SHAHID MASOOD MANZAR, CHAIRMA N---The titled appeal filed at the instance of taxpayer calling in question impugned Order passed under section 129(1) dated 17-03-2021 by the learned Commissioner Inland Revenue of Appeal, R.T .O, Gujranwala on the following grounds: - "1. The order under sections 122(1)1 122(5)(ii) of the Ordinance, 2001 passed by Inland Revenue Officer is illegal and unlawful as it is contrary to law and the facts of the case proceeded ex parte without providing any opportunity of being heard to the appellant.
2. Primarily , a notice dated 12-07-2018 titled as "Notice under section 111(1) (b) of The Income Tax Ordinance, 2001 - Tax Year 2014" having mention in its body , the provisions of section 111(1) (d) (i) as well on the basis of which the additions are having eventually been made which is not only baseless and unjustified but also illegal and unlawful against the facts of the case. It appears that the assessing officer is vacillating between double opinions as to whether the case is to be made on the basis of unexplained assets or it is the case of unexplained income.
3. The order passed under sections 122(1)/122(5)(ii) of the Ordinance, 2001 is based on mere presumption, surmises and guess work hence; not maintainable in the eyes of law and is without any reason or basis.
It is worth to mention here that the appellant has already availed Amnesty Scheme titled as Voluntary Declaration of Domestic Assets Ordinance, 2018 whereunder; its section 10 at its Serial No. 1 has declared Undisclosed Income worth Rs. 122,075,313 belonging to tax year-2014 out of composite aggregate figure of Rs. 492875,000 for tax years 2013 to 2017. This amount is calculated in the table given as under:-- Tax Years 2013 2014 2015 2016 2017 Undeclared sales1,233,872,561 1,382,367,343 1,315,147,064 1,519,643,097 1,101,840,851 Cost of sales 804,917,370 887,331,144 360,323,062 994,579,837 719,307,796 Selling expenses71,396,047 78,854,162 76,513,252 87,239,899 62,935,228 General and admin expenses269,972,91 1 294,106,724 285,1 15,770 329,028,512 238,374,652 Undisclosed income87,586,233 122,075,313 93,194,980 108,795,299 81,223,175 Total 492,875,00087,586,233 122,075,313 93,194,980 108,796,299 81,223,175
5. In view of above, total undisclosed income worth Rs. 492,875,000/- is declared in above said amnesty scheme as envisaged in appellant's declaration dated 30-06-2018 (Copy annexed as "D"). Since, the appellant has disclosed his true sales, cost of sales and all of expenditures incurred in its respe ct and has faithfully worked out undisclosed income on its basis therefore , no more tax liability could be imposed on him. As such, assessment and taxation of amnesty declared income is unwarranted, illegal and merits to be deleted on this score alone.
The amnesty declaration made by appellant has been used as evidence against him for the purpose of proceedings relating to imposition of income tax liability under the Ordinance, 2001 . This at has been done against the provisions of section 12 of the Voluntary Declaration of Domestic Assets Ordinance, 2018. Further , confidentiality has been sabotaged by the Inland Revenue Officers themselves including the Officers of Directorate of Intelligence and Investigation Inland Revenue, Lahore, the Officers of Inland Revenue, Regional Tax Office, Gujranwala and at the last, the Office of Learned Commissioner of Appeals which is against the confidence given in section 1 1 of the V oluntary Declaration of Domestic Assets Ordinance, 2018.
7. Learned Commissioner of Appeals has differentiated "Undisclosed Income" from "Unexplained Deemed Income" and based on this assertion, has erred to maintain that tax has to be charged on unexplained deemed income worth Rs. 1,382,367,343/- as confronted to the appellant for the tax year, 2014 instead of undisclosed income worth Rs. 122,075,313/- as shown by appellant in his declaration made under the amnesty scheme titled as Voluntary Declaration of Domestic Assets Ordinance, 2018.
8. Admittedly , the word, "undisclosed income" has neither found any definition given in the Voluntary Declaration of Domestic Assets Ordinance, 2018 nor it has been defined elsewhere at any place in the Income Tax Ordinance, 2001 however , its reference could have been found from the provisions of section 120(A) of the Ordinance, 2001 which though omitted through Finance Act, 2013 yet one is left with the definitio n of "undisclosed income" in its subsection (4) in the way given hereunder:-- Subsection (4) of omitted section 120A: For the purpose of this section.--(i) "undisclosed income" means any income, including any investment to be deemed as income under section 111 or any other deemed income, for any year or years, which was chargeable to tax but was not so charged.
9. In view of above, it is clear beyond any shadow of doubt that the very concerned terminology of "undisclosed income" is and means any income which was chargeable to tax but was not so-ch arged. The concept of "deemed income" as given in section 13 of the Income Tax Ordinance, 1979 has been abolished with the repeal of old Income Tax Ordinance, 1979 and it is better to say that learned Commissioner of Appeals has attempted to re- enforce it in the name of a new terminology , "unexplained deemed income" to tax the gross sales of appellant instead of his income in terms of provisions of section 111(1)(d) of the Ordinance, 2001. After repeal of section 13 of the Ordinance, 1979 and after omission of section 120A of the Ordinance, 2001, the concept of "deemed income" is no more existed on the statutes book and cannot be re-enforced under section 111(1) (d) of the Ordinance, 2001 as done by learned Commissioner of Appeals.
10. The scope of section 111(1)(d) of the Ordinance, 2001 is very specific for the persons who has concealed income or has furnished inaccurate particulars of income including (i) suppression of any production, sales or any amount chargeable to tax or (ii) the suppression of any items of receipts liable to tax are whole or in part. The production and sales are the particulars of income but not income by itself and which if found inaccurate cannot be taxed as income. The provisions of this section never encapsulates that suppressed gross sales as worked out from sales ledgers and bank credit entries are to be treated as concealed incom e or better to say undisclosed income instead income from business does allow deductions of all business expenditures incurred on its carry and has taxed net profits instead of gross sales. Gross sales of a person cannot be treated his income to create tax liability against him instead it is his net profit in its business which has always to be taxed.
11. Learned Commissioner of Appeals has introduced chargeability of income tax. on unexplained deemed income as this very concept has become obsolete as given in the clauses (a) to (e) of subsection (1) of section 13 of the Income Tax Ordinance, 1979 which is now repealed instead of taxing unexplained income or unexplained assets as provided in clauses (a) to (e) of sub-sectio n (1) of section 111 of the Income Tax Ordinance, 2001 which is currently operative. The version of unexplained deemed income is re-enforced unjustly to tax gross sales of appellant instead of his income in the form of net profits.
12. Learned Commissioner of Appeals, likewise the Assessing Officer in this case , appears to be confused as to whether tax liability is to be created on the basis of unexplained income which according to him is unexplained deemed income or on the basis of unexplained assets. If it is a case of unexplained assets then the amount credited, value of the investment, money , value of the article, or amount of expenditure not adequately explained shall be included in the person's income chargeable to tax under the head "Income from Other Sources".
Conversely , in case of any suppressed amount of production, sales or any amount chargeable to tax or of any item receipts liable to tax shall be included in the person's income chargeable to tax under the head "income from business" to the extent, it is not adequately explained.
13. Since, in the case at hand, addition under section 111(1) (d) (i) is made under the head "income from business" therefore, tax liability has to be calculated in terms of Part-IV , Division-I and Division-II of the Ordinance, 2001 whereunder , section 18 and section 20 it is provided as under:-- PART-IV DIVISION-I Income from Business
18. Income from business. ---(1) The following incomes of a person for a tax year, other than income exempt from tax under this Ordinance, shall be chargeable to tax under the head "Income from business"--
(a) the profits and gains of any business carried on by a person at any time in the year;
(b) any income derived by any trade, professional or similar association from the sale of goods or provisions of services to its member;
(c) any income from the hire or lease of tangible moveable property;
(d) the fair market value of any benefit or perquisite, whether convertible into mone y or not, derived by a person in the course of, or by virtue of, a past, present, or prospective business relationship [.] [Explanation-- ............................................................................................................]
(e) any management fee drive by management company (including a modaraba [management company]).
(2) ............................................................................................................
(3) ............................................................................................................
(4) ............................................................................................................
DIVISION-II Deduction: General Principles
20. Deduction in computing income chargeable under the head "Income from business".----( 1) Subject to this Ordinance, in computing the income of a person chargeable to tax under the head "Income from business" for a tax year, a deduction shall be allowe d for any expenditure incurred by the person in the year [wholly and exclusively for the purpose of business] [(1A) ............................................................................................................
(2) ............................................................................................................
(3) ............................................................................................................
14. The Inland Revenue has charged tax on total sales as per sales ledgers vis-a-vis bank credits of Rs.1,382,367,343/- and addition of Rs.1,260,292,030/- made in appellant's taxable income on this account under section 111(1)(d)(i) of the Ordinance, 2001 for the tax year-2014 is not only illegal and unlawful but also unjustified and ill-founded not tenable in the eyes of law. It is also found contrary to the scheme of levy of income tax as provided under section 18 and section 20 of the Ordinance, 2001 wherein computing income of a person chargeable to tax under the head "income from business" for a tax year, a deduction shall be allowed for any expenditure incurred by the person in the year for the purpose of business. Reliance in this regard is placed on the judgment of the Hon'ble Appellate Tribun al Inland Revenue (Headquarter) Bench, Islamabad in case of Messrs Nawab Karyana Store, Gujrat v. The Commissioner Inland Revenue, Sialkot through its I.T.A. No.55/1B/2019 and 1.T .A No. 56/1B/2019 dated 21-04-2020 [2021 PTD 1223].
The relevant extract is reproduced herein below:- We have held in a number of cases that clause (d) of subsection (1) of section 111(ibid) does not warrant taxation of the whole of the credit entries/deposits in a bank account maintained by a respondent taxpayer treating the same to be "net income" chargeable to tax. Only that part of the "bank deposits/cre dit entries" is chargeable to tax, which can be termed as "total income". Whole of the "credit entries/deposits " in a bank account run by a businessman can never be his "total income".
Instead the credit entries represent the "SALES", which, after defraying the "COST OF SALES" i.e. [Opening Stock plus Purchases minus Closing Stock] give rise to the "GROSS PROFIT", which, after deductions of Profit and Loss Account Expenses, yield the "NET PROFIT". It is "NET PROFIT" which according to the above reproduced sub- clause (ii) of clause (d) of subsection (1) of section 111 of the Income Tax Ordinance, 2001 is the "item of receipt liable to tax in whole or in part".
15. Nevertheless, the taxation of already declared and taxed amounts is unlawful, unjustified and ab initio void because this bad intension falls within the ambit of the principle of DOUBLE JEOP ARDY always to be deprecated particularly in fiscal matters. Reliance is placed on the judgments reported as [2015 PTD 1839], [2017 SCMR 1006 ] and [ PLD 2005 SC 605 ].
Reliance is further placed on the judgment of Hon'ble Lahore High Court, Lahore in case of Messrs Seven-up Bottling Company (Pvt. Limited v. Lahore Development Authority (L.D.A) Lahore through managing director reported as [2003 CLC 513] wherein "Provisions of a statue must be read as a whole--No tax or fee to be levied twice on same goods as per golden rule of interpretation of fiscal statute".
16. There is no denying to the fact that issuance of show-cause notice regarding the same taxed amounts tantamount to double jeopardy which could not be given legal credence but also offends and defies the fundamental rights set out in Article 13 of Constitution of Islamic Republic of Pakistan, 1973 which provides that no person shall be prosecuted and punished for the same offence more than once. The doctrine of "double jeopardy" which corresponds to the principle of "Autre Fois Acquit and Autre Fois Convict" always prohibits the duplicate trial and duplicate punishment for the same of fence.
17. The last but not the least, discovering certain credit entries in appellant's banks without having any nexus to sales and supplies cannot be treated as income derived from business and is therefore; not liable to tax. For the purpose of levy of tax, it would be necessary to show existence of some materi al to indicate that acquisition of money is resulted from unexplained sources. In absence of any corroborating material evidence correlating receipts of money from unexplained resources, no tax can be levied merely on some assumption and presumptions, whims and conjectures and if any tax liability is created otherwise than in these manners, it would remain unsubstantiated in thin air like a building without any pedestal of it cemented into the Earth. Reliance is placed on the judgment of Hon'ble Sindh High Court, Karachi in case of "Messrs Al-Hilal Motors Stores and others reported as 2004 PTD 868 "
2. Brief facts are that the income tax return for the tax Year-2014 was filed by declaring net income of Rs.
2,668,235/- as against declared sales of Rs.30,214,798/-Assessment stood finalized under section 120 of the Ordinance, 2001. Later on, "definite inform ation" was received from the Directorate of Intelligence and Investigation IR, Lahore through its letter C.No. DD-IV/2-376/2018/2544 dated 14-05-2018 in the shape of gross sales, bank and cash ledgers, etc which were verified by Mr. Abdul Ghaf far (Owner/Member of Association of Persons registered in the name of M/s. Shahposh Garments the appellant who duly singed and placed thumb impression thereon. During the course of investigation, has allegedly surfaced on record that appellant is involved in suppression of sales.
The comparison of sales as per gross sales ledgers via-vis sales proceeds confirmed from bank credit entries with that of sales declared in respective income tax returns has revealed that appellant is purportedly involved in suppression of sales worth Rs.6,552,870,916/- for the tax years 2013, 2014, 2015, 2016 and 2017 (07-2016 to 02- 2017). The detailed statistics of suppression of sales are given as follows:-- Sr.
No.Tax year Actual sales as per Gross sales ledgersDeclared Sales Suppressed Sales 1 2013 1,268,121,710 34,249,149 1,233,872,561 2 2014 1,412,582,141 30,214,798 1,382,367,343 3 2015 1,391,499,841 76,352,777 1,315,147,064 4 2016 1,599,281,842 79,638,745 1,519,643,097 5 2017 1,190,425,959 88,585,108 1,101,840,851 Total 6,861,91 1,493 309,040,577 6,552,870,916 The charges of suppression of sales have said to be corroborated from various bank receipts confirming actual sales proceeds made during the period in question.
Based on above, appellant was called upon vide notice dated 21-06-2018 under section 122(9) of the Ordinance, 2001 as to why income tax (including Worker Welfare Fund-WWF) worth Rs. 501,990,415/- may not be assessed under section 122(1)(5)(ii) of the Ordinance, 2001 and as to why additions on account of undisclosed income worth Rs.1,357,334,866/- may not be made in appellant's income under section 111(1) (d)(i) for the tax Year-2014. The assessment order treated as having issued under section 120 of the Ordinance, 2001 may not be amended in the light of definite information received in the form of gross sales ledgers vis-a-vis bank credit entries under sections 122(5) (ii) and 111(1) (d) (i) of the Ordinance, 2001 as followed by reminders issued on 10-06-2020 and 23-06-2020 under section 122(9) of the Ordinance, 2001.
Upon culmination of adjudication, Assistant/Deputy Commissioner IR has adversely adjudged income tax liabilities that appellant confronted an amount of Rs. 1,3822,367,343/- as difference between actual sales and sales declared in return furnished for the year in question out of which amnesty was availed on undisclosed income of Rs.122,075,313/- leaving behind a difference of Rs.1,260,292,030/- as unexplained income attracting income tax of Rs.457,287,517/ - is added in the total income under section 111(1)(d) and amendment to this effect in the assessment was made by him under section 122(1)(5) of the Ordinance, 2001 through his Assessment Order dated 10-12-2020.
Feeling aggrieved, the first appeal was preferred before the learned Commissioner IR of Appeals, Gujranwala who has upheld impugned liability through its Order dated 17-03-2021. Feeling aggrieved by the said treatment, the appellant has come up in appeal before this Tribunal.
3. Learned counsel of appellant has contested impugned notices on the ground that a notice dated 12-07-2018 titled "Notice under Section 111(1)(b) of The Income Tax Ordinance, 2001--T ax Year 2014" having mention in its body , the provisions of section 111(1)(d)(i) as well on the basis of which the additions have eventually been made, is not only baseless and unjustified but also illegal and unlawful against the facts of the case. He contended that the assessing officer was vacillating between double opinions as to whether the case is to be made on the basis of unexplained assets or it is the case of unexplained income.
He contended that the appellant has already availed Amnesty Scheme Voluntary Declaration of Domestic Assets Ordinance, 2018 under; its section 10 at its Serial No. 1 has declared Undisclosed Income worth Rs.122,075,313 belonging to tax year-2014 out of composite aggregate figure of Rs. 492,875,000 for tax years 2013 to 2017. The calculations, is tabulated in the statistics given as under:-- Tax Years 2013 2014 2015 2016 2017 Undeclared sales1,233,872,561 1,382,367,343 1,315,147,064 1,519,643,097 1,101,840,851 Cost of sales 804,917,370 887,331,144 360,323,062 994,579,837 719,307,796 Selling expenses71,396,047 78,854,162 76,513,252 87,239,899 62,935,228 General and admin expenses269,972,91 1 294,106,724 285,1 15,770 329,028,512 238,374,652 Undisclosed income87,586,233 122,075,313 93,194,980 108,795,299 81,223,175 Total 492,875,00087,586,233 122,075,313 93,194,980 108,796,299 81,223,175 According to him in view of above table, total alleged undisclosed income worth Rs. 492,875,000/- is declared in above said amnesty scheme as envisaged in appellant's declaration dated 30-06-2018' and Copy of amnesty scheme declaration is placed on record. Since, appellant has disclosed his true sales, cost of sales and all of expenditures incurred in respect and has faithfully worked out undisclosed income on its basis therefore; no more tax liability could be imposed on him. As such, assessment and taxation of amnesty declared income is unwarranted, illegal and merits to be deleted on this score alone.
The learned A.R argued that amnesty declaration made by appellant has been used as evidence against him for the purpose of proceedings relating to imposition of income tax liability under the Ordinance, 2001. This act has been done against the provisions of section 12 of the Voluntary Declaration of Domestic Assets Ordinance, 2018 as confidentiality has been sabotaged by the Inland Revenue Officers themselves including the Officers of Directorate of Intelligence and Investigation Inland Revenue, Lahore, the Officers of Inland Revenue, Regional Tax Office, Gujranwala and at the last, the Office of Learned Commissioner of Appeals which is against the confidence given in section 1 1 of the V oluntary Declaration of Domestic Assets Ordinance, 2018.
He contended that learned CIR(A) has differentiated "Undisclosed Income" from "Unexplained Deemed Income" and based on this assertion, he has erred to charge the appellant with unexplained deemed income to the effect of amount as confronted the impugned notice for the tax year, 2014 instead of the undisclosed income as shown by appellant in his declaration made under the amnesty scheme titled as Voluntary Declaration of Domestic Assets Ordinance, 2018.
It is contended that admittedly , the word, "undisclosed income" has neither found any definition given in the Voluntary Declaration of Domestic Assets Ordinance, 2018 nor it is defined elsewhere at any place in the Income Tax Ordinance, 2001 however , its referen ce could have been found from the provisions of section 120(A) of the Ordinance, 2001 which though omitted through Finance Act, 2013 yet one is left with the definition of "undisclosed income" in its subsection (4) in the way given hereunder:- Subsection (4) of omitted section 120A: For the purpose of this section.-- (i) "undisclosed income" means any income, including any investment to be deemed as income under section 111 or any other deemed income, for any year or years, which was chargeable to tax but was not so charged.
The learned counsel assailed that the very concerned terminology of "undisclosed income" means any income which was chargeable to tax but was not so-charged . The concept of "deemed income" as given in section 13 of the Income Tax Ordinance, 1979 has been abolished with the repeal of old Income Tax Ordinance, 1979 and learned Commissioner Appeals has attempted to re-enforce it in the name of a new terminology , "unexplained deemed income" to tax the gross sales of appellant instead of his income in terms of provisions of section 111(1)
(d) (i) of the Ordinance, 2001. After repea l of section 13 of the Ordinance, 1979 and after omission of section 120A of the Ordinance, 2001, the concept of "deemed income" is done away and is no more existed on the statutes book and cannot be re-enforced under sectio n 111(1)(d)(i) of the Ordinance, 2001 as made applicable by learned Commissioner Appeals.
He has opposed learned Commissioner of Appeals introducing chargeability of income tax on unexplained deemed income as this very concept has become obsolete as given in the clauses (a) to (e) of subsection (1) of section 13 of the Income Tax Ordinance, 1979 which is now repealed instead of taxing unexplained income or unexplained assets as provided in clauses (a) to (e) of subsection (1) of section 111 of the Income Tax Ordinance, 2001 which is currently operative. The version of unex plained deemed income is re-enforced unjustly to tax gross sales of appellant instead of his income in the form of net profits.
He argued that learned Commissioner Appeals, and the Assessing Officer in this case, appears to be confused as to whether tax liability is to be created on the basis of unexplained income which according to him is unexplained deemed income or on the basis of unexplained assets. If it is a case of unexplained assets then the amount credited, value of the investment, money , value of the article, or amount of expenditure not adequately explained shall be included in the person's income chargeable to tax under the head "Income from Other Sources".
Conversely , in case of any suppressed amount of production, sales or any amount chargeable to tax or of any item receipts liable to tax shall be included in the person's income chargeable to tax under the head "income from business" to the extent, it is not adequately explained.
It is pertinent to mention here that the scope of section 111(1)(d) of the Ordinance, 2001 is very specific for the persons who has concealed income or has furnished inaccurate particulars of income including (i) suppression of any production, sales or any amount Chargeable to tax or (ii) the suppression of any items of receipts liable to tax are whole or in part. The production and sales are the particulars of income but not income by itself and which if found inaccurate cannot be taxed as income. The provisions of this section never encapsulates that suppressed gross sales as worked out from sales ledgers and bank credit entries are to be treated as concealed income or better to say undisclosed income instead income from business does allow deductions of all business expenditures incurred on its carry and has taxed net profits instead of gross sales. Gross sales of a person cannot be treated his income to create tax liabilit y against him instead it is his net profit of his business which has always to be taxed.
The Officer has charged tax on total sales as per sales ledgers vis-a-vis bank credits entries by adding it in appellant's taxable income under section 111(1)(d)(i) of the Ordinance, 2001 for the tax year-2014 is not only illegal and unlawful but also unjustified and ill-founded not tenable in the eyes of law. It is also contrary to the scheme of levy of income tax as provided under section 18 and section 20 of the Ordinance, 2001 wherein computing income of a person chargeable to tax under the head "income from business" for a tax year, a deduction shall be allowed for any expenditure incurred by the person in the year for the purpose of busines s. Learned counsel of appellant has relied on the judgment of this Tribunal in case of Messrs Nawab Karyana Store, Gujrat v. The Commissioner Inland Revenue, Sialkot through its I.T.A. No. 55/IB/2019 and I.T.A No. 56/IB/2019 dated 21- 04-2020 [2021 PTD 1223].
It is argued that taxation of already declared and taxed amounts is unlawful, unjus tified and ab initio void because this bad intension falls Within the ambit of DOUBLE JEOP ARDY always to be deprecated particularly in fiscal matters. Reliance, he has placed on the judgments reported at [2015 PTD 1839], [2017 SCMR 1006 ] and [PLD 2005 SC 605]. Reliance is further placed on the judgment of Hon'ble Lahore High Court, Laho re in case of M/s. Seven-up Bottling Company (Pvt.) Limited v. Lahore Development Authority (L.D.A) Lahore through Managing Director reported as [2003 CLC 513] wherein it is held that "Provisions of a statue must be read as a whole--No tax or fee to be levied twice on same goods as per golden rule of interpretation of fiscal statute".
Learned AR contended that discovering certain credit entries in appellant's banks without having any nexus to sales and supplies cannot be treated as income derived from business and is therefore; not liable to tax. For the purpose of levy of tax, it would be necessary to show existence of some materi al to indicate that acquisition of money is resulted from unexplained sources. In absence of any corroborating material evidence correlating receipts of money from unexplained resources, no tax can be levied merely on some assumption and presumptions, whims and conjectures and if any tax liability is created otherwise than in these manners, it would remain unsubstantiated in thin air like a building without any pedestal of it cement ed into the Earth. The appellant has relied upon the judgment of Hon'ble Sindh High Court, Karachi in case of M/s. Al-Hilal Motors Stores and others reported as [2004 PTD 868] On the basis of these arguments learned AR requested to vacate the impugned orders of the of ficers below .
4. On the other hand, departmental representative supported impugned orders on similar grounds on the basis of the charges as levelled earlier in impugned notice as well as adjudged in consequent orders. She has strongly opposed the contention of appellant that expenditures whether directly or indirectly incurred thereon may be allowed for deductions against total gross sales. She has proposed to confirm chargeability of tax on gross sales as total income of the appellant instead of net profits earned by him out of his business. She asserted for disallowance of all direct and indirect expenses incurred on such gross sales as concealed by the appellant for the tax year in question. She has requested to uphold the impugned orders of the of ficers below and to reject the appeal.
5. We have examined the relevant case record and have heard cross arguments of the rival parties. The learned counsel of the appellant has assailed the very basic notice issued under section 111(1)(b) of The Ordinance, 2001 by arguing that it appears to be redundan t as in its body , the provisions of section 111(1)(d)(i) are, found invoked, on the basis of which the additions have eventually been made. The case is made out on account of unexplained income under section 111(1)(d)(i) and not for unexplained assets under section 111(1)(b) of The Ordinance, 2001.
Since in the instant case, additions are made under section 111(1)(d)(i) of the Ordinance, 2001 under the head "income from business" and not under the head of "income from other sources" therefore; tax liability in this case has to be calculated in terms of Part-IV , Division-I and Division-II of the Ordinanc e, 2001 whereunder , section 18 and section 20 of the Ordinance, 2001 specifically provides as under:- "Section 18. Income from business.----(1) The follow ing incomes of a person for a tax year, other than income exempt from tax under this Ordinance, shall be chargeable to tax under the head "Income from business"--
(a) the profits and gains of any business carried on by a person at any time in the year;
(b) any income derived by any trade, professional or similar association from the sale of goods or provisions of services to its member;
(c) any income from the hire or lease of tangible moveable property;
(d) the fair market value of any benefit or perquisite, whether convertible into mone y or not, derived by a person in the course of, or by virtue of, a past, present, or prospective business relationship [.] [Explanation-- ............................................................................
(e) any management fee drive by management company (including a Modaraba [management company]).
(2) .......................................
(3) .......................................
(4) ......................................
DIVISION-II Deduction: General Principles
20. Deduction in computing income chargeable under the head "Income from business ".----(1) Subject to this Ordinance, in computing the income of a person chargeable to tax under the head "Income from business" for a tax year, a deduction shall be allowe d for any expenditure incurred by the person in the year [wholly and exclusively for the purpose of business] "
Based on above mentioned provisions, it is established that deductions shall always be allowed for any expenditure incurred by the person in the year wholly and exclusively for the purpose of busine ss carried out in that very year.
Contrarily , the Inland Revenue Officer has imposed tax on gross sales as ascertained from sales ledgers vis--vis bank credit entries of the appellant instead of charging tax on net profits earned from the business. We have found this act contrary to the scheme of levy of income tax as provided under section 18 and section 20 of the Ordinance, 2001 wherein computing income of a person chargeable to tax under the head "income from business " for a tax year, a deduction shall be allowed for any expenditure incurred by the person in that year for the purpose of business. Learned counsel of appellant has rightly relied upon the judgment of this Tribunal in case of Messrs Nawab Karyana Store, Gujrat v. The Commissioner Inland Revenue, Sialkot in I.T. A . No. 55/IB/2019 and I.T.A No. 56/IB/2019 dated 21-04-2020 [2021 PTD 1223] on the subject matter . The relevant extract is reproduced herein below:-- "We have held in a number of cases that clause (d) of subsection (1) of section 111(ibid) does not warrant taxation of the whole of the credit entries/deposits in a bank account maintained by a respondent taxpayer treating the same to be "net income" chargeable to tax. Only that part of the "bank deposits/cre dit entries" is chargeable to tax, which can be termed as "total income". Whole of the "credit entries/deposits " in a bank account run by a businessman can never be his "total income".
Instead the credit entries represent the "SALES", which, after defraying the "COST OF SALES" i.e. [Opeding Stock plus Purchases minus Closing Stock] give rise to the "GROSS PROFIT", which, after deductions of Profit and Loss Account Expenses, yield the "NET PROFIT". It is "NET PROFIT" which according to the above reproduced sub-clause (ii) of clause (1) of subsec tion (1) of section 111 of the Income T ax Ordinance, 2001 is the "item of receipt liable to tax in whole or in part".
Liability as to tax on income from busin ess must be created on the mechanism as enshrined in the Part-IV , Division-I and Division-II of the Ordinance, 2001 where under , section 18 and section 20 of the Ordinance, 2001 when read in conjunction with each other , facilitates deductions of business expenditures incurred on income earned and it is the net profit which has to be taxed and not the gross sales deeming them as undisclosed income. The learned Commissioner of Appeals has wrongly upheld tax on gross sales as unexplained deemed income instead of undisclosed income declared by the appellant under the amnesty scheme titled as Voluntary Declaration of Domestic Assets Ordinance, 2018. The word, "undisclosed income" has neither defined in the Voluntary Declaration of Domestic Assets Ordinance, 2018 nor it has elsewhere; found at any place in the Ordinance,- 2001 however , its reference could have been made from the provisions of section 120(A) of the Ordinance, 2001 which though omitted through Finance Act, 2013 yet one is left with the definition of "undisclosed income" in its subsection (4) ibid as it is already reproduced above.
As such, the term "undisclosed income " means any income which was chargeable to tax but was not so- charged . The concept of B "deemed income" as given in section 13 repealed of the Income Tax Ordinance, 1979 has been abolished. Learned Commissioner Appeals has attempted to re-enforce this concept in the name of, "unexplained deemed income" to tax the gross sales of appellant instead of his income in terms of provisions of section 111(1) (d) (i) of the. Ordinance, 2001. After repeal of section 13 of the Ordinance, 1979 and after omission of section 120A of the Ordinance, 2001, the concept of "deemed income" is no more existed on the statutes book and cannot be re-enforced under the garb of the provisions of section 111(1) (d) (i) of the Ordinance, 2001 as done by learned Commissioner of Appeals in this case.
The scope of section 111(1)(d) of the Ordinance, 2001 is every definite for the persons allegedly concealing income or furnishing inaccurate particulars of income that is (i) suppression of any production, C sales or any amount chargeable to tax or (ii) the suppression of any items of receipts liable to tax as a whole or in part. The counsel has rightly pointed for the production and sales are the particulars of income but not income by itself and which if found inaccurate cannot be taxed as income . The provisions of this section never offer suppressed sales to be treated as undisclosed income instead income from business does allow deductions of all business expenditures incurred on its carry taxing net profits instead of total gross sales. We agree with the contention of appellant that gross sales of a person cannot be treated his total income chargeable to tax instead it is the net profits earned from the business which has to be taxed.
It is therefore; confirmed that the appellant has rightly availed Amnesty Scheme under the Voluntary Declaration of Domestic Assets Ordinance, 2018 where under; its section 10 at its Serial No. 1; he has declared Undisclosed Income after deducting all sort of business expenditures permissible under law and has correctly discharged his liability as such; no interference is called for in the declaration made by him under this amnesty scheme.
There is no denying to the fact that issuance of a notice regarding the same taxed amounts tantamount to double jeopardy which could not be given legal credence but also offends and defies the fundamental rights set out in Article 13 of Constitution of Islamic Republic of Pakistan, 1973 which provides that no person shall be prosecuted and punished for the same offence more than once. The doctrine of "double jeopardy" which corresponds to the principle of "Autre Fois Acquit and Autr Fois Convict" always prohibits the duplicate trial and duplicate punishment for the same of fence.
Based on above premises, we have found that impugned liability is raised by taxing the total gross sales instead of imposing tax on net profits earned from the business after defraying all such business expenditures incurred thereon as permissible under law, this act on the part of Inland Revenue Officer is declared to be illegal, unlawful and unfounded particularly when these expenses are duly documented for which books of accounts are maintained as per requisitions of law. Since, the appellant has already discharged his liabilities as of income tax through his declaration made under the tax amnesty scheme given by the Federal Government therefore; impugned notices and consequent orders are hereby vacated on the single ground as dilated upon in the above paragraphs therefore; no needs remain left behind to make more deliberations on other factual and legal grounds taken at the bar.
The appeal is decided in the manner cited supra.