment in the case reported as 1994 SCMR 2232 titled as Mrs. Anisa Rehman v. PIAC and other the same view was taken by the apex court, relevant portion is reproduced below:- "From the above stated cases, it is evident that there is juridical consensus that the Maxim audi alteram partem is applicable to judicial as well as to non judicial proceedings. That above Maxim will be read into as a part of every statue if the right of hearing has not been express. Ly provided therein. Admittedly the fact that no show-cause notice was issued to the appellant nor she was heard before the impugned order dated 6th August, 1991. Reverting her to Grade. VI from Grade VII was passed. In this view of the matter there- has been violation of the principles of natural justice.
(xv) Further it has been held in many cases that if the law requires a thing to be done in a particular manner, it would be legal and valid only if it was done in the manner and not otherwise.
' Reliance is placed on the judgment of the honourable Peshawar High Court reported as 2005 MLD 1329.
(xvi) We may further observe that it has been held on numerous occasions by this Tribunal as well as by the superior higher appellate fora that no addition is legally sustainable if mandatory requirements had not been complied with. The Hon'ble Supreme Court of Pakistan Collector, Sahiwal v. Muhammad Akhtar 1971 SCMR 681 their lordships observed.
"The principle so far as this country is concerned, is accordingly well-settled that where the requirement to be fulfilled to be given by the statute is a mandatory, then the failure to comply with such a mandatory requirement of the statute would render the act void ab initio as being an act performed in disregard of the provisions of the statute." It was further observed by their lordship that any further action taken on the basis of such a void order would also be vitiated and the defect at the initial stage would be incurable by a hearing at a subsequent stage."
13. In view the foregoing discussion we vacate the order of the learned CIR(A) and annul the orders passed by the DCIR making the additions under section 111(1)(b) of the Income Tax Ordinance, 2001 for both the tax years under appeal.
14. As we have annulled the orders, therefore consequential penalty proceedings are not sustainable and hence the penalty imposed under section 182 of the Income Tax Ordinance, 2001 is deleted for both the years being without lawful authority.
15. Resultantly all the four appeals stand disposed of as above.