Law: Income Tax Ordinance, 2001

Section: 114,120,122(5A),122(9),126A(4),153(1)(a),153(1)(b),153(1)(c)

SUMMARY;Assessment under Section 122(5A) — Arbitrary Additions, Procedural Lapses, and Error admit by department.Details:The case pertains to M/s Hassan Abdullah Builders (Pvt) Ltd., a taxpayer whose appeal was transferred to the Appellate Tribunal Inland Revenue (ATIR), Division Bench-I, Islamabad, from the office of the Commissioner Inland Revenue (Appeals-I) under Section 126A(4) of the Income Tax Ordinance, 2001 due to the assessed tax amount exceeding Rs. 20 million.Key Background ;The appellant filed its return of income for the tax year 2022 under Section 114, declaring income of Rs. 40,791,003.A deemed assessment was initially passed under Section 120. However, the Additional Commissioner Inland Revenue (Addl. CIR) concluded that the assessment was erroneous and prejudicial to the interest of revenue.The case was reopened under Section 122(5A), and a show-cause notice was issued on 20.11.2023, citing alleged:Suppression of revenue receipts under Section 153(1)(a)Suppression of contractual receipts under Section 153(1)(c)Excessive tax deduction claims under Section 153(1)(b)Discrepancies in declared salary expensesThe taxpayer responded in detail on 07.12.2023 with supporting documents.Despite this, the Addl. CIR passed an amended assessment order dated 20.12.2023, creating a substantial tax demand of Rs. 43,977,137.Proceedings;The appellant argued that all alleged discrepancies were duly reconciled and supported by documentary evidence, which was ignored by the assessing officer.The Tribunal directed the appellant’s AR and the Departmental Representative (DR) to reconcile the records and file a report.Despite repeated opportunities, the department failed to submit the reconciliation report.In the final hearing, the DR (the same officer who reviewed the case) candidly admitted in open court that:The appellant’s documents were complete.No discrepancies remained.The tax demand was not supported by any substantive evidence.However, the DR refused to sign the court order sheet documenting this admission, though he verbally confirmed the same in the hearing.Conclusion;The Tribunal found that the amended assessment order dated 20.12.2023 was arbitrary,…