This Reference Application and ITR No.34207/2019 are directed against single consolidated order of 29.01.2019, by Appellate Tribunal Inland Revenue, Lahore Bench, Lahore ("Appellate Tribunal"), relating to Tax years 2014 and 2015. Commonly, three questions of law are proposed, claimed to have arisen out of order under reference, however, following question is pressed for determination, which reads as:- "Whether on the facts and circumstances of the case, the learned Appellate Tribunal Inland Revenue was justified in holding that proceedings under section 122(5A) cannot be initiated against taxpayer who has filed only statement of final taxation under section 115(4) because no assessment in that case is in the field?"
2. Learned counsel for applicant department submits that Appellate Tribunal erred in law while holding that section 122(5A) of the Income Tax Ordinance, 2001 (`Ordinance, 2001') was not attracted in the absence of tax return furnished under section 114 of the Ordinance, when taxpayer had simply submitted statement of final tax in terms of section 115(4) of the Ordinance, 2001.
Submits that statement filed under section 115(4), declaring tax due in terms of assessment furnished under subsection (3) of Section 169 of the Ordinance is classified and treated as deemed assessm ent order under section 120 of the Ordinance, which assessment order could by subjected to revision / amendment by invoking jurisdiction extended in terms of section 122 of the Ordinance, 2001, be it under subsection (5) or (5A) of section 122 ibid.
3. Conversely, learned counsel appearing for taxpayer submits that Appellate Tribunal made no error of law while construing relevant provisions of the Ordinance, 2001 and taxpayer stood discharged of any tax liability with respect to the income declared under Final Tax Regime, in terms of subsection (2) of section 169 of the Ordinance, 2001.
4. There is no controversy to the extent that in terms of subsection (3) of section 169 of the Ordinance, 2001, the taxpayer's, with respect to such income as subjected to final taxation under the Ordinance, 2001, is not required to furnish a return of income under section 114 of the Ordinance, 2001 but, in the alternative, shall furnish statement of final tax in terms of section 115(4) of the Ordinance, 2001, declaring tax due. The assessment made by the taxpayer regarding income, subject to final taxation, furnished through the statement shall be treated as deemed assessment order under section 120 of the Ordinance, 2001. The learned counsel do not dispute this position.
5. The heart of the controversy is whether Commissioner can lawfully invoke section 122(1) read with section 122(5A) of the Ordinance, 2001 for the purposes of amending the assessment order, in the context of facts of this case where taxpayer claimed income subject to final tax regime (FTR). It is expedient to examine section 122(1) of the Ordinance, 2001, which reads as: "Subject to this section, the Commissioner may amend an assessment order treated as issued under section 120 or issued under section 121 or issued under section 122C, by making such alterations or additions as the Commissioner considers necessary"
[Emphasis supplied].
6. Section 122(1) of the Ordinance, 2001 makes no distinction between deemed assessment order(s), either with respect to the return of income furnished under section 114 or statement of final tax submitted under section 115(4) - both through the legal fiat, are deemed assessment orders under section 120 of the Ordinance. Appellate Tribunal committed error of law while confusing factum of final discharge regarding tax liability, covered under FTR, with the authority of the Commissioner to review the deemed assessment order - in the instant case powers under section 122(5A) were invoked and exercised. No bar has been placed upon the power of the Commissioner to proceed to amend deemed assessment. order, be it a return of income tax filed under section 114 or a statement under section 115(4) of the Ordinance, 2001. Learned Appellate Tribunal failed to appreciate and contextualize the facts of the case at hand, where deemed assessment order - in lieu of statement of al tax - was examined and component of the income, classifiable under normal tax regime (NTR), was identified and tax liability determined accordingly, which was confronted to the taxpayer - which exercise of jurisdiction implies that component of normal tax was erroneously treated as part of the FTR. Commissioner is competent and eligible to examine, consider and review the deemed assessment order and to determine the real character /status of the income and classify its identity, either falling under the FTR or NTR. It is pertinent to mention that deemed assessm ent order, based on statement of income furnished under section 115(4) of the Ordinance, can be altered / amended by the Commissioner under section 122 of the Ordinance, 2001. This exercise of jurisdiction, under section 122 of the Ordinance, 2001, cannot be construed to offend the protections and privileges otherwise extended to the income, subject to final tax under the provisions of the Ordinance, 2001. Appellate Tribunal's decision to deny jurisdiction, otherwise conferred on the Commissioner under section 122 of the Ordinance with respect to ascertainment of the identity / character of the income, is illegal and contrary to the mandate of the provisions under reference.
7. In view of aforesaid, the question proposed is answered in negative. Appellate Tribunal erred in law while holding that proceedings under section 122(5A) of the Ordinance, 2001 cannot be initiated against taxpayer, which furnished assessment by way of statement under Section 115(4) of the Ordinance, 2001. This Reference Application of the department is allowed, order passed by the Appellate Tribunal is set-aside and matter is remanded to the Appellate Tribunal for decision afresh on the appeal filed by the taxpayer, which shall be deemed pending, after hearing the parties.
8. Office shall send a copy of this order, under seal of the Court, to learned Appellate Tribunal, in terms of subsection (5) of section 133 of the Ordinance, 2001.