Law and Practice of Income Tax -Vol-2

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  Huzaima & Ikram’s
          Law & Practice
                          of
         Income Tax
A comprehensive commentary including
departmental instructions, case-law etc.




             VOLUME II
    [Sections 114 to 7
   www.imranghazi.com th Schedule]



                            by
                 Huzaima Bukhari
                         &
                 Dr. Ikramul Haq


              LAHORE LAW PUBLICATIONS
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                     © Huzaima Bukhari & Dr. Ikramul Haq.
                   Third Revised Edition           :   March 2008
                   Second Revised Edition          :   July 2003
                   First Edition                   :   September 2002

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                                 INCOME TAX ORDINANCE, 2001
                                 Islamabad, the 13th September, 2001

                                   ORDINANCE NO. XLIX OF 2001

    No. F2(I)/2001-Pub.– The following Ordinance promulgated by the
President is hereby published for general information:

                                 *ARRANGEMENT                          OF SECTIONS
Sec. No.                   Title                                                                          at Page No.
              Comparative Table New to Old                      See Vol-I             -----------------    [vii to xiii]
              Comparative Table Old to New                      See Vol-I             -----------------    [xiv to xxi]

                                                       CHAPTER X
                                                       PROCEDURE
                                                           PART I
                                                          RETURNS
     114.     Return of income                                                                             ------   649
     115.     Persons not required to furnish a return of income                                           ------   656
     116.     Wealth statement                                                                             ------   659
     117.     Notice of discontinued business                                                              ------   661
     118.     Method of furnishing returns and other documents                                             ------   662
     119.     Extension of time for furnishing
              returns and other documents                                                                  ------   663
                                             PART II
                     www.imranghazi.com  ASSESSMENTS
     120.     Assessments                                                                                  ------ 675
    120A.     Investment Tax on income                                                                     ------ 701-A
     121.     Best judgement assessment                                                                    ------ 702
     122.     Amendment of assessments                                                                     ------ 710
    122A.     Revision by the Commissioner                                                                 ------ 743
    122B.     Revision by the Regional Commissioner                                                        ------ 750
     123.     Provisional assessment in certain cases                                                      ------ 751
     124.     Assessment giving effect to an order                                                         ------ 753
    124A.     Powers of tax authorities to modify orders, etc.                                             ------ 757
     125.     Assessment in relation to disputed property                                                  ------ 759
     126.     Evidence of assessment                                                                       ------ 760
                                            PART III
                                           APPEALS
     127.     Appeal to the Commissioner (Appeals)                                                         ------   761
     128.     Procedure in appeal                                                                          ------   775
     129.     Decision in appeal                                                                           ------   779
     130.     Appointment of the Appellate Tribunal                                                        ------   783
     131.     Appeal to the Appellate Tribunal                                                             ------   787
     132.     Disposal of appeals by the Appellate Tribunal                                                ------   794
     133.     Reference to High Court                                                                      ------   801
*    Not part of the Gazette notification. Prepared for the benefit of the readers.




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Sec. No.           Title                                                        at Page No.
  134.     [Omitted]                                                             ------   838
 134A.     Alternative Dispute Resolution                                        ------   843
  135.     [Omitted]                                                             ------   849
  136.     Burden of proof                                                       ------   850
                                              PART IV
                         COLLECTION AND RECOVERY OF TAX
  137.     Due date for payment of tax                                           ------   851
  138.     Recovery of tax out of property and through arrest of taxpayer        ------   858
 138A.     Recovery of tax by District Officer (Revenue)                         ------   860
  139.     Collection of tax in the case of private
           companies and associations of persons                                 ------   862
  140.     Recovery of tax from persons holding money on behalf of a taxpayer    ------   865
  141.     Liquidators                                                           ------   868
  142.     Recovery of tax due by non-resident
           member of an association of persons                                   ------ 870
  143.     Non-resident ship owner or charterer                                  ------ 871
  144.     Non-resident aircraft owner or charterer                              ------ 875
  145.     Assessment of persons about to leave Pakistan                         ------ 877
  146.     Recovery of tax from persons assessed in Azad Jammu and Kashmir       ------ 881
 146A.     Initiation, validity, etc., of recovery proceedings                   ------ 883
 146B.     Tax arrears settlement incentives scheme                              ------ 883-A
                                     PART V
          ADVANCE TAX AND DEDUCTION OF TAX AT SOURCE
                                    Division I
                      Advance Tax Paid by the Taxpayer
  147. Advance tax paid by the taxpayer                                          ------   884
                                     Division II
                        Advance Tax Paid to a Collection Agent
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  148. Imports                                                                   ------   897
                                      Division III
                               Deduction of Tax at Source
  149.     Salary                                                                ------   921
  150.     Dividends                                                             ------   930
  151.     Profit on debt                                                        ------   933
  152.     Payments to non-residents                                             ------   940
  153.     Payments for goods and services                                       ------   948
 153A.     Payments to non-resident media persons                                ------   968
  154.     Exports                                                               ------   969
  155.     Income from property                                                  ------   975
  156.     Prizes and winnings                                                   ------   980
 156A.     Petroleum Products                                                    ------   982
 156B.     Withdrawal of balance under Pension Fund                              ------   984
  157.     [Omitted]                                                             ------   985
  158.     Time of deduction of tax                                              ------   986
                                     Division IV
                  General Provisions Relating to the Advance
              Payment of Tax or the Deduction of Tax at Source
  159. Exemption or lower rate certificate                                       ------   987
  160. Payment of tax collected or deducted                                      ------   989
  161. Failure to pay tax collected or deducted                                  ------   990




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Sec. No.           Title                                                       at Page No.
  162. Recovery of tax from the person from whom
       tax was not collected or deducted                                        ------    993
  163. Recovery of amounts payable under this Division                          ------    994
  164. Certificate of collection or deduction of tax                            ------    995
  165. Statements                                                               ------    996
  166. Priority of tax collected or deducted                                    ------   1003
  167. Indemnity                                                                ------   1004
  168. Credit for tax collected or deducted                                     ------   1005
  169. Tax collected or deducted as a final tax                                 ------   1007
                                          PART VI
                                         REFUNDS
  170. Refunds                                                                  ------ 1029
  171. Additional payment for delayed refunds                                   ------ 1040
                                       PART VII
                                   REPRESENTATIVES
  172. Representatives                                                          ------ 1042
  173. Liability and obligations of representatives                             ------ 1044
                                         PART VIII
                RECORDS, INFORMATION COLLECTION AND AUDIT
  174.     Records                                                              ------   1047
  175.     Power to enter and search premises                                   ------   1049
  176.     Notice to obtain information or evidence                             ------   1052
  177.     Audit                                                                ------   1063
  178.     Assistance to Commissioner                                           ------   1070
  179.     Accounts, documents, records and computer-stored
           information not in Urdu or English language                          ------ 1071
  180.     Power to collect information regarding exempt income
                  www.imranghazi.com                                            ------ 1072
                                 PART IX
                         TAXPAYER’S REGISTRATION
  181. Taxpayer‟s registration                                                  ------ 1073
                                            PART X
                                           PENALTY
  182.     Penalty for failure to furnish a return or statement                 ------   1075
  183.     Penalty for non-payment of tax                                       ------   1079
  184.     Penalty for concealment of income                                    ------   1085
  185.     Penalty for failure to maintain records                              ------   1093
  186.     Penalty for non-compliance with notice                               ------   1094
  187.     Penalty for making false or misleading statements                    ------   1096
  188.     Penalty for failure to give notice                                   ------   1098
  189.     Penalty for obstruction                                              ------   1099
  190.     Imposition of penalty                                                ------   1100
                                          PART XI
                           OFFENCES AND PROSECUTIONS
  191.     Prosecution for non-compliance with certain statutory obligations    ------   1103
  192.     Prosecution for false statement in verification                      ------   1106
  193.     Prosecution for failure to maintain records                          ------   1106
  194.     Prosecution for improper use of National Tax Number Certificate      ------   1107
  195.     Prosecution for making false or misleading statements                ------   1108




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Sec. No.           Title                                                at Page No.
  196. Prosecution for obstructing an income tax authority               ------ 1109
  197. Prosecution for disposal of property to prevent attachment        ------ 1110
  198. Prosecution for unauthorised disclosure
       of information by a public servant                                ------ 1111
  199. Prosecution for abetment                                          ------ 1112
  200. Offences by companies and associations of persons                 ------ 1113
  201. Institution of prosecution proceedings
       without prejudice to other action                                 ------   1114
  202. Power to compound offences                                        ------   1115
  203. Trial by Special Judge                                            ------   1116
  204. Power to tender immunity from prosecution                         ------   1117
                                      PART XII
                                   ADDITIONAL TAX
  205. Additional tax                                                    ------ 1119
 205A. Reduction in additional tax, consequential
       to reduction in tax or penalty                                    ------ 1130
                                       PART XIII
                                      CIRCULARS
  206. Circulars                                                         ------ 1131
 206A. Advance ruling                                                    ------ 1133
                                     CHAPTER XI
                                   ADMINISTRATION
                                        PART I
                                       GENERAL
  207.     Income tax authorities                                        ------   1137
  208.     Appointment of income tax authorities                         ------   1150
  209.     Jurisdiction of income tax authorities                        ------   1152
  210.     Delegation                                                    ------   1163
  211.             www.imranghazi.com
           Power or function exercised                                   ------   1166
  212.     Authority of approval                                         ------   1167
  213.     Guidance to income tax authorities                            ------   1169
  214.     Income tax authorities to follow orders of the Board          ------   1170
  215.     Furnishing of returns, documents etc.                         ------   1173
  216.     Disclosure of information by a public servant                 ------   1174
  217.     Forms and notices; authentication of documents                ------   1181
  218.     Service of notices and other documents                        ------   1182
  219.     Tax or refund to be computed to the nearest Rupee             ------   1188
  220.     Receipts for amounts paid                                     ------   1189
  221.     Rectification of mistakes                                     ------   1190
  222.     Appointment of expert                                         ------   1197
  223.     Appearance by authorised representative                       ------   1198
  224.     Proceedings under the Ordinance to be judicial proceedings    ------   1203
  225.     Proceedings against companies under liquidation               ------   1204
  226.     Computation of limitation period                              ------   1205
  227.     Bar of suits in Civil Courts                                  ------   1207
                                         PART II
                     DIRECTORATE-GENERAL OF INSPECTION
  228.     The Directorate General of Internal Audit                     ------   1209
  229.     [Omitted]                                                     ------   1209
  230.     [Omitted]                                                     ------   1210
  231.     [Omitted]                                                     ------   1210




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Sec. No.           Title                                                  at Page No.

                                    PART III
           DIRECTORATE-GENERAL OF WITHHOLDING TAXES
 230A. Directorate-General of Withholding Taxes                            ------ 1212
                                        CHAPTER XII
                     TRANSITIONAL ADVANCE TAX PROVISIONS
 231A.     Cash withdrawal from a bank                                     ------   1213
 231B.     Purchase of motor cars and jeeps                                ------   1216
  232.     [Omitted]                                                       ------   1217
  233.     Brokerage and Commission                                        ------   1218
 233A.     Collection of tax by a stock exchange registered in Pakistan    ------   1225
  234.     Transport Business                                              ------   1228
 234A.     CNG stations                                                    ------   1231
  235.     Electricity Consumption                                         ------   1232
  236.     Telephone users.                                                ------   1235
                                    CHAPTER XIII
                                   MISCELLANEOUS
  237. Power to make rules                                                 ------   1239
  238. Repeal                                                              ------   1242
  239. Savings                                                             ------   1243
 239A. Transition to Federal Board of Revenue                              ------   1250
  240. Removal of difficulties                                             ------   1251
FIRST SCHEDULE
    PART I              :      Rates of Tax                                ------ 1259
       Division I       :      Rates of Tax for Individuals
                               and Association of Persons                  ------   1259
              www.imranghazi.com
       Division IA      :      Rate of tax on certain persons              ------   1263
       Division II      :      Rates of Tax for Companies                  ------   1263
       Division III     :      Rate of Dividend Tax                        ------   1264
       Division IV      :      Rate of Tax on Certain
                               Payments to Non-residents                   ------ 1264
       Division V       :      Rate of Tax on Shipping or Air Transport
                               Income of a Non-resident Person             ------   1264
       Division VI      :      Income from property                        ------   1265
    PART II             :      Rates of advance tax                        ------   1269
    PART III            :      Deduction of tax at source                  ------   1269
       Division I       :      Profit on debt                              ------   1269
       Division II      :      Payments to non-residents                   ------   1270
       Division III     :      Payments for Goods or Services              ------   1270
       Division IIIA    :      Payments to non-resident media persons      ------   1271
       Division IV      :      Exports                                     ------   1271
       Division V       :      Income from Property                        ------   1272
       Division VI      :      Prizes and Winnings                         ------   1273
       Division VIA     :      Petroleum Products                          ------   1273
       Division VIB     :      CNG stations                                ------   1273
       Division VII     :      [Omitted]                                   ------   1273
    PART IV             :      Deduction or collection of advance tax      ------   1275
       Division I       :      [Omitted]                                   ------   1275
       Division II      :      Brokerage and commission                    ------   1275




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Sec. No.           Title                                                at Page No.
           Division IIA    :   Rates for collection of tax by a
                               Stock Exchange Registered in Pakistan      ------   1275
      Division III     :       Tax on Motor Vehicles                      ------   1276
      Division IV      :       Electricity Consumption                    ------   1277
      Division V       :       Telephone users                            ------   1277
      Division VI      :       Cash withdrawal from a bank                ------   1278
      Division VII     :       Purchase of Motor Cars and Jeeps           ------   1278
SECOND SCHEDULE
    EXEMPTIONS AND TAX CONCESSIONS
      PART I           :    Exemptions from total income                  ------   1303
      PART II          :    Reduction in tax rates                        ------   1372
      PART III         :    Reduction in tax liability                    ------   1386
      PART IV          :    Exemption from specific provisions            ------   1390
THIRD SCHEDULE
      PART I           :    Depreciation                                  ------ 1419
      PART II          :    Initial allowance                             ------ 1420
      PART III         :    Pre-Commencement expenditure                  ------ 1420
FOURTH SCHEDULE
      Rules for the computation of the profits
      and gains of insurance business                                     ------ 1429
FIFTH SCHEDULE
      PART I           :    Rules for the computation of the profits
                            and gains from the exploration
                            and production of petroleum                   ------ 1437
      PART II          :    Rules for the computation of the profits
                            and gains from the exploration and
             www.imranghazi.com deposits
                            extraction of mineral
                            (other than petroleum)                        ------ 1442
SIXTH SCHEDULE
      PART I           :    Recognised provident funds                    ------ 1447
      PART II          :    Approved superannuation funds                 ------ 1455
      PART III         :    Approved gratuity funds                       ------ 1459
SEVENTH SCHEDULE
      Rules for the computation of the profits and gains of a
      banking company and tax payable thereon                             ------ 1465
SEE VOLUME III
 (1)       Income Tax Rules, 2002                         -----------   1473 to 1706
 (2)       Repeal & Savings (Income Tax Rules, 1982)      -----------   1707 to 1738
 (3)       Income Tax Appellate Tribunal Rules, 2005      -----------   1739 to 1760
 (4)       Appointment of ITAT Members‟ Rules, 1998       -----------   1761 to 1762
 (5)       Unified Reward Rules 2006                      -----------   1763 to 1766
 (6)       Capital Value Tax & Rules                      -----------   1767 to 1806
 (7)       Federal Tax Ombudsman Ordinance, 2000          -----------   1807 to 1821
 (8)       Federal Tax Ombudsman Investigation &
           Disposal of Complaints Regulations, 2001       -----------   1822 to 1846




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                                                  CHAPTER X
                                                  PROCEDURE
                                                      PART I
                                                     RETURNS
    114. Return of income.– (1) Subject to this Ordinance, the following
persons are required to furnish a return of income for a tax year, namely:–
         1[(a)        every company;]
      2[(ab)          every person (other than a company) whose taxable income for
                      the year exceeds the maximum amount that is not chargeable
                      to tax under this Ordinance for the year;]
       3[(ac)         any non-profit organization as defined in clause (36) of section
                      2; *and
         (ad)         any welfare institution approved under clause (58) of Part I of
                      the Second Schedule;]
         4[(b)        any person not covered by clause 5[(a), (ab), (ac) or (ad)] who,–
                  (i)       has been charged to tax in respect of any of the two
                            preceding tax years;
                 (ii)       claims a loss carried forward under this Ordinance for a tax
                            year;
1   Clause (a) substituted by Finance Act, 2003.
2   Clause (ab) inserted by Finance Act, 2003.
3   Clauses (ac) & (ad) inserted by Finance Act, 2006.
4   Clause (b) substituted by Finance Act, 2005.
5                         www.imranghazi.com
    Substituted for (a) or (ab) by Finance Act, 2006.
* The word “and” is superfluous.

                                              LEGISLATIVE HISTORY
     Section 114(1)(a)–Substitution.–Before substitution by Finance Act, 2003 clause (a) read as follows:–
     “(a) Every company and any other person whose taxable income for the year exceeds the maximum
             amount that is not chargeable to tax under this Ordinance for the year; and”
     Section 114(1)(b)–Substitution.–Before substitution by Finance Act, 2005 clause (b) read as follows:–
     “(b) any person not covered by clause (a) 1[or (ab)] who–
            (i) has been charged to tax in respect of any of the four preceding tax years;
           (ii) claims a loss carried forward under this Ordinance for a tax year;
          (iii) owns immovable property, with a land area of two hundred and fifty square yards or more, located
                in areas falling in the limits of a Metropolitan/ Municipal Corporation, a Cantonment Board, or the
                Islamabad Capital Territory or owns any flat;
          (iv) owns a motor vehicle (other than a motor cycle) in Pakistan;
           (v) subscribes for a telephone including a mobile phone in Pakistan;
          (vi) has undertaken foreign travel in the tax year other than travel by a non-resident person or any
                travel for the purposes of the Haj, Umrah, or Ziarat; or
         (vii) is member of a club where the monthly subscription exceeds five hundred rupees or the admission
                fee exceeds twenty-five thousand rupees.”
1 Words etc. inserted by Finance Act, 2003.



                                                         649




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                                                               650
Section 114                                                              Income Tax Ordinance, 2001.

              (iii)      owns immovable property with a land area of two hundred
                         and fifty square yards or more or owns any flat located in
                         areas falling within the municipal limits existing
                         immediately before the commencement of Local Government
                         laws in the provinces; or areas in a Cantonment; or the
                         Islamabad Capital Territory 1[;]]
            2[(iv)       owns immoveable property with a land area of five hundred
                         square yards or more located in a rating area;
                 (v)     owns a flat having covered area of two thousand square feet
                         or more located in a rating area;
               (vi)      owns a motor vehicle having engine capacity above 1000CC;
                         and
             (vii)       has obtained National Tax Number.]
       3[(2)     A return of income–
          (a)       shall be in the prescribed form and shall be accompanied by
                    such annexures, statements or documents as may be prescribed;
          (b)       shall fully state all the relevant particulars or information as
                    specified in the form of return, including a declaration of the
                    records kept by the taxpayer; 4[and]
           (c)      shall be signed by the person, being an individual, or the
                    person‟s representative where section 172 applies.]
           A www.imranghazi.com
       5[(2A)  return of income filed electronically on the web or any
magnetic media or any other computer readable media as may be specified
by the Board shall also be deemed to be a return for the purpose of
sub-section (1); and the Board may, by notification in the official Gazette,
make rules for determining eligibility of the data of such returns and
e-intermediaries who will digitize the data of such returns and transmit the
same electronically to the Income Tax Department under their digital
1   Substituted for full stop by Finance Act, 2009.
2   Sub-clauses (iv) to (vii) inserted by Finance Act, 2009.
3   Sub-section (2) substituted by Finance Act, 2003.
4   Word inserted by Finance Act, 2005.
5   Sub-section (2A) inserted by Finance Act, 2005.

                                           LEGISLATIVE HISTORY
     Section 114(2)–Substitution.–Before substitution by Finance Act, 2003 sub-section (2) read as follows:–
     “(2) A return of income–
      (a) shall be in the prescribed form;
      (b) shall state the information required by the form, including a declaration of the records kept by the
            taxpayer;
      (c) in the case of a person carrying on a business, shall include an income statement, balance sheet, and
            any other document as may be prescribed for the tax year; and
      (d) shall be signed by the person or the person‟s representative.”




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                                                              651
Chapter X, Procedure – Part I, Returns                                                                        Section 114

signatures 1[and other matters relating to electronic filing of returns,
statements or documents, etc.].]
    (3) The Commissioner may, by notice in writing, require a person, or a
person‟s representative, as the case may be, to furnish a return of income
by the date specified in the notice for a period of less than twelve months,
where–
          (a)       the person has died;
          (b)       the person has become bankrupt or gone into liquidation;
           (c)      the person is about to leave Pakistan permanently;
            2[        ]
          (e)       the Commissioner otherwise considers it appropriate to require
                    such a return to be furnished.
     (4) Subject to sub-section (5), the Commissioner may, by notice in
writing, require any person who, in the Commissioner‟s opinion, is
required to file a return of income under this section for a tax year 3[or
assessment year] but who has failed to do so to furnish a return of income
for that year within thirty days from the date of service of such notice or
such longer period as may be specified in such notice or as the
Commissioner may allow.
   (5) A notice under sub-section (4) may be issued 4[in respect of one or
more] 5[of the] last five completed tax years 6[or assessment years].
1 Words etc. inserted by Finance Act, 2007.
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2 Clause (d) omitted by Finance Act, 2003. Earlier it was omitted by Notification No. SRO 633(I)/2002, dated September 14,
  2002, issued by Federal Government in exercise of the powers conferred by section 240 of the Income Tax Ordinance, 2001.
  This amendment and all others made under SRO 633(I)/2002, dated September 14, 2002) are to be read with the following
  connotation given as preamble:
      “.....the Federal Government is pleased to direct that in making any assessment for the year beginning on the first day of
  July 2002 or making any deduction or collection of tax for the year beginning on the first day of July, 2002, the said Ordinance
  shall have effect as if, .....”
  It means that powers vested under section 240 have been abused by resorting to actual legislative work, rather than removal
  of difficulties for which the section is meant.
      This SRO was rescinded by SRO 608(I)/2003 dated June 24, 2003. It means SRO 633(I)/2002 dated September 14,
  2002 remained in operation till June 30, 2003.
3 Words inserted by Finance Act, 2003.
4 Substituted for “only in respect of the” by Finance Act, 2003. Earlier it was substituted by Notification No. SRO 633(I)/2002,
  dated September 14, 2002, issued by Federal Government in exercise of the powers conferred by section 240 of the Income
  Tax Ordinance, 2001. This amendment and all others made under SRO 633(I)/2002, dated September 14, 2002) are to be
  read with the following connotation given as preamble:
      “.....the Federal Government is pleased to direct that in making any assessment for the year beginning on the first day of
  July 2002 or making any deduction or collection of tax for the year beginning on the first day of July, 2002, the said Ordinance
  shall have effect as if, .....”
  It means that powers vested under section 240 have been abused by resorting to actual legislative work, rather than removal
  of difficulties for which the section is meant.
      This SRO was rescinded by SRO 608(I)/2003 dated June 24, 2003. It means SRO 633(I)/2002 dated September 14,
  2002 remained in operation till June 30, 2003.
5 The words inserted by Finance Act, 2005.
6 The words inserted by Finance Act, 2004.

                                           LEGISLATIVE HISTORY
    Section 114(3)(d)–Omission.–Before omission by Finance Act, 2003 clause (d) read as follows:–
    “(d) the person is otherwise about to cease carrying on business in Pakistan; or”




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                                                          652
Section 114                                                                    Income Tax Ordinance, 2001.

          Subject to sub-section (6A), any person who, having furnished a
        1[(6)

return, discovers any omission or wrong statement therein, may file revised
return subject to the following conditions, namely:–
           (a)       it is accompanied by the revised accounts or revised audited
                     accounts, as the case may be; and
           (b)       the reasons for revision of return, in writing, duly signed, by the
                     taxpayers are filed with the return*]
           If a taxpayer wishes to file a revised return voluntarily along
        2[(6A)

with deposit of the amount of tax short paid or amount of tax sought to be
evaded along with the default surcharge, whenever it comes to his notice,
before receipt of notice under sections** 177 or sub-section (9) of 122, no
penalty shall be recovered from him:
     Provided that in case the taxpayer wishes to deposit the amount of tax
as pointed out by the Commissioner during the audit or before the issuance
of notice under sub-section (9) of section 122, he shall deposit the amount of
tax sought to be evaded, the default surcharge and twenty-five per cent of
the penalties leviable under the Ordinance along with the revised return:
     Provided further that in case the taxpayer wishes to revise the return
after the issuance of a show cause notice under subsection (9) of section 122,
he shall deposit the amount of tax sought to be evaded, default
1 Sub-section (6) substituted by Finance Act, 2010 w.e.f. June 5, 2010. The same amendment was made by Finance
  (Amendment) Ordinance, 2010, promulgated as Ordinance No. III of 2010, dated February 6, 2010, published in the Gazette
  of Pakistan Extraordinary Part I at pages 23 to 53. This Ordinance was presented in the Parliament but lapsed on 5 June
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  2010 as Parliament did not approve it. Originally this amendment was made through Finance (Amendment) Ordinance,
  2009, promulgated as Ordinance No. XXII of 2009, dated October 28, 2009, published in the Gazette of Pakistan
  Extraordinary Part I at pages 229 to 259. Earlier it was substituted by Finance Act, 2009.
2 Sub-section (6A) inserted by Finance Act, 2010 w.e.f. June 5, 2010. The same amendment was made by Finance
  (Amendment) Ordinance, 2010, promulgated as Ordinance No. III of 2010, dated February 6, 2010, published in the Gazette
  of Pakistan Extraordinary Part I at pages 23 to 53. This Ordinance was presented in the Parliament but lapsed on 5 June
  2010 as Parliament did not approve it. Originally this amendment was made through Finance (Amendment) Ordinance,
  2009, promulgated as Ordinance No. XXII of 2009, dated October 28, 2009, published in the Gazette of Pakistan
  Extraordinary Part I at pages 229 to 259.
*  Fullstop is missing.
** Should have been “section”.

                                        LEGISLATIVE HISTORY
   Section 114(6)–Substitution.–Before substitution by Finance Act, 2010 [and earlier substitution by Finance
(Amendment) Ordinance, 2010 and Finance (Amendment) Ordinance, 2009] sub-section (6) read as follows:–
   “(6) Any person who, having furnished a return, discovers any omission or wrong statement therein, without
          prejudice to any other liability, which he may incur under this Ordinance, may furnish a revised return
          for that tax year at any time, within five years from the end of the financial year in which original return
          was filed, subject to the following, namely:–
       (a) it is accompanied by the revised accounts or revised audited accounts, as the case may be;
       (b) the reason of revision of return, in writing, duly signed, is filed therewith,; and
        (c) it is filed before the issuance of the notice for amendment of assessment.”
   Section 114(6)–Substitution.–Before substitution by Finance Act, 2009 sub-section (6) read as follows:–
   “(6) Any person who, having furnished a return, discovers any omission or wrong statement therein, may
          furnish a revised return within five years of the date that the original return was furnished.”




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Chapter X, Procedure – Part I, Returns                        Section 114

surcharge and fifty per cent of the leviable penalties under the Ordinance
along with the revised return and thereafter, the show cause notice shall
stand abated.]
    (7) Every return purporting to be made or signed by, or on behalf of a
person shall be treated as having been duly made by the person or with the
person‟s authority until the person proves the contrary.




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                                 652-B
Section 114                                    Income Tax Ordinance, 2001.




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Chapter X, Procedure – Part I, Returns                                           Section 114


                                       COMMENTS
SECTION 114: ―Return of income‖.
Provisions contained in sections 55, 56, 57, 72, 73, 74 & 81 of repealed Ordinance have all
been sensibly brought under one section. Accordingly, return is to be furnished with effect
from 1.7.2006 by:
     (a) every company;
     (b) any other person whose taxable income for the year exceeds the minimum amount
          that is not chargeable to tax;
      (c) any non-profit organisation as defined in section 2(36);
     (d) any welfare institution approved under clause (58), Part I of the Second Schedule;
     (e) persons who have been charged for their income in the two [previously it was four]
          preceding years;
      (f) persons who have carried forward a loss for a tax year;
     (g) persons who own urban immovable property with an area of 250 sq. yds. or more
          or those who own an apartment/flat;
     The following categories were required to file returns mandatory prior to 1.7.2005:
      (i) persons owning a motor vehicle in Pakistan;
     (ii) telephone/mobile phone subscribers;
    (iii) resident persons having undertaken foreign travel in the tax year other than travel
          for Umrah, Haj or Ziarat;
    (iv) members of a club where monthly subscription exceeds five hundred rupees or
          admission fee exceeds twenty-five thousand rupees.
     With amendments introduced vide Finance Act 2009, further additions have been made.
          Hence 114(1)(iv) talks about such persons who own immovable with land area of
          500 square yards or more located in a rating area and (v) mentions persons who
          own a flat having covered area of 2000 square feet or more, located in a rating area.
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Sub-clause (iii) contains similar provision with the land area of immovable property stated
as 250 square yards or more and flat (size not specified). The only difference in sub-clause
(iii) and new sub-clauses (iv) & (v) is that one talks about property located in areas falling
within the municipal limits in the provices, cantonment areas and Islamabad while the other
two refer to rating areas. According to the provincial Immovable Property Tax acts, ‚rating
areas‛ mean urban area where tax is levied under the provisions of the act. Stalwarts, who
prepared the explanatory notes did not bother to explain the term ‘rating areas’ conveniently
leaving it to the comprehension of the ordinary taxpayer.
Sub-clause (vi) makes it incumbent upon persons owning a vehicle with engine capacity
above 1000 cc. This means that by virtue of this sub-clause, persons who own vehicles with
engine capacity up to 1000cc, unless they fall under another category, are not required to
submit a return.
Sub-clause (vii) appears to be for abundant caution as anyone who obtains a national tax
number (NTN) is automatically obliged to file a return.
     Sub-section (2) lays down the requirements of furnishing a return. If a return is not filed
accordingly, it will be considered invalid.
     By inserting sub-section (2A), Finance Act 2005 has facilitated filing of returns
electronically. This is great leap towards modernising tax administration and needs to be
encouraged. The Board deserves appreciation for taking this timely step as most of the tax
administrations in the world have already been taking advantage of I.T. technology since
long to facilitate filing of return/statements online or by email. The FBR has also been
authorised to make rules in this regard. From 1st July 2007, it has been made mandatory for
companies to file returns and withholding statements electronically [see Rule 73(2A) of the
Income Tax Rules, 2002].




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                                             654
Section 114                                                   Income Tax Ordinance, 2001.

    Commissioner may by a notice in writing require any person or his representative to file
a return for a period of less than twelve months, where he thinks that:
         (i) the person has died;
        (ii) the person has become bankrupt or gone into liquidation;
       (iii) the person is about to leave Pakistan permanently;
       (iv) it is appropriate to require such return.
    Sub-sections (4) and (5) relate to a situation where a person who is required to file a
return does not do so and the Commissioner, by a notice in writing requires that he should
furnish a return of income within the period specified in the notice. However, the power of
the Commissioner has been confined to the last five completed tax years or assessment years.
Interestingly, the Commissioner can also call for a return of any assessment year by an
amendment in sub-section (4) through the Finance Act, 2003, though no such saving is
provided in section 239. More interestingly, consequential amendment in sub-section (5) was
not originally made, which was inserted through Finance Act, 2005. Any notice under
section 114(4) for any assessment year will be void ab initio as it does not go with the scheme
of section 239(1) to (3).
    In order to cater for any omission or mistake on the part of the person who has furnished
a return of income under this section, provision is made in sub-section (6) whereby a revised
return can be filed within a period of five years from the date of filing the original return.
For filing revised returns, Finance Act 2009 substituted sub-section (6) in order to impose
certain conditions that include revised accounts or revised audited accounts, reason for
revision, which can only be made before the commissioner issues any notice with respect to
amendment of assessment. This amendment was prospective i.e. applicable for tax returns
filed after 01-07-2009. The Board in Explanatory Circular wrongly illustrated the law by
taking a case where return was filed for tax year 2007. Now the Finance (Amendment)
Ordinance, 2010 has substituted sub-section (6) and after that inserted new sub-section (6A).
These amendments are anti-business penalising taxpayers even for bona fide omissions and
giving great bargaining powers to Officers of Inland Revenue.
    A number of amendments were made by Finance Act, 2003 wherein:–
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        (a) obligation for filing of return where income exceeds the taxable limit even in the
              case prior to coming into force of the new Ordinance is imposed;
        (b) filing of returns along with necessary documents and statements made
              obligatory;
         (c) obligation of filing returns by the taxpayer’s representative imposed; and
        (d) power given to Commissioner to call for returns of the earlier assessment years.
    These amendments cannot by any stretch of imagination be construed as removing of
editorial mistakes as claimed by CBR in Notes on Clauses appended to the Finance Bill 2003.
How can such serious legal obligations be termed as part of removing editorial mistakes? It
is painful that the entire section has been substantially amended and that too in the name of
‚seeking to correct editorial mistakes.‛
    Legally any notice for the assessment year under the repealed Ordinance cannot be given
asking the taxpayer to file return unless a specific saving clause is provided in section 239.
Limitation for issuance of notice under section 114(4) is provided in sub-section (5).
    Section 114(5), as amended by the Finance Act, 2004, authorises the Commissioner to call
for a return in respect of one or more last five completed tax years or assessment years. The
new amendment extends this power for requiring returns relating to last five completed
assessment years under the repealed Ordinance as well. This amendment is debatable.
Section 239(1) does not save provisions relating to issuance of notices such as 56 or 65 for
assessment years under the repealed Ordinance. Rather, it says that for computation of
income and tax payable thereon for any income year on or before 30th June 2002 provisions
of the repealed Ordinance will apply. On the contrary sub-section (2) of section 239 says that
for years, prior to the commencement of the new Ordinance, assessment is to be made and




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                                             654-A
Chapter X, Procedure – Part I, Returns                                             Section 114

procedure to be adopted would be as specified in section 59 or 59A or 61 or 62 or 63 as the
case may be under the repealed Ordinance.
    It is strange that section 56 is not saved under s. 239 or elsewhere, but assessment for
income years as per s. 239(2) is to be made u/s 62 or 63 after issuance of notice u/s 114(4).
There is an urgent need to reconcile saving provisions contained in sub-sections (1) and (2) of
section 239 which are at present self-contradictory. Logically, if assessments for any period
prior to 30th June 2002 is to be made u/s 59 or 59A or 62 or 63 of the repealed Ordinance, the
procedural law for calling for return or returns, as the case may be, should also be u/s 56 or
65.
    Amendments have been made vide Finance Act, 2006 to make it mandatory for any
non-profit organization as defined in section 2(36) to file return compulsorily. This will also
apply to any welfare institution approved under clause (58) of Part-I of Second Schedule.
    [See comparable position under RO after section 119.]

                                   DEPARTMENTAL VIEW
e-Filing of Income Tax Returns
       Under the existing provisions of Income Tax Ordinance, 2001, the following categories
are required to e-file income tax returns/Statements:–
         (i) Annual Statement of deduction of income tax from salary to be e-filed by the
              employer of an individual;
        (ii) Return of income of salaries individuals (with income five hundred thousand
              rupees or more);
       (iii) Any person registered for sales tax;
       (iv) Any person claiming refund;
        (v) Association of Persons (AOPs);
       (vi) Non-resident ship owner charterer.
       2. However, it has been represented by a larger number of taxpayers that due to
various reasons (including increased e-filing activity in the last dates of filing of income tax
returns/statements) being practical difficulties are faced in e-filing. Hence it is being
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requested that last date of e-filing of returns returns/statements be extended.
       3. The matter has been examined. In order to facilitate the taxpayers in e-filing of income
tax returns/statements, it has been decided that in cases where difficulty is being faced in
e-filing of returns/statements, the taxpayer may submit hard copies of income tax
return/statements by the due date i.e. 15th October, 2010, subject to the following conditions:–
         (i) In such cases income tax return/statement is e-filed by 15th November, 2010,
              otherwise income tax return/statement shall not be deemed to have been filed and
              necessary proceeding under the Income Tax Ordinance, 2001 shall be initiated
              accordingly;
        (ii) Tax due with the return is paid by 15th October, 2010; and
       (iii) No refund in such cases shall be processed unless return of income is e-filed. --
              [Cir. 14/2010, dated 11.10.2010.]
Amendment in Return Filing Regime [Section 114(6) & (6A)].
Through amendments in section 114 revised income tax return filing has been liberalized
and an option has been made available to a taxpayer to file revised return voluntarily, at any
stage of the proceeding, alongwith the payment of amount of tax involved, amount of
default surcharge and payment of penalties at reduced scales–
         (i) A taxpayer, on discovery of any discrepancy in the original return can file revised
              return accompanied with revised accounts alongwith duly signed reasons for
              such revision of return, payment of short paid tax or amount of tax sought to be
              evaded and payment of default surcharge. If such voluntary revision is made
              before receipt of notice under section 177(9), no penalty shall be recoverable in
              such voluntary revision.
        (ii) In case a taxpayer opts to revise his return voluntarily and pay tax demand during
              the process of audit (before issuance of notice of amendment), tax demand
              alongwith the amount of default surcharge and only twenty five percent of
              leviable penalties are required to be paid in case of such voluntary revision.




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Chapter X, Procedure – Part I, Returns                    Section 114




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                                                                       654-B
Section 114                                                                             Income Tax Ordinance, 2001.

       (iii) In cases of such voluntary revision of return after issuance of notice of
             amendment, alongwith payment of the amount of tax sought to be evaded and
             the amount of default surcharge. Only fifty percent of the penalty leviable, is
             required to be paid in such a situation.
             In case of such voluntary filing of revised returns and payments of the amount of
             tax sought to be evaded, amount of penalties and the amount of default
             surcharge, as mentioned above, audit proceedings shall come to an end. --
             (02/2010 dated 22.01.2010).
Filing of annual withholding tax statements by employers.
       In order to facilitate the taxpayers for filing of withholding tax statements, it has been
decided that in cases of employers who had filed monthly/quarterly withholding tax
statement in accordance with the requirement of law, filing of annual withholding tax
statement shall not be required.
       2. These orders shall take immediate effect. - (10/2009 dated 28.09.2009).
Filing of Income Tax Returns in the cases of individuals and Association of Persons (AOPs) and
providing tax payment proof alongwith the return.
       In order to facilitate the process of e-filing of return in the cases of Individuals and
Association of Persons (AOPs) it has been decided that in the cases of individuals and AOPs
income tax returns may be filed manually with in the prescribed time limit subject to
condition that subsequently that such return are e-filed with in the period of two months of
the last date of filing of such returns.
       2. Also, in view of the problems faced by the taxpayers in providing copies of proof of
payment of tax alongwith the income tax return, it has been decided that the taxpayer may
attached the list of challans including the detail regarding name of the taxpayer, name of
withholding agent, NTN of the withholding agent, date of payment of tax, amount of tax
paid/deducted and the name of the bank and branch. However, the actual proof of payment
(copies of challans are required to be provided to the respective income tax office within
thirty days from the date of filing of income tax return for tax year 2009. - (9/2009 dated
25.09.2009).
EXPLANATORY CIRCULAR ON THE AMENDMENTS MADE IN THE INCOME TAX ORDINANCE, 2001
THROUGH FINANCE ACT, 2009.
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15. MANDATORY FILING OF RETURNS BY CERTAIN PERSON. [SECTION 114]
In order to expand the tax base, following persons have been added to the already existing
categories of taxpayer who are required to file the returns of income.
             a) Who owns immoveable property with land area of 500 Square yards or more
                 located in a rating area.
             b) Who owns a flat having covered area of 2,000 square feet or more located in a
                 rating area.
             c) Who owns a motor vehicle having engine capacity above 1000CC.
             d) Who has obtained a National Tax Number. - (3/2009 dated 17.7.2009).
16. CONDITIONAL *REVISIONING OF RETURN. [SECTION 114(6)]
Before the insertion of this amendment, a taxpayer was allowed to file revised return under
the provision of sub-section (6) of section 114, at any time within five years of the filing of
original return. This facility was being misused by some taxpayer who filed revised return at
the time when amendment of assessment proceedings were in hand and demanded the
closure of proceedings on the ground that the revised return is to be deemed amended
assessment as provided under the law. To bring clarity and avoid unnecessary litigation, the
*   Should have been „revising‟ as there is no such word as „revisioning‟ in English.




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                                              655
Chapter X, Procedure – Part I, Returns                                             Section 114

said sub-section has been substituted and now the revised return is allowed to be filed
within five years from the end of the financial year in which original return was filed
without prejudice to any other liability which the taxpayer may incur under the Ordinance
and subject to the following conditions:
         a) The revised return has to be accompanied by revised accounts or revised audited
             accounts as the case may be.
         b) The reason for revision of return, in writing, duly signed, has to be filed
             therewith.
          c) The revised return has to be filed before the issuance of the notice for amendment
             of assessment in respect of the relevant tax year.
Example-I – As per old provisions
Date(s) of filing of Return                                      31.12.2007          30.09.2008
Period of limitation of revision of return                       31.12.2012          30.09.2013
Example-II – As per new provisions
Date(s) of filing of Return                                      31.12.2007          30.09.2008
Financial year ending in which return was filed                  30.06.2008          30.09.2009
Five years from the aforesaid date                               30.06.2013          30.06.2014
More time allowed as per amended provisions as                    6 months            9 months
compared with old provisions
                                                                         (3/2009 dated 17.7.2009).
Finance Act, 2007 – Mandatory electronic filing of returns and statements of withholding tax.
       Section 114(2A) has been amended empowering the Board to make rules for the
matters relating to electronic filing of returns and statements etc. Accordingly, corporate
Qtaxpayers will be required to file returns of income and withholding tax statements
electronically from 1st July 2007 onwards. – (1/2007, dated 02.07.2007).
    [Note: Rule 73(2A) inserted by FBR is violative to the extent of making mandatory
             e-filing of return by companies. Section 114(2A) facilitates the taxpayers to file
             return electronically as well but cannot be used as a mandatory provision as
             opined by the Board.]
Filing of returns for the Tax Year 2005.
       It has been www.imranghazi.com
                    observed that a large number of taxpayers are preoccupied because of their
active engagement in relief work to alleviate problem arising in consequence of earthquake
disaster. I am therefore, directed to say that no penal action may be taken against the
taxpayers who have not yet been able to file returns of income, if the same are filed by
31.10.05. – [C.No.1(1)SS(ITR)/05, dated 15.10.2005].
Income Tax return forms – clarifications regarding.
       I am directed to refer to the subject mentioned above and to say that various queries
have been raised by the taxpayers regarding the new prescribed-Return Form which are
clarified as under:
          a. In Annex IID at Serial No. 4, the situation of set off of business loss only for the
             year against income under any other head is covered, while legally both business
             loss and depreciation/amortization for the year can be set off against the income
             under any other head. In such situations, taxpayers can incorporate their own
             working in the space available after Serial No. 4 in the said Annex.
          b. Annex IIE, IIF and IIG are not applicable in case of an individual and association
             of persons. However, use of these annexes by an individual and association of
             persons will be appreciated.
          c. In Annex IIG Serial No. 3(b)(v) or 4(e)(v), as the case may be, can be used for
             bifurcation of Gain/Loss on disposal of depreciable assets between income subject
             to final tax and normal income.
         d. As a result of short deduction/collection, if any tax is payable in respect of
             incomes etc. subject to final taxation, the same can be adjusted against any refund
             due as per Return of Total income Employer’s Certificate in lieu of Return of Total
             Income, Attachment to Employer’s Certificate or Statement of Final Tax of
             Retailers and vice-versa.
          e. In Annex IIA and IIB, Business Code is to be filled by the Income Tax Department
             and not by the taxpayers (copy attached).




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                                              656
Section 114                                                     Income Tax Ordinance, 2001.

         f. Taxpayers deriving income from commission fall in the category of Agency of
             Services depending upon the facts of each case.
         g. Members of Stock Exchanges are requested to overwrite Code 6443 as 6445 and
             applicable rate 5% as 0.005% in the Statement of Final Taxation (R5) and Annex
             XI, as the case may be.
        h. Member of Stock Exchanges are required to disclose the purchase and/or sale
             value in the column of ‚Receipts/Value‛ in the Statement of Final Taxation (R5)
             and Annex XI, as the case may be.
         i. Following additional line may be inserted for Serial No. 6 in Annex X, wherever
             necessary.
                 ‚5A. On Trading of shares Evidence of payment attached.‛
          j. In Annex V the words ‚Immovable Property‛ wherever used may be ignored. –
             [C.No.1(1)SS(ITR)/05, dated 19.09.2005].
Finance Act, 2005 – Relaxation for mandatory filing of return. [Section 114(1)(b)]
      The conditions for mandatory filing of return under section 114(1)(b) have been relaxed
and subscribers of telephone, car owners, members of clubs and persons undertaking foreign
travel have been absolved from the obligation of mandatory filing. Besides, the number of
years of chargeability to tax has also been reduced from four to two years. – (1/2005, dated
05.07.2005).
Finance Act, 2005 – Electronic filing of returns/statements. [Section 114 (2A)]
      In section 114 a new sub-section (2A) has been inserted which provides that a return of
income filed electronically on the web or any magnetic media or any other computer
readable media, will be considered as valid income tax return for the tax year 2005 and
onwards. This is in keeping with the international trends towards e-government. – (1/2005,
dated 05.07.2005).
Revision of Returns by Taxpayers selected for audit – Tax Year 2003 – Instruction regarding.
      I am directed to refer to subject and to state that queries are being received in the Board
as to whether the taxpayers selected for audit for the subject year can makeup omissions and
inadvertent wrong statements by filing revised returns declaring income higher than the
ones as declared in their original returns.
2.    The matter was considered in the Board and I am directed to state that sub-section (6)
of section 114 of www.imranghazi.com allows a person who, having furnished a
                    the Income Tax Ordinance, 2001
return, subsequently discovers any omission or wrong statements therein, may furnish a
revised return within five years of the date the original returns was furnished. On the basis
of the above legal provision, the taxpayers may file revised return even if their cases have
been selected for audit. In case a person files a revised returns, the concerned Taxation
Officers will review the revised declaration and if found satisfactory, will close the audit
proceedings and inform the taxpayer accordingly.
3.    It is requested that the above legal facility may be brought to the notice of all taxpayers
whose cases have been selected for audit and the Taxation Officers to whom their cases have
been assigned, for their consideration.
4.    Receipt of this letter may please be acknowledged. A copy of directions issued to the
Taxation Officers, as consequence of the above instructions may also be provided to the
Board. – [C.No. 1(1)S.(ITAS)/2004, dated 11.06.2004].

              CASE LAW – SUPREME COURT / HIGH COURTS / ITAT
          TAX PAYER WAS LEGALLY AND MORALLY BOUND TO FURNISH TRUE DECLARATION
                            OF INCOME IN HIS/ITS RETURN U/S 114
   Tax payer was legally and morally bound to furnish true declaration of income in
    his/its return u/s 114. – Syed Bhais (Pvt.) Ltd., through Director v. CBR, Islamabad
    [(2007) 95 TAX 211 (H.C.Lah.) = 2007 PTD 239].
   No provision in Income Tax Ordinance, 1979, existed which could make the payment
    of tax a condition precedent for filing of the return of total income. – CIT, Zone-B,
    Karachi v. Olympia Poultry Farms [(2006) 94 TAX 65 (H.C.Kar.) = 2006 PTD 1061].




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                                          657
Chapter X, Procedure – Part I, Returns                             Sections 115 to 119

           EXEMPT INCOME MERELY ENJOYED IMMUNITY FROM PAYMENT OF TAX AND NOT
                                   THE CHARGEABILITY OF TAX
   Exempt income merely enjoyed immunity from payment of tax and not the
    chargeability of tax. – CIT, Zone-B, Karachi v. Olympia Poultry Farms [(2006) 94
    TAX 65 (H.C.Kar.) = 2006 PTD 1061].
                                           GENERAL
   Assessee in terms of CBR circular No. 1 of 2004 had revised its Income Tax Return
    by increasing 20% higher tax as compared to the tax payable on the original return,
    department was bound to accept the revised return. Therefore, notice for selection of
    return for Total Audit is illegal. – Bilal Ikram v. FBR and 2 others [2008 PTD 1960
    (H.C.Lah.) = PTCL 2009 CL. 48].
   Once impugned notices have been held to be without jurisdiction, Court would not
    like to dilate upon the merits of the contentions raised by parties. – Asia Petroleum
    Ltd. through Managing Director v. Pakistan through Secretary, Ministry of Finance
    (Revenue Division) & Ex-Officio, Chairman, CBR, Islamabad and another [(2005) 92
    TAX 230 (H.C.Kar.) = 2005 PTD 2345].
   Proceedings u/s 61 and 62 without issuance of notice u/s 56 or 65 held to be void ab
    initio. – Asia Petroleum Ltd. through Managing Director v. Pakistan through
    Secretary, Ministry of Finance (Revenue Division) & Ex-Officio, Chairman, CBR,
    Islamabad and another [(2005) 92 TAX 230 (H.C.Kar.) = 2005 PTD 2345].
                      PROVISO INSERTED IN SECTION 56 IS RETROSPECTIVE
   Proviso to section 56 inserted by Finance Ordinance, 2001 is meant to limit powers of
    assessing officer, not to issue notice beyond a period of five years. – [2006 PTR 282
    (Trib.) =(2006) 94 TAX 366 = 2006 PTD 2849 = PTCL 2006 CL. 480].
   Question of limitation of time for filing return of income is a matter of procedure. –
    [2006 PTR 282 (Trib.) =(2006) 94 TAX 366 = 2006 PTD 2849 = PTCL 2006 CL. 480].
   Where the amendment provides remedies and cures, it has to be interpreted
    retrospectively. – [2006 PTR 282 (Trib.) =(2006) 94 TAX 366 = 2006 PTD 2849 =
    PTCL 2006 CL. 480].
                 of unlawful jurisdiction. – [2005
    Assumptionwww.imranghazi.com PTR 115 (Trib.) = 2005 PTD 517].
   Proviso inserted in section 56 is retrospective being remedial and curative law. –
    [(2004) 89 TAX 25 (Trib.) = 2004 PTD 708].
                                 INCOME FOR DIFFERENT YEARS
   Income for different years cannot be shown in one return but in separate returns for
    each year. – [(2004) 90 TAX 36 (Trib.) = 2005 PTD 234].
                   NOTICE U/S 114(4) CAN BE ISSUED FOR ASSESSMENT YEARS
                               AFTER PROMULGATION OF NEW LAW
   Notice u/s 114(4) can be issued for assessment years after promulgation of new law.
    – [2006 PTR 187 (Trib.)].
                                           PENALTY
    „Tax payable‟ is the pre requisite for imposing penalty under section 114. – [2010
    PTR 114 (Trib.)]




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                                                                      658
Sections 115 to 119                                                              Income Tax Ordinance, 2001.

    115. Persons not required to furnish a return of income.– 1[(1)
Where the entire income of a taxpayer in a tax year consists of income
chargeable under the head “Salary”, Annual Statement of Deduction of
Income Tax From Salary, filed by the employer of such taxpayer, in
prescribed form, the same shall, for the purposes of this Ordinance, be
treated as a return of income furnished by the taxpayer under section 114:
                that where salary income, for the tax year is five hundred
        2[Provided

thousand rupees or more, the taxpayer shall file return of income
electronically in the prescribed form and it shall be accompanied by the
proof of deduction or payment of tax and wealth statement as required
under section 116.] ]
        3[               ]
    (3) The following persons shall not be required to furnish a return of
income for a tax year solely by reason of 4[sub-clause (iii)] of clause (b) of
sub-section (1) of section 114–
             (a)      A widow;
             (b)      an orphan below the age of twenty-five years;
             (c)      a disabled person; or
             (d)      in the case of ownership of immovable property, a non-resident
                      person.
1   Sub-section (1) substituted by Finance Act, 2008.
2   Proviso Substituted by Finance Act, 2009.
3   Sub-section (2) omitted by Finance Act, 2004.
                          www.imranghazi.com
4   Substituted for “sub-clauses (iii) through (vii)” by Finance Act, 2008.

                                                LEGISLATIVE HISTORY
     Section 115(1)Pr.–Substitution.–Before substitution by Finance Act, 2009 proviso read as follows:–
    “Provided that where salary income, for the tax year or the last tax year is five hundred thousand rupees or
more, the taxpayer shall file wealth statement as required under section 116.”
    Section 115(1)–Substitution.–Before substitution by Finance Act, 2008 sub-section (1) read as under:
    “(1) Where the entire income of a taxpayer in a tax year consists of income chargeable under the head
“Salary”, the taxpayer may, instead of furnishing a return as required under section 114 furnish–
     (a) a certificate from the person‟s employer in the prescribed form stating such particulars, and
            accompanied by such statements, and verified in such manner, as may be prescribed, and such
            certificate shall be, for the purposes of this Ordinance, treated as a return of income furnished under
            section 114 1[:]
              2[Provided that a taxpayer shall not be required to furnish a certificate, if his employer has furnished

            for the same tax year, Annual Statement of Deduction of Income Tax From Salary as prescribed under
            the Income Tax Rules, 2002.]
     (b) 3[ ] a wealth statement referred to 4[in] section 116.”
1 Substituted for “; and” by Finance Act, 2005.
2 Proviso inserted by Finance Act, 2005.
3 Words etc. “subject to sub-section (2),” omitted by Finance Act, 2004.
4 Word inserted by Finance Ordinance, 2002.
     Section 115(2)–Omission.–Before omission by Finance Act, 2004 sub-section (2) read as follows:–
     “(2) Clause (b) of sub-section (1) shall not apply to a person whose declared income for the tax year, or whose
last declared or assessed income, is less than two hundred thousand rupees.”




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                                                             659
Chapter X, Procedure – Part I, Returns                                                          Sections 115 to 119

      (4) Any person who is not obliged to furnish a return for a tax year
because all the person‟s income is subject to final taxation under sections
1[   ] 2[5, 6, 7, 3[15,] 4[113A,] 5[113B,] 148, 6[clauses (a), (b) and (d) of
sub-section (1) of section 151, sections 152,7[clauses (a) and (c) of
sub-section (1) of section]] 153, 154, 156 8[, 156A, or sub-section (3) of section
233, clause (a) and clause (b) of sub-section (1) of section 233A] or sub-section
(5) of section 234 9[or sub-section (3) of section 234A]] shall furnish to the
Commissioner a statement showing such particulars relating to the
person‟s income for the tax year in such form and verified in such manner
as may be prescribed.
             Any person who, having furnished a statement, discovers any
        10[(4A)

omission or wrong statement therein, he may, without prejudice to any
other liability which he may incur under this Ordinance, furnish a revised
statement for that tax year, at any time within five years from the end of
the financial year in which the original statement was furnished.
        11[                           ]
           Subject to sub-section (6), the Commissioner may, by notice in
        12[(5)

writing, require any person who, in his opinion, is required to file a
prescribed statement under this section for a tax year but who has failed to
do so, to furnish a prescribed statement for that year within thirty days
from the date of service of such notice or such longer period as may be
specified in such notice or as he may, allow.]
          A notice under sub-section (5) may be issued in respect of one or
        13[(6)
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more of the last five completed tax years.]
1    Figure and comma “148,” omitted by Finance Act, 2003.
2    Substituted for “151(a)(b), 153, 154, 156, 157 or 234(5)” by Finance Ordinance, 2002.
3    Figure etc. inserted by Finance Act, 2006.
4    Inserted by Finance Act, 2004.
5    Figure, letter and comma inserted by Finance Act, 2005.
6    Words etc. inserted by Finance Act, 2006.
7    Words etc. inserted by Finance Act, 2009.
8    Inserted by Finance Act, 2004.
9    Words etc. inserted by Finance Act, 2009.
10   Sub-section (4A) inserted by Finance Act, 2009.
11   Sub-section (4B) omitted by Finance Act, 2010. Earlier it was inserted by Finance Act, 2009.
12   Sub-section (5) inserted by Finance Act, 2007.
13   Sub-section (6) inserted by Finance Act, 2007.

                                           LEGISLATIVE HISTORY
     Section 115(4B)–Omission.– Before omission by Finance Act, 2010, sub-section (4B) read as follows:–
     “(4B) Every person (other than a company) filing statement under sub-section (4), falling under final tax
regime (FTR) and has paid tax amounting to twenty thousand rupees or more for the tax year, shall file a wealth
statement alongwith reconciliation of wealth statement.”

                                                     COMMENTS
SECTION 115: ―Persons not required to furnish a return of income‖.
The Finance Act, 2008 substituted sub-section (1) to remove deficiencies pointed out by us as
under:




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                                              660
Sections 115 to 119                                            Income Tax Ordinance, 2001.

           ‚Some persons are not required to furnish a return of income as they fall in
           presumptive tax regime. The following are not required to submit returns:
         (a) persons whose entire income consists of salary. They were only supposed to file
                a certificate. With effect from tax year 2005 even this condition is waived
                provided that the employer files Annual Statement of Deduction of Income Tax
                in the prescribed manner for the relevant tax year and only source of income is
                ‘salary’.
         (b) According to this clause, a person who derives income only from ‘salary’ is not
                required to furnish his wealth statement even if his income exceeds Rs. 200,000
                as the words ‚subject to sub-section(2)‛ were removed by Finance Act 2004.
           The condition for filing of wealth statement in respect of salaried persons having
           last declared/assessed income of Rs. 200,000 or more was earlier deleted and they
           were required to file this statement if taxable income was Rs. 500,000 or more. Now
           even this condition will not apply in view of proviso added to section 115(a) vide
           Finance Act, 2005.
           Proviso to sub-section (1) as substituted by Finance Act 2009 necessitates persons
           earning salary income of Rs. 500,000 or more annually, to file a return. Its quite
           amazing that for such a person to file a return, he will have to check the section
           which covers the subject ‚persons not required to furnish a return.‛ This provision
           should have been inserted in section 114 which makes it mandatory for various
           persons to file return of income.
           Sub-section (3) eases out the situation for the following persons who are merely
           owners of immovable urban property, owners of motor vehicles, telephone
           subscribers, but are not income earners. They include:
              (i) widows
             (ii) orphans below the age of twenty-five years;
            (iii) disabled persons;
            (iv) non-resident owners of immovable property.
           Interestingly, clauses (iv) to (vii) no longer exist after amendment by the Finance
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           Act, 2005. However, no consequential amendment was made keeping the new
           situation in view.‛
    Now, salaried persons deriving incomes exceeding Rs. 500,000 will file wealth
statements. Reference to clauses (iv) to (vii) has also been deleted.
Ridiculously, the Finance Act 2009 in this section has introduced sub-section (4B) that also
makes filing of wealth statements compulsory for persons filing statements instead of
returns where tax paid by them is Rs. 20,000 or more whereas there is a separate section 116
for filing wealth statements. It seems that no consideration is being made by the legislators to
follow correct narration of sections. Anything can be found anywhere yet boastful claims
were made about the simplicity of the new law.
    As per sub-section (4), those persons whose income is governed by the presumptive tax
regime, i.e. any payment of tax is their final discharge of liability, will only submit a
statement in the prescribed form giving complete particulars of their income.
    In sub-section (4), the words ‚section 148‛ appearing for the first time was removed by
Finance Act 2003, meaning by that earlier drafting was so poor that it necessitated such a
frivolous amendment. Reference to 148 was repeated twice, which was later on
rectified.Retailers opting for presumptive tax regime (PTR) under section 113A or 113B, as
the case may be, are required to file a simplified return/statement instead of a regular return
as in the case of other categories falling under PTR.
    Since rent recipients after amendments by Finance Act, 2006 have been subjected to
presumptive tax regime, amendment is made in section 115(4) to this effect. They will not be
required to file a return but a prescribed statement. This will help them not to disclose any
kind of expenditure or increase in their assets or quantum of their personal expenditure.
Persons, covered under clauses (a), (b) and (d) of sub-section (1) of section 151 and section
152, will also not be required to file any return but a prescribed statement.




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                                             660-A
Chapter X, Procedure – Part I, Returns                                   Sections 115 to 119

  By insertion of sub-sections (4) and (5) the Commissioner of Income Tax has been
empowered to obtain prescribed statement for a tax year (cannot go beyond five years)
where a person fails to do so. Notice in writing is required for this purpose.
  [See comparable position under RO after section 119.]

                                   DEPARTMENTAL VIEW
Computation of income tax payable by the salaried taxpayers for Tax Year 2010 – Changes made
through the Finance Act, 2010 – Clarification regarding
4. Annual Withholding Statement of Deduction of Income Tax from Salary.
Annual withholding statement of deduction of income tax from salary shall be deemed to be
return of income for salaried individual having annual salary income less than Rs.500,000.
Annual withholding statement of deduction of income tax from salary is to be filed on or
before 31st day of August next following the end of tax year to which the statement relates.
As provided by Finance Act 2009, in cases where salary income, for the tax year is five
hundred thousand rupees or more, the taxpayer shall file return of income electronically in
the prescribed form and it shall be accompanied by the proof of deduction or payment of tax
and wealth statement as required under section 116. -- [Cir. 11/2010, dated 28.07.2010]
EXPLANATORY CIRCULAR ON THE AMENDMENTS MADE IN THE INCOME TAX ORDINANCE, 2001
THROUGH FINANCE ACT, 2009.
17. E-FILING OF RETURN AND WEALTH STATEMNT BY SALARIED PERSONS. [SECTION 115]
The proviso to sub section (1) of section 115 has been substituted to provide that where
salary income for the tax year is Rs. 500,000/- or more, the taxpayer shall file return of income
electronically in the prescribed form and it shall be accompanied by the proof of deduction
or payment of tax as well as wealth statement as required u/s 116.
18. STATEMENT OF FINAL TAXATION.. [SECTION 115((4)]
By virtue of amendment made in sub-section (4) of section 115, persons deriving income
from rendering or providing of services are subject to minimum tax u/s 153 and would now
be required to file a return of income instead of simplified statement of final taxation.
19. REVISION OF STATEMENT IN CASE OF FINAL TAXATION. [SECTION 115(4A)]
A new sub section (4A) has been inserted in section 115 of the Ordinance to allow a person
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who, having furnished statement, discovers any omission or wrong statement therein, to
furnish revised statement at any time within five years from the end of the financial year in
which such statement was furnished.
20. FILING OF WEALTH STATEMENT IN FINAL TAXATION REGIME (FTR) CASES. [SECTION 115(4B)]
A new sub-section (4B) has been inserted in section 115 of the Ordinance whereby every
person (other than company) filing statement under sub-section (4) of section 115 of the
Ordinance, covered by Final Taxation Regime (FTR), who has paid tax amounting to Rs.
20,000/- or more for the tax year, is required to file wealth statement alongwith a wealth
reconciliation statement. - (3/2009 dated 17.7.2009).
Levying of Workers Welfare Fund (WWF) under Workers Welfare Ordinance, 1971 in Presumptive
Tax Regime (PTR) cases.
      Vide clause 12 of the Finance Act, 2006, the definition of ‚total income‛ under the WWF
Ordinance, 1971, was substituted and the persons, who were required to file the statement,
the profit (before taxation or provision for taxation) as per accounts or 4% of the receipts as
per the statement filed under section 115 of the Ordinance, whichever is higher, were made
liable to WWF. However, corresponding changes in section 4 of WWF Ordinance, 1971, were
not made. In view of this lacuna in law, the chargeability of the WWF in PTR cases, where
only statements under section 115 of the Income Tax Ordinance, 2001 were filed, was
agitated by these taxpayers.
2. The FBR has taken up the matter with the Labour and Manpower Division (WWF Wing)
and has pointed out the deficiency. The aforesaid Division has accordingly agreed that the
status quo be maintained in PTR cases and demand of WWF for the tax years 2007 and 2008
may not be created, as it will not be maintainable by the appellate authorities.
3. The said lacuna, however, has been removed vide the Finance Act, 2008. In the wake of
this amendment levy of WWF may be pressed, wherever exigible in Tax Year 2009. –
(13/2008, dated 23.10.2008).




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                                                  660-B
Sections 115 to 119                                                    Income Tax Ordinance, 2001.

Finance Act, 2007 – Filing of statement in lieu of Income Tax Returns by taxpayers.
       Taxpayers who are covered by Presumptive Tax Regime are not obliged to file a return
of income as required under section 114 of the Income Tax Ordinance, 2001. Such taxpayers
are, however, required under section 115(4) to file prescribed statement showing particulars
relating to the person’s income for the tax year. New sub-sections (5) and (6) to section 115
have been added through the Finance Act 2007 empowering the Commissioner to issue
notice for filing the prescribed statement where statement has not been filed voluntarily by the
taxpayer. The provision will be applicable from the tax year 2007. – (1/2007, dated 2.7.2007).
Finance Act, 2005 – Exemption from filing of returns by persons having salary income only. [Section
115(1)(a)].
       Under section 115(1)(a), a taxpayer deriving only salary income is not obliged to
furnish a return of income. Instead, he is required to file a prescribed certificate from the
employer. Following the policy of simplification and facilitation for the taxpayers, Income
Tax Rules have been reviewed and in this context, an Annual Statement of Deduction of
Income Tax from Salary has been prescribed which shall be filed by the employer containing
complete details of pay, allowances and tax deducted etc.
       In case of taxpayers deriving income from salary only, the prescribed annual statement
filed by the employer will be considered as sufficient discharge of liability to file return of
income on the part of individual employees. – (1/2005, dated 05.07.2005).
CBR‘s clarification to certain queries.
Query: “Whether or not a taxpayer whose income is subject to final discharge of tax liability and who
is required to file statement u/s 115(4) is also supposed to file income tax return if he received profit on
debt below taxable limit during the tax year.
(ii) Similarly, what will be the position in case of salaried taxpayer who received profit on debt which is
below taxable limit, whether he can file salary certificate only.”
CBR’s reply: ‚The person whose only source of income is profit on debt and total income is
below taxable limit is not required to file income tax return.
The salaried taxpayer besides employer certificate has to file the prescribed statement in lieu
of return but tax will be computed on total income in accordance with rates prescribed in
First Schedule to the Income Tax Ordinance, 2001.‛ – [F. 4(48)/TP/2002, dated 13.10.2003].
     Note: Second part of CBR’s reply is misconceived as prescribed statement is only meant
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             for incomes falling under presumptive tax regime. ‘Profit on debt’ *Sec. 151+ is no
             longer part of presumptive tax regime.

                CASE LAW – SUPREME COURT / HIGH COURTS / ITAT
                               STATEMENT U/S 143B IS NOT A RETURN
    Persons filing statement under section 115(4) read with section 113A can be selected
     for audit of tax affairs. – Mohammed Umer vs. Commissioner Income Tax [2009 PTR
     141 (H.C. Kar.)].
    Statement under section 143B has not been held to be a return by any provisions of
     the Income Tax Ordinance, 1979. – [(2005) 91 TAX 222 (Trib.) = 2004 PTD 2786].
    Statement under section 143B is not to be considered an order under section 59A. –
     [(2005) 91 TAX 222 (Trib.) = 2004 PTD 2786].
                             –––––––––––––––––––––––––––




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                                                        660-C
Chapter X, Procedure – Part I, Returns                                                     Sections 115 to 119

    116. Wealth statement.– (1) 1[The] Commissioner may, by notice in
writing, require any person to furnish, on the date specified in the notice, a
statement (hereinafter referred to as the “wealth statement”) in the
prescribed form and verified in the prescribed manner giving particulars
of–
          (a)     the person‟s total assets and liabilities as on the date or dates
                  specified in such notice;
          (b)     the total assets and liabilities of the person‟s spouse, minor
                  children, and other dependents as on the date or dates specified
                  in such notice;
          (c)     any assets transferred by the person to any other person during
                  the period or periods specified in such notice and the
                  consideration for the transfer; 2[ ]
         (d)      the total expenditures incurred by the person, and the person‟s
                  spouse, minor children, and other dependents during the period
                  or periods specified in the notice and the details of such
                  expenditures 3[; and]
       4[(e)       the reconciliation statement of wealth.]
    (2) Every resident taxpayer filing a return of income for any tax year
5[whose  last declared or assessed income 6[or the declared income for the
year], is five hundred thousand rupees or more] shall furnish a wealth
statement 7[and wealth reconciliation statement] for that year along with
such return. www.imranghazi.com
            Where a person files a return in response to a provisional
       8[(2A)

assessment under section 122C, he shall furnish a wealth statement for
that year along with that return and such wealth statement shall be
accompanied by a wealth reconciliation statement and an explanation of
sources of acquisition of assets specified therein.]
           Where a person, who has furnished a wealth statement, discovers
       9[(3)

any omission or wrong statement therein, he may, without prejudice to any
liability incurred by him under any provision of this Ordinance, furnish a
revised wealth statement at any time before an assessment, for
1 Substituted for “Subject to subsection (2), the” by Finance Act, 2007.
2 Word “and” omitted by Finance Act, 2009.
3 Substituted for full stop by Finance Act, 2009.
4 Clause (e) inserted by Finance Act, 2009.
5 The words inserted by Finance Act, 2004.
6 Words inserted by Finance Act, 2007.
7 Word inserted by Finance Act, 2009.
8 Sub-section (2A) inserted by Finance Act, 2010 w.e.f. June 5, 2010. The same amendment was made by Finance
  (Amendment) Ordinance, 2010, promulgated as Ordinance No. III of 2010, dated February 6, 2010, published in the Gazette
  of Pakistan Extraordinary Part I at pages 23 to 53. This Ordinance was presented in the Parliament but lapsed on 5 June
  2010 as Parliament did not approve it. Originally this amendment was made through Finance (Amendment) Ordinance,
  2009, promulgated as Ordinance No. XXII of 2009, dated October 28, 2009, published in the Gazette of Pakistan
  Extraordinary Part I at pages 229 to 259.
9 Sub-section (3) inserted by Finance Act, 2003.




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                                                         660-D
Sections 115 to 119                                                    Income Tax Ordinance, 2001.

the tax year to which it relates, is made under sub-section (1) or sub-section
(4) of section 122.]
           Every person (other than a company) filing statement under
       1[(4)

sub-section (4) of section 115, falling under final tax regime (FTR) and has
paid tax amounting to thirty-five thousand rupees or more for the tax year,
shall file a wealth statement alongwith reconciliation of wealth statement.]
1 Sub-section (4) inserted by Finance Act, 2010 w.e.f. June 5, 2010.

                                                  COMMENTS
SECTION 116: ―Wealth statement‖.
The Finance Act 2010 has inserted new sub-section (2A) requiring filing of wealth statement
along with reconciliation where return if filed in response to a provisional assessment made
under section 123. It also inserted sub-section (4) to bind non-corporate taxpayers filing
statements under sectuin 115(4) to file wealth statement along with reconciliation if tax paid
is Rs. 35,000 or more. Commissioner is empowered to call for the Wealth Statement, in the
prescribed manner, of any person. Vide sub-section (2) of this section, it has been made
mandatory on all resident persons filing a return of income to also submit a Wealth
Statement plus reconciliation where his declared income for the current year or the last
declared or assessed income exceeds rupees five hundred thousand or more.
    The Wealth Statement contains details of a person’s:
    (a) own, his spouse’s, minor children’s and other dependents’ assets and liabilities as
          on the date of filing of return or on the date mentioned in the notice of the
          Commissioner.
    (b) Assets transferred during the period(s) to any other person, stating consideration
          for such transfer.
     (c) Expenditure incurred by the person, his spouse, children and other dependent
                   during this period.
          personswww.imranghazi.com
    (d) New requirement for wealth reconciliation statement has also been added vide
          Finance Act 2009.
    There was no concept of revising a wealth statement by a taxpayer on discovering any
omission etc. This facility was provided by inserting a new sub-section (3) through the
Finance Act, 2003.
    Prior to amendment by the Finance Act, 2004, every resident person filing a return of
income for any tax year was bound to furnish a wealth statement as well. However, in the
case of a salaried person it was to be filed where the last declared/assessed income was Rs.
200,000 or more, which provision already stands removed. The amendment waives filing of
wealth statement for all categories where income is below Rs. 500,000. This amendment is in
conflict with the general scheme of the new Ordinance which requires voluntary compliance
with proper documentation. If a person is not going to file his wealth statement, how will the
department cross-check or verify his declared version which constitutes assessment once
complete return is filed under section 114 or amended assessment u/s 122(4) where revised
return is filed u/s 114(6)?
    It appears that the policy-makers have failed to appreciate the real purpose of the new
Ordinance which requires acceptance of the declared version backed with proper
documentation that is open for audit by the department. The new law intended to promote
voluntary compliance through true declaration backed by proper documentation. The
policy-makers are bent upon pleasing the rulers of the day, a trio of corrupt civil-military
bureaucrats, politicians and unscrupulous businessmen, by giving them free hand to avoid
submission of statements of their assets and liabilities by falsely declaring income below Rs.
500,000 or claiming huge agricultural incomes not chargeable to tax. They can also avoid tax
by falsely showing remittances of their own untaxed money [it can be done at very nominal




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                                             660-E
Chapter X, Procedure – Part I, Returns                                   Sections 115 to 119

premium through any authorised exchange dealer!] with no questions asked by tax
authorities due to bar imposed under section 111(4). This is what policymakers and CBR call
great steps towards reformation of tax system through documentation and voluntary
compliance (sic).
    Non-filing of wealth statement vis-à-vis limitation of income of Rs. 500,000 is a clear
invitation for diversion of income, false declarations and massive evasion of tax.
Introduction of this amendment clearly exposes the tall claims made by the government that
it was desirous of documenting economy and in its enthusiasm for providing facility of
non-declaration of assets and liabilities to certain chosen ones; it has overlooked its policy to
promote voluntary compliance. Both things cannot work simultaneously. This amendment
will rescue many corrupt politicians, dodgy businessmen and their bureaucrat friends,
money-launderers and tax evaders from being entrapped by the tax department for failure in
submitting declarations.
    [See comparable position under RO after section 119.]

                                   DEPARTMENTAL VIEW
FINANCE ACT, 2010 – EXPLANATION REGARDING IMPORTANT AMENDMENTS MADE IN THE
INCOME TAX ORDINANCE, 2001.
22. WEALTH STATEMENT [Section 116]. A new sub-section (2A) has been introduced for
the requirements of furnishing of Wealth statement, wealth reconciliation statement and
explanation regarding sources of acquisition of assets appearing in the wealth statement,
along with return of income filed in response to the provisional assessment.
Secondly, the requirements of filing of wealth statement and wealth reconciliation along
with statement in cases of final tax regime (under sub- section (4) of section 115), has been
added to this section. This provision existed earlier under section 115. However, threshold of
amount of tax under FTR has been enhanced from rupees twenty five thousand to rupees
thirty five thousand for furnishing of wealth statement in such cases. -- [Cir. 10/2010, dated
16.07.2010]
Provisional Assessment [Section 122C and 116(2A)].
       Newly added provisions of sub-sections (1) and (2) of section 122C are aimed at
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facilitation of a taxpayer where he fails to file return of income in response to requisition of
the same by the Department. Under the new scheme of provisional assessment, in such cases
of non-compliance, option shall be vested with the taxpayer even after finalization of (best
judgment provisional assessment) to file a return within a period of sixty days of the service
of demand notice resulting from provisional assessment. Such provisional assessment shall
cease to have any legal effect if the taxpayer files return of income alongwith wealth
statement, wealth reconciliation statement and other required documents, within a period of
sixty days from the date of service of provisional assessment order. However, a return filed
in response to provisional assessment shall be valid only if accompanied with wealth
statement, wealth reconciliation statement and explanation regarding sources of assets in
question. However, if the taxpayer fails to file return of income even after a period of sixty
days of receipt of the demand notice resulting from a best judgment provisional assessment,
such assessment shall attain finality on completion of a period of sixty days from the date of
service of assessment order. -- (02/2010 dated 22.01.2010.)
EXPLANATORY CIRCULAR ON THE AMENDMENTS MADE IN THE INCOME TAX ORDINANCE, 2001
THROUGH FINANCE ACT, 2009.
21. MANDATORY FILING OF WEALTH RECONCILIATION STATEMENT. [SECTION 116(1)]
A new Clause (e) has been inserted in section 116 to provide that every individual taxpayer
required to file wealth statement u/s 116 shall also furnish Wealth Reconciliation Statement.
- (3/2009 dated 17.7.2009).
Finance Act, 2007 – Filing of wealth statement by taxpayers.
Amendment has been made in section 116 through the Finance Act 2007 to authorize the
commissioner to require any individual, to file wealth statement, irrespective of his quantum
of income during the relevant tax year. Further, the mandatory requirement to file a wealth
statement is extended to all those individuals whose declared income for the year exceeds
Rs.500,000/-. This amendment will be applicable for the tax year 2007 and onward. –
(1/2007, dated 02.07.2007).




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                                            660-F
Sections 115 to 119                                           Income Tax Ordinance, 2001.

Finance Act, 2004 – Relaxing limitation for statutory filing of wealth statement.
      Section 116 of the Income Tax Ordinance, 2001 has been amended to provide for
mandatory filing of wealth statement alongwith return of income by all taxpayers whose last
declared or assessed income is five hundred thousand rupees or more. The amendment
shall be applicable, both to salaried and non-salaried taxpayers, for the tax year 2004 and
onwards.
CBR’s clarification to certain queries.
Query: “Whether members of AOP are not required to furnish their personal expenditure statement
since the same has not been provided any where in the return.”
CBR’s reply: ‚The members of an AOP could also be individuals. If that be the case the
statement of personal expenses has to be filled in. Even otherwise the filing of wealth
statement is mandatory for every taxpayer who is required to file income tax return. The
wealth statements have a row to declare personal expenses. The Members of AOP would
obviously declare their personal expenses in their wealth statement. However, for salaried
taxpayer the filing of wealth statement is mandatory if income from salary is above
Rs.200,000.‛ – [F. 4(48)/TP/2002, dated 13.10.2003].
                         –––––––––––––––––––––––––––
    117. Notice of discontinued business.–(1) Any person discontinuing
a business shall give the Commissioner a notice in writing to that effect
within fifteen days of the discontinuance.
     (2) The person discontinuing a business shall, under the provisions of
this Ordinance or on being required by the Commissioner by notice, in
writing, furnish a return of income for the period commencing on the first
day of the tax year in which the discontinuance occurred and ending on the
date of discontinuance and this period shall be treated as a separate tax
year for the purposes of this Ordinance.
     (3) Where no notice has been given under sub-section (1) but the
              www.imranghazi.com
Commissioner has reasonable grounds to believe that a business has
discontinued or is likely to discontinue, the Commissioner may serve a
notice on the person who has discontinued the business or is likely to
discontinue the business to furnish to the Commissioner within the time
specified in the notice a return of income for the period specified in the
notice.
     (4) A return furnished under this section shall be treated for all
purposes of this Ordinance as a return of income, including the application
of Section 120.

                                       COMMENTS
SECTION 117: ―Notice of discontinued business‖.
    Section 72 of the RO also provided for this situation whereby, a taxpayer who
discontinues his business during a tax year, is required to give to the Commissioner a notice
in writing, within fifteen days of such discontinuance.
    The taxpayer is further obliged to file a return of income for the period starting from the
first day of the tax year and ending on the date of discontinuance to be treated as a separate
tax year.
    Moreover, if it is in the knowledge of the Commissioner that a person has or will
discontinue his business, he can serve a notice to him for filing of a return for the period
mentioned therein.




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                                          660-E
Chapter X, Procedure – Part I, Returns                     Sections 115 to 119

   [See comparable position under RO after section 119.]




               www.imranghazi.com




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www.imranghazi.com




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                                                      661
Chapter X, Procedure – Part I, Returns                                               Sections 115 to 119

     118. Method of furnishing returns and other documents.– (1) A
return of income under section 114, an employer‟s certificate under section
115, a statement required under sub-section (4) of section 115 or a wealth
statement under section 116 shall be furnished in the prescribed manner.
     (2) A return of income 1[under section 114 or sub-section (4) of section
115] of a company shall be furnished–
       (a) in the case of a company with a tax year ending any time
             between the first day of January and the thirtieth day of June,
             on or before the thirty-first day of December next following the
             end of the tax year to which the return relates; or
       (b) in any other case, on or before the thirtieth day of September
             next following the end of the tax year to which the return
             relates.
     2[(3) A return of income for any person (other than a company), an

Annual Statement of deduction of income tax from salary, filed by the
employer of an individual or a statement required under sub-section (4) of
section 115 shall be furnished as per the following schedule, namely:–
          (a)      In the case of an Annual Statement of deduction of income tax
                   from salary, filed by the employer of an individual, return of
                   income through e-portal in the case of a salaried person or a
                   statement required under sub-section (4) of section 115, on or
                   before the 31st day of August next following the end of the tax
                   year to which the return, Annual Statement of deduction of
                   income tax from salary, filed by the employer or statement
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                   relates.
          (b)      in the case of a return of income for any person (other than a
                   company), as described under clause (a), on or before the 30th
                   day of September next following the end of the tax year to
                   which the return relates.]
    (4) A wealth statement shall be furnished by the due date specified in
the notice requiring the person to furnish such statement or, where the
person is required to furnish the wealth statement for a tax year under
sub-section (2) of section 116, by the due date for furnishing the return of
income for that year.
    (5) A return required to be furnished by a notice issued under section
117 shall be furnished by the due date specified in the notice.
1 Words etc. inserted by Finance Act, 2003.
2 Sub-section (3) subsittuted by Finance Act, 2010.

                                           LEGISLATIVE HISTORY
     Section 118(3)–Substitution.– Before substitution by Finance Act, 2010, sub-section (3) read as follows:–
     “(3) A return of income for any person (other than a company), an employer certificate of an individual or a
statement required under sub-section (4) of section 115 shall be furnished on or before the thirtieth day of
September next following the end of the tax year to which the return, certificate or statement relates.”




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                                             662
Sections 115 to 119                                           Income Tax Ordinance, 2001.

     (6) Where a taxpayer is not borne on the National Tax Number
Register and fails to file an application in the prescribed form and manner
with the taxpayer‟s return of income or employer‟s certificate, such return
or certificate shall not be treated as a return or certificate furnished under
this section.

                                      COMMENTS
SECTION 118: ―Method of furnishing returns and other documents‖.
Parallel to sections 55 and 72 of the RO, this section lays down the procedure for filing of
income tax returns, an employer’s certificate or statements in respect of incomes covered
under the presumptive tax regime. The main features of this section are that:
    (a) For salaried persons where statements are to be filed through e-portal by employers
          or statement under section 115(4) is required, 31st August next following the end of
          tax year. Persons not covered in this category (though through drafting error they
          have been included instead of excluded), returns/statements/certificates will be
          filed in the prescribed manner on or before 30th September next following the end
          of their tax year to which they relate.
    (b) In the case of a company, the income year of which ends anywhere between the first
          day of January and thirtieth day of June, returns are to be filed on or before 31st
          December and in all other cases on or before 30th September.
     (c) In case a taxpayer does not have a National Tax Number, he must apply for it in the
          prescribed manner along with the return/statement/certificate otherwise these will
          not be valid.
    (d) All other returns and statements to be filed in consequence of a notice from the
          Commissioner are to be submitted by the date specified in the notice.
    In sub-section (2) after the word ‚income,‛ the words ‚under section 144 or sub-section
(4) of section 115‛ were added by Finance Act, 2003 - an omission duly taken care of.
                   www.imranghazi.com
    [See comparable position under RO after section 119.]
                         –––––––––––––––––––––––––––

                                 DEPARTMENTAL VIEW
FINANCE ACT, 2010 – EXPLANATION REGARDING IMPORTANT AMENDMENTS MADE IN THE
INCOME TAX ORDINANCE, 2001.
9. CHANGE IN DEADLINE FOR FILING OF ANNUAL STATEMENT BY THE EMPLOYER
[Section 118(3)]. Sub-section (3) of section 118 has been substituted to provide for change in
deadline for furnishing of annual statement of deduction of income tax from salary to be
filed by an employer of an individual, return of income trough e-portal in the case of a
salaried person or a statement required under sub-section (4) of section 115 of the Income
Tax Ordinance, 2001 from 30th day of September after the end of tax year to 31st day of
August after the end of tax year.
Last date for filing of income tax return in the case of individual and AOPs (30th September)
remains unchanged. Also the deadline for filing of income tax return in the cases of the
companies remains unchanged. -- [Cir. 10/2010, dated 16.07.2010]




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                                                           663
Chapter X, Procedure – Part I, Returns                                                      Sections 115 to 119

     119. Extension of time for furnishing returns and other
documents.– (1) A person required to furnish–
       (a) a return of income under section 114 or 117;
       (b) an employer‟s certificate under section 115;
        (c) a statement required under sub-section (4) of section 115; or
       (d) a wealth statement under section 116,
     may apply, in writing, to the Commissioner for an extension of time to
     furnish the return, certificate, or statement, as the case may be.
     (2) An application under sub-section (1) shall be made by the due date
for furnishing the return of income, employer‟s certificate, or 1[ ] statement
to which the application relates.
     (3) Where an application has been made under sub-section (1) and the
Commissioner is satisfied that the applicant is unable to furnish the return
of income, employer‟s certificate, or 1[ ] statement to which the application
relates by the due date because of–
       (a) absence from Pakistan;
       (b) sickness or other misadventure; or
        (c) any other reasonable cause,
     the Commissioner may, by 2[order], in writing, grant the applicant an
     extension of time for furnishing the return, certificate, or statement, as
     the case may be.
     (4) An extension of time under sub-section (3) should not exceed fifteen
              www.imranghazi.com
days from the due date for furnishing the return of income, employer‟s
certificate, or 1[ ] statement, as the case may be, unless there are
exceptional circumstances justifying a longer extension of time.
        3[                ]
    (6) An extension of time granted under sub-section (3) shall not 4[, for the
purpose of charge of 5[default surcharge] under sub-section *1) of section
205,] change the due date for payment of income tax under section 137.
1   Word “wealth” omitted by Finance Ordinance, 2002.
2   Substituted for “notice” by Finance Ordinance, 2002.
3   Sub-section (5) omitted by Finance Ordinance, 2002.
4   Words etc. inserted by Finance Ordinance, 2002.
5   Substituted for “additional tax” by Finance Act, 2010 w.e.f. June 5, 2010. The same amendment was made by Finance
    (Amendment) Ordinance, 2010, promulgated as Ordinance No. III of 2010, dated February 6, 2010, published in the Gazette
    of Pakistan Extraordinary Part I at pages 23 to 53. This Ordinance was presented in the Parliament but lapsed on 5 June
    2010 as Parliament did not approve it. Originally this amendment was made through Finance (Amendment) Ordinance,
    2009, promulgated as Ordinance No. XXII of 2009, dated October 28, 2009, published in the Gazette of Pakistan
    Extraordinary Part I at pages 229 to 259.
*The opining bracket “(“ is missing in the Gazette.

                                                 LEGISLATIVE HISTORY
    Section 119(5)–Omission.–Before omission by Finance Ordinance, 2002 sub-section (5) read as follows:–
    “(5) An applicant dissatisfied with a decision under sub-section (3) may challenge the decision only under the
Part III of this Chapter.”




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                                                               664
Sections 115 to 119                                                             Income Tax Ordinance, 2001.


                                                      COMMENTS
SECTION 119: ―Extension for time for furnishing returns and other documents‖.
    Interestingly, a whole section is devoted to extension for furnishing returns and other
documents whereas the RO effectively covered it in sub-section (3) of section 55. Another
fascinating aspect of this section is the number of amendments (five in all) that were made vide
Finance Ordinance 2002. In the initial draft, the provisions were slightly on the harsh side like
extension could be availed but payment of admitted liability would be made on the due date.
On the other hand, there was a right of appeal against the decision of the Commissioner vide
deleted sub-section (5). One can say that as a result of the amendments a new section has
emerged and one small piece of advice, file your returns/documents/ statements in time.
    According to this section, if a taxpayer needs to file his return or other documents like the
employer’s certificate, a statement under the presumptive tax regime or a wealth statement
etc., he will have to apply to the Commissioner by the due date of furnishing such document,
for grant of extension. If the Commissioner is fully satisfied that because of reasons beyond
his control, a taxpayer is unable to submit a document by the due date, he may allow up to 15
days as extension and in some pressing cases, even a longer period of time.
    Last but not the least, any ‚default surcharge‛ [prior to The Finance (Amendment)
Ordinance, 2010 it was called ‚additional tax‛+ that will be levied will be calculated from the
due date regardless of any extension granted to the taxpayer.

            COMPARABLE PROVISION OF THE RO – [SECTIONS 55, 55A, 56,
                 57, 58, 72, 74 & 81] (SEE SECTIONS 114 TO 119 )
     55. Return of total income.–(1) Every person,–
      (a) whose total income or the total income of any other person, in respect of which he is assessable under
             this Ordinance, for any income year (hereinafter referred to as the „said income year‟) exceeds the
             maximum amount which is not chargeable to tax under this Ordinance; or
      (b) who has been charged to tax for any of the four income years immediately preceding the said income
             year, 1[or]
    2[(c)              www.imranghazi.com
             who fulfils any of the following conditions, namely:–
            (i) owns immovable property, with land area of 250 sq yards or more, located in areas falling in the limits of
                  a Metropolitan/Municipal Corporation, a Cantonment Board or the Islamabad Capital Territory;
           (ii) owns a motor vehicle;
          (iii) subscribes a telephone; or
          (iv) has undertaken foreign travel (except for the purposes of Haj 3[, Umrah] or Ziarat) during the
                  income year,]
1 Word “or” inserted by Finance Supplementary (Amendment) Act, 1997.
2 Clause (c) added through Finance Supplementary (Amendment) Act, 1997.
3 Comma and word “, Umrah” inserted by Finance Act, 1997.




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                                                                     665
Chapter X, Procedure – Part I, Returns                                                                  Sections 115 to 119

             shall furnish a return of his total income or the total income of such other person, as the case may be,
             for the said income year 1[ ] 2[:]
     3[Provided that, where the entire total income of an assessee during the income year consists of income

chargeable under the head “Salary”, he may, instead of furnishing a return as aforesaid, file a certificate from his
employer in the prescribed form setting forth such particulars, and accompanied by such statements, and verified
in such manner, as may be prescribed, and the said certificate shall be deemed to be a return under this
sub-section 4[:] ]
     5[Provided further that the persons otherwise not required to file return of total income under the first proviso,

or section 80C or section 80CC shall, except in the case of firms, associations of persons, or bodies of individuals,
whether incorporated or not, and companies who are otherwise not chargeable to wealth-tax under the Wealth-tax
Act, 1963 (XV of 1963), 6[and persons whose declared income for the relevant year or the last declared or
assessed income is less than 7[two] hundred thousand rupees,] file return of wealth alongwith the certificate of
statement of their income in lieu of such return of total income.]
     8[Provided also that clause (c) of this section shall not apply to a person, who is:

      (a) widow;
      (b) orphan below the age of 25 years;
      (c) pensioner;
      (d) disabled; or
      (e) non-resident Pakistani in the case of foreign travel 9[and ownership of immovable property] 10[:]]
     11[Provided that where a taxpayer is not borne on the National Tax Number Register, and fails to file an

application in the prescribed form and manner for the said number, alongwith the return of his income or certificate
in lieu of return under the first proviso to sub-section (1), such return of income or certificate shall not be
considered a return under this section.]
     12[(2) The return of total income under sub-section (1) shall be furnished–

      (a) in the case of a company, in respect of the income year ending at any time between the first day of
             January and the thirtieth day of June, both days inclusive, on or before the thirty-first day of December
             next following the income year; and
      (b) in the case of an assessee other than referred to in clause (a), on or before the thirtieth day of
             September next following the income year.]
     13[(3) The Deputy Commissioner may, on sufficient cause being shown, extend the date for the delivery of the

return so, however, that no extension of time for a period or periods amounting in all to more than fifteen days from
the dates specified in sub-section (2) shall be allowed except with the approval of the Inspecting Additional
Commissioner.]
     14[Explanation.–www.imranghazi.com
                         Non-furnishing of wealth tax return alongwith the return of total income, certificate or
statement of income shall render such return, certificate or statement as invalid.]
1 Words “,alongwith the return of wealth-tax in accordance with the Wealth-tax Act, 1963 (XV of 1963),” omitted by Finance Ordinance, 2001.
   Earlier these words were inserted by Finance Act, 1994.
2 Substituted for full stop by Finance Act, 1987.
3 Proviso inserted by Finance Act, 1987.
4 Substituted for full stop by Finance Act, 1994.
5 Proviso inserted by Finance Act, 1994.
6 Words etc. inserted by Finance Act, 1995. The amendment was earlier made by Income Tax (Amendment) Ordinance, 1994 dated July 13,
   1994, Income Tax (Fifth Amendment) Ordinance, 1994 dated November 13, 1994 and Income Tax (Third Amendment) Ordinance, 1995.
7 Substituted for “one” by Finance Act, 1999.
8 Proviso added by Finance Supplementary (Amendment) Act, 1997.
9 Words inserted by Finance Act, 1997.
10 Substituted for the full-stop by Finance Ordinance, 2000.
11 Proviso inserted by Finance Ordinance, 2000.
12 Sub-section (2) substituted by Finance Act, 1995. Earlier it was substituted by Finance Ordinance, 1980.
13 Sub-section (3) inserted by Finance Ordinance, 1980.
14 Explanation inserted by Finance Act, 1994.
     Section 55(2)–Substitution.– Before substitution by Finance Act, 1995 sub-section (2) read was as follows:–
     “(2) The return of total income under sub-section (1) shall be furnished–
           (a) in the case of an assessee deriving income chargeable under the head “income from business or profession”, on
               or before the first day of August, next following the end of the income year or within fifteen days of the expiry of six
               months of the end of the income year, whichever is the later; and
           (b) in any other case on or before the first day of October next following the said income year.”
     Section 55(2)–Substitution.– Before substitution by Finance Ordinance, 1980 sub-section (2) read was as follows:–
     “(2) The return of total income under sub-section (1) shall be furnished–
         1[(a) in the case of a company or a registered firm, in respect of the income year ending at any time between the first

               day of July and the thirty-first day of December, both days inclusive, on or before the thirty-first day of July next
               following the income year;
1 Clauses (a) and (aa) substituted for clause (a) by Finance Act, 1989.




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                                                                         666
Sections 115 to 119                                                                                  Income Tax Ordinance, 2001.

          (aa) in the case of a company, in respect of the income year ending at any time between the first day of January and
                the thirtieth day of June, both days inclusive, on or before the thirty-first day of December next following the
                income year;]
          1[(b) where the total income of an assessee, not being a company, in respect of the income year ending at any time

                between the first day of January and the thirtieth day of June, both days inclusive, consists of, or includes, any
                income chargeable to tax under the head “Income from business or profession” and the assessee has
                maintained, in respect of the said income year, books of accounts (including a cash book and a ledger) or, as the
                case may be, the accounts in the form and manner prescribed by, or under, any rule or rules made in pursuance
                of section 32, on or before the 3[thirtieth day of September] next following:
                        Provided that, where the assessee was, at any time during the said income year, a partner in a firm or a
                member of an association of persons and his income year ends as aforesaid, he shall, whether or not he has
                maintained any books of accounts as aforesaid, file return of his total income by the said 2[thirtieth day of
                September]; and
            (c) in other cases, on or before the 3[thirty first day of August] next following the income year.]”
1 Clauses (b) and (c) substituted for clause (b) by Finance Act, 1987.
2 Substituted for “first day of October” by Finance Act, 1989. The words “first day of October” were earlier substituted for “fifteenth day of
  September” by Finance Act, 1988.
3 Substituted for “first day of October” by Finance Act, 1989. The words “first day of October” were earlier substituted for “thirty-first day of July” by
  Finance Act, 1988.
                                              ------------------------------------------
     1[55A. Method of furnishing return of total income.–Where an assessee is required by section 55 to
furnish a return of his total income, such return shall be furnished by registered post, with acknowledgement due,
or delivered by hand, to 2[the officer having jurisdiction or such other officer which the Commissioner of Income
Tax may specify].]
1 Section 55A substituted by Finance Act, 1988. Earlier this section was inserted by Finance Act, 1987.
2 Substituted for “such authorised officer or officers in such income tax office or offices, as the Central Board of Revenue may, by notification in the
  official Gazette, specify” by Finance Act, 1995.
      Section 55A–Substitution.– Before substitution by Finance Act, 1988 section 55A read was as follows:–
      “55A. Acknowledgement of return.–The Income Tax Officer shall, on receipt of a return of total income for any year
furnished under section 55, issue an acknowledgement of its receipt in the prescribed form.”
                                                  ------------------------------------
     56. Notice for furnishing return of total income.–The Deputy Commissioner may, at any time by notice in
writing, require any person who, in his opinion, is chargeable to tax 1[or is required to file return of total income
under section 55] forwww.imranghazi.com income for such year within thirty days from the
                      any income year to furnish a return of total
date of service of such notice or such longer or shorter period as may be specified in such notice or as the Deputy
Commissioner may allow 2[:]
     3[Provided that no notice under this section shall be issued after the expiration of five years from the end of the

assessment year for which the return of income was due.]
     4[       ]
1   Words inserted by Finance Act, 1997.
2   Substituted for the full-stop by Finance Ordinance, 2001.
3   Proviso inserted by Finance Ordinance, 2001.
4   Explanation omitted by Finance Ordinance, 2001. Earlier it was inserted by Finance Ordinance, 2000.
    Section 56 Exp.–Omission.–Before omission by Finance Ordinance, 2001 Explanation to section 56 reads as follows:–
    “Explanation.–For the removal of doubt it is declared that a notice under this section may be issued in respect of any
assessment year including the current assessment year and any preceding assessment year.”
                                              ------------------------------------------
     57. Revised returns of total income.–If any person has not furnished a return of total income as required by,
or under, any provision of this Ordinance (hereafter in this section referred to as „return‟), or having furnished a
return, discovers any omission or wrong statement therein, he may, without prejudice to any liability incurred by
him under any provision of this Ordinance or the repealed Act, furnish a return or a revised return, as the case may
be, at any time before the assessment is made.
                                              ------------------------------------------
     58. Wealth statement.– 1[(1)] The Deputy Commissioner may, by notice in writing, require any assessee to
furnish, on a date to be specified in the notice, a statement (hereinafter referred to as the „wealth statement‟) in the
prescribed form and verified in the prescribed manner giving particulars*–
      (a) his total assets and liabilities as on the date or dates specified in such notice;
      (b) the total assets and liabilities of his spouse, minor children and dependents as on the date or dates
            specified in such notice; 2[ ]
1 Renumbered by Finance Ordinance, 2001. Earlier Brackets and figure “(1)” omitted by Finance Ordinance, 2000.
2 Word “and” omitted by Finance Act, 1996.




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                                                                    667
Chapter X, Procedure – Part I, Returns                                                                      Sections 115 to 119

      (c)   any assets transferred by him to any person during the period or periods specified in such notice and
            the consideration therefor 1[; and]
    2[(d)   the total expenses incurred by the assessee, his spouse, minor children and dependents during the
            period or periods specified in the notice and the details thereof 3[:]]
     4[Provided that where the income declared is two hundred thousand rupees or more, the return of total income

shall be accompanied by a wealth statement.]
     5[(2) Where a person, who has furnished a wealth statement as required under sub-section (1), discovers any

omission or wrong statement therein, he may, without prejudice to any liability incurred by him under any provision of
this Ordinance, he may furnish a revised wealth statement at any time before the assessment is made.]
1 Substituted for full stop by Finance Act, 1996.
2 Clause (d) inserted by Finance Act, 1996.
3 Substituted for the full-stop by Finance Ordinance, 2000.
4 Proviso inserted by Finance Ordinance, 2000.
5 Sub-section (2) inserted by Finance Ordinance, 2001. Earlier a different sub-section (2) was omitted by Finance Act, 1996.
* The apparently intended word “of” appears to be missing.
     Section 58(2)–Omission.– Before omission by Finance Ordinance, 2001 sub-section (2) read was as follows:–
     “(2) Notwithstanding anything contained in sub-section (1), every assessee, whose total income is not less then* 1[one
hundred] thousand rupees, shall furnish a wealth statement alongwith his return of total income and all the provisions of this
Ordinance shall, so far as may be, apply to the wealth statement as they apply to a return of total income.”
1 Substituted for “fifty” by Finance Ordinance, 1984.
* The apparently intended word is “than”.
                                           ------------------------------------------
     72. Assessment in the case of discontinued business or profession.–(1) Where, in any year, any
business or profession is discontinued, the person discontinuing such business or profession shall give to the
Deputy Commissioner a notice of such discontinuance within fifteen days of the date of such discontinuance
(hereinafter referred to as the “said date”).
     (2) 1[The person discontinuing such business or profession shall, under the provisions of this Ordinance or
upon being required by the Deputy Commissioner by a notice in writing, furnish] a return or returns of total income
in respect of the period commencing from the end of the latest income year for which an order has been made
under sub-section (1) of section 59, 2[section 59A, 62,] 63 or 65, or, where no such order has been made, a return
has been made under section 55, 56 or 57, as the case may be, and ending on the said date, or where no such
order or return has been made, the income year or years comprising the period ending on the said date; and the
period commencing from the end of the latest income year to the said date shall, for purposes of this section, be
                      www.imranghazi.com
deemed to be an income year (distinct and separate from any other income year) for the assessment year in which
the said date falls.
     (3) Notwithstanding anything contained in sub-sections (1) and (2), the Deputy Commissioner may serve a notice
on any person who, in his opinion, has discontinued, or is likely to discontinue, in any year, any business or
profession, to furnish, within such time as may be specified in such notice, a return or returns of total income for the
income year or years for which the assessee is required to furnish such return or returns under sub-section (2).
     (4) The assessment shall be made at the rates applicable to the relevant assessment year and all the
provisions of this Ordinance shall, so far as may be, apply accordingly.
1 Substituted for “The notice under sub-section (1) shall be accompanied by” by Finance Ordinance, 1980.
2 Substituted for “section 62,” by Finance Ordinance, 1980.
                                           ------------------------------------------
     74. Liability in the case of a deceased person.–(1) Where a person dies, his legal representative shall be
liable to pay any tax which the deceased would have been liable to pay if he had not died, in the like manner and to
the same extent as the deceased.
     (2) For the purpose of making an assessment of the income of the deceased and recovery of tax,–
      (a) any proceeding taken against the deceased before his death shall be deemed to have been taken
            against the legal representative and may be continued against the legal representative from the stage
            at which it stood on the date of the death of the deceased; and
      (b) any proceeding which could have been taken against the deceased if he had survived may be taken
            against the legal representative,
     and all the provisions of this Ordinance shall, so far as may be, apply accordingly.
     (3) The legal representative of the deceased shall, for the purposes of this Ordinance, be deemed to be an
assessee.
     (4) The liability of a legal representative under this section or section 71 shall be limited to the extent to which
the estate of the deceased person is capable of meeting the liability.
     (5) For the purposes of this section and sections 71 and 97, “legal representative” includes an executor,
administrator and any person administering the estate of a deceased person.




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                                                 668
Sections 115 to 119                                                 Income Tax Ordinance, 2001.


                                     DEPARTMENTAL VIEW
Extension of Date for Filing of Income Tax Returns/Statements for Tax Year 2010.
       Pakistan Tax Bar Association has requested for extension of date for fling of income tax
returns/statements for tax year 2010 on the grounds that ‚the taxpayers are facing acute
financial problems due to recent unprecedented flood situation in the country which has
impacted adversely on the economic condition of the business community in general and
taxpayers in particular.‛
       2. This request has been examined and it has been decided to extend the last date for
filing of income tax returns/statements for tax year 2010 upto 30th October, 2010. -- [Cir.
15/2010 dated 11.10.2010]
Fiscal relief to rehabilitate the economic life in NWFP, FATA and PATA – Extension in date for filing of
income tax returns.
       On representations made by Small Traders of NWFP in their meetng with the Finance
Minister held on 27th January, 2010, Finance Minster has been pleased to order extension in
date for filing of income tax returns in the cases of taxpayers in the NWFP province, upto 31st
March, 2010. [Cir. 04/2010, dated 24.02.2010]
Extension in date for filing of income tax returns
       FBR has been receiving various requests for extension of time for filing of income tax
returns due to pre-occupation of the taxpayers/tax advisers in connection with the Holy
month of Ramzan, Aitkaf, Umra and Eid related holidays. In order to facilitate the taxpayers
for filing / e-filing of income tax returns, it has been decided to extend the last date of filing of
income tax returns upto October 20, 2009.
       2. However, it is pertinent to reiterate that:
         (i) In the cases where income tax returns could not be e-filed for any reason, hard
              copies of income tax returns can be filed by extended date i.e. October 20, 2009,
              subject to the condition that in such cases returns are e-filed latest by November
              30, 2009. Otherwise the hard copies filed by the tapxyaers shall not be treated as
              valid return of income.
        (ii) It may be noted that no refund claim shall be processed till return is e-filed.
       3. It is further clarified that no further extension in time for filing of income tax returns
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will be allowed. – ( /2009 dated 30.09.2009).
Extension of Time for e-filing the Annual Statement
       The Board has received number of representations for extension in the date for filing of
annual statement. The competent authority has been pleased to approve and extend the date
for e-filing of annual statement upto the 15th September, 2009. – (7/2009 dated 09.09.2009).
Finance Act, 2003 – Return of income.
       An amendment in sub-section (2) of section 114 has been made to state that return is to
be filed on prescribed form along with applicable prescribed statements/annexes and filling
in all the relevant columns with declaration of maintenance of books of accounts.
       In case of complete returns only an assessment under section 120 of the Income Tax
Ordinance 2001 shall be taken to have been made.
       Where returns are not complete as provided in section 114(2), the taxpayers would be
provided an opportunity through a notice by the Commissioner to remove the deficiencies
specified in the notice.
       Non-compliance of the notice would render the return invalid, meaning thereby that a
complete return shall be required to be filed.
       In case the requirements of the notice are met, the assessment in such return shall be
taken to have been made on the date it was originally filed. – (7/2003 dated 12.7.2003).
Finance Act, 2003 – Revision of Wealth Statement in Income Tax Ordinance before assessment.
       A new sub-section (3) has been added to section 116 to provide for furnishing of a
revised wealth statement by a taxpayer to rectify any omission or wrong statement
contained in the original wealth statement but before an assessment under sub-section (1) or
sub-section (4) of section 122 is made, and without prejudice to any liability incurred by him
under any other provision of the Ordinance 2001. – (7/2003 dated 12.7.2003).




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                                                             668-A
Chapter X, Procedure – Part I, Returns                                                            Sections 115 to 119

Filing of Returns under section 55 of the Income Tax Ordinance, 1979.
       I am directed to refer to Board’s letter of even number dated 23-5-1997 on the above
subject and to say that no official/officer of the department will contact the new assessees for
collecting any sort of information as referred to in above mentioned letter.
       2. Violation of these instruction will be seriously viewed and the defaulter will be
proceeded against under Efficiency and Discipline Rules, 1973. – [C.No.7(1S)S.Asstt/97
dated 24.6.1997].
Finance Supplementary (Amendment) Act, 1997 (IV of 1997) and Finance Act, 1997 – Compulsory
filing of income tax returns by certain persons: [Section 55].
       (1) A new clause (c) has been inserted in sub-section (1) of section 55 [through the
Finance Supplementary (Amendment) Act, 1997 (Act IV of 1997)] requiring the following
persons to file a compulsory return of income for assessment year 1997-98 (income year
1996-97), irrespective of the quantum of their incomes:
          (i) owner of immovable property with land area of 250 square yards or more, located
              within the areas falling in the limits of a Metropolitan/ Municipal Corporation or
              a Cantonment Board or the Islamabad Capital Territory;
         (ii) owner of any motor vehicle;
       (iii) subscriber of a telephone; and
        (iv) person who has undertaken foreign travel, other than for Hajj, Umrah or Ziarat,
              during the income year.
       (2) The persons referred to at Sr. (i) and (iv) above, if they are non-resident Pakistani,
are not required to file a compulsory return under the aforesaid clause (c) unless they are
earning taxable incomes.
       (3) Widows, orphans below the age of 25 years, pensioners and the disabled persons*
falling in the above mentioned four categories are also not required to file compulsory
return, if they do not earn taxable income.
       (4) The exceptions mentioned in sub-paragraphs (1)(iv), (2) and (3), do not absolve such
persons from filing returns of income, if they are earning taxable income. – (6/1997 dated
15.07.1997).
Filing of returns under section 55 of the Income Tax Ordinance, 1979.
       I am directed to state that due to the insertion of clause C of sub section (1) of section 55
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of the Income Tax Ordinance through Finance Supplementary (Amendment) Bill 1997,


*   The expression „disabled person‟ means a person who, on account of injury, disease or congenital deformity, is handicapped
    for undertaking any gainful profession or employment in order to earn his livelihood, and includes a person who is blind, deaf,
    physically handicapped or mentally retarded.




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                                  668-B
Sections 115 to 119                             Income Tax Ordinance, 2001.




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                                              669
Chapter X, Procedure – Part I, Returns                                  Sections 115 to 119

the following categories of persons are now required to file their income tax returns:–
          i) owners of immovable property, with land area of 250 sq. yards or more, located in
              areas falling in the limits of a Metropolitan/Municipal Corporations, a
              Cantonment Board or the Islamabad Capital Territory;
         ii) owners of a motor vehicle;
        iii) subscribers of a telephone; or
        iv) persons who have undertaken foreign travel (except for the purposes of Haj or
              Ziarat) during the income year.
       For effective implementation of these provisions it is imperative that the department is
well equipped with the information which will enable it to identity those who are required
to file returns under new provisions of section 55 of the Income Tax Ordinance. The Board
therefore suggests that the following information in respect of property, motor vehicles,
telephone subscribers and foreign travelers may be got collected forthwith by posting
required number of Inspectors on full time basis, at each station.
Information on Properties.
              –– Name of the owner(s)
              –– N.I.C. No.
              –– Address of the owner(s)
              –– Particulars of property
              –– Area/covered area
              –– whether a house or plot
              –– Amount of property tax assessed for the last year.
       Such information is to be collected from the office of Excise and Taxation, Cantonment
Boards, Development Authorities like KDA, MDA, LDA, CDA, FDA, GDA, RDA, PDA etc.
Motor Vehicles.
       The following particulars in respect of motor vehicles may be obtained:–
               i) Registration number
              ii) Make;
            iii) Model/year of manufacture;
             iv) Date of original registration and subsequent registration;
              v) Name of the present owner;
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             vi) NIC number of the owner.
Telephone Subscriber.
               i) Telephone No.
              ii) Place where telephone is installed.
            iii) Amount of telephone bill for one year.
             iv) NIC No. of the subscriber.
Foreign Travelers.
               i) Name
              ii) Address
            iii) NIC No.
             iv) Place of visit
              v) Duration of visit
             vi) NTN if any
       Complete data is required to be collected at the latest by the end of June, 1997. This
information on a continuous basis may be handed over to the Data Processing Centres for
data-entry.
       Progress report in this respect may be furnished to the Board by 30.6.1997. – [C.No.
7(18)S.Asstt/97 dated 23.05.1997].
Dates for Filing of Income Tax Returns.
       I am directed to refer to your letter No. SG/30/772 dated 15 July 1995 on the subject and
to say that return for income year ending on 31st August, 1995 would be due by 30th
September, 1996 and not 30th September, 1995. – [No. F. 55(1)DTP-I/94 dated 03.08.1995].
The Income Tax (Amendment) Ordinance, 1994 – Compulsory filing of returns of wealth.
       The second proviso to section 55(1) has been amended to provide exemption from
compulsory filing of returns of wealth of such persons whose income is less than Rs.100,000.
Thus, only those income tax assessees are henceforth required to compulsorily file returns of




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                                                670
Sections 115 to 119                                               Income Tax Ordinance, 2001.

wealth whose income is Rs. 100,000 or above. In case such income tax returns are not
accompanied by Wealth-tax returns, the same shall be treated as invalid. Notwithstanding
this provision, it may be clarified that all those persons whose net wealth exceeds
Rs.1,000,000, have to file the Wealth-tax returns, irrespective of the quantum of his income. –
(14/1994 dated 19.07.1994).
Return where dividend income exceeds exemption limit.
       Return has to be filed if the dividend income from listed companies (including listed
Modarba companies). N.I.T. and I.C.P. exceeds Rs. 15,000/-. – [C.No.1(8)TP-II/89 Pt. dated
21.8.1989].
Receipt of returns.
       It has been decided by the Central Board of Revenue that for the year 1989-90 the
returns of total income in all cases would be received by the Income Tax Officers holding
jurisdiction over the cases.
       It is, therefore, directed that the Officers may be advised to make necessary
arrangements for receipt of the returns. In order to eliminate any hardship to the tax-payers,
it would be appropriate if each officer is advised to display his jurisdiction outside his office
prominently during the filing of the returns. – [RCIT (2)(11)/89-90/210/R) dated 11.7.1989].
Filing and processing of returns of Income Exempt from Tax.
       References have been received in the Board seeking clarification regarding the
requirements of filing of returns, determination of taxability of income and income itself in
case where exemption from income tax is available under the Second Schedule to the Income
Tax Ordinance, 1979.
       2. It is clarified that a person enjoying income exclusively from sources exempt from
taxation under the Income Tax Ordinance are not obliged to file a return of income. For
example, a person deriving income solely from agriculture dividend income from listed
companies, etc. is not required to file the return of income. Legally, if such a person files the
return declaring exempt income, such return cannot be considered as a return of total
income. Hence, no proceedings under the law can be initiated in respect of such return. The
income tax authority, receiving such a return may inform the person furnishing the return
that the said return, being invalid, has been filed. However, where such return declares an
income which, ex-facie, can not be reasonably attributed to the exempt source declared, it is
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obviously a case where taxable income (from business etc.) is being declared as exempt
income. In such a case, it is the duty of the assessing authority to pass an order determining a
reasonable proportion of the declared income to the exempt source and taxing the remaining
portion under section 13.
       3. Further, Part-II of IT-11, requires declaration of exempt income. This provision has
been specifically made in the form of return to ensure that an assessee having income both
from non-exempt and exempt sources discloses the income from both such sources. In such
cases, the income tax authority can determine whether or to the exemption claimed is in
accordance with law and if so the income declared is reasonable considering the facts of the
case. In case, the income declared from exempt source in un-reasonably high, the excess can
be attributed to income from undisclosed sources taxable under section 13.
       4. The Income Tax Ordinance also provides for exemption of certain income contingent
upon fulfillment of certain conditions. For example, claims of exemption under clauses (93)
to (108) and (113) to (128) of Part I of the Second Schedule to the Income Tax Ordinance, 1979,
are of the type where the issue is to be decided on yearly basis. In such cases returns are to be
called for under section 56 if not filed voluntarily, and examined with reference to the
conditions required to be fulfilled. An order must be passed in such cases. Where the
assessing authority is of the opinion that the income declared is in excess of what can be
reasonably attributed to such exempt source, the excess should be taxed under section 13 of
the Income Tax Ordinance, 1979. – (21/1988 dated 24.10.1988).
Finance Act, 1987, Employer‘s certificate in lieu of return of income.
       An amendment in sub-section (1) of section 55 now permits a tax payer whose entire
total income consists of income chargeable to tax under the head ‚Salary‛ to file a certificate
from his employer, in the prescribed form, accompanied by prescribed statements, which
will be treated as a return of income. The format of employer’s certificate with
accompanying statements has been prescribed in Form IT-11D which can be obtained from
Income Tax Offices. It may, however, be clarified that a salaried tax payer has the option
either to file the aforesaid certificate or the regular returns of income. – (6/1987 dated 5.7.1987).




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                                               671
Chapter X, Procedure – Part I, Returns                                    Sections 115 to 119

Reduction in time period for filing of returns of income in certain cases.
      The date of filing of income tax returns in non-company cases, where income year ends
at anytime between the first day of January and 30th day of June (both days inclusive), has
been advanced from 1st November to 1st October. – (7/1981).
Income Tax Ordinance 1979 – Extension in time for filing of returns of income.
      Under the proviso to section 22(1A) of the replaced Act, the Income Tax Officer could
extend the time of filing of return by an assessee upto 30 months from the due date and
extension in time beyond three months could be granted by the Inspecting Assistant
Commissioner or the Commissioner. There is no specific provision in the new law for the
reason that now quite sufficient time has been allowed for filing of returns of income. In the
case of tax payers having income from business or profession, six and a half months from the
close of income year are allowed to prepare and file returns of income.
      (2) However, if an assessee files a belated return for very genuine reasons and explains
the circumstances which prevented him from filing his return of income in time, the Income
Tax Officer will not, if he is satisfied with the assessee’s explanation, impose any penalty
under section 108. – (4/1979 dated 23.8.1979).
Finance Ordinance 2001 – Notice for filing of return. – [Section 56].
      The explanation to section 56, which was inserted last year, has been substituted by a
proviso. Consequently, where a return is not filed a notice under section 56 may be issued
only for last five assessment years from the end of the year for which return of income was
due. – (5/2001 dated 4.7.2001).
Time for Compliance of Notices. – [Section 56].
      It has been brought to the notice of the Board that sometimes the time gap between the
date of issuance of a notice by an Income Tax Authority and date of its compliance is
unreasonably short. This period gets further curtailed by delay in service of such notice.
Such a situation rightly gives a cause of grievance to the tax-payers.
2.    I am directed to request that instructions may be issued to the assessing officers that
they should always allow reasonable time for compliance of statutory notices issued by
them. – [C.No.4(6)IT-3/88 dated 17.2.1991].
Back assessments. – [Section 56].
      Section 56, as drafted, enables an Income Tax Officer to make an assessment of the
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income of an assessee right up to the date of Independence where it is found that he had not
filed any return under Section 55 or 56 nor any assessment has been made under Section 63.
– (11/1960 Rev.).
Applicability of Section 57 of the Income Tax Ord., 1979 – Clarification Regarding. – [Section 57].
      Please refer to your letter on the above matter.
      I am directed to say that a revised return if filed within due time qualifies for self
assessment if all other conditions are fulfilled. – [C.No.7(1)IT-14/89.PT. dated 11.4.1991].
Disposal of revised Income Tax returns for the assessment year 1987-88. – [Section 57].
      The Finance Minister was pleased to announce that the assessees whose assessments
for the assessment year 1987-88 were pending could exercise the option to revise their
returns by 12th July, 1988.
      2. It has now been decided that all the revised returns filed by 12th July, 1988, for the
assessment year 1987-88 in cases selected for total audit under the defunct Self Assessment
Scheme may be accepted except where gross under statement of income has been made or
positive evidence of concealments in the possession of the Department. – (12/1988 dated
28.8.1988).
Revising Tax Returns. – [Section 57].
      As per Finance Minister’s Announcement in his Press Conference today at Islamabad,
Tax assessees whose returns for the assessment year 1987-88 were selected for Total Audit
but the assessments have not been finalised as yet may be allowed to revise upwards their
returns of Total Income upto and including 12th July, 1988. Kindly proceed accordingly
C.B.R. – [No.2716/PS/CH/88 dated 27.6.1988].
Finance Ordinance 2001 – Revision of wealth statement. – [Section 58].
      The facility of revision of wealth statement before assessment by tax-payers who have
filed wealth statement under sub-section (1) of section 58 has been provided. – (5/2001
dated 4.7.2001).




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                                              672
Sections 115 to 119                                             Income Tax Ordinance, 2001.

Finance Act, 1996 – Provision for personal expenses and doing away with mandatory filing: [Section
58].
      The prescribed form of wealth statement contains a column for personal expenses. The
amendment purports to provide specific legal cover to it. The amendment also removes the
mandatory requirement of filing wealth statement, alongwith return of income, where
income is Rs. 100,000 or more. Wealth tax returns, wherever required will continue to be
filed. – (10/1996 dated 16.07.1996).
Income Tax Ordinance, 1979 – Wealth statements.
      The provisions of this section are same as in old section 22(4A). However, there are two
important changes:
        (i) the assets and liabilities of dependents shall also have to be included in the
            statement alongwith those of the spouse and minor children.
       (ii) the particulars and consideration of the assets transferred during the period
            specified in the notice will also be shown in the statement. – (4/1979 dated
            23.8.1979).
Discontinued business – Section 72(2).
      In case of discontinued business, notice alongwith return of income has to be filed
within 15 days of the discontinuation of business. In view of the difficulty in filing of return
within this short period of 15 days, the requirement of filing of return has been dispensed
with. A notice to the ITO within this period shall continue to be obligatory. – (15/1980 dated
26.6.1980).

              CASE LAW – SUPREME COURT / HIGH COURTS / ITAT
                                     SECTION 55 OF THE RO
            RETURN FILED VOLUNTARILY, AFTER SERVICE OF NOTICE, POSITION PRIOR TO
                                 INCOME TAX ORDINANCE, 1979
   Assessee filed return declaring income and claiming exemption in respect of capital
    gains and subsequently filed revised return of same income contending that figure of
    capital gains was to be reflected/mentioned in column of return for claiming
    exemption. Return cannot be subjected to detailed assessment without order
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    containing valid and plausible reasons. – CIT v. Kamruddin Fakhruddin [(2001) 83
    TAX 353 (H.C.Kar.) 2001 PTD 623].
   Submitting return under section 22(3) after service of notice under section 22(4) is
    held filed voluntarily. Position prior to Income Tax Ordinance, 1979. – CIT v. Imam
    Bux Allah Dewaya, Leiah [(1976) 34 TAX 85 (H.C.Lah.) = 1976 PTD 199 = PLD 1976
    Lah. 1037].
                          REQUISITION OF RETURN FOR EARLIER YEARS
   Proviso to section 56 held retrospective in nature. – [(2002) 86 TAX 31 (Trib.) = 2002
    PTD 2609].
   Notice u/s 56 prior to 5 years held unlawful. – [(2002) 86 TAX 31 (Trib.) = 2002 PTD
    2609].
                         RETURN U/S 114 CONSTITUTE ORDER U/S 120
   Return filed under section 114 is to be treated as assessment order under section
    120. – Ch. Muhammad Hussain and others v. CIT [2005 PTR 120 [H.C.Lah.] =
    (2004) 90 TAX 81 = 2005 PTD 152 = PTCL 2004 CL. 532].
                                   CONSTITUTIONAL VALIDITY
   Foundation for assessment proceedings is charging provision, section 22 of 1922 Act
    etc., are machinery sections to determine amount of tax. – Chatturarn v. CIT [1947]
    15 ITR 302 (PC).
   Liability to pay Income Tax and jurisdiction to assess to Income Tax are not
    conditional on the validity of the notices issued under section 22 of the 1922 Act. –
    Chatturarn v. CIT [1947] 15 ITR 302 (PC).
                              PERSON LIABLE TO FURNISH RETURN
   Liquidator of company-in-liquidation can be asked to file return. – CIT v. Official
    Liquidator of the Agra Spg. & Wvg. Mills Co. Ltd. [1934] 2 ITR 79 (All.).




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                                            673
Chapter X, Procedure – Part I, Returns                               Sections 115 to 119

                                      VALIDITY OF RETURN
   A return duly signed and verified is valid even if it gives no figures. –
    L.PitarnberPrasad, In re [1942] 10 ITR 370 (All.).
                                      EXTENSION OF TIME
   Extension of time. – Vir Bhan Bansi Lal v. CIT [1936] 4 ITR 111 (Lahore);
    Chatturam v. CIT [1946] 14 ITR 695 (Pat.); Maharaja of Patiala v. CIT [1943] 11 ITR
    202 (Bom.); CIT v. Ekbal & Co. [1945] 13 ITR 154 (Bom.); Habib & Sons v. CIT
    [1947] 15 ITR 132 (Bom.); Radhey Lal Balmukand, In re [1942] 10 ITR 131 (All.).
                                   RETURN UNDER 1922 ACT
   A return filed prior to service of demand notice under section 29 of the 1922 Act but
    after completion of assessment is not a valid return. – Dhaniram Dbarampal v. CIT
    [1936] 4 ITR 113 (Lahore).
   If assessee simply indicates that there was an omission in his return it does not
    amount to filing of a revised return. – Gopaldas Purushottamdas v. CIT [1941] 9
    ITR 130 (All.).
                                       DEFECTIVE RETURN
   Where exact income is not given nor is period to which income relates stated, return
    is not valid and assessment under section 21(4) will be justified. – Lal Mohammed
    Sardar Mohammad v. CIT [1934] 2 ITR 358 (Lahore).
                                      SIGNING OF RETURN
   An unsigned return is not a valid return at all. – Bebari Lal Chatterji v. CIT [1934]
    2 ITR 377 (All.).
   An agent appointed by the assessee or a power of attorney holder can sign and file
    the return – IAC v. Chotabhai Javerbhai [1941] 9 ITR 604 (Mad.).
   Where the mukhtar of assessee verified, signed and filed a return on behalf of the
    assessee and question was whether such return was binding on the assessee. – Syed
    Mohainmad Mehdi v. CIT [8 ITC 210 (Lucknow)].
                                     SECTION 56 OF THE RO
                  WORDS „DURING THE PREVIOUS YEAR‟ AND „ANY‟ – MEANING OF

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    Words „during the previous year‟ and „any‟ – meaning of. [Position prior to amendment
    in section 56 by Finance Act, 2000]. – Dada Limited & Muhammad Ibrahim & Co. v.
    CIT [(1974) 30 TAX 91 (S.C.Pak.) = 1975 PTD 117 = PLD 1974 SC 310].
                                           VALIDITY
   Filing of return imposes no bar in challenging the validity of notice u/s 56. – CIT,
    Rawalpindi v. Mst. Shakeela Bano [(2003) 87 TAX 304 (H.C.Lah.) = 2002 PTD 1209].
                                          TIME LIMIT
   Notice under section 56 cannot be issued for any assessment year prior to the date of
    enforcement of the Ordinance i.e. 1.7.1979. – CIT, Rawalpindi v. Muhammad
    Ashraf BKO, Gujjar Khan [(2001) 84 TAX 330 (H.C.Lah.) = 2001 PTD 2620].
                              NOTICE CAN BE GIVEN FOR ANY YEAR
   Notice can be given for any year. – Memoona Ahmad v. ACIT [(1998) 78 TAX 299
    (H.C.Quetta) = 1998 PTD 2969 = PTCL 1999 CL. 199].
   Where two companies merged by the order of the High Court with effect from
    1.7.1981, held that Income Tax Officer could not issue notice to defunct company for
    filing return. – Ujala Cotton Mills Ltd. v. ITO etc. [(1985) 51 TAX 237 (H.C.Lah.) = 1985
    PTD 510 = PTCL 1985 CL. 345].
                      ITO CAN CURTAIL THE PERIOD FOR FILING OF RETURN
   Income Tax Officer can curtail the period for filing of return. – Nirala and Co. v. CIT
    [(1990) 61 TAX 71 (H.C.Lah.) = 1990 PTD 24 = PTCL 1990 CL. 87].
                   PROFIT AND LOSS ACCOUNT NOT FILED – RETURN NOT INVALID
   Balance sheet can be revised. – Zaman Paper and Board Mills v. Taxation Officer,
    Circle-12, Company Zone, Lahore [2006 PTR 77 [H.C.Lah.] = (2006) 93 TAX 141 =
    2005 PTD 2577].




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                                           674
Sections 115 to 119                                        Income Tax Ordinance, 2001.

   Return filed was not accompanied by profit and loss account and balance sheet, held
    that return was not invalid but incomplete. – CIT, East Pakistan v. Aizuddin Gazi
    and others [(1960) 2-TAX (III-474) (H.C.Dacca) = 1960 PTD 727 = PLD 1960 Dacca
    535].
   Return not accompanied by Profit and Loss account held as return in the eye of law.
    – Gopinath Biswambar Roy v. CIT, Dacca [(1960) 2-TAX (Suppl.–174) (H.C.Dacca) =
    1960 PTD 1079].
                                    SECTION 57 OF THE RO
                              REMANDING OF CASE HELD ILLEGAL
   Remanding of case held illegal. – CIT, Multan Zone, Multan v. Muhammad Saleem
    Muhammad Arif Contractors, Multan [(2002) 85 TAX 29 (H.C.Lah.) = 2001 PTD
    1371].
                        REVISED RETURN IS NOT ORIGINAL DECLARATION
   A revised return cannot be equaled with original one. – CIT, Multan Zone, Multan
    v. Muhammad Saleem Muhammad Arif Contractors, Multan [(2002) 85 TAX 29
    (H.C.Lah.) = 2001 PTD 1371].
                      REVISED RETURN FILED BEFORE ISSUANCE OF NOTICE
   Revised return filed before issuance of notice under section 22(4) and 23(2) so as to
    cover omission of entries, omission of entries committed held as bona fide mistake
    and that assessee was entitled to file a revised return in the circumstances of the
    case. – CIT, Central Zone, Karachi v. Shahnawaz Ltd. [(1985) 52 TAX 110
    (H.C.Kar.) = 1985 PTD 498 = PTCL 1985 CL. 337].
                                    SECTION 58 OF THE RO
                                      SPECIFIC PENALTY
                   SECTION 58(2) HAS NO OVERRIDING EFFECT ON SECTION 57
   Section 58(2) has no overriding effect on section 57. – Sabira B. Nanjianai, Karachi
    v. DCIT, Salary Circle-03, Zone-D, Karachi [(2007) 96 TAX 171 (H.C.Kar.); (2007) 95
    TAX 205 = 2007 PTD 1810].
                             WEALTH STATEMENT CAN
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   Wealth Statement can be revised. – Sabira B. Nanjianai, Karachi v. DCIT, Salary
    Circle-03, Zone-D, Karachi [(2007) 96 TAX 171 (H.C.Kar.); (2007) 95 TAX 205 = 2007
    PTD 1810].
   For a default of any kind only the specific penalty provided for can be levied. – CIT,
    A-Zone, Lahore v. Sohail Aslam, Lahore [(2001) 84 TAX 169 (H.C.Lah.) = 2001 PTD
    1325].
                            STATEMENT OF ASSETS AND LIABILITIES
   Assessee filed returns for the assessment years 1991-92, 1992-93 and 1993-94 under
    Self Assessment Scheme, which were completed, after some time assessing officer
    issued notice under section 65 and assessee filed revision petition before the CIT,(A).
    Assessing officer issued notices under section 58(1), 61, which were challenged to be
    ab-initio illegal and beyond jurisdiction. Held that notices are legal. – Sameer
    Electronics v. ACIT, Circle-B, Zone-A, Lahore [(1996) 73 TAX 106 (H.C.Lah.) = 1996
    PTD 36].
   Notice to file statement of assets and liabilities can be issued during reassessment
    proceedings. – Paramount Electric Company, Lahore v. CIT, Lahore Zone, Lahore
    [(1976) 34 TAX 92 (H.C.Lah.) = 1976 PTD 218 = PLD 1976 Lah. 1147].
                                    SECTION 72 OF THE RO
                   DISSOLUTION OF CO-OPERATIVE SOCIETY – POSITION AS AOP
   Liability of members of the dissolved society held to be limited and not joint and
    several. – Ch. Sultan All v. Tax Recovery Officer, etc. [(1979) 40 TAX 27 (H.C.Lah.) =
    1979 PTD 556].




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                                        675
Chapter X, Procedure – Part II, Assessments                                                                                  Section 120


                                                           PART II
                                                        ASSESSMENTS
           Assessments.– (1) Where a taxpayer has furnished a complete
        1[120.

return of income (other than a revised return under sub-section (6) of
section 114) for a tax year ending* on or after the 1st day of July, 2002,–
            (a)        the Commissioner shall be taken to have made an assessment
                       of taxable income for that tax year, and the tax due thereon,
                       equal to those respective amounts specified in the return; and
            (b)        the return shall be taken for all purposes of this Ordinance to
                       be an assessment order issued to the taxpayer by the
                       Commissioner on the day the return was furnished.
            Notwithstanding the provisions of sub-section (1), the
        2[(1A)

Commissioner may 3[conduct audit of the income tax affairs of a person]
under section 177 and all the provisions of that section shall apply
accordingly.]
    (2) A return of income shall be taken to be complete if it is in
accordance with the provisions of sub-section (2) of section 114.
     (3) Where the return of income furnished is not complete, the
Commissioner shall issue a notice to the taxpayer informing him of the
deficiencies (other than incorrect amount of tax payable on taxable income,
as specified in the return, or short payment of tax payable) and directing
him to provide such information, particulars, statement or documents by
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such date specified in the notice.
1 Section 120 substituted by Finance Act, 2003.
2 Sub-section (1A) inserted by Finance Act, 2005.
3 Substituted for “select a person for an audit of his income tax affairs” by Finane Act, 2010 w.e.f. June 5, 2010.
*Is there any tax year that ended on 1st day of July 2002, the date on which this Ordinance came into force? The first tax year under this Ordinance
ended on 30th June 2003. The ending date of a normal tax year [section 74] is 30th June of every calendar year] but this section makes it end on
1st July of each calendar year. If we go by this notation then Finance Act, 2003 is relevant for tax year 2003 whereas the CBR in its letter
No.F4(43)ITP/2002 dated 26.06.2003 has interpreted that provisions of section 64 as amended by the Finance Act, 2003 are applicable from tax
year 2004.

                                                 LEGISLATIVE HISTORY
    Section 120–Substitution.–Before substitution by Finance Act, 2003 section 120 read as follows:–
    “120. Assessments.– Where a taxpayer has furnished a return of income (other than a revised return under
sub-section (6) of section 114) for a tax year 1[ending on or after 1st day of July, 2002*],–
     (a) the Commissioner shall be taken to have made an assessment of the taxable income of the taxpayer
           for the year and the tax due thereon, equal to those respective amounts specified in the return; and
     (b) the taxpayer‟s return shall be taken for all purposes of this Ordinance to be an assessment order issued
           to the taxpayer by the Commissioner on the day the return was furnished.”
1 Words etc. inserted by Finance Ordinance, 2002.
* The intended year “2003” has wrongly appeared as 2002 in the Finance Ordinance, 2002. This Ordinance for the purpose of assessment will
  apply to tax year ending on or after 30th June 2003 for the first time and as per section 74(1) it has to be denoted as tax year 2003. The words
  “tax year ending on or after 1st day of July 2002 here have negated the concept of section 74 and section 239(1) and has made the law
  applicable for current tax year.




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                                              676
Section 120                                                    Income Tax Ordinance, 2001.

     (4) Where a taxpayer fails to fully comply, by the due date, with the
requirements of the notice under sub-section (3), the return furnished shall
be treated as an invalid return as if it had not been furnished.
    (5) Where, in response to a notice under sub-section (3), the taxpayer
has, by the due date, fully complied with the requirements of the notice,
the return furnished shall be treated to be complete on the day it was
furnished and the provisions of sub-section (1) shall apply accordingly.
    (6) No notice under sub-section (3) shall be issued after the end of the
financial year in which return was furnished, and the provisions of
sub-section (1) shall apply accordingly.]

                                       COMMENTS
SECTION 120: ―Assessments‖.
    The much needed and long-demanded facility of universal acceptance of returns was
originally extended under this section whereby all returns of income (other than revised
returns) filed on the due date would have been considered as assessment orders of the
taxpayers relieving them from the hassle of obtaining assessment orders from the
department. But the Finance Act, 2005 has destroyed the very spirit of this law by inserting
sub-section (1A) authorising the Commissioner to even select a completed assessment for
audit u/s 177. Now the Finance Act 2010 has went a step further providing that ‚he may
conduct audit of tax affairs of a person‛.This is against the established principle that an order
which has attained finality cannot be disturbed or unsettled by fishing inquiry through
audit. Such an order constitutes a vested right in the hands of a taxpayer which cannot be
destroyed in this manner. Section 122 provides a detailed legal mechanism for amendment
of an assessment order if so warranted. This insertion is totally unjustified in the presence of
explicit provisions of section 122.
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    It appears that FBR officials are reluctant to change their old mindset of highhandedness
while dealing with taxpayers. They cannot simply accept the idea of non-interference or
non-tinkering with returns. They must realise that new law requires intelligence-based tax
information system that alone can help attain better voluntary compliance. Tax evaders and
avoiders should be tackled by gathering information. The return filers should not be
compelled to provide evidence against themselves. Audit should be on the basis of some
benchmarks announced for each year so that some deterrence is craeted. Once order u/s
120(a) is treated to have been made only section 122 can be invoked, if so warranted by law,
and no specific audit u/s 177 can be conducted for a particular tax year to unsettle the order
passed u/s 120(1) as amended position of sub-section (1A) now provides.
    Earlier in the RO, self-assessment schemes underwent extensive experimentation and
every year a new scheme with different rules was introduced making it cumbersome for the
taxpayers to file their returns accordingly but perhaps this section has proved to be one of
the very few feathers in the cap of the new Ordinance.
    The entire section 120 was substituted by Finance Act, 2003. The substituted section
empowers the Commissioner to issue a notice to a tax-payer for correction of deficiencies in
the return of income. If the taxpayer fails to comply with the notice of the Commissioner and
fails to remove the deficiency, the return furnished is treated as invalid. The completeness of
return is as provided in section 114(2). It will give room to lower staff to remove certain
papers attached with the returns thus asking tax-payer to ‚complete‛ a return which
according to him is deficient. The tax authorities, working under the old mind set will make
every effort to harass taxpayers as they struggle to swallow the bitter pill of universal self
assessment scheme. There is every likelihood that in the name of risk-based selection criteria
and other lame excuses they are going to deny the benefit of this section to the taxpayers. The
legislature has failed to prevent tax officials from resorting to any adverse action unless they
have some incontrovertible evidence to proceed against a taxpayer.




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                                        677
Chapter X, Procedure – Part II, Assessments                                                                                Section 120


                      COMPARABLE PROVISION OF THE RO – [SECTIONS 59]
     59. Self-assessment.–1[(1) Where the return of total income for any income year furnished by the assessee
2[not being 3[ ] a company engaged in the business of banking, leasing and modaraba,] under section 55 qualifies
for acceptance in accordance with the provisions of a scheme of self assessment made by the Central Board of
Revenue for that year or under any instructions or orders issued thereunder, the Deputy Commissioner shall
assess, by an order in writing, the total income of the assessee on the basis of such return and determine the tax
payable on the basis of such assessment.]
     4[Explanation.– For the removal of doubt it is hereby declared that a return of total income furnished under

section 55 does not include a return of total income furnished under section 57.]
     5[(1A) Notwithstanding anything contained in sub-section (1), the Central Board of Revenue or any authority

subordinate to it, if so authorised by the Central Board of Revenue in this behalf, may, in accordance with a
scheme referred to in sub-section (1), select out of returns referred to in that sub-section any cases or classes of
cases or persons or classes of persons, howsoever determined, for assessment under section 62, and the Deputy
Commissioner shall proceed to make the assessment under that section or, if the circumstances so warrant, under
section 63, accordingly.]
        6[ ]
        7[ ]

     (3) In 8[assessing the total income and determining the tax payable under sub-section (1)], the Deputy
Commissioner may make such adjustments as may be necessary, including any adjustment under sections 34,
35, 36, 37, 38, 50, 53 or 54, the rules made under section 165, the First Schedule and the Third Schedule.
     9[(4) No order under sub-section (1) shall be made in any case after the thirtieth day of June of the financial

year next following the income year in respect of which a return of total income has been furnished under section
55:]
     Provided that if such order is not passed by such date, order under sub-section (1) shall be deemed to have
been passed on such date.]
        10[ ]
1 Sub-section (1) substituted by Finance Ordinance, 1980.
2 Substituted for “being an individual, an unregistered firm, a registered firm, an association of persons or a Hindu undivided family” by Finance
   Act, 1999. Earlier these were inserted by Finance Act, 1990.
3 Words “a public company or” omitted by Finance Ordinance, 2001.
4 Explanation added by Finance Act, 1985, and shall be deemed always to have been so added.
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5 Sub-section (1A) inserted by Finance Act, 1985, and shall be deemed always to have been so inserted.
6 Sub-section (1B) omitted by Finance Act, 1990, it was earlier inserted by Finance Act, 1987.
7 Sub-section (2) omitted by Finance Ordinance, 1980.
8 Substituted for “determining the total income and the tax payable under sub-section (1) or sub-section (2)” by Finance Ordinance, 1980.
9 Sub-section (4) inserted by Finance Ordinance, 2001. Earlier sub-section (4) was omitted by Finance Ordinance, 2000.
10 Sub-section (5) omitted by Finance Act, 1990, it was earlier inserted by Finance Act, 1988.
       Section 59(1)–Substitution.– Before substitution by Finance Ordinance, 1980 sub-section (1) read as follows:–
       “(1) Where the return of total income for any income year has been furnished by an assessee, the Income Tax Officer may,
by an order in writing made before an assessment is made under section 62, 63 or 65 as the case may be, determine the total
income of the assessee and the tax payable by him on the basis of such return.”
       Section 59(1B)–Omission.– Before omission by Finance Act, 1990 sub-section (1B) read as follows:–
       “(1B) In the case of a return qualifying for acceptance under sub-section (1), the acknowledgement issued under section
55A in respect of the said return, shall be deemed to be the order referred to in the said sub-section, and the notice of demand
referred to in section 85, if the conditions to this effect, as specified in the scheme of self assessment for the relevant year, are
fulfilled.”
Sub-section (2) omitted by Finance Ordinance, 1980 was simultaneously incorporated as Section 60.
       Section 59(2)–Omission.– Before omission by Finance Ordinance, 1980 sub-section (2) read as follows:–
       “(2) Where no return of total income has been furnished by an assessee for any year, the Income Tax Officer may, by an
order in writing, made before any assessment is made under sections 62, 63 or 65 determine the total income of the assessee
and the tax payable by him on the basis of the assessment, if any, made under any of the said sections or an order under
sub-section (1), as the case may be, for the latest preceding assessment year.”
       Section 59(4)–Omitted.– Before omission by Finance Ordinance, 2000 sub-section (4) read as follows:–
       “(4) No order under sub-section (1) shall be made in any case after the thirtieth day of June of the financial year next
following the income year in respect of which a return of total income has been furnished under section 55 1[:]
       2[Provided that if such order is not passed by such date, the acknowledgement issued under section 55A in respect of the

return of total income shall be deemed to be the assessment order and notice of demand referred to in section 85.]”
1 Substituted for full stop by Finance Act, 1995.
2 Proviso inserted by Finance Act, 1995.
   Section 59(5)–Omission.– Before omission by Finance Act, 1990 sub-section (5) read as follows:–
   “(5) No scheme of self-assessment referred to in sub-section (1) shall be made in respect of any assessment year
commencing on or after the first day of July, 1988.”




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                                              678
Section 120                                                     Income Tax Ordinance, 2001.


                                   DEPARTMENTAL VIEW
Finance Act, 2005 – Selection for audit. [Section 120 (1A)]
      Law provides that where a taxpayer furnishes a complete return of income, it shall be
taken for all purposes to be an assessment order issued by the Commissioner on the date the
return was furnished.
      In order to remove any doubts about the competence of the Commissioner to select a
case for audit, sub-section (1A) has been inserted in section 120 which empowers the
Commissioner in this regard. This provision shall take effect from tax year 2005. – (1/2005,
dated 05.07.2005).
Data recording of tax calculation on order sheet.
Centralized data entry of returns has been made for tax year 2003 at Data Entry Centre
(DEC) of PRAL as a part of reform initiative and electronically generated DCR (Circle-wise)
has been supplied to all the field officers. This DCR contains three parts. Part-I contains cases
where there is no demand or refund. In part II & III of the DCR, cases of demand and refund
have been reflected respectively. Similarly, PRAL is in the process of supplying DCRs to the
circles after centralized data entry of returns for tax year 2004.
2.    Although preparation of IT-30 forms has been dispensed with under the new system of
electronic data feeding, but at the same time no entries are made by the taxation officer on
the order sheet especially in cases where there is a demand or refund. Honourable Federal
Tax Ombudsman has taken serious view of the practice and has held that calculation of tax is
mandatory to be made in those cases where is demand or refund and the same has to be
communicated to the taxpayers (through demand notice). It has also been held by the
honourable FTO that non-recording of such entries tantamount to ‚mal-administration‛.
Copy of decision dated 27.1.2004 in complaint No. 835 & 836 of 2004 is enclosed containing
findings on the subject.
3.    In order to address the situation, it is directed that till we reach a stage of complete
computerization, demand notice or refund voucher may be issued (as the case may be) after
verifying correctness of demand/refund through preparation of IT-30 forms. – [C. No.
2(2)/Rev. Bud/96, dated 11.01.2005].
Universal Self Assessment Scheme for the Tax Year 2003.
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      See Circular No. 5 of 2003 under section 170.
Universal Self Assessment Scheme – Letters for removal of deficiencies and filing of short
documents for Tax Year 2003 – Instructions regarding.
      Please refer to this officer letter No. 1(1)Chief(USAS)/03, dated 21st May, 2004 on the
above subject.
2.    It was clarified by CBR vide afore referred letter that in connection with returns filed
under self assessment for tax year 2003, no correspondence will be made by the department
with any taxpayer asking to make up deficiencies or filing the short documents. Queries
have been raised asking for clarification as to whether these instructions are also applicable
in cases selected for audit. It is clarified for guidance of all field offices that aforementioned
instructions are not applicable in cases selected for audit and the same may be processed in
the light of instructions separately issued. – [C. No. 1(1)Chief (USAS)/03, dated 27.05.2004].
Universal Self-Assessment Scheme – Letters for Removal of deficiencies and filing of short
documents for tax year 2003 – Instructions regarding.
      Please refer to the above subject.
2.    Instances have been brought to the notice of CBR that Taxation Officers have started
issuing letters to the taxpayers asking for removal of deficiencies and filing of short
documents for the tax year 2003. This is a clear violation of policy decision of CBR because it
had been decided that no correspondence will be made by the department with the
taxpayers with regard to the short documents for tax year 2003.
3.    It is once again clarified that in connection with returns filed under Self-Assessment
Scheme for tax year 2003, no correspondence will be made by the department with any
taxpayer asking to make up deficiencies or filing the short documents.
4.    Notices already issued should not be pursued or pressed further.
5.    In case of violation of these instructions, strict action shall be taken by CBR. – [C.No.
1(1)Chief (USAS)/03, dated 21.05.2004].




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                                        679
Chapter X, Procedure – Part II, Assessments                                       Section 120

Universal Self Assessment and Income Tax Ordinance, 2001.
The FBR on its website www.fbr.gov.pk has placed the following note:
      ‚Income Tax Ordinance, 2001 was promulgated on 13th September 2001. It shall come
into force on July 01, 2002 and will be applicable from the said date. The new income tax law
is in simple language and is easy to understand. You can now prepare your income tax
return and compute your tax liability without any difficulty.
      The new income tax law will bring a complete change in the philosophy of income tax
proceedings and it will make life easier. The salient features are:
          * No assessing officer will determine your income and compute your tax liability.
            Now you will yourself declare your income and determine your tax liability.
          * Your income tax return shall be accepted without any conditions. There will be no
            compulsory enhancement of tax liability over previous year to qualify for
            acceptance. Even your loss return shall also qualify for acceptance.
          * Filing of your income tax return itself will be an assessment order and your
            eligibility for refund will flow from your tax return.
          * A certain percentage of returns filed shall be selected for tax audit on the basis of
            risk assessment to verify the accuracy and correctness of your income tax return.
          * Tax audit will not necessarily mean an amendment of the assessment originally
            made based by you in your return of income.
          * Your original assessment can only be amended on the basis of information
            acquired during tax audit or any other source.
          * If selected for audit, there will be no pre-designated auditors to carry out audit.
            The officials making selection for audit will be different from those who do actual
            audit. In other words you have no designated Income Tax Officer holding
            jurisdiction on you.
      Thus universal self-assessment in its true sense will be available to all taxpayers
irrespective of quantum, status, location or size. This is the first such experience in this part
of the world.
      The new law and the universal self-assessment system will take away the discretionary
powers of the tax collectors and place great responsibility and obligation on you as a
taxpayer and an honorable citizen.
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      The new Income Tax Ordinance, 2001 and its salient features, briefly explained above,
are not workable without adequate records to support the items reported by you on the
income tax return and allied statements.
      The Central Board of Revenue is fully aware of your (small taxpayers) problems and
difficulties in maintaining adequate records. Therefore only bare minimum books of
account; documents and records (that you generally maintain to run your business) have
been prescribed, as explained in Part III of this brochure.‛
      Note: For brochure visit FBR website: www.fbr.gov.pk.
Self Assessment Scheme for the Assessment year 2002-2003.
      In exercise of powers vested in the Central Board of Revenue under section 59 of the
Income Tax Ordinance, 1979 (hereinafter called the Ordinance), the following Self
Assessment Scheme (SAS) is made for the assessment year 2002-2003:–
1.    SCOPE OF THE SCHEME:
1.1 All returns filed by tax-payers, other than those that are in-eligible under Para 7 of this
Scheme, shall qualify for acceptance subject to the fulfillment of the following conditions,
namely;
       (a) tax has been fully paid under section 54 of the Ordinance and proof of such
            payment is attached with the return;
       (b) return of income for the assessment year 2002-2003 has been filed under section
            55 of the Ordinance, within due date as defined in this Scheme;
        (c) returns of Public Limited Companies quoted on stock exchange, where tax
            payable on the income declared is equal to or more than the tax payable on the
            income last declared or assessed, whichever is higher;
       (d) returns of other Companies, where tax payable on the income declared is higher
            by ten percent (10%) or more compared to the tax payable on the income last
            declared or assessed, whichever is higher;
       (e) returns of Registered Firms of Professionals not liable to pay Super Tax under




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                                             680
Section 120                                                   Income Tax Ordinance, 2001.

            clause (2B) of Para (A) of Part-IV of 1st Schedule to the Ordinance, where the tax
            computed, under Part-II of the 1st Schedule to the Ordinance, on income declared
            is higher by twenty percent (20%) as compared to the similar tax computed on the
            income last declared or assessed, whichever is higher; and
        (f) returns of Persons not being Companies or Registered Firms of Professionals, as
            indicated in sub-paras (c) (d) & (e) above, where tax payable on income declared
            is higher by twenty percent (20%) or more as compared to the tax payable on the
            income last declared or assessed, whichever is higher.
1.2 Returns filed by new taxpayers and persons deriving income from any other sources
specified in section 15 of the Ordinance, shall also qualify for acceptance subject to the
conditions specified in the Scheme.
   Note: The conditions regarding percentage increase in tax shall not be applicable if
            income consists of or includes salary and such income constitutes more than 50%
            of the total income declared for the year, or where income is derived only from
            house property.
EXPLANATION:
        (i) For the purpose of Self Assessment Scheme, ‚Tax‛ includes surcharge but does
            not include additional tax/penalty.
       (ii) The comparison of tax shall be made with the tax payable excluding the amount
            deducted/ paid/ payable under sections 80B, 80C, 80CC and 80CD of the
            Ordinance.
      (iii) Where an existing assessee takes over the business of another existing assessee,
            the comparison of tax shall be made with the tax payable by the successor or the
            predecessor, whichever is the higher.
      (iv) ‚New taxpayer‛ means a person who has never filed a return or statement of
            income under the Ordinance, in the past or no assessment has ever been made in
            respect of his income.
       (v) Where any person takes over the business of an existing assessee,‛ it would be a
            case of succession in business and the successor shall be taken to be an existing
            assessee, unless there is a change in the place or nature of business.
      (vi) ‚Income last assessed‛ means the income for the latest year assessed immediately
            before the last date of filing of return by a taxpayer.
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     (vii) ‚Due date‛ means the date prescribed under sub-section (2) of section 55 of the
            Ordinance and includes the date extended by the CBR. ‚Due date‛, however,
            does not include any extension beyond 15 days, granted by DCIT under
            sub-section (3) of section 55 of the Ordinance.
2.    REQUIREMENTS:
      The following statements, accounts, details, documents and declarations are to be filed
alongwith returns of income:
       A) INCOME FROM BUSINESS OR PROFESSION:
            (i) Where accounts are maintained:–
                Copies of trading/manufacturing, profit and loss accounts, balance sheet of
                the business, receipt and expenditure statement, wherever applicable,
                depreciation chart as per Third Schedule to the Ordinance and personal
                accounts of the proprietor, members, partners or directors as the case may be,
                alongwith a declaration and details of the books of accounts and record
                maintained.
            Note: Where companies are required under the law to file copies of
                    trading/manufacturing, profit & loss accounts and balance sheet certified
                    by a Chartered Accountant, such copies are to be filed accordingly.
           (ii) Where accounts are not maintained:–
                Where no accounts are maintained, Manufacturing and/or Trading Account(s)
                and Profit & Loss Account or Receipt and Expenditure statements on estimate
                basis.
        B) INCOME FROM SALARY:
            Salary certificate prescribed under the Income Tax Rules, 1982, showing salary,
            allowances, perquisites, or any other receipt and the amount of tax deducted at
            source.




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                                        681
Chapter X, Procedure – Part II, Assessments                                   Section 120

       C) INTEREST ON SECURITIES:
            Evidence of payment of interest on money borrowed for investment in securities
            and of the commission if any paid for realizing interest on securities.
      D) INCOME FROM HOUSE PROPERTY:
            (i) Evidence for payment of provincial or local taxes on property, collection
                charges claimed if any, interest on capital borrowed for purposes of the
                property in question and any other admissible deductions claimed under the
                Ordinance.
           (ii) Full particulars of the property/properties and its financing in cases where
                property income is declared for the first time.
          (iii) Particulars of unadjustable advance rent or ‘Pugree’, if any, received.
          NOTE: Wherever aggregate investment in new assets and properties exceeds Rs.5
                    lacs, sources of investment shall be declared and evidence attached with
                    the return.
       E) INCOME FROM OTHER SOURCES:
            Description of nature and source of income as well as details of any expenses
            claimed alongwith necessary evidence.
       F) NEW CASES:
            (i) The requirements of return prescribed in paragraph 2 shall also apply mutatis
                mutandis to new taxpayers according to the respective category in which a
                case falls.
           (ii) Wealth statement as on 30.6.2002 along with the sources of investment. Proof
                of investment, exceeding Rs. 5 lacs, shall be attached with the return.
          (iii) A duly completed application form for issuance of National Tax Number shall
                also be filed.
3.   WEALTH STATEMENT:
     In cases of existing taxpayers, wealth statements alongwith reconciliation, shall
     accompany all returns of income where the income declared is Rs. 200,000/- (2 lacs) or
     more.
     NOTE:- New taxpayers are, however, required to file wealth statements irrespective of
                the quantum of income declared.
4.                www.imranghazi.com
     DEDUCTIONS, REBATES AND TAX CREDITS:
     Evidence of payments made on account of donations, or contributions to any approved
     institutions or funds and rebates and tax credits as admissible under the Ordinance,
     shall be attached with the return of income.
5.   EXEMPT INCOME:
     If any income is claimed to be exempt from tax, its computation and the basis of
     exemption shall be adduced to the return.
6.   PURCHASE OF IMMOVABLE PROPERTY AND MOTOR-VEHICLE:
     The existing taxpayers, declaring income of less than Rs. 2 lacs and not filling the
     wealth statements, are required to declare and attach with returns the particulars of
     immovable properties and motor vehicles, purchased during the year. Note Legible
     copies of statements, accounts, certificate, details, documents and evidences as
     required in the foregoing paragraphs shall be filed alongwith the return.
7.   RETURNS NOT ELIGIBLE:
     Following returns shall not be eligible for acceptance and shall automatically be
     subjected to total audit:
        i) All cases where loss has been declared.
       ii) All cases where income has been arrived at by making a lumpsum addition.
      iii) All cases of non-residents.
      iv) All cases of modarbas and companies engaged in the banking and leasing business.
       v) All cases, where a legal issue is pending in any appeal in respect of a previous
            assessment and the same issue exists in the current year, unless the
            appeal/reference is withdrawn either by the taxpayer or the Department, as the
            case may be, before the filing of return under the Scheme.
      vi) All returns where there is evidence of concealment of income.
     vii) All returns selected for total audit.




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                                               682
Section 120                                                      Income Tax Ordinance, 2001.

8.     PROCESSING OF RETURNS FILED UNDER THE SCHEME:
            (a) The assessing officer, will make initial scrutiny of the returns with respect to
                 the provisions of Scheme to determine the acceptability thereof.
            (b) In case of non-filing of documents as required by this Scheme, a notice shall be
                 issued to the person indicating the deficiency to be made up within 15 days of
                 the receipt of such notice.
            (c) In cases of non-compliance within the time so allowed, the DCIT shall exclude
                 the case from the SAS by passing a speaking order immediately but not later
                 than fifteen days from the expiry of prescribed time.
9.     SELECTION OF CASES FOR AUDIT:
            (a) From amongst the returns filed under the Self Assessment Scheme (excluding
                 salary and only property income cases), twenty percent (20%) returns may be
                 selected for total audit in the following manner:–
                  i) through computer ballot which may be random or parametric, as deemed
                     fit by C.B.R.
                 ii) By Regional Commissioners of Income Tax on the recommendations of
                     Commissioners concerned, in the light of guidelines issued by the Central
                     Board of Revenue in this behalf.
            (b) Returns qualifying for self assessment shall be expeditiously processed either
                 manually, or through computer, after the selection of cases for total audit. The
                 assessing officer shall make necessary adjustments u/s 59(3) of the Ordinance,
                 if so required, after giving a notice in writing to the assessee and considering
                 his explanation, if any. These adjustments may include add-backs on account
                 of:–
                 (i) expenses claimed which are legally inadmissible ;
                (ii) any sum(s) deemed to be income under the Ordinance; and
               (iii) adding agricultural income to the chargeable income for rate purposes in
                     terms of Proviso to Clause (1) of Part-I of the Second Schedule to the
                     Ordinance.
10. PROCESSING OF CASES SELECTED FOR AUDIT:
       The cases selected for total audit, shall be scrutinized in detail, including field audit by
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departmental officers or by professional auditors authorized under section 4A of the
Ordinance. The investigation and assessment proceedings shall be monitored and completed
under guidance of supervisory officers within the meaning of section 7 of the Ordinance.
Information collected from available sources shall be utilized for determining income of the
taxpayer and tax payable thereon. – (7/2002 dated 15.6.2002).
Finance Ordinance, 1980 – Section 59 – Redrafted.
       Section 59 has been redrafted. It relates to Self Assessment Scheme. Subject to the rules,
orders and instructions of the CBR in this behalf, a return which qualifies to be processed
under the scheme has now a right to be accepted under the Scheme. – (15/1980 dated
26.6.1980).
Detailed scrutiny of cases.
       Self Assessment Scheme envisages that a certain number of cases are to be subjected to
detailed scrutiny. The main purpose of this detailed scrutiny is to ensure that the trust
reposed by the department in the tax-payers through Self Assessment Scheme is not
misused. As this scrutiny is intended to provide deterrence against tax-evasion, every effort
is to be made to unearth evasion, if committed, in the cases so selected. Since their number is
very small, every officer shall have ample time to thoroughly probe the said cases. It need
not be emphasised that the success of the Self Assessment Scheme depends largely upon the
results of this detailed scrutiny. Unearthing of concealment is not only a responsibility of the
department but also a challenge to the competence of the field officers.
        (2) The purpose of this circular is to provide general guidance to the assessing
             officers in the conduct of this detailed scrutiny. Although every trade profession
             has specific areas of investigation, the points which need special attention
             generally in all cases, irrespective of the nature of trade or profession are briefly
             discussed hereunder.
        (3) The income which is not reported to the department is disposed off in either of
             the two ways:–




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Chapter X, Procedure – Part II, Assessments                                       Section 120

            (i) Appears in books or investment in property etc.
           (ii) Disappears – having been consumed or hidden away in cash/deposits/
                valuables.
      (4) The black money which does appear may do so in any of the following forms:–
            (i) Cash credits in fictitious names (including remittances from relatives abroad).
           (ii) Additions in capital (shown mostly as sale of jewellery).
          (iii) Gifts/inheritance received,
          (iv) Exempt income like income from agriculture, poultry farming, winnings of
                prize bonds,
           (v) Investment in property (the actual investment being far more than shown).
      (5) The money which disappears also leaves traces behind. The major areas to be
            probed in this behalf are personal and house-hold expenses, marriages of
            children, travels abroad etc. The money going into undisclosed bank-deposits is
            some times utilized as security against business loans.
      (6) A part from total concealment of income, the other broad category of evasion is
            diversion of income i.e. the income is recorded and declared but it is done in the
            name of a person other than the real owner or beneficiary. This type of evasion is
            achieved by one of the following methods:–
            (i) Bogus firms.
           (ii) Business established or income yielding investments made in the names of
                family members, dependents and relatives (including where such person are
                made benami partners in other firms).
          (iii) Creation of selling/purchasing agencies owned by relatives/dependents of the
                owners of main manufacturing concerns.
     Detailed instructions in respect of examination of such cases are contained in separate
annexures detailed as under–
                Subject                                                        Annexure
            (i) Cash credits                                                   I
           (ii) Additions in capital account                                   II
          (iii) Exempt income                                                  III
          (iv) Investment in property                                          IV
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           (v) Personal expenses                                               V
          (vi) Bogus firms                                                     VI
         (vii) Benami business                                                 VII
        (viii) Wealth statement                                                VIII
      (7) As stated above, these instructions are for general guidance and are only
            illustrative and not exhaustive. Apart from the areas of enquiry mentioned in the
            annexures, if any other useful information is available to the assessing officer
            from the records or otherwise, it should also be utilized.
      (8) Detailed scrutiny/enquiry is a tedious process and in such circumstances, the
            assessees are bound to be evasive and non-co-operative. They are also likely to
            employ delaying tactics. It is, therefore, imperative that assessing officers should
            have patience and perseverance to pursue the enquiry to its logical conclusion.
            Hasty actions should be avoided at all costs. Besides, it is easier to detect
            concealment than to establish it in the assessment order in such a way that it is not
            upset in appeal. This requires collection of maximum evidence and affording the
            assessee maximum opportunity to explain his position. And last though not the
            least, is the importance of proper and systematic presentation of the case in
            assessment order. A good many cases of proven concealment have been lost in
            appeals because of poor drafting.
      (9) If, after completion of scrutiny, concealment is established, maximum penalties
            should be levied and prosecution filed (after approval by the Board). In case,
            concealment is not established but material defects in accounts are discovered
            warranting rejection of accounts, efforts should be made to make a lumpsum
            addition to the declared income keeping in view (a) past history of the case (b)
            capital employed in business (own and borrowed) and income shown as
            compared with capital employed and income assessed last year (c) and ad-hoc
            addition made in the return by the assessee voluntarily for self assessment etc.




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                                               684
Section 120                                                       Income Tax Ordinance, 2001.

             Such addition should be made as far as possible with the consent of the assessee.
             Estimate of sales and application of routine rate of profit should be avoided as far
             possible.
        Note. Ordinarily tax-payers undertake their turnover but show higher rate of profit
                 to conform to the rate ordinarily applied in their trade. If as assessee declares
                 correct (or at least higher) turnover but lower rate of profit, then in such a case
                 estimate of sales, based on higher turnover shown, and application of the
                 usual rate of profit would cause hardship. Hence the insistence upon relating
                 the lumpsum addition to the income declared and capital employed this year
                 and income assessed in the earlier year. The anxiety is that if an assessee
                 himself shows higher turnover or income for self assessment, he should not be
                 punished for it.
      (10) If as a result of the scrutiny, neither concealment is established nor any major
             defects are discovered, the accounts and income should be gracefully accepted
             and petty P & L account additions in such cases should be avoided as far as
             possible.
      (11) The undersigned is directed to state that in the cases selected for detailed scrutiny,
             the instructions contained in this circular are to be complied with. The Directorate
             of Inspection has been directed to carry out inspection of such cases on their
             completion. Disciplinary action will be taken for violation of these instructions.
      (12) Similar instructions about specific trades and professions like contractors, forest
             contractors, real estate developers etc. medical practitioners and mine operator
             shall be separately issued by the Directorate of Inspection (Taxes).
                                                                                        Annexure I
                       CASH CREDIT : DETECTION AND TREATMENT
      Whenever an assessee has to meet a financial commitment (i.e., the payment in respect
of purchases, expenses etc.) and he finds that their is no cash or not enough cash available in
the books and the bank, he borrows the money required. The person lending the money
appears in the books of the assessee a creditor. However, in most of the cases, the needed
cash is available with the assessee but it is outside his books of accounts i.e., out of un-taxed
profits. In such cases, the cash is introduced in the name of a fictitious creditor who is often
an agriculturist or a person enjoying income not liable to tax.
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      (2) It ha been held by superior courts that in the case of a cash credit, the burden of
proof of the genuineness of the credit lies on assessee. He has to prove not only that money
was in fact borrowed but also that the lender was in a financial position to lend money.
      (3) Cash credits appearing in the cash book fall into the following categories:–
       (a) Where the cash is received in the cash book (i.e., the cash account is debited) but
             the account of the person who lends the money is not credited (i.e., no ledger
             account of the creditor is opened in the ledger).
       (b) Where cash received appears in the cash book and the account of the creditor is
             also opened in the ledger and is credited with the amount of the money
             borrowed. This category of cash credit has two sub-categories. (1) Where the
             money is returned within the income year and the account of the creditor opened
             in the ledger is closed during the income year. This is what is called ‚Squared-up
             Account.‛ (2) Where the credit or money borrowed remains unpaid till the end of
             the year and the credit balance appearing in the ledger appears in the balance
             sheet as credit.
      (4) How to detect cash credits–
       (a) See the receipt or the debit or receipt side of the cash book and look for the round
             figures. The money borrowed is usually in round figures. In vernacular accounts,
             the narration usually is ‚dasti‛ i.e., cash received by hand. Similarly scan the
             ledger and look for the squared up account. If the squared up accounts contain
             amounts which are not in round figures, these are likely to be genuine credits for
             purchase of goods or for expenses incurred. If these are in round figures they are
             usually amounts borrowed from others.
       (b) Examine the liabilities side of the balance sheet. The credit balances appearing in
             the balance sheet in various names fall into two categories. Either they are for
             goods purchased or services obtained or cash received. Each item has to be




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Chapter X, Procedure – Part II, Assessments                                           Section 120

             examined with reference to ledger and cash book. Sometime all the credit
             balances are combined together and appear in the balance sheet in the form of
             sundry creditors. In such cases the list of sundry creditors should be obtained and
             examined in order to see whether the credits appear for cash received or for goods
             purchased or services obtained. The balance sheet also sometime separately
             mentions liabilities for purchases or expenses and liabilities for finance (loans).
             Cases have been noticed where a credit appeared in the balance sheet as a bank
             loan but on examination it was found that the amount had not been borrowed
             from any bank but it was fictitious cash credit shown as if it was a bank loan. Each
             item appearing on the liabilities side of the balance sheet should be verified and
             examined.
       (5) The treatment of various types of cash credits. – Once a cash credit has been detected, the
question remains is how to examine and how to prove its genuineness or otherwise
fictitiousness. Various types of cash credits are discussed as below:–
        (a) Unledgerized cash credit. – (6) Where cash is received in the cash book but it is not
             ledgerized, such cash credits are surely fictitious. The assessee should be asked to
             produce the creditors and if he expresses his inability to do so the addresses of the
             creditors should be obtained and they should be summoned under section 148
             and their statement be recorded. The fictitiousness of this type of cash credit is
             easiest to prove. Since the assessee does not ledgerize the account, no name
             appears in his books. Courts are reluctant to accept such credits as genuine.
        (b) Squared-up-Accounts. – (7) The assessee should be asked to furnish address of the
             creditor. If he is an existing assessee a letter may be addressed to him requiring
             him to confirm if he has advanced the alleged amount to the assessee. If he is not
             an existing assessee, he should be summoned under section 148 and his statement
             be recorded.
        (c) Credits appearing in the balance sheet. – (8) The treatment is similar. The assessee
             should be asked to establish identity of the creditor. If he is an existing assessee
             his file may be consulted. If he also closes his accounts on the same date as the
             assessee does, then the said credit should appear on the ‚Assets‛ side of his
             balance sheet. If it is so, the credit may be accepted as genuine. If he closes his
             account on a date different than that of the assessee or if his file is not readily
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             available, then a letter be addressed to him requiring him to confirm the credit. If
             he is not an existing assessee he should be summoned under section 148 and his
             statement be recorded.
       (9) As regards the factum of the cash credit, it will be appreciated that giving of cash by
one person to another involves a series of events i.e., the borrower requests the lender, the
lender agrees then delivers the money. The request is made by someone at some place at
some time. The money is delivered to some one at some place at some time. These are the
details which a genuine lender and borrower would definitely know and remember. When
they are examined and put the same questions, their replies would be similar. Thus, the first
step towards verification of cash credit is to summon the creditor and the person who
received the money from the creditor together at one time. First the creditor should be
questioned about the details of request for loan and delivery of money. Some of the
questions are as under:–
        (1) Has the creditor made a loan ? If so, what was the original amount of credit, how
             much has been returned and how much is still outstanding ?
        (2) Did the assessee request the creditor for a loan or has the creditor given the
             amount as ‚Amanat‛?
        (3) If the assessee asked for the loan, how was the request made, whether directly or
             by writing a letter or by telephone or by a messenger ?
        (4) At what precise place the request was made, shop, street or house, and if house,
             which part of the house ? (Be as precise as possible).
        (5) Who else was present when the request was made ?
        (6) What was the time ?
        (7) Was the money paid there and then or later ? If later, how many days later etc. ?
        (8) How was the money delivered, personally, through a messenger, by money order
             etc. ?




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                                                686
Section 120                                                        Income Tax Ordinance, 2001.

        (9) Who delivered the money ? To whom it was delivered ?
      (10) At what precise place the money was delivered (drawing-room of the assessee’s
             house or shop or office).
      (11) At what time it was delivered?
      (12) In whose presence it was delivered ? etc.
      (These questions are only illustrative. Similar questions can be devised to meet the
requirements of the situations). Then, the assessee or the person who received the money be
called in and he should be asked to answer the same questions that were put to the creditor.
If the transaction is genuine, the answers of both the witnesses would agree. If they do not,
the genuineness of the creditor can be rejected. It must be remembered that where statement
of any witness is to be recorded the assessee or his counsel has to be afforded the
opportunity of cross-examining the witness. If he does not want to cross examine, this
should be recorded below the statement and his signature be obtained.
Financial ability of the creditor
      (10) Whenever a notice is issued under section 148 to a creditor, he should also be
directed to bring along, evidence regarding his financial position. While recording the
statement questions should be asked regarding his financial ability to make the loan in
question. Usually, the fictitious creditors are those who enjoy exempt income. Some of the
categories of creditors and their treatment is discussed below.
      (11) If the creditor is an agriculturist, he should be asked to produce evidence of
ownership of land etc. Agriculturists sell their produce through commission agents carrying
on business in mandi towns, cities. Enquiries can then be made from that commission agent
who should be asked to furnish the copy of the ledger account of the agriculturist
(Commission agents always maintain accounts meticulously). In one case an agriculturist,
who had allegedly advanced Rs. 2,25,000/- to an assessee free-of-interest, was found to be
owing Rs. 60,000 to this commission agent on which amount he was also paying interest at
3% per month which conclusively contradicted his claim. Agriculturists are usually in debt
and are seldom in a position to make a loan to anyone. Similarly, another agriculturist
creditor was found to have obtained an interest bearing loan from Agricultural Development
Bank and was returning that loan by instalments and had defaulted several instalments
during the period when he allegedly advanced money to the assessee. Thus, if such
questions are put to bogus agriculturist creditors and relevant enquiries are made, they fail
to establish their www.imranghazi.com
                    financial ability.
      (12) If the creditor is an employee, a retired employee or a businessman (with a ‘no
account’ case) he should be asked if he has a bank account, which he usually has (though the
loan is always claimed to have been made from cash available in home chest). If so, the
account be requisitioned and examined. It is often found that during the time he allegedly
advanced money he has deposited and withdrawn petty amounts from his account.
Obviously a person having substantial cash in home chest would not deposit in and
withdraw petty amounts from his bank account. Very often bank account of such a creditor
is overdrawn. Often income-tax file of the creditor contradicts him. In one case a creditor was
shown to have advanced Rs. 50,000 in March 1962. His file showed that in December, 1961
income tax amounting to Rs. 4,000 odd was imposed on him. In January, 1962 he applied to
Income Tax Officer for instalments on the ground of weak financial position. The Income Tax
Officer rejected the plea and imposed penalties for non-payment both in February and
March, 1962. The demand remained unpaid till June, 1962.
Other requirements of law
      (13) Where after the necessary enquiry/examination under section 148, it is found that
the creditor:
         (i) either does not exist or is not available.
       (ii) though he appears before the Income Tax Officer either he is unable to prove his
             financial ability or his statement regarding ‘giving of loan’ is different from that of
             the assessee.
      Conclusion can be safely drawn that credit is not genuine. Before completing the
assessment, a notice under section 62 should be given to the assessee, mentioning clearly, the
reasons of not accepting the credit as genuine, and requiring him to explain why the said
credit should not be treated as fictitious and assessed under section 13.
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Chapter X, Procedure – Part II, Assessments                                       Section 120

                                                                                  Annexure II
                           ADDITIONS IN CAPITAL ACCOUNT ETC.
      (1) The untaxed money appearing as an addition in capital account, of a proprietor or a
partner is usually shown as:–
                (a) receipt of exempt income,
                (b) sale of jewellery,
                (c) receipt of gift or inheritance.
             Mode of enquiry into accretion in capital from exempt income has been discussed
             separately in Annexure III.
      (2) Sale of Jewellery. – Every assessee declares some jewellery in his wealth statement.
Most often, he does not declare its quantum but only the value or cost. This enables him to
claim later that jewellery was old and valued at cost thereby increasing its quantity. As a
rule, therefore, wherever jewellery is shown, its quantity must be got specified.
      (3) In every city, some unscrupulous jewellers have developed the practice of issuing
bogus receipts for sale of jewellery on a nominal commission of 2 to 3% of the sale value. The
current practice of examining sale of jewellery is that the examining officer just obtains
photocopy of the sale receipt and places it on file. This lack of proper enquiry is the major
reason why accretions in capital account are being explained through fictitious sale of
jewellery.
      (4) Where any claim of sale of jewellery is made, the purchasing goldsmith and the
‚Kanta Wala‛ (if a weightment receipt is produced) should invariably be summoned under
section 148 and examined. Similarly the mandatory ‚Gold Purchase Register‛ maintained by
every goldsmith should also be examined. The statement should also be recorded on the
following issue:–
            (a) Details of jewellery sold and its quantity.
           (b) Name and address of the shop at which sold.
            (c) Name and location of the ‚Kanta Wala‛.
           (d) The rate at which sold.
      (5) Any person who has genuinely sold the jewellery would know all the details of
jewellery, the shop where he sold, the rate he obtained etc. etc. Usually, sale receipts are
obtained through brokers and the seller in such cases would not even know the whereabouts
of the shop who www.imranghazi.com
                   issued the receipt.
      (6) In a large number of cases, the ‘brokers’ have got printed receipts in the names of
bogus goldsmiths. Such receipts, if probed into, can be easily proved fictitious.
Gifts
      (7) As in the case of cash credits, the onus of proof lies upon the assessee that–
            (a) gift was actually made and
           (b) the giftor was in a financial position to make the gift.
             So, where an assessee claims to have received any gift, the statement of the giftor
             and assessee must be recorded as in Annexure I (in respect of cash credits) and
             the financial position of the giftor should also be examined in the manner
             described in the said Annexure.
Inheritance
      (8) The issues to be examined in the case of Inheritance received are as under:–
       (a) Financial status of the deceased.
       (b) What was the amount/value of the total estate ?
        (c) Was it entirely in cash or in the form of the assets ?
       (d) If the estate consisted of assets other than cash, how, when and where were these
             sold?
       (e) Have the other co-heirs also received proportionate shares, if not, why?
        (f) If there was a ‘will’ allocating whole or larger part of the estate to the assessee,
             evidence of the existence of the ‘will’.
       (g) If other co-heirs have also received inheritance, evidence of the receipt of the
             inheritance.
       (h) where an estate consists of a bank account or a property, a succession certificate is
             always obtained which consists of the details of all the estate (This can be used as
             evidence against inflated claims). etc. etc.




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                                               688
Section 120                                                       Income Tax Ordinance, 2001.

      In such cases, the statements of co-heirs on issues mentioned above yield very useful
results.
                            --------------------------------------------
                                                                                   Annexure III
                                        EXEMPT INCOME
      Although one cannot say that all those people who declare exemption come are making
their ‘black’ money ‘white’, yet it is true in vast majority of cases. Unfortunately, where such
incomes is declared, the treatment meted out by the assessing officers is rather sloppy. In
most of the cases, it is accepted. Even in cases where it is not, the disallowance is just
arbitrary. An attempt shall be made to lay down methods of scientific inquiry in this behalf.
      (2) Agricultural income:
       (a) If the assessee owns agricultural land, he may derive income–
            (i) by self cultivation,
           (ii) by cultivation through tenants (share-cropping), or
          (iii) by leasing out the land at fixed rental.
       (b) If he does not own land, he may obtain it on lease and derive income by any of the
            methods mentioned above.
      (3) Examination. – Self cultivated or tenant cultivated:
            Land record and produce record. – If the land is self owned, the assessee may be
            asked to produce copies of ‘land record’ which identifies the location of land, its
            owners, by whom cultivated (if there are tenants, it indicates names of tenants),
            the type of land etc. He should also be required to produce copy of produce
            record which indicates year-wise crops and the yield. In some cases, where an
            assessee claimed to have orchards, it was later discovered from the land records
            that the land was ‘Banjar Qadim’ (Ancient Barren) or Banjar ‘Ghair Mumkin’
            (barren impossible) etc. It will be appreciated that the yield of Barani (rain
            irrigated Chahi (well-irrigated), Nehri (canal irrigated) etc., varies. In short the
            agricultural income will depend on (a) type of land (b) way it is irrigated (c)
            equipment employed (d) number and type of crops grown etc. Further if the land
            is tenant-cultivated, the income per acre shall be less than half as more than half is
            taken by the tenant.
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      (4) Commission Agent. – The produce of land is sold through commission agents. The
assessee may be required to furnish the name of the commission agent and copy of assessee’s
account can be obtained from him. In case of crops like sugar-cane, kapas, these are often
sold direct to the factories or mills. Information can be obtained from such factories or mills.
      (5) Bank Record. – Land-lords also obtained loans from Agricultural Bank for purchase
of tractors, seeds, fertilizers etc. Their record often shows the assessee asking for
postponement of instalments due to bad crops while they show huge income in their
tax-returns.
      (6) Revenue Record. – Similarly, revenue records often indicate the assessee applying for
remission of land revenue on account of ‘Kharaba’ or destruction of crops while in their
tax-returns, they claim achieving bumper crops.
      (7) Leased Out Lands. – Where land is leased out, there is invariably a lease agreement.
This should be requisitioned and examined. Very often such agreements are afterthoughts
and this can be verified from the stamps of the vendor affixed on the stamps paper and the
name of purchaser of paper. The stamp register of a financial year, on completion is
deposited by the vendor in the office of the Registrar of Stamps. The genuineness of the
stamp paper an be verified from his office.
      (8) Land taken on lease. – Assessees trying to convert their ‘black money’ into ‘white’
usually do not own land. They claim that they obtained agricultural land on lease and they
derived income by ‘self-cultivation’ or by share-cropping. In such cases the first step should
be to verify the genuines of the deed. In most of the cases the deed is fictitious. If the deed is
genuine, then the other enquiries regarding (a) land record (b) produce record (c) revenue
records (d) the account of commission agent, etc., should be made.
      (9) Common features of claim of Agricultural Income. – An intelligent tax dodger, under a
proper planning, can so arrange the affairs that he can frustrate all the above noted




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Chapter X, Procedure – Part II, Assessments                                            Section 120

enquiries. But such persons are few. The claims we usually face are of the following types:–
       (1) Usually the need of showing agricultural income arises where there are excessive
              profits in business in any year and the assessee is keen to bring the money into
              books. He, therefore, creates ‘back-dated’ arrangements. In such circumstances,
              he is unable to create the proper evidence.
       (2) Where an assessee is unable to reconcile his wealth statement with reference to an
              earlier statement, he attempts to explain the same by showing agricultural
              income. This again necessitates creation of back-dated evidence. In such cases, not
              only the evidence (lease deeds, land records, produce record etc.) can be proved
              fabricated, but the income tax record can also be cited. Such people, being
              unaware of the future enquiry have not declared agricultural income in the
              relevant returns.
       (3) Those assessee who have regular ‘black’ income usually buy barren piece of land
              and start declaring the ‘black’ money as agricultural income. Scrutiny of land,
              produce and revenue records can easily demolish their claim. Such people also
              usually forget to account for the cost of development of land.
       (4) A typical land lord in our country is usually a big spender. He is invariably
              indebted to the commission agent through whom he sells his produce. He keeps
              borrowing money from him for seeds, fertilizer, household expenses long before
              he pays him with the produce of land. If that arhati can be contacted, the account
              of the assessee in his books can easily demolish his claim.
      (10) Poultry Farming. – Income derived from poultry farming is exempt from tax. There
are parties who are genuinely engaged in this business. But as usual, there are assessees who
bring their ‘black money’ into books etc., in the garb of poultry income.
      (11) Poultry operation. – These broadly fall into two categories:–
            (a) Keeping ‘layers’ for eggs and
           (b) Breeding broilers from ‘pullets’
      In, egg-farming, it may be called, the farmer buys layers from such ‘parent breeders’ as
PIA-Shaver, Arbor Acres etc. These ‘layer hens’ are kept in specially made sheds. The birds
are given special type of feed for bigger eggs with strong shells. This poultry feed is bought
from certain specialized sources (Leaver Brothers etc.) For health of birds services of doctors
are required. Then the farmer has the problem of sale of eggs. These may be directly
supplied to big www.imranghazi.com
                     consumers or through commission agents/whole-sellers in the ‘Poultry
Market.’
      (12) Similarly, a broiler-breeder buys ‘day-old’ pullets from a few sources like
PIA-Shaver, Arbor Acre etc. Then he keeps them in specially designed sheds and given them
a particular type of feed. Services of doctors are required from vaccination and these doctors
are employed on whole-time or part-time basis. Again, the bred up broilers are sold through
commission agents etc.
      (13) In both type of farms, one needs land, sheds, gas connection, electricity, medical
advice etc. He has to purchase ‘layers’ or ‘pullets’ and to sell eggs or broilers.
      (14) Thus where an assessee claims income from poultry farm, the following enquiries
ought to be made:–
        (i) If possible, the farm should be visited. If it is an egg producing farm, the number
              of layers can be counted. If it is broiler producing farm, by the size of facilities, the
              average production of broilers can be ascertained.
       (ii) Usually, the farms are not situated in the same city, or the farm is stated to have
              been closed etc. In that case, the assessee be required to produce:–
            (a) evidence of ownership or lease of land,
           (b) gas/electricity bills,
            (c) purchase vouchers of layers/pullets,
           (d) name and address of parties and voucher for purchase of feed,
            (e) name and address of the commission agent/whole-sellers through whom the
                  eggs or broilers are sold.
             (f) name and address of the doctor who vaccinated the birds.
      (iii) If the assessee claims that he himself looked after the farm, he should be
              summoned under section 148 and his statement be recorded. If he claims that it
              was looked after by a manager etc., the said manager be summoned under
              section 148.




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Section 120                                                     Income Tax Ordinance, 2001.

       (15) It will be appreciated that anyone who runs a poultry farm should know all about
farming. Below are some of the questions that should be asked:–
         (a) whether the farm was broiler producing or egg producing.
        (b) address of farm – names and address of adjacent farms or factories etc.
         (c) if land is rented, name of the land-lord,
        (d) the name and address of the party from whom the layers or pullets are purchased,
         (e) names and addresses of the parties from whom feed is purchased (the name of the
              person, who usually deals with the assessee),
          (f) the type of feed consumed (a real farmer knows its composition),
        (g) name and address of the commission agent/wholesaler who usually buys the
              produce (some ‘alleged’ farmers did not even know the address of the whole-sale
              market),
        (h) number of weeks in which a pullet becomes saleable or the number of eggs a
              ‘layer’ lays in a year or the age at which a layer starts laying eggs and the age at
              which it stops laying etc. etc.
        (k) types of diseases the birds usually contract and their remedies etc. etc.
       (16) The above questions are only illustrative, questions can be asked on various aspect
of farming. No person who is not in fact engaged in such farming can answer the questions
noted above and produce the evidence required.
Income from Fishing
       (17) Income from fishing is also exempt. Fishing is done in trawlers. Every trawler has
to be registered just as every motor vehicle is registered. It, therefore, has a registration
number. There is a Fishermen Cooperative Society which lends loans etc., to the trawler
owners. The catch is brought to the Fish Harbour and sold to the processing plants etc.,
through registered commission agents called ‘Mole-holders’. Occasionally processing plant
owners do make direct purchases from the ‘boat owners’. Many a ‘trawler’ owner rents out
his trawler to others who indulge in fishing activities. Income received as ‘rent of trawlers’ is
not exempt.
       (18) Where an assessee claims income from fishing, he should be examined under
section 148. It will be appreciated that no assessee would be engaged in fishing personally.
The claim, therefore, always is that they have employed qualified people to run the
operations. The www.imranghazi.com the business should also be examined
                     person who actually looks after
together with the assessee.
       The questions that ought to be asked are as under:–
         (a) What is the number and name of the fishing boat.
        (b) How was it acquired (The investment is very heavy and need be probed)?
         (c) Membership number with the society.
        (d) Name and address of the mole-holder through whom the catch is sold.
         (e) If the catch is sold direct to the ‘Processing’ plant, name and address of the plant.
          (f) Name of the pilot of the boat (they are licensed like car-drivers), number and
              names of the crew.
        (g) Type and average quantity of the catch.
        (h) One may also enquire about the details of the boat e.g., the horse-power of the
              engine, whether diesel or petrol drive, the speed of the boat, the length of boat,
              number of crew, number of days the boat remains at sea.
       (19) After recording his statement verification can be made from the relevant quarters.
Now if a person does not own a boat (as is often the case), he shall never be able to pass the
test. If the boat is owned but leased out, enquiries made from the society will reveal the truth.
Prize Bonds
       (20) Successful bonds are purchased from market at a premium (current rate is 30%
above face value) and the prize is claimed thereon. It is usually difficult to demolish the
claim. Since the Department has been accepting the claims without any enquiry, the
claimants are now extremely careless. Very often, prize is claimed on a bond which was
successful in a draw made a year or two earlier. This means that either the assessee had the
bond on the date the ‘draw’ was made or has purchased it when it was already successful in
a draw. The later eventuality is highly improbable as the seller is unlikely to sell a successful




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                                        691
Chapter X, Procedure – Part II, Assessments                                        Section 120

bond without knowing it. If the bond was in possession of the assessee at the time of draw,
then it should appear in his wealth statement of the relevant year. It is, therefore, always
profitable to examine all the claims of such winnings where the bond was successful in a
draw held on a date prior to the income year during which prize is claimed.
                            --------------------------------------------
                                                                                    Annexure IV
                                 INVESTMENT IN PROPERTY
      Property acquired by an assessee may fall in any of the following categories:–
           (a) open plot,
           (b) completed building or
            (c) building partly or wholly constructed by the assessee.
The purchase of open plots and completed buildings are always backed by registered deeds.
The price is invariably grossly under-stated. The assessing officers at present do nothing
about it and the declared investment in accepted as such. May be in many cases nothing
could be done to establish the actual investment by the purchasers, yet enquiries made in the
following manner, have produced results in a number of cases.
Open Plots
      (2) In housing schemes sponsored by official bodies like KDA, LDA, CDA. etc. most of
the plots are allotted, yet some are auctioned also. This can establish the market value of
similar plots in the scheme. The information about prices of auctioned plots can be obtained
from these authorities. If the registered sale price is grossly understated the seller is (under
the Gift Tax Act) liable to pay gift tax on the difference between the recorded sale price and
the fair market value.
      (3) The seller should be summoned under section 148, and required to produce his
bank account. If informed of the gift tax liability, the seller often produces evidence like, sale
agreement, pay order/draft which does establish that the transaction did take place at a
higher amount.
      (4) Even if evidence for the actual sale price cannot be collected and it is not possible to
assess the purchaser, gift tax proceedings should at least be ensured in respect of the seller.
House property
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      (5) Investment made in completed buildings are similarly grossly understated. Unlike
that of open plot market value of constructed buildings cannot be ascertained by
comparison. But very often, the price of such building is recorded at a figure less than the
market value of the plot underneath if or often the price is less than 10 times the A.L.V. In
such cases at least enquiries from seller as mentioned above at para 3 can prove useful.
Similarly, gift tax proceedings against seller can be taken.
Property constructed by assessee
      (6) In such cases, the tax payers not only understate the cost of construction but also the
extent of construction. Often 3-room houses turn out, in reality, to be 6-bed-room
bungalows. The assessing officer should invariably obtain:–
       (a) certified building plan,
       (b) total constructed area floor wise,
       (c) total cost and average cost/sq. ft.
      (7) Very often incorrect information is supplied including a fictitious site-plan. The
assessing officer should invariably visit the house and have on-the-spot verification of the
extent of construction and its type. As regards rates of various types of construction, rates
granted by PWD, other government agencies and big public companies (like Pakistan Steel
Mills etc.) can provide data. In case of dispute between the assessee’s version and
department the matter can be referred to the ‘Valuer’.
      (8) It must be remembered that unexplained investment is assessable in the year in
which the construction is completed.
Additional construction in existing property
      (9) Very often, after purchase of a constructed property or after constructing it the
assessees undertake additional construction once the issue of the original investment is
settled with the department. Thus, on record, the original investment stays, while additional
investment is made without disclosing it. Since additional constru ction cannot be
undertaken without permission of the local authority, their record can provide evidence of




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Section 120                                                      Income Tax Ordinance, 2001.

further investment. On the spot visit of the property can always reveal whether the actual
construction confirms to the extent of construction shown to the department.
                           --------------------------------------------
                                                                                 Annexure V
                                       PERSONAL EXPENSES
      As mentioned in the circular, a substantial part of the unrecorded income is consumed
by the assessee, yet unfortunately, the department seldom makes any attempt to ascertain
the extent of the assessee’s personal and private expenditure. Thus in every case selected for
detailed scrutiny, information detailed at the end of this annexure should be obtained from
the assessee, if he is sole proprietor and in respect of each partner of firm or member of
A.O.P. The idea behind obtaining such information is not only to determine his personal
expenses but also to make him commit about these details so that, if, on later enquiries, any
omission is detected, necessary action could be taken.
      (2) Substantial part of such details are obtained in some cases, yet neither the
supporting evidence is requisitioned nor examined. It is, therefore, imperative that bills
passports etc. should be invariably requisitioned and examined and the information
furnished should be checked from external sources.
                                    DETAILS TO BE OBTAINED
        1. House rent, if occupying rented house (indicating address of building and name
           of owner).
        2. Amount of local taxes paid, if own house.
        3. Electricity charges.
        4. Gas charges.      (Bills to be produced).
        5. Telephone charges.
        6. No. of motor vehicles and expenses thereon.
        7. No. and names of domestic             (Ration                                 Card
           servants and amount of salaries paid. to be produced).
        8. No. of family members and dependents.
        9. No. of children receiving education (indicating class, name of institution and
           amount of fees of each child).
                  www.imranghazi.com
       10. Names of clubs of which the assessee or a member of his family is a member and
           the amount of expenses.
       11. Travels abroad by assessee or his family member details of each trip alongwith
           the expenses should be separately shown (Passport to be produced).
       12. Marriage expenses of children, if any.
       13. Expenses on local travel by assessee or his family member (including hotel
           charges) if any incurred.
       14. Entertainment expenses (including hotel bills) if any.
       15. Expenditure incurred on purchase of furniture, electrical appliances and other
           household goods during the year.
       16. Details of any gifts made during the year.
       17. Medical expenses on self and family members (Hospital expenses to be separately
           shown).
       18. Insurance Premia paid by self and family members (indicate policy No. and sum
           assured).
       19. Other household expenses (Food clothing etc.)
                 Total Expenses ................
                 Signature............
                           --------------------------------------------
                                                                                  Annexure VI
                                   BOGUS PARTNERSHIPS
     In respect of the cases selected for detailed scrutiny, the genuineness of the partnership
should invariably be thoroughly probed unless the assessing officer is satisfied that at the
time of grant of registration, the issue had been satisfactorily examined.
     (2) Both the Ordinance as well as the Rules empower the Income Tax Officer to enquire
into the genuineness of the firm. Merely because there is a deed and an application




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and all other requirements of law have been fulfilled does not entitle the firm to be
registered. Similarly, the facts that registration has been granted does not debar the
department from making enquiries relating to genuineness of the firm. Income Tax Officer
can examine both the direct and indirect evidence leading to the determination of the firm to
be real or bogus. The powers of the Income Tax Officer in respect of these enquiries are
unfettered.
      (3) Factors to be considered:–
       (a) The partners know and accept being partners.
       (b) The resources of the persons shown as partners. Are they capable of contributing
             the capital shown ?
        (c) If a person is shown as working partner, is he actually working ?
       (d) The relationship of the partners interest. The closer the relation, the more the
             chances of a bogus partner. Wherever any person hitherto being assessed as
             individual, introduces his son or a daughter as partner, it calls for a closer examination.
       (e) The contribution of the partner by way of service to the firm. A partner shown to
             be an active partner ought to be working.
        (f) In the case of a sleeping partner, the share in the profits ought to be
             commensurate with the capital contributed.
       (g) The business or professional experience of the partner is also an important factor
             to be considered.
       (h) The extent to which a partner can act on his own authority is also an important
             criterion. If all the authority is concentrated in one partner, it calls for a closer look.
        (i) If a partner is brought into a firm for a particular reason, e.g., for the sake of
             additional capital, business experience etc. and on examination it is found that
             either the capital was not needed or the partner did not possess the alleged
             experience, it is an adverse reflection on the genuineness of the firm.
         (j) If a business is being carried on by a firm, then all persons doing business or
             otherwise dealing with it (its clients, principals, agents, bankers, various
             Government departments etc.) should know that it is a firm. If it presented itself
             otherwise to these parties, it adversely reflects on the genuineness of the firm.
      [Note.– The criteria mentioned above are to be considered together. None of the
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                  factors stated above alone is sufficient to reject the claim. All the factors must
                  be taken into account before taking a decision.]
Enquiries regarding genuineness of the firm
      (4) The normal practice. – It has been observed that the treatment given by the officers
in this behalf falls into four categories:–
       (a) Where the genuineness is accepted on the basis of the deed of partnership and the
             application and no enquiries whatsoever are made in this behalf.
       (b) where the effort is confined to obtaining affidavits of the partners to the effect that
             they are partners.
        (c) Where the statements of the individual partners is recorded.
       (d) Where apart from recording statements of the partners, some enquiries are made
             from outside parties, i.e., the bank, any authority where the firm is registered i.e.
             (C.C.I.E. etc.)
The treatment described at (a) and (b) constitutes an absolute negligence on the part of the
officer and needs no further comments. But even in cases where statements of the partners
are recorded, it has been observed that it is more of a ritual or formality than an effort to
really examine the genuineness. In cases where outside enquiries are made, these are made
mostly through the assessee and not directly. No fruitful results have ever been achieved by
this method.
The proper method of enquiry
      (5) If there is a firm in existence, then not only the partners should know their rights in
and obligations to the firm and other partners, but the persons dealing with the firm should
also know what they are dealing with. Thus the persons who should be examined are as under:–
       (a) The partners.
       (b) The bankers.
        (c) The landlord if the premises is on rent.
       (d) The Controller of Imports and Exports or any authority with whom the firm is
             registered or enrolled.




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Section 120                                                        Income Tax Ordinance, 2001.

        (e) The employees.
         (f) The clients especially the creditors of the assessee.
        (g) Any other person who deals with the firm in any manner.
Each of the above types of persons needs a different type of enquiry and examination. The
methods are discussed briefly below:–
Partners
       (6) While granting registration, each partner must be examined under section 148. If a
partner is a lady and not an active partner an affidavit would be sufficient. If a partner lives
at a distant place, an Inspector or the Income Tax Officer of the area be commissioned to
examine him. The object of the recording of his statement should be to establish whether he
knows what a genuine partner actively engaged in the business is likely to know. Some of
the relevant points are as under:–
        (a) His capital and share of profit.
        (b) Profit of the year falling to his share and whether it was received in cash or
              credited to his account.
         (c) Names of other partners and their shares.
        (d) Address at which the shop and/or factory is situated ; name of its owner (if it is rented).
        (e) Phone No. of the shop and/or factory.
         (f) Names of the adjoining shops/factories.
        (g) Names of the employees (which according to his duties he ought to deal with).
        (h) Names of the bankers and their addresses.
         (i) Names of major clients etc.
          (j) In case of contractors, the place of contract and the authorities with whom he
              deals with etc.
        (h) Depending on the nature of the duties allegedly performed by him, does he know
              about the work he does.
       (7) These questions are only illustrative, other questions can be devised according to
the situation.
Bank
       (8) When a firm opens an account in a bank, it is obliged to disclose the constitution of
the firm to the bank. The bank always require the assessee firm to file a copy of the deed also.
                    www.imranghazi.com
So letters be addressed to the bankers of the firm requiring them to disclose the constitution
of the firm as disclosed by the assessee to the bank.
Landlords
       (9) The rent deed or the lease deed of the business premises should always be examined
to ascertain whether it is an individual partner or the firm who is the tenant. If there is no
lease deed the landlord should be examined under section 148.
Employees
       (10) Ordinarily, an employee knows in whose employment he is. Statements of the
employees should be recorded asking them in whose employment they are. In most of the
fictitious firms, the employees seldom know that it is a firm or an individual who runs the
concern. (Only the accountant knows the financial arrangements).
Registering Authorities
       (11) By nature of their business, firms usually register themselves with certain
departments either to obtain business or to get licences or quotas. For example every importer
and exporter has to register itself with Chief Controller of Imports and Exports. Similarly,
contractors, suppliers etc., are registered with various Government and Semi-Government or
private organizations. Such registration and enrollment requires the firms to disclose their
constitution to such authorities etc. Similarly, where the assessee holds selling/buying agency
of some manufacturer, such manufacturer also requires the assessee to disclose their
constitution. Enquiries made from such organizations and authorities often produce results.
Clientele
       (12) Ordinarily, the clients dealing with a firm know with whom they are dealing. In
particular, if some party gives loan or goods on credit to a firm, it is in his interest to know
who will be responsible for the repayment. Such clients, creditors should be examined under
section 148.
       (13) It will be appreciated that if enquiries are made on the lines suggested above, the




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firms that exist only on paper will fail to pass the test. It must, however, be cautioned, that
failure in any one of the above noted tests, is not a conclusive proof of the fictitiousness of the
firm. It has been held by the courts that the question can be decided only if all the various
factors are considered together. It is the picture of the firm on the whole which determines
whether a firm is genuine or not.
Miscellaneous statutory obligations
   (14)(a) The profits must be divided among the partners. The payment may be either in
            cash or his account may be credited
       (b) The profits must be divided according to the shares of the partners.
        (c) The articles of the deed of partnership must be substantially adhered to. If the
            firm itself violates the stipulation of the deed of partnership, it is not eligible for
            registration.
Common pitfalls
      (15) Genuineness of a firm cannot be doubted merely because:
       (a) One or more partners cannot explain their capital.
       (b) The partnership is between father and son or between former employer and
            employees.
        (c) The bank account is not in the name of the firm.
       (d) That no capital is contributed by any of the partners or the capital contributed is
            not commensurate with share in the profit and loss.
       (e) That any clause of the deed has been violated; or
        (f) That the partners are residing together and have a common kitchen etc. etc.
      None of the above objections alone is sufficient ground for rejecting the claim on the
ground of genuineness of the firm. As mentioned above, while adjudicating upon the
genuineness of the firm, the whole picture should be taken into account.
                            --------------------------------------------
                                                                                  Annexure VII
                                     BENAMI BUSINESSES
      Often, in order to reduce incidence of taxation, assessees establish new lines of business
in the names of their family members and dependents separate from their own business.
                   www.imranghazi.com
They conduct the business themselves though it is shown in the name of a family member
(wife, a minor child or a child, though major yet still in education).
      (2) Thus every assessee or the partner of a firm whose case has been selected, should be
required to furnish information regarding business activities of his family members. If such a
member is a lady, a minor or a son still in education, enquiries should be conducted to check
whether the said person is the genuine owner of the business or merely a benamidar.
      (3) If the said dependent is real owner and conducting business, he would be knowing
the ins and outs of his businesses. If the said dependent is major and claims to conduct
business himself, he should be examined under section 148 and questions on facts relating to
business be asked e.g.–
       (a) Nature of business.
       (b) Whereabouts of shop/showroom.
        (c) If shop is in a market, the names and addresses of adjoining shop owners.
       (d) Name and address of banker.
       (e) Name of landlord of shop or showroom.
        (f) Places from where goods are purchased.
       (g) Names of employees etc. etc.
             (Other questions can be devised to suit the nature of business).
      (4) In case of ladies and minors, the rent deed, records available with banks, office of
CCI&E and other government departments would indicate who is conducting business on
their behalf. If it is established that the business is conducted by the assessee, appropriate
action may be taken accordingly.
      (5) Examination of the employees of such benami business under section 148 often
produces good results.
      (6) It may be pointed out that such benami businesses are more common in the case of
importers, exporters, contractors, real estate developers, selling agents etc.




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                                               696
Section 120                                                       Income Tax Ordinance, 2001.

Bogus selling and purchasing agencies.
      (7) It is common practice that large manufacturing concerns make purchases of raw
materials and also sell their products through firms and proprietorships owned by the
family members and dependents of the partners or directors thereby diverting part of profits
of the main concern to these benami agencies. Actually, such purchases and sales are made
by such manufacturing concerns (usually firms and private limited companies) but on paper
these are shown to be made through these benami concerns. Though ex-facie such benami
concerns have separate offices/show rooms and establishments, yet their records etc are
available on the premises of the main concern.
      (8) The assessing officers should, therefore, ascertain the constitution of the parties
through whom purchases are made or who are selling agents. Once it is known that the said
concerns are owned by family members of the owners of such main concern, enquiries in the
manner indicated above should be made                to ascertain the genuines of such
purchasing/selling agents.
                            --------------------------------------------
                                                                                 Annexure VIII
                                   WEALTH STATEMENT
      A wealth statement is a statement of assets owned and liabilities owned by an assessee.
The prescribed form IT-10B classifies the various assets and liabilities.
      (2) While examining a wealth statement, the most important point to be kept in mind is
that the assessee should not only clearly identify every asset and liability but should also
give exact quantum of asset. Secondly, the value of asset should be exact and at cost. Thirdly,
the assets shown should also include the assets of wife, minor children, whether they are
existing assessees or not. The following paragraphs discuss the aspects which should be
examined in respect of some of the important assets/liabilities.
Agricultural land
      (3) The exact location and measurement of each tract of land should be obtained so that
any future acquisition or disposal could be identified. The assessees often don’t mention
exact measurement and keep on increasing the lands without disclosing it or often change a
cheap tract with a costly one without disclosing it. If there are any acquisitions or disposals,
necessary documents should be obtained and examined.
Urban plots       www.imranghazi.com
      (4) Complete details regarding location size and cost should be obtained. In the case of
acquisition or disposal, necessary documents be obtained and examined.
House property
      (5) In case, house property has been newly built or acquired during the year, the
enquiries mentioned in Annexure IV of this circular should be made. In case of old houses,
details regarding location, extent and type of construction, year of completion etc. should be
obtained. In large number of cases, assessees have been found to have completely
reconstructed the property without mentioning the fact in the wealth statement.
      (6) In respect of self-occupied houses, the assessees often keep making alternations,
additions etc. without disclosing such expenditure. Enquiries from local authorities
regulating housing can disclose such changes.
Shares/Bonds.
      (7) Where any shares, securities, bonds (including Prize Bonds) are declared then
complete description and serial numbers should be obtained. The changes in the holding
during the year should also be obtained.
Jewellery
      (8) Assesses often show jewellery as having been inherited or received in dowry. They
often show only approximate value without their exact weight and nature. Therefore, exact
weight and description of jewellery should invariably be obtained.
House-hold effects.
      (9) This is perhaps the most universally under-stated item. Few assessees declare cost
of house-hold effects exceeding Rs.20,000. Complete details of furniture, carpets, electrical
appliances, silverware etc. should be obtained alongwith year of acquisition. Houses located
in fashionable localities should invariably be visited for verification of the household effects
(if possible).
Bank Accounts.




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Chapter X, Procedure – Part II, Assessments                                        Section 120

       (10) The account number, name of bank and branch should be obtained and recorded. If no
accounts in the name of family members and dependents are declared, a specific certificate be
obtained and then enquiries made from the bank where assessee has his account.
Liabilities
       (11) Very often, in order to explain assets that cannot be hidden, loans are shown from
friends and relations. complete addresses of such persons be obtained and such persons be
examined under section 148 in the manner described in Annexure I. If any loan from bank is
shown, enquiries should be made from the bank regarding the security furnished.
Cash at home and loans to friends.
       (12) Very often assessees incurring losses in un-recorded businesses or heavy personal
expenditure overdraft from banks or firm or companies in which they are partners but, in
order not to deplete their assets, they show fictitious loans to friends or cash in hand. This
enables them to hide future black money. Thus, in case where there are loans from
firms/companies or banks and also substantial cash in hand, the assessee may be asked to
explain reason for holding cash and paying interest to bank. In case of unsatisfactory
explanation, a finding be recorded in assessment order and also on wealth statement that
those assets are fictitious. This would preclude them from taking future credit for such
fictitious assets. Similarly, if loans to friends are shown, they should be examined under
section 148 and in case they fail to establish the loans, a finding of their fictitiousness should
be recorded. – [C.No.1(9)IT-1/80, dated 13.3.1980].

              CASE LAW – SUPREME COURT / HIGH COURTS / ITAT
                   SECTION 120(1A) IS EXPLANATORY, HENCE, RETROSPECTIVE
   Even before the promulgation of subsection (1A) of Section 120 the Commissioner
    had the powers to select the cases which fall under the provisions of subsection (1) of
    Section 120 for audit of their tax affairs and also that subsection (1A) has
    retrospective effect. – Noble (Pvt.) Ltd. vs. Federal Board of Revenue & Others [2009
    PTR 38 (H.C. Kar.)].
             SELF-ASSESSMENT SCHEME – SECTION 59 READ WITH SECTION 65 OF THE
                                    ORDINANCE – GENERAL
   Assessee was not under statutory obligation to file his return of total income for any
    year in terms of provisions of section 59 of the Income Tax Ordinance, 1979 under
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    Self-Assessment Scheme. – CIT and others v. Media Network and others [2007 PTR
    3 [S.C.Pak.] = (2006) 94 TAX 293 = 2006 PTD 2502 = PLD 2006 SC 787 = PTCL 2007
    CL. 1].
   Non-filing of documents within prescribed time does not totally deprive the assessee
    from the benefit of Self-Assessment Scheme. – Novitas International v. ITO and
    others [(1991) 64 TAX 86 (S.C.Pak.) = 1991 PTD 968].
   Tax Department failed to substantiate that under self assessment scheme for year
    1996-97 there was any bar for new assessee to qualify. – CIT/WT, Zone-B, Lahore v.
    Malik Brothers Cloth Dealer, Lahore [(2005) 92 TAX 127 (H.C.Lah.) = 2005 PTD 1845].
   Income Tax Officer did not pass any order upto 30.6.1988 on the return for the
    assessment year 1987-88 and failed to comply with the provisions, held that Income
    Tax Officer could not pass any order on the return after 30.6.1988 and assessee could
    not be deprived of benefit of Self Assessment Scheme. – Shoaib Bilal Corporation,
    Faisalabad v. CIT, Faisalabad and another [(1993) 67 TAX 233 (H.C.Lah.) = 1993
    PTD 332].
                              RETROSPECTIVITY OF SECTION 59(4)
   Subsection (4) of section 59 reintroduced by Finance Act, 2001 also applies to cases
    pending before the said date. – H & Sons v. CBR [2005 PTR 116 [H.C.Lah.] = (2005)
    91 TAX 224 = 2005 PTD 147].
                     SECTION 59(3) IS RESTRICTED TO MINOR ADJUSTMENTS
   Section 59(3) is restricted to minor adjustments. – CIT, Companies-I, Karachi v.
    Eastern Services Pvt. Ltd., Karachi [2006 PTR 29 [H.C.Kar.] = (2006) 93 TAX 26 =
    2005 PTD 2429 = PTCL 2005 CL. 751].
                CONDITION OF ONLY SOURCE OF INCOME FROM HOUSE PROPERTY
   Condition of 10% increase u/s USAS does not apply to cases where only source of
    income was from house property. – [2006 PTR 127 (Trib.) = (2006) 94 TAX 389 =
    2007 PTD 745].




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                                           698
Section 120                                                Income Tax Ordinance, 2001.

   Section 59(3) authorises adjustments u/s 34 to 38, 50, 53 or 54, the rules made under
    section 165, the First Schedule and the Third Schedule. – Mushtaq Cold Storage,
    Lahore v. IT/WT, Lahore [(2004) 89 TAX 351 (H.C.Lah.) = 2003 PTD 2097].
                CONCEPT OF ENACTMENT OF INCOME TAX ORDINANCE, 2001, IS TO
                       “LET THE TAXPAYER MAKE HIS OWN ASSESSMENT”
   Concept of enactment of Income Tax Ordinance, 2001, is to “let the taxpayer make
    his own assessment”. – Syed Bhais (Pvt.) Ltd., through Director v. CBR, Islamabad
    [(2007) 95 TAX 211 (H.C.Lah.) = 2007 PTD 239].
               CONCESSIONS U/S 59 CANNOT BE WITHDRAWN ON TECHNICALITIES
   Retrieval of concession of SAS on far fetched technicalities is unjustified. – Profile
    Architectural Consultants v. DCIT, Circle-02, Zone-B, Lahore [(2003) 89 TAX 75
    (H.C.Lah.) = 2003 PTD 1795].
                          CONDITIONS FOR REOPENING OF SAS CASES
   Cases accepted under SAS cannot be reopened unless “definite information” is
    available with the Department. – ITO and another v. Chappal Builders [(1993) 68
    TAX 1 (S.C.Pak.) = 1993 PTD 1108].
   Onus lies with Department to establish sufficient grounds to reopen SAS cases. – ITO
    and another v. Chappal Builders [(1993) 68 TAX 1 (S.C.Pak.) = 1993 PTD 1108].
   Expression “definite information” – How to be interpreted. – ITO and another v.
    Chappal Builders [(1993) 68 TAX 1 (S.C.Pak.) = 1993 PTD 1108].
   Difference of opinion is not definite information. – ITO and another v. Chappal
    Builders [(1993) 68 TAX 1 (S.C.Pak.) = 1993 PTD 1108].
   If Revenue is in possession of an evidence of concealment, it must first accept the
    return under Self-Assessment Scheme and then proceed to re-open it in accordance
    with provisions of law. – Usman Siddiqui v. ACIT/WT, Lahore [(2004) 89 TAX 139
    (H.C.Lah.) = 2003 PTD 2838].
   A Self-assessment case not excluded from the preview of the Scheme cannot be
    re-opened on the basis of information already available on record. – CIT, Companies-II,
    Karachi v. Khalid Jamal [(2003) 88 TAX 245 (H.C.Kar.) = 2003 PTD 1093].
   Assessee received a notice informing that its case was selected for detailed scrutiny.
                www.imranghazi.com
    Definite information based on material evidence was not disclosed held that assessee
    rightly contended that the impugned action is arbitrary and invalid. – Muhammadi
    Oil Trading Co. through Partner, Karachi v. RCIT, Southern Region, Karachi and
    other [(1994) 70 TAX 204 (H.C.Kar.) = 1994 PTD 494].
   SAS cases can be reopened under section 65 on fulfillment of legal provisions. – Haji
    Ismail Ibrahim v. ITO, Circle W-II, West Zone, Karachi and 2 others [(1992) 65 TAX
    153 (H.C.Kar.) = 1992 PTD 45 = PTCL 1992 CL. 471].
          REGISTERED FIRMS NOT MAINTAINING ACCOUNTS – SAS WAS NOT APPLICABLE
   Self-Assessment scheme for assessment year 1982-83 was not available to registered
    firms that were not maintaining the accounts. – ITO & two others v. Shaikh
    Ghulam Shah [(1991) 64 TAX 91 (S.C.Pak.) = 1991 PTD 993].
                   PRINCIPLE OF RES JUDICATA DOES NOT APPLY TO SAS CASES
   Principle of res judicata does not apply to Self Assessment Scheme cases. – CIT,
    East Pakistan, Dacca v. Wahiduzzaman [(1965) 11 TAX 296 (S.C.Pak.) = 1965 PTD
    283 = PLD 1965 SC 171].
                                SCOPE OF ADDITIONS UNDER SAS
   Scope of addition(s) under section 59(3) of the 1979 Ordinance. – CIT v. Sadiq
    Traders [(1999) 80 TAX 112 (H.C.Kar.) = 1999 PTD 2907].
   Assessing officer is not competent to make any addition to return version where
    assessment was made under section 23(1) of the repealed Act. – Mian Aziz Ahmad,
    Lahore v. CIT, Lahore [(1979) 39 TAX 1 (H.C.Lah.) = 1979 PTD 12 = PLD 1979 Lah. 63].
                                  SELECTION FOR TOTAL AUDIT
   Both the selection of the case for total audit and the action under Section 122(5A) are
    different actions and there is no bar for initiating both the actions for the same tax
    year even on identical points. – Noble (Pvt.) Ltd. v. Federal Board of Revenue &
    Others [2009 PTR 38 (H.C.Kar.)]




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                                        699
Chapter X, Procedure – Part II, Assessments                                     Section 120

   Policy guidelines for selection of cases for total audit. – CIT and others v. Media
    Network and others [2007 PTR 3 [S.C.Pak.] = (2006) 94 TAX 293 = 2006 PTD 2502 =
    PLD 2006 SC 787 = PTCL 2007 CL. 1].
   Procedure for selection of cases for total audit. – CIT and others v. Media Network
    and others [2007 PTR 3 [S.C.Pak.] = (2006) 94 TAX 293 = 2006 PTD 2502 = PLD
    2006 SC 787 = PTCL 2007 CL. 1].
   Sub-section (1A) of section 120 is an exception to section 120(1). – Amson Vaccines
    Pharma (Pvt.) Ltd. v. CIT and others [(2008) 98 TAX 178 (H.C.Isl.) = 2008 PTD 1440
    = PTCL 2009 CL. 97].
   No limitation has been provided in section 120 for invoking sub-section (1A) and it can
    be assumed that Commissioner may not select a person for an audit under subsection
    (1A) after the end of the Financial year. – Amson Vaccines Pharma (Pvt.) Ltd. v. CIT
    and others [(2008) 98 TAX 178 (H.C.Isl.) = 2008 PTD 1440 = PTCL 2009 CL. 97].
   There is no express provision of issuing notice before selection of case for audit, the
    mode of affording opportunity of showing cause against action proposed to be taken
    varies from case to case. – Amson Vaccines Pharma (Pvt.) Ltd. v. CIT and others
    [(2008) 98 TAX 178 (H.C.Isl.) = 2008 PTD 1440 = PTCL 2009 CL. 97].
   A notice informing the petitioner of the fact its case being selected and the grounds
    therefore was given to the petitioner is sufficient compliance of the principle of
    natural justice. – Amson Vaccines Pharma (Pvt.) Ltd. v. CIT and others [(2008) 98
    TAX 178 (H.C.Isl.) = 2008 PTD 1440 = PTCL 2009 CL. 97].
   Selection of assessee‟s case for total audit on the basis of guidelines withheld from
    assessee till filing of return is improper. – Lahore Alma v. CBR and others [(2004)
    90 TAX 282 (H.C.Lah.) = 2004 PTD 2511].
   Policy guidelines issued in respect of SAS 2002-03 by CBR are merely
    “administrative” in nature for subordinate officials. – Sahib Textile (Pvt.) Ltd. and
    others v. Federation of Pakistan [(2003) 88 TAX 337 (H.C.Lah.) = 2004 PTD 1].
   Revenue tried to take advantage of Para 9 of SAS. – Sahib Textile (Pvt.) Ltd. and
    others v. Federation of Pakistan [(2003) 88 TAX 337 (H.C.Lah.) = 2004 PTD 1].
   State functionaries should not keep the citizens in dark. – Sahib Textile (Pvt.) Ltd.
    and others v. Federation of Pakistan [(2003) 88 TAX 337 (H.C.Lah.) = 2004 PTD 1].
   Word “issued” in para 9(a)(ii) of SAS should not be read as “to be issued”. – Sahib Textile
    (Pvt.) Ltd. and others v. Federation of Pakistan [(2003) 88 TAX 337 (H.C.Lah.) = 2004
    PTD 1].
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   Holding of guidelines for selection of cases for audit till the filing of returns held not
    bona fide. – Sahib Textile (Pvt.) Ltd. and others v. Federation of Pakistan [(2003) 88
    TAX 337 (H.C.Lah.) = 2004 PTD 1].
   Concession of Self-Assessment Scheme cannot be denied after the assessee files his
    return. – Dr. M.D. Youchi v. ACIT, Circle-20, Companies Zone-I, Lahore [(2004) 89
    TAX 155 (H.C.Lah.) = 2003 PTD 1780].
   Selection of case for total audit held invalid as the same was made after the date
    fixed by the CBR. – Mian Kamal Anwar, Sargodha Road Faisalabad v. ITAT,
    Lahore and others [2002 PTD 1895 (H.C.Lah.)].
   Selection of case of total audit on vague grounds held invalid. – Mian Kamal Anwar,
    Sargodha Road Faisalabad v. ITAT, Lahore and others [2002 PTD 1895 (H.C.Lah.)].
   Parametric computer balloting held contrary to the law. – Ikhlaq Cloth House,
    Faisalabad v. ACIT, Circle-12, Faisalabad Zone, Faisalabad and 3 others [(2001) 84
    TAX 146 (H.C.Lah.) = 2001 PTD 3121 = PTCL 2001 CL. 597].
   Selection of SAS cases for total audit remanded back to a three-member committee
    for de novo action. – Mian Travel and Trade Pvt. Ltd. v. Federation of Pakistan
    [(2003) 88 TAX 69 (H.C.Lah.) = 2003 PTD 1821].
   Selection of cases in violation of SAS held without lawful authority. – Millat Bottles
    Store, Faisalabad v. ACIT [(1998) 78 TAX 173 (H.C.Lah.) = 1998 PTD 2555 = PTCL
    1998 CL. 213].
   Immunity could not be denied for failure to pay the exact amount of tax due as no
    such provision existed in SAS. – Shoaib Bilal Corporation, Faisalabad v. CIT,
    Faisalabad and another [(1993) 67 TAX 233 (H.C.Lah.) = 1993 PTD 332].
   Selection of case for total audit is justified where no violation of law existed. – Dawn
    Sports v. ITO [(1993) 67 TAX 208 (H.C.Lah.) = 1992 PTD 1285].




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                                            700
Section 120                                                  Income Tax Ordinance, 2001.

   Case filed under SAS could be earmarked for balloting for next two years. – Shafqat
    Rasool v. Islamic Republic of Pakistan through Secretary Finance, Islamabad and
    others [(1992) 66 TAX 85 (H.C.Lah.) = 1992 PTD 889].
   Wrong selection of case for total audit disapproved. – [(2004) 89 TAX 245 (Trib.)].
   Selection of case for audit on the basis of guidelines issued after the date of filing of
    returns held unjustifiable. – [(2005) 91 TAX 135 (Trib.) = 2004 PTD 2672].
   Claiming of lesser expenses cannot be a basis for taking a case out of SAS. – [(2004)
    89 TAX 452 (Trib.) = 2004 PTD 2449].
                                 NO SELECTION ON RCIT‟S WHIMS
   Selection for total audit cannot be made on mere contemplation by the RCIT. – Super
    Electronics v. RCIT/WT and others [(2004) 90 TAX 221 (H.C.Lah.) = 2004 PTD 1719].
   View of the RCIT that assessee has suppressed income cannot be accepted on its face
    value where policy directions have been disregarded. – Super Electronics v.
    RCIT/WT and others [(2004) 90 TAX 221 (H.C.Lah.) = 2004 PTD 1719].
   Selection of cases for audit held unlawful. – Lahore Alma v. CBR [2004 PTD 2511
    (H.C.Lah.)].
   Department‟s plea that case does not qualify for SAS was found self-contradictory as
    the case was earmarked for total audit. – Sarfraz Ice Factory v. CBR and another
    [(2004) 89 TAX 240 (H.C.Lah.) = 2004 PTD 31].
   Revenue authorities reprimanded for backing out from promise made in the shape of
    giving immunity clauses. – CIT/WT, Lahore Zone-B, Lahore v. Noor Trading
    Company, Pattoki [(2003) 87 TAX 102 (H.C.Lah.) = 2002 PTD 1560].
   Qualification of a case under SAS is a question of fact. – CIT/WT, Lahore Zone-B, Lahore
    v. Noor Trading Company, Pattoki [(2003) 87 TAX 102 (H.C.Lah.) = 2002 PTD 1560].
                             CASES SELECTED FOR DETAILED SCRUTINY
   Selection for detailed scrutiny without disclosing the information based on material
    evidence and without opportunity of hearing had been afforded to the assessee
    before issuance of notice held arbitrary and discriminatory in nature, hence illegal. –
    Pakistan Educational Society, Karachi v. Govt. of Pakistan, through Chairman &
    Secretary, Revenue Division, Islamabad and others [(1993) 67 TAX 311 (H.C.Kar.) =
    1993 PTD 804].
   Case was wrongly excluded from SAS as assessee was entitled to 50% tax rebate,
    being senior citizen. – [2004 PTD (Trib.) 199].
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                 ENHANCEMENT OF INCOME VIS-À-VIS SELF-ASSESSMENT SCHEME
   Assessing officer held not empowered to enhance income filed under SAS. – Ameer
    Bux Badruddin, Sarraf, Hyderabad v. CIT, Karachi West, Karachi [(1984) 50 TAX 61
    (H.C.Kar.) = 1984 PTD 347].
   Return filed by assessee fulfilling all requirements of self assessment scheme could
    not be rejected by Income Tax Officer on the sole ground that assessee had not
    maintained any books of accounts. – CIT, Karachi West, Karachi v. Manzoor Hussain
    Abdul Karim [(1984) 49 TAX 1 (H.C.Kar.) = 1983 PTD 291 = PTCL 1984 CL. 47].
   Accounts submitted by the assessee can only be rejected on an objective basis. –
    [(2003) 88 TAX 295 (Trib.) = 2004 PTD 151].
                                      CLAIM FOR IMMUNITY
   Assessee filed returns before the Income Tax officer in the normal course and
    declared certain income, on the basis of which profits and sales were determined,
    claiming immunity held that assessee was entitled for the same. – Saifuddin
    Ghulam Ali and Sons v. CIT [(1990) 61 TAX 76 (H.C.Kar.) = 1989 PTD 1061].
                         COMPARISON OF INCOME WHERE LOSS ASSESSED
   If brought forward loss is adjusted against income of subsequent year and result is
    loss, case cannot qualify for SAS. – [(2004) 89 TAX 541 (Trib.) = 2004 PTD 1562].
   Loss assessed in any of the three preceding years should be ignored for calculation of
    average of the assessed income of the three preceding years. – Cannon Products
    Ltd., and others v. ITO and others [(1985) 51 TAX 114 (H.C.Kar.) = 1985 PTD 549 =
    PLD 1985 Kar. 572 = PTCL 1985 CL. 178].
ASSESSEE CAN FILE A REVISED RETURN FOR AVAILING THE BENEFIT OF SELF ASSESSMENT SCHEME
   CBR cannot exclude any case from the purview of self assessment scheme merely on
    the ground that revised return was filed. – Cannon Products Ltd., and others v. ITO
    and others [(1985) 51 TAX 114 (H.C.Kar.) = 1985 PTD 549 = PLD 1985 Kar. 572 =
    PTCL 1985 CL. 178].




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                                        701
Chapter X, Procedure – Part II, Assessments                                  Section 120

                              SECTION 59 VIS-A-VIS WRIT PETITION
   Section 59(1) of the Income Tax Ordinance, 1979, vis-à-vis writ under Article 199 of
    the Constitution of Pakistan. – Rehmania Hospital v. Govt. of Pakistan through
    Ministry of Finance, etc. [(1997) 76 TAX 138 (H.C.Pesh) = 1997 PTD 1845].
   Where a new interpretation was made in respect of Self Assessment Scheme by the
    CBR. – Faisal Plaza v. CBR [(1995) 71 TAX 282 (H.C.Lah.) = 1995 PTD 850].
   Notice to exclude case from Self Assessment Scheme on mere surmises declared
    unlawful. – Chapal Builders v. ITO and another [(1990) 61 TAX 57 (H.C.Kar.) =
    1990 PTD 62 = PTCL 1990 CL. 778].
   Service of notice on the counsel of the petitioner for short documents held legal. –
    Friends Construction Company v. CIT and others [(1989) 60 TAX 88 (H.C.Lah.) =
    1989 PTD 843].
   Assessee cannot claim immunity from detailed scrutiny under writ jurisdiction. –
    Mohammad Asghar, etc. v. CBR, etc. [(1986) 53 TAX 109 (H.C.Lah.) = 1986 PTD 357].
                          ORDERS U/S 59 & 59A ARE HIT BY S. 65(1)(C)
   Acknowledgement slip is to be taken as “assessment order” as command of law. –
    [(2004) 89 TAX 418 (Trib.) = 2004 PTD 752].
   Deemed order cannot be equated with an order under section 59A. – [(2005) 91 TAX
    222 (Trib.) = 2004 PTD 2786].
   Deemed order under section 59A is neither an assessment order nor an order in
    respect of total income. – [(2005) 91 TAX 222 (Trib.) = 2004 PTD 2786].
                             SERVICE OF SHORT DOCUMENT NOTICE
   Where service is improper, case should be cancelled/annulled instead of being
    set-aside. – [(2004) 89 TAX 413 (Trib.) = 2004 PTD 1391].
                                   ACCEPTANCE UNDER SAS
   Return held to be qualified for acceptance under SAS. – [(2004) 90 TAX 331 (Trib.) =
    2004 PTD 2679].
                                     IT-30 IS NOT AN ORDER
   IT-30 and Demand Notice cannot be equated with “assessment order passed in
    writing”. – [2004 PTD (Trib.) 2644].
                               AGREED ASSESSMENT IS NOT VALID
                www.imranghazi.com
    No provision of law allows making assessment of income on the basis of agreement.
    – [(2005) 91 TAX 135 (Trib.) = 2004 PTD 2672].
                       INCLUSION OF DEEMED INCOME FOR SAS PURPOSE
   If SAS includes deemed income for comparison purposes CBR cannot withdraw it by
    issuing a clarificatory circular letter. – [2004 PTD (Trib.) 1038].
                                    LIMITATION UNDER SAS
   Order passed beyond limitation period provided in section 59(4) held void ab initio. –
    [2004 PTD (Trib.) 1424].
                                ESSENTIAL FOR AN ASSESSMENT
   Existence of the company was essential for an assessment as there cannot be an
    assessment of a non-existent person. – [(2005) 91 TAX 117 (Trib.) = 2004 PTD 2648].
   Any proceedings conducted without issuance of notice u/s 62 are nullity in the eye of
    law. – [(2004) 89 TAX 42 (Trib.) = 2004 PTD 1233].
   No assessment can be finalized without allowing the assessee proper opportunity of
    being heard. – [(2004) 90 TAX 352 (Trib.) = 2004 PTD 2051].
                        ASSESSMENTS UNDER SECTION 59A vs. 62 vs. 120
   Return shall be taken for all purposes to be an assessment order issued to the
    taxpayer by the commissioner. – [2010 PTR 95 (Trib.)]
   In the presence of information and issuance of relevant notices, assessment could not be
    made on the basis of return u/s 59A. – [(2004) 90 TAX 340 (Trib.) = 2004 PTD 2074].
                                      AGREED ASSESSMENT
   As first agreement was consented by both the parties, a second cannot be considered
    as with free consent of taxpayer. – [2010 PTR 127 (Trib.)]
   Breach of agreement on the part of any officer of FBR is not permissible. – [2010
    PTR 135 (Trib.)]
   Entire contract must be performed. – [2010 PTR 135 (Trib.)]




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                                                   702
Section 120A                                                     Income Tax Ordinance, 2001.

            Investment Tax on income.– (1) Subject to this Ordinance,
      1[120A.

the Board may make a scheme of payment of investment tax in respect of
undisclosed income, representing any amount or investment made in
movable or immovable assets.
     (2) Where any person declares undisclosed income under sub-section
(1) in accordance with the scheme and the rules, the tax on such income
called investment tax shall be charged at such rate as may be prescribed.
    (3) Where a person has paid tax on his undisclosed income in
accordance with the scheme and the rules, he shall –
         (a)      be entitled to incorporate in his books of account such
                  undisclosed income in tangible form; and
         (b)      not be liable to pay any tax, charge, levy, penalty or prosecution
                  in respect of such income under this Ordinance.
      (4) For the purposes of this section –
          (i)     “undisclosed income” means any income, including any
                  investment to be deemed as income under section 111 or any
                  other deemed income, for any year or years, which was
                  chargeable to tax but was not so charged; and
         (ii)     “investment tax” means tax chargeable on the undisclosed
                  income under the scheme under sub-section (1) and shall have
                  the same meaning as given in clause (63) of section 2 of the
                  Income Tax Ordinance, 2001.]
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1 Section 120A inserted by Finance Act, 2008.

                                                COMMENTS
SECTION 120A: ―Investment Tax on income‖.
This money-laundering, asset-whitening scheme not only proved moral bankruptcy of the
State but also fetched only Rs. 1.5 billion – a disappointing figure when nearly 50% of
economy is undergrome. It also proved to be a slap on the face of honest taxpayers and a big
bonus for tax evaders, money launderers, looters and plunderers of national wealth. In
civilized, law-respecting societies such criminals are dealt with an iron hand. By exemplary
punishment coupled with asset-seizure legislation, the State could have set a precedent on
how to deal with this class that has ruined the State structure and moral fabric of our society.
    On the contrary, such miscreants are protected through NRO (National Reconciliation
Ordinance) and such loathsome schemes as the one under discussion. In the face of this
situation, Pakistan will never solve the goals of becoming an egalitarian society having good
governance and rule of law. Those who have introduced this scheme should be punished by
the apex Court taking suo moto action under Article 184(3) of the Constitution. However,
there is a remote possibility of such an action as judiciary has long been actively serving the
interests of the corrupt, and the prowerful and not that of the masses.

                                          DEPARTMENTAL VIEW
Extension in date to file return of income for tax year 2008 for new taxpayers who intend to file a
declaration under the Investment Tax Scheme, 2008.
Under the Investment Tax Scheme (ITS) 2008 filing of Income Tax return for Tax Year 2008
and for subsequent three tax years is mandatory. The last date for the filing of declaration




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                                       702-A
Chapter X, Procedure – Part II, Assessments                                            Section 120A

under this scheme is 31-12-2008 while the date for filing of Income Tax return for tax year,
2008 has expired on 31.10.2008. Due to this reason various representations have been
received in the Board proposing to extend the last date for filing of Income Tax returns by
new taxpayers who intend to file declarations under the Investment Tax Scheme 2008, in
order to harmonize both dates.
2. The matter has been considered in the Board and it has been decided to extend the date for
filing of Income Tax return for Tax Year 2008 upto 31.12.2008 only for new taxpayers who
intend to avail the benefits of the scheme and intend to file declaration under the Investment
Tax Scheme, 2008.
3. ‚New taxpayer‛ means a person having undisclosed assets/un-explained income upto
30.06.2007 and who has never filed return of income. – (14/2008, dated 16.12.2008).
AMENDMENT IN INVESTMENT TAX SCHEME, 2008.
The Federal Board of revenue is pleased to make the following amendments in the investment
tax Scheme, 2008 announced through Circular No. 3 of 2008 dated 1.7.2008, namely:-
1.      (i) In Paragraph-I after sub-paragraph (ii) the following new sub-paragraph shall be
            added.
      (iii) The scheme shall not apply to the cases where proceedings are pending before the
            Department, Appellate Authority or any court.
       (ii) In paragraph 2(b) for the figure ‚2008:‛ the figure ‚2007‛ shall be substituted.
2.    It is further clarified that the term ‚Cash‛ mentioned in Para A of Part-I of the
Annexure to the said Investment Tax Scheme, includes cash in foreign currency also. For the
calculationo f 2% tax payable thereon, the amount is to be converted into Pak rupees at the
exchange rate as on 30.06.2008. – (8/2008 dated 08.08.2008).
Investment Tax Scheme, 2008 – Clarification Regarding.
Through the Finance Act, 2008, Government has introduced Investment Tax Scheme 2008
with effect from July 1, 2008 under section 120A of the Income Tax Ordinance, 2001 for the
payment of tax on unexplained income/assets @ 2% of Fair Market Value as on 30.06.2008. In
this regard various queries/issues have been raised which have been considered by the
Board and are clarified hereunder:–
   S.No.          QURIY RAISED                               CLARIFICATION
          Whether the scheme comes only
   1.                           This scheme is applicable  every person whose
                 www.imranghazi.com is chargeable to taxtounder the Income Tax
                                income
          for the resident taxpayers or the
          non-resident as well, and whether     Ordinance, 2001.
          it extends to FATA/ Northern
          Areas/Azad Jammu and Kashmir
          also. This may kindly be clarified.
   2.     No formula is prescribed for          No formula or basis has been given for determination
          determination of fair market value    of the Fair Market Value in the scheme because
          of various classes of assets          Government of Pakistan has reposed full confidence
                                                in the tax payer in stating the value of the assets as on
                                                30.06.2008 in the declaration form. It is expected that
                                                the taxpayers would declare the fair market value of
                                                the assets as only nominal tax of 2% of the value has to
                                                be paid in lieu of a much higher tax and penalties
                                                payable on the value of assets/investments under the
                                                deeming provisions of the Income Tax law.
   3.     Scheme does not elaborate the         As mentioned in para 6 (ii) of the scheme, ‚deficiency‛
          types of deficiencies covered         refers to any mistake in calculation of tax or filling in
          under the sub para (ii) of            of columns of the declaration form etc. The scheme
          paragraph 6. It appears that          does not prescribe any method of valuation of Fair
          under-declaration of fair market      Market Value as was available in the earlier amnesty
          value also constitutes deficiency.    schemes. Accordingly fair market value as declared by
                                                the taxpayer is liable to be accepted.
   4.     (i) Cut off date for conveying the    (i)   The declarant is required to meet the deficiency
              deficiency under para-6(ii) is          within 10 days of the receipt of the intimation
              not prescribed.                         letter as mentioned at para 6(ii) of the scheme.




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                                                 702-B
Section 120A                                                         Income Tax Ordinance, 2001.

        (ii)  Valuation date (30.6.2008)         (ii)   It has been mentioned in para 2(b) and 7 of the
          has been mentioned in the                     main circular that valuation date would be
          proforma of declaration but the               30.06.2008.
          same has not been mentioned
          in the main circular.
  5.    Whether declaration can be filed         (i)    The scheme is applicable to all undisclosed
        with regard to the issues                assets/income which somehow or the other could not
        pertaining to audit and already          be disclosed and remained un-explained. Issues
        communicated to the taxpayer or          pending in appeals or raised/ detected by the
        not? Moreover, the cases where           department would be dealt with under normal
        concealment proceedings/ NAB             law and not under specific provisions of the scheme.
        proceedings are pending are also         (ii) Its scope is limited to the proceedings covered
        not excluded.                            by the Income Tax Ordinance, 2001 only. The
                                                 declaration made and tax paid under the scheme,
                                                 therefore, shall not absolve the declarants from any
                                                 action under the provisions of other applicable laws.
  6.    Whether any action can be taken if       Under para 4 of the scheme, a new taxpayer is obliged
        the declaration subsequently             to file return of income for the tax year 2008 and
        proves wrong. Similarly, it is not       succeeding three tax years. In case the taxpayer fails to
        clear about the fate of declaration      do so, then immunity under the scheme shall not be
        if the taxpayer fails to file returns    available in his case.
        of succeeding three years.
  7.    The language of para 2, sub-para         The scheme primarily applies to income represented
        (b) of the Circular, which defines       by any undisclosed/unexplained investment made or
        unexplained      income/        assets   asset acquired in the past. Normal income relating to
        proposes that any person can also        tax year 2008 which is required to be included in the
        declare his untaxed income for the       total income and chargeable to tax under the
        tax year 2008.                           ordinance, is obviously not covered by the scheme. It
                                                 will cover the period upto tax year 2007 where tax
                                                 payer is prevented under the law to make good any
                                                 under declaration or non-declaration of income/assets.
                www.imranghazi.com               All incomes and assets pertaining to tax year 2008 are
                                                 to be declared in the return of income/wealth
                                                 statement for the tax year 2008 and tax paid on normal
                                                 rates.
  8.    Whether income or assets covered         The scheme covers all assets/investments pertaining
        under the repealed Income Tax            upto the tax year 2007 and the period falling within
        Ordinance, 1979 are covered by           the ambit and scope of the repealed Income Tax
        the scheme?                              Ordinance, 1979.
  9.    Investment Tax is payable @ 2% of        Had the tax payer disclosed such income/asset in
        the fair market value of the assets      relevant tax year in the past a much higher tax rate/tax
        at the time of declaration which         liability would have been attracted including invoking
        seems to be illogical.                   of the penal provisions of the Income Tax Ordinance.
                                                 Since the scheme provides a fair opportunity of
                                                 making true declaration at a very nominal rate of 2%
                                                 the fair market value, as declared by the tax payer, has
                                                 been made the basis of declaration. The taxpayer,
                                                 obviously, knows the market value of his assets and is
                                                 expected to declare it in all fairness.
  10.   The purpose of mentioning                It is to identify the person who will sign the
        member of AOP/Principal Officer/         declaration on behalf of AOP or Company. The
        Chief Executive Officer of the           portion not applicable may be struck off by the
        Company at S.No. 5 of the                declarant.
        declaration   form    is    not
        understandable.




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                                       702-C
Chapter X, Procedure – Part II, Assessments                                                  Section 120A


    11.     For vehicles and other assets not           The value of assets including a motor vehicle is to be
            shown in column A, B and C                  declared on the basis of fair market value as on
            part-I of Annexure I the                    30.6.2008, therefore, mentioning of the year of
            information regarding the tax year          acquisition, is for reference purposes only and will
            in which these assets were                  have no material bearing on the declaration. Even
            acquired      is   required   only.         otherwise complete particulars of the assets declared
            Whereas for all other kind of               under the scheme should be provided as these are
            assets the condition for the tax            subsequently entered in the books of the taxpayers.
            year in which assets are acquired
            is not required. This requires
            explanation.
    12.     What will be the criteria to                The criteria for declaration of these assets should be
            determine the fair market value in          the accounting and legal practice followed for
            case of the followings:–                    valuation of such assets and any deviation therefrom
            1. Shares of Private Limited                could not be suggested in the scheme. – (07/2008
               Companies.                               dated 19.07.2008).
            2. Investment in Government
               Securities. DSC. Behbud
               certificates with maturity
               period of ten years.
            3. Stock-in-Trade.
EXPLANATORY CIRCULAR ON THE AMENDMENTS MADE IN THE INCOME TAX ORDINANCE, 2001
THROUGH FINANCE ACT, 2008.
11. INTRODUCTION OF INVESTMENT TAX. [Section 120A].
        In order to encourage and promote investment in business and industry, a time bound
scheme of investment tax has been introduced allowing any past and present investment
made in the business, industry, moveable or immovable assets to be declared in accordance
with the scheme and tax paid @ 2% on the fair market value of investment as declared under
the scheme. The declarant shall not be liable to any pecuniary or penal action, in respect of
such income/assets, under the Ordinance.
11.1 New taxpayers availing the scheme would be required to file returns of income for the
tax year 2008, at www.imranghazi.com However, they would neither be asked
                    least for three subsequent tax years.
to file return of income for the last five years nor sources of acquisition of assets during the said
period of five years as declared under the scheme would be questioned. This scheme would
prove to be instrumental in substantially improving the tax base. The scheme has been released
by the Board vide Circular No.03 of 2008 dated July 1, 2008. – (5/2008 dated 5.7.2008).
INVESTMENT TAX SCHEME, 2008.
        In exercise of the powers conferred under section 120A of the Income Tax Ordinance,
2001 the Federal Board of Revenue is pleased to introduce the scheme for the declaration of
moveable and immoveable assets and payment of ‚investment tax‛ thereon as under:–
1.      TITLE AND SCOPE OF THE SCHEME
          (i) This Scheme shall be called ‚Investment Tax Scheme (ITS) 2008‛
         (ii) The Scheme shall apply to all existing as well as new taxpayers.
      1[(iii) The scheme shall not apply to the cases where proceedings are pending before the

              Department, Appellate Authority or ny court.]
2.      DEFINITIONS
        For the purposes of this Scheme,-
          a) ‚Investment Tax‛ means tax as defined under clause (63) of section 2 of the
              Income Tax Ordinance, 2001.
          b) ‚Unexplained income/assets‛ means any asset for which the taxpayer has no
              explanation regarding nature and source and was chargeable to tax but could not
              be so charged under Income Tax Ordinance, 2001, for any tax year or years ended
                               th
              on or before 30 day of June, 2[2007].
           c) ‚Declaration‛ means declaration made on the prescribed form annexed to the
              Scheme (Annex-I).
1 Sub-paragraph inserted by Circular No. 8 of 2008, dated 8 August 2008.
2 Substiuted for “2008” by Circular No. 8 of 2008, dated 8 August 2008.




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                                 702-B
Section 120A                                 Income Tax Ordinance, 2001.




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                                       702-E
Chapter X, Procedure – Part II, Assessments                                                                  Section 120A

     d) ‚Declarant‛ means a person, as defined under section 80 of Income Tax
         Ordinance, 2001, who files declaration under the Scheme.
3. CHARGE OF TAX.
   Investment tax shall be payable @ 2% of fair market value of the asset at the time of
   declaration of all moveable/immovable, undisclosed/unexplained investments/ assets,                                  st
   as declared by the taxpayer under this scheme, on the prescribed form any time from 1
                   st
   July, 2008 to 31 December, 2008.
4. COMPULSORY FILING OF RETURN FOR NEW DECLARANTS.
   New tax payers availing this scheme shall be obliged to file return of income for the tax
   year 2008 and subsequent three consecutive tax years. The department shall not
   question the source of acquisition of assets declared under the scheme for the past
   years and obligation of filing income tax return, if any, for the last five years.
5. INCORPORATION OF UNEXPLAINED INCOME/ASSETS IN BOOKS OF
ACCOUNTS.
   Where the declarant has paid tax on his unexplained income/assets in accordance with
   the Scheme, he shall be entitled to incorporate such income in his books of accounts.
6. FINALITY OF PROCEEDINGS UNDER THE SCHEME.
     (i) Where a declaration in respect of undisclosed/unexplained income/assets has
         been made and the tax due thereon has been fully paid, such declaration shall be
         accepted by the department and the declarant shall be informed within one
         month of the date of receipt of the declaration.
    (ii) Where any deficiency in calculation of tax or filling in the columns of the
         declaration form is noticed, the taxpayer shall be conveyed through a letter to
         make good the deficiency. The aforesaid letter shall be issued with the approval
         of Director General requiring the declarant to meet the deficiency within 10 days
         of the service of such letter.
7. DEPRECIATION ALLOWANCE
   No depreciation allowance in respect of building, plant and machinery or other
   depreciable assets declared under the Scheme shall be admissible for any tax year prior
   to the tax year commencing on or before the 1st day of July, 2008.
8. VALUATION OF ASSETS
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   The Scheme of ‚Investment Tax – 2008‛ is a voluntary scheme through which
   government has reposed trust in the taxpayers and an opportunity has been provided
   to legitimize the unexplained/undisclosed assets at a nominal rate of 2% of the fair
   market value of the assets as declared.
                                                                                                               ANNEX-I
                                 INVESTMENT TAX SCHEME - 2008
                            DECLARATION FORM FOR UNEXPLAINED
                                  INCOME/ASSETS/INVESTMENTS
1. NTN ___________________________________________________________________________________________________________________
               (New declarant shall attach NTN application form duly filled in)
2. Name and Address of the declarant _________________________________________________________________________
3. CNIC No. _________________________________________________________________________
4. Name and address of business_________________________________________________________________________________
       _____________________________________________________________________________________________________________________________

5.     Status
         Individual          AOP              Member of AOP/ Principal Officer/Chief
                                          Company
                                                 Executive Officer of the Company
6.     Phone: Office/Business ____________________ Fax No. ____________________
7.     Phone: Residential ____________________________________________________
8.     Total value of assets declared (As per annex) ______________________________
9.     Investment Tax Payable ________________________________________________
10.    Amount of Investment Tax paid _________________________________________
                                                              Signature ___________________
                                                              Name ______________________




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                                                            702-D
Section 120A                                                                       Income Tax Ordinance, 2001.

                                   VERIFICATION
     The undersigned, solemnly declare that the above information to the best of my
knowledge is complete and correct. The valuationo f assets declared is as per fair market
value as on 30.6.2008.
                                                          Signature ___________________
                                                          Name ______________________
Dated ___________________
                                        PART-I
PARTICULARS OF MOVEABLE ASSETS.
(A) 1[Cash]/Bank deposits/Bonds/Shares/Securities etc.
          Description      Amount         Fair Market Value on 30-06-2008           Tax payable
                           Total:
(B)    Jewellery (gold/bullion) and jewellery other than gold
          Description      Weight          Fair Market Value on 30-06-2008               Tax payable
                           Total:
(C)    Plant and Machinery/Stock-in-Trade
          Description                Fair Market Value on 30-06-2008                      Tax payable
                           Total:
(D) Vehicles and other assets not shown in A, B & C above
           Description         Make and          Registration No.          Tax year         Fair Market           Tax
                                types               Wherever               in which           Value on          payable
                                                   applicable              acquired          30.06.2008
                                                                          Total:
                                                         PART-II
Particulars of Immovable Assets
   Description of        Location and       Commercial/        Size of     Covered        Total Fair Market        Tax
   property (plot,       Identification     residential /       plot /     area/and       Value of the asset     payable
      house,                No. of           industrial        Value        Value          on 30-06-2008
   apartment etc.     www.imranghazi.com
                           property                                                             (4+5)
          1                    2                  3              4             5                  6                  7
                                        PART-III
                            ACKNOWLEDGMENT RECEIPT
NTN ________________________ CNIC No._________________________________
Name of declarant ______________________________________________________
The receipt of declaration of undisclosed assets along with computerized payment
receipt/pay order/bank draft No.___________________ dated _________________ of
Rs.________________ is hereby, acknowledged.
                                                      Signature of DCIT_______________
                                                      Name of DCIT__________________
                                                     Officer’s Code No._______________
Official Seal                                               – (3/2008 dated 01.07.2008).
1 Term “Cash” explained by Circular No. 8 of 2008 dated August 8, 2008 is as under:
       “It is further clarified that the term “Cash” mentioned in Para A of Part-I of the Annexure to the said Investment Tax
       Scheme, includes cash in foreign currency also. For the calculationo f 2% tax payable thereon, the amount is to be
       converted into Pak rupees at the exchange rate as on 30.06.2008.”




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                                                                          702-F
Section 121                                                                                             Income Tax Ordinance, 2001.

         1[121.       Best judgement assessment.– (1) Where a person fails to–
               2[             ]
       3[(aa)          furnish a statement as required by a notice under sub-section
                       (5) of section 115; or]
             (b)       furnish a return as required under section 143 or section 144; or
             (c)       furnish the statement as required under section 116; or
             (d)       produce before the Commissioner, or any person employed by a
                       firm of chartered accountants 4[or a firm of cost and
                       management accountants] under section 177, accounts,
1 Section 121 substituted by Finance Act, 2003.
2 Clause (a) omitted by Finance Act, 2010 w.e.f. June 5, 2010. The same amendment was made by Finance (Amendment)
  Ordinance, 2010, promulgated as Ordinance No. III of 2010, dated February 6, 2010, published in the Gazette of Pakistan
  Extraordinary Part I at pages 23 to 53. This Ordinance was presented in the Parliament but lapsed on 5 June 2010 as
  Parliament did not approve it. Originally this amendment was made through Finance (Amendment) Ordinance, 2009,
  promulgated as Ordinance No. XXII of 2009, dated October 28, 2009, published in the Gazette of Pakistan Extraordinary
  Part I at pages 229 to 259.
3 Clause (aa) inserted by Finance Act 2009.
4 Words inserted by Finance Act, 2010.

                                                    LEGISLATIVE HISTORY
     Section 121(1)(a)–Omission.– Before omission by Finance Act, 2010 [and earlier omission by Finance
(Amendment) Ordinance, 2010 and Finance (Amendment) Ordinance, 2009] clause (a) read as follows:–
      (a) “furnish a return of income as required by a notice under sub-section (3) or sub-section (4) of section
            114; or”
     Section 121–Substitution.–Before substitution by Finance Act, 2003 section 121 read as follows:–
     “121. Assessment of persons who have not furnished a return.– (1) Where a person required 1[by the
Commissioner through a notice], to furnish a return of income for a tax year fails to do so by the due date, the
Commissioner may, based on any available information and to the best of the Commissioner‟s judgement, make
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an assessment of the taxable income of the person and the tax due thereon for the year.
     (2) As soon as possible after making an assessment under this section, the Commissioner shall issue, in
writing, an assessment order to the taxpayer stating–
      (a) the taxable income of the taxpayer for the year;
      (b) the amount of tax due;
      (c) the amount of tax paid, if any; and
      (d) the time, place, and manner of appealing the assessment order.
     (3) An assessment order shall only be issued within five years after the end of the tax year 2[, or the income
year,] to which it relates 3[ ].”
1 Substituted for the words etc. “under this Ordinance *[, or the repealed Ordinance]” by Notification No. SRO 633(I)/2002, dated September 14, 2002,
   issued by Federal Government in exercise of the powers conferred by section 240 of the Income Tax Ordinance, 2001. This amendment and all
   others made under SRO 633(I)/2002, dated September 14, 2002) are to be read with the following connotation given as preamble:
   “.....the Federal Government is pleased to direct that in making any assessment for the year beginning on the first day of July 2002 or making
   any deduction or collection of tax for the year beginning on the first day of July, 2002, the said Ordinance shall have effect as if, .....”
   It means that powers vested under section 240 have been abused by resorting to actual legislative work, rather than removal of difficulties for
   which the section is meant.
           This SRO is now rescinded by SRO 608(I)/2003 dated June 24, 2003. It means SRO 633(I)/2002 dated September 14, 2002 remained in
   operation till 30-06-2003.
2 Words etc. inserted by Finance Ordinance, 2002.
3 Word etc. “and shall be an alternative to the application of sub-section (4) of section 114” omitted by Notification No. SRO 633(I)/2002, dated September 14,
   2002, issued by Federal Government in exercise of the powers conferred by section 240 of the Income Tax Ordinance, 2001. This amendment and all
   others made under SRO 633(I)/2002, dated September 14, 2002) are to be read with the following connotation given as preamble:
   “.....the Federal Government is pleased to direct that in making any assessment for the year beginning on the first day of July 2002 or making
   any deduction or collection of tax for the year beginning on the first day of July, 2002, the said Ordinance shall have effect as if, .....”
   It means that powers vested under section 240 have been abused by resorting to actual legislative work, rather than removal of difficulties for
   which the section is meant.
           This SRO is now rescinded by SRO 608(I)/2003 dated June 24, 2003. It means SRO 633(I)/2002 dated September 14, 2002 remained in
   operation till 30-06-2003.
* Words etc. inserted by Finance Ordinance, 2002.




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                                        703
Chapter X, Procedure – Part II, Assessments                                                      Section 121

             documents and records required to be maintained under section
             174, or any other relevant documents or evidence that may be
             required by him for the purpose of making assessment of
             income and determination of tax due thereon,
the Commissioner may, based on any available information or material and
to the best of his judgement, make an assessment of the taxable income 1[or
income] of the person and the tax due thereon.
     (2) As soon as possible after making an assessment under this section,
the Commissioner shall issue the assessment order to the taxpayer
stating–
       (a) the taxable income;
       (b) the amount of tax due;
       (c) the amount of tax paid, if any; and
       (d) the time, place and manner of appealing the assessment order.
     (3) An assessment order under this section shall only be issued within
five years after the end of the tax year or the income year to which it
relates.]
1 Words inserted by Finance Act, 2010.

                                               COMMENTS
SECTION 121: ―Best judgement assessment‖.
The Finance Act 2010 has omitted clause (a) of sub-section (1) as old concept of provisional
assessment has been revived. This section is similar in content to section 63 of the RO. It
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contemplates a situation where a person has not furnished a return when he was required to
or in response to a notice issued by the commissioner to file return or is trying to avoid tax by
not filing returns; has failed to produce accounts, documents or evidence when called for by
the Commissioner or any person employed by a firm of chartered accountants under section
177. The Commissioner has been empowered to proceed against such defaulting taxpayers by:
    (a) Writing an assessment order on the basis of available information or any return(s)
          filed as a consequence to a notice issued to this effect.
    (b) Issuing an assessment order to the taxpayer clearly stating the amount of income
          assessed, tax levied and payable and the manner in which an appeal can be filed
          against the assessment order.
    A time limit of five years, which is to be calculated after the end of the tax year or income
year to which it relates has been laid down for the issuance of an assessment order.
    The provisions relating to the best judgement assessments have been rephrased to make
them clearer and effective. The principles, however, remain the same as contained in section
63 of the repealed Ordinance.

              COMPARABLE PROVISION OF THE RO – [SECTION 63 & 64]
    63. Best judgment assessment.–Where any person–
    (a) fails to furnish a return of total income required to be furnished by him under section 56, sub-section (3)
          of section 72 or sub-section (3) of section 81; or




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                                                                    704
Section 121                                                                         Income Tax Ordinance, 2001.

       (b)     fails to comply with any of the terms of a notice issued under sections 58 1[ ] or 61,
1 Comma and figure “,60” omitted by Finance Ordinance, 1980.
      the Deputy Commissioner may, by an order in writing, assess the total income of the assessee to the best of
      his judgment and determine the amount of tax payable by him.
                                           ------------------------------------------
      1[64.Limitation for assessment.–(1) No assessment under 2[section 59A,] section 62 or section 63 shall be
made after the expiration of two years from the end of the assessment year in which the total income was first
assessable.
     (2) Notwithstanding anything contained in sub-section (1), where a return of total income 3[ ] has been filed
after the end of the financial year in which the last date of filing of such return specified in 4[section 55] falls, no
assessment under 2[section 59A,] section 62 or section 63 shall be made after the expiration of two years from the
end of the financial year in which the said return is filed.
     (3) Notwithstanding anything contained in sub-section (1), where, for any income year, an assessee has failed
to furnish the return of total income, no assessment under section 62 or section 63 shall be made after the
expiration of two years from the end of the financial year in which notice under section 56, sub-section (3) of
section 72 or sub-section (3) of section 81, as the case may be, was served.]
1   Section 64 substituted by Finance Ordinance, 1982.
2   Inserted by Finance Ordinance, 1983.
3   Words and figure “under section 55” omitted by Finance Act, 1986.
4   Substituted for “that section” by Finance Act, 1986.
     Section 64–Substitution.– Before substitution by Finance Ordinance, 1982 section 64 read was as follows:–
     “64. Limitation for assessment.–No assessment under section 62 or section 63 shall be made after the expiration of two
years from the end of the assessment year in which the total income was first assessable:
     Provided that where for any income year, an assessee has failed to furnish the return of total income under section 55, the
said period of two years shall commence from the end of the financial year in which notice under section 56, sub-section (3) of
section 72 or sub-section (3) of section 81, as the case may be, was served.”

                                                    DEPARTMENTAL VIEW
EXPLANATORY CIRCULAR ON THE AMENDMENTS MADE IN THE INCOME TAX ORDINANCE, 2001
THROUGH FINANCE ACT, 2009.
22. BEST JUDGMENT ASSESSMENT IN FTR CASES. [SECTION 121(1)(aa)]
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The powers of the Commissioner of Income Tax to make best judgment assessment u/s 121
of the Ordinance on the basis of available information and material have been extended to
such cases where a person fails to furnish statement of final taxation under sub-section (5) of
section 115 of the Ordinance. - (3/2009 dated 17.7.2009).
Finance Act, 2003 – Best Judgement Assessment.
      Section 121 has been substituted stipulating the reasons, procedure and limitation for
making best judgement assessments. – (7/2003 dated 12.7.2003).
Ex-parte assessment – Nature of. – [Section 63].
      In their judgement dated 22nd January, 1969 in Civil Appeals No. K-60 and 61 and No.
K-22 of 1965, their Lordships of the Supreme Court of Pakistan have made certain
observations regarding the nature of an assessment order made under section 23(4) of the
Income Tax Act (corresponding to section 63 of the Income Tax Ordinance). Relevant portion of
the judgement is reproduced below for the guidance of the officers of the department.
            ‚As to Abdul Ghafoor, he has withheld evidence and has allowed best judgement
            assessment to be made in terms of sub-section (4) of section 23 of the Income Tax
            Act. Such an assessment must ex-hypothesis be made on inadequate materials,
            therefore, it is a judgement in the sense of being a well-considered conclusion not
            dishonest, vindictive or capricious. Attempts have been made to show that some
            of the expressions used and observations made in the orders are open to criticism.
            Such attempts are themselves unjustified, because whatever vagueness or
            uncertainty is found to exist in the orders is the result of the conduct of the
            assessee who withheld evidence. A best-judgement assessment ‘must to some
            extent be arbitrary.‛ – [C.No.45(15)-ITP/58 dated 4.8.1970].
Limitation for assessment. – [Section 64].
      Sub-section (2) of Section 64 has been amended to make it clear that where a return of
Income is filed after the end of the financial year in which the last date for filing of the




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                                       704-A
Chapter X, Procedure – Part II, Assessments                                        Section 121

return (as specified in Section 55) fell, no assessment under Section 59A, 62 or 63 can be made
after the expiration of two years from the end of the financial year in which the return is
filed. – (16/1986).
Enhancement of limitation for completion of assessment on the basis of return – Sub-section (2) of
Section 59A and Section 64. – [Section 64].
       In case of a return filed under Section 55, which did not qualify for acceptance under
self-assessment scheme, but was otherwise found to be correct and complete, assessment
could not be made under Section 59A upto the end of the financial year next following the
income year for which the return was filed.
       (2) This limitation caused unnecessary difficulty in cases where the return was found to
be complete and correct but the assessment could not be finalised within the aforesaid
financial year. To remove this difficulty, sub-section (2) of Section 59A and Section 64 have
been amended to bring at par the limitation period for assessment under Section 59A with
that for assessment under Section 62 or 63. – (7/1983).
Limitation of assessment where a return is voluntarily filed for past year. – [Section 64].
       A person can voluntarily file return of income for any of the past years. In the present
law, however, there was no provision for making an assessment if such return was filed after
the expiry of two years from the end of the year in which the income was first assessable.
       (2) In order to remove this lacuna Section 64 has been re-drafted. Sub-section (1) and (3)
contain the old provisions. sub-section (2) lays down that assessment in cases where return
is filed voluntarily after due date would be made within two years from the end of the
financial year in which the said return is filed. – (8/1982).




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                                 704-B
Section 121                                    Income Tax Ordinance, 2001.




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                                        705
Chapter X, Procedure – Part II, Assessments                                Section 121


            CASE LAW – SUPREME COURT / HIGH COURTS / ITAT
                EX-PARTE ASSESSMENTS NOT MAINTAINABLE ON SINGLE DEFAULT
   Ex-parte order for single default is not maintainable – section 63 and section 68. –
    CIT, Rawalpindi Zone v. Public Medical Hall, Lyallpur [(1974) 29 TAX 192
    (S.C.Pak.)].
                          ASSESSEE FAILS TO PRODUCE DASTI BOOKS
   Best judgment assessment is justified if assessee fails to produce dasti books. – Pak
    Company, Sargodha v. CIT, Rawalpindi Zone [(1985) 51 TAX 181 (S.C.Pak.)].
                           BEST JUDGMENT ASSESSMENT – GENERAL
   Best judgment must reflect fair and proper estimate. – Ayenbee (Pvt.) Ltd. v. ITAT
    and others [(2002) 86 TAX 117 (H.C.Kar.) = 2002 PTD 407].
   Unverifiability of sales and purchases alone cannot be a ground for rejection of
    trading results. – Ayenbee (Pvt.) Ltd. v. ITAT and others [(2002) 86 TAX 117
    (H.C.Kar.) = 2002 PTD 407].
   Ex-parte assessment on a date subsequent to the date of hearing without issue of
    fresh notice held proper and valid. – CIT, Lahore Zone, Lahore v. M. B. Qureshi,
    Gulberg, Lahore [(1975) 32 TAX 219 (H.C.Lah.) = 1975 PTD 126 = PLD 1975 Lah.
    1317].
   Certificates of payment produced in support of income version could not be rejected
    without proper verification. – Shahid Hameed, Gulberg, Lahore v. ITO, Film Circle,
    Lahore and another [(1976) 34 TAX 31 (H.C.Lah.) = 1976 PTD 347 = PLD 1976 Lah.
    1626].
   Ex-parte assessment converted into order u/s 62 as the assessee produced books. –
    [(2004) 89 TAX 183 (Trib.) = 2004 PTD 1377].
   An assessment under section 23(4) of the 1922 Act should not be influenced by a
    desire to punish assessee for a non-compliance with a notice under section 22 or
    section 23. – Jot Ram Sher Singh v. CIT [1934] 2 ITR 129 (All.).
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    Section 62 vs. Section 63. – CIT v. Badridas Ramrai Shop [1939] 7 ITR 613 (Nag.).
   Even the „best judgment assessment‟ can be reopened under section 34 of the 1922
    Act. – Sheikh Mubarak Ali v. CIT [1938] 6 ITR 625 (Lahore).
   Notice under section 29 of 1922 Act can be validly issued where assessment is made
    under section 23(4) of 1922 Act. – Behari Lal Chatterji v. CIT [1934] 2 ITR 377
    (All.).
                        LIMITATION OF MAKING AN ASSESSMENT ORDER
   Limitation of making an assessment order has nothing to do with service of such
    order. – [2007 PTR 18 (Trib.) = (2007) 95 TAX 28 = 2007 PTD 803].
                        GUESS WORK VIS-À-VIS BEST JUDGMENT ORDER
   “Guess work” vis-à-vis best judgement explained. – Ayenbee (Pvt.) Ltd. v. ITAT and
    others [(2002) 86 TAX 117 (H.C.Kar.) = 2002 PTD 407].
   Best judgment assessment made by Income Tax Officer believing the same to be fair
    estimate although process involving some amount of guess work held unjustified. –
    Imperial Paint and Varnish Works v. CIT, West Karachi [(1980) 41 TAX 51
    (H.C.Kar.) – 1979 PTD 473].
   Guess work under section 63 should be “honest guess work” and not capricious,
    dishonest and vindictive. – Reyaz-o-Khalid Company, Karachi v. CIT, South Zone,
    Karachi [(1968) 18 TAX 111 (H.C.Kar.) = 1968 PTD 492 = PLD 1968 Kar. 858].
   “Failure”, meaning of. – CIT, North Zone, Lahore v. Warris Silk Weaving & Knitting
    Mills, Gujranwala. [(1973) 28 TAX 181 (H.C.Lah.) = 1973 PTD 446 = PLD 1973 Lah.
    873].
   Income determined on hypothetical basis is disapproved. – [(2004) 89 TAX 183
    (Trib.) = 2004 PTD 1377].




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                                        706
Chapter X, Procedure – Part II, Assessments                                   Section 121

                       WHEN BEST JUDGMENT ASSESSMENT CAN BE MADE
   Conditions are alternative and not cumulative. – Behari Lal Chatterji v. CIT [1934]
    2 ITR 377 (All.); Jainarain Motiram & Shegaon v. CIT [3 ITC 255 (Nag.)];
    R.M.S.RM. Ramaswami Chettiar v. CIT [3 ITC 290 (Mad.)].
   Provisions of clause (d) of sub section (1) of section 121 of the Ordinance are attracted
    only in the case of absence of a valid return. – [2010 PTR 77 (Trib.)]
                                  FAILURE TO FURNISH RETURN
   Best judgment assessment can be made where return is not signed. – Behari Lal
    Chatterji v. CIT [1934] 2 ITR 377 (All.).
   Where, in response to a reassessment notice requiring the assessee to submit a
    return of escaped income in respect of one of its branches, the assessee filed an
    unsigned blank return together with a petition stating that the alleged income had
    already been included in the original return. – Ram Chandra Kashi Nath v. CIT [5
    ITC 58 (Pat.)].
   Where the assessee, in response to a notice, filed a return with all columns blank. –
    Rattan Chand Dunichand of Guru Bazar v. CIT [3 ITC 69 (Lahore)].
   Where the assessee had furnished only approximate figure in his return of income
    without any further details. – A.R.A.N.Chettyar Firm v. CIT [2 ITC 477 (Rangoon)].
   Where the assessee did not file a return to the Income Tax Officer having jurisdiction
    over his principal place of business, but submitted returns of branch income. –
    Mohan LaI Hardeo Das v. CIT [5 ITC 127 (Pat.)].
   Question as to legality of a best judgment assessment made for the assessee‟s failure
    to submit a return without sufficient cause, is not a question of law. – Lalit Kishore
    Mitra v. CIT [4 ITC 467 (Pat.)].
   Position prior to 1.4.1989. – Rajmani Devi v. CIT [1937] 5 ITR 631 (All.); Dr. R.N.
    Singha v. Secretary of State for India in Council [2 ITC 462 (Rangoon)]; Seth Kishan
    Lal v. CIT [1938] 6 ITR 108 (Nag.).
                       FAILURE TO PROVE EXEMPTION, EX-PARTE JUSTIFIED
   Where assessee failed to justify the claim of exemption Income Tax Officer held
    justified to frame best judgement assessment. – Iram Ghee Mills (Pvt.) Ltd., Lahore
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    v. ITAT, Lahore [(1998) 78 TAX 188 (H.C.Lah.)].
                      FAILURE TO COMPLY WITH NOTICE UNDER SECTION 61
   After having filed returns in both the years, the assessee could not be allowed to
    challenge the vires of the notice issued under section 34 of the late Act, 1922. –
    Sutlej Textile Mills, Lahore v. CIT, Central Zone, Lahore [(2001) 84 TAX 284
    (H.C.Lah.) = 2001 PTD 2232].
   Income Tax Officer held justified to proceed under section 63 when the default had
    occurred on the date of hearing and not on subsequent date. – CIT, Faisalabad v.
    Vousaf Sons, Sargodha [(1998) 73 TAX 242 (H.C.Lah.) = 1996 PTD 1125].
   Assessment under section 63 held bad in law where proper notice was not served on
    the assessee. – CIT v. Sakhi Contractors & Engineers, Multan [(1982) 45 TAX 44
    (H.C.Lah.) = 1981 PTD 210].
   In case of non-compliance of statutory notices book version is liable to be rejected. –
    Shahid Hameed, Gulberg, Lahore v. ITO, Film Circle, Lahore and another [(1976) 34
    TAX 31 (H.C.Lah.) = 1976 PTD 347 = PLD 1976 Lah. 1626].
   Income Tax Officer held competent to make ex-parte assessment on a data
    subsequent to the date of default. – CIT, Lahore Zone, Lahore v. Popular
    Engineering Works, Burewala [(1975) 32 TAX 171 (H.C.Lah.) = 1976 PTD 9 = PLD
    1975 Lah. 545].
   For order under section 63, notice under section 61 is a must. – CIT, East Pakistan
    v. Aizuddin Gazi and others [(1960) 2-TAX (III-474) (H.C.Dacca) = 1960 PTD 727 =
    PLD 1960 Dacca 535].
   Ex parte order can be made only if there is non-observance of statutory notices. –
    [(2004) 89 TAX 561 (Trib.) = 2004 PTD 1688].




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                                        707
Chapter X, Procedure – Part II, Assessments                                 Section 121

   Assessment under section 23(4) should be fair, proper and not dishonest. – Karachi
    Trading Company v. CIT, Central Circle, Karachi [(1959) 1-TAX (III-337) (H.C.Kar.)
    = 1959 PTD 180 = PLD 1958 Kar. 274].
   Failure to produce account books will justify best judgment assessment. – Vir Bhan,
    Bansi Lal v. CIT [1936] 4 ITR 111 (Lahore).
   Even partial default to comply with the terms of notice issued under section 22(4) or
    23(2) of the 1922 Act, attracts section 23(4). – Banarsi Das v. CIT [1936] 4 ITR 142
    (Lahore).
   Section 22(4) only relates to accounts or documents which are in the possession, or
    under the control of, person making return. – CIT v. Bombay Trust Corpn. [1938] 6
    ITR 445 (Bom.).
   Section 22(4) only relates to accounts or documents which are in the possession, or
    under the control of, person making return. – Bhiwani Sahal Bishambar Dayal v.
    CIT [1936] 4 ITR 222 (Lahore).
   Necessity for account books called by Income Tax Officer is something that Income
    Tax Officer has to decide, and a best judgment assessment made because of
    non-production of documents cannot be assailed by assessee on ground that, in his
    opinion, documents were not relevant for assessment purposes. – Tulsi Das Nagin
    Chand v. CIT [1938] 6 ITR 385 (Lahore).
   Even if Income Tax Officer‟s assumption of existence of certain other accounts is
    wrong but assessment made is proper, a reference is not competent. – Bhikhi Ram
    Ramdeo v. CIT [1941] 9 ITR 306 (All.).
   If assessee fails to comply with notice issued under section 22(4) of 1922 Act, best
    judgment assessment can be made, though he may have sufficient cause for not
    complying with a notice under section 23(2) of 1922 Act. – CIT v. Laxminarain
    Badridas [1937] 5 ITR 170 (PC).
   If assessee does not comply with notice under section 22(4), best judgment
    assessment can be made without issuing notice under section 23(2). – L.Pitamber
    Prasad, In re [1942] 10 ITR 370 (All.).
   Even after issue of a notice under section 23(3) of 1922 Act an assessment can be made
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    under section 23(4) if there has been a default in complying with notice under section
    22(4) or 23(2). – Gopaldas Parsbottamdas v. CIT [1941] 9 ITR 130 (All.).
   Where there was no evidence before Income Tax Officer from which it was
    permissible to draw inference that some income or accounts had been necessarily
    suppressed or concealed by assessee, it was not open to Income Tax Officer to make a
    best judgment assessment. – Ram Datta Sita Ram of Basti, In re [1947] 15 ITR 61
    (All.).
   Where, in response to a combined notice for personal appearance as well as
    production of account books, the assessee appeared in person, but did not produce
    any account books. – Rm.Pl.S. Sivaswami Chettiar v. CIT [4 ITC 207 (Mad.)].
   Where the assessee produced certain accounts before an Income Tax Officer but
    another Income Tax Officer who succeeded him called for those books again by an
    order which did not mention the provision of the Act under which it was called for. –
    Brij Raj Rang Lal v. CIT [2 ITC 458 (Pat.)].
   Where the assessee failed to respond to notice given to produce the books under
    section 22(4) of 1922 Act, and an assessment was made under section 23(4), question
    whether the assessment made was proper would not arise for consideration in
    reference. – Ali Mohammad v. CIT [1940] 8 ITR 243 (Nag.).
   Others. – R.M.P. Chettiyar Concern v. CIT [6 ITC 44 (Rangoon)]; L.Hira Lal v. CIT
    [1942] 10 ITR 148 (All.); N.B. Moonshi v. CIT [8 ITC 104 (Rangoon)]; S.P.K.A.A.M.
    Chettyar Firm v. CIT [6 ITC 49 (Rangoon)]; Chaturbbuj v. CIT [1941] 9 ITR 286
    (Oudh).
   If return is valid and notice under section 22(4) has been complied with, no notice
    under section 23(2) having been issued, best judgment assessment cannot be made.
    – L.Bishambhar Nath, In re [1942] 10 ITR 379 (All.).




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                                        708
Chapter X, Procedure – Part II, Assessments                                  Section 121

                    ASSESSMENT WAS MADE ON THE BASIS OF PAST HISTORY
   Assessment was made on the basis of past history. Prevalent market rate during the
    relevant year was not taken into account held that best judgment assessment
    was not justified. – Rahmania Bidi Factory, Chandpur v. CIT, Dacca [(1964) 10
    TAX 115 (H.C.Dacca)].
     EXERCISE OF JURISDICTION UNDER ARTICLE 199 OF THE CONSTITUTION OF PAKISTAN, 1973
   Where assessee failed to establish that discretion exercised by department under
    section 63 was arbitrary, capricious, or based on suspicion, conjectures or surmises,
    writ is not maintainable. – Khalid Abbas Khan Niazi v. Member Income Tax
    (Judicial) CBR, etc. [(1999) 80 TAX 276 (H.C.Kar.) = 1998 PTD 2767].
                                    ESTIMATION OF PROFITS
   In making a best „judgment assessment‟ the Assessing Officer does not possess
    absolute arbitrary authority to assess any figure he likes and although he is not
    bound by strict judicial principles, he should be guided by rules of justice, equity and
    good conscience. – Abdul Qayyum & Co. v. CIT [1933] 1 ITR 375 (Oudh).
   The language of the Act does not justify the laying down of rules imposing upon the
    officer the duty of (i) conducting some kind of local inquiry before making the
    assessment under section 23(4), and (ii) recording a note of the details and results of
    such inquiry. – CIT v. Laxminarain Badridas [1937] 5 ITR 170 (PC).
   Where assessee does not include in his return income from business carried on at all
    places, assessment under section 23(4) is justified. – Abhey Ram Chunni Lal, In re
    [1933] 1 ITR 126 (All.).
   Where interest income of the assessee was computed by the Income Tax Officer on
    accrual basis by adopting a specified percentage of capital, and in the next year, the
    assessee switched over to cash system of accounting. – C.T.V.S. Chettyar Firm v.
    CIT [4 ITC 160 (Rangoon)].
   Question as to whether an assessment to the best judgment made under section
    23(4) of the 1922 Act has been made arbitrarily, recklessly or capriciously, without
    the Income Tax Officer exercising his „judgment‟ in the matter, is a question of law. –
    Somchand Maluk Chand v. CIT [1937] 5 ITR 336 (Lahore).
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                                   OPPORTUNITY OF HEARING
   Questions as to whether the Income Tax Officer was justified in the circumstances of
    the case to refuse to the applicant an opportunity for further statement and evidence
    and was he justified in proceeding ex-parte against him, are questions of fact. – Sir
    Han Singh Gour v. CIT [6 ITC 317 (Nag.)].
                                     ASSESSMENT ORDER
   Making „assessment‟ in section 23(4) of 1922 Act includes computing tax payable. –
    CIT v. Khernchand Rarndas [1938] 6 ITR 414 (PC).
                                         RES JUDICATA
   Opinion expressed by earlier Income Tax Officer is not binding in fresh proceedings.
    – N.A. Concern v. CIT [1938] 6 ITR 518 (Rangoon).
                                          REMEDIES
   In an appeal against assessment made under section 23(4) of the 1922 Act, AAC can
    examine record to satisfy himself that appeal was competent. – Pallu Mall Bhola
    Nath, In re [1933] 1 ITR 235 (All.).
   Position under 1922 Act. – CIT v. Khernchand Rarndas [1938] 6 ITR 414 (PC).
                                   VALIDITY OF ASSESSMENT
   Whether Income Tax authorities acted legally and rightly in making an assessment
    under section 23(4), is not a question of law. – Nanneh Mat Janki Das v. CIT [1934]
    2 ITR 333 (Lahore); KirtanIal Rasiklal v. CIT [7 ITC 209 (Bom.)].
   Validity or otherwise of a best judgment assessment is a question of fact, but
    whether there was any evidence to support the order will be a question of law. –
    N.A. Concern v. CIT [1938] 6 ITR 518 (Rangoon); Kanhaiya Lal Umrao Singh v. CIT
    [1941] 9 ITR 225 (Oudh).




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                                        709
Chapter X, Procedure – Part II, Assessments                                   Section 121

   Question as to whether there is sufficient cause for reopening an assessment made
    under section 23(4) of the 1922 Act, is essentially a question of fact and not of law. –
    Nanneh Mal Janki Das v. CIT [1934] 2 ITR 333 (Lahore).
   Where the assessee did not challenge before the Income Tax authorities the
    sufficiency of cause for a best judgment assessment made on him, he would not be
    entitled to challenge the legality of the assessment in a reference – ChinaraJni Lal
    Gobinda Prasad v. CIT [5 ITC 28 (Pat.)].
   Others. – Jot Ram Sher Singh v. CIT [1934] 2 ITR 129 (All.).
                                     AGREED ASSESSMENT
   An agreed assessment though framed outside the four comers of the Act is still an
    assessment at par with any other assessment. – CIT, Sargodha v. Irshad Anwar &
    Co. Kamlia [(2002) 85 TAX 470 (H.C.Lah.) = 2002 PTD 750].
   Agreed assessment violative of Contract Act will be voidable. – CIT, Sargodha v.
    Irshad Anwar & Co. Kamlia [(2002) 85 TAX 470 (H.C.Lah.) = 2002 PTD 750].
                             JURISDICTION OF ASSESSING OFFICER
   Assessing officers cannot directly proceed u/s 121. – [2010 PTR 49 (Trib.)]
                                     AGREED ASSESSMENT
   As first agreement was consented by both the parties, a second cannot be considered
    as with free consent of taxpayer. – [2010 PTR 127 (Trib.)]
   Breach of agreement on the part of any officer of FBR is not permissible. – [2010
    PTR 135 (Trib.)]
   Entire contract must be performed. – [2010 PTR 135 (Trib.)]
            PROVISIONS OF SECTION 121(1)(d) AND SUB SECTION (1) & (5) OF 122 NOT
                                SIMULTANEOUSLY APPLICABLE
   The provisions of section 121(1)(d) and those of sub section (1) & (5) of section 122 are
    different in nature dealing with entirely different situations therefore not
    simultaneously applicable. – [2010 PTR 77 (Trib.)]


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                                                           710
Section 122                                                                      Income Tax Ordinance, 2001.

     122. Amendment of assessments.– (1) Subject to this section, the
Commissioner may amend an assessment order treated as issued under
section 120 or issued under section 121 1[or issued under section 59, 59A,
62, 63 or 65 of the repealed Ordinance,] by making such alterations or
additions as the Commissioner considers necessary 2[ ].
         No order under sub-section (1) shall be amended by the
       3[(2)

Commissioner after the expiry of five years from the end of the financial
year in which the Commissioner has issued or treated to have issued the
assessment order to the taxpayer.]
       (3) Where a taxpayer furnishes a revised return under sub-section (6)
4[or   (6A)] of section 114–
          (a)      the Commissioner shall be treated as having made an amended
                   assessment of the taxable income and tax payable thereon as
                   set out in the revised return; and
          (b)      the taxpayer‟s revised return shall be taken for all purposes of
                   this Ordinance to be an amended assessment order issued to
                   the taxpayer by the Commissioner on the day on which the
                   revised return was furnished.
     (4) Where an assessment order (hereinafter referred to as the “original
assessment”) has been amended under sub-section (1) 5[,] (3) 6[or (5A)], the
Commissioner may further amend 7[, as many times as may be necessary,]
the original assessment within the later of–
          (a)      five years 8[from the end of the financial year in which] the
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                   Commissioner has issued or is treated as having issued the
                   original assessment order to the taxpayer; or
          (b)      one year 8[from the end of the financial year in which] the
                   Commissioner has issued or is treated as having issued the
                   amended assessment order to the taxpayer.
1 Words etc. inserted by Finance Ordinance, 2002.
2 Words “to ensure that the taxpayer is liable for the correct amount of tax for the tax year to which the assessment order
  relates” omitted by Finance Act, 2003.
3 Sub-section (2) substituted by Finance Act, 2009.
4 Words etc. inserted by Finance Act, 2010 w.e.f. June 5, 2010. The same amendment was made by Finance (Amendment)
  Ordinance, 2010, promulgated as Ordinance No. III of 2010, dated February 6, 2010, published in the Gazette of Pakistan
  Extraordinary Part I at pages 23 to 53. This Ordinance was presented in the Parliament but lapsed on 5 June 2010 as
  Parliament did not approve it. Originally this amendment was made through Finance (Amendment) Ordinance, 2009,
  promulgated as Ordinance No. XXII of 2009, dated October 28, 2009, published in the Gazette of Pakistan Extraordinary
  Part I at pages 229 to 259.
5 Substituted for “or” by Finance Act, 2010 w.e.f July 1, 2003.
6 Word etc. inserted by Finance Act, 2010 w.e.f. July 1, 2003.
7 Substituted for “to claim tax relief” by Finance Ordinance, 2002.
8 Substituted for “after” by Finance Act, 2009.

                                        LEGISLATIVE HISTORY
    Section 122(2)–Substitution.–Before substitution by Finance Act, 2009 sub-section (2) read as follows:–
   “(2) An assessment order shall only be amended under subsection (1) within five years after the
Commissioner has issued or is treated as having issued the assessment order on the taxpayer.”




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                                       710-A
Chapter X, Procedure – Part II, Assessments                                                                   Section 122

            In respect of an assessment made under the repealed Ordinance,
       1[(4A)

nothing contained in sub-section (2) or, as the case may be, sub-section (4)
shall be so construed as to have extended or curtailed the time limit specified
1 Sub-section (4A) inserted by Finance Act, 2003. Earlier different sub-section (4A) inserted by Notification No. SRO
  633(I)/2002, dated September 14, 2002, issued by Federal Government in exercise of the powers conferred by section 240
  of the Income Tax Ordinance, 2001. This amendment and all others made under SRO 633(I)/2002, dated September 14,
  2002) are to be read with the following connotation given as preamble:
      “.....the Federal Government is pleased to direct that in making any assessment for the year beginning on the first day of
  July 2002 or making any deduction or collection of tax for the year beginning on the first day of July, 2002, the said Ordinance
  shall have effect as if, .....”
  It means that powers vested under section 240 have been abused by resorting to actual legislative work, rather than removal
  of difficulties for which the section is meant.
      This SRO is now rescinded by SRO 608(I)/2003 dated June 24, 2003. It means SRO 633(I)/2002 dated September 14,
  2002 remained in operation till June 30, 2003.

                                           LEGISLATIVE HISTORY
    Section 122(4A)–Insertion.–Earlier inserted sub-section (4A) by Notification No. SRO 633(I)/2002, dated
September 14, 2002 read as follows:–
    (4A) An amended assessment shall only be made within six years of the date of original assessment.”




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                                 710-B
Section 122                                    Income Tax Ordinance, 2001.




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                                        711
Chapter X, Procedure – Part II, Assessments                                                                               Section 122

in section 65 of the aforesaid Ordinance in respect of an assessment order
passed under that section and the time-limit specified in that section shall
apply accordingly.]
     1[(5) An assessment order in respect of a tax year, or an assessment

year, shall only be amended under sub-section (1) and an amended
assessment for that year shall only be further amended under sub-section
(4) where, on the basis of definite information acquired from an audit or
otherwise, the Commissioner is satisfied that–
        (i) any income chargeable to tax has escaped assessment; or
       (ii) total income has been under-assessed, or assessed at too low a
             rate, or has been the subject of excessive relief or refund; or
      (iii) any amount under a head of income has been mis-classified.]
     2[(5A) Subject to sub-section (9), the Commissioner may amend, or

further amend, an assessment order, if he considers that the assessment
order is erroneous in so far it is prejudicial to the interest of revenue.
1 Sub-section (5) substituted by Finance Act, 2003.
2 Sub-section (5A) substituted with sub-sections (5A) & (5B) by Finance Act, 2003. Earlier a different sub-section (5A) inserted
  by Notification No. SRO 633(I)/2002, dated September 14, 2002, issued by Federal Government in exercise of the powers
  conferred by section 240 of the Income Tax Ordinance, 2001. This amendment and all others made under SRO 633(I)/2002,
  dated September 14, 2002) are to be read with the following connotation given as preamble:
      “.....the Federal Government is pleased to direct that in making any assessment for the year beginning on the first day of
  July 2002 or making any deduction or collection of tax for the year beginning on the first day of July, 2002, the said Ordinance
  shall have effect as if, .....”
  It means that powers vested under section 240 have been abused by resorting to actual legislative work, rather than removal
  of difficulties for which the section is meant.
      This SRO is now rescinded by SRO 608(I)/2003 dated June 24, 2003. It means SRO 633(I)/2002 dated September 14,
  2002 remained in operation till June 30, 2003.
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                                                LEGISLATIVE HISTORY
    Section 122(5)–Substitution.–Before substitution by Finance Act, 2003 sub-section (5) read as follows:–
    “(5) An assessment order shall only be amended under sub-section (1) and an amended assessment shall
only be amended under subsection (4) where the Commissioner–
     (a) is of the view that this Ordinance 1[or the repealed Ordinance] has been incorrectly applied in making
           the assessment (including the misclassification of an amount under a head of income 2[, incorrect
           payment of tax with the return of income, an incorrect claim for tax relief or rebate,], an incorrect claim
           for exemption of any amount or an incorrect claim for a refund); or
     (b) has definite information acquired from an audit or otherwise that the 3[income has been concealed or
           inaccurate particulars of income have been furnished or the assessment is otherwise incorrect].
1 Words inserted by Notification No. SRO 633(I)/2002, dated September 14, 2002, issued by Federal Government in exercise of the powers
  conferred by section 240 of the Income Tax Ordinance, 2001. This amendment and all others made under SRO 633(I)/2002, dated September
  14, 2002) are to be read with the following connotation given as preamble:
  “.....the Federal Government is pleased to direct that in making any assessment for the year beginning on the first day of July 2002 or making
  any deduction or collection of tax for the year beginning on the first day of July, 2002, the said Ordinance shall have effect as if, .....”
  It means that powers vested under section 240 have been abused by resorting to actual legislative work, rather than removal of difficulties for
  which the section is meant.
          This SRO is now rescinded by SRO 608(I)/2003 dated June 24, 2003. It means SRO 633(I)/2002 dated September 14, 2002 remained in
  operation till June 30, 2003.
2 Substituted for “to claim tax relief” by Finance Ordinance, 2002.
3 Substituted for the words “assessment is incorrect” by Notification No. SRO 633(I)/2002, dated September 14, 2002, issued by Federal
  Government in exercise of the powers conferred by section 240 of the Income Tax Ordinance, 2001. This amendment and all others made under
  SRO 633(I)/2002, dated September 14, 2002) are to be read with the following connotation given as preamble:
  “.....the Federal Government is pleased to direct that in making any assessment for the year beginning on the first day of July 2002 or making
  any deduction or collection of tax for the year beginning on the first day of July, 2002, the said Ordinance shall have effect as if, .....”
  It means that powers vested under section 240 have been abused by resorting to actual legislative work, rather than removal of difficulties for
  which the section is meant.
          This SRO is now rescinded by SRO 608(I)/2003 dated June 24, 2003. It means SRO 633(I)/2002 dated September 14, 2002 remained in
  operation till June 30, 2003.




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                                                              712
Section 122                                                               Income Tax Ordinance, 2001.

             In respect of any subject matter which was not in dispute in an
        1[(5AA)

appeal the Commissioner shall have and shall be deemed always to have
had the powers to amend or further amend an assessment order under
sub-section (5A).]
     (5B) Any amended assessment order under sub-section (5A) may be
passed within the time-limit specified in sub-section (2) or sub-section (4),
as the case may be.]
    (6) As soon as possible after making an amended assessment under
2[sub-sections (1), sub-section (4) or sub-section (5A)], the Commissioner
shall issue an amended assessment order to the taxpayer stating–
           (a)        the amended taxable income of the taxpayer;
           (b)        the amended amount of tax due;
            (c)       the amount of tax paid, if any; and
           (d)        the time, place, and manner of appealing the amended
                      assessment.
    (7) An amended assessment order shall be treated in all respects as an
assessment order for the purposes of this Ordinance, other than for the
purposes of sub-section (1).
     (8) For the purposes of this section, “definite information” includes
information on sales or purchases of any goods made by the taxpayer*
3[receipts of the taxpayer from services rendered or any other receipts that

may be chargeable to tax under this Ordinance,] and on the acquisition,
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possession or disposal of any money, asset, valuable article or investment
made or expenditure incurred by the taxpayer.
         No assessment shall be amended, or further amended, under this
        4[(9)

section unless the taxpayer has been provided with an opportunity of being
heard.]
1   Sub-section (5AA) inserted by Finance Act, 2010.
2   Substituted for “sub-section (1) or (4)” by Finance Act, 2003.
3   Words etc. inserted by Finance Ordinance, 2002.
4   Sub-section (9) inserted by Finance Ordinance, 2002.
* Required „comma‟ is missing.

                                           LEGISLATIVE HISTORY
    Section 122(5A)–Substitution.–Earlier inserted sub-section (5A) by Notification No. SRO 633(I)/2002, dated
September 14, 2002 read as follows:–
           This SRO is now rescinded by SRO 608(I)/2003 dated June 24, 2003. It means SRO 633(I)/2002 dated
           September 14, 2002 remained in operation till June 30, 2003.
    “(5A) where a person does not produce accounts and records, or details of expenditure, assets and liabilities
or any other information required for the purposes of audit under section 177, or does not file wealth statement
under section 116, the Commissioner may, based on any available information and to the best of Commissioner‟s
judgement, make an amended assessment.”




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Chapter X, Procedure – Part II, Assessments                                          Section 122


                                         COMMENTS
SECTION 122: ―Amendment of assessment‖.
    The insertion of sub-section (5AA) retrospectively to nullify the judgements in favour of
taxpaypayers is highly lamentable. Since new sub-section (6A) has been inserted in section
114 subsequent amendement is made in section 122(3). The concept of amending/revising an
assessment order is not new. There are times when an existing order – whether under a
universal acceptance scheme or passed after scrutiny by a departmental official – may
contain errors prejudicial to revenue that need to be corrected or the taxpayers concealed or
understated their income(s) calling for remedial action. However, this must not be confused
with rectification of mistakes (section 221) which is altogether different. Here the subject
matter is assessment calling for corrective action as was under sections 65 and 66A of the
repealed Ordinance. This section envisages situations where the Commissioner thinks that:
      o A return submitted by a taxpayer is incorrect because he has failed to rightly
          compartmentalize sources of income under their respective heads because of which
          income has wrongly been assessed.
      o Any assessment order issued under section 120 or 121 needs to be amended (no
          restriction on the number of subsequent amendments within the stipulated time).
      o A taxpayer has deliberately furnished inaccurate particulars of income on the basis
          of information in the possession of the Commissioner or acquired through audit.
    In all the above cases, the Commissioner can go ahead with amending the assessment
orders so as to arrive at the correct income and tax liability of the taxpayer. However, there
are certain limitations for proceeding with amended assessments. They are:
    (a) Amended assessment orders can only be made within five years from the end of the
          financial year in which Commissioner has issued or is treated to have issued the
          assessment order. Earlier, it was ‘after’ the issuance of notice that led to many
          different dates on which cases were getting time-barred and keeping their track
          was becoming a tedious practice.
    (b) For further re-amending of assessment orders, the time limit is the later of five years
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          from the end of the financial year in which the Commissioner has issued or is
          treated as having issued the original assessment order to the taxpayer; or one year
          from the end of the financial year in which the Commissioner has issued or is
          treated as having issued the amended assessment order to the taxpayer.
    (c) Before any amendment is made, the taxpayer has to be provided with an
          opportunity of being heard.
    Finally, any revised return filed by a taxpayer will stand accepted as an order amended
by the Commissioner on the date that it is furnished.
    The powers given to the Commissioner in 2002 to amend completed assessments under
the repealed Ordinance (which constituted past and closed transactions) generated lot of
controversy and litigation. We pointed out bad drafting of law in various articles and in
Practical Handbook of Income Tax. The issue has now finally settled by the apex court in CIT v
Eily Lilly (Pvt) Ltd 2009 PTR 23 (S.C.Pak) holding that assessments finalised under the
repealed law could not be amended under section 122(5) and that section 122(5A) was not
retrospective. This has vindicated our stance expressed in 2003 and 2004.
    We made the following comments when the law was amended:
  ‚This amounts to retrospective operation of law impairing existing rights and imposing new
obligations in respect of past and closed transactions. The new Ordinance originally applied section
122 to assessments already barred by time from the perspective of sections 65, 66A and 156 of the
repealed Ordinance. The law has now been corrected by substituting sub-section (4A) by the Finance
Act, 2003. However, the question remains how in the absence of any explicit words in section 239, the
new Ordinance can apply to any period prior to its commencement, not to talk of reopening the
assessments already completed under the repealed law.
    These are important issues that still need to be addressed vis-à-vis the true scope and import of
repeal and saving provisions embodied in the new Ordinance. It is a cardinal principle of law that in




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Section 122                                                          Income Tax Ordinance, 2001.

the absence of a clear provision to the contrary, a statute must not be construed as disturbing existing
rights and orders which have become final. [Per Mackenna J, Regina v. General Commissioner of I.T.
(Ex parte Fysh) 40 TC 225, 228]. Applying this principle, the Commissioner cannot reopen a case
under section 122 that had attained finality under the repealed Ordinance, as section 239 does not save
provisions of section 65 of the repealed Ordinance. It is pertinent to mention that when the 1979
Ordinance repealed the Income Tax Act, 1922, it specifically provided in section 166(2)(c)(ii) that
proceedings in terms of section 34 could be taken u/s 65. Such a saving provision is completely missing in
the new Ordinance. The same is the position with reference to section 66A”.
    We made the following remarks about this aspect of section 122 earlier that forced the
CBR to amend the law through the Finance Act, 2003:
          ‚Although pending proceedings initiated under section 65 or 66A before the commencement
          of new Ordinance are protected in section 239(4), but the question is whether similar (fresh)
          proceedings can be initiated u/s 122 for the assessments already completed under the repealed
          Ordinance or not? It is a well-established rule of interpretation of statutes that words in an
          amending statute which enable the Department to make an assessment or reassessment in
          respect of years which were over before the amending law began, are not to be construed as
          authorizing action in respect of a year for which action was already time-barred at the time
          when the amending Act came into force; and the position remains the same where an old Act
          is replaced by a new Act. Only remedial and curative amendments are to be taken as
          retrospective in nature. Any amending law that takes away accrued/ vested rights should not
          be construed to have retrospective effect by implications”.
          If section 122 is analysed in the light of the above principles, it cannot amend any
          assessment/order that became time-barred on 1st July 2002. In other words all the
          assessments finalized up to assessment year 1996-97 that became time-barred for the purpose
          of section 65 cannot be disturbed under section 122. Likewise all such orders where time
          limitation of four years expired u/s 66A or 156 of the repealed Ordinance on 1st July 2002
          (when the new Ordinance commenced) can no longer be disturbed u/s 122 or 221. It is
          worthwhile to note that limitation under section 122 is six years of the date of original order
          and under section 221 (Rectification of mistakes) five years from the date of the order sought
          to be amended.
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          Can section 122(5)(a) read with section 122(4A) override limitation of 66A? For example an
          assessment order was passed by the DCIT on 2nd July 1997 that was erroneous and
          prejudicial to the revenue. The IAC could have invoked section 66A on or before 1st July
          2002, whereafter it became time-barred. Now the new Ordinance says that action can be
          taken till 1st July 2003 [section 122(4A)]. Is it not gross violation of law enunciated above?
          Similarly action u/s 65 under the repealed Ordinance in respect of assessment year 1996-97
          could have been taken on or before 30th June 2002. Any notice u/s 65 served (and not issued)
          after 30th June 2002 in respect of 1996-97 would have been void and unlawful ab initio. It
          appears mockery of law when section 122(5)(b) read with section 122(4A) says that
          Commissioner of Income Tax can even amend assessment in such a case “within six years
          from the date of original assessment.” So if assessment for the assessment year 1996-97
          was completed on 30.06.99, action u/s 122 can be taken up to 29.06.2004.
          How an action that was barred by time on the date of commencement of the new law can be
          taken under the repealing statute?”
In the wake of above comments, the most controversial section was amended on the same
lines as principles contained in sections 65 and 66A of the repealed Ordinance by Finance
Act, 2003.
    The law accepted that time limit specified in section 65 of the repealed Ordinance in no way
could be extended under the new Ordinance. Interestingly, the same principle has not been
provided in case of sub-section (5A) inserted by Finance Act, 2003.
    The basis for amendment under sub-section (5) is confined to ‚definite information‛
from an audit or otherwise. It is still debatable as how definite information can be acquired




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Chapter X, Procedure – Part II, Assessments                                                       Section 122

from an audit. Audit is always on the basis of available record and any deficiency or error
discovered cannot be construed as definite information, which according to courts should be
fresh, not based on the material already available and must come into possession from some
external source. Any observation by an auditor is in fact change of opinion and not definite
information as held in a number of cases decided by higher courts in Pakistan and India.
There is need to re-consider this conceptual error in section 122(5).
    The concept of ‘erroneous’ as well as ‘prejudicial to the interest of revenue’ as contained
in section 66A of repealed Ordinance stands restored in sub-section (5A), though it is still not
clear how the same person can consider his own order as erroneous. How can a
Commissioner be a judge in his own cause? This provision is violative of the well established
principles of due process of law as contained in Article 4 of the Constitution of Pakistan. The
amendment made by Finance Act 2004 that for the purpose of section 122(5A) the
Commissioner can only delegate powers u/s 210 to an IAC is faulty on two grounds:
     (i) It is self-defeating where under the repealed Ordinance, the original order or order
          u/s 66A is passed by the IAC.
    (ii) Since all the orders are made in the name of Commissioner under the new Ordinance, it
          is immaterial to whom power is delegated as it will be unlawful ab initio.
The legislature (which is in fact FBR and not the Parliament) has failed to appreciate that
Commissioner can only delegate functions but not legal obligation of applying independent
mind which is a prerequisite for invoking section 122.
    Section 122 even after amendment by various Finance Acts is partial, unjust, unfair and
faulty as it makes the Commissioner a judge in his own cause. He cannot review his own
order though passed by the taxation officer in his name under delegated authority. The
department has lost the case on this point-- see judgement of apex court in CA 861/08 in the
case of Prime Commercial Bank Limited (now RBS) reported as 2009 PTR 23 (S.C.Pak).
    For detail discussion on all facets of section 122, see Practical Handbook of Income Tax and
articles: Confusion about repeal and saving and Absolute power corrupts absolutely at
http://www.huzaimaikram.com or in Tax Review, monthly law journal published by Lahore
Law Publications, containing in-depth articles, analyses on various aspects of tax codes,
issues relating to public finance, foreign news and local as well as foreign case law.
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                COMPARABLE PROVISION OF THE RO – [SECTIONS 65 & 66A]
     65. Additional assessment.–(1) If, in any year, for any reason,–
      (a) any income chargeable to tax under this Ordinance has escaped assessment; or
      (b) the total income of an assessee has been under assessed, or assessed at too low a rate, or has been
            the subject of excessive relief or refund under this ordinance; or
    1[(c)   the total income of an assessee and the tax payable by him has been assessed or determined under
            sub-section (1) of section 59 or section 59A or deemed to have been so assessed or determined under
            sub-section (1) of section 59 or section 59A,]
the Deputy Commissioner may, at any time, subject to the provisions of sub-sections (2), (3) and (4), issue a notice
to the assessee containing all or any of the requirements of a notice under section 56 2[ ] and may proceed to
assess or determine, by an order in writing, the total income of the assessee or the tax payable by him, as the case
may be, and all the provisions of this Ordinance shall, so far as may be, apply accordingly:
     Provided that the tax shall be charged at the rate or rates applicable to the assessment year for which the
assessment is made.
     (2) No proceedings under sub-section (1) shall be initiated unless definite information has come into the
possession of the Deputy Commissioner 3[and] he has obtained the previous approval of the Inspecting Additional
Commissioner of Income Tax in writing to do so.
4[Explanation.–As used in this sub-section, “definite information” includes information in respect of sales and

purchases, made by the assessee, of any goods, and any information regarding acquisition, possession or
transfer, by the assessee, of any money, asset or valuable article, or any investment made or expenditure incurred
by him.]
1   Clause (c) substituted by Finance Act, 1992 and deemed to have always been so substituted.
2   Words and figure “or Section 58” omitted by Finance Ordinance, 1980.
3   Substituted for “or” by Finance Act, 1987.
4   Explanation inserted by Finance Act, 1987.




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Section 122                                                                                 Income Tax Ordinance, 2001.

     1[(3) Notice under sub-section (1), in respect of any income year, may be issued within ten years from the end

of the assessment year in which the total income of the said income year was first assessable 2[:] ]
     3[Provided that, where the said notice is issued on or after the first day of July, 1987, this sub-section shall

have effect as if for the words “ten years” the words “five years” were substituted.]
     4[(3A) Where a notice under sub-section (1) is issued on or after the first day of July, 1982, no order under the

said sub-section shall be made after the expiration of one year from the end of the financial year in which such
notice was served.]
     5[         ]
1 Sub-section (3) substituted by Finance Ordinance, 1982.
2 Colon substituted for full stop by Finance Act, 1987.
3 Proviso inserted by Finance Act, 1987.
4 Sub-section (3A) substituted by Finance Ordinance, 1984 and shall be deemed to have been so substituted on June 14, 1982. This sub-section
  was earlier inserted by Finance Ordinance, 1982.”
5 Sub-section (4) omitted by Finance Act, 1995. Earlier it was substituted by Finance Ordinance, 1980.
      Section 65(1)(c).–Substitution.– Before substitution Finance Act, 1992 clause (c) read as follows:–
         “(c) the total income of an assessee or the tax payable by him has been 1[assessed or] determined under sub-section
               (1) of section 59 and no order of assessment has subsequently been made under this section or any other
               provision of this Ordinance.”
1 Words inserted by Finance Ordinance, 1980.
     Section 65(3)–Substitution.– Before substitution by Finance Ordinance, 1980 sub-section (3) read as follows:–
     “(3) No order under sub-section (1) shall be made in respect of any income year after the expiration of ten years from the
end of the assessment year in which the total income was first assessable”.
     Section 65(3A)–Substitution.– Before substitution by Finance Ordinance, 1984 sub-section (3A) read as follows:–
     “(3A) Where a notice under sub-section (1) has been issued, no order under the said sub-section shall be made after the
expiration of one year from the end of the financial year in which such notice was served.”
     Section 65(4)–Omission.– Before omission by Finance Act, 1995 sub-section (4) read as follows:–
     “(4) Nothing contained in sub-section (3) shall apply to any case to which clause (c) of sub-section (1) applies.”
     Section 65(4)–Substitution.– Before substitution by Finance Ordinance, 1980 sub-section (4) read as follows:–
     “(4) Nothing contained in sub-section (2) shall apply to any such case or class of cases to which clause (c) of sub-section (1)
applies as may be specified by the Central Board of Revenue.”
                                           ------------------------------------------
      1[66A.  Powers of Inspecting Additional Commissioner to revise Deputy Commissioner’s order.–(1)
The Inspecting Additional Commissioner may call for and examine the record of any proceedings under this
Ordinance, and if hewww.imranghazi.com by the Deputy Commissioner is erroneous in so far
                         considers that any order passed therein
as it is prejudicial to the interests of revenue, he may, after giving the assessee an opportunity of being heard and
after making, or causing to be made, such enquiry as he deems necessary, pass such order thereon as the
circumstances of the case justify, including an order enhancing or modifying the assessment, or canceling the
assessment and directing a fresh assessment to be made.
      2[(1A) The provisions of sub-section (1) shall, in like manner, apply,–

       (a) where an appeal has been filed under sections 129, 134 and 137, or 3[an appeal has been filed] under
             section 136, against an order passed by the Deputy Commissioner; and
       (b) where an appeal 4[ ] referred to in clause (a) has been decided, in respect of any point or issue which
             was not the subject matter of such appeal 4[ ].]
      (2) No order under sub-section (1) shall be made after the expiry of four years from the date of the order
sought to be revised.]
      5[Explanation.–For the purpose of this section, an order prejudicial to the interests of revenue shall include an
order passed without lawful jurisdiction.]
1   Section 66A inserted by Finance Ordinance, 1980.
2   Sub-section (1A) inserted by Finance Act, 1991.
3   Substituted for “a reference has been made” by Finance Act, 1997.
4   Words “or reference” omitted by Finance Act, 1997.
5   Explanation inserted by Finance Act, 1992.

                                                    DEPARTMENTAL VIEW
FINANCE ACT, 2010 – EXPLANATION REGARDING IMPORTANT AMENDMENTS MADE IN THE
INCOME TAX ORDINANCE, 2001.
10. AMENDMENT OF ASSESSMENTS [Section 122]. The following amendments have been
made in section 122 of the Income Tax Ordinance, 2001:–
      (i) Sub-section (4) of section 122 of the Income Tax Ordinance, 2001 has been
          amended. This sub-section provides for further amendment of assessments




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Chapter X, Procedure – Part II, Assessments                                       Section 122

             amended already under sub-section (1) and subsection (3) of section 122 of the
             Income Tax Ordinance, 2001. In certain situations assessments amended under
             sub-section (5A) are also allowed to be further amended now under sub-section
             (4) of section 122. These amendments are aimed at streamlining the functions of
             assessment for safeguarding revenues.
       (ii) Through insertion of sub-section (5AA) the Commissioner has been empowered
             to amend an assessment order under sub-section (5A) and such coverage operates
             retrospectively, from 1st day of July, 2003. -- [Cir. 10/2010, dated 16.07.2010]
EXPLANATORY CIRCULAR ON THE AMENDMENTS MADE IN THE INCOME TAX ORDINANCE, 2001
THROUGH FINANCE ACT, 2009.
23. LIMITATION FOR AMENDMENT OF ASSESSMENT. [Section 122(2) and (4)]
      Sub-sections (2) and (4) of section 122 of the Ordinance have been amended to provide
a uniform timeline of five years reckoned from the end of the financial year in which the
Commissioner has issued or treated to have issued the assessment order to the taxpayer for
amendment of assessment. Previously such limitation for finalization of assessment was to
be worked out with reference to the date of filing of return which had created difficulties in
ascertaining the limitation period in different cases where returns were filed on different
dates during the tax year. - (3/2009 dated 17.7.2009).
Finance Act, 2004 – Restraining power of delegation for amendment of assessments.
      Section 210 of the Income Tax Ordinance, 2001 has been amended whereby the
Commissioner cannot delegate the powers of amendment of assessment under sub-section
(5A) of section 122 of the Income Tax Ordinance, 2001 to an officer lower than the rank of
Additional Commissioner of Income Tax. – (17/2004, dated 17.7.2004).
Revision of returns by taxpayers selected for audit – Tax Year 2003 – instructions regarding.
      I am directed to refer to subject and to state that queries are being received in the Board
as to whether the taxpayers selected for audit for the subject year can makeup omissions and
inadvertent wrong statements by filing revised returns declaring income higher than the
ones as declared in their original returns.
2.    The matter was considered in the Board and I am directed to state that sub-section (6)
of section 114 of the Income Tax Ordinance, 2001 allows a person who, having furnished a
return, subsequently discovers any omission or wrong statements therein, may furnish a
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revised within five years of the date the original return was furnished. On the basis of the
above legal provision, the taxpayers may file revised returns even if their cases have been
selected for audit. In case a person files a revised return, the concerned Taxation Officers will
review the revised declaration and if found satisfactory, will close the audit proceedings and
inform the taxpayer accordingly.
3.    It is requested that the above legal facility may be brought to the notice of all taxpayers
whose cases have been selected for audit and the Taxation Officers to whom their cases have
been assigned for their consideration.
4.    Receipt of this letter may please be acknowledged. A copy of directions issued to the
Taxation Officers, as a consequence of the above instructions may also be provided to the
Board. – [C. No. 1(1)S.(ITAS)/2004, dated 11.6.2004].
Delegation of powers u/s 122(5A) of the Income Tax Ordinance, 2001 – Instruction regarding.
      I am directed to refer to the subject and to state that instance are being reported to the
Board that there is no uniformity in exercise of powers under the subject provisions of law.
At some places, the CsIT have delegated such powers to Taxation Officers of the level of
DCIT and at others the Inspecting Additional Commissioners (IACs) are made responsible to
exercise such powers. Reportedly, the above situation has created ambiguity about the
exercise of powers under the subject legal provisions and is resulting in uncertainty among




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Chapter X, Procedure – Part II, Assessments                                        Section 122

the taxpayers and the Bars alike.
2. I am further directed to state the matter being of a sensitive nature, was considered in the
Board. It needs to be appreciated that the foremost objective of the Government of Pakistan in
introducing the above Ordinance was the facilitation of the taxpayers. Accordingly, the new law
is to be exercised in such a manner that the above spirit is kept alive.
3. In view of the foregoing and in order to maintain uniformity across the country, I am
directed to request that Zonal Commissioners be advised to delegate powers u/s 122(5A) of
the said Ordinance to Taxation Officers of the level of Additional Commissioners (IACs).
They may however, be advised to remain discrete in exercising such powers.
4. I am further directed to state that wherever the above powers were delegated to the
DCsIT, those must be withdrawn forthwith.
5. Receipt of this letter may please be acknowledged. – [C. No. 2(1)S.Asstt/2002, dated 18.5.2004].
Decision of the President of Pakistan in Complaint No. 530 of 2002 – Mr. Zahid Sadiq vs. CBR.
       I m directed to enclose a decision of the President of Islamic Republic of Pakistan on
our representation, which stands accepted.
2.     Brief facts of the case are that return for Assessment Year 2000-01 declaring property
income filed under S.A.S. was processed under normal law on 31.12.2001 due to various
deficiencies. The assessee filed a complaint to the F.T.O. who recommended to amend the
assessment u/s 122(5) of the Income Tax Ordinance, 2001 & to accept the return under S.A.S.
Against the findings of F.T.O. a representation was filed before the President of Islamic
Republic of Pakistan who was pleased to accept the representation & set-aside the F.T.O.
order with the observation that provision of section 122(5) cannot be invoked in this case as
the new Ordinance came into force w.e.f. 1.7.2002, and cannot be applied to the assessment
order for assessment 2000-2001.
3.     These facts and Order of the President may be circulated among the officers for their
guidance. – [C. No. 4(530)TO-1/2002, dated 22.03.2004].
Representation under section 32 of the Ordinance XXXV of 2000 against findings of the Federal Tax
Ombudsman dated 9.9.2002 in Complaint No. 530-1/2002 (Zahid Sadiq vs. CBR).
       The undersigned is directed to refer to Central Board of Revenue’s representation C.
No0. 4(530)TO-1/2002, dated 23.10.2002, on the above subject and to say that the President
has been pleased to pass the following order:–
             ‚The www.imranghazi.com
                    Federal Tax Ombudsman has recommended that the Commissioner shall
             amend by suo moto action under section 122(5) of the Income Tax Ordinance,
             2001 the assessment framed on 31.12.2001 (Assessment year 2000-2001). The
             Commissioner referred to in section 122(5) of the 2001 Ordinance is the assessing
             officer and his power to amend an assessment is exercisable only if the conditions
             set out in the sub-section are fulfilled. Further, the 2001 Ordinance which came
             into force on 1.7.2002 does not apply to the assessment order for the Assessment
             Year 2000-01. Law Division’s recommendation proposing acceptance of the
             Agency’s representation is well founded.‛
2.     Accordingly, the President has been pleased to accept the representation of the
Commissioner and set-aside the F.T.O’s finding dated 9.9.2002 in complaint No. 530-I/2002.
– [No. 111/2002-Rep(FTO)Law, dated 11.11.2003].
Finance Act, 2003 – Issues raised in audit to be confronted before making amended assessment.
       It has been made obligatory on the Commissioner to obtain taxpayer’s explanation on
all the issues raised in any audit before passing an order amending the assessment under
section 122 of the Income Tax Ordinance, 2001. – (7/2003 dated 12.7.2003).
Finance Act, 2003 – Amendment of assessment.
       Sub-section (5A) has been inserted to section 122. It empowers the Commissioner to
amend an assessment order if the said order is erroneous in so far as it is prejudicial to the
interest of the revenue.
       Such action, however, is to be completed within the time limit specified in sub-section
(2) or sub-section (4) of section 122.
       However, where an assessment order was earlier passed under section 65 of the
repealed Ordinance, the limitation contained in the section shall neither be curtailed nor
extended by the provisions of sub-section (2) or sub-section (4) of section 122. – (7/2003
dated 12.7.2003).




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Section 122                                                   Income Tax Ordinance, 2001.

Clarification by CBR re invoking section 122 for earlier years.
       ‚...by virtue of an amendment in section 122(1) through Finance Ordinance, 2002 the
provisions of the said section may be invoked in assessments completed under section 59,
59A, 62, 63 or 65 of the repealed Ordinance. Through Finance Act, 2003, the limitation period
as contained in section 65 of the repealed Ordinance has also been provided in section 122
through insertion of sub-section (4A).‛ – [No. F. 4(75)/ITP/2002 dated 28.6.2003].
Issuance of pre-show cause notices u/s 65 of the Income Tax Ordinance, 1979 Recommendations
of the FTO Instructions regarding.
       I am directed to enclose a copy of Federal Tax Ombudsman’s (FTO) order in complaint
No. C711/2001 dated 29.12.2001 whereby the Honourable FTO has observed that the
practice, prevailing in the department of issuing Pre-Show Cause Notice u/s 65 of the Income
Tax Ordinance, 1979 is completely illegal and unwarranted. It is stated that department may
call it a pre-notice but, in fact, it amounts to initiations of proceedings u/s 65 of the said
Ordinance. Such an action without obtaining prior approval, in writing of the Inspecting
Additional Commission (IAC) is illegal, void and without any jurisdiction.
2.     The matter has been examined in the light of the observations and recommendations of
learned FTO and it has been decided that hence-forth Show Cause Notice prior to the
issuance of notice u/s 65 of the Ordinance would not be issued. Any action, required u/s 65
of the Ordinance, must not be initiated without obtaining the prior written approval of the
IAC. In view of above I am accordingly directed to request that all such pre-show cause
notices issued earlier be withdrawn and cancelled and action if deemed necessary be taken
u/s 65 after observing the legal requirements including approval of the IAC. – [No.
7(29)/S.Asstt/01, dated 07.01.2002].
Finance Act, 1995 – Additional assessment proceedings.
       Sub-section (4) of Section 65 empowered CBR to specify cases or classes of cases for
additional assessment proceedings. This power has been withdrawn by repealing
sub-section (4). Thus, the additional assessment proceedings can be initiated only if:
         a) assessing officer is in possession of definite information; and
         b) previous approval of the IAC has been obtained. – (4/1995 dated 9.7.1995).
Finance Act, 1992 -Additional assessment -Removal of ambiguity in section 65:
       Through a retrospective amendment in Section 65 of the Ordinance, the Income Tax
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Officer has been empowered to reassess the income assessed earlier under the
self-assessment scheme or simplified procedure of assessment or deemed to have been so
assessed under sub-section (1) of Section 59 or 59A read with Sections 80B, 80C and 80CC.
This provision aims at providing a remedy against the possible loss of revenue on account of
acceptance of declared incomes without scrutiny and verification. – (14/1992 dated
1.7.1992).
Time limit for reopening of income tax cases.
       Proceedings for additional assessment can be initiated under Section 65 of the Income
Tax Ordinance, 1979 within 10 years from the end of the assessment year in which the total
income of the said income year was first assessable. Representations have been received in
the Board to the effect that this period is too long and that assessments are sometimes
reopened indiscriminately.
       2. The matter has been considered and I am directed to say that in order to obviate the
possibility of indiscriminate reopening of assessments it has been decided that cases more
than five years old shall be reopened only with the prior written permission of the Regional
Commissioner of Income Tax concerned.
       3. All assessing officers may please be accordingly informed. – [C.No. IT.JT-1(48)/79,
dated 16.7.1986].
Limitation period for re-assessment under Section 65 of the Income Tax Ordinance, 1979 –
Instructions regarding.
       In sub-section (3) of Section 65 of the Income Tax Ordinance, 1979, as it stood
originally, a period of limitation at ten years for completion of additional assessment had
been provided. In 1982, through an amendment in the Ordinance, sub-section (3) was
substituted and a new sub-section (3A) was inserted which provided a period of limitation
for additional assessment at one year from the end of financial year in which the notice
under sub-section (1) of Section 65 was served. This provision was intended to be effective
from 1st of July, 1982 i.e. in those cases where assessments were reopened after 30th June,




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                                        719
Chapter X, Procedure – Part II, Assessments                                        Section 122

1982 as was explained in Board’s circular No. 8 of 1982 describing provisions of Finance
Ordinance, 1982 relating to income tax.
      (2) A division bench of the Lahore High Court, however, held in writ petition No. 3590
of 1982 that re-assessment orders passed after 30th June, 1982 in all cases where assessment
had been reopened before 30th June, 1981 had become barred by time since the inserted
sub-section (3A) was of procedural nature and applied retrospectively to all pending cases
also. As a result of this order re-assessments completed after the 30th June, 1982 in all cases
where notices under sub-section (1) of Section 65 had been served prior to the 30th June, 1981
became void and of no legal effect.
      (3) Sub-section(3A) was again substituted retroactively with effect from the 14th June,
1982 through the Finance Ordinance, 19894 and the substituted sub-section (3A) has
specially been made applicable to only those cases where notices under sub-section (1) were
or are issued on or after 1st day of July, 1982. Through this substitution of sub-section (3A),
the period of limitation for additional assessment stands restored at ten years in cases where
notices under sub-section (1) were issued before 1st day of July, 1982.
      (4) In the context of cases where the re-assessment proceedings completed after 30th
June, 1982 were held to be void and of no legal effect by the order of the High Court in the
above mentioned writ, the following questions have been referred to the Board:
        (i) Whether proceedings under Section 65 can again be initiated in such cases?
       (ii) Whether proceedings under Section 65 left incomplete after the judgement of the
             learned Lahore High Court can again be started from the stage at which these
             were left incomplete in respect of cases re-opened on or before the 30th June,
             1981?
      (5) The issues have been examined and it is clarified that: __
        (i) Proceedings under Section 65 can again be initiated by issuing a fresh notice
             under sub-section (1) in cases where additional assessments were declared to be
             void and of no legal effect provided period of limitation of ten years, as provided
             in the original sub-section (3), is still available. However, in such cases period of
             limitation for completion of additional assessment in pursuance of a fresh notice
             under sub-section (1) shall be one year from the end of financial year in which
             such notice is served as provided in the sub-section (3A) after the 1984
             amendments.
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       (ii) Proceedings, in cases which were left incomplete, can again be started from the
             stage at which these were left incomplete and the limitation to complete
             additional assessment in such cases would be ten years as was before the 1982
             amendment. – [20(8)IT-1/84, dated 7.2.1985].
Fixation of time limit for completion of additional assessment – Sub-section (3A) of Section 65.
      Sub-section (3A) of Section 65 has been substituted by a new subsection (3A) which
provides that where a notice under sub-section (1) is issue don or after 1st July, 1982, no
order under sub-section (1) shall be made after the expiration of one year from the end of the
financial year in which such notice was served. Notices served prior to the specified date
shall not be governed by sub-section (3A). – (7/1984).
Time limit for completion of additional assessment – Sub-section (3A).
      Under Section 65(3), additional assessment can be made upto ten years from the end of
assessment year in which total income was first assessable. This gave little time for
completion of assessment if proceedings were initiated in the 10th year. A new sub-section
(3A) has been added to the effect that once a notice under Section 65 is served, proceedings
would be completed within one year from the end of the financial year in which it was served.
This amendment will be applicable to the notices issued on or after 1-7-1882. – (8/1982).
Finance Ordinance, 1980 – Additional assessment.
      Two important amendments have been made in this Section:–
        (i) At present there is not time limit for reopening of an assessment made under
             self-assessment scheme. A limit of 10 years which obtains in the case of normal
             assessments has been prescribed for self-assessment cases also.
       (ii) The self assessment scheme envisages that, out of the cases accepted under the
             scheme a certain number of cases may be selected by CBR for detailed scrutiny.
             The amendment dispenses with the condition of definite information or approval
             of IAC in such cases. – (15/1980 dated 26.6.1980).




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                                                  720
Section 122                                                      Income Tax Ordinance, 2001.

Income Tax Ordinance, 1979 – Re-opening of assessment.
      Provisions of section 65 stipulate that the Income Tax Officer may issue a notice, to the
assessee containing ail or any of the requirements of a notice under section 56 or section 58.
The reference to section 58 which relates of filing of wealth statement is likely to create unwanted
complications and difficulties. The reference to section 58 has been omitted from the provision
by a notification issued under section 167 of the Ordinance. – (10/1979 dated 1.10.1979).
Income Tax Ordinance, 1979 – Time limit for re-opening of assessment.
      Under the new provision, an assessment made under Section 59(1) i.e. under self
assessment scheme can be re-opened at any time,. This provision is necessary because about
95% of the cases would be completed under the scheme and a limited number of such cases
may be selected for detailed scrutiny every year with the result that some of cases may have
to be reopened after a considerably long time. – (4/1979 dated 23.8.1979).
Invocation of provisions of section 66A in cases assigned to Inspecting Additional Commissioners
under Section 5(1)(c) of the Income Tax Ordinance, 1979.
      Reference Central Board of Revenue’s U.O. No. F.66(1) ITP/94, dated the 4th February,
1996, on the subject noted above.
2.    I am directed to inform you that a person cannot be a judge of his own cause. On the
same principle when an Inspecting Additional Commissioner acts as assessing officer, he
cannot, in respect of such assessment, exercise the powers of revision under section 66A of
the Income Tax Ordinance 1979. In that case, as provided under Section 5(1)(c) of the
Ordinance, read with section 66A ibid, the revisional power shall be exercisable by the
Commissioner of Income Tax. – [U.O. No. 316/96-Law dated 6.1.1997].
Finance Act, 1994 – Right of appeal against an order passed by the Additional Commissioner of
Income Tax.
      The order passed by an Additional Commissioner of Income Tax under section 66A,
setting-aside income tax assessment made by an Assessing Officer for denovo proceedings,
was not appealable. This appeared to be a drafting omission. section 134 has, therefore, been
amended in a manner that all orders passed by an Additional Commissioner of Income Tax
u/s 66A have now become appealable. – (6/1994 dated 10.7.1994).
Finance Act, 1992 – Revision of orders passed without lawful jurisdiction.
      Section 66A of the Ordinance has been amended by adding an Explanation whereby an
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order passed by an Income Tax Officer without lawful jurisdiction, being ab-initio erroneous,
would also be considered as prejudicial to the interest of revenue, making it actionable under
this section. This provision has been brought to safeguard the interest of revenue where,
through collusive arrangement or otherwise, an assessment is made without there being
lawful jurisdiction over the case. – (14/1992 dated 1.7.1992).
Revision of the assessment order.
      Section 66A provides that where an order passed by the Income Tax Officer is found to
be erroneous in so far as it is prejudicial to the interest of revenue, the Inspecting Assistant
Commissioner (IAC) may revise such order. However, no such order could be revised by the
IAC against which an appeal was filed by the assessee. Resultantly, frivolous appeals were
sometimes filed in order to protect the erroneous orders against any future revision by the
IAC.
      Section 66A has now been amended as a result of which its provisions shall apply even
if an appeal has been filed under section 129, 134 and 137 or a reference has been made under
section 136. Where an appeal or reference has been decided, the revision of erroneous order
of Income Tax Officer will still be possible in respect of a point or issue which was not the
subject matter of such appeal or reference. (8/1991 dated 30.6.1991).
                                              –


Power of IAC to revise the orders of the ITO – Section 66A.
      IAC has been empowered to revise an assessment made by the ITO if such assessment
is prejudicial to the interests of revenue. The provision is same as section 34A of the repeated
Act. – (15/1980 dated 26.6.1980).
Retrospectivity of application of section 66A of the I.T. Ordinance, 1979 – Instructions regarding.
      It would be recalled that section 34A of the replaced Income Tax Act, 1922 provided
that the Inspecting Assistant Commissioner of Income Tax could reopen an assessment made
by the Income Tax Officer if it was erroneous in so far as it was prejudicial to the interest of
revenue. No order could, however, be made under the said section after expiry of four years
from the date of order sought to be revised. A corresponding provision was not




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                                        721
Chapter X, Procedure – Part II, Assessments                                       Section 122

available in the Income Tax Ordinance, 1979 at the time of its promulgation. However,
section 66A was inserted through Finance Ordinance, 1980 which corresponds to the
provisions of section 34A of the repealed Income Tax Act, 1922.
(2) Certain queries have been made from the Board raising the following questions:–
        (i) whether the proceedings under section 34A of the repealed Act pending on 1st
            July, 1979 have lapsed on repeal of the said Act;
       (ii) whether it is possible to revise assessments completed after the promulgation of
            Income Tax Ordinance, 1979 but before the insertion of section 66A in 1980.
(3) The undersigned is directed to say that the principle applicable in such cases is given in
section 6 of the General Clauses Act, according to which the repeal does not affect the
proceedings already commenced unless the repealing act otherwise intends. The repeal does
not revive anything not in force or existing at the time the repeal takes effect. Hence the
proceedings which were pending under the repealed Act may continue under that Act.
However, if proceedings under section 34A had not been initiated when the old Act was
repealed these can not be initiated under the repealed Act. Similarly section 66A does not
have retrospective application. The assessments finalised before 1st July. 1980 cannot be
reopened under section 66A of the Income Tax Ordinance, 1979.
(4) The undersigned is further directed to say that if there is any difficulty in applying this
principle in a particular case, it may be referred to the Board for advice. – [C.No.1(48)IT-I/79,
dated 17.2.1981].
Scope of Inspecting Assistant Commissioner‘s powers under section 34A (corresponding to section
66A of the Ordinance).
      In the case of Commissioner of Income Tax Lahore Vs. Mr. M. Iqbal Saigal, the Lahore
High Court considered the scope and extent of an Inspecting Assistant Commissioner’s
powers to revise the Income Tax Officer’s order under section 34A of the Income Tax Act. A
summary of this case is being forwarded for general information and guidance of the
departmental officers.
(2) The assessee, beside having other sources of income, was a shareholder in M/s. Azam
Agencies Limited. In the latter case, the assessing officer completed the assessment for the
assessment year 1963-64 on 23.6.1967 and passed an order under section 23A(1) directing
that accumulated profits to the extent of Rs. 15,01,680/- be deemed to have been distributed
among the share-holders as on 8.12.1962. This ‘deemed dividend’ in the case of the assessee
came to Rs. 1,87,680 as against Rs.312 declared in the return. The Income Tax Officer having
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jurisdiction over Mr. Saigal’s case made the assessment for the assessment year 1963-64 on
10.6.1968 but, as he had no information regarding the order passed under section 23A(1) by
the assessing officer in the case of M/s. Azam Agencies Ltd. he did not include in the
assessee’s hands the dividend income deemed to have been declared/distributed in the case
of the above company. The IAC, Coys. Range, Lahore, however, included the said dividend
income under section 34A in the total income of the assessee and assessed it to tax.
(3) The assessee went in appeal before the ITAT against the IAC’s order. One of the pleas
taken before the Tribunal was that section 34A could not be invoked as the Income Tax
Officer who passed the original order did not possess the information that an order under
section 23A had been passed in the case of M/s. Azam Agencies Ltd. and as such, his order
was not erroneous. The learned Tribunal allowed the appeal and deleted the disputed
amount from the assessee’s income. Against the order of the Tribunal, the department
moved the High Court under section 66(1) of the Income Tax Act (134 of the Ordinance).
(4) In allowing the departmental appeal, the High Court held that subject to the limitations
contained in section 34A of the Act (66A of the Ordinance), the power of revision conferred
on the Inspecting Assistant Commissioner is very wide. He may revise orders both on points
of law and facts. The revisional jurisdiction thus vested in him is one of the superintendence
and correction. One of the main functions of the Inspecting Assistant Commissioner for
which he is appointed is to detect ‘tax evasion’. The court further stated that ‚there is no
express bar imposed on the Inspecting Assistant Commissioner that the cannot interfere
unless the mistake in the order under revision is apparent from the record. Indeed under this
Section, he is vested with a very wide power to call for and examine the record of any
proceedings under the Act. After examination of the record, if he considers that any order
passed therein by the Income Tax Officer is erroneous in so far it is prejudicial to the interest
of the revenue, he may take cognizance of the case in revision‛.
(5) The court also pointed out that there is no analogy in the provisions of section 35 of the
Act (corresponding to section 156 of the Ordinance) for review with those contained in




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                                              722
Section 122                                                    Income Tax Ordinance, 2001.

section 34A of the Act for revision and has held that while the scope of section 35(1) is
confined to cases for the rectification of mistakes which are apparent on the record of
individual assessments, it does not necessarily follow that in order to attract the jurisdiction
of the Inspecting Assistant Commissioner under section 34A of the Act, the error in the
orders of the Income Tax Officer should have been discovered from the record of the
respondent assessee himself. – [C.No.13(21)IT-1/76, dated 17.3.1976 Rev.].
Revision of assessments by Inspecting Assistant Commissioner.
      This section gives Inspecting Assistant Commissioners power to review the order of
Income Tax Officer. The powers so given to Inspecting Assistant Commissioners are very
wide and in a way this section vests in them all the powers of an Appellate Assistant
Commissioner with the significant difference that an Appellate Assistant Commissioner can
reduce or enhance an assessment or penalty only when appeal has been filed before him
while an Inspecting Assistant Commissioner can pass an order under this section of this own
accord. It should, therefor, be obvious that while exercising such wide powers, the
Inspecting Assistant Commissioners should exercise great care and caution. it is desirable
that there should be no conflict of opinion between Appellate Assistant commissioner and
the Inspecting Assistant Commissioner. The Inspecting Assistant Commissioners should not
take up any case of the income where an appeal is pending before the Appellate Assistant
Commissioner or the Tribunal. In such cases, the material on which IAC thinks that there is a
case for enhancement of income, it should be brought to the notice of the Appellate Tribunal
or the Appellate Assistant Commissioner through the Income Tax Officers who should be
directed to move these authorities to exercise their power to enhance the assessment. It is
only in cases where no appeal proceedings are pending that the Inspecting Assistant
Commissioner should take action under section 66A. – (9/1959 Rev.).
              CASE LAW – SUPREME COURT / HIGH COURTS / ITAT
                           PRINCIPLES AND SCOPE OF REASSESSMENT
   Where assessing officer applied mind consciously at the time of original assessment,
    action under section 65 on mere change of opinion is not permissible. – Pakistan
    Tobacco Co. Ltd. v. Govt. of Pakistan through Secretary Finance and 3 others [(1993)
    67 TAX 222 (S.C.Pak.) = 1993 PTD 697].
   If satisfied that there has been escapement of assessment Assessing Officer can
    re-open the www.imranghazi.com CIT, Karachi v. Abdul Ghani [2007 PTR
                 previous assessments u/s 65. –
    53 (S.C.Pak.) = (2007) 95 TAX 353 = 2007 PTD 967 = PLD 2007 SC 308].
   Where reference is pending, the Assessing Officer cannot make re-assessment. –
    Royal Edu Care v. Assistant CIT/Taxation Officer, Lahore [2008 PTD 1998
    (H.C.Lah.) = PTCL 2009 CL. 90 = PLJ 2009 Lahore 84].
   The provision of section 122 of Income Tax Ordinance, 2001 are not retrospective and
    shall not apply on proceedings culminated under Income Tax Ordinance, 1979. –
    CIT, Gujranwala v. Fayyaz Ahmad [(2008) 98 TAX 123 (H.C.Lah.) = 2008 PTD 773 =
    PTCL 2008 CL. 360].
   Assessment order recorded under section 122(1) of Income Tax Ordinance, 2001
    declared to be illegal and without lawful authority. – Muhammad Hanif v. AC of
    Income Tax Audit, Lahore [2007 PTD 1184 (H.C.Lah.)].
   Once assessment is finalized after consciously considering facts on record then action
    cannot be taken u/s 65 on reappraisal of same facts unless new facts have come into
    possession of ITO subsequent to passing of assessment order. – Citibank N.A. through
    Resident Vice-President v. CIT [(2007) 96 TAX 93 (H.C.Kar.) = 2007 PTD 1560].
   In case ITO did not apply his mind consciously to the facts of the case, proceedings
    u/s 65 were held justified. – Mrs. Farida Abdul Aziz v. CIT [(2006) 94 TAX 44
    (H.C.Kar.) = 2006 PTD 441].
   A comparison of the relevant section of the repealed law and section 122 of the present
    law shows a difference. Whereas, under section 65 & 66A of the previous Ordinance, a
    lower-grade official could re-open the assessment, whereas, the new law has totally
    vested the powers in the Commissioner. – Kashmir Edible Oil Ltd. v. Federation of
    Pakistan [2005 PTR 70 [H.C.Lah.] = (2005) 91 TAX 480 = 2005 PTD 1621].
   No question of law arises when both ITAT and CIT(A) gave categorical finding of fact
    that there was no justification to re-open the case u/s 65. – CIT/WT, Companies Zone,
    Faisalabad v. Mechanical Engineering Concern (Pvt.) Ltd., Faisalabad [(2004) 89 TAX
    300 (H.C.Lah.) = 2003 PTD 1842].




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                                        723
Chapter X, Procedure – Part II, Assessments                                  Section 122

   Section 122(2) restricts the scope of amendment to any order issued by the
    Commissioner. – Commissioner Income Tax (Legal) vs Frontier Sugar Mills [2009
    PTR 184 (H.C. Pesh.)]
   Proceedings u/s 65 can be initiated only when income for that year has been
    assessed. – Abdur Rehman alias Boota, Lahore Cantt v. CIT, Zone-A, Lahore [2002
    PTD 998 (H.C.Lah.)].
   Case can be reopened if conscious mind is not applied at the time of making
    assessment. – Kurram Enterprises Medicines Dealer, Bannu v. Special Officer
    IT/WT, Circle-24, Bannu [2002 PTD 2761 (H.C.Pesh.)].
   Assessing Officer “may proceed to assessee or determine by an order in writing, the
    total income of the assessee or the tax payable by him, as the same may be, and all
    the provisions of this Ordinance shall, so far as may be, apply accordingly. – CIT v.
    Saifullah [(2001) 83 TAX 482 (H.C.Lah.) = 2001 PTD 1475].
   Section 65 applies where assessment was not completed consciously. – National
    Beverages (Pvt.) Ltd. v. Federation of Pakistan and others [(2001) 83 TAX 359
    (H.C.Kar.) = 2001 PTD 633 = 2002 PTD 191 = PTCL 2001 CL. 250].
   Section 65 applies to cases where excessive relief was granted. – CIT, Rawalpindi v.
    Amanat Ali [(2001) 83 TAX 268 (H.C.Lah.) = 2001 PTD 860].
   Position under section 34 of the repealed Act vis-à-vis section 65 explained. – CIT,
    Rawalpindi v. Amanat Ali [(2001) 83 TAX 268 (H.C.Lah.) = 2001 PTD 860].
   Assessment framed without conscious application of mind can be reopened under
    section 65. – Qadus Ahmad v. ACIT/WT, Circle 16, Zone-A, Lahore and another
    [(1996) 74 TAX 24 (H.C.Lah.) = 1996 PTD 634].
   Assessee filed return as proprietor of a concern and his wife also filed return being
    proprietor of another concern. Assessing officer issued notice for re-assessment
    whereas the assessment of wife was not annulled, held re-assessment could not be
    made. – Zam Zam Traders v. ITO [(1996) 74 TAX 21 (H.C.Lah.) = 1997 PTD 40].
   Re-assessment proceedings without issuing a fresh notice is without lawful
    authority and of no legal effect. – Sh. Akhtar Ali v. The Federation of Pakistan
    [(1994) 70 TAX 274 (H.C.Lah.) = 1995 PTD 268].
   Section 65 initiated on mere assumptions of taxability of no certain receipts is of
                  – Dawood Hercules Chemical
    legal effect.www.imranghazi.com Ltd., Lahore v. ITO, Central Circle VI,
    Lahore [(1987) 55 TAX 163 (H.C.Lah.) = 1987 PTD 289 = PTCL 1987 CL. 315].
   Scope of reassessment proceedings. – Arafat Woollen Mills Ltd. v. ITO, Companies
    Circles E-1, Karachi [(1986) 54 TAX 1 (H.C.Kar.) = 1986 PTD 316].
   Where notice is not prescribed it could be issued in any form. – Paramount Electric
    Company, Lahore v. CIT, Lahore Zone, Lahore [(1976) 34 TAX 92 (H.C.Lah.) = 1976
    PTD 218 = PLD 1976 Lah. 1147].
   For “any reason” and “definite information” should be coupled with good faith. –
    Paramount Electric Company, Lahore v. CIT, Lahore Zone, Lahore [(1976) 34 TAX 92
    (H.C.Lah.) = 1976 PTD 218 = PLD 1976 Lah. 1147].
   Issuance of notice to the proper person is prerequisite for invoking section 65. – CIT,
    (North Zone), Lahore v. Abdul Hamid Muhammad Jamil, Lyallpur [(1973) 28 TAX
    73 (H.C.Lah.) = 1988 PTD 135].
   Section 34 of 1922 Act is a machinery section. – CIT v. Mahallram Ramjidas [1940]
    8 ITR 442 (PC).
   Section 34 of 1922 Act is unhappily and even ungrammatically phrased. – CIT v.
    Mahalirarn Ramjidas [1940] 8 ITR 442 (PC).
   When assessment is reopened assessee cannot be allowed credit in respect of some
    items which have been over-assessed. – Madhavjee Damodar Thackersay v. CIT
    [1935] 3 ITR 457 (Bom.).
   If Revenue is in possession of an evidence of concealment, it must first accept the
    return under Self-Assessment Scheme and then proceed to re-open it in accordance
    with provisions of law. – Usman Siddiqui v. ACIT/WT, Lahore [(2004) 89 TAX 139
    (H.C.Lah.) = 2003 PTD 2838].
   There is no other method to modify or reassess a deemed assessment under the
    provisions of section 122 before exercising jurisdiction provided u/s 122(5). – [2010
    PTR 49 (Trib.)]




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                                            724
Section 122                                                  Income Tax Ordinance, 2001.

   Unless the assessment which is a deemed assessment in terms of section 122 is
    cancelled there cannot be another assessment in the presence thereof. – [2010 PTR
    46 (Trib.)]
   Section 122(5A) cannot be invoked unless Commissioner applies independent mind
    and personally examines the case. – [2010 PTR 35 (Trib.)]
   Following 2005 PTD (Trib) 344 order under section 122 (5A) declared null and void.
    – [2010 PTR 35 (Trib.)]
   Import and scope of word “consider” in section 122 (5A). – [2010 PTR 35 (Trib.)]
   Section 122(5A) cannot be invoked unless Commissioner applies independent mind
    and personally examines the case. – [2010 PTR 35 (Trib.)]
   Assessing authority if given power to sit in his own judgment, will be violative of
    supreme law of the land. – [2007 PTR 59 (Trib.) = (2007) 95 TAX 167 = 2007 PTD
    1226].
   Section 65 cannot be waived as there is no estoppel against law. – [(2004) 89 TAX
    436 (Trib.) = 2004 PTD 491].
   Ambiguous and non-confident report of a valuer cannot be equated with the word
    “found” and made a basis for reopening a finalized assessment. – [(2003) 88 TAX
    368 (Trib.) = 2004 PTD 259].
   Orders made by the IAC, beyond limitation period are not maintainable in the eye of
    law. – [(2003) 88 TAX 366 (Trib.) = 2004 PTD 1115].
   Provision of section 66A are attracted where assessing officer adopts incorrect value of
    shares, being prejudicial to the interest of revenue. – [(2003) 88 TAX 259 (Trib.) = 2003
    PTD 2767].
   The CIT(A) has no jurisdiction over a case falling under section 66A. – [(2003) 88
    TAX 201 (Trib.) = (2004) 89 TAX 107 (Trib.) = 2004 PTD 480].
   Order u/s 62, although sequel to the IACs order u/s 66A, is an independent order and
    thus is appealable before the CIT(A). – [(2003) 88 TAX 201 (Trib.) = (2004) 89 TAX
    107 (Trib.) = 2004 PTD 480].
                                     ESCAPED ASSESSMENT

                www.imranghazi.com 65. – Dada Limited & Muhammad
    Escapement of income as envisaged in section
    Ibrahim & Co. v. CIT [(1974) 30 TAX 91 (S.C.Pak.) = 1975 PTD 117 = PLD 1974 SC
    310].
   „Escaped assessment‟ – scope of. – CIT, East Pakistan Dacca v. Hossen Kasam
    Dada, Karachi [(1961) 4 TAX 96 (S.C.Pak.) = 1961 PTD 771]; Haji, Muhammad
    Zakaria & Faruqui Flour Mills v. CIT, Karachi [(1962) 5 TAX 147 (H.C.Kar.) = 1962
    PTD 101 = PLD 1962 Kar. 136].
   “Escaped income” how to be construed? – Arafat Woollen Mills Ltd. v. ITO,
    Companies Circles E-1, Karachi [(1986) 54 TAX 1 (H.C.Kar.) = 1986 PTD 316].
   Where quantum of investment was not disclosed by assessee and original
    assessment was made without taking into account income from building,
    reassessment proceedings held legal. – CIT,. Lahore Zone, West Pakistan, Lahore v.
    Dr. Khurshid Alam Malik, Sheikhupura [(1973) 28 TAX 164 (H.C.Lah.) = 1988 PTD
    771].
   Original assessment was made without taking into account devaluation of Indian
    currency. Reassessment was made after conversion of Indian currency to Pakistani
    currency, reassessment held to sustainable in law. – Chundeechers Tea Co. Ltd.,
    Chittagong v. CIT, East Pakistan, Dacca [(1962) 5 TAX 267 (H.C.Dacca)].
   Assessment was made on individual as firm ceased to exist. Re-opened by issue of
    notice under section 23(2) and assessment was made on firm, held that notice under
    section 34 was obligatory. – Estate of R.B.L. Jaikrishan Das v. CIT, Punjab [(1960)
    2-TAX (Suppl.–269) (H.C.Lah.) = 1960 PTD 1040 = PLD 1951 Lah. 271].
   Where escaped income pertaining to prepartition period, action under section 34 of
    the Act held to be legal in Pakistan after independence. – Union Jute Company Ltd,
    Narayanganj, In re. [(1960) 2-TAX (Suppl.–265) (H.C.Dacca) = 1960 PTD 1036].




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                                       724-A
Chapter X, Procedure – Part II, Assessments                                Section 122

   „Escape‟ connotation of. – Madan Mohan Lal v. CIT [1935] 3 ITR 438 (Lahore) (FB).
   So long as assessment proceedings are pending against an assessee and no final
    order has been passed thereon, it would be premature to say that income has
    escaped assessment. – Sir Rajendranath Mukerjee v. CIT [1934] 2 ITR 71 (PC).
   Expression „escaped assessment „in section 34 applies to cases where the Income Tax
    Officer has deliberately adopted an erroneous construction of the Act, just as much
    as to cases where officer has not considered the matter at all but simply omitted the
    assessable profits from his view and from his assessment. – CIT v. Sri Krishna
    Chandra Gajapathi Narayana Deo [2 ITC 104 (Mad.)].
   If an assessee had made a false return and by misleading Income Tax authorities
    had evaded tax, it would amount to escapement of income, so that proceedings under
    section 34 could be initiated. – CIT v. Lokumal Bhojumal [1938] 6 ITR 51 (Sind).




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                                  724
Section 122                                    Income Tax Ordinance, 2001.




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                                        725
Chapter X, Procedure – Part II, Assessments                                   Section 122

   Words „income escaping assessment‟ in section 34 cover a case where assessee
    income is a homogeneous one, i.e., where income of the assessee is derived from the
    source, such as money-lending. – Bulaqi Shah v. Crown [1 ITC 256 (Lahore)].
   Deduction improperly allowed can be set right by reassessment treating it as income
    escaping assessment. – Anglo-Persian Oil Co. India Ltd v. CIT [1933] 1 ITR 129 (Cal.).
   Question as to whether an escaped income has been included by the assessee in his
    return under some other head, is purely a question of fact. – Jawala Prasad Chobey
    v. CIT [1935] 3 ITR 295 (Cal.).
                                   SCOPE OF TIME LIMITATION
   Section 122 of Income Tax Ordinance, 2001 does not speak of limitation provided in
    section 66A of the repealed Ordinance wherein it was four years. – CIT, Gujranwala
    v. Fayyaz Ahmad [(2008) 98 TAX 123 (H.C.Lah.) = 2008 PTD 773 = PTCL 2008 CL.
    360].
   Time limitation u/s 65(3) is not controlled by section 62(2). – Gulistan Khan Bhittani v.
    Govt. of Pakistan and others [(2004) 89 TAX 70 (H.C.Pesh.) = 2003 PTD 2611].
   Assessing Officer could not reopen an assessment which was barred by limitation
    under the provisions of section 34 of the late Income Tax Act, 1922. – CIT, Zone-B,
    Lahore v. Niamat & Brothers, Shahkot [(2001) 84 TAX 342 (H.C.Lah.) = 2001 PTD
    2300].
   Scope of time limitation under section 65 vis-à-vis section 34 of repealed act. – CIT,
    Central Zone, Lahore v. Crescent Textile Mills Ltd., Lahore [(2001) 83 TAX 502
    (H.C.Lah.) = 2001 PTD 874].
   Notice under section 56 cannot be issued for any assessment year prior to the date of
    enforcement of the Ordinance i.e. 1.7.1979. – CIT, Rawalpindi Zone, Rawalpindi v.
    Muhammad Ashraf Bko, Gujar Khan [2001 PTD 2620 (S.C.India)].
              RE-OPENING OF ASSESSMENT ON MERE CHANGE OF OPINION IS ILLEGAL
   Reopening of assessment on change of opinion is illegal. – Arafat Woollen Mills Ltd.
    v. ITO, Companies Circle C-1, Karachi [(1990) 61 TAX 46 (S.C.Pak.) = 1990 PTD 338
    = 1989 PTD 935 = PTCL 1990 CL. 639].
   Powers of www.imranghazi.com principle of “change of opinion” or
                 IAC to revise DCIT‟s order on
    “difference of opinion”. – Services Industries Limited v. CIT, Zone-III, Lahore
    [(2006) 94 TAX 237 (H.C.Lah.) = 2006 PTD 67 = PTCL 2007 CL. 63].
   “Change of opinion” or “difference of opinion”, distinction between. – Services
    Industries Limited v. CIT, Zone-III, Lahore [(2006) 94 TAX 237 (H.C.Lah.) = 2006
    PTD 67 = PTCL 2007 CL. 63].
   Reopening of assessment by IAC. – Pakistan Industrial Credit and Investment
    Corporation Ltd. v. CIT and others [(2008) 97 TAX 64 (H.C.Kar.) = 2006 PTD 1400 =
    PTCL 2006 CL. 503].
   In the absence of fresh material, notice under section 65 held to be without lawful
    authority and of no legal effect. – Pakistan Herald Ltd. v. IAC /Chairman, Panel-02,
    Companies-III, Karachi and others [(1996) 73 TAX 134 (H.C.Kar.) = 1996 PTD 186].
   Re-opening on mere change of opinion is not permissible. – CIT, Central Zone-C,
    Karachi v. American Express International Banking Corporation Ltd., Karachi
    [(1993) 67 TAX 30 (H.C.Kar.) = 1992 PTD 751].
   Assessee an educational academy claimed exemption under Rule 86 of the Second
    Schedule and Income Tax Officer accepted the claim and issued certificate.
    Subsequently successor Income Tax Officer issued notice calling in question the
    previous assessment, held that notice under section 65 was illegal and without
    lawful authority. – Al-Imtiaz Foundation (Regd.) v. ITO, Abbotabad [(1992) 66 TAX
    182 (H.C.Pesh.) = 1992 PTD 1292].
   Notice issued under section 65 on allegation of “benami purchaser” not maintainable
    being contrary to the facts of the case. – Muhammad Azim v. CIT, East Zone,
    Karachi [(1991) 63 TAX 143 (H.C.Kar.) = 1991 PTD 658].
   Action under section 65 on mere change of opinion is held without lawful authority.
    – Republic Motors Ltd. v. ITO and others [(1990) 62 TAX 8 (H.C.Kar.) = 1990 PTD 889].




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                                          726
Section 122                                                Income Tax Ordinance, 2001.

   Action taken under section 65 on mere change of opinion and not on the basis of any
    definite information was held without jurisdiction and of no legal effect and
    subsequent proceedings based on such notice were also without lawful authority
    having no legal effect. – N.V.Philips Glocilan Peufabrikan v. ITO and other [(1990)
    61 TAX 159 (H.C.Kar.)].
   Company filed return for the assessment year 1984-85 and Income Tax Officer
    framed assessment after scrutiny of the relevant record. Subsequently Income Tax
    Officer issued notice under section 65 to the assessee for re-opening the assessment
    and assessee challenged the notice. Held that notice was without jurisdiction and
    illegal. – Jeson International (Pvt.) Ltd. v. ITO, Company Circle C-7, Karachi and 3
    others [(1990) 61 TAX 20 (H.C.Kar.) = 1989 PTD 1141].
   Assessments framed by the Income Tax Officer were set aside in appeal and Income
    Tax Officer issued notices to reopen the assessments. The original assessment orders
    were restored by the Tribunal which attained finality. Income Tax Officer again
    issued notices to reopen the assessments for the same period held that impugned
    notices were without lawful authority and of no legal effect. – Badr-ud-Din H.
    Mavani v. ITO Circle XII, East Karachi [(1989) 60 TAX 63 (H.C.Kar.) = 1989 PTD
    685].
   Reassessment not permissible on mere change of opinion. – Arafat Woollen Mills Ltd.
    v. ITO, Companies Circles E-1, Karachi [(1986) 54 TAX 1 (H.C.Kar.) = 1986 PTD
    316].
   Once the Income Tax Officer made up his mind to reopen assessment, he was obliged
    to confront that material upon which he wished to rely upon for reassessment.
    Words, “reason to believe”, meaning of. – Burhan Engineering Co., Ltd. v. ITO
    Companies Circle II, Karachi and others [(1985) 52 TAX 55 (H.C.Kar.) = 1985 PTD
    465 = PTCL 1985 CL. 394].
   Action u/s 65 held lawful. – [2006 PTR 9 (Trib.) = (2006) 93 TAX 338 = 2006 PTD 2614].
   Invocation of section 65 based on change of opinion held illegal. – [(2005) 91 TAX 203
    (Trib.) = 2004 PTD 2749].
   Action u/s 65 on mere change of opinion is not maintainable. – [(2002) 86 TAX 61
    (Trib.) = 2002 PTD 2539].
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             SUCCESSOR HAS JURISDICTION OVER CASES PENDING UNDER SECTION 65
   Powers of successor Income Tax Officer. – Arafat Woollen Mills Ltd. v. ITO,
    Companies Circles E-1, Karachi [(1986) 54 TAX 1 (H.C.Kar.) = 1986 PTD 316].
   Wrong application of Act by predecessor Income Tax Officer can be set right by
    successor Income Tax Officer. – Amir Singh Sher Singh v. CIT [1935] 3 ITR 171
    (Lahore).
                         “DEFINITE INFORMATION”, MEANING AND SCOPE
   Definite information should not be gossip or surmises. – CIT, Companies Zone-II,
    Karachi v. Sindh Engineering (Pvt.) Limited, Karachi [(2002) 85 TAX 386 (S.C.Pak)
    = 2002 PTD 419].
   “Definite information” – how to be construed. – IAC and others v. Pakistan Herald
    Ltd. [(1997) 76 TAX 131 (S.C.Pak) = 1997 PTD 1485].
   Any interpretation of law by CBR or its subordinate functionaries cannot be termed
    as „definite information‟. – E.F.U. General Insurance Ltd. and others v. Federation of
    Pakistan and others [(1997) 76 TAX 213 (S.C.Pak) = 1997 PTD 1693 = PLD 1997 SC
    700 = PTCL 1997 CL. 478]
   Definite information should be fresh and must come into possession after completion
    of assessment. – Central Insurance Co. and others v. CBR, Islamabad etc. [(1993) 68
    TAX 86 (S.C.Pak.) = 1993 PTD 766].
   „Discovery‟ of under assessment explained. – H.Malik & Sons, Lahore v. CIT,
    Punjab and NWFP, Lahore [(1960) 2-TAX (Suppl.–261) (S.C.Pak.)].
   Mere guesswork, gossip or estimate cannot be equated with the term “definite
    information”. – CIT v. Imran Siddique [2005 PTR 99 [H.C.Lah.] = (2005) 91 TAX
    231 = 2005 PTD 106].




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                                        727
Chapter X, Procedure – Part II, Assessments                                  Section 122

   „Definite information‟ - scope of. – Muhammad Shafi and 3 others v. ITO and others
    [2005 PTR 295 [H.C.Kar.] = (2005) 92 TAX 84 = 2005 PTD 1014]; Saitex Spinning
    Mills, Lahore v. CIT, Zone-3, Lahore [(2003)] 87 TAX 156 (H.C.Lah.) = 2003 PTD
    808].
   No proceedings under sub-section (1) of section 65 shall be initiated unless „definite
    information‟ has come into the possession of the DCIT. – Mrs. Farida Abdul Aziz v.
    CIT [(2006) 94 TAX 44 (H.C.Kar.) = 2006 PTD 441].
   Initiation of action in terms of section 65 undertaken without availability of definite
    information, is unlawful. – CIT/WT, Zone, Faisalabad v. Usman Ashiq [2005 PTD
    1795 (H.C.Lah.)].
   Action u/s 65 held invalid. – Saitex Spinning Mills, Lahore v. CIT, Zone-3, Lahore
    [(2003)] 87 TAX 156 (H.C.Lah.) = 2003 PTD 808].
   Meaning of terms “definite information” and “assessment had been consciously
    completed” explained in the light of decisions of the apex Court. – National
    Beverages (Pvt.) Ltd. v. Federation of Pakistan and others [(2001) 83 TAX 359
    (H.C.Kar.) = 2001 PTD 633 = 2002 PTD 191 = PTCL 2001 CL. 250].
   Officer other than IAC can issue directions for invoking Section 65. – National
    Beverages (Pvt.) Ltd. v. Federation of Pakistan and others [(2001) 83 TAX 359
    (H.C.Kar.) = 2001 PTD 633 = 2002 PTD 191 = PTCL 2001 CL. 250].
   Definite information should be fresh. – National Beverages (Pvt.) Ltd. v. Federation
    of Pakistan and others [(2001) 83 TAX 359 (H.C.Kar.) = 2001 PTD 633 = 2002 PTD
    191 = PTCL 2001 CL. 250].
   Existence of a binding judgment of a competent court is included in the expression on
    “definite information”. – Adamjee Insurance Co, Ltd. and others v. ITO and others
    [(1995) 71 TAX 164 (H.C.Kar.) = 1995 PTD 761].
   Assessment framed under Self Assessment Scheme without indicating the cost of
    construction could be re-opened on subsequent “definite information”. – Crescent
    Art Fabrics Ltd. v. CIT, Central Zone, Lahore and 2 others [(1988) 58 TAX 137
    (H.C.Lah.) = 1988 PTD 857].
   Survey conducted for tracing new assessee and to find out under assessed old
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    assessees. Held that though Income Tax Officer was competent to make
    re-assessment, any order passed without opportunity of being heard was illegal. –
    Abdul Hamid, son of Mohammad Ismail, Azad Boot House, Mirpur, and others v.
    Deputy Collector, Excise & Taxation/ITO and CIT and others [(1988) 57 TAX 14
    (H.C.A.J&K) = 1988 PTD 324].
   Abdul Hamid and others v. Deputy Collector Excise & Taxation/ITO and CIT
   Assessment made originally after issue of notice under section 65 of the Ordinance,
    on the basis of certain averments of assessee and accepting source of capital
    investment in house property. Subsequently original information supplied by
    assessee found to be false and value of house property found to be grossly
    undervalued. Second notice issued under section 65 of the Ordinance on discovery of
    new facts, held valid in law. – Muhammad Bashir v. ITO, Lahore [(1983) 47 TAX 16
    (H.C.Lah.) = 1982 PTD 322].
   Proceedings initiated on the ground that accounts indicated inflated liability held to
    be based on definite information and previous approval of Inspecting Additional
    Commissioner for such proceedings was not required. – CIT, East Pakistan, Dacca
    v. Murlidhar Benichand, Saidpur [(1968) 17 TAX 63 (H.C.Dacca) = 1968 PTD 397 =
    PLD 1968 Dacca 593].
   The term definite information means discovery of new facts. – Rao & Company,
    Karachi v. Secretary, Revenue Division, Islamabad. [(2002) 86 TAX 167 (FTO Pak.) =
    2002 PTD 2143].
   Action u/s 65 upheld as definite information was available with DCIT. – [(2004) 90
    TAX 287 (Trib.) = 2004 PTD 2504].
   Wealth statement on record constitutes “definite information” for reopening u/s 65. –
    [2004 PTD (Trib.) 2300].




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                                           728
Section 122                                                 Income Tax Ordinance, 2001.

   Difference on the basis of parallel case and the value declared cannot be definite
    information. – [2004 PTD (Trib.) 2641].
   All types of information do not qualify as „definite information‟. – [(2003) 88 TAX 158
    (Trib.) = 2004 PTD 1052].
   Section 65 can be invoked only if some new information comes into the possession of
    department. – – [(2003) 88 TAX 158 (Trib.) = 2004 PTD 1052].
   Mere fact that another property in near vicinity fetched higher rent cannot be
    termed as „definite information‟. – [2004 PTD (Trib.) 2861].
   “Definite information” should not be based on conjunctures, surmises and whims. –
    [(2004) 90 TAX 61 (Trib.) = 2004 PTD 983].
   Words „definite information‟ used in section 65 and „in the opinion of‟ in section 13(2)
    do not mean „reason to suspect‟. – [(2002) 86 TAX 219 (Trib.) = 2003 PTD 714].
   Order u/s 65 disapproved as Department did not possess “definite information”. –
    [(2004) 90 TAX 61 (Trib.) = 2004 PTD 983].
   Anonymous complaint divulging receipts and not indicating expenses is not “definite
    information”. – [(2004) 89 TAX 162 (Trib.) = 2004 PTD 456].
               EFFECT OF FAVOURABLE JUDGMENT ON PAST & CLOSED TRANSACTION
   Revenue cannot open past and closed transactions on the basis of a favourable
    judgement. – Shahtaj Sugar Mills Ltd. through Chief Executive v. G.A. Jahangir
    and 2 others [2004 PTD 1621 (H.C.Lah.)].
   Action u/s 65 based on inspection note of CIT disapproved. – [(2004) 90 TAX 287
    (Trib.) = 2004 PTD 2504].
                             CONDITIONS PRECEDENT IN GENERAL
   Mere fact that another property fetched higher price cannot be made basis to invoke
    section 65. – Muhammad Shafi and 3 others v. ITO and others [2005 PTR 295
    [H.C.Kar.] = (2005) 92 TAX 84 = 2005 PTD 1014].
   Legal objections as to assumption of jurisdiction under section 65 should be decided
    first. – Imtiaz Rafi Butt v. ITO [(1993) 67 TAX 133 (H.C.Lah.) = 1993 PTD 265].
                www.imranghazi.com
    Income Tax Officer was under a legal obligation to seek approval of Inspecting
    Additional Commissioner and give detailed reasons of escapement of income before
    issuing notice under section 65. – CIT, Lahore v. Sh. Mian Muhammad, Lyallpur
    [(1992) 66 TAX 52 (H.C.Lah.)].
   Income Tax Officer made assessment for the assessment year 1987-88 and the
    assessee paid tax under section 50 which was more than the tax actually due from
    him. Assessee applied for issuance of refund voucher but Income Tax Officer issued a
    letter to reopen the case, held that Income Tax Officer‟s action was without lawful
    authority and he was bound to issue refund before issuance of notice under section
    65. – Inayat Ullah v. ITO and others [(1989) 60 TAX 125 (H.C.Lah.) = 1989 PTD
    876].
   Definite information as per record of the case or prior approval of Inspecting
    Additional Commissioner in writing is condition precedent for vesting jurisdiction in
    Income Tax Officer to initiate proceedings for additional assessment. – Muhammad
    Hanif Monnoo v. ITO Central Circle 1, Lahore [(1984) 50 TAX 37 (H.C.Lah.) = 1984
    PTD 171 = PTCL 1984 CL. 291 = PLJ 1984 Lah. 423].
   Order u/s 66A of 1979 Ordinance. – [2005 PTR 55 (Trib.) = (2005) 91 TAX 329 = 2005
    PTD 504].
   Additional assessment. – [2005 PTR 83 (Trib.) = (2005) 92 TAX 49 = 2005 PTD 534].
   Cancellation of additional assessment. – [2005 PTR 83 (Trib.) = (2005) 92 TAX 49 =
    2005 PTD 534].
   Basis for reopening deprecated. – [2005 PTR 83 (Trib.) = (2005) 92 TAX 49 = 2005
    PTD 534].




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                                        729
Chapter X, Procedure – Part II, Assessments                                 Section 122

   SAS cases cannot be unsettled lightly. – [2005 PTR 76 (Trib.) = (2004) 90 TAX 275 =
    2005 PTD 529].
   Order u/s 66A not maintainable on the basis of subsequent judgment. – [2005 PTR
    204 (Trib.) = 2005 PTD 920].
   One consolidated approval in place of two separate approvals for section 13
    disapproved. – [2004 PTD (Trib.) 1396].
   Prior approval of Inspecting Assistant Commissioner is condition precedent for issue
    of the notice. – Paramount Electric Company, Lahore v. CIT, Lahore Zone, Lahore
    [(1976) 34 TAX 92 (H.C.Lah.) = 1976 PTD 218 = PLD 1976 Lah. 1147].
   Intimation to assessee regarding nature of alleged escapement and factum of
    approval from superiors and providing opportunity of hearing before initiation of
    proceedings is not condition precedent. – Escorts Limited v. ITO, Lahore [(1975) 31
    TAX 164 (H.C.Lah.) = 1975 PTD 50 = PLD 1975 Lah. 443].
   In the absence of any definite information there is no justification for reopening an
    assessment. – [(2004) 90 TAX 287 (Trib.) = 2004 PTD 2504].
   Reopening of case u/s 65 on illegally obtained documents has no validity. – [2004
    PTD (Trib.) 2644].
   Proceedings u/s 65 cannot be initiated where no order is in existence. – [(2004) 89
    TAX 533 (Trib.) = 2004 PTD 1593].
   Position under 1922 Act. – Burn & Co., In re [1934] 2 ITR 30 (Cal.).
            CASES FINALISED UNDER SELF ASSESSMENT SCHEME VIS-À-VIS SECTION 65
   Cases finalised under Self Assessment Scheme cannot be reopened under section 65
    on mere change of opinion. – CIT, Zone D, Karachi and others v. Jennings Private
    School [(1992) 66 TAX 156 (S.C.Pak.)].
   Assessee in terms of CBR circular No. 1 of 2004 had revised its Income Tax Return
    by increasing 20% higher tax as compared to the tax payable on the original return,
    department was bound to accept the revised return. Therefore, notice for selection of
    return for Total Audit is illegal. – Bilal Ikram v. FBR and 2 others [2008 PTD 1960
    (H.C.Lah.) = PTCL 2009 CL. 48].
   A Self-assessment case not excluded from the preview of the Scheme cannot be
    re-opened on the basis of information already available on record. – CIT,
                www.imranghazi.com
    Companies-II, Karachi v. Khalid Jamal [(2003) 88 TAX 245 (H.C.Kar.) = 2003 PTD
    1093].
   Assessment order was passed under Self Assessment Scheme. Assessee paid
    advance tax which was not fully adjusted against the tax payable, therefore, on
    application by the assessee application for adjustment of advance tax was considered
    and rectified and a refund was created. Assessee applied for refund of tax, but Tax
    Recovery Officer required certain explanations. Assessee issued show cause notice
    for re-opening of assessment, held that notice was illegal and without jurisdiction. –
    Muhammad Amjad v. CIT, Zone-A, Karachi [(1992) 65 TAX 176 (H.C.Kar) = 1992
    PTD 513 = PTCL 1992 CL. 386].
   Assessment for the year 1985-86 was finalized under Self Assessment Scheme but
    the same was re-opened. Matter was compromised and an agreed assessment was
    framed. Later, information received from the IAC of Income Tax, (Survey &
    Collation) that declared value of a plot purchased by assessee-company was under
    statement and Income Tax Officer issued another show case notice against which
    assessee filed constitutional petition against the show cause notice, held that notice
    was not without jurisdiction. – Shadman International (Pvt.) Ltd. v. ITO, etc.
    [(1991) 64 TAX 73 (H.C.Kar.) = 1991 PTD 387 = PTCL 1991 CL. 357].
   Section 65 is applicable when assessing officer passed orders in a mechanical and
    routine manner under Self Assessment Scheme. – Pakistan Tobacco Co. Ltd. v.
    Pakistan through The Secretary, Ministry of Finance, Islamabad and 4 others [(1991)
    63 TAX 163 (H.C.Kar.) = 1991 PTD 359 = PTCL 1992 CL. 282].
   Declared income was accepted without any investigation and taxes were determined
    accordingly. After three years, Income Tax Officer issued notice alleging that the
    income was under assessed. Petitioner challenged the notice, held that notice issued
    was not on mere change of opinion. – H.M. Abdullah v. ITO, Circle-V, West Zone,
    Karachi [(1991) 63 TAX 113 (H.C.Kar.) = 1991 PTD 217 = PTCL 1991 CL. 228].




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                                          730
Section 122                                                Income Tax Ordinance, 2001.

   Assessee a school submitted all relevant documents alongwith the return for the
    assessment year 1984-85. Assessment finalized under Self Assessment Scheme on
    15.12.1984. Assessee received a notice dated 28.11.1986 for under assessment of
    income and discrepancies in assets. Held that there was no definite information in
    possession of the Income Tax Officer and he had not obtained the previous approval
    of Inspecting Additional Commissioner in writing, therefore the notice was invalid
    for want of jurisdiction. – Jennings Private School v. ITO, Salary Circle-III, Central
    Zone-D, Karachi and another [(1991) 63 TAX 16 (H.C.Kar.) = 1990 PTD 873 = PTCL
    1990 CL. 995].
   Cases finalized under SAS should not be reopened on self-assumed notions of
    concealment. – [2004 PTD (Trib.) 2261].
         JURISDICTION UNDER SECTION 65 IN CASES WHERE APPROVAL FROM IAC OBTAINED
   Evidence once examined cannot be made basis for re-opening of a completed
    assessment. – Javaid Saigol and others v. CIT, Lahore [(1987) 56 TAX 1 (S.C.Pak.)
    = PTCL 1987 CL. 278].
   Notice of re-assessment vis-à-vis approval of Inspecting Additional Commissioner. –
    Arafat Woollen Mills Ltd. v. ITO, Companies Circles E-1, Karachi [(1986) 54 TAX 1
    (H.C.Kar.) = 1986 PTD 316].
   Order passed by Inspecting Assistant Commissioner was set aside by the CIT, on
    ground of jurisdiction, held such order cannot debar Income Tax Officer from
    exercising his jurisdiction under section 65 of the Ordinance. – Muhammad Bashir
    v. ITO, Lahore [(1983) 47 TAX 16 (H.C.Lah.) = 1982 PTD 322].
      NOTICE ISSUED BY ITO UNDER SECTION 65 TO RE-OPEN THE ASSESSMENT HELD VALID
   Information received from the Excise and Taxation Officer showing the assessee to
    be owner of six passenger motor vehicles could be treated as definite information
    within the meaning of subsection (2) of section 65. – CIT/WT, Sahiwal v. Chohan
    Flying Coach Service, Sahiwal [(2001) 84 TAX 481 (H.C.Lah.) = 2001 PTD 3155 =
    2002 PTD 951 – 2002 PTD 990 = PTCL 2002 CL. 351].
   Assessment finalized under section 62 can be reopened under section 65 if warranted
    by law and facts. – Zafar Usman v. ITO etc. [(1989) 59 TAX 86 (H.C.Kar.) = 1989
    PTD 547]. www.imranghazi.com
               TOTAL AUDIT & DETAILED SCRUTINY CASES CAN ALSO BE REOPENED
   Reopening of cases selected for total audit – Position prior to Finance Act, 1995. –
    Haji Ismail Ibrahim v. CIT [(1992) 65 TAX 153 (H.C.Kar.) = 1992 PTD 45 = PTCL
    1992 CL. 471].
   Cases wrongly qualified under Self Assessment Scheme can be re-opened under
    section 65. – Meraj Sons, Contractors v. ITO, Contarctors Circle-Il, Lahore [(1982)
    45 TAX 2 (H.C.Lah.) = 1982 PTD 6].
          PROCEEDINGS FILED AFTER ITAT‟S DECISION IN A CASE CANNOT BE RE-OPENED
                  AFTER OBSERVATIONS OF SUPREME COURT IN ANOTHER CASE
   Proceedings filed after ITAT‟s decision in a case cannot be re-opened after
    observations of Supreme Court in another case. – ITO, Central Circle II, Karachi
    and another v. Cement Agencies Limited [(1969) 20 TAX 1 (S.C.Pak.) = 1969 PTD 611
    = PLD 1969 SC 322].
   Income Tax Officer had no jurisdiction for re-assessment proceedings where ITAT‟s
    order attained finality. – Nishat Talkies, Karachi v. ITO, Companies Circle A-4,
    Central Zone-A, Karachi and 2 others [(1989) 60 TAX 91 (H.C.Kar.) = 1989 PTD 513].
                                 SECTION 156 VS. SECTION 65
   Provisions of section 34 deals both with assessment and reassessment. Words
    “reason to believe”, “information”, implications explained. – Begum Nusrat Bhutto
    v. ITO, Circle-V, Rawalpindi [(1980) 42 TAX 59 (H.C.Lah.) = PLD 1980 Lah. 449].
   Fact that a mistake might be remedied under section 35 of 1922 Act is no reason why
    assessment should not be altered under section 34 of 1922 Act, if case falls within
    that section. – CIT v. D.R. Naik [1939] 7 ITR 362 (Bom.).




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                                        731
Chapter X, Procedure – Part II, Assessments                                   Section 122

    SCOPE OF ITO‟S POWERS – REASSESSMENT PROCEEDINGS ARE PERMITTED ONLY UNDER LAW
    Notice was issued by the Income Tax Officer on 9.4.1978 to file returns of income on
     12.4.1978. Petitioner requested the Income Tax authorities to disclose the reason for
     proposed action. The Department replied that relevant information would be
     disclosed after filing of returns. Petitioner contended that the notice issued by the
     Income Tax authorities at the instance of the Martial Law Authorities for reasons
     which were extraneous to section 34. Petitioner levelled serious allegations of mala
     fides which was supported by the last letter on record issued by the Inspecting
     Additional Commissioner Held that Income Tax Officer‟s action was not illegal and
     Court could call upon the Department to produce the relevant record in order to
     satisfy itself the reasonableness of the proposed action. The Court after examining
     the record pronounced that no material available to justify reopening. – Bliss
     Industries Ltd. v. ITO, Companies Circle B-3, Karachi [(1989) 59 TAX 72 (H.C.Kar.)
     = 1989 PTD 131].
    It is not necessary to make a quasi-judicial enquiry before proceeding under section
     34 of 1922 Act. – CIT v. Mahaliram Ramjidas [1940] 8 ITR 442 (PC).
    Income Tax Officer cannot give himself jurisdiction on an erroneous finding of fact
     that income has escaped assessment, he cannot initiate proceedings on basis of mere
     suspicion. – Ramjidas Mahaliram, In re [1936] 4 ITR 25 (Cal.).
                        NOTICE UNDER SECTION 65 VIS-A-VIS WRIT PETITION
    Challenge to notice under section 65 on factual controversy cannot be resolved in
     writ petition. – Macpac Films Ltd. v. The Federation of Pakistan and others [2001
     PTD 1574 (H.C.Kar.)].
    Controversial issue requiring factual inquiry cannot be determined in summary
     jurisdiction of High Court. – Ahmad Fabric v. IAC Income Tax, and others [(1999)
     80 TAX 93 (H.C.Lah.) = 1999 PTD 2899].
    Assessee was engaged in business of timber and assessment was framed on
     12.9.1982 for the assessment year 1982-83. Income Tax Officer issued notice under
     section 65 after obtaining permission of Inspecting Additional Commissioner.
     Assessee replied that the purchases showed in return including closing stock of
     previous year. Notice issued by the Income Tax Officer held cannot be challenged by
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     invoking constitutional jurisdiction as appellate remedies were available to assessee.
     – Wali Traders v. ITO, etc. [(1988) 58 TAX 29 (H.C.Kar.) = 1988 PTD 206 = PTCL
     1988 CL. 479].
    Return filed in response to illegal notice u/s 65 in no way disentitles the assessee
     from challenging the proceedings. – [(2002) 86 TAX 61 (Trib.) = 2002 PTD 2539].
                                 “PERMISSION” AND “APPROVAL”
    “Permission” and “approval”. – [2006 PTR 9 (Trib.) = (2006) 93 TAX 338 = 2006 PTD
     2614].
                                  LIMITATION UNDER SECTION 65
    Assessing Officer could not reopen an assessment which was barred by limitation
     under the provisions of section 34 of the late Income Tax Act, 1922. – CIT, Zone-B,
     Lahore v. Niamat & Brothers, Shahkot [2001 PTD 2300 (H.C.Lah.)].
    Amended sub-section could not have effect of disturbing the cases which were
     concluded and closed. – Chaudhry Textile Mills Ltd., ITO, Circle-V, Lahore [(1988)
     58 TAX 7 (H.C.Lah.) = 1988 PTD 542 = PLD 1988 Lah. 440 = PTCL 1988 CL. 626].
    Income Tax Officer was authorised to issue notice under section 65 within ten years
     but to pass order in this behalf before expiration of one year from the end of the
     financial year in which such notice was issued. Amendment in law in 1982 held to be
     a matter of procedure and the amendment applies to pending cases as well. –
     Crescent Boards Limited, Lahore v. ITO, Central Circle-VIII, Lahore [(1984) 49 TAX
     122 (H.C.Lah.) = 1985 PTD 276].
    Assessee‟s objection in writing against exercise of jurisdiction by assessing officer on
     ground of bias were ignored by, held that assessee was denied a fair trial to which he
     was entitled under the law and orders passed by the assessing officer and




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                                           732
Section 122                                                Income Tax Ordinance, 2001.

    the Appellate Tribunal held without lawful authority and of no legal effect. – Sheikh
    Akhtar Ali v. Federation of Pakistan and 4 others [(1980) 42 TAX 47 (H.C.Lah.) =
    1980 PTD 406].
   Notice issued under section 34(2D) as well as under section 34(1) and assessment
    made in pursuance of notice under section 34(2D), held valid in law. – Malik
    Muhammad Akram Khan & Co. v. ITO, Jhelum [(1977) 36 TAX 216 (H.C.Lah.) =
    1977 PTD 335 = PLD 1977 Lah. 1047].
   Assessment made after expiry of four years were annulled by appellate authorities
    before introduction of sub-section (2B) in July 1963. Held cannot be re-opened under
    the provisions of the newly inserted sub-section. – Bengal River Service Co. Ltd. and
    others v. ITO, Companies Cirlce-II, Dacca, and others [(1965) 11 TAX 92 (H.C.Dacca)
    = 1964 PTD 114 = PLD 1965 Dacca 217].
   Reassessment must relate to original assessment proceedings and law applicable in
    year in which income ought to have been assessed would apply. – Krishna
    Hydraulic Press Ltd. v. CIT [1943] 11 ITR 504 (Cal.).
   In response to a notice for reassessment, assessee is entitled to show, if he can, that
    allegedly escaped income was in fact included in return under some other heads. –
    Jawala Prasad Chobey v. CIT [1935] 3 ITR 295 (Cal.).
                          DENIAL OF NATURAL JUSTICE IS NOT PROVED
   Denial of natural justice not proved, action under section 65 upheld. – Sutlej Cotton
    Mills Ltd., Okara v. CIT, North Zone, West Pakistan, Lahore [(1965) 11 TAX 353
    (S.C.Pak.) = 1965 PTD 465 = PLD 1965 SC 443].
                            REASSESSMENT OF DIFFERENT ENTITIES
   Reassessment of successor is not invalidated by fact that succession took place after
    close of year in which income escaped assessment. – CIT v. Nachal Achi [1933] 1
    ITR 277 (Mad.).
   Where firm‟s dissolution had been accepted, subsequent assessment of firm without
    issuing notice under section 34 and making partners liable for tax, was not valid. –
    Jaikishan Das v. CIT [1951] 20 ITR 540 (Lah).
   Partners can be reassessed for escaped profits of firm. – M.A.L.A.R. Aryan Chettiar
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    v. CIT [1937] 5 ITR 600 (Mad.).
   Even „best judgment‟ assessment can be reopened under section 34. – Sheikh
    Mubarak Ali v. CIT [1938] 6 ITR 625 (Lahore).
             LEGAL OBJECTIONS TO ASSUMPTION OF JURISDICTION UNDER SECTION 65
   Preliminary legal objections should be decided by adjudicating authority before
    proceedings further in the matter. – Malik Liaquat Ali v. ACIT/WT, Circle-27, Zone
    B, Lahore and another [(2000) 81 TAX 309 (H.C.Lah.) = 2000 PTD 369].
   Action under section 65 disapproved as glaring omission was committed. – Brig.
    (Retd.) Muhammad Sadiq Khan, Ex-Chairman, Chief Minister’s Inspection Team,
    Govt. of the Punjab v. Federation of Pakistan through CIT, Zone-B and 2 others
    [(2000) 81 TAX 321 (H.C.Lah.) = 2000 PTD 371].
   Notice under section 65 held as legally issued on the basis of available material in
    view of specific language of section 107(5). – Amin Textile Mills (Pvt.) Ltd. v. CIT
    [(1999) 80 TAX 15 (H.C.Kar.) = 1999 PTD 1903].
   Legal objections as to assumption of jurisdiction under section 65 should be decided
    first. – Imtiaz Rafi Butt v. ITO [(1993) 67 TAX 133 (H.C.Lah.) = 1993 PTD 265].
   Income Tax Officer issued notices under section 34 for the years 1974-75 and
    1975-76 and final orders were also passed against which appeals were filed, but the
    petitioner also challenged the notices through Constitutional petition. Held that
    petition was not maintainable. – Leslie Sequeira v. ITO, Circle V, Zone C, Karachi
    and another [(1990) 61 TAX 81 (H.C.Kar.) = 1990 PTD 58 = PTCL 1990 CL. 464].
   Notice issued under section 65 on the same material merely on the basis of change of
    opinion that valuation accepted by the predecessor was not fair held not sustainable.
    – Car Tunes v. ITO etc. [(1989) 59 TAX 115 (H.C.Kar.) = 1989 PTD 468 = PLD 1988
    Kar. 337 = PTCL 1989 CL. 627]




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                                        733
Chapter X, Procedure – Part II, Assessments                                  Section 122

   High Court inclined to restrain the Income Tax Officer from reopening of assessment
    observing that he was entitled to send for account books for ascertaining as to
    whether or not bad debts for which adjustment was claimed had actually been
    written off in the said books of accounts in terms of order of Appellate Tribunal. –
    N.V.Philips’ Globilampenfarrieken v. ITO, etc. [(1987) 56 TAX 117 (H.C.Kar.) = 1987
    PTD 655].
   Non-ticking of relevant clause of section 65 renders the notice to be nullity in law. –
    [(2003) 88 TAX 158 (Trib.) = 2004 PTD 1052].
   Order u/s 62/65 without lawful jurisdiction should be annulled by CIT(A) instead of
    setting it aside. – [(2003) 88 TAX 158 (Trib.) = 2004 PTD 1052].
   Application for a writ prohibiting Income Tax Officer from proceedings with
    reassessment is not maintainable. – U.C. Rekhi v. ITO [1950] 18 ITR 618 (Punj.).
              TO TAX INCOME ESCAPING TAX DUE TO CHANGE IN ACCOUNTING SYSTEM
   Income Tax Officer‟s failure to charge inadmissible expenditure or to charge the
    income entirely due to oversight or negligence or inadvertence attracts section 65. –
    CIT, Rawalpindi Zone, Rawalpindi v. Safdar and Company, Gujrat [(1980) 42 TAX
    171 (H.C.Lah.) = 1980 PTD 336].
   Where assessee was assessed on actual receipt basis for several years, on his
    requesting for assessment on mercantile basis, Income Tax Officer could not assess
    interest of earlier years which had escaped assessment. – Arnrit Warnan v. CIT
    [1937] 5 ITR 721 (Nag.).
                WHERE ASSESSMENT HAD EARLIER BEEN MADE ON ESTIMATE BASIS
   Where the income of the assessee, a money-lender and dealer in gold and silver, was
    estimated at a flat rate and subsequently, the successor-Income Tax Officer
    reopened the assessment on the ground that the estimate of the first Income Tax
    Officer was too low. – Gopal Vaijnath Manohar v. CIT [8 ITC 273 (Bom.)].
   Where, after the completion of a best judgment assessment, the Income Tax Officer
    initiated reassessment proceedings for bringing escaped income under certain
    specified heads to tax. – Satyendra Mohen Roy Choudhury v. CIT [4 ITC 447 (Cal.)].
   Where, during original assessment, the Income Tax Officer accepted the sales
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    figures furnished by the assessee but adopted a higher profit percentage, and, on
    noticing in the assessment for the next year that profits were far less when compared
    to the investment, initiated reassessment proceedings for the earlier year under
    section 34. – Sheikh Mubarak Ali v. CIT [1938] 6 ITR 625 (Lahore).
   Mere wrong estimate of income by predecessor-I TO will not justify reassessment by
    successor. – CIT v. Gopal Vajiuath Manohar [1935] 3 ITR 372 (Bom.).
                                     UNDER ASSESSMENT
   Following 2005 PTD (Trib) 344 order section 122 (5A) declared null and void. –
    [2010 PTR 35 (Trib.)]
   Reassessment is justified in case of wrong allowance of deduction. – P.C. Mallick
    and D.C. Aich, In re [1940] 8 ITR 236 (Cal.).
                                ASSESSMENT AT TOO LOW A RATE
   Assessment was completed by the Income Tax Officer. Later the Income Tax Officer
    issued notice stating that he had reason to believe that the income has been under
    assessed or assessed at too low a rate. Assessee filed revised return and also prayed
    that the re-assessment proceedings may be dropped. Assessee was called upon to
    explain the investments. Assessment was reframed being dissatisfied with the
    explanation, held that Income Tax Officer‟s action was valid in law. – J.L.Wei & Co.
    v. CIT [(1989) 59 TAX 108 (H.C.Kar.) = 1989 PTD 271].
   If income is assessed at a low figure because of incorrect status, section 147 can be
    invoked. – Rai Bahadur Chotay Lal v. CIT [5 ITC 466 (All.)]; Lakshmi Narain
    Gadodia & Co., In re [1943] 11 ITR 491 (Lahore).
   Where the Income Tax Officer initiated reassessment proceedings for the specific
    purpose of adopting the correct tax. – P.L.M.P.L. Palaniappa Chettiar v. CIT [4 ITC
    196 (Mad.)].




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                                           734
Section 122                                                Income Tax Ordinance, 2001.

                                              OTHERS
   Others. – CIT v. DR. Naik [1939] 7 ITR 362 (Bom.).
                                             GENERAL
   Application of Income Tax Ordinance, 2001 on the assessments finalized under
    Income Tax Ordinance, 1979 is illegal. – Commissioner of Income Tax, Gujranwala
    vs Ali Bricks Company, Jalapur Bhattian District, Hafizabad [2009 PTR 193 (H.C.
    Lah.)]
   Assessments finalised on the basis of law amended by SRO 633(I)/2002 dated
    14-09-2002 held to be void. – Commissioner of Income Tax, Gujranwala vs Ali Bricks
    Company, Jalapur Bhattian District, Hafizabad [2009 PTR 193 (H.C. Lah.)]
   Matters pending under the repealed Ordinance, are required to be decided under the
    provision of repealed Ordinance. – Commissioner of Income Tax, Gujranwala vs Ali
    Bricks Company, Jalapur Bhattian District, Hafizabad [2009 PTR 193 (H.C. Lah.)]
   The term “this Ordinance” used in the definition clause cannot include any
    enactment beyond Income Tax Ordinance, 2001. – Commissioner of Income Tax,
    Gujranwala vs Ali Bricks Company, Jalapur Bhattian District, Hafizabad [2009
    PTR 193 (H.C. Lah.)]
   Information. – CIT v. Mahaliram Ramjidas [1940] 8 ITR 442 (PC); Badar Shoe
    Stores, In re [1946] 14 ITR 431 (All.); Mahabir Prasad Munna Lal v. CIT [1947] 15
    ITR 393 (All.).
                                          ILLUSTRATIONS
   Illustrations. – V.Ramaswamy Ayyangar v. CIT [1944] 12 ITR 29 (Mad.); CIT v.
    K.M.S. Lakshmana Iyer [1945] 13 ITR 242 (Mad.); CIT v. Dey Bros. [1936] 4 ITR 209
    (Rangoon).
                              NOTICE FOR REASSESSMENT – GENERAL
   Mere issuance of notice under section 65 is not an illegal act. – Amin Textile Mills
    (Pvt.) Ltd. v. CIT, and 2 others [PTCL 2000 CL. 316 (S.C.Pak)].
   Show-cause notice to assessee for reopening the assessment for concealment of
    income because of under estimating the value of the property when assessee was not
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    the owner of the property held without lawful authority and of no legal effect. Notice
    issued beyond ten years from the year of assessment held barred by time. – Kassam
    Haji Abbas Patel v. ITO, Contractors Circle, Karachi and another [(1983) 47 TAX 162
    (H.C.Kar.) = 1982 PTD 361].
   If notice is invalid originally, but is subsequently validated by statute, reassessment
    is valid. – Dayaldas Khushiram v. CIT [1943] 11 ITR 67 (Bom.); Govindram
    Seksaria, In re. [1943] 11 ITR 104 (Bom.).
   Notice is only to tell assessee which case he has to meet. – Chirnanrarn Motilal v.
    CIT [1943] 11 ITR 44 (Bom.).
   Before issuing notice it not necessary to hear assessee. – Indian National Tannery,
    In re [1941] 9 ITR 618 (All.).
   Opportunity of hearing has to be given but not before notice is served. – Haji All
    Moharnmad v. CIT [1940] 8 ITR 243 (Nag.).
                           LIMITATION PERIOD FOR ISSUANCE OF NOTICE
   Limitation once fixed cannot be extended. – Nagina Silk Mills, Lyallpur v. ITO,
    A-Ward, Lyallpur and others [(1963) 7 TAX 442 (S.C.Pak.) = 1963 PTD 633 = PLD
    1963 SC 322].
   Limitation period for issuance of notice under section 34. – CIT, East Pakistan
    Dacca v. Hossen Kasam Dada, Karachi [(1961) 4 TAX 96 (S.C.Pak.) = 1961 PTD 771].
   Assessment for the year 1951-52 were set aside by the appellate authorities from
    time to time on various grounds. Set aside assessment were ultimately completed




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                                       734-A
Chapter X, Procedure – Part II, Assessments                                   Section 122

     on 22.9.1960 held the same are not hit by the bar of limitation. – Shamim and
     Company, Dacca v. CIT, East Pakistan, Dacca [(1968) 17 TAX 122 (H.C.Dacca) =
     1968 PTD 401 = PLD 1968 Dacca 597].
   Limitation period of four years of twelve calendar months expired on 31.3.1960, held
    that assessment made under the provisions of sub-section (2B) on 29.6.1960 were not
    hit by the bar of limitation. – Hassan Ali Saraf v. CIT [(1966) 13 TAX 178
    (H.C.Lah.) = 1966 PTD 89 = PLD 1966 Lah. 241].
   Reassessment – Time-limit. – Barnala Commission Shop, Chak-Jhumra v. ITO,
    B-Ward, Lyallpur [(1963) 7 TAX 153 (H.C.Lah.) = 1963 PTD 534 = PLD 1963 Lah.
    311].
             PROVISIONS OF SECTION 121(1)(d) AND SUB SECTIONS (1) & (5) OF 122
                            ARE NOT SIMULTANEOUSLY APPLICABLE
   The provisions of section 121(1)(d) and those of sub section (1) & (5) of section 122 are
    different in nature dealing with entirely different situations therefore not
    simultaneously applicable. – [2010 PTR 77 (Trib.)]
   One can modify his earlier assessment after holding that the same is either
    under-assessed on the basis of definite information u/s 122(5) or is erroneous and
    prejudicial to the interest of revenue u/s 122(5A). – [2010 PTR 46 (Trib.)]
                                 SCOPE OF WORD “CONSIDER”
   Import and scope of word “consider” in section 122 (5A). – [2010 PTR 35 (Trib.)]
                  DEFECTS IN NOTICE UNDER SECTION 65 VIS-À-VIS SECTION 122
   More than one notice under section 65 for the same income cannot be issued. –
    M.Rehman, ITO, and others v. Narayanganj Company (Pvt.) Ltd. [(1971) 23 TAX 223
    (S.C.Pak) = 1971 PTD 175 = PLD 1971 SC 1].
   Defective notice under section 65 renders the entire proceedings unlawful. – Home
    Planners through Muhammad Azeem, Partner v. The ACIT, Circle-06, Coys, Zone-
   Initiation of assessment proceedings through simultaneous issuance of notices u/s
    177 and 122 or 121(1)(d) is legally not justified. – [2010 PTR 77 (Trib.)]
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                                 734-B
Section 122                                    Income Tax Ordinance, 2001.




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                                        735
Chapter X, Procedure – Part II, Assessments                                 Section 122

    III, Lahore (Now Circle 14, Coy Zone-II, Lahore) and 4 others [(2001) 84 TAX 223
    (H.C.Lah.) = 2001 PTD 1633].
   If notice under section 65 is prima facie defective and error is incurable the entire
    proceedings are null and void. – Baby Own v. ITO [(1996) 74 TAX 229 (H.C.Lah.) =
    1997 PTD 47].
   After thorough scrutiny of evidence Income Tax Officer accepted the cost of
    acquisition of plots and receipts but did not accept gross profit declared by the
    assessee. Income Tax Officer estimated the gross profit rate and some additions were
    made in the profit and loss account and assessment was framed. After more than
    four years Income Tax Officer issued notice on the ground that the two plots
    purchased by the assessee were under valued held that notice was void ab-initio and
    without jurisdiction. – M.R. Sons v. ITO, etc. [(1992) 65 TAX 271 (H.C.Kar.) = 1989
    PTD 1010].
   Assessment of a particular year made subject matter of appeal held that
    reassessment proceedings for that year were valid in law. – Wahiduddin Ahmed,
    Dacca v. ITO, Investigation Circle I, Dacca And Another [(1967) 15 TAX 252
    (H.C.Dacca)].
   „Service‟ of notice under section 65 on employee is not valid. – S.H.Mahmood & Co.,
    v. CIT, Karachi [(1961) 3 TAX 68 (H.C.Kar.) = 1960 PTD 1347 = PLD 1961 Kar. 23].
   Section 34 does not prescribe any standard form of notice. – Burn & Co., In re [1934]
    2 ITR 30 (Cal.).
   A notice under section 34 can be in any form, provided it brings to attention of
    assessee matters required to be answered or dealt with and things required to be
    furnished. – Jawala Prasad Chobey v. CIT [1935] 3 ITR 295 (Cal.).
   Notice under section 34 need not specify income believed to have escaped
    assessment. – H.M. Istifa Khan v. CIT [1942] 10 ITR 435 (Oudh).
   Before issue of notice it is not necessary to prove that a particular income has
    escaped assessment. – B.P. Haider & Sons, In re [1942] 10 ITR 79 (All.).
                               FRESH NOTICE OF REASSESSMENT
   Simultaneous issue of notices under sections 23(2) and 23(3) held not illegal. –
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    Sutlej Cotton Mills Ltd., Okara, (In the matter of) [(1962) 6 TAX 156 (H.C.Lah.) =
    1962 PTD 924 = PLD 1962 Lah. 108].
   When a notice under section 34 of the 1922 Act has been served on a person and he
    has made a return in response thereto, proceedings can be continued by issue of
    notices under sections 22(4) and 23(2) of 1922 Act to successor of such person, and
    proceedings against successor need not be started de novo. – CIT v. Nachal Achi
    [1933] 1 ITR 277 (Mad.).
                           NOTICE ON DIFFERENT ENTITIES – GENERAL
   Notice issued in a different capacity needs not be processed if reassessment is made
    personally on assessee on basis of notice issued to assessee in his personal capacity.
    – H.M. Istifa Khan v. CIT [1942] 10 ITR 435 (Oudh).
                   NOTICE ON DIFFERENT ENTITIES – HINDU UNDIVIDED FAMILY
   Where assessee-HUF had made a claim for partition and Income Tax Officer issued a
    reassessment notice without indicating status, filing of return by karta waived
    irregularity in notice. – CIT v. K.M.N.N. Swaminathan Chettiar [1947] 15 ITR 430
    (Mad.).
         EXTENDED PERIOD OF LIMITATION IN CASE OF DIRECTIONS OR FINDING IN APPEAL
                            – POSITION UNDER REPEALED ACT 1922
   Position under 1922 Act. – CIT v. Khemchand Ramdas [1938] 6 ITR 414 (PC).
              NON-DISCLOSURE OF PRIMARY FACTS – ASSESSEE‟S DUTY TO DISCLOSE
   Where the Income Tax Officer was already aware of an income at the time he
    completed the assessment and omitted to consider it, recourse to section 34 was not
    valid. – Fazal Dhala v. CIT [1944] 12 ITR 341 (Pat.).




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                                        736
Chapter X, Procedure – Part II, Assessments                                     Section 122

                                      OMISSION TO FILE RETURN
   Others. – CIT v. Pirojbai N. Contractor [1937] 5 ITR 338 (Bom.); Maharaja of
    Patiala v. CIT [1943] 11 ITR 202 (Bom.).
                             „NA‟ / „NOT ASSESSED‟ – CONNOTATION OF
   Where proceedings against assessee are dropped following his death reassessment
    cannot be made. – CIT v. D.N. Mehta [1935] 3 ITR 147 (Bom.).
                 REASSESSMENT WHERE RETURNS HAVE NOT BEEN DISPOSED OF
   If return originally filed was void and assessment thereon declared illegal, section 34
    of the 1922 Act could be invoked to make assessment. – Kunwar Bishwanath Singh
    v. CIT [1942] 10 ITR 322 (All.).
   Order u/s 66A held justified as assessing officer failed to apply law correctly and also
    caused loss of revenue. – [(2002) 86 TAX 346 (Trib.) = 2003 PTD 909].
                            REOPENING OF TIME-BARRED ASSESSMENT
   Time-barred matters cannot be reopened u/s 65. – Anwar Elahi v. DCIT/WT, Circle 2,
    Companies Zone-II, Lahore [(2004) 90 TAX 279 (H.C.Lah.) = 2004 PTD 2852].
   A time-barred assessment is nullity in the eye of law, hence subsequent action of
    reopening or revision will be void ab initio. – [2004 PTD (Trib.) 167].
                                     SECTION 65 V. SECTION 59B
   In cases covered u/s 59B, proceedings u/s 65 are not permissible. – [2004 PTD (Trib.)
    70].
                                REOPENING IN ABSENCE OF ORDER
   In the absence of an order, section 65 cannot be invoked. – [2004 PTD (Trib.) 70].
   Reopening on same facts held untenable. – [2004 PTD (Trib.) 844].
                          NO REOPENING WHERE FACTS ARE DISCLOSED
   Since action u/s 65 was disapproved, original assessment u/s 59(1) restored. –
    [(2004) 89 TAX 1 (Trib.) = 2004 PTD 271].
               SECTION 66A CAN BE INVOKED IN RESPECT OF „AGREED ASSESSMENT‟
   IAC can proceed to exercise jurisdiction under section 66A if the agreed assessment
    is erroneous as well as prejudicial to revenue. – CIT, Sargodha v. Irshad Anwar &
    Co. Kamlia [(2002) 85 TAX 470 (H.C.Lah.) = 2002 PTD 750].
                        CONDITIONS NECESSARY TO INVOKE SECTION 66A
   Prerequisites for invoking section 66A. – Glaxo Laboratories Ltd. v. IAC of Income
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    Tax, and others [(1992) 66 TAX 74 (S.C.Pak.) = 1992 PTD 932 = PLD 1992 SC 549].
   Effect of sub-section (1A) inserted by Finance Act, 1991. – Glaxo Laboratories Ltd. v.
    IAC of Income Tax, and others [(1992) 66 TAX 74 (S.C.Pak.) = 1992 PTD 932 = PLD
    1992 SC 549].
   Sub-section (1A) of section 66A applies in respect of appeals filed under sections 129,
    134 and 137 or a reference made under section 136 and where the appeal or
    reference has been decided in respect of any point of issue, which was not subject
    matter of appeal or reference. The provision does not need any scholarly
    interpretation. Provisions of 66A (1A) can be invoked in respect of matters where the
    issue or a question was not directly involved, in the orders passed in appeals or
    reference made. – CIT/WT, Multan Zone, Multan v. Chaudhry Trading Company,
    Multan [(2008) 98 TAX 204 (H.C.Lah.) = 2008 PTD 1525 = PTCL 2008 CL. 372].
   Provisions of section 122(5A) of Income Tax Ordinance, 2001 relating to amendment
    of assessment, were not retrospective in operation. – Muhammad Hanif v. AC of
    Income Tax Audit, Lahore [2007 PTD 1840 (H.C.Lah.)].
   Assessment could not be cancelled on such ground, which would entail penal
    consequences as provided under section 108 of Income Tax Ordinance, 1979. –
    CIT/WT, Gujranwala Zone, Gujranwala v. Pakistan Electronics, Gujranwala
    [(2007) 95 TAX 301 (H.C.Lah.) = 2007 PTD 453].
   Erroneous assessment and assessment prejudicial to interest of revenue, both such
    requirements must be satisfied separately for exercise of power under section 66A of
    income Tax Ordinance, 1979. – CIT/WT, Faisalabad v. Nusrat Corporation,
    Faisalabad [2006 PTD 2660 (H.C.Lah.)].
   Increase in directors‟ loan was erroneous as well as prejudicial to the interest of Revenue
    and such failure was sufficient for Revenue Authority to invoke provisions of section 66A
    of the Income Tax Ordinance, 1979. – Services Industries Limited v. CIT, Zone-III,
    Lahore [(2006) 94 TAX 237 (H.C.Lah.) = 2006 PTD 67 = PTCL 2007 CL. 63].




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                                        737
Chapter X, Procedure – Part II, Assessments                                Section 122

   Action u/s 66A disapproved. – CIT/WT, Companies Zone-I, Lahore v. Hafeez Valqa
    Industries Pvt. Ltd., Lahore [2006 PTR 13 [H.C.Lah.] = (2006) 93 TAX 49 = 2005
    PTD 2403].
   Action u/s 122(5) is not subject to order u/s 122(5A). – Fauji Oil Terminal and
    Distribution Co. Ltd. Port Bin Qasim Karachi v. AC/TO-A, Audit Division, LTU,
    Karachi, TO-III, DCIT, Audit Division, LTU, Karachi, Pakistan, through Secretary,
    Ministry of Finance, Islamabad. [2006 PTR 97 [H.C.Kar.] = (2006) 94 TAX 84 = 2006
    PTD 734 = PTCL 2006 CL. 268].
   Action u/s 122(5A) for income falling under PTR disapproved. – Fauji Oil Terminal
    and Distribution Co. Ltd. Port Bin Qasim Karachi v. AC/TO-A, Audit Division, LTU,
    Karachi, TO-III, DCIT, Audit Division, LTU, Karachi, Pakistan, through Secretary,
    Ministry of Finance, Islamabad [2006 PTR 97 [H.C.Kar.] = (2006) 94 TAX 84 = 2006
    PTD 734 = PTCL 2006 CL. 268].
   Income Tax Ordinance 2001 has become too patchy. – Fauji Oil Terminal and
    Distribution Co. Ltd. Port Bin Qasim Karachi v. AC/TO-A, Audit Division, LTU,
    Karachi, TO-III, DCIT, Audit Division, LTU, Karachi, Pakistan, through Secretary,
    Ministry of Finance, Islamabad [2006 PTR 97 [H.C.Kar.] = (2006) 94 TAX 84 = 2006
    PTD 734 = PTCL 2006 CL. 268].
   Issue of taxability under PTR or NTR left for ITAT. – Fauji Oil Terminal and
    Distribution Co. Ltd. Port Bin Qasim Karachi v. AC/TO-A, Audit Division, LTU,
    Karachi, TO-III, DCIT, Audit Division, LTU, Karachi, Pakistan, through Secretary,
    Ministry of Finance, Islamabad [2006 PTR 97 [H.C.Kar.] = (2006) 94 TAX 84 = 2006
    PTD 734 = PTCL 2006 CL. 268].
   Notices u/s 122(5A) declared unlawful. – Fauji Oil Terminal and Distribution Co.
    Ltd. Port Bin Qasim Karachi v. AC/TO-A, Audit Division, LTU, Karachi, TO-III,
    DCIT, Audit Division, LTU, Karachi, Pakistan, through Secretary, Ministry of
    Finance, Islamabad [2006 PTR 97 [H.C.Kar.] = (2006) 94 TAX 84 = 2006 PTD 734 =
    PTCL 2006 CL. 268].
   Section 122 applies where order is in existence. – Fauji Oil Terminal and
    Distribution Co. Ltd. Port Bin Qasim Karachi v. AC/TO-A, Audit Division, LTU,
    Karachi, TO-III, DCIT, Audit Division, LTU, Karachi, Pakistan, through Secretary,
                www.imranghazi.com
    Ministry of Finance, Islamabad [2006 PTR 97 [H.C.Kar.] = (2006) 94 TAX 84 = 2006
    PTD 734 = PTCL 2006 CL. 268].
   Section 122(5) not applies to escapement of income. – Fauji Oil Terminal and
    Distribution Co. Ltd. Port Bin Qasim Karachi v. AC/TO-A, Audit Division, LTU,
    Karachi, TO-III, DCIT, Audit Division, LTU, Karachi, Pakistan, through Secretary,
    Ministry of Finance, Islamabad [2006 PTR 97 [H.C.Kar.] = (2006) 94 TAX 84 = 2006
    PTD 734 = PTCL 2006 CL. 268].
   Section 122(5) - scope of. – Fauji Oil Terminal and Distribution Co. Ltd. Port Bin
    Qasim Karachi v. AC/TO-A, Audit Division, LTU, Karachi, TO-III, DCIT, Audit
    Division, LTU, Karachi, Pakistan, through Secretary, Ministry of Finance,
    Islamabad [2006 PTR 97 [H.C.Kar.] = (2006) 94 TAX 84 = 2006 PTD 734 = PTCL
    2006 CL. 268].
   “Right to premises” does not create the right of ownership in the property. –
    Shaukat Soap Factory v. Income Tax Officer and 3 others [2006 PTR 271 [H.C.Lah.]
    = (2006) 94 TAX 181 = 2006 PTD 1543 = PTCL 2006 CL. 601].
   Section 66A can be invoked on the basis of information already available on record. –
    Shaukat Soap Factory v. Income Tax Officer and 3 others [2006 PTR 271 [H.C.Lah.]
    = (2006) 94 TAX 181 = 2006 PTD 1543 = PTCL 2006 CL. 601].
   Notices u/s 122(5A) cannot be issued for any assessment completed before 30th June
    2003. – Honda Shahra-e-Faisal, 13-Banglore Town, Karachi and others v. RCIT,
    Corporate Region, Income Tax Building, Shahra-e-Kamal Ata Turk, Karachi and
    others [2005 PTR 63 [H.C.Kar.] = (2005) 91 TAX 474 = 2005 PTD 1316].
   SRO No. 633(I)/2002, dated 14th September, 2002 is not a valid and legal document
    and, therefore, is of an consequence and it is so declared. – Kashmir Edible Oil Ltd.
    v. Federation of Pakistan [2005 PTR 70 [H.C.Lah.] = (2005) 91 TAX 480 = 2005 PTD
    1621].




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                                        738
Chapter X, Procedure – Part II, Assessments                                 Section 122

   Provisions of section 66A can only be attracted when decision of Assessing Officer is
    prejudicial to interest of revenue. – CIT, Companies Zone-I, Lahore v. Grays Leasing
    Co. Ltd. [(2005) 92 TAX 293 (H.C.Lah.) = 2005 PTD 2093].
   Order u/s 122 annulled in view of 2005 PTR 63 & 2005 PTR 70. – [2006 PTR 1 (Trib.)
    = (2006) 93 TAX 73 = 2006 PTD 1778].
   Order under section 66A cannot be passed by the Inspecting Additional
    Commissioner if he passed the original order. – Sandal Engineering (Pvt.) Limited,
    Faisalabad v. IAC of IT/WT, Range-I, Companies Zone-I, Faisalabad & 2 others
    [(2001) 83 TAX 551 (H.C.Lah.) = 2001 PTD 1467].
   Order under section 66A held unlawful for want of jurisdiction. – Sandal
    Engineering (Pvt.) Limited, Faisalabad v. IAC of IT/WT, Range-I, Companies
    Zone-I, Faisalabad & 2 others [(2001) 83 TAX 551 (H.C.Lah.) = 2001 PTD 1467].
   Inspecting Additional Commissioner has vast powers to interfere with the
    assessment framed by Income Tax Officer adversely affecting the interest of
    revenue. – Shahabuddin v. IAC of Income Tax, Karachi and 4 others [(1988) 58 TAX
    106 (H.C.Kar.) = 1988 PTD 723].
   AAC‟s appellate order modified the assessment order which merged with the
    appellate order held there was no order of Income Tax Officer in existence and
    therefore Inspecting Additional Commissioner could not invoke section 66A. – CIT,
    East Zone, Karachi v. Atta Muhammad Faiz [(1986) 53 TAX 31 (H.C.Kar.) = 1985
    PTD 874].
   Inspecting Additional Commissioner not in agreement with the result of the
    assessment made by Income Tax Officer cannot exercise his supervisory authority
    unless proving that he is “prejudicial” as well as erroneous. – United Builders
    Corporation, Mirpur v. CIT, Muzaffarbad [(1984) 49 TAX 34 (H.C.AJ&K) = 1984
    PTD 137].
   Notice issued by Inspecting Assistant Commissioner to assessee for revision of
    assessment order on the ground that the assessment of Income Tax Officer was not
    convincing held to be illegal. – United Builders Corporation, Mirpur v. CIT,
    Muzaffarbad [(1984) 49 TAX 34 (H.C.AJ&K) = 1984 PTD 137].
                www.imranghazi.com
    Difference of opinion is an essential element for taking action under section 66A. –
    [(2004) 90 TAX 240 (Trib.) = 2004 PTD 2087].
   Order which is perfectly legal ought not to be disturbed under the umbrella of section
    66A. – [(2004) 90 TAX 128 (Trib.) = 2005 PTD 344 = PTCL 2004 CL. 596].
   The view that IAC is barred to invoke section 666A only where he cancelled or
    modified or set aside an assessment, held mistaken. – [(2004) 90 TAX 128 (Trib.) =
    2005 PTD 344 = PTCL 2004 CL. 596].
   Subsequent judgement, event, information or report cannot be made basis for
    invoking section 66A. – [(2004) 90 TAX 128 (Trib.) = 2005 PTD 344 = PTCL 2004 CL.
    596].
   Order u/s 66A held not sustainable if based on misreading of facts. – [(2002) 86 TAX
    403 (Trib.) = 2003 PTD 279].
   Exercise of revisionary jurisdiction under section 66A by the IAC is a very special
    statutory authority that must be exercised independently by the IAC without any
    advice or direction from any other authority, including the Zonal CIT. – [(2002) 86
    TAX 403 (Trib.) = 2003 PTD 279].
   Order u/s 66A held justified as assessing officer wrongly assessed business income of
    a commercial plaza in the hands of individuals. – (2002) 85 TAX 387 (Trib.) = 2002
    PTD 2335.
   Order u/s 66A cancelled on wrong interpretation of law based on CBR‟s circulars and
    without applying independent mind. – [(2002) 86 TAX 266 (Trib.) = 2003 PTD 975].
                         NOTICE ISSUED BY IAC U/S 66A HELD ILLEGAL
   Order u/s 66A held invalid as DCIT rightly taxed the income. – S.N.H. Industries
    (Pvt.) Ltd. v. Income Tax Department and another [(2004) 89 TAX 252 (H.C.Kar.) =
    2004 PTD 330].




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                                        739
Chapter X, Procedure – Part II, Assessments                                  Section 122

   Bona fide mistake of filing return in previous circle does not attract proceedings
    under section 66A. – Profile Architectural Consultants v. DCIT, Circle-02, Zone-B,
    Lahore [(2003) 89 TAX 75 (H.C.Lah.) = 2003 PTD 1795].
   Provisions of section 66A cannot be invoked on assessment arrived at in agreement if
    it was not made by cheating or misguiding the department. – Punjab Beverages Co.
    (Pvt.) Limited through General Manager, Faisalabad v. DCIT, Faisalabad and 2
    others [(2004) 89 TAX 158 (H.C.Lah.) = 2003 PTD 1762].
   Retrieval of concession of SAS on far fetched technicalities is unjustified. – Profile
    Architectural Consultants v. DCIT, Circle-02, Zone-B, Lahore [(2003) 89 TAX 75
    (H.C.Lah.) = 2003 PTD 1795].
   Section 66A cannot be invoked on issues already decided in appeal. – Rehman Ice
    Factory v. IAC, Lahore and others [2002 PTD 1014 (H.C.Lah.)].
   Section 66A cannot be applied to cases completed under 1922 repealed Act. –
    Monnoo Industries Ltd. v. CIT, Central Zone, Lahore [(2001) 84 TAX 86 (H.C.Lah.) =
    2001 PTD 1525].
   Notice under section 66A prior to amendment in 1991 held unlawful. – Mrs.
    Anjuman Shaheen v. IAC of Income Tax, Range-III and another [(1993) 68 TAX 167
    (H.C.Lah.) = 1993 PTD 1232 = PTCL 1993 CL. 650].
   Action u/s 66A on mere supposition is not tenable. – [(2004) 89 TAX 316 (Trib.) =
    2004 PTD 422].
   IAC cannot invoke revisional jurisdiction on arbitrary, vague and fanciful
    assumption based on a hypothesis of personal knowledge. – [(2004) 90 TAX 128
    (Trib.) = 2005 PTD 344 = PTCL 2004 CL. 596].
   Jurisdiction u/s 66A can be invoked only on sound grounds showing error leading to
    prejudice to the interest of revenue. – [(2004) 90 TAX 128 (Trib.) = 2005 PTD 344 =
    PTCL 2004 CL. 596].
   Orders passed by DCIT restored as action u/s 66A by IAC held unlawful. – [(2004) 90
    TAX 128 (Trib.) = 2005 PTD 344 = PTCL 2004 CL. 596].
   After accepting that the taxpayer was entitled to a concession the Department could
    not withdraw the same on whimsical grounds. – [(2004) 90 TAX 275 (Trib.) = 2005
                 www.imranghazi.com
    PTD 529].
   Order u/s 66A vacated as initiated on wrong assumptions. – [(2005) 91 TAX 126
    (Trib.) = 2004 PTD 2494].
   Order u/s 66A vacated as action u/s 59(3) was appropriate. – [2004 PTD (Trib.)
    2827].
   Action u/s 66A on mere supposition is not tenable. – [(2004) 89 TAX 316 (Trib.) =
    2004 PTD 422].
   Divergent views of two officers alone are not valid justification to invoke section 66A.
    – [2004 PTD (Trib.) 1004].
   Action u/s 66A is not maintainable in the absence of valid order by the assessing
    officer. – [2004 PTD (Trib.) 288].
   Allowing time to file certain documents to qualify for SAS is different from
    condonation of short payment u/s 54, hence order u/s 66A held justified. – [(2002) 85
    TAX 214 (Trib.) = 2002 PTD 1186].
   Order u/s 66A based on wrong notions that exempt companies having joint directors
    are not covered under clause (118C) disapproved. – [(2002) 85 TAX 285 (Trib.) =
    2002 PTD 2185].
                           THEORY OF “MERGER” AND SECTION 66A
   Law of merger is restricted to the extent of a point of issue which is the
    subject-matter in appeal. – BCCI (Overseas) Ltd. v. CIT and another [(2003) 87 TAX
    370 (H.C.Kar.) = 2003 PTD 752].
   The theory of “merger” and section 66A. – Glaxo Laboratories Ltd. v. IAC of Income
    Tax, and others [(1992) 66 TAX 74 (S.C.Pak.) = 1992 PTD 932 = PLD 1992 SC 549].




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                                        740
Chapter X, Procedure – Part II, Assessments                                  Section 122

   Merger of order explained. – Sh. Abdul Sattar v. CIT, Zone-C, and 2 others [(1995)
    72 TAX 63 (H.C.Lah.) = 1995 PTD 882].
   Where original assessment order having been appealed merged into the order of the
    AAC section 66A could not be invoked. – Mrs. Anjuman Shaheen v. IAC of Income,
    Zone-A, Lahore and another [(1993) 68 TAX 160 (H.C.Lah.) = 1993 PTD 1113 =
    PTCL 1993 CL. 641].
   Order of the Income Tax Officer, in regard to that aspect of the case which was not
    appealable was not to be merged with the order passed by the appellate authority. –
    Glaxo Laboratories (Pakistan) Limited v. IAC of Income Tax, Range-1 Companies-II,
    Karachi and 4 others [(1992) 65 TAX 115 (H.C.Kar.) = 1992 PTD 82 = PTCL 1993 CL.
    1].
   IAC debarred from taking action u/s 66A on an issue decided by the CIT(A). – [(2004)
    90 TAX 240 (Trib.) = 2004 PTD 2087].
   Section 66A cannot be extended to portion of the order or issues decided or modified by
    the learned CIT(A). – [(2002) 85 TAX 181 (Trib.) = 2002 PTD 1941].
                                WORD “ERRONEOUS”, MEANING OF
   Word “erroneous”, meaning of. – United Builders Corporation, Mirpur v. CIT,
    Muzaffarbad [(1984) 49 TAX 34 (H.C.AJ&K) = 1984 PTD 137].
   An order based on binding precedents of superior courts cannot be held erroneous
    and prejudicial to the interest of revenue. – [(2004) 90 TAX 128 (Trib.) = 2005 PTD
    344 = PTCL 2004 CL. 596].
   The scope of word “erroneous” explained. – [(2004) 89 TAX 316 (Trib.) = 2004 PTD 22].
   Mere difference of opinion does not render an order erroneous. – [(2002) 85 TAX 285
    (Trib.) = 2002 PTD 2185].
   Filing of return in a different circle held erroneous and also prejudicial to the
    interest of revenue in term of proviso to section 66A. – [(2002) 86 TAX 199 (Trib.) =
    2003 PTD 754].
                       PRINCIPLE OF RES-JUDICATA VIS-A-VIS SECTION 66A
   Principle of res-judicata is not applicable. – Glaxo Laboratories Ltd. v. IAC of Income
                 www.imranghazi.com
    Tax, and others [(1992) 66 TAX 74 (S.C.Pak.) = 1992 PTD 932 = PLD 1992 SC 549].
   Principle of res judicata explained vis-à-vis fiscal laws. – CIT, East Pakistan Dacca
    v. Wahiduzzaman [(1965) 11 TAX 296 (S.C.Pak.) = 1965 PTD 283 = PLD 1965 SC
    171].
   No allegation that order obtained was the result of any fraud or mis-representation
    on part of assessee held no justification for change in the basis of assessment. –
    Farrukh Chemical Industries Ltd. v. CIT, South Zone, Karachi [(1983) 47 TAX 139
    (H.C.Kar.) = 1983 PTD 67 = PLD 1982 Kar. 269 = PTCL 1986 CL. 224].
                    JURISDICTION OF INSPECTING ADDITIONAL COMMISSIONER
   By virtue of provisions of 66A(1A)(b), the Inspecting Additional Commissioner was
    not competent to re-open the assessment which had merged into appellate order. –
    CIT/WT, Multan Zone, Multan v. Chaudhry Trading Company, Multan [(2008) 98
    TAX 204 (H.C.Lah.) = 2008 PTD 1525 = PTCL 2008 CL. 372].
   Every quasi judicial authority is under legal obligation to consider the objection as
    to its jurisdiction if raised in proceedings and to decide it as preliminary step before
    exercising jurisdiction or invoking authority under relevant law. – Abdul Majeed
    Awan v. IAC of Income Tax [(1999) 80 TAX 115 (H.C.Lah.) = 1999 PTD 2910 = 2000
    PCTLR 1046].
   Tribunal was not justified in holding that Inspecting Additional Commissioner had
    no jurisdiction to review the assessment order. – CIT, Central Zone, Karachi v.
    Artex Industries Ltd., Karachi [(1987) 56 TAX 89 (H.C.Kar.) = 1987 PTD 528].
   Revisional jurisdiction is not confined to examination of records of Income Tax
    Officer and correction of errors on face of records, the Inspecting Additional
    Commissioner is competent to go behind the records and rely on any information or
    material not forming part of the record. – CIT, Lahore Zone, Lahore v. M. Iqbal




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                                        741
Chapter X, Procedure – Part II, Assessments                                  Section 122

    Saigol (C/o, Kohinoor Industries Ltd., Lahore) [(1976) 33 TAX 157 (H.C.Lah.) = 1976
    PTD 11 = PLD 1975 Lah. 547].
   Additional Commissioner having delegated powers u/s 210(1A) can amend an order
    passed u/s 120(1) by Taxation Officer below Grade 19. – [2007 PTR 279 (Trib.)].
                        CONSTITUTIONAL PETITION VIS-A-VIS SECTION 66A
   No order u/s 66A can be passed after the expiry of four years from the date of order. –
    Naubhar Bottling Co. (Pvt.) Ltd. through Managing Director v. IAC of Income Tax,
    Range-II, Gujranwala and 3 others [2002 PTD 1808 (H.C.Lah)].
   Writ petition rejected as taxpayer could approach the Court u/s 136(2). – Ch.
    Samiullah v. CIT, Zone-A, Lahore and 2 others [(2002) 86 TAX 235 (H.C.Lah.) = 2002
    PTD 1212]; BILZ (Pvt.) Ltd., Multan v. DCIT, Companies Circle-01, Multan and
    another [(2001) 84 TAX 508 (H.C.Lah.) = 2001 PTD 2337].
   Inspecting Additional Commissioner issued notice seeking explanation with the
    direction to produce documentary evidence. Assessee challenged the notice through
    constitutional petition. Assessee did not avail the prevailing remedy held notice
    could not be quashed. – Noor Hospital v. IAC of Income Tax [(1994) 70 TAX 20
    (H.C.Lah.) = 1994 PTD 1323].
   Action proposed claiming that assessment made under section 59A was erroneous as
    investment made in the property was not examined by the Income Tax Officer.
    Assessee challenged the notice under constitutional jurisdiction directly, held notice
    issued by Inspecting Additional Commissioner was not capricious, arbitrary and
    mala fide. – Shahabuddin v. IAC of Income Tax, Karachi and 4 others [(1988) 58
    TAX 106 (H.C.Kar.) = 1988 PTD 723].
                      SCOPE OF ASSESSMENT FOLLOWING ORDER U/S 66A
   After conducting enquiry and finding out alleged defects Inspecting Additional
    Commissioner revised the assessment order. Failure of Inspecting Additional
    Commissioner to confront the assessee with the result of enquiry and to provide him
    opportunity to meet the objections and issues by providing evidence or otherwise
    held unlawful. – United Builders Corporation, Mirpur v. CIT, Muzaffarbad [(1984)
    49 TAX 34 (H.C.AJ&K) = 1984 PTD 137].
                www.imranghazi.com TO 1979
                                   POSITION PRIOR
   Aims and objects of the provisions of section 34A, explained. – United Builders
    Corporation, Mirpur v. CIT, Muzaffarbad [(1984) 49 TAX 34 (H.C.AJ&K) = 1984
    PTD 137].
   A reference does not lie from an order under section 33B of the 1922 Act unless that
    order is prejudicial to the assessee in the sense that he is in a worse position than
    before the order was made. – CIT v. Tribune Trust [1948] 16 ITR 214 (PC).
   Revision order vis-à-vis limitation prior to 1.7.1979. – CIT v. Mangaldas Motilal &
    Co. [1944] 12 ITR 89 (Bom.).
                       SECTION 66A VIS-À-VIS TIME-BARRED ASSESSMENT
   A time-barred assessment is nullity in the eye of law, hence subsequent action of
    reopening or revision will be void ab initio. – [2004 PTD (Trib.) 167].
                ORDER PASSED WITHOUT JURISDICTION VIS-À-VIS ACTION U/S 66A
   Any order passed without jurisdiction falls in the category of “erroneous in so far as
    prejudicial to the interest of revenue.” – [(2004) 89 TAX 418 (Trib.) = 2004 PTD
    752].
                  COMPUTATION OF TOTAL INCOME OF NON-RESIDENT ASSESSEE
   Tax liability of non-resident – How to be calculated. – CIT v. Ismail Yousuf Saedat
    and others [(1985) 51 TAX 77 (H.C.Kar.) = 1984 PTD 231].
   Non-resident is entitled to earned income relief inspite of provisions of section 16(1).
    – CIT v. R.C. Chapman [(1980) 41 TAX 73 (H.C.Kar.) = 1979 PTD 484 = 1984 PTD
    235].




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                                        742
Chapter X, Procedure – Part II, Assessments                                Section 122

                                   AGREED ASSESSMENT
   An agreed assessment though framed outside the four comers of the Act is still an
    assessment at par with any other assessment. – CIT, Sargodha v. Irshad Anwar &
    Co. Kamlia [(2002) 85 TAX 470 (H.C.Lah.) = 2002 PTD 750].
   Agreed assessment violative of Contract Act will be voidable. – CIT, Sargodha v.
    Irshad Anwar & Co. Kamlia [(2002) 85 TAX 470 (H.C.Lah.) = 2002 PTD 750].
                          SAS ORDER ON RECTIFIED COPY OF RETURN
   Order passed u/s 59(1) on the receipted copy of the return qualifies all requirements
    of law and it does constitute an assessment order. – [(2002) 85 TAX 214 (Trib.) =
    2002 PTD 1186].
                  INVOLVEMENT OF IAC AT ASSESSMENT STAGE VS. SECTION 66A
   Where the IAC is involved at the assessment stage, he becomes functus officio to
    invoke section 66A. – [(2004) 90 TAX 128 (Trib.) = 2005 PTD 344 = PTCL 2004 CL.
    596].
              EXPRESSION “RECORD” WITH REFERENCE TO SECTION 66A EXPLAINED
   Expression “record” as used in section 66A certainly denotes record of proceedings at
    the time of passing order by taxation officer. – [(2004) 90 TAX 128 (Trib.) = 2005
    PTD 344 = PTCL 2004 CL. 596].
                REVISION U/S 66 ON THE BASIS OF REPORT OF OTHER AUTHORITY
   Revision u/s 66A based upon report of any other authority negates the whole scheme
    of section 66A. – [(2004) 90 TAX 128 (Trib.) = 2005 PTD 344 = PTCL 2004 CL. 596].
   Proceeding u/s 66A in compliance of audit report of Audit Department held unlawful.
    – [2004 PTD (Trib.) 2658].
                                   AGREED ASSESSMENT
   As first agreement was consented by both the parties, a second cannot be considered
    as with free consent of taxpayer. – [2010 PTR 127 (Trib.)]
   Breach of agreement on the part of any officer of FBR is not permissible. – [2010
    PTR 135 (Trib.)]
               www.imranghazi.com
    Entire contract must be performed. – [2010 PTR 135 (Trib.)]




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                                        743
Chapter X, Procedure – Part II, Assessments                                                         Section 122A

       1[122A. Revision by the Commissioner.– (1) The Commissioner
may, 2[suo moto], call for the record of any proceeding under this Ordinance
or under the repealed Ordinance in which an order has been passed by any
3[Officer of Inland Revenue] other than the Commissioner (Appeals).

    (2) Subject to sub-section (3), where, after making such inquiry as is
necessary, Commissioner considers that the order requires revision, the
Commissioner may make such revision to the order as the Commissioner
deems fit.
    (3) An order under sub-section (2) shall not be prejudicial to the person
to whom the order relates.
       (4) The Commissioner shall not revise any order under sub-section (2)
if–
          (a)     an appeal against the order lies to the Commissioner (Appeals)
                  or to the Appellate Tribunal, the time within which such appeal
                  may be made has not expired; or
          (b)     the order is pending in appeal before the Commissioner
                  (Appeals) or has been made the subject of an appeal to the
                  Appellate Tribunal.]
1 Section 122A inserted by Finance Act, 2003.
2 Substituted for “suo motu” by Finance Act, 2005. Earlier the word “suo motu” was inserted by Finance Act, 2004.
3 Substituted for “taxation officer” by Finance Act, 2010 w.e.f. June 5, 2010. The same amendment was made by Finance
  (Amendment) Ordinance, 2010, promulgated as Ordinance No. III of 2010, dated February 6, 2010, published in the Gazette
  of Pakistan Extraordinary Part I at pages 23 to 53. This Ordinance was presented in the Parliament but lapsed on 5 June
  2010 as Parliament did not approve it. Originally this amendment was made through Finance (Amendment) Ordinance,
  2009, promulgated as Ordinance No. XXII of 2009, dated October 28, 2009, published in the Gazette of Pakistan
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  Extraordinary Part I at pages 229 to 259.

                                                 COMMENTS
SECTION 122A: ―Revision by Commissioner.‖
    This provision is pari-materia to section 138 of the repealed Ordinance. However, it does
not fit into the scheme of the new law where everything is done in the name of
Commissioner even by the Officers of Inland Revenue under delegated authority. The
repealed law was centered around the Deputy Commissioner so any action by a senior
against the DCIT’s order was justifiable whereas the new law purports to do everything in
the name of the Commissioner.
    The word ‚Commissioner‛ in section 2(13) of the Income Tax Ordinance, 2001 includes
any authority vested with all or any of the powers and functions of the Commissioner. The
section is saying that a Commissioner can revise the order of an Officer of Inland Revenue
other than the Commissioner (Appeals). In other words he is revising his own order, though
not prejudicial to the taxpayer. This unprecedented power to the Commissioner makes him a
king of his own kind who one day makes a decree and the next day suo moto revises it. In any
civilized society such intermingling of authorities cannot be conceived. It would have been
better if this power was given to the Chief Commissioner of Income Tax.
    The word ‘suo moto’ has been inserted giving the Commissioner power to take
cognizance of any order passed by any Officer of Inland Revenue for revision which
certainly cannot be prejudicial to the person to whom the order relates. This insertion may
nullify the powers of the Federal Tax Ombudsman (FTO) to direct the Commissioner to carry
out his instructions/orders under section 122A as now he can only invoke these powers suo
moto. This displays animosity on the part of FBR towards the institution of Federal Tax
Ombudsman. Time and again the FBR high-ups have shown their displeasure and




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                                                                     744
Section 122A                                                                                   Income Tax Ordinance, 2001.

annoyance about orders passed by the FTO. In most of the cases, representations were made
to the President u/s 32 of the FTO Ordinance, and orders were set aside. Such orders were
made without giving an opportunity of being heard to the taxpayers and the High Courts
declared such orders null and void as even President could not condemn any person
unheard. The FTO in his annual report 2003 submitted to President of Pakistan had taken
strong exception of such orders and tendency on the part of FBR to file representations in
the majority of the cases decided against it. This amendment hints at a sinister plan to block
the implementation of FTO’s order/instruction through legislative mischief. Stakeholders
and international donors (giving huge money for tax reforms) should take note of it and
force the government to withdraw this adverse amendment. The right of revision as
available to the taxpayers under section 138 of the RO should be restored in its entirety.

                      COMPARABLE PROVISION OF THE RO – [SECTION 138]
     138. Revision by Commissioner.–(1) The Commissioner may, either of his own motion or on an application
made by the assessee for revision, call for the record of any proceeding under this Ordinance in which an order
has been passed by any authority subordinate to him and may make such inquiry or cause such inquiry to be
made and, subject to the provisions of this Ordinance, may pass such order thereon, not being an order prejudicial
to the assessee, as he thinks fit 1[:]
     2[Provided that no application for revision under sub-section (1) against an order made under section 132

shall lie after the thirtieth day of June, 2001.]
     (2) The Commissioner shall not revise any order under sub-section (1) if,–
      (a) where an appeal against the order lies to the Appellate Additional Commissioner or to the Appellate
             Tribunal, the time within which such appeal may be made has not expired, or the assessee has not
             waived his right of appeal; or
      (b) the order is pending on appeal before the Appellate Additional Commissioner or has been made the
             subject of an appeal to the Appellate Tribunal; or
      (c) in the case of an application made by the assessee, the application has not been made within ninety
             days of the date on which such order was communicated to him, unless the Commissioner is satisfied that
             the assessee was prevented by sufficient cause from making the application within the said period.
     (3) No application for revision shall lie under sub-section (1) unless the tax payable under section 54 has been
paid.
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     (4) Every application by an assessee under sub-section (1) shall be accompanied by a fee of 3[4[one
thousand] rupees or ten per cent of tax levied, whichever is less, provided that where no tax is levied, 5[a fee of one
thousand rupees in case of companies and two hundred rupees in case of other assessees] shall be paid].
     (5) For the purposes of this section,–
      (a) an order by the Commissioner declining to interfere shall be deemed not to be an order prejudicial to
             the assessee; 6[ ]
      (b) the Appellate Additional Commissioner shall be deemed to be an authority subordinate to the 7[Central
             Board of Revenue] 8[;]
    9[(c)    where, in pursuance of an order by the 10[Central Board of Revenue] under clause (b) of sub-section (1)
             of section 5, a Commissioner exercises the powers of an Appellate Additional Commissioner,
             references to “Commissioner” shall be deemed to be references to 11[Regional Commissioner] 12[;]]
1  Substituted for full-stop by Finance Ordinance, 2001.
2  Proviso inserted by Finance Ordinance, 2001.
3  Substituted for “twenty-five rupees” by Finance Act, 1994.
4  Substituted for “two thousand five hundred” by Finance Act, 1996.
5  Substituted for “a fee of two thousand five hundred rupees” by Finance Act, 1996.
6  Word “and” omitted by Finance Ordinance, 1981.
7  Substituted for “Commissioner” by Finance Act, 1989.
8  Word “and” omitted by Finance Ordinance, 1982, the semi-colon and word “;and” at the end were earlier substituted by Finance Ordinance,
   1981 for a full stop.
9 Clause (c) inserted by Finance Ordinance, 1981.
10 Substituted for “Regional Commissioner” by Finance Ordinance, 2001 and shall be deemed always to have been so substituted. Earlier it was
   substituted for “Central Board of Revenue” by Finance Ordinance, 2000.
11 Substituted for “Central Board of Revenue” by Finance Ordinance, 2000. Earlier it was substituted for “Regional Commissioner” by Finance Act,
   1989.
12 Word “and” omitted by Finance Act, 1988, the semi-colon and word “;and” were earlier substituted for a full stop by Finance Ordinance, 1982.




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                                       744-A
Chapter X, Procedure – Part II, Assessments                                                        Section 122A

     1[(cc)    where, in pursuance of an order by the Commissioner under clause (cc) of sub-section (1) of section 5,
               an Income Tax Panel exercises the powers of Deputy Commissioner, references to “Commissioner” shall
               be deemed to be references to “Regional Commissioner”; 2[ ]]
    3[(ccc)    where, in pursuance of an order by the Commissioner under clause (c) of sub-section (1) of section 5, an
               Inspecting Additional Commissioner exercises the powers of an Deputy Commissioner of Income Tax,
               references to “Commissioner” shall be deemed to be references to “Regional Commissioner”; 4[ ]]
1   Clause (cc) inserted by Finance Act, 1988.
2   Word “and” omitted by Finance Act, 1991.
3   Clause (ccc) inserted by Finance Act, 1991.
4   Word “and” omitted by Finance Act, 1992.




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                                  744-B
Section 122A                                    Income Tax Ordinance, 2001.




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                                        745
Chapter X, Procedure – Part II, Assessments                                                   Section 122A

     1[(d)    where an order is passed under section 115, references to “Commissioner” shall be deemed to be
              references to “Regional Commissioner” 2[; and]]
     3[(e)    where an order is passed by an Appellate Additional Commissioner on or after the first day of July,
              1991, reference to “Commissioner” shall be deemed to be reference to “4[Regional Commissioner]”.]
1   Clause (d) inserted by Finance Ordinance, 1982.
2   Substituted for “full stop” by Finance Act, 1992.
3   Clause (e) inserted by Finance Act, 1992.
4   Substituted for “Central Board of Revenue” by Finance Ordinance, 2000.

                                                   DEPARTMENTAL VIEW
Finance Act, 2003-Suo-motu revision of assessment order by the Commissioner.
       Section 122A has been inserted to empower the Commissioner to suo-motu call for
assessment record of any proceedings under the Ordinance or the repealed Ordinance and
revise an order passed by any taxation officers other than Commissioner (Appeal).
       The revision, however, shall not be prejudicial to the taxpayer. – (7/2003 dated
12.7.2003).
Finance Ordinance 2001 _ Revision against orders of Commissioner Appeals: – [Section 138(1) &
(5)].
       Section 138 has been amended and no revision applications can now be filed against
the orders of Appellate Additional Commissioner or Commissioner Income Tax (Appeals)
after 30th June 2001. The pending applications would be disposed of by Regional Commissioners.
       The sub-section (5) of section 138 has also been amended and the words ‚Regional
Commissioner‛ occurring for the first time have been replaced by the words ‚Central Board
of Revenue‛ to remove the error. – (5/2001 dated 4.7.2001).
Finance Act, 1994 – Increase in fee for filing of appeals.
       Fees for filing of income tax appeals before the Commissioner of Income Tax (Appeals)
and revision petitions under section 138 were fixed at Rs. 25 in 1940. Similarly, appeal fee for
filing of appeal before the Income Tax Appellate Tribunal was fixed at Rs. 100 in mid-sixties.
Such low appeal fees have been an incentive for filing of appeals in most of the cases where
the taxpayers intended to delay their tax payments. In order to discourage filing of
infructuous appeals, the appeal fees have been increased by amending sections 130, 134 and
138 and now the www.imranghazi.com
                    same stand as under:–
    (a) Fee for filing Appeal              Rs. 2500/= or
         before Commissioner of            10% of tax levied, whichever is lower. In case where
         Income Tax (Appeals)              no tax is levied, a fee of two thousand five hundred
         under section 130.                rupees shall be paid.
    (b) Fee for filing Appeal              Rs. 5000/= or
         before Income Tax                 10% of tax levied, whichever is lower. In case where
         Appellate Tribunal                there is no tax levied, the appeal fee shall be Rs.5000/=
         under section 134.
    (c) Fee for filing of Revision         Rs. 2500/= or
         Application under                 10% of tax levied, whichever is lower. In cases where
         section 138.                      no tax is levied, a fee of two thousand five hundred
                                           rupees shall be paid. – (6/1994 dated 10.07.1994).
Finance Act, 1992 – Revision petitions against orders of the Appellate Assistant Commissioner:
       A new clause (e) has been added in sub-section (5) of section 138 of the Ordinance to
empower CBR to hear revision petitions against orders passed on or after July 1, 1992 by an
Appellate Assistant Commissioner to provide the forum of revision to assessees aggrieved
by the orders of AACs. Previously assessees aggrieved against the orders of the
Commissioners of Appeal had this remedy but no such forum against the orders of
Appellate Assistant Commissioners was available. – (14/1992 dated 1.7.1992).
Finance Act, 1992 – Disposal of appeal by the Income Tax Appellate Tribunal:
       Sub-section (7A) had been inserted in section 138 of the Ordinance vide Finance Act,
1991, making it obligatory for the Income Tax Appellate Tribunal to decide an appeal within
six months from the end of the month in which it was filed. The provision was to come into
force on a date to be notified by the Tribunal which had not to be later than July 1, 1992. This
limitation on the Tribunal for notifying the said date has been removed. – (14/1992 dated
1.7.1992).




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                                               746
Section 122A                                                     Income Tax Ordinance, 2001.

Revision petition in cases where assessment has been framed by the IAC:
       An amendment has been made in section 138 to the effect that where an IAC exercises
the functions of an Income Tax Officer, revision petitions will lie before the Regional
Commissioner of Income Tax instead of the Commissioner of Income Tax. – (8/1991 dated
30.6.1991).
Hearing of revision petitions by the Central Board of Revenue is certain cases.
       Section 138 of the Ordinance has been amended to make Appellate Assistant
Commissioner (AAC) and Commissioner hearing appeals as an A.A.C., directly subordinate to
the Central Board of Revenue. From 1st July, 1989 and onwards power of revision by the
Commissioner or the Regional Commissioner to review and revise orders of the A.A.C. and CIT
(Appeals) vests in the Central Board of Revenue. A Member Judicial (Income Tax) has been
posted in the Central Board of Revenue to perform these functions. – (9/1989 dated 26.7.1989).
Filing revision applications against the orders of the Commissioners of Income Tax (appeals) to the
Central Board of Revenue.
       I am directed to refer to the subject noted above and to state that section 138 of the
Income Tax Ordinance, 1979, as amended by Finance Act, 1989 provides for filing revision
applications against the Orders of the Commissioners of Income Tax (Appeals) to the Central
Board of Revenue.
       2. Since the office of the Member Judicial (Income Tax) Central Board of Revenue has
not yet been established, such revision applications may be received by Regional
Commissioners on behalf of the Central Board of Revenue.
       3. I am further directed to request that the interim arrangement may kindly intimated
to Bar Associations. – [C.No.I.T.752/89 dated 10.7.1989].
Power of Regional Commissioner to revise order made by the Income Tax Panel.
       New Clause (cc) has been inserted in sub-section (5) of section 138 of the Ordinance,
which empowers the Regional Commissioner of Income tax to revise the orders made by an
income Tax Panel. – (20/1988 dated 8.10.1988).
Filling of revision petition before Regional Commissioners under section 138 – Instructions
regarding.
       Queries have been received in the Board as to where pending appointment of the
Regional Commissioners, the revision petitions due to be filed before the Regional
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Commissioner against the orders of Commissioners of Income Tax (Appeals) should actually
be filed.
       (2) The matter has been considered and the undersigned is directed to say that all such
petitions may be addressed to Second Secretary (I.T. III) in the Central Board of Revenue
during the interim period. These shall be transferred to the respective Regional
Commissioners immediately after their appointment. – (9/1983).
Penalty for obstructions – Approval before Appellate Assistant Commissioner.
       By the Finance Ordinance, 1982, section 115 was amended to assign the power of
imposing penalty for obstructing any income tax authority to the Commissioner. Reference
to section 115 in section 129 has been omitted. However, relief against the order under
section 115 can be sought in revisionary jurisdiction from the Regional Commissioner under
section 138. – (8/1982 dated 8.7.1982).
Filling of revision petitions before the Regional Commissioner of Income Tax.
       I am directed to state that section 138 of the Income Tax Ordinance, 1979 as amended
by Finance Ordinance, 1981 provides for filing of revision petitions against the orders of CIT
(Appeals) to the Regional Commissioner.
       (2) It has been decided by the Board that pending the appointment of Regional
Commissioners, the Offices of CIT (Revision) may receive applications which lie to Regional
Commissioners. It is requested that necessary arrangements may please be made in this
regard. – [C.No.13(32)IT-1/80, dated 14.11.1981].
Grant of powers to Regional Commissioners to revise orders of Commissioners (Appeal).
       The Regional Commissioner has been given the powers to revise order of
Commissioner (Appeal). – (7/1981).
Jurisdiction of revision cases transferred from one Commissioner of Income Tax to the other –
Question Regarding.
       Assignment of income tax cases from one Commissioner of Income Tax to the other is




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                                        747
Chapter X, Procedure – Part II, Assessments                            Section 122A

not an infrequent phenomenon in our department. Consequently, the controversy over the




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                                             748
Section 122A                                                  Income Tax Ordinance, 2001.

jurisdiction of pending revision cases usually crops up. In order to resolve this controversy,
the matter was referred to Law Division for advice. They have opined that the pending
revision cases will stand transferred to and will be heard by the Commissioner of Income
Tax in whose jurisdiction the case exists at the time of hearing of revision petition. –
[C.No.55(75)Rev.Intell/75, dated 21.9.1976].
Revision petition under section 33A of the appealed Act – Amendment by Finance Act 1967 –
Implications thereof.
      Section 33A of the repealed Act was amended by F.A. 1967 reducing the time allowed
to the assessees for filing revision petitions from one year to 90 days. A number of queries
were made regarding the effect of the amendment. Until 30th June, 1967 a revision petition
could be filed with the Commissioner of Income Tax, against orders of the authorities
subordinate to him, within a period of one year. However, with effect from 1-7-1967, the
period of limitation was reduced from one year to ninety days. The question was whether
this amendment would be applicable to all the orders passed after 30th June, 1967 or to only
the assessment year 1967-68 and onwards.
      (2) The Board considered that this amendment could be styled as a procedural
amendment only. Thus, for all the assessments prior to the assessment year 1967-68, whether
made before 1st July, 1967 or afterwards, the unamended provisions of section 33A continue
to be effective i.e. period of limitation for all assessments upto 1966-67 assessment year
continue to be one year. – [C.No.4(85)T-3/69, dated 13.4.1971 Rev.].
Section 138 of the Income Tax Ordinance.
      Section 138 empowers the Commissioner to revise any order passed by an authority
subordinate to him, at any time. Previously, under section 33A of the repealed Act, the
Commissioner, on his own motion, could not revise such order after more than one year
from the date of such order. However, he could, for reason to be recorded by him in writing,
revise any order made more than one year previously.
      (2) Normally an assessee should be left to make a revision application on payment of
the statuary fee. The unrestricted power should, therefore, be exercised only in very hard
cases or in cases where the assessee has become untraceable or a wrong order passed by a
subordinate authority has to be rectified.
      (3) Although ordinarily, an assessee can file a revision petition within 90 days of the
order sought to be revised, the Commissioner has the discretion under section 138(2)(c) to
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entertain an application beyond the said 90 days if he is satisfied that the assessee was
prevented by sufficient cause from making the application within the said period. – (4/1958
Rev.).

              CASE LAW – SUPREME COURT / HIGH COURTS / ITAT
                                     POWERS OF REVISION
   CIT, cannot pass any order prejudicial to the assessee. – Paras Commercial Co. and
    others v. CIT, Central Zone-A. Karachi [(1993) 68 TAX 154 (S.C.Pak.) = 1993 PTD
    1629].
   Relief under section 138 – Scope of. – Singer Sewing Machine Company v. CIT,
    Karachi and others [(1965) 11 TAX 364 (S.C.Pak.) = 1965 PTD 321 = PLD 1965 SC
    303].
   Exercise of revisional jurisdiction against the law would be illegal. – CIT,
    Companies Zone-I, Lahore v. Simnwa Poloy Propylene Products Pvt. Ltd. [2006 PTR
    35 [H.C.Lah.] = (2005) 92 TAX 307 = 2005 PTD 2022].
   Option of revision is available in case where appeal lies; it is assessee‟s choice to opt
    either of two though not simultaneously. – Metal Forming (Pvt.) Limited through
    Maulood Ahmad Shahid v. DCIT/WT, Circle-10, Companies Zone-1, Lahore and 2
    others [(2001) 83 TAX 435 (H.C.Lah.) = 2001 PTD 1150].
   CIT, cannot pass order under section 138 prejudicial to the assessee. – Junejo Flour
    Mills v. CIT, Lahore, etc. [(1992) 66 TAX 185 (H.C.Lah.) = 1993 PTD 27].
   Commissioner cannot pass order prejudicial to assessee. – Paras Commercial
    Company and 4 others v. CIT, Central Zone-A, Karachi [(1988) 57 TAX 28 (H.C.Kar.)
    = 1987 PTD 734].




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                                        749
Chapter X, Procedure – Part II, Assessments                              Section 122A

   Revisional powers of Commissioner are discretionary. – Singer Sewing Machine Co.
    v. CIT, and others [(1964) 9 TAX 273 (H.C.Kar.) = 1964 PTD 554].
   Where the assessee by a combined application asked/or review or alternatively for
    reference and the Commissioner exercised his discretion and made a review and
    remanded the cases, no reference arose till the case was finally decided after
    remand. – Shamlal Prag Narain v. CIT [1945] 13 ITR 359 (All.).
                REVISIONAL JURISDICTION – APPLICATION OF INDEPENDENT MIND
   Commissioner directed to make a decision completely independent of CBR's Circular
    No. 13 of 1997 which was earlier declared void by the High Court. – Prime
    Commercial Bank Ltd., Lahore Cantt v. Federation of Pakistan, through Secretary,
    Ministry of Finance, Islamabad and 3 others [2002 PTD 1816 (H.C.Lah)].
   Constitutional petition vis-à-vis scope of challenge to erroneous orders explained. –
    Bhatti Ice Factory, Bucheke District Sheikhupura v. CIT, Zone-C, Lahore and 2
    others [(2001) 83 TAX 573 (H.C.Lah.) = 2001 PTD 1548].
          OPPORTUNITY OF HEARING / SERVICE OF NOTICE – OPPORTUNITY OF HEARING
   Revision under section 138 constitutes judicial proceedings. – Singer Sewing
    Machine Company v. CIT, Karachi and others [(1965) 11 TAX 364 (S.C.Pak.) = 1965
    PTD 321 = PLD 1965 SC 303].
   Opportunity of being heard is a pre-requisite for making an order. – CIT, East
    Pakistan v. Fazlur Rehman and CIT, East Pakistan v. Sayeedur Rehman [(1964) 10
    TAX 49 (S.C.Pak.) = PLD 1964 SC 410].
   Commissioner is not under a legal obligation to accord hearing to the assessee, to
    engage himself in a judicial enquiry or to decide the matter in any prescribed
    manner. – Kalat Coal Company Ltd., v. CIT, South Zone, Karachi [(1963) 7 TAX 188
    (H.C.West Pakistan, Quetta Circuit) = 1963 PTD 244].
   Revision order under section 33A(2) is judicial. – Sayeedur Rahman, Dacca v. CIT,
    East Pakistan, Dacca [(1962) 6 TAX 25 (H.C.Dacca) = 1963 PTD 280 = PLD 1963
    Dacca 186].
   Revision is quasi-judicial. – Fazlur Rahman, Dacca v. CIT, East Pakistan, Dacca
    [(1962) 6 TAX 18 (H.C.Dacca)].

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    Commissioner refused to set aside assessments held not “prejudicial to the assessee”.
    – CIT, West Punjab v. The Tribune Trust, Lahore [(1960) 2-TAX (Suppl.–250) (PC)].
   Where Commissioner had heard assessee in full before he made an order calling for a
    further report from Assistant Commissioner, fact that he did not hear assessee again
    did not give rise to any question of law. – Indarchand Kagrlwal v. CIT [1939] 7 ITR
    506 (Pat.).
                                REVISION IS NOT MAINTAINABLE
   In case departmental appeal is pending before ITAT, revision by assessee is not
    maintainable. – Venus Stationary Mart v. Member Income Tax (Judicial) [(1995) 71
    TAX 136 (H.C.Lah.) = 1995 PTD 794].
                                  RECORDS, CONNOTATION OF
   Cancellation of assessment by CIT, confirmed. – Pak Trade Affiliation v. CIT,
    Zone-A and others [1989 PTD 68 (S.C.Pak)].
   Proceedings under this section commence with calling for a record. – Baijnath
    Bajorla, In re [1944] 12 ITR 430 (Cal.).
                              „ANY PROCEEDING‟, CONNOTATION OF
   Cancellation of order is prejudicial to assessee. – Paras Commercial Co. and others
    v. CIT, Central Zone-A. Karachi [(1993) 68 TAX 154 (S.C.Pak.) = 1993 PTD 1629].
   Orders attaining finality cannot be agitated under section 138. – American
    Insurance Company, Karachi v. CIT, Central, Karachi [(1983) 47 TAX 14 (H.C.Kar.)
    = 1983 PTD 10 = PTCL 1983 CL. 172].
   Section 33B does not confer any right on assessee. – CIT v. Tribune Trust [1948] 16
    ITR 214 (PC).




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                                          750
Section 122A                                               Income Tax Ordinance, 2001.

   An order of under section 33 of the 1922 Act declining to interfere with Assistant
    Commissioner‟s order is not an order prejudicial to assessee referable to High Court
    under section 66(2) of the 1922 Act. – CIT v. Bishwambharlal Maheshwari [1944] 12
    ITR 36 (Bom.).
                                        ILLUSTRATION
   Income Tax Department is not authorised to remove entire record of a company and
    thereafter to justify action under section 146 from such record. – Tri Star Industries
    (Pvt.) Ltd. & 8 others v. CIT, Companies-I, Karachi & 5 others [(1999) 79 TAX 255
    (H.C.Kar.) = 1998 PTD 3923].




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                                        751
Chapter X, Procedure – Part II, Assessments                                  Section 122B

      1[122B.  Revision by the Regional Commissioner.– (1) The
Regional Commissioner may, either of his own motion or on an application
made by the taxpayer for revision, call for the record of any proceedings
relating to issuance of an exemption or lower rate certificate with regard to
collection or deduction of tax at source under this Ordinance, in which an
order has been passed by any authority subordinate to him.
     (2) Where, after making such inquiry as is necessary, Regional
Commissioner considers that the order requires revision, the Regional
Commissioner may, after providing reasonable opportunity of being heard
to the taxpayer, make such order as he may deem fit in the circumstances
of the case.]
1 Section 122B inserted by Finance Act, 2006.

                                                COMMENTS
SECTION 122B: ―Revision by the Regional Commissioner‖.
    Section 122B was inserted authorizing the Regional Commissioner of Income tax to
review any matter related to issuance of exemption certificate either of his own motion or on
an application made by a taxpayer. RCIT is empowered to revise the order of the
Commissioner after giving reasonable opportunity of being heard to the taxpayer. This is a
logical provision as the Regional Commissioner is senior in rank to the Commissioner, hence
entitled to oversee his actions.

                                          DEPARTMENTAL VIEW
Finance Act, 2006 – Revision by the Regional Commissioner of Income Tax against order of the
Commission under WHT Regime.
     Under various provisions of law relevant to withholding tax, the Commissioner is
empowered to www.imranghazi.com deduction certificate to the taxpayers.
                 issue exemption or lower rate
However, no appeal can be filed if such certificate is refused. To take care of such like
eventualities Regional Commissioner of Income Tax has been empowered to review the
orders of the CIT. – (1/2006, dated 01.07.2006).




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                                                        750-B
Section 122C                                                                   Income Tax Ordinance, 2001.

             Provisional assessment.– (1) Where in response to a notice
        1[122C.

under sub-section (3) or sub-section (4) of section 114 a person fails to
furnish return of income for any tax year, the Commissioner may, based on
any available information or material and to the best of his judgment, make
a provisional assessment of the taxable income of the person and issue a
provisional assessment order specifying the taxable income assessed and
the tax due thereon.
     (2) Notwithstanding anything contained in this Ordinance, the
provisional assessment completed under sub-section (1) shall be treated as
the final assessment after the expiry of sixty days from the date of service of
order of provisional assessment and the provisions of this Ordinance shall
apply accordingly:
     Provided that the provisions of sub-section (2) shall not apply if return
of income alongwith wealth statement, wealth reconciliation statement and
other documents required under sub-section (2A) of section 116 are filed by
the person for the relevant tax year during the said period of sixty days.]
1 Section 122C inserted by Finance Act, 2010 w.e.f. June 5, 2010. The same amendment was made by Finance (Amendment)
  Ordinance, 2010, promulgated as Ordinance No. III of 2010, dated February 6, 2010, published in the Gazette of Pakistan
  Extraordinary Part I at pages 23 to 53. This Ordinance was presented in the Parliament but lapsed on 5 June 2010 as
  Parliament did not approve it. Originally this amendment was made through Finance (Amendment) Ordinance, 2009,
  promulgated as Ordinance No. XXII of 2009, dated October 28, 2009, published in the Gazette of Pakistan Extraordinary
  Part I at pages 229 to 259.

                                                 COMMENTS
SECTION 122C: ―Provisional assessment‖.
                www.imranghazi.com
    This new section is more in the nature of ex-parte assessment but wrongly named as
‚provisional assessment‛. Already available section 123 to that effect could have been
amended for widening the scope. It shows poor comprehension of FBR’s draftsmen. The
assessment under this section will be treated as ‚final‛ after the 60 days of service of the
order, meaning by recovery proceedings would be taken. However, this provision will not
apply if the taxpayer comes forward and files return with wealth statement within the
contemplated perion of 60 days.

                                           DEPARTMENTAL VIEW
Section 122C of the Income Tax Ordinance, 2001 – Clarification Regarding.
      Sub section (1) of the section 122C of the Income Tax Ordinance, 2001 provides that
where in response to a notice issued under sub section (3) or sub section (4) of section 114, a
person fails to furnish return of income for any tax year, the Commissioner may, based on
any available information or material and to the best of his judgment, make a provisional
assessment of taxable income or income of the said person and issue a provisional
assessment order specifying the taxable income or income assessed and the tax due thereon.
      2. The order so passed under sub section (1) of section 122* attains finality after the
expiry of the sixty days from the date of service of order of provisional assessment and all
the provisions of the Ordinance apply accordingly. However, the provisions of sub section
(2) of section 122C are not applicable if return of income alongwith wealth statement, wealth
reconciliation statement and other documents as required under sub section (2A) of section
116 are filed by the tax payer for the relevant tax year, before the expiration of sixty days.
*
    It should have been “122C”.




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                                       750-A
Chapter X, Procedure – Part II, Assessments                                    Section 122C

       3. The representations have been made regarding the treatment of the provisional
demand, where the compliance of the notices under section 114(3) and (4) of the Ordinance
has been made before the expiry of sixty days from the service of the provisional assessment
order and requests have been made to lay down procedure regarding this provisional tax
demand raised and communicated to the compliant taxpayer.
       4. In the given circumstances, it has been decided that where the compliance by the
taxpayer under sub section (1) of section 122C is made before the expiration of sixty days
from the service of the provisional assessment order, the provisional demand shall be taken
into minus account by the Enforcement & Collection Division and an order under the
proviso to sub section (2) of section 122C shall be passed by the Commissioner and
communicated to the taxpayer accordingly. - [No. C 69(1) S-DOS/2009-138499-R, dated
05.10.2010]
Provisional Assessment [Section 122C and 116(2A)].
       Newly added provisions of sub-sections (1) and (2) of section 122C are aimed at
facilitation of a taxpayer where he fails to file return of income in response to requisition of
the same by the Department. Under the new scheme of provisional assessment, in such cases
of non-compliance, option shall be vested with the taxpayer even after finalization of (best
judgment provisional assessment) to file a return within a period of sixty days of the service
of demand notice resulting from provisional assessment. Such provisional assessment shall
cease to have any legal effect if the taxpayer files return of income alongwith wealth
statement, wealth reconciliation statement and other required documents, within a period of
sixty days from the date of service of provisional assessment order. However, a return filed
in response to provisional assessment shall be valid only if accompanied with wealth
statement, wealth reconciliation statement and explanation regarding sources of assets in
question. However, if the taxpayer fails to file return of income even after a period of sixty
days of receipt of the demand notice resulting from a best judgment provisional assessment,
such assessment shall attain finality on completion of a period of sixty days from the date of
service of assessment order. -- (02/2010 dated 22.01.2010.)




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                                        751
Chapter X, Procedure – Part II, Assessments                                                                      Section 123

    123. Provisional assessment in certain cases.– (1) Where a
concealed asset of any person is impounded by any department or agency of
the Federal Government or a Provincial Government, the Commissioner
may, at any time before issuing any assessment order under section 121 or
any amended assessment order under section 122, issue to the person a
provisional assessment order or provisional amended assessment order, as
the case may be, for the last completed tax year of the person taking into
account the concealed asset.
    (2) The Commissioner shall finalise a provisional assessment order or
a provisional amended assessment order as soon as practicable 1[ ].
    (3) In this section, “concealed asset” means any property or asset
which, in the opinion of the Commissioner, was acquired from any income
subject to tax under this Ordinance.
1 Words “after making it” omitted by Finance Act, 2003.

                                                       COMMENTS
SECTION 123: ―Provisional assessment in certain cases‖.
    Section 60A of the RO is parallel to this section and was introduced to tax provisionally
any assets seized by the Customs authorities, ANF, NAB and other governmental agencies.
In many cases these assets (worth millions of rupees) belong to persons who have either not
filed returns of income or understated income in their returns resulting in tremendous loss to
the exchequer. Therefore, in order to redeem this loss the Commissioner can make
provisional assessment in the case of a taxpayer whose asset has been seized by any
governmental agency, if he believes that the asset was created out of undisclosed source(s) of
income.
                   www.imranghazi.com
    The omission of words ‚after making it‛ in sub-section (2) by Finance Act, 2003 was to
correct editorial mistake as per the official version available in the Finance Bill, 2003.

                    COMPARABLE PROVISION OF THE RO – [SECTION 60A]
    1[60A. Provisional assessment in certain cases.– Where a concealed assets of any person 2[ ] is

impounded by any department or agency of the Federal or Provincial Government, the Deputy Commissioner
may, at any time, by an order in writing before making any assessment under section 62, 63 or 65, assess
provisionally the total income of such person and the tax payable by him on the basis of the assessment:
    Provided that proceedings under this section shall not be initiated without prior permission in writing of the
Commissioner.
    Explanation.– For the purpose of this section, “concealed asset” means any property or asset which, in the
opinion of the Deputy Commissioner, was acquired from any income liable to tax.]
1 Section 60A inserted by Finance Act, 1992.
2 Words and comma “comes to the knowledge of the Deputy Commissioner, or such asset” omitted by Finance Act, 1997.

                                                DEPARTMENTAL VIEW
Finance Supplementary (Amendment) Act, 1997 and Finance Act, 1997 – Provisional Assessment
in Certain Cases: [Section 60A].
      An assessing officer could frame a provisional assessment where a concealed asset:–
         i) is impounded by a government agency; or
        ii) comes to the knowledge of the assessing officer.
      With the amendment of section 60A(1) the assessing officer can now make a
provisional assessment only in the event described at (i) above. – (6/1997 dated 15.07.1997).
Finance Act, 1992 – Provisional assessment in certain cases:
      A new section 60A has been inserted in the Ordinance empowering the Income Tax




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                                             752
Section 123                                                   Income Tax Ordinance, 2001.

Officer (with the prior written permission of the Commissioner of Income Tax) to
provisionally assess the total income of any person where a concealed asset of such person
comes to his knowledge or is impounded by any department or agency of the Federal or
Provincial Government. For the purposes of this section, concealed asset means any property
or asset which in the opinion of the Income tax Officer, has been acquired from any income
liable to tax and on which no tax has been paid. This provision of law has been introduced to
safeguard the interest of revenue in cases where no other alternate action is readily possible
and is to be invoked only in exceptional circumstances. Before granting permission to initiate
proceedings under this section, the Commissioner of Income tax will satisfy himself that the
opinion of the Income Tax Officer is based on sound reasons and the facts and circumstances
of the case justify such an action against the tax-dodger.
      This provision is effective from assessment year 1992-93. – (14/1992 dated 1.7.1992).

              CASE LAW – SUPREME COURT / HIGH COURTS / ITAT
                                EX-PARTE ORDER UPHELD
   Ex-parte order upheld. – [2005 PTR 69 (Trib.) = 2005 PTD 523].




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                                        753
Chapter X, Procedure – Part II, Assessments                                           Section 124

     124. Assessment giving effect to an order.– (1) Except where
sub-section (2) applies, where, in consequence of, or to give effect to, any
finding or direction in any order made under Part III of this Chapter by the
Commissioner (Appeals), Appellate Tribunal, High Court, or Supreme
Court an assessment order or amended assessment order is to be issued to
any person, the Commissioner shall issue the order within two years from
the end of the financial year in which the order of the Commissioner
(Appeals), Appellate Tribunal, High Court or Supreme Court, as the case
may be, was served on the Commissioner.
    (2) Where, by an order made under Part III of this Chapter by the 1[
],*Appellate Tribunal, High Court,** or Supreme Court, an assessment
order is set aside 2[wholly or partly,] and the Commissioner 3[or
Commissioner (Appeals), as the case may be,] is directed to 4[pass] a new
assessment order, the Commissioner 3[or Commissioner (Appeals), as the
case may be,] shall 4[pass] the new order within 5[one year from the end of
the financial year in which] the Commissioner 3[or Commissioner
(Appeals), as the case may be,] is served with the order 6[:]
                that limitation under this sub-section shall not apply, if an
         7[Provided

appeal or reference has been preferred, against the order 8[ ] passed by
9[      ],* Appellate Tribunal or a High Court.]
     (3) Where an assessment order has been set aside or modified, the
proceedings may commence from the stage next preceding the stage at
which such setting aside or modification took place and nothing contained in
this Ordinance shall render necessary the re-issue of any notice which had
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already been issued or the re-furnishing or re-filing of any return, statement,
or other particulars which had already been furnished or filed.
    (4) Where direct relief is provided in an order under section 129 or 132,
the Commissioner shall issue appeal effect orders within two months of the
date the Commissioner is served with the order.
    (5) Where, by any order referred to in sub-section (1), any income is
excluded–
            (a)       from the computation of the taxable income of a taxpayer for
                      any year and held to be included in the computation of the
                      taxable income of the taxpayer for another year; or
1     Words and brackets “Commissioner (Appeals)” omitted by Finance Act, 2010.
2     Words etc. inserted by Finance Act, 2003.
3     Words etc. inserted by Finance Act, 2008.
4     Substituted for “make” by Finance Act, 2010.
5     Substituted for “six months from the date” by Finance Ordinance, 2002.
6     Substituted for the full-stop by Finance Act, 2005.
7     Proviso inserted by Finance Act, 2005.
8     Words and comma “setting aside the assessment,” omitted by Finance Act, 2010.
9     Words and bacekts “a Commissioner (Appeals)” omitted by Finance Act, 2010.
* After omission comma is superflous.
** Before the word “or” comma is redundent.




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                                                      754
Section 124                                                   Income Tax Ordinance, 2001.

         (b)      from the computation of the taxable income of one taxpayer and
                  held to be included in the computation of the taxable income of
                  another taxpayer,
       the assessment or amended assessment relating to that other tax year
       or other taxpayer, as the case may be, shall be treated as an
       assessment or amended assessment to be made in consequence of, or to
       give effect to, a finding or direction contained in such order.
    (6) Nothing in this Part shall prevent the issuing of an assessment
order or an amended assessment order to give effect to an order made
under Part III of this Chapter by the Commissioner (Appeals), Appellate
Tribunal, High Court, or Supreme Court.
          The provisions of this section shall in like manner apply to any
       1[(7)

order issued by any High Court or the Supreme Court in exercise of original
or appellate jurisdiction.]
1 Sub-section (7) inserted by Finance Act, 2003.

                                                   COMMENTS
SECTION 124: ―Assessment giving effect to an order‖.
Different time limits have been provided in this section for giving effect to various orders
emerging from the Commissioner (Appeals), Appellate Tribunal, High Court or Supreme
Court. These are discussed in a more simplified form as under:
    (a) Where the order relates to giving effect to a finding or direction, the Commissioner
         must amend the assessment order within two years of the end of the financial year
         in which he receives the order from the appellate authorities.
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    (b) Where the appellate authorities direct that a fresh assessment has to be made, the
         Commissioner or Commissioner Appeals, as the case may be, will do so within one
         year of the end of the financial year in which he receives the appellate order.
         However, if an appeal or reference has been preferred against the order then this
         4limitation will not apply.
    (c) Where the appellate authorities have provided with direct relief to the appellant,
         the Commissioner has only two months from the date of receipt of the appellate
         order to give effect to the assessment order.
    Some further provisions of this section are very important. They are:
    (a) Proceedings in case of an assessment order that has been set aside or modified will
         commence from the stage immediately before setting aside or modification. In the
         normal course of procedure, precious time was lost in restarting proceedings from
         issuance of notices which has been rightly taken care of in this section.
    (b) Time limit for amending or re-amending an assessment order has been relaxed
         where it is directed that an income which is included in one tax year is to be
         included in another tax year or income assessed in the hands of a taxpayer is to be
         included in the income of another taxpayer.
    The words ‚set-aside‛ are now qualified with ‚wholly or partly‛. A new sub-section (7)
was inserted by Finance Act, 2003 to say that provisions of section 124 shall in like manner
apply to any order issued by the High Court or the Supreme Court in exercise of original or
appellate jurisdiction.




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                                        755
Chapter X, Procedure – Part II, Assessments                                                                                   Section 124


                COMPARABLE PROVISION OF THE RO – [SECTIONS 62A & 66]
     1*[62A.Assessment after appellate decision.–Where an assessment or re-assessment or any order made
under this Ordinance, has been annulled, set aside, cancelled or modified, the proceedings may commence
from the stage next preceding the stage at which such annulment, setting aside, cancellation or modification took
place and nothing contained in this Ordinance shall render necessary the re-issue of any notice which had already
been issued or the re-furnishing or re-filing of any return, statement, or other particulars which had already been
furnished or filed, as the case may be.]
1 Section 62A inserted by Finance Act, 1987.
* This section was made operational w.e.f. July 1, 2000. Earlier it remained suspended till 30.06.2000 by virtue of clause (7), Part IV of the Second
  Schedule. The said clause (7) was omitted by Finance Ordinance 2000.
                                             ------------------------------------------
     66. Limitation for assessment in certain cases.–(1) Notwithstanding anything contained in section 64 and
sub-section (3) of section 65 where in consequence of, or to give effect to, any finding or direction contained in any
order made under this Chapter or Chapter VIII, XIII or XIV or any order made by any High Court or the Supreme
Court of Pakistan in exercise of its original or appellate jurisdiction,–
      (a) an assessment is to be made on any firm or a partner of any firm; or
      (b) an assessment is to be made on the assessee or any other person; or
      (c) an assessment has been set aside, in full or in part, by an order under section 132 or section 135 and
             no appeal is filed under section 134 against such order or no 1[appeal filed] under section 136 in
             respect thereof, as the case may be,
such assessment may be made at any time within two years in any case to which clause (a) or clause (b) applies,
and within one year in any case to which clause (c) applies, from the end of the financial year in which such order
is received by the Deputy Commissioner.
     (2) Where, by any such order, as is referred to in sub-section (1), any income is excluded–              *
       (i) from the total Income of the assessee for any year and held to be the income of another year;
      (ii) from the total income of one person and held to be the income of another persons,
the assessment of such income as income of another income year or of another person, as the case may be, shall,
for the purposes of the said sub-section, be deemed to be an assessment made in consequence of, or to give
effect to, a finding or direction contained in such order.
     (3) Notwithstanding anything contained in this Ordinance, where the ownership of any property the income
from which is chargeable under this Ordinance is in dispute in any Civil Court in Pakistan, the assessment on any
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person in respect of such income may be made at any time within one year of the end of the financial year in which
the decision of such Court is brought, or otherwise comes, to the notice of the Deputy Commissioner.
1 Substituted for “reference made” by Finance Act, 1997.
* The apparently intended word “or” is missing in the Gazette.

                                                     DEPARTMENTAL VIEW
FINANCE ACT, 2010 – EXPLANATION REGARDING IMPORTANT AMENDMENTS MADE IN THE
INCOME TAX ORDINANCE, 2001.
11. ASSESSMENT GIVING EFFECT TO AN ORDER [Section 124(2)]. Since the Commissioner
appeal is no more empowered to set-aside an assessment, therefore necessary amendment in
sub-section (2) of section 124 of the Income Tax Ordinance, 2001 has been made to delete the
reference pertaining to ‚setaside orders‛. -- [Cir. 10/2010, dated 16.07.2010]
EXPLANATORY CIRCULAR ON THE AMENDMENTS MADE IN THE INCOME TAX ORDINANCE, 2001
THROUGH FINANCE ACT, 2008.
12. PROVIDING LIMITATION ON COMMISSIONER (APPEALS) TO MAKE ORDER
      IN CASES SET-ASIDE BY ITAT. [Section 124(2)].
      No limitation for making a fresh order by Commissioner (Appeals) was provided in
sub-section (2) of section 124 where an order has been set-aside by the Income Tax Appellate
Tribunal for re-adjudication by CIT (A). Such cases were generally not decided by the
Commissioner (Appeals) promptly, causing unnecessary hardship to the appellant taxpayers.
12.2 Limitation period as provided in sub-section (2) of section 124 of the Ordinance for
making order consequent to directions of the Tribunal, would now be applicable to CIT (A)
as well for making order remitted back to him by ITAT. This amendment would mitigate the
grievance of the taxpayers. – (5/2008 dated 05.07.2008).




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                                              756
Section 124                                                     Income Tax Ordinance, 2001.

Finance Act, 2005 – Limitation in set aside cases.
      Section 124 implied that even in cases where the Department or the taxpayer had gone
into second appeal or reference against the order setting aside the original assessment (full or
partly), the Commissioner would have to complete the reassessment within the limitation
period of one year. This created unnecessary workload and hardship for taxpayers and at
times led to multiplicity of appeals. A proviso after section 124(2) has been added which
envisages that limitation provided under this sub-section shall not apply, if an appeal or
reference has been preferred against the order by any authority, tribunal or court of setting
aside the assessment. – (1/2005, dated 05.07.2005).
Assessment after appellate decision. – [Section 62A].
      ‚A new section 62A has been introduced which provides that where an assessment or
reassessment or order made under the Ordinance has been annulled, set aside, cancelled or
modified, further proceedings may commence from the stage next preceding the stage at
which such annulment, setting aside, cancellation or modification took place and it would
not be necessary to issue any notice which had already been issued or require the tax payer
to again furnish or file such return, statement or other particulars which had already been
furnished or filed by him. In many cases, however, the situation may demand that the
assessee be given a further opportunity before the finalisation of the post-appeal
proceedings. In such cases the requisite notices may invariably be issued.‛
      However the provisions of this section have been made inapplicable by inclusion of
clause (7) in Part IV of the Second Schedule, as per which the provisions of the said section
shall not apply in respect of any person. Please see notes to the said Clause (7). – (6/1987
dated 5.7.1987).
Income Tax Ordinance, 1979 – Disputed title of property – Sub-section (3).
      It is a new provision which provides for assessment of income from a property whose
ownership is in dispute in a civil court. Usually such litigation is so prolonged that when the
issue is ultimately decided, the limitation for assessment had expired. This provision enables
the department to make an assessment on the rightful legal owner within one year of the
financial year in which final decision of a civil court is brought to its notice. – (4/1979 dated
23.8.1979).
Income Tax Ordinance, 1979 – Limitation for assessment in certain cases.
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      The provisions of this section are similar to those contained in section 34 of the repealed
Act. However, a new provision has been made in respect of the assessments set-aside in full
or in part by the Appellate Assistant Commissioner or the Tribunal. Where no further appeal
has been filed against such order, the re-assessment shall be completed within one year from
the end of the financial year in which such order is received by the Income Tax Officer.
Previously, there was no time limit for completion of set-aside assessments. The provision has
been inserted to remove the genuine grievance of the assessees that set-aside assessments
were not finalised expeditiously. – (4/1979 dated 23.8.1979).
Disposal of set aside cases.
      The Board therefore directs that all assessments set aside on appeal should be disposed
of within six months from the date of the appellate order. – (3/1962 dated 20.01.1962).

              CASE LAW – SUPREME COURT / HIGH COURTS / ITAT
                                         GENERAL
   It may be true that petitioner has no immediate remedy but he has an adequate
    remedy to challenge the order sought to be set aside through this writ petition before
    the Appellate forums after the order of assessment is made. – Royal Edu Care v.
    Assistant CIT/Taxation Officer, Lahore [2008 PTD 1998 (H.C.Lah.) = PTCL 2009
    CL. 90 = PLJ 2009 Lahore 84].
   Re-assessment. – Sh. Amanat Ali v. ITAT, Lahore and another [2005 PTR 145
    [H.C.Lah.] = 2005 PTD 493].
   Notice issued in consequence of the observation made in the order of the A.A.C. that
    income escaped assessment held not time barred. – Kaiser Jehan Begum v. CIT,
    East Karachi [(1984) 50 TAX 168 (H.C.Kar.) = 1984 PTD 438].
   Accounts submitted by the assessee can only be rejected on an objective basis. –
    [(2003) 88 TAX 295 (Trib.) = 2004 PTD 151].




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                                       756-A
Chapter X, Procedure – Part II, Assessments                               Section 124

                         SECTION 34(2B) (AFTER AMENDMENT IN 1964)
   Assessment for the year 1956-57 was annulled by Commissioner of Income Tax and
    reassessment was made on 16.12.1963, which was held within time. – Jaban Ali
    Khan v. CIT, East Pakistan and another [(1970) 21 TAX 140 (H.C.Dacca) = 1969
    PTD 413 = PLD 1969 Dacca 681].
                        “ADEQUATE REMEDY” OR “IMMEDIATE REMEDY”
   In Article 199, the phrase used is “adequate remedy” and not “immediate remedy”. –
    Royal Edu Care v. Assistant CIT/Taxation Officer, Lahore [2008 PTD 1998
    (H.C.Lah.) = PTCL 2009 CL. 90 = PLJ 2009 Lahore 84].
                                    SCOPE OF LIMITATION
   When in the earlier round there is a continuation of proceedings in terms of “Appeal
    or Reference” the limitation provided in section 66 for a set aside order cannot be
    applied. – Royal Edu Care v. Assistant CIT/Taxation Officer, Lahore [2008 PTD
    1998 (H.C.Lah.) = PTCL 2009 CL. 90 = PLJ 2009 Lahore 84].
                         DATE FROM WHICH LIMITATION SHOULD START
   Limitation should be counted from the date when the assessee comes to know of the
    order or has either actual or constructive knowledge of it and not when the order is
    passed. – Eastern Textile Mills Ltd., Chittagong v. CIT, East Pakistan, Dacca / and
    / G. Merajuddin and another v. CIT, East Pakistan, Dacca [(1966) 13 TAX 145
    (H.C.Dacca) = 1966 PTD 66 ].




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                                 756-B
Section 124                                    Income Tax Ordinance, 2001.




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                                        757
Chapter X, Procedure – Part II, Assessments                                                        Section 124A

             Powers of tax authorities to modify orders, etc.– (1)
       1[124A.

Where a question of law has been decided by a High Court or the Appellate
Tribunal in the case of an assessee, on or after first day of July 2002, the
Commissioner may, notwithstanding that he has preferred an appeal
against the decision of the High Court or made an application for reference
against the order of the Appellate Tribunal, as the case may be, follow the
said decision in the case of the said assessee in so far as it applies to said
question of law arising in any assessment pending before the
Commissioner until the decision of the High Court or of the Appellate
Tribunal is reversed or modified.
     (2) In case the decision of High Court or the Appellate Tribunal,
referred to in sub-section (1), is reversed or modified, the Commissioner
may, notwithstanding the expiry of period of limitation prescribed for
making any assessment or order, within a period of one year from the date
of receipt of decision, modify the assessment or order in which the said
decision was applied so that it conforms to the final decision.]
1 Section 124A inserted by Finance Ordinance, 2002.

                                                      COMMENTS
SECTION 124A: ―Powers of tax authorities to modify orders, etc.‖.
Firstly, the legislators deserve full kudos for having introduced this section which will prove
to be a matter of tremendous relief to the taxpayers who were forced to go into appeal on the
same issue because of the highhandedness of the departmental officials.
    Secondly, in their eagerness to introduce this section they copied word by word
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provisions of section 62BB of the RO changing only the words ‘Deputy Commissioner’ with
‘Commissioner’ and overlooking the term ‘assessee’ appearing in sub-section (1):
           ‚Where a question........... follow the said decision in the case of the said
           assessee............‛
    The term ‘assessee’ was defined in the RO but no such definition exists in the RO where
the word ‘taxpayer’ is used. Perhaps this may not be very significant but it definitely shows
the callousness with which amendments are made and checked by the authorities.
    Anyway, what is good is the fact that there will be fewer appeals on the same issue
reducing the burden of appeals both in the case of taxpayers and the appellate authorities
and the department too can subsequently redeem its loss in case of a favourable decision.

                   COMPARABLE PROVISION OF THE RO – [SECTION 62BB]
     1[62BB.  Powers of tax authorities to modify orders, etc.–(1) Where a question of law has been decided
by a High Court or the Appellate Tribunal in the case of an assessee, on or after first day of July 2002, the Deputy
Commissioner may, notwithstanding that the Commissioner has preferred an appeal against the decision of the
High Court or made an application for reference against the order of the Appellate Tribunal, as the case may be,
follow the said decision in the case of the said assessee in so far as it applies to said question of law arising in any
assessment pending before the Deputy Commissioner until the decision of the High Court or of the Appellate
Tribunal is reversed or modified.]
1 Section 62BB inserted by Finance Ordinance, 2002.

                                                DEPARTMENTAL VIEW
Finance Ordinance, 2002 –Powers of tax authorities to modify orders. – [Section 62BB].
      A new section 62BB has been added which provides that where a question of law, in
the case of assessee, has been decided by the High Court or the Income Tax Appellate




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                                            758
Section 124A                                                 Income Tax Ordinance, 2001.

Tribunal, on or after July 1, 2002, the DCIT may follow the said decision on similar issue at
the time of framing any pending assessment of such assessee notwithstanding the fact that a
reference application against the order of ITAT or an appeal against the order of the High
Court has been filed. In case, the decision followed by the DCIT is reversed or modified, the
assessment framed on the basis of earlier decision of the High Court or Appellate Tribunal,
can be modified accordingly within one year from the date of receipt of the final decision. –
(13/2002 dated 9.8.2002).




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                                        759
Chapter X, Procedure – Part II, Assessments                                                     Section 125

    125. Assessment in relation to disputed property.– Where the
ownership of any property the income from which is chargeable to tax
under this Ordinance is in dispute in any Civil Court in Pakistan, an
assessment order or amended assessment order in respect of such income
may be issued at any time within one year after the end of the financial
year in which the decision of the Court is made.

                                               COMMENTS
SECTION 125: ―Assessment in relation to disputed property‖.
    Parallel to section 66(3) of the RO, this section caters for a situation where a property
from which income is earned is a subject of dispute in a civil court. The Ordinance provides a
time limit that is within one year of the end of the financial year in which an order is passed
by the civil court, to amend an assessment order accordingly.

                COMPARABLE PROVISION OF THE RO – [SECTION 66(3)]
     66(3). Notwithstanding anything contained in this Ordinance, where the ownership of any property the income
from which is chargeable under this Ordinance is in dispute in any Civil Court in Pakistan, the assessment on any
person in respect of such income may be made at any time within one year of the end of the financial year in which
the decision of such Court is brought, or otherwise comes, to the notice of the Deputy Commissioner.




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                                                       760
Section 126                                                                Income Tax Ordinance, 2001.

     126. Evidence of assessment.– (1) The production of an assessment
order or a certified copy of an assessment order shall be conclusive evidence
of the due making of the assessment and, except in proceedings under Part
III of this Chapter relating to the assessment, that the amount and all
particulars of the assessment are correct.
     (2) Any 1[order] of assessment or other document purporting to be
made, issued, or executed under this Ordinance may not be–
        (a) quashed or deemed to be void or voidable for want of form; or
        (b) affected by reason of any mistake, defect, or omission therein,
     if it is, in substance and effect, in conformity with this Ordinance and
     the person assessed, or intended to be assessed or affected by the
     document, is designated in it according to common understanding.
1 Substituted for “notice” by Finance Act, 2003.

                                                   COMMENTS
SECTION 126: ―Evidence of assessment‖.
Sub-section (2) of this section is similar to section 155 of the RO whereby certain mistakes or
omissions do not invalidate a document while sub-section (1) relates to production of
assessment order or certified copy of such order to be ample evidence of a person being a
taxpayer. Only for the purpose of filing an appeal, it is important to produce an authentic
evidence of the assessment order.
    The word ‚notice‛ is substituted with ‚order‛ by Finance Act, 2003.

                     COMPARABLE PROVISION OF THE RO – [SECTION 155]
    155. Certain mistakes not to vitiate assessment, etc.–No assessment order, notice, warrant or other
document made, issued or executed or purporting to be made, issued or executed under this Ordinance shall be
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void or otherwise inoperative merely for want of form, 1[or for having been generated through a computer,] or for a
mistake, defect or omission therein, if such want of form, 1[or for having been generated through a computer,] or
mistake, defect or omission, is not of a substantial nature prejudicially affecting as* assessee.
1 Words etc. inserted by Finance Act, 1998.
* The apparently intended word is “an”.

                                              DEPARTMENTAL VIEW
Finance Act, 1998 – Enabling provisions for computerization. – [Sections 155 and 165].
     Sections 155 and 165 have been amended to enable filing of tax returns and statements
on computer media and to provide legal cover to computer generated notices, orders, forms
and documents. The format and procedures are being prescribed separately. – (11/1998
dated 25.7.1998).

                    CASE LAW – SUPREME COURT / HIGH COURTS / ITAT
                                          GENERAL
     The non-mentioning of certain sections of the Ordinance in some of the rules will not
      by itself mean that are not enforceable and have lost their legal effect. – CIT/WT,
      Companies Zone, Faisalabad v. Kamil Cotton Industries Pvt. Ltd., Toba Tek Singh
      [2005 PTD 2283 (H.C.Lah.)].
     Non-mentioning of particular provision of Income Tax Ordinance, 1979 would not
      render the order unlawful. – CIT, Companies-II, Lahore v. Creative Packages Pvt.
      Ltd., Lahore [(2005) 92 TAX 71 (H.C.Lah.) = 2005 PTD 1567].
                                “CERTIFIED COPY”, MEANING OF
     “Certified copy”. – CIT/CST Rawalpindi v. Pakistan Television Corp. Rawalpindi
      [(1978) 38 TAX 181 (H.C.Lah.) = PLD 1978 Lah. 1027].




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                                                                      761
Chapter X, Procedure – Part III, Appeals                                                                                    Section 127

                                   PART III
                                  APPEALS
     127. Appeal to the Commissioner (Appeals).– 1[(1) Any person
dissatisfied with any order passed by a Commissioner or a 2[taxation
officer]* under section 121, 122, 143, 144, 3[162,] 170, 182,** 4[ ] 5[or 205], or
an order under sub-section (1) of section 161 holding a person to be
personally liable to pay an amount of tax, or an order under clause (f) of
sub-section (3) of section 172 6[declaring] a person to be the representative
of a non-resident person 7[or an order giving effect to any finding or
directions in any order made under this Part by the Commissioner
(Appeals), Appellate Tribunal, High Court or Supreme Court], or an order
under section 221 refusing to rectify the mistake, either in full or in part, as
claimed by the taxpayer or an order having the effect of enhancing the
assessment or reducing a refund or otherwise increasing the liability of the
person, may prefer an appeal to the Commissioner (Appeals) against the
order.]
         No appeal under sub-section (1) shall be made by a taxpayer
        8[(2)

against an order of assessment unless the taxpayer has paid,–
1 Sub-section (1) substituted by Finance Ordinance, 2002.
2 The words “Officer of Inland Revenue” were substituted for “taxation officer” by by Finance (Amendment) Ordinance, 2010,
  promulgated as Ordinance No. III of 2010, dated February 6, 2010, published in the Gazette of Pakistan Extraordinary Part I
  at pages 23 to 53. This Ordinance was presented in the Parliament but lapsed on 5 June 2010 as Parliament did not approve
  it. Originally this amendment was made through Finance (Amendment) Ordinance, 2009, promulgated as Ordinance No.
  XXII of 2009, dated October 28, 2009, published in the Gazette of Pakistan Extraordinary Part I at pages 229 to 259.
3 Figure and comma inserted by Finance Act, 2004.
4 Figures and commas “183, 184, 185, 186, 187, 188, 189” omitted by Finance Act, 2010.
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5 Substituted for “or 189” by Finance Act, 2009.
6 Substituted for “treating” by Finance Act, 2003.
7 Words etc. inserted by Finance Act, 2009.
8 Sub-section (2) substituted by Finance Ordinance, 2002.
* Consequent to insertion of section 239B, reference to “taxation officer” shall be construed as reference to “Officer of Inland Revenue”.
** After amendment by Finance Act, 2010, the comma has become superfluous.

                                                LEGISLATIVE HISTORY
     Section 127(1)–Substitution.–Before substitution by Finance Ordinance, 2002 sub-section (1) read as
follows:–
     “(1) Any person dissatisfied with any proceeding under this Ordinance in which an order has been issued by a
Commissioner of Income Tax (other than the Commissioner (Appeals) or a taxation officer may prefer an appeal to
the Commissioner (Appeals) against the order.”
     Section 127(2)(b)–Substitution.–Before substitution by Finance Act, 2004 clause (b) read as follows:–
     “(b) an amount equal to–
            (i) fifteen percent of the amount of tax assessed as is in excess of the tax due under sub-section (1) of
                 section 137, or
           (ii) twenty percent of the amount of tax assessed for the immediately preceding tax year, and where a
                 person has not been assessed to tax for that tax year, thirty percent of the amount of tax
                 mentioned in clause (a),*
             whichever is less.”
* Comma is superfluous here. The words “whichever is less” is to be read between calculation made at (b)(i) and (ii). See example in commentary
  for actual calculation.
     Section 127(2)–Substitution.–Before substitution by Finance Ordinance, 2002 sub-section (2) read as
follows:–
     “(2) No appeal may be made by a taxpayer against an assessment unless the amount of tax due under the
assessment that is not in dispute and fifteen per cent of the disputed tax has been paid by the taxpayer.”




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                                                                     762
Section 127                                                                                    Income Tax Ordinance, 2001.

           (a)        the amount of tax due under sub-section (1) of section 137, and
       1[(b)*         No appeal under sub-section (1), shall be made by a taxpayer
                      again** an order of assessment unless the taxpayer has paid the
                      amount of tax due under sub-section (1) of section 137.]
        (3) An appeal under sub-section (1) shall–
                 (a)         be in the prescribed form;
                 (b)         be verified in the prescribed manner;
                    (c)      state precisely the grounds upon which the appeal is made;
                 (d)         be accompanied by                           the        prescribed               fee       specified             in
                             sub-section (4); and
                    (e)      be lodged with the Commissioner (Appeals) within the time
                             set out in sub-section (5).
        (4) The prescribed fee 2[shall be]–
                ♦
                 (a)         in the case of an appeal against an assessment, 3[one
                             thousand rupees]; or
                 (b)         in any other case–
                          (i)     where the appellant is a company, one thousand rupees;
                                  or
                          (ii)    where the appellant is not a company, two hundred
                                  rupees.
          An www.imranghazi.com to the Commissioner (Appeals)
        4[(5) appeal shall be preferred
within thirty days of the following–
           (a)        where the appeal relates to any assessment or penalty, the date
                      of service of the notice of demand relating to the said
                      assessment or penalty, as the case may be; and
           (b)        in any other case, the date on which the order to be appealed
                      against is served.]
1   Clause (b) substituted by Finance Act, 2004.
2   Substituted for “is” by Finance Ordinance, 2002.
3   Substituted for “the lesser of one thousand rupees or ten per cent of the tax assessed” by Finance Act, 2009.
4   Sub-section (5) substituted by Finance Ordinance, 2002.
* The Finance Act, 2004, while substituting clause (b) has inadvertently reproduced the same wordings as contained in sub-section (2) and clause
   (a). The earlier position under the Finance Bill was more suitable which attempted to delete the entire clause (b).
** Apparently the correct word should be “against”.
♦ The Finance Act, 2010, sought to omit the words “or ten per cent of the tax assessed” in clause (a) of sub-section (4), however, the said words
   have already been substituted by Finance Act, 2009. See footnote 3 above.

                                                LEGISLATIVE HISTORY
     Section 127(5)-Substitution.–Before substitution Finance Ordinance, 2002 sub-section (5) read as follows:–
     “(5) An appeal shall be lodged with the Commissioner (Appeals)–
      (a) where the appeal relates to an assessment order, within thirty days of the date of service of the demand
            relating to the assessment; or
      (b) in any other case, within thirty days of the date of service of the notice of the decision or determination
            appealed against.”




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                                           762-A
Chapter X, Procedure – Part III, Appeals                                   Section 127

     (6) The Commissioner (Appeals) may, upon application in writing by
the appellant, admit an appeal after the expiration of the period specified in
sub-section (5) if the Commissioner (Appeals) is satisfied that the appellant
was prevented by sufficient cause from lodging the appeal within that
period.

                                    COMMENTS
SECTION 127: ―Appeal to the Commissioner (Appeals)‖.
   An appeal can be made to the Commissioner (Appeals) in case a taxpayer is dissatisfied
by an order passed by the an Officer of Inland Revenue under the following circumstances:




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                                 762-B
Section 127                                    Income Tax Ordinance, 2001.




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                                              763
Chapter X, Procedure – Part III, Appeals                                         Section 127

   (a)    For an assessment where a person has not furnished a return of income [section
          121];
    (b) For an amendment of assessment [section 122]. Previously, appeal against orders
          u/s 66A of the RO was to be filed directly in the ITAT. Now although 122(5A)
          retains the characteristics of 66A, appeal is to be filed with CIT (Appeals);
    (c) Determination of tax in the case of a non-resident ship owner or chatterer or
          non-resident aircraft owner or charterer [sections 143 & 144];
   (d) In case a person is treated as defaulter for any deduction or payment of tax [section
          162]
    (e) Decision in the case of a refund application [section 170];
     (f) Imposition of various penal provisions [section 182 to 189];
    (g) Holding a person liable to pay an amount of tax [section 161(1)];
    (h) Decision of treating a person to be the representative of a non-resident [section
          172(3)(f)];
     (i) Imposition of additional tax under section 205;
     (j) Refusal to rectify a mistake in full or in part [section 221];
    (k) An order giving effect to any finding or direction by the CIT (Appeals), Tribunal,
          High Court or Supreme Court.
    Prior to amendment vide Finance Act, 2004, a person could not file an appeal unless he
had paid a certain amount of tax as illustrated hereunder:
Example 1.
A person’s admitted liability is Rs.1000 and assessed tax is Rs.5000. He was assessed to tax of
Rs.4000 for the immediately preceding tax year. In this case he had to pay a total of:
          A             Admitted liability     =    1,000
                    + 15% of 4000         =            600
                                                    1,600
                              OR
          B       www.imranghazi.com
                        Admitted liability     =    1,000
                    + 20% of Rs. 4000 =                800
                                                    1,800
    Whichever of A or B was less, that is, Rs. 1,600.
Example 2.
    A person’s admitted liability is Rs. 5,000 and he was assessed to an amount of Rs. 70,000.
No tax was payable by him in the earlier years. In this case he had to pay:
          A             Admitted liability     =    5,000
                    + 15% of 65,000            =    9,750
                                               =    14,750
                              OR
          B             Admitted liability     =    5,000
                    + 30% of 5,000             =    1,500
                                                    6,500
    Whichever of A or B was less, that is, Rs. 6,500.
We had been continuously agitating about such provisions being harsh, confiscatory and
violative of the basic rights of citizens guaranteed by the Constitution. Our stand was ratified
by the decision of a division bench of Lahore High Court (Rawalpindi) in (2003) 88 TAX 355
(H.C.Lah.) = 2004 PTD 122 declaring mandatory payment for availing right of appeal u/s 129
as unconstitutional. Amendment by the Finance Act, 2004 has abolished pre-payment as a
pre-requisite for filing of appeal.
Other features of this section are that:
    (a) Appeal will be filed and verified in the prescribed form/manner stating clearly the
          grounds of appeal;




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                                                                   764
Section 127                                                                                  Income Tax Ordinance, 2001.

     (b)  Any tax determined on the basis of return has to be paid before filing appeal
          otherwise a taxpayer would not be entitled to appeal.
     (c) Accompanied by the prescribed fee which is:
          In case of an appeal against assessment Rs. 1000 or 10% of the assessed tax
          whichever is less.
          In case of appeal against that which is other than assessment:
              Where appellant is company                       Rs. 1,000
              Where appellant is non-company                   Rs. 200
    (d) Time period for filing of appeal is restricted to thirty days from the date of service
          of notice of demand in case of assessment and in other cases thirty days from the
          date of service of order.
     Of course, the Commissioner (Appeals) is empowered to condone any delay where he is
satisfied that the taxpayer was prevented because of reasonable cause from filing of appeal
in time.
     Where a person is declared representative of a non-resident, the term ‚treating‛ is now
replaced with ‚declaring‛ by Finance Act, 2003.
     The amendment vide Finance Act, 2004 includes section 162 thus giving a right to appeal
to a person against whom proceedings for any default of non-deduction of tax at source are
initiated or order has been passed.

              COMPARABLE PROVISION OF THE RO – [SECTIONS 129 & 130]
     129. Appeal to the Appellate Additional Commissioner.–(1) Any assessee objecting to an order made by
Deputy Commissioner under section 1[59 or 59A [where any adjustment has been made under sub-section (3) or
sub-section (2), respectively, of those sections],] 62, 63, 65, 68, 75, 2[80, 80A,] 91, 98, 99, 105 to 112 (inclusive),
114 3[ ] or sub-section (2) of section 148, 4[or an order under section 52, treating a person to be an assessee in
default,] or an order under section 78, treating the assessee as an agent of a non resident, or an order under
section 156 5[refusing to rectify the mistake, either in full or in part, as claimed by the assessee or] having the effect
of enhancing the assessment or reducing a refund or otherwise increasing the liability of the assessee may appeal
to the Appellate Additional Commissioner against such order.
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     6[(2) No appeal under sub-section (1) shall be made by a taxpayer against an order of assessment unless the

taxpayer has paid,–
      (a) the amount of tax due under section 54; and
      (b) an amount equal to–
            (i) fifteen percent of the amount of tax assessed as is in excess of the tax due under section 54, or
           (ii) twenty percent of the amount of tax assessed for the immediately preceding assessment year and
                where a person has not been assessed to tax for that assessment year, thirty percent of the
                amount of tax mentioned in clause (a), whichever is less.]
1 Inserted by Finance Ordinance, 1980.
2 Inserted by Finance Act, 1986.
3 Word and figure “or 115” omitted by Finance Ordinance, 1982.
4 Inserted by Finance Act, 1987.
5 Inserted by Finance Ordinance, 1980. The words were earlier deemed to have been inserted by Notification No. SRO 885(I)/79, dated October
  1, 1979 issued u/s 167 for assessment year 1979-80.
6 Sub-section (2) substituted by Finance Ordinance, 2002.
     Sub-section (2)–Substitution.– Before substitution by Finance Ordinance, 2002 sub-section (2) read as follows:–
     “(2) No appeal under sub-section (1) shall lie against any order of assessment unless the tax payable under section 54
1[and not less than fifteen per cent of the amount of tax assessed] 2[ ] has been paid 3[.]

     4[         ]”
1 Words inserted by Finance Ordinance, 2000.
2 Words “and not less than fifteen per cent of the amount of tax assessed” omitted by Finance Act, 1996. Earlier these words were inserted by
  Finance Act, 1994.
3 Substituted for colon by Finance Act, 1996. Earlier the colon was substituted for full stop by Finance Act, 1995.
4 Proviso omitted by Finance Act, 1996. It was earlier inserted by Finance Act, 1995. The amendment was earlier made by Income Tax (Fourth
  Amendment) Ordinance, 1994, dated October 16, 1994, Income Tax (Second Amendment) Ordinance, 1995 dated February 23, 1995, w.e.f.
  February 16, 1995 and Income Tax (Fifth Amendment) Ordinance, 1995 dated May 31, 1995. The Income Tax (Fourth Amendment) Ordinance,
  1994 lapsed on February 15, 1995 and the CBR immediately issued Circular No. 1 of 1995 that the proviso to section 129(2) has become
  inoperative. The President issued another Ordinance, the Income Tax (Second Amendment) Ordinance, 1995 on February 23, 1995 with
  retrospective effect from February 16, 1995. After another 4 months the Income Tax (Fifth Amendment) Ordinance was issued on May 31, 1995.
  Anyhow after amendment by Finance Act, 1995 the proviso became a part of the Ordinance before deletion.




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                                                                    765
Chapter X, Procedure – Part III, Appeals                                                                      Section 127

      Section 129(2) Pro.–Omission.– Before omission by Finance Act, 1996 Proviso read as follows:–
      “Provided that the total amount payable under this sub-section shall not exceed by twenty per cent of the total tax assessed
for the preceding year.”
     130. Form of appeal and limitation.–(1) Every appeal under section 129 shall be in the prescribed form and
shall be verified in the prescribed manner, and shall be accompanied by a fee of 1[2[one thousand] rupees or ten
per cent of tax levied, whichever is less, provided that where no tax is levied, 3[a fee of one thousand rupees in the
case of companies and two hundred rupees in the case of other assessees] shall be paid].
     (2) The appeal shall be presented within thirty days of the following date, namely:–
      (a) where the appeal relates to any assessment or penalty, the date of service of the notice of demand
            relating to the said assessment or penalty, as the case may be; and
      (b) in any other case, the date on which intimation of the order to be appealed against is served.
     (3) The Appellate Additional Commissioner may admit an appeal after the expiration of the period specified in
sub-section (2) if he is satisfied that the appellant was prevented by sufficient cause from presenting the appeal
within that period.
1 Substituted for “twenty-five rupees” by Finance Act, 1994.
2 Substituted for “two thousand five hundred” by Finance Act, 1996.
3 Substituted for “a fee of two thousand five hundred rupees” by Finance Act, 1996.

                                                   DEPARTMENTAL VIEW
EXPLANATORY CIRCULAR ON THE AMENDMENTS MADE IN THE INCOME TAX ORDINANCE, 2001
THROUGH FINANCE ACT, 2009.
24. FILING OF APPEAL BEFORE THE COMMISSIONER OF INCOME TAX (APPEALS).
       [Section 127(1) and (4)]
       Sub section (1) of section 127 has been amended providing that if an order giving effect
to any findings or directions to any order is made under Part III of Chapter X by the Taxation
Officer and the taxpayer is not satisfied with the order passed, the tax payer may again
contest such order before the CIT (Appeals). It was a lacuna in law which has been removed.
This amendment will help the taxpayer to contest the legal issues before the appellate fora,
even if no tax liability is involved in the order passed by the Taxation Officer.
       Further, previously a taxpayer was not allowed to file appeal against charge of
additional tax u/s 205 of the Ordinance. Now after amendment in sub-section (1) of section
127 the taxpayerwww.imranghazi.com
                    can file appeal against such order u/s 205. Sub-section (4) has also been
amended to fix appeal fee at Rs. 1,000/- instead of determining the fee in relation to the tax
assessed. - (3/2009 dated 17.7.2009).
Removing the condition of payment of 15% of disputed demand for filing first appeal.
       The condition of payment of 15% of disputed tax demand or 20% of tax assessed for the
last tax year etc. has been omitted. It would be applicable in respect of appeals filed before
Commissioner (Appeals) on or after July 1, 2004 irrespective of the year of assessment. –
(17/2004, dated 17.7.2004).
Note: In view of decision of Lahore High Court (2003) 88 TAX 355 (H.C.Lah.) = 2004 PTD 122
even for earlier period mandatory payment is unlawful.
Finance Ordinance, 2002 –Mandatory payment of tax for filing of first appeal.
       In order to obviate the hardships of the taxpayers the provision relating to mandatory
payment of tax for filing of first appeal has been modified. The said payment, in respect of
appeals filed on or after first day of July 2002 would be 15% of the additional tax demand
raised or 20% of the tax assessed in immediately preceding tax year – whichever is the less.
Where a person has not been assessed to tax for that tax year, then thirty percent of the
amount of tax paid under section 54 of the Income Tax Ordinance, 1979 or section 137 of
Income Tax Ordinance, 2001 (i.e. payment alongwith the return) is to be paid for the
aforesaid purpose. – (13/2002 dated 9.8.2002).
Clarification regarding amendment in sub-section (2) section 129 of the Income Tax Ordinance. –
[Section 129(2)].
       The Board has received queries seeking clarification provisions of sub-section (2) of
section 129 relating to payment of 15% tax on filing of appeals, which were introduced
through the Finance Ordinance, 2000, apply to all appeals under section 129 on or after 1st
July 2000 or only to the appeals relating to assessment year 2000-2001.




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                                             766
Section 127                                                   Income Tax Ordinance, 2001.

2.    The matter has been examined by the Board. It is clarified that as laid down by the
Lahore High Court in Essential Industries versus Central Board of Revenue 1969 PLD 24, the
15% tax payable under sub-section (2) of section 129 on filing of appeals under that section is
payable in respect of appeals relating to assessment year 2000-2001 and onwards. – (3/2001
dated 25.5.2001).
Circular No. 3 of 1997 – Clarification regarding.
      I am directed to sate that vide Board’s letter of even number dated 22.04.1997 it was
clarified that for assessment years 1995-96 and 1996-97, the statutory provision for stay of
demand to the extent of 85% would be applicable. On receipt of Lahore High Court Lahore’s
order No. 9212-97, dated 14-04-1997, the issue was taken up with the Ministry of Law and
Justice. The Ministry of Law and Justice has confirmed that the amended provisions will
apply to appeals preferred against any decision on or after the 1st day of July, 1996
irrespective of the year of assessment. The opinion of Ministry of Law and Justice has
already been circulated vide Board’s letter No. 3(16)-M(Jud)/93-Pt. dated 01-07-1998. The
clarification issued vide Board’s letter dated 22.4.1997 may, therefore, be treated as
withdrawn.
      NOTE:        The letter of the Ministry referred to is as under:
            Mandatory payment of tax for filing of appeals clarification regarding.
      It appears that keeping in view of the amendments by the Finance Act, 1996 (IX of 1996)
the Central Board of Revenue vide their circular No. 10 of 1996 (Income Tax), dated the 16th
July, 1996 (at page 12) have stated that the amended provisions will be applicable with effect
from the assessment year 1996-97 thereby implying that cases arising out of earlier
assessment years 1994-95 and 1995-96 will be governed by the law as it existed prior to the
said amendments and condition of mandatory payment for filing of appeals will be
applicable irrespective of the fact that the appeals were filed after 30th June, 1996.
      2. According to them the aforesaid circular was issued on the basis of the decision of
the Lahore High Court in case of M/s. Essential Industries Vs. The Central Board of Revenue
reported as 1969 PTD 116. It may be pointed out that in that case by the Finance Act, 1967, a
proviso to sub-section (1) of section 30 of the Income Tax Act, 1922, was substituted by a new
proviso whereby the entertainment of an appeal was subjected to a pre-requisite of
depositing 50% of the tax demanded. The Court held the right of an appeal to be a vested
right and the Finance Act, 1967 cannot be applied with retrospective effect to curtail the
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vested right of appeal in the absence of any express provision or necessary intendment to
that effect. In that case the appeals arose out of assessment year 1962-63, the court held that
the amendment in substantive law has no retrospective effect and does not affect the right of
an appeal existing on the day of which proceeding commences is a vested right and such
right has to be governed by the law prevailing on that day and not on the day of its decision.
Such vested right can be taken away only by a subsequent enactment if it so provides
expressly or by necessary intendment.
      3. It may be pointed out in the case in Writ Petition No. 12129/94, the facts of the case
are that the assessment for the year 1987-88, was made on the 16th July, 1998, and was
subsequently reopened under section 65 of the Income Tax Ordinance, 1979 and
re-assessment order under sections 62/65 for the year 1987-88 was served upon the petitioner
on the 31st July, 1994, which was assailed before the Commissioner of Income Tax (Appeals)
who summarily rejected the appeal as the appeal was not accompanied by the requisite fee.
The aggrieved assessee preferred writ petition before the Lahore High Court requesting,
among others, that the enhanced appeal fee for twenty five rupees to two thousand and five
hundred rupees under sub-section (1) of section 130 be declared invalid and without any
legal effect as the aforesaid fee was payable in view of the amended provisions of the Income
Tax Ordinance, 1979, by the Finance Act, 1994. It appears that during the course of
proceedings the Central Board of Revenue’s clarification vide circular No. C. 129(1)DIP/
94/Pt-1, dated, the 19th October, 1994, was brought to the notice of the court where under it
was clarified that the provisions relating to mandatory payment introduced through Finance
Act, 1994, were applicable to proceedings relating to assessment year 1994-95 and onward. In
this case since the appeal related to the assessment year 1987-88, the court rightly held that
the order of the Commissioner of Income Tax (Appeals) was void as the amended provisions
of the Income Tax Ordinance, 1979, were applicable to proceedings relating assessment years
1994-95 and onwards. It appears from the record that the decision of the court has been
accepted by the department and no appeal was preferred against it. It may




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                                             766-A
Chapter X, Procedure – Part III, Appeals                                          Section 127

also be pointed out that the decision of the High Court in the Essential Industries Vs. The
Central Board of Revenue (1969 PTD 16) applies with full force to the facts of the case in Writ
Petition No. 12129/94 (Annex-III).
      4. As regards the observation in para 5/N, it is pointed out that in the judgement dated
the 10th February, 1995, in Writ Petition No. 12129/94 the Lahore High Court has nowhere
held that in matters of appeal the law on the date of filing of appeal will apply irrespective of
the assessment years involved. The High Court has simply decided the case in the light of
Central Board of Revenue’s circular No. 129(1)DIP/1/94-Pt. 1, dated the 19th October, 1994,
according to which the amended provisions of section 129 of the Income Tax Ordinance,
1979, have been made applicable to proceedings relating to assessment years 1994-95 and
onwards. Since the matter under consideration of the court related to the assessment for the
year 1987-88, the order of the Commissioner of Income Tax (Appeals) was declared void and
the appeal was held to have been validly filed.
      5. As regards the issue raised in para 6/N, it is pointed out that the amended provisions
of sections 129 and 134 by the Finance Act, 1996 do not curtail or in any way impair the right
of appeal rather these provisions are beneficial to the assessee and remove the clog of
making mandatory payment for filing of appeal. Therefore, these provisions will apply to
appeals preferred against any decision on or after the 1st July, 1996, irrespective of the year
of assessment as in fiscal statutes interpretation favourable to the subject has to be preferred.
Since the Finance Act, 1996 took effect on the 1st July, 1996 the appeals against the decisions
of the departmental authorities will be governed by the amended provisions of section 129




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                                 766-B
Section 127                                    Income Tax Ordinance, 2001.




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or section 134 of the Income Tax Ordinance, 1979, as the case may be, without reference to
the year of assessment. – [C.No.3(42)-Rev.Bud./96. dated 6.10.1998].
Request for withdrawal of Circular No. 3 of 1997 dated 18.02.1997.
      I am directed to refer to your letter No. RCIT/J-4-Vol-III/95-96/4482 dated 27.03.1998 on
the subject and to state that a proposal for restricting the applicability of administrative
instructions to the extent of 30% of the tax demand in order to make the remaining 70%
recoverable was not acceded to by the competent authority. Instead it was desired that the
pending current assessment may be expeditiously disposed of making arrangement of early
disposal of appeals so that revenue stuck up in such cases may be covered. The Zonal CsIT
may keep a liaison with CIT (Appeals) concerned for early disposal of appeals in cases
involving huge tax demand. – [No.3(43)-Rev.Bud./98. dated 6.4.1998].
Amendment made in sections 129(2) & 130(1) of the Income Tax Ordinance, 1979 through Finance
Act, 1994 – Clarifications regarding.
      I am directed to refer to your letter No. CLAP/FA/MISC-94, dated October 20, 1994 on
the subject and to comment to various queries raised by you, as under :
        (i) ‚Whether the tax u/s 129(2) is payable on additional tax levied in addition to
             liability u/s 54?‛
       (ii) ‚Whether tax deducted u/s 50, 53 or paid u/s 54 is in excess of admitted liability or
             a refund of previous year can be adjusted against tax u/s 129(2) and fee u/s
             130(1)?‛
                    The refund assessed for preceding years can be got adjusted against tax
                 payable under impugned order but not against appeal fee.
      (iii) ‚Whether payment of tax u/s 54 and fee u/s 130(1) entitles an assessee to file an
             appeal u/s 129 foregoing his right of automatic stay u/s 85 due not/short payment
             of tax u/s 129(2)?‛
                    ‚This query is vague and needs elaboration.‛
      (iv) Whether in the case of an explicit computing error in preparation of I.T.-30/
             Demand Notice, such mistake shall be deemed to have been rectified for the
             purpose of payment of tax u/s 129(2) and fee u/s 130(1). For instance :
              i) Agricultural Income is shown and entered but its credit (rebate) is not worked
                 out.
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             ii) Adjustment of tax paid u/s 50, 53, or 54 is either less made or totally ignored.
           iii) An excessive rebate or adjustment is allowed.
                 The amount appearing in I.T.–30 form will be the basis of calculation of tax
                 payable.
       (v) ‚Whether the appellant shall be given sufficient opportunity to make up
             deficiency if the reply to above query under Sr. No. 4 is in negative?‛
      (vi) ‚Whether the replies given against the above queries shall also apply in appeal
             cases u/s 134 and 138?‛
      This is a query of general nature, Hence, precise reply cannot be offered. – [C.No.
129(1)DTP-I/94-Pt-I dated 10.11.1994].
Annulment/cancellation of orders.
      While disposing of an appeal against an assessment order, an appellate authority is
competent to (a) confirm (b) reduce (c) enhance, (d) set-aside or (e) annul the assessment.
      An assessment is set aside where an assessee is not afforded a proper opportunity of
being heard or presenting his case or where facts are not properly ascertained. A set aside
assessment has to be completed within one year from the end of the financial year in which
the appellate order is received by the ITO (as stipulated by section 66(1)(c) of the Ordinance).
However, where an appeal or a reference is filed either by the Department or the assessee,
there is no limit on the completion of re-assessment.
      An assessment is annulled where:–
            (a) the notice under section 56 or 65 has been issued without jurisdiction (by a
                 wrong officer),
           (b) the notice has not been properly served,
            (c) a wrong notice has been issued e.g. a notice under section 56 instead of 65 or
                 vice-versa),
           (d) assessment has been framed on the wrong person,
            (e) assessment has been made in the wrong assessment year,




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            (f) assessment has been made in respect of an income which is not income or
                such income is exempt from tax etc.,
           (g) assessment was framed when it was barred by time.
      There is a common misconception prevailing that once an assessment is annulled, no
re-assessment can be made. This situation obtains only n the cases mentioned at (f) and (g)
above i.e. where a proper notice is served on the correct person by a correct officer for the
correct assessment year but the income was either not income or is held to be otherwise
exempt or was made when it was already barred by time. In all other cases re-assessment can
be made by issue of a proper notice by the proper officer, served on the proper person for the
proper assessment year (as the case may be). The only limitation is the one imposed by
section 65. Since the assessment proceedings finalised are nullified ab-initio, the situation for
re-assessment would be exactly the same as if no assessment had earlier been made and an
assessment is being made for the first time. If the period of limitation has not expired, fresh
notices can be issued.
      Sometimes, the appellate order, instead of annulling the assessment, cancels it.
Although the term used is inappropriate, yet effect is exactly the same as if it is annulled.
      In certain cases, the appellate order proceeds towards setting aside the assessment yet
in the operative part of the judgement, the assessment is annulled (often inadvertently). In
such cases an application under section 156 may be moved. In case it is rejected (or delayed)
further appeal or reference may be filed.
      One of the very common appellate decisions relates to additions made under section 13
where statutory approvals have not been obtained from the IAC. Such addition are straight
away deleted and not set aside. In most of the cases, the Department does not file any appeal
nor is any effort made to re-assess the same. In such cases, the Department has the option
either to go in appeal or to re-start the proceedings to assess the amount after fulfilling the
statutory requirements.
      In case re-assessment proceedings are barred by time, an appeal may be filed to the
ITAT on the ground that the assessment should have been set aside on this issue instead of
deleting the addition. Seeking of IAC’s approval for an addition under Section 13 is as much
a statutory obligation of an ITO as issue of a notice under section 61 before making an
assessment under section 62. In the case of Sant Baba Mohan Singh Vs. CIT (1973) 90 ITR 197,
the Allahabad High Court held that a proceeding is nullity when the authority taking it has
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no power to have jurisdiction over the case. The omission of the ITO to issue a notice under
section 61, (which is his statutory obligation), does not affect the ab-initio jurisdiction
enjoyed by him in respect of the proceedings. In the case of such a failure, the AAC could
only set aside the order. The same ratio applies to the case of failure to obtain the approval of
the IAC.
      In case action under section 65 is not barred by time, notice under section 65 may be
issued to re-assess the amount deleted and the re-assessment be completed after meeting the
statutory objection. Deletion of the addition under section 13 would constitute escapement
of income for the purposes of section 65.
      Where for any year, there is no income other than income deemed under section 13, the
assessment is most probably annulled, which means that the assessment order does not exist
ab-initio. In such cases, proceedings can be re-started by issue of a notice under section 61, if
return is available or notice under section 65 has been served.
      Similarly, in the case of a penalty under Chapter XI imposed without approval of IAC,
the orders are being cancelled by the appellate authorities. In such case proceeding may be
re-started by issuing a notice under section 116 and final order may be passed after approval
of the IAC.
      The officers may be directed to examine the cases falling in the above categories where
appellate orders have been received and to initiate appropriate action. They may also be
directed to keep the above instructions in mind while scrutinizing appellate orders in future.
– [No.588/PS/4100 dated 19.12.1987].
Disposal of appeals – Letter of Chairman C.B.R.
      It has been brought to my notice that some of the appellate/revisional authorities are
reluctant to pass firm orders of their own in matters coming up before them for adjudication:
instead they remand cases back to lower formations even after stating in detail the two sides
of the case and even their own opinion in respect thereof; but without passing the final order.




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Chapter X, Procedure – Part III, Appeals                                          Section 127

      2. In this connection, a copy of a case reported as 1983 (48-Tax-6) (Trib) is enclosed. The
portion marked ‘A’ is of special interest.
      3. The communication is not meant to interfere in any way with the judicial discretion
of the appellate or revisional authorities but is only meant to suggest that, as a rule,
appellate/ revisional authorities should desist from remanding cases unnecessarily to lower
formations, and should try to pass firm orders of their own.‛
      The portion from the case, referred above is as follow:–
             ‚The learned Commissioner of Income Tax (Appeals) should have taken pains to
             consider and decide the issues on merits instead of leaving the appellant’s fate in
             the hands of the assessing officer. It is also patent from the record that the
             assessing officer has drawn inferences against the appellant without carefully
             taking into consideration or rebutting the explanations given at the assessment
             stage, which prima facie, appear to have resulted in harsh assessments. In any
             case, when the matter was carried before the learned Commissioner of Income
             Tax (Appeals) he failed to exercise his powers properly in as much as instead of
             redressing the grievance of the appellant by disposing of the appeals on merits, he
             simply set-aside the orders and remitted the matter to the assessing officer with
             the directions to re-examine the position and pass fresh orders on merits and
             without any prejudice or favour. Keeping in view the facts and circumstances
             under which the assessments were made, we feel compelled to vacate the order of
             the learned Commissioner of Income Tax (Appeals) and proceed to dispose of the
             appeals on merits on the basis available on record and the submission made by
             the parties.‛ – [No. 1549-PS/CH/86, dated 24.4.1986].
Appeal against order of penalty under section 115.
      By the Finance Ordinance, 1982, section 115 was amended to assign the power of
imposing penalty for obstructing any income tax authority to the Commissioner. Reference
to section 115 in section 129 has been omitted. However, relief against the order under
section 115 can be sought in revisionary jurisdiction from the Regional Commissioner under
section 138. – (8/1982).
Appeal against penalty for obstruction.
      ‚By the Finance Ordinance, 1980 section 115 was amended to assign the power of
imposing penalty for obstructing any income tax authority to the Commissioner. Reference
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to section 115 in section 129 has been omitted. However, relief against the order under
section 115 can be sought in revisionary jurisdiction from the Regional Commissioner under
section 138.‛ – (8/1982 dated 8.7.1982).
Appeal against add backs under section 59(3).
      ‚While making an assessment under self-assessment scheme under section 59 an
Income Tax Officer, is authorised to make certain adjustments and add-backs. However, no
appeal is provided against any un-warranted adjustments and add-backs. An appeal has
now been provided for such an eventuality.‛ – (15/1980 dated 26.6.1980).
Right of appeal against assessment under section 59.
      While making an assessment under self-assessment scheme under section 59 an Income
Tax Officer is authorized to make certain adjustments and add-backs. However, no appeal
was provided against any un-warranted adjustments and add-backs. An appeal has been
provided for such an eventuality. – (15/1980 dated 26.6.1980).
Appeal against refusal to rectify a mistake.
      Section 156 provides that where no action is taken on an application by the assessee by
end of the financial year next following the year in which such application is made, the
mistake sought to be rectified shall be deemed to be rectified. Difficulty arises where
application of the assessee is unjustly rejected, as no remedy is provided in law against such
eventuality. In order to remove this difficulty, section 129 has been amended by a
notification under section 167 to provide appeal against such order of refusal to rectify. –
(10/1979 dated 1.10.1979).
Income Tax Ordinance 1979 –Appeals to Appellate Assistant Commissioner.
      The provisions of the new section are similar to those of old section 30. However, the
following orders of the Income Tax Officers have also been made appeal able:–
        (i) Refusal to allow refund under section 98 or 99.
       (ii) Levy of penalty on liquidator under section 114.




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Chapter X, Procedure – Part III, Appeals                                          Section 127

     (iii)     Levy of penalty for obstruction under section 115.
     (iv)      Levy of penalty for failure to give evidence under section 148.
      (v)      Treating a resident as agent of a non-resident under section 78.
     (vi)      An order under section 156 rectifying the mistake apparent from record if the
               order enhances the tax or reduces the refund.
      It may be pertinent to point out that order involving provisions of section 84 (Section
44F of the repealed Act) are still appeal able as these are part of order under section 62 or 63
which is appeal able. – (4/1979 dated 23.8.1979).
Disposal of appeals.– [Section 129].
      ‚.........ordinarily it should be possible for the Appellate Assistant Commissioner to pass
an order under section 31 within one week of the date of the hearing of the appeal and also
despatch the order to the appellant within three days of the date of passing of the order.
Under no circumstances, an appeal should remain undisposed of for more than fifteen days
from the date of its final hearing. If, however, there is a change in jurisdiction of A.A.C., all
appeals which have been finally heard must be disposed of before the transfer of the charge
or jurisdiction.‛ – (17/1957 dated 12.8.1957).
Mandatory payment of tax for filing of appeals clarification regarding. – [Section 130].
      It appears that keeping in view of the amendments by the Finance Act, 1996 (IX of 1996)
the Central Board of Revenue vide their circular No. 10 of 1996 (Income Tax), dated the 16th
July, 1996 (at page 12) have stated that the amended provisions will be applicable with effect
from the assessment year 1996-97 thereby implying that cases arising out of earlier
assessment years 1994-95 and 1995-96 will be governed by the law as it existed prior to the
said amendments and condition of mandatory payment for filing of appeals will be
applicable irrespective of the fact that the appeals were filed after 30th June, 1996.
      2. According to them the aforesaid circular was issued on the basis of the decision of
the Lahore High Court in case of M/s. Essential Industries Vs. The Central Board of Revenue
reported as 1969 PTD 116. It may be pointed out that in that case by the Finance Act, 1967, a
proviso to sub-section (1) of section 30 of the Income Tax Act, 1922, was substituted by a new
proviso whereby the entertainment of an appeal was subjected to a pre-requisite of
depositing 50% of the tax demanded. The Court held the right of an appeal to be a vested
right and the Finance Act, 1967 cannot be applied with retrospective effect to curtail the
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vested right of appeal in the absence of any express provision or necessary intendment to
that effect. In that case the appeals arose out of assessment year 1962-63, the court held that
the amendment in substantive law has no retrospective effect and does not affect the right of
an appeal existing on the day of which proceeding commences is a vested right and such
right has to be governed by the law prevailing on that day and not on the day of its decision.
Such vested right can be taken away only by a subsequent enactment if it so provides
expressly or by necessary intendment.
      3. It may be pointed out in the case in Writ Petition No. 12129/94, the facts of the case
are that the assessment for the year 1987-88, was made on the 16th July, 1998, and was
subsequently reopened under section 65 of the Income Tax Ordinance, 1979 and
re-assessment order under sections 62/65 for the year 1987-88 was served upon the petitioner
on the 31st July, 1994, which was assailed before the Commissioner of Income Tax (Appeals)
who summarily rejected the appeal as the appeal was not accompanied by the requisite fee.
The aggrieved assessee preferred writ petition before the Lahore High Court requesting,
among others, that the enhanced appeal fee for twenty five rupees to two thousand and five
hundred rupees under sub-section (1) of section 130 be declared invalid and without any
legal effect as the aforesaid fee was payable in view of the amended provisions of the Income
Tax Ordinance, 1979, by the Finance Act, 1994. It appears that during the course of
proceedings the Central Board of Revenue’s clarification vide circular No. C.
129(1)DIP/94/Pt-1, dated, the 19th October, 1994, was brought to the notice of the court
whereunder it was clarified that the provisions relating to mandatory payment introduced
through Finance Act, 1994, were applicable to proceedings relating to assessment year
1994-95 and onward. In this case since the appeal related to the assessment year 1987-88, the
court rightly held that the order of the Commissioner of Income Tax (Appeals) was void as
the amended provisions of the Income Tax Ordinance, 1979, were applicable to proceedings
relating assessment years 1994-95 and onwards. It appears from the record that the decision
of the court has been accepted by the department and no appeal was preferred against it. It
may also be pointed out that the decision of the High Court in the Essential Industries Vs.




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                                              771
Chapter X, Procedure – Part III, Appeals                                          Section 127

The Central Board of Revenue (1969 PTD 16) applies with full force to the facts of the case in
Writ Petition No. 12129/94 (Annex-III).
      4. As regards the observation in para 5/N, it is pointed out that in the judgement dated
the 10th February, 1995, in Writ Petition No. 12129/94 the Lahore High Court has nowhere
held that in matters of appeal the law on the date of filing of appeal will apply irrespective of
the assessment years involved. The High Court has simply decided the case in the light of
Central Board of Revenue’s circular No. 129(1)DIP/1/94-Pt. 1, dated the 19th October, 1994,
according to which the amended provisions of section 129 of the Income Tax Ordinance,
1979, have been made applicable to proceedings relating to assessment years 1994-95 and
onwards. Since the matter under consideration of the court related to the assessment for the
year 1987-88, the order of the Commissioner of Income Tax (Appeals) was declared void and
the appeal was held to have been validly filed.
      5. As regards the issue raised in para 6/N, it is pointed out that the amended provisions
of sections 129 and 134 by the Finance Act, 1996 do not curtail or in any way impair the right
of appeal rather these provisions are beneficial to the assessee and remove the clog of
making mandatory payment for filing of appeal. Therefore, these provisions will apply to
appeals preferred against any decision on or after the 1st July, 1996, irrespective of the year
of assessment as in fiscal statutes interpretation favourable to the subject has to be preferred.
Since the Finance Act, 1996 took effect on the 1st July, 1996 the appeals against the decisions
of the departmental authorities will be governed by the amended provisions of section 129 or
section 134 of the Income Tax Ordinance, 1979, as the case may be, without reference to the
year of assessment. – [C.No.3(16)M(Jud.)93-Pt. dated 1.7.1998].

              CASE LAW – SUPREME COURT / HIGH COURTS / ITAT
                                          GENERAL
   Right of appeal is a creature of statute. – Chairman, CBR v. Pak-Saudi Fertilizer
    Ltd. [(2001) 83 TAX 119 (S.C.Pak.) = 2000 PTD 3748].
   Higher Courts cannot entertain application for condonation of delay if it was not
    filed before the original authority. – Nida-e-Millat Pvt. Ltd., Lahore v. CIT, Zone-I,
    Lahore [(2007) 96 TAX 11 (S.C.Pak.) = 2007 PTD 1387= PTCL 2008 CL. 112].
   Provisions of section 129(5), (6) and (7) of the Ordinance are mandatory and not
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    directory or regulatory. – Data Electronics Pvt. Ltd., Lahore v. Federation of
    Pakistan through Secretary Finance, Finance Division, Islamabad and 3 others
    [2005 PTR 270 [H.C.Lah.] = (2005) 91 TAX 238 = 2005 PTD 862 = PTCL 2005 CL.
    664].
   Refusing interim relief against an original order of a Revenue Officer is travesty of
    justice and is likely to encourage raising of fabulous demands for extraneous
    reasons. – Brother Textile Mills Ltd. v. Federation of Pakistan through Secretary
    and 3 others [(2004) 89 TAX 141 (H.C.Lah.) = 2003 PTD 2834].
   Right of appeal is a creature of statute and there can be no right of appeal unless the
    statute confers it. – Sui Southern Gas Company v. Federation of Pakistan [(2002) 86
    TAX 254 (H.C.Kar.) = 2002 PTD 150].
   Forum exercising judicial or quasi-judicial functions is not required to confront the
    party of the natural consequence of the default made on his part. – Nidai Millat Ltd.
    v. CIT [2002 PTD 270 (H.C.Lah.)].
   Revision filed against the order before the Inspecting Assistant Commissioner held
    not maintainable. – Souvenir Tobacco Co. Ltd. v. ITO, Companies Circle XIII, Karachi
    And Another [(1983) 47 TAX 158 (H.C.Kar.) = 1983 PTD 41 = PTCL 1983 CL. 79].
   Provisions of Limitation Act are applicable to the proceedings under the Income Tax
    Act. – Aftab Medical Stores, Dera Ghazi Khan v. CIT, Lahore [(1976) 34 TAX 10
    (H.C.Lah.) = 1976 PTD 242 = PTCL 1984 CL. 326].
   Order refusing condonation is an appealable order. – R.P. Saha v. CIT, East Bengal
    [(1960) 2-TAX (Suppl.–227) (H.C.Dacca) = 1960 PTD 1025].
   If an order is passed at time when an appeal, which was not earlier available, is
    provided for, appeal is competent. – Govindram Seksaria, In re [1943] 11 ITR 104
    (Bom.).




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                                           772
Chapter X, Procedure – Part III, Appeals                                    Section 127

   Appeal is part of machinery for assessment. – Chatturarn v. CIT [1947] 15 ITR 302
    (PC).
   Appeals should be decided on the basis of law prevailing on date of decision. – Raja
    Bahadur Karnakshya Narain Singh of Rarngarh v. CIT [1947] 15 ITR 311 (PC).
   Order of withdrawal of exemption is appealable. – [2007 PTR 262 (Trib.) = (2007) 96
    TAX 133 = 2007 PTD 2088].
   One appeal should be made available as a matter of right. – [2007 PTR 262 (Trib.) =
    (2007) 96 TAX 133 = 2007 PTD 2088].
   Order passed by CIT(A) deprecated for failure to comment on action of assessing
    officer to deny credit of tax u/s 50(7E). – [2004 PTD (Trib.) 1424].
   Order u/s 62, although sequel to the IACs order u/s 66A, is an independent order and
    thus is appealable before the CIT(A). – [(2003) 88 TAX 201 (Trib.) = (2004) 89 TAX
    107 (Trib.) = 2004 PTD 480].
   Assessees right of appeal is not infringed if he chooses to invoke jurisdiction of the
    High Court. – [(2003) 88 TAX 238 (Trib.) = 2003 PTD 2778].
                     DECISION WITHIN 3 MONTHS – SCOPE OF SECTION 129(5)
   If notice u/s 129(7) is not given, the benefits stipulated in section 129(5) cannot be
    availed. – Data Electronics Pvt. Ltd., Lahore v. Federation of Pakistan through
    Secretary Finance, Finance Division, Islamabad and 3 others [2005 PTR 270
    [H.C.Lah.] = (2005) 91 TAX 238 = 2005 PTD 862 = PTCL 2005 CL. 664].
                         DEFECT IN THE FORM OF APPEAL IS RECTIFIABLE
   Verification of appeal other than by the assessee is a curable defect. – Bibi Gul
    Sajjad v. ACIT, Income Tax Department, Peshawar and 4 others [2000 PTD 2662
    (H.C.Pesh.) = PTCL 2002 CL. 142].
                          MANDATORY PAYMENT FOR FILING OF APPEAL
   Payment of fee - relevant date. – Shahroon International Pvt. Ltd., Lahore v. CIT,
    Companies Zone-I, Lahore [2006 PTR 9 [H.C.Lah.] = (2006) 93 TAX 33 = 2005 PTD
    2397].
   Quantification of income cannot be challenged in a constitutional jurisdiction. –
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    Chaman Milk Shake Ice Cream through Proprietor v. Special Officer of Income Tax,
    Circle 10, Zone-A, Lahore and another [2003 PTD 2855 (H.C.Lah.)].
   Imposition of 15% tax as a pre-condition for filing appeal is an abridgement of right
    of appeal vested in a person, hence unconstitutional having no legal sanctity. –
    Sadiq Brothers Poultry, Rawalpindi v. Appellate Additional Commissioner, IT/WT,
    Rawalpindi [(2003) 88 TAX 355 (H.C.Lah.) = 2004 PTD 122].
   On writ challenging mandatory payment of 15% for filing appeals the Appeal
    Commissioner directed to entertain the same without deposit. – Reem Rice Mill
    (Pvt.) Ltd. v. Federation of Pakistan and others [(2002) 85 TAX 478 (H.C.Lah.) = 2002
    PTD 363].
   CIT (Appeals) directed to entertain appeal without compulsory deposit of 15%. –
    Taxnet (Pvt.) Ltd. v. Federation of Pakistan and others [(2002) 85 TAX 507
    (H.C.Lah.) = 2002 PTD 348].
   Condition for payment of 15% tax for filing of appeal held intra vires. – Aashi
    Packages (Pvt.) Limited, Baghbanpura, Lahore through Director, Hassan Kamal v.
    Federation of Pakistan through Secretary Finance, Islamabad and 2 others [2002
    PTD 2797 (H.C.Lah.)].
   Appeal accepted without mandatory payment of 15% tax. – Humayoun Khan,
    Director Manakin Textile (Pvt.) Ltd., Lahore v. CBR through Chairman and 3 others
    [(2002) 85 TAX 483 (H.C.Lah.) = 2002 PTD 385].
   Compulsory deposit for filing appeal under section 129 disapproved. – Sonia Silk,
    108-Anarkali, Lahore through Sheikh Wajih-ud-Din Ahmad v. The CBR, through
    Chairman, Islamabad and 4 others [(2001) 84 TAX 492 (H.C.Lah.) = 2001 PTD
    1789].
   Right of appeal subjected to a pre-requisite of payment of 50 percent of tax demand
    held to have affected vested rights of appellate. – Essential Industries, Model




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Chapter X, Procedure – Part III, Appeals                                     Section 127

    Town, Lahore v. CBR, Govt. of Pakistan, Islamabad [(1968) 17 TAX 247 (H.C.Lah.) =
    1968 PTD 746; 1969 PTD 116 = PLD 1969 Lah. 24].
                                 NON-PAYMENT OF APPEAL FEE
   Where the appellant fails to deposit appeal fee, he should be allowed to make this
    defect good. – Tariq Ikram v. ITAT [(2004) 89 TAX 168 (H.C.Lah.) = 2003 PTD
    1784].
   Non-payment of fee will render an appeal invalid, but the taxpayer must be given
    prescribed time to pay it. – [(2002) 86 TAX 310 (Trib.) = 2002 PTD 2192].
              DENIAL OF ASSESSEE TO BE ASSESSED UNDER A PARTICULAR SECTION
   Words „denying his liability to be assessed under this Act‟ in section 30(1) of the 1922
    Act are not confined to the denial of liability before the Income Tax Officer but
    include, and must include, his denial in the appeal filed by him. – Rani Anand
    Kunwar v. CIT [1940] 8 ITR 126 (Oudh).
                                 BEST JUDGMENT ASSESSMENT
   In an appeal against assessment made under section 23(4) of the 1922 Act, AAC can
    examine record to satisfy himself that appeal was competent. – Pallu Mall Bhola
    Nath, In re [1933] 1 ITR 235 (All.).
   In disposing of an appeal from an assessment under section 144, first appellate
    authority need not confine itself only to the materials on record at time of
    assessment. – CIT v. Ranicherra Tea Co. Ltd. [1994] 207 ITR 979/75 Taxman 164
    (Cal.).
   Position under the 1922 Act. – CIT v. Khemchand Ramdas [1938] 6 ITR 414 (PC);
    L.Hira Lal v. CIT [1942] 10 ITR 148 (All.); Sheoduttrai Pannalal v. CIT [1941] 9 ITR
    118 (All.); Naba Kurnar Singh Dudhuria v. CIT [1944] 12 ITR 327 (Cal.).
                                   OBJECTION AS TO STATUS
   Where fact of partition of HUF is accepted by Income Tax Officer but from a different
    date, assessee-HUF can raise question of date in quantum appeal, without filing a
    separate-appeal. – CIT v. Lachrni Narain Bhadani [1944] 12 ITR 355 (Pat.).
                              ORDER AS TO PLACE OF
                 www.imranghazi.com ASSESSMENT
   Scheme of the Act does not contemplate an objection as to the place of assessment
    being raised in an appeal against the assessment after the assessment has been
    made. – Wallace Bros. & Co. Ltd. v. CIT [1945] 13 ITR 39 (PC).
                                       ORDER IN APPEAL
   Position under 1922 Act. – Sehgal Bros., In re [1943] 11 ITR 553 (Lahore).
   Position under the 1922 Act. – Lalchand v. CIT [1935] 3 ITR 330 (Cal.); CIT v.
    Bassantram Chhatornal [1941] 9 ITR 254 (Sind); CIT v. Gangaram Kanayalal & Co.
    [1940] 8 ITR 421 (Sind).
                       APPEAL BY PARTNER – APPLICATION OF PROVISION
   Application of provision. – Lala Suraj Dev Khanna v. CIT [1941] 9 ITR 190 (Lahore).
                               FORM OF APPEAL AND LIMITATION
   Time requisite for obtaining certified copy should be excluded in computing the
    period of limitation. “Certified copy”, meaning of. – CIT/CST Rawalpindi v.
    Pakistan Television Corp. Rawalpindi [(1978) 38 TAX 181 (H.C.Lah.) = PLD 1978
    Lah. 1027].
   Limitation starts with service of order against which appeal is to be filed. – [2007
    PTR 18 (Trib.) = (2007) 95 TAX 28 = 2007 PTD 803].
   Position under the 1922 Act. – Maharani Gyan Manjari Kuari, Dowager Maharani
    of Hathwa v. CIT [1944] 12 ITR 59 (Pat.).
                                    PROCEDURE IN APPEAL
   Assistant Commissioner is a revenue Court for the purposes of the Court Fees Act. –
    Merchant Flour Mills Co. Ltd. v. CIT [1937] 5 ITR 459 (Lahore).




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                                           774
Chapter X, Procedure – Part III, Appeals                                  Section 127

   Others. – Malik Darnsaz Khan v. CIT [1947] 15 ITR 445 (PC).
                               POWER TO SET ASIDE ASSESSMENT
   Section 31(3)(b) of the 1922 Act means that assessment can be set aside on the
    ground that it is defective on record as it stands. – Biradhrnal Lodha v. CIT [1934]
    2 ITR 164 (All.).
                                  POWER OF ENHANCEMENT
   Power of the Assistant Commissioner cannot extend to enhancing an assessment,
    which the Income Tax Officer has no jurisdiction to make and must be limited to
    annulling it. [This is a position prior to 1979 Ordinance]. – North British &
    Mercantile Insurance Co., In re [1937] 5 ITR 349 (Cal.).
   Appellate authorities, CIT(A) or another in the hierarchy, have full power to reduce
    any tax or penalty keeping in view the circumstances of each case. – [(2003) 88 TAX
    324 (Trib.) = 2004 PTD 474].
   AAC can change flat rate of profits applied to sales. – Pearey Lal Shukla of
    Cawnpore, In re [1942] 10 ITR 239 (All.).
                             POWER TO ADMIT ADDITIONAL GROUND
   Act does not contain any express provision debarring an assessee from raising an
    additional ground in appeal and there is no provision in the Act placing restriction
    on power of appellate authority in entertaining an additional ground in appeal. –
    Ram Rakha Mal & Sons Ltd. v. CIT [1937] 5 ITR 137 (Lahore).
   Plea that HUF properties had been divided must be raised at assessment stage and
    not at stage of appeal. – Biradhmal Lodha v. CIT [1934] 2 ITR 164 (All.).
   Others. – Behari Lal Rarnchandra v. CIT [10 ITC 473 (Oudh)].
                                   POWER TO LEVY PENALTY
   Assistant Commissioner cannot uphold penalty after rejecting appeal. – Banarsi
    Das v. CIT [1936] 4 ITR 217 (Lahore).
                             POWER TO REJECT BOOKS OF ACCOUNT
   AAC has power to substitute a different method of computation than one adopted by
    Income Taxwww.imranghazi.comassessment under proviso to section 13 of
                 Officer in an appeal against an
    1922 Act. – Lala Sarju Prasad, In re [1943] 11 ITR 525 (All.).
                                   WITHDRAWAL OF APPEAL
   An appeal once filed before AAC cannot be withdrawn. – CIT v. Nawab Shah Nawaz
    Khan [1938] 6 ITR 370 (Lahore).
                                  DELAY IN FILING OF APPEAL
   Delayed appeal against a void order entertained as no prejudice was caused to the
    Department. – [(2004) 89 TAX 89 (Trib.) = 2004 PTD 1517].
                                       LAW APPLICABLE
   If a statutory provision is enacted when appeal is pending appellate authority is
    bound to give effect to it. – Raja Bahadur Kamakshya Narain Singh v. CIT [1946]
    14 ITR 683 (Pat.).
                               RECTIFIED ORDER OF ASSESSMENT
   Order of assessment passed under section 23 substituted by the rectified order under
    section 35 is appealable. – Inland Navigation Co. Ltd., Chittagong v. ITO,
    Companies Circle V, Chittagong [(1967) 16 TAX 1 (H.C.Dacca) = 1968 PTD 257].
   Unlawful action/order does not force any law of limitation for filing of appeal. –
    [2004 PTD (Trib.) 838].




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                                                       775
Chapter X, Procedure – Part III, Appeals                                                         Section 128

    128. Procedure in appeal.– (1) The Commissioner (Appeals) shall
give notice of the day fixed for the hearing of the appeal to the appellant
and to the Commissioner against whose order the appeal has been made.
    (2) The Commissioner (Appeals) may adjourn the hearing of the appeal
from time to time.
    (3) The Commissioner (Appeals) may, before the hearing of an appeal,
allow an appellant to file any new ground of appeal not specified in the
grounds of appeal already filed by the appellant where the Commissioner
(Appeals) is satisfied that the omission of the ground from the form of the
appeal was not wilful or unreasonable.
     (4) The Commissioner (Appeals) may, before disposing of an appeal,
call for such particulars as the Commissioner (Appeals) may require
respecting the matters arising in the appeal or cause further enquiry to be
made by the Commissioner.
    (5) The Commissioner (Appeals) shall not admit any documentary
material or evidence which was not produced before the Commissioner
unless the Commissioner (Appeals) is satisfied that the appellant was
prevented by sufficient cause from producing such material or evidence
before the Commissioner.

                                               COMMENTS
SECTION 128: ―Procedure in appeal‖.
    The procedure laid down in the new Ordinance is the same as it was in the RO with the
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following as the salient features:
    (a) The Commissioner (Appeals) fixes a day for hearing and notifies the same to the
         appellant and the Commissioner against whom the appeal is filed. He can also
         adjourn the hearing to some other day.
    (b) New grounds of appeal submitted by the appellant can be admitted by the
         Commissioner (Appeals) if he thinks that their omission was not deliberate.
    (c) The Commissioner (Appeals) can conduct further enquiry or call for information/
         particulars before deciding an appeal but he will not admit any evidence which was
         not produced before the Commissioner unless circumstances had prevented the
         appellant from filing it then.

                 COMPARABLE PROVISION OF THE RO – [SECTION 131]
     131. Procedure in appeal.–(1) The Appellate Additional Commissioner shall give notice of the day fixed for
the hearing of the appeal to the appellant and to the Deputy Commissioner against whose order the appeal is
preferred and may adjourn the hearing of the appeal from time to time.
     (2) The Appellate Additional Commissioner may, before the hearing of an appeal, allow an appellant to file any
new ground of appeal not specified in the grounds of appeal already filed by him on being satisfied that the
omission of that ground from the form of appeal was not willful or unreasonable.
     (3) The Appellate Additional Commissioner may, before disposing of any appeal, call for such particulars as
he may require respecting the matters arising in the appeal or cause further inquiry to be made by the Deputy
Commissioner.
     (4) The Appellate Additional Commissioner shall not admit any documentary material or evidence which was
not produced before the Deputy Commissioner, unless he is satisfied that the appellant was prevented by
sufficient cause from producing such material or evidence before the Deputy Commissioner.




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                                               776
Section 128                                                       Income Tax Ordinance, 2001.

                                    DEPARTMENTAL VIEW
Admission of fresh evidence at the stage of appeal.
      Sub-section (4) of Section 131, rules out the admission of fresh evidence at the stage of
appeal before the Appellate Assistant Commissioner even where the appeal has been filed
against an assessment under Section 62. Thus, unless the assessee can satisfy the Appellate
Assistant Commissioner that he was prevented by sufficient cause from producing the
material or evidence, which was not produced by him before the Income Tax Officer and
which he wants to produce before the AAC, the later cannot allow him to do so while
hearing an appeal both against an assessment under section 62 or section 63. – (8/1959 Rev.).
Appeals under Income Tax Law – Instructions regarding.
      The Board has reasons to think that implication of Circular No. 7 of 1949, dated 6.4.1948
has not been fully appreciated. It, therefore, finds it necessary to issue the following further
instructions.
      (2) Appeals against assessments. ‚When an assessment is made by Commissioners, the
burden is upon the person disputing to displace it, not on the person making it to sustain it‛.
This principle applies to appeals under Pakistan income tax law as much as it applies to
appeals under the English Income Tax Act. Commenting on the scope of this principle, an
eminent judge observed: ‚If it were necessary to decide the point, I would, as at present
advised, be prepared to hold that the tax-payers must, as a general rule, show not only
negatively that the assessment is wrong but also positively what correction should be made
to make it right or more nearly right. I say so as a general rule, because there might be a case
where it appears that the assessment had been made upon no intelligible basis even as an
approximation and the Court would then set aside the assessment and remit to the
Commissioners for further consideration‛. In Rehmat-un-Nisa Begum and others Vs. Price
and others, their Lordships of the Privy Council used equally clear language and remarked:
‚It was urged in argument against interference with this decision that it is opposed to sound
practice for an appellate court to substitute its discretion for that of the court from which an
appeal has been preferred. The justice of this argument is undoubted‛. In 1953 (24-ITR-93)
these observations of the Privy Council were cited as applicable to appeals under the Income
Tax Act. Discussion so far establishes beyond doubt that when an assessment is made in
absence of accounts and evidence or where the accounts and evidence produced are
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incomplete or unreliable, the appellate authority will not be right in interfering with the
assessment unless ‚it has been shown to the satisfaction of the appellate court that the
discretion has been exercised by the Income Tax Officer mala fide, arbitrarily or
capriciously.‛
      (3) Appeals against penalty. In Board’s Circular No. 19 of 1939, dated 26.9.1939, the
following instructions were issued:–
            ‚The revision of a penalty on appeal stands on a different footing from the
            original imposition of a penalty, and an Appellate Assistant Commissioner,
            though free to take a different view from the Central Board of Revenue on policy,
            i.e. on the severity of the penalty to be imposed for a particular type of offence or
            level of culpability. It is, therefore, not likely that in the absence of fresh evidence
            an Appellate Assistant Commissioner would need to interfere with the penalty
            imposed by the Income Tax Officer either to enhance or to reduce it.‛
                 The Board has re-examined the legal correctness of these instructions and
                 found no reasons to modify them.
      (4) Admission of fresh evidence (i) In Board’s Circular No. 5 of 1954, dated 1-4-1954 the
question of admissibility of fresh evidence at the appeal stage has been discussed. In
addition to those instructions, Board likes to bring to the notice of the officers of the
department, the following observation of a Full Bench of Rangoon High Court in 4-ITC-III
(E.M. Chettyar Firm Vs. CIT, Burma). ‚It was entirely in the discretion of the Commissioner
whether or not he should admit further evidence at that stage. The Commissioner rightly
remarks that an appellant in an income tax proceeding has no higher right in adducing fresh
evidence in appeal than he would have in a civil case under order 41, Rule 27 of the Civil
Procedure Code‛.
       (ii) In conclusion, it may be mentioned, that in the nature of things, all facts and their
            details concerning persons, business or income are essentially matters within the




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                                              777
Chapter X, Procedure – Part III, Appeals                                         Section 128

            assessee’s knowledge. Income Tax authorities should, therefore, follow the
            principle of Section 106 of the Evidence Act, which says that when any fact is
            within the knowledge of any person, the burden of proving that fact is upon him.
            Benefit of doubt, if any, must go to the revenue.
      (iii) Income Tax Officers should, when occasion arises, bring this to the notice of
            Appellate Assistant Commissioners and the Departmental Representative should
            make suitable use of the legal discussions contained in this Circular. – (12/1957
            Rev.).
Admitting additional evidence in appeal.
      It has come to the notice of the Board that some Appellate Assistant Commissioners are
admitting, in appeal, additional evidence without satisfying themselves that the assessee
was not given opportunity to produce that evidence or was prevented from producing it by
sufficient cause. Not only that, the Income Tax Officer is also not given an opportunity to
present his point of view of the evidence. In a recent case an Appellate Assistant
Commissioner has stated as follows:–
      ‚The Income Tax Officer made an addition of Rs. 35,657 under rice account on estimate
      at the rate of Rs. 8 per maund (71,314 maunds of rice dealt in the year) chiefly on the
      ground that the purchases could not be proved. The parties have now produced a
      regular Bhahi Book before me where, on verification, I find that every such item is
      authenticated by the parties from whom such purchases were made. Several paddy
      purchases were made from small Zamindars and it was not possible for the appellant
      to furnish the addresses in each and every case. In my opinion there was no doubt
      about the authenticity of the purchase price shown and verification of the purchases
      was possible in all cases. The addition of Rs. 35,657 is, therefore, deleted and reduction
      to that extent is allowed in the total income‛.
      (2) Here the Appellate Assistant Commissioner has not stated that the assessee had not
been given the opportunity to produce these documents or that he was prevented from
producing them by sufficient cause. Nor did the Appellate Assistant Commissioner give an
opportunity to the Income Tax Office to examine the evidence.
      (3) The Appellate Assistant Commissioner may, under Section 131 (2), before disposing
of an appeal, call for such particulars as he may require respecting the matters arising in the
appeal from which it would follow that he can in his discretion go into additional evidence.
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But it may be assumed that the Appellate Assistant Commissioner will not accept fresh
evidence without paying due regard to the circumstances in which it was not produced
before the Income Tax Officer and will also realise the danger of encouraging assessees to
withhold any evidence until the appellate stage.
      (4) The above view is not inconsistent with sub-section (4) of Section 131. Sub-section
(4) is a ‚prohibitive‛ sub-section and prohibits admission of fresh evidence in the
circumstances stated therein. An inference cannot be drawn from this sub-section that
sub-section (2) permits admission of fresh evidence as a matter of course. In a case where the
assessee has deliberately not produced any document or evidence required, to be produced,
by the Income Tax Officer, he (the Income Tax Officer) should not over-look the default but
make the assessment under Section 63. This would preclude the Appellate Assistant
Commissioner under Section 131(4) from admitting fresh evidence.
      (5) The Board also thinks it only proper that where any additional evidence is admitted
by the Appellate Assistant Commissioner, the Income Tax Officer should have an
opportunity to examine it and state his views. – (6/1956).
Admitting fresh evidence in appeal.
      The Board has observed that there are certain misunderstandings in the interpretation
of sub-section (4) of Section 131 of the Income Tax Ordinance. This Section provides, that in
an appeal against an assessment under Section 62, 63 of the Ordinance, the Appellate
Assistant Commissioner shall not admit, at the appellate stage, any documentary material or
evidence which the assessee failed without sufficient cause to produce before the Income
Tax Officer. It is therefore, desirable that while making a best judgement assessment under
Section 63, the Income Tax Officer should invariably call for the accounts, documentary
material or evidence under Section 61 in order to leave no ground to the assessee to plead at
the time of appeal that he was never asked to produce the accounts. In short, the provisions
of Section 131(4) cannot be invoked in favour of the department if there was no requisition
by the Income Tax Officer for the accounts. – (5/1954).




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                                          778
Section 128                                              Income Tax Ordinance, 2001.


              CASE LAW – SUPREME COURT / HIGH COURTS / ITAT
                                          GENERAL
   Orders of ITAT and AAC‟s held to be flagrant violation of law. – CIT v. Durathene
    Manufacturers [(2001) 83 TAX 521 (H.C.Kar.) = 2001 PTD 1002].
   Statement prepared on the basis of account books already produced before the
    Income Tax Officer does not constitute fresh material. – Star Rolling Mills v. CIT
    [(1974) 30 TAX 27 (H.C.Kar.) = 1974 PTD 200].
                                    ADDITIONAL EVIDENCE
   Since admission of additional evidence was never raised before the Tribunal,
    question of law refused on this point. – CIT, Zone-C, Lahore v. Jinnah Cadet School,
    Lahore [(2002) 85 TAX 489 (H.C.Lah.) = 2002 PTD 462].




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                                                            779
Chapter X, Procedure – Part III, Appeals                                                  Section 129

     129. Decision in appeal.– (1) In disposing of an appeal lodged under
section 127, the Commissioner (Appeals) may–
        1[(a)      make an order to confirm, modify or annul the assessment
                   order, after examining such evidence as required by him
                   respecting the matters arising in appeal or causing such further
                   enquiries to be made as he deems fit;]
          (b)      in any other case, make such order as the Commissioner
                   (Appeals) thinks fit.
    (2) The Commissioner (Appeals) shall not increase the amount of any
assessment order or decrease the amount of any refund unless the
appellant has been given a reasonable opportunity of showing cause
against such increase or decrease, as the case may be.
     (3) Where, as the result of an appeal, any change is made in the
assessment of an association of persons or a new assessment of an
association of persons is ordered to be made, the Commissioner (Appeals)
may authorise the Commissioner to amend accordingly any assessment
order made on a member of the association and the time limit in sub-section
(2) of section 122 shall not apply to the making such amended assessment.
    (4) As soon as practicable after deciding an appeal, the Commissioner
(Appeals) shall serve 2[ ] his order on the appellant and the Commissioner 3[:]
                    that such order shall be passed not later than one
              4[Provided

hundred and twenty days from the date of filing of appeal or within an
extended period of sixty days, for reasons to be recorded in writing by the
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Commissioner (Appeals):
         Provided further that any period during which the hearing of an
appeal is adjourned at the request of the appellant or is postponed due to
any appeal or proceedings or stay order, remand or alternative dispute
resolution proceedings or for any other reason, shall be excluded in the
computation of the aforementioned periods.]
    (5) Where the Commissioner (Appeals) has not made an order on an
appeal before the expiration of 5[four] months from the end of the month in
which the appeal was lodged, the relief sought by the appellant in the
1   Clause (a) substituted by Finance Act, 2005.
2   Words “notice of” omitted by Finance Ordinance, 2002.
3   Substituted for full stop by Finance Act, 2009.
4   Provisos inserted by Finance Act, 2009.
5   Substituted for “three” by Finance Act, 2008.

                                        LEGISLATIVE HISTORY
     Section 129(1)(a)–Substitution.–Before substitution by Finance Act, 2005 clause (a) read as follows:–
     (a) in the case of an appeal against an assessment order–
           (i) make an order to set aside the assessment order and direct the Commissioner to make a new
               assessment order in accordance with any directions or recommendations of the Commissioner
               (Appeals); or
          (ii) make an order to confirm, modify or annul the assessment order; or




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                                                     780
Section 129                                                    Income Tax Ordinance, 2001.

appeal shall be treated as having been given and all the provisions of this
Ordinance shall have effect accordingly.
    (6) For the purposes of sub-section (5), any period during which the
hearing of an appeal is adjourned on the request of the appellant shall be
excluded in the computation of the period of 1[four] months referred to in
that sub-section.
    (7) The provisions of sub-section (5) shall not apply unless a notice by the
appellant stating that no order under sub-section (1) has been made is
personally served by the appellant on the Commissioner (Appeals) not less
than thirty days before the expiration of the period of 5[four] months.
1 Substituted for “three” by Finance Act, 2008.

                                                  COMMENTS
SECTION 129: ―Decision in appeal‖.
The provisions of this section are the same as section 132 of the RO except that after 30.6.2005
the CIT(A) cannot set-aside the order.
    The Commissioner (Appeals) was authorised to set-aside an assessment order. This
power has been taken away. Now, the Commissioner cannot set-aside any case even where
some procedural lapse is committed by the assessing officer. In this instance he will have to
cancel or annul the assessment which will be a great blow to the Department. It appears that
Board has realized that orders creating obnoxious demands are set-aside by the
Commissioners for de novo consideration whereas these should either be confirmed or
cancelled. It is a strange move as it can also be detrimental because Commissioners (Appeal),
being under the direct control of FBR will be more inclined to confirm even the most
obnoxious orders under the pretext of no power to set-aside the same.
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    This amendment may be well-intentioned but under the existing state of affairs the
Commissioner (Appeals) may be at a loss to annul orders involving, in particular, huge
revenue even though such orders may be arbitrary. Any categorical decision is no doubt
required to bring certainty but justice demands that the first appellate authority exercising
such power should be independent of administrative control of FBR.
    The Commissioner (Appeals) is expected to make judicious decisions after taking into
consideration information of both the sides, the appellant and the department, before him.
The salient features of this section with respect to the powers of Commissioner (Appeals)
are:
     (a) He can, in case of assessment order, confirm, modify or annul an order. In other
          cases of appeal, he must decide on merit as he thinks fit.
    (b) He cannot increase assessed income or reduce refund already determined, unless
          he provides the appellant a proper opportunity of being heard.
     (c) He can direct and authorise the Commissioner to amend any assessment order
          made on a member of an association of persons or an AOP where as a result of
          appeal there is a change in the constitution and consequently time limit provided in
          section 122(2) will not apply here.
    (d) He will, after deciding an appeal make arrangement for serving the order both on
          the appellant and the Commissioner.
     (e) Two provisos inserted in sub-section (4) make it compulsory for the commissioner
          to pass an order within 120 days from the date of filing of appeal.
      (f) He will, after deciding an appeal make arrangement for serving the order both on
          the appellant and the Commissioner.
    (g) Sub-sections (5) and (6) relate to a situation where he does not finalise his decision
          within four (prior to 01.07.2008, it was three) months from the end of the month in




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                                                            781
Chapter X, Procedure – Part III, Appeals                                                            Section 129

         which appeal is filed. In this case the appeal is assumed to have been disposed of in
         favour of the appellant and relief sought for is automatically granted. However,
         there are two things that must be remembered here:
        o Period of adjournment sought by the appellant will not be counted towards
             calculation of the three months; and
        o The Commissioner (Appeals) will have to be notified personally thirty days
             before expiry of three months that he has failed to pass an order for the decision
             to be effected in favour of the appellant.
   Had the new Ordinance been taxpayer friendly, this provision of informing the
Commissioner (Appeals) would have been discarded. No person can be so daring as to
malign high officials and have a decision made against his interest. It will be quite an
eye-opener for the department to find out in just how many cases appellants have had the
courage to tell the Commissioner (Appeals) that he has failed to pass a decision in time.

                     COMPARABLE PROVISION OF THE RO – [SECTION 132]
      132. Decision in appeal.–(1) In disposing of an appeal, the Appellate Additional Commissioner may,–
       (a) in the case of an order of assessment,–
             (i) set aside the assessment and direct the assessment to be made afresh after making such further
                  inquiry as the Appellate Additional Commissioner may direct or the Deputy Commissioner thinks
                  fit;
            (ii) confirm, reduce, enhance or annul the assessment;
       (b) in the case of an order imposing a penalty, confirm, set aside or cancel such order or enhance or
              reduce the penalty; and
        (c) in any other case, pass such order as he thinks fit.
      (2) The Appellate Additional Commissioner shall not enhance an assessment or a penalty or reduce the
amount of refund unless the appellant has been given a reasonable opportunity of showing cause against such
enhancement or reduction, as the case may be.
      (3) Where, as the result of an appeal, any change is made in the assessment of a firm or an association of
persons or a new assessment of a firm or an association of persons is ordered to be made, the Appellate
Additional Commissioner may authorized the Deputy Commissioner to amend accordingly any assessment made
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on any partner of the firm or any member of the association.
      (4) On the disposal of an appeal, the Appellate Additional Commissioner shall communicate the order passed
by him to the appellant and to the Deputy Commissioner and the Commissioner.
      1[(5) Where no order under sub-section (1) is made before the expiration of three months from the end of the

month in which the appeal is presented, the relief sought through the said appeal shall be deemed to have been
given and all the provisions of this Ordinance shall have effect accordingly:
      Provided that, where the hearing of appeal is adjourned for any period on the request of the appellant, the said
period shall be excluded while computing the aforesaid period of three months:
      Provided further that nothing contained in this sub-section shall apply to any appeal presented before the first
day of January, 1992.
      (6) The provisions of sub-section (5) shall not apply unless a notice by the appellant stating that no order
under sub-section (1) has been made is personally served by the appellant on the Appellate Additional
Commissioner not less than thirty days before the expiration of the period of three months.]
      2[(7) Where an appeal has been preferred under section 129, the Appellate Additional Commissioner may, by

an order in writing, stay the recovery upto eighty-five per cent of the amount of tax, upto a period of three months
or till the decision of appeal, whichever may be earlier.]
1 Sub-sections (5) and (6) inserted by Finance Act, 1991.
2 Sub-section (7) inserted by Finance Ordinance, 2000.

                                                   DEPARTMENTAL VIEW
EXPLANATORY CIRCULAR ON THE AMENDMENTS MADE IN THE INCOME TAX ORDINANCE, 2001
THROUGH FINANCE ACT, 2009.
25. FIXING OF MAXIMUM TIME LIMIT TO PASS AN ORDER BY THE COMMISSIONER (APPEALS).
     [SECTION 129(4)]
     A new proviso has been added to sub-section (4) of section 129 of the Ordinance by virtue
of which the Commissioner (Appeals) is now required to pass an order not later than 120 days




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                                                782
Section 129                                                        Income Tax Ordinance, 2001.

from the date of filing of appeal or within an extended period of 60 days for reasons to be
recorded in writing by him. The period during which the hearing of an appeal is adjourned at the
request of the appellant or is postponed due to any appeal or proceedings or stay order,
remand or alternative dispute resolution proceedings or for any other reason, shall be
excluded in the computation of the aforementioned period. - (3/2009 dated 17.7.2009).
Finance Act, 2005 – Setting aside of assessment order by Commissioner (Appeals). [Section
129(1)(a)]
       Clause (a) of sub-section (1) of section 129 has been substituted and Commissioner
(Appeals) has been divested of the option to set-aside an assessment. After amendment
Commissioner (Appeals) would be able only to modify, confirm or annul the assessment
after making (or getting conducted) enquiries or examining the books of accounts etc. as he
deems fit. This will bring relief to the taxpayers and also stop unnecessary deferment of
revenue. The provision of said clause will be applicable in case of appeals filed on July 1,
2005 and onwards. – (1/2005, dated 05.07.2005).
Fixation of time limit for disposal of appeals:
       Section 132 has been amended whereby a time limit of three months has been fixed for
disposal of appeals presented after the 31st December, 1991. In case no order is made before
the expiration of three months from the end of the month in which the appeal is presented,
the relief sought through the said appeal shall be deemed to have been given. While
calculating the limitation, the period for which hearing of appeal is adjourned at the request
of the appellant has to be excluded. These provisions, however, shall not apply unless a
notice by the appellant or his representative is served on the person of the Appellate
Assistant Commissioner not less than thirty days before the expiration of period of three
months stating that the order on the appeal has not been made.
       Section 135 has also been amended which has the effect of fixing a time limit of six months
for the disposal of appeals by the Income Tax Appellate Tribunal (ITAT). These provisions shall
come into force on such date as may be notified by the ITAT in the official Gazette, not being a
date later than the 1st July, 1992. It may be clarified that the operation of six months limitation is
restricted to appeals filed by the tax payers only. – (8/1991 dated 30.6.1991).
Mention of Appellate authority in the assessment orders.
       As a result of frequent amendments in the jurisdiction of the CIT (Appeals) of the
Region, the Members of the Tax Bar as well as Tax payers find it very difficult and vexing to
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identify the Appellate Commissioner before whom the appeals lie against the assessment
orders in respect of different Tax-payers.
       Although the Notice of Demand under Section 85 of the Income Tax Ordinance, 1979
finds mention of the fact, at the end of the same, to the effect as to where the appeal lies, but
seldom is the relevant portion of the Demand Notice filed in relating to the filing of appeals.
       In order to facilitate and assist the Tax-payers in filing appeals against the assessments
framed, wherever desired it is suggested that after the end of the assessment order, the
following additional paragraph may be typed in all the orders:–
             ‚Appellate Authority in respect of the orders of this Circle is the Commissioner of
             Income Tax (Appeals- )‛. – [RCIT/T-04/88-89/5093 dated 26.12.1989].
Income Tax Ordinance 1979 – Communication of appellate order to ITO.
       Previously, under Section 31(8) of the repealed Act, an AAC was obliged to
communicate the order to the assessee and the Commissioner. Now under Section 132(4), he
has to communicate the order to Income Tax Officer as well. – (4/1979 dated 23.8.1979).

               CASE LAW – SUPREME COURT / HIGH COURTS / ITAT
                             MANDATORY DISPOSAL OF APPEAL
   Mandatory disposal of appeal within 3 months is subject to service of notice on the
    Commissioner of Income Tax (Appeals) in person. – Aasmi Packages (Pvt.) Limited
    through Managing Director v. CIT(Appeals), Zone-A, Lahore [(2000) 81 TAX 220
    (H.C.Lah.) = 2000 PTD 39 = PTCL 2000 CL. 153].
                                   LIMITATION OF PERIOD
   Operation of section 85 of Income Tax Ordinance, 1979 and the period of limitation
    would not commence from service of assessment order upon an Authorized
    Representative. – Gujranwala College Employees Cooperative Housing Society Ltd.,
    Gujranwala v. DCIT and 2 others [(2008) 97 TAX 27 (H.C.Lah.) = 2007 PTD 2389].




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                                           783
Chapter X, Procedure – Part III, Appeals                                   Section 129

   Service of notice is a mandatory requirement. – Ch. Irshad Ahmad Virk v.
    CIT(Appeals) [(1995) 72 TAX 277 (H.C.Lah.) = 1996 PTD 279].
   In set aside cases while giving effect to the orders of the Appellate Authorities,
    Income Tax Officer is bound to follow the instructions. – CIT, Central Zone-B,
    Karachi v. National Cement Industries Ltd. [(1992) 65 TAX 366 (H.C.Kar.) = 1992
    PTD 709].
                              SCOPE OF CORRECT PROCEDURE
   If the case is remanded with a specific direction to be carried out then it would
    merely be a ministerial act on the part of the Assessing Officer and therefore, would
    neither be open to appeal nor be subject to the revisional jurisdiction of an IAC. –
    CIT, Central Zone, Lahore v. Crescent Jute Products Ltd., Lahore [(2001) 84 TAX 485
    (H.C.Lah.) = 2001 PTD 3110].
   Issuance of two appeal effect orders one based on partly confirmed assessment and
    second adjudicating set aside issues held to be correct procedure. – [2007 PTR 357
    (Trib.) = 2007 PTD 2173].
   Assessment set aside where documents and evidences produced before ITAT were
    not placed before assessing officer. – [2007 PTR 346 (Trib.) = 2007 PTD 2109].
                        MENS REA ON THE PART OF CIT(A) ESTABLISHED
   Mens rea on the part of CIT(A) established. – [2006 PTR 21 (Trib.) = (2006) 94 TAX 5
    = 2006 PTD 2575].
                            POWER OF ENHANCEMENT/REDUCTION
   Appellate authorities, CIT(A) or another in the hierarchy, have full power to reduce
    any tax or penalty keeping in view the circumstances of each case. – [(2003) 88 TAX
    324 (Trib.) = 2004 PTD 474].




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                                                            784
Section 130                                                                        Income Tax Ordinance, 2001.

    130. Appointment of the Appellate Tribunal.– (1) There shall be
established an Appellate Tribunal to exercise the functions conferred on the
Tribunal by this Ordinance.
    (2) The Appellate Tribunal shall consist of a chairperson and such
other judicial and accountant members as are appointed by the Federal
Government having regard to the needs of the Tribunal.
    (3) A person may be appointed as a judicial member of the Appellate
Tribunal if the person–
          (a)      has exercised the powers of a District Judge and is qualified to
                   be a Judge of a High Court; or
          (b)      is or has been an advocate of a High Court and is qualified to be
                   a Judge of the High Court.
          A person may be appointed as an accountant member of an
       1[(4)

appellate tribunal if,–
           (i)     he is an officer of Inland Revenue equivalent to the rank of
                   Regional Commissioner; or
          (ii)     a Commissioner Inland Revenue or Commissioner Inland
                   Revenue (Appeals) having at least five years experience as
                   Commissioner or Collector.]
     (5) The Federal Government shall appoint a member of the Appellate
Tribunal as Chairperson of the Tribunal and, except in special
circumstances, the person appointed should be a judicial member.
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    (6) The powers and functions of the Appellate Tribunal shall be
exercised and discharged by Benches constituted from members of the
Tribunal by the Chairperson of the Tribunal.
     (7) Subject to sub-section (8), a Bench shall consist of not less than two
members of the Appellate Tribunal and shall be constituted so as to contain
an equal number of judicial and accountant members, or so that the
number of members of one class does not exceed the number of members of
the other class by more than one.
    (8) The Federal Government may direct that all or any of the powers of
the Appellate Tribunal shall be exercised by–
          (a)      any one member; or
          (b)      more members than one, jointly or severally.
1 Sub-section (4) substituted by Finance Act, 2010 w.e.f. June 5, 2010. Earlier it was substituted by Finance Act, 2007.




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                                                                 784-A
Chapter X, Procedure – Part III, Appeals                                                                               Section 130


                                              LEGISLATIVE HISTORY
     Section 130(4)–Substitution.– Before substitution by Finance Act, 2010 sub-section (4) read as follows:–
     “(4) A person may be appointed as an accountant member of the Appellate Tribunal if the person is 1[an officer
of Inland Revenue] Group equivalent in rank to that of a Regional Commissioner and the 2[Commissioner Inland
Revenue] or 3[Commissioner Inland Revenue (Appeals)] having at least five years experience as Commissioner
shall also be eligible for appointment.”
1 Substituted for “an officer of the Income Tax” by Finance (Amendment) Ordinance, 2010, promulgated as Ordinance No. III of 2010, dated
  February 6, 2010, published in the Gazette of Pakistan Extraordinary Part I at pages 23 to 53. Earlier the same amendment was made by
  Finance (Amendment) Ordinance, 2009, dated October 28, 2009.
2 Substituted for “Commissioner of Income Tax” by Finance (Amendment) Ordinance, 2010, promulgated as Ordinance No. III of 2010, dated
  February 6, 2010, published in the Gazette of Pakistan Extraordinary Part I at pages 23 to 53. Earlier the same amendment was made by
  Finance (Amendment) Ordinance, 2009, dated October 28, 2009.
3 Substituted for “Commissioner of Income Tax (Appeals)” by Finance (Amendment) Ordinance, 2010, promulgated as Ordinance No. III of 2010,
  dated February 6, 2010, published in the Gazette of Pakistan Extraordinary Part I at pages 23 to 53. Earlier the same amendment was made by
  Finance (Amendment) Ordinance, 2009, dated October 28, 2009.
     Section 130(4)–Substitution.– Before substitution by Finance Act, 2007 sub-section (4) read as follows:–
     “(4) A person may be appointed as an accountant member of the Appellate Tribunal if the person is an officer
of the Income Tax Group equivalent in rank to that of a Regional Commissioner 1[ ].
1 Words “of Income Tax” omitted by Finance Ordinance, 2002.




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                                 784-B
Section 130                                    Income Tax Ordinance, 2001.




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                                                         785
Chapter X, Procedure – Part III, Appeals                                     Section 130

          Notwithstanding anything contained in sub-sections (7) and (8),
       1[(8A)

the Chairman may constitute as many benches consisting of a single
member as he may deem necessary to hear such cases or class of cases as
the Federal Government may by order in writing, specify.
     (8AA) The Chairman or any other member of the Appellate Tribunal
authorized, in this behalf by the Chairman may, sitting singly, dispose of
any case where the amount of tax or penalty involved does not exceed five
million rupees.]
     (9) Subject to sub-section (10), if the members of a Bench differ in
opinion on any point, the point shall be decided according to the opinion of
the majority.
     (10) If the members of a 2[Bench] are equally divided on a point, they
shall state the point on which they differ and the case shall be referred by
the Chairperson for hearing on that point by one or more other members of
the Appellate Tribunal, and the point shall be decided according to the
opinion of the majority of the members of the Tribunal who have heard the
case including those who first heard it.
     (11) If there are an equal number of members of the Appellate
Tribunal, the Federal Government may appoint an additional member for
the purpose of deciding the case on which there is a difference of opinion.
     (12) Subject to this Ordinance, the Appellate Tribunal shall have the
power to regulate its own procedure, and the procedure of Benches of the
Tribunal in all matters arising out of the discharge of its functions
including the www.imranghazi.com shall hold their sittings.
               places at which the Benches
1 Sub-sections (8A) and (8AA) inserted by Finance Act, 2009.
2 Substituted for “majority” by Finance Ordinance, 2002.

                                                 COMMENTS
SECTION 130: ―Appointment of the Appellate Tribunal‖.
Pari materia to section 133 of the RO, this section provides for the appointment of an
Appellate Tribunal Inland Revenue which is the next stage of appeal after the Commissioner
(Appeals). The prominent features are:
   (a) The Appellate Tribunal Inland Revenue comprises a chairperson and members
        appointed by the Federal Government. The Tribunal is authorized to formulate its
        own procedural rules.
   (b) A judicial member is appointed on the basis that he has exercised the powers of a
        District Judge and qualified to be Judge of a High Court or he has been an advocate
        of a High Court and is qualified to be a Judge of the High Court.
    (c) The condition for appointment of an Accountant Member which was restricted up
        to 30.06.2007 to an officer equivalent in rank to Regional Commissioner stands
        relaxed by Finance Act, 2007 to include Commissioner Inland Revenue or
        Commissioner of Inland Revenue (Appeals) having five years experience of the
        said position. This amendment is inappropriate. Tax officials should not be allowed
        at all to join Tribunal. If this forum is to work independently, it must be placed
        under judicial control of Supreme Court and not Ministry of Law [See our detailed
        article in Tax Review of December 2009] . Even otherwise the prerequisite for
        appointment as ‘Accountant Member’ under the ‘Appointment of Income Tax
        Appellate Tribunal Member Rules, 1988’ *see Volume III+ is at least two




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                                                        786
Section 130                                                                  Income Tax Ordinance, 2001.

         years experience of ‚performing appellate work‛. A Commissioner who has never
         performed any appellate work can also be appointed as Accountant Member under
         sub-rule 4 is quite shocking!
    (d) Only the judicial member is entitled to be appointed as chairperson of the Tribunal
         except in special circumstances.
    (e) Benches comprising not less than two members (one judicial and the other
         accountant) will exercise the functions of the Tribunal. If a larger Bench is
         constituted, the number of members will be such that there is equal representation
         of both judicial and accountant members.
     (f) Through Finance Act 2009, the Chairman has been empowered to create even single
         member benches for rapid disposal of cases where the amount of tax or penalty
         involved does not exceed five million rupees. This was done after posting of large
         number of income tax officers in Tribunal. If members accounts do their work
         diligently, this measure (which seems more for the purpose of accommodating
         grade 20/21 officers of income tax) can go a long way in disposal of pending cases at
         the Tribunal level. The news is, however, that majority of them are unhappy with
         their posting as Member Accounts and trying hard to go back. Those who are
         influential have already managed to do so, and others have told the Chairman that
         they ‚are not willing workers‛. It would be much better if Tribunal is revamped.
         Like Service Tribunal it must be the first appeal stage and then only one appeal
         should lie before the Supreme Court. The first appeal before the Commissioner
         (Appeals) and reference to High Courts should be done away with. All the
         members should be recruited through a Council of Judges and final approval
         should be given by the Chief Justice of Pakistan.
    (g) Where members are divided in their opinion on any point, the majority decision
         will prevail. If the members are equally divided, reference will be made to the
         chairperson for hearing on the disputed point by other members of the Tribunal
         and here too the majority decision will be considered. An additional member can be
         appointed by the Federal Government to decide a case on which there is a
         difference of opinion.
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    [See Income Tax Appellate Tribunal Rules, 2005 & Appointment of Income Tax Appellate
Tribunal Members’ Rules, 1998 in Volume III.]
                  COMPARABLE PROVISION OF THE RO – [SECTION 133]
     133. Appointment of the Appellate Tribunal.–(1) The Federal Government shall appoint an Appellate
Tribunal to exercise the functions conferred on the Appellate Tribunal by this Ordinance.
     (2) The Appellate Tribunal shall consist of as many judicial members and accountant members, as may be
necessary:
     Provided that the Tribunal shall not be deemed to be invalidly constituted merely by reason of the absence of
a judicial or an accountant member.
     1[(3) A judicial member shall be–

       (i) a person who has exercised the powers of a District Judge and is qualified to be a Judge of a High
              Court; or
      (ii) a person who is, or has been, an advocate of a High Court and is qualified to be a Judge of a High
              Court.]
     2[(3A) An accountant member shall be an officer of the Income Tax Group equivalent in rank to that of a

Regional Commissioner of Income Tax.]
     (4) The Federal Government shall 3[ordinarily] appoint a judicial member of the Tribunal to be 4[Chairman]
thereof.
     (5) The powers and functions of the Appellate Tribunal may be exercised and discharged by Benches
constituted from members of the Tribunal by the 4[Chairman] of the Tribunal.
     (6) A Bench shall consist of not less than two members of the Tribunal, and shall be constituted so as to
contain an equal number of judicial members and accountant members, or so that the number of members of one
class does not exceed the number of members of the other class by more than one:
     Provided that the Federal Government may direct that all or any of the powers of the Appellate Tribunal shall
be exercised (a) by any one member, or (b) by more members than one, severally and singly.
     (7) If the members of a bench differ in opinion on any point, the point shall be decided according to the opinion
of the majority, if there is a majority; but if the members are equally divided, they shall state the point or




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                                                                      787
Chapter X, Procedure – Part III, Appeals                                                                                    Section 130

points on which they differ, and the case shall be referred by the 4[Chairman] of the Tribunal for hearing on such
point or points by one or more of the other members of the Tribunal, and such point or points shall be decided
according to the opinion of the majority of the members of the Tribunal who have heard the case, including those
who first heard it:
     Provided that if there are only two members of the Tribunal the Federal Government may appoint an
additional member for the purpose of deciding the case on which there is a difference of opinion.
     (8) Subject to the provisions of this Ordinance, the Appellate Tribunal shall have power to regulate its own
procedure, and the procedure of Benches of the Tribunal in all matters arising out of the discharge of its functions,
including the places at which the Benches shall hold their sittings.
1   Sub-section (3) substituted by Finance Ordinance, 2001. Earlier it was substituted by Finance Act, 1997.
2   Sub-section (3A) inserted by Finance Ordinance, 2001.
3   Inserted by Finance Ordinance, 1980.
4   Substituted for “President” by Finance Ordinance, 1982.
      Section 133(3).–Substitution.– Before substitution by Finance Ordinance, 2001 sub-section (3) read as follows:–
      “(3) A judicial member shall be–
           (a) a person who has exercised the powers of a District Judge and is qualified to be a Judge of a High Court; or
           (b) a person who is or has been an advocate of a High Court and is qualified to be a Judge of a High Court; and
           an accountant member shall be–
                 (a) an officer of the Income Tax Group equivalent in rank to that of a Regional Commissioner of Income Tax; or
                 (b) a Commissioner of Income Tax, with at least two years experience of performing appellate work; or
                 (c) a person who has, for a period of not less than ten years, practiced professionally as a Chartered Accountant
                       within the meaning of the Chartered Accountants Ordinance, 1961 (X of 1961) 1[; or]
             2[           ]
1 Substituted for full stop by Finance Act, 1998.
2 Clause (d) omitted by Finance Ordinance, 2000. Earlier it was inserted by Finance Act, 1998.
      Section 133(3)(d)-Omission.-At the time of omission by Finance Ordinance, 2000, it read as follows:–
           “(d) a person who is or has been an advocate and has as such for a period of, or of periods aggregating, not less than
                 twenty years been an income tax practitioner.”
      Section 133(3).–Substitution.–Before substitution by Finance Act, 1997 sub-section (3) read as follows:–
      “(3) A judicial member shall be a person who has exercised the powers of a District Judge 1[and is qualified to be a Judge of
a High Court or who is a person who is or has been an advocate of a High Court and is qualified to be a Judge of a High Court];
and an accountant member shall be 2[an officer of the Income Tax Group equivalent in rank to that of a Regional Commissioner
of Income Tax]:
1 Substituted for “or who possesses such qualifications as are normally required for appointment to the post of District Judge” by Finance
  Ordinance, 1980.
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2 Substituted for “a person who has, for a period of not less than ten years, practiced professionally as a Chartered Accountant within the meaning
  of the Chartered Accountants Ordinance, 1961 (X of 1961)” by Finance Act, 1991. The word “ten” was earlier substituted for “six” by Finance
  Ordinance, 1980.
      1   [         ]”
1 Proviso omitted by Finance Act, 1991.
     Sub-section (3) Proviso.–Omission.–Before omission by Finance Act, 1991 proviso read as follows:–
     “Provided that the Federal Government may appoint as an accountant member of the Tribunal any person not possessing
the qualifications required by this sub-section, if it is satisfied that he has qualifications and has had adequate experience of a
character which render him suitable for appointment to the Tribunal.”

                                                     DEPARTMENTAL VIEW
EXPLANATORY CIRCULAR ON THE AMENDMENTS MADE IN THE INCOME TAX ORDINANCE, 2001
THROUGH FINANCE ACT, 2009.
26. CONSTITUTION OF BENCHES BY THE CHAIRMAN APPELLATE TRIBUNAL
      [SECTION 130(8A) & (8AA)]
      A new sub-section (8A) has been inserted in section 130 of the Ordinance empowering
the Chairman Appellate Tribunal to constitute as many Benches consisting of a single
member as he may deem necessary to hear such cases or class of cases as the Federal
Government may by order in writing specify.
      Besides, a new sub-section (8AA) has also been inserted in section 130 of the Ordinance
to provide that the Chairman Appellate Tribunal or any other Member of the Appellate
Tribunal authorized in this behalf by the Chairman may sitting singly dispose of any case
where the amount of tax or penalty involved does not exceed Rs. 5 million. - (3/2009 dated
17.7.2009).
Finance Act, 2007 – Appointment of commissioner as accountant member.
Section 130(4) has been substituted through Finance Act, 2007, in pursuant to which
Commissioners and Commissioners of Income Tax (Appeals), having at least 5 years




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                                            788
Section 130                                                  Income Tax Ordinance, 2001.

experience as Commissioner, are also eligible for appointment as accountant member of the
Income Tax Appellate Tribunal. – (1/2007, dated 02.07.2007).
Finance Ordinance 2001– Qualifications of an Accountant Member of ITAT. – [Section 133].
     Section 133 has been amended to restore the original qualifications prescribed for
appointment as Member of the Income Tax Appellate Tribunal. – (5/2001 dated 4.7.2001).
Finance Ordinance, 1982 –Change in the designation of the head of the Tribunal.
     Designation of the head of the Tribunal has been changed from ‘President’ to
‘Chairman’. – (8/1982 dated 8.7.1982).
Finance Ordinance, 1980 –Raising the status of Member, Income Tax, Appellate Tribunal.
     The status of the president and members of I.T.A.T. is being raised. For this purpose,
the qualifications of the members of the Tribunal have been revised as under:–
      (a) A judicial Member shall be a person who is or has been a District Judge and is
            qualified for appointment of a judge of High Court or who is member of Bar and
            possesses qualifications required for appointment of a Judge of the High Court.
      (b) An Account Member shall be a person who has practised for at least 10 years as
            chartered accountant or any other person about whom the Government is
            satisfied that he has adequate experience and qualifications which renders him
            suitable for the appointment.
      (c) Ordinarily the President shall be the Judicial Member but an Accountant Member
            shall also be eligible for appointment as President. – (15/1980 dated 26.6.1980).

              CASE LAW – SUPREME COURT / HIGH COURTS / ITAT
                TRIBUNAL BECOMES FUNCTUS OFFICIO AFTER REJECTING APPEALS
   After rejecting appeals, Tribunal becomes functus officio, and cannot re-examine the
    issue regarding application for condonation of delay. – [2007 PTR 101 (Trib.) =
    (2006) 93 TAX 105 = 2006 PTD 1571 = PTCL 2007 CL. 58].
                              ACTUAL DATE OF FILLING OF APPEAL
   Date on which appeal papers are received by the Registrar/Assistant Registrar
    would be considered the actual date of filing of appeal. – [2007 PTR 101 (Trib.) =
    (2006) 93 TAX 105 = 2006 PTD 1571 = PTCL 2007 CL. 58].
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                                                              789
Chapter X, Procedure – Part III, Appeals                                                                Section 131

    131. Appeal to the Appellate Tribunal.– (1) Where the 1[taxpayer]
or Commissioner objects to an order passed by the Commissioner (Appeals),
the 1[taxpayer] or Commissioner may appeal to the Appellate Tribunal
against such order.
       (2) An appeal under sub-section (1) shall be–
          (a)      in the prescribed form;
          (b)      verified in the prescribed manner;
           (c)     accompanied 2[, except in case of an appeal preferred by the
                   Commissioner] by the prescribed fee specified in sub-section (3);
                   and
        3[(d)      preferred to the Appellate Tribunal within sixty days of the
                   date of service of order of the Commissioner (Appeals) on the
                   taxpayer or the Commissioner, as the case may be.]
       4[(3)     The prescribed fee shall be „two‟ thousand rupees.]
     (4) The Appellate Tribunal may, upon application in writing, admit an
appeal after the expiration of the period specified in clause (d) of sub-section
(2) if it is satisfied that the person appealing was prevented by sufficient
cause from filing the appeal within that period.
          Notwithstanding that an appeal has been filed under this section,
       5[(5)

tax shall, unless recovery thereof has been stayed by the Appellate Tribunal,
be payable in accordance with the assessment made in the case.
               that where recovery of tax
     Provided www.imranghazi.com has been stayed by the Appellate
Tribunal by an order, such order shall cease to have effect on the expiration
of a period of three months following the date on which it is made, unless
the appeal is decided, or such order be withdrawn by the Appellate
Tribunal earlier:
1   Substituted for “appellant” by Finance Ordinance, 2002.
2   Words inserted by Finance Ordinance, 2002.
3   Clause (d) substituted by Finance Ordinance, 2002.
4   Sub-section (3) substituted by Finance Act, 2009.
5   Sub-section (5) inserted by Finance Act, 2003.

                                         LEGISLATIVE HISTORY
     Section 131(2)(d)–Substitution.–Before substitution by Finance Ordinance, 2002 clause (d) read as
follows:–
     “(d) filed with the Appellate Tribunal within sixty days of the date of service of notice of the Commissioner
           (Appeals)‟s decision to the appellant or Commissioner, as the case may be.”
     Section 131(3)–Substitution.–Before substitution by Finance Act, 2009 sub-section (3) read as follows:–
     “(3) The prescribed fee shall be–
      (a) in the case of an appeal in relation to an assessment order, the lesser of two thousand five hundred
             rupees or ten percent of the tax assessed; or
      (b) in any other case–
            (i) where the appellant is a company, two thousand rupees; or
           (ii) where the appellant is not a company, five hundred rupees.”




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                                                                 790
Section 131                                                                               Income Tax Ordinance, 2001.

    Provided further that the Appellate Tribunal shall not make an order
which has the effect of staying the recovery of tax beyond the period of six
months in aggregate.]
                 further that the Appellate Tribunal may stay the recovery
        1[Provided

of the tax on filing the appeal which order will remain operative for thirty
days and during which period a notice shall be issued to the respondent and
after hearing the parties, order may be confirmed or varied as the Tribunal
deems fit but stay order shall in no case remain operative for more than one
hundred and eighty days.]
1 Proviso inserted by Finance Act, 2009.

                                                        COMMENTS
SECTION 131: ―Appeal to the Appellate Tribunal‖.
Parallel to section 134 of the RO, this section lays down provisions related to appeals to be
filed before the Appellate Tribunal. The main points are that:
    (a) If the taxpayer or the Commissioner is dissatisfied with the decision of the Commissioner
          (Appeals), he can file an appeal against such order before the Tribunal.
    (b) The appeal is to be filed in the prescribed form and verified in the prescribed
          manner and accompanied by a fee in case of a taxpayer but not in the case of the
          Commissioner, within sixty days of the service of order. In exceptional
          circumstances, the Tribunal can condone any delay in filing of the appeal.
    (c) Until amendment by Finance Act, 2009 the prescribed fee for taxpayers was in case of
          an appeal against an assessment order, Rs.2,500 or 10% of the tax assessed, whichever
          was less. In cases other than assessments:
              Where appellant is company                          Rs. 2,000
              Where appellant is non-company                      Rs. 500
Now all persons www.imranghazi.com 2,000.
                   will have to pay a fixed fee of Rs.
    Through Finance Act, 2003, the Tribunal has been given the power to grant stay from
recovery of tax for a period of three months unless the appeal is decided or order is
withdrawn by the Tribunal. However, Tribunal cannot extend the stay of recovery beyond a
period of six months in aggregate.
However, Finance Act 2009 has curtailed this power to grant stay for a period of thirty days
only and which order cannot remain operative for a period beyond 180 days.

                     COMPARABLE PROVISION OF THE RO – [SECTION 134]
      134. Appeal to the Appellate Tribunal.–(1) An assessee objecting to an order passed by an Appellate
Additional Commissioner under section 111 or 132, or sub-section (2) of section 148, or an order made by the
Appellate Additional Commissioner under section 156, 1[ ] having the effect of enhancing the assessment or
reducing a refund or otherwise increasing the liability of the assessee 2[or an order made by an Inspecting
Additional Commissioner under section 66A] may appeal to the Appellate Tribunal against such order.
      (2) The Commissioner may, if he objects to any order passed by an Appellate Additional Commissioner under
section 132 direct the Deputy Commissioner to appeal to the Appellate Tribunal against such order.
      (3) Every appeal under sub-section (1) or sub-section (2) shall be filed within sixty days of the date on which
the impugned order is communicated to the assessee or the Commissioner, as the case may be 3[.]
      4[    ]
      (4) The Appellate Tribunal may admit an appeal after the expiration of the period specified in sub-section (3) if
it is satisfied that the appellant was prevented by sufficient cause from presenting it within that period.
1 Words etc. “, or an order made by an Inspecting Additional Commissioner under section 66A” omitted by Finance Act, 1994. Earlier it was
  Inserted by Finance Ordinance, 1981. These words were earlier deemed to have been inserted by Notification No. SRO 11630(I)/80, dated
  20.11.1980 issued u/s 167.
2 Words etc. inserted by Finance Act, 1994.
3 The full stop substituted for colon by Finance Act, 1996. Earlier full stop was substituted by colon by Finance Act, 1994.
4 Proviso omitted by Finance Act, 1996. The proviso was inserted by Finance Act, 1994.




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                                                                     790-A
Chapter X, Procedure – Part III, Appeals                                                                       Section 131

     Section 134(3)–Payment of tax before appeal.–The omitted proviso read as under:–
     “Provided that no appeal, except in the case of an appeal under sub-section (2), shall lie unless an amount not less than fifty
per cent of the amount of tax assessed has been paid.”
     (5) An appeal to the Appellate Tribunal shall be in the prescribed form and shall be verified in the prescribed
manner, and shall, except in the case of an appeal under sub-section (2), be accompanied by a fee of 1[2[two
thousand five hundred] rupees or ten percent of the tax levied, whichever is less, provided that where no tax is
levied, 3[a fee of two thousand rupees in the case of companies and five hundred rupees in the case of other
assessees] shall be paid].
     (6) Notwithstanding that an appeal has been filed under this section, tax shall, unless recovery thereof has
been stayed by the Appellate Tribunal, be payable in accordance with the assessment made in the case 4[:]
     5[Provided that where recovery of tax has been stayed by the Appellate Tribunal by an order, such order shall

cease to have effect on the expiration of a period of three months following the day on which it is made, unless the
appeal is decided, or such order is withdrawn, by the Appellate Tribunal earlier;
     Provided further that the Appellate Tribunal shall not make an order which has the effect of staying the
recovery of tax beyond the period of 6[six] months in the aggregate.]
1   Substituted for “one hundred rupees” by Finance Act, 1994.
2   Substituted for “five thousand” by Finance Act, 1996.
3   Substituted for “a fee of five thousand rupees” by Finance Act, 1996.
4   Substituted for full stop by Finance Ordinance, 1984.
5   Provisos inserted by Finance Ordinance, 1984.
6   Substituted for “three” by Finance Act, 1991.

                                                     DEPARTMENTAL VIEW
EXPLANATORY CIRCULAR ON THE AMENDMENTS MADE IN THE INCOME TAX ORDINANCE, 2001
THROUGH FINANCE ACT, 2009.
27. FEE FOR FILING OF APPEAL BEFORE APPELLATE TRIBUNAL. [Section 131(3)]
      Upon recommendations of the committee on harmonization of different tax laws,
amendment has been made in sub-section (3) of section 131 to fix the appeal fee at Rs. 2,000/-
instead of determining the fee in relation to the tax assessed.
28. STAY OF DEMAND BY THE APPELLATE TRIBUNAL [Section 131(5)]
      A new proviso has been inserted in section 131 providing that the Appellate Tribunal
may stay the recovery of tax on filing appeal which order will remain operative for 30 days
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during which period a notice shall be issued to the respondent and after hearing the parties
order may be confirmed or altered as the Tribunal deems fit. However, stay order shall in no
case remain operative for more than 180 days. - (3/2009 dated 17.7.2009).
Finance Act, 2003 – Stay of tax demand by the Appellate Tribunal.
      The Appellate Tribunal has been empowered to grant stay of recovery of tax demand
for a period of three months.
      However, stay of demand shall not exceed a period of six months in aggregate.
      Accordingly, sub-section (5) in section 131 has been added for this purpose. – (7/2003
dated 12.7.2003).
Amendment in section 134(3) of Income Tax Ordinance, 1979.
      I am directed refer to your letter No. A/A/Misc-2/95, dated January 4, 1995 on the
subject and to say that amendment in section 134(3) relating to mandatory payment of tax
before filing of appeal is applicable to appeals relating to assessment year 1994-95 and
onwards. – [C.No. 134(1)DTP-/94 dated 08.01.1995].
Amendment in section 129 and 134 of the Income Tax Ordinance, 1979.
1.    Amendments have been made in section 129 and section 134 of the Income Tax
Ordinance, 1979, by virtue of which, payment of a certain minimum amount has been made
obligatory for admittance of appeals before the AAC/CIT (Appeals) and the Appellate
Tribunal. Now onwards a tax-payers shall have to pay at least 15% and 50% of the amount of
tax assessed, prior to filing of appeals before the two forums, respectively.
2.    Whereas the new enactment is expected to curb the general tendency of filling frivolous
appeals, it also places an added responsibility on the assessing officer to pass fair and
judicious assessment order. Creation of bogus tax demand would not only result in
unnecessary hardships for the genuine tax payer but the revenue shall also stand to lose, as
an additional amount @ 15% per annum shall also have to be paid alongwith the refund of
excess tax paid, if the assessees appeal is accepted by the Appellate Tribunal.




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                                             790-B
Section 131                                                     Income Tax Ordinance, 2001.

3.     Taking cognizance of this fact, it has been decided that whereas good assessments
framed with care and caution which yield additional revenues to the Government, would be
adequately rewarded, disciplinary proceedings shall be initiated against an assessing officer
if five of his assessments are reversed by the Appellate Authorities for the reasons that the
orders were passed in a perfunctory manner without bringing any supportive material
evidence on record.
4.     In this view of the matter, the assessing officers would be well advised to be mindful of
the fact that this amendment should in no way be taken as a license to create harassment and
every effort should be made to pass balanced orders, likely to stand the test of appeal.
5.     Respective Zonal Commissioner shall closely monitor this aspect and cases of misuse of
power be recorded in their Annual Confidential Reports and brought to the notice of the
Board recommending disciplinary action for ‚misconduct‛ under the Efficiency ad
Discipline Rules. Pending such action the officer would also be shifted from the assessment
charge. – (16/1994 dated 26.07.1994).
Departmental appeals – Revision applications.
       Reference above subject.
2.     The Department and the assessee can both go into second appeal before the Income Tax
Appellate Tribunal which holds appellate jurisdiction against the orders of the
Commissioner of Income Tax. The assessee however has an option, that of filing an
application for revision under section 138 before the Member (Judicial-Income Tax), who
holds revisional jurisdiction. It often happens that the assessee is un-aware of the
department’s second appeal, and avails of his option. On the other hand, the provisions of
clause (c) of sub-section (2) of section 138 of the Income Tax Ordinance, 1979 debars a
hearing for revision in-cases where the order has been made the subject matter of an appeal
to the Income Tax Appellate Tribunal. In fact, if for some inadvertent reason, a conflict arises,
the ‚appellate jurisdiction ‘would prevail over the revisional’ jurisdiction.‛
3.     As such, applicants for revision under section 138 in cases where the department is in
second appeal, are not being entertained by this office. The applicants/assessees are being
informed accordingly.
4.     This is being brought to your notice so that necessary measures are adopted for timely
intimation to the assessees regarding filing of second appeal by the department, who would
otherwise be faced with the problems of limitation. – [C.No.3(16)M(IT.Jud)/93 dated
06.06.1994].       www.imranghazi.com
Withdrawal of appeals pending before the ITAT.
       You are aware that quite a large number of appeals are pending with the Income Tax
Appellate Tribunal for adjudication. In a number of appeals though the revenue involved is
quite insignificant, yet the Department has filed appeals. There is an urgent need to bring
down the pendency before the ITAT.
2.     I would, there, suggest that the withdrawal of appeals involving revenues of upto
Rs.2000/- may be given serious consideration. All such cases where the appeals have been
filed by the Department may please be reviewed by a committee consisting of the concerned
Zonal CIT and the CIT (Appeals) and if no legal issue is involved, these may be
recommended for withdrawal from the ITAT. Relevant particulars of such cases may be
maintained in the office of RCIT, as well. – [D.O.No.1(26)IT-I/94 dated 27.06.1994].
Filing of departmental appeals, CBR‘s instructions.
       I am directed to say that all officers may please be asked not to file appeals against the
orders of the appellate authorities in the following types of cases:–
         (i) Where relief allowed by appellate authorities in tax demand does not exceed
             Rs.1000/-;
        (ii) Where orders of annulment in respect of exparte assessments made in the month
             of June, 1991 have been passed and where no basis for such exparte orders is
             apparent from record; and
       (iii) Where, on some basis available for fresh assessments, exparte orders have been
             set-aside by appellate authorities for denovo proceedings. – [C.No. 1(114)/IT-J/91
             dated 24.8.1991].
Stay of recovery proceedings by the ITAT.
       Under sub-section (6) of section 134, the ITAT can stay the recovery proceedings for a
period of 3 months. Now an amendment has been made in the said sub-section whereby the
Tribunal’s powers to grant stay has been extended to six months. – (8/1991 dated 30.6.1991).




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                                              790-C
Chapter X, Procedure – Part III, Appeals                                            Section 131

Destruction of second appeals filed by the Department.
       With reference to the subject notice above, I am directed to say that it has been brought
in the knowledge of worthy Regional Commissioner of Income Tax, Central Region, Lahore
that second appeal papers filed by the Department are being tampered with by certain
elements. The result of this exercise on part of these elements would be that Department
appeals may never come up for hearing at the loss of revenue and with ultimate benefit to
the tax-payers. It may be difficult to keep the track of all such second appeals. One way to
counter-check the loss of appeals in this way would be the maintenance of proper record of
all second appeals in every circle and the CIT’s office and to have periodic cross verification
with the Tribunal’s records.
             In view of the above, necessary instructions may please be given to all the
             assessing officers in this regard. – [No.RCIT/SI/(411) dated 22.12.1987].
Departmental appeal filing only in fit cases.
       It has been noticed that proper care and caution is not being observed while filing
second appeals before the Tribunal. Sometimes cases set aside at the first appeal stage and
involving verification of facts for re-assessment are taken to the Tribunal without much
justification.
       2. In order to eliminate unnecessary litigation, it is desired that before filing appeal in
the Tribunal, the Zonal Commissioners should carefully examine themselves whether a
particular case is fit for a second appeal or not.
       3. The Zonal Commissioners may please be advised accordingly.                               –
[No.IT.Jud.II(180)/85 dated 11.11.1985].
Stay of recovery by the Income Tax Appellate Tribunal – Proviso to sub-section (6) of section 134.
       By inserting provisos to sub-section (6) of section 134, a time limit of three months in
the aggregate has been imposed on the operation of stay granted by the Income Tax




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                                 790-D
Section 131                                    Income Tax Ordinance, 2001.




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                                              791
Chapter X, Procedure – Part III, Appeals                                          Section 131

Appellate Tribunal unless the appeal is decided or the stay is withdrawn earlier. Thus no
subsequent stays after the decision of an appeal or the expiry of three months from an earlier
stay, would be operative. While stays granted after the commencement of the Finance
Ordinance, 1984, would lapse on the expiry of three months from the date of issuance of such
orders, those granted before the fourteenth day of June, 1984 would expire on the thirteenth
day of September, 1984 in accordance with the provisions of sub-section (3) of section 5 of the
Ordinance. – (7/1984).
Income Tax Ordinance 1979 –Appeal to Income Tax Appellate Tribunal [Section 141 & 135].
      The provisions are similar to those of the old section 33. However, the new provisions
empowers the Tribunal to stay demand in any case under appeal before it [section 134(6)].
      (2) It may be clarified here that the tax payable as mentioned in section 134(6) is the tax
payable in accordance with assessment as modified by the Appellate Assistant
Commissioner. – (4/1979 dated 23.8.1979).
Payment of 50% demand before appeal.
      By an amendment introduced in section 53 of the repealed Act through the Finance Act,
1974, an appellant was required to pay 50% of the difference of tax payable on the basis of
return and the tax determined by the AAC before his appeal to the ITAT could be admitted.
This condition was reversed by an amendment made through Finance Act, 1975. There is no
such condition even under section 134 of the Ordinance. – (9/1975 Rev.).
Appeals against orders of Appellate Assistant Commissioners.
      Where an AAC refuses to admit an appeal on the ground that it is barred by time,
section 134(1) allows the assessee to file an appeal to the ITAT against such order. – (3/1953
Rev.).

              CASE LAW – SUPREME COURT / HIGH COURTS / ITAT
                                           GENERAL
   Case remanded back to ITAT for not applying independent mind. – Nafees Cotton
    Mills Limited, Lahore v. ITAT of Pakistan, Lahore and another [(2004) 89 TAX 145
    (H.C.Lah.) = 2003 PTD 2841].
   The use of word “shall” in section 134(5), Income Tax Ordinance, 1979 does not make
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    it mandatory in nature. – Allied Bank of Pakistan Ltd., Azad Kashmir Branches,
    Mirpur through Inam Elahi Azhar, EVP and Provincial Chief, PHQ (Punjab) v.
    ITAT, AJK Council, Muzaffarabad and others [(2001) 83 TAX 404 (H.C.A&JK) =
    (2000) 82 TAX 417 = 2000 PTD 2872]
   Appellate Tribunal is competent to stay recovery proceedings during pendency of
    appeal. – CIT, Karachi v. Mohammadi Rerolling Mills [(1980) 41 TAX 30 (H.C.Kar.)
    = 1979 PTD 603].
   Tempering with quasi judicial order is a cognizable offence punishable under
    Pakistan Penal Code. – [2007 PTR 200 (Trib.) = (2007) 96 TAX 202].
   Appeal rejected being misdirected. – [(2004) 89 TAX 307 (Trib.) = 2004 PTD 1638].
   Case remanded back where CIT(A) failed to record specific findings regarding various
    issues raised in Grounds of Appeal. – [(2004) 89 TAX 223 (Trib.) = 2004 PTD 420].
   Issues already resolved in the earlier round of litigation cannot be agitated again. –
    [(2004) 89 TAX 180 (Trib.) = 2004 PTD 476].
     [See further case law in Volume III under ITAT Rules.]
                            ITAT IS FINAL FACT FINDING AUTHORITY
   It is ITAT‟s duty to correctly record the facts. – Pakistan Electric Fittings
    Manufacturing Co. Ltd. through Directors v. CIT, and 2 others [(2000) 82 TAX 135
    (H.C.Lah.) = 2000 PTD 2407].
                 TRIBUNAL CANNOT REJECT APPEAL WITHOUT GIVING ANY REASON
   Tribunal held not right in rejecting the appeal without giving any reason. – Abdul
    Aziz Khan Niazi v. Federation of Pakistan (The Chairman, CBR), Govt. of Pakistan,
    Islamabad and 3 others [(1995) 72 TAX 156 (H.C.Lah.) = 1995 PTD 1087].




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                                             792
Chapter X, Procedure – Part III, Appeals                                        Section 131

                           REJECTION OF APPEAL ON TECHNICALITIES
   Defect in the form of appeal is rectifiable and party must be given an opportunity to
    do so. – Pakistan Industrial Gases Ltd. v. CIT [(2000) 82 TAX 126 (H.C.Lah.) = 2000
    PTD 2903 = 2000 PTCLR 1191].
   Case remanded to CIT(A) for decision on merit and rejection of appeal on
    technicalities disapproved. – [(2004) 89 TAX 546 (Trib.) = 2004 PTD 1543].
   Violation of Rules of the Tribunal does not entail the penalty of dismissal of appeal.
    – [2004 PTD (Trib.) 2393].
                          POINT OF LAW CAN BE RAISED AT ANY STAGE
   Additional legal ground going to the root of the case can be taken at any stage. –
    Amin Spinning Mills and another v. Deputy Collector Central Excise and others
    [(2004) 90 TAX 191 (S.C.AJ&K) = 2004 PTD 2479].
   Questions referred to the High Court should be problematic or debatable and not
    obvious or simple point of law. – Japan Storage Battery Ltd. v. CIT, Companies
    Zone-I, Karachi [2003 PTD 2849 (H.C.Kar.)].
   Reference to ITAT rejected on the ground that statement of case did not contain
    findings or reasons related to issues of assessee but only a reference to an earlier
    order. – CIT/WT, Companies Zone-III, Lahore v. Hafiz Abdul Wahid & Brothers
    (Pvt.) Ltd., Lahore [2003 PTD 2846 (H.C.Lah.)].
   Point of law can be raised at any stage. – CIT v. Abdul Majeed [(2000) 81 TAX 317
    (H.C.Lah.) = 2000 PTD 359].
   Additional grounds allowed to be taken and argued. – [2004 PTD (Trib.) 2352].
             FACTUAL ISSUE, NOT AGITATED EARLIER CANNOT BE RAISED AT ITAT LEVEL
   Tribunal cannot entertain a ground that was not taken before the CIT(A). – [2004
    PTD (Trib.) 2038].
   Factual issue not agitated below could not be raised at ITAT‟s level. – [(2002) 85
    TAX 256 (Trib.) = 2002 PTD 764].
                            PRACTICE AND PROCEDURE BEFORE ITAT
                www.imranghazi.com
    Practice and procedure before ITAT. – Muhammad Yousuff, Sylhet v. CIT, East
    Pakistan, Dacca [(1960) 2-TAX (Suppl.–153) (H.C.Dacca) = 1995 PTD 167].
                                     PERIOD OF LIMITATION
   Where a judgment has not been conveyed to a party limitation starts running from
    the date of knowledge. – Qureshi Vegetable Ghee Mills Ltd. v. CIT, and 3 others
    [(2002) 85 TAX 397 (S.C.AJ&K) = 2002 PTD 399].
   Condonation of delay and limitation period. – Commissioner of Sales Tax, Lahore v.
    Climax Engineering Co. Ltd., Gujranwala [(1976) 34 TAX 148 (H.C.Lah.) = PLD
    1976 Lah. 1364].
   Time spent in deciding application for restoration of the appeal should be excluded in
    computing the period of limitation. – Aftab Medical Stores, Dera Ghazi Khan v. CIT,
    Lahore [(1976) 34 TAX 10 (H.C.Lah.) = 1976 PTD 242 = PTCL 1984 CL. 326].
   Discretion to condone delay should not be exercised lightly. – [2007 PTR 200 (Trib.)
    = (2007) 96 TAX 202].
   Where sufficient cause has not been made out within the meaning of section 5 of
    Limitation Act, delay cannot be condoned. – [2007 PTR 200 (Trib.) = (2007) 96 TAX
    202].
   If conduct of taxpayer is not fair, he is not entitled to condonation of delay in filing of
    appeal. – [2007 PTR 200 (Trib.) = (2007) 96 TAX 202].
   Tribunal can condone and admit appeal if cause of delay is satisfactorily explained
    by the applicant. – [(2004) 89 TAX 409 (Trib.) = 2004 PTD 1514].
   Late filing of appeal by Department rejected in the absence of sufficient cause. –
    [(2004) 89 TAX 168 (Trib.) = 2004 PTD 1825].




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                                           793
Chapter X, Procedure – Part III, Appeals                                    Section 131

                   ITAT CANNOT DISMISS THE APPEAL FOR NON-APPEARANCE
   ITAT cannot dismiss appeal for non-prosecution by the petitioner and instead is
    obliged to decide it on merits. – Saleem Salamat v. Special Officer of Wealth Tax
    and others [(2004) 90 TAX 276 (H.C.Lah.) = 2004 PTD 2839].
   Rule authorising Appellate Tribunal to dismiss appeal for default of appearance held
    ultra vires the provisions of section 33(4) of the Income Tax Act. – Walayat Flour
    Mills, Lyallpur v. CIT, Rawalpindi [(1974) 29 TAX 31 (H.C.Lah.) = 1973 PTD 530].
                               JURISDICTION / POWERS OF ITAT
   ITAT is empowered to set aside a case. – Asad & Company v. ITAT, Lahore Bench
    Lahore, and others [2006 PTR 74 [H.C.Lah.] = (2006) 93 TAX 60 = 2005 PTD 2541].
   Tribunal cannot make a direction for a reason which is factually not correct. – Bata
    Pakistan Ltd. Lahore v. CIT, Lahore [(2003) 87 TAX 299 (H.C.Lah.) = 2002 PTD
    1535].
   Failure of Tribunal to decide all the objections raised in the memorandum of appeal
    tantamount to refusal to exercise his vested jurisdiction. – United Builders
    Corporation, Mirpur v. CIT, Muzaffarbad [(1984) 49 TAX 34 (H.C.AJ&K) = 1984
    PTD 137].
   Tribunal is empowered to stay payment of tax assessed in the assessment order
    under appeal at any stage. – Julian Hoshang Dinshaw Trust v. ITO, Circle-XVIII,
    South Zone, Karachi and two others [(1981) 43 TAX 92 (H.C.Kar.) = 1981 PTD 53].
   Objections purely legal and going to the root of the case can be raised. – CIT, Lahore
    Zone, Lahore v. M. Iqbal Saigol (C/o, Kohinoor Industries Ltd., Lahore) [(1976) 33
    TAX 157 (H.C.Lah.) = 1976 PTD 11 = PLD 1975 Lah. 547].
   ITAT refuses to review its judgement u/s 156. – [(2004) 89 TAX 509 (Trib.) = 2004
    PTD 2400].
   ITAT is empowered to remand the case to IAC for fresh proceedings. – [(2004) 89
    TAX 18 (Trib.) = 2004 PTD 689].
                                    POWERS OF REDUCTION
    Appellate authorities, CIT(A) or another in the hierarchy, have full power to reduce

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    any tax or penalty keeping in view the circumstances of each case. – [(2003) 88 TAX
    324 (Trib.) = 2004 PTD 474].
                                      INHERENT POWER
   ITAT has inherent power to prevent abuse of power. – [(2004) 89 TAX 18 (Trib.) =
    2004 PTD 689].
                                        ADJUDICATION
   „Adjudicate‟ necessarily implies settling a matter. – Prime Chemicals through
    Member of Association of Person v. Govt. of Pakistan through Secretary Finance,
    Islamabad and 3 others [2004 PTD 1388 (H.C.Lah.)].
   Adjudication requires passing of a speaking order. – Prime Chemicals through
    Member of Association of Person v. Govt. of Pakistan through Secretary Finance,
    Islamabad and 3 others [2004 PTD 1388 (H.C.Lah.)].
                                      HISTORY OF CASE
   Decision rendered in one year has no binding force if the circumstances changes in
    the subsequent year. – [2004 PTD (Trib.) 1071].
   Judgment of the Court is designed to advance cause of justice and not be a source of
    perpetual injustice. – [2004 PTD (Trib.) 1071].
                    DIFFERENCE OF OPINION BETWEEN MEMBERS‟ TRIBUNAL
   Difference of opinion vis-à-vis controversy explained. – [2004 PTD (Trib.) 2300].




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                                                              794
Section 132                                                                  Income Tax Ordinance, 2001.

     132. Disposal of appeals by the Appellate Tribunal.– (1) The
Appellate Tribunal may, before disposing of an appeal, call for such
particulars as it may require in respect of the matters arising on the appeal
or cause further enquiry to be made by the Commissioner.
          The Appellate Tribunal shall afford an opportunity of being heard
         1[(2)

to the parties to the appeal and, in case of default by any of the party on the
date of hearing, the Tribunal may if it deems fit, dismiss the appeal in
default, or may proceed ex parte to decide the appeal on the basis of the
available record.]
           The Appellate Tribunal shall decide the appeal within six
         2[(2A)

months of its filing;*]
      (3) Where the appeal relates to an assessment order, the Appellate
Tribunal may 3[, without prejudice to the powers specified in sub-section
(2),] make an order to–
             (a)        affirm, modify or annul the assessment order; or
               4[       ]
          5[(c)         remand the case to the Commissioner or the Commissioner
                        (Appeals) for making such enquiry or taking such action as the
                        Tribunal may direct.]
    (4) The Appellate Tribunal shall not increase the amount of any
assessment 6[or penalty] or decrease the amount of any refund unless the
taxpayer has been given a reasonable opportunity of showing cause against
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             or decrease, as the case may
     (5) Where, as the result of an appeal, any change is made in the
assessment of an association of persons or a new assessment of an
association of persons is ordered to be made, the Appellate Tribunal may
authorise the Commissioner to amend accordingly any assessment order
made on a member of the association and the time limit in sub-section (2) of
section 122 shall not apply to the making of such amended assessment.
1   Sub-section (2) substituted by Finance Ordinance, 2002.
2   Sub-section (2A) inserted by Finance Act, 2005.
3   Words etc. inserted by Finance Ordinance, 2002.
4   Clause (b) omitted by Finance Act, 2007.
5   Clause (c) inserted by Finance Ordinance, 2002.
6   Words inserted by Finance Act, 2003.
*It should be a full-stop.

                                                LEGISLATIVE HISTORY
     Section 132(2)–Substitution.–Before substitution by Finance Ordinance, 2002 sub-section (2) read as
follows:–
     “(2) The Appellate Tribunal shall give both parties to the appeal an opportunity of being heard either in person
or through an authorised representative.”
     Section 132(3)(b)–Omission.–Before omission by Finance Act, 2007 clause (b) read as follows:–
     “(b) set aside the assessment order and direct the Commissioner to make a new assessment order in
            accordance with the directions or recommendations of the Tribunal 1[; and]”
1 Substituted for the full-stop by Finance Ordinance, 2002.




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                                                            795
Chapter X, Procedure – Part III, Appeals                                                         Section 132

    (6) Where the appeal relates to a decision other than in respect of an
assessment, the Appellate Tribunal may make an order to affirm, vary or
annul the decision, and issue such consequential directions as the case may
require.
         The Appellate Tribunal shall communicate its order to the
      1[(7)

taxpayer and the Commissioner.]
      2[      ]
      3[      ]
    (10) Save as provided in section 133, the decision of the Appellate
Tribunal on an appeal shall be final.
1 Sub-Section (7) substituted by Finance Ordinance, 2002.
2 Sub-Section (8) omitted by Finance Ordinance, 2002.
3 Sub-Section (9) omitted by Finance Ordinance, 2002.

                                       LEGISLATIVE HISTORY
     Section 132(7)–Substitution.–Before substitution by Finance Ordinance, 2002 sub-section (7) read as
follows:–
     “(7) The Appellate Tribunal shall serve a notice of its order on the appellant and the Commissioner.”
     Section 132(8)–Omission.–Before omission by Finance Ordinance, 2002 sub-section (8) read as follows:–
     “(8) Where the Appellate Tribunal has not made an order in respect of an appeal before the expiration of six
months from the end of the month in which the appeal was filed, the relief sought by the appellant in the appeal
shall be treated as having been given and all the provisions of this Ordinance shall have effect accordingly.”
     Section 132(9)–Omission.– Before omission by Finance Ordinance, 2002 sub-section (9) read as follows:–
     “(9) For the purposes of sub-section (8), any period during which the hearing of an appeal is adjourned on the
request of the appellant shall be excluded in the computation of the period of six months referred to in that
sub-section.”
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                                                 COMMENTS
SECTION 132: ―Disposal of appeals by the Appellate Tribunal‖.
The decisions passed by the Tribunal are vital as this forum, in the hierarchy of income tax
appellate system is the final court where questions of facts are involved. Where a question of
law is involved, its verdict is final subject to acceptance of reference under section 133.
Through an amendment made by Finance Act, 2007, the ITAT, with effect from 01.07.2007
cannot ‚set aside the assessment and direct the Commissioner to make a new assessment
order‛. This will create a lot of problems. The ITAT in many cases will have to act as
assessing officer. If at the first stage, an assessing officer has failed to give correct finding
after obtaining evidence and ITAT wants him to do so, it cannot remand back the case any
more. In this event, the ITAT will have to assume the role of an assessing officer and to act as
a quasi judicial authority which will be against the norms of this judicial forum. This
withdrawal of powers of setting aside the matter is totally ill-advised and against all norms
of judicial propriety. The ITAT, after this amendment will have to entertain new evidence
since cases cannot be set aside even with specific directions.
    Tribunal follows certain procedure for arriving at a decision. This is laid down as under:
    (a) The Appellate Tribunal has to afford equal opportunity to both parties in appeal
          before arriving at a decision. It can also procure information or have an enquiry
          conducted relating to issues in the appeal. On the day fixed for hearing if one or
          both parties do not attend court, the Tribunal can dismiss the appeal or make an
          ex-parte decision.
    (b) Decision in cases pertaining to assessments can be one that affirm, modify or annul
          an assessment order. The same can also be set aside for renewed action or for




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                                                                    796
Section 132                                                                                   Income Tax Ordinance, 2001.

        proceeding in a manner directed by the Tribunal. In other cases, the Tribunal may
        give a decision in accordance with what it considers right.
    (c) The Tribunal cannot increase assessed income or reduce refund already
        determined, unless it provides the taxpayer a proper opportunity of being heard.
   (d) The Tribunal can direct and authorise the Commissioner to amend any assessment
        order made on a member of an association of persons or an AOP if as a result of
        appeal there is a change in the constitution and consequently time limit provided in
        section 122(2) will not apply here.
   In sub-section (4), insertion of the words ‚or penalty‛ after the word ‚assessment,‛ by
Finance Act, 2003 was meant to remove legal lacuna.

                      COMPARABLE PROVISION OF THE RO – [SECTION 135]
     135. Disposal of appeals by the Appellate Tribunal.–(1) The Appellate Tribunal may, before disposing of
any appeal, call for such particulars as it may require respecting the matters arising in the appeal or cause further
enquiry to be made by the Deputy Commissioner.
     (2) The Appellate Tribunal shall give both parties to the appeal an opportunity of being heard either in person
or through an authorized representative.
     (3) If the Appellate Tribunal is not satisfied that the assessment or the order which is the subject of the appeal
ought to be interfered with, it shall reject the appeal.
     (4) If the Appellate Tribunal is satisfied that an assessment which is the subject of appeal–
      (a) ought to be reduced or annulled, it shall reduce or annul the assessment accordingly; or
      (b) is insufficient, it shall enhance the assessment accordingly; or
      (c) ought to be set aside, it shall set aside the assessment and direct the Deputy Commissioner to make a
              fresh assessment.
     (5) If the Appellate Tribunal is satisfied that an order which is the subject of appeal, ought to be interfered with,
it shall cancel or vary the order accordingly and shall issue such consequential directions as the case may require.
     Explanation.–In the case of an order imposing a penalty, the power to vary the order shall include the power to
enhance the penalty.
     (6) The Appellate Tribunal shall not enhance an assessment or a penalty or reduce the amount of refund,
unless the assessee has been given reasonable opportunity of showing cause against such enhancement or
                       www.imranghazi.com
reduction, as the case may be.
     (7) Where, as the result of an appeal, any change is made in the assessment of a firm or an association of
persons or a fresh assessment of a firm or an association of persons is ordered to be made, the Appellate Tribunal
may authorise the Deputy Commissioner to amend accordingly any assessment made on any partner of the firm
or any member of the association, as the case may be.
     1[(7A) Where no order under this section is made before the expiration of six months from the end of the month

in which the appeal under sub-section (1) of Section 134 is presented, the relief sought through the said appeal shall
be deemed to have been given and all the provisions of this Ordinance shall have effect accordingly:
     Provided that, where the hearing of appeal is adjourned for any period on the request of the appellant, the said
period shall be excluded while computing the aforesaid period of six months:
     Provided further that the provisions of this sub-section shall come into force on such date 2[ ] as may be
notified by the Income Tax Appellate Tribunal in the official Gazette.]
     (8) The Appellate Tribunal shall communicate its order to the assessee and to the Commissioner.
     (9) Save as provided in section 136, an order passed by the Appellate Tribunal on appeal shall be final.
1 Sub-section (7A) inserted by Finance Act, 1991.
2 Words and commas “, not being later than the first day of July, 1992,” omitted by Finance Act, 1992.

                                                    DEPARTMENTAL VIEW
Finance Act, 2005 – Fixation of time limit for disposal of appeals by ITAT. [Section 132 (2A)]
      A new sub-section (2A) has been added in section 132, fixing a time limit of six months
for the disposal of appeals by the ITAT. This amendment shall be effective for appeals filed
on or after July 01, 2005 and shall be applicable to appeals filed by the taxpayers as well as by
the Department. – (1/2005, dated 05.07.2005).
Early hearing of the appeals.
      It has been decided that since 1st January, 1990 till further orders all applications for




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                                             797
Chapter X, Procedure – Part III, Appeals                                       Section 132

early hearing of the appeals shall be disposed of by the Bench having jurisdiction to hear the
appeal. The application shall be written either in Urdu or English and shall set-forth
concisely and in different paragraphs the grounds for early hearing of appeals like a
memorandum of appeal. The application would also be supported by an Affidavit of the
applicant and other documents on which the reliance is placed. Such application would be
registered and disposed of as miscellaneous applications.
      It shall be the duty of the Assistant Registrar concerned to solicit the date of hearing
from the senior Member of the concerned Bench within 7 days of the receipt and registration
of such applications. The learned Members of the Bench would dispose of such applications
on judicial considerations with the emphasis on disposal of pending appeals in their
chronological order. – (12/1989 dated 28.12.1989).

              CASE LAW – SUPREME COURT / HIGH COURTS / ITAT
           ITAT HAS A DUTY TO CORRECTLY RECORD THE FACTS AND GIVE OBJECTIVE FINDINGS
   This is settled principle of law that a question of law arising out of the facts of the
    case relating to the fundamental issues involved therein, even if was not raised
    before the lower forum can be allowed to be taken before the higher forum. –
    CALTEX Oil Pakistan Ltd. v. Collector, C. E. & S. T. and others [2005 PTR 19
    [S.C.Pak.] = (2005) 91 TAX 277 = 2005 PTD 480].
   This is the duty of the Court seized of the matter, to apply the correct law to meet the
    ends of justice. – CALTEX Oil Pakistan Ltd. v. Collector, C. E. & S. T. and others
    [2005 PTR 19 [S.C.Pak.] = (2005) 91 TAX 277 = 2005 PTD 480].
   Assessments suffered from incurable legal defects and Appellate Tribunal was
    justified to annual the assessments for all the years. – CIT v. Ahmad Yar Khan
    Menhais [2007 PTD 1651 (H.C.Lah.)].
   No illegality or irregularity has been committed which needs to be rectified/cured by
    this Court. – CIT v. Ahmad Yar Khan Menhais [2007 PTD 1651 (H.C.Lah.)].
   High Court with consent of parties, set aside both such orders of the Tribunal,
    resultantly appeal would deemed to be pending before Appellate Tribunal to be
    heard and decided afresh in accordance with law. – CIT, Companies Zone-I, Lahore v.
                 www.imranghazi.com
    S.M. Riaz & Sons Pvt. Ltd. [(2006) 94 TAX 284 (H.C.Lah.) = 2006 PTD 1557].
   High Court in appeal struck out such observation of Tribunal, thus, impugned order
    would be read to mean that order of Appellate Authority was upheld by Tribunal. –
    Jillan Packaging and Paper Industries Pvt. Ltd. v. ITAT of Pakistan, and 2 others
    [(2006) 94 TAX 280 (H.C.Lah.) = 2006 PTD 1479].
   Finding of the Tribunal without examining factual position is not sustainable in law.
    – Pak Saudi Fertilizer Ltd., Karachi v. CIT, Karachi [(2006) 94 TAX 248 (H.C.Kar.)
    = 2006 PTD 1343 = PTCL 2006 CL. 523].
   Finding of the Tribunal based on mere assumptions and conjectures is not
    warranted in law. – Pak Saudi Fertilizer Ltd., Karachi v. CIT, Karachi [(2006) 94
    TAX 248 (H.C.Kar.) = 2006 PTD 1343 = PTCL 2006 CL. 523].
   Tribunal while hearing appeal u/s 134 is vested with jurisdiction u/s 135(4)(5) to cancel
    or vary order which is subject matter of appeal. – CIT, Special Zone, Lahore v.
    Musarrat Textile Mills Ltd. Faisalabad [(2006) 93 TAX 7 (H.C.Lah.) = 2005 PTD 2270]
   In the absence of appellant‟s representative, Tribunal can decide appeal on merit. –
    CIT/WT, Faisalabad Zone, Faisalabad v. Saeed Steel Casting Factory Area,
    Faisalabad [2005 PTD 1816 (H.C.Lah.)]
   Duties of Tribunal. – Nazir Muhammad v. Customs, CE&ST Appellate Tribunal,
    Islamabad and another [2005 PTR 139 [H.C.Lah.] = 2005 PTD 449 = PTCL 2005 CL.
    330].
   Order passed by ITAT after nine months of hearing upheld. – Essem Power (Ltd.),
    Escorts House though Company Secretary Mr. Qaim Mehdi v. Federation of Pakistan
    through Secretary, Ministry of Finance and 2 others [(2004) 89 TAX 380 (H.C.Lah.) =
    2004 PTD 811].




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                                          798
Section 132                                                Income Tax Ordinance, 2001.

   Every revenue and appellate authority is under obligation to give reason for its
    directions. – Coca Cola Export Corporation v. IAC of Income Tax, Lahore [(2003) 87
    TAX 162 (H.C.Lah.) = 2002 PTD 1496].
   ITAT has a duty to correctly record the facts and give objective findings. – Kenhill
    Ltd., Karachi v. ITO, Companies Circle-A-3, Karachi [(2000) 81 TAX 466 (H.C.Kar.)
    = 2000 PTD 1320].
                      QUESTION OF LAW VIS-À-VIS ORDER U/S 156 BY ITAT
   Three conditions to be kept in mind while considering if a question of law arising out
    of an order of Tribunal under section 135. – Hong Kong Chinese Restaurant, Main
    Boulevard Gulberg, Lahore v. ACIT, Circle 6, Lahore and another [2002 PTD 1878
    (H.C.Lah.)].
                       ARBITRARY USE OF POWERS BY ITAT DISAPPROVED
   Arbitrary use of powers by ITAT disapproved. – Wimpy 19-Restaurant (Pvt.) Ltd. v.
    ITAT and others [1999 PTD 4158 (S.C.Pak.) = PTCL 2000 CL. 308].
   Wavering attitude of the learned Tribunal deprecated. – Mehmood Barni,
    Proprietor Interhome, Gujranwala v. IAC, Companies Range, Gujranwala [2005 PTR
    112 [H.C.Lah.] = (2005) 91 TAX 221 = 2005 PTD 119].
                            HEARING AND DISPOSAL OF THE APPEALS
   Hearing and disposal of the appeals. – CIT, Central Zone-C, Karachi v.
    International Building Industries Ltd. [(1993) 67 TAX 67 (H.C.Kar.) = 1993 PTD 58].
   Order passed after several months - validity of. – [2006 PTR 21 (Trib.) = (2006) 94
    TAX 5 = 2006 PTD 2575].
                                   FINALITY OF PROCEEDINGS
   Proceedings attain finality if Tribunal‟s order is not challenged in reference/appeal.
    – Saeed-ur-Rehman v. ACIT, Circle 16, Abbottabad and 4 others [2002 PTD 2379
    (H.C.Pesh.)].
   New evidence cannot be introduced at the ITAT level. – H.I.(Pvt.) Ltd. Lahore v.
    ITAT and others [(2002) 85 TAX 485 (H.C.Lah.) = 2002 PTD 212].
                www.imranghazi.com TECHNICALITIES
                           REJECTION OF APPEAL ON
   Appeal before ITAT should be decided on merit rather than indulging into
    technicalities. – Ravi Flour Mills v. ITAT and others [(2002) 85 TAX 505 (H.C.Lah.)
    = 2002 PTD 86].
   ITAT cannot dismiss an appeal on account of alleged indifference or lack of interest
    on the part of Revenue. – CIT, Zone-A, Lahore v. Al-Tariq Construction Co., Lahore
    [2001 PTD 2179 (H.C.Lah.)].
   In matters of collection of revenue the dispute could not be allowed to be determined
    in a perfunctory manner, ITAT cannot dismiss for violation of Rule 11. – CIT/WT,
    Faisalabad Zone, Faisalabad v. Sheikh Rashid Ahmed [(2001) 84 TAX 521
    (H.C.Lah.) = 2001 PTD 2316].
                                      APPEALABLE ORDERS
   Others. – CIT v. T. Namberurnal Chetty & Sons [1933] 1 ITR 32 (Mad.).
                           PROCEDURE BEFORE TRIBUNAL – GENERAL
   On the basis of another parallel case CIT(A) can reduce the addition. – Muhammad
    Fayyaz Butt v. CIT, Zone-A, Lahore [2007 PTR 166 (H.C.Lah.) = (2007) 95 TAX 122 =
    2006 PTD 2828 = PTCL 2007 CL. 334].
   Before touching the pocket of a tax payer the Revenue must establish its case beyond
    any doubt. – Muhammad Fayyaz Butt v. CIT, Zone-A, Lahore [2007 PTR 166
    (H.C.Lah.) = (2007) 95 TAX 122 = 2006 PTD 2828 = PTCL 2007 CL. 334].
   Plea that has to be judged on the basis of other material brought on record cannot be
    taken at appellate stage. – Dr. Muhammad Yousaf v. CIT [2006 PTR 228 [H.C.Kar.]
    = (2006) 94 TAX 145 = 2006 PTD 590].




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                                           799
Chapter X, Procedure – Part III, Appeals                                 Section 132

   While disposing of appeal, any change in law during pendency of appeal can be taken
    into account by Tribunal. – Raja Bahadur Kamakshya Narain Singh v. CIT [1934]
    26 ITR 563 (Pat.).
                                            FEES
   If appeal to Tribunal is rejected as barred by limitation, assessee does not become
    entitled to refund of deposit of Rs.100. – S.Subbiah Pillai & Sons v. CIT [1942] 10
    ITR 467 (Mad.).
                              POWERS OF TRIBUNAL – GENERAL
   Since the real matter in controversy was not adjudicated by the Tribunal, the case
    was remanded back. – Mehmood Ahmad v. ITAT, Lahore through Chairman and 2
    others [(2007) 95 TAX 327 (H.C.Lah.) = 2007 PTD 744].
   ITAT is not an administrative Tribunal and discharges judicial functions and a
    sketchy, non-speaking order is not expected from it. – Mahmood Barni v. IAC of
    Income Tax, Gujranwala and another [2005 PTR 134 [H.C.Lah.] = (2005) 91 TAX
    235 = 2005 PTD 165].
   Appellate Tribunal can remand the case for denovo proceedings. – Karim Aziz
    Industries Ltd., Hasanabad v. CIT, Rawalpindi Zone, Rawalpindi. [(1997) 75 TAX
    90 (H.C.Lah.) = 1996 PTD 1192].
   Powers of Appellate Tribunal under section 135(5). – Karim Aziz Industries Ltd. v.
    CIT [(1997) 75 TAX 90 (H.C.Lah.) = 1996 PTD 1192].
   Tribunal can rely upon judgment of a criminal court. – Anraj Narain Dass v. CIT
    [1951] 20 ITR 562 (Punj.).
   Tribunal cannot itself raise a ground which is adverse to appellant and suggest
    another mode of assessment. – Motor Union Insurance Co. Ltd. v. CIT [1945] 13 ITR
    272 (Bom.).
   Question regarding provision of bad debt not forwarded to High Court. – [2006 PTR
    165 (Trib.) = (2006) 94 TAX 130 = 2006 PTD 661 = 2006 PTD 2784].
   Questions already decided by High Courts declined. – [2006 PTR 165 (Trib.) = (2006)
    94 TAX 130 = 2006 PTD 661 = 2006 PTD 2784].

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    Questions referred to High Court. – [2006 PTR 165 (Trib.) = (2006) 94 TAX 130 =
    2006 PTD 661 = 2006 PTD 2784].
   Law does not empower a person to reverse his own decision/judgment. – [2006 PTR
    203 (Trib.)].
   Wrong application of law deprecated. – [2006 PTR 205 (Trib.)].
   ITO/CIT(A) has no power to interfere on the issues decided by ITAT. – [2006 PTR
    225 (Trib.) = (2006) 94 TAX 122].
   Remand to CIT (Appeals). – [2005 PTR 211 (Trib.) = (2005) 91 TAX 275 = 2005 PTD
    944].
   Conducted of subordinate Court when matter in pending in High Court. – [2005
    PTR 123 (Trib.) = 2006 PTD 1292].
   Legal ground can be raised at any stage. – [2005 PTR 219 (Trib.) = (2005) 91 TAX
    322 = 2005 PTD 960].
              COMPLETION OF RE-ASSESSMENT PROCEEDINGS DURING PENDENCY OF
                                     APPEAL/REFERENCE
   Assessing Officer acted without lawful authority in completing the assessment when
    appeal against the order of the CIT(A) was still pending before Tribunal. –
    Muhammad Inayatullah Cheema v. Sardar Ali Raza Masood Qazilbash [(2002) 86
    TAX 241 (H.C.Lah.) = 2002 PTD 1195].
                            POWER TO ADMIT ADDITIONAL GROUND
   There is no requirement that application urging additional grounds, be verified or
    bear court fee stamp. – Byramji & Co. v. CIT [1943] 11 ITR 286 (Nag.).




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                                          800
Section 132                                               Income Tax Ordinance, 2001.

                                      PERIOD OF LIMITATION
   Where a judgment has not been conveyed to a party limitation starts running from
    the date of knowledge. – Qureshi Vegetable Ghee Mills Ltd. v. CIT, and 3 others
    [(2002) 85 TAX 397 (S.C.AJ&K) = 2002 PTD 399].
   Reference filed u/s 136(3) after prescribed time dismissed. – CIT/WT, Zone-A,
    Peshawar v. Associated Industries Ltd. [2006 PTR 139 [H.C.Pesh.] = (2005) 91 TAX
    187 = 2005 PTD 1314].
   Merely because a reference application lies against an order under section nobody
    can be allowed to circumvent the law relating to the period of limitation provided in
    subsection of section 136. – CIT v. Ateeq Riaz [(2002) 86 TAX 130 (H.C.Kar.) = 2002
    PTD 570].
   Others. – S.Subbiah Pillai & Sons v. CIT [1942] 10 ITR 467 (Mad.).
   Relief to the taxpayer in failure of the learned ITAT to pass order within six months
    of the filing of appeal is illogical. – [2010 PTR 1 (Trib.)]
   Wherever the legislature has wanted to prescribe limitation period for any action
    under the provisions of Income Tax Ordinance 2001, it has done so by incorporating
    specific provisions. – [2010 PTR 1 (Trib.)]
   Period of limitation for filing appeal - when starts. – [2005 PTR 197 (Trib.) = 2005
    PTD 588].
                                FINDING OF FACT BY CIT(A) UPHELD
   After having maintained the relief allowed by CIT(A) ITAT could not enhance the
    liability of taxpayer without serving show-cause notice u/s 135(6). – Muhammad
    Fayyaz Butt v. CIT, Zone-A, Lahore [2007 PTR 166 (H.C.Lah.) = (2007) 95 TAX 122 =
    2006 PTD 2828 = PTCL 2007 CL. 334].
   Finding of fact by CIT(A) that notice was not served properly upheld. – [(2004) 90
    TAX 331 (Trib.) = 2004 PTD 2679].
                                             STATUTE
   Effect of deeming provision is restricted to the Section to which it is attached. –
    [2010 PTR 1 (Trib.)]
                 www.imranghazi.com
                      PROVISIONS OF SECTION 132(2A) DIRECTORY IN NATURE
   Provisions of Section 132(2A) of the Income Tax Ordinance, 2001 are not mandatory
    but directory in nature. – [2010 PTR 1 (Trib.)]




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                                                                 801
Chapter X, Procedure – Part III, Appeals                                                             Section 133

            Reference to High Court.– (1) Within ninety days of the
         1[133.

communication of the order of the Appellate Tribunal under sub-section (7)
of section 132, the aggrieved person or the Commissioner may prefer an
application, in the prescribed form along with a statement of the case, to
the High Court, stating any question of law arising out of such order.
1 Section 133 substituted by Finance Act, 2005.

                                               LEGISLATIVE HISTORY
     Section 133–Substitution.–Before substitution by Finance Act, 2005 section 133 read as follows:–
     “133. Reference to High Court.– (1) Where the Appellate Tribunal has made an order on an appeal under
section 132, the 1[taxpayer] or Commissioner may, by application in such form and accompanied by such
documents as may be prescribed, require the Appellate Tribunal to refer any question of law arising out of such
order to the High Court.
     (2) An application under sub-section (1) shall be made within ninety days of the date on which the 1[taxpayer]
or Commissioner, as the case may be, was served with 2[ ] the Appellate Tribunal‟s order.
     (3) Where, on an application under sub-section (1), the Appellate Tribunal is satisfied that a question of law
arises out of its order, it shall, within ninety days of receipt of the application, draw up a statement of the case and
refer it to the High Court.
     (4) Where, on an application under sub-section (1), the Appellate Tribunal refuses to state the case on the
ground that no question of law arises, the 1[taxpayer] or the Commissioner, as the case may be, may apply to the
High Court and the High Court may, if it is not satisfied with the correctness of the decision of the Appellate
Tribunal, frame a question of law for its consideration.
     (5) An application under sub-section (4) shall be made within one-hundred and twenty days from the date on
which the 1[taxpayer] or Commissioner, as the case may be, was served with 3[order] of the refusal.
     (6) Sub-sections (10) through (14) shall apply to a question of law framed by the High Court in the same
manner as they apply to a reference made under sub-section (1).
     (7) If, on an application under sub-section 4[(2)], the Appellate Tribunal rejects the application on the ground
that it is time-barred, the 1[taxpayer] or Commissioner may apply to the High Court and, if the High Court is not
satisfied with the correctness of the Appellate Tribunal‟s decision, the Court may require the Appellate Tribunal to
treat the application www.imranghazi.com
                      as made within the time allowed under sub-section 4[(2)].
     (8) An application under sub-section (7) shall be made within 5[ninety days] from the date on which the
1[taxpayer] or Commissioner, as the case may be, was served with 3[order] of the rejection.

     (9) If the High Court is not satisfied that the statement in a case referred under sub-section (3) is sufficient to
enable it to determine the question raised thereby, the Court may refer the case back to the Appellate Tribunal to
make such modification therein as the Court may direct.
     (10) A reference to the High Court under this section shall be heard by a Bench of not less than two Judges of
the High Court and, in respect of the reference, the provisions of section 98 of the Code of Civil Procedure, 1908 (V
of 1908) shall apply, so far as may be, notwithstanding anything contained in any other law for the time being in
force.
     (11) The High Court upon hearing a reference under this section shall decide the questions of law raised by
the reference and deliver judgment thereon containing the grounds on which such decision is founded.
     (12) A copy of the judgment of the High Court shall be sent under the seal of the Court and the signature of the
Registrar to the Appellate Tribunal which shall pass such orders as are necessary to dispose of the case
conformably to such judgment.
     (13) The costs of a reference to the High Court under this section shall be at the discretion of the Court.
     (14) Where a reference relates to an assessment, the tax due under the assessment shall be payable in
accordance with the assessment, unless recovery of the tax has been stayed by the High Court.
     (15) Section 5 of the Limitation Act, 1908 (IX of 1908) shall apply to an application under sub-section (1).
     (16) An application under sub-section (1) by a person other than the Commissioner shall be accompanied by
a fee of one hundred rupees.”
1   Substituted for “appellant” by Finance Ordinance, 2002.
2   Words “notice of” omitted by Finance Act, 2003.
3   Substituted for “notice” by Finance Act, 2003.
4   Substituted for “(1)” by Finance Act, 2003.
5   Substituted for “three months” by Finance Ordinance, 2002.




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                                             802
Section 133                                                   Income Tax Ordinance, 2001.

    (2) The statement to the High Court referred to in sub-section (1), shall
set out the facts, the determination of the Appellate Tribunal and the
question of law which arises out of its order.
    (3) Where, on an application made under sub-section (1), the High
Court is satisfied that a question of law arises out of the order referred to in
sub-section (1), it may proceed to hear the case.
     (4) A reference to the High Court under this section shall be heard by a
Bench of not less than two judges of the High Court and, in respect of the
reference, the provisions of section 98 of the Code of Civil Procedure, 1908
(Act V of 1908), shall apply, so far as may be, notwithstanding anything
contained in any other law for the time being in force.
    (5) The High Court upon hearing a reference under this section shall
decide the question of law raised by the reference and pass judgment
thereon specifying the grounds on which such judgment is based and the
Tribunals order shall stand modified accordingly. The Court shall send a
copy of the judgment under the seal of the Court to the Appellate Tribunal.
    (6) Notwithstanding that a reference has been made to the High Court,
the tax shall be payable in accordance with the order of the Appellate
Tribunal:
    Provided that, if the amount of tax is reduced as a result of the
judgment in the reference by the High Court and the amount of tax found
refundable, the High Court may, on application by the Commissioner
               days of the receipt of the judgment of the High Court that he
within thirty www.imranghazi.com
wants to prefer petition for leave to appeal to the Supreme Court, make an
order authorizing the Commissioner to postpone the refund until the
disposal of the appeal by the Supreme Court.
    (7) Where recovery of tax has been stayed by the High Court by an
order, such order shall cease to have effect on the expiration of a period of six
months following the day on which it was made unless the reference is
decided or such order is withdrawn by the High Court earlier.
    (8) Section 5 of the Limitation Act, 1908 (IX of 1908), shall apply to an
application made to the High Court under sub-section (1).
   (9) An application under sub-section (1) by a person other than the
Commissioner shall be accompanied by a fee of one hundred rupees.]

                                      COMMENTS
SECTION 133: ―Reference to High Court‖.
This section was substituted by Finance Act, 2005 providing direct reference to High Court
rather than through Tribunal with effect from 1.7.2005. The salient features of this provision
with respect to a reference to the High Court on point of law against the decision of the
Tribunal are:
    (a) As a result of the decision of the Appellate Tribunal the taxpayer or the
         Commissioner think that point(s) of law arise that have not been dealt with




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                                               803
Chapter X, Procedure – Part III, Appeals                                           Section 133

          satisfactorily by the Tribunal, may within 90 days of the date on which the
          Appellate decision is served, apply to the High Court in the prescribed manner
          along with a fee of Rs.100, where the applicant is a taxpayer for referring any
          question of law to the High Court stating any question of law arising out of such
          order. Section 5 of the Limitation Act, 1908 (IX of 1908) shall apply to such
          application.
   (b) A Bench of the High Court comprising not less than two judges will hear a
          reference under this section, decide the questions of law and deliver judgement
          accordingly. Under the seal and provisions of section 98 of the Civil Procedure
          Code, 1908 will apply notwithstanding anything contained in any other law being
          in force.
Section 98 of the Code of Civil Procedure, 1908 (V of 1908), reads as under:
       “98. Decision where appeal heard by two or more Judges: (1) Where an appeal is
              heard by a Bench of two or more Judges, the appeal shall be decided in
              accordance with the opinion of such Judges or of the majority (if any) of such
              Judges.
                  (2) Where there is no such majority which concurs in a judgment varying or
              reversing the decree appealed from, such decree shall be confirmed:
                  Provided that where the Bench hearing the appeal is composed of two
              Judges belonging to a Court consisting of more than two Judges, and the Judges
              composing the Bench differ in opinion on a point of law, they may state the
              point of law upon which they differ and the appeal shall then be heard upon
              that point only by one or more of the other Judges, and such point shall be
              decided according to the opinion of the majority (if any) of the Judges who have
              heard the appeal, including those who first heard it.
                  (3) Nothing in this section shall be deemed to alter or otherwise affect any
              provision of the letters patent of any High Court.‛
Section 5 of Limitation Act, 1908, reads as under:
        “5. Extension of period in certain case. – Any appeal or application for a revision
              or awww.imranghazi.com to appeal or any other application to
                     review of judgment or for leave
              which this section may be made applicable by or under any enactment for the
              time being in force may be admitted after the period of limitation prescribed
              therefore, when the appellant or applicant satisfies the Court that he had sufficient
              cause for not preferring the appeal or making the application within such period.
                  Explanation. – The fact that the appellant or applicant was misled by any
              order, practice or judgment of the High Court in ascertaining or computing the
              prescribed period of limitation may be sufficient cause within the meaning of
              this section.‛
   The substituted section provides the following deviations from earlier section:
   (a) Notwithstanding a reference made to the High Court, a taxpayer will be bound to
          pay tax in accordance with the order of ITAT.
   (b) If tax is reduced as a result of order of the High Court and any amount is found
          refundable, the Commissioner, within 30 days of the receipt of the judgment of
          High Court may intimate intention to prepare for petition for leave to the Supreme
          Court and than High Court may make an order authorising the Commissioner to
          postpone the refund until the disposal of the appeal by the Supreme Court.
    (c) Where recovery of tax is stayed by High Court such order shall expire after six
          months following the day on which it is made unless the appeal is withdrawn or
          such order is withdrawn earlier by the High Court.
   (d) The order of ITAT shall stand modified in the light of order passed by High Court
          dealing with the question of law.




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                                                                    804
Section 133                                                                                   Income Tax Ordinance, 2001.


                      COMPARABLE PROVISION OF THE RO – [SECTION 136]
     1[136.    Reference to High Court.–(1) Within ninety days of the date upon which he is served with notice of
an order under section 135, the assessee or the Commissioner may, by application in such form and
accompanied by such documents as may be prescribed, require the Appellate Tribunal to refer to the High Court
any question of law arising out of such order, and the Appellate Tribunal shall, within ninety days of the receipt of
such application, draw up a statement of the case and refer it to the High Court.
      Explanation.–For the removal of doubts it is hereby declared that a reference application under this section
may be made in respect of a question of law arising out of an order of the Appellate Tribunal made on or after the
first day of July, 2000.
      (2) If, on an application made under sub-section (1), the Appellate Tribunal refuses to state the case on the
ground that no question of law arises, the assessee or the Commissioner, as the case may be, may within one
hundred and twenty days from the date on which he is served with notice of the refusal, apply to the High Court
and the High Court may, if it is not satisfied with the correctness of the decision of the Appellate Tribunal, frame a
question of law and the provisions of sub-sections (5), (6), (7) and (8) shall, so far as may be, apply as they apply
to a reference made under sub-section (1).
      (3) If on an application made under sub-section (1), the Appellate Tribunal rejects it on the ground that it is
time-barred, the assessee or the Commissioner, as the case may be, may, within three months from the date on
which he is served with notice of the rejection, apply to the High Court, and the High Court, if it is not satisfied of the
correctness of the Appellate Tribunal‟s decision, may require the Appellate Tribunal to treat the application as
made within the time allowed under sub-section (1).
      (4) If the High Court is not satisfied that the statement in a case referred under sub-section (1) is sufficient to
enable it to determine the question raised thereby, the Court may refer the case back to the Appellate Tribunal to
make such modification therein as the Court may direct.
      (5) When any case has been referred to the High Court under this section, it shall be heard by a Bench of not
less than two Judges of the High Court, and in respect of such case the provisions of section 98 of the Code of
Civil Procedure, 1908 (V of 1908), shall, so far as may be, apply notwithstanding anything contained in the Letters
Patent applicable to any High Court or in any other law for the time being in force.
      (6) The High Court upon the hearing of any such case, shall decide the questions of law raised thereby and
shall deliver its judgement thereon containing the grounds on which such decision is founded and shall send a
copy of such judgement under the seal of the Court and the signature of the Registrar to the Appellate Tribunal
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which shall pass such orders as are necessary to dispose of the case conformably to such judgement.
      (7) Where a reference is made to the High Court under this section, the costs shall be in the discretion of the
Court.
      (8) Notwithstanding that a reference has been made under this section to the High Court, tax shall, unless the
recovery thereof has been stayed by the High Court, be payable in accordance with the assessment made in the
case.
      (9) Section 5 of the Limitation Act, 1908 (IX of 1908), shall apply to an application under sub-section (1) or
sub-section (2).
      (10) When an application is made under sub-section (1) by the assessee, it shall be accompanied by a fee of
one hundred rupees.]
1 Section 136 substituted by Finance Ordinance, 2000. Earlier it was substituted by Finance Act, 1997.
     Section 136–Substitution.– Before substitution by Finance Ordinance, 2000, section 136 read as follows:
     “136. Appeal to High Court.– (1) An appeal shall lie to the High Court in respect of any question of law arising out of an
order under section 135.
     (2) The appeal under this section shall be filed within sixty days of the date upon which an assessee or the Commissioner is
served with notice of an order under section 135.
     (3) Where an appeal under sub-section (1) is filed by the assessee, it shall be accompanied by a fee of one hundred rupees.
     (4) An appeal filed under this section shall be heard by a Bench of not less than two Judges of the High Court.
     (5) The High Court upon the hearing of an appeal under this section shall decide the question of law raised therein and shall
deliver its judgement thereon containing the grounds on which such decision is founded and shall send a copy of such judgement
under the seal of the Court and the signature of the Registrar to the Appellate Tribunal, which shall pass such orders as are
necessary to dispose of the case conformably to such judgement.
     (6) Subject to sub-section (7), notwithstanding that an appeal has been filed under this section, tax shall, unless recovery
thereof has been stayed by the High Court, be payable in accordance with the assessment made in the case as modified by the
order of the Appellate Additional Commissioner or, as the case may be, the Appellate Tribunal.




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                                                                805
Chapter X, Procedure – Part III, Appeals                                                                          Section 133

      (7) Where recovery of tax has been stayed by the High Court by an order, such order shall cease to have effect on the
expiration of a period of six months following the day on which it is made, unless the appeal is decided, or such order is
withdrawn, by the High Court earlier.
      (8) The costs of the appeal shall be in the discretion of the Court.”
      Section 136 –Substitution.– Before substitution by Finance Act, 1997, section 136 read as follows:
      “136. Reference to High Court.– (1) Within ninety days of the date upon which he is served with notice of an order under
section 135, the assessee or the Commissioner may, by application in such form and accompanied by such documents as may
be prescribed, require the Appellate Tribunal to refer to the High Court any question of law arising out of such order, and the
Appellate Tribunal shall, within ninety days of the receipt of such application, draw up a statement of the case and refer it to the
High Court.
      1[Explanation.–The period of ninety days within which an application is to be made shall apply notwithstanding that the

application relates to an assessment year prior to the assessment year beginning on the first day of July, 1979, if such
application is made on or after the first day of July, 1979.]
      (2) If, on an application made under sub-section (1), the Appellate Tribunal refuses to state the case on the ground that no
question of law arises, the assessee or the Commissioner, as the case may be, may within one hundred and twenty days from
the date on which he is served with notice of the refusal, apply to the high Court, and the High Court may, if it is not satisfied with
the correctness of the decision of the Appellate Tribunal, frame a question of law and the provisions of sub-sections (4), (5), (6)
and (7) shall, so far as may be, apply as they apply to a reference made under sub-section (1).
      2[(2A) If on any application made under sub-section (1) the Appellate Tribunal rejects it on the ground that it is time-barred,

the assessee or the Commissioner, as the case may be, may, within three months from the date on which he is served with
notice of the rejection, apply to the High Court, and the High Court, if it is not satisfied of the correctness of the Appellate
Tribunal‟s decision, may require the Appellate Tribunal to treat the application as made within the time allowed under sub-section
(1);]
      (3) If the High Court is not satisfied that the statement in a case referred under sub-section (1) is sufficient to enable it to
determine the question raised thereby, the Court may refer the case back to the Appellate Tribunal to make such modification
therein as the Court may direct.
      (4) When any case has been referred to the High Court under this section, it shall be heard by a Bench of not less than two
Judges of the High Court, and in respect of such case the provision of section 98 of the Code of Civil Procedure, 1908 (V of 1908)
shall, so far as may be, apply notwithstanding anything contained in the Letters Patent applicable to any High Court or in any
other law for the time being *force.
      (5) The High Court upon the hearing of any such case, shall decide the questions of law raised thereby and shall deliver its
judgment thereon containing the grounds on which such decision is founded and shall send a copy of such judgment under the
seal of the Court and the signature of the Registrar to the Appellate Tribunal, which shall pass such orders as are necessary to
                          www.imranghazi.com
dispose of the case conformably to such judgment.
      (6) Where a reference is made to the High Court under this section, the costs shall be in the discretion of the Court.
      (7) Notwithstanding that a reference has been made under this section to the High Court, tax shall, unless the recovery
thereof has been stayed by the High Court, be payable in accordance with the assessment made in the case.
      (8) Section 5 of the Limitation Act, 1908 (IX of 1908) shall apply to an application under sub-section (1) or sub-section (2).
      (9) When an application is made under sub-section (1) by the assessee, it shall be accompanied by a fee of one hundred rupees.”
1 Explanation added by Finance Act, 1985.
2 Sub-section (2A) inserted by Finance Act, 1985.
*The apparently intended word “in” is missing in the Gazette.

                                                    DEPARTMENTAL VIEW
Direct reference to High Court – Date of applicability.
      Section 133 of the Income Tax Ordinance, 2001 has been substituted through Finance
Act, 2005 and (inter-alia) provides for a direct reference to the High Court. Queries have
been raised with regard to the date of applicability of the new provisions. It is accordingly
clarified that the new procedure shall be applicable to all applications preferred to the High
Court from July 1, 2005 onwards. – (6/2005, dated 19.08.2005).
Finance Act, 2005 – Direct reference to High Court. [Section 133]
      Section 133 has been substituted to provide for a direct reference to the High Court,
which shall decide whether a question of law arises and then shall proceed to hear the case.
A further provision has been made whereby, the High Court can authorize the
Commissioner to postpone the payment of refund arising as a result of an order by the High
Court, till the disposal of appeal by the Supreme Court.
      Amendment has also been made to the effect that a stay of recovery granted by the
High Court shall be automatically vacated at the expiry of the period of six months, unless
the order for stay is withdrawn or the reference is decided at an earlier date. – (1/2005, dated
05.07.2005).




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                                              806
Section 133                                                     Income Tax Ordinance, 2001.

Finance Supplementary (Amendment) Act, 1997 and Finance Act, 1997 – Appeal to High Court:
[Section 136].
      ITAT is the highest appellate forum on questions of fact. The questions of law could
earlier on be referred to the High Court by the Tribunal on an application made by the
assessee or the department inviting a cumbersome procedure. By amending section 136, both
taxpayers as well as the Department can now file an appeal directly to the High Court on
questions of law. – (6/1997 dated 15.07.1997).
Section 136 – Reference to High Court.
      According to sub-Section (1) of Section 136 the assessee or the Commissioner on receipt
of an order of the Appellate Tribunal under Section 135 may, within ninety days of such
receipt, require the Tribunal to refer to the High Court any question of law arising out of the
order. In sub-section (1) of Section 66 of the repealed Income Tax Act, 1922, the period for
filing such a reference application before the Tribunal was sixty days. An explanation has
now been added to sub-section (1) of Section 136 which clarifies the intention of the law that
the limitation of ninety days in the sub-section would apply to any reference application
filed before the Tribunal on or after the 1st July, 1979, irrespective of the assessment year to
which the application relates.
      A new sub-section (2A) has also been inserted in Section 136 which allows the assessee
or the Commissioner to apply to the High Court in case of rejection of a reference application
by the Tribunal on the ground that it is time-barred. The application to the High Court is to
be made within three months of the service of the rejection by the Tribunal and if the High
Court is not satisfied with the Tribunal’s decision it may require the Tribunal to treat the
application as within time. – (10/1985 dated 18.8.1985).
Procedure for sending reports for references appeals etc.
      The Board have noticed that instructions issued from time to time regarding the
procedure to be followed in cases requiring references to High Court or appeals to the
Supreme Court have not been compiled with uniformly or consistently. It has been found
desirable. therefore, to consolidate those instructions and bring them to the notice of the
Commissioners for strict compliance in future. The following procedure is laid down in
supersession of all previous instructions on the subject.
      (2) It is primarily the responsibility of the Commissioner concerned to bring to the
Board’s notice any order of the Tribunal which in his opinion should be challenged before
                   www.imranghazi.com
the High Court. The Commissioners should, therefore, have suitable arrangements in their
offices for the scrutiny of the Tribunal’s orders in all cases regardless of the fact whether the
appeal was filed by the department or by the assessee. It is essential that this scrutiny takes
place as soon as a copy of order is received in the Commissioner’s office to eliminate the
chance of any delay in filing a reference application if one is subsequently found necessary. It
is also desirable that the Commissioner should refer to the Board all cases in which he
favours an application under section 136(1) or in which he has some clarification to seek. For
this he should–
       (a) send his detailed views to the Board, alongwith the copies of relevant orders, well
             in time and in any event not less than 30 days before the expiry of the limitation
             period, to allow the Board sufficient time for examination of the case;
       (b) keep the relevant papers ready in cases where he favours filing a reference
             application and if no instructions are received from the Board until 7 days before
             the expiry of the limitation period, he may file the application with the Tribunal
             and ask for confirmation of this action.
      (3) The procedure detailed at para (2) above should be followed in the case of appeals
to the Supreme Court of Pakistan also. It may be noted that Article 58 of the Constitution
provides that in cases, other than those involving a substantial question of law as to the
interpretation of the Constitution, an appeal shall lie to the Supreme Court only if the
supreme Court grants leave to appeal. Therefore, for income tax references, the High Courts
no longer have the powers to certify a case as fit for appeal to the Supreme Court and an
application has to be made directly to the Supreme Court for grant of leave to appeal.
      (4) It is desirable that the Departmental Representatives should also refer to the Board
the cases which, in their opinion, require further action. They should send their views in
such cases simultaneously to the Board and to the Commissioner of Income Tax concerned
and the latter should communicate his opinion thereon immediately to the Board without
awaiting a formal requisition. The Departmental Representatives should take care that they




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                                           807
Chapter X, Procedure – Part III, Appeals                                     Section 133

make such preferences well in time so that the Commissioner is able to follow the procedure
detailed in para (1) above.
      (5) At present, some-times, copies of the decisions communicated by the Commissioner
of Income Tax to the Inspecting Assistant Commissioner/Income Tax Officers are endorsed
to the Board. This is unnecessary and may be avoided in future. – [C.No.20(498)T-3/70,
dated 13.4.1971].
             CASE LAW – SUPREME COURT / HIGH COURTS / ITAT
          SCOPE OF APPLICATION UNDER SECTION 136 / SCOPE OF HIGH COURT‟S POWER
   Scope of section 136(2) explained. – CIT v. Asbestos Cement Industries Ltd., Karachi
    and others [(1993) 67 TAX 174 (S.C.Pak.) = 1993 PTD 459].
   Principle of res-judicata not applicable to Income Tax cases. – CIT, Central Zone B,
    Karachi v. Farrokh Chemical Industries [(1992) 65 TAX 239 (S.C.Pak.) = 1992 PTD
    523 = 1992 SCMR 523]
   Scope of reference to High Court. – Javaid Saigol and others v. CIT, Lahore [(1987)
    56 TAX 1 (S.C.Pak.) = PTCL 1987 CL. 278]
   Power of High Court under section 136 is of advisory nature. – CIT v. United
    Builders Corporation [(1986) 54 TAX 72 (S.C.AJ&K)].
   High court has only advisory jurisdiction in reference cases. – CIT, Lahore Zone,
    Lahore v. Sh. Muhammad Ismail & Co. Ltd., Lyallpur [(1986) 53 TAX 122 (S.C.Pak.)
    = PTCL 1986 CL. 321].
   High Court‟s jurisdiction neither original nor appellate but special statutory
    jurisdiction. – (1) Provincial Library v. CIT, East Pakistan; (2) Satish Chandra
    Biswas v. CIT, East Pakistan; and (3) Haji Abdur Rahim Choudhury v. CIT, East
    Pakistan and Income Tax Tribunal, Lahore [(1959) 1-TAX (III-290) (S.C.Pak.) = 1959
    PTD 1 = PLD 1958 SC 81].
   Nature of High Court‟s jurisdiction under section 136(1) is neither original nor
    appellate, but special statutory power. – (1) Provincial Library v. CIT, East
    Pakistan; (2) Satish Chandra Biswas v. CIT, East Pakistan; and (3) Haji Abdur
    Rahim Choudhury v. CIT, East Pakistan and Income Tax Tribunal, Lahore [(1959)
    1-TAX (III-290) (S.C.Pak.) = 1959 PTD 1 = PLD 1958 SC 81].

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    High Court cannot formulate a new question. – Muhammad Idrees Barry & Co. v.
    CIT, Punjab and NWFP [(1959) 1-TAX (III-14) (S.C.Pak.) = PLD 1959 SC 202].
   If income of petitioner is assessed after the audit, the order is appealable firstly to
    Appellate Commissioner and then to the Tribunal. The petitioner having an adequate
    remedy writ petition is therefore dismissed. – Amson Vaccines Pharma (Pvt.) Ltd. v.
    CIT and others [(2008) 98 TAX 178 (H.C.Isl.) = 2008 PTD 1440 = PTCL 2009 CL. 97].
   A successor in office can proceed in the matter from the stage it was earlier reached
    by the predecessor. – Muhammad Naseem v. CIT [2007 PTR 135 (H.C.Lah.) =
    (2007) 95 TAX 86 = 2006 PTD 2318].
   Reference application rejected holding that ITAT rightly exercised its powers. –
    Muhammad Naseem v. CIT [2007 PTR 135 (H.C.Lah.) = (2007) 95 TAX 86 = 2006
    PTD 2318].
   Tribunal u/s 136(1) could either refer proposed question for opinion of High Court or
    could reject the same. – CIT, Legal Division, Karachi v. National Development Finance
    Corporation (NDFC) [2007 PTR 54 [H.C.Kar.] = (2007) 95 TAX 48 = 2006 PTD 2439].
   Order refusing rectification does not merge in or become part of original order of
    Tribunal for purpose of reference or appeal to High Court. – Ali Medicine Co.,
    Faisalabad v. IAC of IT/WT, Range-V, Faisalabad [(2007) 95 TAX 231 (H.C.Lah.) =
    2007 PTD 1770].
   Factual conclusion drawn by the ITAT cannot be contested in appeal before High
    Court. – CIT/WT, Faisalabad v. Waseem Ashfaq [2007 PTD 2396 (H.C.Lah.)].
   Factual controversy cannot be raised in the jurisdiction of High Court. – Accord Textile
    Mills (Pvt. Ltd. v. DCIT and 2 others [(2008) 97 TAX 25 (H.C.Lah.) = 2007 PTD 2380].
   Factual controversy cannot be entertained u/s 136. – CIT, Zone-B, Lahore v. Rahat
    Bakery, Lahore Cantt [2006 PTR 54 [H.C.Lah.] = (2006) 93 TAX 69 = 2005 PTD 2518].




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                                           808
Section 133                                                Income Tax Ordinance, 2001.

   Factual exercise of valuation of property cannot be done u/s 136. – Qadri Cloth
    House, Lahore v. ITAT, Lahore and 2 others [2006 PTR 31 [H.C.Lah.] = (2006) 93
    TAX 38 = 2005 PTD 2430].
   An issue already decided by Supreme Court cannot be agitated again before the High
    Court for reinterpretation. – Collector of Sales Tax and Federal Excise, LTU,
    Karachi v. B.O.C. Pakistan Limited, Karachi.[2006 PTR 193 [H.C.Kar.].
   Fresh plea u/s 136 rejected. – Qadri Cloth House, Lahore v. ITAT, Lahore and 2
    others [2006 PTR 31 [H.C.Lah.] = (2006) 93 TAX 38 = 2005 PTD 2430].
   Appellate authorities are vested with powers to reduce, vary or change the quantum
    of penalty. – Sh. Zafar Iqbal v. DCIT/WT, Circle-01, Sialkot and 2 others [(2006) 93
    TAX 367 (H.C.Lah.) = 2006 PTD 60].
   Estimation of sales by Assessing Officer and Tribunal in two different ratio of sui gas
    consumption during relevant period, if not supported by any material on record, then
    High Court would interfere in such matter. – Cebee Industries Pvt. Ltd., Lahore v.
    ITAT and 2 others [2006 PTD 348 (H.C.Lah.)].
   Reference/appeal to High Court under laws relating to direct taxes, nature and scope
    of jurisdiction elucidated. – Ghulam Mustafa Jatoi, Karachi v. CIT, Central Zone-B,
    Karachi [(2006) 94 TAX 263 (H.C.Kar.) = 2006 PTD 1647].
   No appeal lies u/s 136 of the late Income Tax Ordinance against an order of the
    Tribunal recorded on a miscellaneous application. – CIT v. Standard Food [2005
    PTR 98 [H.C.Lah.] = (2005) 91 TAX 230 = 2005 PTD 101].
   It was the responsibility of appellant to have engaged some other counsel to properly
    assist High Court, which had not been done so. – Abdul Rauf v. ITAT, Punjab,
    Lahore and others [2005 PTD 1868 (H.C.Lah.)].
   High Court can consider a question that was raised but not dealt with by the
    Tribunal. – CIT v. National Refinery Ltd. [(2004) 89 TAX 304 (H.C.Kar.) = 2003
    PTD 2020].
   Reference to ITAT rejected on the ground that statement of case did not contain
    findings or reasons related to issues of assessee but only a reference to an earlier
    order. – CIT/WT, Companies Zone-III, Lahore v. Hafiz Abdul Wahid & Brothers
                 www.imranghazi.com
    (Pvt.) Ltd., Lahore [2003 PTD 2846 (H.C.Lah.)].
   Objection regarding constitution of bench can only be raised before initiation of
    proceedings. – M. Shafi Muhammadi and others v. Islamic Republic of Pakistan
    and another [(2003) 87 TAX 232 (H.C.Kar.)].
   For the purpose of section 136, law prevalent at time of Tribunal‟s decision would be
    applicable. – Commissioner of Revenue Tax, Water Companies Zone III, Lahore v.
    State Life and others [2002 PTD 1874 (H.C.Lah)].
   In case of improper service of notices u/s 61 and 62, the assessment should be
    set-aside and not annulled. – Muhammad Rafiq v. CIT, Faisalabad Zone,
    Faisalabad [2002 PTD 2743 (H.C.Lah.)].
   For the purpose of section 136, law prevalent at the time of Tribunal‟s decision would
    be applicable. – CIT, Companies Zone-I, Lahore v. Olympia Industries (Pvt.) Ltd.,
    Lahore [2002 PTD 2538 (H.C.Lah.)].
   Tribunal was justified to accept value as per sale deeds and to delete additions
    inspite of fact that Tribunal itself observed in order that it fell within exclusive
    jurisdiction of ITO to determine market value of any property. – CIT, Zone-A,
    Lahore v. Abubakar Maqsood [(2001) 84 TAX 19 (H.C.Lah.) = 2001 PTD 1333].
   ITAT cannot dismiss an appeal on account of alleged indifference or lack of interest
    on the part of Revenue. – CIT, Zone-A, Lahore v. Al-Tariq Construction Co., Lahore
    [2001 PTD 2179 (H.C.Lah.)].
   In absence of party on whose instance question is referred no answer can be given. –
    Bannu Woollen Mills Ltd., Lahore v. CIT, Companies, Lahore [(2001) 84 TAX 344
    (H.C.Lah.) = 2001 PTD 2127].
   Taxes payable could be learned as retained income for the purpose of levy of surcharge.
    – CIT, Lahore v. Schazoo Laboratories Limited [2001 PTD 3366 (H.C.Lah.)].




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                                           809
Chapter X, Procedure – Part III, Appeals                                     Section 133

   High Court is not bound to answer question of law if the party raising such question
    opts to remain absent. – Ravi Tentage Industries, Lahore v. CIT, Zone-B, Lahore
    [(2001) 84 TAX 1 (H.C.Lah.) = 2001 PTD 1402].
   High Court‟s power under section 136 explained. – Nafees Cotton Mills, Ltd., Lahore v.
    ITAT, Lahore and 2 others [(2001) 83 TAX 579 (H.C.Lah.) = 2001 PTD 1380].
   The High Court under section 136 can only resolve the issue referred by the ITAT
    and not any other which the counsel wanted to be resolved. – Iqbal Poultry Farm,
    Faisalabad v. CIT, Faisalabad [(2001) 84 TAX 17 (H.C.Lah.) = 2001 PTD 1366].
   High Court‟s jurisdiction under section 136 is of advisory nature. – Shafsal
    Enterprises, Lahore v. CIT, Zone-B, Lahore [(2001) 83 TAX 437 (H.C.Lah.) = 2001
    PTD 1153].
   Only substantial question of law can be decided by High Courts. – CIT, Lahore v.
    Immion International, Lahore [(2001) 83 TAX 505 (H.C.Lah.) = 2001 PTD 900].
   Inherent power or incidental powers could not be construed as to confer the power of
    reviewing the judgment. – Nazir Ali M.H. Gangji v. CIT, Companies-1, Karachi
    [(1994) 69 TAX 71 (H.C.Kar.) = 1994 PTD 958].
   Question of sufficiency or insufficiency or the quality of evidence is not to be looked
    into by the High Court. – Ahmad and Ahmad, Multan v. CIT, Lahore Zone [(1980)
    42 TAX 106 (H.C.Lah.) = 1980 PTD 57].
   Function of the High Court merely advisory and confined to considering and
    answering the actual question referred to it. – Walayat Flour Mills, Lyallpur v. CIT,
    Rawalpindi [(1974) 29 TAX 31 (H.C.Lah.) = 1973 PTD 530].
   If party at whose instance reference is made does not appear at the time of hearing,
    High Court is not bound to answer the question. – Dada Bhai H. Mama & Sons,
    Karachi v. CIT [(1967) 16 TAX 43 (H.C.Kar.)].
   Scope of, High Court‟s power: „Any question of law‟, meaning of; word „decision‟;
    provides for addition or alternation of questions. – Abdul Ghani & Co. v. CIT [(1962)
    6 TAX 185 (H.C.Lah.) = 1962 PTD 660 = PLD 1962 Lah. 635].
   High Court jurisdiction under section 136 is only advisory in nature. – Gopinath
                 Roy v. CIT, Dacca [(1960) 2-TAX
    Biswambar www.imranghazi.com (Suppl.–174) (H.C.Dacca) = 1960 PTD
    1079].
   No specific form for question of law is framed then High Court can change the form
    of question. – Muhammad Idrees Barry & Co. Lahore v. CIT, Punjab & N.W.F.P.
    [(1960) 2-TAX (Suppl.–166) (H.C.Lah.) = 1960 PTD 802 = PLD 1960 Lah. 852].
   Jurisdiction of High Court. – United Bank of India Ltd., v. CIT, Dacca [(1960)
    2-TAX (III-454) (H.C.Dacca) = 1960 PTD 768 = PLD 1960 Dacca 621].
   High Court should not restrict itself to the form of question propounded by the
    Tribunal. – Scindia Steam Navigation Company v. CIT [(1959) 1-TAX (III-195)
    (H.C.Kar.) = 1959 PTD 695 = PLD 1959 Kar. 527].
   Where Court is satisfied as to correctness of Tribunal‟s decision, a reference need not
    be called for. – Tarak Nath Bagchi v. CIT [1946] 14 ITR 319 (Cal.).
   The High Court should not answer a question not referred to it. – Maharaja Sir
    Pateshwari Prasad Singh v. CIT [1947] 15 ITR 181 (Oudh).
   High Court is concerned with questions of law of substantial nature only. – Sir Han
    Singh Gour v. CIT [6 ITC 317 (Nag.)].
   Jurisdiction conferred upon Court by section 66 of 1922 Act is a special jurisdiction
    and forms no part of Court‟s original or appellate jurisdiction. – CIT v. Hungerford
    Investment Trust Ltd. [1935] 3 ITR 188 (Cal.).
   No reason found for further reference of question to the Hon‟ble High Court. – [2006
    PTR 165 (Trib.) = (2006) 94 TAX 130 = 2006 PTD 661 = 2006 PTD 2784].
       QUESTION ALREADY SETTLED BY THE APEX COURT HAS TO BE ANSWERED ACCORDINGLY
   Question already settled by the Apex Court has to be answered accordingly. –
    Dadabhoy Energy Supply Company Ltd. v. Federation of Pakistan and others [(2006) 94
    TAX 53 (S.C.Pak.) = 2006 PTD 555 = PTCL 2006 CL. 384 = 2006 SCMR 388].




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                                           810
Section 133                                                Income Tax Ordinance, 2001.

   Share of super tax payable by a registered firm could not be apportioned with
    reference to the share of the partner as computed under section 16(1)(b) of the
    Ordinance. – CIT, Zone-B, Lahore v. Iqbal A. Qazi, Lahore [(2001) 84 TAX 329
    (H.C.Lah.) = 2001 PTD 2603].
   Question already settled by the apex Court has to be answered accordingly. – CIT,
    Companies, Lahore v. Punjab Flour Milling Corporation Ltd., Lahore [(2001) 84 TAX
    95 (H.C.Lah.) = 2001 PTD 1409].
                              REFERENCE AGAINST ORDER U/S 156
   Order u/s 156 cannot be equated with one passed u/s 135. – CIT, Rawalpindi v. Mst.
    Shakeela Bano [(2003) 87 TAX 304 (H.C.Lah.) = 2002 PTD 1209].
   ITAT‟s refusal to rectify a mistake does not merge with its original order. – Hong
    Kong Chinese Restaurant, Main Boulevard Gulberg, Lahore v. ACIT, Circle 6, Lahore
    and another [2002 PTD 1878 (H.C.Lah.)].
   If an order simply refuses to rectify the original order, it stands alone and remains a
    different order independent of the one originally recorded u/s 135. – Hong Kong
    Chinese Restaurant, Main Boulevard Gulberg, Lahore v. ACIT, Circle 6, Lahore and
    another [2002 PTD 1878 (H.C.Lah.)].
   Three conditions to be kept in mind while considering if a question of law arising out
    of an order of Tribunal under section 135. – Hong Kong Chinese Restaurant, Main
    Boulevard Gulberg, Lahore v. ACIT, Circle 6, Lahore and another [2002 PTD 1878
    (H.C.Lah.)].
   If on rectification the rectified order of ITAT causes prejudice to the assessee or the
    revenue, an appeal is competent reading sections 156 and 135 together. – Hong
    Kong Chinese Restaurant, Main Boulevard Gulberg, Lahore v. ACIT, Circle 6, Lahore
    and another [2002 PTD 1878 (H.C.Lah.)].
   A successful application for rectification or suo motu action by ITAT amending
    earlier order u/s 135 becomes part of the original order. – Hong Kong Chinese
    Restaurant, Main Boulevard Gulberg, Lahore v. ACIT, Circle 6, Lahore and another
    [2002 PTD 1878 (H.C.Lah.)].
                     POWER OF HIGH COURT TO REFRAME
                 www.imranghazi.com QUESTION REFERRED
   Amendment in petition is allowed to determine the real controversy which would
    avoid multiplicity of litigation and advance the ends of justice. – Pioneer Cement
    Ltd., Jauharabad v. Assistant Collector of S. T., Sargodha and others [2005 PTR 79
    [S.C.Pak] = PTCL 2005 CL. 291].
   Question formulated not able to point out the real controversies between parties,
    High Court is empowered to reset the question. – CIT v. National Bank of Pakistan,
    Karachi [(1976) 34 TAX 158 (H.C.Kar.) = 1976 PTD 237 = PLD 1976 Kar. 1025].
   High Court is empowered to reframe the question proposed without changing its
    substance to resettle and restate the real issue. – Kashmir Cap. House, Lahore v.
    CIT, Lahore Zone, Lahore [(1979) 39 TAX 6 (H.C.Lah.) = 1979 PTD 108 = PLD 1979
    Lah. 162].
   While it is for Commissioner to state for Court‟s decision questions of law, if from
    case as stated by him another question of law arises, High Court is not precluded
    from deciding it. – CIT v. Indian Relief and Benefit Insurance Co. Ltd. [1939] 7 ITR
    341 (Sind).
   High Court can reframe question to bring out real controversy. – Narayan Atmaram
    Patkar v. CIT [1934] 2 ITR 486 (Bom.); CIT v. D.N. Mehta [1935] 3 ITR 147 (Bom.);
    Ganga Ram Balmokand v. CIT [1937] 5 ITR 464 (Lahore).
   High Court can reframe question to bring out real controversy. – Ditturam Idan v.
    CIT [1937] 5 ITR 502 (Lahore).
   High Court cannot resurrect a question answered in assessee‟s favour. – Chamber
    of Commerce v. CIT [1936] 4 ITR 397 (All.).




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                                           811
Chapter X, Procedure – Part III, Appeals                                     Section 133

                        WHEN HEARING OF REFERENCE CANNOT BE MADE
   Hearing of case could not be made unless party at whose instance questions had
    been referred to court was present and argued its case. – Mst. Farida Bibi v. ITO,
    Circle-14, Lahore [(2001) 84 TAX 186 (H.C.Lah.) = 2001 PTD 137].
   Hearing of case could not be made unless party at whose instance questions had
    been referred to court was present and argued its case. – Lalazar Glass & Silicate
    Factory, Faisalabad v. CIT, Faisalabad [(2001) 84 TAX 197 (H.C.Lah.) = 2001 PTD
    1502].
   It is open to High Court when hearing case on statement of Commissioner to decide
    what are questions of law which arise. – Biradhmal Lodha v. CIT [1934] 2 ITR 164
    (All.).
          REFERENCE APPLICATION FILED WITHOUT THE CERTIFIED COPY OF THE ORDER OF
                                 THE ITAT IS NOT MAINTAINABLE
   Impugned order set aside and case remanded to High Court for decision afresh in
    accordance with law. – CIT/WT v. Sarhad Development Authority, Peshawar
    [(2007) 96 TAX 198 (S.C.Pak.) = 2007 PTD 2012 = 2008 SCMR 593].
   Impugned judgment set aside and cases remanded to the High Court as case relied
    was distinguishable. – CIT, Karachi v. Occidental Petroleum Pakistan Ltd. [(2007)
    96 TAX 257 (S.C.Pak) = 2007 PTD 2297].
   Appeal to High Court would be competent only on question of law with reference to
    original order of Tribunal. – Ali Medicine Co., Faisalabad v. IAC of IT/WT,
    Range-V, Faisalabad [(2007) 95 TAX 231 (H.C.Lah.) = 2007 PTD 1770].
   Application u/s 136(2) has been dismissed observing that question proposed does not
    arise from the impugned order. – CIT, Lahore v. Taiwah Chinese Restaurant Pvt.
    Ltd., Lahore [2005 PTR 304 [H.C.Lah.] = (2005) 91 TAX 463; (2005) 92 TAX 30 =
    2005 PTD 1027].
   Neither general adjournment had been sought nor request specifying case or Bench
    had been made, therefore, adjournment did not merit acceptance. – CIT/WT,
    Companies Zone, Faisalabad v. Blue Sky Tour Bureau Pvt. Ltd. Faisalabad [(2005)
                  (H.C.Lah.) = 2005 PTD 2209].
    92 TAX 318www.imranghazi.com
   Finding of the Tribunal not been made with application of mind in accordance with
    law could not be sustained. – Habib Credit & Exchange Bank Limited v. DCIT
    [(2001) 83 TAX 494 (H.C.Kar.) = 2001 PTD 785].
   Failure to file certified copies of the order of Income Tax Appellate Tribunal has no
    consequence for reference. – Ch. Muhammad Din v. CIT, Zone-B, Lahore [(1993) 67
    TAX 256 (H.C.Lah.) = 1993 PTD 623].
   Reference application filed without the certified copy of the order of the Appellate
    Tribunal is not maintainable. – CIT, Lahore v. Fazal Muhammad [(1992) 65 TAX
    167 (H.C.Lah.) = 1993 PTD 635].
   Assessee filed two reference applications against the same order. One application
    presented alongwith certified copy of the impugned order and the other was without
    certified copy. Exemption could not be granted from filing of the certified copy of the
    impugned order. – Naseer Mughis Ltd. v. CIT, Lahore [(1991) 64 TAX 131
    (H.C.Kar.) = 1991 PTD 871].
   Appeal is continuation of original proceedings. – Chanda Motors, Karachi v. CBR
    [(1990) 62 TAX 67 (H.C.Kar.) = 1990 PTD 948].
   Reference Applications filed without certified copy is not maintainable. – CIT,
    Rawalpindi Zone, Rawalpindi v. Mian Javed A. Sheikh [(1989) 60 TAX 5 (H.C.Lah.)
    = 1989 PTD 525].
   Income Tax Appellate Tribunal having ordered remand of case on all issues raised by
    the assessee reference is not maintainable. – New Qaiser Engineering Company v.
    CIT,. Zone-A, Lahore and another [(1987) 56 TAX 79 (H.C.Lah.) = 1987 PTD 500 =
    PTCL 1988 CL. 16].
   Sub-sections (3) and (7) of section 66 of the 1922 Act. – Maharani Lakshrni Pat
    Mahadevi Garu Dowager Maharani of Jaipur v. CIT [1940] 8 ITR 489 (Oudh).




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                                          812
Section 133                                              Income Tax Ordinance, 2001.

           HEARING OF REFERENCE BY HIGH COURT/POWER OF HIGH COURT TO ADMIT
                                    ADDITIONAL GROUNDS
   Additional legal ground going to the root of the case can be taken at any stage. –
    Amin Spinning Mills and another v. Deputy Collector Central Excise and others
    [(2004) 90 TAX 191 (S.C.AJ&K) = 2004 PTD 2479].
   The writ petition is therefore, accepted in the manner that the learned Income Tax
    Appellate Tribunal is directed to dispose of aforementioned grounds which have
    erroneously been omitted at the time of original decision. – Dr. Zafar Haider v.
    ITAT and 2 others [2008 PTD 1940 (H.C.Lah.) = PTCL 2009 CL. 69].
   Admissibility of additional grounds during the pendency of case is a rule and not an
    exception. – Haji Mehr Din, Lahore v. CIT, Zone-A, Lahore [(2001) 84 TAX 471
    (H.C.Lah.) = 2002 PTD 541].
   When a reference is made at instance of an aggrieved assessee, the assessee should
    normally be heard first. – CIT v. P.V.R.M. Visalakshi Achi [1937] 5 ITR 448
    (Rangoon).
   Practice to be followed in reference under section 66 of the 1922 Act should be that
    the counsel for the assessee should begin and should also have a right to reply. –
    CIT v. Khemchand Ramdas [1933] 1 ITR 309 (Sind).
   High Court in hearing a reference cannot take into consideration evidence which
    was not before revenue authorities. – Shyam Chambers Ltd. v. CIT [1941] 9 ITR 224
    (Lahore).
   High Court has no power, in case of best judgment assessment, to direct
    Commissioner to state case on question whether assessment was made arbitrarily,
    recklessly or capriciously without Income Tax Officer exercising his judgment in
    matter. – Som Chand Maluk Chand v. CIT [1938] 6 ITR 297 (Lahore).
                    QUESTION ENTAILING SUBSTANTIAL LEGAL CONTROVERSY
   Only that question can be referred which entails substantial legal controversy. –
    CIT/WT, Faisalabad Zone v. Ibrahim and Sons, Faisalabad [(2003) 87 TAX 360
    (H.C.Lah.) = 2003 PTD 863].
   Only a question of law having some substance can be referred to High Court. –
    CIT/WT, Faisalabad Zone, Faisalabad v. Sh. Muhammad Ali [2002 PTD 1865
    (H.C.Lah)]. www.imranghazi.com
   Question not entailing any legal controversy cannot be referred to High Court. –
    CIT/WT, Companies Zone-III, Lahore v. Dr. Farooq Saeed Khan, C/o Farooq
    Hospital, Allama Iqbal Town, Lahore [2002 PTD 1870 (H.C.Lah)].
   Question entailing substantial legal controversy can only be entertained under
    section 136. – CIT, Zone-A, Lahore v. Al-Falah International, Lahore [(2001) 84 TAX
    447 (H.C.Lah.) = 2001 PTD 2213].
           REJECTION UNDER RULE 11 WITHOUT RESORTING TO RULE 15 DISAPPROVED
   Rejection of appeals for violation of Rule 11 of ITAT without resorting to rule 15
    disapproved. – CIT/WT, Faisalabad v. Fine Cloth House (Pvt) Ltd., Faisalabad
    [(2001) 84 TAX 440 (H.C.Lah.) = 2001 PTD 2411].
   Dismissal of appeal by the ITAT on violation of Rules without affording a chance to
    appellant to amend it disapproved. – CIT/WT, Companies Zone, Faisalabad v. Fine
    Cloth House (Pvt.) Ltd., Faisalabad [2001 PTD 2411 (H.C.Lah.)].
                                   CONDONATION OF DELAY
   CIT‟s refusal to admit revision petition by applying dictionary meaning to word
    “pending” in isolation disapproved. – Home Service Syndicate v. CIT [(2004) 89 TAX
    55 (H.C.Lah.) = 2003 PTD 2109].
   In revenue matters prayer for condonation by an assessee/ citizen should be
    considered sympathetically. – Saleem Akhtar v. CIT [(2002) 85 TAX 255 (H.C.Lah.)
    = 2002 PTD 1035].
                         BINDING FORCE OF HIGH COURT‟S JUDGMENT
   Judgment of High Court if not appealed against, becomes binding, and even if High
    Court has misconstrued law, there is no way to correct it. – CIT v. Tehri-Garhwal
    State [1934] 2 ITR 1 (PC).




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                                            813
Chapter X, Procedure – Part III, Appeals                                       Section 133

   It is clearly not desirable that conflicting decisions under Act which applies to whole
    of British India should be given by different High Courts on exactly similar facts. –
    CIT v. Jesingbhai Ugarchand [1938] 6 ITR 25 (Bom.).
   One High Court should normally follow view taken by another High Court. –
    Sarupchand Hukamchand, In re [1945] 13 ITR 245 (Bom.).
                                  WHO CAN MAKE A REFERENCE
   Only Commissioner who has jurisdiction over assessee can state a case. – Seth
    Govindrarn Gordhandas v. CIT [1941] 9 ITR 679 (Bom.).
   Others. – Dhanirarn Ram Gopal v. CIT [1936] 4 ITR 384 (Lahore).
                            APPLICATION FOR REFERENCE – GENERAL
   Several questions should not be combined in form of one question and questions
    should not be in abstract. – Gopiram Gobindram, In re [1936] 4 ITR 157 (Cal.).
   Question of law to be referred has to be specified by applicant. – Court of Wards,
    Majgawan Estate v. CIT [1945] 13 ITR 94 (Oudh).
   It is duty of Commissioner in a case stated, to set out specifically particular point of
    law upon which it is sought to obtain a determination from High Court. – CIT v.
    V.S.A.R. Firm [1935] 3 ITR 64 (Rangoon).
   In application for reference questions should be serially numbered. – CIT v.
    Maharajadhiraja Kameshwar Singh of Darbhanga [1933] 1 ITR 94 (PC).
   Statement of question of law in an abstract form is to be deprecated. – Raja
    Raghunandan Prasad Singh v. CIT [1933] 1 ITR 113 (PC).
   Question should not be in abstract form. – Charusila Dassi, In re [1937] 5 ITR 1 (Cal.).
                       LEAVE GRANTED TO CONSIDER LEGALITY OF ISSUANCE
   Leave granted to consider legality of issuance of notice u/s 62. – I.C.I. Pakistan Ltd.
    v. Federation of Pakistan through Secretary, Ministry of Finance and others [2007
    PTD 2306 (S.C.Pak.).
   Leave to appeal granted to examine whether appeal to High Court filed against
    original order was time-barred and could be lawfully maintained. – CIT,
                 www.imranghazi.com
    Companies-III, Karachi and others v. Pakistan Electric Fittings Manufacturing Co.
    Ltd. [(2007) 96 TAX 17 (S.C.Pak.)] = (2007) 96 TAX 199 = 2007 PTD 1933 = 2007
    SCMR 1026].
   A proceedings cannot be stayed on the issuance of leave to appeal unless the order
    appealed from stands suspended. – Harvest Topworth International, Lahore v.
    DCIT, Lahore and 2 others [(2006) 94 TAX 76 (H.C.Lah.) = 2006 PTD 538].
                                       LIMITATION PERIOD
   Additional question could not be raised after expiry of period of limitation for filing of
    reference application. – Superior Steel, Karachi v. CIT, Zone-D, Karachi and
    another [(2007) 96 TAX 65 (H.C.Kar.) = 2007 PTD 1577].
   Appeal before ITAT held to be within time limitation. – Sh. Muhammad Nadeem v.
    CIT, Sialkot [2006 PTR 308 [H.C.Lah.] = 2007 PTD 1 = PTCL 2006 CL. 492].
   Reference dismissed being time-barred. – CIT/WT, Zone-A, Peshawar v. Associated
    Industries Ltd. [2006 PTR 139 [H.C.Pesh.] = (2005) 91 TAX 187 = 2005 PTD 1314].
   Merely because a reference application lies against an order under section nobody
    can be allowed to circumvent the law relating to the period of limitation provided in
    subsection of section 136. – CIT v. Ateeq Riaz [(2002) 86 TAX 130 (H.C.Kar.) = 2002
    PTD 570].
   Alternate remedy is no bar where order/action is illegal on the face of record. –
    Tapal Energy Ltd. v. Federation of Pakistan [1999 PTD 4037 (H.C.Kar.) = PTCL
    2000 CL. 111].
   Where sufficient cause of delay is apparently lacking, whether appeal barred by
    limitation cannot be entertained. – CIT, Sukkur Zone, Sukkur, through DCIT v.
    Gatron (Industries) Ltd. [(1999) 79 TAX 161 (H.C.Quetta) = 1998 PTD 2769].




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                                           814
Section 133                                                 Income Tax Ordinance, 2001.

   Period of Limitation is mandatory. – CIT, Companies Zone, Lahore v. Mst. Khurshid
    Begum [(1995) 71 TAX 280 (H.C.Lah.) = 1995 PTD 1085].
   Period of limitation for making reference to the Tribunal or to the High Court should
    be governed by section 136(1). – CIT v. Aizaz Mansoor [(1993) 68 TAX 165
    (H.C.Lah.) = 1993 PTD 1236].
   Departmental appeal dismissed by the Appellate Tribunal and direct reference
    application was filed. Tribunal held that the reference application was barred by 50
    days, which was upheld. – CIT, Central Zone-C, Karachi v. Habib Bank Ltd.,
    Karachi [(1993) 67 TAX 60 (H.C.Kar.) = 1993 PTD 83].
   Tribunal order served on assessee on 4.7.1982 and application filed for making
    reference on 25.9.1982. Tribunal held that the application was time barred, held that
    application was within time. – CIT, South Zone, Karachi v. Noor Jehan S. All Bhai
    [(1992) 66 TAX 163 (H.C.Kar.) = 1992 PTD 1172].
   Additional questions could not be referred after the date expires. – N.A. Industries,
    Karachi v. CIT [(1992) 65 TAX 169 (H.C.Kar.) = 1992 PTD 50 = PTCL 1993 CL. 60].
   Barred by limitation applications are to be rejected. – CIT, Central Zone-B, Karachi
    v. Cynamid (Pak.) Ltd., Karachi [(1992) 65 TAX 130 (H.C.Kar.) = 1992 PTD 37=
    PTCL 1992 CL. 247].
   Tribunal held justified in refusing to condone the delay and dismissing the appeal as
    barred by time. – National Film Development Corporation Ltd., Islamabad CIT,
    Islamabad [(1991) 64 TAX 186 (H.C.Lah.) = 1991 PTD 1056].
   Reference application filed after 1.7.1979 should be governed by amended provision
    of section 136. – CIT, Central Zone-C, Karachi v. B. D. Avari [(1991) 64 TAX 110
    (H.C.Kar.) = 1991 PTD 839]; CIT, Central Zone-B, Karachi v. Grindwheel (Pak.) Ltd.,
    Karachi [(1991) 64 TAX 99 (H.C.Kar.) = 1991 PTD 859].
   Appeal filed beyond prescribed time is not maintainable. – CIT, Central Zone-A,
    Karachi v. S.M. Naseem Allawala [(1991) 64 TAX 31 (H.C.Kar.) = 1991 PTD 843].
   Reference application filed after sixty days is hit by limitation provided in the Act. –
    CIT v. ITAT and another [(1990) 61 TAX 55 (H.C.Kar.) = 1989 PTD 1214].
   Time barred reference application rejected by Tribunal did not suffer from any
                www.imranghazi.com
    jurisdictional order could not be disposed of under Article 199, Constitution of
    Pakistan, 1973. – CIT v. Asbestos Cement Industries [(1988) 58 TAX 60 (H.C.Kar.) =
    1988 PTD 227].
   Law of limitation is part of procedural law. – CIT v. Syeda Sarwat Sultana and
    others [(1986) 54 TAX 46 (H.C.Lah.) = 1986 PTD 368].
   Application not accompanied by prescribed reference fee is incompetent. – Khalid
    Cotton Factory, Multan v. ITO Circle-A, Multan [(1979) 40 TAX 60 (H.C.Lah.) = 1979
    PTD 429].
   Time consumed in seeking restoration of appeal dismissed by Tribunal for default of
    appearance should be excluded in counting the period of limitation. – Walayat Flour
    Mills, Lyallpur v. CIT, Rawalpindi [(1974) 29 TAX 31 (H.C.Lah.) = 1973 PTD 530].
   Tribunal is empowered to allow amendment or to frame a proper question of law. –
    CIT v. H. D. Allah Bux & Company [(1967) 16 TAX 38 (H.C.Kar.) = 1967 PTD 675 =
    PLD 1967 Kar. 807].
   Copy of order supplied after about two years of order of assessment. Time requisite
    for obtaining copy of order should be excluded in computing the period of limitation.
    – Haji Abdul Rahim Haji Abdullah and others v. CIT [(1967) 15 TAX 219 (H.C.Kar.)
    = 1967 PTD 615 = PLD 1967 Kar. 681].
   Time Limit for filing reference application can be extended. – Scindia Steam
    Navigation Company Limited v. Income Tax Appellate Tribunal [(1959) 1-TAX
    (III-342) (H.C.Kar.) & [(1960) 2-TAX (Suppl.–330) (H.C.Kar.) = 1959 PTD 127 = PLD
    1958 Kar. 516].




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                                           815
Chapter X, Procedure – Part III, Appeals                                     Section 133

   Service of order on domestic servant not valid, limitation not expired. – Muhammad
    Abdullah & Sons, Lahore v. CIT, Lahore [(1960)] 2-TAX (Suppl.–279) (H.C.Lah.) =
    1960 PTD 1253 = PLD 1955 Lah. 417].
   Tribunal held not exercised its discretion judicially in condoning delay. – Bombay
    Cloth House, Lahore v. CIT, Punjab & N.W.F.P. [(1960) 2-TAX (Suppl.–238)
    (H.C.Lah.) = 1960 PTD 1217 = PLD 1954 Lah. 50].
   Where dismissal of reference being barred by limitation application under section
    66(2) was not proper remedy. – Vikrampur Tea Industry Co. Ltd. v. CIT, East
    Bengal [(1960) 2-TAX (Suppl.–235) (H.C.Dacca) = 1960 PTD 301 = PLD 1957 Dacca
    571].
   Application filed within period prescribed under section 66(2) of the 1922 Act was
    valid even if affidavit supporting application was filed after period of limitation. –
    Nand Ram Chhotey LaI v. CIT [1947] 15 ITR 121 (All.).
   Words „served with notice of an order‟ occurring in section 66(2) of 1922 Act do not
    mean „served with a written notice or „served with a copy of the detailed order giving
    reasons‟. – Lala Har Kishen Das v. CIT [1934] 2 ITR 484 (Lahore).
         TIME LIMITATION FOR FILING APPEAL UNDER SECTION 136 VIS-À-VIS SECTION 5 OF
                                       LIMITATION ACT
   Leave to appeal refused as reasons advanced for extending period of limitation were
    not sufficient. – CIT/WT, Companies Zone, Islamabad v. Miss. Naheed Khan
    [(2007) 96 TAX 202 (S.C.Pak.) = 2007 PTD 2087 = 2008 SCMR 608].
   Where a judgment has not been conveyed to a party limitation starts running from
    the date of knowledge. – Qureshi Vegetable Ghee Mills Ltd. v. CIT, and 3 others
    [(2002) 85 TAX 397 (S.C.AJ&K) = 2002 PTD 399].
   Time limitation for filing appeal under section 136 vis-à-vis section 5 of Limitation
    Act. – CIT, Sukkur Zone, Sukkur, through D.C. of Income Tax v. Gatron (Industries)
    Ltd. [(1999) 79 TAX 161 (H.C.Quetta) = 1998 PTD 2769].
   Delay cannot be condoned where appellant fails to show sufficient cause for
    condonation. – CIT, Sukkur Zone, Sukkur, through D.C. of Income Tax v. Gatron
    (Industries) Ltd. [(1999) 79 TAX 161 (H.C.Quetta) = 1998 PTD 2769].
                 www.imranghazi.com
   Limitation Act does apply to section 136. – CIT, Sukkur Zone, Sukkur, through D.C.
    of Income Tax v. Gatron (Industries) Ltd. [(1999) 79 TAX 161 (H.C.Quetta) = 1998
    PTD 2769].
   Appellant filed reference application on 26.3.1980, heard on 29.8.1981 and ordered
    for reference on 30.9.1981 but despatched to the High Court after five years. Held
    reference badly time barred. – CIT, Zone-A, Lahore v. Malik Bashir Ahmad [(1996)
    73 TAX 238 (H.C.Lah.) = 1996 PTD 1136].
                                     FEE FOR REFERENCE
   Office of High Court reported on the completion certificate that the notices were not
    issued as the appellant had not provided the fresh addresses nor the process fee,
    hence appeal dismissed. – CIT/WT, Companies Zone, Faisalabad v. Blue Sky Tour
    Bureau Pvt. Ltd. Faisalabad [(2005) 92 TAX 318 (H.C.Lah.) = 2005 PTD 2209].
   Application for reference unaccompanied by fee is not complete; belated remittance
    of fee after limitation period does not cure defect. – Lala Ganesh Prasad, In re
    [1942] 10 ITR 286 (All.).
   Only one fee is payable on application to the Tribunal under section 66(1) of the 1922
    Act irrespective of the number of questions of law specified in the application. –
    A.R.A.R.S.M. Chokalingam Chetty v. CIT [1924] 1 ITC 392 (Rangoon).
                                     COST OF REFERENCE
   Amount deposited as a fee for a reference under section 66(2) of the 1922 Act is a part
    of costs of reference. – Lachman Das Babu Ram v. CIT [1933] 1 ITR 275 (All.); CIT
    v. J.I. Mime [1934] 2 ITR 25 (Rangoon); Mohammed Mohsin Maula Bakhsh v. CIT
    [1940] 8 ITR 247 (Lahore).




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                                          816
Section 133                                                Income Tax Ordinance, 2001.

   In a case in which assessee is ordered to pay costs, court can, if it considers that
    credit should be given to assessee for fee, give Commissioner his costs less Rs.100. –
    CIT v. Gopal Vaijnath Manohar [1936] 4 ITR 417 (Bom.).
   An unsuccessful assessee is not entitled to have costs payable to the Commissioner
    set off against deposit of Rs.100. – CIT v. Central Popular Assurance Co. Ltd. [1939]
    7 ITR 556 (Sind).
   Where the assessee‟s application under section 66(3) of the 1922 Act has been
    dismissed and he has been ordered to bear the costs of the reference, he cannot ask
    that these costs should come out of the deposit made for reference. – Balchand
    Jivandas v. CIT [1942] 10 ITR 507 (Sind).
   Costs of an application to direct Commissioner to state a case ought, in absence of
    special circumstances, to follow the event. – Central Talkies Circuit v. CIT [1939] 7
    ITR 628 (Bom.).
   Taxing Master is entitled to allow Commissioner costs of getting reference settled by
    Government Solicitor and Counsel for Commissioner. – Sir Chinnubhai Madhowlal
    v. CIT [1938] 6 ITR 148 (Bom.).
   While granting leave to appeal to the Privy Council the High Court cannot ask
    appellant to bear costs of the appeal of respondent also. – CIT v. S.L. Mathias [1938]
    6 ITR 8 (Mad.).
                                   WITHDRAWAL OF REFERENCE
   Where refund of fees has been taken it means application for reference is withdrawn,
    no application would then lie under section 256(2). – Rai Saheb Ram Dayal
    Agarwala, In re [1942] 10 ITR 93 (All.).
   Where under a vakalatnama pleader had power to effect any compromise, pleader
    could withdraw application for reference. – Mussammat Hashen Banu Bibi v. CIT
    [1940] 8 ITR 482 (Cal.).
   Position under the 1922 Act. – Ghulam Din & Co. v. CIT [1942] 10 ITR 89 (All.).
                    WHEN HIGH COURT CAN DECLINE TO ENTERTAIN REFERENCE
   High Court cannot be expected to decide a question if party concerned did not choose
    to press it. www.imranghazi.com others [(1985) 52 TAX 144 (S.C.Pak.) =
                 – Lassani Brothers v. CIT, and
    PLD 1985 SC 387 = PTCL 1986 CL. 68].
   Question of law declined. – Mahmood Nawaz v. CIT Companies Circle, Zone-B,
    Karachi [2006 PTR 45 [H.C.Kar.] = (2005) 92 TAX 228 = 2005 PTD 2035].
   Questions proposed decided in the light of already available judgements. – CIT
    (Appeals-I), Faisalabad v. Flora Food Industries Pvt. Ltd., Faisalabad [2005 PTR
    292 [H.C.Lah.] = (2005) 91 TAX 465 = 2005 PTD 1012];
   Every question of law need not be referred to High Court and that only question
    having some substance needed to be referred. – CIT/WT, Sialkot v. Popular
    Industries, S.I.E., Sialkot [2005 PTR 307 [H.C.Lah.] = (2005) 91 TAX 461 = 2005
    PTD 1038].
   No fresh finding is required when question is already decided by High Court. – CIT
    v. Agro General Insurance Co., Ltd. [2005 PTR 317 [H.C.Kar.] = (2005) 91 TAX 453 =
    2005 PTD 1047].
   A question settled by Apex court cannot be referred and pressed unless some
    distinction is clearly established. – CIT/WT, Companies Zone-III, Lahore v. Muslim
    Insurance Co. Ltd., Lahore [(2004) 90 TAX 266 (H.C.Lah.) = 2004 PTD 2707].
   Court answers only a question which was mooted before the Tribunal and was
    neither ruled upon by them or arose as a natural result of that order. – CIT,
    Rawalpindi v. Mst. Shakeela Bano [(2003) 87 TAX 304 (H.C.Lah.) = 2002 PTD 1209].
   Question of law is said to arise only which was either properly raised and ruled upon
    by the Tribunal or it otherwise arises as a natural consequence of the Tribunals
    order. – Al-Noor Poultry & Vegetable Farm, Rawalpindi v. ITAT and another
    [(2003) 87 TAX 307 (H.C.Lah.) = 2002 PTD 1484].




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                                            817
Chapter X, Procedure – Part III, Appeals                                      Section 133

   Only substantial question of law can be referred to High Court. – CIT, Companies-I,
    Karachi v. National Investment Trust Ltd., Karachi [(2003) 87 TAX 317 (H.C.Kar.) =
    2003 PTD 589].
   Questions referred to the High Court should be problematic or debatable and not
    obvious or simple point of law. – Japan Storage Battery Ltd. v. CIT, Companies
    Zone-I, Karachi [2003 PTD 2849 (H.C.Kar.)].
   Every question of law needs not be referred to the High Court and that only a
    question having some substance needs to be referred. – CIT/WT, Faisalabad Zone
    v. Ibrahim and Sons, Faisalabad [(2003) 87 TAX 360 (H.C.Kar.) = 2003 PTD 863].
   Factual controversy relating to G.P. rate cannot be entertained u/s 136. – Nylex
    (Private) Ltd. v. DCIT [2002 PTD 275 (H.C.Lah.)].
   Since admission of additional evidence was never raised before the Tribunal,
    question of law refused on this point. – CIT, Zone-C, Lahore v. Jinnah Cadet School,
    Lahore [(2002) 85 TAX 489 (H.C.Lah.) = 2002 PTD 462].
   Where no question of law arises, appeal under section 136 is not maintainable. –
    CIT/WT, Peshawar Zone, Peshawar v. Muhammad Zahoor, Palveshah Furniture,
    Abbotabad [(2001) 84 TAX 172 (H.C.Pesh.) = (2001) 83 TAX 27 = 2000 PTD 3400].
   Jurisdiction of officer or validity of notice could not be referred to High Court. – CIT,
    Central Zone, Lahore v. Qureshi Chemicals Store, Lahore [(2001) 84 TAX 333
    (H.C.Lah.) = 2001 PTD 2824].
   Question already decided by Supreme Court cannot be referred. – CIT v. Karim Silk
    Mills Ltd. [(2001) 83 TAX 498 (H.C.Kar.) = 2001 PTD 793].
   Question refused as order of ITAT held sound on merit. – CIT, Companies, Lahore v.
    Crescent Art Fabrics Ltd., Lahore [(2001) 83 TAX 567 (H.C.Lah.) = 2001 PTD 2553].
   Question not accurately and correctly framed is not referable to High Corut. – CIT,
    Central, Karachi v. Haji Ali Mohammad H.K. Dada, Karachi [(1969) 20 TAX 52
    (H.C.Kar.) = 1969 PTD 630 = PLD 1969 Kar. 614].
   Court is not bound, or indeed, entitled to propound for itself a question of law, which
    apparently the Commissioner decided not to press, either as an addition to or as an
    alternative to the only one set up by the Tribunal. – Hira Mills Ltd. v. ITO [1946] 14
                www.imranghazi.com
    ITR 417 (All.).
   Question already decided by apex court cannot be forwarded. – [(2004) 90 TAX 39
    (Trib.) = 2004 PTD 2417].
                               QUESTION OF LAW & FACT – GENERAL
   Only those questions can be referred which contain substantial legal issue. –
    CIT/WT, Sialkot Zone v. Maqbool Ahmed Gill [(2007) 96 TAX 165 (H.C.Lah.) = 2007
    PTD 1757].
   Matters related to facts do not fall in the jurisdiction of High Court. – Ch. Omar
    Nazir v. CIT, Zone-B, Lahore [2007 PTR 61 [H.C.Lah.] = 2006 PTD 2208 = PTCL
    2006 CL. 670].
   Question of law already resolved answered accordingly. – CIT, Companies Zone-I,
    Lahore v. Saritow Pakistan Limited [2006 PTR 1 [H.C.Lah.] = 2005 PTD 2386].
   Question of fact and question of law, distinction between. – CIT, Companies-III,
    Karachi v. Polypropylene Products Ltd. [2006 PTD 2419 (H.C.Kar.)].
   Accounts regularly maintained in a particular manner could not be rejected in a
    summary manner or on the generalized statement like lowness of gross profit. –
    Barry Brothers v. CIT [2001 PTD 2612 (H.C.Lah.)].
   Claim of export rebate is also allowable to the partner of the registered firm. – CIT,
    Gujranwala v. M. Anwar [(2001) 84 TAX 301 (H.C.Lah.) = 2001 PTD 2382].
   Findings of facts not involving any legal controversy not a subject matter of section
    136. – CIT, Zone-B, Lahore v. Lahore American Society School, Lahore [(2001) 84
    TAX 13 (H.C.Lah.) = 2001 PTD 1425].
   Question of fact cannot be raised. – CIT, East Zone, Karachi v. Mst. Mariam Bai
    Ahmad [(1989) 60 TAX 32 (H.C.Kar.) = 1989 PTD 576].




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                                          818
Section 133                                                Income Tax Ordinance, 2001.

   Question of facts cannot be referred to High Court. – CIT v. Shakil Express Ltd.
    Karachi [(1987) 56 TAX 95 (H.C.Kar.) = 1987 PTD 630].
   Changes in law substituting “reference” with “appeal” explained. – CIT v. Sultan
    Textile Mills [(1987) 56 TAX 92 (H.C.Kar.) = 1987 PTD 532].
   Where Tribunal‟s order neither perverse nor capricious question of law arises. – CIT
    v. Dabistan Ltd. [(1986) 54 TAX 40 (H.C.Kar.) = 1986 PTD 197].
   Objection against order of Income Tax Officer never raised before Tribunal and
    completely new point sought to be urged before High Court in reference, without
    notice to CIT, held such point cannot be entertained by High Court. – CIT v.
    Dadabhoy Silk Mills Ltd., Karachi [(1985) 51 TAX 222 (H.C.Kar.) = 1984 PTD 271].
   High Court cannot interfere if the fact finding authority acted without evidence. –
    Coronet Paints & Chemicals Ltd., Karachi v. CIT, Central, Karachi [(1984) 50 TAX
    115 (H.C.Kar.) = 1984 PTD 355].
   Points not raised before Appellate Tribunal cannot be considered by the High Court.
    – International Beverages Ltd. v. CIT, Karachi [(1984) 50 TAX 1 (H.C.Kar.) = 1984
    PTD 431].
   Tribunal‟s finding that the machine in which assessee was dealing was obsolete is a
    finding of fact and cannot be re-opened by High Court. – CIT, East Karachi v.
    International Computers & Tabulators, Ltd., Karachi [(1982) 45 TAX 204 (H.C.Kar.)
    = 1982 PTD 29 = PTCL 1983 CL. 333].
   Question framed assuming existence of agreement with assessee to the disregard of
    the finding recorded by Tribunal to the contrary. Held question posed was not
    arising out of Tribunal‟s order. – CIT, Rawalpindi Zone, Rawalpindi v. Safdar and
    Company, Gujrat [(1980) 42 TAX 171 (H.C.Lah.) = 1980 PTD 336].
   Finding of fact neither perverse, capricious or without any material are not open to
    review by High Court. – East Wing Industries, Sialkot v. CIT, Rawalpindi Zone,
    Rawalpindi [(1979) 40 TAX 62 (H.C.Lah.) = 1979 PTD 480].
   Question not raised before the Appellate Tribunal cannot be made subject matter of
    reference to High Court. – Kashmir Cap. House, Lahore v. CIT, Lahore Zone, Lahore
    [(1979) 39 TAX 6 (H.C.Lah.) = 1979 PTD 108 = PLD 1979 Lah. 162].

                 www.imranghazi.com
    Question of fact decided by the Tribunal on the basis of tangible evidence produced
    before the Income Tax Authorities cannot be determined by High Court. – Mst.
    Khatija Bai v. CIT, Karachi West, Karachi [(1978) 37 TAX 351 (H.C.Kar.) = 1978
    PTD 109 = PLD 1978 Kar. 395].
   Tribunal‟s finding based on cogent reasons and proved facts do not give rise to
    question of law. – Rajput Metal Works Ltd., Gujranwala v. CIT, Rawalpindi [(1976)
    33 TAX 1 (H.C.Lah.) = 1976 PTD 119 = PLD 1976 Lah. 223].
   Tribunal‟s finding based on grounds which was not the basis of assessment order
    held that not sustainable in law. – Star Re-rolling Mills Ltd., Karachi v. CIT,
    Karachi [(1967) 16 TAX 34 (H.C.Kar.)].
   Question raised before High Court related to disputed question of fact cannot be
    answered on the basis of affidavit. – Chittagong Engineering and Electric Supply
    Co. Ltd., Chittagong v. ITO, Companies Circle IV, Chittagong and others [(1964) 10
    TAX 56 (H.C.Dacca) = 1964 PTD 739 = PLD 1965 Dacca 11].
            QUESTION NOT ARISING OUT OF TRIBUNAL‟S ORDER CANNOT BE REFERRED
   Question of law if not raised, argued or decided by the Tribunal, could not be said to
    have arisen out of the said order. – Nida-i-Millat Pvt. Ltd., Lahore v. CIT, Zone-I,
    Lahore [(2006) 93 TAX 413 (S.C.Pak.) = 2006 PTD 1085 = 2006 SCMR 526].
   Questions not arising from Tribunal‟s order cannot be entertained. – CIT, Lahore v.
    Taiwah Chinese Restaurant Pvt. Ltd., Lahore [2005 PTR 304 [H.C.Lah.] = (2005) 91
    TAX 463; (2005) 92 TAX 30 = 2005 PTD 1027].
   High Court can only consider the question that arises from the ITAT order. – Urooj
    (Pvt.) Ltd., Karachi v. DCIT and 2 others [(2004) 89 TAX 249 (H.C.Kar.) = 2004 PTD
    195].




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                                            819
Chapter X, Procedure – Part III, Appeals                                       Section 133

   Court in reference jurisdiction proceeds only on the findings recorded and answers a
    question which arises out of the Tribunal. – CIT, Rawalpindi v. Mst. Shakeela Bano
    [(2003) 87 TAX 304 (H.C.Lah.) = 2002 PTD 1209].
   Every revenue and appellate authority is under obligation to give reason for its
    directions. – Coca Cola Export Corporation v. IAC of Income Tax, Lahore [(2003) 87
    TAX 162 (H.C.Lah.) = 2002 PTD 1496]; Millat Tractors Ltd., Lahore v. CIT/WT,
    Coys, Zone-I, Lahore [2002 PTD 1201 (H.C.Lah.)].
   Only a question of law arising out of the order of the Tribunal can be a subject of
    appeal in the High Court. – CIT/WT, Lahore v. Margala Textile Mills Limited,
    Lahore [(2002) 86 TAX 75 (H.C.Lah.) = 2002 PTD 327].
   Question not arising out of the order of the Tribunal does not merit any
    consideration. – Schowk International (Pvt.) Ltd. v. CIT [(2002) 86 TAX 269
    (H.C.Lah.) = 2002 PTD 498)].
   Tribunal should seek advice from High Court in the best possible manner for a legal
    preposition by stating the facts that gave rise to that preposition. – CIT v. Bashir
    Jamil & Brothers Ltd. [(2002) 85 TAX 273 (H.C.Lah.) = 2002 PTD 557].
   Where findings of fact are not challenged no question of law can be said to have
    arisen out of the order of the Tribunal. – Shahzad Izhar (Pvt.) Ltd., Faisalabad v.
    DCIT/WT, Faisalabad [(2001) 84 TAX 346 (H.C.Lah.) = 2001 PTD 2198].
   Question of law not arising from ITAT‟s order cannot be answered. – H.M.
    Investments (Pvt.) Ltd., Lahore v. CIT, Coys. Zone-I, Lahore [2001 PTD 2565 (H.C.Lah.)].
   Order of ITAT held on law and merit. – CIT, Companies, Lahore v. Crescent Art
    Fabric Limited, Lahore [2001 PTD 2553 (H.C.Lah.)].
   Only a question of law arising out of the order of the Tribunal can be a subject matter
    of reference under section 136. – BILZ (Pvt.) Limited, Multan v. DCIT, Companies
    Circle-01, Multan and another. [(2001) 84 TAX 508 (H.C.Lah.) = 2001 PTD 2337].
   High Court can interfere in finding of facts by Tribunal, if decided recklessly, without
    any material and applying a wrong principle. – United Bank of India Ltd., v. CIT,
    Dacca [(1960) 2-TAX (III-454) (H.C.Dacca) = 1960 PTD 768 = PLD 1960 Dacca 621].
                declined to answer question as
    High Court www.imranghazi.com the same was not arising out of ITAT‟s
    order. – CIT, Zone-A, Lahore v. Mst. Iqbal Begum [(2001) 84 TAX 7 (H.C.Lah.) =
    2001 PTD 1414].
   Question of fact or those not arising from the order of ITAT cannot be decided under
    section 136. – CIT, Central Zone, Lahore v. Tauheed Elahi [2001 PTD 1329
    (H.C.Lah.)].
   In case High Court declines a question not arising out of ITAT‟s order, the question of
    giving fitness certificate under section 137 does not arise. – Shafsal Enterprises, Lahore
    v. CIT, Zone-B, Lahore [(2001) 83 TAX 437 (H.C.Lah.) = 2001 PTD 1153].
   Question of law held not arising from ITAT‟s order. – CIT v. Shirazi Investment
    [(2001) 83 TAX 518 (H.C.Kar.) = 2001 PTD 999].
   Question referred to the High Court by the Department did not arise out of the
    Tribunal‟s order hence could not be allowed to be raised under section 66(2). – CIT,
    Central Zone, Karachi v. Mustafa Gokal [(1989) 59 TAX 77 (H.C.Kar.) = 1989 PTD
    130].
   Plea neither raised by applicant before Tribunal nor arose out of Tribunal‟s order
    could not form subject-matter of reference. – CIT, Central Karachi v. Haji Moulabux
    & Sons [(1987) 56 TAX 67 (H.C.Kar.) = 1987 PTD 492].
   Tribunal‟s finding that proceeding under section 34 rightly initiated were not
    challenged by the Department before Tribunal. Department‟s application under
    section 66(1) was dismissed. – CIT, Central Zone-B, Karachi v. Soomer Saleh
    Foundation, Karachi [(1987) 56 TAX 33 (H.C.Kar.) = 1987 PTD 184 = PTCL 1987 CL.
    350].




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                                           820
Section 133                                                Income Tax Ordinance, 2001.

   Question whether or not certain materials were considered or utilised by Tribunal
    behind the back of the applicant held to be a controversial question of fact and
    question of law does not arise. – M.S. Hameed Masood and Associates, Multan v.
    CIT, Lahore [(1979) 39 TAX 176 (H.C.Lah.) = 1979 PTD 252 = 1994 PTD 927 = PLD
    1979 Lah. 453].
   Question that Tribunal was not justified in giving its finding without considering the
    materials placed before it held not arises out of Tribunal‟s order. – M.S. Hameed
    Masood and Associates, Multan v. CIT, Lahore [(1979) 39 TAX 176 (H.C.Lah.) = 1979
    PTD 252 = 1994 PTD 927 = PLD 1979 Lah. 453].
   Tribunal‟s finding that some of the transactions were of shady and doubtful
    character and the rest were not so. Held a question of law does not arise. – CIT,
    Karachi v. Ismail Brothers Limited, Karachi [(1967) 15 TAX 275 (H.C.Kar.)].
   Question whether the co-ownership between the existing partner and legal
    representative of the deceased partner could constitute a firm. Held not arises out of
    Tribunal‟s order. – CIT v. Bliss and Company [(1967) 15 TAX 258 (H.C.Kar.)].
   Tribunal allowed relief observing that “assessee has not come up for claim of
    deduction under section 10(2)(ii) of 1922 Act” held section 10(2)(ii) was applicable or
    not does arise directly out of Tribunal‟s order. – CIT, East Pakistan Dacca v.
    Gulistan Cinema and Company, Dacca [(1967) 15 TAX 245 (H.C.Dacca) = 1967 PTD
    214 = PLD 1967 Dacca 500].
   Question neither raised nor discussed by Appellate Tribunal held not arises out of
    Tribunal‟s order. – Shamim and Company, Dacca v. CIT, East Pakistan; Dacca
    [(1967) 15 TAX 177 (H.C.Dacca) = 1967 PTD 210 = PLD 1967 Dacca 488].
   Decision given by Appellate Tribunal on the basis of certain material that was not
    disclosed to assessee giving him opportunity to rebut held that valid in law. –
    Superior Furniture Company v. CIT [(1967) 15 TAX 56 (H.C.Kar.) = 1967 PTD 261].
   Finding of Appellate Tribunal that two activities of the assessee constitute same
    business being inter-connected and inter-dependent. Question of law not arising out
    of Tribunal‟s order. – CIT v. Pakistan Refrigeration Limited, Peshawar [(1966) 13
    TAX 218 (H.C.Lah.) = 1966 PTD 291 = PLD 1966 Lah. 513].
   Only a question raised before Tribunal can be referred to High Court. – R.S.Munshi
    Gulab Singh & Sons v. CIT, Punjab & N.W.F.P. [(1960) 2-TAX (Suppl.–246)
                www.imranghazi.com
    (H.C.Lah.) = 1960 PTD 1250].
   Question not raised before the Tribunal could not be referred to the High Court. –
    Pokardas Dwarkadas, Karachi v. CIT, Sind and Bluchistan [(1960) 2-TAX
    (Suppl.–14) (H.C.Kar.) = 1960 PTD 786 = PLD 1957 Kar. 68].
   No question of law can be referred unless it arises out of order of Tribunal. –
    Srirnathi Chanan Devi, In re [1944] 12 ITR 153 (Lahore).
   When a question of law was neither raised before Tribunal nor considered by it, it is
    not a question arising out of its order notwithstanding that it may arise on findings
    given by it. – A.Abboy Chetty & Co. v. CIT [1947] 15 ITR 442 (Mad.).
   Court may decide a question, though not referred, arising from question referred. –
    CIT v. Indian Relief & Benefit Insurance Co. Ltd. (No. 1) [1939] 7 ITR 341 (Sind).
   If questions of law are based on incorrect assumption and do not really arise, they
    need not be referred. – H.M. Istifa Khan v. CIT [1942] HI ITR 435 (Oudh).
                                      QUESTION OF FACT
   Question of law cannot be extended if facts remain the same. – Amin Spinning Mills
    and another v. Deputy Collector Central Excise and others [(2004) 90 TAX 191
    (S.C.AJ&K) = 2004 PTD 2479].
   Question of reliability of account is a question of fact and primarily falls for
    determination of the Income Tax Authorities. – Miss Assia v. ITAT, etc. [(1980) 41
    TAX 1 (S.C.Pak.) = PLD 1979 SC 949].
   Omission of the Draftsman is to be ignored in the presence of the facts. – Royal Edu
    Care v. Assistant CIT/Taxation Officer, Lahore [2008 PTD 1998 (H.C.Lah.) = PTCL
    2009 CL. 90 = PLJ 2009 Lahore 84].
   High Court in its advisory jurisdiction refused to adjudicate question raised in
    reference based on finding of fact rendered by Tribunal. – Superior Steel, Karachi v.
    CIT, Zone-D, Karachi and another [(2007) 96 TAX 65 (H.C.Kar.) = 2007 PTD 1577].




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                                           821
Chapter X, Procedure – Part III, Appeals                                    Section 133

   The fact of the service of notice or otherwise is a question of fact and cannot be
    adjudicated upon by this Court while exercising its instant jurisdiction. – CIT/WT,
    Companies Zone-III, Lahore v. Mian Ijaz Ahmad [(2007) 95 TAX 326 (H.C.Lah.) =
    2007 PTD 774 = PTCL 2007 CL. 532].
   High Court refused to answer questions which were question of fact and no
    allegation had been made in the questions that decision of the Tribunal was based on
    misreading of facts or distortion of evidence.          – Independent Newspapers
    Corporation Pvt. Ltd., Karachi v. CIT, Companies-II, Karachi [(2007) 96 TAX 207
    (H.C.Kar.) = 2007 PTD 1720].
   Exercising advisory jurisdiction the High Court is not supposed to probe into a
    question of fact not raised before the ITAT. – Ghulam Mustafa Jatoi, Karachi v.
    CIT, Central Zone-B, Karachi [(2006) 94 TAX 263 (H.C.Kar.) = 2006 PTD 1647].
   Enquiry into factual controversy is not subject matter of section 136. – CIT/WT,
    Faisalabad v. Nusrat Corporation, Faisalabad [2006 PTD 2660 (H.C.Lah.)].
   Question referred relating to factual controversy, High Court declined to answer
    such questions. – CIT, Companies Zone-I, Lahore v. Khalifa Syed Saif Ullah c/o
    Mehboob Industries, Lahore [2006 PTD 2669 (H.C.Lah.)].
   Findings of ITAT were on factual premises and did not call for any interference. No
    question of law arose in such matters, therefore, High Court declined to interfere in
    the judgment passed by ITAT. – CIT, Zone-A, Lahore v. Mst. Khair-un-Nisa [(2007)
    95 TAX 257 (H.C.Lah.) = 2006 PTD 2691].
   Finding whether a single transaction of sale amounted to an adventure in the nature
    of trade was purely a question of fact, which had to be ascertained on the basis of
    factual inquiry to such effect. – CIT, Zone-A, Lahore v. Mst. Khair-un-Nisa [(2007)
    95 TAX 257 (H.C.Lah.) = 2006 PTD 2691].
   Jurisdiction of High Court could only be invoked under section 136(2) of Income Tax
    Ordinance, 1979 on the question of law and not on questions of facts involving
    inquiry of the nature which had been held and finalized by the Tribunal. – Major
    Retd. Pervaiz Iqbal v. CIT/WT, Sialkot [(2007) 95 TAX 137 (H.C.Lah.) = 2006 PTD
    2734].
   High Courtwww.imranghazi.comappeal involving factual controversy. –
                  would decline to entertain an
    CIT, Faisalabad v. Rahim Cotton Factory, Faisalabad [2006 PTD 1525 (H.C.Lah.) =
    PTCL 2006 CL. 615].
   No question would arise out of such order as consideration of facts of the case and a
    ruling thereupon by High Court would be out of place. – Services Industries Limited
    v. CIT, Zone-III, Lahore [(2006) 94 TAX 237 (H.C.Lah.) = 2006 PTD 67 = PTCL 2007
    CL. 63].
   Finding recorded by ITAT that there was no slump sale in favour of assessee was a
    question of fact, which was not referable for opinion of High Court under section
    136(2). – Pakistan Paper Products Ltd. v. CIT [(2006) 93 TAX 424 (H.C.Kar.) = 2006
    PTD 1027].
   Question of fact could not be converted into a question of law on the idea that
    Tribunal itself ought to have probed into the matter to find out the truth. – Rao
    Talib Ali Khan v. ITAT, Lahore and 2 others [2006 PTD 327 (H.C.Lah.)].
   High Court has no jurisdiction to re-inquire into and re-determine question of fact in
    exercise of its advisory jurisdiction under the Income Tax law. – Sardar Ali Bhatti v.
    ITAT, Lahore and another [(2006) 93 TAX 213 (H.C.Lah.) = 2006 PTD 83].
   Holding that certain investment was considered in the case of AOP in a particular
    year is a question of fact. – CIT/WT, Faisalabad Zone, Faisalabad v. Ghulam
    Shabbir & Co. [2005 PTD 1833 (H.C.Lah.)].
   Acceptance of a return filed under Self Assessment Scheme or otherwise is
    necessarily a question of fact and not law. – CIT/WT, Sialkot v. Popular Industries,
    S.I.E., Sialkot [2005 PTR 307 [H.C.Lah.] = (2005) 91 TAX 461 = 2005 PTD 1038].
   The question of qualifying a return under self-assessment scheme is necessarily that
    of a fact and not law. – CIT/WT, Gujranwala v. Aleem Ullah and Co.,




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                                          822
Section 133                                                Income Tax Ordinance, 2001.

    Proprietor Ehsan Ullah, Ghalla Mandi, Wazirabad [(2004) 89 TAX 302 (H.C.Lah.) =
    2003 PTD 1850].
   Qualification of a case under SAS is a question of fact. – CIT/WT, Lahore Zone-B,
    Lahore v. Noor Trading Company, Pattoki [(2003) 87 TAX 102 (H.C.Lah.) = 2002
    PTD 1560]; CIT/WT, Faisalabad Zone, Faisalabad v. New Mehboob Finishing and
    Bleaching Plant, Samundari Road, Faisalabad [2002 PTD 2802 (H.C.Lah.)];
    CIT/WT, Faisalabad Zone, Faisalabad v. Gulshan Trading Co., Faisalabad [2002
    PTD 2829 (H.C.Lah.)].
   The question if an assessee derived income from a particular business in a particular
    assessment period is purely a question of fact. – Al-Noor Poultry & Vegetable Farm,
    Rawalpindi v. ITAT and another [(2003) 87 TAX 307 (H.C.Lah.) = 2002 PTD 1484].
   Question as to the availability of an information justifying re-opening of assessment
    is predominantly a question of fact. – Al-Noor Poultry & Vegetable Farm,
    Rawalpindi v. ITAT and another [(2003) 87 TAX 307 (H.C.Lah.) = 2002 PTD 1484];
    CIT v. Sh. Muhammad Yaqoob, Faisalabad [(2003) 87 TAX 98 (H.C.Lah.) = 2002
    PTD 1448].
   Qualification of a return under Self Assessment Scheme is not a question of law. –
    CIT/WT, Faisalabad Zone v. Ibrahim and Sons, Faisalabad [(2003) 87 TAX 360
    (H.C.Kar.) = 2003 PTD 863].
   Determination of fact of payment made in a particular manner or not does not give rise
    to a question of law. – Madina Traders, Main Bazar, Sheikhupura v. CIT/WT,
    Zone-C, Lahore [(2002) 86 TAX 228 (H.C.Lah.) = 2002 PTD 1026].
   The question whether the taxpayer was a manufacturer or selling sweets on
    commission basis is a question of fact. – CIT, Companies, Lahore v. Nirala (Pvt.)
    Ltd., Lahore [(2002) 85 TAX 467 (H.C.Lah.) = 2002 PTD 464].
   Issue regarding nature of a particular amount introduced in the books of account is a
    question of fact. – CIT/WT, Faisalabad v. Mohsin & Co. Rice Dealer, Lahore Road,
    Chiniot [2002 PTD 1858 (H.C.Lah)].
   Existence of a genuine firm or otherwise is a question of fact. – CIT, Zone-A, Lahore
    v. Afzal Brothers, Lahore [(2001) 84 TAX 3 (H.C.Lah.) = 2001 PTD 1444].

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    Tribunal necessarily recorded finding of fact that the partner of the firm was a
    professional and counsel for Revenue had not challenged these findings of fact,
    therefore, answering of question was declined on ground of its being predominantly a
    question of fact. – CIT, Zone-B, Lahore v. Hakam Qureshi, Law Associate, Lahore
    [(2001) 84 TAX 175 (H.C.Lah.) = 2001 PTD 2133].
   Proposition that registration of a firm was necessary is a question of fact. – CIT,
    Lahore v. Alpha Mian & Co., Lahore [(2001) 84 TAX 97 (H.C.Lah.) = 2001 PTD
    1406].
   Determination of G.P. is not question of law. – CIT, Faisalabad v. Noorani Ghazi
    Poultry Hatchery and Breeding Farm, Faisalabad [(2001) 84 TAX 15 (H.C.Lah.) =
    2001 PTD 1397].
   Question not raising any legal controversy cannot be taken up under section 136. –
    Crescent Art Fabrics (Pvt.) Ltd., Lahore v. CIT, Companies, Lahore [(2001) 83 TAX 569
    (H.C.Lah.) = 2001 PTD 1386].
   Addition held to be wrongly made in the hands of company rather than directors. –
    Crescent Art Fabrics (Pvt.) Ltd., Lahore v. CIT, Companies, Lahore [(2001) 83 TAX
    569 (H.C.Lah.) = 2001 PTD 1386].
   Factual controversy cannot be subject matter of section 136. – Nafees Cotton Mills,
    Ltd., Lahore v. ITAT, Lahore and 2 others [2001 PTD 1380 (H.C.Lah.)].
   Availability of a definite information warranting initiation of re-assessment
    proceedings is necessarily a question of fact. – CIT, Companies, Lahore v. Punjab
    Small Industries Corporation, Lahore [(2001) 84 TAX 512 (H.C.Lah.) = 2001 PTD
    2333].




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                                            823
Chapter X, Procedure – Part III, Appeals                                      Section 133

   The issue of a particular rate of profit is not possible in a particular trade is not a
    question of law. – Alam Sher & Brothers Contractors, Mianwali v. CIT, Zone,
    Faisalabad [(2001) 84 TAX 517 (H.C.Lah.) = 2001 PTD 2251].
   Tribunal was right in hold that the gratuity payable to employees is an allowable
    expense. – Nida-i-Millat (Pvt.) Ltd. v. CIT [(2001) 83 TAX 547 (H.C.Lah.) = 2001
    PTD 443].
   Tribunal was right in holding that rental income from property was not assessable
    under section 10 instead of section 9 of 1922 Act. – CIT v. Nawa-e-Waqt
    Publications Ltd. [(2001) 83 TAX 293 (H.C.Lah.) = 2001 PTD 455].
   Revenue expenditure held to be worked out properly. – CIT v. Al-Ghazi Tractors
    Ltd., Lahore [(2001) 83 TAX 47 (H.C.Lah.) = 2001 PTD 789].
   Departmental appeal dismissed as no law point arises. – CIT v. Abdul Rashid,
    Rawalpindi [(2001) 83 TAX 22 (H.C.Lah.) = 2000 PTD 3365].
   G.P. rate on trading account and manufacturing account is a question of fact. –
    Farooq Interprises v. CIT, and another [(1996) 73 TAX 245 (H.C.Lah.) = 1996 PTD
    1110].
   Tribunal finding that the assessee was carrying on business of re-rolling on own
    account as well as on account of others is a question of fact. – CIT, Lahore Zone,
    Lahore v. Kamran Steel Re-rolling Mills [(1989) 60 TAX 13 (H.C.Lah.) = 1989 PTD
    521].
   Assessee claimed loss as a hedging loss on the basis of previous practice, Income Tax
    Officer disallowed the same on the ground that it was a speculative loss. Held a
    question of fact. – CIT, Central Zone-C, Karachi v. Hussain Industries Ltd. [(1989)
    60 TAX 7 (H.C.Kar.) = 1989 PTD 519].
   Determination of G.P. rate is a question of facts. – Afzal Brothers Industries v. The
    ITAT, etc. [(1988) 58 TAX 139 (H.C.Lah.) = 1988 PTD 998].
   Reduction of market value by Tribunal is a question of fact. – CIT, Central-A, Karachi v.
    Amsons Dairies & Food Ltd. [(1987) 56 TAX 118 (H.C.Kar.) = 1987 PTD 656].
   Concurrent findings of Income Tax Officer, AAC and Tribunal that the firm of which
                  was sought was not genuine is
    registrationwww.imranghazi.compurely a finding of fact. – Shambhumal
    Hiranand & Co. v. CIT, West Karachi [(1982) 46 TAX 120 (H.C.Kar.) = 1982 PTD 206
    = PLD 1982 Kar. 691].
   Question whether or not an agreement is collusive is a question of fact. – Mian
    Ghulam Murtaza v. CIT, Lahore Zone, Lahore [(1982) 45 TAX 21 (H.C.Lah.) = 1981
    PTD 180].
   Tribunal‟s finding that fixed deposits belonged to the assessee and not to his children
    is a question of fact. – Sh. Muhammad Din v. CIT [(1981) 43 TAX 163 (H.C.Lah.) =
    1981 PTD 195].
   Tribunal‟s finding that a certain transaction is „benami‟ is normally one of fact. –
    Maulvi Brothers, Lyallpur v. CIT, Rawalpindi [(1980) 42 TAX 33 (H.C.Lah.) = 1980
    PTD 48].
   Determination of reasonableness of commission to employee is a question of fact. –
    Andrew & Co. (Pak) Ltd., Karachi v. CIT, Karachi [(1967) 16 TAX 68 (H.C.Kar.)].
   Finding based on sufficient material that from the method of accounting employed
    profits could not be properly deduced held no questions of law arises. – Pokardas
    Dwarkadas, Karachi v. CIT, Karachi, Sind and Baluchistan [(1960) 2-TAX
    (Suppl.–156) (H.C.Kar.) = 1960 PTD 780 = PLD 1957 Kar. 61].
   If accounts have been rejected by giving sound reasons, it is a question of fact and no
    reference lies. – Makhan Mal Ram Chand v. CIT [1941] 9 ITR 330 (Peshawar).
                      QUESTION OF FACT – HIGH COURT CANNOT INTERFERE
   High Court cannot interfere in matters related to facts alone. – CIT, Central Zone A,
    Karachi v. Printers Combined Limited [(1986) 54 TAX 51 (S.C.Pak.)].
   Question of fact – High Court cannot interfere. – Mohammad Akbar, Muhammad
    Afzal v. Income Tax Appellate Tribunal [(1974) 30 TAX 45 (S.C.Pak.)].




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                                          824
Section 133                                                Income Tax Ordinance, 2001.

   Question of fact cannot be entertained u/s 136. – CIT, Companies Zone-I, Lahore v.
    Sufi Muhammad Saleem [2006 PTR 27 [H.C.Lah.] = (2006) 93 TAX 13 = 2005 PTD
    2427].
   Pure question of fact not entertained. – CIT, Faisalabad v. Rashid Textile
    [2006 PTR 149 [H.C.Lah.] = (2005) 92 TAX 25 = 2005 PTD 1456].
   Finding of fact by Tribunal cannot be interfered by High Court in its advisory
    jurisdiction. – CIT/WT, Zone-A, Eastern Region, Lahore v. Muhammad Riaz
    [(2006) 93 TAX 139 (H.C.Lah.) = 2005 PTD 2281].
   Courts declined to answer question which had not arisen from the current order of
    Tribunal. – CIT, Special Zone, Lahore v. Attock Textile Mills Ltd., Faisalabad [2005
    PTD 2285 (H.C.Lah.)].
   On question of fact High Court cannot entertain reference u/s 136. – Syed Akhtar
    Ahsan through Legal heir v. ITO, Circle 05, Zone-B, Lahore and 4 others [2005 PTR
    268 [H.C.Lah.] = 2005 PTD 858].
   Where a question is not ruled upon by the Tribunal jurisdiction u/s 136 cannot be
    exercised by High Court. – CIT/WT, Sialkot Zone, Sialkot v. Glorious Mercantile
    Corporation Pvt. Ltd., Sialkot [(2005) 91 TAX 248 (H.C.Lah.) = 2005 PTD 192].
   In case of clear finding of fact, case cannot be referred. – CIT/WT, Companies Zone,
    Faisalabad v. Bashir Printing Industries (Pvt.) Ltd., Faisalabad [(2004) 89 TAX 321
    (H.C.Lah.) = 2003 PTD 1803].
   Where ITAT has given its finding on appreciation of facts, High Court refuses to
    entertain Departments appeal. – CIT v. BCCI Overseas Ltd. [(2002) 86 TAX 224
    (H.C.Kar.) = 2002 PTD 1197].
   Finding of facts by ITAT cannot be challenged under section 136. – Colony Sarhad
    Textile Mills Limited v. CIT, Rawalpindi [(2001) 84 TAX 198 (H.C.Pesh.) = 2001 PTD
    1504].
   Findings of facts by ITAT cannot be challenged under section 136. – CIT, Faisalabad v.
    Farooq Akram Cheema [(2001) 84 TAX 72 (H.C.Lah.) = 2001 PTD 1534].
   Concurrent finding of the Appellate Assistant Commissioner and Appellate Tribunal
    that genuine partnership firm was in existence and was entitled to registration is
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    finding of fact neither contrary to evidence on record nor vitiated by misreading of
    evidence or perverse appreciation of evidence and has to be accepted as binding. –
    CIT, Karachi v. Hussain Corporation, Karachi [(1983) 48 TAX 150 (H.C.Kar.) = 1983
    PTD 289].
   Where Tribunal‟s finding based on materials before it, the High Court justified to
    interfere. – Haider Ali Rajab Ali & Company v. CIT [(1980) 41 TAX 158 (H.C.Kar.) =
    1980 PTD 1].
   Correct finding of fact cannot be assailed under section 136 of the 1979 Ordinance. –
    Sainrapt & Et. Brice, Karachi v. CIT, West Karachi [(1979) 40 TAX 116 (H.C.Kar.) =
    1979 PTD 354 = PLD 1979 Kar. 591]
   Question whether the assessees were carrying on business together or not is
    pre-eminently a question of fact. – ITAT v. Pir Faiz Rasul, Gujrat [(1979) 39 TAX 32
    (H.C.Lah.) = 1980 PTD 345].
   Question whether applicant has established that amount invested by him was the
    sale proceeds of jewellery or was his earning from undisclosed source is a question of
    fact. – Haji Adam Noor Mohammad v. CIT [(1967) 16 TAX 123 (H.C.Kar.)].
                                    QUESTION OF LAW ARISES
   Question of law - leave to appeal refused. – Collector ST&CE West, Karachi v. Amsons
    Textile Mills, Karachi [2005 PTR 39 [S.C.Pak] = (2005) 91 TAX 333 = 2005 PTD 880].
   Non-exercise or mis-exercise of jurisdiction by a forum/tribunal is relatable to the
    question of law. – CIT, Companies Zone-II, Karachi v. Sindh Engineering (Pvt.)
    Limited, Karachi [(2002) 85 TAX 386 (S.C.Pak) = 2002 PTD 419].
   Only question of law posing a leading controversy can be referred to High Court. –
    CIT v. Sui Northern Gas Pipelines Ltd., Lahore [2006 PTR 251 [H.C.Lah.] = (2006)
    94 TAX 164 = 2006 PTD 521].




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                                           825
Chapter X, Procedure – Part III, Appeals                                    Section 133

   Term “question of law” explained. – Pakistan International Public School, Abbottabad
    v. CIT, Abbottabad/Peshawar [2006 PTR 215 [H.C.Pesh.] = (2006) 94 TAX 134 = 2006
    PTD 545].
   Question of law arising out of an order under section 135 is referable to High Court.
    – Kurram Wood Factory Pvt. Ltd. v. CIT [(2006) 94 TAX 336 (H.C.Pesh.) = 2006 PTD
    1142].
   Whether the assessee was maintaining a mercantile system of accounting was a
    question of law and no immunity from interference under section 136 can be claimed.
    – Pakistan Industrial Credit and Investment Corporation Ltd. v. CIT and others
    [(2008) 97 TAX 64 (H.C.Kar.) = 2006 PTD 1400 = PTCL 2006 CL. 503].
   The question that the appellant company has the right to be assessed u/s 80C of the
    Ordinance once advance tax has been deducted u/s 50(4) on the payment made to it,
    ipso facto is a pure question of law. – Pak Saudi Fertilizers Ltd. v. CIT and others
    [(2005) 92 TAX 93 (H.C.Kar.) = 2005 PTD 1607].
   The issue whether “definite information” existed to re-open a case u/s 65 is
    necessarily a question of law. – CIT v. Imran Siddique [2005 PTR 99 [H.C.Lah.] =
    (2005) 91 TAX 231 = 2005 PTD 106].
   Interpretation of exemption clause constitutes question of law. – CIT v. Ravi
    Intertrade and others [2005 PTD 1802 (H.C.Lah.)].
   Fresh plea does not fall within the ambit of question of law arising out of impugned
    order – Pakistan Refinery Ltd. v. CIT Companies-V, Karachi [(2005) 92 TAX 235
    (H.C.Kar.) = 2005 PTD 2217].
   Question of law can be said to have arisen out of an order of the Tribunal only if it
    was duly raised and ruled upon. – CIT v. Hafiz Abdul Waheed & Brothers [2005
    PTD 200 (H.C.Lah.)].
   A question about validity of an assessment for the reason that there was no material
    or evidence on record to support the estimate is a question of law. – Eastern
    Distributors, Karachi v. CIT [2002 PTD 2472 (H.C.Kar.)].
   Question of law could be said to had arisen out of order of Tribunal only if issue was
    raised and it was ruled upon by Tribunal. – Milko (Pvt.) Ltd. v. DCIT and 2 others
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    [(2001) 84 TAX 183 (H.C.Lah.) = 2001 PTD 2141].
   Every question of law need not be referred to the High Court; only a question having
    some substance needs to be so referred. – CIT, Zone-A, Lahore v. Al-Falah
    International, Lahore [2001 PTD 2213 (H.C.Lah.)].
   A question of law can be said to have arisen only if it was argued and ruled upon by
    ITAT. – CIT, Rawalpindi v. Sh. Ghulam Hussain [(2001) 84 TAX 5 (H.C.Lah.) =
    2001 PTD 1419].
   Misreading of facts by Tribunal gives rise to question of law. – Mehran Girls College
    v. CIT [(2001) 83 TAX 510 (H.C.Kar.) = 2001 PTD 987].
   No appeal under section 136 unless question of law arises. – CIT/WT, Peshawar v.
    Gul Zamin and others [(2001) 83 TAX 135 (H.C.Pesh.)].
   Appeal under section 136 can only be filed where question of law arises. – CIT v.
    Mazhar Javed and others [(2000) 82 TAX 545 (H.C.Pesh.) = 2000 PTD 3361].
   ITAT‟s order based on misreading of law is not sustainable in law. – CIT v. Khairul
    Hayat Amin & Co. Ltd. [(2000) 81 TAX 311 (H.C.Kar.) = 2000 PTD 363].
   Different and conflicting views by different ITAT Benches, case was referred for
    constitution of a larger Bench. – CIT, South Zone, Karachi v. Iran Bukhara Carpet
    Industries, Karachi [(1993) 67 TAX 129 (H.C.Kar.) = 1993 PTD 110].
   Question of law arises. – CIT, Central Zone-C, Karachi v. International Building
    Industries Ltd. [(1993) 67 TAX 67 (H.C.Kar.) = 1993 PTD 58].
   Where assessee disputed the assessment order on the basis of facts, held that
    question of law arose out of the Tribunal‟s order. – N.A. Industries, Karachi v. CIT
    [(1992) 65 TAX 169 (H.C.Kar.) = 1992 PTD 50 = PTCL 1993 CL. 60].




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                                           826
Section 133                                                 Income Tax Ordinance, 2001.

   Income Tax Officer had jurisdiction at the time of filing of return but lacked
    jurisdiction at the time of passing of the assessment order being unaware of
    notification withdrawn, point raised for the first time before Appellate Tribunal; a
    question of law arises. – Kishandas Sakuio v. CIT, and others [(1987) 56 TAX 35
    (H.C.Kar.) = 1987 PTD 485].
   Income Tax Officer cannot pass a fresh assessment order, if the same question is still
    pending in the High Court. – Mst. Inayat Begum v. CIT, Zone-B, Lahore [(1985) 51
    TAX 53 (H.C.Lah.) = 1985 PTD 375 = PTCL 1985 CL. 152].
   Determination that question of law arises. – CIT, Lahore v. Nazir Begum [(1974) 29
    TAX 230 (H.C.Lah.)].
   Appellate Tribunal upsetting the decision on a question of fact without controverting
    the correctness of the factual position gives rise to question of law. – CIT,
    Rawalpindi v. K.K. & Co. Ltd. [(1980) 42 TAX 81 (H.C.Lah) = 1980 PTD 210].
   Allowance of interest as revenue expenditure is a question of law. – Khairpur
    Textile Mills Ltd., Karachi v. CIT, Karachi [(1978) 38 TAX 120 (H.C.Kar.) = PLD
    1978 Kar. 505].
   Inference or conclusion drawn by Appellate Tribunal on certain facts that purchase
    and sale of shares was incidental to business and taxable. A mixed question of law
    and fact. – Industrial Management Ltd., Karachi v. CIT, Karachi [(1978) 38 TAX 5
    (H.C.Kar.) = PLD 1978 Kar. 673].
   Question whether section 10(2)(xvi) of 1922 Act is restricted to items which are spent
    directly for the purposes of business or can extend to items of expenditure which
    have no visible connection with business but which can be termed as expenditure on
    account of business expediency is a question of law. – CIT, Rawalpindi Zone, West
    Pakistan, Rawalpindi v. Frontier Sugar Mills, Mardan [(1970) 21 TAX 117
    (H.C.Kar.) = 1969 PTD 603 = PLD 1969 Kar. 189].
   Tribunal‟s decision was based on materials, partly relevant and partly irrelevant,
    held that question of law arises out of such an order. – CIT, South Zone, West
    Pakistan, Karachi v. Dawood Cotton Mills Ltd., Karachi [(1967) 16 TAX 101
    (H.C.Kar.).
                www.imranghazi.com
    Appellate Tribunal‟s finding not based on appraisal of evidence on record gives rise
    to question of law. – CIT, Karachi v. Pak Threadball Manufacturers Association,
    Karachi [(1967) 16 TAX 77 (H.C.Kar.)].
   Finding involved question whether there was sufficient material on the record for
    discarding the book version gives rise to question of law. – Star Rolling Mills Ltd.,
    Karachi v. CIT, South Zone, West Pakistan, Karachi [(1967) 16 TAX 62 (H.C.Kar.)].
   Conclusion that cash credit was not liable to tax was not based on evidence on record
    held that question of law arises. – CIT v. Seth Haji Habib [(1967) 16 TAX 58
    (H.C.Kar.)].
   Question whether loss arising in production of film is a capital loss is a question of
    law. – CIT, Investigation, Karachi v. Nishat Limited, Karachi [(1967) 15 TAX 278
    (H.C.Kar.)].
   Tribunal‟s finding that three lines of business conducted by the same assessee were not
    interdependent and inter-lacing and did not constitute the same business gives rise to a
    question of law. – Wallem and Company v. CIT [(1967) 15 TAX 228 (H.C.Kar.)].
   Question whether a payment is an admissible deduction under a certain provision of
    the Act is substantially a question of law. – CIT, Central, Karachi v. Muslim
    Commercial Bank Ltd., Karachi [(1967) 15 TAX 174 (H.C.Kar.) = 1967 PTD 333].
   Tribunal‟s finding that assessment was made in haste was not a best judgment
    assessment and rectification order was not permissible under the provision of section
    35 of 1922 Act gives rise to question of law. – CIT, Karachi v. Edulji F. E. Dinshaw
    And Others [(1967) 15 TAX 164 (H.C.Kar.) = 1967 PTD 317].
   Tribunal‟s finding that the case was covered by provisions of Section 44 before its
    amendment in 1959 gives rise to a question of law. – CIT, Central, Karachi v.
    Sinjhoro Cotton Company, Sinjhoro [(1967) 15 TAX 154 (H.C.Kar.) = 1967 PTD 337].




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                                           827
Chapter X, Procedure – Part III, Appeals                                   Section 133

   Tribunal‟s finding that partnership was not genuine based on inferences from other
    proved facts is a question of law. – Buxly Paints Works, Karachi v. CIT, South Zone,
    West Pakistan, Karachi [(1967) 15 TAX 98 (H.C.Kar.) = 1967 PTD 195 = PLD 1967
    Kar. 551].
   Commission paid to directors in addition to salary is whether admissible deduction
    under section 10(2)(xvi) of 1922 Act and not under section 10(2)(x) of 1922 Act gives
    rise to question of law. – CIT, South Zone, West Pakistan, Karachi v. Hakim Sons
    Limited, Karachi [(1966) 14 TAX 309 (H.C.Kar.)].
   Penalty imposed for concealment of income on the basis of material in the order of
    assessment. Question whether or not it was necessary for the department to lay
    fresh material for imposition of penalty is a question of law. – Mohammad Haji
    Ghani, Karachi v. CIT, Central, Karachi [(1966) 14 TAX 205 (H.C.Kar.)].
   Question whether there was material before the Tribunal to reject the book result
    and for adding certain amount to the declared income is a question of law. – Haroon
    Textile Mills Ltd., Karachi v. CIT, South Zone, West Pakistan, Karachi [(1966) 14
    TAX 167 (H.C.Kar.) = 1967 PTD 236 = PLD 1967 Kar 532].
   Question whether assessee is entitled to claim loss in the assessment year or in
    subsequent year is a question of law. – A.Hussain S. Mirza & Co., Dacca v. CIT,
    East Pakistan, Dacca [(1963) 7 TAX 200 (H.C.Dacca) = 1963 PTD 714].
   Appeal filed late due to laches of Postal Authorities. Whether constitutes sufficient
    cause for condonation of delay. Held a question of law arises. – Grand Tea and
    Trading Co., Chittagong v. CIT, East Pakistan, Dacca [(1960) 2-TAX (Suppl.–544)
    (H.C.Dacca) = 1961 PTD 897 = PLD 1961 Dacca 613].
   Wrong notion of law is a question of law. – Bombay Cloth House, Lahore v. CIT,
    Punjab & N.W.F.P. [(1960) 2-TAX (Suppl.–238) (H.C.Lah.) = 1960 PTD 1217 = PLD
    1954 Lah. 50].
   The question that the basis of the standard rate applied was not legally correct held
    to be a question of law. – Muhammad Yousuff v. CIT, East Pakistan [(1960) 2-TAX
    (Suppl.–146) (H.C.Dacca) = 1960 PTD 280 = PLD 1960 Dacca 298].
   Interest on borrowed capital reduced by Tribunal for non-commercial reasons gives
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    rise to question of law. – Eastern Silk Stores v. CIT, Karachi, Sind and Baluchistan
    [(1960) 2-TAX (Suppl.–126) (H.C.Kar.) = 1960 PTD 733 = PLD 1957 Kar. 130].
   Question of law arises. – Eastern Silk Stores v. CIT, Karachi, Sind and Baluchistan
    [(1960) 2-TAX (Suppl.–126) (H.C.Kar.) = 1960 PTD 733 = PLD 1957 Kar. 130].
   Tests for determination of question of law explained. – [(2002) 86 TAX 326 (Trib.) =
    2002 PTD 2746].
   Question whether in the circumstances of the case assessee was resident in Pakistan
    is a question of law. – Badshah Muhammad, Sardar Muhammad v. CIT [(1960)
    2-TAX (Suppl.–75) (Judicial Commissioner Peshawar) = 1960 PTD 1045 = PLD 1960
    Pesh. 22].
   Question as to whether types used in a printing press forms part of plant and
    machinery, is a question of law. – Amar Singh v. CIT [1934] 2 ITR 445 (Lahore).
   Material questions of law referred to High Court. – [2006 PTR 133 (Trib.) = (2007)
    95 TAX 1 = 2006 PTD 2709].
                                QUESTION OF LAW NOT ARISES
   Impugned order set aside and remanded to the competent authority for decision in
    accordance with law. – Federation of Pakistan through Secretary Finance,
    Islamabad and others v. Zaman Cotton Mills Ltd. [(2007) 96 TAX 203 (S.C.Pak.) =
    2007 PTD 1999 = 2008 SCMR 602].
   Question of law not raised in appeal or before Tribunal cannot be raised at a later
    stage. – Ahmad Karachi Halva Merchants & Ahmad Food Products v. CIT, Karachi
    [(1982) 46 TAX 1 (S.C.Pak.)].
   No law point emerges. – CIT, Rawalpindi v. Zamindara Flour Mills, Lyallpur
    [(1975) 31 TAX 68 (S.C.Pak.)].




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                                           828
Section 133                                                Income Tax Ordinance, 2001.

   Whether material relied by the learned Tribunal suffices to sustain the amount of
    the addition requires an appraisal of evidence and interference with a finding of fact.
    High Court decline to interfere. – Sheikh Traders v. ITAT, Lahore Bench, Lahore
    and others [2007 PTD 2073 (H.C.Lah.)].
   Remand order of Appellate Tribunal generally would not give rise to a question of
    law. – CIT/WT, Sialkot Zone v. Maqbool Ahmed Gill [(2007) 96 TAX 165 (H.C.Lah.)
    = 2007 PTD 1757].
   Impugned order of Tribunal directing ITO to allow the perquisites as an exempt item
    and calculate tax accordingly for certain assessment year only, is neither referable
    nor a question of law. – CIT/WT, Companies Zone, Faisalabad v. Mushtaq Ali
    Cheema c/o M.S.C. Textile (Pvt.) Ltd., Faisalabad [(2007) 95 TAX 333 (H.C.Lah.) =
    2007 PTD 833 = PTCL 2007 CL. 444].
   Finding that sale deals of immovable property was a business income cannot be
    assailed as question of law. – Major Retd. Pervaiz Iqbal v. CIT/WT, Sialkot [(2007)
    95 TAX 137 (H.C.Lah.) = 2006 PTD 2734].
   Tribunal directed Assessing Officer to allow depreciation and question as posed by
    the Revenue did not arise out of Tribunal‟s order, therefore, High Court refrained
    from answering the same. – CIT/WT, Faisalabad v. Dr. Bashir Ahmed [(2007) 95
    TAX 265 (H.C.Lah.) = 2006 PTD 2585].
   Mere remand of a matter does not give rise to a question of law. – Kohinoor Energy
    Limited v. CIT Appeals, Zone-I, Islamabad and 2 others [(2006) 94 TAX 216
    (H.C.Lah.) = 2006 PTD 1409 = PTCL 2006 CL. 553].
   Question of law formulated and raised in reference not agitated or argued before or
    decided by Tribunal. – CIT, Zone-A, Lahore v. Riazuddin [2006 PTD 854
    (H.C.Lah.)].
   Controversy revolving around the facts is not a question of law. – CIT v. Angola
    Enterprises [(2006) 94 TAX 286 (H.C.Lah.) = 2006 PTD 1398 = PTCL 2006 CL. 415].
   No question of law arises. – Pakistan International Public School, Abbottabad v.
    CIT, Abbottabad/Peshawar [2006 PTR 215 [H.C.Pesh.] = (2006) 94 TAX 134 = 206
    PTD 545].
   Question ofwww.imranghazi.com
                 law held not arises. – Haji Traders v. CIT/WT, Zone-B, Lahore [2006
    PTR 23 [H.C.Lah.] = (2006) 93 TAX 21 = 2005 PTD 2413].
   No question of law arises unless it can be established that the Tribunal reached a
    conclusion which was against the record. – CIT v. Olives Catering [2005 PTR 95
    [H.C.Lah.] = (2005) 91 TAX 220 = 2005 PTD 88].
   Question held not to be rising from the Tribunal‟s order. – CIT/WT, Sialkot Zone,
    Sialkot v. Ittefaq Traders, Mandi Sambrial [(2005) 91 TAX 227 (H.C.Lah.) = 2005
    PTD 184].
   Order set aside with direction. – Abdul Waheed v. ACIT/WT and 2 others [2005
    PTR 313 [H.C.Lah.] = (2005) 91 TAX 458 = 2005 PTD 1044].
   No question of law arises to examine CIF sales in juxtaposition to section 32 in the
    light of ratio already decided in 1999 PTD 1329. – CIT/WT, Gujranwala Zone,
    Gujranwala and others v. Asif Industries, Alipur Chatha, Wazirabad and others
    [(2005) 91 TAX 470 (H.C.Lah.) = 2005 PTD 1145].
   Questions referred to High Court being misconceived and not arising from the order
    of the Tribunal rejected. – CIT/WT, Zone C, Lahore v. Minhas Automotive
    Industries, Lahore [2005 PTD 2338 (H.C.Lah.)].
   Question of law as claimed in the present appeal does not arise for consideration by
    this Court. – CIT, Zone-A, Lahore v. Saleem Brothers [2005 PTD 2366 (H.C.Lah.)].
   No question of law arises - where the issue relates to investigation about a fact. –
    Shahkot Flour and General Mills (Pvt.) Ltd., Faisalabad Road, Shahkot v. DCIT,
    Circle-10, Company Zone-I, Lahore and 2 others [(2003) 88 TAX 116 (H.C.Lah.) =
    2003 PTD 1103].




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                                           829
Chapter X, Procedure – Part III, Appeals                                    Section 133

   Issue of entitlement of exemption is a question of fact. – Shahkot Flour and General
    Mills (Pvt.) Ltd., Faisalabad Road, Shahkot v. DCIT, Circle-10, Company Zone-I,
    Lahore and 2 others [(2003) 88 TAX 116 (H.C.Lah.) = 2003 PTD 1103].
   Question re eligibility to avail SAS held not a substantial question of law. – CIT/WT,
    Lahore v. Ainee Silk Centre, Lahore [(2002) 86 TAX 68 (H.C.Lah.) = 2002 PTD 467].
   Valuation of land is not a question of law. – CIT, Companies Zone-1, Lahore v.
    Lasani Steel Mills (Pvt.), Lahore [(2002) 86 TAX 150 (H.C.Lah.) = 2002 PTD 473].
   Acceptance of return under SAS does not give rise to any question of law. –
    Muhammad Akram Proprietor of Akram General Store v. ITAT and 2 others [2002
    PTD 2386 (H.C.Lah.)].
   Sales on C.I.F value is not question of law. – CIT, Gujranwala Zone, Gujranwala v.
    Waqar Trading Company, Sialkot [(2001) 84 TAX 281 (H.C.Lah.) = 2001 PTD 2257].
   Assessing Officer was competent to determine the market value of any property and
    cancellation of valuation by Tribunal would not raise legal controversy for making
    reference to High Court. – CIT, Zone-A, Lahore v. Babar Maqsood [(2001) 84 TAX
    179 (H.C.Lah.) = 2001 PTD 2154].
   Where no question of law arises, appeal under section 136 is not maintainable. –
    CIT/WT, Peshawar Zone, Peshawar v. Muhammad Zahoor, Palveshah Furniture,
    Abbotabad [(2001) 84 TAX 172 (H.C.Pesh.) = (2001) 83 TAX 27 = 2000 PTD 3400].
   In the absence of question of law appeal under section 136 does not arise. – CIT,
    Rawalpindi v. Abdul Rashid, Proprietor, Amin Rashed & Co., Bazar Dalgran,
    Rawalpindi [(2001) 83 TAX 65 (H.C.Lah) = 2000 PTD 3365].
   Question of law held not arising under section 136 of the Income Tax Ordinance,
    1979. – Commodity and Equipment International (Pvt.) Ltd., KYC v. CIT [(2000) 81
    TAX 235 (H.C.Kar.) = 2000 PTD 334].
   Question of law neither raised before the Tribunal under section 66(1) nor dealt with
    by the Tribunal while rejecting the application, nor it was alleged in the application
    filed under section 66(2), the High Court has no jurisdiction to answer the question.
    – CIT, Central Zone, Lahore v. Gauhar Ayyub [(1995) 71 TAX 271 (H.C.Lah.) = 1995
    PTD 1074].

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    In the presence of correct appreciation of facts, law point does not arise. – CIT v.
    Mst. Saeeda Nasreen [(1994) 69 TAX 87 (H.C.Lah.) = 1994 PTD 949].
   No misreading of facts by the ITAT, law point does not arise. – CIT v. Sh.
    Muhammad Saeed & Brothers [(1993) 68 TAX 82 (H.C.Lah.) = 1993 PTD 1198].
   Neither any interpretation of the provision was in question nor any other question of
    law was in issue before the Tribunal. Held no question of law arose out of the
    Tribunal‟s order. – Karimi Mill Stores v. CIT, East Zone, Karachi [(1992) 65 TAX
    217 (H.C.Kar.) = 1992 PTD 333].
   Tribunal remanded the case for decision afresh. Questions formulated by the
    assessee for answer held wholly misconceived. – Dr. Abdur Rauf Hamid v. CIT,
    Faisalabad [(1992) 65 TAX 207 (H.C.Lah.)].
   Company employed a considerable staff to look after the business. Female directors
    did not possess necessary qualifications and business acumen. Income Tax Officer
    reduced the salaries of the female directors. Tribunal maintained the Income Tax
    Officer‟s order. Held no question of law arises. – Duke Sports Ltd. v. CIT,
    Rawalpindi [(1991) 64 TAX 79 (H.C.Lah.) = 1991 PTD 776].
   Assessee claimed interest paid on the capital borrowed, Income Tax Officer rejected
    the same and held that certain interest free advances were made to the directors and
    associate concern. Tribunal set aside the assessment and deleted the addition of
    interest. Held question of law does not arise. – CIT, Central Zone-B, Karachi v.
    Qamar Overseas Automobile Agencies Limited, Karachi [(1991) 64 TAX 12
    (H.C.Kar.) = 1991 PTD 567].
   Assessee filed declaration of income after the last date with the plea that he was
    arrested and thus could not file the declaration in time. Assessee‟s contention was




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                                           830
Section 133                                                Income Tax Ordinance, 2001.

    not accepted by the Tribunal. Held question of law did not arise. – Muhammad
    Sarwar Khan v. CIT [(1990) 62 TAX 28 (H.C.Lah.) = 1990 PTD 691].
   Finding made by any forum in contrast to the finding of a lower forum of the same
    hierarchy is not a question of law referable to the High Court. – CIT v. Weighing
    Equipment Corporation [(1989) 60 TAX 120 (H.C.Lah.) = 1989 PTD 878].
   Tribunal‟s finding on facts does not give rise to question of law. – CIT, Central
    Zone-A, Karachi v. Amin Mohiuddin Foundation Ltd. [(1989) 60 TAX 66 (H.C.Kar.) =
    1989 PTD 581].
   Tribunal‟s finding that the application was barred by time does not give rise to
    question of law. – CIT, Central Zone, Karachi v. M. Hussain Ahmad [(1989) 59 TAX
    59 (H.C.Kar.) = 1989 PTD 52].
   Order of rejection of accounts on facts does not give rise to any question of law. –
    Muhammad Aslam Khan & Co., Ltd. v. CIT [(1986) 54 TAX 60 (H.C.Lah.) = 1986
    PTD 134].
   Question of law not arises where finding of facts involved. – Rainbow Carpets,
    Kasur v. CIT, Lahore [(1986) 54 TAX 43 (H.C.Lah.) = 1986 PTD 392].
   Record of daily production and day to day consumption of raw material and
    production of finished goods not verifiable. Income Tax Officer rejected book result
    and made additions. Tribunal held accounts rightly rejected but reduced the
    additions held that no question of law arises. – CIT, Central Zone, Karachi v. Karachi
    Oil and Seed Industries Ltd. [(1985) 52 TAX 153 (H.C.Kar.) = 1985 PTD 770].
   Tribunal‟s finding that assessee‟s accounts for assessment year 1960-61 should be
    accepted does not give rise to any question of law. – CIT, Investigation, Karachi v.
    Jan Muhammad and Bros., Karachi [(1982) 46 TAX 162 (H.C.Kar.) = 1982 PTD 287
    = PLD 1982 Kar. 911].
   Refusal to grant registration based on findings of facts does not give rise to question
    of law. – Bahreen Foundry and Workshop, Gujranwala v. CIT, Rawalpindi [(1979)
    39 TAX 30 (H.C.Lah.) = 1980 PTD 343].
   Point neither raised nor considered by Tribunal cannot be said to have arisen out of
    Tribunal‟s order. – Mst. Khatija Bai v. CIT, Karachi West, Karachi [(1978) 37 TAX
                 www.imranghazi.com
    351 (H.C.Kar.) = 1978 PTD 109 = PLD 1978 Kar. 395].
   Discretion exercised neither capricious nor order arbitrary or perverse does not give
    rise to question of law. – Hamiduddin Samiuddin v. CIT [(1976) 33 TAX 209
    (H.C.Lah.) = 1976 PTD 1 = PLD 1976 Lah. 237].
   Tribunal‟s finding based on sufficient material brought on record does not give rise to
    question of law. – Naseer A. Sheikh v. CIT [(1976) 33 TAX 121 (H.C.Lah.) = 1977
    PTD 1 = PLD 1977 Lah. 753].
   Penalty imposed by Income Tax Officer for default of payment of tax. Appellate
    Tribunal remitting penalty in exercise of its discretion. Held the order does not give
    rise to question of law. – CIT, Lahore Zone, Lahore v. Lahore Textile & General Mills
    Ltd., Lahore [(1974) 29 TAX 236 (H.C.Lah.)].
   Appellate Tribunal remitting penalty in exercise of its discretion is not a to question
    of law. – CIT, Lahore Zone, Lahore v. Muhammad Shafi, Contractor, Lahore [(1973)
    27 TAX 251 (H.C.Lah.)].
   Rejection of accounts on factual ground is not a question of law. – Mian Abdul Rahim &
    Sons (Electric Fan section), Gujrat v. CIT, Rawalpindi [(1972) 27 TAX 89 (H.C.Lah.) =
    PLD 1973 Lah. 416].
   Inference from facts based on relevant materials held question of law does not arise.
    – Sh. Muhammad Rafique C/o Gojra Cotton Textile Mills Ltd., Gojra v. CIT,
    Rawalpindi Zone, Rawalpindi [(1972) 27 TAX 87 (H.C.Lah.)].
   Tribunal‟s finding that subletting of contract was genuine and profits were received by
    sub-lessees is not a question of law. – CIT, Rawalpindi Zone, Rawalpindi v. Mustaqeem
    Khan & Company, Islamabad [(1972) 27 TAX 85 (H.C.Lah.)].
   Tribunal‟s finding that for all legal purposes the firm was the owner of the property
    is not a question of law. – CIT, Lahore Zone, West Pakistan, Lahore v. Jamal Ice




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                                           831
Chapter X, Procedure – Part III, Appeals                                     Section 133

    Factory, Hussain Agahi, Multan [(1972) 27 TAX 81 (H.C.Lah.) = 1973 PTD 422 =
    PLD 1973 Lah. 356].
   Tribunal‟s finding that expenditure incurred was solely and exclusively for business
    purposes is not a question of law. – CIT, Investigation, Karachi v. Sutlej Cotton
    Mills Ltd., Okara [(1972) 25 TAX 150 (H.C.Lah.)].
   Tribunal‟s finding based on evidence on record does not give rise to any question of
    law. – Uberoi Co-operative Sports Ltd., Sialkot v. CIT, Rawalpindi Zone West
    Pakistan, Rawalpindi [(1973) 27 TAX 218 (H.C.Lah.)].
   Tribunal‟s finding that income of minors from partnership did not arise from assets
    transferred to them by father. Finding based on evidence on record question of law
    does not arise. – CIT, East Pakistan v. Tar Muhammad Haji Hameed [(1970) 21
    TAX 131 (H.C.Dacca) = 1969 PTD 638 = PLD 1969 Dacca 905].
   Tribunal‟s finding that the debt being irrecoverable was admissible deduction does
    not give rise to question of law. – CIT v. United Commercial Bank Ltd., Karachi
    [(1969) 20 TAX 216 (H.C.Kar.) = 1969 PTD 730 = PLD 1970 Kar. 148].
   Tribunal‟s finding that unabsorbed depreciation should be treated in accordance
    with the proviso to section 10(2)(vi) does not give rise to question of law. – CIT v.
    United Commercial Bank Ltd., Karachi [(1969) 20 TAX 216 (H.C.Kar.) = 1969 PTD
    730 = PLD 1970 Kar. 148].
   Substitution of new question for the original question is not entertainable under
    section 66(2). – CIT, Central, Karachi v. Pestonji Bhicaji, Keamari, Karachi [(1969)
    20 TAX 130 (H.C.Kar.) = 1969 PTD 821 = PLD 1969 Kar. 540].
   Tribunal‟s finding that default committed by assessee was not wilful and as such it
    was not a fit case for imposition of penalty. Tribunal‟s finding does not give rise to
    question of law. – CIT, Rawalpindi Zone, Rawalpindi v. Ch. Fazal Din & Sons,
    Sialkot [(1974) 29 TAX 110 (H.C.Lah.) = 1974 PTD 192].
   Tribunal‟s finding that addition made to the book version was justified and this
    finding is not based on wrong assumption of facts or erroneous view of law involved.
    Question of law not arises. – Western Motors Limited, Rawalpindi v. CIT, North
    Zone, West Pakistan, Lahore [(1968) 18 TAX 100 (H.C.Lah.)].

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    Partnership including some lady partners. Capital contribution by lady partners not
    proved. Lady partners not taking active part in the running of the business.
    Tribunal‟s finding that partnership deed was not genuine. Finding held does not give
    rise to question of law. – Shah Nawaz Khan & Co., Multan v. CIT, North Zone, West
    Pakistan, Lahore (Now Lahore Zone, Lahore) [(1968) 18 TAX 97 (H.C.Lah.)].
   Tribunal‟s finding that some of the cash credits represented income from undisclosed
    sources whereas others were not so held that question of law does not arise. – CIT,
    Karachi v. Buxly Paint Works, Karachi and Buxly Paint Works, Karachi. v. CIT,
    Karachi [(1967) 16 TAX 55 (H.C.Kar.)].
   Tribunal‟s finding relating to quantum of expenditure does not give rise to question
    of law. – CIT, Karachi v. Eastern Automobiles Ltd., Karachi [(1967) 15 TAX 233
    (H.C.Kar.)].
   Tribunal‟s finding that account books were not reliable based on evidence on record
    but on grounds other than those raised in the grounds of appeal held that did not
    give rise to question of law. – Habib Noor Muhammad Hashim, Karachi v. CIT, South
    Zone, West Pakistan, Karachi [(1967) 15 TAX 152 (H.C.Kar.) = 1967 PTD 331].
   Tribunal‟s finding that discretion exercised by Appellate Assistant Commissioner
    was arbitrary and capricious was based on evidence on record held that it does not
    give rise to question of law. – Ahmad and Company v. CIT [(1967) 15 TAX 148
    (H.C.Kar.) = 1967 PTD 328].
   Question of law not raised before the Tribunal cannot be said to arise out of its order.
    – CIT, Central, Karachi v. Ahmad Abdul Ghani, Karachi [(1967) 15 TAX 141
    (H.C.Kar.) = 1967 PTD 322].
   Finding based on appraisal of evidence produced by assessee does not give rise to
    question of law. – CIT v. Bakhsh Ellahi and others [(1966) 14 TAX 216 (H.C.Kar.)].




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                                           832
Section 133                                                 Income Tax Ordinance, 2001.

   Question of law was not required to be stated by Appellate Tribunal. – CIT v. Pak
    Chemical & Motor Co. [(1963)] 7 TAX 165 (H.C.Kar.) = 1963 PTD 332 = PLD 1963
    Kar. 390].
   Valuation of land is not a question of law. – CIT, Companies Zone-1, Lahore v.
    Lasani Steel Mills (Pvt.), Lahore [(2002) 86 TAX 150 (H.C.Lah.) = 2002 PTD 473].
   Instances where question of law does not arise. – CIT v. Nabadwip Chandra Shah
    [1960 PTD 249 (H.C.Dacca) = PLD 1960 Dacca 229].
   Question of law held not arises. – Muhammad Saleem v. ITAT and 2 others [2004
    PTD 633 (H.C.Lah.)].
   No question of law arises. – [(2004) 90 TAX 357 (Trib.) = 2004 PTD 892; (2004) 89
    TAX 146 (Trib.) = 2004 PTD 627].
   If Income Tax Officer adopts a different method under section 145(2) in a later year,
    no question of law arises. – Pandlt Pyare Lal Shukla v. CIT [1942] 10 ITR 416 (All.).
         QUESTIONS OF FACT / QUESTIONS OF LAW / MIXED QUESTIONS OF LAW AND FACT
                                     AND RELATED MATTERS
   Question of fact cannot be converted into question of law by simply saying that
    certain provisions of law had been ignored. – CIT v. Firdous Textile Mills,
    Faisalabad [(2002) 86 TAX 63 (H.C.Lah.) = 2002 PTD 255].
   Responsibility to establish mixed question of law and fact rests heavily on appellant. –
    Sui    Northern      Gas    Pipelines    Limited,   Avari     Plaza,    Hilton    Hotel,
    Shahrah-e-Quaid-e-Azam, Lahore v. CIT, Central Zone, Lahore [2001 PTD 798
    (H.C.Lah.)].
   Applicability or otherwise of section 13 not raised before the Tribunal. Held a
    question of law not arises out of Tribunal‟s order. – Modern Silk Mills Ltd., Lahore
    v. CIT, Lahore Zone, Lahore. [(1979) 39 TAX 14 (H.C.Lah.) = PLD 1979 Lah. 135].
   Question whether sub-partnership existed in respect of assessee‟s shares in two
    registered firms is a mixed question of law and fact. – Haji Moosa Haji Habib v.
    CIT, Karachi [(1967) 16 TAX 87 (H.C.Kar.)].
   Question whether profits arising from sale of shares is revenue receipt is a mixed
                www.imranghazi.com
    question of law and fact. – CIT, Central, Karachi v. Habib Bank (Overseas) Limited,
    Karachi [(1967) 15 TAX 272 (H.C.Kar.)].
   Question whether legal expenses incurred for recovery of loan is admissible
    deduction is a mixed question of law and fact. – Cowasjee Family Funds, Karachi v.
    CIT, South Zone, West Pakistan, Karachi [(1967)15 TAX 243 (H.C.Kar.)].
   Question whether in the circumstances of a given case the assessee is entitled to
    claim expenditure under section 10(2)(xvi) of 1922 Act is a mixed question of law and
    fact. – CIT v. Forbes Forbes Campbell and Company [(1967) 15 TAX 231 (H.C.Kar.)].
   Question whether certain expenditure is in the nature of revenue or capital
    expenditure is a mixed question of law and fact. – CIT, Central, Karachi v. Hirjina
    And Company (Pak) Limited, Karachi [(1966) 14 TAX 209 (H.C.Kar.)].
   Question of law or fact. – Universal Engineering Co., Karachi (in the matter of) v.
    CIT [(1963) 7 TAX 184 (H.C.Kar.) = 1963 PTD 401 = PLD 1963 Kar. 487].
   Question of fact vs. Question of law – General principles. – Wall Mohammad v.
    Mohamrnad Baksh [1930] 57 ITR 86 (PC) = 59 MU 53 (PC); IRC v. Lysaght [1928]
    AC 234/13 TC 511 (HL).
                               IMPROPER FRAMING OF QUESTION
   Any person submitting reference application before the High Court under the direct
    tax law or indirect tax law is required to formulate the questions of law and no vague
    reference application is to be submitted. – Ghulam Mustafa Jatoi, Karachi v. CIT,
    Central Zone-B, Karachi [(2006) 94 TAX 263 (H.C.Kar.) = 2006 PTD 1647].
   Answer to an improperly framed question may lead to misinterpretation of law. –
    CIT, Companies Zone-I, Lahore v. Faisal Enterprises (Pvt.) Ltd., Lahore [(2004) 89
    TAX 332 (H.C.Lah.) = 2003 PTD 2005].




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                                            833
Chapter X, Procedure – Part III, Appeals                                      Section 133

   Improper framing of question may lead to misinterpretation. – CIT, Companies Zone-I,
    Lahore v. Faisal Enterprises (Pvt.) Ltd., Lahore [(2004) 89 TAX 332 (H.C.Lah.) = 2003
    PTD 2005].
                  WHETHER HIGH COURT CANNOT GO BEHIND FINDING OF FACTS
   Where complete facts were not placed, High Court refused to answer a question. –
    CIT v. Sui Northern Gas Pipelines Ltd., Lahore [2006 PTR 251 [H.C.Lah.] = (2006)
    94 TAX 164 = 2006 PTD 521].
   High Court cannot go behind the facts found by the Tribunal. – CIT, Central Zone B,
    Karachi v. Farrokh Chemical Industries [(1992) 65 TAX 239 (S.C.Pak.) = 1992 PTD
    523 = 1992 SCMR 523]
   High Court in a reference cannot enter into fact finding exercise. – S.M. Ilyas &
    Sons v. CIT, Lahore Zone [(1982) 46 TAX 113 (S.C.Pak.) = PLD 1982 SC 259].
   High Court is not entitled to go behind the facts found by the Tribunal. – Hormone
    Laboratories v. CIT [(1988) 58 TAX 55 (H.C.Kar.)].
   Tribunal is the final fact-finding authority and High Court/Supreme Court cannot go
    behind the finding recorded by the Tribunal. – CIT v. Shri Dwarka Dhees Temple
    [1946] 14 ITR 440 (All.); R.S. Munshi Gulab Singh & Sons v. CIT [1946] 14 ITR 66
    (Lahore); Benoy Ratan Banerji v. CIT [1947] 15 ITR 98 (All.).
                          WHEN FINDING OF FACT CAN BE CHALLENGED
   Where a finding of fact not based on evidence or where a material evidence ignored,
    reference u/s 136 is maintainable. – Mst. Fazal Be and 6 others v. CIT [(1996) 74
    TAX 141 (H.C.AJ&K) = 1997 PTD 78 = PTCL 1997 CL. 1175].
   Where Tribunal‟s order totally ignores material fact it is liable to be set aside. – Noor
    Muhammad Muhammad Saeed v. CIT, Lahore [(1976) 33 TAX 243 (H.C.Lah.) = PLD
    1976 Lah. 353].
   Tribunal‟s finding that there was no definite information with Income Tax Officer for
    action under section 34 and in absence of prior approval by Inspecting Additional
    Commissioner, the notice and reassessment held invalid. – CIT, South Zone, West
    Pakistan, Karachi v. Ahmed Ali Brothers, Karachi [(1966) 14 TAX 297 (H.C.Kar.)].
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    If fact-finding authority has committed errors of law and misunderstood legal
    position, finding cannot be accepted. – Sirdar Bahadur Indra Singh v. CIT [1943]
    11 ITR 16 (Pat.).
   Findings of the Tribunal can be reviewed only on the ground that there was no
    evidence to support it or that it was perverse. – Sardar Kirpal Singh v. CIT [1937] 5
    ITR 62 (Lahore).
   Court‟s duty is only to ascertain whether there is evidence to support finding of fact.
    – K.H. Mody, In re [1940] 8 ITR 179 (Bom.).
   Where finding of fact is based partly on independent admissible material and partly
    on independent inadmissible material, it may not be vitiated. – Seth Gurmukh
    Singh v. CIT [1944] 12 ITR 393 (Lahore).
   Even if finding of fact is wrong High Court cannot interfere with it. – Lala Suraj Pev
    Khanna v. CIT [1941] 9 ITR 190 (Lahore).
                               POINT OF LAW VS. QUESTION OF LAW
   “Point of law” could not be equated with expression “question of law”. – CIT/WT,
    Multan Zone v. Muhammad Rafi, Medical Officer, DHQ Khanewal [(2007) 95 TAX
    289 (H.C.Lah.) = 2007 PTD 333].
   A “point of law” could not be equated with the expression “question of law” and that the
    question referred must be a disputed or disputable question of law. – Dr. Mukhtar
    Hassan Randhawa v. CIT, Coys Zone-1, Lahore [(2001) 84 TAX 326 (H.C.Lah.) =
    2001 PTD 2593].
                                       OTHER PRINCIPLES
   Every question of law need not be referred to High Court and only a question having
    some substance needed to be so referred. – CIT/WT, Multan Zone v.




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                                           834
Section 133                                                 Income Tax Ordinance, 2001.

    Muhammad Rafi, Medical Officer, DHQ Khanewal [(2007) 95 TAX 289 (H.C.Lah.) =
    2007 PTD 333].
   The nature of jurisdiction of this Court is clearly distinguishable from its appellate
    or the revisional jurisdiction. – CIT/WT, Multan Zone v. Muhammad Rafi, Medical
    Officer, DHQ Khanewal [(2007) 95 TAX 289 (H.C.Lah.) = 2007 PTD 333].
   Grounds which were not urged before the High Court could not be urged before
    Supreme Court. – Mst. Nasir Bibi and others v. Muhammad Shafique Ahmad and
    another [2007 PTD 1279 (S.C.Pak.) = 2007 SCMR 997].
   Court as a rule should give due weight and consideration to the opinion of other
    Courts. – Mst. Nasir Bibi and others v. Muhammad Shafique Ahmad and another
    [2007 PTD 1279 (S.C.Pak.) = 2007 SCMR 997].
   ITAT to pass order on receipt of High Court order. – CIT/WT, Gujranwala v.
    Mughal Mechanisms Pvt. Ltd., Gujranwala [2006 PTR 263 [H.C.Lah.] = (2006) 94
    TAX 174 = 2006 PTD 1626].
   Court is not bound to answer questions if the party at whose instance it has been
    referred remains absent. – Molvi Brothers v.CIT, Faisalabad [(2004) 90 TAX 15
    (H.C.Lah.) = 2004 PTD 1123].
   Question answered as decided earlier. – CIT, Central Zone, Lahore v. Pioneers Ltd.,
    Lahore [(2001) 84 TAX 340 (H.C.Lah.) = 2001 PTD 2309].
   Taxes payable constitute retained income for the purpose of levy of surcharge. –
    CIT, Companies, Lahore v. Millat Tractors Ltd., Lahore [(2001) 84 TAX 282
    (H.C.Lah.) = 2001 PTD 2269].
   Plea of mercantile system was not raised before Income Tax Officer as well as before
    the CIT, held the Tribunal was justified in disallowing the claim. – Sallos (Private)
    Ltd. v. CIT, Companies Zone, Lahore [(1990) 62 TAX 95 (H.C.Lah.) = 1990 PTD 907 =
    PTCL 1991 CL. 48].
   A question of fact cannot be turned into a question of law. – CIT v. Laxminarain
    Badridas [1937] 5 ITR 170 (PC).
   Inference from facts can give rise to question of law. – Cameron v. Prendergast
    (Inspector of Taxes) [1940] 8 ITR Suppl. 75 (HL).

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    The proper effect of a proved fact is a question of law. – CIT v. Shanmugham Rubber
    Estate [1945] 13 ITR 329 (Mad.).
   Question of applicability of a section or construction of a section is always a question
    of law. – New India Assurance Co. Ltd. v. CIT [1946] 14 ITR 809 (Bom.).
   Question whether finding of fact is based on evidence is a question of law but if there
    was such evidence, finding of fact must stand. – B.B. Jubb v. CIT [1938] 6 ITR 210
    (Rangoon).
   Applicant cannot be allowed to turn a mere question of fact into one of law by asking
    whether as a matter of law officer came to a correct conclusion upon a matter of fact.
    – Manohar Das Munni Lal v. Secretary of State for India [1945] 13 ITR 356 (All.).
   Neither Tribunal while stating case, nor the High Court at time of hearing reference,
    is bound by assumption of fact made by Court at mandamus stage. – Seth Gurrnukh
    Singh v. CIT [1944] 12 ITR 393 (Lahore).
   Cases cannot be referred back to Tribunal so as to enable revenue to adduce fresh
    contentions or fresh evidence. – Craddock (H.M. Inspector of Taxes) v. Zevo Finance
    Co. Ltd. [1946] 27 Tax Cas. 267.
   Question of law should bring out clearly whether it is an inference on facts –
    Bornford v. Osborne (H.M. Inspector of Taxes) [1942] 10 ITR Suppl. 27 (HL).
           PRECISE OBJECTION WAS NOT RAISED AT ANY STAGE BEFORE THE INCOME TAX
                                  OFFICER AND THE TRIBUNAL
   Precise objection raised before the High Court for the first time going to the root of
    the case is permissible. – CIT, Lahore v. Govt. Jallo Rosin and Turpentine Factory,
    Lahore [(1976) 34 TAX 71 (H.C.Lah.) = 1976 PTD 206].




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                                           835
Chapter X, Procedure – Part III, Appeals                                    Section 133

   New legal plea raised for the first time before the High Court at belated stage. Plea
    going to the root of the case was admitted. – Chief Secretary, Govt. of The Punjab
    Lahore v. CIT, Lahore Zone, Lahore [(1976) 33 TAX 176 (H.C.Lah.) = 1976 PTD 56 =
    PLD 1976 Lah. 258].
   Assessee not making application separately on point decided against him. Held not
    entitled to decision on that point raising separate and independent question. – CIT,
    Lahore Zone, Lahore v. M. Iqbal Saigol (C/o, Kohinoor Industries Ltd., Lahore)
    [(1976) 33 TAX 157 (H.C.Lah.) = 1976 PTD 11 = PLD 1975 Lah. 547].
   Additional ground admitted by Tribunal in exercise of discretionary jurisdiction held
    proper exercise of discretion. – Pakistan Medical Stores v. CIT [(1967) 15 TAX 157
    (H.C.Kar.) = 1967 PTD 339].
        AMENDED PROVISION HAS NOT ALTERED FUNDAMENTALS OF JURISDICTION OF THE
                                         HIGH COURT
   Amended provision has not altered fundamentals of jurisdiction of the High Court
    under section 136; “appeal” and “appellate jurisdiction”, meaning of. – Iram Ghee
    Mills (Pvt.) Ltd., Lahore v. ITAT, Lahore [(1998) 78 TAX 188 (H.C.Lah.)].
   Amended provision has not altered fundamentals of jurisdiction of the High Court
    under section 136. – CIT, Rawalpindi v. Begum Mumtaz Jamal [(1976) 33 TAX 288
    (H.C.Lah.) = 1976 PTD 182 = PLD 1976 Lah. 761].
                                    ACADEMIC QUESTIONS
   Questions of academic nature are not to be considered. – CIT, Companies-I, Karachi
    v. Hassan Associates (Pvt.) Ltd., Karachi [(1994) 69 TAX 165 (S.C.Pak.) = (1994) 70
    TAX 157 = 1994 PTD 1256].
   Answer to the question refused being of academic interest as it is not going to effect
    the cancellation of assessments as directed by Tribunal itself. – CIT v. Ravi Flour
    Mills, Lahore [(2004) 89 TAX 329 (H.C.Lah.) = 2003 PTD 1885].
   Question declined lacking substance and being academic in nature. – CIT,
    Companies, Lahore v. Locus Traders Shan (Pvt.) Ltd., Lahore [(2001) 84 TAX 516
    (H.C.Lah.) = 2001 PTD 2322].
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    Where an answer to a question will not result into any change in the tax liability of
    an assessee, the issue raised would be of an academic interest only, and need not to
    be answered. – CIT, Rawalpindi v. Rural Food Products, Rawalpindi [(2001) 84
    TAX 343 (H.C.Lah.) = 2001 PTD 2306].
   Where, question of law is not substantial and answer to the question is self-evident,
    the High Court is not bound to require the Tribunal to refer the question. – Surpat
    Singh Dugar v. CIT [1943] 11 ITR 549 (Cal.).
   A question which has since become academic need not be answered. – Noperam
    Ram Gopal v. CIT [1942] 10 ITR 288 (Pat.).
   High Court in cases referred to it under section 66 of the 1922 Act is advisory only,
    and is confined to considering and answering the actual question referred to it. – Sir
    Rajendra Narayan Bhanja Deo v. CIT [1940] 8 ITR 495 (PC) = AIR 1940 PC 158.
   Others. – Khemji Walji & Co. v. CIT [1945] 13 ITR 421 (Pat.).
        PROCEEDINGS TAKEN SUBSEQUENT TO GRANT OF STAY ORDER ARE NULLITY IN THE
                                         EYES OF LAW
   Proceedings taken subsequent to grant of stay order are nullity in the eyes of law. –
    Shoaib Bilal Corporation, Faisalabad v. CIT, Faisalabad and another [(1993) 67
    TAX 233 (H.C.Lah.) = 1993 PTD 332].
                          SCOPE AND FRAME OF QUESTION REFERRED
   ITAT cannot refer a question on an issue which was not challenged by the party. –
    CIT v. Sui Northern Gas Pipelines Ltd., Lahore [2006 PTR 251 [H.C.Lah.] = (2006)
    94 TAX 164 = 2006 PTD 521].
   Only those questions can be referred to High Court which have got any legal value. –
    Jalil Centre, Multan v. CIT/WT, Appeals Zone, Multan [(2003) 87 TAX 257
    (S.C.Pak.) = 2003 PTD 647].




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                                           836
Section 133                                                 Income Tax Ordinance, 2001.

   Tribunal should seek advice from High Court in the best possible manner by stating
    the facts giving rise to legal preposition. – CIT v. Bashir Jamil & Brothers Ltd.
    [(2002) 85 TAX 273 (H.C.Lah.) = 2002 PTD 557].
   Court cannot entertain a question whose reference was not sought. – Babulal Raj
    Garhia, In re [1936] 4 ITR 148 (Cal.).
   Where in a reference Tribunal did not refer a question of law on a point because
    assessee accepted its findings on it, the High Court had no jurisdiction to deal with
    that point. – ITAT v. Managing Trustee, Shri Radha Madho Trust [1946] 14 ITR
    470 (Nag.).
                                        ILLUSTRATIONS
   An objection to place of assessment cannot be raised first time in appeal reference. –
    Seth Kanhaiyalal v. CIT [1937] 5 ITR 739 (All.).
                           DIRECTION TO TRIBUNAL TO STATE A CASE
   Question sought to he raised was never agitated before the Tribunal. Held could not
    be referred to the High Court. – CIT, Central Zone-C, Karachi v. Bawany Industries
    Ltd., Karachi [(1991) 63 TAX 95 (H.C.Kar.) = 1991 PTD 385].
   Application requiring Appellate Tribunal to state a case is a proceeding on original
    side of High Court. – Hans Raj Gupta & Co. v. CIT [1951] 19 ITR 122 (Punjab).
                    WHEN AN APPLICATION UNDER SECTION 136 CAN BE MADE
   Where ITAT rectified its order u/s 156, it shall deem to be an order u/s 135 and
    reference against it shall lie as in the case of original order. – CIT v. Ateeq Riaz
    [(2002) 86 TAX 130 (H.C.Kar.) = 2002 PTD 570].
   Mere fact that the Court would probably follow previous decisions of other High
    Courts is not sufficient reason for refusing to direct the Commissioner to state a case.
    – Sardar Saheb Sardar Singar Singh & Sons v. CIT [1942] 10 ITR 441 (Oudh).
   Assessee cannot be debarred from seeking a decision of relevant High Court on
    ground that question stands decided by another High Court. – Dhanrajmal
    Chatandas v. CIT [1942] 10 ITR 384 (Sind).
    Others. – Nazar Mi Ishabhai v. CIT [1943] 11 ITR 179 (Nag.).

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                                 FORM OF STATEMENT OF CASE
   General. – Juthararn Jankidas v. CIT [1944] 12 ITR 344 (Pat.).
   Tribunal should state facts clearly. – Hanrnantrarn Rarnnatah v. CIT [1945] 13
    ITR 203 (Bom.).
   It would he a practice more in conformity with section 66(1) of the 1922 Act and with
    general convenience, if the statement of the case itself had contained all the relevant
    facts, rather than that they should have had to be sought for in the judgments. –
    Hira Mills Ltd. v. ITO [1946] 14 ITR 417 (All.).
   Statement of question of law in an abstract form is to be deprecated. – Raja
    Raghunandan Prasad Singh v. CIT [1933] 1 ITR 113 (PC).
   Commissioner cannot be required to give a copy of his opinion to assessee along with
    statement of case. – Ratanchand Lallurnal, In re [1936] 4 ITR 189 (All.).
                                 RIGHTS OF AGGRIEVED PARTY
   High Court cannot ask for a supplementary statement on the ground that the findings
    are not supported by evidence. – Sir Sobha Singh v. CIT [1950] 18 ITR 998 (Punj.).
                                            OTHERS
   Two Reference Applications respecting two years made to the Tribunal. Tribunal
    making one Reference to High Court by single order covering both the years. Single
    reference permitted by High Court. – CIT, Rawalpindi v. Azizur Rahman [(1978) 38
    TAX 79 (H.C.Lah.) = PLD 1978 Lah. 784].
                                          LIMITATION
   Limitation starts from the date of service of ITAT‟s order on the relevant person. –
    [(2004) 90 TAX 279 (Trib.) = 2004 PTD 1636].




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                                            837
Chapter X, Procedure – Part III, Appeals                                      Section 133

   Period of limitation for filing of appeal starts from the date of communication of the
    order to the concerned Commissioner. – [(2004) 90 TAX 279 (Trib.) = 2004 PTD 1636].
   Assessee voluntarily filing revised return in respect of income of deceased father.
    Statutory notices served on assessee and assessment completed accordingly. No plea
    raised for impleading other legal heirs of the deceased in assessment proceedings. Held
    assessment cannot be challenged on that ground. – Mian Aftab Ijaz v. CIT, Lahore Zone
    Lahore [(1977) 36 TAX 82 (H.C.Lah.) = 1976 PTD 291 = PLD 1977 Lah. 1163].
   Until Court has considered statement sent by Tribunal, parties should not rush with
    petition for further facts or questions. – N.V. Khandvala v. CIT [1946] 14 ITR 635
    (Bom.).
   Where, the Commissioner settled the statement of case for reference in its final form
    without regard to the points raised by the assessee in view of rules 11 and 12 of the
    Lahore High Court Rules, the case was to be sent back to the Commissioner in order
    that he might comply with the above rules. – Kangra Valley Estate Co. Ltd., In re
    [1934] 2 ITR 199 (Lahore).
   Validity of an assessment cannot be questioned on a writ of certiorari. – Dinshaw
    Darabshaw Shroff v. CIT [1943] 11 ITR 172 (Bom.).
                               REMAND OF CASE TO THE TRIBUNAL
   Case remanded to ITAT for deciding the issue afresh. – CIT, Companies Zone-II,
    Karachi v. Sindh Engineering (Pvt.) Limited, Karachi [(2002) 85 TAX 386 (S.C.Pak)
    = 2002 PTD 419].
                        INQUIRY REPORT WITHOUT EVIDENCE NOT TENABLE
   Inquiry report not supported by documentary evidence held invalid. – Pakistan
    General Store v. ITAT and 2 others [(2004) 89 TAX 238 (H.C.Lah.) = 2004 PTD 30].
                                   REFERENCE VIS-À-VIS APPEAL
   Filing of appeal instead of reference application after amendment in law rejected. – CIT
    v. Chinkiong Chinese Restaurant [(2004) 89 TAX 368 (H.C.Kar.) = 2004 PTD 318].
   Writ is converted into appeal u/s 136. – Karachi Properties Investment Company
    (Pvt.) Limited, Karachi v. ITAT, Karachi and another [2004 PTD 948 (H.C.Kar.)].
   In the presence of reference, direct appeal cannot be filed in High Court. – CIT,
    Companies Zone-1, Lahore v. Air Travel Concept (Pvt.) Ltd., Lahore [(2002) 86 TAX
                 www.imranghazi.com
    152 (H.C.Lah.) = 2002 PTD 509].
   Writ petition rejected as taxpayer could approach the Court u/s 136(2). – Ch.
    Samiullah v. CIT, Zone-A, Lahore and 2 others [(2002) 86 TAX 235 (H.C.Lah.) = 2002
    PTD 1212]; BILZ (Pvt.) Ltd., Multan v. DCIT, Companies Circle-01, Multan and
    another [(2001) 84 TAX 508 (H.C.Lah.) = 2001 PTD 2337].
                                   INTERPRETATION OF STATUTE
   When there is no „appeal‟ provided under section 136 keeping the word „Appeal‟ in
    section 66(1)(c) was the negligence of draftsman and it cannot be understood to be
    the intention of the legislature. – Royal Edu Care v. Assistant CIT/Taxation Officer,
    Lahore [2008 PTD 1998 (H.C.Lah.) = PTCL 2009 CL. 90 = PLJ 2009 Lahore 84].
                                  POSITION UNDER THE 1922 ACT
   Sub-sections (3) and (7) of section 66 of the 1922 Act. – Azizullah Inayat Ullah Kohat
    v. CIT [1942] 10 ITR 510 (Peshawar); Official Receiver v. ITO [1945] 13 ITR 112 (Mad.);
    Ramakrishna Ramnath Firm of Tirora v. CIT [4 ITC 171 (Nag.)]; Gulab Chand
    Choteylal v. CIT [5 ITC 273 (All.)]; C.P.L.L.Concern v. CIT [7 ITC 200 (Rangoon)]; Smt.
    Niki Devi v. CIT [7 ITC 370 (Lahore)]; Kumar Sarat Kumar Roy v. CIT [2 ITC 279
    (Cal.)]; Ratanchand Khimchand Motishaw v. CIT [2 ITC 225 (Bom.)]; Ratanchand
    Khimchand Motishaw v. CIT [2 ITC 225 (Bom.)]; Sheik Ata-Ur-Rahman v. CIT [1934] 2
    ITR 339 (Lahore); Narayan Atrnararn Patkar v. CIT [1934] 2 ITR 486 (Bom.); CIT v.
    C.P.L.E. Chettiyar Firm [1934] 2 ITR 201 (Rangoon); CIT v. Kokine Dairy [1938] 6 ITR
    502 (Rangoon); Hukini Chand Hardat Rai v. CIT [2 ITC 140 (Pat.)]; Husseinbhoy
    Mahornedbhoy v. CIT [5 ITC 31 (Sind)]; Beli Ram Bros. v. CIT [1935] 3 ITR 243
    (Lahore); Vora Sreerarnulu Chetty v. CIT [1939] 7 ITR 263 (Mad.); Lakshrni Narain
    Gadodia & Co., In re [1943] 11 ITR 491 (Lahore); M. and D. Arninoff v. CIT [1938] 6 ITR
    474 (Lahore); Hon’ble Mr. Justice Iqbal Ahrned, In re [1942] 10 ITR 152 (All.); East Khas
    Jharia Colliery Co. Ltd. v. CIT [1942] 10 ITR 296 (Pat.).




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                                                                   838
Section 134                                                                                 Income Tax Ordinance, 2001.

        1[               ]
1 Section 134 omitted by Finance Act, 2005.

                                               LEGISLATIVE HISTORY
     Section 134–Omission.–Before omission by Finance Act, 2005 section 134 read as follows:–
     “134. Appeal to Supreme Court.– (1) An appeal shall lie to the Supreme Court from any judgment of the
High Court delivered on a reference made or question of law framed under section 133 in any case which the High
Court certifies to be a fit one for appeal to the Supreme Court.
     (2) The provisions of the Code of Civil Procedure, 1908 (V of 1908), relating to appeals to the Supreme Court
shall apply, so far as may be, in the case of an appeal under this section in like manner as they apply in the case of
an appeal from decrees of a High Court.
     (3) Where the judgment of the High Court is varied or 1[reversed] in appeal under this section, effect shall be
given to the order of the Supreme Court in the manner provided in sub-section 2[(12)] of section 133 in the case of
a judgment of the High Court.
     (4) The provisions of sub-sections (11), (12) and (13) of section 133 shall apply in the case of an appeal to the
Supreme Court made under this section as they apply to an appeal to the High Court under section 133.”
1 Substituted for “reserved” by Finance Act, 2003.
2 Substituted for “(10)” by Finance Act, 2003.


                                                         COMMENTS
SECTION 134: ―Appeal to Supreme Court‖.
    The ultimate and highest forum of appeal is the Supreme Court in cases where a question
of law is involved. The judgments of the honourable apex Court are binding on all the courts
and authorities under Article 189 of the Constitution of Pakistan. The omitted section catered
for appeals to the apex Court where the decision of the High Court is a subject matter of
further litigation by one of the parties in dispute. The provisions were more or less similar to
those of section 133 related to appeal before the High Court. The Finance Act, 2005 has
omitted this section meaning by no certification is required from High Court and now leave
to Court is to be sought under Article 185(3) of the Constitution.
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                      COMPARABLE PROVISION OF THE RO – [SECTION 137]
     137. Appeal to the Supreme Court.–(1) An appeal shall lie to the Supreme Court from any judgment of the
High Court delivered on 1[a reference made, or any question of law framed,] under section 136 in any case which
the High Court certifies to be a fit one for appeal to the Supreme Court.
     (2) The provisions of the code of Civil Procedure, 1908 (V of 1908), relating to appeals to the Supreme Court
shall, so far as may be, apply in the case of appeals under this section in like manner as they apply in the case of
appeals from decrees of a High Court.
     (3) Where the judgment of the High Court is varied or reversed in appeal under this section, effect shall be
given to the order of the Supreme Court in the manner provided in sub-section (5) of section 136 in the case of a
judgment of the High Court.
     (4) The provisions of sub-sections (6) and (7) of section 136 shall apply in the case of an appeal to the
Supreme Court made under this section as they apply to a reference made under the said section 136.
1 Substituted for “an appeal filed” by Finance Ordinance, 2000. Earlier these word substituted for “a reference made, or any question of law
  framed,” by Finance Act, 1997.

                                                     DEPARTMENTAL VIEW
Finance Act, 2005 – Deletion of provision regarding appeal to Supreme Court. [Section 134]
      Section 134 of the Income Tax Ordinance, 2001 incorporated right of appeal to Supreme
Court both for the taxpayer and the department against any judgment of the High Court
delivered on a reference made or question of law framed under section 133 in any case which
the High Court certified to be a fit one for appeal to the Supreme Court. However, it was
seen that Article 185 of the Constitution of Pakistan, 1973 also provided the right of filing of
CPLA by any person, against the judgment of a High Court, to the Supreme Court. This
section was considered as a duplication in the law. Therefore, section 134 has been omitted
w.e.f. July 01, 2005. – (1/2005, dated 05.07.2005).




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                                            839
Chapter X, Procedure – Part III, Appeals                                      Section 134


             CASE LAW – SUPREME COURT / HIGH COURTS / ITAT
                 IN TAX MATTERS, SUPREME COURT‟S JURISDICTION IS LIMITED
   In tax matters appeal/reference to Supreme Court is governed by income tax laws. –
    (1) Provincial Library v. CIT, East Pakistan; (2) Satish Chandra Biswas v. CIT, East
    Pakistan; and (3) Haji Abdur Rahim Choudhury v. CIT, East Pakistan and Income
    Tax Tribunal, Lahore [(1959) 1-TAX (III-290) (S.C.Pak.) = 1959 PTD 1 = PLD 1958
    SC 81].
   In tax matters, Supreme Court‟s jurisdiction is limited. – (1) Provincial Library v. CIT,
    East Pakistan; (2) Satish Chandra Biswas v. CIT, East Pakistan; and (3) Haji Abdur
    Rahim Choudhury v. CIT, East Pakistan and Income Tax Tribunal, Lahore [(1959)
    1-TAX (III-290) (S.C.Pak.) = 1959 PTD 1 = PLD 1958 SC 81].
                            TIME LIMITATION FOR FILING REFERENCE
   Where a judgment has not been conveyed to a party limitation starts running from
    the date of knowledge. – Qureshi Vegetable Ghee Mills Ltd. v. CIT and 3 others
    [(2002) 85 TAX 397 (S.C.AJ&K) = 2002 PTD 399].
   Time limitation for filing reference. – Booz Allen & Hemilton International
    (Panama) Inc. USA v. CIT, Lahore [(1981) 44 TAX 38 (S.C.Pak.)].
   Application dismissed on ground of limitation. – CIT, Investigation v. Miss Shireen
    Ayub Khan and Master Tariq Ayub Khan[(1980) 42 TAX 141 (S.C.Pak.)].
   Delay cannot be condoned without valid reasons. – Commissioner of Sales Tax v.
    Chenab Textile Mills Ltd., Lahore [(1980) 42 TAX 140 (S.C.Pak.)].
   Delay not condoned – Reasons explained. – Jumma v. Maulvi Mubarak [(1975) 31
    TAX 97 (S.C.Pak.)].
   Petition for special leave filed beyond period of limitation is not maintainable. –
    Executors of Estate of late F.E. Dinshwa and others v. CIT, South Zone, Karachi
    [(1969) 19 TAX 1 (S.C.Pak.)].
                             SCOPE OF APPEAL TO SUPREME COURT
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    A contention not raised before the Tribunal cannot be raised in reference or in appeal
    from decision on reference. – Keshardeo Charnria v. CIT [1939] 7 ITR 394 (PC).
                              INTERIM STAY WHEN TO BE GRANTED
   Interim stay when to be granted. – CBR, Islamabad and 7 others v. Syed Jamat Ali
    Shah [1982 PTD 378 (S.C.Pak.)].
   Order for maintenance of status quo issued by the Supreme Court. A copy of stay
    order was not supplied to the Income Tax Officer. Effectiveness of the stay order does
    not depend upon its communication. – National Electric Co. (Pvt.) Ltd., Gujranwala
    v. CIT, Gujranwala Zone [(1996) 74 TAX 89 (H.C.Lah.) = 1996 PTD 901].
                                 QUESTION OF LAW EXPLAINED
   Finding of fact partly on evidence and partly on conjecture gives rise to question of
    law. – Irum Ghee Mills Limited v. Income Tax Appellate Tribunal and another
    [(2000) 82 TAX 3 (S.C.Pak)].
   Finding of facts on flimsy grounds and without material evidence give rise to a
    question of law. – Irum Ghee Mills Limited v. Income Tax Appellate Tribunal and
    another [(2000) 82 TAX 3 (S.C.Pak)].
   Question of law explained. – CIT, Punjab, NWFP and Bahawalpur v. Mrs. E.V.
    Miller, (deceased) presented by; (1) Mrs. Brickwood and (2) The Grindlays Bank Ltd.,
    Lahore; CIT, Punjab, NWFP and Bahawalpur v. Col. J.F.L. Taylor C/o Renala
    Estate Ltd.; CIT, Punjab, NWFP and Bahawalpur v. R. Mitchell; CIT, Punjab,
    NWFP and Bahawalpur v. Executors to the Estate of the late Col. Sir Edward Coley,
    Colyana Estate [(1976) 34 TAX 14 (S.C.Pak.)].
   Leave to court denied. – CST, Lahore Zone, Lahore v. S. Muhammad Din and Sons
    Ltd. [(1985) 51 TAX 234 (S.C.Pak.) = PTCL 1985 CL. 207].




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                                           840
Section 134                                                 Income Tax Ordinance, 2001.

    ORDER GRANTING LEAVE TO APPEAL BY HONOURABLE SUPREME COURT IS NOT A JUDGEMENT
   Order granting leave to appeal by honourable Supreme Court is not a judgement. –
    Muhammad Ansar etc. v. Administrator Town Committee Kabirwala District
    Khanewal and 4 others [(2000) 81 TAX 60 (H.C.Lah.) = 2000 PTD 478].
                                  LEAVE TO APPEAL GRANTED
   In granting leave to appeal rule of consistency is to be followed. – Central Insurance
    Co. Ltd. v. CIT [(1999) 79 TAX 1 (S.C.Pak) = 1997 PTD 71= PTCL 1999 CL. 635].
   Leave to appeal is granted to consider whether the imposition of Income Tax on the
    basis of „turn over‟ alone. – Lahore Textile & General Mills Ltd., Lahore and other v.
    Pakistan through Secretary, Ministry of Finance, Islamabad and others [(1997) 76
    TAX 102 (S.C.Pak.) = 1997 PTD 1054].
   Court has already granted leave against the judgment of the High Court which is
    also the subject-matter of the present petitions, in order to follow the rule of
    consistency, we are inclined to grant leave in the present cases to consider inter alia
    the question on which earlier leave has been granted. – Central Insurance Co. Ltd.
    v. CIT [(1999) 79 TAX 1 (S.C.Pak) = 1997 PTD 71= PTCL 1999 CL. 635].
   Conditional stay granted with leave to appeal. – Sardarpur Tex Zahur Textile Mills,
    Mandiwala Mauser Sh. Spinning Mills and others v. Federation of Pakistan [1997
    PTD 70 (S.C.Pak)].
   Cost of bonus shares – Leave to appeal is granted. [See [1992] 66 TAX 6 (S.C.Pak) =
    1992 PTD 1693 for final decision]. – CIT, Central Zone, Lahore v. Umreen Saigol
    and others [1989 PTD 41 (S.C.Pak.)].
   Leave to appeal granted – Notices issued declared unlawful having no legal effect. –
    Arafat Woollen Mills Ltd. v. ITO, Companies Circle C-1, Karachi [(1990) 61 TAX 46
    (S.C.Pak.) = 1990 PTD 338 = 1989 PTD 935 = PTCL 1990 CL. 639].
   Leave to appeal granted to examine the question of public importance. – Sh.
    Mohammad Zaki and Sh. Rahimuddin etc. v. ITO [(1980) 42 TAX 92 (S.C.Pak.) =
    (1985) 51 TAX 235 = 1981 PTD 69].
   Leave of appeal is granted – High Court cannot go beyond the question raised and
    referred to them. – K.B. Raja Muhammad Walayat Khan (deceased through Raja
                 www.imranghazi.com
    Muhammad Iqbal (legal heir) v. CIT, Rawalpindi Zone [(1985) 51 TAX 1 (S.C.Pak.)].
   Rejection of accounts – Leave is granted to examine the issue. – CIT, Lahore v.
    Colony Woollen Mills Ltd. [1990 PTD 839 (S.C.Pak.)].
   The petitions are in time raises exactly the same questions of law and fact as on the
    case cited. – Leave to appeal is granted. – CIT, Lahore v. General Boot House,
    Lahore and others [1990 PTD 842 (S.C.Pak)].
   Interpretations of the expression „unless he is himself liable to pay any income tax
    and super tax thereon as an agent‟. Legal question which is likely to affect a large
    number of cases has arisen, special leave to appeal is granted. – Noon Sugar Mills
    Ltd., Bhalwal v. CIT, Rawalpindi [(1981) 44 TAX 10 (S.C.Pak.) = 1981 PTD 235 =
    1982 PTD 126].
   In view of issue involved is of public importance leave to appeal is granted. – Mian
    Aziz S. Sheikh v. CIT, Investigation, Lahore [(1981) 43 TAX 105 (S.C.Pak) 1981 PTD
    124].
   Two equally possible interpretations emerge – Leave to appeal granted. – Mian Aziz
    S. Sheikh v. CIT, Investigation, Lahore [(1981) 43 TAX 105 (S.C.Pak) 1981 PTD 124].
   Leave to appeal granted to examine constitutional and legal issues relating to
    advance tax. – Khalid & Co. Lahore and another v. the Islamic Republic of Pakistan
    and others [(1980) 42 TAX 95 (S.C.Pak.) = 1981 PTD 72].
   Leave to appeal granted to examine the question raised. – Mian Muhammad Sharif
    & Co. v. CIT, Rawalpindi [(1980) 42 TAX 93 (S.C.Pak.) = 1981 PTD 71].




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                                           841
Chapter X, Procedure – Part III, Appeals                                    Section 134

   Remuneration paid outside the taxable territories of Pakistan to a non-resident
    company – Leave to appeal granted. – Macneill & Barry Ltd., Calcutta v. CIT, East
    Pakistan [(1970) 21 TAX 270 (S.C.Pak.) = PLD 1968 SC 514].
                                LEAVE TO APPEAL IS REFUSED
   Leave refused. – Collector of Customs (Appraisement) Customs House, Lahore and
    others v. M. Ramzan Sewing Machines Company and others [(2004) 90 TAX 38
    (S.C.Pak.) = 2004 PTD 2214].
   Leave refused as order under section 52 read with section 86 held to be in order. –
    BILZ (Pvt.) Ltd. v. DCIT, Multan and another [2002 PTD 1 (S.C.Pak) = PLD 2002 SC
    353].
   Relevant basis for the impugned assessment were not ignored, nor there was any
    defect in the manner adopted. In our view, there was nothing dishonest in it – Leave
    to appeal is refused. – Siddique Textile Limited v. CIT, Rawalpindi [1989 PTD 1182
    (S.C.Pak.)].
   Acceptance of reference doubted. – CIT, East Pakistan, Dacca v. Luxmi Narayan
    Cotton Mills Ltd., Dacca [(1960) 2-TAX (III-538) (S.C.Pak.) = 1960 PTD 855].
   Grant of leave against High Court‟s decision denied. – CIT, Lahore Zone, Lahore v.
    Nasir A. Sheikh [(1980) 42 TAX 80 (S.C.Pak.)].
                         REFERENCE REJECTED FOR NON-PROSECUTION
   Reference rejected for non-prosecution. – Walayat Agencies, Lyallpur v. CIT,
    Rawalpindi [(1977) 35 TAX 39 (S.C.Pak.)].
                                JUDGMENT – CONNOTATION OF
   An order passed by High Court declining to call upon Commissioner to state a case
    and refer it, is not a judgment „on a reference‟ within meaning of section 66A. –
    Gurmukh Rai v. Secretary of State for India In Council [1934] 2 ITR 412 (All.).
   Order of High Court refusing to call a reference is not a final decree or judgment and
    thus, leave to appeal cannot be granted in respect of such order. – Sri Mahant
    Harihar Gir v. CIT [1941] 9 ITR 246 (Pat.).
                  ANSWER IN REFERENCE REVERSED AS DECIDED BY HIGH COURT
                www.imranghazi.com
    Answer in reference reversed as decided by High Court. – CIT, North Zone, West
    Pakistan v. The Lyallpur Cotton Mills, Ltd. Lyallpur [(1960) 2-TAX (III-155)
    (S.C.Pak.) = 1960 PTD 137 = PLD 1960 SC 48].
           SPECIAL LEAVE PETITION/CERTIFICATION FOR FITNESS TO APPEAL – GENERAL
   No certificate required under section 137 when appeal itself is by way of leave of
    Court under Article 185(3) of the Constitution. – Irum Ghee Mills Limited v. Income
    Tax Appellate Tribunal and another [(2000) 82 TAX 3 (S.C.Pak)].
   Appeal from High Court‟s‟ judgment lie before the Supreme Court only if leave to
    appeal under Article 185(3) of the Constitution (1973) is granted by the Supreme
    Court. – CIT, Lahore v. Umar Saigol [(1976) 33 TAX 245 (H.C.Lah.) = 1976 PTD 76
    = PLD 1975 Lah. 1558].
   Grant of certificate by High Court for leave to appeal to Supreme Court. Power could
    not be taken away by Constitution of Pakistan. – Harjina & Co. (Pak) Ltd., Karachi
    v. CIT, Central, Karachi [(1964) 8 TAX 1 (H.C.Kar.) = 1963 PTD 867 = PLD 1963
    Kar. 996].
   Appeal to Federal Court lies under section 66A of the Income Tax Act; sections 109
    and 110 of the C.P.C, or clause 29 of Letters patent. Held, only under section 66A,
    particularly when it is certified by the High Court to be fit one for appeal. – CIT,
    Punjab And NWFP v. Bombay Cloth House, Lahore [(1960) 2-TAX (Suppl.–300)
    (H.C.Lah.) = PLD 1954 Lah. 32].
   High Court refused to direct Tribunal to state case. Held order final and certificate
    for appeal to the Federal Court can be granted. – Khushab-Nowshera Bus Service
    Ltd., Khushab v. CIT, Punjab And NWFP [(1960) 2-TAX (Suppl.–290) (H.C.Lah.) =
    1960 PTD 1128 = PLD 1954 Lah. 759]; Satish Chandra Biswas v. CIT, East Pakistan
    [(1960) 2-TAX (Suppl.–281) (H.C.Dacca) = 1960 PTD 292 = PLD 1957 Dacca 535].




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                                           842
Section 134                                                 Income Tax Ordinance, 2001.

   Right of appeal is confined only to cases certified as fit for appeal by the High Court.
    – Delhi Cloth and General Mills Co. Ltd. v. CIT [2 ITC 439 (PC)].
   Right of appeal to His Majesty in Council in Income Tax cases is confined to cases
    certified to be fit for appeal by High Court – CIT v. Vijayananda Gajapathi Raju
    [1935] 3 ITR 358 (All.).
                            SPECIAL LEAVE PETITION – ILLUSTRATIONS
   No question of law arises. – Shah Nawaz Khan & Co., Multan v. CIT, North Zone,
    West Pakistan, Lahore [(1975) 31 TAX 69 (S.C.Pak.)].
   If no law point emerges, Court will decline reference petition. – Lungla (Sylhet) Tea
    Co. Ltd., Sylhet v. CIT, Dacca Circle, Dacca [(1975) 31 TAX 64 (S.C.Pak.)].
   Where amount involved in appeal is small but question is to arise every year, leave
    to appeal to Privy Council cannot be refused on ground that amount involved was
    small. – CIT v. S.L. Mathias [1938] 6 ITR 8 (Mad.).
   Question as to whether income from „Malikana‟ and income from forest trees were
    agricultural income and the question as to whether certain payments of annuity
    with interest were liable to Income Tax, are substantial questions of law. – Raja
    Mustafa All Khan v. CIT [1946] 14 ITR 265 (Oudh).
   Question as to whether interest and further compensation awarded after acquisition
    of house property is income is not a substantial question of law. – CIT v. Behari Lal
    Bhargava [1942] 10 ITR 388 (All.).
   Question as to whether maintenance allowance received by junior member of an
    impartible estate is received by him as a member of a Hindu undivided family is a fit
    one to be referred to Privy Council. – CIT v. Maharaj Kumar of Vizianagaram
    [1935] 3 ITR 155 (All.).
   Question of allowability of interest paid on contribution by partner is not a question
    of public or private importance. – CIT v. Tejbhandas Motumal [1936] 4 ITR 227
    (Slnd).
   No appeal lies to Supreme Court against an order of High Court directing reference
    of a case. – CIT v. Voora Sreeramulu Chetty (No.2) [1939] 7 ITR 566 (Mad.).
                www.imranghazi.com
    Leave to appeal under section 66A of 1922 Act should be granted against order of
    High Court calling reference under section 66(3) against order of Income Tax Officer
    refusing registration to assessee-firm. – CIT v. Bulchand Keshavdas [1934] 2 ITR
    197 (Sind).
   Others. – Raja Bahadur Dhakeswar Prasad Narayan Singh v. CIT [1939] 7 ITR 260
    (Pat.).
                               PROCEDURE FOR FILING OF APPEAL
   Provisions in the Civil Procedure Code relating to appeals to the Supreme Court are
    contained in sections 109 to 112 read with Order XLV, C.P.C. – Prime Dairies Ice
    Cream Ltd. Lahore v. CIT, Companies Zone [(2002) 85 TAX 509 (S.C.Pak) = 2002
    PTD 430].
   Appeals rejected for want of non-observance of relevant provisions of law. – Prime
    Dairies Ice Cream Ltd. Lahore v. CIT, Companies Zone [(2002) 85 TAX 509 (S.C.Pak)
    = 2002 PTD 430].




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                                                             843
Chapter X, Procedure – Part III, Appeals                                                               Section 134A

        1[134A. 2[Alternative]  Dispute Resolution. 3[(1) Notwithstanding
any other provision of this Ordinance or the rules made thereunder an
aggrieved person, in connection with any matter pending before an
Appellate Authority, may apply to Board for the appointment of a
committee for the resolution of any hardship or dispute mentioned in detail
in the application 4[except where prosecution proceedings have been
initiated or where interpretation of question of law having effect on
identical other cases].]
     (2) The 5[Board] after examination of the application of an aggrieved
person, shall 6[within sixty days of receipt of such application in the Board,]
appoint a committee consisting of an officer of 7[Inland Revenue] and two
persons from a 8[panel comprising] of Chartered or Cost Accountants,
Advocates, Income Tax Practitioners or reputable taxpayers for the
resolution of the hardship or dispute.
     9[(3) The Committee constituted under sub-section (2) shall examine

the issue and may if it deem fit necessary conduct inquiry seek expert
opinion, direct any officer of the 7[Inland Revenue] or any other person to
conduct an audit and shall make recommendations within ninety days of
its constitution in respect of the resolution of the dispute. If the committee
fails to make recommendations within the said period the Board shall
dissolve the committee and constitute a new committee which shall decide
the matter within a further period of ninety days. If after the expiry of that
period the dispute is not resolved the matter shall be taken up by the
appropriate forum for decision.]
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    (4) The 5[Board] may, on the recommendation of the committee, pass
such order, as it may deem appropriate 10[within forty five days of the
receipt of recommendations of the committee].
1    Section 134A inserted by Finance Act, 2004.
2    Substituted for “Alternate” by Finance Act, 2006.
3    Sub-section (1) substituted by Finance Act, 2006.
4    Words inserted by Finance Act, 2009.
5    Substituted for “Central Board of Revenue” by Finance Act, 2007.
6    Words and comma inserted by Finance Act, 2009.
7    Substituted for “Income Tax” by Finance Act, 2010 w.e.f. June 5, 2010.
8    Substituted for “notified panel” by Finance Act, 2005.
9    Sub-section (3) substituted by Finance Act, 2009.
10   Words inserted by Finance Act, 2009.

                                          LEGISLATIVE HISTORY
     Section 134(1)–Substitution.–Before substitution by Finance Act, 2006 sub-section (1) read as follows:–
     “(1) Notwithstanding any other provision of this Ordinance, or the rules made thereunder, any aggrieved
person in connection with any matter of income tax pertaining to liability of income tax, admissibility of refund,
waiver or fixation of penalty or fine, relaxation of any time period or procedural and technical condition may apply
to the Central Board of Revenue for the appointment of a committee for the resolution of any hardship or dispute
mentioned in detail in the application.”
      Section 134(3)–Substitution.–Before substitution by Finance Act, 2009 sub-section (3) read as follows:–
    “(3) The committee constituted under sub-section (2) shall examine the issue and may, if it deems necessary,
conduct inquiry, seek expert opinion, direct any officer of Income Tax or any other person to conduct an audit and
make recommendations in respect of the resolution of dispute as it may deem fit.”




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                                                          844
Section 134A                                                                   Income Tax Ordinance, 2001.

            Notwithstanding anything contained in sub-section (4), the
        1[(4A)

Chairman Federal Board of Revenue may, on the application of an
aggrieved person, for reasons to be recorded in writing, and on being
satisfied that there is an error in order or decision, pass such order as may
be deemed just and equitable.]
    (5) The aggrieved person may make the payment of income tax and
other taxes as determined by the 2[Board] in its order under sub-section (4)
and all decisions, orders and judgments made or passed shall stand
modified to that extent and all proceedings under this Ordinance or the
rules made thereunder by any authority shall abate:
     Provided that 3[ ] an 4[order passed by] the Board in the light of
recommendations of the committee shall be submitted before that authority*
tribunal or the court 5[where the matter is subjudice] for consideration and
orders as deemed appropriate 6[:]
                further that if the taxpayer is not satisfied with the said
        7[Provided

order, he may continue to pursue his remedy before the relevant authority,
tribunal or court as if no such order had been made by the Board.]
        8[                ]
     (7) The Board may, by notification in the official Gazette, make rules
for carrying out the purposes of this section.]
1 Sub-section (4A) inserted by Finance Act, 2008.
2 Substituted for “Central Board of Revenue” by Finance Act, 2007.
3 Commas and words “, in case the matter is already sub-judice before any authority or tribunal or the court,” omitted by
  Finance Act, 2006.      www.imranghazi.com
4 Substituted for “agreement made between the aggrieved person and” by Finance Act, 2005.
5 Words inserted by Finance Act, 2006.
6 Substituted for full-stop by Finance Act, 2005.
7 Proviso inserted by Finance Act, 2005.
8 Sub-section (6) omitted by Finance Act, 2005.
*Comma is missing in the official gazette.

                                             LEGISLATIVE HISTORY
    Section 134A(6)–Omission.–Before omission by Finance Act, 2005, sub-section (6) read as follows:–
    “(6) In case the aggrieved person is not satisfied with the orders of the Central Board of Revenue, he may file
an appeal or reference with the appropriate authority, tribunal or court under the relevant provisions of this
Ordinance within a period of sixty days of the order passed by the Board under this section has been
communicated to the aggrieved person.”

                                                 COMMENTS
SECTION 134A: ―Alternative Dispute Resolution‖.
Parallel to conventional appellate system, alternative dispute resolution mechanism was
introduced for the first time vide Finance Act, 2004 in the income tax law which is different
from Settlement Commission under the repealed Ordinance that did not last for long. The
main features after amendments up to Finance Act, 2009 are:
     * any aggrieved person in connection with any matter (pending before an appellate
          authority), except where prosecution proceedings have been taken or where
          interpretation of question of law having effect on identical cases involved, may
          apply to the Federal Board of Revenue for the appointment of a committee for the
          resolution of any hardship or dispute mentioned in detail in the application.




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                                               845
Chapter X, Procedure – Part III, Appeals                                          Section 134A

     *    The Federal Board of Revenue may within 60 days, after examination of the application
          of an aggrieved person, appoint a committee consisting of an officer of Income Tax and
          one or two persons from a panel of Chartered or Cost Accountants, Advocates, Income
          Tax Practitioners or reputable taxpayers for the resolution of the hardship or dispute.
     * The committee will have to examine the issue and may, if it deems necessary,
          conduct inquiry, seek expert opinion, direct any officer of Income Tax or any other
          person to conduct an audit and make recommendations within 90 days in respect of
          the resolution of dispute as it may deem fit. If the committee fails to meet the
          deadline, the FBR can dislove it and constitute a new committee, which shall decide
          the matter within further 90 days. If the second committee also fails to resolve the
          matter within the stipulated time, the matter will be taken up by the forum where it
          is pending.
     * The Board, on the recommendation of the committee, is to pass such order, as it
          may deem appropriate, within 45 days of the receipt of recommendations.
     * The aggrieved person may make the payment of income tax and other taxes as
          determined by the Board in its order under sub-section (4) and in case the matter is
          already sub-judice before any forum or tribunal or the court, the order passed by the
          Board in the light of recommendations of the committee is to be submitted before that
          forum, tribunal or the court for consideration and orders as deemed appropriate.
     * In case the aggrieved person is not satisfied with the orders of the Board, he may
          continue to pursue his remedy before the relevant authority, tribunal or court as if
          no such order had been made by the Board.
     * Under sub-section (4A) FBR, on the application of an aggrieved person, can rectify
          an error in the order.
          The Finance Act 2009 has made major changes in the procedural conduct of the
          committee whereby it will have to make recommendations within 90 days of its
          constitution and where it is unable to resolve any issue, the Board would dissolve it
          and form another committee with the same condition of resolving dispute within 90
          days of its formation. If at the end of the term, the second committee also fails then
          the matter would be taken up at the appropriate forum.
          Interestingly, where the taxpayer fails to say, file a return in time, make payment of
                  www.imranghazi.com
          tax, comply with notices or other demands, he is pounded with various penal
          provisions. On the contrary, the Board allows committees to enjoy the privilege of
          180 days of keeping a taxpayer on his tenterhooks while they waste his time and
          money in either delayed proceedings, no proceedings or transferring the case to an
          appropriate forum. Let this work be done by the Federal Tax Ombudsman under
          section 33 of the Federal Ombudsman Ordinance, rather than FBR and its
          hand-picked committees.
          However, there is one redeeming feature which is restricting the Board to pass an
          order within 45 days of the receipt of the committee’s recommendations. Having
          said this, there is no accountability/penalty for the Board if an order is not passed
          within the specified period. Besides, there is no way a taxpayer can ensure that the
          Board does its work on time.
   We made the following remarks about omitted sub-section (6):
          ‚Sub-section (6) is not properly drafted. The right to appeal is to be saved against
          the order about which a person opts for this mechanism in terms of time factor, if he
          does not accept CBR’s order. As drafted now it gives an impression as if right to
          appeal is provided against CBR’s order which is absurd‛.
   In the light of above remarks, the Finance Act, 2005 rectified the mistake by omitting
sub-section (6) and inserting second proviso in sub-section (5). See also rule 214A in Volume III].

                                   DEPARTMENTAL VIEW
EXPLANATORY CIRCULAR ON THE AMENDMENTS MADE IN THE INCOME TAX ORDINANCE, 2001
THROUGH FINANCE ACT, 2009.
29. ALTERNATIVE DISPUTE RESOLUTION. [SECTION 134A]
     Through an amendment in section 134A(1) of the Ordinance, following conditions have
been inserted which would make the section inapplicable.




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                                              846
Section 134A                                                    Income Tax Ordinance, 2001.

         a) Where prosecution proceedings have been initiated.
         b) Applications which require interpretation of various question of law having effect
             on identical other cases.
       Further sub-section (3) has been substituted to provide that ADRC shall submit its
recommendations within 90 days of its constitution. The Committee shall be dissolved by the
FBR in case it fails to submit its recommendations within the stipulated period. In such cases
the Board shall then constitute another committee and the reconstituted committee will be
required to submit its recommendations in 90 days. If there is no decision the taxpayer may
revert back to the appellate forum where the case is pending.
       Previously no time limit was specified for FBR to pass order on the recommendations
made by the ADRC. Now FBR is required to pass an order as it deem appropriate within 45
days of the receipt of recommendations of ADRC. - (3/2009 dated 17.7.2009).
Finance Act, 2006 – Provisions relating to Alternative Dispute Resolution.
       Under the existing scheme, a taxpayer can apply to the Central Board of Revenue for
resolution of any hardship relating to income tax. Amendment has been made to specifically
restrict the jurisdiction of such Committee to pending issues only meaning thereby that
closed matters fall outside the ambit of ADRCs. – (1/2006, dated 01.07.2006).
Finance Act, 2005 – Rationalization of provisions for Alternate Dispute Resolution (ADR). [Section
134A]
       The purpose of introduction of Alternate Dispute Resolution mechanism was to
provide a separate stream for dispute resolution apart from the normal appeal process. An
apprehension was expressed by stakeholders that the language of sub-section (6) was
ambiguous and not in consonance with the intent of the law.
       To clarify the ambiguity, sub-section (6) has been omitted and a proviso to sub-section
(5) has been added which provides that if a taxpayer is not satisfied with the order of the
Board, he may continue to pursue his remedy before the relevant authority, tribunal or court
as if no order under this section had been made by the Board. – (1/2005, dated 05.07.2005).
Committees For Alternate Dispute Resolution.
       In partial modification of Circular No. 20 of 2004 dated 04/09/04, the following
Committees are reconstituted as under.–
                    ALTERNATE DISPUTE RESOLUTION COMMITTEES
Lahore.            www.imranghazi.com
                                         Committee No. I
1.     Kh.Habibullah                                                 Chairman
       83/1 *Raze View, Jail Road
       Opp. Service Hospital, Lahore.
       Ph. 042-7586447
2.     Mr. Ahmad Rauf                                                Member
       Advocate
       M/s. Ahmad Rauf & Associates
       24/BS, Gulberg-II, Lahore.
3.     CIT Special Zone, Lahore.                                     Member
       CIT Companies Zone-I, Lahore                                  Alternate Member
                                         Committee No. II
1.     Dr. Pervaiz Hassan                                            Chairman
       Hassan & Hassan Advocates
       PAAF Building,
       7-D Kashmir Egerton Road, Lahore.
       (Ph. No. 042-**8360800-4)
2.     Mr. Muhammad Aslam Khan, CA                                   Member
       M/s. Aslam Khan & Co
       11-Happy Home, 38-A,
       Main Gulberg, Lahore
       (Ph No 042-5716691-93)
*Correct name is “Race-View”.
**The correct number is 6360800-4.




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                                           846-A
Chapter X, Procedure – Part III, Appeals                             Section 134A

3.   CIT Companies Zone-I, Lahore                        Member
     CIT Special Zone, Lahore                            Alternate Member
                                     Committee No. III
1.   Mr. Javed Iqbal                                     Chairman
     C/o Pak Kuwait Textile Mills Ltd
     Lahore
2.   Mian Ashiq Hussain                                  Member
     Advocate Supreme Court
     16-Link Farid Kot Road, Lahore
3.   CIT Companies Zone-II, Lahore                       Member
     CIT Zone-A, Lahore                                  Alternate Member
Karachi.
                                       Committee No. I
1.   Mr. Mushtaq Ahmad Vohra                             Chairman
     Chairman, Taxation & Fiscal Committee
     APTMA House, 44-A, Lalazar, Karachi
2.   Mr. Younus Rizwan Sheikh, CA                        Member
     M/s. Avais Hyder Nauman Rizwani
     Karachi
3.   CIT Special Zone, Karachi                           Member
     CIT Companies Zone-I, Karachi                       Alternate Member
                                      Committee No. II
1.   Mr. M A M Siddiqui                                  Chairman
     Bait-ul- Hameed 18/N, Phase-IV DHA,
     Karachi.
2.   Mr. Shabbar Zaidi, FCA                              Member
     M/s. A F Ferguson & Co
     Karachi
3.   CIT Companies Zone-I, Karachi                       Member
     CIT Special Zone, Karachi                           Alternate Member
Islamabad.
1.              www.imranghazi.com
     Mr. Ahadullah Akmal                                 Chairman
     House No. 299, St No. 20
     E-7, Islamabad (Ph: 2271515)
2.   Mr. Abdul Basit, FCA                                Member
     M/s. Amir Alam Khan & Co
     55/1, Bank Road, Rawalpindi
3.   CIT Companies Zone, Islamabad                       Member
     CIT Islamabad Zone, Islamabad                       Alternate Member
Rawalpindi.
1.   Mr. Alvi Abdul Rahim                                Chairman
     House No. 169, St No. 54, I-8/3, Islamabad
2.   Mr. Shahid Sadiq, CA                                Member
     M/s. A F Ferguson & Co
     49-A, PIA Building, Blue Area, Islamabad
3.   CIT (MTU), Rawalpindi                               Member
     CIT Companies Zone, Islamabad                       Alternate Member
Sialkot.
1.   Ch. Ahmad Zulfiqar Hayat                            Chairman.
     M/s. Leather Field (Pvt) Ltd
     Capital Road, Sialkot
     (Ph No. 0432-556272)
2.   Pirzada Syed Saeed Ahmad Shah                       Member.
     Advocate, Allama Iqbal Market,
     Paris Road, Sialkot (0432-589312)
3.   CIT Sialkot Zone Sialkot                            Member.
     CIT Gujranwala Zone, Gujranwala                     Alternate Member




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                                        846-B
Section 134A                                    Income Tax Ordinance, 2001.

Faisalabad.
1.   Mr. Munawar A Sheikh                         Chairman
     President
     Yarn Merchant Association, Faisalabad
2.   Mr. Salman Zahid Jamil, CA                   Member
     M/s. Zahid Jamil & Co, Faisalabad
3.   CIT Companies Zone, Faisalabad              Member
     CIT Faisalabad Zone, Faisalabad             Alternate Member
                                                 – (21/2004, dated 19.11.2004).




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                                            847
Chapter X, Procedure – Part III, Appeals                                     Section 134A

Committees for Alternate Dispute Resolution.
     A new section 134A has been inserted in the Income Tax Ordinance, 2001 through the
Finance Act, 2004 which provides an option to the taxpayer to avail the facility of
administrative means for resolving disputes/ hardship through mediation outside the ambit
of conventional appeal system. This system will ensure speedy and amicable settlement of
disputes.
2.   The Committees constituted (annex) for different cities as provided in the provisions of
sub-section (2) of section 134A of the Income Tax Ordinance, 2001, are notified with
immediate effect.
3.   The working and procedure of the Committees will be adhered to by the members as
provided in section 134A of Income Tax Ordinance, 2001 as well as rule 231C of the Income
Tax Rules, 2002.
                         Alternate Dispute Resolution Committees
Lahore
                                       Committee No. I
1.   Kh. Habibullah                                             Chairman.
     83/1 *Raze-View Jail Road
     Opp. Services Hospital, Lahore
     Ph.042-7586447
2.   Mr. Ahmad Rauf                                             Member
     Advocate
     M/s. Ahmad Rauf & Associates
     24/BS, Gulberg-II, Lahore
3.   CIT Special Zone Lahore                                    Member.
                                      Committee No. II
1.   Dr. Pervaiz Hassan                                         Chairman
     Hassan & Hassan Advocates
     PAAF Building, 7-D Kashmir
     Agerton Road, Lahore
     (Ph No. 042-**8360800-4)
2.   Mr. Muhammad Aslam Khan, CA                                Member
     M/s. Aslamwww.imranghazi.com
                  Khan & Co
     11-Happy Home, 38-A,
     Main Gulberg, Lahore
     (Ph No 042-5716691-93)
3.   CIT Companies Zone-I, Lahore                               Member
                                      Committee No. III
1.   Mr. Javed Iqbal                                            Chairman
     C/o Pak Kuwait Textile Mills Ltd
     Lahore
2.   Mian Ashiq Hussain                                         Member
     Advocate Supreme Court
     16-Link Farid Kot Road
     Lahore
3.   CIT Companies Zone-II, Lahore                              Member
Alternate Dispute Resolution Committees
Karachi
                                       Committee No. I
1.   Mr. Mushtaq Ahmad Vohra                                    Chairman
     Chairman, Taxation & Fiscal Committee
     APTMA House, 44-A, Lalazar, Karachi
2.   Mr. Younus Rizwan Sheikh, CA                               Member
     M/s. Avais Hyder Nauman Rizwani, Karachi
3.   CIT Special Zone, Karachi                                  Member
*Correct name is “Race-View”.
**The correct number is 6360800-4.




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                                             848
Section 134A                                                  Income Tax Ordinance, 2001.

                                       Committee No. II
1.    Mr. M A M Siddiqui                                        Chairman
      Bait-ul- Hameed 18/N, Phase-IV DHA,
      Karachi.
2.    Mr. Shabbar Zaidi, FCA                                    Member
      M/s. A F Ferguson & Co
3.    CIT Companies Zone-I, Karachi                             Member
                          Alternate Dispute Resolution Committees
Islamabad
1.    Mr. Ahadullah Akmal                                       Chairman
      House No. 299, St No. 20
      E-7, Islamabad (Ph: 2271515)
2.    Mr. Abdul Basit, FCA                                      Member
      M/s. Amir Alam Khan & Co
      55/1, Bank Road
      Rawalpindi
3.    CIT Companies Zone Islamabad Member
Rawalpindi
1.    Mr. Alvi Abdul Rahim                                      Chairman
      House No. 169, St No. 54, I-8/3
      Islamabad
2.    Mr. Shahid Sadiq, CA                                      Member
      M/s. A F Ferguson & Co
      49-A, PIA Building, Blue Area
      Islamabad
3.    CIT (MTU), Rawalpindi                                     Member
Sialkot
1.    Ch. Ahmad Zulfiqar Hayat                                  Chairman
      M/s. Leather Field (Pvt) Ltd
      Capital Road, Sialkot
      (Ph No. 0432-556272)
2.                www.imranghazi.com
      Pirzada Syed Saeed Ahmad Shah                             Member
      Advocate, Allama Iqbal Market,
      Paris Road, Sialkot (0432-589312)
3.    CIT Sialkot Zone Sialkot                                  Member.
Faisalabad
1.    Mr. Munawar A Sheikh                                      Chairman
      President
      Yarn Merchant Association
      Faisalabad
2.    Mr. Salman Zahid Jamil, CA                                Member
      M/s. Zahid Jamil & Co
      Faisalabad
3.    CIT Companies Zone, Faisalabad                            Member
                                                                – (20/2004, dated 04.09.2004).
Finance Act, 2004 – Providing Alternate Dispute Resolution.
      To provide the taxpayers an easy and efficient dispute resolution mechanism and to
liquidate arrears of tax, an alternate dispute resolution forum has been introduced in the
Income Tax Ordinance, 2001 by inserting section 134A.
      The taxpayers shall have the choice to refer any dispute, relating to levy and payment
of tax, arising out of an assessment order passed by a taxation officer or an order pending
decision before any authority or Income Tax Appellate Tribunal or Court to Dispute
Resolution Committees to be constituted for this purpose. – (17/2004, dated 17.7.2004).




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                                                      849
Chapter X, Procedure – Part III, Appeals                                                        Section 135

      1[            ]
1 Section 135 omitted by Finance Ordinance, 2002.

                                      LEGISLATIVE HISTORY
     Section 135–Omission.–Before omission by Finance Ordinance, 2002 section 135 read as follows:–
     “135. Revision by the Commissioner.– (1) The Commissioner may either of the Commissioner‟s own
motion or on application in writing by a person for revision, call for the record of any proceeding under this
Ordinance in which an order has been passed by any taxation officer other than the Commissioner (Appeals).
     (2) Subject to sub-section (3), where, after making such inquiry as is necessary, Commissioner considers that
the order requires revision, the Commissioner may make such revision to the order as the Commissioner thinks fit.
     (3) An order under sub-section (2) shall not be prejudicial to the person to whom the order relates.
     (4) The Commissioner shall not revise any order under sub-section (2) if–
      (a) where an appeal against the order lies to the Commissioner (Appeals) or to the Appellate Tribunal, the
            time within which such appeal may be made has not expired, or the person has not waived their right of
            appeal;
      (b) the order is pending on appeal before the Commissioner (Appeals) or has been made the subject of an
            appeal to the Appellate Tribunal; or
      (c) in the case of an application made by a person, the application has not been made within ninety days of
            the date on which such order was served on the person, unless the Commissioner is satisfied that the
            person was prevented by sufficient cause from making the application within the time allowed.
     (5) No application for revision of an assessment order may be made under sub-section (1) unless the amount
of tax due under the assessment that is not in dispute has been paid by the taxpayer.
     (6) An application under sub-section (1) shall be accompanied by–
      (a) in relation to an assessment order, a fee of the lesser of two thousand five hundred rupees or ten
            percent of the tax assessed; or
      (b) in any other case–
           (i) where the applicant is a company, a fee of two thousand rupees; or
          (ii) where the applicant is not a company, a fee of five hundred rupees.
     (7) An order by the Commissioner declining to interfere shall not be treated as an order prejudicial to the
applicant.”           www.imranghazi.com




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                                             850
Section 136                                                   Income Tax Ordinance, 2001.

    136. Burden of proof.– In any appeal 1[by a taxpayer] under this
Part, the burden shall be on the taxpayer to prove, on the balance of
probabilities–
         (a)      in the case of an assessment order, the extent to which the
                  order does not correctly reflect the taxpayer‟s tax liability for
                  the tax year; or
         (b)      in the case of any other decision, that the decision is erroneous.
1 Words inserted by Finance Act, 2003.

                                         COMMENTS
SECTION 136: ―Burden of proof‖.
Prior to insertion of the words ‚by a taxpayer‛ vide Finance Act, 2003, we made the
following remarks:
          The over-zealous defenders of revenue have blatantly violated the basic norm of
          justice whereby onus lies on the one who makes a claim, and how the same can be
          shifted entirely to a taxpayer for defending the wrong-doings of the department is
          anyone’s guess. Taxpayers have been asked to prove the incorrectness of
          determination of income and tax liability or errors committed by the tax authorities
          even where they have positive findings in their favour by the appellate authorities.
          For example, if a taxpayer gets relief from the Commissioner (Appeals) and the
          department prefers appeal under section 130, the burden of proof under this section
          will remain on the taxpayer rather than on the Commissioner who is the claimant in
          the appeal. This is perhaps the most vivid example of discrimination and mockery
          of justice violative of Article 25 of the Constitution.
    It is a matter of relief that due notice of above comments was taken of and remedial
amendment was made.
                    www.imranghazi.com
                 CASE LAW – SUPREME COURT / HIGH COURTS / ITAT
                               “ERRONEOUS”, MEANING OF
    “Erroneous”. – United Builders Corporation Mirpur, v. CIT, Muzzafarabad [(1984)
     49 TAX 34 (H.C.AJ&K) = 1984 PTD 137].




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                                          851
Chapter X, Procedure – Part IV, Collection and recovery of tax                                                Section 137

                                  PART IV
                 COLLECTION AND RECOVERY OF TAX
     137. Due date for payment of tax.– (1) The tax payable by a
taxpayer on the taxable income of the taxpayer 1[including the tax payable
under 2[ ] 3[section 4[113 or] 113A]] for a tax year shall be due on the due
date for furnishing the taxpayer‟s *return of income for that year.
     5[(2) Where any tax is payable under an assessment order or an

amended assessment order or any other order issued by the Commissioner
under this Ordinance, a notice shall be served upon the taxpayer in the
prescribed form specifying the amount payable and thereupon the sum so
specified shall be paid within 6[fifteen] days from the date of service of the
notice 7[:]]
     8[Provided that the tax payable as a result of provisional assessment

under section 122C, as specified in the notice under sub-section (2) shall be
payable after a period of sixty days from the date of service of the notice.]
     (3) Nothing in sub-section (2) 1[or (4)] shall affect the operation of
sub-section (1).
     (4) Upon written application by a taxpayer, the Commissioner may,
where good cause is shown, grant the taxpayer an extension of time for
1 Words etc. inserted by Finance Act, 2003. Earlier it was inserted by Notification No. SRO 633(I)/2002, dated September 14,
  2002, issued by Federal Government in exercise of the powers conferred by section 240 of the Income Tax Ordinance, 2001.
  This amendment and all others made under SRO 633(I)/2002, dated September 14, 2002) are to be read with the following
  connotation given as preamble:
      “.....the Federal Government is pleased to direct that in making any assessment for the year beginning on the first day of
  July 2002 or making any deduction or collection of tax for the year beginning on the first day of July, 2002, the said Ordinance
                          www.imranghazi.com
  shall have effect as if, .....”
  It means that powers vested under section 240 have been abused by resorting to actual legislative work, rather than removal
  of difficulties for which the section is meant.
      This SRO is now rescinded by SRO 608(I)/2003 dated June 24, 2003. It means SRO 633(I)/2002 dated September 14,
  2002 remained in operation till June 30, 2003.
2 Words “section 113 or” omitted by Finance Act, 2008.
3 Words etc. inserted by Finance Act, 2004.
4 Word and figure inserted by Finance Act, 2009.
5 Sub-section (2) substituted by Finance Act, 2003.
6 Substituted for “thirty” by Finance Act, 2008.
7 Substituted for full stop by Finance Act, 2010 w.e.f. June 5, 2010. The same amendment was made by Finance
  (Amendment) Ordinance, 2010, promulgated as Ordinance No. III of 2010, dated February 6, 2010, published in the Gazette
  of Pakistan Extraordinary Part I at pages 23 to 53. This Ordinance was presented in the Parliament but lapsed on 5 June
  2010 as Parliament did not approve it. Originally this amendment was made through Finance (Amendment) Ordinance,
  2009, promulgated as Ordinance No. XXII of 2009, dated October 28, 2009, published in the Gazette of Pakistan
  Extraordinary Part I at pages 229 to 259. However there was a semi colon at the end of sub-section (2).
8 Proviso inserted by Finance Act, 2010 w.e.f. June 5, 2010. The same amendment was made by Finance (Amendment)
  Ordinance, 2010, promulgated as Ordinance No. III of 2010, dated February 6, 2010, published in the Gazette of Pakistan
  Extraordinary Part I at pages 23 to 53. This Ordinance was presented in the Parliament but lapsed on 5 June 2010 as
  Parliament did not approve it. Originally this amendment was made through Finance (Amendment) Ordinance, 2009,
  promulgated as Ordinance No. XXII of 2009, dated October 28, 2009, published in the Gazette of Pakistan Extraordinary
  Part I at pages 229 to 259.
*The word “return” does not go with section 113A as taxpayer is only required to file statement u/s 115(4).

                                                LEGISLATIVE HISTORY
    Section 137(2)–Substitution.–Before substitution by Finance Act, 2003 sub-section (2) read as follows:–
    “(2) Where an assessment order or amended assessment order is issued by the Commissioner, the tax
payable under the order shall be payable within fifteen days from the date of the assessment order is issued.”




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                                                          852
Section 137                                                                    Income Tax Ordinance, 2001.

payment of tax due 1[under sub-section (2)] or allow the taxpayer to pay
2[such tax] in instalments of equal or varying amounts as the

Commissioner may determine having regard to the circumstances of the
case.
     (5) Where a taxpayer is permitted to pay tax by instalments and the
taxpayer defaults in payment of any instalment, the whole balance of the
tax outstanding shall become immediately payable.
     (6) The grant of an extension of time to pay tax due or the grant of
permission to pay tax due by instalments shall not preclude the liability for
3[default surcharge] arising under section 205 from the due date of the tax

under sub-section 4[(2)].
       5[            ]
1 Words etc. inserted by Finance Act, 2003.
2 Substituted for “any tax due” by Finance Act, 2003.
3 Substituted for “additional tax” by Finance Act, 2010 w.e.f. June 5, 2010. The same amendment was made by Finance
  (Amendment) Ordinance, 2010, promulgated as Ordinance No. III of 2010, dated February 6, 2010, published in the Gazette
  of Pakistan Extraordinary Part I at pages 23 to 53. This Ordinance was presented in the Parliament but lapsed on 5 June
  2010 as Parliament did not approve it. Originally this amendment was made through Finance (Amendment) Ordinance,
  2009, promulgated as Ordinance No. XXII of 2009, dated October 28, 2009, published in the Gazette of Pakistan
  Extraordinary Part I at pages 229 to 259.
4 Substituted for “(1)” by Finance Act, 2003.
5 Sub-section (7) omitted by Finance Ordinance, 2002.

                                        LEGISLATIVE HISTORY
      Section 137(7)–Omission.–Before omission by Finance Ordinance, 2002 sub-section (7) read as follows:–
      “(7) A taxpayer dissatisfied with a decision under sub-section (4) may challenge the decision only under Part
III of this Chapter.”
                     www.imranghazi.com
                                                 COMMENTS
SECTION 137: ―Due date for payment of tax‖.
Parallel to section 54 and 85 of the RO, this section explains the concept and the procedure of
‚due tax‛ and its payment. Determination of the due date is necessary for calculation of
additional tax and/or penalty.
    Three specific due dates mentioned, are as follows:
    (a) That on which the taxpayer voluntarily furnishes his return of income under
          section 114 or statement u/s 115(4) in respect of section 113, 113A, and
    (b) That on which a taxpayer is supposed to make payment as a result of an assessment
          or an amended assessment order issued by the Commissioner which is 15 days (it
          was 30 days prior to 1.7.2008) from the date of issuance of the order.
    (c) In the case of provisional assessment under section 122C, tax payable will be after
          60 days from the service of the order.
    The new Ordinance has some rather innovative sub-sections like sub-section (3), which
have no parallels in any other piece of law. One wonders what the draftsman had in mind
while drafting this sub-section which reads as under:
       ‚(3) Nothing in sub-section (2) or (4) shall affect the operation of sub-section (1).‛
Is it to state that which is too obvious or to remove some complication? The claim of
simplification of law is fully exposed here.
    A very wise step taken in this section is that in addition to allowing extension in the date
for payment of tax, the Commissioner has been empowered to allow convenient instalments




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                                         852-A
Chapter X, Procedure – Part IV, Collection and recovery of tax                                      Section 137

(the Ordinance is fraught with both American and English spellings) to the taxpayer. This
was in practice under sub-section (2) of section 85 of the RO. This measure will definitely
relieve taxpayers of hardship in paying their tax dues.
Prior to amendment in sub-section (6), we made the following comments:
    ‚A very strange provision in the form of sub-section (6) needs immediate attention of the
legislators. For the purpose of levying additional tax, due date under sub-section (1)
(voluntary payment of tax) will remain the same despite any extension or instalments
granted by the Commissioner. But what about extension or instalments granted under
sub-section (2)? Does it mean that sub-section (6) will not apply in such cases?‛ The law was
amended through Finance Act, 2003 to rectify the lacuna pointed out by us.
    Retailers opting for presumptive taxation have been included for the purpose of payment
of tax on the due date when they are required to file simplified return/statement under
section 115(4). The Finance (Amendment) Ordinanmce, 2010 has substituted the expression
‚additional tax‛ with ‚default surcharge‛.

                 COMPARABLE PROVISION OF THE RO – [SECTIONS 54 & 85]
     54. Payment of tax with return of income.–Every person who is required, under this Ordinance to furnish a
return of total income shall pay the tax payable, on the basis of such return, on or before the date on which he is so
required to furnish such return 1[:]
1 Substituted for full stop by Finance Ordinance, 1980.




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                                 852-B
Section 137                                    Income Tax Ordinance, 2001.




                       PAGE LEFT BLANK INTENTIONALLY




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                                          853
Chapter X, Procedure – Part IV, Collection and recovery of tax                                                    Section 137

     2[Provided that where such person has paid any sum under sub-section (1) or sub-section (2) of section 53,

the Deputy Commissioner shall adjust the said sum against the tax payable under this section.]
     3[Explanation.– For the removal of any doubt, it is declared that the expression “tax payable” as used in this

section includes the tax under section 80D.]
1 Substituted for full stop by Finance Ordinance, 1980.
2 Proviso inserted by Finance Ordinance, 1980.
3 Explanation added by Finance Act, 1993 and shall always be deemed to have been so added.
     85. Payment of tax on demand.–1[(1)] Where any tax is payable in consequence of any assessment or other
order under this Ordinance, the Deputy Commissioner shall serve upon the assessee, or any other person liable to
*any such tax on behalf of the assessee, a notice of demand in the prescribed form specifying the sum payable;

and thereupon the sum so specified shall be paid to the credit of the Federal Government within the time specified
in the said notice.
     2[(2) Notwithstanding anything contained in sub-section (1), where the assessee or any other person on whom

a notice under the said sub-section has been served makes an application for granting stay of payment of tax or for
allowing payment in instalments, the Inspecting Additional Commissioner may, subject to the provisions of section
89, stay the payment of tax till such time as he thinks fit or allow the payment of tax in such installments as he may
determine 3[.]]
     4[    ]
1 Section 85 renumbered as sub-section (1) by Finance Ordinance, 1980.
2 Sub-section (2) inserted by Finance Ordinance, 1980.
3 Substituted for colon by Finance Act, 1996. Earlier colon was substituted for full stop by Finance Act, 1991.
4 Proviso omitted by Finance Act, 1996. Earlier it was inserted by Finance Act, 1991.
*Appears as “pay” in the official gazette.
     Section 85(2) Pr.–Automatic stay of demand where appeal is filed, discontinuation. Before omission by Finance Act,
1996 proviso read as follows:–
     “Provided that, where the assessee files an appeal under section 129 after the thirtieth day of June, 1991, in respect of an
order relating to the sum payable as specified in the notice under sub-section (1), the payment of 1[eighty-five percent of] the said
sum shall be deemed to have been stayed till the decision in appeal under the said section.”
1 Words etc. inserted by Finance Act, 1994.

                                                     DEPARTMENTAL VIEW
Collection of Income Tax on 29th and 30th October, 2010 by Authorized Branches of State Bank of
Pakistan and National Bank of Pakistan
       Please refer to your D.O letter No. 1(8) Rev. Bud/98 dated the 21st October, 2010
addressed to the www.imranghazi.comon the captioned subject.
                   Governor State Bank of Pakistan
       We have issued necessary instructions to our field offices to open sufficient counters till
6.00 P.M on Friday, the 29th October, 2010 and 8.00 P.M on Saturday the 30th October, 2010 to
facilitate tax payers in depositing tax. National Bank of Pakistan is being advised for the
purpose.
       Kindly note that the deposits through Cash will be recorded accordingly at our offices.
However, since clearing of cheques/deposits drawn on Commercial Bank branches
throughout Pakistan may not be possible due to Saturday being closed/holiday, the credit of
the same will be given upon its clearing which will be 1st November or later. --
[No.AD(Policy)/9062/87-2010, dated 27.10.2010]
Collection of Tax Revenue on 29th and 30th October, 2010.
       I am directed to enclose a copy of letter No.AD(Policy)/9062/87-2010 dated 27.10.2010
received from Director, State Bank of Pakistan, Karachi on the subject and to say that under
an arrangement with the State Bank of Pakistan and National Bank of Pakistan, the
authorized branches of State Bank of Pakistan and National Bank of Pakistan would accept
tax payments upto 06.00 P.M. on Friday the 29th October, 2010 and upto 8.00 P.M. on
Saturday the 30th October, 2010.
       2. Accordingly the Income Tax Offices will remain open till 7.00 P.M. on Friday the 29th
October, 2010 and upto 9.00 P.M. on Saturday the 30th October, 2010. They will receive tax
returns and will facilitate taxpayers in submission of tax returns/collection of tax.
       3. Liason with authorized branches of National Bank of Pakistan may please be kept to
ensure passing on of the tax collection by these authorized branches to the respective offices
of the State Bank of Pakistan on the same day. Like-wise officers posted in Muffasil areas
may also be advised to approach respective Treasury Officers for submission of collection of
respective Branches of National Bank of Pakistan/State Bank of Pakistan for timely reporting
and accouting of the tax deposited on the aforementioned dates.




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                                              854
Section 137                                                     Income Tax Ordinance, 2001.

       4. The data about the number of returns and tax deposited alongwith returns on 29th
and 30th October, 2010 may please be faxed, on the prescribed format, to Second Secretary
(Tax Base) at Fax # 051-9207664 by 8.00 P.M. and 10.00 P.M on 29th and 30th October, 2010
respectively, with a copy this office for record. -- [