KINGCRETE ASSOCIATES (PVT.) LTD. Versus COMMISSIONER INLAND REVENUE, CTO, LAHORE

ORDER

1. ZAHID SIKANDAR, MEMBER.--- The titled first appeal has been preferred by the taxpayer directly before the tribunal under section 131 read with erstwhile provisions of section 126A of Income Tax Ordinance, 2001 (hereinafter referred as 'ITO') against order dated 10-06-2024 passed by AC/DCIT Range-III, Zone-II, CTO, Lahore whereby taxpayer's assessment for tax year 2018 was amended under section 122(1)/(5). During the pendency of this appeal, the appellant also filed a miscellaneous application for raising addition ground which is allowed in the interest of justice.

2. Brief facts of the case are that the taxpayer, a private limited company, filed its income tax return for tax year 2018 declaring taxable property income at Rs.12,398,881/- and loss from business at Rs.67,222,742/-. The return, so filed, constituted as deemed assessment order in terms of section 120 of the ITO. Subsequently on the basis of definite information received by the department in respect of purchase of certain properties by the taxpayer, the OIR issued notice under section 176 on 16.11.2022 for compliance which allegedly remained un-responded. Consequently, the OIR issued show-cause notice under section 122(9) and separate notice 111(1)(b). Relevant extract of the SCN is reproduced as under:

2. Whereas I consider that the assessment order treated as issued under sections 120/122 of the Income Tax Ordinance, 2001 for the tax year 2018 needs alteration and to make addition to the declare income by amendment under section 122(5) read with Section 122(8) of the Income Ordinance, 2001. The amendment is required for imposition of correct amount of tax for the tax year 2018, as in my opinion, income tax return and document relating to the Income declared under the relevant provision of the Ordinance have resulted is an assessment whereby Income chargeable to tax has escaped assessment. As per available information with this office, you have purchased certain properties worth Rs. 267,500,000/- Perusal of return and audited accounts reveals that you have not declared the property purchased. The detalis is given below:

3. CPR NO: 112017111510271158627

4. Value: 267,500,000

5. Tax deducted: 5,350,000 u/s 236K

6. Notice under section 176 issued was issued dated 16-11-2022. No compliance was made by you on due date. You are hereby given an opportunity to justify as to why your assessment may not be amended under section 122(1) read with section 122(5) by making an addition of Rs. 267,500,000/- In the light of section 111(1)(b) of the Income Tax Ordinance, 2001. Date of hearing is 28 Feb 2023.

3. In response, the taxpayer filed the following reply alongwith certain evidence:

7. M/S Bahira Town (Pvt.) Ltd has purchased the building measuring 361 Sq yards bearing survey No. 1/1A, Sheet No. S.R. No. 13, Muhammad bin Qasim Road, Karachi worth Rs.267,500,000/- In the name of its associate company M/S Kingcrete Associates (Pvt.) Ltd. The building is shown in the balance sheet of M/S/ Bahria Town (Pvt.) Ltd and payment is also made by M/S. Bahria Town (Pvt.) Ltd. The physical possession of the said premises has not been transferred to M/S Kingcrete Associates (Pvt.) Ltd. This premises will be accounted for in financial statements of M/S. Kingcrete Associates (Pvt.) Ltd. when the physical possession of the building is handed over."

4. Being dissatisfied with the explanation, the OIR vide order dated 10.06.2024 amended the taxpayer's assessment by way of making addition of Rs.267,500,000/- in its income. It was held by the assessing officer that the registered deed submitted by the taxpayer reflected that the title of the purchased property was transferred to taxpayer on October 2017 and the amount was not declared in the return and audited accounts of the taxpayer company. The OIR also rejected the taxpayer's stance that the said amount has been declared in accounts under the head advance on purchase of land as the amount under the head was declared at Rs.137,053,749/- whereas the value of land on which tax under section 236K deducted was at Rs.267,500,000/-. The taxpayer has assailed the impugned addition before the tribunal both on factual and legal premise.

5. Arguments heard, order perused.

6. Besides, explaining the issue on factual merits the learned AR has primarily argued that impugned assessment order is time barred. The learned counsel drew our attention to the summary/chart available in the Impugned order in respect of adjudication hearings and adjournments sought and submitted that the assessment has been finalized beyond the stipulated time even after the grant of extension by the CIR hence is time barred. Further adds that extension given by CIR was without reasons as of routine without application of independent judicious mind as required under the law. After examining the record, we find that initially show-cause notice was issued on 13.02.2023 whereas amended assessment order was passed on 10.06.2024 meaning thereby after 331 days of the issuance of SCN. Extension of 90 days was also stated to be granted by CIR. There is no denial of extension of time given by the Commissioner from taxpayer's side and the only objection raised by the learned AR relates to non-giving of reasoning justifying the extension. We do not dispute that the commissioner could not extend the time according to his own choice and whims as a matter of routine without any limit or constraint. He could only do so after applying his mind and after recording reasons for such extension in writing. However, the learned AR has not placed any material or record before us to substantiate the contention. It is a trite law that whoever alleges something is required under the law to substantiate the same. Onus probandi lies on the claimant of an alleged fact. If the appellant had any grievance regarding such extension of time limit, it may have requested the concerned commissioner or the OIR to communicate the reasons for such extension but since nothing has been placed before us therefore without any clarity on this point we would refrain to comment on that. However, one thing which is apparent from the chart/summary in the Impugned order that extension was granted by CIR from 12.09.2023 to 15.12.2023 which is beyond 90 days. The first proviso of section 122(9) clearly stipulates that extended period granted by CIR shall in no case exceed ninety days. The phrase "such extended period shall in no case exceed ninety days" clearly reflects the legislature's intent and force behind it so as to confine the CIR not to extend even a single day beyond ninety days. So, the extension given by the CIR beyond ninety days was patently illegal and unlawful.

7. Now coming to the main question as to whether the assessment framed by the OIR is time barred or not. As per summary given in the impugned order, after excluding the adjournments of 45 days taken by the taxpayer and even after excluding the illegal extension of time by CIR (treating the same as lawful) the impugned order is still time barred. We have gathered the following Information from record and made calculation of number of days as follows:

8. No of days

9. Notice 122(9) issued on

10. 13-Feb-23

11. 15

12. Month of March

13. 01-Mar-23

14. 31

15. Month of April

16. 01-Apr-23

17. 30

18. Month of May

19. 01-May-23

20. 31

21. Month of June

22. 01-Jun-23

23. 30

24. Month of July

25. 01-Jul-23

26. 31

27. Month of Aug

28. 01-Aug-23

29. 31

30. Month of Sep

31. 01-Sep-23

32. 30

33. Month of Oct

34. 01-Oct-23

35. 31

36. Month of Nov

37. 01-Nov-23

38. 30

39. Month of Dec

40. 01-Dec-23

41. 31

42. Date of order

43. 10-Jan-23

44. 10

45. Order issued after No. of days

46. 331

47. Less Allowed

48. -180

49. Additional as per CIR extension

50. -90

51. Adjournment

52. -45

53. Limitation expired by No. of days

54. 16

8. Plain language of first proviso to section 122(9) inserted through Finance Act, 2021, as amended in Finance Act, 2022, clearly indicates that the tax officer was bound to pass order within the stipulated time 180 days or within extended time by the CIR which could not exceed ninety days. The intention of legislature by inserting this proviso clearly meant to restrict the officers to pass orders within time so as to curtail the unbridled and unlimited powers of the officers in passing assessment orders whenever they wanted. The curtailing of powers of the officer and CIR and the negative character of language employed in the first proviso pointed towards their mandatory nature. This is further supported by the fact that previously there was no time limit and the first proviso in section 122(9) was inserted in Income Tax Ordinance, 2001 by way of amendment through Finance Act, 2021. When the legislature made an amendment in an existing law by providing a specific procedure or time frame for performing a certain act, such provision could not interpreted in a way which would render it redundant or nugatory. Reliance is placed on decision of Hon'ble Supreme Court given in case titled as Collector of Sales Tax, Gujranwala v. Super Asia reported in 2017 SCMR 1427. First proviso to section 122(9) is mandatory in nature and the non-compliance with its terms would be that any order passed beyond stipulated time period would be invalid. Further, as per second proviso of section 122(9) time taken through adjournments by the taxpayer not exceeding sixty days shall be excluded from the computation of the period specified in the first proviso. In the present case, the taxpayer took adjournments for 45 days which have been excluded from the above made computation.

9. The assessment order is time barred hence is illegal, void ab-initio and not sustainable under the law. Though, the learned counsel has also raised legal objection in respect of non-conformity with the procedure laid down by Hon'ble Supreme Court in Millat Tractor's case 2024 PTD 483 while making addition under section 111(1)(b) but since the order is not sustainable being time barred therefore no further adjudication or deliberation is required on rest of the legal objections or on factual aspect.

10. Impugned order is set aside. Taxpayer's appeal is allowed.

55. MQ/59/TAX(TRIB) Appeal allowed.