Law: Income Tax Ordinance, 2001

Section: 111,120(1),122(1),122(5),122(9),184(2)(a )

Law: Income Tax Ordinance, 1979

Section: 65

[Income Tax Ordinance (XLIX of 2001)].....Ss. 184(2)(a), 122(5) & 111---Penalty for concealment of income---Amendment of assessment---Definite information---Audit of sales tax---During audit proceedings, it was found that sales of the company were diverted to undisclosed joint accounts of the Directors of the company--Assessment was amended with the view that company's sales had been diverted to the joint accounts of Directors which resulted additions in the declared income---Taxpayer contended that there was no nexus whatsoever between the amount lying in the bank accounts of Directors and the sales receipts of the taxpayer and also the fact that requisite ingredients especially availability of `definite information' was altogether missing---Department contended that joint accounts of the Directors were in fact benami accounts of the company in which company's suppressed/undisclosed sales had been deposited; and S.122(5) of the Income Tax Ordinance, 2001 was rightly invoked and resultant amended order passed was quite in consonance with law---Validity---Not only the department did not involve the Directors in the amended proceedings but strangely enough they were not asked with regard to the source of the deposits lying in their accounts---With regard to the amounts appearing in the present accounts of Directors per se, the correct course was that a notice under S.111 of the Income Tax Ordinance, 2001 should have been issued to Directors in order to seek an explanation with regard to the credit entries in the bank accounts of the Directors to ascertain the nature and source of such entries---Failing which, by initiating proceedings under S.111 of the Income Tax Ordinance, 2001, addition as per law could have been made---Revenue failed to establish any nexus between the sales receipts made by the taxpayer and the money deposited in the Directors bank accounts, the same could not be treated as `definite information'---Amended assessment was liable to be cancelled and additions were directed to be deleted. 1986 PTD 37 and (1989) 59 Tax 112 (H.C. Lah.) rel. 1997 PTD 1485 (S.C. Pak); 2003 PTD 1885 and 1997 PTD (Trib.) 2037 ref. THIS ORDER PASSED BY: SYED NADEEM…

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