This Reference Application, filed under Section 133 of the Income Tax Ordinance, 2001 (hereinafter "Ordinance, 2001"), arises out of the impugned order dated 30.08.2017 passed by the learned Appellate Tribunal Inland Revenue, Lahore Bench, Lahore (hereinafter "the Tribunal"). The following questions of law have been proposed for our opinion. i. Whether, on the facts and in the circumstances of the case, the learned Tribunal was justified in holding that credit entries appearing in the taxpayer's bank account did not constitute "definite information" within the meaning of Section 122(5) of the Ordinance? ii. Whether, on the facts and in the circumstances of the case, unexplained credit entries in the bank account of the taxpayer fall within the purview of "definite information" under Section 122(5) of the Ordinance, particularly in light of the judgment relied upon by the Tribunal?
2. Briefly stated, the respondent taxpayer, acting as a commission agent of M/s Shell Pakistan Limited, filed a return for the Tax Year 2010 under Section 115(4) of the Ordinance, which was deemed to be an assessm ent under Section 120. The Department, upon scrutiny of the taxpayer's bank statements, identified credit entries which allegedly did not correspond with the declared income. Consequently, proceedings under Section 122(1) read with 122(5) of the Ordinance, 2001 were initiated, culminating in the amendment of the assessment order based on an estimation of income derived from bank credit entries.
3. The Assessing Officer treated the entire amount of the credit entries as sales, applied a gross profit rate, and deducted estimated expenses therefrom. The taxpayer's appeal before the Commissioner (Appeals) was dismissed. However, on further appeal, the learned Tribunal allowed the taxpayer's plea and annulled the reassessment order. The department, being aggrieved, filed this Reference Application.
4. We have heard learned counsel for the applicant-department and perused the record with their assistance.
5. It is settled law that the jurisdiction under Section 122(5) of the Ordinance, 2001 can only be invoked where "definite information" comes into the notice of the Commissioner or the Officer Inland Revenue (hereinafter "OIR"). The term "definite information" has received authoritative interpretation from the Hon'ble Supreme Court of Pakistan.
6. In the present case, the Officer Inland Revenue initiated reassessment proceedings solely on the basis of credit entries in the taxpayer's bank account, without establishing any direct nexus between those entries and taxable income. No audit or independent inquiry was conducted to convert those entries into actionable "definite information."
7. At the outset, it becomes necessary to examine whether the learned OIR was indeed in possession of "definite information". The expression "definite information" has been the subject of judicial interpretation by the Hon'ble Apex Court in a series of pronouncements, notably in a recent judgment pronounced by the Hon'ble Supreme Court of Pakistan in case titled Commissioner Inland Revenue vs. M/s. Khudad Heights (2025 SCMR 716), wherein the Apex Court reaffirmed that credit entries in bank statements, standing alone, do not necessarily reflect taxable income. In the regime of the 2001 Ordinance, definite information' was either left to audit analysis, enabling the Commissioner to adjudge whether: (i) any income chargeable to tax has escaped assessment; or
(ii) total income has been under-assessed, or assessed at too low a rate, or subjected to excessive relief or refund; or (iii) any amount under a head of income has been misclassified. Thus, a statement of account alone cannot be a basis to form any of the three routes provided in the later part of Section 122(5). This legal position was eloquently summarized by the Hon'ble Supreme Court in the following passage of the above referred judgment:- "7. In the instant case the re-assessment proceedings triggered on the basis of bank statement of the taxpayer. All transactions therein not necessarily demonstrate the income of the taxpayer/assessee hence unless it is established that these statements and/or entries therein disclose information of income which is definite', the subject instrument cannot be applied as being one having definite information'. Neither the Commissioner nor the Tribunal and the learned High Court were of the view that all credit entries in the statement of account disclosed the income of the assessee and hence it does not constitute definite information'. Indeed, the Tribunal is the last fact finding forum which question could neither be raised in the reference jurisdiction nor before this Court."
8. In another landmark judgment titled "Messrs EFU General Insurance Co. Limited vs. The Federation of Pakistan and others" (PLD 1997 SC 700), the Hon ble Supreme Court of Pakistan took cognizance of the matter and rendered a seminal judgment elucidating the relevant principles of law that "definite information" must be understood in its ordinary and plain meaning, information that is conclusive, precise, and unambiguous, and mere change of opinion or reappraisal of previously available material does not constitute "definite information." The relevant paragraph of the judgment is as under: - "10. Another question debated during the hearing of these appeals was whether binding judgment of the Courts come within the term better information" employed in section 65(2) of the Income Tax Ordinance. As has been observed, section 65(1) gives powers to the Income Tax Officer to reopen assessm ents in cases of under assessment or escaped assessment etc., but subsection (2) of the section places an embargo upon the Income Tax Officer by' providing that no proceedings for reopening the assessm ent shall be initiated unless "definite information" has come into the possession of the Income Tax Officer.
In a later judgment of this Court in the case of Central Insurance Company v. C.B.R. 1993 SCRM 1232, decided on 04-04-1993, this Court, inter alia, dealt in great detail with the expression "definite information" in section 65(2) of the Ordinance. It was observed that the words "definite information" are the keywords for the purposes of justifying action under subsection (1) and, as the said words had not been defined in the Ordinance, they will carry their literary meanings. It was observed that every information cannot be treated as the basis for reopening of the assessment but the information should be of the nature which should qualify as "definite information" and that the expression "definite information" could not be given a universal meaning but it will have to be construed in each case. It was further observed that where an assesse discloses all the material facts without any concealment and the assessment had been consciously completed by the Income Tax Officer, in such a, case, in the absence of the discovery of any new facts which can be treated as "definite information", there cannot be any scope for reopening of the assessment under section 65. It was further observed that any change of opinion on the basis of the same material by the Income Tax Officer will not warrant pressing into service the said provision. It was observed that a Circular from the Board of Revenue interpreting any provision of a law was not a "definite information" for reopening of assessment by an Income Tax Officer. It was then observed that expression "definite information" will include factual information as well as information about the existence of a binding judgment of a competent Court of law/forum for the purposes of section 65 of the Ordinance, but any interpretation of a provision of law by a functionary which has not been entrusted with the function to interpret such provision judicially cannot be treated as a "definite information".
An interpretation by a functionary of the Revenue Department or a change in the interpretation of any provision by any functionary of the department including the Central Board of Revenue is not "definite information" for being made a lawful basis for reopening an assessment already made."
9. Furthermore, the Hon'ble Supreme Court, in its authoritative pronouncement reported as CHIEF COMMISSIONER INLAND REVENUE, RTO, PESHAWAR Versus Messrs SABRINA TENT SERVICES (2019 PTD 2001), has categorically lays down the settled proposition of law on the subject, which squarely governs the issue under consideration and leaves no room for a contrary interpretation. It has been held as under: "4. ."Definite information' does not mean a reanalysis of existing information or an analysis of further information that was previously accessible but had not been taken into account. Reliance in this respect is placed Central Insurance Co. vs. Central Board of Revenue (1993 SCMR 1232), Inspecting Assistant Commissioner v. Pakistan herald Ltd. (1997 SCMR 1256) and Income-tax Officer v. Chappal Builders (1993 PTD 1108)."
10. The approach adopted by the OIR treating gross bank credit entries as business receipts, estimating sales, applying a gross profit rate, and deducting assumed expenses is contrary to the settled law. Particularly, in the case of a commission agent, such as the respondent, income is earned through receiving commission and not from the value of goods sold on behalf of the principal. The estimation method adopted by the Assessing Officer was not only improper but has also held to be illegal in a series of precedents, including COMMISSIONER INLAND REVENUE, ZONE- II, REGIONAL TAX OFFICE, (RTO) LAHORE Vs MIAN LIAQAT ALI PROPRIETOR, LIAQAT HOSPITAL, HOUSE NO.6, STREET NO.6, LAL PUL, PANJ PIR ROAD, MUGHALPURA, LAHORE (2023 SCMR 534), wherein following dictum was laid down:- "11. Having considered the point, we are of the view that there are at least two reasons why the Department's view cannot prevail and the one taken by the Tribunal is to be preferred. Firstly, on the Department's reading of the provision, sub-clause (i) of clause (d) creates two categories: production or sales on the one hand, and "any amount chargeable to tax" on the other. In respect of the first category it is the "gross receipts" or "gross income" that can, in its entirety, be taxed. In respect of the other, it is only "income" properly so called that can be made liable. Why there should be such a distinction is not readily apparent. It is true that in respect of the interpretation of fiscal statutes the State is given greater latitude in respect of choosing what is to be taxed (or exempted) and if so, in what manner and to what extent. However, this approach is but a rule of interpretation (and one among several) that aids the Court in coming to the correct conclusion with regard to the provision under consideration. It is not an absolute rule, to be applied rigidly and strictly to the exclusion of all else. Production and sales are two types of activity that produce income. However, as is well established, income is a very broad and inclusive concept. In the felicitous words of Kanga and Palkhiwala: "The categories of income are never closed" (see Fawad Ahmad Mukhar and others v. Commissioner Inland Revenue and another 2022 SCMR 426, para 9 and the authorities there cited). To pick out only two types of income (production and sales) and treat those "gross receipts" as liable to tax, out of the vast sea that otherwise constitutes "income" properly so-called ("any amount chargeable to tax") is in our view not the correct approach. No discernable yardstick or standard appears in the provision as would justify such differentiation and radical departure from settled principles of income tax law. Like should (unless otherwise lawfully dictated) be treated alike. If "any amount" can be brought within the scope of sub-clause (i) of clause (d) only if, and to the extent, that it is "chargeable to tax" (i.e., constitutes "income" properly so called), then production and sales must be given the same treatment. Thus, it is only production or sales chargeable to tax that can be brought within the ambit of clause (d). The categorization made by the Department is artificial and cannot be accepted. The approach taken by the learned Tribunal was correct."
11. It is a matter of record that all transactions conducted by the taxpayer were duly routed through recognized banking channels, thereby ensuring transparency and traceability in the financial dealings. Furthermore, the commission income earned was fully declared, corroborated by valid sales tax invoices duly issued by M/s Shell Pakistan Limited, which clearly established the taxpayer's role as a commission agent and explained the precise nature and source of the income.
These factual assertions were not only substantiated by documentary evidence but were also duly appreciated and analyzed by the learned Appellate Tribunal. The findings so recorded by the tribunal are based on sound appreciation of evidence, are supported by the record, and do not suffer from any legal infirmity, perversity, or misreading/non-reading of material evidence. In the absence of any jurisdictional error or misapplication of law, no exception can be taken to the well reasoned conclusions.
12. The Appellate Tribunal, being the final fact finding Authority under the statutory scheme, has rendered its findings after due appreciation of the evidence on record, in consonance with the applicable statutory provisions and in conformity with binding precedents of the Superior Courts.
The conclusions so drawn are neither arbitrary nor capricious, but are grounded in a reasoned and judicious analysis of the material available. No jurisdictional error, misapplication of law, or perversity in the appreciation of evidence has been demonstrated that would warrant interference by this Court in exercise of its jurisdiction under Section 133 of the Ordinance, 2001. Mere disagreement with the Tribunal's findings, absent any substantial question of law arising therefrom, does not justify invocation of this Court's jurisdiction.
13. In light of the foregoing, we hold that mere credit entries in the bank statement of the taxpayer do not, by themselves, constitute "definite information" within the meaning of the law. Such entries require further verification and correlation with the taxable income of the assesse. The order passed by the Tribunal aligns with the well settled principles of law and does not disclose any legal infirmity warranting interference, which is hereby upheld. Consequently, the instant Reference Application is decided against the applicant department and the questions proposed are answered in NEGATIVE.
14. Office shall send a copy of this order under seal of the Court to learned Appellate Tribunal as required under the law, as required under Section 133(8) of the Ordinance, 2001.