2020 SLD 842 Equiv.

Citation: 2020 PTD 968 = = =

LAHORE HIGH COURT

I.T.R. No. 255487 of 2018, decided on 14th March, 2019

PRESENT:
MUHAMMAD SAJID MEHMOOD SETHI, JUSTICE
MUZAMIL AKHTAR SHABIR, JUSTICE

PETITIONER(S): COMMISSIONER INLAND REVENUE

VS
RESPONDENT(S): MESSRS MALIK USMAN

Saeed ur Rehman Dogar for Applicant.

Hashim Aslam Butt for Respondent.

ORDER

This order shall also dispose of ITR No. 255493 of 2018 titled "Commissioner Inland
Revenue v. Messrs Malik Usman" as common questions of law and facts are involved in
these cases.

2. Through this Reference Application under section 133 of the Income Tax Ordinance,
2001 ("the Ordinance of 2001"), following question of law, arising out of impugned
consolidated order dated 28.08.2018, passed by learned Appellate Tribunal Inland
Revenue, Lahore Bench, Lahore ("Appellate Tribunal"), has been pressed and argued for
our opinion:-

"Whether on the facts and in the circumstances of the case, the Tribunal was justified to
delete the addition made under section 111(1)(b) of the Income Tax Ordinance, 2001 on
account of concealed closing bank balance which remained unexplained despite provision
of ample opportunity of being heard?"

2. Brief facts of the case are that original deemed assessment in this case was amended
under sections 122(1)/122(5) of the Ordinance of 2001, whereby net income for the year
2010 was re-computed at Rs.264,890,921/- and addition under section 111(1)(a) at
Rs.259,734,177/- and addition under section 111(1)(b) amounting to Rs.4,981,744/- were
made. Being aggrieved respondent-taxpayer preferred appeal before CIR (Appeals),
Lahore, which was allowed.

Feeling dissatisfied, applicant-department filed appeal before learned Appellate Tribunal,

which was dismissed. Hence this Reference Application.

3. Learned counsel for applicant department was confronted with the operative part of
impugned order that findings given therein are of facts. He could not rebut that findings
are not of law.

4. Heard. Available record perused.

5. Learned counsel for applicant department, at the very outset, was confronted with the
following underlined portion of impugned order passed by learned Appellate Tribunal,
wherein findings of facts have been given that credit entries appearing in the hank
accounts were treated as business receipts / sales for the tax year 2010 and assessing
authority failed to establish that the taxpayer made any investment or found to be owner
of money or valuable article. It has also been observed that without verification and
examination of relevant record/ balance sheet, assessing authority hurriedly made the
addition on presumption. The relevant part of impugned order is reproduced hereunder:-

"7. We have looked into the matter and after due consideration, we find that no exception
can be taken to the treatment as accorded by the learned CIR(A) which is found to be fair
and reasonable in the ambient circumstances of the case. The impugned addition under
section 111(1)(b) was made on account of credit entries appearing in the bank accounts
which was treated as business receipts / sales for the tax year 2010 in terms of section
111(1)(b) of the Ordinance. The assessing authority has wrongly invoked the provisions of
section 111(1)(b) for tax year 2010 to make the said addition. For the sake of facility and
ready reference, the provisions of section 111(1)(b) are reproduced hereunder:-

111. Unexplained income of assets:- (1) Where-

(a) "¦"¦"¦"¦"¦"¦"¦"¦"¦"¦"¦"¦"¦"¦"¦.

(b) a person has made any investment or is the owner of any money or valuable article;

A plain reading of subsection (b) transpires that unless it could be established that the
taxpayer had made an investment or was found to be owner of money or valuable article,
no addition could be made under section 111(1)(b). The amending authority failed to
establish that the taxpayer made any investment or found to be owner of money or
valuable article. Reliance in this behalf is placed on the reported judgment cited as 1988
PTD 117 (Trib), wherein it has been held that:-

"Unless it could be shown that the assessee had made any investment or was found to be
owner of money or valuable article, no addition could be made under section 13(1)(aa) of
the Ordinance."

8 "¦"¦"¦"¦"¦"¦"¦"¦.
9 "¦"¦"¦"¦"¦"¦"¦"¦.
10 "¦"¦"¦"¦"¦"¦"¦..
11 "¦"¦"¦"¦"¦"¦"¦..
12 "¦"¦"¦"¦"¦"¦"¦..
13 "¦"¦"¦"¦"¦"¦"¦..

14. We have looked into the matter and after due consideration, we find that the assessing
authority has made the impugned addition merely on presumption. As per law, the
assessing authority was required to ascertain whether closing balances appearing in the
bank account(s) were explainable or not and for this purpose he was required to call from
the taxpayer his statement of business affairs / balance sheet to see that against these
balances, apart from capital account what type of other liability has been declared on the
liability side of balance sheet and thereafter he was required to verify and examine the
liability which may be in the shape of creditors. After adopting such procedure, any
amount which remained un-reconciled, can be added in terms of section 111(1)(b). In the
instant case, the assessing authority has failed to follow the said procedure and hurriedly
made the addition on presumption which action is not sustainable in the eye of law.

15. Here, we would like to observe that every information cannot be treated as the basis
for reopening of the assessment but the information should be of the nature which should
qualify as "definite information" could not be given a universal meaning. Any estimate,
gossip, personal whims or surmises could not be termed as the definite information. Any
information which, creates doubts or provides reasons to suspect that the income has been
concealed does not form a part of the term "˜definite information'. Reliance in this regard
can safely placed on the decisions reported as 1993 SCMR 1232 and 2010 PTD (Trib) 122.

16. Hon'ble Supreme Court of Pakistan in the case reported as 1993 PTD 1108, has
interpreted the term "definite information" in the following manner:-

"The expression definite information, and similar other expressions used in the above
noticed provisions or other related provisions certainly meant much more than mere
material so as to cause of reasonable belief of even such evidence which might lead to a
definite belief. Unless there is 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".

17. In view of the above, we are inclined to hold that the impugned addition made under
section 111(1)(b) amounting to Rs.4,968,982/- is not sustainable in the eye of law which
is hereby deleted. Orders of the authorities below in this regard are accordingly cancelled.

18. Taxpayer's appeal succeeds in the above manner."

[emphasis supplied]

6. It has not been shown to us that above findings are perverse, contrary to record or
suffer from any other legal infirmity or impropriety warranting interference in reference
jurisdiction. This Court has to decide Reference Application in the exercise of its advisory
jurisdiction, on facts and circumstances founded by the Appellate Tribunal, which is the last
fact finding forum. High Court cannot change findings of facts arrived at by the Appellate
Tribunal. Reliance in this regard can be placed upon Messrs F.M.Y. Industries Ltd. v. Deputy
Commissioner Income Tax (2014 SCMR 907).

9. Since the decision by learned Appellate Tribunal is based on findings of facts, therefore,
we decline to exercise advisory jurisdiction.

This Reference Application, along with connected reference application, is decided against
applicant department.

10. Office shall send a copy of this order under seal of the Court to learned Appellate
Tribunal as per Section 133(5) of the Income Tax Ordinance, 2001.

Sd/-
MUHAMMAD SAJID MEHMOOD SETHI
JUSTICE

Sd/-
MUZAMIL AKHTAR SHABIR
JUSTICE