CH: SHAHID IQBAL DHILLON (JUDICIAL MEMBER): The titled appeal is directed against the order dated 26.07.2016, passed by the Learned CIR (Appeals) Faisalabad on recording the following findings resulting in failure of appeal at the first appeal stage:- "After hearing rival arguments of both parties and going through relevant record, impugned order and provisions of law, I find that the assessing officer has rightly computed income at Rs.
863,113,882/- in accordance with the provision of section 48 (2) ibid for the purposes of charging super tax under section 48 ibid. The income so computed by the assessing officer exceeds threshold limit of Rs. 500 million and hence, it is held that the appellant company was chargeable to super tax under section 48 ibid. In view of above, the impugned order is held to be lawful and justified and hence, the same is confirmed."
2. Unless otherwise expressed sections referred to in this order are of the Income Tax Ordinance, 2001.
Briefly stated facts of the case are that the appellant/taxpayer undisputedly was liable to file statement u/s.115 (4), for its business receipts against the execution of construction works. As a statutory -2- ITA No.2122/LB/2016 requirement, final accounts/financial statements along with balance sheet for the year ended on 30-06-2015 was also part and parcel of the statement u/s 115(4), this statement instead of an income tax Return legally becomes applicable for the contractual construction work receipts. The respondent/department invoked the provisions of section 122(5A) for imposition of tax u/s. 4B, which section in the Income Tax Ordinance, 2001 is captioned as "Super Tax for rehabilitation of temporarily displaced persons".
3. This tax has been imposed in the instant case on the income imputed by working back on the basis of the tax withheld by the payers of the amount for construction work done, despite the fact that audited accounts showing the net income as per books of accounts were available with the statement on record. Against the imposition of this Super Tax, on failure at the first appeal stage that matter has been brought before this Tribunal.
4. The Learned AR at the very beginning has submitted that proceedings initiated u/s 122(5) and the order passed under this section are illegal void ab-initio, to explain this averment the Learned AR has firstly stated that it is by ignoring altogether, the income arrived at as per account statements which was below the minimum thresh hold prescribed in section 4B for imposition of Super Tax and in order to cross this minimum thresh-hold that the imputing the income on working back from the tax deductions was resorted to, so as to create the super tax demand against the appellant, which is violation of law, secondly but more importantly than the earlier, it has been forcefully argued that Section 4B, has its own independent charging and procedural sub-section (2),(4) for proceeding against -3- ITA No.2122/LB/2016 the tax payer and for passing the order without recourse to any other section or sections like 122(5A) of the Income Tax Ordinance,2001, thirdly the Sections 122(5A) is not vested with any authority/ power for proceeding against a taxpayer for imposition/recovery of super tax and also for passing the order under this section .
5. The Learned AR in an attempt to sum up his arguments has stated as a preliminary objection that the impugned order is suffering from incurable defect of jurisdiction as it has been passed by totally ignoring the specific provisions, i.e. sub-section (4) of Section 4B, as I e presence of Specific Provision in the shape of sub-section (4) , e order was to be passed as provided in it, because when an act is to be done in a particularly prescribed manner, then it has to be done strictly in accordance with it otherwise it would be taken as not done at all, in this manner it has been proved that the order u/s 122 (5A) is out of jurisdiction, so liable to be cancelled, the learned AR read before us the provisions of Section 122(5A) and importantly of the provisions of section 4B, and highlighted its sub-section (4) being the only provision entrusting the jurisdiction for any action by the Respondent/department. The Learned AR stated that the order was to be passed u/s 4B(2)/(4) and not under section 122 (5A). The Learned AR has also forcefully pleaded that in the presence of the final account statements, imputing the income by working back from tax deduction is not legal as there is ,no law permitting it by turning down the declared income worked out on the basis of regularly maintained accounting record. -4-ITA No.2122/LB/2016
6. The Learned DR on the other has supported the impugned order with the submission that there is no bar for recovery /imposition of Super Tax leviable u/s 4B and sub- section (2) as provided for it.
On a question from the court, that as to how legally the order could be passed u/s. 122(5A) for imposition / creation of tax demand u/s 4B when specific provisions in form of its sub-section (4) has been made available in law, the Learned DR by observing silence has conveyed that there is nothing to be submitted as justification for what has been done, the Learned DR also could not explain as to how the Income worked out on the basis of historical accounting could be ignored for imposing super tax u/s 4B, when no legal provision is available in the ordinance for discarding the net income arrived at in audited account statements which for all intent and purposes is being relied upon or not contested as incorrect by the Department except for imposing the super tax u/s 4B, have not been taken into consideration where income is imputed.
7. Arguments have been heard, available record perused. The provisions of law referred to us have been minutely studied. After proper analysis of arguments, it has helped us to reach to a conclusion that the Department by ignoring the specific provisions of law as laid down by the legislature in Section 4B, has preferred to move in an arbitrary not legally prescribed manner, thereby have committed jurisdictional incurable error by not proceeding strictly in accordance with the Specific provisions as set out in section 4B, which has made the order u/s 122(5A) as not maintainable being -5- ITA No.2122/LB/2016 illegal void ab-initio, as the law has prescribed a specific way for particularly charging the super tax u/s 4B, then it ought has to be followed for a compulsory legal coverage but in the instant case it has illegally been done under Section 122(5A), which has made it as not has been done at all by recording the findings on the issue of jurisdiction, the appeal stood accepted on this score. Here it would be of immense importance to bring on record that audited accounts as a mandatory requirement for the appellant company were the part and parcel of the statutory mandatory statement u/s 115(4) where the taxable income declared was much below the minimum thresh hold being neither income equal to nor was exceeding Rs.500 million, further the words used is the "income for imposition of Super Tax clearly specified in Division-IIA of the Part-I of the First Schedule to Ordinance 2001 and in the absence of any provision of law authorizing for ignoring or net taking into consideration the income duly worked out in the attached accounts then legaIly income was not 10 be imputed as has been done here for imposition of Super Tax u/s 4B, thus here it is also clearly held by us that when audited accounts are available on record showing the net income below the thresh hold and it has not been expressed in law regarding rejecting/ ignoring the accounts then imputing the income is against the law, which is silent on the issue, so the benefit of doubt is also to go in favour of the appellant/ taxpayer company.
8. Resultantly the appeal succeeds in the manner as indicated above, the Learned CIR (A) order is vacated and the order passed u/s.122 (5A) is hereby cancelled.
(CH. SHAHID IQBAL)
Judicial Member (RAANA AHMED)
Accountant Member