COMMISSIONER INLAND REVENUE ZONE-I, REGIONAL TAX OFFICE, QUETTA vs KHALID HUSSAIN Ss

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COMMISSIONER INLAND REVENUE ZONE-I, REGIONAL TAX OFFICE, QUETTA VS KHALID HUSSAIN Ss. 111(1) (a), (b), (c) & (d), & 122(9)---Unexplained income or assets---Amendment in assessment---Addition made---Separate specific/ formal notice, non-issuing of---Effect---Section 111 of the Ordinance, 2001 empowers tax authorities to question any unexplained investment, expenditure or concealed income enumerated in S. 111 (1) (1)(a) to (d), while first proviso to S. 111 provides that if a taxpayer claims an amount as agriculture income this explanation shall be accepted only to the extent of the agricultural income worked back on the basis of agricultural income tax paid under the relevant provincial law---In case the taxpayer failed to render any explanation or the explanation offered by the taxpayer is not satisfactory in the opinion of Commissioner, the said liabilities become chargeable to tax---All this exercise naturally called from a taxpayer by issuing a specific notice under S. 111 of the Ordinance, 2001, while S.122 of the Ordinance, 2001 relates to amendment of deemed assessment and allows the Commissioner Inland Revenue to amend a tax assessment if the acquired definite information indicates that income declared by taxpayer is incorrect or incomplete---Such amendment must be based on concrete evidence and follow due process---Pertinently, in respect of issuance of specific notice to the taxpayer under S. 111 of the Ordinance, 2001 an explanation was added in S. 111 pursuant to Finance Act, 2021, whereby it was clarified that a separate notice under this Section is not required to be issued if the explanation regarding nature and source of amount enumerated has been confronted to the taxpayer through a notice under subsection (9) of S. 122 of the Ordinance, 2001---The explanation was further substituted through the Finance Act, 2022 whereby it was also clarified that a separate notice is not required to be issued if the explanation enumerated in S. 111 (1) (a) to (d) of the Ordinance, 2001 had been confronted to taxpayer through a notice under subsection (9) of S. 122 (9) of the Ordinance, 2001---The proceeding under S.111 of the Ordinance, 2001 regarding unexplained income must be concluded before initiating action under S. 122 of the Ordinance, 2001 which pertains to the amendment of assessment of the Ordinance, 2001, which sequence ensures due process and taxpayer rights---The law allows the taxpayer an opportunity to revise returns and voluntarily pay tax under S. 114 (6A) of the Ordinance, 2001 before a notice under S.122 (9) of the Ordinance, 2001 is issued, thereby avoiding penalties under S. 182 of the Ordinance, 2001---Even after introduction of an explanation in 2021, to S. 111(1) of the Ordinance, 2001 the procedural hierarchy remains unchanged i.e. the tax department must conclude the S.111 proceedings before invoking S. 122(9) of the Ordinance, 2001 ; which ensures procedural fairness and prevents arbitrary or premature taxation---In the present case, the taxpayer's return for the year 2018 was amended by the Department without concluding/completing the proceedings under S. 111 of the Ordinance, 2001---As a result, the proceedings under S. 122 of the Ordinance, 2001 would be considered invalid and without legal sanctity---Thus, proposed question was answered against the Department---Income Tax Reference, filed by the Department, was dismissed, in circumstances .

COMMISSIONER INLAND REVENUE ZONE-I, REGIONAL TAX OFFICE, QUETTA vs KHALID HUSSAIN Ss — 2025 PTD 936 QUETTA-HIGH-COURT-BALOCHISTAN

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