NADEEM DAR, ACCOUNTANT MEMBER.---The second appeal is filed by the taxpayer against the order passed by CIR (A-III), Rawalpindi in Appeal No.73/2013 dated 16.09.2014 on the following grounds:--
1. That both the orders of the learned Commissioner Inland Revenue (Appeals-III) Rawalpindi (CIR- A) as well as the Deputy Commissioner Inland Revenue, Audit-II.Zone-III, Regional Tax Office Rawalpindi (DCIR) are had in law and contrary to the facts and circumstance of the case.
2. That the said CIR (A) not at all justified in setting aside the order under section 122(5) instead of annulling the same, which in view of the facts and circumstances of the case is illegal and unjustified.
3. That the order of DCIR was without lawful jurisdiction as such was not maintainable in the eye of law.
4. That the selection of case for audit under section 177 is illegal and without lawful jurisdiction.
5. That the order under section 122(1) is illegal, void and without jurisdiction.
6. That as per section 169(3), the statement under section 113B is not a deemed order as such no amendment under section 122(1) can be made, accordingly the order is illegal and void ab-initio.
7. That as per section 113B, the tax is payable on turnover no tax on income can be levied as such order under appeal is illegal.
8. That order under appeal is not a speaking order, no basis for amendment was given, no working of add backs of Rs.173,871/- was given. So order is not maintainable in the eye of law.
9. That the estimate of sales, allowability of cost of sales, assessment of G.P. rate and add backs is illegal, against the provisions of law and without having any lawful jurisdiction.
10. That no definite information was available with the DCIR, record was produced by the appellant as such passing of such order in such a manner is illegal.
11. That the law is very much clear on the issue as such the CIR(A) was bound to decide the issue instead of setting aside the same.
2. Briefly stated facts as per record are that appellant/taxpayer is an AOP derives income from M/s. Sunny Jewelers. Return for the year under appeal filed. The case was selected for audit under section 177 of the Income Tax Ordinance, 2001 and notice issued. The taxpayer made reply with contention that its return filed under section 113B could not be amended under section 122. The taxation officer did not satisfied with his reply and made amendment in assessment in terms of deemed assessm ent under section 120 of the Ordinance ibid. In appeal before the learned CIR (A) who decided the case, vide the impugned order. Aggrieved with this appeal order, taxpayer has preferred the instant appeal before this forum on the reproduced supra.
3. The 12 grounds of appeal violated Tribunal's Rule 11 as they are argumentative and repetitive. hi hearing, L/AR Hafiz Muhammad Idrees stated that he would like stress on one issue only, namely that: Return was filed under section 113B and this section 113B is not a deemed assessment under section 169(3), therefore the department's order of amended assessment dated 18.12.2013 is without jurisdiction as amendment orders under section 122(1) are only for situations where deemed order under section 169(3) accedes. L/DR has vehemently objected to the AR's reasoning, and states that taxpayer filed its return under section 114 and that all returns received under section 114 are legally deemed as assessm ent orders under section 120(1) of the Ordinance ibid. She further argues that L/AR is incorrect in stating that return of appellant was filed under section 113B because section 113B only states the rates of tax for the situations specified in the said section 113B.
4. The relevant parts of the above sections are reproduced as under: "113B. Taxation of income of certain retailers.---Subject to this Ordinance, a retailer being an individual or association of persons,
(a) whose turnover exceeds live million rupees: and
(b) who is subject to special procedure for payment of sales tax under Chapter II of the Sales Tax Special Procedures Rules, 2007, shall pay final tax at the following rates which shall form part of single stage sales tax as envisaged in the aforesaid rules;
114. Return of income.---(1) Subject to this Ordinance, the following persons are required to furnish a return of income for a tax year, namely:--
(a) every company
(ab) every person (other than a company) whose taxable income for the year exceeds the maximum amount that is not chargeable to tax under this Ordinance for the year: or
(ac) any non-profit organization as defined in clause (36) of section 2;
(ad) any welfare institution approved under clause (58) of Part I of the Second Schedule;
(b) any person not covered by clauses (a), (ab), (ac) or (ad) who,
(i) has been charged to tax in respect of any of the two preceding tax years;
(ii) claims a loss carried forward under this Ordinance for a tax year;
(iii) owns immovable property with a land area of two hundred and fifty square yards or more or owns any flat located in areas falling within the municipal limits existing immediately before the commencement of Local Government laws in the provinces; or areas in a Cantonment; or the Islamabad Capital Territory.
(iv) owns immoveable property with a land area of five hundred square yards or more located in a rating area:
(v) owns a flat having covered area of two thousand square feet or more located in a rating area; (vi)owns a motor vehicle having engine capacity above 1000 CC;
(vii) has obtained National Tax Number; or
(viii) is the holder of commercial or industrial connection of electricity where the amount of annual bill exceeds rupees [five hundred thousand; or (ix)is a resident person registered with any chamber of commerce and industry or any trade or business association or any market committee or any professional body including Pakistan Engineering Council, Pakistan Medical and Dental Council, Pakistan Bar Council or any Provincial Bar Council. Institute of Chartered Accountants of Pakistan or Institute of Cost and Management Accountants of Pakistan.
(1A) Every individual whose income under the head 'income from business' exceeds rupees three hundred thousand but does not exceed rupees 1 [four hundred thousand] in a tax year is also required to furnish return of income from the tax year.
120. Assessments.---(1) Where a taxpayer has furnished a complete return of income (other than a revised return under subsection (6) of section 114) for a tax year ending on or after the 1st day of July, 2002.
(a) the Commissioner shall be taken to have made an assessment of taxable income for that tax year, and the tax due thereon, equal to those respective amounts specified in the return; and
(b) the return shall be taken for all purposes of this Ordinance to be an assessment order issued to the taxpayer by the Commissioner on the day the return was furnished.
Perusal of the above law shows that the L/DR is correct in that section 113B is not a sectton Cur filing of returns, for returns are filed under section 114 while section 113B be merely identified the rates of taxes to be paid in certain specified situations. It is also correct that appellant paid tax in terms of section 113B, however it is incorrect to claim that its return was also filed under section 113B. The law clearly states section 114 that returns are to be file as stated there in it. It is therefore held that the return for tax year 2009 is filed by appellant, was actually filed under section 114 of the Ordinance ibid and that tax thereon was paid claiming, rates as given in section 113B.
5. It is therefore, clear that the returns filed under section 114 was a deemed assessment in terms of section 120(1), and therefore the selection of appellant for audit and passing an amended assessm ent order under section 122(1) and on 18.12.2013 suffers from no legal infirmities.
The L/AR has filed three citations as under:
(1) 2010 PTD (Trib.) 1709.
(2) 2010 PTD (Trib.) 1700.
(3) 2012 PTD 1184.
I have read the said orders of the Tribunal in cited cases and find them to be not relevant to the issue in hand as under:-- Citation 102 Tax 284 is on I.T.A. No.346/LB/2010 - dealing with three issues:
(i) That issuance of prior notice before selection is a legal requirement.
(ii) That selection of CIT on basis of parameters of section 177 is not valid.
(iii) That hearing notice was for 31.05.2009 which being a hold, officers passed orders one day earlier for which there was no notice.
Citation 102 Tax 193 was against selection of case for audit under section 177.
Citation 2012 PTD 1184 was that assessm ent can be amended under section 122(1) and further amended under section 122(4) of the Ordinance only, where the condition provided under subsection (5) of section 122 are fulfilled. The first condition in this regard is the definite information acquired through audit or otherwise which must lead to the three situations provided in clauses I to III of subsection (5) of section 122 of the Ordinance, 2001.
6. As second appeal was restricted to this single point, the appeal stands rejected.
The taxpayer's appeal rejected as above.