VS, 2010 PTD-INCOME-TAX-APPELLATE-TRIBUNAL-PAKISTAN 1221 (2010)

(a) Income Tax Ordinance (XLIX of 2001)---

----Ss.122(5) & 122(1)---Amendment of assessment---Definite information--Taxation Officer without confronting the assessee had made addition assuming the jurisdiction under S.122(5) of the Income Tax Ordinance, 2001 despite the fact that no notice had ever been issued under S.122(5) of the Income Tax Ordinance, 2001---Validity---Taxation Officer assumed jurisdiction without issuing proper notice under S.122(5) of the Income Tax Ordinance, 2001 having no definite information and had amended the assessment without giving any basis which had been upheld by the First Appellate Authority without considering the facts as well---Order of First Appellate Authority was vacated and order passed by the Taxation Officer under S.122(1) of the Income Tax Ordinance, 2001 was annulled by the Appellate Tribunal.

2007 PTD (Trib.) 2601; 1993 SCMR 1108 = 1993 PTD 1108 and 2002 PTD 102 rel.

(b) Income Tax Ordinance (XLIX of 2001)---

----S.122(5)---Amendment of assessment---Definite information---Reason to believe---Scope---Tangible information and such proof that led to the `reason to believe' could only be considered as a `definite information'---Any estimate, gossip, personal whims or surmises could not be termed as the `definite information'---Prefix of definite with suffix of information had made the term more strong---Any information which created doubts or provided reason to suspect that the income had been concealed did not ,form a part of the term `definite information'.

Mirza Anwar Baig for Appellant.

Mrs. Sabiha Mujahid, D.R. for Respondent.

ORDER

JAWAID MASOOD TAHIR BHATTI, (JUDICIAL MEMBER).---The appellant through this appeal has objected to the impugned order of the learned CIT(A) dated 30-4-2009 on the following grounds:---

"(1) That the CIT(A) has erred in confirming the amended assessment which was made by the Taxation Officer without jurisdiction, as it did not issue the requisite notice under section 122(5) of the Income Tax Ordinance, 1979, which was a condition precedent for vesting jurisdiction upon the Taxation Officer to make the amended assessment under section 122(5) read with section 122(1) of the Income Tax Ordinance, 2001.

(2) That the assessment amended under section 122(5) by the Taxation Officer is illegal, without jurisdiction and liable to be cancelled as there was no definite material available on record which was essential before the issuance of notice for amending the assessment under section 122(5). Thus the action of the C.I.T.(A) in confirming the amended assessment is illegal and arbitrary.

(3) That the C.I.T.(A) has erred in confirming the amendment of assessment which was made by the Taxation Officer without giving due consideration and totally neglecting AR's written reply vide letter No.T/805/08 dated August 28, 2008 filed with the department on due date 30-08-2008 fixed for compliance. Thus the action of the CIT(A) in confirming the action of the Taxation Officer in making ex parte amended order is illegal and arbitrary.

(4) That the CIT(A) has erred in confirming the action of the Taxation Officer in making the following disallowances.

Thus the action of the CIT(A) on this score is illegal and arbitrary.

(5) That the Taxation Officer did not allow the loss on sale of assets which is a business and revenue loss and is liable to be set off against other income/property income. Thus the action of the CIT(A) in confirming the action of the Taxation Officer on this score is illegal and arbitrary.

(6) That the CIT(A) has erred in law in confirming amended order, wherein the Taxation Officer did not account for the brought forward losses while working out total income of the assessee. Thus the action of the CIT(A) on this score is illegal and arbitrary.

(7) That the CIT(A) is otherwise bad for such further reasons in law and on facts as may be raised at the time of hearing of appeal."

I have heard the learned representatives from both the sides and have also perused the impugned order of the learned CIT(A), the assessment order, and other relevant record of the case.

The learned counsel for the appellant has contended that the Taxpayer in this case is a private limited company deriving income from manufacturing and sale of yarn products. He has submitted that the return filed by the assessee was taken to be an assessment order in terms of section 120(1) read with section 122(5) of the Ordinance, 2001 against which the appeal was filed before the learned CIT(A) who has dismissed the appeal. Learned counsel ha contended that the case of the assessee was reopened after issuing three statutory notices under section 122(9) of the Ordinance, 2001 dated 9-8-2008, 1-8-2008 and 28-8-2008. The learned counsel has contended that in all these three notices there is no mention that the Taxation Officer was having any definite information acquired from audit or otherwise that the Taxpayer has escaped assessment or under assessed income has been assessed as at too low rate or has been subject of excessive relief or refund or any amount under head of income has been misclassified. He has contended that the above referred notices were duly replied by the taxpayer vide letter dated 28-8-2008 but the Taxation Officer without confronting the assessee has made the addition assuming the jurisdiction under section 122(5) of the Ordinance, 2001 despite the fact that no notice has ever been issued under section 122(5) of the Ordinance, 2001. Learned counsel placing reliance on the decision reported as 2007 PTD (Trib.) 2601 has contended that subsection (5) of section 122 of the Ordinance provides an embargo on the Taxation Officer that he could only amend an assessment under section (1) or may further amend an assessment under sub-section (4) if he had in his custody a definite information that any income of the assessee had escaped assessment or his income had been under-assessed or had been assessed at two low a rate or had been subject to excessive relief or refund or if the income had been misclassified. Learned counsel has contended that through the above referred judgment this Tribunal has held that the tangible information and such proof that leads to the `reason to believe' could only be considered as a `definite information'. Any estimate, gossip, personal whims or surmises could not be termed as the definite information. The prefix of definite with suffix of information makes the term more strong. Any information which creates doubts or provides reason to suspect that the income has been concealed does not form a part of the term definite information. In another decision of the Hon'ble Supreme Court reported as 1993 SCMR 1108 = 1993 PTD 1108 it has been held that "it was the duty of the department before re-opening a case of self-assessment to be in possession of definite information regarding the department's assertion against the assessee. The expression definite information, and similar other expression used in the above noticed provisions or other related provisions certainly meant much more than mere material so as to cause a reasonable belief of even such evidence which might lead to a definite belief. Unless there is definite direct information and there is no further need to put the said definite information to trial by putting in further supporting material the process of self-assessment could not be reopened." The Hon'ble High Court in a decision reported as 2002 PTD 102 has held that "If an assessee is able to demonstrate that either the jurisdictional notice was not served at all or it was not served on assessee or a person duly authorized by the assessee in this behalf, the jurisdiction acquired by an Assessing Officer, which is contingent on a proper service of notice on the assessee or his legally authorized agent, shall result in vitiation of the entire proceedings." Likewise in a decision of the Madras High Court India regarding the assumption of jurisdiction the notice in this regard has been made mandatory requirement. Likewise in the decision of the Azad Jammu and Kashmir High Court explaining the word information when it is qualified with the word definite it has been held that "it would mean that the said information in all probabilities, is correct in all respects and there is no likelihood of its being wrong or untrue and there is no necessity to conduct probe to be satisfied about its correctness and there is no chance of its being untrue."

Learned D.R. is supporting the impugned orders of the officers below but he is unable to rebut the above referred legal position. After considering the above referred decisions of the Hon'ble Supreme Court of Pakistan, the Hon'ble. High Courts and of this Tribunal, I am of the view that in this case the Taxation Officer has assumed jurisdiction without issuing proper notice in this regard under section 122(5) of the Ordinance, 2001 having no definite information and has amended the assessment without giving any basis which has been upheld by the c learned CIT(A) without considering the facts as well as the above referred legal aspects of the case. The impugned order of the learned CIT(A) is therefore vacated and the order passed by the Taxation Officer under section 122(1) of the Ordinance, 2001 is annulled.

The appeal filed by the assessee is allowed.

C.M.A./37/Tax (Trib.)Appeal accepted.