Law: Income Tax Ordinance, 2001

Section: 114(6),120,122(5A),122(7),122(9)

[Income Tax Ordinance (XLIX of 2001)]......Section 122(5A)---Amendment of assessment---Taxation of accumulated profits---Business of Association of Persons was taken over by limited company/assessee including pre-incorporation accumulated profits---Proceedings were started to amend the assessment under S.122(5A) of the Income Tax Ordinance, .2001 on the ground that assessment was erroneous in so far as being prejudicial to the interest of Revenue for the reason that a huge amount of accumulated profits for the last many' years, remained untaxed,--Validity---Assessee-company had been regularly filing its returns and assessments were completed on the basis of accounts submitted along with return after proper consideration of relevant details---Department had no case to prove that assessee concealed true particulars of its income/profits---If the argument of department that "at the time of taking over AOP's' business, the company also became owner of the entire amount of accumulated profits and in this manner, this amount became company's income chargeable to tax" accepted, then departmental action was legally flawed because the so called income could be taxed in relevant year(s) only---Proceedings for taxing the pre-incorporation receipts had already been dropped by department and action in this regard had attained finality---Accumulated profit worked out included profits pertaining to pre-incorporation period---Such assessments had become barred by time and income declared/assessed already for three years could not be taxed again under the garb of action under S.122(5A) of the Income Tax Ordinance, 2001--Provisions of S.122(5A) of the Income Tax Ordinance, 2001 required that an assessment order should be erroneous in so far as it is prejudicial to the interests of revenue but the accumulated profits pertaining to many years, had not been established at all that deemed assessment order under consideration was erroneous and prejudicial to the interest of Revenue---Assessments for preceding years were also framed on agreed basis and income assessed for such years had attained finality and profit/income assessed for such years could not be made basis for any action…

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