1997 P T D (Trib) 1106
[Income-tax Appellate Tribunal Pakistan]
Before Sardar Muhammad Anwar A. Khan, Judicial Member and Saleem Asghar Mian, Accountant Member
I.T.As. Nos. 1677/LB/DB and 1678/LB/DB of 1991-92, 2694/LB of 1992-93 and 1210/LB and 1211/LB of 1995, decided on /01/.
st
November, 1995. (a) Income Tax Ordinance (XXXI of 1979)---
----Ss.55 & 32(3)---Return of total income ---Assessee returned income declaring loss---Rejection of accounts---Sales estimated---Validity---Assessing Officer, rejecting assessee's version made his own estimate and applied G.P. rate-- C.I.T.(A) maintained same to grievance of assessee---Despite more consumption of power than preceding year, assessee declared low income---Nominal increase was shown in sales estimated by Assessing Officer than declared by assessee in preceding year---Issue of sale, held, did not call for interference.
(b) Income Tax Ordinance (XXXI of 1979)---
----S.22---Disallowance---Profit and loss accounts---Add-backs---Validity Disallowance made out of P&L Account expenses were not challenged under specific and distinct heads, but assessee took general grounds ---Assessee, held, could not make out case for interference in circumstances.
Sher Muhammad Gondal for Appellant (in I.T.As. Nes.1677 and 1678 of 1991-92).
Muhammad Akram Tahir, D.R. for Respondent (in I.T.As. Nos. 1677/LB/DB and 1678 LB/DB of 1991-92, 2694/LB of 1992-93, 1210 and 1211/LB of 1995).
Muhammad Akram Tahir, D.R. for Appellant (in I.T.A. Nos.2693.LB of 1992-93).
Sher Muhammad Gondal for Respondent (in I.T.A. 1497 and 1498/LB of 1995).
Date of hearing: 15th November, 1995.
ORDER
SARDAR MUHAMMAD ANWAR A. KHAN (JUDICIAL MEMBER).---In this case eight appeals have been filed to call in question the legality and correctness of the orders of the learned C.I.T.(A)s, dated 22-8-1991 for the assessment years 1989-90 and 1990-91, dated 25-11-1992 for the assessment year 1991-92 and 9-2-1995 for the assessment years 1992-93 and 1993-94. The first two appeals are on behalf of the assessee-appellant while the other appeals are cross-appeals by both the assessee as well as the Department.
2. The assessee is a private limited company, which derived income from manufacturing and sale of tractor parts and auto parts. All the appeals are decided as under:---
ASSESSEE'S APPEALS FOR THE ASSESSMENT YEARS 1989-90 AND 1990-91
3. The learned A.R. of the assessee did not press the appeal for the assessment year 1989-90 at the time of hearing. Hence, the appeal for the assessment year 1989-90 is dismissed as not pressed.
4. The assessee filed a return of income on 31-12-1989 to declare net loss of Rs.3,26,696. The return was accompanied with financial accounts comprising balance-sheet, P and L Account and Schedule of fixed assets. After discussion of the case with the learned A.R. of the assessee and perusal of the record the assessing officer reached the conclusion that accounts of the assessee suffered from various defects enumerated in detail in the body of the assessment order dated 19-6-1991, rejected the declared version and determined the net income at Rs.180,644. He applied a G. P. rate by 29% on estimated sales of Rs.71,00,000 as against the declared sales of Rs.58,88,945. In appeal, the learned C.I.T. (A) maintained the estimated sales, G.P. rate applied was found to be in order and add backs in the P and L accounts expenses were also found to be reasonable as such not interfered with.
5.Dissatisfied and aggrieved, the assessee has preferred this second appeal. The assessee is aggrieved with the confirmation of sales estimate and applied G.P. rate and also the disallowances made out of the P and L Account expenses. It was argued on behalf of the assessee that the learned first appellate authority has erred in, confirming the sales estimated by the assessing officer'. From the perusal of the impugned order, it is observed that in the immediately preceding year, the sales were declared at Rs.70,61,615. During the year under review the sales have been declared at Rs.58,88,845. The appellant company consumed 22.28% more power during the year under consideration, i.e. electricity in 1990-91 viz., 1989-90. The explanation offered by the assessee A before the I.T.O. was that the assessee had been engaged in preparation of new moulds for M/s. Pak. Suzuki Motor Company, was rejected by the I.T.O. as no conclusive evidence to support the contention was produced by the assessee before him. Even otherwise there is only a nominal increase in sales as compared to the sales in the immediately preceding year. The impugned order on the issue of sales does not call for any interference and the same is maintained.
6. In the assessment year 1988-89 the appellant disclosed a G.P: rate at 28.09%. In this background, application of G.P. rate 29% by the I.T.O. and confirmation of the same by the learned first appellate authority is proper and the same is maintained.
7.The assessee has challenged the disallowances made from the P and L Account expenses under six heads. From the perusal of the impugned order, it is observed that the disallowances made out of the P and L Account expenses were not challenged under specific and distinct heads. The assessee took a general ground that the additions out of the P and L Accounts are unwarranted before the, learned C.I.T. (A). The learned -C.I.T.(A) maintained the add-backs taking cognizance of personal element involved or because of part of the expenditure claimed is not properly verifiable. The assessee could not make out a case for interference in the disallowances upheld by the learned first appellate authority. The assessee's appeal being devoid of any merit is dismissed.
CROSS-APPEALS FOR THE ASSESSMENT YEARS 1991-92, 1992-93 AND 1993-94
8. The assessee as well as the Department are in cross Appeals for these years. The same are decided as under:---
Assessment year 1991-92
9. The assessee declared loss of Rs.8A859 for the assessment year 1991-92. The assessing officer taking cognizance of the defective nature of the accounts books discarded the declared version and estimated the sales at Rs.96,40,000 and applied a G.P. rate of 29% Certain add-backs out of the P and L Account expenses were also made and the income was determined at Rs.3,59,445 vide the assessment order dated 30-6-1992. In appeal the sales were reduced to Rs.80,00,000 but the G.P. rate as applied was maintained. Partial relief was allowed in the P and L Account expenses.
10. Now both the assessee as well as the Department are in second appeal. It was argued on behalf of the assessee that the reduction in sales is not sufficient keeping in view this history of the case. In the immediately preceding year the sales were estimated at Rs.71,00,000 which were confirmed in appeal. History of the assessee is that of rejection of accounts. In the assessment order the assessing officer after enumerating various defects in the accounts of the assessee estimated the sales at Rs.96,40,000. From the perusal of the record, it is observed that the assessee company consumed 73,970 units of electricity as against 58,864 consumed during the last year. The reduction in estimate of sales to Rs.80,00,000 by the C.I.T. Appeals is not proper in the circumstances of the case. The sales are fixed at Rs.85,00,000. G.P. rate applied and confirmed by the learned first appellate authority in as per history of the case and the same is also maintained. The disallowances were made by the assessing officer keeping in view the, uncouch and unverifiability of the expenses claimed. In certain heads element of personal nature was also involved. The order of the learned C.I.T.(A) on this point is also maintained being reasonable.
11. The departmental appeal succeeds to the extent and as the manner indicated above. The assessee's appeal being devoit of pay merit is dismissed.
Assessment year 1992-93
12. The sales were declared at Rs.75,77,275 and estimates at Rs.8~56,657. G.P. rate of 29% was applied. After disallowance of certain expenses, loss was determined at 372,771. In appeal the sales were reduced to Rs.81,00,000. The applied G.P. rate was maintained. In respect of disallowances made of the P and L Account expenses account the treatment accorded to the assessee in the immediately preceding year was ordered to be adopted.
13. The assessee as well as the Department have filed cross-apps. The assessee hag contested that the reduction in estimated sales is insufficient. Additions/reduction in claimed expenses out of the P and L Account are contested to be unjustified. The Department is aggrieved by the redaction in estimate sales.
14. The assessee declared sales at Rs.75,77,275 which were estimated at Rs.89,22,040. The same were reduced to Rs.81, 00,000 by the, learns C.I.T. Appeals. In the immediately preceding year, i.e., 1991-92, 73,970 units of the electricity were consumed whereas in the year under consideration 74-57 units of electricity were consumed. keeping in view the units of electricity consumed, the sales are fixed at Rs.86,00,000 G.P. rate of 29% has been applied and confirmed as per history of the case.
15. The expenses claimed under the head labour whether were di4lowed by the I.T.O. being treading account expenses. However, the learned C.I.T(A) reduced the same to Rs.10,000. The addition made by the learned C.I.T(A) does not call for any interference and confirmed. The other disallowance also do not call for any interference and are confirmed.
16. The departmental appeal is partially accepted. The assessee's appeal is dismissed.
Assessment year 1993-94
17. For this year the assessee declared sales at Rs.1,03,70,808 which were assessed at Rs.1,22,58,295. Rejection of accounts was not contested by the learned A.R. of the assessee before the learned first appellate authority. The assessee-company consumed lesser electricity units as compared to the last year. The explanation of the assessee that despite of reduction in consumption of electricity the assessee had declared appreciable increase in the sale, was discarded by the assessing officer on the ground that the assessee had purchased some semi-finished goods from the market, which were subjected to assembling process. In the immediately preceding year the sales were reduced to Rs.81,00,000 by the learned first appellate authority. Considering the facts of the case, the learned C.I.T. (Appeals) reduced the sales to Rs.1,10,00,000. Even the reduced sales .of Rs.1,10,00,000 are on the higher side. The shine are reduced to Rs.1,05,00,000. On the issue of G.P. rate the assessee has 4o case, G.P. rate at 29% w4s applied as per history of the assessee. The same was confirmed by the learned first appellate authority. Sufficient relief was granted by the learned first appellate authority. A case for further reduction has not been made out on behalf of the assessee. The assessee's appeal succeeds to the extent and in the manner indicated above, whereas the departmental appeal has no force and is rejected.
C.M.S./244/TribAppeal rejected.