APPELLATE TRIBUNAL INLAND REVENUE, DIVISION BENCH-I, ISLAMABAD
ITA No.451/IB/2026
MA(Stay) No.720/IB/2026
(Tax
Year, 2022)
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Mr. Saqib Ahmed; 497, F-Block, Satellite Town,
Rawalpindi. NTN:3740568477669 |
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Appellant |
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Vs |
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Commissioner Inland Revenue, RTO, Rawalpindi. |
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Respondent |
Appellant By: Mr. Akhlaq Hussain
Chishti, Advocate
Respondent BY: Mrs.
Nafeesa Bano, DR
Date of Hearing: 20.05.2026
Date of Order: 20.05.2026
ORDER
M.
M. AKRAM (Judicial Member): The present appeal, along with the
accompanying stay application, has been instituted by the appellant under
section 131 of the Income Tax Ordinance, 2001 (“the Ordinance”) as a
first appeal against the impugned order dated February 28, 2026, passed by the
learned Deputy Commissioner Inland Revenue, RTO Rawalpindi, under section 111
of the Ordinance, pertaining to Tax Year 2022. The appellant has assailed the
said order on various grounds as set forth in the memorandum of appeal.
2. The appeal came up for hearing on May 20,
2026. At the very outset, the learned Authorized Representative (AR) for
the appellant was confronted with the maintainability of the instant appeal
inasmuch as the impugned order has been passed under section 111 of the Income
Tax Ordinance, 2001, whereas no consequential assessment order under section
122 of the Ordinance has yet been passed, which ordinarily constitutes the
appealable order before the Commissioner (Appeals) or this Tribunal, as the
case may be. In response, the learned AR for the appellant was unable to
furnish any cogent or satisfactory explanation in support of the
maintainability of the present appeal.
3. The following question arises for
determination:
Whether an order passed by the
Commissioner Inland Revenue under section 111 of the Income Tax Ordinance, 2001,
constitutes an independently appealable order under section 127 of the
Ordinance, and consequently whether the taxpayer could validly invoke section
131 of the Ordinance by directly filing an appeal before this Tribunal while
surrendering the remedy before the Commissioner (Appeals)?
We have heard
the learned AR appearing on behalf of the appellant-taxpayer as well as the
learned Departmental Representative (DR) for the respondent-Department,
examined the statutory framework governing the appellate hierarchy under the
Ordinance and carefully perused the available record.
4. The controversy involved in the instant
matter lies within a narrow but significant jurisdictional compass, namely,
whether proceedings undertaken under section 111 of the Ordinance constitute an
independently appealable order within the contemplation of section 127 of the
Ordinance, thereby enabling the taxpayer to either invoke the jurisdiction of
the Commissioner Inland Revenue (Appeals) or, by surrendering such remedy,
directly maintain an appeal before this Tribunal under section 131 of the
Ordinance. At the very outset, it is necessary to observe that the right of
appeal is neither inherent nor equitable in nature; rather, it is a substantive
statutory right which must emanate strictly from express legislative
conferment. It is a settled canon of fiscal jurisprudence that appellate
remedies cannot be inferred by implication, assumption, convenience or
intendment where the statute itself remains silent. Unless a particular order
is specifically made appealable by the legislature, no appellate forum can assume
jurisdiction merely because adverse civil consequences may have ensued. The
Hon'ble Supreme Court of Pakistan in its judgment titled Mughal Surgical (Pvt.) Ltd.
and others v. Presiding Officer, Punjab Labour Court No.7 and others (2006 SCMR 590), has held that an appeal
is not a natural or an inherent right of litigants, but is a statutory right
granted by different laws and different enactments. In Muzaffar Ali v. Muhammad Shafi
(PLD 1981 SC 94), it is
held that the right of appeal can only be availed if it is granted by law. In a
judgment cited as Malik Umar Aslam v. Mrs Sumaira Aslam and others (2014 SCMR
45), the Apex Court has re-emphasised the principle that “appeal is a statutory right that can only be
exercised if the statute has provided so as a matter of right”.
5. To appreciate the controversy in its
proper legal perspective, reference to section 127 of the Ordinance is
indispensable. The said provision exhaustively enumerates the categories of
orders against which an appeal shall lie before the Commissioner Inland Revenue
(Appeals). The legislative scheme unmistakably demonstrates that the right of
appeal is confined only to those orders specifically incorporated therein. Inter
alia, significantly, while section 127 expressly refers to orders passed
under sections 120(2A), 121, 122, 143, 144, 161, 162, 170, 182 and 205 of the
Ordinance, no reference whatsoever has been made to section 111. The deliberate
omission of section 111 from the catalogue of appealable orders is legally
significant and cannot be treated as accidental or inconsequential. It is a
well-recognized principle of statutory interpretation that where the
legislature expressly mentions certain provisions while omitting others, such
omission must ordinarily be regarded as intentional. Had the legislature
intended proceedings under section 111 to independently attract appellate
jurisdiction, it could easily have incorporated the same within section 127.
The conscious legislative abstinence from doing so necessarily leads to the
conclusion that proceedings under section 111 were never intended to constitute
a standalone appealable order.
6. The proviso appended to section 127(1)
indeed confers upon an aggrieved person an election either to avail the remedy
before the Commissioner Inland Revenue (Appeals) or to surrender such right and
directly invoke the jurisdiction of this Tribunal under section 131 of the
Ordinance. However, the said proviso does not create an independent or original
right of appeal. It merely regulates the forum where an already existing
statutory right of appeal may be exercised. The availability of the option
contemplated under section 131 is therefore conditional upon the prior
existence of an appealable order under section 127 of the Ordinance.
7. In other words, section 131 cannot be
interpreted in isolation so as to enlarge the scope of appealability beyond
what is expressly sanctioned under section 127. The jurisdiction of this
Tribunal under section 131 remains appellate in nature and cannot be converted
into a court of original jurisdiction merely because a taxpayer elects to
bypass the Commissioner Inland Revenue (Appeals). The surrender contemplated by
the statute is a surrender of the forum alone and not a mechanism for the creation
of appellate rights where none statutorily exist.
8. In the present matter, the taxpayer
directly opted to invoke the jurisdiction of this Tribunal under section 131 of
the Ordinance while surrendering the remedy before the Commissioner (Appeals).
However, the impugned proceedings admittedly arise exclusively from section 111
of the Ordinance and do not create any tax liability independently. Since
section 111 does not independently fall within the ambit of section 127, the
very jurisdictional foundation necessary for maintaining a direct appeal before
this Tribunal is conspicuously absent.
9. It is equally important to examine the
true nature and character of proceedings under section 111. The said provision
substantially operates as a charging-cum-investigative mechanism empowering the
Commissioner to question unexplained income, investments, expenditures, assets,
money or beneficial ownership which remain inadequately explained by the
taxpayer. However, proceedings under section 111 by themselves do not
ordinarily crystallize enforceable tax liability unless and until the resulting
additions are incorporated into an assessment or amended assessment order under
the relevant charging and assessment provisions of the Ordinance, most notably
section 122. Thus, in the ordinary statutory scheme, section 111 does not
function in isolation. Rather, it constitutes one of the factual and legal
bases upon which an amended assessment is ultimately framed. The enforceable
fiscal consequence emerges not from the mere issuance of a show cause notice or
recording of findings under section 111, but from the consequential amended
assessment order whereby taxable income is finally determined, and tax demand
is created.
10. The legal effect of such statutory
architecture is that proceedings under section 111 are ancillary, supplemental
and subordinate to the ultimate assessment proceedings. Once the amended
assessment order under section 122 is passed, all antecedent findings,
observations and additions recorded during the section 111 proceedings lose
their independent character and merge into the consequential assessment order.
The doctrine of merger squarely applies in such circumstances. The doctrine of
merger, now firmly embedded within administrative and tax jurisprudence,
postulates that where an inferior or preliminary determination culminates into
a final statutory order, the earlier proceedings cease to survive independently
and become subsumed into the final operative order. Therefore, the additions
proposed or determined under section 111 attain legal enforceability only
through their incorporation into the amended assessment framed under section
122.
11. Consequently, the legally competent and
statutorily recognized remedy available to an aggrieved taxpayer is to
challenge the consequential amended assessment order under section 122 before
the appropriate appellate forum as contemplated under section 127 of the
Ordinance. While assailing such assessment order, the taxpayer remains fully
competent to question every jurisdictional, procedural and factual aspect
relating to section 111 proceedings, including but not limited to:
i.
assumption
or exercise of jurisdiction under section 111;
- validity of notices issued
thereunder;
- legality of initiation of
proceedings;
- sufficiency or admissibility of
evidence;
- nexus between alleged
unexplained assets and taxable income;
- factual correctness of
additions;
- quantum of additions made; and
viii. procedural compliance with due
process requirements.
Thus, no
prejudice whatsoever is caused to the taxpayer merely because section 111
proceedings are not independently appealable. The statutory remedy remains
fully available against the consequential amended assessment order, wherein all
such objections may comprehensively be adjudicated.
12. Needless to observe that acceptance of the
contrary proposition would produce anomalous and legally incongruous
consequences. If proceedings under section 111 were treated as independently
appealable despite not being enumerated in section 127, it would effectively
amount to judicial legislation by enlarging the appellate jurisdiction beyond
the boundaries consciously prescribed by Parliament. Such an interpretation
would also fragment assessment proceedings into multiple parallel appellate
streams, thereby defeating the coherence and hierarchy contemplated under the
Ordinance.
13. We are therefore persuaded to hold that the
legislative intent underlying sections 111, 122, 127 and 131, when read
harmoniously, clearly demonstrates that section 111 proceedings are merely
intermediate and incorporative in character and derive appellate significance
only upon culmination into an appealable assessment order.
For the
foregoing reasons, we unequivocally hold that:
1. Proceedings undertaken under section
111 of the Income Tax Ordinance, 2001, do not constitute an independently
appealable order within the contemplation of section 127 of the Ordinance;
2. The findings and additions recorded
during section 111 proceedings merge into the consequential amended assessment
order passed under section 122 of the Ordinance;
3. The statutory option of directly
invoking the appellate jurisdiction of this Tribunal under section 131 of the
Ordinance is available only where the impugned order is otherwise appealable
under section 127 of the Ordinance;
4. Section 131 does not create an
independent substantive right of appeal but merely provides an alternate
appellate forum in cases where the right of appeal already exists under section
127;
5. Since no independent right of appeal
exists against proceedings initiated or concluded under section 111 of the
Ordinance, the taxpayer could not validly bypass the forum of Commissioner
Inland Revenue (Appeals) and directly invoke the jurisdiction of this Tribunal
under section 131 of the Ordinance; and
6. The proper and legally competent
course available to the taxpayer was to assail the consequential amended
assessment order passed under section 122 of the Ordinance, wherein all
grievances pertaining to section 111 proceedings could lawfully and adequately
be agitated.
Accordingly, the
instant appeal, being incompetent and not maintainable in the eyes of the law,
is liable to dismissal on jurisdictional grounds alone.
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Sd/- (M. M.
AKRAM) JUDICIAL MEMBER |
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Sd/- (SHARIF UD
DIN KHILJI) MEMBER |
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