Law: Income Tax Ordinance, 2001

Section: 122,122(5A),115,122(5A

(a) Income Tax Ordinance (XXXI of 2001)---Ss. 122(5A) 115---Amendment of assessment---Statements under S.115 of the Income Tax Ordinance, 2001 were filed; on examination of accounts, it was observed that cost of sales declared was much more than the sales declared by way of imports; and it was inferred that taxpayer must have made local purchases and enjoyed income by way of sales of locally purchased goods---Show cause notice was issued to estimate the income of locally purchased goods---Taxpayer contended that exaggerated figure of cost of sales was for the purpose of bank loan facilities which had no impact on the sales; that not even a single outlet ever had locally purchased goods; and that there was nothing on record to establish the erroneousness and prejudice caused to the interest of revenue---Another notice was issued asking for the submission of audited accounts and bank account statement; and on no response, income on the basis of estimation was assessed---Validity---Nothing was available on record which could establish actual existence of local purchases and local sales and that the taxpayer earned income to the extent estimated by the Assessing Officer---Revision resulting into estimation of income was based upon assumption and guesswork---Calling for the audited accounts and bank statements through second notice was an act completely out of jurisdiction for the purposes of amendment under S.122(5A) of the Income Tax Ordinance, 2001---Assessing Officer wanted to make inquiries for the amendment which act was illegal---First show cause notice issued was defective as the same had no definite material to establish the co-existence of erroneousness and prejudice rather it needed further enquires---No such information was available on record that cost of sales actually represented local purchases and to establish that the taxpayer had receipts/income from the sale of locally purchased goods---Assessing Officer had asked for the documents/record and showed his intention or the estimation of receipts from the locally purchased goods---Action was based on assumptions which was not allowable in proceedings under S.122(5A) of the Income Tax Ordinance,…

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