M/s Strengthening Participatory Organization Employees Contributory Provident Found, Islamabad. Vs The Commissioner Inland Revenue, Zone-II, CTO, Islamabad.

 

APPELLATE TRIBUNAL INLAND REVENUE, DIVISION BENCH-I,

ISLAMABAD 

ITA No.1197/IB/2024

(Tax year, 2018)

******

 

M/s Strengthening Participatory Organization Employees Contributory Provident Found, Islamabad. NTN:5105070-0		Applicant
	Vs
The Commissioner Inland Revenue, Zone-II, CTO, Islamabad.		Respondent

 

Appellant By:                                         Mr. Waqas Shabbir, ITP

Respondent BY:                                     Mr. Sheryar Akram, DR

 

Date of Hearing:                                    09.09.2024

Date of Order:                                       09.09.2024

 

ORDER

M. M. AKRAM (Judicial Member): The titled appeal has been filed by the appellant taxpayer as the first appeal under section 131 of the Income Tax Ordinance, 2001 (“the Ordinance”) against the Impugned Order dated 26.06.2024 passed by the Assistant Commissioner Inland Revenue, Zone-II, Range-II, Unit-III, CTO, Islamabad for the tax year 2018 on the grounds as set forth in the memo of appeal.

2.      The key facts from the record indicate that the appellant M/s Strengthening Participatory Organization Employees Contributory Provident Fund, located at Plot No. 19-B-1, 2nd Floor, Chohan Plaza, G-8 Markaz, Islamabad, is a company earning income from investments and related activities. The assessing officer received specific information from the Directorate of Intelligence & Investigation (IR) via a letter dated 22.04.2021, indicating that the taxpayer’s bank account showed credit entries amounting to Rs. 71,414,906 for the tax year in question. However, the declared income did not align with these bank credits. Consequently, a show cause notice (IRIS barcode No. 10000015291141) was issued on 27.12.2021, with compliance due by 11.01.2022, under subsection (9) of section 122 read with clause (a) of section (1) of section 111 of the Ordinance. On 03.01.2022, the taxpayer submitted a written response through IRIS, claiming that the account with the credited entries belonged to the employer, M/s Strengthening Participatory Organization, but no supporting documentation was provided. The reply tendered by the appellant was considered unsatisfactory. Therefore, a notice requesting further clarification was issued on 02.05.2024, with a compliance deadline of 09.05.2024. On the due date, neither a reply nor a personal appearance from the taxpayer was received. To ensure fair and due process, a reminder notice was sent on 04.06.2024 for compliance by 10.06.2024, but once again, no response or appearance was made by the taxpayer. As a result, the assessing officer was left with no choice but to proceed based on the available information and data. After reviewing the records, the proceedings initiated under section 122(9), read with section 122(5)/111(1)(b) of the Ordinance were concluded, and the deemed assessment under section 120 was amended under section 122(1) of the Ordinance vide order dated 26.06.2024. Dissatisfied with this order, the appellant has now brought the matter before the Tribunal, challenging the impugned order on several grounds.

3.      This case came up for hearing on 09.09.2024. The learned Authorized Representative (AR) for the appellant argues that the Show Cause Notice (SCN) was issued on December 27, 2021, and the amended Order was passed on June 26, 2024, which exceeds the 270 days stipulated in Section 122(9) of the Ordinance. As a result, the order passed after this statutory period is illegal, void ab initio, and beyond the jurisdiction of the authority. In support of this argument, the learned counsel cited the case of Collector of Sales Tax, Gujranwala & another vs. M/s Super Asia Mohammad Din Sons (Pvt.) Ltd. (2017 SCMR 1427). Furthermore, on merit, the AR contends that the subject bank account with the credited entries belonged to the employer, M/s Strengthening Participatory Organization. In support, he placed on record the bank certificate dated July 2, 2024, issued by the UBL, F-11 Branch, Islamabad. The AR, therefore, requested that the appeal be accepted.

4.      Conversely, the learned Departmental Representative (DR) opposed the appeal without any solid arguments.

5.      We have heard the parties and perused the record. This case raises a novel issue concerning the interpretation of Section 122 of the Ordinance. Specifically, it involves reconciling the limitations set forth in subsections (2) and (4) of Section 122 with the proviso to subsection (9) of the same section. To address this, it is essential to first understand the context and scope of each provision within Section 122.

SCOPE OF SECTION 122

Section 122 of the Ordinance outlines the powers of the Commissioner to amend assessment orders. The section is detailed, stipulating the conditions, timelines, and procedural requirements under which amendments to assessment orders can be made. Let's analyze the provisions one by one:

Subsection (1): Authority to Amend Assessments

This subsection gives the Commissioner the authority to amend any assessment order by making necessary alterations or additions. The authority to amend is broad and includes assessment orders issued under various sections (120, 121, etc.). This general power is, however, subject to the constraints provided in the subsequent subsections.

Critical Analysis:

The broad discretionary power given to the Commissioner here allows for flexibility in rectifying errors or omissions in assessment orders. However, the lack of specific guidelines in this subsection could lead to potential misuse or arbitrary amendments, which could adversely affect taxpayers.

Subsection (2): Time Limit for Amendments

This subsection imposes a five-year limitation on the Commissioner’s power to amend an assessment order. The five-year period starts from the end of the financial year in which the original assessment order was issued or treated as issued.

Critical Analysis:

The time limit provides a balance between the need for finality in tax matters and the need for correcting errors. This limitation ensures that taxpayers are not indefinitely exposed to amendments and that tax matters are resolved within a reasonable timeframe.

Subsection (3): Amendments Following Revised Returns

If a taxpayer submits a revised return under certain conditions (specified in section 114), the Commissioner is deemed to have amended the assessment based on the revised return. This subsection also clarifies that the revised return is considered an amended assessment order from the date it was furnished.

Critical Analysis:

This provision simplifies the process when a taxpayer self-corrects errors by submitting a revised return, reducing the administrative burden on the tax authorities. It promotes voluntary compliance by taxpayers, who can correct their returns without facing penalties or additional scrutiny.

Subsection (4): Further Amendments

The Commissioner can make further amendments to an original assessment if it has already been amended once, as long as it is done within:

• Five years from the end of the financial year in which the original assessment was issued, or
• One year from the end of the financial year in which the amended assessment order was issued.

Critical Analysis:

This allows for flexibility in making multiple amendments if necessary, reflecting the dynamic nature of tax assessments. However, it also implies that an assessment can remain open to changes for up to six years from the original assessment. This provision ensures that all significant errors can be corrected, but it also emphasizes the importance of timely and accurate original assessments.

Subsection (4A): Repealed Ordinance

This subsection clarifies that the time limits specified in subsection (2) and subsection (4) do not extend or curtail the time limits set by a repealed Ordinance, particularly section 65.

Critical Analysis:

This is a safeguarding provision to ensure that amendments to assessments under previous laws adhere strictly to the time limits prescribed by those laws. It prevents the retroactive application of new time limits, which could otherwise unfairly disadvantage taxpayers.

Subsection (5): Conditions for Amending Assessments

Amendments can only be made if the Commissioner, based on an audit or definite information, is satisfied that:

• Income chargeable to tax has escaped assessment,
• Total income has been under-assessed or assessed at too low a rate,
• There has been excessive relief or refund, or
• Misclassification of income.

Critical Analysis:

This subsection provides a structured basis for making amendments, ensuring that amendments are not made arbitrarily but are based on concrete evidence or findings. It helps in preventing tax evasion and ensuring that tax assessments reflect the correct income and liabilities. However, terms like "definite information" or "excessive relief" could be subject to interpretation, potentially leading to disputes between the taxpayer and tax authorities.

Subsection (5A) and (5AA): Further Powers to Amend

These subsections give the Commissioner the power to amend an assessment order if it is deemed erroneous and prejudicial to the revenue’s interests. This power also applies to matters not in dispute in an appeal.

Critical Analysis:

These provisions significantly broaden the scope of amendments by allowing the Commissioner to address errors that negatively affect revenue collection. This could be seen as overreaching, as it enables the Commissioner to reopen assessments based on a broad criterion ("prejudicial to the interest of revenue"), which might lead to frequent reassessments and increased administrative burden on taxpayers.

Subsection (5B): Time Limits for Amendments under (5A)

Any amended assessment under subsection (5A) must adhere to the time limits specified in subsections (2) or (4).

Critical Analysis:

This ensures consistency in the application of time limits across different types of amendments, preventing indefinite reopening of cases and ensuring fairness to taxpayers.

Subsection (6): Issuance of Amended Assessment Orders

Once an amended assessment is made, the Commissioner must issue an amended assessment order, specifying the revised taxable income, tax due, tax paid, and the right to appeal.

Critical Analysis:

This is a procedural safeguard ensuring transparency and providing taxpayers with all relevant information regarding the amended assessment. It also ensures that taxpayers are aware of their right to appeal, which is crucial for upholding taxpayer rights.

Subsection (7): Treatment of Amended Assessment Orders

An amended assessment order is treated as an assessment order for all purposes, except for further amendments under subsection (1).

Critical Analysis:

This provision simplifies the legal treatment of amended assessment orders, avoiding potential confusion about their status and enforceability.

Subsection (8): Definition of "Definite Information"

The term "definite information" is defined broadly, including details about sales, purchases, services rendered, money, assets, investments, etc.

Critical Analysis:

Providing a broad definition helps in encompassing various types of financial information, ensuring comprehensive coverage for amendment purposes. However, the broad definition might lead to disputes over what constitutes "definite information," potentially causing challenges in enforcement.

Subsection (9): Right to a Hearing and Time Limit for Issuance of Orders

Before any amendment is made, taxpayers must be given an opportunity to be heard. Additionally, any amendment order must be made within 180 days of issuing a show cause notice, extendable by 90 days with reasons recorded in writing.

Critical Analysis:

This subsection upholds the principles of natural justice by ensuring that taxpayers have the right to be heard before any amendments are finalized. The time limit for issuing amendment orders ensures that the process is completed within a reasonable timeframe, providing certainty to taxpayers.

Interpretation of Time Limits in Different Subsections

The Ordinance specifies various time limits for different actions related to amending assessments, ensuring a structured process:

1.   Five-year limit under Subsection (2): This is the general limitation period for amending an assessment order.

2.   Further amendments under Subsection (4): Allows amendments within five years of the original assessment or one year of the amended assessment, whichever is later.

3.   Special provisions under Subsection (5B): Aligns with the general time limits but applies specifically to amendments under Subsection (5A).

Conclusion

Section 122 provides a comprehensive framework for amending tax assessments, balancing the need for accurate tax collection with procedural fairness for taxpayers. While the broad powers granted to the Commissioner ensure that errors can be corrected and revenue protected, the broad definitions also pose potential challenges, including administrative burden on taxpayers and risks of overreach by the tax authorities. The Ordinance aims to safeguard taxpayer rights through requirements like hearings and specific time limits, ensuring transparency and fairness in tax administration.

6.       Now we come to the time limitations provided in different subsections of section 122 of the Ordinance.

Subsection (2) – Overarching Time Limit

Subsection (2) establishes a general time limit for the Commissioner to amend an assessment order. Specifically, it states:

• No amendment after five years: The Commissioner cannot amend an assessment order after five years from the end of the financial year in which the assessment order was issued or treated as issued.

This time limit is intended to provide certainty and finality to taxpayers, ensuring that they are not indefinitely subject to amendments to their tax assessments.

Proviso to Subsection (9) – Subservient Time Limit

Subsection (9) adds another requirement, which acts subservient to subsection (2), related to the amendment process:

• Opportunity to be heard: No assessment shall be amended or further amended unless the taxpayer has been provided with an opportunity to be heard.
• Proviso to Subsection (9): This proviso specifies that an order under this section must be made within 180 days of the issuance of the show cause notice, or within an extended period that does not exceed 90 days, provided the extension is justified in writing by the Commissioner. The proviso also states that certain periods (like those due to a stay order or Alternative Dispute Resolution proceedings) are excluded from this 180-day computation.

Reconciling the Two Provisions

1.   Different Purposes: The limitation in subsection (2) sets a maximum time frame within which the Commissioner can decide to amend an assessment (five years). This is an overarching substantive provision prescribing a time limit for taking action on an assessment order. On the other hand, the proviso to subsection (9) is also a substantive provision that governs the time frame within which the Commissioner must complete the amendment process after issuing a show cause notice.

2.   Sequential Application: The provisions apply sequentially rather than simultaneously. First, the Commissioner must decide to amend an assessment within the five years stipulated in subsection (2). If this decision is made, the Commissioner then issues a show cause notice to the taxpayer, initiating the amendment process.

3.   Compliance with Both Provisions: After issuing the show cause notice, the Commissioner must comply with the time limit in the proviso to subsection (9). The amendment must be finalized within 180 days of the notice or the extended period allowed (up to an additional 90 days, under specific conditions). These substantive deadlines are to ensure the timely completion of the amendment process once it has begun, however, the same would act as subservient to subsection (2) and do not extend the initial five-year period.

4.   No Extension of Overarching Time Limit: The substantive time limit in the proviso to subsection (9) does not extend the five-year overarching substantive time limit in subsection (2). The five-year limit governs the initiation and conclusion of the amendment, while the 180-day limit (plus any extensions) governs the completion of the amendment process after the show cause notice is issued.

Conclusion

In essence, subsection (2) provides the maximum period (five years) within which the Commissioner can amend an assessment order. If the Commissioner initiates the amendment process, the proviso to subsection (9) ensures that the amendment process is completed promptly, within 180 days from the issuance of the show cause notice or the allowed extended period, but in no case, the time limit provided in subsection (9) can go beyond the overarching five years time limit provided in subsection (2). Thus, the two provisions operate in tandem but govern different stages of the amendment process.

7.      Further questions that may arise concerning the time limitations in section 122 of the Ordinance could be:

Question A.        Is the time limit specified in subsection (9) mandatory, and does it override the limitation provided in subsection (2) of this section?

The time limit provided in the proviso to subsection (9) of Section 122 is mandatory, but it does not override the overarching time limitation given in subsection (2) of the same section.

Here’s how these two provisions function together:

1. Nature and Purpose of Each Provision:

• Subsection (2) – Substantive Time Limitation:
• Nature: This subsection provides a substantive time limit within which the Commissioner must act to amend an assessment order. It sets an outer limit of five years from the end of the financial year in which the original assessment order was issued or treated as issued.
• Purpose: This provision aims to ensure finality in tax matters and to protect taxpayers from indefinite uncertainty regarding their tax liabilities. It is a statutory limitation that restricts the Commissioner’s power to initiate amendments after a certain period.
• Proviso to Subsection (9) –Time Limit:
• Nature: The proviso to subsection (9) imposes an additional time limit within which the Commissioner must complete the amendment process once a show cause notice has been issued. This period is 180 days from the issuance of the notice, extendable by up to 90 days under specified conditions.
• Purpose: The purpose of this provision is to ensure that once the amendment process is initiated, it is concluded within a reasonable timeframe, thus preventing unnecessary delays and providing clarity to the taxpayer.

2.  Interaction Between Subsection (2) and Proviso to Subsection (9):

• Subsection (2) is a Precondition: The five years set in subsection (2) is a precondition for any amendment to take place. This means that for the Commissioner to have the authority to issue a show cause notice thereby initiating the amendment process and to conclude that process, this must happen within five years.
• Proviso to Subsection (9) is Conditional on Subsection (2): The statutory time limit in the proviso to subsection (9) is conditional upon the Commissioner having already met the requirement of subsection (2). In other words, the Commissioner must first be within the five-year window allowed by subsection (2) to begin and conclude the amendment process.

3.  Can the Time Limit provided in subsection (9) breach the Overarching Limit in subsection (2)?

• No, It Cannot: The time limit in the proviso to subsection (9), though substantial in nature, cannot override the five-year limitation period in subsection (2). The five-year limit acts as an absolute bar after which no amendment process can be initiated, continued, and/or concluded. Even if the subservient time limit (180 days plus any extension) is still running, it cannot extend the time beyond the five-year time limit if the five-year overarching time limit has lapsed.
• Both Must Be Complied With: The Commissioner must comply with both limits simultaneously. The initiation and conclusion of the amendment must occur within five years per subsection (2). After a show cause notice is issued, the completion of the amendment must occur within earlier of the timeframe specified in subsection (2) or the proviso to subsection (9).

4.  Mandatory Nature of Proviso to Subsection (9):

• Mandatory for Process Execution: While the proviso to subsection (9) is mandatory in ensuring that the Commissioner concludes the amendment process within a specific time after initiating it, it does not extend or affect the initial five-year limit set by subsection (2).

Conclusion:

The proviso to subsection (9) is a mandatory requirement but does not have the power to extend or override the five-year time limit set by subsection (2). Both provisions are mandatory and must be strictly adhered to, but they aim at different objectives as far as the amendment process. Subsection (2) provides a time limit for the conclusion of the amendment process, while the proviso to subsection (9) governs how quickly the amendment process must be completed once started.

8.  Question B.   If an order is not passed within the time frame specified in subsection (9) of this section, would an order issued after this period be considered time-barred, even if the five-year period outlined in subsection (2) is still available?

Yes, if the order is not passed within the time frame given in the proviso to subsection (9) of Section 122, the order would be considered time-barred, even if the five-year period given in subsection (2) is still available.

Understanding the Interaction of the Two Time Limits

1.   Subsection (2) – Overarching Time Limitation:

o   This subsection sets an outer limit of five years from the end of the financial year in which the original assessment order was issued or treated as issued. This five-year period is the maximum time frame within which the Commissioner can decide to amend an assessment order.

2.   Proviso to Subsection (9) – Subservient Time Limit:

o   The proviso to subsection (9) stipulates that, once the Commissioner issues a show cause notice for amending an assessment, the amended order must be passed within 180 days of the notice's issuance. This period can be extended by up to an additional 90 days under specific conditions (e.g., reasons recorded in writing by the Commissioner). There are also provisions to exclude certain periods (like those due to stay orders or Alternative Dispute Resolution proceedings) from the calculation of this time limit.

Consequences of Missing the Adjudication Deadline

• Mandatory Requirement: The time limit given in the proviso to subsection (9) is mandatory. This means that, once a show cause notice is issued, the Commissioner must finalize the amended assessment within the specified period (180 days plus any allowable extension) subject to the overarching time limit of five years.
• Time-Barred if Exceeded: If the Commissioner fails to pass the amended assessment order within 180 days (or the extended period, if applicable), the order is considered time-barred. This is because the law imposes a strict deadline on the completion of the amendment process once it has started, ensuring the taxpayer's right to timely finalization.
• Five-Year Limit Irrelevant in This Context: The five years given in subsection (2) determines when the Commissioner can initiate the amendment process by issuing a show cause notice and can pass an order to conclude the amendment process. However, once the process is initiated, the time limit in the proviso to subsection (9) takes over subject to the outer time limit as specified in subsection (2). The fact that the five-year period is still available does not grant the Commissioner additional time beyond what is permitted in the proviso to subsection (9) to complete the amendment process.

Conclusion

Even if the five-year period under subsection (2) has not yet expired, if the Commissioner does not complete the amendment process within the mandatory timeframe specified in the proviso to subsection (9) (i.e., 180 days plus any extension), the amended assessment order will be considered time-barred. The Commissioner must comply with both time limits simultaneously, and a breach of any of the time limits provided in subsections (2) or (9) would render the entire amendments proceedings to be nullity in the eyes of law.

9.   Question No.C. If the above interpretation is accepted then whether the provision of section 122(4) would become redundant which provides that the original assessment order can be amended as many times as may be necessary?

This question raises an important point about interpreting legal provisions in a way that avoids redundancy and maintains coherence within the statute. Let's analyze how the time limits in the proviso to subsection (9) and subsection (4) interact; and how to interpret these provisions to avoid redundancy.

Understanding the Provisions

1.   Subsection (4) - Multiple Amendments:

o   Subsection (4) of Section 122 states that the Commissioner may amend an assessment order multiple times as necessary, within the limits specified:

§  Five years from the end of the financial year in which the original assessment order was issued or treated as issued, or

§  One year from the end of the financial year in which the amended assessment order was issued or treated as issued, whichever is later.

This provision allows for multiple amendments within these time frames, ensuring that if new information or errors are discovered, the assessment can be corrected.

2.   Proviso to Subsection (9) – Mandatory Time Limit:

o   The proviso to subsection (9) mandates that an amended order must be passed within 180 days of issuing a show cause notice (extendable by up to 90 days). This requirement ensures timely action once the amendment process begins.

Reconciling Both Provisions

To reconcile these provisions and avoid redundancy, we need to understand their specific roles and limits:

• Overarching vs. subservient Time Limits:
• Subsection (4) provides substantive authority to amend an order multiple times within certain periods (five years or one year, whichever applies). This flexibility is necessary for addressing errors or new information that may arise over time.
• The proviso to subsection (9) imposes another mandatory requirement to complete each specific amendment within a set period (180 days plus any allowable extensions) once the amendment process is initiated by issuing a show cause notice.
• Complementary Roles:
• These provisions are not redundant but complementary:
• Subsection (4) ensures that amendments can be made as often as needed, subject to the five-year or one-year limits.
• The proviso to subsection (9) ensures that each amendment, once started, is completed promptly, promoting efficiency and preventing undue delays.

Interpreting to Avoid Redundancy

• Multiple Amendments Within Overarching Time Limits:
• Subsection (4) allows the Commissioner to make multiple amendments to the same assessment order, as long as they fall within the overarching and ultimate timelimits (five years or one year).
• Each of these amendments must independently comply with the mandatory time frame setout in the proviso to subsection (9) to conclude the amendment proceedings once initiated.
• Limit provided in (9) to conclude proceedings are subservient to and do Not Extend the Overarching Limits:
• The mandatory time limit, to conclude amendment proceedings, as provided in the proviso to subsection (9) does not override or extend or interfere with the overarching limits of subsection (4). Instead, it applies to each amendment once it is initiated.
• Implications for Redundancy:
• The provisions do not become redundant under this interpretation. Subsection (4) governs how often and within what timeframe amendments can be initiated and completed, while the proviso to subsection (9) governs the promptness of completing any single amendment once initiated.

Conclusion

The provision in subsection (4) remains relevant and essential under this interpretation. It allows multiple amendments as needed, ensuring tax assessments can be amended within the statutory timeframes. The limit prescribed in the proviso to subsection (9) is another safeguard placed by the Legislature to ensure that each amendment, once initiated, is completed efficiently, promptly, and strictly within the prescribed timeframe. Both provisions work together to create a comprehensive framework for amending tax assessments without becoming redundant.

10.   Question No.D:   Once it is declared that the order is not passed within the time given in subsection (9) then how the further amendments be made?

If an amended assessment order is not passed within the time frame given in the proviso to subsection (9) of Section 122 (i.e., within 180 days of the issuance of the show cause notice, or within the extended period as allowed), that particular amendment attempt is considered time-barred. This raises a valid question: If an amendment is time-barred due to non-compliance with the mandatory time limit in subsection (9), how can further amendments be made under subsection (4)?

Analyzing the Legal Framework

To address this, it's important to understand the distinct functions of these provisions:

1.   Proviso to Subsection (9) - Time Limit to conclude proceedings:

o   This sets a strict deadline for completing an amendment once the process has been initiated by issuing a show cause notice. If the Commissioner fails to pass the amended assessment order within this specified period, that amendment process lapses or becomes void due to being time-barred.

2.   Subsection (4) - Authority for Multiple Amendments:

o   Subsection (4) allows the Commissioner to amend an assessment order multiple times as necessary within the broader substantive time limits:

§  Five years from the end of the financial year in which the original assessment order was issued or is treated as issued, or

§  One year from the end of the financial year in which the amended assessment order was issued or treated as issued, whichever is later.

Reconciling the Provisions for Further Amendments

If a particular amendment attempt becomes time-barred under the proviso to subsection (9), further amendments can still be made under subsection (4) if the following conditions are met:

1.   Within Overarching Time Limits:

o   The Commissioner can initiate another amendment process as long as it is within the substantive time limits set by subsection (4) (i.e., within five years from the original assessment or one year from the last amended assessment).

2.   New Show Cause Notice Required:

o   To initiate a new amendment process after an amendment has become time-barred, the Commissioner would need to issue a new show cause notice to the taxpayer. This new notice would start a new procedural timeline (180 days plus any allowed extensions) under the proviso to subsection (9).

3.   Fresh Grounds or Information:

o   Any new amendment must be based on fresh grounds or new information not covered in the previously time-barred amendment. If the grounds for amendment are the same as those already attempted, and that process became time-barred, this may limit the Commissioner's ability to further amend without new or additional information not earlier confronted to the taxpayer.

Implications of Time-Bar to Conclude Proceedings

• Specific Amendment Attempt is Barred, Not the Authority to Amend Further:
• If an amendment is time-barred under the proviso to subsection (9), it means that the specific amendment attempt becomes a closed case, but this does not necessarily preclude the Commissioner from making further amendments under subsection (4) if within the overarching time frame on the basis of new or additional information not earlier confronted to the taxpayer.
• Compliance with Both Overarching and Secondary Limits:
• Each amendment attempt must simultaneously and independently comply with the mandatory requirements contained in the proviso to subsection (9) and subsection (4). Failure to meet the deadline prescribed in the proviso to subsection (9), however, does not affect the Commissioner's overall authority to amend within the overarching prescribed period, provided a new amendment process is initiated properly on the basis of new or additional information not earlier confronted to the taxpayer.

Conclusion

If an amended assessment order is not passed within the time frame set by the proviso to subsection (9), that specific amendment process is considered time-barred, and the Commissioner cannot finalize it. However, further amendments can still be made under subsection (4) as long as they are initiated within the overarching time limits and comply with other requirements, including issuing a new show cause notice and adhering to the subsequent time limits. This interpretation maintains the integrity and purpose of both provisions, allowing the tax assessment process to remain flexible but ensuring due process and timely action.

11.   Question No.E.     If a show cause notice is issued for instance just five days before the end of the five years, did the Commissioner make the order under subsection (9) within the prescribed timeframe?

If the show cause notice is issued just five days before the expiry of the five years specified in subsection (2) of Section 122, the Commissioner would face significant constraints regarding the timing of the order due to the intersection of the two substantive time limits.

Analysis of the Timing Constraints

1.   Overarching Time Limit (Subsection (2)):

o   Subsection (2) sets a strict primary time limit of five years from the end of the financial year in which the original assessment order was issued or is treated to have been issued.

o   This means the Commissioner cannot amend an assessment after the expiry of these five years.

2.   Subservient mandatory Time Limit (Proviso to Subsection (9)):

o   The proviso to subsection (9) sets a time limit that allows the Commissioner to make the amended assessment order within 180 days from the issuance of the show cause notice. This period can be extended by up to 90 days in certain circumstances.

Scenario: Show Cause Notice Issued Five Days Before the Expiry of Five Years

• Issuance of Notice Close to the Five-year Deadline:
• If the show cause notice is issued just five days before the expiry of the five years, this leaves the Commissioner with only five days to complete the amendment process under the substantive time limit of subsection (2).
• Impact of the Five-year Time Limit:
• Despite the mandatory time limit in the proviso to subsection (9) allowing up to 180 days (plus any extensions) to complete an amendment, the overarching time limit in subsection (2) takes precedence in terms of the outer limit for the Commissioner’s authority to amend.
• Therefore, the Commissioner must complete the amendment process and issue the amended assessment order within the five-day window remaining before the five-year period expires.

Conclusion

If the show cause notice is issued just five days before the expiry of the five years, the Commissioner would have only those five days to make and issue the amended assessment order. The 180-day period provided in the proviso to subsection (9) does not extend the overarching limit set by subsection (2). Thus, the order must be completed within the remaining days before the expiry of the five years, regardless of the procedural allowance for 180 days.

In this scenario, if the Commissioner fails to issue the amended assessment order within those five days (before the five-year limit expires), the order would be considered time-barred. This strict interpretation ensures that amendments are made within the allowed substantive period, promoting certainty and finality in tax matters. This leads to another question where the entire amendment proceedings are initiated and concluded within merely a period of five days, would such an amendment sustain the test of ‘fair trial and due process’ in terms of Article 10A of the Constitution, FBRs’ circulars, and the appellate findings. However, we leave this question for some other cases where it has a direct bearing.

12.    In interpreting Section 122 of the Ordinance, we apply the principle of harmonious construction. It is a trite law that while interpreting the law, in particular, fiscal laws, the provisions be construed such that between two or more reasonable constructions of their terms that which will save them should prevail. The statute should be read as a whole, and all possible efforts should be made to apply and adhere to the rules of purposive and harmonious construction so that the allegedly conflicting provisions can be reconciled and saved. Reliance is placed on the judgments reported as Waqar Zafar Bakhtawari v. Mazhar Hussain Shah (PLD 2018 SC 81), Lucky Cement LTD v. Commissioner Inland Tax (2015 SCMR 1494); Collector of Sales Tax and Central Excise (Enforcement) v. Mega Tech (Pvt.) Ltd. (2005 SCMR 1166); Abdul Saboor v. Federation of Pakistan (2024 PTD 517); and Reliance Commodities (Private) Ltd v. Federation of Pakistan, (2020 PTD 1464). Our opinion also finds support from the Circular No. C.No. 6(9)S(IR-Operations)/2021/Pt dated 16 August 2021 issued by FBR.

13.    Now, addressing the merits of the case, the Authorized Representative (AR) argues that the bank account in question is not owned by the appellant, but rather belongs to the employer, M/s Strengthening Participatory Organization (NTN: 2168117-1). This account is duly reflected in their financial statements and tax returns. To support this claim, the AR submitted a bank certificate dated July 2, 2024, issued by UBL, F-11 Branch, Islamabad. Upon confronting the Departmental Representative (DR) with this evidence, the DR, after reviewing the original bank certificate, conceded that the account did not belong to the appellant. Therefore, the addition of Rs. 71,414,906/- under section 111 of the Ordinance in the appellant’s name is legally unsustainable. As a result, the addition under section 111 is deleted.

14.    In light of the above discussion, the impugned order is first found to be time-barred, as it was not passed within the timeframe stipulated under subsection (9) of section 122 of the Ordinance, and secondly, it is also unsustainable on merit. Consequently, the assessing officer’s order is annulled.

 

 

	Sd/-                     (M. M. AKRAM)                      JUDICIAL MEMBER
Sd/-  (IMRAN LATIF MINHAS)   ACCOUNTANT MEMBER

                  

CERTIFICATE U/S 5 OF THE LAW REPORT ACT

                 This case is fit for reporting as it settles the principles highlighted above.

 

                 Sd/-   

                (M. M. AKRAM)

                 JUDICIAL MEMBER