SHAHID MASOOD MANZAR, CHAIRMAN.----Succinct facts of the case, as gathered from the impugned orders, are that on receipt of information that the appellant has purchased properties i.e. 08 Marla (26-P at Chak No.51) at cost of Rs.25,000,000/- vide Registry No.699 dated 18.05.2010 and 9 Marla (Chak No.51) at cost of Rs.1,700,000/- vide Registry No.457 dated 29.03.2010. No return was filed, hence the statutory notices under sections 114(4) and 116(1) dated 27.06.2012 were issued for filing of income tax return along with wealth statement for the tax year 2010 but in vain. Therefore, a show-cause notice under section 122C read with section 111(1)(b) of the Income Tax Ordinance, 2001 was issued vide No. RTO/SG/Enf-06/M.B.Din/161 dated 27.08.2014 and proceedings initiated which culminated in passing of order under section 122C of the Ordinance ibid by making addition under section 111(1)(b) at Rs.26,700,000/- and addition under section 111(1)(c) at Rs.34,000/- and total income was assessed at Rs.26,734,000/- by creating tax demand of Rs.9,089,560/- inclusive of default surcharge at Rs.2,406,060/-. The appellant being aggrieved filed writ petition before the Hon'ble Lahore High Court, their lordship vide their judgment dated 02.05.2016 in W.P. No.30602 of 2015 remitted the writ petition to the Commissioner to treat it as revision petition under section 122A of the Income Tax Ordinance, 2001. The Commissioner (BTB) Zone in compliance to the directions of Hon'ble Lahore High Court given his verdict as under: - "6. It is worth mentioning that the outstanding tax demand Rs.9,089,560/- was recovered through the banking authorities and the same was deposited into Government Treasury vide CPR No.IT-2015-10130362-1083405 dated 13.10.2015. Further return of Income was filed on 26.10.2015 and no refund was claimed in the income tax return.
In view of forging facts it has been observed-that:
(i) Provisional assessment order for the tax year 2010 was served on 28.07.2015.
(ii) The provisional assessment order attained finality on 11.09.2015 in the light of provisions of section 116(2) in the Income Tax Ordinance, 2001.
(iii) Income Tax Return, wealth statement, wealth reconciliation statement and source of investment was filed on 26.10.2015 and no refund was claimed."
Being aggrieved, the appellant filed appeal before the learned Commissioner Inland Revenue (Appeals), who vide his impugned order dated 21.042017 dismissed appeal by upholding the impugned orders of the authorities below. Disgruntled taxpayer, filed appeal before this Tribunal on the following grounds:
1. That the appellant a non-resident person as defined under section 81 of the Income Tax Ordinance living in Saudi Arabia since last 30 year, doing business there and is filing the appeal through his nephew Mr. Tauseef- ul-Islam, who is well versant with the facts of the case and is competent to file this appeal.
2. That brief facts giving rise to this Appeal are :- I. That the Appellant has always been a law abiding citizen of Pakistan and is residing in Saudi Arabia since last 30 years, from where he has been regularly sending his hard earned foreign income through banking channel in Pakistan.
II. That the Respondent No. 3, without having any lawful jurisdiction , by completely ignoring the RULES OF pertaining to Tax Year - 2010 under section 122C of the Income Tax Ordinance, 2001 (hereinafter referred to as the Ordinance) and also levied unlawful and unjustified demand of income tax amounting to Rs.9,089,560/- upon the appellant. That the impugned order dated 30-6-2015 was served upon the nephew of the appellant on 16-09-2015.
III. That the impugned order dated 30-06-2015 has been passed without giving a single notice of hearing to the appellant and this fact is evident from the impugned order. It is pertinent to mention here that whole of the proceedings have been taken up and finalised by the Respondents against the appellant, when he is not available in Pakistan.
IV. That the appellant made investments in his homeland Pakistan through his hard earned money from abroad and have sufficient proof to justify that the investments made through foreign remittance.
V. That provisions of section 122C of the Income Tax Ordinance, 2001 provides mechanism of PROVISIONAL ASSESSMENT and provisional assessment order is to be passed under section 122C(1) of the Ordinance. The provisional assessment order shall become final assessment order under section 122C(2), only if the tax payer fails to submit the return of income along with wealth statement, wealth reconciliation statement and other documents required under subsection (2A) of the section 116 of the Ordinance within a period of forty five days from the date of service of Provisional Assessment Order. Furthermore when if the tax payer fully complies with requisites of section 122C within a period of forty five days from the date of receipt of provisional assessment order, provisional assessment will meets its fate and there will be no recovery against the tax payer.
VI. That the Respondent No. 03 by acting illegally and violating the provisions of law issued notice under section 137(2) dated 30-6-2015 of the Ordinance, which is without legal footings as there is no final order in field.
VII. That the illegal acts of Respondents didn't end, the Respondent No. 3 under the authority of respondent No. 2 issued notices under section 140 of the Ordinance dated 07-10-2015 and attached the bank accounts of the appellant and illegally took Rs.9089560/- from the bank account of the appellant through pay .order dated 08- 10-2015.
VIII. That the appellant through letter dated 08-10-2015 brought whole the legal and factual circumstances of his case before the respondents but all in vain.
IX. That in the case of the appellant, impugned order which is a provisional assessment order, was served upon the appellant on 16-09-2015 and forty five days are to expire on 30-10-2015, hence it is beyond the shadow of doubt that provisional assessment order dated 30-06-2015 in case of the appellant is still in field, hence all the recovery proceedings taken by the respondents are unwarranted and without of force of all, as the appellant is not liable to pay any income tax demand because there is no final order in field.
X. That, the appellant fully complied with the order received and filed his wealth statement and return for the tax year 2010 but was never ever consider in this regard appellant has already provided relevant documents to respondent No. 01 but were never considered.
Xl. That the recovery of the impugned demand without fully complying with provisions of the ordinance is merely colorful exercise of power.
XII. That all the acts of the Respondents are illegal in the light of dictum of this Honorable court reported at :- 2013 PTD 914 That it is a well settled principle that before a recovery created by a Departmental Authority could be affected ; a taxpayer was entitled, to be heard by at least one independent forum outside the Departmental hierarchy. That the Hon'ble Courts held that it was the dictate of fairness, equity and justice that before a tax demand created by a Departmental Authority was enforced such demand must have undergone scrutiny by atleast one independent forum.
XIII. That, the Appellant being aggrieved of impugned order dated 30-6-2015 under section 122C of Income Tax Ordinance, 2001 filed a Writ Petition No. 30602/2015 before Hon'ble High Court Lahore. Wherein ; Hon'ble court disposed of the writ petition with the following directions, Para-5 is reproduced as under:- "5. In view of the allegations raised by the petitioner, a copy of this writ petition is ordered to be remitted to a Commissioner Inland Revenue, respondent No. 1, who shall treat it as a revision petition under section 122A of the Ordinance on behalf of petitioner and shall proceed to decide it in accordance with Law. Respondent No. 1 is further directed to make a determination regarding the date of receipt by the petitioner of provisional assessment order under section 122C of the Ordinance. On being satisfied that the said order was indeed received by the brother of petitioner on 15-09-2015, Respondent No. 1 shall immediately pass necessary orders for returning of the amount of Rs. 9,089,560/- to the petitioner. The aforesaid determination shall be made within a period of one week from the date of receipt of certified copy of his this order."
XIV. That, in impugned order respondent No. 1 has mentioned that the inspector IR affixed the demand notice and assessment order on 28-07-2015 on the last Known residential address of the taxpayer in the presence of two witnesses duly mentioned but presence of witnesses was neither discussed nor mentioned in earlier written reply submitted in Writ Petition No. 30602/15 nor mentioned in the impugned order dated 30-06-2016 and same indicates the male fide intention of department and particularly respondent No. 01.
XV. That, the applicant again filed Writ Petition No. 30911/2016 before the Hon'ble High Court Lahore. Wherein; Hon'ble court disposed off the writ appeal with the following directions, Para-5 is reproduced as under:- a. By the consent of the learned council for the party, order dated 16-05-2016 impugned in this writ petition is set-aside. In order to streamline the process, petitioner is directed to appear before the concerned Commissioner Inland Revenue shall pass an order afresh in terms of directions given to him in Writ Petition No. 30602/2015.
XVI. That, again the direction were given to seek; if notice has been served to the brother of appellant, then to immediately return the recover amount to petitioner but again the order of the respondent No. 01 is nothing about clarifying the facts of the case and to pass an fair order but same reproducing the old stuff again, hence need to be nullified.
XVII. That, the appellant being filed an appeal before respondent No.1, wherein; the impugned order dated 21- 04-2017 has been passed without considering the legal and factual circumstances of the appellant, so that impugned order is without legal footings and erred in Law.
XVIII. That, the order passed by the Respondent No.01 is near exploitation of discretionary powers and no consideration have been given to the argument and record provided to him and the order passed by him is illegal, contrary to the facts of the case.
3. During the course of hearing, learned counsel for the taxpayer contended as per grounds of appeal as prayed that the impugned Order No.0672 dated 21-04-2017 passed by the Assessing Officer may be declared as illegal, without jurisdiction, void- ab-initio, ultra vires and unlawful.
4. On the other hand, learned DR appeared to defend the respondent/Department. He vehemently opposed the contention of learned AR and fully supported the impugned orders of the officers below. He prayed that the orders of the below officers may be upheld and the appeal of the appellant may be dismissed, being devoid of any merit.
5. We have heard the arguments of both the parties and perused the available record and the provisions of law, case law referred and other submissions very carefully. It is found that the Assessing Officer has taxed the amount of investment made in the purchase of property as income from other/unexplained sources. The learned CIR(A) dismissed the appeal of taxpayer by observing that the same is not supported with concrete evidence.
The taxpayer claims that no proper service of notices was made and as the Taxpayer is non-resident no representative was appointed under section 172(3) of the Income Tax Ordinance, 2001. Though the agitation of the taxpayer is correct that an ex parte order was passed by the Assessing Officer but it is the matter of fact that the Assessing Officer while passing the impugned ex parte order was unaware about non-resident status of the taxpayer. In view of the above scenario, the impugned orders of the authorities below are vacated and the case is remanded back to the Assessing Officer with the direction to conduct a detailed inquiry regarding the non- resident status of the taxpayer by following the proper procedure of law as has been held by the Hon'ble Supreme Court of Pakistan in the judgment reported as 2006 SCMR 129 that "It is well-settled and established principle of law that when the Legislature requires the doing of a thing in a particular manner then it is to be done in that manner and all other manners or modes of doing or performing that thing are barred."
The Assessing Officer is further directed to probe the source of investment after providing proper opportunity of being heard to the taxpayer and accordingly a speaking order to be passed as per the provisions of law.
6. Before parting with judgment, we may observe that many discussions regarding the deteriorating situation of Pakistani economy have surfaced since the devaluation of Pakistani rupee against US dollar in the domestic market and subsequently, oil prices increased significantly by 9.5pc, which caused uproar within the nation. We are afraid to observe that currently, Pakistan's economy is going through a rough patch and the currency devaluation is a great shock to the macroeconomic situation as it gave rise to many more problems which our economy is currently facing and for the reason, the country is striving to achieve monetary support from international funding agencies. Moreover, our foreign exchange reserves are eroding which attributed to external debt servicing and other official payments. In such alarming economic situation, we must encourage the foreign investments rather than to force them to avoid from making investments in our/their beloved country.
In this scenario, we may be fortified with judgment of this Tribunal in I.T.A. No.1066/LB/2013 dated 15.08.2013 whereby it is emphasized to encourage the investment of foreign nationals in Pakistan. The relevant extract of the judgment is as under:- "5. We have heard the representatives of both the parties and gone through the available record as well as the case-law cited at bar. At the very outset we would like to clarify that a citizen can be made liable to pay tax only on the basis of unambiguous and explicit law. In fiscal statute there is no room for any presumption or intendment and no provision of law can, by any process of argumentation or interpretation be loaded with meaning or intentions which plain language of the provision does not covey. In this case, we are of the considered view that the department is trying to screw the taxpayer and extorting tax without observing the cardinal principal of tax laws discussed above. The department functionaries are also acting under sheer ignorance and not following procedure laid down in statute and circulars and clarifications issued by the FBR which are binding on all functionaries working under FBR under the law.
6. We are of the view that once it has come on record and has been established that the appellant is a French National Pakistani having sufficient sources of income through running Restaurant in France and having transferred foreign currency through proper Banking channels or otherwise by legal means, there was no justification to harass the appellant which is discouraging him to invest in Pakistan. He has no means/business in Pakistan and all sources of income are in France and has only made investment in Pakistan by purchasing landed property through foreign exchange brought from France. It is further observed that tax is not a forced liability but in fact it is a responsibility to owe to the state a proportionate share given by the taxpayer for utilizing and consuming the services provided by the state. Its determination must be made with a view to keep the above principle intact and to maintain confidence and to boost the encouragement in the taxpaying society so that the tax should not be taken by the concerned public to be a harsh imposition but a duty. The Honourable High Courts and this Tribunal has held in many cases that it is high time to develop tax culture in the working classes which will help the enforcement of self assessment at large and the tendency of concealment of taxes shall be gradually discouraged and public would rather prefer to be the taxpayer instead of tax swallowers. Similar is the position regarding Foreign National making investment, they should be encouraged rather forced to make investment in other countries."
7. It is also important to mention that the Federal Board of Revenue (FBR), in order to provide guidance, has had issued clarification to field formations vide letter No. C69(1) S-DOS/2009- 138499-R, 2010 also reported in (2010) 102 Tax 149(sic). The relevant portion in para 4 of the said letter is as under: "From the perusal of the available record of the instant case it reveals that the appellant had purchased two plots against a consideration or of rupees six million at G. T. Road, Sara-e-Alamgir in February, 2009 out of foreign currency proceeds earned from abroad. The department has collected the information from concerned Sub-Registrar of lands Sara-e-Alamgir, and issued a notice under sections 114 and 116 of the Income Tax Ordinance, 2001 which, according to the learned AR were never received by the appellant or his representatives. The learned ACIR has passed ex parte Order under section 122C(1) of the Income Tax Ordinance, 2001. But it is interesting to note that instead of invoking section 111 he preferred to get it assessed as "Income from Other Sources" under section 39 of the Income Tax Ordinance, 2001 without identifying the exact nature of income. There are 16 types of income postulated in section 39 and the assessing officer has not bothered to identify one out of all types of sources. This shows the level of care in framing the Provisional Assessment. The assessment under section 122C require the same amount of care as is required under subsections (5) and (5A) of section 122 of the Income Tax Ordinance, 2001 and such provisional assessment must indicate on what material or the basis the income is assessed and tax is determined.
This is necessary because a provisional assessment order might attain finality under section 122C(2) of the Income Tax Ordinance, 2001 or may be subject to revision by the Honourable High Court under section 115 of Code of Civil Procedure, 1908 or may be matter in writ before Honourable High Court under Article 199 of the Constitution of Pakistan therefore, the order should contain with sufficient precision, the material on which the assessment is based, so that the concerned authority can from an unbiased option of the fairness of assessment."
8. Appeal filed by the Taxpayer is disposed off in the above manner.