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2017 SLD 1113 Equiv. Citation: 2017 PTD 1821 = = =

I.T.A. No.238/LB of 2017, decision date: 20th March, 2017, Heard on: 16th
March, 2017.

BEFORE:
MUHAMMAD WASEEM CH., JUDICIAL MEMBER
MUHAMMAD AHMAD, ACCOUNTANT MEMBER

M/S. ROYAL WEAVING FACTORY, PROP: UMAR IMTIAZ, SMALL INDUSTRIAL

M. Imran Rashid for Appellant.

Law: Income Tax Ordinance (XLIX of 2001)

THIS ORDER PASSED BY: MUHAMMAD WASEEM CH., JUDICIAL MEMBER:---.---

This appeal has been filed by the taxpayer against the impugned order dated 18.07.2016
recorded by the learned CIR(Appeals), Faisalabad, wherein maintenance of assessment
order under section 122(1) of the Income Tax Ordinance, 2001 has been challenged.

2. Succinctly facts of the case are that the taxpayer an individual derives income from
embroidery/conversion of cloth on behalf of others, return filed for the year under appeal
declaring income at Rs.439,211/- which were to be deemed assessment order under
section 120(1) of the Income Tax Ordinance, 2001. Later on information regarding import
of machinery from Custom Import Data received which was not disclosed by the taxpayer.
The taxation officer was issued show-cause notice under section 122(9) read with sections
122(5)/111(1)(b) of the Income Tax Ordinance, 2001. The taxpayer submitted written
reply which was discarded by the taxation officer being unsatisfactory and amended the
assessment under section 122(1) of the Income Tax Ordinance, 2001 as under:--

Income declared Rs. 439,211/-

Addition under section 111(1)(b) ibid Rs.7,372.798/-

Total Income assessed Rs.7,812,009/-

In appeal, the learned CIR (Appeals) upheld the treatment meted out by the taxation
officer for the reasons and factors as embodied in the impugned order.

3. The learned counsel of the taxpayer contended that the taxpayer duly furnished
documentary evidence regarding barter trade with Messrs Juckson Machinery Company
Limited through Dr. S. Ainul Haque and proprietor of the Royal Weaving. Thus the question
of investment does not arise. He further added even specific performance of contract could

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be sought even on the basis of oral agreement is valid in the eye of law. In the instant
case a barter contract was made between the two parties. Reference in this regard is given
in a judgment of the Honourable Supreme Court of Pakistan reported as 2012 SCMR 1526;
their Lordships have held that:--

“Remedy of specific performance of a contract being equitable in nature cannot be granted

He further argued that the provisions of section 122(1) ibid can only the invoked when
amending authority is in possession of “definite information” [as defined in section 122(8)
ibid. obtained from audit or otherwise and on the basis of the same assessing officer is
satisfied that there is escapement of assessment, under-assessment and assessment at
too a low a rate; excessive relief of refund or misclassification of an amount under a head
of income as provided in section 122(5) ibid.

4. During arguments the learned counsel of the taxpayer stated that the amending
authority issued two show-cause notices. He submitted that issuance of notice under
section 122(9) was not enough to proceed further and the amending authority could not
directly reach conclusion to make addition without fulfilling the requirements of law. No
separate specific notice under section 111 of the Ordinance which precedent condition was
issued. The superior court in such like situation had always disapproved the addition made
by the departments. Show-cause notice is a foundational document, which is to
comprehensively describe the case made out against the taxpayer by making reference to
the evidence collected in support of the same. It is the narration of facts in the Show-
Cause Notice along with the supportive evidence which determines the offence attracted in
particular case. Reliance was placed in a case of the honourable Appellate Tribunal Inland
Revenue, Lahore Bench, Lahore vide I.T.As. Nos.2135 to 2137/LB/2015 dated 19.02.2016;
wherein it has been held that:--

“6. We have heard the rival parties, perused the available record as the case law replied
upon by the learned AR and convinced that addition under section 111(1)(b) were made
without issuing the specific notice and fulfilling the requirements of law. Therefore, the
ratio decided in case law is applicable on all fours of the instant case. In its judgment
decided vide I.T.A. No.1141/LB/2013, the Tribunal has held “the addition under section 111
is a subsequent stage on which the Assessing Officer would not directly reach before
crossing the barrier and fulfilling the requirements for cancelling the deemed assessment
order under section 120 in terms of section 122(5). The Assessing Officer, therefore, was
required to first determined through audit that the deemed order is under assessed etc., in
the interest of Revenue as provided under section 122(5A). Therefore, is no other method
to modify or re-assess a deemed assessment under the provision of Section 122 before
exercising jurisdiction provided under sections 122(5) and 122(5A) on the basis and
circumstances mentioned in these provisions separately”. Assessee must have been given
opportunity of being heard before making any addition ......issuing of combined notice
under two different sections was fatal .Taking guidance from the case cited supra we are of
the considered opinion that the addition under section 111(1)(b) were made without
fulfilling the legal requirements of law and has wrongly been maintained by the learned
first appellate authority. Consequently, the same are deleted and the appeal is allowed.”

5. We have given due consideration to the rival arguments of both the parties and also
gone through the available record. In view of the above facts and judgment mentioned
supra and after going through arguments advance by the learned AR the legal infirmities
has been present in the assessment. It is well settled principle that “the intention of the
assessee has to be considered in each case of sale or exchange and several principles have

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to be borne in mind and in deciding whether the transaction of sale and exchange amounts
to adventure in the nature of trade or otherwise. Each individual transaction had to be
considered after going into the full facts of the case”, we hold that the impugned order as
well as the order of the CIR (Appeals) are not sustainable in the eye of law. Hence, both
the orders of the authorities below are annulled.

6. The appeal filed by the taxpayer succeeds.

APPEAL ALLOWED

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