I.T.A. NO. 983/LB/DB OF 1991-92, DECIDED ON 23RD APRIL, 1992. VS I.T.A. NO. 983/LB/DB OF 1991-92, DECIDED ON 23RD APRIL, 1992., 1992 PTD-INCOME-TAX-APPELLATE-TRIBUNAL-PAKISTAN 1653 (1992)

(a) Self-Assessment Scheme of Income Tax for the Assessment Year 1990-91- -

----[C.B.R. Circular No.5 of 1990], Para 4(II)---Word "suspected" has been used in para 4(II) deliberately to enable the enforcing Agency to take action if there were reasonable grounds of suspicion on the basis of information available with the department.

1988 PTD 328 and 1988 PTD 612 (Trib.) ref.

(b) Circular-

---- C.B.R's circular/instructions were to be operative from the same date on which there were issued.

Saghir Tirmizi for Appellant.

Nemo for Respondent.

Date of hearing: 6th February, 1992.

ORDER

NASIM SABIR SPED, (ACCOUNTANT MEMBER): --The assessee is an individual. Appeal has been filed for the assessment year 1990-91.

2. The assessee had declared income from four different sources a Rs.68,328 including income from business at Rs.56,328. The same has beet assessed at Rs.3,54,845.

3. The first objection raised by the assessee is that- the learned CIT(A) was not justified in setting aside the order passed being ab initio void as it should have been cancelled and the declared income should have been accepted under Self-Assessment Scheme as it had been wrongly set apart for total audit. The facts of the case are that it was selected for total audit under Clause 1 of para. 4 of CBR's Circular No.5 of 1990 by the RCIT Northern Region, Islamabad vide his letter No.SOI/SAS/50-8/1991/3052, dated 7-4-1991. Intimation to this effect was made to the assessee on 14-4-1991. The assessee objected to this claiming that the reasons given for selecting the case for total audit by RCIT were in contravention of the said Circular. The reasons for doing the same were as under:

(1) Coal commission not separately declared.

(2) It was a newly-constructed kiln and investment thereon was to be probed into:

(3) Shop was purchased in Gole Karyana Bazar, Faisalabad the investment in which needed probe.

(4) Sales declared under the heads `Sujee, Mada' were Rs.15,00,000 with G.P. rate of 3.3% whereas in parallel cases a G.P. rate of 6.25% had been applied which was confirmed in appeal. Net income from this source at Rs.17,000 was grossly understated alongwith brick-klin income at Rs.36,750.

Para-4(11) of the Circular of CBR referred to before says that the case can be set apart for total scrutiny by the RCIT if "understatement of income is suspected on the basis of definite information based on material evidence". The learned A.R. of the assessee argued that as far as the brick-kiln is concerned no enquiry was made about its capacity so it cannot be said that definite information or material evidence was available with the RCIT. Reference was made to 1988 PTD 328 wherein clarification had been made about the words "definite information" saying that as it was not defined in the Income Tax Act/Ordinance. Obviously the legislature intended to give ordinary dictionary meaning to these words. It was emphasised that definite information has to be based on evidence which has a legal base and not based on a mere suspicion. Reference was made also to1988 PTD 612 (Trib.) where it had been held that the evidence available could be treated as information but not definite information. The learned A.R. of the assessee was asked to appreciate the relevance of the term used "suspected" in para-4(11) of the CBR's Circular. It was conveyed to him that the use of word "suspected" had deliberately been made enabling the enforcing Authorities to take action if there were reasonable grounds of suspicion on the basis of information available with the Department. The RCIT had .made reference to definite information available with him about other cases engaged in the same type of business which aroused the suspicion that the assessee had not disclosed the real income. The reply given by him was that even "suspicion" had to be based on definite information based on material evidence and this was at least not so in the case of the brick?-kiln. This contention of the learned A.R. is not correct because the capacity of the kiln has been taken from the information available with the Department and it is not a figure adopted in a vacuum. Second argument given by the learned A.R. was that the definite information based on material evidence had to be in the case of the assessee itself and the case could not be selected by the RCIT by making a reference to other cases although in the same nature of business. This contention of the assessee does not seem to be of any validity because in such an eventuality, as asserted by him, resort could be taken to action under section 65 of the Ordinance. This provision had been deliberately introduced in the Self-Assessment Scheme to enable the Department to take action in such cases where the incomes declared were suspected to be not reasonable vis-a-vis other assessees in the same line of business.

4. Another objection raised was that the CBR's Circular No.1 of 1991 was an open letter with C. No.1(3)/DT/-14/91, dated 1-4-1991 addressed to RICT Karachi communicating in the same letter that no cases were to be selected on the basis of this Circular by RCIT after 5-4-1991. The learned A.R. insisted that this letter must not have been received by the RCIT, Northern Region by 7-4-1991 because according to him even if a Circular is approved on a certain date some time is taken in the administrative follow up and the time gap in issuing a letter by the CBR to the field officer is ten to 15 days. It way further asserted by him that letter issued by the CBR on 5-4-1991 became operative from the same date, so the RCIT could not initiate any action on? 7-4-1991. The learned D.R. on the other hand took the plea that the letter issued by the CBR was to the RCIT Karachi and the same was not expected to be received by the RCIT, Islamabad (Northern Region) by 7-4-1991. This contention of the learned D.R. is not convincing because copies of all important letters issued by the CBR are sent to all the RCIT's even if the letter is addressed to a particular RCIT. The copy of the letter despatched by the CBR on 1-4-1991 intimating that no action should be taken after 5-4-1991 must have been received by the RCIT, Islamabad being a local office. On seeing the actual Circular (placed on file) it has been found that it is issued to all the Regional Commissioners including Regional Commissioner, Islamabad. May be it was not put before him by the time he allowed to take resort to this Circular. Secondly the instructions issued by the CBR become operative from the same date on which they are issued. The time of receipt by the Field in Officers is legally of not any importance. The learned CIT(A) has set aside the case on an entirely different issue i.e. according to him, enough opportunity had not been afforded to the assessee as the appellant had never been informed about the fate of his adjournment application. We are of the considered opinion that the instructions issued by the CBR not to take resort to action under Circular No.1 of 1991 became operative from 1-4-1991 and the RCIT could not initiate any action after 5-4-1991. As a result the ITO is directed to accept the return filed for the assessment year 1990-91 under Self? Assessment Scheme.

5. This disposes of the appeal as above.

M.B.A./1730/T??????????????????????????????????????????????????????????????????????????????????? Order accordingly.