COMMISSIONER INLAND REVENUE, CANTT ZONE, REGIONAL TAX OFFICE, RAWALPINDI vs LAL FAQEER Ss

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COMMISSIONER INLAND REVENUE, CANTT ZONE, REGIONAL TAX OFFICE, RAWALPINDI VS LAL FAQEER Ss.111 & 122---Unexplained income or assets---Amendment of assessments---Whether proceedings under S. 122 of the Income Tax Ordinance 2001 (the Ordinance) for amendment of assessment can be initiated without the prior initiation and culmination of proceedings under S. 111 of the Ordinance---Initiation and culmination of proceedings under S. 111 of the Ordinance before taking any action under S. 122 of the Ordinance---Significance, object and scope---From the bare perusal of S. 111 of the Ordinance it becomes clear that whenever the department has any information resulting into an impression or understanding that grounds in S. 111(1)(a to d) relating to unexplained income or assets are attracted, calling explanation from the taxpayer becomes necessary, as till that stage, information available with the department is mere information---If any explanation offered by the taxpayer is not satisfactory in response thereto, in the opinion of the Commissioner, the said liability becomes unexplained income and is to be added to the income of the taxpayer chargeable to tax---However, if the explanation offered seems to be satisfactory, the said proceedings can be dropped and no further action is then warranted---The prime object of the above noted provision of law is to provide an opportunity of explanation to the taxpayer to contest the allegations confronted to him with regard to any of the grounds mentioned in S. 111 (a to d) where-after an opinion is to be formed by the commissioner on the basis of said information, if any---Whereas, from the bare reading of S. 122 of the Ordinance, it becomes obvious that the commissioner has been empowered to amend an assessment order, treated as issued under S. 120 or 121 of the Ordinance by making such alterations or additions, as the Commissioner considers necessary---However, under S. 122(5) of the Ordinance, an assessment order in respect of a tax year, or an assessment year, shall only be amended under subsection (1) and an amended assessment for that year shall only be further amended under subsection (4) where, on the basis of definite information acquired from an audit or otherwise, the Commissioner is satisfied that any of the grounds in the said provisions are sufficient enough to make amendments---Section 122(8) of the Ordinance provides what constitutes definite information for the purposes of this provision---On the other hand, subsection (9) of S. 122 of the Ordinance stipulates that no assessment shall be amended, or further amended, under this section unless the taxpayer has been provided with an opportunity of being heard---From the joint analysis of both the above provisions of law (i.e. Ss. 111 and 122), it becomes crystal clear that initiation and culmination of the proceedings under S. 111 of the Ordinance are sine qua non before taking any action in terms of S. 122 of the Ordinance to amend the assessment on the basis of proceedings undertaken under S. 111 of the Ordinance. Citation Name: 2025 PTD 1337 LAHORE-HIGH-COURT-LAHOREBookmark this Case COMMISSIONER INLAND REVENUE, CANTT ZONE, REGIONAL TAX OFFICE, RAWALPINDI VS LAL FAQEER Ss. 111, 122 & 133---Unexplained income or assets, allegation of---Assessment order passed based on no response by taxpayer---Amendment of assessments---Essence and prerequisites---Initiating and concluding proceedings under S. 111 of the Income Tax Ordinance 2001 (the Ordinance) before taking any steps under S. 122 of the Ordinance, requirement of---Scope---Proceedings under S. 111 are mandatory and sine qua non before any action under S. 122 of the Ordinance---Brief facts were that the Commissioner Inland Revenue filed a reference application under S. 133 of the Income Tax Ordinance, 2001, challenging the order of the Commissioner (Appeals-I) who had annulled an earlier assessment order passed by the Deputy Commissioner Inland Revenue---Original order was based on definite information that the respondent taxpayer had acquired immovable properties worth Rs. 33 million while declaring a taxable income of only Rs. 1.25 million---Show-cause notice was issued under Ss. 122(9) and 111(1)(b) of the Ordinance, but due to the taxpayer's non-response, a tax demand of over Rs. 11 million was raised---Appellate authority allowed the taxpayer's appeal, leading the department to file the reference---Legal point for determination before the High Court was as to "Whether proceedings under S. 122(9) of the Income Tax Ordinance, 2001, for amendment of assessment could be validly initiated without the prior initiation and culmination of proceedings under S. 111 of the Ordinance?"---Held: The proceedings under S. 122(9) of the Ordinance could not be launched unless the proceedings under S. 111 of the Ordinance were initiated and completed---Before taking any steps in terms of S. 122(9) of the Ordinance, the requirement of S. 111 of the Ordinance was mandatory---As a result, the present appeal failed and questions of law raised therein were answered accordingly.

COMMISSIONER INLAND REVENUE, CANTT ZONE, REGIONAL TAX OFFICE, RAWALPINDI vs LAL FAQEER Ss — 2025 PTD 1337 LAHORE-HIGH-COURT-LAHORE

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