I.   BACKGROUND (BG)

1.   This refers to the related Important TLQCs in trail, blue, italic and double Line (a) 2019 of 21.10.22 about Service via on IRIS is not valid Service for Ex-Parte Order-FTO (b)1879 of 20.5.22 about Notice service by Tax officials - IT Rules’ amendment

2.   We also refer to several Other TLQC including (a) 1226 of 10.11.20 about De-seal of PMCL as proper opportunity was not provided - IHC orders (b) 1115 of 29.6.20 about Tax Year 2014 audit/best judgement assessment - LHC Interim order

II.   EXECUTIVE SUMMARY

A manufacturer and seller of furnishing items, filed a revised Income Tax Return for 2017 declaring a loss. The case was subsequently selected for audit, and despite statutory notices and reminders, the company failed to comply or attend hearings. This led to an amended assessment determining a significant income of Rs 86,487,863 u/s 122(4).

2.   The Appellant AR argued that the impugned order was passed without a fair opportunity of being heard, asserting that notices were not properly served as required by section 218 (as on IRIS only and not physically). Also contended that the assessment should have been made under section 121, not section 122(1), and claimed to possess supporting documents against the additions made.

3.   The Tribunal rejected the appellant's argument regarding the assessment section, distinguishing it from a cited precedent due to differences in audit procedures. However, Tribunal found that the Officer Inland Revenue (OIR) failed to ensure proper service of notice as per section 218, citing relevant case law on maladministration due to lack of proof of service.

4.   Tribunal vacated the impugned order and remanded the case back to the OIR. This decision granted the appellant another opportunity to present their case and produce complete documentary evidence during reassessment proceedings, with the OIR directed to pass a speaking order after considering all details.

III.   DETAILS

A.   Reference of Issue

1.    Further to KQU 3434 ---------, being an important matter, we would inform you about  -------------------------- (Attachment 3253.1) in the ensuing paragraph, in Italic with emphasis in bold & Underline, heading ours for quick reading.

2.   The above-titled appeal has been transferred to this tribunal by the CIR Appeals Multan in terms of section 126A (inserted by tax laws amendment 2024) and has preferred at the instance of appellant against the impugned ST der dated 20.6.23 passed by the Assistant CIR unit III, Corporate Zone, RTO Multan.

B.   Brief Facts

1.   Brief facts of the case leading to the instant appeal are that the taxpayer is a private limited company dealing in the manufacturing and sale of upholstery, bedding, decorative items, furniture, and other furnishing items, providing furnishing services to the general public, etc. Revised return for the tax year 2017 was filed u/s 114(6) , declaring a loss of Rs 1,694,241. The return was deemed to be an amended assessment order u/s 122(3).

2.   Later on, the case was selected for audit u/s 177 by the CIR, Corporate Zone, RTO -------------. Statutory notice u/s 177(1) calling for the records/books of accounts was issued on 20.8.21. However, no compliance was made by the appellant/taxpayer. Reminders issued also remind uncompiled.

3.   Audit was conducted on the basis of available records and an audit observation report u/s 177(6) was issued seeking an explanation from the taxpayer. On the due date, no response was received. Thereafter Statutory notice u/s 122(9) was issued on 26.5.23 for compliance on 9.6.23. However, ne compliance was made by the appellant/Taxpayer As per order hearing of the case was also fixed on 16.6.23 and 20.6.23 but the taxpayer did not bother to attend the proceeding resultantly amended assessment u/s 122(4) was passed and amended income u/s 122(4) was determined at rupees 86,487,863.

C.   Taxpayer / Appellant AR Arguments

1 to 5

D.   Learned Departmental Representative Submissions

The learned Departmental Representative defended the case and stated that a fair opportunity to be heard was allowed to the appellant.

E.   ATIR Deliberation

1 to 5

F.   ATIR Decision

Considering all the facts of the case, mentioned supra, we are of the opinion that in the best interest of justice, one more opportunity may be afforded to the appellant to defend its case before the OIR. Thus, the impugned order is vacated, and the case is remanded to the OIR for deciding the matter afresh after taking into account the complete documents/details to be produced by the appellant/taxpayer during the reassessment proceedings, and the OIR will pass a speaking order. The appellant is also directed to associate with the proceedings and produce complete documentary evidence in support of his stance. We order accordingly.

IV.   FURTHER DETAILS & SERVICES

Should you require any clarification or explanations in respect of the above or otherwise, or require Income Tax, Federal & Provincial Sales Tax or Withholding Tax Statement, Advisory, Return Filing or Review services, please feel free to email Mr Amsal at amsal@kasbati.co with CC to info.kasbati@professional-excellence.com, asif.s.kasbati@professional-excellence.com.

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