' MUHAMMAD JAWED ZAKARIA, JUDICIAL MEMBER --- Above-captioned Departmental appeals are directed on the grounds as set forth in the memo. Of appeals against the consolidated orders No, 03 & 04, dated 28.06.2010 relating to the tax years 2008 and 2009 passed by the learned Commissioner Inland Revenue (Appeals), Karachi @ Hyderabad. Since the facts and issues involve in the two appeals are common, therefore, we intend to dispose of the above appeals through this common, consolidated and single order.
2. Mr. Tariq Mustafa Khan, DR appeared for department/appellant and Mr. M. Jawaid Khurram, Advocate, represented the Tax Payer/respondent.
3. Brief facts of the case are that the Tax Payer/Respondent is a practicing Doctor maintaining Clinics at Saddar, Hyderabad and Ankal Saria Hospital, Karachi., Besides medical profession the Tax Payer/respondent is also enjoying income from agricultural land at Tandu Allah Yar and Tandu Muhammad Khan and from the said and he earns agricultural income. The respondent for the Tax Year 2008 declared income from medical profession Rs, 616,500/- and agricultural income Rs, 1,000,000/- the respondent in the Wealth Statement filed alongwith the Tax return declared net Wealth of Rs, 7,379,863/- as on 30.06.2008 inclusive of agricultural land 220 Acres at Sandi Tandu Allah Yar and 40 Acres in Tandu Muhammad Khan.
' Similarly, for the Tax Year 2009 declared income from medical profession Rs, 626,000/- and agriculture income Rs, 1,000,000/-, the Tax payer also filed wealth statement wherein the above- mentioned agricultural land duly declared. The case of the Tax Payer/Respondent for the Tax Year 2008 selected for total audit under Section 177(4) for the Income Tax Ordinance, 2001, the respondent duly complied all the notices issued by the assessing officer and placed before him all the relevant details, documents and information called for. After protracted proceedings the DCIR/OIR, Audit Unit-X, RTO, Hyderabad issued notice under Section 122(9), dated 21.07.2010 whereby besides other issues he confronted to disallow the 10% out of salaries and entire claim of expenses such as stationary, printing, fuel, expense and maintenance, misc. Expenses, under Section 174(2) of the Income Tax Ordinance, 2001 without making any reference to Section 122(5)(i), 122(5)(ii) and 122(5)(iii) of the Income Tax Ordinance, 2001 and finally disallowed 10% of Salaries, 50% of Stationery Printing, Fuel expenses and maintenance and misc. Expenses. While passing the amended assessm ent order for the Tax Year 2008 the assessing officer at page(s) 7 and 8 of the amended order under Section 122(1)/(5) of the Income Tax Ordinance, 2001, dated 30.01.2010 categorically stated that in view of Section 111(2) of the Income Tax Ordinance, 2001 the unexplained credit entries in banks during the accounting year 01.07.2007 to 30.06.2008 i,e,, Rs, 75,95,825/- (Closing balance as on 30.06.2008) and Rs, 580.000/- being the travelling expenses discoursed during the Tax Year 2010 therefore such amounts would be taxed in the Tax Year 2009. After passing the amended order for the Tax Year 2008, dated 30.01.2010 the assessing officer issued notice under Section 122(9), dated 17.03.2010 for the Tax Year 2009, thereafter, passed amended order under Section 122(1)/122(5), dated 15.04.2010 for the Tax Year 2009 and made additions enumerated below:--- {{TABLE}} ; Tax Year 2008 Tax Year 2009 ;Taxable income Rs, Taxable income Rs,1 ;declared 616,500/- declared 626,000/- Additions: Additions: Salaries Under Section (10%) Rs, 111(1)(b) of I.T.
23,160/- Ord., 2001 Rs, Stationery/ 7,595.826/- Printing (50%) Rs, 7,660/- Fuel Under Section Expenses 111(1)(c) of I.T.
(50%) Rs, Ord., 2001 Rs, 25,397/- Maintenance/ 5,80,000/- Misc. Expenses (50%) Rs, 10,885/- Rs, 67,102/- Rs, 8,175,826/- Amended Rs, Amended Rs, taxable income 683,602/- taxable income 8,801,826/-
4. Learned Departmental Representative argued that the learned CIR(A) was not justified to cancel selection of the case for audit which was legally amended under Section 122(1) read with Section 122(5) after fulfilling all legal requirement. According to the learned Departmental Representative, the learned CIR(A) failed to consider that there was no condition for issuance of a pre-show-cause notice, as held by Hon'ble Supreme Court of Pakistan. He concluded his arguments by contending that the learned CIR(A) was not justified to delete the additions, which were made towards expenses claimed in profit & loss account, for want of evidence for the tax year 2008 and he supported the additions made under Section 111(1)(b) and 111(1)(c) for the tax year 2009.
Accordingly, he prayed that the order of the learned CIR(A); may be vacated and that of the order of Deputy Commissioner Inland Revenue, passed under Section 122(1), (5) may be restored.
5. On the other hand, learned Authorized Representative of the taxpayer/respondent vehemently opposed the contentions made by the learned Departmental Representative.
6. Mr. M. Jawaid Khurram, Advocate the learned counsel of the Tax Payer/respondent defended the orders passed by the CIR(A), dated 28.06.2010. The learned A.R. Of the taxpayer succinctly advanced his points as respondent before this Court which are appended below:- The impugned case wrongly selected for Audit by CIR. No Audit Report/Audit objection/ charge- sheet/observations/findings confronted under Section 177(6) before invoking Section 122.
The mandatory requirement of Section 177 has not been fulfilled. No opportunity provided for rebuttal of so-called audit report/Observations. Hence entire proceedings/exercise is void abinitio.
No definite information, neither furnished nor proved and no addition is based on definite information. Mandatory requirement of Sections 177, 122 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 must be cancelled for the purpose of modification. If deemed order existing in the field and not cancelled before invoking Section 122, the alteration and modification is illegal.
7. While elaborating point of view of taxpayer. Mr. M. Jawaid Khurram, Advocate the learned counsel of the Tax Payer/respondent at the outset very ably defended and opposed the selection of audit under Section 177 and amended order under Section 122(1), 122(5), he also vociferously objected to against additions/disallowances made out of expenses in Tax Year 2008 and additions made under Section 111(1)(b) and 111(1)(c) read with Section 111(2) of the Income Tax Ordinance, 2001 in the Tax Year 2009. He further argued that the DCIR/OIR has not given mandatory notice(s) under Sections 122(5)(i), 122(5)(ii) and 122(5)(iii) read with Sections 122(5) and 122(8) of the Income Tax Ordinance, 2001 and as such not confronted the Tax Payer/respondent about the acquisition of "definite information". According to him, in view of the amended order made through under Section 122(1), 122(5) and addition made under Section 111(2) of the Income Tax Ordinance, 2001 he contended that vide Finance Act, 2010 no addition under Section 111(1)(b) and 111(1)(c) of the Income Tax Ordinance, 2001 with reference to any alleged concealment discovered during Tax Year 2010 in respect of accounting period 01.07.2007 to 30.06.2008 can be made in the Tax Year 2009 and DCIR have had not issued any separate, independent, specific and valid notice under Section 111 for making any addition under Section 111 and furthermore, there is no un-explained income/investment or expenditure, hence, additions under Section 111 liable to be deleted.
8. Mr. M. Jawaid Khurram, Advocate the learned counsel of the Tax Payer/respondent in respect of passing order under Section 122(1)/122(5) of the Income Tax Ordinance, 2001 and disallowances of expenses with reference to Section 174(2) of the Income Tax Ordinance, 2001 drawn our attention to Section 122(5) of the Income Tax Ordinance, 2001.
' Section 122(5)
"(5) An assessm ent order in respect of tax year, or an assessment year, shall only be amended under sub-section (1) and an amended assessment for that year shall only be further amended under sub-section (4) where, on the basis of definite information acquired from an audit or otherwise, the Commissioner is satisfied that:-
(i) any income chargeable to tax has escaped assessment; or
(ii) total income has been under assessed, or assessed at too low a rate, or has been the subject of excessive relief or refund; or
(iii) any amount under a head of income tax has been misclassified.
(emphasized supplied)
9. The learned counsel of the Tax Payer/respondent emphasized that on plain reading of Section 122(5) for passing order under Section 122(1) and 122(5) the availability of the "definite information" the precondition and submitted that Section 122(5) provides that an assessment order shall only be amended under Section 122(1) and 122(5) read with Section 177, where "definite information" has been acquired through audit or otherwise. In the instant case no such definite information was acquired by the DCIR/OIR. Add backs/disallowances out of profit & loss account expenses which stand declared in the return and accounts filed with the return do not constitute "definite information" within the meaning of Section 122(8) and the case-law on the subject. Reliance was placed on the decision of this Tribunal in the case reported as 2007 PTD 2601, wherein it has been held that "any information which creates doubts or provides reasons to suspect that the income has been concealed does not form a part of term "definite, information". According to the [ATIR] tangible information and such proof that leads to the reason to believe, could only be considered as "definite information." It has further been held in the same decision that any estimate, gossip, personal whims or surmises could not be termed as "definite information". The learned counsel further contended that after filing of return by the taxpayer, the deemed assessment under Section 120 of the Income Tax Ordinance, 2001 was deemed to be passed and until and unless the deemed 'assessm ent under Section 120 is Cancelled there cannot be ' another assessment in the presence thereof. He argued that deemed assessment has attained finality having the sanction of law,' he went to say 'that. The audit proceedings are a process to reach to a conclusion from where the jurisdiction under Section 122(1) and 122(5) and then an assessment within the said provision. Can be altered/Modified. Assessm ent have to be 'Linder Section 122 and before embarking upon such proceedings, the requirements of Section 122(5) are to be fulfilled in letter and spirit. The selection of the audit in itself does not mean an assessment or modification of assessment. Audit proceedings may be dropped if department could not find any justifiable material evidence based on "definite information".
10. The learned AR of the Tax Payer/respondent vehemently argued that a plain reading of reasons assigned for various additions/disallowances in the orders for the tax years 2008 and 2009 clearly perceived that the same constitute difference of opinion but not the definite information as defined in Section 122(8) and held by the superior Courts in various judgments. Reliance in this regard had been placed on the judgment Hon'ble Supreme Court of Pakistan reported as 2009 PTD 1392 = 100 Tax 81 [CIT v. Eli Lilly Pakistan (Pvt.) Limited)]. According to learned AR the Hon'ble apex Court had been pleased to held as under:- "Under sub-section (5) an assessm ent shall only be amended or an amended assessment shall only be further amended on the basis of definite information acquired from an audit or otherwise, where Commissioner is satisfied that any income chargeable to tax has escaped assessment or total income has been under assessed or assessed at too low a rate or has been the subject- matter of excessive relief or refund or any amount under a head of income had been misclassified.
So, there has to be a definite information with the Commissioner e.g. Information on sale and purchase of any goods made by taxpayer, receipts of taxpayer from services rendered or any other receipts that may be chargeable to tax under the Ordinance and on the acquisition, possession or disposal of any money, assets, valuable article or investment made or expenditure incurred by the taxpayer. Such information must have been received from a certain source. Such information must stipulate a case of escaped assessment, under assessment, assessment at too low a rate, excessive relief or refund, misclassification of a head of income."
11. The learned A.R. Of the Tax Payer submitted that the learned Tribunal in the case reported as 2011 PTD (Trib.) 321 has also emphasized of the fulfilment of the three conciliates referred in Section 122(5) of the Income Tax Ordinance, 2001 in addition to "definite information" and held that:--- "The Assessing Officer has amended the deemed assessment on the basis of material already available on record and no fresh information/documents and come into possession of the Department. We are, therefore, of the view that there was no justification to amend the already completed assessm ent under Section 122 of the Income Tax Ordinance, 2001. Reliance in this respect is on this Tribunal's judgment reported as 2003 PTD 1093. The provision of subsection (5) of Section 122 of the Income Tax Ordinance, 2001 stipulate three conditions for issuance of said notice i,e, (1) any income chargeable to tax has escaped assessment, or (2) total income has been has been under assessed, or assessed at too low a rate, or has been subject of excessive relief or refund, or (3) any amount under a head of income has been misclassified. We have further noted that in this case the notice sent by the Taxation Officer under Section 122 of the Ordinance, 2001, dated 30.12.2006 as this does not fulfill the requisite preconditions as mentioned above which render the entire proceedings as illegal and void ab initio. The reliance in the regard has been placed on the decision of the Hon'ble High Court reported as 1997 PTD 47."
12. Similarly, it has been maintained that Hon'ble Islamabad High Court in judgment reported as 2010 PTCL 354/2010 PTD 1506 in Writ Petition No, 517-518 of (Pakistan Mobile Communications Ltd. v.
Commissioner of Income Tax Audit Division and 5 others) and W.P. No, 553 of 2009 M/s. SME Bank Ltd. v. Additional Commissioner of Income Tax Audit & 4 others, while giving its findings on definite information and the applicability of the provisions of Section 122(1) and (4) & (5) of the Ordinance has been pleased to hold as under:--- "Comparing the powers possessed by the Commissioner under sub-section (5A) or (5B) with the powers conferred on the Commission under subsections (1) and (4) of Section 122, I have come to the conclusion that the powers under sub-section (5A) or (5B) are exercisable on the basis of data already available in shape of return and other documents annexed with the return. The jurisdiction can be exercised by the Commissioner, if Commissioner, on the basis of available data considers that the assessm ent order is erroneous and is prejudicial to the interest of the revenue. The assessm ent order means order treated as issued or order passed under Section 121. However, if the Commissioner acquires come additional information from audit or through any other source (additional means additional to data already available) and the information is definite he can exercise powers under sub-section (1) to amend assessment order treated as issued under Section 120 order passed under Section 120. Since the power under sub-section (5A) is exercisable on the basis of the material already available, if the order passed is appealed against and the appellate order comes into field the doctrine of merger would be applicable. Appellate order cannot be amended. However, powers under sub-sections (1) and (4) are altogether different. Even in the presence of appellate order, if the Commissioner acquires definite information through audit or otherwise he can proceed under the law to amend or further amend the assessment order. The reason is that the appellate order has been passed in the absence of information subsequently acquired by the Commissioner."
13. The learned counsel submitted that in other words, the Hon'ble superior Courts have been pleased to prescribe following criteria for invoking the provisions (1) and (4) to fulfill the requirements of sub-section (5) of Section 122.
(i) The definite information must have been received from a source,
(ii) The definite information must be in addition to the data that is already available on record.
14. The leaned A.R. Of the Tax Payer/respondent vociferously submitted that a plain reading of the above judgments of the Hon'ble Supreme Court, the High Court and the Tribunal together with facts and circumstances of the case makes it clear that in the instant case the add backs and disallowances have been misconstrued by the DCIR/OIR as "definite information" as the same is neither received from any source nor is in addition to the data that was already available on record. Besides, additions have been mace by the assessing officer on estimate, assumption, surmise and conjecture which could not be termed as "definite information" by any stretch of imagination. He contended that Hon'ble Supreme Court, on the contrary, by using the word "must" in its above cited judgment has made it mandatory that such information must been received from a source. The DCIR/OIR admittedly did not receive any information nor have any source of information other than record of the taxpayer. Similarly, as envisaged by the Hon'ble Islamabad High Court, there is no additional information acquired from audit or through any other source to fulfill the requirements of sub-section (5) read with sub-sections (1) and (4) of Section 122. It has been unambiguously stated by the Hon'ble Islamabad High Court that the additional information means information in addition to the data that is already available on record and it should be definite too. He urged that the add backs and disallowances out of profit and loss account expenses made in the instant case do not constitute such additional information i,e, the information was part or data already available in the shape of income tax return and other documents available with the return and cannot be termed as (definite) additional information, as envisaged by the Hon'ble Islamabad High Court.
15. The learned counsel for the taxpayer has also placed reliance on the ratio of learned ATIR order.
This Tribunal reported as 2007 PTD 2319. In this case completed proceedings under Section 111 but did not mention as to what clause of sub-section (1) of Section 111 was being applied. The Tribunal held that taxpayer was deprived of his legal right. All actions taken by the assessing authority and the consequential order passed by them were declared legally not maintainable. Orders of Additional Commissioner and that of CIT(A) Were vacated being defective. It has been contended that this judgment is squarely applicable in the respondent's case appeal. As in this case the taxpayer has been deprived of his right to know under which provisions of law huge disallowances and add-backs have been made by the assessing office. Reliance is further placed on the ratio of judgment of Sales Tax Tribunal in the case reported as 2006 GST 255/404/KB of 2001, dated 14.6.2006. According to the learned AR the Tribunal has been pleased to hold as under:--- "13. On the failure of the department to specifically mention in the show-cause notice the specific subsection of Section 36 of the 1990 Act, the learned departmental representative has no answer. It is true that allegations of tax evasion have been made but the same are once again vague and defective in material particulars. What the apex Court in the case of Assistant Collector v. Khyber Electric Lamp 2001 SCMR 838 (and the other authorities on Central Excise and Sale Tax cited by the learned counsel supra) has held is that the show-cause notice should specifically state the sub- section of Section 32 of the Customs Act, 1969 (pari-materia to Section 36 of 1990 Act) and in doing so it must be specifically stated as to whether the action in being taken for collusion, deliberate act, inadvertence, error or misconstruction. We are afraid that none of these particulars have been spelt out in the show-cause notice. Merely alleging "tax evasion" or "Wilful attempt to defeat or circumvent the tax" is hardly sufficient.
14. This, in respect of the second question framed by Hon'ble Supreme Court, it is held that the show-cause notice, not being in consonance with the law laid by the apex Court in Assistant Collector v. Khyber Electric Lamp is completely unlawful, illegal and without jurisdiction and accordingly the show-cause notice and all subsequent proceedings were ab-initio not warranted by law."
16. Mr. Jawed Khurram, the learned Advocate for the taxpayer pointed out and supported that in the instant case the DCIR/OIR was required to confront the appellant as to whether add backs/disallowances made by him comes under the provisions of Section 122(5)(i)/122(5)(ii) and 122(5)(iii) and also meet the requirement "definite information" under sub-section (5) of Section 122 read with Section 122(8) of the Income Tax Ordinance, 2001. He further placed reliance on cases as M/s. Central Insurance Co. And others v. The Central Board of Revenue, Islamabad and others (1993 PTD 765) [Supreme Court of Pakistan], Income Tax Officer and others v. Chappal Builders (1993) 86 Tax 1 (S. C. Pak) and M/s. Pakistan Educational Society v. The Government of Pakistan through Chairman and Secretary. Revenue Division, Islamabad and 2 others 1993 PTD 804 [Karachi High Court]. This should have been specifically confronted to the respondent enabling him to come-up with a proper reply. Thus the principle of fair trial, natural justice and opportunity of being heard have also been denied in due process of law and gross violation to Articles 4 and 10A of the Constitution.
17. The learned counsel of the Tax Payer/respondent submitted in respect of application of Section 111(2) of the Income Tax Ordinance, 2001 and additions made in Tax Year 2009. He contended that the amended/assessm ent under Section 122(1)/122(5) of the Income Tax Ordinance, 2001 stand finalized on 15.04.2010 wherein the additions of Rs, 7,595,826/- and Rs, 580,000/- have been made with reference to Section 111(1)(b) and 111(1)(c) read with Section 111(2) of the Income Tax Ordinance, 2001 in the declared income of the Tax Payer, the learned counsel of the Tax Payer/respondent vehemently submitted that in order to amend the assessment under Section 122(1)/122(5) of the Income Tax Ordinance, 2001 the basic condition of availability of "definite information" and in addition to above issuance of notice under Section 122(5)(i), 122(5)(ii) and 122(5) (iii) of the Income Tax Ordinance, 2001 with reference to that any income chargeable to tax has escaped assessment or total income has been under assessed or assessed at too low a rate or has been the subject- matter of excessive relief or refund or any amount under a head of income had been misclassified as narrated in the cases discussed in preceding paragraphs is condition precedent which is sine qua non.
18. Mr. M. Jawaid Khurram, Advocate the learned counsel of the Tax Payer/respondent vehemently, once, again pointed out that vide Finance Act, 2010 sub-section (2) of Section 111 of the Income Tax Ordinance, 2001 amended according to which the words "immediately preceding the financial year in which it was discovered by the Commissioner" have been substituted by inserting the words "to which such amount relates" and therefore in view of such amendment no addition under Section 111(1)(b)/111(1)(c) read with Section 111(2) warranted in the Tax Year 2009.
19. In respect of application of the above-narrated amended provision of law the learned A.R. Of the taxpayer had placed reliance to the following judgments of the superior judicial forums:-
(1) Commissioner of Income Tax v. Shahnawaz Ltd. [(1992) 66 Tax 126 (S.0 Pak)].
(2) Commissioner Income Tax v. Eliy Lilly Pakistan (Pvt.) Ltd. [(2009) 100 Tax 81 (S.C. Pak)].
(3) Koh-i-Noor Textile Mill Ltd. v. Commissioner of Income Tax [(1974) 30 Tax 138 (S.C.)]
(4) Zeal Pak Industries (Pvt.) Ltd. v. Regional commissioner Income Tax [2009 PTD 712. Khi.)].
45) Central Board of Revenue v. Chanda Motors [1992 '1681 (S.C. Pak.)].
' The learned counsel summed up that '-the upshot of the above-referred cases are the procedural amendment and/or curative/remedial amendment shall apply with retrospective effect to the pending assessm ents and shall also apply where appeal/references are pending before the appellate forums.
21. The learned counsel of the tax-payer besides above augments and also discussed provision of law and pointed out that the Tax Payer/respondent fully complied all the notices and cooperated with the tax department and submitted all the necessary details, documents and information and explained each and every query raised by the DCIR/OIR, the Tax Payer/respondent in respect of credit entries in the banks submitted a detailed explanation and supporting evidence in shape of certificates and affidavits. Of various ,,parties from whom the Tax Payer/respondent received the agriculture income the details of Which also furnished before this Bench of ATR. He contended that the following details, information and certification and evidences submitted before both the authorities below:- {{TABLE}} Sr. Date No, I I Realized Date of Cheque Amount
(PKR) Explanation 1 101:07.2007 05.07.2007 1,100,000 Sale of mango orchard to I Muhammad Yousuf (see confirmation from M.
Yousuf)
2 ' 14.07.2007 16 07 2007 Si 22.08.2007,1 20.08.2007 806,020 Sale of sugarcane to Farhan Sugar Mills (see letter from Mill - Cheque ,Sr. No, -------r-i- Date Realized I Date of Cheque Amount
(PKR) Explanation No, 7 of 2007 ' 4 27.09.2007 28.09.2007 150,000 Sale of banana crop (see confirmation)
5 10.11.2007 1.500,000 Transfer from HBL Hyderabad account 6 15.01.2008 . . 1,000,000 Sale of mango orchard to Muhammad Yousuf (see confirmation from M.Yousuf)
7 18.01.2008 17.01.2008 1,000,000 Sale of sugarcane to Farhan Sugar Mills (see letter from Mill Cheque No, 1 of 2008).
8 21.01.2008 850,000 9 28.02:2008 27.01.2008 500,000 Sale of sugarcane to Farhan Sugar Mills (see letter from .Mill Cheque No, 2 of 2008 .10 06.03.2008 01.02.2008 PKR 165,600) and I 03.03.2008 . (PKR - 1,84,006)' . . . 349,600 ,,!',, . Lease of agricultural lands to British Petroleum for oil wells (see letter from. BP) --I
11. '' 12.03.2008 11.03.2008 1,000,000 Sale of sugarcane to Farhan Sugar Mills (see letter from Mill Cheque No, 3 of 2008)
12 1 ..-- 1---- 13 _---_L 04 04 2008 2.00,000 Sale of wheat of Muhammad Yousaf 1 8 04.2008 18.04.2008 1,000,000 Sale of sugarcane to Farhan Sugar Mills (see letter from Mill Cheque No, 4 of 2008)
4-f-30.05.2008 1 1 100,000 J {{TABLE}} Sr. I No, Date Realized Date of Cheque Amount
(PKR) Explanation 15 30.05.2008 29.05.2008 1,000,000 Sale of sugarcane to Farhan Sugar Mills (see letter from Mill - Cheque No, 5)
16 30.06.2009 01.07.2009 1,600,000 Sale of mango orchard to Muhammad Yousaf (seel confirmation from M.
Yousaf)
17 30.10.2007 29.10.2007 1,723,500 Payment for life insurance policy {{TABLE}}
22. He respectfully stated that these receipts in the said account are primarily from agricultural income, same has not been inadvertently declared by the taxpayer and moreover these receipts are not taxable; being agriculture-income hence does not affect the taxable operation of the taxpayer. It is also categorically stated that the receipt do not belong to the taxpayer but also to other members of the family.
23. The learned counsel for the Tax Payer/respondent in respect of non-disclosure of agricultural income/exempt income, in his support he placed reliance on the reported case of the Sindh High Court Re: Commissioner of Income Tax, Zone-C, Karachi v. A.R. Hussain reported as 2006 PTD 1422 where in the Hon'ble High Court held as under:--- "11. In the facts and circumstances of the. Present case, we are of the opinion that on perusal of facts, the learned ITAT held that the profit/gain after development of agricultural land was not liable to income tax and that the income so earned was not required to be disclosed in the return of income and further held that the entire facts were disclosed in the wealth statement and the non-disclosure of income/gain in the relevant column of the return of income would not amount to concealment or suppression of the particulars of income/gain."
24. Mr. M. Jawaid Khurram, Advocate emphasized that the respondent Tax Payer is the custodian of the agriculture land as well as the said bank accounts. It is pertinent to point out here that bank account at HSBC is actually as amanant account in which the proceeds of the agricultural receipts of the all the co-owners/family members are first kept, then distributed to the co-share holders/coowners.
25. The learned counsel pointed out that the DCIR/OIR has also made addition of Rs, 580,000/- which have been paid for foreign tours. As that the appellant being the elder of the family paid the said amount to the travel agent on account of travelling for the family members and this amount has been paid out the co-owner/family members from the agriculture income deposited in the appellant's bank accounts in HSBC therefore the addition in bank of the appellant not warranted.
26. The learned A.R. Of the Tax Payer/respondent very humbly submitted that the DCIR/OIR while making addition of Rs, 7,595,825/- inclusive Rs, 1,723,500/- being the amount received on account of maturity of life policy such addition which is 100% from verifiable source is a typical example of maladministration and thereby creating illegitimate tax demand. , 27, In finale, the learned A.R. Of the taxpayer contended that selection of case is illegal without jurisdiction and contrary to law as such the order requires to be annulled. It is now a settled proposition of law that if any action is deemed illegal, the whole super structure built upon it also becomes illegal and falls. Reference is made to decision of Karachi High Court reported as (1991) 63 TAX 143 in case of Muhammad Azeem v. CIT. Same ratio has been laid down in cases reported as (1992) 66 TAX 230 (H.C. Kar.), PLD 1971 SC 124, 2006 SCMR 783, (1992) 66 TAX 230 (H.C. Kar). On the basis of these judgments he submitted that the initial action or assumption for invoking provisions of under Sections 177(1), 177(2), 177(6) and 122(1) and 122(5) of IT Ord., 2001 by the Commissioner are incorrect, illegal and contrary to the law, the whole superstructure built upon it is also illegal and void ab-initio as held by High Court of Karachi in case reported as (1991) 63 TAX 143. Based on the above and considering the facts and circumstances of the case it is prayed that the order be declared void ab-initio and not sustainable in law and the same is to be annulled. In support he placed reliance on the following cases reported as 2006 PTD 673 it has been held:- "Notice issued for assumption of jurisdiction was defective subsequent action could note termed as legal."
' In the case reported as 2007 PTD 2601 it has 'been held:--- "Notice under Section 122 of Income Tax Ordinance, 2001 was without jurisdiction having not mentioned the provisions of exact law, subsequent proceedings being based on illegal notice would crumble to ground and cancelled."
' In case reported as (2006) 93 TAX 309 (Lahore H.C.) it was held:--- "When a statute limits a thing to be done in a particular form, it necessarily includes in itself a negative viz. That thing should not be done otherwise."
' The law has very well been settled by now that thing should be done according to law or should not be done at all. In support he relied on the following case-laws:--- If the doing of a thing is made lawful in a particular manner then doing of that thing in conflict with the manner prescribed will be unlawful, PLD 1964 SC 536.
In the case reported as 2001 SCMR 838, 2003 SCMR 1505, 2011 PTD 2480 - while considering the impact of violation or nonobservance of the method prescribed by law for doing an act in a particular manner or mode observed that if the laws had prescribed method for doing of a thing in a particular manner such provision of law is to be followed in letter and spirit and achieving or attaining the objective of performing by law would not be permitted.
' 2011 PTD 1172 - Acts, things and deeds should be done in the manner prescribed or should not be done at all.
' 2011 PTD 43 - If the statute required a particular act to be done in a particular manner then the act must be performed in that manner alone all other manner of doing act would not be permissible under the law.
' 2010-PTD-1315 - violation of mandatory provisions of law are in fact substantive illegalities and not procedural irregularities or technicalities and violation of the same will hit the cases fatally.
2009-PTD-2074 - Where power was given to do a certain thing in certain way, then that thing must be done in that way or not at all and other methods of performance not so prescribed were necessarily forbidden.
2007-PTD-1292 - When law requires a thing to be done in a particular manner, if not so done the same shall be nullity in the eyes of law.
2009-PTD 1919 - As the order passed under Section 122(1) of the Income Tax Ordinance, 2001 had been declared by the Appellate ' Tribunal to have been passed without any lawful jurisdiction coupled with the fact that the addition made under Section 111(1)(a) of the Income Tax Ordinance, 2001 had been held to be not tenable in law, the penalty order was also liable to be quashed.
28. The learned counsel for the taxpayer while supporting the order passed by the learned CIR(A) lastly, submitted that the learned CIR(A) has rightly deleted the additions made by the Deputy Commissioner Inland Revenue. He further submitted that the order of the learned CIR(A) is well within the framework of law and there is no ambiguity, infirmity, and impropriety in the order of learned CIR(A). Accordingly, he prayed for dismissal of the Departmental appeal by confirming the order the learned CIR(A), he went on to state that the learned Departmental Representative has failed to prove that his case is prima facie. He has failed to present his case properly which is evident from the grounds enumerated in the memo. Of appeals which do not explain that what amount of expenses has been claimed and what amount has been disallowed and under which head of expenses by the Deputy Commissioner Inland Revenue. The grounds couched by the Department are in general terms, therefore, the appeal are liable to stand dismissed being devoid of any merit.
29. We have heard the learned representatives of both the parties and have gone through the records of the case, orders of both the authorities below and as well as case-laws cited before us by both the parties.
30. As far as the objections of the learned D.R. About the admission of new material/evidence by Commissioner Inland Revenue (Appeals) we, after careful consideration of the provision of law i,e,, Section 128(5) of the Income Tax Ordinance, 2001 and perusing the case-laws cited by the learned counsel for the respondent are of the opinion that CIR(A) in his order dated 28.06.2010 incorporated all the legal/factual objections of the assessing officer whether in the shape of amended orders and/or written arguments. The CIR(A) within the meaning of Section 128(5) has been authorized under law to admit new evidence if he is satisfied that the appellant was prevented by sufficient cause from producing such material or evidence 'before the Commissioner.
31. We with advantage may refer a reported judgment as [(2000) 81 Tax 317 (H.0 Kan)] wherein it has been held that-- "With regard to question No, 1, we are of the view that the dispute as to whether the income claimed by the respondent/assessee to have been earned from fishing/fish catching was exempt from charge to income-tax was a question of law and even if the respondent/assessee had not raised the same before the Income-tax Officer or the Commissioner of Income-tax same before the Income-tax Officer or the Commissioner of Income-tax (Appeals), there was no bar in the same being raised before the Appellate Tribunal and the Appellate Tribunal had jurisdiction` to consider and decide the same. This in view of the established principle that a question of law which goes to the root of the case or raises a question with regard to the jurisdiction of a particular forum to proceed with the matter of with a particular issue can be raised at any stage of the proceedings.
The respondent/assessee had claimed the income earned by it from fish catching to be exempted from charge to tax in view of clause (99) of the Second Schedule to the Income Tax Ordinance, which exempts income derived by an assessee from the business of fish catching from charge to tax. The question whether the income or the profits earned by the respondent/assessee from fish catching was exempt from charge to tax was question of law. As such,. The assessee could raise the same even at the stage of second appeal before the Appellate Tribunal and the Appellate Tribunal was competent to entertain the question and decide whether the income-tax officer had jurisdiction to proceed with the assessment of such income and to bring the same within Tax Net."
32. Therefore, we tend to agree with the submissions made by the learned counsel on this behalf.
Besides above on examination of the amended assessment orders and orders passed by the CIR(A) with the help of authorized representatives of both the sides we have noticed that the said evidence/information/material were also submitted before the assessing officer during the assessm ent proceeding and as such we find no merit for consideration of such grounds of appeals.
33. A careful examination of the amended order passed under Section 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. In this regard we may refer to sub-section (6) of Section 177 of the Income Tax Ordinance, 2001 which is reproduced hereunder: "177. Audit...............................
(5) After completion of the audit, the Commissioner may, if considered necessary, after obtaining taxpayer's explanation on all the issues raised in the audit, amend the assessment under sub- section (1) or sub-section (4) section 122, as the case may be."
(underling for emphasis)
34. A bare reading of the above sub-section (6) quoted supra, clearly lays down firstly, that it is obligatory upon the CIR/DCIR/CIR that after observation/objections/charge-sheet, he ought to first confront the same to the taxpayers the contents of the Report on all the issues. Secondly, after considering the explanation of the taxpayer, if he considers necessary that the same is required to be amended on the basis of definite informatiOn then he may invoke sub-section (1) of Section 122 for acquiring jurisdiction to amend the order under subsection (4) read with sub-section (5) as the case may be. However, the DCIR has not followed the requirement of law in letter and spirit and passed the order under Sections 122(1), 122(5) of the Income Tax Ordinance, 2001 without confronting the Taxpayer the contents of the audit report/charge-sheet before invoking the amending assessm ent order under Section 122(1) read with sub sections (4), (5) and clauses (i), (ii) & (iii) of Section 122(5) of Income Tax Ordinance, 2001 or even before the issuance of notice under Section 122(9) of the Income Tax Ordinance, 2001. Therefore, assessment in this case has been framed total ignorance of the law and in violation of the prescribed procedure and legal requirement. The CIR/DCIR/OIR, in total oblivion of the procedure has been made for the amended assessm ent under the provisions of Section 122(1) in continuation to the proceedings of audit under Section 177 without acquiring proper jurisdiction as prescribed in Sections 177(6), 122(1) and 122(5).
In our opinion the fact that the order has been amended under Section 122 should be the point of favour of selecting a case for audit instead of being treated as an obstacle in the path of selection of case for audit because on the basis of amendment of an order it can be safely assumed that the return which has been converted into assessment order cannot be relied upon.
35. The audit proceeding under Section 177 is only a procedure to find out some defects in the accounts and to obtain information to further enter into the jurisdiction under Section 122(1) for making an amended assessm ent after acquiring authority under Section 122(5) on the basis of "definite information". We may further observe that for all practical purposes S. 177 of the Income Tax Ordinance, 2001 was a just process to reach to conclusion as to from where the CIR/OIR/DCIR/assessing officer could further modify an already assessed income for which law had very clearly provided the provision in terms of Section 122(5) of the Income Tax Ordinance, 2001.
36. We are of the considered opinion that Section 177 does not in itself provide any power to modify assessm ent or re-determine the income of taxpayer. In this regard the key point which is to be kept in mind is that it is not a return of income which is being processed by the CIR/DCIR/OIR, doing audit. He is dealing with a 'deemed assessment' which by process of law has acquired a sanctity.
The finalized assessm ent, therefore, cannot just be modified or disturbed in continuation of the proceedings of audit under Section 177.
37. The selection of audit or even conducting of audit does not mean or include an assessment or amended assessm ent/alteration or modification of assessment. The selection of audit and thereafter conducting of audit proceeding is just process and audit authority before invoking provision of Section 122 for amendment have to frame charge-sheet/audit observation/audit qUalification/audit report and the same ought to be communicated to the taxpayer for rebuttal and the explanation/reply/assertion/contention/objections of taxpayer must be obtained and considered before proceeding for invoking Section 122. Then after acquiring jurisdiction, and fulfilling all the requirements of sub-sections (1) and (5) of Section 122. Only thereafter assessment may be amended under 'Section 122. The mere issuance of notice under Section 122(9) read with under Section 122(1) after selection and ' conducting audit of the taxpayer is not complete requirement of law. Department first has to reject the objection/rebuttal of taxpayer on audit report then require to acquire jurisdiction under Section 122(1) and then 122(5). However, this having not been done so. We may conclude this issue that the CIR/OIR after selection and conducting audit ought in every case to be able to give the taxpayer all the objections/issues raised in audit against taxpayer such as to enable him to answer/explain them before invoking provisions of Section 122 and after obtaining and considering explanation of taxpayer on audit objection even if the CIR/OIR may consider necessary. The CIR/DCIR/OIR, may amend the assessment under Section 122(1), (4)/(5) after fulfilling all requirement of law subject to definite information and fulfilment of further condition of clause (i), (ii) or (iii) of sub-section (5) of Section 122.
38. Adverting to 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'ble Lahore High Court in its recent decision (2013) 107 Tax 41 = 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 in information but definite enough to satisfy the concerned officer that income chargeable to tax of an assessee has escaped assessm ent 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" 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 y the department. The word "acquireused 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."
39. 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 statute 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 sub-sections (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 sub-sections 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 sub-section 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 sub-section (5) of sub-section (5A) is fatal as the parameters for each of the said provisions are entirely different from the other. Besides, erroneousness of the assessm ent for determining prejudice to the interest of revenue in a deemed assessm ent order shall also need a good deal of dilation and discussion. There are certain more questions, which would require answer in a case like this. The Assessing Officer has proceeded to make the assessm ent under Section 120. The provision of Section 122 which has been titled as assessm ents and as a sub-title as an amendment of assessment, provides full authority for making an assessm ent, These provisions in fact are para materia to the assessments under Section 62 as well as 63 in addition to 65 and 66-A etc. Section 120 does not come into picture for amendment of an assessm ent. 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."
40. We may further take support from the judgment of Appellate Tribunal vide order 2013 PTD 1083, (2013) = 107 Tax 389 (Trib.) 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 assessm ent 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 assessm ent this dictum is elaborated in detail by the honourable 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 favourable 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 deciding invoking of Section 122(5) of above issues as unlawful."
41. We, therefore, hereby hold that it is a trite law that the provisions of sub-section (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 clause (i), (ii) and (iii) of sub-section (5) of Section 122 of the Income Tax Ordinance, 2001 highlighting the fact under which category appellant's case falls. Non-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 assessm ent order, cannot be termed as definite information. Thus, the law has rendered the entire proceedings void abinitio, and illegal. Even otherwise the simple issuance of notice under Section 122(9) just after conducting audit of the taxpayer and prior to confrontation 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 Section 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 that there was no grave error in deemed 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 assessment proceeding through notices under Sections 177 and 122(9) 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 "Misinformation" 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:--- Any income chargeable to tax has escaped; or
(ii) Total income has been under-assessed, 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.
42. 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 sub-section of Section 111 of the Income Tax Ordinance, therefore, the additions made under Section 111 are hereby deleted.
43. The DCIR has not given independent separate notice or disclosed his mind under separate notice which clause he has made addition. Each clause has different eventuality. Hence, the aforesaid additions under Section 111(1) are without filling the legal requirement of said clauses is illegal, unwarranted and uncalled for, ab initio void. That in numerous cases it has been held by the higher Appellate Courts that specific, separate and independent mandatory notice under Section 111(1) of the I.T. Ordinance, 2001 specifying and invoking relevant sub-section and particular clauses be issued prior to making addition. However. In the instant case no specific, separate and independent mandatory notice under Section 111(1) of the I.T. Ordinance, 2001 has been issued and served upon the appellant. Therefore the addition made under Section 111(1) of I.T. Ordinance, 2001 is unjust, unfair, illegal and liable to be annulled. Reliance may be made on judgment of the Tribunal reported as 2012 PTD (Trib.) 312 whereby the learned Tribunal has cancelled the order passed under Section 122(1) by the DCIR as statutory notice was not served upon the taxpayer. The relevant partition of which is reproduced below:--- "Ss. 111(1)(b), 122 & 128---Unexplained income or assets---Proper service of statutory notices--- Revenue contended that first Appellate Authority was not justified in treating the service of statutory notices under Section 218 of the Income Tax Ordinance, 2001 as improper and annul the order passed under Section 122(1) of the Income Tax Ordinance. 2001 merely on technical grounds- --Taxpayer contended that notice issued were not properly served and opportunity of being heard was not provided to explain the source of investment: and taxpayer had valid source to explain the source of investment; and taxpayer had valid source to explain the investment--- ' First Appellate Authority had given a categorical finding that the notice issued were not properly, served and the assessm ent had been made without providing reasonable opportunity of being heard to the taxpayer-Assessing Officer failed to serve statutory notice in accordance with law-- First Appellate Authority was justified to cancel the assessment made under S. 122(1) of the Income Tax Ordinance, 2001---Appeal filed by the Revenue was dismissed being devoid of any merit.
In arriving at this conclusion our view is fortified with the latest judgment of ATIR 2012 PTD (Trib.)
790: wherein it has, been held that "that no separate notice under section 111(C) of the Income Tax Ordinance, 2001 was issued; and that addition was not sustainable in the eye of law---Validity-- Without issuance of separate notice no addition could be made---Addition was deleted by the Appellate Tribunal being wrongly made by the Taxation Officer."
The DCIR has failed to comply with the requirement of law and if the law had prescribed method for doing of a thing in a particular manner, such provision of law is to be followed in letter and spirit and achieving or attaining the objective of performing or doing of a thing in a manner other than provided by law would not be permitted. Reliance is placed on PTCL 2008 CL 337 (SC). In another case, the honourable Supreme Court of Pakistan Collector, Sahiwal v. Muhammad Akhtar 1971 SCMR 681 their lordships observed as under:-- 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."
' In another case reported as (1993) 67 TAX 74 NTR 1993 TRIB 143 it has been held that no addition is legally sustainable if mandatory requirement had not been complied with. 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.
44. Here, it would not be out of place to mention that where a law requires a thing should be done in a particular manner unless the same is done in the prescribed manner the same shall be illegal In case of Khalid Saeed v. Shamim Rizvi reported as 2003 SCMR 1505 the Hon. Supreme Court of Pakistan while considering the impact of violation or non-observance of method prescribed by law for doing any act in particular manner or mode observed that if the law had prescribed method of doing a thing in a particular manner, such provision of law is to be followed in letter and spirit and achieving or attaining the objective of performing or doing of a thing in a manner other than provided by law would not be permitted and would be illegal.
2 In addition thereof the amended assessment is not in strict compliance of the provision and the procedure provided in statute and lacks jurisdiction.
45. The above findings may be summarized as under:--- Audit under Section 177 read with sub-section (6) of Section 177 is void ab-initio and not in accordance with law having no legal effect. Amendment under Section 122(1) without fulfilling legal requirement of Section 177(6) is without jurisdiction or in excess of jurisdiction.
Provisions of Section 122 of the Income Tax Ordinance, 2001 start with the language "subject to this section". Such language restricts all further proceedings for amendment of an assessment which means it could only be amended if they were covered by the provisions of this section.
Amendment of assessm ent for which this section has been prescribed cannot be made if the requirements and qualifications prescribed in this section were not completed before making such amendment of the assessm ent.
That once audit proceedings were initiated under Section 177 of the Ordinance and amendment was required to be made under Section 122(5), assumption of jurisdiction under Section 122(5) was a condition precedent for amendment ' DCIR failed to fulfill pre-requisite requirement under Section 122(5) and has not brought on record "definite information"
' What to speak of definite information" clauses (I), (ii) and (iii) of sub-section (5) of Section 122 further stipulate three conditions for issuing of a notice that is i,e, any income chargeable to tax has escaped assessm ent; or total income has been under-assessed, or assessed at too low a rate or has been the subject of excessive relief or refund; or any amount under a head of income has been misclassified.
If "deemed assessm ent" selected for audit and conducted audit under Section 177. It may be amended by invoking jurisdiction under Section 122(1) subject to fulfilment of conditions as envisaged under sub-section (6) of Section 177 and after fulfilling the pre-requisite requirement of "definite information" under sub-section (5) of Section 122 and subject to execution of conditions of clauses (i), (ii) and (iii) of Section 122(5).
' No proper and valid notice issued under Section 122(5) and no notice issued under which clause the DCIR had amended order under Section 122(5) and what was the specific "definite information".
' No specific, separate and independent valid notice under Section 111 issued for additions under Section 111(1)(a) and under Section 111(1)(c). Moreover, there was no unexplained income or expenditure proved by the DCIR without any shadow of doubt
46. Hence we annul the orders for tax year 2008 and 2009 under Section 122(1),(5) passed by, DCIR, restore orders under Section 120 and uphold the Orders No, 03 & 04 dated 28.06.2010 of CIR(A). As we have already annulled the orders passed by the DCIR under Section 122(1) and (5) and deleted the disallowances for the tax year 2008 and additions under Section 111(1)(b) and 111(1)(c) for the tax year 2009 also knocked-down, therefore, we need not to dilate upon other issues which having been covered by, this judgment.
47. Before parting with this judgment' we may observe that No tax shall be levied or collected except by authority of law. A tax can only be imposed by a legislative Act and not on executive order. It thus embodies the democratic principle "No taxation without representation'. The law imposing a tax must be a valid law. That is it should not violate any provision of the Constitution and should be within the legislative competence of the legislature. It will be valid only if it is made in accordance with the procedure prescribed by the statute. This Court cannot hold that the Revenue Department was constitutionally free to ignore all the procedures of the law and power to tax is" not power to destroy. Who will' sympathise with the Revenue Officers for impatient commitment to their cause for targeted killing of tax-payers but respect for judicial process is a small price to pay for the civilising hand of law, which alone can be given abiding meaning to Constitutional freedom.
"The law makes no difference between great and petty officers; thank God, they are all amenable to justice."
48. Consequently, both the Departmental appeals are dismissed and disposed of in the manner as indicated above.