Law: Income Tax Ordinance, 2001

Section: 161,162, 124, 122(4), 122(1)(5), 111(1)(b), 111, 122(9), 218, 205, 165

Law: Income Tax Rules, 2002

Section: Rule 44 (4)

Summary of the Order – Appeals on Income Tax Assessment (Tax Years 2015 & 2016)

1. ITA No. 852/LB/2022 (Tax Year 2016):

• The taxpayer challenged a remand order by the Commissioner Inland Revenue (Appeals), claiming improper treatment and default proceedings without full consideration of records. The Tribunal found merit in taxpayer’s contention, noting the authorities failed to follow the legal principles set by the Supreme Court (MCB and PEPCO cases) and Lahore High Court (notably W.P. No. 81107/2021), which require a proper basis and opportunity before acting under section 161/205 of the Income Tax Ordinance, 2001. The order was annulled and the case remitted to the original assessing officer for fresh adjudication after hearing the taxpayer.

1. ITA No. 2871/LB/2024 (Tax Year 2016):

• The second appeal related to a subsequent ex-parte assessment during the pendency of the earlier appeal. Relying on Lahore High Court judgments (1985 PTD 375 - Mst. Inayat Begum and (2002) 86 TAX 241), the Tribunal held that no fresh order can be passed while the first assessment is under appeal. Thus, the subsequent order was set aside.

1. ITA No. 2869/LB/2024 (Tax Year 2015):

• The appeal addressed an ex-parte reassessment adding unexplained credits, largely based on bank entries, under section 111(1)(b) of the Ordinance. The taxpayer argued, and the Tribunal accepted, that a proper opportunity was not provided and the principles laid down by the courts (including 2012 PTD 964 – CIR Legal Division v. Zulfiqar Ali and guidance from the Supreme Court in M/s Millat Tractors Ltd. 2024 PTD 700) were not followed. The order was annulled and the case remanded for de novo examination, with instructions to properly consider all reconciliation and documentation provided by the taxpayer.

Key Legal Principles Settled:

• No assessment or reassessment should proceed while an earlier related appeal is pending.
• Authorities must strictly adhere to procedures for issuing notices, providing fair opportunity to respond, and considering all documentary evidence and reconciliation offered by the taxpayer.
• Orders violating directions of higher courts (Supreme Court or High Court) are liable to be set aside.
• Addition under section 111(1)(b) requires a separate and properly concluded process, as held by the Supreme Court.

All three appeals were allowed in favour of the taxpayer in the manner indicated above. The order is certified fit for reporting.