Dr. SHAHID SIDDIQ, ACCOUNTANT MEMBER.----Titled appeals has been preferred at the instance of Appellant / taxpayer directed against the Separate Appellate Orders Nos.564 and 565 even dated 13.11.2020, passed by the learned CIR(A), Faisalabad, pertaining to tax years 2016 and 2017.
2. Brief facts- of the case are that the taxpayer filed his returns of income for tax years 2016 and 2017 declaring income of Rs.4,958,741/- and Rs.10,119,007/- respectively. The declared results constituted deemed assessm ent order under section 120(1) of the Income Tax Ordinance, 2001. The ACIR examined the assessm ent record and found that the taxpayer declared agricultural incomes for years under consideration and claimed as exempt from tax. As per proviso to section 111(1) of the Income Tax Ordinance, 2001, the exemption to the agricultural income is available only to the extent the agricultural income tax is paid to the relevant authorities and the proof regarding the payment is provided. No proof of agriculture income tax paid to the relevant provincial authorities was available on record which rendered the deemed assessment erroneous in so far as prejudicial to the revenue. A show-cause notice under section 122(9) read with section 122(5A) of The Income Tax Ordinance, 2001 was issued. In response thereto, the taxpayer failed to furnish any explanation.
The ACIR issued various reminders but again the taxpayer failed to make compliance. Therefore, the deemed assessm ents were amended under section 122(5A) of Income Tax Ordinance, 2001 vide orders dated 12.04.2019.
3. The Appellant being aggrieved with the order of the ACIR filed appeal before the CIR(A) who rejected the appeal. The Appellant being dissatisfied with the orders of authorities below has filed instant appeal before the Tribunal.
4. Learned AR on behalf of Appellant contended that the ACIR illegally created the impugned tax demand through ex parte order. He submitted that the notices which claimed to have been served upon the taxpayer were actually not served. He contested that the no separate notice under section 111 was issued to the taxpayer which was mandatory for invoking provisions of section 111 of the Ordinance, 2001. Reliance was placed on 2019 PTD 1828. He contested that the ACIR passed order without providing proper opportunity of being heard henee, the action of ACIR is contrary to the provisions of section 2012 PTD 964. He argued that the tax liability was created on wear grounds which are not maintainable in the eye of law. The DR on the other hand opposed the contentions of learned AR and supported the order of authorities below for the reasons recorded therein.
5. We have given due consideration to the arguments advanced by the rival parties and perused the relevant available record. The AR submitted that the notices which claimed to have been served upon the taxpayer were actually not served. He contested that the no separate notice under section 111 was issued to the taxpayer which was mandatory for invoking provisions of section 111 of the Ordinance, 2001. In this regard he placed reliance on reported judgment of Hon'able Lahore High Court cited as 2019 PTD 1828 titled Commissioner Inland Revenue v. Faqir Hussain and another. We have perused the aforesaid judgment of Hon'able Lahore High Court and found that orders of authorities below are not sustainable in light of law laid down by the Hon' able Court. The relevant part of the judgment is reproduced as under:-- "10. Non-issuance of separate notice under section 111 has caused prejudice to respondent- taxpayer as substantial compliance of said provision of law has not been made. The ordinary meanings of "Notice" as referred to by learned Legal Advisors, with reference to various dictionaries, are not applicable to the issue in hand. Non-issuance of proper notice in order to invoke provisions of Section 111 cannot be taken lightly and its non-compliance may lead to render the proceedings not in conformity with or according to the intent and purpose of law. In the instant case, neither notice under Section 111 of the Ordinance of 2001 has been issued to the taxpayer nor was the taxpayer specifically confronted with such proposed addition so that the taxpayer could have advanced some explanation in this regard. Thus, impugned addition appears to be without any lawful authority.
11. So far as argument of learned Legal Advisors of applicant-department, with reference to the case of Abdul Ghani and Zamindara Paper and Board Mills supra, that mere substance of notice is to be seen and mentioning of Section 111 with its all ingredients along with notice under Section 122(9) read with Section 122(5A) fulfills the conditions, suffice it to say that law mandates the issuance of separate notice/explanation within the contemplation of Section 111, therefore, same cannot be made redundant.
12. In view of the above, our answer to the proposed question is in affirmative i.e. against the applicant-department and in favour of respondent-taxpayers.
In view of above it is apparent that non-issuance of proper notice in order to invoke provisions of Section 111 render the proceedings not in conformity with or according to the intent and purpose of law. The quoted judgment of the superior courts applies on all fours of the instant case hence orders of the authorities below are annulled. The appeal of the appellant for tax years 2016 and 2017 are allowed. We ordered accordingly. revisions by the competent authorities. Therefore, it is advisable to consult the official sources or legal professionals for the most up-to-date and accurate information.