Qh 7 APPELLATE TRIBUNAL INLAND REVENUE OF PAKISTAN KARACHI BENCH, KARACHI Present: MR. TAUQEER ASLAM, CHAIRMAN MR. MANZOOR ALI JOKHIO, A.M ITA No.65/KB/2023 (Tax Year-2021) U/S. 122(8A) M/S. ASHRAF AND COMPANY, KARACHI. NTN: 2236207 ‘Appellant Versus The Commissioner-IR, Audit-l, MTO, Karachi Respondent Appellantby : Mr. Irshad Alam, Advocate Respondent by : Mr. Farhan Badar Solangi, D.R. Date of hearing 24-08-2023 Dateoforder : 25-05-2023 ORDER MANZOOR ALI JOKHIO, A.M: This listed appeal has been filed by the appellant/taxpayer against the impugned order bearing Bar code Noi100000137894766, dated 16-12-2022 passed by the Commissioner-IR (Appéals-IV), Karachi. Through this order, the learned CIR(A) has confirmed the order passed by the Additional Commissioner Inland Revenue, Range-A, Audit-I, MTO, Karachi. 2. The taxpayer being aggrieved with the order of Learned CIR(A), preferred appeal before this forum on the basis of grounds as set forth in the memo of Appeal 3. The brief facts of the case as gathered from the available record are that the Taxpayer is an AOP engaged in the business of manufacturing of textiles. The Taxpayer has filed return of income for tax year 2021 under section 114(4) of the Income Tax Ordinance, 2001 declaring income at Rs.8,873,118/- and tax chargeable at Rs. 1,388,872/- which stands deemed assessed u/s 120 of the Income Tax Ordinance, 2001. After careful scrutiny of the taxpayer's return of income filed u/s 114(4) of the Income Tax Ordinance, 2001 for the tax year 2021, it was found by the Additional Commissioner Inland Revenue that the Page 1 of 6taxpayer's deemed assessment u/s 120 of the Income Tax Ordinance, 2001 is erroneous in so far as prejudicial to the interest of revenue and requires amendment as provided u/s 122(SA) of the Income Tax Ordinance, 2001, on the grounds mentioned in Show Cause Notice U/s.122(9) read with section 122(6A) of the Income Tax Ordinance 2001 issued by ADCIR to the taxpayer vide Bar code No.100000120340760, dated 30-03-2022. The Officer issued various notices/reminders to ‘Taxpayer for submitting reply but the Taxpayer failed to comply with any single notice. Resultantly, the Officer culminated its proceedings by creating tax liability of Rs.71,948,449/- by passing order w/s.122(SA) of the Income Tax Ordinance, 2001 4. On the date of hearing, Mr. Irshad Alam, Advocate appeared on behalf of the Appellant/taxpayer while Mr. Farhan Badar Solangi, D.R attended the case proceedings on behalf of the Respondent/department. 8. During the course of court proceedings, the learned counsel of the appellant/taxpayer argued that the CIR(A) confirmed the order of the officer without touching the merit of the case, grounds taken by appellant remained undecided in first stage of litigation i-e CIR(A), who confirmed amended assessment order on the ground of non- compliance of proceeding initiated by Additional Commissioner Inland Revenue under section 122(SA) of Income Tax Ordinance 2001. He further argued that the respondent has not bothered to adopt any other mode of services. In this regard, he placed reliance on the judgement reported as 2017 PTD 1839, relevant extract is as under; “It may be further observed that in view of Article 10A of the Constitution and Section 24-A of the General Clauses Act, every public functionary, including the taxation Authorities, are required to provide fair opportunity of being heard to any person before taking an adverse action against him, or passing any order of assessment or creating any additional liability of tax, by confronting such person with the proposed action in writing. The fair trial and right of hearing is regarded as a cardinal principle of Natural justice, which has to be read into very Statute, even if it may not be specifically provided therein.” Page 2 of 66. The learned AR of the appellant/taxpayer submitted that the appellant sought extension for four week through IRIS on 06-06-2022. ‘The assessing officer passed order within prescribed period envisaged under section 122(9) of the Income Tax Ordinance 2001, whereas adjournment sought by the appellant, excluded from limitation period defined under the law, thus assessing officer had sufficient time to offer another opportunity of hearing before passing ex-parte amended assessment order. He further submitted that the learned officer was not justified to pass ex-parte assessment on 22-07-2022 which was not a date fixed for hearing (compliance date of notice u/s 122(9) of the Income Tax Ordinance 2001 was 06-07-2022). Thus passing of order on a date which was not fixed for hearing was illegal. In this regard, he placed rreliance upon reported judgment as 1975 PTD 58 (LHC), 1995 PTD (Trib) 1159, 2012 PTD (Trib) 202 and 2009 PTD (Trib) 1641 According to him, the appellant’s total audit under section 177(1) of the Income Tax Ordinance 2001, was already conducted by the Commissioner Inland Revenue, bearing barcode number 100000126602218 dated 30-06-2022 and transpired reason / risk area for audit which is same issues as confronted by the ADCIR. The CIR is higher in hierarchy as per law, who superseded the proceeding of ADCIR and same issue was adjudicated by the two different officers which leads to multiplicity of orders. In coneciton with the same, he placed reliance on reported judgment 2011 PTD (Trib) 1824 wherein the Honourable ATIR held that “order passed by DCIR is legal and within lawful authority as the order passed by DCIR is considered to have been passed by the Commissioner u/s 211(1)” 7. The learned counsel of the appellant/taxpayer contended that the Honourable apex court and Tribunal has already decided the plethora of cases regarding jurisdiction of section 122(5A) of the Income Tax Ordinance, 2001 and held that erroneousness and prejudicial to interest of revenue must exist simultaneously in the show cause notice and not based on fishing inquiries, assumption and surmises. He placed reliance on the following reported judgments: 2010 PTD (trib) 111 2012 PTD (Trib) 1593 2010 PTD (Trib) 111 2014 PTD (Trib) 2085 Page 3 of 68. The learned AR of the Taxpayer further contended that the ADCIR passed amended assessment order confronted different issues on the basis of non-compliance and passed amended assessment order under section 122(SA) of Income Tax Ordinance 2001, issue wise grounds are as under; “Minimum Tax u/s 113 Through routine audit selected under section 177(1) of the Income tax Ordinance 2001, the DCIR already confront this issue under section (122(9) bearing barcode umber 100000136514920 dated 28.11.2022, (Annexure “I”), reply submitted to DCIR hence ex. parte order for charging minimum tax u/s 133 liable to delete from impugned order, Let the findings comes from total audit conducted by commissioner IR, Exempt /Other Revenue 1. Exempt or other revenue was charged by the ADCIR under section 18 without mentioning subsection of section 18 of the Income tax Ordinance 2001, further stated that assessing officer failed to mention any particular section in show cause notice. 2, That the appellant counsel while filling return erroneously declared exempt income Rs.38,864,370/, this value pertains to tax deduction u/s 153 by the buyer of appellant, erroneously shown as exempt other revenue, no effect of this exempt income transfer in books of account neither reflect in balance sheet nor any partner claimed share of exempt income. 3. That the DCIR issued audit observation bearing barcode number 100000130925457 dated 04.11.2022 (Annexure “J”), wherein point no.6 confront the same issue, appellant replied along with supporting document and same was drop/settled by the DCIR in included this issue in show cause notice bearing No. 100000136514920 dated 28.11.2022. (Annexure”K”), Additional u/s 111 (1)(4) (Point No. 3&4) 1. That the Difference of CPRN u/s 153(1)(a) 183(1)(b) of the ITO,2001 added as un-explained income amounting to Rs, 12,6241,893/- and Rs. 65,030,922/-, officer failed to confront CPRN details, the appellant is quite assure that all taxes was deducted by those buyers whose sales declared in Sales tax Return and accordingly total sales and revenue declared in income tax return and accordingly total sales and revenue declared in income tax return, it is general practice of buyers that they do not furnished all tax payment challan to the supplier, appellant declared deduction of tax u/s 153 well in available challan. 2. That the same issued was confront by the Honourable CIR for selection of audit u/s of the ITO 2001, point number 7 of the notice bearing no. 100000126602218 dated 30.06.2022 after Page 4 of 6submission of relevant documents DCIR satisfy and excluded this issue in audit observation as well in show cause notice. 3. That the additional under section 111(1)(d) of the Income tax Ordinance 2001, required enquiry and explanation not permitted under section 122(SA) reliance is placed on report judgement reproduced hereunder ; 2013-PTD-1557 122(5) vs. 122(5A) 10.. ..We also find force in the assertion of AR that section 111(1)(d) pertains to concealment or furnishing of inaccurate particulars of income therefore it has a nexus to the provisions of section 122(1) read with subsection (5) and (8) of section 122. The A.R. has explained that the FBR itself in its explanatory Circular No. 7 of 201! dated 1.7.2011 clarified that by virtue of in section of 111(1)(d) in the Ordinance by Finance Act, 2011 any production sale or any amount chargeable to tax and suppression of any iter or receipt liable to tax in whole or in part has to be treated as “concealed income” whereas section 122(5) deals with the orders which are found erroneous and prejudicial to the_interest_of revenue but the orders involving concealment in our view have to be dealt with under section 122(1) read with 122(5)(8) therefore action of the additional Commissioner to invoke provisions of section 111()(@)_in_his order under section 122(5A)_is_ not sustainable in the eyes of law. 2013 PTD 900 We are of the considered view that addition under section 111(1)(b) cannot be made without making inquiry. Firstly the assessing Officer will have to ask the taxpayer to submit explanation regarding nature and source of the amount and after considering the explanation, than addition under section 111()(b) will be made. Asking for explanation means conducting of inquiry which is beyond the scope of section 122(5A). Hence, additions under section 111(1)(b) for tax years 2006 and 2007 are ordered to be deleted.” 9. On the other hand, the learned D.R vehemently opposed the contentions of learned AR of the appellant/taxpayer and stated that both the orders of below officers are well within the framework of law and carry no illegality and infirmity, and prayed that both order of CIR(A) may be confirmed. 10. We have heard the arguments of learned representatives from both sides and perused the available record of the case including two order of below authorities. We have observed that the two officers below ignored cardinal principle of audi alteram partem and Section 24-A of the General Clauses Act. The learned CIR(A) confirmed the Page 5 of 6order of the assessing officer without touching the merits of the case and the grounds taken by appellant, which remained undecided in first stage of litigation i-e CIR(A), who confirmed amended assessment order on the ground of non-compliance of proceeding initiated by Additional Commissioner Inland Revenue under section 122(8A) of Income Tax Ordinance 2001. In view of the reported judgment as 2017 PTD 1839, we deem it appropriate to remand back the case to the department with the directions to decide the matter afresh after providing adequate opportunity of being heard to the taxpayer and the taxpayer is also directed to provide all relevant documentary evidences to the Officer for concluding the matter in instant appeal. 11. The appeal filed by the taxpayer is disposed of in the manner discussed supra. Sa/- (MANZOOR ALI JOKHIO) ACCOUNTANT MEMBER Sa/- (TAUQEER ASLAM) CHAIRMAN Younus/SPS* Page 6 of 6