I.T.A. NO. 2628/LB OF 1986-87, DECIDED ON 2ND AUGUST, 1994. VS I.T.A. NO. 2628/LB OF 1986-87, DECIDED ON 2ND AUGUST, 1994.
1995 P T D (Trib.) 1149
[Income-tax Appellate Tribunal Pakistan]
Before Nasim Sikandar, Judicial Member and Muhammad Mushtaq, Accountant Member
I.T.A. No. 2628/LB of 1986-87, decided on 02/08/1994.
(a) Income tax---
---- Assessee, a contractor---Deposit call receipts---Nature---Deposit call receipt being an amount which represents security of contractor with the contracting Authority for execution of contract satisfactorily and refundable is not part of contract payments---Deposit call receipt, in fact, is the contractor's money which is to be refunded by the contracting Authority.
(b) Income Tax Ordinance (XXXI of 1979)---
----S. 59---Self-Assessment Scheme (1985-86), para.9---C.B.R. Circular No.8 of 1985, dated 17th June, 1985---Exclusion of a case from purview of Self- Assessment Scheme on ground of concealment of income by assessee-- Procedure---Assessee has to be confronted, as to the alleged concealment and asked his explanation therefor before exclusion of his case from the purview of Self-Assessment Scheme---Income Tax Officer's arriving at a conclusion of concealment first and then issuing the notice to the assessee for explanation would indicate that he did not have positive evidence of concealment by the assessee---Exclusion of assessee's case from purview of Self-Assessment Scheme, in circumstances, was not justified.
Muhammad Asif Hashmi, D.R. for Appellant.
Asif Aziz for Respondent
Date of hearing: 5th October, 1993.
ORDER
MUHAMMAD MUSHTAQ (ACCOUNTANT MEMBER).---This appeal has been filed on behalf of the Income Tax Department challenging the order of learned C.I.T. (Appeals), Zone-II, Lahore vide A.O. N6.1224/A, dated 4-9-1986.
2. The brief facts leading to this appeal are that the respondent in this case M/s. Tenzo Engineering, Lahore (hereinafter also referred to as the assessee) is a registered firm, earning its income from execution of contracts. For the assessment year under consideration the assessee filed its income-tax return declaring net income at Rs.2,45,000 under Self-Assessment Scheme. The income-tax return filed by the assessee was not accepted under Self-Assessment Scheme because I.T.O. was of the view that assessee had committed concealment. A perusal of the record indicates that assessee declared trading results as under:---
Gross receipts Rs.1,09,53,414
G.P. rate.12.48%
The I.T.O. drew inference of concealment on the ground that as per payment certificate, total payments were indicated at Rs.1,12,71,814 whereas the assessee had declared total receipts at Rs.1,09,53,414. The difference was on account of C.D.R. to the extent of Rs.3,18,400 (wrongly referred to as D.C.R. by the I.T.O. as well. as by the learned CIT (Appeals). Another reason indicated in the assessment order for taking out the case out of Self Assessment Scheme was that the bank account of the assessee disclosed a number of credits which according to the I.T.O. remained unexplained and I.T.O. was of the view that these represented concealed income of the assessee.
3. Because of the above two reasons the I.T.O. took out this case out of Self-Assessment Scheme and completed assessment under normal law at an income of Rs.16,84,829.
4. Aggrieved by this treatment the assessee went into appeal and contended before the learned C.I.T. (Appeals) that I.T.O. was not justified in taking out the income-tax return out of Self-Assessment Scheme because the assessee did not commit any concealment. The assessee also furnished explanation regarding C.D.R. of Rs.3,18,400 and the credits appearing in the bank account. The learned C.I.T. (Appeals) accepted the explanation of the assessee and directed that income-tax return filed by the assessee should be accepted under Self-Assessment Scheme. The learned C.I.T. (Appeals) made the following observations:---
"There is absolutely no discrepancy with regard to the suppression of receipts of the unexplained deposits in Bank account. Deposit Call Receipts have also been properly explained, payments were correctly disclosed and certified by WASA. The appellant's case was wrongly excluded from Self-Assessment Scheme. It does not fall within the purview of para. 9 of the Self-Assessment Scheme. The Income Tax Officer is directed to accept the return subject to such additions as may be called for out of profit and loss account.
The appeal is disposed of accordingly."
5.The Income Tax Department is aggrieved by the relief allowed by the learned CIT (Appeals) as above. As per grounds of appeal the contention of the Income Tax Department is as under:--
"That the C.I.T. (Appeals) was not justified in deleting the addition under the head of unexplained bank deposits as the assessee did not produce any documentary evidence in support of these deposits before the ITO nor any explanation in this regard was also filed by him. The assessee had produced the documentary evidence in support of aforesaid unexplained bank deposits before finalization of assessment proceedings. This act of assessee has not validity in the eyes of law."
6.The learned D.R. appearing on behalf of the Income Tax Department has contended that learned C.I.T. (Appeals) was not justified in directing that the income-tax return filed by the assessee should be accepted under Self Assessment Scheme because prima facie there was a case of concealment against the assessee.
The learned D.R. continued that the assessee was provided sufficient opportunities by the I.T.O. Notices under section' 61/62 were issued on 21-6-1986 but the assessee failed to comply with these notices, hence, the assessment was completed under section 63 of the Income Tax Ordinance, 1979. And according to the learned D.R. since the assessee wrongly excluded C.D.R. from the payments and also did not explain the bank credits, hence, assessment was completed justifiably under section 63 by the I.T.O.
7. Mr. Asif Aziz, Advocate, the learned counsel of the assessee on the other hand contended that I.T.O. was not justified in taking out the income-tax return filed by the assessee out of Self-Assessment Scheme as there was no discrepancy.
8. We have carefully considered the facts of the case and arguments advanced from both the sides. A perusal of the Self-Assessment Scheme for the assessment year 1985-86 indicates that I.T.O. is authorised to take any return out of Self-Assessment Scheme in which there is evidence of concealment. Para 9 of the Self-Assessment Scheme for the assessment year 1985-86 is reproduced as under:---
"Notwithstanding anything contained in the preceding paragraphs the cases where positive evidence of concealment exists or comes into possession of the Department during the pendency of the assessment, shall fall outside the purview of the Self-Assessment Scheme irrespective of the quantum of income declared or immunity."
9. As per grounds of appeal the case of the Income Tax Department is that assessee should have furnished explanation to the I.T.O. regarding the above discrepancy instead of learned C.I.T. (Appeals). But a perusal of the record indicates that the I.T.O. did not have any evidence of concealment in this case. He was just proceeding on the basis of guesswork and whims. The I.T.O. failed to appreciate the exclusion of C.D.R. from payments (wrongly indicated as D.C.R. by the I.T.O.). C.D.R. is an amount which represents I security of contractor with the contracting authorities for execution of contract satisfactorily. It has been pointed out by the learned C.I.T. (Appeals) that if the contract is not awarded to the contractor or if the contract is completed satisfactorily then this amount is refunded to the contractor. It is never a part of contract payments. In fact it is the assessee's money which is to be refunded by the contracting department.
10. As far as bank credits are concerned, the I.T.O. simply jumped to the conclusion' without affording a proper opportunity to the assessee for explanation of the bank credits. It is correct that I.T.O. issued notices under section 61/62 on 21-6-1986 in this case but these notices were issued by the I.T.O. after the case of the assessee had been taken out of the Self-Assessment Scheme whereas the I.T.O. should have asked the assessee for explanation before he took out this case out of Self-Assessment Scheme. In other words the ITO arrived at conclusion of concealment first then issued the notice to the assessee for explanation indicating thereby that I.T.O. did not have positive evidence of concealment in this case.
11. Secondly the only ground on the basis of which the income-tax return filed by the assessee was taken out by the assessee was that the assessee had wrongly excluded the amount of C.D.R. from payments but this conclusion drawn by the I.T.O. was not correct as discussed above.
12. A perusal of the assessment order indicates that assessee declared receipts at Rs.1,09,53,414 whereas the I.T.O. has estimated receipts at Rs.1,20,00,000 for which no basis have been given in the assessment order. Because of these reasons we are not inclined to interfere in the order of the learned C.I.T. (Appeals) and appeal of the Income Tax Department fails, and is rejected.
M.BA./101/TAppeal dismissed.