ISLAMABAD: The Supreme Court allowed a Federal Board of Revenue (FBR) petition against the Lahore High Court (LHC)’s judgment regarding Commissioner Inland notices to M/S Master Tile & Ceramics Industries (Pvt) Limited, Gujranwala under Section 111 (1)(a) and 111(2) of Income Tax Ordinance 2001. A three-judge bench, headed by Justice Umar Ata Bandialheard the appeal of the Commissioner Inland Revenue, Gujranwala, against the LHC.
Advocate Kausar Parveen, representing the Commissioner Inland Revenue, Gujranwala, argued that the impugned judgment of the High Court failed to notice that the taxing officer issued notices to respondent (M/S Master Tile & Ceramics) on 6 June 2017 under Section 111 (1)(a) and 111(2) of Income Tax Ordinance 2001 in respect of tax year 2011.
The condition of issuing notice was duly satisfied and the requirement of the law was met. She contended that the LHC had erred in law by not appreciating that as both the notices were issued on 6th June 2017 and the adjudicating officer is empowered under the provision of Section 122 (4), 122 (5)(ii) and 122(9) of the Ordinance to adjudicate the case.
He is empowered to proceed with the notice under Section 111(1) (a) and 111(1)(2) as in both the provisions, the taxpayer is required to give its version in adjudication and in un-explained income cases. She stated that separate proceedings under Section 111 is not required when the law require that if the explanation offered by a taxpayer is not satisfactory or no explanation is offered by a taxpayer, the unexplained income shall be included in the person’s income chargeable under the head “income from other sources” after confronting the taxpayer notice under Section 122(4), 122(5)(ii) and 122(9) of the Income Tax Ordinance.
According to the petition, on 6 June 2017, Commissioner Inland Revenue, Gujranwala issued a show cause notice to M/S Master Tile & Ceramics Industries (Pvt) Limited, Gujranwala (respondent) under provisions of Section 122(4) read with Section 122(5)(ii) and 122(9) of the Income Tax Ordinance 2001 for the tax year 2011 with the contention that the respondent under self-assessment scheme, which was subsequently revised on 13 February 2013. The revised return was based on self-assessment order in terms of under Section 122(3) of the Income Tax Ordinance, 2001.
It was further contended that income for the tax year 2011 is under assessed and need to be amended under Section 122(5) (ii) of the Income Tax Ordinance as the same needs amendment under Section 122(4) of the Ordinance to determine the correct taxable income and tax was chargeable thereon.
The company has opened account in the name of their employees, Muhammad Humayoun Khan and Khurram Taj in various banks and at the account opening form mobile number given belonged to the company, M/S Master Tiles & Ceramic and accounts were benami accounts of the company and amount of Rs4,240,578,484 was alleged to be evaded for the tax period July 2010 to June 2011.
A parallel notice under Section 111(1)(a) 111(2) of the Ordinance was issued, wherein, both the notices were challenged before the single bench of the LHC, which issued notices to the department and also granted stay.
Finally, the case was decided by the LHC on 25 September 2020 on the basis of the judgment cited as Commissioner Inland Revenue vs Faqir Hussain, whereas, it is not relevant in the instant case as both the notices under section 111(1)(a), 122(4), 122(5)(ii), and 122(9) were issued in the instant case, said the petition.
