These are five appeals preferred on behalf of the taxpayer company. Appeal pertaining to the tax year 2008, has been directed against order dated 24-7-2014, whereas other four appeals for the tax years, .2009 to 2012 are directed against consolidated order dated 24-7-2014, passed by the learned CIR(A), Zone-II, Lahore. All these are disposed of through this order in the following manner:-- Tax Year 2008
2. The appellant/company assailed the order of the learned CIR(A) on the following grounds:--
(i) That the CIR(A) is not justified in confirming the order of the learned Additional Commissioner, without giving plausible reason.
(ii) That the impugned order dated 23.06.2014 passed by the learned Additional Commissioner, is bad in law and contrary to the facts of the case.
(iii) That the impugned order is wholly void, unlawful and unattainable in eye of law being without jurisdiction.
(iv) That the addition made under section 21C of the Income Tax Ordinance, 2001 at Rs.32,862,895/- and confirmed by the learned CIR(A) is wholly unwarranted, unlawful, baseless and without any plausible and cogent justification.
(v) That the addition made under section 111(1)(b) of the Income Tax Ordinance, 2001 and confirmed by the learned CIR(A) is wholly unwarranted, uncalled for misconceived and based on surmises and conjectures and self-device working, without any support of law.
(vi) That the whole addition of Rs.1,584,528 under section 111(1)(b) of the Income Tax Ordinance, 2001 is violate of the provisions of subsection (2) of section 111 as it existed at the relevant time prior to amendment brought through Finance Act, 2010 w.e.f. July 2010, hence not maintainable.
(vii) That the learned Additional Commissioner has abused the power, authority and jurisdiction while invoking the provisions of section 122(5) of the Ordinance, which lacks the application of mind and forming of opinion on the basis of such application of mind, hence, beyond the scope of provision.
(viii) That the learned Additional Commissioner having traveled beyond the show cause notice, the whole action shall strain down on the earth on the basis of principal firstly that, if very initiation is bad, whatsoever shall follow shall be bade in law, secondly when a law require a thing to be done in a particular manner the same should be done in the manner provided or should not be done that at all thirdly, the provision of section 122(5A) cannot be invoked in consequence of roving and fishing inquiries.
3. Briefly stated, the relevant facts in brief are that taxpayer in this case is a private limited company, derives income from the business of rendering of advertising services to various business concerns. Return of income for tax year 2008 was filed declaring income at Rs.1,442,752/- which was deemed to be treated as assessment in terms of section 120 of the Income Tax Ordinance, 2001. Subsequently, on perusal of assessment record, the concerned Additional Commissioner observed that the deemed order was erroneous insofar as prejudicial to the interest of revenue on certain grounds. Accordingly, the proceedings were initiated to amend the already completed assessm ent under section 122(5A) of the Income Tax Ordinance, 2001. Statutory notices were issued which were duly complied with by the taxpayer. Legal/factual objections raised by the taxpayer were rejected and ultimately deemed assessment for the year was amended by resorting to the provisions of subsection (5A) of Section 122 of the Income Tax Ordinance, 2001. Addition amounting to Rs.32,862,895/- under section 21(c) and addition under section 111(1)(b) amounting to Rs.1,584,528/- were made towards income for the year as a result of which net income for tax year 2008 was re computed at Rs.35,924,582/-. Being aggrieved, the taxpayer preferred appeal before the learned CIR(A) on a number of legal as well as factual grounds of appeal. However, the learned CIR(A) after detailed discussion in the body of the impugned appellate order has dismissed the appeal of the taxpayer.
4. At the very outset of his arguments, the learned AR for the appellant has taken a legal stance and submitted that the impugned amendment of assessment made under section 122(5A) is not maintainable in the eye of law being barred by time limitation as provided under subsection (2) of section of the Income Tax Ordinance, 2001. It is contended by the learned that limitation as provided under the said law at the relevant time is five years from the filing of income tax return, therefore, the amendment of assessment as made after more than five years on 19.06.2014 is not maintainable in the eye of law. It is the contention of the learned AR that amendment brought in subsection (2) of section 122 through Finance Act, 2009, is not applicable for tax year 2008 being not retrospective in application. To support the above contention, the learned AR relied upon various decisions of this Tribunal, including the landmark judgment of the Hon'ble Supreme Court of Pakistan in re; CIT v. Elli Lilly (Pvt.) Ltd., reported as 2009 PTD 1392.
5. On the contrary, the learned DR supported the order passed by the Additional Commissioner and submitted that amendment brought in statute through Finance Act, 2009, whereby the limitation extended beyond the five years periods is procedural in nature, therefore, the same is applicable retrospectively.
6. We have heard the rival parties and have carefully perused the available record, including the case law cited at the bar. After due consideration, we are of the considered opinion that issue in hand has already been decided by this Tribunal in a plethora of decisions whereby it was consistently held that amendment made through Finance Act, 2009, whereby limitation for invocation of the provisions of section 122 was extended beyond five years is not applicable retrospectively. Limitation as stood at the time of filing of return will have to apply in the case of the appellant and it is trite law that even procedural law cannot take away vested and existing rights by applying it retrospectively.
7. The impugned order is legally unsustainable being barred by time having been admittedly made on a date after the expiry of the limitation prescribed in law for the tax year 2008. The proceedings initiated by the Addl. CIR were grossly time barred as the time prescribed in law had run out in view of the fact that the order proposed to be amended under section. 122(5A) by the assessing authority was deemed to have been finalized under section 120 of the Income Tax Ordinance, 2001, on the date of filing of return under section 114 ibid. The limitation for the said purpose i.e. Amending the assessm ent is prescribed in subsection (2) of section 122 at the relevant time.
Subsection (2) of section 122 of the Income Tax Ordinance, 2001, reads as follows:-- "An assessm ent order shall only be amended under subsection (1) within five years after the Commissioner has issued or is treated as having issued the assessment order on the taxpayer"
8. On the filing of return and its maturity into a deemed assessment, the appellant acquired a vested right. It became a past and closed matter. Even any subsequent change in law could not effect such a finalized matter. The department was, therefore, left with no authority or jurisdiction and was specifically precluded to reopen an already finalized assessment. The issuance of the notice and passing the impugned order pursuant thereto after expiry of the prescribed limitation of five years was against the binding precedents of the superior courts including the ratio settled by the Hon'ble Supreme Court of Pakistan in re: Nagina Silk Mills Lyallpur v. The Income Tax Officer Lyallpur reported as 1963 PTD 633 =PLD 1963 SC 322 and 1981 CLC 372 and 1985 CLC 679. The Hon'ble Supreme Court of Pakistan in its judgment in re: CIT V. Eli Lilly Pakistan (Pvt.) Limited, reported as 2009 SCM R 1279, in paragraph-48 has held that the limitation prescribed in section 122, is of substantive nature and has given a finding as under:-- 'Having anxiously considered the matter, the view we were inclined to take is that the provision is impregnated with the potential of adding to the liability of the taxpayer, therefore, the same is not a mere matter of procedure. It has already been held that the taxpayers/assessees have a right that their assessm ent will not be reopened after the expiry of the statutory period of five years".
9. This Tribunal in the case re: CIR v. Maj. Gen (R) Dr. C.M. Anwar etc., vide I.T.A. No. 431/IB/2011, has decide the issue in hand in favour of the taxpayer. Against the said decision, the department filed a Reference Application before the Hon'ble Lahore High Court, Rawalpindi Bench, whereby following questions of law were raised: -
(1) Whether on the facts and circumstances of the case, the ATIR was justified to accept the appeal of the taxpayer by ignoring CIR (Appeals) judgment holding departmental action in line with law to compute limitation period for amending assessment for tax year 2004 within "5" years in terms of amendment brought in subsection (2) of section 122 of the Income Tax Ordinance, 2001 through Finance Act, 2009?
(2) "Whether on the facts and circumstances of the case, the amendment brought in subsection
(2) of the section 122 being procedural in nature, shall not operate retrospectively?
Hon'ble Lahore High Court, Rawalpindi Bench, vide ITR 01/2013, dated 25.03.2014, decided the above questions of law against the department. Relevant portion of the said decision is reproduced here- under:-- "(8) The subsection 122(2) of the Ordinance requires the limitation to run after the expiry of five years from the end of the financial year which is in this case should be 01.07.2005 i.e. From the end of the financial year ending on 30.06.2004. As a consequence the deemed assessment under section 120 dated 29.09.2004 shall expire on 30.06.2010 instead of 28.09.2009 under the law before substitution.
(9) Show Cause notice has been issued on 13.05.2010 when limitation under the substituted law had expired on 28.09.2009, therefore, assessment under section 120 had attained finality under the repealed subsection (2). Reference is made under Section 6(1)(c) of the General Clauses Act, 1897, which reads:-- Where this Act, or any Central Act or Regulation made after the commencement of this Act, repeals any enactment hitherto made or here after to be made, then, unless a different intention appears, the repeal shall not; a) b)
(c) "Affect any right, privilege, obligation or liability acquired, accrued under any enactment so repealed"
Limitation as it stood at the time of filing of return will apply to the case of the petitioner. Reliance is placed on Messrs Fawad Textile Mills Ltd through Director, Lahore v. Pakistan through Secretary, Ministry of Finance and 3 others (2005 PTD 14) and Comer. Of Income Tax v. Dharamchand Dalchand (1 ITC 264 (Nagpur)
(10) It is therefore, trite law that even procedural law cannot take away vested and existing rights by applying it retrospectively, unless such intention of the legislature is expressed in unequivocal terms.
11. In light of the discussion made and law referred, answer to question No.1 is in the affirmative and the answer to question No.2 is in the negative. On the whole reference filed by the department is dismissed.
10. In view of the above observations made by us and case law relied upon by us, we have no hesitation to hold that the impugned amendment of assessment made under section 122(5A) for tax year 2008 is not maintainable in the eye of law being made beyond the time limitation prescribed in law, therefore, the same is hereby cancelled. Order of the learned CIR(A) in this behalf is vacated and appeal of the taxpayer for tax year 2008 is accepted.
11. Since, we have accepted the appeal of the taxpayer on legal ground, there is no need to adjudicate other grounds of appeals raised through memo of appeal.
Tax Years 2009 to 2012
12. The appellant/company assailed the consolidated order of the leaped CIR(A) for all the years on the following common grounds: -
(i) That the CIR(A) is not justified in confirming the order of the learned Additional Commissioner, without giving plausible reason.
(ii) That the impugned order dated 23.06.2014 passed by the learned Additional Commissioner, is bad in law and contrary to the facts of the case.
(iii) That the impugned order is wholly void, unlawful and unattainable in eye of law being without jurisdiction.
(iv) That the addition made under section 21c of the Income Tax Ordinance, 2001 and confirmed by the learned CIR(A) is wholly unwarranted, unlawful, baseless and without any plausible and cogent justification.
(v) That the addition made under section 111(1)(a)/(d) of the Income Tax Ordinance, 2001 and confirmed by the learned CIR(A) is wholly unwarranted, uncalled for misconceived and based on surmises and conjectures and self-device working, without any support of law.
(vi) That the whole addition under section 111(1)(a)/(d) of the Income Tax Ordinance, 2001 is violate of the provisions of subsection (2) of section 111 as it existed at the relevant time prior to amendment brought through Finance Act, 2010 w.e.f. July 2010, hence not maintainable.
(vii) That the learned Additional Commissioner has abused the power, authority and jurisdiction while invoking the provisions of section 122(5A) of the Ordinance, which lacks the application of mind and forming of opinion on the basis of such application of mind, hence, beyond the scope of provision.
(viii) That the learned Additional Commissioner having traveled beyond the show cause notice, the whole action shall strain down on the earth on the basis of principal firstly that, if very initiation is bad, whatsoever shall follow shall be bade in law, secondly when a law require a thing to be done in a particular manner the same should be done in the manner provided or should not be done that at all, thirdly, the provision of section 122(5A) cannot be invoked in consequence of roving and fishing inquiries.
13. Briefly stated, the relevant facts in brief are that taxpayer filed returns of incomes for tax years 2009 to 2012 declaring income at Rs.4,471,8301-, Rs.296,735/-, Rs.5,244,626/- and Rs.2,629,977/- which were deemed to be treated as assessments in terms of section 120 of the Income Tax Ordinance, 2001. Subsequently, on perusal of assessment record, the concerned Additional Commissioner observed that the deemed order were erroneous insofar as prejudicial to the interest of revenue on certain grounds. Accordingly, the proceedings were initiated to amend the already completed assessm ents under section 122(5A) of the Income Tax Ordinance, 2001.
Statutory notices were issued which were duly complied with by the taxpayer. Legal/ factual objections raised by the taxpayer were rejected and ultimately deemed assessments for the years were amended by resorting to the provisions of subsection (5A) of Section 122 of the Income Tax Ordinance, 2001. Additions under section 21(c) in all the years under appeal and additions under section 111(1)(a) in tax years 2009 and 2010 and additions under section 111(1)(d) in tax years 2011 and 2012 were made. As a result of which net incomes for tax years 2009 to 2012 were re- computed. Being aggrieved, the taxpayer preferred appeals before the learned CIR(A) on a number of legal as well as factual grounds of appeal. However, the learned CIR(A) after detailed discussion in the body of the impugned consolidated appellate order has dismissed all the appeals of the taxpayer.
14. Firstly, the learned A.R. Opted to argue the case on the legal grounds and it is submitted by him that the impugned amendment of assessments as made by the Adl; Commissioner under section 122(5A) is not maintainable in the eyes of law being made on the basis of fishing and roving inquiries. It is contended by the learned AR that original show cause notice was issued only on the point of sales and WWF etc. But all the charges were dropped and the declared sales were accepted and no addition on these account was made in the amended order. It is asserted by him that in the amendment of assessm ent, the assessing authority all along shifted her stance and made additions under sections 21(c) and 111 which is beyond the show cause notice. It is contended by the learned AR that the assessing authority issued different notices and again and again shifted her stance in the manner that audit proceedings were under process. It is contended by the AR that such type of action of the assessing authority to investigate the taxpayer to invoke the provisions of section 122(5A) is tantamount to conjectures and surmises and was clearly against the law for amending an order under section 122(5A). It is submitted by the AR that placing reliance based on such information which is incomplete, or requires further processing does not constitute "definite information". To support the above averment, the learned AR placed reliance on the judgment cited as 2013 PTD 884 (HC. Lah).
"
15. It is also the contention of the AR before us that the Adl. Commissioner has abused her power, authority and jurisdiction while exercising her revisionary jurisdiction as the same lacks own application of mind and forming opinion on the basis of such application of mind. In this behalf, it is contended by the AR that the Adl; Commissioner during the course of assessment proceedings had at a several times said that the Intelligence and Investigation (IR) Lahore are pressing hard for the finalization of the case as this is initiated on their investigation report. To support the above contention, the learned AR filed an Affidavit before the CIR(A) as well as before us. In this background, it is asserted by the AR that provisions of section 122(5A) can be invoked by the Adl.
Commissioner only by his application of independent mind.
16. To sum up his legal objections, it is submitted by the learned AR that the Additional Commissioner having travelled beyond the show cause notice, therefore, the whole action taken shall strain down on the earth on the principle, firstly, that if very initiation is bade, whatsoever shall follow shall be bad in law. Secondly, when a law requires a things to be done in a particular manner the same be done in the manner provided or should not be done at all. Thirdly, the provision of section 122(5A) cannot invoke in consequence of roving and fishing inquiries.
17. The learned DR on behalf of Revenue rebutted the above legal objections raised by the learned AR and submitted that the Addl. Commissioner has rightly invoked the provisions of section 122(5A) as the deemed assessm ent completed were erroneous insofar as prejudicial to the interest of revenue.
18. We have heard the arguments put-forth by the learned representatives of both the sides and have carefully gone through the available record, including the case law cited at the bar. After due consideration, we are convinced that the legal objections raised by the AR carry substantial weight.
From the perusal of amended assessment orders and after carefully going through the contents of notices issued to the taxpayer which are duly reproduced in the body of these amended orders, we observe that originally the taxpayer was confronted to reconcile the sales, WWF etc. But all these charges were later on dropped and no addition was made by the assessing authority on these counts rather the impugned additions under section 21(c) and under section 111 were made which were never made the basis originally for invoking the revisionary jurisdiction under section 122(5A) to amend the already completed deemed assessment. Such action of the assessing authority is not maintainable in the eye of law and is obviously against the decision of the higher appellate fora.
19. The Adl. CIR after being persuaded and convinced by the explanation rendered by the appellant, rather than dropping the proceedings initiated for amendment of assessment, decided to proceed on entirely different facts which were originally neither before her nor were they considered while applying independent mind that the deemed assessments were erroneous insofar as prejudicial to the interest of revenue. It is seems that the Adi. CIR changed her stance to proceed with the amendment proceedings on the basis of fishing inquiries based on fluctuating and shifting mind is patently illegal. Reliance in this behalf is placed on the findings give in the judgment of Hon'ble Lahore High Court in Writ Petition No. 4630 of 2009 in re: Mohsin Raza v. Chairman, FBR, in paragraph-20 of which it was observed by his Lordship as under:- It is well settled proposition of law that roving enquiries and fishing expeditions and that too in violation of the statutory provisions---is violative of the due process of law.
20. The assessing authority's basis for amendment of assessment was merely in the nature of verification clearly indicate her desire to hold a roving enquiry in the matter. It has been held by the Hon'ble Lahore High Court in W.P. No. 393/2012, that:-- legislative policy of the Ordinance cannot equip the Commissioner with naked power to pick and choose according to his whims and wishes. Even though the Commissioner may be best person in the system to identify a tax default, he cannot enjoy unguided discretion but only exercise discretion which is under a legislative guideline showing structured, uniform and transparent exercise of discretion. Hence these provisions as they stand are ex-facie discriminatory and given an unchecked license to the Commissioner. Any provision of law that is ex-facie discriminatory also offends the right to "due process" under Article 10A. Fundamental rights in our Constitution have a symbiotic relationship. They are interrelated and mutually support each other. A provision of law that is ex facie discriminatory and is also being applied discriminatory cannot pass the test of due process under Article 10A of the Constitution. Similarly, any such illegal and unconstitutional evasiveness to call for the record for verification is an extra burden on the taxpayer and unduly interferes with his business offending Articles 18 and 23 of the Constitution. Hence section 177(1) and its first proviso offend Articles 10A, 18, 23 and 25 of the Constitution. Reliance is placed on Waris Meah v. The State etc. (PLD 1957 SC 167). Jibendra Kishore Achharyya Chowdhury and 59 Messrs East and West Steamship Company v. Pakistan etc. PLD 1958 SC 41. Inanzur. Rehman v. Federation of Pakistan and others (1992 SCM R 563), Shaukat All Mian and another v. The Federation of Pakistan (1999 CLC 607), Government of Balochistan through Additional Chief Secretary v. Azizullah Memon and 16 others (PLD 1993 SC 341), Province of the Punjab through Secretary, Local Government and Rural Development Department, Civil Secretariat, Lahore and another v. Mian Manzoor Ahmad Wattoo (1998 CLC 1585) and In the matter of Reference No.2 of 2005 by the President of Pakistan (PLD 2005 SC 87)"
21. Every information cannot be treated as the basis for reopening of the assessment but the information should be of the nature which should qualify as "definite information" could not be given a universal meaning but it will have to be construed in each case where an taxpayer disclose all materials facts without any concealment. Any estimate, gossip, personal whims or surmises could not be termed as the definite information. Any information which creates doubts or provides reason to suspect that the income has been concealed does not form a part of the term 'definite information'. Reliance in this regard can safely places on the decisions reported as 1993 SCM R 1232 and 2010 PTD (Trib.)
122. It is also observed that the learned IAC has made addition in purchases including the site expenses as rent about which she was not crystal clear, otherwise she would have taxed the addition under section 155 of the Ordinance.
22. The learned AR on behalf of the taxpayer filed before us an Affidavit wherein he solemnly affirm and declare as under:-- "I Mujahid Islam, Advocate High Court son of Haji Salamat Ullah, Office No. 29-30, Fazal Manzil, Beadon Road, Lahore, do hereby take oath and solemnly declare as under:--
(1) That the proceedings under section 122(5) A in the case of Messrs. Arrows Advertising (Pvt.)
Limited, Lahore, was conducted by me in the court of Additional Commissioner Inland Revenue, Audit Range Zone-II, RTO, Lahore, Madam Amna Faiz Bhatti.
(2) That during proceedings learned Additional Commissioner Inland Revenue, Audit Range Zone-II, RTO, Lahore, Madam Amna Faiz Bhatti at several times said that Intelligence and investigation department, Lahore are pressing hard for the finalization of the case as this case was intiatived on their investigation report. Deponent The learned DR has failed to controvert the contents of the above affidavit and no counter affidavit is submitted in this regard. From the above, it is observed that the AdI. Commissioner has failed to apply his own independent mind while forming opinion that the deemed assessm ents needs alteration in terms of section 122(5A) of the Ordinance. The said provision of law can be invoked by the AdI; Commissioner only by his application of independent mind. Reliance in this regard is placed on the judgment of the Hon'ble Supreme Court of Pakistan reported .As 1997 SCM R 641, wherein it was held that "any authority vested with the power or discretion is duty bound to exercise the same by himself by applying his independent mind not influenced by extraneous consideration. He should neither accept any dictation nor delegate his authority to any other person"
23. In view of the above observations made by us and case-law relied upon by us, we have no hesitation to hold that the impugned amendment of assessments made under section 122(5A) for tax years 2009 to 2012 are not maintainable in the eye of law, hence, the same are hereby cancelled. Order of the learned CIR(A) in this behalf is vacated and appeals of the taxpayer for tax years 2009 to 2012 are accepted.
24. Since, we have disposed of the appeals of the taxpayer on legal grounds, the other grounds need not to be commented upon.