(a) Income Tax Ordinance (XXXI of 1979)---

----S. 134---Appeal to Appellate Tribunal---Appellant had brought out a number of factors which certainy merited consideration at the stage of earlier proceedings---Such factors having not been pressed before, Tribunal declined to allow the appellant to ventilate same at the stage of an appeal before Tribunal.

(b) Income Tax Ordinance (XXXI of 1979)---

----S.111---Penalty---Concealment of income---Penalty proceedings being criminal in nature required an independent appraisal of the evidence, the contentions and the defence raised before burdening the assessee with penalty---Rolling up of both assessment and penalty proceedings could not be seen with favour---Where the Department based the penalty order solely on the agreement executed between itself and the assessee and proceedings were conducted in a pre-determined manner without a manifest effort to justify the penalty except of the fact of agreement, Tribunal ordered the deletion of penalties in circumstances.

Mian Ashiq Hussain for Appellant.

F.D. Qaiser, D.R. for Respondent.

Date of hearing: 15th October, 1992.

ORDER

Out of these eight appeals four are directed against an order of AAC, Sialkot dated 10-7-1985 whereby assessments framed in respect of assessee appellant for the assessment years 1980-81 to 1983-84 were confirmed. The other four appeals impugned a consolidated order of AAC, Sialkot dated 10-7-1985 whereby he confirmed the penalties imposed under section 111 of Income Tax Ordinance pertaining to assessment years 1980-81 to 1983-84.

2. The assessee-appellant is a registered firm and derives income from sale of oil products as a distributor of M/s. Pakistan State Oil Limited. The returns filed for the assessment years under review were completed under self assessment scheme. Subsequently the case was selected for detailed scrutiny for the assessment year 1983-84. And, on account of an information received from the principal, notices under section 65 for reopening of the case pertaining to all the four assessment years viz. 1980-81 to 1983-84 were served. Faced with the dilemma of definite information from the principal that the purchases were suppressed by the assessee for all the four years, the assessee entered into an agreement available on order-sheet dated 5-6-1984 agreeing to be assessed at Rs.90,000, Rs.105,000, Rs.115,000 and Rs.125,000 for the assessment years 1980-81 to 1983-84 respectively. In this very agreement concealment of income was admitted and the assessee agreed to pay penalty under section 111 of the Ordinance at a rate of 100% of the tax evaded. The order-sheet was signed not only by the assessee-appellant but also by his AR MR. Farooqui, ITP. This agreement is stated to have been witnessed by the CIT, Gujranwala, IAC. Sialkot and the concerned ITO.

3. In spite of the abovesaid agreement the assessee-appellant impugned all the four assessments as also the penalty orders before AAC, Sialkot Range, Sialkot. As regards the appeals filed impugning assessments framed under section 62/65 for all the four years, the learned appellate authority observed as under:

"The learned counsel for the appellant Mr. M.R. Farooqi, ITP attended and filed written arguments but did not press for, appeals against 'the orders passed under section 62/65 of the Income Tax Ordinance, 1979 as well as detailed secutiny order for the assessment year 1983-84."

Resultantly, the aforesaid appellate authority dismissed all the four appeals.

4. The four appeals impugning penalty order were also dismissed by the same appellate authority by way of a separate order dated 10-7-1985 Earlier, the appellate authority examined the issues involved at length stating the background of the agreement as also the, conduct of the assessee-appellant in this regard. The rejection of the appeals was also based upon the finding of the learned appellate authority that the penalties having been agreed to by the appellant, the orders imposing the penalties were not appealable.

5. We have heard the parties. The learned counsel for appellant vehemently argued a number of points assailing the assessment orders framed under section 62/65 during the said four years. The fact of the matter he was quite successful in bringing out a number of factors which certainly merited consideration at the stage of earlier proceedings. However, we confronted him with the situation that since all the four appeals against the assessment orders framed under section 62/65 were not pressed before the first appellate authority as the above-stated excerpt from the impugned order indicates, no grievance shall be allowed to be ventilated at this stage of second appeal. The assessee-appellant in a way withdraw his first appeals and, therefore, the contentions against the agreed assessments for all the four years could not be allowed to be raised again. The assessee having not pressed the appeals and the learned appellate authority having not considered the case on merits, we will refuse to interfere in the assessment orders and will, therefore, dismiss all the four appeals impugning them.

6. As regards the penalties, the contentions raised by the learned counsel for the appellant bear weight. In the first instance he maintained that the said agreement having remained the sole reason for imposition of penalties, the purpose for which independent proceedings are contemplated was necessarily defeated. Therefore, he maintained that in spite of an agreement to that effect the assessing officer ought to have considered the imposition of penalty on its own merits rather than merely backing his order on a reference to the agreement. Therefore, on the ratio of (1980) 42 Tax 37 (Trib.) (1982) PTD 60 (Trib.), 1986 PTD (Trib.) 129, 1987 PTD (Trib.) 646 and 1992 PTD 155. He submitted that the department was not absolved of proving independent that the assessee had been guilty of conscious and deliberate suppression of income. The fact-that the penalty orders though framed independently were still wholly based on the agreement and no independent appraisal of the situation was made appears admitted. In other words it is clear that the impugned penalties were imposed solely on the basis of the aforesaid agreement executed between the assessee and the department. In this situation, even if we do not strain much on the alleged element of coercion employed on the assessee, the fact remains that both the assessments as well as the penalty proceedings were intermingled. This Tribunal in a number of cases has stressed that penalty proceedings were criminal in nature and, therefore, required an independent appraisal of the evidence, the contentions and the defence raised before burdening the assessee with penalty. The rolling up of both assessment and penalty proceedings, therefore, cannot be seen with favour. The real of revenue collectors in exploiting the situation to its maximum end appears understandable in cases where concealments are admitted. However, they have to keep in mind that when law requires a thing to be done in a particular manner then that must be done in that particular manner or should not be done at all.

7. After hearing the parties and going through the orders of the authorities below we conclude that the department based the penalty orders solely on the agreement executed between itself and the assessee and that penalty proceedings were conducted in a pre-determined manner without a manifest effort to justify the penalties except for the factum of the aforesaid agreement. Therefore, we will accept all the four appeals and order that the penalties imposed in all the four years under review shall be deleted.

M.BA./47/T.T.Order accordingly.