MRS. AMBREEN ASLAM, (JUDICIAL MEMBER).---Through this Order, we intend to dispose of the captioned appeal filed by the department against the Order No.162 dated 28-9-2012, passed by the learned Commissioner Inland Revenue (Appeals-III), Karachi @ Hyderabad on the following grounds: i. That the order passed by the learned Commissioner Inland Revenue (Appeals-III) Karachi @ Hyderabad is bad in law and on facts. ii. That the learned Commissioner Inland Revenue (Appeals) was not justified to annul the order passed by the Additional Commissioner Inland Revenue, Audit, Zone-I, Sukkur under section 122(5A) of the Income Tax Ordinance, 2001. iii. That the taxpayer had filed return of income for tax year 2006 at Rs.150,000/- showing income from the business of Gold Smith. The case was selected for audit under section 177 of I.Tax. Ord. 2001 for tax year 2006. The original assessment was amended under section 122(3) of Income Tax Ord: 2001 at Rs.400,000/- against originally declared income at Rs.150,000/-. iv. That the learned Commissioner Inland Revenue (Appeals) was not justified to annuli the order.
The tax payer was engaged in the business of gold smith but he also ventured in the business of land development/real estate. This source of income was not determined while amending the assessm ent under section under section 122(3) of I Tax Ord: 2001. The Additional Commissioner Inland Revenue, Audit, Zone-I, RTO, Sukkur found assessment erroneous and prejudicial to the interest of revenue, hence amended the order under section 122(5A) of the Income Tax Ordinance, 2001. v. That the appellant craves permission to add, amend or alter the ground of appeal at the time of hearing.
2. Brief facts, of the case are that the taxpayer is a goldsmith and Real Estate Agent. In this case original Return of income filed by the taxpayer was revised at the income of Rs.400,000/-. The Return was revised as a result of proceedings conducted under section 177 of the Income Tax Ordinance, 2001. After examination of the record and documents filed by the taxpayer during audit proceedings it revealed that the audit proceedings conducted by the Taxation Officer, Audit-II, RTO, Sukkur were erroneous in so far prejudicial to the interest of revenue which required to be retrieved by passing amended assessm ent under section 122(5A) of the Income Tax Ordinance, 2001 for the tax year 2006. In this regard show-cause notice under section 122(9) of the Income Tax Ordinance, 2001 to amend the assessm ent under section 122(5A) of the Income Tax Ordinance, 2001 was issued vide letter bearing No . Jud . /Addl . C IR/Audit/Zone- I/Suk/2011/12/705 dated 11.5.2012. The show-cause notice and statutory notice under section 122(9) of the Income Tax Ordinance, 2001 was properly served upon the taxpayer. On the due date i.e. 26-5-2012, the taxpayer did not comply with the contents of show-cause notice also no one appeared to represent the case neither sought adjournment. Another opportunity was provided to the taxpayer and a reminder bearing office letter No. Jud./Addl.CIR/ Audit/z-I/RTO/Suk/735/2011-12 dated 28-5-2012 was issued and the compliance was fixed for 11th June, 2012. The letter was also properly served upon the taxpayer. Again on 11th June, 2012, the taxpayer failed to avail the opportunity provided to him despite the facts that the statutory notices were served upon the taxpayer. The taxpayer failed to represent his case personally or either through representative on the date of hearing, neither sought any adjournment in person or through authorized representative nor the taxpayer has sent any application for adjournment of his case thereafter the ACIR amended the assessment under section 122(5A) read with section 122(9) of the Income Tax Ordinance, 2001 by passing Order No.15/2 dated 12- 6-2012 and issued a demand notice to the taxpayer accordingly.
3. Being aggrieved and dissatisfied with the order passed by the ACIR, the taxpayer preferred appeal before the learned Commissioner (Appeal), who annulled the order of the ACIR and allowed the appeal of the taxpayer on the following observations: "I have carefully considered the facts of the case, the arguments advanced by the learned AR, the provisions of law and various case laws and also perused the impugned order. My findings/decision on the instant appeal are as under: The brief facts of the case are that the appellant is gold smith, besides business of jewellery he is also carrying on business of real estate. He has been declaring income from both businesses which is evident from the audit proceedings initiated under Section 177 of the Income Tax Ordinance, 2001, as the appellant furnished complete details of purchase and sale of land/plots.
The learned Additional 'Commissioner is not justified to say that no income from real estate was declared. Further, the learned Additional Commissioner eroded to treat advance payments at Rs.3,100,000/- as a income for the Tax Year under appeal.
According to details as drawn by the learned Additional Commissioner and appended with the amended order passed under 'Section 122(5A) the same fall into Tax Year 2005 not in Tax Year 2006. Further, the details drawn by the learned Additional Commissioner regarding purchase and sale of land is not a table work, but it is equal and tantamount to fishing which is not tenable to justify the action under section 122(5A) of the Income Tax Ordinance, 2001.
Even otherwise the impugned order passed by the Additional Commissioner Inland Revenue (Audit) Zone-I, RTO, Sukkur is not maintainable. In this respect, the AR of the appellant has correctly raised a series of legal objections that the assessment was amended without providing proper opportunity of being heard, secondly to justify invoking of provisions contained in the section 122(5A), fishing enquiry was conducted through which the learned Additional Commissioner collected details of properties purchased and sold. The exercise of fishing enquiry is not permissible to invoke provisions contained in section 122(5A) as held by the Income Tax Appellate Tribunal vide 1999 PTD 524 (ITAT), in which held that "Such type of fishy inquiries could not be approved to make basis for invocation of section 122(5A), as such an approach, if allowed would result in gross misuse of provisions of law."
On the basis of above and as per principles of settled law that if the very foundation of an action is illegal or without jurisdiction the whole superstructure built upon it cannot validly and legally stand and held in the judgment reported as Muhammad Azim v. CIT, East Zone Karachi 1991 PTD 658. I hold that the order passed under "Section 122(5A) of the Income Tax Ordinance, 2001, is not sustainable in the eyes of law, as discussed above. It is accordingly annulled.
Appeal is succeeded as above."
4. Being aggrieved and dissatisfied with the order passed by the learned CIR(A), the department preferred this appeal before this Tribunal.
5. On the date of hearing, none present on behalf of appellant/department while Mr. Udha Ram, Advocate appeared on behalf of the respondent/taxpayer. The learned AR fully supported the order passed by the learned CIR(A) and also prayed for rejection of this appeal of the department.
6. We have considered the arguments advanced by the learned AR, and perused the record including impugned order and have gone through the case laws relied upon by the learned representative of the respondent/ taxpayer and the grounds containing in the appeal. To decide the instant appeal the question before us whether the impugned order requires interference?
7. The main grumble of the appellant is that the Commissioner Inland Revenue was not justified to annul the order passed by the Additional Commissioner Inland Revenue Audit Zone-I, Sukkur, under section 122(5A) of the Income Tax Ordinance, 2001. The appellant further contended that the taxpayer had filed return of income for the tax year 2006 at Rs.150,000/- showing income from the business of gold smith. The case was selected for audit for the tax year 2006 and the original assessm ent was amended under section 122(3) of Income Tax Ordinance 2001 at Rs.400,000/- against originally declared income of Rs.150,000/- The appellant further alleged that the respondent was also ventured in the business of land development/estate business along with business of gold smith and the said source of income was not determined while amending the assessm ent under section 122(3) of the Income Tax Ordinance, 2001. Being so the ACIR found assessm ent erroneous and prejudicial to the interest of revenue so he amended the order under section 122(5A) of the Income Tax Ordinance, 2001.
8. The above-mentioned crux accumulated from the record as the appellant failed to appear to argue its case whereas the learned counsel for the taxpayer present in the Court since morning so we heard the learned counsel for the respondent and considered the record and proceedings available with us.
9. As it is matter of record that the taxpayer filed return of income for the tax year 2006 showing Rs.150,000/- income from the business of gold smith and his case was selected for audit under section 177 of the Income Tax Ordinance, 2001 and after audit its case was closed by amended assessm ent under section 122(3) with the prior approval of the Commissioner Inland Revenue after examination of all facts and figures presented by the taxpayer before the audit officer and the audit officer enhanced the income of the appellant at Rs.400,000/- against declared Rs.150,000/-.
10. The main contention of the respondent is that the ACIR amended assessment on the basis of fishing enquiries which is not permissible in the eye of law. The respondent emphasis that the ACIR alleged to appellant that he also engaged in the business of purchasing and sale of real estate and the income earned from the same has not been offered to tax. The respondent emphasis that if he has not declared income from business of real estate how it come to know to the Additional Commissioner Inland Revenue regarding keeping on of the respondent in the business of estate.
11. So considering these aspects in mind, we appraise the record. It is fact at this score the record is silent beside this the respondent in that context emphasis that either the respondent declare the same at the time of audit or ACIR collected the same and for proving the same the respondent submitted that he filed all details and documents during the audit proceeding and audit officer examined all the documents and failed to draw any adverse inference against the respondent therefore he closed the audit proceedings with the prior approval of the Commissioner.
12. It is fact that no any tangible material available on record which could reveal the source of information of the DCIR from where he confirmed regarding carrying on estate business by the taxpayer. It is C settled principle of law that fishing enquiries are not permissible to invoke provisions contained in section 122(5A) as held in Judgment 1999 PTD 524 ITAT.
13. Beside this as per record the respondent filed original return on 28-9-2006 and return revised on 22-01-2009 if from these dates we compute time of making amendment the same would be from 28-9-2006 to 28-09-2011 and if we compute time from the revised return date which was 22-01- 2009 the same would be 22-01-2010 for making amendment whereas assessment amended as per record on 12-6-2012 meaning thereby the amendment was made after prescribed time of limitation enumerated under section 122 (4)(a) of the Income Tax Ordinance, 2001.
14. So keeping in view the above mentioned prospects combined together we are of the view that the order dated 28-09-2012 of learned CIR(A) does not require interference, the same is upheld.
Resultantly the appeal of the. appellant is dismissed.
15. In view of above, the appeal in hand is disposed of accordingly.