Law:

Section: 2,111,111(1),111(1)(a),111(1)(b),111(1)( c),111(2),111(3),111(4),122,122(2),237

ORDER The appellant is a public limited company (not quoted on the stock exchange), engaged in the business of manufacturing and sale of yarn. Appeal has been filed for the tax years 2003 and 2007 on a number of issues and also against addition, under section m of income Tax Ordinance, 2001 (hereinafter called the Ordinance), although arising out of the order for the tax year 2003 but added in the tax year 2007 under section 111(2) of the Ordinance. Considering the ITAT judgment bearing ITA No. 15/LB/2009 dated 24-09-2009 (Single Bench unreported) and another judgement reported as 2006 PTD (Trib) 2662 (Division Bench) stated to be conflicting on the matter regarding meaning and time of discovery, instant full bench has been constituted to decide the conflict arising out of aforementioned two judgments. The issue referred to the full bench has been formulated in the following manner:- "Determine the meanings and impact of the word "Discovery" as used in section 111(2) of the income Tax Ordinance, 2001." 2. Briefly stated facts of the present case are that pay order aggregating Rs. 31,196,456 were issued in various names from the company's Faysal Bank Ltd. between September 25, 2001 to September 29,2001 (i.e. relevant to the assessment year 2002-03) as per detail furnished through cross cheques issued toy the company from the same bank account. The said pay orders were cancelled and credited in the same bank account during the subsequent months i.e. October 3, 2001 to October 10, 2001 which period falls in the tax year 2006. The Taxation Officer during the course of audit observed that transactions of deposits and withdrawals in the above mentioned bank account booked as advance against "miscellaneous account" and other issues required explanation. Accordingly, first general show cause notice was issued through the Taxation Officer's letter No. LTU/DC/Audit -04-457 dated 04-08-2008 requiring the company to explain the transactions and other queries raised by her. In response thereto, the reply was tendered vide letter JC-T/2008/141 dated August 28,2008 claiming pay order deposits to have been received although in different names through two parties. 4. The…

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