The titled appeal on behalf of the taxpayer is directed against the order passed by the learned CIR (Appeals), Faisalabad dated 18-9-2013 pertaining to tax year-2011 on the following grounds:-
(1) That the initiation of proceedings under section, 122(9) which culminated into amendment of order under section 122(1) of the Income Tax Ordinance, 2001 as confirmed by the worthy CIR(A) is ab-initio void, illegal, perverse, arbitrary, capricious, inoperative, incompetent, mala fide, without jurisdiction and in excess of jurisdiction:
(2) That the learned Additional Commissioner (IR) SBTB-Unit, RTO, Sarghodha is Coram non Judice in the present case And the worthy CIR (A) has unlawfully rejected this ground.
(3) That the order passed by the learned ACIR under section 122(1) as modified by the Learned First Appellate Authority is glaring example of non-application of judicious mind, thereby reaching absurd and unwarranted results.
(4) That the order passed by the learned ACIR under section 122(1) of the Income Tax Ordinance, 2001 is based on surmises, whims and conjectures and without any definite information, therefore, is not sustainable.
(5) That by allowing credit of receipts from agriculture and deleting addition regarding peak credit balances, the learned CIR(A) has indirectly admitted that the order under section 122(1)/(5) has been passed without any definite information but instead of vacating the order he has allowed nominal relief. The action of the learned CIR(A) is against the spirit of law, hence not sustainable.
(6) That the learned counsel ACIR has repeatedly issued notices under section. 122(9) of the Income Tax Ordinance, 2001 one after the other for making fishing inquiries and calling of record.
This type of the treatment as confirmed by the worthy. CIR (A) is unlawful and beyond the scope of the provisions of section 122 of the Income Tax Ordinance, 2001, hence not sustainable in the eye of law.
That the action of the learned ACIR, treating total of the credit transactions/entries as suppressed receipts, without any corroborated evidence and pointing out any specific fact of transaction, is unlawful, arbitrary and without jurisdiction.
That the learned ACIR has miserably failed to consider the documentary evidence in respect of agricultural receipts/income, case-law, arguments and submissions of the appellant and passed the order without proper and judicious application of mind on the basis of irrelevant facts, hence, the order passed under section 122(1) is not maintainable in the eye of law.
(9) That the estimation of receipts on the basis of total of credit entries in bank at Rs, 129,902,067 as reduced by the worthy CIR(A) at. Rs, 109,727,194 against declared at Rs,55,473,950 is still highly excessive, illegal, unjustified and without any basis, hence liable to be deleted.
(10) That the alleged concealed credit entries in bank relates to agriculture receipts and the appellant was not legally required to declare the same along with his business receipts being exempt from taxation, therefore, inclusion of the same as business receipts by ignoring the submission and documentary evidence is unlawful and contrary to the facts of the case.
(11) That the allowance of the P&L expenses @ 80% of the receipts as confirmed by the worthy CIR(A) against declared expenses of 92% of the receipts are illegal, unjustified, baseless and do not commensurate with the nature of business.
(12) That the estimation of income at Rs,25,980,413 on the basis of credit entries in bank account as reduced by the worthy CIR(A) at Rs,21,945,439 against declared of Rs,4,437,916 is highly excessive, unjustified, without any basis as well as the same is against the law.
(13) That the income qua the receipts and expenses were estimated on the basis of presumption, supposition, notions and without any basis as well, as definite information, therefore, liable to be annulled.
2. Brief facts of the case are that the taxpayer is an individual, derives income as a stone supplier to FWO. The return of income for the tax year-2011 was e-filed on 21-11-2011 declaring receipts of Rs,55,473,950 and net income of Rs,4,437,916. The taxpayer has also declared agricultural income of Rs,35,00,000 in his return of income as an exempt income. The said return constitutes to be an assessm ent order in terms of section 120 of the Income Tax Ordinance, 2001. The Deputy Commissioner Inland Revenue, Special BTB Unit, RTO, Sargodha on possession of bank statement of account of Bank Islami, Sargodha found certain deficiencies which were communicated to the taxpayer under section 122(9) read with section 122(1) and (5) and section 111(1)(b) of the Income Tax Ordinance, 2001 vide notice dated 1-2-2012. This notice was followed by several show-cause notices as mentioned in the body of assessment order calling for books of accounts and certain others documents and explanations. The taxpayer has submitted his explanations and supporting evidence/documents in response to notices which were discarded by the assessing officer on the ground that no books of accounts were produced in support of explanations and documents submitted. Consequently, the assessment was amended under section 122(1) read with section 122(5) of the Income Tax Ordinance, 2001 as under:-- Total receipt as per bank: Rs. 129,902,067 P&L expenses allowed @ 80% of business receipt:Rs. 103,921,654 Income worked out on total turnover: Rs. 25,980,413 Addition under section 111(1)(b) of peak credits:Rs. 25,841,550 Total Income Rs. 45,879,888 Less set off addition under Section 111(1)(b) of peak credits:Rs. 25,841,550 Balance Taxable Income: Rs. 25,980,413
3. Being dissatisfied with the treatment given by the assessing officer, the taxpayer preferred appeal before the learned CIR (A), Faisalabad who after considering the facts and perusal of documentary evidence observed aunder:-- "Assessment of business receipts.
As per bank account statement in respect of Account No,0046620-0001 maintained with Bank Islami Pakistan, Sargodha total credit entries are Rs,12,99,02,067 whereas the taxpayer has declared business receipts in the return at Rs,5,54,73,950. A show-cause notice was issued and reply of the taxpayer was not accepted and business receipts were assessed at Rs, 12,99,02,067.
The learned AR has contended that there are some cash deposits which pertain to agricultural income, hence, not taxable. He filed copy of return wherein agricultural income is declared at Rs,35,00,000. He further stated that most of cheques are received from FWO. The learned A.R., however, could not explain as to how all the cheques were not considered at the time of filing of return. The contention of the learned A.R. Is accepted to the extent of cash deposits pertaining to agricultural income. The total business receipts are, therefore, reduced as under:-- Total Business receipt assessed: Rs. 12,99,02,067 Less Cash deposit pertaining to agricultural income:Rs. 2,01,74,873 Balance business receipt: Rs. 10,97,27,194 Less P&L expenses @ 80% of receipt: Rs. 8,77,81,755 Balance income from business Rs. 2,19,45,439 Addition under section 111(1)(b): As per bank account statement peak credit balance of Rs,2,58,41,550 was received on 25-6-2011 which was found to be unexplained and added towards total income under section 111(1)(b) of Income Tax Ordinance, 2001. The learned A.R. Has agitated such addition on the ground that all the credit entries made during the year are unexplained. Such deposits in bank account pertaining to cheques received from FWO and cash deposits pertaining to agricultural income. . The learned A.R. Also pointed out that the Additional Commissioner (IR) jailed to notice that peak credit includes opening balance as on 2-7-2010 at RA. 32,65,685. Considering the contention of the learned A.R. And after perusing the description of credit entries in the said bank account, it is concluded that all the credit entries are explained as discussed in the above paragraph.
Therefore, the addition made under section 111(1)(b) is not warranted in .This case. The addition made under section 111(1)0) is, therefore, deleted."
4. Still feeling aggrieved with the treatment given by the learned CIR (A), Faisalabad the taxpayer has come up in appeal before this Tribunal on the grounds raised supra.
5. On legal side the learned counsel representing the taxpayer has attacked the legality of the assessm ent order on the grounds that the assessment was amended unlawfully and without jurisdiction as the prerequisite for amendment of assessment i,e, "definite information" was missing in this case. The learned DCIR while assuming jurisdiction-:` under section 122(5) of the Income Tax Ordinance, 2001 has presumed that total of the credit entries amounting to Rs, 129;902,067 are suppressed and concealed business receipts. He submitted that the credit entries over and above the declared receipts of Rs,55,473,950 represent receipts from the sale of agricultural produce. The taxpayer himself has declared net agricultural income of Rs,35,00,000 in his return of income after deducting all the expenses attributable to agricultural income from the gross receipts arrived from the sale of agricultural produce in accordance with the provisions of section 4-A of the Punjab Agricultural Income Tax Act, 1997. He has submitted that the taxpayer has paid agricultural income tax on his agricultural income under the Punjab Agricultural Income Tax, 1997 and evidence in this regard has been produced before both the authorities below. He has contended that there is no column in the return of income which allows the taxpayer to declare gross agricultural receipts. He has further submitted ,that in response to show-cause notices the taxpayer has produced the required documents in support of his contention i,e, Khasra Gardawari, Jhar Padawar, Fard Malkiat, Lease agreement inclusive of FWO certificates but the assessing officer has rejected the same on the ground that the same are not supported by the books of accounts.. In this regard he has referred last-Para of Page-6 of the assessment order wherein the assessing officer has reproduced the reply of the taxpayer as well as Para-2 of page-7 of the order. He has submitted that asking of books of accounts it self proves that the assessing officer has no definite information in his possession regarding alleged concealed receipts and through books of accounts he has tried to fish out evidence against the taxpayer. Fishing inquiries are also evident from the repeated issuance of show-cause notices under section 122(9) of the Income Tax Ordinance, 2001 whereby the Assessing Officer time and again asked for the production of books of accounts and seeking information on certain issues. Regarding information of bank account the learned representative of the taxpayer has contended that the taxpayer himself provide the information of bank account to the department in this regard he has referred front page of the return of income wherein name of bank with branch and account number is mentioned. He asserted that at the time of passing the deemed order under section 120 of the Income Tax Ordinance, 2001 the information regarding bank account was available with the department. He submitted that action of the assessing officer, treating total of the credit transactions/entries as suppressed business receipts, without any corroborated evidence and pointing out any specific fact of transaction and by ignoring the fact that the credit entries in bank relate to agriculture receipts and the appellant was not legally required to declare the same along with his business receipts being exempt from taxation is illegal.
He has submitted that by allowing credit of receipts from agriculture against total credit entries and deleting addition regarding peak credit balances under section 111(1)(b) of the Income Tax Ordinance, 2001, the learned CIR(A) has indirectly admitted that the order under section 122(1)/(5) has been passed without any "definite information" but instead of vacating the order the learned CIR(A) has allowed nominal relief which is against the law. The learned representative of the taxpayer in support of his above contentions has relied upon the reported judgments cited as 2013 PTD 884 (LHC) CIR v. Messrs Khan CNG and Filling Station and others, 2012 PTD (Trib.) 1593, 2012 PTD (Trib.) 1775, 2012 PTD (Trib.) 741 and 2013 PTD (Trib.) 900.
6. On the other hand the learned DR has argued that the assessing officer has rightly amended the assessm ent under section 122(1} read with section 122(5) of the Income Tax Ordinance, 2001 as the taxpayer has failed to produced 'books of accounts in response to notices issued under section 122(9) and reminders thereupon. He has submitted that burdon of proof lies upon the taxpayer to substantiate his declared version but he has failed to prove the same, therefore, orders of both the authorities are maintainable and appeal of the taxpayer is liable to be dismissed.
7. We have heard both the sides and have also perused the impugned order of the learned CIR(A), the order passed by the assessing officer, relevant provisions of law, the case-law referred and the available record of ihe case. That so long as the availability of "definite information", is concerned, we have noted that the taxpayer has declared business receipts from FWO at .Rs,55,473,950 and consequent net income of Rs,4,437,916 in his return of income for the tax year 2011. Apart from the above the taxpayer has also declared net agricultural income of Rs,35,00,000 being exempt income under section 41 of the Income Tax Ordinance, 2001 as well as the taxpayer has also declared information regarding his bank account in his return of income. The said information/declaration was filed well before the initiation of proceedings under section 122 of the Income Tax Ordinance, 2001. The exempt net agricultural income could only be arrived after deducting expenditure, allowances and deductions from the gross receipts of the B sale of agricultural produce on the same way as the net business income was arrived after deducting expenses from the gross receipts from FWO. There is no column in the income tax return for the tax year, 2001 which required the taxpayer to declare gross agricultural receipts only a column under the heading "Exempt income/loss" is available in the return for declaring agricultural income and the taxpayer has accordingly declared net agricultural income at Rs,35,00,000. By no stretch of imagination it can be hold that the net agricultural income can arrive without bearing any expenditure or allowances. Section 4-A of the Punjab Agricultural Income Tax Act, 1997 also allows a taxpayer to made deductions while computing net agricultural income. The assessing authority while B examining the bank statement has ignored this aspect of the case and presumed that the entire credit entries in the bank statement are suppressed and undisclosed business receipts and asked the taxpayer to produce books of accounts and other supporting documents by issuing, several notices. Perusal of the order passed under section 122(1) also reveals that the taxpayer has submitted documents in support of his declared agricultural income as mentioned in last-Para of Page-6 of the order but the assessing officer has discarded the same on the ground that the same are not supported by books of accounts. Last-Para of Page-6. And 2nd Para of Page-7 of the assessm ent order are being reproduced for the sake of reference:-- Pake-6, Last-Para "Besides land acquired on lease of which lease amount has been declared is actual, income is derived from owned land as well. Khasra Gardawari and Jhar Padawar of which has already been submitted but your honour is reluctant to accept the same. All documentary evidence has already been provided inclusive of FWO certificate, Purchase/tax certificate, Khasra Gardawari (copy again enclosed for ready reference) has also been verified and hence addition under section 111(1)(b) is illegal. Agricultural income has been exempted from income tax by the Central Govt. However tax levied by Govt. Of Punjab has been paid and documentary evidence also furnished. Further peak entries and the cheques issued by FWO have also been verified detail thereof has already been given in earlier reply"
Page-7, 2nd Para. "The reply of the taxpayer 's A.R. Has been perused and considered. The taxpayer and his A.R.
Again failed to produce any books of accounts, any records showing bifurcation of bank deposits relatable to agricultural income or receipts as well as personal saving. Mere assertions, not supported with prescribed records, are not liable to be accepted, particularly when the hollowness of such assertions has duly been communicated to the taxpayer through this office various letters."
8. Perusal of the above would reveal that the Assessing Officer has shown no doubt regarding the receipts from the sale of agricultural produce but he has rejected the same only on the ground that the taxpayer has failed to produce the books of accounts in this regard as well as bifurcation of the bank deposits relatable to agricultural receipts. C "This type of treatment itself proves that the assessing officer has no definite information" or any other corroborated evidence showing that the alleged receipts are concealed business receipts instead of exempt agricultural receipts.
Subsection (8) of section 122 of the Income Tax Ordinance, 2001 clearly states that "definite information" includes information on sale or purchases of any goods made by the taxpayer, receipts of the taxpayer from services rendered or any other receipts that may be chargeable to tax under this ordinance". Subsequently the learned CIR(A) has affixed the stamp on the doubt, assumption and presumption of the assessing officer by accepting the agricultural receipts and allowing credit thereto and by deleting addition under section 111(1)(b) of the Income Tax Ordinance, 2001. The prefix of definite with suffix of information makes the terms more strong. Any information which creates doubt or provide reason to suspect that the income or receipts have been concealed or suppressed do not form a part of the term "definite information". In a decision of the August Supreme Court of Pakistan cited as 1993 SCMR 1108 = 1993 PTD 1108 it has been held that "it was the duty of the department before re-opening a case of self-assessment to be in possession of definite information regarding the department's assertion against the assessee. The expression definite information and similar other expression used in the above noticed provisions or other related provisions certainly meant much more than mere material so as to cause a reasonable belief of even such evidence which might lead to a definite belief. Unless there is definite direct information and there in no further need to put the said definite information to trail by putting in further supporting material the process of self-assessment could not be reopened".
In the present case the deemed assessment was amended under section 12Z(5) of the Income Tax Ordinance, 2001 by presuming that the difference between the declared receipts and of total of credit entries are .Suppressed business receipts ignoring the fact of declared agricultural income.
This does not constitute 'definite information' but moreso a departmental opinion evolved on the basis suspicion, presumption and assumption.
9. The learned A.R. Of the taxpayer has also referred certain case' law on this point. Relevant portions of the same are being reproduced for the sake of reference:- 2013 PTD 884 (LHC). CIR v. Messrs Khan CNG and Filling Station and others "12. The term "definite information" in section 122(5) of the Ordinance is not just any information but definite enough to satisfy the concerned officer that income chargeable to tax of an assessee has escaped assessment or total income of an assessee has been under-assessed, etc. "Definite" means indisputable, known for certain, explicitly precise, clearly defined, leaving. Nothing to, 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 tool/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 by the department. The word "acquired" used in section 122(5) of the Ordinance which literally means to gain possession 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 completed through further calculation or processing as that would not be acquiring information but analyzing it
13. 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".
2012 PTD (Trib.) 741 "Term 'definite information' has not been defined in the Income Tax Ordinance, 1979/2001 it will be assumed that the legislature intended to give ordinary dictionary meaning to it, whenever it is required to be dealt with. Word 'information' when it is qualified with the word 'definite', would mean that the said information in all probabilities, is correct in all respect and there in no likelihood of its being wrong or untrue and there is no necessity to conduct probe to be satisfied about its exactness/correctness, and there is no chance of its being untrue".
10. The assessing officer has issued repeated show-cause notices based on suspicion, seeking information, examination of books of accounts, wavering/dithering from one point of view to other.
Such type of the fishy inquiries by issuing repeated notices has already been disapproved by the Hon'ble Higher Courts as well as by this Tribunal through various reported judgments. In a judgment reported as 2010 PTD (Trib.) 111, it has been held that "Fishy inquiries cannot be approved to make basis of invocation of section 122(5A) as this type of approach, if allowed, would result in gross misuse of the provisions of law. Mere suspicions cannot be allowed to be a basis to invoke section 122(5A)". So long as the credit entries in the bank statement are concerned, it has already been held by this tribunal in a judgment reported as 2012 PTD (Trib.) 1775 that addition on the basis of credit entries in the bank as suppressed receipts without any corroborated evidence is illegal. It was further held in this judgment that in case of suppressed receipts, heavy burdon lies upon the tax officer to point out specific facts of transaction i,e, from whom and in what connection it was received, whether it was a sale proceed. Regarding calling of books of accounts in pursuance of show-cause notice under section 122(9) of the Income Tax Ordinance, 2001 the A.R. Of the taxpayer has referred a judgment of this Tribunal reported as 2013 PTD (Trib.) 900 wherein it has been held that "Additional Commissioner was not empowered under section 122(5A) of the Income Tax Ordinance, 2001 to call for books of G accounts and conduct inquiries; that power to call for accounts books of the taxpayer could be exercised only while conducting audit under section 177 of the Income Tax Ordinance, 2001". Even otherwise, the Assessing Officer was required books of accounts in respect of agricultural income which is exempt under section 41 of the Income Tax Ordinance, 2001 and the taxpayer was not legally obliged to prepare books of accounts in respect of exempt agricultural income. The taxpayer has voluntarily declared agricultural income in his return of income along with his business income. If the taxpayer earned only agricultural income covered by section 41 of the Income Tax Ordinance, 2001 he was legally not required to file return of income as required under section 114 of the Income Tax Ordinance, 2001.
11. Based on the facts and circumstances of the case and keeping in view of the above discussion, we are of the view that the taxpayer himself declared agricultural income in his return of income and he was not legally required to declare gross agricultural receipts in his return, which was presumed by the Assessing Officer as suppressed business receipts. Therefore, we hold that the notices for initiation of proceedings under section 122(5) of the Income Tax Ordinance, 2001 for the year under appeal were void ab initio and of no legal effect. The proceedings initiated on the basis of illegal notices and superstructure constructed thereon in the shape of amended order under section 122(1)/(5) is nullity in law. Therefore, the impugned order of the learned CIR(A) is vacated and the amended order passed by the assessing officer under section 122(1)/(5) of the Income Tax Ordinance, 2001 is annulled by declaring to have been passed against the spirit of Income Tax Ordinance, 2001.
12. Appeal of the taxpayer is accepted.