I.TA. NO.445/HQ OF 1988-89, DECIDED ON 4TH FEBRUARY, 1991. VS I.TA. NO.445/HQ OF 1988-89, DECIDED ON 4TH FEBRUARY, 1991.
1991 P T D (Trib.) 518
[Income-tax Appellate Tribunal Pakistan]
Before Muhammad Mujibullah Siddiqui, Judicial Member and Manzurul Haque,
Accountant Member
I.TA. No.445/HQ of 1988-89, decided on 04/02/1991.
Income Tax Ordinance (XXXI of 1979)--
----Ss. 19 & 63---C.B.R. Circular No. 9 of 1987, para.8---Self-assessment---Income from House property---"Concealment"---What amounts to---Technical error in computation of total income---Not concealment-- -When there was no element of evasion of tax, the question of concealment would not arise---Mere wrong mode of accounting or technical mistake in computing total income would not amount to concealment of income so as to take the case out of the ambit of Self-assessment within meaning of para. 8 of Circular No. 9 of 1987.
When there is no element of evasion of tax the question of concealment does not arise. Mere wrong mode of accounting or technical mistake in computing total income does not amount to concealment of income. The concealment of income preconceives dishonest motive on the part of an assessee in filing untrue estimate of tax or intentional withholding of the true facts for the purpose of evading the tax or concealing the true income or giving inaccurate particulars or claiming any deduction or showing any expenditure not actually incurred. The crux of the matter is that all or any of the above acts should be done with the intention and motive of evading the tax. If neither there is any intention or motive for evading the tax, nor the ultimate effect of any computation is the evasion of tax or even reduction of tax the question of concealment does not arise. Every bona fide mistake, omission or error on the part of an assessee shall not bring it within the purview of concealment. This principle is true in all the matters and particularly in taxation matters. The true intention and nature of the act done is very necessary because notwithstanding the technicalities of law the real purpose of the law of taxation is to determine the true profits and gains and to tax the real taxable income. If this purpose is achieved then notwithstanding any omissions and errors an assessee would not be held liable for concealment as envisaged in the law of taxation. Every expression has its own peculiar connotation in the peculiar scheme of the things in which it is used. The expression "concealment" is always to be examined in the scheme of taxation in the sense as explained above.
I.N. Pasha for Appellant.
Ashrafuddin Bhatti, D.R. for Respondent.
Date of hearing: grid February, 1991.
ORDER
MUHAMMAD MUJIBULLAH SIDDIQUI (JUDICIAL MEMBER).- This appeal is directed against the order dated 20-12-1988 by the learned C.I.T.(A), Zone-II, Karachi in ITA No. C.I.T.(A)/11/929/88, pertaining to the assessment year 1987-88.
2. The appellant is a private limited company earning income from property and business. The appellant has objected to the exclusion of return from the purview of self-assessment scheme for the assessment year 1987-88. The appellant has further objected to the framing of assessment under section 63 of the Income Tax Ordinance, 1979, confirmation of estimated sales at Rs.80,50,000 and confirmation of the application of gross profit rate at 23%.
3. Heard Mr. I.N. Pasha, learned counsel for the appellant and Mr. Ashrafuddin Bhatti, learned D.R. for the Department. Mr. Pasha has taken us through the assessment order and the relevant portion whereof is reproduced below for the sake of convenience.
"Return was filed declaring income at Rs.7,90,053 which was accompanied by audited statement of accounts comprising of trading and profit and loss account and balance-sheet etc. The return qualified for self-assessment and was also exempt from total audit.
However, on scrutiny of the return it was noted that among other income the assessee had declared gross income from property at Rs.1,65,000 as against Rs.1,80,000 in the immediately preceding year and Rs.2,40,000 in assessment year 1985-86. Therefore, vide my letter dated 22-12-1987 the assessee was requested to explain/clarify the reason for the continued fall in the rental income and was also requested to furnish full particulars of the property given on rent alongwith copies of relevant rent agreements, and evidence of payment of property taxes, etc. In response vide letter dated 26-12-1987 the assessee explained as under:--
(1) The gross property income at Rs.1,65,000 is the rental received upto November, 1986 that is for 11 (eleven) months during our accounting year 1986 and hence this income is less by Rs.15,000 as compared to income on this account of last year for 12 months. While total wise it is less by Rs.15,000 rate wise it is the same as that of the last year and thus there is no fall of rental as compared to last year.
The rental for last month i.e. December, 1986 could not be realised as the tenant suffered huge loss and were not in a position to pay it at all.
(2) On account of comparatively good year of the tenant in the assessment year 1985-86 the rental income was charged at Rs.20,000 per month and hence in that year the total gross property income was declared at Rs.2,40,000 for the whole year.
The above explanation of the assessee was considered vis-a-vis the provisions of law. It was noted that the assessee had declared income from property which was assessable under section 19 of the Income Tax Ordinance, 1979 and as per scheme of the Ordinance the annual value of the property was chargeable to tax. The annual value of the property had been defined in the Income Tax Ordinance and could in no case be less than the rent payable by the tenant. Since the assessee had admittedly declared lesser rent (i.e. for eleven months) that the rent payable (i.e. for twelve months) it was apparent that the assessee had concealed his income. Therefore, the case of the assessee fell outside the purview of the self-assessment scheme as per para-8 of Circular No.9 of 1987."
4. Mr. Pasha has submitted that the learned C.I.T.(A) has confirmed the exclusion of return from the purview of self-assessment scheme without considering the fact that the appellant had fulfilled all the conditions for acceptance of return under the self-assessment scheme contained in Circular No. 9 of 1987. The assessing officer excluded the return from the purview of self -assessment scheme for the reason that the appellant declared property income at Rs.1,65,000 which was the rent received for 11 months. The I.T.O. was of the view that the appellant ought to have declared annual value of the property as defined in section 19 of the Income Tax Ordinance, 1979 meaning thereby that the property income ought to have been declared at Rs.1,80,000 which was the rental for 12 months, Mr. Pasha has submitted that under the provisions of section 19(e) read with Rule 19 the appellant was entitled to the deduction of unrealised rent, and, therefore, there was no concealment on the part of appellant. On the other hand, the learned D.R. has contended that if the provisions of section 19 of the Income Tax Ordinance, 1979 are read with Rule 19, the view taken by the I.T.O. appears to be justified that the appellant ought to have declared property income for the period of 12 months and thereafter he could claim deduction provided the requirements of law in this behalf were satisfied. Mr. I.N. Pasha has ultimately conceded that the appellant has committed technical error in not declaring rental income for the entire 12 months in the first instance and thereafter claiming the deduction. However, Mr. Pasha has submitted that notwithstanding this technical mistake on .the part of appellant there was no positive evidence of concealment because of the reason that the appellant has made a lump sum addition of Rs.36,500 to the total income for availing exemption from -total audit. The appellant could have achieved this purpose after declaring the property income at Rs.1,80,000 and then making the lump sum addition of Rs.21,500 without enhancing the taxable income and the tax payable. The learned D.R. is not able to deny the fact that the appellant could have achieved the purpose of availing exemption from total audit by declaring the property income at Rs.1,80,000 and making lump sum addition of Rs.21,500 to the total income instead of making lump sum addition of Rs.36,500. Thus, there appears to be force in the contention of Mr. Pasha that in the facts and circumstances of this case there could be a technical error in computation of total income but it cannot be a case of concealment because there is nothing to show that by declaring rental income at Rs.1,65,000 instead of Rs.1,80,000 the appellant attempted to evade any tax. When there is no element of evasion of tax the question of concealment does not arise. We find substance in the contention of Mr. Pasha. We are of the opinion that mere wrong mode of accounting or technical mistake in computing total income does not amount to concealment of income. The concealment of income preconceives dishonest motive on the part of an assessee in filing untrue estimate of tax or intentional withholding of the true facts for the purpose of evading the tax or concealing the true income or giving inaccurate particulars or claiming any deduction or showing any expenditure not actually incurred. The crux of the matter is that all or any of the above acts should be done with the intention and motive of evading the tax. If neither there is any intention or motive for evading the tax, nor the ultimate effect of any computation is the evasion of tax or even reduction of tax the question of concealment does not arise. Every bona fide mistake, omission or error on the Pert of an assessee shall not bring it within the purview of concealment. This principle is true in all the matters and particularly in taxation matters. The true intention and nature of the act done is very necessary because notwithstanding the technicalities of law the real purpose of the law of taxation, is to determine the true profits and gains and to tax the real taxable income. If this purpose is achieved then notwithstanding any omission and errors an assessee would not be held liable for concealment as envisaged in the law of taxation. Every expression has its own peculiar connotation in the peculiar scheme of the things in which it is used. The expression "concealment" is always to be examined in the scheme of taxation in the sense as explained above. Applying the above connotation of expression "concealment" we find that in the facts and circumstances of this case the computation of income given by the appellant alongwith the return does not contain any element of evasion of any tax and consequently it is held that the learned two officers below were not justified in holding that there was any positive evidence of concealment in possession of department for excluding the return of appellant from the purview of self-assessment scheme. In the above circumstances the orders of the learned two officers below excluding the return of appellant from the purview of self-assessment scheme is hereby vacated. The I.T.O. is directed to process the return filed by the appellant under the self-assessment scheme for the assessment year 1987-88 as contained in Circular No.9 of 1987.
5. In view of our above direction we need not to dilate on the objections in respect of the estimated sales and gross profit rate.
6. The appeal is allowed as indicated above.
M.B.A./1173/TAppeal allowed.