I.T.AS. NOS.5856 AND 5857/LB OF 1991-92 VS I.T.AS. NOS.5856 AND 5857/LB OF 1991-92
1997 P T D (Trib.) 2055
[Income-tax Appellate Tribunal Pakistan]
Before Malik Muhammad Tauqir Afzal, Judicial Member and
Iftikhar Ahmad Bajwa, Accountant Member
I.T.As. Nos.5856/LB and 5857/LB of 1991-92, decided on 18/03/1996.
Income Tax Ordinance (XXXI of 1979)---
----S. 32(3)---Estimate of sales---Additions---Held, in absence of figures of inputs, estimate of sales was devoid of sanctity---Further held in absence of material indicating volume of production and turn over estimate of sales ire brought in conformity with preceding as well as' subsequent assessment-- Add backs made by I.T.O. did not appear to have proper objective basis and C.I.T.(A) failed to do justice by restricting additions.
Muhammad Tahir for Appellant.
Zafar Ahmad, D.R. for Respondent.
Date of hearing: 18th March, 1996.
ORDER
IFTIKHAR AHMAD BAJWA (ACCOUNTANT MEMBER).-- Appellant, a private limited company, deriving income from manufacturing and sale of Steel Ingots is contesting various additions in trading as well as P&L account for assessment years 1989-90 and 1990-91.
2. For the two years under appeal, GP @ 5.901 and 5.79% had been disclosed on sales of Rs,151,32,203 and Rs.2,31,27,507 respectively. The declared results were not accepted and G.P. at the rate of 6% was applied on sales estimated at Rs. 2,25,00,000 and Rs.3,35,00,000 for the two years respectively. In first appeal, the treatment of the trading account was contested mainly on the point of estimate of sales which were claimed to be excessive. The first appellate authority reduced the estimate of sales for assessment year 1989-90 to Rs.2,10,00,000 whereas estimate of sales for assessment year 1990-91 at Rs.3,25,00,000 was confirmed. In the appeals before us, estimate of sales for two years, at Rs.2,18,00,000 arid Rs,3,35,00,000 as confirmed in first appeal, is being contested.
3. According to the Authorised Representative, appellant Company is engaged in the manufacturing of steel ingest which are sold to re-rolling mills. Thus the sales are claimed to be mostly verifiable. From a perusal of the record, however, it is evident that appellant had been unable to substantiate the declared sales in the course of assessment proceedings. The rejecting of the declared sales was, therefore, amply justified. So far as quantum of sales is concerned, the estimate of sales at Rs.2,10,00,000 and Rs.3,35,00,000 appears to be some what excessive. In the preceding assessment i.e. for assessment year 1988-89 the sales declared at Rs.1,29,97,725 had been estimated at Rs.1,75,00,000 while in the subsequent assessment i.e. for assessment year 1991-92 sales declared at Rs.2,13,41,959 had been estimated at Rs.2,67.00,000 which were subsequently reduced in appeal to Rs.2,50.00,000. In the absence of any figures of inputs i.e. consumption of raw material, fuel, etc., the estimate of sales in the two years is devoid of any sanctity. At the same time, the estimates for the two years are disproportionately higher as compared with the preceding as well as the subsequent assessments. In the absence of any material indicating the volume of production and turnover, it is only fair that estimate of sales during the two years is brought in conformity with the preceding as well as the subsequent assessment. The estimate of sales for the two years is accordingly reduced to Rs. 1,90,00,000 and Rs.2,70,00,000.
4. So far as P&L add backs are concerned, disallowance under the heads salaries in assessment years 1989-90 was obviously unjustified. Out of the total claim of Rs.2.14,800 the ITO had disallowed an amount of Rs.50,000 while the CIT(A) thought it fit to reduce the add back to Rs.10,000. After having observed that add back made by the ITO did not appear to have a proper objective basis, the CIT (Appeals) failed to do justice by reselecting the addition to Rs.10,000. The addition being unwarranted is hereby deleted.
5. The two appeals succeed to the extent indicated above.
C.M.S./286/Trib.
Order accordingly.