I.T.A. NO-. 6/KB OF 1995-96, DECIDED ON 8TH JANUARY, 1996. VS I.T.A. NO-. 6/KB OF 1995-96, DECIDED ON 8TH JANUARY, 1996.
1996 P T D (Trib.) 420
[Income-tax Appellate Tribunal Pakistan]
Before Muhammad Mujibullah Siddiqui, Chairman and S.M. Sibtain, Accountant
Member
I.T.A. No-. 6/KB of 1995-96, decided on 08/01/1996.
(a) Income Tax Ordinance (XXXI of 1979)---
----S. 32---C.B.R. Circular No. 12 of 1991---Method of accounting-- Conversion of capital asset into stock in trade---Method of ascertaining profit---Principles---Value of a capital asset converted into stock in trade is to be taken at market value on the date of conversion and not its cost to the assessee when it did not form part of the stock in trade.
In the case of conversion of a capital asset into stock-in-trade the original cost to an assessee is not to be taken but the cost to the business is to be adopted. The reason for taking such view is that when a capital asset acquired in any manner whatsoever is converted into stock-in-trade, thereafter the profit of the business is to be ascertained and computed and any appreciation in the value of the capital asset prior to the conversion into stock-in-trade or in other words prior to the taking of said assets by the business are not relevant for the purpose of taxing the profit. A difference is always to be kept in view for the purpose of taxing profit or gain in respect of appreciation in value of an asset not liable to tax and appreciation in value of stock-in-trade acquired by a business for the purpose of earning profit and increase realised as a result of business transaction. Any appreciation or increase in the value of an asset prior to taking thereof by a business would not be deemed to be profit of a business which is required to be ascertained for the purpose of levying income-tax and, therefore, the only reasonable method of ascertaining the profit in the circumstances is that the value of an asset converted into stock-in-trade is to be taken at market value on the date of conversion and not its cost to the assessee when it did not form part of the stock-in-trade.
The Law and Practice of Income-tax by N.A. Palkhiwala and B.A. Palkhiwala, 8th Edn., p.1172, S.145(1); C.I.T. v. Shirin Bai, 46 ITR 86 (SC); C.I.T. v. Appu 45 ITR 152; C.I.T. v. Bai Shirinbai K. Kooka (1956) 30 ITR 753; C.I.T. v. A.V. Appu Chettiar (1962) 45 ITR 152; Osborne v. Steel Barrel Co. Ltd. (1942) 24 Tax Cas. 293 and Gunn's Commonwealth Income-tax Law and Practice, 4th Edn., p.311 ref.
(b) Income Tax Ordinance (XXXI of 1979)---
----S. 66-A---Rectification of mistake---Mistake which is apparent from record and has made the assessment erroneous and consequently prejudicial to the interest of revenue can be rectified by I.R.O. by invoking the-provisions of S.66-A, Income Tax Ordinance, 1979.
Muhammad Farid for Appellant.
Shaheen Niazi, D.R. for Respondent.
Date of hearing: 7th January, 1996.
ORDER
MUHAMMAD MUJIBULLAH SIDDIQUI (CHAIRMAN).--This appeal at the instance of assessee is directed against the order, dated 7-6-1995 under section 66-A of the Income-tax Ordinance, 1979 by the learned Inspecting Additional Commissioner of Income-tax, Range-1, Zone-D, Karachi.
2. Briefly stated the relevant facts are that the appellant an individual derived income in the assessment year .1994-95 by import business and construction business. During the course of assessment proceedings the appellant field necessary details regarding construction business as required by the assessing officer which were scrutinised and placed on record. A statement under section 143-B. was also filed. The total import business was covered under section 80-C on which tats was already deducted under section 50(5) which was accepted by the assessing officer. The construction receipts were declared at Rs.77,11,000 on which G. P. was declared at 15 % . The construction project was started in the preceding year and it was completed in the assessment year 1994-95. All the shops and flats were sold by the appellant. The assessing officer observed that the material purchased were unverifiable and, therefore, the declared version was rejected. The assessing officer applied G.P. rate at 20% and thereby made an addition of Rs.3,85,550 to. the trading result in the construction business. Expenses claimed in the profit and loss account were also held to be unverifiable and, therefore, partial add backs were made. The assessing officer ultimately completed the assessment in accordance with C.B.R. Circular No. 12, of 1991. Proportionate expenses were allowed in accordance with the instructions contained in Circular No. 12 of 1991.
3. Subsequently during the course of inspection of the file the learned I.A.C. found that the appellant had filed separate account in respect of imports which was covered under section 80-C and iii respect of receipts from sale of flats/shops. The learned I.A.C. formed opinion that the Deputy Commissioner of Income-tax wrongly applied Circular No.12 and prorated the expenses claimed in the profit and loss account. He observed that since the expenditure incurred under the two heads of accounts were ascertainable, therefore, there was no need to determine the expenditure on prorata basis. The learned I.A.C. further observed that the plot on which the construction was raised belonged to the appellant and its value was being declared in the wealth statement at Rs.30,000 from year to year, while in the assessment year 1994-95 the appellant estimated the: value of plot at Rs.22,50,000 at the time of converting the plot of land into stock-in-trade. The learned I.A.C. was of the view that the appellant by estimating the plot at Rs.22,50,000 as against the earlier declared value at Rs.30,000 claimed capital gain which was not permissible in law.
4. In the above circumstances the learned I.A.C. issued a notice to the appellant which reads as follows:
"Whereas I have reasons to believe that the order passed under section 62 pertaining to the assessment year 1994-95, dated 18-8-1994 is erroneous in so far as it is prejudicial to the interest of revenue on the following grounds:
(1) That you have two different sources of income, namely, import of tyres and tubes and (2) construction and sale of shops and flats. You rightly filed statement under section 143-B in respect of imports and a separate trading and profit and loss account in respect of business of construction. While framing the assessment the assessing officer applied C.B.R. Circular No. 12 of 1991 which factually was pot applicable. The said circular, it may be pointed out, is applicable only in cases where sales and expenses are not identifiable and no separate account could be prepared, which is not the position in your case.
(2) In the construction account, the plot on which shops/flats was constructed by you was inherited and the value of which was declared at Rs.30,000 in your wealth statement. However, when the project was completed you valued the plot at Rs.22,50,000 on the basis of collectors tables and charged the same as expenditure in the trading account which was actually not incurred. The plot in question was in fact a stock-in-trade and its valuation was neither required nor admissible nor was this account chargeable to the trading account.
Now, therefore, I intend to proceed under section 66-A and cancel the assessment so framed, dated 18-8-1994 and hereby give you an opportunity to show cause by 15-12-1994 positively.
Please note that in case no explanation is received on or before the due date it will be presumed that you have no explanation to offer and the action as proposed shall be taken without any further reference.
5. The appellant filed his explanation through his Advocate which reads as follows:
"With due respect I beg to submit that the notice issued by you under section 66-A of the Income Tax Ordinance, 1979 for the assessment year 1994-95 is not according to law for the following reasons:
The plot in question i.e. No.LR-9/8, Lawrence quarter Corner Orange Aamil Street, Karachi, measuring 1125 sq. yards was purchased by the grandfather of the assessee in 1901 who came to Karachi and settled here in 1835. He gifted this plot of land to the father of the assessee in 1940. The father of the assessee gifted this plot to his son Mr. Muhammad Shafiq, the assessee who was showing the value of this plot at Rs.30,000 in his wealth statement field from year to year.
In the assessment year 1993-94 the assessee launched a project of constructing flats and shops on this plot and declared the receipts at Rs.45,39,000 for the period ending 30-6-1993 against which construction work was done had been declared at Rs.38,58,150. The learned Income Tax Officer accepted the declared receipts but applied G.P. rate of 20% and finalized the assessment.
In the assessment year 1994-95 the assessee completed this project and declared the receipts at Rs.77,11,000 which were accepted by the learned Income Tax Officer and the assessment was finalized under section 62 of the Income Tax Ordinance, 1979.
Now your honour have served a notice under section 66-A of the Income Tax Ordinance, 1979 on the assessee saying that the plot on which shops/flats were constructed by you was inherited and the value of which was declared at Rs.30,000 in your wealth statement However, when the project was completed you valued the plot at Rs.22,50,000 on the basis of Collector's Tables and charged the same as expenditure in the trading account which was actually not incurred The plot in question was in fact a stock-in-trade and its valuation was neither required nor admissible nor was this account chargeable on the trading account. The fact of the matter is that the assessee has invested this plot in his business as his stock-in-trade. He is fully entitled to do so under the law and the Income Tax Department has to accept the same subject to of course examination whether or not the stock-in-trade has been correctly worked out according to Collector's Tables.
In this connection two questions arise. One whether the assessee is liable to capital gain on the difference between Rs.22,50,000 and Rs.30,000. The answer is that since this is an immovable property the capital gain accrued to the assessee is exempt from tax under section 27(2)(a)(ii) which reads, "for the purposes of subsection (1) of sections 28 and,29 capital asset does not 'include any immovable property; and". Even otherwise no man can make a profit out of himself so the question of taxability does not arise. Then question arises whether or not the assessee is entitled to debit his trading account pertaining to construction business at Rs.22,50,000 on the basis of Collector's Table. In this respect my submission is that he is duly entitled to do so under section 32 of the Income Tax Ordinance, 1979. I may mention that section 145(1) of the Indian Income Tax Act, 1961 is parallel to section 32 of the Income Tax Ordinance, 1979 M/s. N.A. Palkhiwala and B.A. Palkhiwala in their commentary "The Law and Practice of Income-tax", Volume 1, 8th Edition, while commenting on section 145(1) at page 1172 have stated "Capital Investments converted into stock-in-trade". Where an investor converts his capital assets into stock-in-trade and starts dealing in them, the taxable profit on the sales must be determined by deducting from the sale proceeds the market value of tile assets at the date of their conversion into stock-in-trade (since that is the cost to the business) and not the original cost to the investor. Thus the heirs of a deceased business man inheriting his stock- in-trade or coparceners acquiring the joint family business assets on partition and commencing there own new business with it, would be entitled to value their opening stock at its market value at the commencement of their business.
I am enclosing photo copies of judgments (i) C.I.T. v. Shirin Bai, 46 ITR.86(SC) C. I. T. v. Appu 45 I. T. R. 152.
A perusal of these judgments would convince you that it is just and proper for the assessee that while converting his capital assets into stock-in-trade he should value it at the market value prevalent on the date when he is converting it and this assessee had adopted the correct procedure. Therefore, there is nothing wrong in debiting of the trading account of construction business of the assessee by the amount of market value of the plot of Rs.22,50,000 on the basis of Collector's; Tables. The assessment order has been correctly passed by the learned Income Tax Officer. Neither it is erroneous nor it is prejudicial to the interest of revenue. You are, therefore, requested to kindly withdraw the notice served by you on the assessee. "
6. On receiving the above explanation the learned I.A.C. cancelled the assessment order with the following finding:
"The explanation filed by the assessee's counsel is unsatisfactory. Further the assessee has not offered any explanation regarding wrong application of Circular No.12 of 1991. The assessment order framed by the DCIT under section 62 is thus erroneous in so far as it is prejudicial to the interest of revenue and, therefore, cancelled under section 66-A of the Income Tax Ordinance, 1979 for fresh assessment by the DCIT."
7. Being aggrieved by the cancellation of assessment as above by a very short order without any discussion and detailed consideration of the explanation furnished on behalf of the appellant the present appeal has been filed before us assailing the cancellation of assessment. It is contended on behalf of the appellant that the plot on which the project has been raised belonged to assessee and he was entitled to estimate the same at the start of project while converting the same into stock-in-trade at the market rate and the learned I.A.C. was not justified in holding to the contrary. With regard to the application of C.B.R. Circular No. 12 of 1991 plea has been taken that the expenses of the two businesses of imports and construction were identical and, therefore, Circular No. 12 of 1991 was rightly invoked. It is further stated that even if the learned I.A.C. rightly appreciated the facts it was a case of rectification under section 156 of the Income Tax Ordinance, 1979 and not of exercising powers under section 66-A of the Income Tax Ordinance, 1979.
8. We have heard Mr. Muhammad Farid, learned counsel for the appellant and Mr. Shaheen Niazi, learned representative for the department. Mr. Muhammad Farid has reiterated the same contentions as raised before the learned I.A.C. and contained in the explanation furnished on behalf of the appellant which has been reproduced by the learned I.A.C. in his order. Mr. Muhammad Farid has elaborated the contentions submitted before the learned I.A.C. and no new or further plea of law or fact has been taken before us. The learned D.R. has supported the impugned order of learned I.A.C.
9. We have carefully considered the contentions raised on behalf of the parties and the material available on record. Our finding on the two issues agitated before us are as follows.
10. Mr. Muhammad Farid, learned counsel for the appellant has submitted that the question of valuation of a capital asset on conversion of the same to the stock7in-trade has not been considered in Pakistan at any higher forum and, therefore, he is not aware of any judgment on this point .by the Income Tax Appellate Tribunal or any superior Court in Pakistan. He has contended that the point in issue already stands considered and resolved in the Indian jurisdiction. Mr. Muhammad Farid has placed reliance 'in this behalf on the judgment of Bombay High Court in the case of C.I.T. v. Bai Shirinbai K. Kooka (1956) 30 I.T.R. 753. In the cited case the facts were that the assessee purchased shares for investment in the year 1939-40. Her dividend income was being assessed to income-tax prior to 1st of April, 1945 when she converted her shares into stock-in-trade and carried on a business in shares. Some of the shares were sold in the assessment year 1947-48 and the question arose as to how the profit of the assessee was to be ascertained with regard to the price realized by her on the sale of these shares. The assessing officer computed income of the assessee on the basis of the profits which she made by the sale of her shares as a trading activity on the basis of difference between the ruling market price at the beginning of the account year and the sale proceeds. The assessee preferred appeal to the Appellate Assistant Commissioner who enhanced the income for the reason that the profit earned by the assessee on the sale of the shares was the difference between the original cost price of the shares and the sale proceeds. The appeal was taken to the Income Tax Appellate Tribunal and a difference of opinion took place between the Members of the Bench. One of the Members agreed with the basis adopted by the assessing officer while the other Member accepted the view expressed by the Appellate Assistant Commissioner. The matter was referred to the President of the Tribunal who agreed with the member of confirming the view of the assessing officer. Thereafter the following question of law was referred to the Bombay High Court:
"Whether the assessee's assessable profit on the sale of shares is the difference between the sale price and the cost price, or the difference between the sale price and the market price prevailing on April 1st, 1945?"
11. Chagla, C.J. while considering the issue observed as follows:
"It is settled law to which it is hardly necessary to refer that what is to be brought to tax is the real profits of a business. In order to arrive at those real profits you must consider accounts of that business on commercial principles and as the Privy Council said in Gresham Life Assurance Society v. Styles, you must construe the profits in their normal and natural sense, in a sense in which no commercial man will misunderstand. Therefore, it may be said that what is being assessed to tax in a business or not in profits considered from a theoretical, academic or legislative sense, but profits that are being assessed to tax are commercial profits, profits which are made in a business by the carrying on of the business which a commercial man would accept as profits of that business. "
12. The Hon'ble C.J. Chagla further observed that in order to ascertain the real profits or the commercial profits, what has to be ascertained is what an article costs the business and what the business realized by the sale of that article. It was irrelevant to consider what that article costs someone else. He cited a law Lord who said, it is merely a historical record and what was previously spent on that article. The historical record, although of some interest to a student of history would be of no interest or relevancy to the Court which is deciding and determining what the commercial profits of a particular transaction are. He further expressed the view that the commercial profits of a transaction which is the sale of an article can only be the; difference between what that article realized and what that article costs the business. According to the Hon'ble C.J. Chagla if that be the true view, then it was impossible to contend that the shares cost the business anything less or more than their market value on 1st April, 1945. He further held that when the assessee purchased the shares at a lesser price that is what they cost her, not the business. This was long before the business was started, long before the shares were converted into stock-in -trade but when we come to the relevant point of time which is 1st April, 1945, it is then that we have got to make the enquiry: what was the value of these shares on that date and what it costs the business, so that we should ultimately be in a position to decide what the real profits were when that asset or article were ultimately sold. He ultimately held that the appreciation in the value of shares originally purchased for the purpose of investment and subsequently converted into stock-in-trade must be distributed to the two different activities which resulted in these profits, and thus different activities were, one as an investigator purchasing shares for capital appreciation and the other for the purpose of making profit by purchase and sale of these shares. The Hon'ble Judges of the Bombay High Court ultimately upheld the view taken by the Income Tax Appellate Tribunal and held that, "assessee's assessable profit on the sale of shares is the difference between the sale price and the market price prevailing on 1st April, 1945.
13. A similar issue came for consideration before Madras High Court in the case of C.I.T. v. AN. Appu Chettiar, (1962) 45 I.T.R. 152. In this case briefly stated the relevant facts were that a person who carried on business in silk goods died leaving a will under which his two daughters became entitled to carry on the business under the old firm name. The testator had followed the system of valuing stock according to the cost. The two daughters formed themselves into a firm sometime after the death of the testator to carry on the business and valued the opening stock left by the testator at its market value. It was contended on behalf of the department that the opening stock should be valued by the new firm at nil as the partners of the firm had not paid anything for it, or at any rate it should be valued at cost in accordance with the system employed by the testator. The Hon'ble Judges of the Madras High Court did not accept the plea and referred to a judgment by House of Lords in the case of Osborne v. Steel Barrel Co. Ltd. (1942) 24 Tax Cases 293. It was held that, "stock-in-trade obtained whether under a gift or by reason of a bequest would be property of the donee or lagatee and if that person puts it into his business thereafter he would really be putting his property in the business, a property which has market value. In such a case it is but reasonable to say that the cost of the owner is the market value of the property. This can be deduced from the following illustration. Suppose a person commences business in a particular commodity and brings into that business as his stock-in-trade goods which he already possessed and which he had purchased several years previously at a particular price. Is it the original cost of the goods that is to be shown as the value-of the opening stock-in-trade or is the market price of the goods on the date when the goods are put into the business that has to be taken? At the time when the goods were purchased there was no business. The cost or value in such a case to the businessman would be the value of the goods as they stood on the date when he put them into his business as part of his stock-in-trade. There is yet another reason by which the same. conclusion can be reached. The figure to be adopted as m valuing the stock at the commencement of a business will be the actual cost of the stock if it could be ascertained. As a legatee pays no price for the stock received under a bequest market value as representing the cost to him can alone be taken".
14. Hon'ble Mr. Justice Ram Chandara Iyer, C.J. further placed reliance on the following in Gunn's Commonwealth Income Tax Law and Practice, 4th Edition, page 311:
"Devolution on death.--Where the assets of a business carried on by a tax payer devolve by reason of his death and the assets include trading stock, standing or growing crops the value thereof is included in the assessable income derived by the deceased up to the date of his death and the person upon whom the property devolves is deemed to have purchased it at that value. The value of such stock-in-trade etc., is the market value at the date of death. "
15. Thus the Madras High Court agreed with the view held by Bombay High Court in the case of Bai Shirinbai K. Kooka cited above. The judgment of Bombay High Court in the case of Bai Shirinbai K. Kooka was taken to the Supreme Court of India. The appeal was originally heard by a Bench of three Judges but later on a Larger Bench consisting of seven Judges was constituted which disposed of the appeal. Mr. Justice S.K. Das speaking for the majority of six Judges upheld the view expressed by Chagla, C.J. The majority view of the Hon'ble Judges of Supreme Court of India was as follows:
"What then is the basis for computing the actual profits in the present case? We think that the basis must be, as the High Court has put it, the ordinary commercial principles 'on which actual profits are computed. We think that the approach of the High Court was correct and normally the commercial profits out of the transaction of a sale of an article must be the difference between what the article costs the business and what it fetched on sale. So far as the business or trading activity was concerned, the market value of the shares as on April 1st, 1945 was what it costs the business. We do not think that there is any question of a notional sale here. The High Court did not create any legal fiction for a sale when it took the market value as on April 1, 1945 as the proper figure for determining the actual profits made by the assessee. That the assessee later sold the shares in pursuance of a trading activity was not in dispute; that sale was an actual sale and not a national sale; that actual sale resulted in some profits. The problem is how should those profits be computed? To adopt the language of Lord Radcliffe, the only fair measure of assessing trading profits in such' circumstances is to take the market value at one end and the actual sale proceeds at the other, the difference between the two being the profit or loss as the case may be. In a trading or commercial sense this seems to us accord more with reality than with fiction. "
16. Mr. Muhammad Farid, learned counsel for the appellant has submitted that the principles propounded by the Indian superior Courts and the House of Lords are very sound in the legal and commercial sense. He has contended that the learned I.A.C. without considering the principles propounded in the judgments produced before him merely observed that the explanation was unsatisfactory. Mr. Muhammad Farid has taken a strong exception to such summary dismissal of the contentions taken before the learned I.A.C. The learned D.R. has though supported the impugned direction of learned I.A.C. but he is not able to support the impugned view of the learned I.A.C. for any logical or rational reasons.
17. We have carefully considered the facts and law argued before us. So far the facts are concerned there is no dispute between the parties and, therefore, we need not to dilate on the actual .aspect of the case. So far the point of law is concerned as already observed by us the short question for consideration is as to what should be the basis of valuation of a capital asset when it is converted into stock-in-trade. The contention of the assessee which was accepted by the assessing officer is that the value of the capital asset converted into stock-in -trade, should be taken at ruling market price on the date of conversion of the capital asset into stock-in-trade. On the other hand, the view taken by the learned I.A.C. is that for the purpose of ascertaining profit of the business the value of the capital set converted into stock-in-trade should be taken at cost. In view of the fact that the point in issue has not been considered in Pakistan at any higher forum, we have cited at length the judgments delivered by the superior Courts in Indian jurisdiction. We find ourselves in respectful agreement with the views expressed by Mr. Justice Chagla, C.J. and Mr. Justice Iyer, C.J. of Bombay and Madras High Courts and the majority view of the Supreme Court of India that in the case of conversion of a capital asset into stock-in-trade the original cost to an assessee is not to be taken but the cost to the business is to be adopted. The reason for our taking such view is that when a capital asset acquired in any manner whatsoever is converted into stock-in-trade, thereafter the profit of the business is to be ascertained and computed and any appreciation in the value of the capital asset prior to its conversion into stock-in-trade or in other words prior to the taking of said assets by the business are not relevant for the purpose of taxing the profit. A difference is always to be kept in view for the purpose of taking profit or gain in respect of appreciation in value of an asset hot liable to tax and appreciation in value of stock-in-trade acquired, by a business for the purpose of earning profit and increase realised as a result of business transaction. Any appreciation or increase in the value of an asset prior to taking thereof by a business would not be deemed to be profit of a business which is required to be ascertained for the purpose of levying income-tax and, therefore, the only reasonable method of ascertaining the profit in the circumstances as before us is that the value of an asset converted into stock-in-trade is to betaken at market value on the date of conversion and not its cost to the assessee when it did not form part of the stock-in-trade. Applying the above principles to the facts of the present case we find that the plot in question was acquired by the grandfather of the appellant in 1901 and was gifted to the father of the appellant in 1940 who gifted the same to the appellant. The year of gift in favour of the appellant is not known. However, it is not denied by the department that it was long before the appellant converted the plot into stock-in-trade for the purpose of construction business. The appellant launched the construction project in the assessment year 1993-94 and, therefore, the appellant rightly estimated the plot according to the market value prevailing at the time of conversion of the plot into stock-in-trade. The value adopted by the appellant at Rs.22,50,000 was the actual cost to the business. The assessing officer had rightly accepted the same and the learned I.A.C. has erred in holding that the assessment as framed in respect of the valuation of plot was erroneous and prejudicial to the interest of revenue. The assessment as made by the assessing officer on the point of valuation of the plot is neither erroneous nor prejudicial to the interest of revenue and, therefore, and direction of the learned I.A.C. cancelling the assessment on the point of valuation of the plot in question is hereby vacated and the assessment as framed by the assessing officer is hereby restored.
18. The second issue under consideration is pertaining to the application of Circular No. 12 of 1991 for the purpose of allowing expenditure on prorata basis. We have pointed out to Mr. Muhammad Farid, learned counsel for the appellant that the learned I.A.C. has observed in the impugned order as follows:--
"Actually the assessee has filed separate account including trading as well as profit and loss in respect of income covered under section 80-C and other income chargeable to tax, therefore, expenditure incurred under both the heads are ascertainable and there is no need to determine the expenditure on prorata basis."
19. Mr. Muhammad Farid is not able to controvert the factual position as observed by the learned I.A.C. He has submitted that in the grounds of appeal he has himself taken plea that if any mistake has taken place it may be rectified under section 156 of the Income Tax Ordinance, 1979. Mr. Muhammad Farid has very candidly stated that if any loss of revenue is taken place due to wrong application of C.B.R. Circular No. 12 of 1991 the same may be rectified as he is himself not in favour of any loss to the revenue. Thus, Mr. Muhammad Farid has not contested on the factual plane. He has in fact meekly contested the issue on legal plane contending that the mistake should not be rectified by invoking provisions contained in section 66-A and the mistake should be rectified under section 156 of the Income Tax Ordinance, 1979. Thus, the objection raised by Mr. Muhammad Farid is more or less of academic nature only. Since the mistake in application of C.B.R. Circular No.12 of 1991 is not contested, therefore, we are not persuaded to agree with his submission that the mistake which is apparent from record and had made the assessment erroneous and consequently prejudicial to the interest of revenue cannot be rectified by I.A.C. by invoking the provisions contained in section 66-A of the Income Tax Ordinance, 1979. The impugned direction of the learned I.A.C. relating to the application of C. B. R. Circular No. 12 of 1991 is, therefore, maintained.
20. The appeal is partly allowed as above.
M.B.A./161/TOrder accordingly.