1. Through the above titled cross appeals the impugned order dated 10.04.2013 of the learned CIR(A)
2. Faisalabad have been objected by both the parties.
3. Brief facts of the case are that the taxpayer, an AOP, derives income from wholesale of ghee sugar and karyana. Returns were filed declaring net income of Rs .255,000/- Rs .260,000/-, Rs .265,000/-, Rs, 270,000/- respectively for Tax years 2006 to 2009, which were deemed to have been assessed under section 120(1). Later on the assessing officer obtained information from third parties on the basis of which an inference was drawn that the income of the taxpayer was under assessed. The assessing officer treated the information collected from different sources, as definite and started proceedings for amendment of assessments under section 122(1). A number of letters and notices were issued to the taxpayer seeking his clarification/explanation on various points. During the pendency of proceedings the taxpayer filed revised returns wherein the same income was declared for all the years under appeal. However, in the computation charts sales were revised upwards. For tax year 2009 the second revised return was filed wherein the same income was declared. The assessing officer rejected the revised returns holding that the same were not properly revised in the light of section 114(6). It was also held that the revision was made after the taxpayer was confronted on specific information. Since the revision of returns was not voluntary, therefore, the returns revised by the taxpayer were declared invalid.
4. ' The assessing officer obtained information from banks which reflected total deposits of Rs,126,232,881/-, Rs,371,328,855/-, Rs,112,111,540/- and Rs,521,198,369/- for the period relevant to tax years 2006 to 2009. The taxpayer was confronted about these deposits. It filed revised returns along with revised computation charts. The same income as before was shown in the revised returns but in the computation charts sales were revised upwards and were shown equal to the amount of bank deposits for all the years under appeal. The assessing officer treated the aggregate of bank deposits of each year as business turnover. He treated 9.98 % of the turnover as whole sale of karayana and applied GP of 3% on it. Remaining amount was treated as retail sale of karayana items on which GP @ 15% was applied. The assessing officer also found that the taxpayer had been depositing very heavy amounts in the bank accounts. He chose the entries of peak deposits and confronted the taxpayer about his intention of treating it as concealed income. The taxpayer's explanation was turned down and peak deposit of Rs,3,775,000/- was added under section 111(1)(b) in tax year 2006. Peak credit entry of Rs,5,365,500/- related to tax year 2007 out of which adjustment of Rs,3,775,000/- was allowed for the reason that this amount had already been added in tax year 2006. The addition of remaining amount of Rs,1,590,500/- was made under section 111(1)(b) in the income for tax year 2007. Peak credit of Rs, 2,821,500/- was found in tax year 2008. It was observed that total addition of Rs,5,365,500/- (Rs,3,775,000 +1,590,500) had already been made in tax years 2006 and 2007. The amount relating to tax year 2008 was therefore, covered by the addition already made. No further addition was made in tax year 2008. In tax year 2009 peak credit of Rs,5,900,000/- was found out of which a sum of Rs,5,365,500/- (Rs,3,775,000+ 1,590,500) had already been made in tax years 2006 and 2007. Remaining amount of Rs,534,500/- was added under section 111(1)(b) in the income of tax year 2009.
5. It was held in the assessm ent order that sufficient explanation/ evidence was not furnished in support of sources of peak bank deposits. Moreover the turnover declared in the original returns was treated to be understated and GP rate declared by the taxpayer was considered as low for the reasons recorded in the impugned assessment order dated 30.06.2012, the assessment was finalized in the following manner:-- Tax yearIncome from businessAdditions 111(1)
6. (b)Total Income 2006 Rs. 3,709,123 Rs. 3,1775,000 Rs.7,884,126 2007 Rs. 10,910,830 Rs. 1,590,500 Rs.12,501,330 2008 Rs. 3,294,196 NIL Rs.3,294,196 2009 Rs. 15,314,476 Rs. 534,500 Rs.15,848,976.
7. Being aggrieved against this treatment the taxpayer filed appeal contesting the addition under section 111(1)(b) and estimate of business income. Learned CIR(A) vide his impugned order Nos.
8. 4761 to 4765 dated 10.04.2013 confirmed the estimate of business turnover (Equal to aggregate of bank deposits ). He however held that the taxpayer was not engaged in retail -sale of karyana items. Rather whole sale business of ghee, sugar and karyana items was being done. He ordered that 35% of the turnover should be treated as from ghee and sugar on which GP @ 1.5 % should be applied. The remaining sales were ordered to be treated as whole sale of karyana items on which GP of 3 % was fixed. P & L a/c expenses were allowed @ 35% of gross profit. Addition for Tax year 2006 under section 111 (1)(b) was reduced from Rs 3,775,000/- to Rs,2,775,000/-. Adjustment of business capital of one partner amounting to one million rupees was allowed in tax year 2006 whereas additions under section 111(1)(b) for tax years 2007 and 2009 were confirmed. As a result of this appellate order final income of the taxpayer was determined as under:-- Tax year 2006 Tax year 2007 Tax year 2008 Tax year 2009 Total sales assessedRs.126232881 Rs.371328855 Rs.112111540 Rs.521198369 Sales of ghee/sugarRs.44181508 Rs.129965099 Rs.39239039 Rs.182419369 (35% of total sales )
9. GP elp 1.5% Rs.662722 Rs.1949476 Rs. 588585 Rs.2736291 Sale of karyanaRs.82,051,373 Rs.241,363,756 Rs.72,872,501 Rs.338,778,940 GP@ 3 % Rs.246,1541 Rs.7,240,912 Rs.2,186,175 Rs.10,163,368 Total GP Rs.3,124,263 Rs.9,190,388 Rs.2,774,760 Rs.12,899,659 Less P&I expenses allowed a 35 %Rs.1,093,492 Rs.3,216,136 Rs.970,961 Rs.4,514,880 Income from businessRs.2,030,771 5,973,752 Rs. 1,803,799 Rs.8,384,779 Additions under section 111(1)(b)Rs. 2,775,000 1,590,500 NIL Rs.534,500 Total taxable incomeRs.4,805,771 Rs.7,564,252 Rs.1,803,799 Rs.8,918,279 Tax payable Rs.1,554,520 Rs.1,891,063 Rs. 450,950 Rs.2,229,820 The taxpayer, being dissatisfied with the orders of CIR(A) filed second appeals before this forum on the following grounds:- Tax year 2006 1) That the order of Learned Additional Commissioner is miserably barred by time.
10. 2) That the order of Learned Additional Commissioner is hit by limitation as provided in subsection
(2) of section 122 of the Income Tax Ordinance, 2001.
11. 3) That the amendment made in subsection (2) and subsection (4) of section 122 of the Ordinance through Finance Act, 2009 is prospective in nature.
12. 4) That the limitation in this case under subsection (2) of section 122 of the Ordinance had start running on 30.09.2006 and fixed the terminal date of the period of five years i.e, 30.09.2011.
13. That it is well recognized principle of the law of limitation that once time begins to run from a specified date it cannot be interrupted or extended unless the legislature makes express provision.
14. Ground of Appeal Tax year 2006-2009 1) That both the order of Learned Additional Commissioner Inland Revenue Regional Tax Office Sargodha as well as Commissioner Inland Revenue (A) Faisalabad are bad in the eyes of law and contrary to the facts and Circumstances of the Case.
15. 2) That when issuance of notice is a statutory requirement the subsequent proceedings taken on the basis of that notice are without jurisdiction and ab initio null and void 3) That the order under sections 122(1)/122 (5) is illegal void ab intio.
16. 4) That the learned Additional Commissioner has erred and misdirected himself under the facts/law and circumstances of the case by invoking section 122(5) of the Income Tax Ordinance, 2001.
17. 5) That there was no definite information available with A.C., nor obtained from any other source as such action under section 122(5) is not sustainable so the order is illegal.
18. 6) That the Learned Assessing officer was not justified to reject the revise return. If a taxpayer, after filing his return discovers that it is not correct and any part of taxable income has been omitted and not included in taxable income or a "wrong statement" including "wrong statement of accounts" has been filed, he is legally entitled to correct such "omission" or "wrong statement".
19. 7) That the law does not stop any taxpayer from revising his return, therefore, Additional Commissioner's action of refusal to accept revised return was legally not correct and scope of "omission" or "wrong statement" is very wide and all encompassing. Revised Return was filed by the assessee before the completion of the assessment, it covered the discrepancy appeared to have cropped on account of inadvertence, there remains, therefore, taxpayer could legally revise the return he had right to rectify that omission.
20. 8) That there is no bar to file revised return of income after confrontation of sales.
21. 9) That the Learned Assessing Officer was not justified in saying that the AOP deriving Income on running Karayana store on wholesale as well as retail sales. Whereas the appellant derives income from sales/purchase of Ghee/Sugar and wholesales of karayana only.
22. 10) That bifurcation of sales made by Learned Assessing Officer is without any basis and case relied upon for bifurcation of sale is irrelevant. Now business modalities have been totally changed in present scenario.
23. 11) That the Learned Assessing Officer was not justified to make addition under section 111(1)(b)
24. 12) That the wealth statements of the partners duly showed a huge capital. Which was ignored by the assessing officer and make assessment on gunshot manner.
25. 13) That the application of G.P. Rate @ 3 % and 15 % on wholesale and retail sales is highly excessive and against the history of case the relief allowed by the CIR(A) is not sufficient.
26. 14) That the income estimated is highly excessive and expenditure is not allowed in same ratio.
27. 15) That the assessing officer was not justified to pass combined order for all the years under appeal.
28. 16) That the learned D.C. Has adopted a very narrow and pedantic approach overlooking the correct law on the subject and correct lawful jurisdiction on the case and by-passing the real facts and without probing into those facts which were available on record.
29. 17) That notice under section 184 is illegal.
30. ' The department has also filed second appeals against the order of CIR(A) contesting the reduction of one million rupees in addition under section 111(1)(b) for tax year 2006, fixation of sales of ghee/ sugar at 35% of total turnover, fixation of whole sales of karyana (a 65% of total turnover, deletion of retail sales and GP @ 15 % on them fixation of GP of 1.5 % on whole sale of ghee/ sugar, fixation of GP of 3% on whole sale of karayana and allowance of P&L expenses @35% of GP.
31. ' Learned AR stated that amendment was brought in Section 122(2) through Finance Act, 2009 and the period of 05 years prescribed under Section 122(4) was extended by counting it from the end of financial year in which Commissioner had issued or treated to have issued the assessment order to the taxpayer. He submitted that in present case, assessment order was in respect of tax year 2006, and amended assessm ent order dated 30.6.2012 being after five years from the date of assessm ent under section 120(1), was barred by time. He further stated that before amendment in year 2009, both these provisions provided limitation of five year for amendment or further amendment of assessm ent order, after the assessment order was issued or treated as having been issued by Commissioner. However, through Finance Act, 2009, both these provisions were amended in same fashion whereof limitation for amendment or further amendment of assessm ent order is to be reckoned from the end of the financial year when assessment order has been passed or treated to have been passed. Learned AR vehemently contented that in the light of above mentioned legal position, the assessment for taxpayer 2006 was clearly barred by time.
32. Learned DR stated that amendment in law was of procedural nature. It did not affect the substantive right of the taxpayer. Therefore, it could apply retrospectively. Thus the assessment for tax year 2006 was not time-barred.
33. ' We have given due consideration to the legal aspect of this issue, we have noted that question of retrospectivity of amendment of section 122(2) is involved here. As far as retrospective effect of amended section 122(2) is concerned, the Honorable Lahore Court has already authoritatively decided this question in negative in the judgment reported as CIR v. Major General Retd. Dr. C.M.
34. Anwar etc. (PTCL 2014 CL 608), which was also followed in PTR No,277/2014 titled CIR v. Messrs D.S. Textile PTR No,284 of 2014 5 Mills Ltd. And upheld vide order dated 03.9.2014 by the august Supreme Court in Civil Petition No,1306 of 2014 titled Commissioner of Income Tax v. Major General (R) Dr. C.M Anwar etc., wherein it has been held that amendment in section 122(2) of the Ordinance through Finance Act, 2009 could not be applied retrospectively and limitation as it stood at the time of filing of return, will be applicable to the case of the taxpayer. Admittedly, in the present case, income tax return was filed for tax year 2006 on 30.09.2006 and the period of five years limitation in terms of section 122(2) of the Ordinance, relating to tax year 2006 (as it then stood) expired on 30.09.2011.
35. Therefore, the notice dated 02.05.2012 and amendment of assessment order dated 30.6.2012 being after expiry of limitation of 05 years from the date of return were barred by time as per law laid down in judgments referred supra. The bare reading of Section 122(2) of the Ordinance (pre and post amendment) reveals that the limitation period of five years remained unchanged and through amendment in Section 122(2) by Finance Act, 2009, only the date of commencement of the limitation has been changed, from the date of issuance of assessment order to the end of the financial year in which assessm ent order was issued or treated to have been issued. The aforesaid amendment in Section 122(2) of the Ordinance is not a direct case of enlargement of limitation period by extending the terminal date of limitation but the change is in the date of commencement of limitation period. If it was a direct case of enlargement of limitation, the DR's arguments that no vested right accrued as amendment was made before expiry of limitation, may had force but as the amendment is to change the commencement date of limitation, the argument is mis-conceived. The commencement date has already been availed by the taxpayer by filling return which was treated as an assessment order under Section 120 of the Ordinance from date of return and therefore, the said commencement date cannot be changed by giving retrospective effect to amended provisions of Section 122(2). Once the assessee triggered the date of commencement of limitation by filing return, vested right already accrued in its favour through statutory enactment that after efflux of five year, the assessment cannot be opened or amended.
36. After commencement of limitation period, the said date of commencement become, "past and closed transaction" for everyone, and the provisions of Section 122(2) of the Ordinance, could not be applied retrospectively, merely by construction, to change the date of commencement of limitation, unless the legislature by express words or necessarily implication intended to give it retrospective effect. The august Supreme Court in Commissioner of Income Tax v. Messrs Eli Lilly Pakistan Private Limited (2009 PTD 1392) held that where provision is impregnated with an essential attribute, which effects an accrued right of an assessee or taxpayer that after efflux of a certain period of time, his assessm ent would not be opened or amended, the provision cannot be applied retrospectively unless the legislature has by express word or necessary implication intended to give it retrospective effect. The august Supreme Court in Nagina Silk Mill Layallpur v. The Income Tax Officer etc. (PLD 1963 SC 322) case held that once time begins to run from a specified date it cannot be interrupted or extended unless the legislature intervenes and makes express provision to the contrary and by mere process of construction it cannot be done. The case-law relied upon by the learned counsel for the taxpayer are strictly applicable to the facts and circumstances of this case.
37. So far as the argument of the learned DR that amendment in limitation being procedural in nature will apply retrospectively is concerned, there is no cavil with the settled proposition of law, that period of limitation is to be considered as procedural law and normally applied retrospectively.
38. However, when right is accrued to the tax payer at the commencement of limitation period through statutory enactment, that after efflux of certain period of time, the assessment cannot be opened or amended, the procedural provision to impair said accrued vested right, cannot be applied retrospectively through mere construction, unless the legislature by its express words or necessary implication intended to give it retrospective effect. In nutshell, the questions under discussion is identical to the one already decided by High Court as well as august Supreme Court in the afore noted judgments. Accordingly it is held that assessment order for tax year 2006 was barred by time and was thus a nullity in the eyes of law. The same is therefore annulled.
39. ' Learned AR stated that the assessing officer was not in possession of any definite information. He relied on cases reported as 1993 PTD 1108 (SC Pak), 1993 SCM R 1108 = 1993 PTD 1108, 2009 PTD (Trib.)
40. 1919, 1997 PTD (Trib.) 1994, 2007 PTD (Trib.) 2601 and 2013 PTD 884. It was held by the courts in these decisions that the expression of "information" is prefixed with the word "definite" which make the term more strong and such information should be new, fresh, certain, exact and not existing, contingent, doubtful, subjective or mere estimate, gossips, surmise, probabilities and need not to be further probed, trailed, investigated, examined, scrutinized, enquired to determine its definiteness, authenticity and certainty. He further stated that following extract from judgment of Lahore High Court 2013 PTD 884 was relevant:-- "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 assessm ent or total income of an assessee has been under-assessed, 6[etc]. "Definite"
41. 7[means] indisputable, known for certain, explicitly precise, clearly defined, leaving nothing to implication, established beyond doubt and cut and dried.
42. ' 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 drictrine 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 8[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 pitting 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 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.
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 " Learned AR further stated that parameters of "definite information" have clearly been laid down by the superior courts. It is clear that before starting proceedings for amendment of assessm ent under section 122 in the case of this taxpayer, the department was not in possession of any definite information. He further stated that addition on account of peak credit entries was made by the assessing officer on estimate basis. He claimed that the entire amount of bank deposits was treated as business turnover of the taxpayer and was accordingly assessed in his hands. A part of the same bank deposits representing peak credit entries were again added in the income of the taxpayer under section 111(1)(b). In this manner the same amount was taxed twice in the hands of the taxpayer. This action is totally illegal. The CIR(A) made his estimate against the estimate of assessing officer and reduced the business income as per above mentioned details.
43. Similarly addition under section 111(1)(b) was made on account of peak deposit in bank account.
44. These deposits infact represented sales of the taxpayer as well as circulation and re-circulation of cash kept for business purposes. Addition on this account was made by the assessing officer on the basis of his personal whims. Similarly the learned CIR (A) reduced the addition under section 111(1)(b) for tax year 2006 on the basis of his personal whims. No authority was clear in his mind about what to do and what not to do. All their actions were driven by subjective estimates, whims and surmises. There was no element of definiteness, authenticity or certainty. These actions are therefore, not legally correct.
45. ' Learned AR submitted that business income was estimated by the assessing officer and this estimate was further changed CIR(A) without any justification. He stated that the rate of gross profits (low or High) does not constitute definite information. He stated that it was held by Honorable Lahore High Court in their judgment in ITR No,4/2014 dated 27.03.2014 in the case of M/S D. Watson Chemist etc. That the credit entries in the bank statement of assessee do not constitute definite information. Learned AR stated that all the impugned additions under section 111 and assessm ent of business income were based on mere estimate of assessing officer. He stated that in their judgment reported as 2013 PTD 884 honorable Lahore High Court clearly held that for treating any information to be definite, it should be new, fresh, certain, exact and not existing, contingent, doubtful, subjective or mere estimate, gossips, surmise, probabilities and need not to be further probed, trailed, investigated, examined, scrutinized, enquired to determine its definiteness, authenticity and certainty. He claimed that the assessing officer was not in possession of any information which could be treated as definite in the light of above parameters.
46. ' Learned DR supported the treatment meted out to the taxpayer at the assessment stage and contended that the assessing officer was certainly in possession of definite information to the effect that declared income of the taxpayer was grossly under assessed. Moreover the taxpayer failed to explain the sources of funds from which heavy bank deposits were made. The additions were, therefore, rightly made in this case.
47. We have given due consideration to arguments of both the parties. We tend to agree with learned AR that the department was not in possession of any definite information. The information available with the department did not fulfill the parameters of being "definite" as enunciated by superior courts. The assessing officer was totally unjustified to make addition under section 111(1)(b) on account of peak deposit in bank accounts. Similarly he was not legally justified to estimate the business income. The CIR(A) was not fully justified to make his estimate of business income. He was also not justified to uphold the additions under section 111(1)(b) for tax years 2007 and 2009.
48. We fully agree with learned AR that neither the deposits in bank account nor the GP rate (low or high) can be treated as "definite information". In our view the assessing officer as well CIR (A) entered into un-necessary controversies and their treatment to the taxpayer was based on mere estimate, gossips and surmises. Such treatment cannot be upheld in any case. We therefore feel no hesitation to hold that the impugned assessment was made without any definite information.
49. Orders of both the authorities below for tax years 2007 to 2009 are hereby vacated and the impugned assessm ents are annulled.
50. So far as departmental appeals for tax year 2006 to tax year 2009 are concerned the same were also taken up for consideration. Learned DR stated that the assessing officer was in possession of "definite information and the amendment of assessment, as per above details, was fully justified.
51. She further stated that the CIR(A) was not justified to reduce the addition under section 111(1)(b) for tax year 2006. Moreover there was no justification with CIR(A) to reduce the business income.
52. Learned AR on the other hand opposed these arguments and stated that there was no substance in these appeals. We have considered the submissions of both the parties and we have already given our findings about all the legal points involved in these appeals. We do not find any merit in departmental appeals. The same are therefore, rejected.