I.T.AS. NOS. 780/IB AND 1050(IB)/1993-94, DECIDED ON 9TH AUGUST, 1995. VS I.T.AS. NOS. 780/IB AND 1050(IB)/1993-94, DECIDED ON 9TH AUGUST, 1995.
1996 P T D (Trib) 305
[Income-tax Appellate Tribunal Pakistan]
Before Rasheed Ahmad Sheikh, Judicial Member and Tariq Aziz, Accountant Member
I.T.AS. Nos. 780/IB and 1050(IB)/1993-94, decided on 09/08/1995.
(a) Income Tax Ordinance (XXXI of 1979)---
---Ss. 59C(1)(a) & 55---Scheme of Fixed Tax (1992-93)---C.B.R. Circular No. 17 of 1992, dated 1-7-1992---Person by, declaring sales in wholesale-cum -retail basis, in his computation chart filed alongwith the income-tax return under S.55, Income Tax Ordinance, 1979, had himself debarred by his own conduct that he was not eligible to be processed under the Fixed Tax Scheme.
(b) Income Tax Ordinance (XXXI of 1979)---
----S. 59-C(1)(a)---Scheme of Fixed Tax (1992-93), paras. 1 & 2(c) --- C. B. R. Circular No. 17, of .1992, dated 1-7-1992---Benefits of Fixed Tax Scheme (1992-93) were only available to all individuals, A.O.P., H.U.F. and U.R.F. who were carrying on business or profession with a fixed place of business located in cities or towns or villages as the case may be on retail basis and not being wholesaler---Where the optee himself had declared himself as wholesaler as well as retailer in his computation chart, he was not entitled to the benefits of Fixed Tax Scheme which were otherwise available to the new tax payers or to the persons who had either not been assessed to tax for any assessment prior to assessment year 1992-93 or if assessed to tax their assessed income did not exceed Rs.36,000 in the areas mentioned in para. 2(c) of the Scheme.
(c) Income Tax Ordinance (XXXI of 1979)---
----S. 59-C(1)(a)---Scheme of Fixed Tax (1992-93), paras. 6(c), 1 & 2(c)-- C.B.R. Circular No. 17 of 1992, dated 1-7-1992---Person who opts Fixed Tax Scheme, onus to prove squarely falls upon him to substantiate that he is eligible for the said Scheme---Where the department had sufficient evidence available on record to hold that optee was not eligible for the Scheme and optee had failed to prove his eligibility, Income Tax Officer was fully justified to process his case under normal law.
(1987) 163 ITR 294 and 1995 PTD (Trib.) 178 distinguished.
(d) Income-tax---
----Practice and procedure---Typing mistake and omission in assessment order ---Merley typing the word "individual" instead of "A.O.P." in front of the specified column of I.T. 88 would not make the assessment order void or otherwise inoperative for want of mistake or omission thereon, for such mistake or omission is not of substantial nature prejudicially affecting the tax payer.
M. Musharaf Akhund, D.R. for Appellant
Sikandar Hayat Khan for Respondent
Date of hearing: 19th February, 1995.
ORDER
RASHEED AHMAD SHEIKH (JUDICIAL MEMBER).--Both the assessee as well as the Department have come up for further appeal against the order of the C.I.T.(A), Islamabad, recorded in Income Tax Appeal No. 621, dated 9-3-1994, pertaining to assessment year 1992-93.' In the memo of appeal the assessee has narrated as many as sixteen grounds while the Department has assailed on account of reduction in sales by the first appellate authority. All the issues in these appeals are disposed of hereunder.
Facts leading to these appeals are that the assessee, an ACP, deals in Gents, Silkan Cloth and Bed Sheets etc. As per assessment order, the I.T.O. on 20-9-1992 was informed by three persons that they had opted for Fixed Tax Scheme, but at the time of assessment it was communicated to the I.T.O that instead of three optees four persons made payment for obtaining token of fixed tax under the following names and style:--
(1) M/s. Macca Cloth, Saidpur Road, Rawalpindi. Proprietor Sajjid Pervaiz.
(2) M/ s. 1Vlacca Gents Cloth, Saidpur Road, Rawalpindi. Proprietor Hamza Mushtaq.
(3) M/s. Macca Silk Cloth, Saidpur Road, Rawalpindi. Proprietor Shikh Javed Iqbal.
(4) M/s. Macca Bed Sheet, Saidpur Road, Rawalpindi. Proprietor Sheikh Muhammad Amin.
Before processing optees' intimation under the Fixed Tax Scheme, the ITO on 17-11-1992 personally visited their business premises and besides preparing stock inventory, the statements of two members of AOP, appearing at serial Mos. 2 and 3 mentioned above, were recorded who admitted the following positions:---
(i) Stock available in the shop at Rs.6,00,000 , with a cash credit of Rs.7,00,000 total Rs.13,00,000.
(ii) Total investment made including expenses of Rs.2,00,000 incurred on decoration it comes to Rs. 15,00,000.
(iii) One telephone installed at business premises No.412833.
(iv) Cash counter one.
(v) Business proprietorship of 5 brothers.
(vi) Salesmen employed 6 (six) persons alongwith 5 brothers.
(vii) Salary to saleman paid Rs.1,500 per month each.
(viii) Daily sales Rs.12,000/13,000.
(ix) Electricity expenses Rs.5,000 per month.
(x) Cash available in cash box at the time of enquiry at Rs.4,500 up to 2-00 p.m.
In view of the above facts, the I.T.O. intimated to all the four persons that their cases did not fall within the ambit of Fixed Tax Scheme in terms of sub-paras. (a) and (b) of para. 6 of C.B.R's Circular No.17, dated 1-7-1992. It was also communicated to them that since, the capital employed in their business as on 30-6-1992 had exceeded the maximum limit of Rs.1,00,000 which was otherwise the requirement of the said scheme, thus the I.T.O. concluded that all of them were jointly doing business under one shed and one cash counter and one cash memo. was maintained by them and in order to avoid burden of tax, they misused Fixed Tax Scheme by filing intimation in the name of each person separately in this regard. With this background and after having gone through the facts of the case in its entirety, the I.T.O. excluded the intimation of each optee out of the purview of Fixed Tax Regime and required them to file income-tax return, as prescribed in the manner laid down in section 55 of the Income Tax Ordinance, 1979 and in this regard notices under sections 58 and 56(1) of the Ordinance were issued for the assessment year 1992-93. In pursuance thereof, separate income tax returns were filed by each optee of Fixed Tax Scheme, mentioning therein. "under protest", declaring net income at Rs.36,000 in the following manner:---
Macca Cloth Depot. Pro. Sajjad Pervaiz
| Wholesales. | Rs.2,00,000 | |
| G. P. @ 6.25% | | Rs.12,500.00 |
| Sales retail. | Rs.9,03,960 | |
| GP @ 15% | | Rs.1,35,594.00 |
| | | Rs.1,48,094.00 |
| Less Expenses | | Rs.1,12,094.00 |
| | Net income | Rs. 36,000.00 |
Macca Cloth Depot: Peop Hamza Mushtaa
| Wholesales | Rs.225,000.00 | |
| GP @ 6.25 % | | Rs.14,062.00 |
| Sales on retail | Rs.604,207.00 | |
| GP @ 15% | | Rs. 90,631.00 |
| | Total: | Rs.104,693.00 |
| Less expenses | | Rs. 68,693.00 |
| | Net income: | Rs. 36,000.00 |
Macca Bed Sheet. Prop. Muhammad Amin
| Wholesales. | Rs.200,000 | |
| GP @ 6.25% | | Rs.12,500.00 |
| Sales on retail | Rs.488,794 | |
| GP @ 15% | | Rs.73,319.00 |
| | Total: | Rs.85,819.00 |
| Less expenses | | Rs.49,819.00 |
| | Net income: | Rs.36,000.00 |
Sh. Javed Iqbal Prop Macca Silk Centre
| Wholesales | Rs.250,000.00 | |
| GP @ 6.25 % | | Rs.15,675.00 |
| Sales on retail | Rs.465,447.00 | |
| GP @ 15% | | Rs.69,817.00 |
| | Total: | Rs.85,492.00 |
| Less expenses | | Rs.49.452.00 |
| | Net income: | Rs.36,000.00 |
On receipts of prescribed income-tax returns, the I.T.O. issued many notices under section 61 and were duly served upon them but remained un-complied with. However, finally a statutory notice under section 61 of the Ordinance alongwith a notice under section 62 for 16-1-1993 was issued wherein the assessee, inter alia, was confronted on accoun6of proposed adoption of sales as well as application of GP rate. In compliance thereof Mr. Sajjid Pervaiz attended the assessment proceedings who requested for adjournment of the case which was allowed and he was also required to submit the following:---
(i) Wealth statement of each member of AOP;
(ii) Proof and details of investment; and
(iii) Proof of commencement of business.
Responding to the notice issued under section 62 of the Ordinance, the assessee contended that as per para. 5 of Circular No. 17 of 1992, dated July 1, 1992, once 'the tax payer/person had opted Fixed Tax Regime and token of payment of tax was received from the post office then the I.T.O. is debarred to question about the stock and capital investment made in business by the optee of the scheme until and unless the Department had evidence available contrary to that of the capital or the declared income exceeded the prescribed limit as laid down in para. 6(a) of the said scheme. In the end the learned A.R. stated that exclusion of tax payer's cases out of the purview of Fixed Tax Regime is illegal, unjustified and against the norms of justice and the I.T.O., was requested to drop the assessment proceedings initiated, against the above-noted tax payers, under section 62 of the Ordinance.
It is also worthwhile to note that, apart from the statement of two members of the AOP recorded by the ITO at the time of his visit to the assessee's business premises he (ITO) again recorded the statement of Mr. Sajjid Pervaiz, during the course of assessment proceedings, who further solemnly affirmed the following facts:---
(a) Business of gents cloth and silk cloth and bed sheets etc. was started one year ago by five brothers with the capital of Rs.13/14 lacs including Rs.2 lacs which were spent on decoration of shop.
(b) Business premises consisted of basement and ground floor.
(c) Rent agreement was entered into between Mr. Javed Iqbal the managing partner and landlord for Rs.5,000per month.
(d) One cash counter and one cash memo was found there.
However, the I.T.O. did not accede to the assessee's contentions and in the light of abovementioned detailed facts of the case, he inferred that the tax payers had failed to prove with any documentary evidence that the capital employed in business as on 30-6-1992 was less than the limit as prescribed by the Fixed Tax Regime i.e. at Rs.1,00,000. Besides none of the optees of Fixed Tax Scheme had established with any material evidence that they were previously executing the above said business in an individual capacity. In the circumstances, the I.T.O. concluded that they were not eligible to avail the benefits of Fixed Tax Scheme and he processed their returns under the normal law by assigning the status to that of an A.O.P. to the said business. He (ITO) also clubbed the income of each optee by treating them as one assessable entity and accordingly computed its income in the following manner:---
Investment/stock Rs.14,00,000 while taking 6 times annual sales it comes to Rs.84,00,000.
| 7 months sales | | Rs.49,00,000 |
| GP @ 15% | | Rs.7,35,000.00 |
| Less expenses | | |
| Advertisement | Rs.200;000,00 | |
| Salary of 6 | Rs. 63,00..00 | |
| Rent salesmen | Rs.25,000.00 | |
| Electricity | Rs. 14,000.00 | |
| Telephone | Rs. 4,900.00 | Rs.3,16,900.00 |
| | Rs.316,900.00 | |
| | Net income: | Rs.4,18,100.00 |
Being dissatisfied by the order of the assessing officer the assessee preferred appeal before the learned CIT(A), Islamabad who not only upheld the action of the ITO regarding exclusion of tax payer's cases out of the purview of the Fixed Tax Regime but also confirmed assigning of status by him as an AOP to the assessee's business. As regards estimation of sales, the CIT(A) after referring to the stock, admitted by the tax payers before the ITO at the time of his visit to their business premises and cash as well as credit facilities available to them, computed its stock/investment in business in the year under appeal at Rs.13,00,000 instead of Rs.14,00,000 as determined by the I.T.O. He, thus, directed the I.T.O. to work out its annual sales by rotating the stock, as adopted by him (i.e. at Rs.13,00,000) by 6 times. Accordingly, total sales would be worked out at Rs.78,00,000 against assessed at Rs.84,00,000 and keeping in view that the tax payer executed business in the year under appeal, for 7 months, evolved its sales at Rs.45,50,000 against assessed by the I.T.O. at Rs.49,00,000. However, the remaining part(s) of the assessment order was also confirmed by the CIT(A).
Mr. Sikandar Hayat Khan, Advocate, the learned A.R. of the assessee strenuously contended that date of enquiry report is the pivotal time for determination and acceptance of tax payer's cases under the Fixed Tax Regime as well as that of assigning of status of an AOP by the ITO. According to him, the enquiry report, dated 15-10-1992 was relevant to assessment year 1993-94 and should not be made basis for framing assessment in the year under appeal. In support of his contention he heavily placed reliance from one case of Indian Jurisdiction cited as (1987) 163 ITR 294 (Rajasthan High Court--Jaipur Bench) in re: Narnauli Jewel Corporation v. Commissioner of Income-tax and the other of Income Tax Appellate Tribunal, - Karachi Bench, reported as 1985 PTD (Trib.) 178.
Mr. Musharaf Akhund, the learned D.R. vehemently contended that enquiry report, dated 15-10-1992 was no doubt related to assessment year 1993-94 but for the purpose of determination of factual position of the tax payers that whether the case of each optee vas eligible to be processed under the Fixed Tax Regime or not, the ITO concerned had to conduct enquiry after notifying by the optees to him that their oases fell within the parameters of the said Scheme. He further stated that on each occasion (i.e. at the time of ITO's enquiry, dated 15-11-1992 as well as the statement of Mr. Sajjid Pervaiz recorded by him during the course of assessment proceedings none of the person had admitted that business in the immediately preceding assessment year was conducted as an individual capacity and capital employed in business was less than Rs.1, 00,000 Thus, the statement given by-each person was definitely related to the year under appeal and the ITO did no mistake in processing tax payer's cases under normal law, being not otherwise eligible for the Fixed Tax Regime.
We have given anxious thoughts and careful consideration to the averments advanced by both the learned representatives and would like to dilate upon the legal issues hereunder firstly. After having perused the Fixed Tax Scheme, announced by the C.B.R. vide C. No. 7(10)/D-14/92, the first July, 1992, it is observed that each person by d Glaring sales on wholesale-cum-retails basis, in his computation chart filed alongwith the income-tax return under section 55 of the Ordinance, had himself debarred by his own conduct that -- was not eligible to be processed under a Fixed Tax Scheme. He should, therefore, not blame the ITO that he has illegally excluded his option out of the Fixed Tax Scheme. In fact, according top para 1 of the Circular No. 17 of 1992, dated July 1, 1992 the benefits of Fixed Tax Scheme were only available to all individuals, AOP, HUF and URF who w re carrying on business or profession, with a fixed place of business located in cities or towns or villages, as the case may be, ON RETAIL BASIS AND NO'S' BEING WHOLESALLERS. Since, each optee had declared wholesales as well as retail sales in his computation chart, reproduced above by us in earlier part of this order, under different name and styles, as a result of which, each one f them was not entitled to the benefits of Fixed Tax Scheme which were otherwise available to the new taxpayers or to the persons who had either not been assessed to tax for any assessment prior to assessment year 1992-93 or if assessed to tax and their assessed income did nor exceed Rs. 36,000 in the areas mentioned in para. 2(c) of the said scheme.
Even on factual plain, we too have examined the intimation of each optee of Fixed Tax Scheme at great length which is being discussed hereunder It is pertinent to mention here that on received of intimation by the ITO from each optee that his case fell within the ambit of Fixed Tax Scheme, he (ITO conducted enquiry to ascertain that whether each one of them was eligible for this said scheme or not and whether the said scheme had been misused or not by them For this purpose, he recorded the statements of Mr. Javed Iqbal and Sajjid Pervaiz on solemn affirmation, who categorically admitted on 15-11-1992 that business of gents clothes silken cloth and bed sheets etc. was started one year ago by five brothers with the capital of Rs.13,00,000/14,00,000 including Rs.2,00,000 which were spent on decoration of shop. Besides, they also affirmed that only one rent was entered in between Mr. Javed Iqbal, the managing partner, and the landlord for Rs.5,000 per month. In addition to that only one cash memo and one cash counter was found there. We have also examined that the I.T.O., before finalizing the assessment had also confront the optees to explain the sources of investment made in the business and proposed estimation of sales/income but it was the assessee who on each time had failed to substantiate with documentary evidence that capital invested in the business by each optee of Fixed Tax Scheme was less than Rs.1,00,000. Since, each person had opted Fixed Tax Scheme, therefore, the onus to prove squarely fell upon the shoulders of each of them to substantiate that they were eligible for the said scheme. On the contrary, the Department had sufficient evidences available on record (i.e. in the shape of stock inventory prepared by the I.T.O. himself and statements of two persons recorded by him etc.) to hold that none of them was eligible for the said scheme and the ITO was fully justified to process such intimations under normal law. Besides, as per order sheet entry, dated 11-4-1993, the statement of Mr. Sajjid Pervaiz, one of the members of an AOP, was recorded by the ITO who also solemnly affirmed that at the very start of the above said business, each one of them (five partners) had equally invested and are also enjoying equal shares in the profits and losses of the firm. It is also noteworthy that the statements of two members of A.O.P. recorded by the ITO were contradictory to each other and it looks that they were concealing true affairs of their business from the Department because on one occasion, dated 15-11-1992 Mr. Javed Iqbal and Sajjid Pervaiz admitted ownership of business by five brothers whereas intimation of adopting Fixed Tax Scheme was filed by four persons.
We have also specifically asked the learned A.R. of the assessee to substantiate with documentary evidence that whether each optee had executed his business as an individual capacity prior to the financial year ending on 30-6-1992 and business capital employed therein by each one of them was not exceeding Rs.1,00,000 during the income year but he could not do so. We have also gone through each and every case laws referred (ibid) by the learned A.R. of the assessee on this very issue and found that none of those would come to his rescue because the facts and circumstances of those cases are quite distinguishable and are not applicable in all fours owing to the peculiar circumstances of the present case. We, therefore, need not to discuss the facts of those cases hereunder.
Summing up, each one of the optee of Fixed Tax Scheme had principally admitted and affirmed that he had executed business of cloth etc on retail as well as on wholesale basis in the income year ending on 30-6-1992. Further, since, each optee of Fixed Tax Scheme had failed to establish with corroborative documentary evidence that they were eligible for the said scheme. We, therefore, hold that the ITO has rightly excluded their cases out of the purview of the Fixed Tax Regime in terms of sub-para. (c) of para. 6 of the Circular No. 17 of 1992, dated July 1, 1992. We further hold that the ITO was legally justified to assign the status of an AOP to the said business and has correctly processed its case under section 62 of the, Ordinance, being the case of each optee was duly hit by para. 1 of CBR's Circular (ibid). This part of our order will dispose of assessee's grounds of appeal bearing at Serial Nos. l, 2, 3, 4, 5, 6, 9, 10 and 14 of the memorandum.
The next contention of the learned A.R. that the I.T.O. has assigned status of an "individual" to the assessee in IT. 88 (assessment order form) in front of column 5 of first page of the assessment order while in the body of the order it has been mentioned as an "AOP". Thus, the order passed by the I.T.O. is illegal and warrants annulments. This contention of the learned A.R. is devoid of any merits because due to typographical mistake the word "individual" has been typed in the first page of the assessment order whereas the ITO, after giving detailed reasons has categorically assigned status of an AOP to the said business in other parts of the assessment order. Merely typing the word "individual" instead of AOP in front of the specified column of IT-88 would not make the order void or otherwise inoperative for want of mistake or omission therein because such mistake or omission is not of substantial nature prejudicially affecting the taxpayer.
As regards assessee's contention that the learned C.I.T. (A) was sot justified in recording any findings in his Order No.621, dated 9-2-1994 with regard to grounds of appeal raised of Serial Nos. 2, 3, 4 and 5 of memorandum of appeal filed before him and as a result of which appellate order has been rendered a non-speaking order and is liable to be struck down on tote ratio of decision in (1990) 181 ITR 143 (J&K) and (1989) (180 ITR 21 Calcutta).
After having gone through the appellate order passed by the learned CIT(A), we do not find any weight in the contention of the learned A.R. that no findings on grounds of appeal at Serial Nos. (ibid) have been recorded by him. On going through the said appellate order it is abundantly clear that all the objections raised by the assessee before the first appellate authority were disposed of by him. Even otherwise we have noted that neither the assessee nor his A.R. (who appeared before the CIT-A) had filed duly sworn affidavit on the point that grounds mentioned at Serial Nos. 2, 3, 4 and 5 were duly pressed before the first appellate authority and he had failed to adjudicate upon those grounds. It is also pertinent to mention here that after perusal of appeal papers filed before this Tribunal, we find that no copy of memo of appeal, narrating therein the grounds which were raised before the CIT(A), was furnished before us to ascertain this fact. We, therefore, do not entertain this objection of the appellant at this belated stage. For the foregoing facts, the case-laws referred by the learned A.R. of the assessee, on the abovementioned contention, would be of no avail to rely upon.
The last contention of the learned A.R. that the sales estimated and reduced by the first appellate authority are still excessive and the GP rate applied thereon is also high. As regard sales, we have noted that the ITO as on 15-11-1992 made a spot visit to the assessee's business premises and prepared a stock inventory of goods lying in the shop and according to which stock was valued at Rs.14;01,070 which was duly signed by one Mr. Sajjid Pervaiz the member of an AOP. Though the said report is relevant for the subsequent assessment year but the learned CIT(A), while reducing the sales as against estimated by the ITO, had adopted, stock in trade at Rs.13 lacs and his action fixing the stock at Rs.13,00,000 in the relevant assessment year seems to be on the valid reasons. In spite of what has been mentioned above, the assessee was also confronted vide notice No. 704, dated 10-3-1994 with the proposed estimation of sales and application of appropriate GP rate but it was the assessee who time and again failed to substantiate his declared version with any documentary evidence.
The Department has also assailed the dispensation allowed by the first appellate authority on account of sales as unjustified and it was contended that the sales so estimated by the ITO, in view of the stock admitted by two members of an AOP were quite reasonable and do not warrant any modification therein.
After hearing the arguments of both the parties at great length and keeping in view the admitted capital of Rs.15,00,000 (inclusive of Rs.2,00,000 spent on decoration of shop) at the very start of its business, stock inventory prepared by the I.T.O. at the time of his enquiry, the statements made by members of an AOP with regard to its extent of business and besides, that the assessee was specifically confronted on this very issue, we feel persuaded that the learned CIT(A), after thorough discussion and appraisal of the facts, reduced the assessee's sales. His order is, therefore, well reasoned and well based and does not warrant any further modification therein.
Coming to the point of application of GP rate of 15%, it is observed by us that neither any comparable or parallel cases were furnished before the authorities below or before us to substantiate his contention that lesser GP rate is applied in this line of business. In any case, the assessee was also afforded with the opportunities to explain its view point by the ITO but he has not bothered to lead any evidence in this regard. We, are, therefore, fully convinced that 'the order of both the authorities below does not call for any interference on the point of application of GP rate by us.
Consequently, the assessee's appeal as well as the departmental appeal pertaining to assessment year 1992-93 are dismissed, being benefit of any merit.
M.B.A./150/Trib.
Order accordingly.