MANZOOR AHMAD Versus COMMISSIONER INLAND REVENUE, ZONE II, RTO, FAISALABAD
ORDER
ZAHID SIKANDAR, JUDICIAL MEMBER .----The instant second appeal has been preferred by the taxpayer under section 131 of the Income Tax Ordinance, 2001 (hereinafter referred as 'ITO') against the Order 6551 dated 28.10.2014 passed by the Commissioner Inland Revenue (Appeals), Faisalabad wherein the learned Commissioner Inland Revenue (Appeals), rejected the appeal of the taxpayer and maintained the amended assessment made by the assessing officer.
2. Brief facts of the case are that the appellant/taxpayer filed income tax return for the year 2012 declaring total income at Rs.829,311/- which was deemed as assessment order under section 120 of the ITO. Upon scrutiny the assessing officer found the self-assessment order erroneous in so far as prejudicial to the interest of revenue and as a consequence issued a show-cause Notice No.483 dated 06.03.2014 under section 122(5A) read with section 122(9) seeking explanation with regards to the discrepancies noted and conveyed his intention to amend the assessment. The relevant portion of the said show-cause notice is reproduced below:
1. As per Annex-B to the return, tax deduction under section 231A has been claimed at Rs.96,655/-. When worked back from this tax deduction, the cash withdrawals during the year compute at Rs.48.327,500/-, which represent your transactions debitable to the manufacturing/trading account and profit/loss account. Contrarily, as per the return you have shown purchases at Rs.27,592,845/-. Thus, it appears that purchases has been suppressed which are liable for addition under section 111(1)(d). As such the assessment order has been rendered erroneous and prejudicial to the interest of revenue.
2. As per Sale tax returns for the same corresponding period, purchases have been declared at Rs.37,606,422/- whereas in the Income Tax Return the same are shown at Rs.27,592,845/-. It appears that purchases have been suppressed in the Income Tax return, which are liable for addition under section 111(1)(d)
3. The learned AR for the taxpayer furnished replies to the assessing officer contesting the confronted issues raised during the hearings from time to time but could not satisfy the assessing officer with regards to the salaries paid to the employees after withdrawal of cash from the bank account and being in contradiction of section 21(m) of the ITO. Consequently, the Addl. CIR finalized the proceedings and amended the assessment order by way of making addition under section 21(m) in the following manner:
Declared total income
Rs.829,311/-
Add: inadmissible expense under section 21(m)
Rs.1 165,200/-
Total income
Rs.1,994,511/-
Tax on above income @ 25%
Rs.498,628/-
Tax paid (subject to verification)
Rs.124,519/-
Balance taxpayable
Rs.374,109/-
4. Feeling aggrieved with the aforesaid treatment the taxpayer filed an appeal under section 127 of the ITO before the Commissioner (Appeals). The learned CIR(A) after hearing the matter vide order dated 28.10.2014 dismissed the appeal of the taxpayer and upheld the amended assessment made by the assessing officer. Hence, this second appeal has been filed by the taxpayer against the order passed by the learned CIR (A).
5. Mr. Suhail Ibn e Siraj, Advocate is present on behalf of the appellant taxpayer whereas none tendered appearance on behalf of the respondent department despite proper service of notices served through registered posts. Since no one has appeared on behalf of the respondent therefore this appeal is decided ex parte on merits and on the basis of available record and arguments advanced by the learned counsel for the appellant taxpayer.
6. The learned AR for the appellant agitated against the orders of the assessing officer as well as the CIR(A) and submitted that the CIR(A) was not justified to confirm the order passed by the assessing officer by holding that the additions under section 21(m) was lawfully made. Finally, he prayed for the acceptance of the instant second appeal filed by the taxpayer.
7. I have observed that the show-cause notice issued to the taxpayer does not reflect the addition proposed under section 21(m) of the ITO rather the allegations contained in the said notice confronted to the taxpayer proposed the addition under section 111(1)(b). The learned AR for the taxpayer pointed this legal infirmity and took this legal objection before the CIR(A) but the learned commissioner ignored this contention of the AR and confirmed the addition made under section 21(m). The order of the CIR(A) is not based on correct application of law. It is a right of the taxpayer to know as to under what provision of law the officer is intended to make assessment so that he may get an opportunity to defend the proposed action accordingly. Non mentioning of section 21(m) and the proposed addition under this provision cannot be condoned as it tantamount to denial of statutory right of the taxpayer. If the taxpayer did not know as to under what provision of law the addition in the income is going to be made, he could not come up with his view to the legality of jurisdiction and would not be able to take objections against the proposed action. Without specifically confronting the specific provision of law and without issuance of any notice in respect of the proposed addition/action, the proceedings initiated are defective and nullity in the eye of law. The Hon'ble Islamabad High Court in a case titled as Raja Fida Hussain v. Deputy Director reported in 2021 PTD 1710 observed in para 14 as under;
"The taxpayer/person has a right to know the unpaid/arrears of tax demand or government dues levied under the law, which should be communicated to him by disclosing all the particulars of the alleged outstanding amounts and the provisions of law in clear and unambiguous terms. Thus, a vague and blind notice whereby the petitioner is asked to pay full tax of FBR without disclosing the details and exact amount of tax and without reference to the provision of the statue covered under the domain of FBR is patently arbitrary, void ab-initio and without jurisdiction."
8. The record perused by me in the instant appeal clearly reflects that the taxpayer was not confronted with the addition under section 21(m) in the show-cause notice rather the assessing officer conveyed his intention to make additions under section 111(1)(b) hence the additions made under section 21(m) by the assessing officer without being confronted are liable to be struck down. The orders passed by the learned officers below suffer from legal infirmity and are not sustainable in the eye of law, hence are hereby annulled.
9. With the stated reasons, the instant second appeal of the taxpayer succeeds.
10. Since the instant appeal has been decided on this very legal ground hence the factual aspects or merits of the case do not require any discussion or observation by this bench.
SA/1/Tax (Trib) Appeal allowed.