Mr. Saqib Ahmed; V. Commissioner Inland Revenue, RTO, Rawalpindi.

 

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		Appellant
	Vs
Commissioner Inland Revenue, RTO, Rawalpindi.		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;

2. validity of notices issued thereunder;
3. legality of initiation of proceedings;
4. sufficiency or admissibility of evidence;
5. nexus between alleged unexplained assets and taxable income;
6. factual correctness of additions;
7. 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.

 

	Sd/- (M. M. AKRAM) JUDICIAL MEMBER
Sd/- (SHARIF UD DIN KHILJI) MEMBER