ATIR gives landmark ruling on scope of revisional jurisdiction under ITO

Business Recorder reported that the Appellate Tribunal Inland Revenue (ATIR), sitting as a Special Division Bench in Quetta, has ruled that Section 122(5A) cannot be used to probe third-party bank credits and recast them as suppressed business turnover. Even after its 2021 amendment, the provision does not permit such an examination, the bench said. Such work, the tribunal found, concerns allegedly escaped income and falls under Section 122(5) if its conditions are met.

Lal Muhammad, a Quetta trader in wholesale and retail, challenged the Commissioner-IR, Zone-I, RTO Quetta over tax years 2018 to 2020. He had declared turnover of Rs9.375 million, Rs1.305 million and Rs1.325 million for those years and paid minimum tax on each. Acting on bank-credit information from a Faisalabad intelligence directorate, the assessing officer revised those assessments and treated the differences as suppressed sales, a step the CIR (A) endorsed. The tribunal then annulled both the CIR (A) and assessing officer decisions.

The bench described Section 122(5A) as a narrower corrective power, limited to mistakes already visible in the assessment record. A bank credit, the tribunal observed, may be a loan, capital introduced or a transfer, so its nature needs factual inquiry. Relying on a Supreme Court judgment and earlier precedents, the tribunal concluded that error and revenue loss must be apparent in the show-cause notice, leaving no scope for speculative probing under Section 122(5A).