Law: Income Tax Ordinance, 2001

Section: 111 (1), 120(1), 122(5A), 122(9), 170

Case Summary 

Facts:

• Taxpayer filed its return for the relevant year, initially treated as a deemed order under Section 120(1) of the Income Tax Ordinance, 2001.
• Taxpayer self-adjusted Rs. 4,628,486/- as refund adjustment against current year tax, which department alleged was unsupported by previous returns.
• Show cause notice u/s 122(9) read with 122(5A) issued on 09.09.2024; later, notice u/s 111(1) issued on 30.10.2024. Taxpayer did not respond.
• AO passed order u/s 122(5A) on 17.04.2025, making following additions:
• Rs. 40,991,171/- u/s 21(c) (Domestic Purchases)
• Rs. 10,451,666/- u/s 111(1)(b) (Closing Stock)
• Income assessed: Rs. 52,059,045/-; Tax: Rs. 17,015,988/-

Contentions:

• Taxpayer:

1. Order passed after 220 days, beyond statutory period (180 + max 90 days); claimed 45-day extension was unsupported and fabricated.
2.  u/s 111 proceedings not concluded before issuing 122(9) notice, violating Millat Tractors (2024 PTD 483).
3.  Additions made on issues not raised in show-cause notice or addendum.
4. Refund adjustment of Rs. 4,628,486/- wrongly disallowed; taxpayer had prior tax credit of Rs. 4,360,245/-.

• Revenue:

1. Claimed order within extended period; proceedings u/s 111 culminated.
2. Proper opportunity of hearing given; Millat Tractors inapplicable.

• Decision / Holding:

1. Order time-barred: 17.04.2025 order passed after 220 days; claimed extension unsupported and undocumented.
2. Initiation nullity: 111 proceedings not concluded prior to 122(9) notice; order void.
3. Wrong appreciation of facts: Additions u/s 21(c) and 111(1)(b) made without confronting taxpayer; taxpayer’s documentary evidence valid.
4. Refund adjustment: Rs. 4,360,245/- to be allowed in accordance with law.
5. Administrative accountability: Order sheet tampering suspected; matter referred to Member (Legal) and Member (Operations), FBR.

Outcome: