I.T.A. NO.250/HQ OF 1990-91, DECIDED ON 17TH NOVEMBER, 1990. VS I.T.A. NO.250/HQ OF 1990-91, DECIDED ON 17TH NOVEMBER, 1990.
1991 P T D (Trib.) 210
[Income-tax Appellate Tribunal]
Before Farhat Ali Khan, Chairman and Alvi Abdul Rahim, Accountant Member
I.T.A. No.250/HQ of 1990-91, decided on 17/11/1990.
(a) Income Tax Ordinance (XXXI of 1979)---
----S. 59---Self-Assessment Scheme (1986-87), paras. 1 & 2---C.B.R. Circular No.13 of 1986, dated 15-7-1986---C.B.R. Letter No. C. No. I.TA. 1/(25)/86, dated 29-7-1986---In spite of proper opportunity provided by the Income Tax Officer, assessee failed to furnish a copy of Trading and Profit and Loss account ---Assessee's Return, held, was disqualified from acceptance under the Self-Assessment Scheme as per provision of C.B.R. Circular No.13 of 1986, dated 15-7-1986 and C.B.R. Clarifactory Letter No. C.N. I.TA. 1/(25)/86, dated 29-7-1986 was not relevant in the case of assessee.
(b) Income Tax Ordinance (XXXI of 1979)---
----S. 59---Self-Assessment Scheme (1986-87), paras. 1 & 2---C.B.R. Circular No.13 of 1986, dated 15-7-1986---Requirements listed in para. 2(A) to (F) of Self-Assessment Scheme (1986-87) have to be fulfilled by each person to whom they apply ---Assessee, who furnished return as a new tax-payer for the first time, was firstly required by para. 2(D)(i)(a) of the Scheme to furnish Trading and Profit and Loss Account on estimate basis or a receipt and expenditure statement on estimate basis and secondly he was required to comply with requirements of para. 2(E) of the Scheme---Failure of assessee to comply with requirements of para 2(D) & (E), in spite of proper opportunity would attract contents of para. 1(f) to C.B.R. Circular No.13 of 1986 to disqualify his return from acceptance under Self-Assessment Scheme (1986-87).
Abbas Ali Siddiqui for Appellant.
Ilyas Shaikh, D.R. for Respondent.
Date of hearing: 11th November, 1990.
ORDER
FARHAT ALI KHAN (CHAIRMAN).---Mr. Israr Ahmed, proprietor of Gabol Ice Factory, hereinafter referred to as the appellant, has filed this appeal against decision given by the learned C.I.T.(A), Hyderabad Zone in respect of assessment year 1986-87. The brief facts of the case are that the appellant furnished annual return of income under the Self-Assessment Scheme by declaring income of Rs.27,000 from an Ice Factory. Alongwith this return he filed a copy of wealth statement as on 30-6-1986. But he did not furnish copy of Trading and Profit and Loss Account, either on actual basis or on estimate basis. The I.T.O. asked the appellant to furnish the same. Admittedly the same was not furnished in spite of proper opportunity provided. The case of the appellant is that he was required to furnish only a wealth statement and no other document. As he had fulfilled the necessary requirement of the Self-Assessment Scheme his case should be processed under the Self-Assessment Scheme. Neither the I.T.O. nor the learned C.I.T.(A) have accepted this contention of the appellant. Both of them have held that the appellant was required to furnish a copy of Trading and Profit and Loss Account in addition to the wealth statement which he had furnished.
2. At the time of hearing before us Mr. Abbas Ali Siddiqui, the learned counsel for the appellant, has again submitted that the declared income should be accepted under the Self-Assessment Scheme because the appellant fulfils requirements of the Scheme as explained by a clarifactory letter issued by the Central Board of Revenue and as laid down by para. 2 of Circular No.13 of 1986, which contains the Self-Assessment Scheme for 1986-87. Before proceeding further it will be worthwhile to reproduce the letter on which Mr. Abbas has relied and also paras. 1 and 2 of the Self-Assessment Scheme Circular `Letter dated 13th July, 1986 addressed to C.B.R.'
Letter dated 13-7-1986, from Mr. Latif Shahid, Advocate, Lahore, addressed to the Secretary, C.B.R., Islamabad and copy endorsed to the Editor `Taxation' Lahore.
"SUB: SELF-ASSESSMENT SCHEME 1986-87.---Circular No.13 of 1986, contains various provisions of Self-Assessment Scheme for the assessment year 1986-87. New tax-payers having the status of `Individual have been given exemption from Total Audit provided the income returned is not less than Rs.24,000. No procedure for declaring income has been laid down as in the earlier Self-Assessment Schemes. The wealth statements at 30-6-1986 is one of the conditions to be fulfilled by the individual.
Please clarify whether an individual who has not assets in lacs and he declared his income at Rs.24,100 shall qualify for exemption from Total Audit or in such cases, the department will enquire about the source of such assets declared in the wealth statement."
C.B.R.'s clarifiactory letter:
Letter C. No. I.TA. 1/(25)/86, dated 29-7-1986 from Khawas Khan Niqvi, Second Secretary C.B.R., Islamabad addressed to President Gujranwala I.T. Bar Association Gujranwala, in reply to his letter dated 6-6-1986.
Sub:SELF-ASSESSMENT SCHEME 1986-87 NEW TAX-PAYERS UNABLE
TO EXPLAIN THEIR INVESTMENT IN NET ASSETS-CONSIDERATION OF.
"Please refer to your letter NO.CTBA/1/88, dated 6th June, 1986 addressed to the Board on the abovementioned subject.
I am directed to say that para. 6(a) of the Self-Assessment Scheme for 1986-87 lays down that cases of new tax-payers will be exempted from total audit if the tax-payer is an individual and the income declared by him exceeds Rs.24,000 explanatory."
PARAS. 1 & 2 OF THE SELF-ASSESSMENT SCHEME CIRCULAR.
"Scope of the Scheme:--
1. All returns filed for assessment year 1986-87 shall be self-assessment returns with the following exceptions:--
(a) Returns which are not filed voluntarily by the due dates, including the extended dates.
(b) Returns where the declared income, before any adjustment for brought forward assessed loss, does not exceed Rs.24,000.
(c) Returns of existing tax-payers in whose cases a legal issue is pending in an appeal/reference in respect of a previous assessment and the same issue exists for the assessment year 1986-87, unless the appeal/reference is withdrawn by the tax-payers or the Department.
(d) Returns selected for Total Audit.
(e) Returns in cases where evidence of concealment is available.
(f) Returns where the requirements as specified in para. 2 are not fulfilled and the tax-payer fails to provide such particulars/documents within one month of the date of service of a letter from the Income Tax Officer.
REQUIREMENTS OF THE RETURN
2. The following statements, accounts, details and documents shall be required to be filed alongwith the return of income:--
(A) Salary Cases:
(i) Salary certificate showing salary, allowances, perquisites, or any other receipts and the amount of tax deducted at source.
(ii) Evidence of claim for investment, if any.
(iii) Evidence of payment of tax under section 54, if any.
(B) Property Cases:
(i) Evidence of payment of municipal taxes, collection charges, interest on capital borrowed etc.
(ii) Evidence of claim for investment allowance, if any.
(iii) Details of the investment made in property and description of source of investment in cases where property income is declared for the first time.
(iv) Statement, indicating the unadjustable advance rent or `Pugree' if any.
(v) Evidence of payment of tax under section 54.
(C) Cases of Income from other sources:
(i) Description of nature and source of income.
(ii) Details of expenses claimed.
(iii) Evidence of claim for investment allowance, if any.
(iv) Evidence of payment of tax under section 54.
(D) Business income:
(i) In case of Individuals, HUFs, URFs and AOPs:--
(a) Where no accounts are maintained:
(1) Trading and profit and loss account on estimate basis, or receipt and expenditure statement where trading account cannot be prepared.
(2) Evidence of claim for investment allowance, if any.
(3) Evidence of payment of tax under section 54.
(b) Where accounts are maintained:
(1) Trading/manufacturing account, profit and loss account and balance-sheet; receipts and expenditure statement, where applicable.
(2) Copies of personal accounts of the partners or members or the proprietors.
(3) Evidence of claim for investment allowance, if any.
(4) Evidence of payment of tax under section 54.
(ii) In case of Registered firms:
(1) Trading/manufacturing account, profit and loss account and balance-sheet; receipt and expenditure statement, wherever applicable.
(2) Copies of personal accounts of partners.
(3) Evidence of payment of tax under section 54.
(iii) In the case of Limited Companies:
(1) Trading/manufacturing accounts, profit and loss account and balance-sheet; receipt and expenditure statement, wherever applicable.
(2) Copies of personal accounts of directors.
(3) Where any depreciation allowance is claimed complete depreciation chart showing the value of assets, depreciation allowance claimed, rates at which claimed and the resultant WDV.
(4) Where any addition to assets is shown, evidence regarding its value and source of investment.
(5) Complete particulars, including names, addresses and N'TN (if any) of all debtors/creditors where the amount in each case exceeds Rs.50,000. (Banks and companies listed on stock exchange may not file these details).
(6) Evidence of payment of tax under section 54.
(E) New Tax-payers:
(i) In case of an individual his wealth statement as on 30th June, 1986.
(ii) In case of an AOP, URF, HUF and RF the wealth statement of members/partners, as at the close of the income year.
(F) Exempt Income:
In case any exempt income or gift is shown, its details supported by documentary evidence.
Notes:--
(iv) Where an individual is required by the law to file a wealth statement, such statement, alongwith a reconciliation statement, shall be filed accordingly."
3. According to Mr. Ilyas Shaikh the return did not qualify for acceptance under the Self-Assessment Scheme. Rebutting the argument of Mr. Siddiqui he stated that the Circular, on which the learned counsel is relying, talks about more than one conditions that have to be fulfilled. The case of Mr. Siddiqui is that the only requirement (vie. wealth statement) had been fulfilled to avail the facility of Self-Assessment Scheme. The learned D.R. submitted that the query made to C.B.R. states that the "wealth statement" is one of the conditions to be fulfilled by an assessee.
4. We have considered the issue in dispute before us. For the reasons given hereinafter we find no force in the argument of Mr. Saddiqui that the appellant's return had to be processed under the Self-Assessment Scheme. In spite of proper opportunity provided by the I.T.O. the appellant failed to furnish a copy of Trading and Profit and Loss Account. Thus, his return was disqualified from acceptance under the Self-Assessment Scheme as per provisions of para. 1(f) of C.B.R. Circular No. 13 of 1986, dated 15th July, 1986. The case of Mr. Abbas Ali I Siddiqui gets support neither from the clarifactory letter issued by the C.B.R. nor from Circular 13 of 1986, which contains the requirements of a Self-Assessment Scheme. The C.B.R. clarifactory letter dated 29-7-1986 deals with the subject of "immunity" from Total Audit. All returns furnished under the Self-Assessment Scheme, which fulfil requirements of the Scheme., have to be accepted except those cases which are picked up for total audit. This is stated in para. 1(d) of the Circular. Para. 6 of the Circular describes those cases which cannot be picked up for total audit though they fall in the ambit of Self-Assessment Scheme. The point worth noting here is that "immunity" from total audit is available to returns which otherwise qualify under the Self-Assessment Scheme. In case a return of involve, does not qualify under the Self-Assessment Scheme the question of exemption from total audit will not arise because such a return has to be processed after auditing the accounts. Thus, clarifactory letter of 29-7-1986 is of no help to us in deciding whether the return furnished by the appellant for 1986-87 was covered by the Self-Assessment Scheme. Secondly, as has been pointed out by the learned D.R. the query submitted to C.B.R. talks about more than one conditions to be fulfilled. In other words the person seeking clarification admitted that more than one conditions are to be fulfilled. It appears that Mr. Siddiqui has not appreciated properly the subject-matter of query made to C.B.R. and C.B.R's reply thereto. This query was not made to seek clarification as to whether a new tax-payer has to fulfil only one requirement vie submission of wealth tax statement. The subject-matter of these letters is different from this issue. During the earlier years, for example assessment year 1985-86, a new tax-payer could claim exemption from detailed scrutiny or total audit in case he was able to explain the source of investment made in the business or his declared income had a particular relationship with the capital introduced by him. For 1985-86 the required relationship was that an assessee should declare income which is at least 60% of his net assets in case the net assets did not exceed Rs.50,000. In case the net asset exceeded Rs.60,000 the assessee was required to declare income which was at least 45% of the assets in excess of Rs.50,000. In the year under consideration no such requirement has been listed in the Self-Assessment Scheme. The Scheme says that if a new tax-payer furnishes his wealth statement as on 30-6-1986 and the declared income is in excess of Rs.40,000 his return shall be exempt from total audit. In this way a substantial new concession was given as compared with the Scheme effective in 1985-86. The C.B.R., was, therefore, approached to get confirmation for this new concession. It was for this reason that Mr. Latif Shahid, Advocate, pointedly asked the following:--
"Please clarify whether an individual who has assets `in lacs and he declared his income at Rs.24,100 shall qualify for exemption from total audit or in such cases, the department will inquire about the source of such assets declared in the wealth statement:'
After considering the material placed before us by Mr. Siddiqui we are convinced that the reference made by Mr. Latif to C.B.R. and C.B.R. clarifactory letter dated 29-7-1986 are not relevant for the purpose of deciding whether the return filed by the appellant qualifies under the Self-Assessment Scheme. As a matter of fact these letters talk about those returns which qualify for acceptance under the Self-Assessment Scheme, and are also entitled to a further facility namely exemption from total audit.
5. Now we take up the second argument of Mr. Siddiqui. According to him the appellant was required fulfil only one condition namely, furnishing of wealth statement as on 30th June, 1986. This requirement is listed in sub-para (E) of para. 2 of the Circular No.13. In other words his argument is that any return will qualify for Self-Assessment in case anyone of the six sub-paras of paragraph 2, namely sub-paras (A), (B), (C), (D), (E) & (F) is applicable. These sub-paras have been reproduced on pages 5 to 8 of this order, Before proceeding further we should keep in mind that there is no dispute among the parties to this appeal that requirements of the return listed in para. 2 have to be fulfilled for qualifying under the Self-Assessment Scheme. The dispute is as follows: whether all the relevant sub-paras. [namely, (A) to (F)] are to be complied with or only one of them. There is nothing in para. 2 which says that the requirements listed in this sub-para are alternate in nature. When there is nothing to this effect it means that requirements listed in paras. (A) to (F) have to be fulfilled by each person to whom they apply. For example a new tax-payer enjoying property income will comply with requirements of sub-paras (B) and (E). 1f we accept the argument of Mr. Siddiqui the entire Self-Assessment Scheme will become meaningless. This is due to the fact that most of the tax-payers enjoy income from more than one source. The persons earning salary income earn income from immovable property or income from dividends. A business man may have property income and dividend income in addition to income from business. If we accept Mr. Siddiqui's argument such a person will be required to furnish information about income from one source only and claim that he fulfils requirements of para. 2. We reject this argument and hold that the appellant, who furnished return as a new tax-payer for the first time, was required by para. 2(D)(i)(a) to furnish Trading and Profit and Loss Account on estimate basis or a receipt and expenditure statement on estimate basis. And he was also required to comply with requirements of sub-para. (E). As he failed to comply with requirements of sub-para (D) in spite of proper opportunity the contents of para. 1(f) to Circular No.13 of 1986 are attracted to disqualify his return from acceptance under the Self-Assessment Scheme.
6. For the reasons given above we reject the appeal and hold that the I.T.O. has rightly invoked provisions of para. 1(f) of Circular No.13 of 1986, dated 1st July, 1986.
M.BA./949/TAppeal rejected.