MRS. SEEMA IMRAN, JUDICIAL MEMBER.----These three income tax appeals have been filed by the appellant taxpayer against the consolidated order of learned Commissioner Inland Revenue (Appeals-V) Karachi dated 05-06-2018 for the tax years 2014, 2015 and 2016 all dated 22-03-2018 passed under section 122(1) of the Income Tax Ordinance, 2001.
2. Following common grounds have been taken by the appellant in all three appeals:-
1. That the order of the Commissioner Inland Revenue, (Appeals-V), Karachi, passed on 05-06- 2018 under section 122(1)(5) is wrong on facts and bad in law being finalized on incorrect appreciation of the facts of the case and legal position on the subject hence, without lawful authority and not maintainable in the eyes of law.
2. That the Commissioner Inland Revenue, (Appeals) has erred in confirming the action taken under section 122(5) read with section 111(1)(b) of the Income Tax Ordinance, 2001 and the order passed under section 122(1) of the Ordinance.
3. That the Commissioner Inland Revenue, (Appeals) has erred in holding that the provisions of section 111 were squarely applicable in this case.
4. That the Commissioner Inland Revenue, (Appeals) was not justified in passing the impugned order on incorrect appreciation of the facts of the case and misconstruing and misinterpreting the relevant provisions of law.
5. That the Commissioner Inland Revenue, (Appeals) was not justified in treating the guesswork, assumptions and personal whims of the assessing officer as the definite information within the meaning of section 122(5) of the income Tax Ordinance for amendment under section 122(1).
6. Without prejudice to the above the issuance of multiple of notices and insistence of the assessing officer as well as the Commissioner Inland Revenue, (Appeals) for production of books of accounts, bank statements, party-wise ledgers and other details as per the notices of the DCIR for verification, in itself is an evidence to show that no definite information was available with the assessing officer to issue the notice under section 122(9) read with section 122(5) and finalize the impugned contended assessment order 122(1).
7. That the Commissioner Inland Revenue, (Appeals) has erred in dismissing the appeal filed by the taxpayer on the ground that books of accounts and cask flow were not produced before the assessing officer.
That the Commissioner Inland Revenue, (Appeals) has erred in ignoring the fact that books of accounts could only be produced under section 177 of the Income Tax Ordinance, 2001 whereas appellant's case was not selected for audit under section 177.
9. That the Commissioner Inland Revenue, (Appeals) has erred in rejecting the contention of the AR that the definition of imputable income as contained in subsection (28A) of section 2 of the Income Tax Ordinance, 2001 is for the purposes of section 4B of the Ordinance and cannot be applied to any other provisions of the Ordinance.
10. That the Commissioner Inland Revenue, (Appeals) has erred in relying on the judgment of Hon'able Supreme Court of Pakistan reported as 1997 PTD 1555 (Elahi Cotton Mills and others v.
Federation) as the same was not relevant. No provisions similar to section 80C(5) of the repealed Income Tax Ordinance, 1979 is available in the Income Tax Ordinance, 2001, therefore reliance is misconceived and misplaced.
11. That the Commissioner Inland Revenue, (Appeals) was not justified in rejecting the taxpayer's appeal with the remarks based on her personal whims and assumption such as "exorbitant profit rates, as high as 50% of turnover are unusual and rarely seen" and that appellant cannot be allowed to misuse the FTR regime as a means of whiten or launder unlimited amount of income".
This shows her bias and mala fide towards the taxpayer.
12. That the Commissioner Inland Revenue, (Appeals) was not justified in passing remarks like "appellant cannot be allowed to misuse the FTR regime as a means of whiten or launder unlimited amount of income" No issue relating to money laundering was subjudice before her nor was she competent to pass such remarks. Such derogatory remarks may please be directed to be expunged from the order of Commissioner Inland Revenue, (Appeals).
3. Brief facts of the case are that the appellant is an exporter and has paid tax on exports under section 154 of the Ordinance, falling under final tax regime (FTR) in terms of section 169 of the Income Tax Ordinance, 2001. The appellant accordingly filed statements under section 115(4) of the Ordinance together with wealth statements and its reconciliation in the light of section 116 of the Ordinance. The learned DCIR on examination of wealth reconciliations observed that the appellant had claimed higher incomes in wealth reconciliations than the imputable income worked back on the basis of tax paid on exports under section 154 of the Ordinance. The DCIR accordingly worked out 'imputable income' based on the tax collected by the banks under section 154 on exports, covered under FTR in terms of section 169 of the Ordinance and arrived at impugned additions in all three tax years, treating the same as income from unexplained sources assessable under section 111 being the difference of income shown in wealth statement and the 'imputable income worked' out by him on the basis of tax collected and section 154. During the proceedings under section 122(1) the DCIR asked the appellant to produce books of accounts and documents for verification and examination in support of income declared in wealth statement. On failure of the taxpayer to produce books of accounts the DCIR finalized the impugned orders.
4. Being aggrieved with the order of the DCIR, the taxpayer/appellant filed appeal before the Commissioner (Appeals), who vide his order dated 05.06.2018 confirmed.
5. Being dissatisfied with the order of the Commissioner (Appeals), the taxpayer/appellant has come up to this forum for redressal of his grievances.
6. On the date of hearing, Syed Riazuddin and Mr. Vishno Raja Qavi Advocates appeared on behalf of the Appellant/Taxpayer while Mr. Muhammad Aslam Jamro, D.R attended the case on behalf of the Respondent/Department.
7. The learned AR of the taxpayer argued that the learned CIR(A) was not justified in upholding the orders of the DCIR under section 122(1)/(5) of Income Tax Ordinance, 2001, which according to them were void ab initio and illegal, based on whims, guess work and assumptions hence there was nothing on record calling for impugned action by making additions to the declared income of the appellant under section 111 of the Ordinance. It has further been contended that the impugned orders of the learned Deputy Commissioner under section 122(1)/(5) of the Ordinance and confirmed by the learned CIR (A) are in complete disregard of the facts of the case and legal position on the subject, hence are not maintainable in the eyes of law.
8. The learned ARs have contended that following objections were raised by the AR/ appellant before the two authorities below: a. That DCIR had no 'definite information' in his possession to acquire jurisdiction under section 122(5) and to amend the deemed order tinder subsection (1) of section 122 of the Ordinance. b. That concept of imputable income by working back the final tax was not available in the Income Tax Ordinance, 2001 after omission / deletion of subsection (4) of section 169 of the Ordinance. c. That word 'imputable income' were alien to the Income Tax Ordinance, 2001 during the periods under consideration.
That words 'imputable income' under section 2(28A) introduced through F.A., 2015 has restricted application with reference to levy of Super Tax under section 4B of the Ordinance.
9. According to the learned ARs the learned CIR (A) rejected the appellant's contention with the following observations:- (0 that the concept of income worked back on final tax was approved by the Honourable Supreme Court of Pakistan in the judgment reported as 1997 PTD 1555 in the case of Elahi Cotton Mills Limited and placed reliance on the following extract from the cited judgment:- "In our view, subsection (5) of section 80-C cannot be used by the Income Tax Department for defeating the above objective of the legislation and therefore, resort cannot be made to subsection (5) of the above section as a matter or course. It will be invoked sparingly in exceptional circumstances. If an assessee makes profit more than what is subject to tax under subsection (1) of section 80-C, the Revenue has no power to charge tax on the additional income so long as the above additional income is earned by him on account of the transactions, which have been subjected to tax under subsection (1) of section 80-C. However, if the assessee claims that he has made unusual profit, for example, he has earned Rs.100,000/- instead of Rs.5,000/-, which would have been the normal profit, the protection of above subsection (4) of section 80-C will still be available to him, if he can on the basis of reliable evidence prove the above fact to the satisfaction of the forums provided under the Ordinance."
(ii) That concept of 'imputable income' under section 2(28A) catered such situation for addition of alleged excess income.
(iii) That the DCIR has acquired 'definite information' to satisfy the condition of subsection (5) of section 122.
(iv) That appellant failed to produce reliable evidence and books of accounts in support of FIR income.
10. The learned ARs of the taxpayer stated that DCIR has framed impugned order without acquiring lawful jurisdiction and the CIR(A) was not justified in confirming the said order of DCIR without considering appellant's legal objections. According to the learned ARs the reliance by the learned CIR(A) on the judgment of Supreme Court reported as 1997 PTD 1555 was wrong and misplaced.
The said judgment is in respect of the provisions of subsection (5) of section 80C of the repealed Ordinance of 1979. No such or corresponding provisions were available in the present Income Tax Ordinance during the tax years under appeal. It has been contended that at the time of promulgation of the present law i.e. the Income Tax Ordinance, 2001, a provision para-meteria to subsection (5) of section 80C of the repealed Ordinance of 1979 was available in the income Tax Ordinance, 2001 in the shape of subsection (4) of section 169 of the Income Tax Ordinance, 2001.
The learned ARs have made comparison of section 80(5) of the repealed Ordinance of 1979 and section 169(4) of Income Tax Ordinance, 2001 in the following manner:- Subsection (5) of section 80C of Repealed OrdinanceSubsection (4) of section 169 of the Income Tax Ordinance, 2001
(5) Where an assessee, while explaining the nature and source of any sum, investment, money, valuable article, excess amount or expenditure, referred to in section 13, takes into account any source of income which is subject to tax in accordance with the provisions of this section, he shall not be entitled to take credit of any sum as is in excess of an amount which if taxed of an amount which if taxed at a rate or rates, other than the rate applicable to income chargeable to tax under this section, would have resulted in tax liability equal to the tax payable in respect of income under this section.(4) Where a taxpayer, while explaining the nature and source of any amount, investment, money, valuable article, expenditure, referred to in section 111, takes into account any source of income which is subject to tax in accordance with the provisions of sections 148 153, 156 or subsection (5) of section 234, he shall not be entitled to take credit of any sum as is in excess of an amount which if taxed at a rate or rates other than the rate applicable to the income chargeable to tax under aforesaid section 148 153, 154, 156 or subsection (5) of section 234 would have resulted a tax liability equal to the tax payable in respect of income under any of the aforesaid section.
11. The learned ARs of the taxpayer further stated that the provision of subsection (4) of section 169 were omitted / deleted through Finance Act, 2004 and was never re-introduced in the 2001 Ordinance again. Therefore, no provision similar to subsection (5) of section 80C of the Repealed Ordinance of 1979 was available when the impugned amended assessment orders were passed by the DCIR in the appellant's case.
12. The learned AR of the taxpayer contended that both the officers below have coined expression "imputable income" for tax years under appeal. These words were not in the statue in tax years under appeal. Entire Income Tax Ordinance is silent about the concept of "imputable income" in these tax years. Thus alien words were coined and created on imaginary figures and worked out illegal and wrong income under the garb of unexplained income under section 111. There was no lawful authority available with both the officers below for making alleged addition under section 111 based on imaginary, coined and created words "imputable income" for tax years under appeal.
Accordingly the edifice built by the DCIR and endorsed by the CIR(A) in their respective impugned orders was based on incorrect appreciation of the relevant provisions of law, which did not exist in the Income Tax Ordinance, under which impugned order was passed / confirmed by the two authorities below. Accordingly the impugned orders were essentially based on wrong interpretation of the judgment of Hon'ble Supreme Court of Pakistan. The impugned orders on this legal issue are not sustainable in the eyes of law and liable be annulled.
13. The learned ARs of the taxpayer vehemently argued that the learned CIR (A) in order to upheld the action of the DCIR has placed reliance on "imputable income" as used in section 2(28A) of the Ordinance, introduced by F.A, 2015. This reliance is misplaced for the reason that the 'definition' in the statue are helpful in understanding the meaning if the same word is available in the main statute so as to remove any doubt while interpreting the main statute. In case any word in the statute is not defined in the "definition" of the statue then one has to seek the meaning of word from Ordinary dictionary. This rule of interpretation has been explained and confirmed by the superior courts in a plethora of judgments. Reliance may be favourably placed on the judgment of Lahore High Court reported as 2008 PTD 1401 in the case Messrs Ellcot Spinning Mills and the judgment of Sindh High Court reported as 2016 PTD 1667 in the case of Mr. Mumtaz Hussain Khan.
After omission of subsection (4) of section 169 of the Income Tax Ordinance, 2001, the word 'imputable income' was used for the first time in section 4B for levy of Super Tax. In the judgment of Sindh High Court reported as 2016 PTD 1667 (Mumtaz Hussain Khan) the Hon' able Sindh High Court has been pleased to rule as under: "It is pertinent to note that section 2(28) (the definition of "imputable income') was added by the Finance Act, 2015, i.e., along with section 4B, in which it is used in subsection (2) Other than section 4B, this definition is not used anywhere else in the 2001 Ordinance."
14. Honorable High Court also confirmed that word 'imputable income' is not used elsewhere in the statute except under section 4B. It is not out of place to point out that later on word 'imputable income' has been used at one another place at Rule 6 of Part II of the Ninth Schedule. For the sake of case the same is reproduced here as under:
6. Where the imputable income as defied in clause (28A) of section 2 on relation to tax on turnover at the rated specified in Rule 4 of Part I is higher than the taxable income declared, the trader qualifying under this Part may opt to take the credit for the purpose of section 111, of the difference between the said imputable income and taxable income, provided that tax at the rate of one per cent of the difference is paid along with the return.
15. The learned ARs of the taxpayer vehemently argued that the when word 'imputable income' has not been used in section 111 or section 169 then any addition under section 111 with reference to the definition of 'imputable income', held to be confined to section 2(28A) of the Ordinance is without lawful authority, arbitrary, against the law and baseless. It has been contended that as per the principles of interpretations the definitions, provided in a statute are in support of main statute and help to understand the meaning of said word but 'definition' itself cannot create charge on income or impose any tax when the said section does not carry or contain the same word or expression.
The impugned orders on this legal issue are also not sustainable in the eyes of law and liable to be annulled.
16. The learned ARs of the taxpayer vehemently further argued that the DCIR has framed his impugned order under section 122(1) of the Ordinance on whims, surmise, assumption and conjecture. For amending an order under section 122(1) availability of 'definite information', as envisaged in subsection (5) read with subsection (8) of section 122 is an essential pre-requisite. In the appellant's case 'definite information' in the light of subsection (5) read with subsection (8) of section 122 was not available and the very jurisdiction has been acquired without lawful authority, thereby rendering the impugned show-cause notice and the resultant impugned order as illegal and without jurisdiction. The alleged 'imputable income' is not an income chargeable to tax which was allegedly escaped or understated asking for action, under section 122(5). Further it was not a definite information acquired from audit or otherwise. The Honorable Supreme Court of Pakistan in the case Commissioner Inland Revenue v. Messrs Khan CNG Filling Station in reported judgment 2017 PTD 1731 has held that 'definition information' the may be acquired through 'audit and investigation' For the sake of case extract from para No. 11 of the judgment is given as below: "Under the Income Tax Ordinance, 2001, however, the Commissioner has been given the authority to initiate proceedings such as audit and investigation and in the process if he acquires 'definite information' which satisfies him to form an opinion that any income chargeable to tax has been under assessed or escaped assessment or wrongly classified or assessed at too low a rate then he can proceed to amend the original assessment order, which on account of provisions of section 120(1) of Ordinance was deemed to have already been issued by him."
17. In the above judgment, the Commissioner has gathered information by issuing notice under section 176 of the Ordinance whereas it was not selected for audit under section 177. Thus word "otherwise" shall apply if information is acquired from external sources or which has not been declared by the taxpayer. Whatever declared by the appellant didn't qualify to be covered by the expression "otherwise" as used in section 122(5). In the appellant's case "audit" was deliberately not carried out so as to acquire the jurisdiction under section 122(5) hence 'definite information' was lacking in the appellant's case as admittedly the information available in the wealth reconciliation statements of all three tax years was used in the amended assessment order passed under section 122(1) read with section 122(5) of the Ordinance. Thus admittedly the appellant itself has declared the information in his wealth reconciliation statements of all three tax years. The information declared by the taxpayer in his return or wealth reconciliation statements, by no stretch of imagination could be used against him treating it as definite information for amending the assessm ent within the meaning of section 122(1) read with 122(5) of the Ordinance. As submitted earlier 'imputable income' itself was not an income chargeable to tax hence the impugned orders are not sustainable in the eyes of law and may be annulled.
18. According to the ARs the two authorities below in order to justify their ill-conceived action have cited another reason in their respective orders and have stated that books of accounts were called but the taxpayer failed to produce books of accounts. It has been submitted that admittedly the appellant filed statements under section 115(4) of the Ordinance, which falls under FTR under section 169 of the Ordinance. According to the ARs the FBR itself has absolved the cases falling under FTR from maintaining books of accounts. In this regard the FBR's Circular No.14 of 2002 has been cited with favour which according to the ARs protects the taxpayers falling under final tax regime against maintenance of minimum books of accounts which otherwise is mandatory for taxpayers falling normal tax regime. The learned ARs have produced a copy of the said circular which reads as under: "The Board has received various queries regarding subject mentioned above. The matter has been considered in the Board and I am directed to clarify that the requirement of maintenance of minimum books of accounts, documents and records prescribed under Rule 30 of the Income Tax Rules, 2002 are not attracted in case of importers, exporters, suppliers, contractor or any other person deriving income from business whose tax collected or deducted at source is the final discharge of tax liability and who is filing a statement under section 165 of the Income Tax Ordinance, 2001."
19. According to the ARs bare minimum requirement for maintenance of books of accounts under sub-rule (2) of Rule 30 of Income Tax Rules, 2002 includes invoices, receipts, cash book, bank book, ledger, purchases, expenses etc. However in view of the expressed instructions of FBR as per Circular No. 14 of 2002, none of these books and records are to be maintained by the taxpayers falling under Final Tax Regime (FTR). It has been stated by the ARs that FBR's instructions contained in FBR's circulars are binding upon field officers in terms of section 206(2) and the DCIR has violated the provisions of section 206 in the appellant's case. It has been contended that both the officers below were legally and morally not justified in asking the appellant to produce books of accounts and evidence from a taxpayer admittedly falling under FTR. Thus finalization of the order under section 122(1) by the DCIR and confirmation of the same by the CIR(A) on the pretext that books of accounts were not produced by the appellant before them was patently illegal.
20. The learned ARs of the taxpayer finally argued that the respondent DCIR had further erred in not issued specific mandatory notice under section 111 of the Ordinance before making addition of alleged unexplained income. According to them higher appellate forum already up held on numerous occasions that the specific notice for making addition under section 111 of the Ordinance is essential and mandatory. The learned ARs have placed reliance on the score of judgments of the superior appellate fora in this regard including 2017 PTD 1839 (Sindh High Court) CIR, RTO Sukkur v. Ranipur CNG Station 2012 PTD 790 (Trib), 2Q15 PTD 1242 (Trib), 2015 PTD 2042 (Trib), 2010 PTD 704 (Sindh High Court). According to the learned ARs in these judgments it has been held that non issuance of specific notice renders the addition under section 111 of the Ordinance unsustainable and the impugned order as void ab initio. It has been maintained by the ARs that these judgments are squarely applicable to the facts and circumstances of the appellant case.
21. On the other hand, Mr. Muhammad Aslam Jamro, DR has strongly opposed the contentions submitted by the learned counsel of the taxpayer and has supported the orders passed by the officers below. He argued that the orders passed by both the authorities below are lei, al, lawful, within the framework of law and carries no illegality, irregularity and infirmity in it.
22. The learned ARs have also filed written synopsis together with supporting documents and the case laws which have been perused and taken on record. Since common grounds are involved in all three appeals therefore, these appeals are disposed of through this consolidated order.
23. We have heard the arguments of representatives from both sides and have also perused the available record of the case. We have perused the impugned orders of the two authorities below and have given due consideration to the written and verbal submissions made by the learned representatives of both parties. There is no dispute between the parties on the facts of the case to the extent that the appellant is an exporter and has paid tax on exports under section 154 of the Ordinance, which falls under final tax regime (FTR) in terms of section 169 of the Income Tax Ordinance, 2001. The appellant accordingly filed statements under section 115(4) of the Ordinance together with wealth statements and its reconciliation in the light of section 116 of the Ordinance.
The learned DCIR on examination of wealth reconciliation statements found that the appellant had claimed higher incomes in wealth reconciliations than the imputable income worked back on the basis of tax paid on exports under section 154 of the Ordinance. The DCIR accordingly worked out `imputable income' based on the tax collected by the banks under section 154 on exports, covered under FTR in terms of section 169 of the Ordinance and arrived at impugned additions in all three tax years, treating the same as income from unexplained sources assessable under section 111 being the difference of income shown in wealth statement and the 'imputable income' worked out by him on, the basis of tax collected under section 154. During the proceedings under section 122(1) the DCIR asked the appellant to produce books of accounts and documents for verification and examination in support of income declared in wealth statement. On failure of the taxpayer to produce books of accounts the DCIR finalized the impugned orders. The learned CIR(A) confirmed the impugned orders of learned DCIRs inter-alia for failure of the appellant to produce books of accounts and records. Additionally the learned CIR(A) has relied on the judgment of Hon'ble Supreme Court of Pakistan reported as 1997 PTD 1555 wherein certain findings with reference to subsection (5) of section 80C of the repealed Ordinance of 1979 were given. The learned ARs on the other hand have contended that reliance by the learned CIR (A) on the judgment of Hon' ble Supreme Court of Pakistan reported as 1997 PTD 1555 was misplaced. According to them the said judgment is in respect of the provisions of subsection (5) of section 80C of the repealed Ordinance of 1979. No such or corresponding provisions were available in the present Income Tax Ordinance during the tax years under appeal. It has been contended that at the time of promulgation of the present law i.e. the Income Tax Ordinance, 2001, a provision para-meteria to subsection (5) of section 80C of the repealed Ordinance of 1979 was available in the Income Tax Ordinance, 2001 in the shape of subsection (4) of section 169 of the Income Tax Ordinance, 2001, which according to them was omitted by the Finance Act, 2004. The contention of the learned ARs has been found correct and in accordance with law it was not existed during the tax years under appeal.
Accordingly it is held that the reliance placed by the learned CIR(A) was not relevant as no provision pari materia or corresponding to subsection (5) of section 80C of the repealed Ordinance of 1979 was available in the Income Tax Ordinance, 2001. Thus judgment of Hon'able Supreme Court of Pakistan reported as 1997 PTD 1555 was not relevant to the appellant's case rather distinguishable hence cannot be applied to the facts and circumstances of the appellant's case. Accordingly the findings of the learned CIR (A) based on the judgment of Hon'ble Supreme Court of Pakistan reported as 1997 PTD 1555 being misconceived are hereby dismissed. Appeal succeeds on this ground.
24. As regards findings of the learned CIR (A) that concept of `imputable income' has been taken care of in the provisions of section 2(28A) of the Income Tax Ordinance, 2001, we are of the considered opinion that after the omission of subsection (4) of section 169 of the Income Tax Ordinance, 2001, by the Finance Act, 2004, the expression 'imputable income' was used for the first time in the Income Tax Ordinance, 2001 through introduction of new section 4B for levy of Super Tax.
We found ourselves in agreement with the contention of the learned ARs that the expression "imputable income" as used in section 2(28A) of the Ordinance, introduced by FA, 2015, is confined to section 2(28A) of the Ordinance. It cannot be applied to the whole of the Ordinance. We are fortified in our findings by the judgments of Lahore High Court reported as 2008 PTD 1401 in the case Messrs Ellcor Spinning Mills and of Sindh High Court reported as 2016 PTD 1667 in the case of Mr. Mumtaz Hussain Khan. The findings of learned CIR (A) have not been found in accordance with law. The same are accordingly not approved. Appeal succeeds on this ground.
25. We also find force in the arguments of the learned ARs that in order to amend an order under section 122(1) availability of 'definite information', as envisaged in subsection (5) read with subsection (8) of C section 122 is an essential pre-requisite. If this pre-requisite is not fulfilled, requirements of subsection (5) of section 122 would not be met and the assessment order sought to be amended cannot be amended under section 122(1) of the Ordinance. In the appellant's case 'definite information' in the light of subsection (5) read with subsection (8) of section 122 was not available and the very jurisdiction was acquired without first satisfying the pre-requisite of subsection (5) of section 122, hence jurisdiction assumed was without lawful authority, thereby rendering the impugned show-cause notice and the resultant impugned order as illegal and without jurisdiction. The alleged 'imputable income', already declared by the taxpayer in the wealth reconciliation statements was not a definite information and was not an income chargeable to tax which could be treated as escaped or under assessed requiring for action under section 122(1) read with section 122(5). Further it was not a definite information acquired from audit or otherwise as has been held by the Honorable Supreme Court of Pakistan in the judgment reported as 2017 PTD 1731 [CIR v. Messrs Khan CNG Filling Station] envisaging that the 'definition information' may be acquired through 'audit and investigation', a pre-requisite which was never met by the DCIR in the appellant's case. It is accordingly held that no definite information was acquired in the appellant's case in terms of subsection (5) of section 122, therefore no action under section 122(1) leading to amendment of assessm ent was warranted. The findings of learned CIR (A) in this regard are without any basis and are in disregard of the provisions of section 122(5) hence are not sustainable. The appeal succeeds on this ground.
26. The next issue pertains to the grounds that the Commissioner Inland Revenue, (Appeals) has erred in dismissing the appeal filed by the taxpayer on the ground that books of accounts and cash flow were not produced before the assessing officer. We agree with the assertion of the learned ARs that the Commissioner Inland Revenue, (Appeals) has erred in ignoring the fact that books of accounts could only be produced under section 177 of the Income Tax Ordinance, 2001 whereas appellant's case was not selected for audit under section 177. It is an admitted and undisputed position that the appellant filed statements under section 115(4) of the Ordinance, which falls under FTR under section 169 of the Ordinance. The FBR itself has exempted the cases falling under .FTR from maintaining books of accounts. In this regard the FBR's Circular No.14 of 2002 has been cited by the ARs which protects the taxpayers falling under final tax regime against maintenance of minimum books of accounts which otherwise is mandatory for taxpayers falling normal tax regime. Accordingly both the authorities were not justified in requiring the taxpayer to produce books of accounts. In fact the DCIR has erred in requiring the taxpayer, a case admittedly falling under the FTR scheme, to produce books of accounts disregard of the FBR's Circular No.14 of 2002, which was binding on him in terms of section 206 of the Income Tax Ordinance, 2001.
Therefore, amended assessm ent order framed by him was not sustainable in the eyes of law and the learned CIR(A) was not justified in confirming the said amended assessment order. The appeal succeeds on these grounds.
27. The learned ARs have also agitated the addition under section 111 of the Income Tax Ordinance, 2001, thereby treating the difference between the amounts arrived at by the DCIR as imputable income and the income declared by the appellant in the wealth reconciliation statement as unexplained in terms of section 111(1)(b) of the Income Tax Ordinance, 2001. It has been contended that since the entire order under section 122(1) has been framed by the DCIR and upheld by the CIR
(A) on incorrect appreciation of the facts of the case and the legal position on the subject, no addition under section 111(1)(b) of the Ordinance was warranted. Without prejudice to the fact that no addition under section 111(1)(b) was warranted, it has further been contended that no specific notice, which courts have held as mandatory, was issued by the DCIR. The CIR (A) was not justified in confirming such order. We have found the contention of the learned ARs convincing on these points too and accordingly impugned orders of the two authorities below are not found maintainable. The orders of both the officers are, therefore, annulled.
28. As a result, appeals filed by the appellant/taxpayer are allowed.