2010 P T D (Trib.) 1733
[Income Tax Appellate Tribunal of Pakistan]
Before Khawaja Farooq Saeed, Chairperson and Khalid Siddiqui, Accountant Member
I.T.A. No. 868/LB of 2010, decided on 17/04/2010.
(a) Income Tax Ordinance (XLIX of 2001)---
----S. 111(1)(b)---Unexplained income or assets---Additional evidence---Deletion of addition---Department objected that balance sheet was not supplied at the time of assessment and its entertainment at the stage of First Appellate Authority was not valid while deleting the addition---Validity---First Appellate Authority had mentioned that balance sheet was on record---Contention that First Appellate Authority should not have entertained same as an additional evidence, could not help---If the accounts indicated that the receipt in bank stood reported in previous year's sale, there was no reason for its addition during subsequent year on its realization in the bank---Same was the position of contra entry in the bank---Amount was deposited and bank gave its credit, it was then reversed for some technical reason and was later again credited after final clearance---Such could not be added twice while totalling the deposit---Facts were so obvious and clear that department's point of view appeared to be as an unnecessary effort.
(b) Income Tax Ordinance (XLIX of 2001)---
----Ss.111(1)(b), 177(4), 120, 122 (5) & 129(9)---Unexplained income or assets---Audit---Addition---Procedure---Addition without assumption under S.122(5) of the Income Tax Ordinance, 2001---Validity---Issuance of notice under S.129(9) of the Income Tax Ordinance, 2001 after the audit was not enough to further proceed in the matter under law---Before invoking the provisions of S.111(1) of the Income Tax Ordinance, 2001 the department was required to acquire jurisdiction under the provisions of S.122(5) of the Income Tax Ordinance, 2001 and there was no other provisions in law which permitted the Assessing Officer to modify or reassess the already assessed return of income before establishing that his income was either under-assessed or assessed at too low a rate etc. as provided in S.122(5) of the Income Tax Ordinance, 2001---Addition under S.111 of the Income Tax Ordinance, 2001 was a subsequent stage on which the Assessing Officer should not directly reach before crossing the barrier and fulfilling the requirements for cancelling the deemed assessment under S.120 of the Income Tax Ordinance, 2001 in terms of S.122(5) of the Income Tax Ordinance, 2001---Assessing Officer was required to first determine through audit that the deemed assessment was under-assessed etc. in terms of S.122(5) of the Income Tax Ordinance, 2001 or otherwise erroneous and prejudicial to the interest of revenue as provided under Ss.122(5) & 122(5A) of the Income Tax Ordinance, 2001 on the basis and circumstances mentioned in these provisions separately ---Assessee had explained all deposits and so called discrepancies in its accounts to the satisfaction of First Appellate Authority against which no mentionable argument had been advanced; in addition to this, assessment was not in strict compliance of the provisions and the procedure provided in law---Deletion was unexceptionable and the departmental appeal was dismissed by the Appellate Tribunal being devoid of any merit.?
C.I.R. v. Dr. Yasmin Rashid I.T.A. No. 346/LB of 2010 and Fauji Oil Terminal and Distribution Co. Ltd. Karachi v. Additional Commissioner/Taxation Officer-A, Audit? Division Karachi and 2 others (2006) 94 Tax 84 (H.C. Kar.) rel.
Maroof Gilani, D.R. for Appellant.
Ishrat Hussain, I.T.P. for Respondent.
ORDER
This appeal has been filed by the Department. The grounds of appeal are as follows:
"(1) That the learned CIT(A) was not justified to hold that the taxpayer was not properly confronted as per law under which the additions were attracted through notice under section 122(9) of the Income Tax Ordinance, 2001, whereas he was properly confronted and discussed by the Taxation Officer at page No.3 of the said order.
(2) That the learned CIT(A) was not justified to delete the addition under section 11(1)(b) of the Income Tax Ordinance, 2001, amounting to Rs.3,936,831 which were made as per law and discussed in detail at page-10 of the said order.
(3) That the learned CIT(A) admitted the plea on the issue of balance sheet and allow relief in respect of addition under section 111(1)(b) amounting to Rs.3,936,831: The arguments were never submitted before Taxation Officer at the time of proceeding at first stage.
(4) That the learned CIT(A) has ignored the provisions of section 128(5) of the Income Tax Ordinance, 2001 while deleting addition of Rs.3,936,831 under section 111(1)(b) of Income Tax Ordinance, 2001.
(5) That the learned CIT (A) was not justified to delete the addition under section 111(1)(b) of the Income Tax Ordinance, 2001 read with section 122(1)/177 (4) of the Income Tax Ordinance, 2001 amounting to Rs.7,868,166 being the closing balance of bank account on 30-6-2008 as discussed in detail at page 111 of the order.
(6) That the learned CIT(A) has admitted the plea of taxpayer regarding balance sheet and allowed relief in respect of addition under section 11(1)(b) amounting to Rs.7,868,166. The arguments were never submitted before Taxation Officer at the time of proceeding and also ignored the provisions of section 128(5) of the Income Tax Ordinance, 2001.
(7) That the learned CIT (A) was not justified to delete the addition under section 111(1)(b) of the Income Tax Ordinance read with' section 122(1)/177(4) of the Income Tax Ordinance, 2001 amounting to Rs.6,661,436 as discussed in detail by the Taxation Officer at page-9 of the said order.
(8) That the learned CIT(A) was not justified to hold that "deposits include receipts" pertaining to previous year and contra entries as evident from the bank statement when no such evidence/explanations were submitted by taxpayer before the Taxation Officer at the time of proceeding."
2. The learned D.R. while supporting the grounds of appeal one by one first of all brought attention of the court towards page 10 of the order of the Taxation Officer. He pointed out that the taxpayer was duly confronted through a notice under section 177(2) read with section 122(9) of the Income Tax Ordinance, 2001 and all the subsequent additions were made after considering the reply to be as unsatisfactory. He said that the taxpayer's total investment in the business is for too less than his assets. The taxpayer failed to explain the difference between the two. Similarly, in addition to the said amount, the bank balance which showed the figure of Rs.7,868,166 could also not be explained with appropriate evidence. In addition thereto a figure of Rs.24,00,000 was also added for the reason that the assessee failed to explain the source. He, therefore, argued that the assessment of the taxpayer may be restored.
3. After narrating the above facts, the learned D.R. objected to the action of the First Appellate Authority of deleting the additions with a new arguments that the proof given to him at the appellate stage was not produced at assessment level. He argued that appreciating evidence at the stage of the First Appellate Authority notwithstanding the fact that he has the power to make inquires and call for such particulars which he thinks have nexus with the deciding of the appeals, was still not justified. He further reiterated that the entertainment of the additional evidence at the appellate stage has generally never been appreciated by the Courts. Regarding page 8 of the order of the assessing officer where the reply of the assessee has been reproduced, he remarked that same is totally vague and not a single annexure or evidence has been given by the taxpayer.
4. The learned A.R. of the assessee however, supported the order of the learned CIT (A). He brought the attention of the court to pages 2 and 3 of the order of the CIT (A). He submitted that the addition of Rs.6,611,436 which was over and above the sales have been explained before the CIT (A) satisfactory. Firstly there is a contra entry on 12-7-2007 amounting to Rs.28,74,271 while two other deposits dated 10-7-2007 and 23-7-2007 for Rs.14,00,000 and Rs.11,00,000 were also not appreciated. These two deposits in the accounts were on account of sales through Credit Cards and the same have already been disclosed in the previous year account for the year ending 30-6-2007. However, these amounts totalling Rs.25,00,000 appeared as credit entries on 10-7-2007 and 23-7-2007 respectively. The same, therefore, could not be added in the income of the assessee again for this year.
5. He reiterated this arguments by saying that the contra entry in the accounts is clear as per bank statement on record and there is no reason of counting it twice while calculating deposits. The said other additions also stood explained from the accounts itself. The question of any definite information found in the accounts through audit leading to under assessment etc., therefore, does not arise. Referring other additions the counsel brought the attention of the court to Page-5 of the order of the learned CIT(A), wherein appreciating the arguments of the counsel the First Appellate Authority observed that the Taxation Officer failed to properly confront the appellant, the provision of law under which the additions were attracted through notice under section 122(9) of the Income Tax Ordinance, 2001. Further, since bank statement and balance sheet both are available on record, there appears no justification to attract the provision of section 111(1)(b) of the Income Tax Ordinance, 2001. It is, therefore, for the said reason that the First Appellate Authority in unequivocal terms held the addition of Rs.30,36,831 and Rs.78,68,166 on account of excess fixed assets and the closing bank balance respectively to be as not sustainable in the eyes of law having been correctly shown in the balance sheet. It is, therefore, urged that the order of the CIT(A) may be maintained.
6. As already mentioned the claim of the department is that the balance sheet was never supplied at the time of assessment hence its entertainment at the stage of the CIT(A) is not valid. On the other hand the findings of the CIT(A) is clear and while deleting the addition the CIT(A) has mentioned clearly that the balance sheet is on record. The argument that CIT(A) should not have entertained it as an additional evidence, therefore, cannot help. Similarly, if the accounts clearly indicate that the receipt in bank dated 10-7-2007 and 23-7-2007 respectively for the two deposits of Rs.14,00,000 and Rs.11,00,000 stand reported in the previous year's sale, there is no reason for its addition during this year on its realization in bank. The same is the position of the contra entry in the bank. Amount was deposited and the bank gave its credit. It was than reversed for some technical reason and was later again credited after final clearance. This obviously could not be added twice while totaling the deposit. The facts are so obvious and clear that the department's point of view appears to be as an un-necessary effort.
7. Even otherwise the simple issuance of notice under section 129(9) after doing audit of the assessee was not enough to further proceed in the matter under law. Before invoking the provisions of section 111(1) the revenue department was required to acquire jurisdiction under the provisions of section 122(5). There is no other provisions in law which permits the assessing officer to modify or reassess the already assessed return of income before establishing that his income is either under assessed or assessed at too low rate etc: as is provided in 122(5). The addition under section 111 is a subsequent stage on which the assessing officer would not directly reach before crossing the barrier and fulfilling the requirements for cancelling the deemed assessment order under section 120 in terms of section 122(5). The assessing officer therefore, was required to first determine through audit that the deemed assessment is under assessed etc. in terms of section 122 (5) or otherwise erroneous and prejudicial to the interest of Revenue as provided under sec?tion 122(5A). There is no other method to modify or reassess a deemed assessment under the provisions of section 122 before exercising jurisdiction provided under section 122(5) and 122(5A) on the basis and circumstances mentioned in these provisions separately. The matter as already been discussed in a number of cases including I.T.A. No.346/LB of 2010 (Tax year 2008) re: CIR v. Dr. Yasmin Rashid in which further reliance has been placed on the judgment of (2006) 94 Tax 84 (H.C. Kar.) Fauji Oil Terminal & Distribution Co. Ltd. Karachi v. Additional Commissioner/Taxation Officer-A, Audit Division Karachi and 2 others. The relevant para of the same is as follows:-
"Thus, an assessment order or revised assessment order issued or taken/treated as issued can be amended by invoking original jurisdiction under subsection (5) of section 122, on fulfillment of conditions specified therein, and on no other ground. Such assessment orders can be revised by invoking original jurisdiction under section 122(5A). There is not other ground or method for amendment of an assessment order issued."
8. This legal flaw in the assessment is in addition to the facts mentioned in the order of CIT (A) which is clear and unequivocal. The assessee has explained all the deposits and the so called discrepancies in its accounts to the satisfaction of the CIT(A) against which no mentionable argument has been advanced before us. In addition thereof the assessment is not in strict compliance of the provisions and the procedure provided in law which has already been explained by us in a number of our judgments as well as the superior Courts. The deletion, therefore, is unexceptionable and the departmental appeal is considered of no merit.
9. The same is accordingly dismissed.
C. M. A ./87/Tax(Trib.)??????????????????????????????????????????????????????????????????????? Appeal dismisse