SARDAR M. AJAZ KHAN, JUDICIAL MEMBER. This appeal has been filed by the taxpayer against Order No.100000151389443 dated 10.05.2023 passed by CIR(A), Sargodha. Brief facts of the case as per impugned order are that the taxpayer under reference is an individual who filed his return of income declaring Profit on debt at Rs.548,803/-, which constituted deemed assessment order by operation of law in terms of section 120 of the Income Tax Ordinance, 2001 (The Ordinance).
However, the said assessm ent order under section 120(1) of the Ordinance for the year under consideration was found erroneous in so far as prejudicial to the interest of revenue due to the reasons mentioned in show-cause notice issued under section 122(9) along with notice under sections 122 and 111(1) of the Ordinance through which the declared "Foreign Remittances" amounting to Rs.72,640,946/- under Inflows in order to reconcile the accretion in wealth as on 30- 06-2021 was confronted as no documentary evidence has been filed/attached in support of declared amount. The taxpayer was asked to provide documentary evidence of the failing which the same will be added under section 111(1)(b) as provided in section 111(4) of the Income Tax Ordinance, 2001. In response to show-cause notice nobody appeared nor filed any reply despite issuance of reminders, therefore, the assessing officer passed the impugned order under section 122(5A) of the Ordinance by making additions under section 111(1)(b) of the Income Tax Ordinance, 2001 amounting to Rs. 72,640,946/- while creating income tax demand of Rs. 24,516,831/-. Against this treatment the taxpayer filed appeal before the CIR(A) Sargodha who vide the order dated 10.5.2023 while deciding the appeal, modified the amendment of assessment order 16.8.2022 by allowing foreign remittances to the extent of Rs.20,520,258/- while reducing the additions under section 111(1)(b) to the tune of Rs. 52,000,000/-. However, still aggrieved, taxpayer filed second appeal before this forum on following grounds:
1. "That both orders of the authorities below i.e. CIR (A), Sargodha and ADCIR, Audit, Zone-I, RTO, Sargodha are bad in the eyes of law, without lawful jurisdiction and contrary to the facts and circumstances of the case.
2. That the amendment of assessment order is also against the ratio settled by the Sindh High Court in the case of Messrs Siemens Pakistan Engineering Co. Ltd, v. FOP and others (1999 PTD 1358) wherein the Honorable High Court make it abundantly clear that the scope of the word "opportunity of being heard" requires adequate and personal hearing and not mere formality of issuing notice or discussing some aspects of reply of the party in a casual manner.
3. That Learned ADCIR erred and mis-directed under the facts/law and circumstances of the case by invoking section 122(5A) of the Income Tax Ordinance, 2001. Learned CIR (A) has also not adjudicated the same in judicious manner.
4. That the jurisdiction under section 122(5A) has been wrongfully invoked by the Assessing Officer as to invoke this section the assessment should be "erroneous as well as prejudicial to the interest of revenue" and assessment under this section cannot be amended if the twin conditions are not fulfilled simultaneously.
5. That the authorities below failed to realize that section 122(5A) cannot be invoked to correct each and every type of mistake or error, it is only when an order is erroneous that the section will be attracted. An incorrect assumption of facts or an incorrect application of law will satisfy the requirement of the order being erroneous.
6. That the learned officer failed to comprehend that the phrase Prejudicial to the interests of the Revenue" is not an expression of art and is not defined in the Act Understood in its ordinary meaning it is of wide import and is not confined to loss of tax. The scheme of the Act is to levy and collect tax in accordance with the provisions of the Act and this task is entrusted to the Revenue. If due to an erroneous order, the Revenue is losing tax lawfully payable by a person, it will certainly be prejudicial, to the interests of the Revenue. The phrase "prejudicial to the interests of the Revenue" has to be read in conjunction with an erroneous order passed by the Assessing Officer.
Every loss of revenue as a consequence of an order, cannot be treated as prejudicial to the interests of the Revenue. The authorities below however, failed to comprehend the same.
7. That learned ADCIR in the assessment order and show-cause notice sought documentary evidence for examination. This shows that the scrutiny/examination of record, even in view of assessing officer was necessary to reach on the conclusion which is not the mandate available to your office under section 122(5A) of the Income Tax Ordinance, 2001. Learned CIR (A) has also not take it judicially.
8. That the impugned assessment is beyond jurisdiction by making enquiries which is not mandated under section 122(5A) after amendment through Finance Act, 2021 no such provision is available at the time of issuance of notice under section 122(5A). The amendment made in section 122(5A) ibid provides no powers to the Commissioner to make inquiries as he deems fit after the amendment and now the assessment could only be revised if the same appeared to be erroneous or prejudicial to the revenue and no information could be sought to determine the same.
9. That the authorities below failed to comprehend that section 122(5A) is also not authorizing to conduct audit because it is revisional in nature. Section 122(5A) is a curative section and its canvass is not broader like section 177 and calling of record/documents is not permissible which tantamount to fishing and roving enquires which is outside the mandate provided through section 122(5A) and the learned Assessing Officer passed order beyond the jurisdiction.
10. That the amendment of assessment under subsection (SA) of section 122 is legally flawed and dearly outside the scope and mandate of said section. Reliance is placed on the latest order of learned ATIR Islamabad in the case of M/s. National Highway Authority v. CIR, CTO Islamabad dated 06.12.2022
11. That learned Assessing Officer failed to appreciate the well settled law that the error and prejudice should be dearly manifest from the show-cause notice and there is no room for any roving inquiry or fishing expedition. Reliance in this regard is placed on judgments in the cases of Commissioner Inland Revenue, Zone-I, LTU v. MCB Bank Limited (2021 PTD 1367); Honda Atlas Cars (Pakistan) Limited v. Appellate Tribunal Customs, Excise and Sales Tax (2021 PTD 1806) and Caretex v. Collector of Sales Tax and Federal Excise (2013 PTD 1536).
12. That without prejudice to the above it is held by the Lahore High Court in its judgment in Income Tax Reference No.02 of 2018 in the case of CIR v. Muhammad Iqbal Rind & Sons D.G. Khan and held that even "Every loss of revenue as a consequence of an Assessment Order cannot be treated as prejudicial to the interest of revenue".
13. That the Learned CIR(A) was not justified to accept the claim of the appellant partially with regard to Foreign Remittance remitted through proper banking channel and modified the assessment order instead of annulling the same.
14. The learned C1R (A) failed to appreciate that the learned ACIR has not issued separate notice under section 111 of Ordinance, 2001. Although, it is well settled law as per reported judgment of the Hon'ble Supreme Court in 2021 PTD 1182. The Lahore High Court has also affirmed the same view on this principle in case cited as 2019 PTD 1828 wherein it was held that "law mandates the issuance of separate notice/explanation within the contemplation of Section 111, therefore, same cannot be made redundant". The honorable Apex Court also held that the issuance of notice is mandatory before issuance of notice under section 122(9) of the Ordinance, 2001.
15. That the taxpayer was a non-resident during the period and declared his assets and income in the declarations filed before the FBR and discharged its lawful obligation in the prescribed manner. Being a non-resident person for the purpose of taxation under the Income Tax Ordinance, 2001 and French resident and citizen. Due to the non-resident status of the taxpayer the department was under legal obligation to appoint Representative under section 172(3) of the Income Tax Ordinance, 2001 while no such appointment made by the respondent department Moreover, prescribed procedure for service of notice to the non-resident person as was not followed by the Assessing Officer.
16. That without prejudice to all the authorities below failed to appreciate that the taxpayer has closer personal relations as well as substantial economic relations; to one contracting state (France), while in the other state (Pakistan) he merely has an economic interest his center for vital interest will be deemed to be the first contracting state, i.e. France therefore provisions of section 111 of the Income Tax Ordinance, 2001 were not applicable in the instant case. Reliance is placed on the judgment of the honorable Lahore High Court in the case CIR v. Raja Muhammad Raheel in the case reported as "2020 SLD 2004" in the similar case while deciding the reference against the applicant, department uphold the order of ATIR.
17. That the provisions of the Income Tax Ordinance, 2001 cannot be invoked because the Bilateral Tax Treaty between Pakistan and France has an overriding effect on the Income Tax Ordinance, 2001. Furthermore, since the appellant is filing his tax returns in France, in light of the tax treaty between Pakistan and France, no action can be perpetuated in Pakistan by the Pakistan tax authorities and the appellant is absolved from Pakistan taxation and no provision of Income Tax Ordinance is attracted as he does not have any plausible source of income that has deemed to have accrued to him.
18. The learned assessing officer with total disregard of the legal provisions of the ITO, 2001 and with complete ignorance of the submissions made by the appellant passed the impugned order without taking into account the same. Learned CIR (A) was also not justified to modified the assessment.
19. That the learned officer was not justified to impose huge tax liability of Rs. 24,516,831/- which was partially confirmed by the learned CIR(A) without taking into accounts the evidence and facts of the matter under reference.
20. That the appellant, however, reserve the right to present further arguments verbally or in writing and to present evidence to prove their case etc.
21. That the appellant requests for relief as per above stated grounds, or any other relief as the Honorable forum think reasonable.
22. That the appellant begs leave to add, to amend or alter the above said ground."
2. During hearing of appeal, learned AR reiterated the grounds of appeal. He argued that Jurisdiction in the instant case has been assumed by the Assessing Officer under section 122(5A) and as per settled law the error and prejudice should be clearly manifest from the show-cause notice and there is no room for any roving inquiry or fishing expedition. However, in the instant case the Assessing Officer after assuming jurisdiction under section 122(5A) with the assertion that deemed assessm ent is erroneous as well as prejudice to the interest of revenue on the face of it and during proceeding of amending the assessment under section 122(5A) of the Ordinance, 2001, the assessing officer cannot require the explanation from the taxpayer based on documentary evidence however, it is transpired from the show-cause notice, notice under section 122 dated 06.4.2022 and subsequent order that times and again he requires documentary evidence and books of accounts from the taxpayer which is not the mandate available to him under section 122(5A) thus the Assessing Officer exercised beyond lawful jurisdiction.
3. Learned AR further contended that the appellant is that the taxpayer was a non-resident person during the period under reference and drawn handsome amount of foreign income from France.
He added that the amount of foreign remittances declared was received through banking channel and brought to Pakistan through legal means and the source is also valid and explainable. He produced evidence of being non-resident during the impugned period and tax return filed in the Republic of France which is placed on record. He contended that the same evidence was also produced before the below authorities but despite acknowledging the evidence CIR(A) partially considered the evidence. AR contended that the assessing officer was not justified to pass order ignoring the fact that the appellant is a non-resident individual and French resident during the year and double taxation treaty between Pakistan and France exists and this aspect is fully ignored. Moreover, as a resident of France the appellant has center of vital interest in France by virtue of his personal and economic interest abroad moreover, he has his habitual abode abroad, having bank account and does not come to Pakistan frequently and his income is assessed in France on which tax has been paid there. AR also placed reliance on the judgment of the Honorable Lahore High Court reported as "2020 PTD 1662" dated 03.12.2019 wherein in a similar case the honorable court held that once it is established that the center of vital interest is not Pakistan, section 111 read with section 82 of the Income Tax Ordinance, 2001 are thus superseded by the bilateral tax treaty between Pakistan and contracting state on the application of tie-breaker test under Article-4 of the bilateral Double Taxation Treaty with France.
4. AR further contended that the respondent department has simply assumed that by virtue of declaration with FBR renders the appellant as a resident of the country, without concerning the relevant authorities (i.e. the French embassy) or having done any conclusive study into the double tax agreement between the two countries, which provides the taxpayer with relief for the Avoidance of Double Taxation and the Prevention of Fiscal Evasion with Respect to Taxes on Income. Learned AR also submitted that another issue that needs the careful consideration, is that of the application of section 1(2) of the Income Tax Ordinance, 2001. The section states that the authority of the letter of the law laid out in the Income Tax Ordinance, 2001, extends to the whole of Pakistan. The issue that arises here is one of jurisdiction. Due to the fact, that the person does not live in Pakistan, the application of unexplained income does not arise under section 111 of the Income Tax Ordinance, 2001. Furthermore, as the individual in question is not a "resident" of Pakistan, the issue of unexplained income under section 111 is also ill-founded. He vehemently submitted that the application of section 111 of the ITO, 2001, is only applicable to individuals who are residents of Pakistan for the tax year as illustrated in section 82 of the ITO, 2001. He also draws attention to the matters of international tax case law and the residence test, as imposed under the national legislation under section 82(a) of the ITO, 2001. The test laid out in the provision provides that the person to be in Pakistan for a total of 183 days, to attract the tax liability under the provisions and added that the appellant, has not been a resident of Pakistan for said number of days; as is evident from entries on his passport. This hereby excludes him from the definition of a "resident" under section 82(a) of the ITO, 2001. Learned AR also submitted that another issue that needs the careful consideration, is that of the application of section 1(2) of the Income Tax Ordinance, 2001. The section states that the authority of the letter of the law laid out in the Income Tax Ordinance, 2001, extends to the whole of Pakistan.
The issue that arises here is one of jurisdiction. Due to the fact, that the person does not live in Pakistan, the application of unexplained income does not arise under section 111 of the Income Tax Ordinance, 2001, Furthermore, as the individual in question is not a "resident" of Pakistan, the issue of unexplained income under section 111 is also ill-founded, AR placed reliance on different international conventions with regard to tiebreaker test applied in contracting states explaining vital interests on an individual.
5. On the other hand, learned DR however supported orders of the assessing officer as well as CIR(A) and stated that the taxpayer provided sufficient opportunity by the assessing officer. But he preferred not to comply with the notices. Therefore, amendment of assessment was made on the basis of definite information obtaining on record CIR(A) also rejected the appeal because it was without any substance or merit.
6. We have given due consideration to the arguments of both sides, in the light of relevant record.
The matter under controversy is that the appellant declared foreign remittances in his tax declarations in Pakistan and the proceedings under section 111(1)(b) of the Income Tax Ordinance, 2001 were finalized by the assessing officer and modified by the CIR(A).
7. Jurisdiction in the instant case has been assumed by the Assessing Officer under section 122(5A).
It is also well settled that the error and prejudice should be clearly manifest from the show-cause notice and there is no room for any roving inquiry or fishing expedition. However, in the instant case it is quite explicit that the Assessing Officer originally assumed jurisdiction under section 122(5A) with the assertion that deemed assessment is erroneous as well as prejudice to the interest of revenue on the face of it and during proceeding of amending the assessment under section 122(5A) of the Ordinance, 2001, the assessing officer cannot require the explanation from the taxpayer based on documentary evidence. The Ordinance, 2001, in the same section gives alternative way to proceed for amendment based on examination of record and documents which is subsection (5) of section 122 of the Ordinance, 2001. In the instant case the Assessing Officer resort to call for documentary evidence and information which is not the mandate available to here under section 122(5A) of the Ordinance, 2001. If the assessing officer intends to amend the assessm ent based on document and record, he should have resorted to amend the assessment order under subsection (1) read with subsection (5) of section 122, which provides that if the Commissioner is satisfied what any income chargeable to tax has been escaped or due tax has not been paid by the taxpayer, he can amend the assessment order based on definite information or the recourse available under section 177 of the Ordinance, 2001. Fishing and roving inquiries are not permissible under section 122(5A) of the Ordinance, 2001. Reliance in this regard is placed on judgments in the cases of Commissioner Inland Revenue Zone-I, LTU v. MCB Bank Limited (2021 PTD 1367); Honda Atlas Cars (Pakistan) Limited v. Appellate Tribunal Customs; Excise and Sales Tax (2021 PTD 1806) and Caretex v. Collector of Sales Tax and Federal Excise (2013 PTD 1536). It is established beyond any shadow of doubt that in the instant case the Additional Commissioner was indulged in seeking details, documents, information and evidences on whims, surmises, assumptions, suspicion, guesswo rk and apprehensions which supports the contention of the appellant that the order sought to be amended was not erroneous in so far it is prejudicial to the interest of revenue. The Additional Commissioner miserably failed to establish erroneousness or prejudice to the revenue through his initial notice. Similarly, the Additional Commissioner not only issued/made multiple notices/requests but required the taxpayer to file supporting evidences and justify his claim which suggests that he had not been able to identify any erroneousness or prejudice to the interest of revenue in the order under section 120 sought to be amended. The additional data, information, document's or records were required by him to establish erroneousness and prejudice to the interest of revenue which falls clearly out of the scope of section 122(5A). Therefore, the arguments of the learned ARs are convincing as the same are based on the 'ratio decidendi' of the following reported judgments of this Tribunal as well as the higher courts of the country.
8. It has also been observed that after assuming jurisdiction under section 122(5A) of the Ordinance ibid the Assessing Officer issued notice dated 06.4.202 for compliance by 21.4.2022 vide bar code No.100000122056394 through which "foreign remittances" amounting to Rs.72,640,946/- were confronted however, consequent upon this in his order passed under section 122(5A) dated 16.8.2022 made additions under section 111(1)(b) of the Ordinance, 2001 added the said amount as "Foreign Income" declared without confronting the same through a show-cause notice. Learned CIR(A) has ignored this blatant illegality while there is no show-cause notice on record where the taxpayer was confronted with "foreign income" thus the authorities below travelled beyond the show-cause notice which is illegal and as per ratio settled by the apex Court in its judgment reported as 1987 SCMR 1840 an order of adjudication, being ultimately based on a ground which was not mentioned in the show-cause notice, was palpably illegal on face of it. The purpose of serving a notice on a taxpayer is to notify him of the case against him. When such a document contains incomplete information it can seriously prejudice the taxpayer's defense. As the taxpayer under reference has undoubtedly been saddled with a tax liability on the account which was not disclosed in the notice, thus not sustainable. In the instant case such charge as adjudged in impugned adjudication in respect of "foreign income: was not primarily levelled in show-cause notice which renders it null and void in eye of law. It is trite law that a charge which was not framed in show-cause notice cannot be adjudged through an adjudication order. I am also fortified in my views on the basis of settled law by the Honourable Supreme Court of Pakistan in case of Collector Central Excise and Land Customs v. Rahim Din reported as 1987 SCMR 1844, wherein it was laid down. "The order of adjudication being ultimately passed on a ground which was not mentioned in the show-cause notice was palpably illegal and void on the face of it". This verdict of Honourable Supreme Court of Pakistan has also been followed by a Division Bench of the Honourable Sindh High Court, Karachi in case of Messrs Excide Pakistan v. The Deputy Collector reported as 2004 PTD 1449. It is therefore, held that the Assessing Officer could not go beyond the allegations mentioned in the show-cause notice while CIR (A) also failed to apply judicious mind to confirm the same. It is therefore, held that the additions made by the Assessing Officer and confirmed by the CIR (A) on this account without confronting the same through show-cause are illegal hence not sustainable as per ratio settled by the Apex Court.
9. It has also been observed that as per record the appellant is a resident of France during the period. The documentary evidence including passport of the appellant examined to ascertain the status of the appellant and it is established beyond any shadow of doubt that the appellant in the instant case was a non-resident during the period under reference. Now we come to the issue of taxability of non-resident person under the tax law of Pakistan keeping in view the bilateral treaty between the contracting states i.e. France and Pakistan in the instant case. The appellant was liable to be assessed in accordance with the Article 4 of the Convention between the Government of Islamic Republic of Pakistan and the Government of French Republic for the Avoidance of Double Taxation and the Prevention of Fiscal Evasion with respect to Taxes on Income vide SRO No.729(I)/96 dated 2-9-1996 (referred hereinafter as "Tax Treaty"). The relevant portion of tax treaty is reproduced for the benefit of ready reference:- Article 4 Resident
1. For the purposes of this Convention, the term "resident of a Contracting State" means any person who, under the laws of that State, is liable to tax therein by reason of his domicile, residence, place of management or any other criterion of a similar nature. But this term does not include any person who is liable to tax in that State in respect only of income from sources, in that State.
2. Where by reason of the provisions of paragraph I an individual is a resident of both Contracting States;' then his status shall be determined as follows: - a) he shall be deemed to be a resident of the State in which he has a permanent home available to him; if he has a permanent home available to him in both States, he shall be deemed to be a resident of the State with which his personal and economic relations are closer (center of vital interests); b) if the Nate in which he has his center of vital interests cannot be determined, or if he has not a permanent home available to him in either State, he shall be deemed to be a resident of the State in which he has a habitual abode; c) if he has a habitual abode in both States or in neither of them, he shall be deemed to be a resident of the State of which he is a national; d) if he is a national of both States or of neither of them, the competent authorities of the Contracting States shall settle the question by mutual agreement.
3. Where by reason of the provisions of paragraph 1 a person other than an individual is a resident of both Contracting States, then it shall be deemed to be a resident of the State in which its place of effective management is situated"
10. It is quite explicit from the quoted articles the citizens or nationals of one of the contracting States shall not, while resident in the other contracting State, be subjected in such other state (country) to taxes. According to the record this fact is evident that the appellant has an established source or income in France and resides abroad and in Pakistan he has sent remittances in Pakistan. At this stage, if at all we presume that he has permanent home in both the states (i.e., France and Pakistan) though it is not alleged by the department at any point of time.
Even then, the taxpayer cannot be subject to Pakistani tax because the center of vital interest is France and his personal and economic relations are closer. We are also fortified with the International Tax Law Reports and the case laws relating to international tax jurisdictions. In these cases, it has been unequivocally held that center of vital interest is place where economic activity is generated i.e., there are closest economic ties. The Courts have preferred to 'economic activity and relations' over mere 'residence or personal relations' as a tie breaker, when the economic activities and the residence are not simple to assess.
11. Before parting with judgment, we may observe that many discussions regarding the deteriorating situation of Pakistani economy have surfaced since the devaluation of Pakistani rupee against US dollar in the domestic, market and subsequently, oil prices increased significantly, which caused uproar within the nation. We are afraid to observe that currently, Pakistan's economy is going through a, rough patch and the currency devaluation is a great shock to the macroeconomic situation as it gave rise to many more problems which our economy is currently facing 'and for the reason, the country is striving to achieve monetary support from international funding agencies. Moreover, our foreign exchange reserves are eroding which attributed to external debt servicing and other official payments. In such alarming economic situation, we must encourage the foreign investments rather than to force them to avoid from making investments in our/their beloved country. In this scenario, we are also fortified with judgment of this Tribunal in I.T.A. No. 1066/LB/2013 dated 15.08.2013 whereby it is emphasized to encourage the foreign investment in Pakistan. The relevant extract of the judgment is as under:- "5. We have heard the representatives of both the parties and gone through the available record as well as the case-law cited at bar. At the very outset we would like to clarify that a citizen can be made liable to pay tax only on the basis of unambiguous and explicit law. In fiscal statute there is no room for any presumption or intendment and no provision of law can, by any process of argumentation or interpretation be loaded with meaning or intentions which plain language of the provision does not covey. In this case, we are of the considered view that the department is trying to screw the taxpayer and extorting tax without observing the cardinal principal of tax laws discussed above. The department functionaries are also acting under sheer ignorance and not following procedure laid down in statute and circulars and clarifications issued by the FBR which are binding on all functionaries working under FBR under the law.
6. We are of the view that once it has come on record and has been established that the appellant is a French National Pakistani having sufficient sources of income through running Restaurant in France and having transferred foreign currency through proper Banking channels or otherwise by legal means, there was no justification to harass the appellant which is discouraging him to invest in Pakistan. He has no means/business in Pakistan and all sources of income are in France and has only made investment in Pakistan by purchasing landed property through foreign exchange brought from France. It is further observed that tar is not a forced liability but in fact it is a responsibility to owe to the state a proportionate share given by the taxpayer for utilizing and consuming the services provided by the state. Its determination must be made with a view to keep the above principle intact and to maintain confidence and to boost the encouragement in the taxpaying society so that the tax should not be taken by the concerned public to be a harsh imposition but a duty. The Honourable High Courts and this Tribunal 'has held in many cases that it is high time to develop tax culture in the working classes which will help the enforcement of self assessment at large and the tendency of concealment of taxes shall be gradually discouraged and public would rather prefer to be the taxpayer instead of tax swallowers. Similar is the position regarding Foreign National making investment, they should be encouraged rather forced to make investment in other countries."
12. In the case under reference, it is also established that the taxpayer has closer personal relations as well as substantial economic relations; to one contracting state (France), while in the other state (Pakistan) he merely has an economic interest. His center for vital interest will be deemed to be the first contracting state, i.e. France. In the case of appellant, it is obvious to us now that the center for vital interest for him is France, and not Pakistan. Once it is established that the center of vital interest is not Pakistan, section 111 read with section 82 of the Income Tax Ordinance, 2001. The honorable Lahore High Court in the case CIR v. Raja Muhammad Raheel in the case reported as "2020 PTD 1662" in the similar case while deciding the reference against the applicant department uphold the order of ATIR as under:- "The taxpayer has closer personal relations as well as substantial economic relations, to one contracting state (France), while in other state (Pakistan) he merely has an economic interest that is current (wherein the appellant has just purchased a piece of land). His center for vital interest will be deemed to be the first contracting state i.e. France. In the case of Appellant, it is obvious to us now that the center for vital interest for him is France and not Pakistan. Once it is established that the center of vital interest is not Pakistan, section 111 read with section 82 of the Income Tax Ordinance, 2001 are thus superseded by, and thus quashed by Article 4 of the Bilateral Tax Treaty between Pakistan and France"
5. We observed that deletion of levy of tax has been made by the Appellate Tribunal vide impugned order after detail scrutiny of facts and discussing merits of case by invoking correct legal provisions of Income Tax Ordinance, 2001 and Article 4 of the Bilateral Tax Treaty between Pakistan and France upon applicable tie-breaker test and it was categorically held that the section 111 of the Income Tax Ordinance is not attracted to the case of the Respondent. The facts are so obvious and clear that the department's point of view appears to be as an un-necessary effort hence averments made by the learned counsel for the Applicant before us stands falsified.
The deletion of levy of tax, therefore, is unexceptionable.
6. We agree with the findings of the Appellate Tribunal and see no reason to interfere with the impugned order which does not suffer from any factual or legal infirmity as the same has been passed after scrutinizing the relevant record as well as on the basis of sound reasoning."
13. In view of the above we hold that the provisions of the Income Tax Ordinance, 2001 cannot be invoked because the Bilateral Tax Treaty between Pakistan and France has an overriding effect on the Income Tax Ordinance, 2001. Furthermore, since the appellant is filing his tax returns in France, in light of the tax treaty between Pakistan and France, no action can be perpetuated in Pakistan by the Pakistan tax authorities. We are constrained to hold that the appellant is absolved from Pakistan taxation and no provision of Income Tax Ordinance is attracted as he does not have any plausible source of income that has deemed to have accrued to him. Section 111 is applicable to residents of Pakistan only and cannot be extended to appellant who is resident abroad and do not have taxable in Pakistan. We also hold that section 111 of the Income Tax Ordinance, 2001 cannot be invoked on non-resident whose habitual abode is in France and have more personal and economic interest in France than Pakistan and has not earned Pakistan source income. The department has failed to discharge onus for the reinforcement of Section 111. In the light of above we hold that the appellant is not taxable in Pakistan and section 111 is not attracted to non-resident in the presence of tax treaty between Pakistan and France upon applicable tie-breaker text.
14. Based on the facts and circumstances of the case and keeping in view the above discussion, we do not fee any hesitation to vacate both the orders of authorities below Consequently, the appeal under consideration stands accepted and the demand created vide the impugned order is deleted as well as the consequential proceedings stands vacated.