I.T.AS. NOS.5480/LB, 5481/LB, 4434/LB AND 4435/LB OF 1991-92 VS I.T.AS. NOS.5480/LB, 5481/LB, 4434/LB AND 4435/LB OF 1991-92
1997 P T D (Trib) 1124
[Income-tax Appellate Tribunal Pakistan]
Before Muhammad Mujibullah Siddiqui, Chairman
I.T.As. Nos.5480/LB, 5481/LB, 4434/LB and 4435/LB of 1991-92, decided on 14/03/1996.
Income Tax Ordinance (XXXI of 1979)---
----S.32(3)---Estimate of sales---Gross profit rate---Additions---History of assessee's case---Rejection of assessee returned sales---Assessing Officer rejected declared version placing reliance on past history, unverifiability, non- maintenance of stock register and declaration of low G.P. rate, and estimated sales at his own and applied G.P. rate at enhanced rate and some additions were made in profit trading accounts---Appellate Assistant Commissioner reduced estimate of sales and G.P. rate---Held: A.A.C. reduced sales without considering entire facts---Reduction in G. P. rate was maintained because history of assessee showed that application/additions made by Assessing Officer were excessive.
Shaukat Ali Sheikh, D.R. for Appellant.
Shams-ud-Din Qadri for Respondent.
Date of hearing: 14th March, 1996.
ORDER
The above cross-appeals at the instance of Department and the assessee are directed against the order dated 12-11-1991 by the learned A.A.C. Range-II, Gujranwala in Income Tax Appeals Nos. 2241 and 2520 relating to the assessment years 1989-90 and 1990-91.
2. Heard Mr. Shaukat Ali Sheikh, learned Representative for the Department and Mr. Shams-ud-Din Qadri, Advocate for the assessee. The assessee is a registered firm deriving income from manufacture and sale of Brass Spare Parts of hand pumps. The first common objection raised on behalf of the Department as well as the assessee is to the finding of learned A.A.C. pertaining to the trading account. The assessee declared sales in the assessment year 1989-90 at Rs.8,97,398 with G.P. rate at 16.99%. The income was declared at Rs.85,231. In the assessment year 1990-91 sales were declared at Rs.7,74,384 with G.P. rate at 16.8%. The assessing officer rejected the declared version in both the assessment years under appeal by the placing reliance on the past history, unverifiability of purchases and sales, non-maintenance of stock register and low declaration of G.P. rate. The assessing officer observed that the assessment year 1988-89 sales were declared at Rs.8,99,780 and G.P. rate at 16.99% . The total income was declared at Rs.89,300 The accounts maintained by the assessee were found of defective nature and, therefore, the assessee offered to be assessed at total income at Rs.1,56,500 which was accepted. With the above observation, the assessing officer estimated sales in the assessment year 1989-90 at Rs.11,80,000 and in the assessment year 1990-91 at Rs.10,50,000 and applied G.P. rate at 18% in both the assessment years. The assessee preferred first appeals and the learned A.A.C. while maintaining the rejection of accounts, reduced the sales to Rs.10,00,000 in the assessment year 1989-90 and Rs.9,00,000 in the assessment year 1990-91, while, reduced the G.P. rate to 17 % . The Department is aggrieved with the reduction in the estimated sales and G.P. rate while the assessee is still dissatisfied and has contended that the rejection of declared trading results was not justified and that the estimated sales and application of G.P. rate as reduced are still excessive. A perusal of the assessment order shows that after making an addition in the trading account, estimating sales and applying G.P. rate as well as making various additions in the P and L Account, the Assessing Officer worked out the total income at Rs.1,60,000 in the assessment year 1989-90 and at Rs.1,42,617 in the assessment, year 1989-91. A perusal of record further shows that in the assessment years 1987-88 when the assessment was completed under section 59(1) the sales were declared at Rs.8,51,159 and G.P. rate at 17 % . An income was declared at Rs.88,014 and an ad-hoc addition was made at Rs.48,210 by the assessee for availing the benefit of Self-Assessment Scheme and thus the total income was declared at Rs.1,36,224. The learned counsel for the assessee has submitted that as compared to the previous years, the assessee has used lesser Sui gas and electric power. According to the chart produced by the learned counsel for the appellant, the payment on account of consumption of Sui-gas and electric power is as follows:--
| | 1987-88 | 1988-89 | 1989-90 | 1990-91 |
| Bill Suit Gas | 39213.00 | 119919.00 | 118360.00 | 105199.00 |
| Bill Electric Power | 18469.00 | 20832.00 | 23755.00 | 22660.00 |
A perusal of the above chart shows that the contention of the learned counsel is not correct as more amount has been paid on account of Sui gas in the assessment years under appeal as compared to the assessment year 1987-88 and in respect of electric power as compared to the assessment years 1987-88 and 1988-89. I have asked the learned counsel for the appellant to work out the sales in the assessment year 1988-89 in the light of addition agreed by the assessee after taking into consideration the preparation of addition to the P and L Account. The learned counsel submitted that in the case of agreed assessment various other considerations also came into play and, therefore, no reliance can be placed on the agreed assessment. The contention is not absolutely without force but it does not mean that the income offered by an assessee himself in the earlier years is to be ruled out of consideration. The learned counsel for the assessee submitted that is a declining business and therefore, the assessee has declared lesser sales. I have asked the learned counsel to give details of the purchases of raw materials, consumption and the details of finished goods but these details were not available with him. In these circumstances, and looking to the past history I am of the opinion that the assessing officer was fully justified in estimating the sales at Rs.11,80,000 in the assessment year 1989-90 and at Rs.10,50,000 in the assessment year 1990-91. The learned A.A.C. reduced the estimated rates without considering the entire facts and, therefore, the impugned direction of learned A.A:C. reducing the estimated sales in both the years under appeal is hereby vacated and the sales as estimated by the assessing officer are hereby restored. So far the application of G.P. rate at 18% is concerned, I find force in the contention of learned counsel for the assessee that the Assessing Officer has not pointed out any parallel cases in this behalf and the history of 14 appellant from the assessment year 1977-78 is of application of G.P. rate of 17% which should not be disturbed. The direction of the learned A.A.C. for applying G. P. rate at 17 % is, therefore, hereby maintained. The objections raised on behalf of the Department and assessee pertaining to the trading account are disposed of as above. This brings me to the objection raised by the Department to the relief allowed by the learned A.A.C. in the P and L Account in the Assessment year 1989-90. The objection has been raised by the Department to the reduction in the additions under the head, telephone, repair of machinery and building repairs. The learned A.A.C. has restricted the addition under the head telephone' to 15 % and to the disallowances under the heads 'repair of machinery' and 'building repairs' to Rs.1,500 and Rs.2,400 respectively. The additions as reduced by the learned AC under the above heads are reasonable as the additions made by the Assessing Officer were highly excessive and, therefore, the objection raised on behalf of the Department in this behalf is hereby repelled. So far the assessment year 1990-91 is concerned, no specific objections have been taken and the objection in the grounds of appeal is in genuine terms. The learned counsel for the assessee has submitted that the ground of appeal is not in consonance with the rules of this Tribunal and, therefore, requires no consideration. I agree with the learned counsel for the assessee and, therefore, the objections raised by the Department in the assessment year 1990-91 in respect of the relief allowed by the learned A.A.C. the P and L Account merits no consideration.
3. The assessee has also raised objection to various disallowances in the P and L account confirmed by the learned A.A.C. After discussing with the learned Representatives for the parties I find that these additions under the head travelling expenses are not justified as the claim in both the assessment years is very reasonable and, therefore, the addition under this head in both the assessment years under appeal stands agreed. All other expenses are reasonable and require no interference.
4.The appeals at the instance of the Department and assessee stand disposed of as above.
C.M.S./255/Trib. Order accordingly.