SHAHID MASOOD MANZAR, CHAIRMAN .----Brief facts of the case as per impugned orders, are that the taxpayer is an individual deriving incom e from Property as well as business. Taxpayer filed the return of total income for the tax year 2015 declaring gross property income amounting to Rs.1,848,000. The case was selected for audit by the Federal Board of Revenue under section 214C of the Income Tax Ordinance, 2001. The learned CIR intimated the taxpayer regarding the selection of the case for audit and, thereafter , the DCIR issued IDR and two notices for provision of certain documents. In response thereto, the taxpayer submitted the requisite documents, which were examined by the DCIR and on scrutiny some discrepancies were found which the taxpayer was communicated through show-cause notice under section 122(9) read with section 177(10) of the Income Tax Ordinance, 2001 dated 11.05.2017 for compliance on 26.05.2017. Taxpayer complied with notice and submitted the documents. After examination of the documents, the taxpayer was issued notice under section 111(1). As a result, the DCIR, passed the amended assessm ent order under section 122(1) of the Income Tax Ordinance, 2001 in the following manner:- "Income declared/assessed under section 1201,478,400/- Additions: Addition of differential credit entries43,488,677/- Others 10,084,175/- Total Additions: 53,572,852/- Taxable income: 55,051,252 Being aggrieved, the taxpayer filed appe al before learned CIR (Appeals-II) Islam abad, who vide his impugned Order-in-Appeal No.575/2018 dated 26.03.2018 learned Commissioner Inland Revenue (Appeals-II), Islamabad whereby he maintained the order of Assessing Of ficer with the following observation: - "3. Heard and record perused. On the balance of relevant considerations, the scale inclines in favour of the department for the following reasons: a. the case laws relied upon by the learned counsel are not binding precedent as they are in rem and not in personam. b. The so called "Peak Credit" Rule means that a subsequent cash credit should be presumed to have been made by withdrawing a prior cash deposit/credit. The reliance on "Peak Credit" Rule is uncalled for. The said rule is also rejected by the Indian Courts in the case reported as: 276 ITR 38, 294 ITR 610 and (2006) 202 CTR 515. c. the appellant was unable or unwilling to provide a self contained reply to the Officer despite the fact that multiple notices were served on the appellant, d. the DCIR was forced to draw inferences on the basis of partial compliance and incomplete information, e. the order is well considered conclusion and cannot be termed as capricious, dishonest or vindictive, and f. the AR argued his case to show that some of the expressions used or observations made in the order are open to criticism. Such arguments are bereft of merit and unjustified, because whatever vagueness or uncertainty is found to exist in the order is the result of the conduct of the appellant who withheld evidence.
4. Resultantly , for what has been stated above, the relief sought through this appeal is declined and the order is maintained."
The appellant again being aggrieved with the impugned order of learned CIR(A), filed the instant appeal before this Tribunal has contended on the following grounds by praying that the orders of the authorities below may be annulled:- 1) "That the impugned order of the learned Commissioner Inland Revenue (Appeals-1 1) Islamabad is bad in law, against the facts of the case, arbitrary and unlawful; 2) That the CIR (Appeals-II) has grossly erred and passed a non-speaking order and has neither considered nor discussed even a single ground of appeal therein; 3) That the CIR (Appeal-II) has erred and not considered the written arguments submitted at the time of hearing of appeal; 4) That the CIR (Appeals-II) has brushed aside the case laws cited as precedents stating that these are not binding as these are in rem and not in person am; 5) That the CIR (Appeals-II) has erred and grossly failed to appreciate the ground of appeal, case laws cited and arguments advanced regarding the "doctrine of peak credit'; 6) That the CIR (Appeals-II) has erred in holding that the appellant was unable or unwilling to provide a self- contained reply to the officer despite multiple notices served by the DCIR; 7) That the learned CIR (Appeals-II's) decision is based on misinterpretations of facts and misconceptions that DCIR was forced to draw inference on the basis of partial compliance and incomplete information whereas he has not drawn this inference anywhere in the order ; 8) That the CIR (Appeals-II) has erred and instead of appreciation of vivid and elucidated arguments advanced before him regarding the illegalities and contradictions in the DCIR's order . He has painted these as bereft of merit and unjustified; 9) That the CIR (Appeals-II) has erred and under delusion presumed that the vagueness and uncertainty in the order is the result of the conduct of the appellant who withheld evidence; 10) That the CIR (Appeals-II) has erred and incorrectly held that the appellant withheld information and made incomplete compliance; 11) That the CIR (Appeals-II) has failed to appreciate that the appellant complied on each date of hearing / no extension was sought and submitted each and every document or evidence lawfully required by the DCIR; 12) That the CIR (Appeals-II) failed to appreciate that on the one hand the DCIR has admitted, "that the taxpayer has provided documentary evidence hence observation confronted via show cause notice is withdrawn" and on the other hand, he made additi on of Rs.10,084,175 and Rs.10,280,425 unlawfully and illegally under section 1 11 of the Income T ax Ordinance, 2001; 13) That the CIR (Appeals-II) failed to appreciate this fact that the total of all credit entries in all bank accounts was Rs.52,658,956 whereas the DCIR accounted for these at 59,820,329, and confront ed an addition of Rs.57,972,329 and ultimately made an addition of Rs.53,572,852 under section 111 of the Income Tax Ordinance, 2001 without any basis and evidence; 14) That the CIR (Appeals-II) has erred and not appreciated that the total amount confronted was 16.57,972,329 (Rs.57.972 million) and out of total correct deposits of Rs.52.659(million), the deposits to the extent of Rs.14,483,652 (Rs.14.484 million) were accepted, then how total additions could be at Rs.53,572,852 (Rs.53.573 million) instead of Rs.38.175 (million); 15) That the CIR (Appeals-II) also failed to appreciate this fact that the DCIR did not subtract the opening balances in all bank accounts which were amounting to Rs.6.563 (million) which did not attract the provisions of section 111 of the Income T ax Ordinance, 2001 ; 16) That the CIR (Appeals-II) also failed to appreciate undeniable evidence that loan of Rs. 10 (million) was given by a taxpayer through crossed cheque. The DCIR as well as the CIR (Appeals-II) both failed to take cognizance of the evidence; the former added the same under section 1 11 of the Ordinance, 2001 and the latter maintained it; 17) That the CIR (Appeals-II) failed to appreciate that the DCIR passed the order in haste / hurry and did not issue the demand notice under section 137 of the Income T ax Ordinance, 2001, which is statutory requirement; 18) That the appellant kindly be allowed to amend these grounds of appeal or file new grounds of appeal at the time of hearing or any time before the hearing of this appeal".
2. On the due date of hearing, Syed Ali Husnain, ITP/learned Authorized Representative/A.R appeared on behalf of the taxpayer/appellant and argued that the bank statement of all three bank accounts namely , the Emaan Islamic Bank, F-8, Markaz, Islamabad A/c No. 5000071643, the Bank Alfalah Limited, F-8, Markaz, Islamabad A/c No.0148-1002481329 and Standard Chartered Bank, F-7, Markaz, Jinnah super Br. Islamabad A/c No. 08049138701 for the period relevant to tax year 2015 were submitted in the office of learned DCIR. The learned AR pointed out that the DCIR has calculated and confronted the total deposits in the three (03) banks accounts at Rs.59,820,329.00 (59.820 million ) whereas the actual total deposits or credits were amounting to Rs.52,658,956.00 (52.659 million ), thus the DCIR erred and accounted for the total deposits wrongly to the tune of Rs.7,161,373. Learned AR further argued that the matter was contested before the learned CIR(Appeals-II) with supporting documents but he did not appreciate the fact. The learned AR has pointed out that the summary of deposits has been placed at pages 42 and 42.1 and bank statements of three bank accounts. Learned AR added that this is a verifiable fact that DCIR wrongly computed the total deposit at Rs.59. 820 (m) and confronted addition under section 111(1)(b) of the Income Tax Ordinance, 2001 amounting to Rs.57,972,329 where as these were only 52.659(m) only, resultantly , both the officers below failed to ascertain the actual amounts of deposits and computed and added an amount excess to the tune of Rs.7,161,373 (or Rs.7.161 million ) wrongly and unlawfully . In support of his contention, learned AR of the taxpayer submitted bank account details which is reproduced hereunder for the sake of ready reference: Name of the Bank(s)Account number Total deposits in TY.2015 Emann Islamic Bank, F-8, Markaz, Islamabad.5000071643 3,228,266 Bank Alfalah Limited F-8, Markaz, Islamabad.1002481329 20,073,900 Standard and Chartered Bank, F- 7, Islamabad08049138701 29,356,790 TOTAL 52,658,956 The learned AR further argued that the opening balances of all the three accoun ts were amounting to Rs.6.363 (million) and closing balances were amounting to Rs.16.647(million). He submitted that the opening balance had to be deduced from the addition. He further pointed out that if all the additions made by the DCIR are subtracted from the actual deposits in the three banks, only the balance would be Rs.747,600 - whereas the DCIR has added Rs.
53,572,852 under section 1 11 of the Income Tax Ordinance, 2001.
The learned AR further argued that the DCIR had accepted the deposits/credit entries amounting to Rs.14,483,652 and Rs.500,000 (Total Rs. 14.984 million) as explained by the taxpayer satisfactorily and this fact had been jotted down in the order passed by him. The learned AR also argued that one of the relative of the taxpayer namely , Mr. Muhammad Khaleeque (a taxpayer at NTN 61101-5540303-9) had given Rs.10 (million) as temporary loan to the appellant taxpayer , from his ABL Bank, F-8/3, Markaz Br. Islamabad account through a crossed cheque bearing No.02300555 dated 21.03.2015 which was deposited by the appellant taxpayer in his SCB bank A/c No.08049138701, operated with F-7, Markaz, Jinnah Super Br. Islamabad. The learned AR alleged that as the source and nature of the credit entry amounting to Rs.10(m) was fully explained and verifiable from the 3rd party documents even then the amount of Rs.10 (million) was illegally and unlawfully added and not subtracted from the amount added under section 1 11 of the Income Tax Ordinance, 2001.
3. On the other hand, Mr. Tariq Iqbal, learned DR represented the Department/Respondent. Learned DR vehemently opposed the contention made by the learned AR of the taxpayer . He fully supported the impugned orders of the authorities below and prayed that the same may be upheld. During the course of hearing, learned DR also submitted parawise comments authored by the OIR in rebuttal to the written arguments placed by the learned AR of the taxpayer/appellant, whereby every para of the written arguments of taxpayer is not admitted and it is submitted that the taxpayer has failed to substantiate a single stance during the proceedings before DCIR and at 1st stage of appeal. Accordingly , learned DR prayed that the appeal may be dismissed being without merit.
4. Rival parties have been heard and the case record examined. We have carefully perused the impugned orders of the learned CIR(A) as well as DCIR. After going through the record and conside ring the arguments put forth by the learned AR, we specifically inquired from the learned AR whether these things were contested before the DCIR as well as the learned CIR (Appeals-II)?. The learned AR submitted a copy of his predecessor namely , the Bukhari Law Chamber's reply dated 08th June, 2017 submitted before the DCIR which shows that each and every credit entry was explained with evidence. As regards, the order passed by the learned CIR(A), the learned AR invited our attention on the written arguments submi tted before the learned CIR (A). In this regard, we perused the impugned order of learned CIR(A), which showed that that all such points were raised before him but the learned CIR (A) made two assumptions i.e. firstly , "the appellant was unable or unwilling to provide a self-contained reply to the Officer despite the fact that multiple notice were served on the appellant," and secondly , "the DCIR was forced to draw inference on the basis of partial compliance and incomplete information."
We also find that the DCIR has not pointed out which document (except Balance sheet) was not submitted by the taxpayer whereas the taxpayer was "Individual" and having rental income only and under Rule 31 of the Income Tax Rules, 2002, he was required under the law to submit the following documents; a. Tenancy agreement (-which was submitted by the appellant taxpayer); b. Tenancy termination agreement, (as it was not executed, therefore, question of submission of the same didn't arise; c. Receipt for amount of rent received: (the rent was received through crossed cheques and it was highlighted in the bank and response submitted on June 08, 2017); d. Evidence of deductions claimed etc. (no expense or deduction was claimed by the taxpayer , therefore, nothing was required to be submitted).
Record reveals that the learned AR in addition to the above documents also submitted the following documents: - a. The bank statements of all bank accounts maintained by the taxpayer; b. Power of attorney given by Mr. Imdad Hussain son of Fazal Dad (CNIC No. 61101-038281 1-3) and sale agreement to sell on behalf of him, his House No. 475A, Street No. 10, Sector F-10/2, Islamabad; c. A copy of the cheque of Rs.10 (million) given by Mr . Muhammad Khaleeque; d. A copy of the deposit slip of the said cheque; e. Wealth statement along with reconciliation of wealth and inflow; and f. Evidence of house hold, utility expenses and other educational expenses etc. Record further reveals that the DCIR accepted that the deposits to the extent of Rs.14.984 (million) have been explained but on the other hand, the same have not been subtracted from the total amount confronted and added under section 111 of the Income Tax Ordinance, 2001; Further , the DCIR on the one hand has admitted the inflow of Rs.11.563(m) but on the other hand, the accretion in wealth of Rs.10,280,425 against Code No. 703003 of wealth statement and the gross inflow of Rs.10,084,175 against code No. 7048 of wealth statement have been added without any rhyme and reason, unlawfully and illegally . We are of the view that when the inflow has been explained, admitted and notice on this point withdrawn by the DCIR, thereafter , neither the gross inflow or accretion in asset can be added as unexplained because this is the outcome of the inflow which has been accepted by the DCIR. It is evident from the above facts and figures that the DCIR has not appli ed his mind, as the nature and source of all credit entries have been explained by the taxpayer , therefore, no addition was warranted under section 1 11 of the Income Tax Ordinance, 2001.
As far as the written arguments of learned AR and rebuttal/parawise comments of the Department are concerned, we find that the Department has failed to file satisfactory rebuttal as he has not given any explanation on illegal and unlawful additions made by the DCIR under section 111 of the Ordinance even when these were explained by the taxpayer; In view of the above circumstances; we hold that the DCIR proceeded unlawfully and made all addition illegally under section 111 of the Income Tax Ordinance, 2001 even when the nature and source of deposits was explained.
We hold that the learned CIR (Appeals-II) was not able to appreciate the facts of the case and legal provisions on merit and failed to impart justice to the appellant/taxpayer . We, therefore, vacate the orders of both the officers below and direct to accept the declared version of the appellant tax payer .
5. The appeal is disposed of f in the above manner .