' Taxpayer has challenged the action under section 121(1)(c) of Income Tax Ordinance, 2011, which was upheld by Commissioner (Appeals) vide its Order No,4282 dated 16-6-2012, impugned in this appeal.
2. The appellant taxpayer is an individual who filed his return for tax year 2011 under section 114.
Admittedly was the statement under section 116 was not filed, despite being mandatory in the relevant year, therefore, appellant was served with a notice under section 121(1)(c). In response, the appellant taxpayer filed wealth statement on 24-12-2011. The taxation officer, however, proceeded under section 121 and passed best judgment assessment. This order was challenged before Commissioner (Appeals), who upheld the action under section 121 in following words:-- "Having heard arguments from both the sides and perusing the relevant record and case-law quoted by both the parties, I am of the considered opinion that this is a case of violation of mandatory provisions of law. As provided under section 116(2), the taxpayer declaring income more than Rs,5-lacs was required to file wealth statement along with the return which he failed to do.
Therefore, this is not a case of short document and even subsequent filing of wealth statement will not make the original return as valid return. As provided under section 121(1)(c), the best judgment assessm ent would be framed if a tax payer does not file wealth statement in violation of provisions of law as contained in section 116(2). Therefore, the learned DCIR has proceeded in accordance with law to frame best judgment under section 121(1)(c) of Income Tax Ordinance, 2001 which is maintained."
3. Learned counsel for the appellant argues that in case of any short document, required to be filed along with return under section 114, the Commissioner or taxation officer is required to proceed under subsection (3) of section 121, asking through a notice, to furnish any short document or statement etc. In case of compliance within time the return shall be treated as complete under subsection (5) and provisions of subsection (1) would apply accordingly. In case of non- compliance of notice under subsection (3), return would be treated as incomplete under subsection (4). He submits that the provisions of section 121 could only have been invoked if the return under section 114 was treated as invalid under subsection (4). His case is that on furnishing of statement under section 116 the return became complete therefore it had attained the status of assessm ent order under section 120. He has also read the provisions of section 116, whereunder the Commissioner can require any person through notice to furnish wealth statement if that person is legally required to filed the same. Learned counsel submits that the notice under section 121(1)(c), at best, could be treated as notice under section 120(3) read with section 116(1) and on compliance by the taxpayer by filing wealth statement, the return under section 114 should have been treated as complete. He submits that the order under section 121 is against the spirit of scheme of Income Tax Ordinance. He has also relied on a judgment by this Tribunal reported as 2011 PTD (Trib.) 184 and contends that the assessm ent under section 121 is a second assessment which could have not been passed in presence of deemed assessment under section 120.
' DR has opposed the arguments, and submits that the default on the part of appellant taxpayer is admitted and was incurable, therefore, the taxation officer had rightly proceeded under section 121(1)(c).
4. Heard both the parties and record perused. It is admitted fact that wealth statement as required under section 116(2) of.Income Tax Ordinance, 2001 was not filed along with return under section 114.
It is also not disputed that on notice under section 121(1)(c), the wealth statement was field on 24- 12-2011. Perusal of the impugned order (reproduced above) shows that learned Commissioner, for his decision, had relied simply on sections 116(2) and 121(1)(c). The questions raised by learned counsel for the appellant with reference to section 120(3) and (5), have not been discussed in the impugned order, under consideration. We are mindful of the tried principle of interpretation that no provision should be construed in isolation. To find out the intent of legislature whole statute is to be read. We, therefore, have examined all relevant provisions of Income Tax Ordinance, 2001. Section 120 is reproduced hereunder:-- "120. Assessments.---(1) Where a taxpayer has furnished a complete return of income (other than a revised return under subsection (6) of section 114) for a tax year ending on or after the 1st day of July, 2002.
(a) The Commissioner shall be taken to have made an assessment of taxable income for that tax year, and the tax due thereon, equal to those respective amounts specified in the return; and
(b) The return shall be taken for all purposes of this Ordinance to be an assessment order issued to the taxpayer by the Commissioner on the day the return was furnished.
(IA) Notwithstanding the provisions of subsection (1), the Commissioner may conduct audit? Of the income tax affairs of a person under section 177 and all the provisions of that section shall apply accordingly.
(2) A return of income shall be taken to be complete if it is in accordance with the provisions of subsection (2) of section 114.
(3) Where the return of income furnished is not complete, the Commissioner shall issue a notice to the taxpayer informing him of the deficiencies (other than it correct amount of tax payable on taxable income, as specified in the return, or short payment of tax playable) and directing him to provide such information, particulars, statement or documents by such date specified in the notice.
(4) Where a taxpayer fails to fully comply, by the due date, with the requirements of the notice under subsection (3), the return furnished shall be treated as an invalid return as if it had not been furnished.
(5) Where, in response to a notice under subsections (3), the taxpayer has, by the due date, fully complied with the requirements of the notice, the return furnished shall be treated to be complete on the day it was furnished and the provisions of subsection (1) shall apply accordingly.
(6) No notice under subsection (3) shall be issued after the end of . The financial year in which return was furnished, and the provisions of subsection (1) shall apply accordingly.
' Perusal of this section tells that a complete return filed under subsection (1) shall be taken to be an assessm ent order of taxable income for a relevant year. Its subsection (2) reveals that a return shall be taken to be complete which is in accordance with the provisions of subsection (2) of section 114. Subsection (3) deals with the situation where incomplete return is filed. The Commissioner is required to issue a notice under this subsection informing him of the deficiencies and shall direct to provide such information, particulars, statement or documents by the date specified in the notice. On non-compliance by taxpayer of notice under subsection (3), the return shall be treated as invalid return under subsection (4). However, if the notice under subsection (3) is fully complied with, the return already furnished shall be treated to be complete on the day it was furnished and the same shall be treated as an assessment order under subsection (1).
5. Requirements of a complete return, as mentioned in subsection (2) of section 120, are contained in subsection (2) of section 114. The same being relevant is also reproduced:-- "Section 114(2):
(2) A return of income:--
(a) shall be in the prescribed from and shall be accompanied by such annexures, statements or documents as may be prescribed.
(b) shall fully state all the relevant particulars or information as specified in the form of return, including a declaration of the records kept by the taxpayer.
(c) shall be signed by the person, being an individual, or the person's representative where section 172 applies:
(d) shall be accompanied with evidence of payment of due tax as per return of income; and
(e) shall be accompanied with a wealth statement as required under section 116.
' Clause (e) of subsection (2) tells that a complete return "shall also be accompanied with a wealth statement as required under section 116".
6. After examining the reproduced provisions we may hold that return filed by appellant for tax year 2011, without wealth statement, was not complete.
7. In presence of undisputed fact that appellant was required under subsection (2) of section 116 to furnish wealth statement along with return under section 114, we have also examined the provisions of sections 116 and 121 of the Income Tax Ordinance, 2001. Subsection (1) of section 116 empowers the Commissioner to required, by a notice in writing, to furnish wealth statement in prescribed form. Clause (c) of subsection (1) of section 121 authorizes, the Commissioner to proceed for passing a best judgment assessm ent, on any available information or material, if a person fails to furnish statement as required under section 116. Section 121(1) is also reproduced here under:-- "(1) Where a person fails to---
(a) furnish a statement as required by a notice under subsection (5) or section 115; or
(b) furnish a return as required under section 143 or section 144; or
(c) furnish the statement as required under section 116; or
(d) produce before the Commissioner, or any person employed by a firm of chartered accountants or a firm of cost and management accountants under section 117, accounts, documents and records required to be maintained under section 174, or any other relevant documents or evidence that may be required by him for the purpose of making assessment of income and determination of tax due thereon.
' The Commissioner may, based on any available information or material and to the best of his judgment, make an assessment of the taxable income or income of the person and the tax due thereon."
8. Examination of the provisions reproduced supra, in back drop of the facts of appeal has raised a valid question:-- :Whether Commissioner/Taxation Officer was justified to proceed under section 121 for not furnishing wealth statement, without resorting to the provisions of sections 120(3) and 116(1)?"
Independent perusal of the section discussed above reveals that non-furnishing of statement the Commissioner has option to issue notice under section 120(3) or to issue notice under section 116(1) or under section 121(1)(c),. And pass a best judgment assessment. We are afraid that this cannot be the intent of legislature because it would lead to uncertain and varied action of same default by the department. In our considered view these provisions needs harmonious construction leading to a definite action by the department for default of not furnishing wealth statement. In our opinion if a wealth statement as required under section 116(2) and (2A) is not furnished along with return under section 114, the return is incomplete for not fulfilling the requirement of section 114(2). The department should, on such default issue a notice under section 120(3) read with section 116(1) informing the taxpayer about the deficiency and directing him to provide wealth statement within the time specified in written notice. If the wealth statement is furnished within time to the satisfaction of the Commissioner, the return should be treated to be complete on the day it was furnished. However, if the notice under section 120(3), read with section 116(1) is not complied with as per the provisions of law the return shall be treated as invalid return.
' It is held that provisions of section 121 could be invoked only after declaring the return filed by taxpayer under section 114 as invalid under subsection (4) of section 120. We may add that return filed under section.120 becomes an assessment order by operation of law unless it is declared in- valid under subsection (4) of section 120. The Taxation Officer could not proceed under section 121 by keeping the fate of return filed under section 114 in lurch.
10. For the reasons noted above, both the orders below are declared to have been passed against the spirit of Income Tax Ordinance, 2001. It is held that the notice issued by Taxation Officer under section 121(1)(c) dated 19-12-2011 should be treated as notice under section 120(3) read with section 116(1). Since taxpayer had filed wealth statement on 24-12-2011 in response to the said notice, therefore, the return filed under section 114 shall be treated to be complete on the day it was furnished.