I.T.AS N, - 3455 AND 3456/LB OF 1995 VS I.T.AS N, - 3455 AND 3456/LB OF 1995
1997 P T D (Trib.) 2100
[Income-tax Appellate Tribunal Pakistan]
Before Abdul Rashid Qureshi, Judicial Member and
Inam Elahi Sheikh, Accountant Member
I.T.As. Nos.3455 and 3456/LB of 1995, decided on 04/01/1996.
Income Tax Ordinance (XXXI of 1979)---
----Ss.23 & 80-C---Bifurcation of income ---Assessee filed return declaring loss---Income Tax Officer repudiated assessee's version and assessed on his own---Commissioner of Income-tax (Appeals) set aside assessment for de novo assessment ---Assessee returned sales anew in response to notice-- Income Tax Officer treated sales on which tax deducted at source as deemed income under S.80-C of Income Tax Ordinance, 1979 and proceeded to estimate income in respect of sales on which, tax was not deducted at source---Income Tax Officer while doing so bifurcated trading and P & L Account---Commissioner of Income Tax (Appeals) though reduced sales, but indicated nothing about the treatment, in respect of deemed income-- Assessee, aggrieved, went before Tribunal where both parties consented to the effect that either whole of income would be deemed under S.80-C or assessed under S.23 of the Ordinance---Case was remitted back to inquire to contention of assessee for determination whether payments received by assessee were of nature on which tax was deductible at source so to be assessed under S.80-C if not, assessee would be assessed under S.23 of the Income Tax Ordinance, 1979.
M.A. Malik, F.C.A. for Appellant.
Shahbaz Butt, L.A. for Respondent.
Date of hearing: 4th January, 1996.
ORDER
ABDUL RASHID QURESHI (JUDICIAL MEMBER). ---These two appeals have been filed by the assessee to agitate on recorded, by the learned CIT(A) on 27-5-1995.
2. The brief facts of the case are that the assessee, a private limited company derives income from running a printing press. The assessee filed returns to declare a loss of Rs.29,341 and Rs.9,392 which was originally assessed at net income of Rs.272,201 and Rs.258,000 respectively for the years 1992-93 and 1993-94. The learned CIT(A) set aside these assessments with the direction to make further inquiries about the nature of the business of the assessee and to pass de novo assessment orders in the facts and circumstances of the business of the assessee. In response to notices for re assessment by the Assessing Officer the assessee filed trading and profit and loss accounts for the years 1992-93 and 1993-94 showing net profit for the year 1992-93 at Rs.21,619 and for the year 1993-94 at Rs.33,424. The trading account for the year 1992-93 disclosed sales of Rs.1,866,405 consisting of sales at Rs.1,101,405 on which tax was deducted at source and the sales on which tax was not deducted at source were shown at Rs.765,000. The trading account for the year 1993-94 disclosed sales at Rs.2,157,205 which consisted sales of Rs.1,406,766 on which tax was deducted at source and the sales on which tax was not deducted at source were disclosed at Rs.750,439. The assessee filed statements in respect of gales on which tax was deducted at source for the years under appeal. The assessing Officer treated the sales on which tax deducted at source as deemed income under section 80-C and proceeded to estimate the income in respect of sales on which tax was not deducted at source. In doing so he bifurcated the trading and profit and loss account and estimated the sales of which tax. was not deducted at source in respect of the assessment year 992-93 at Rs.14 lac and applied G.P. rate thereon at 35% and after making disallowance out of profit and loss account assessed income at Rs.283,225, similarly in respect of the Assessment Year 1993-4 the sales were estimated at Rs.17 lac against the disclosed sales on which tax was not deducted at source at Rs.750,439 and after applying G.P. rate at 35% and making some disallowances out of P & L account assessed the income at Rs.336,331.
3. The above treatment by the ITO was challenged before the CIT(A) who did not say anything regarding the treatment in respect of deemed income under section 80-C and relief in respect of sales estimate of income under the head income from business. However, the sales estimates were reduced to Rs.13 lac and Rs.15 lac respectively for the years under appeal.
4. The assessee being dissatisfied with the treatment meted out by the learned CIT(A) came up in appeal before us agitating that the ITO was not justified in bifurcating the business of the assessee. It may be mentioned here that the assessee has not furnished to the ITO full details of the sales made by him showing names and addresses etc., of the customers. The Assessing Officer partly assessed the income under section 80-C as deemed income and partly assessed the income from business or profession in respect of the same business of printing and sale of stationery against the orders of the customers. The assessee also agitated the sales estimate by the ITO being arbitrary and without any basis and unwarranted in the facts and circumstances of the business of the assessee. The learned A.R. for the assessee has submitted that the sales were fully verifiable for which complete details were provided to the ITO who has not pointed out any discrepancy. The learned A.R., has also submitted that the G.P. rate declared by the assessee is better than the G.P. rate disclosed in comparable cases viz. NTA 7-7-1721424 M/s. Lion Press (Pvt.) Ltd., and NTN 7-3-1708094 M/s. S.A. Rashid & Co. Private Ltd. In both these cases G.P. rate was applied at 26%. The learned A.R. further argued that the ITO was not justified in bifurcating the same business of the assessee in two different businesses one relating to printing and supply of stationery to NBP and the other relating to printing and supply of stationery to customers. The learned A.R. further submitted that the estimate of sales adopted by the ITO is without any basis and unwarranted in the facts and circumstances of the business of the assessee, and the learned CIT(A) has not truly appreciated the facts of the case. The learned A.R. has pointed out that the Assessing Officer has not appreciated the provisions of section 80-C, which are not applicable in the case of a manufacturer. He further argued that the provision of section 80-C prohibits allowances or deduction against deemed income and his treatment of bifurcating trading and profit and loss expenses to treat .allowances and deductions against deemed income was unwarranted in law. It has also been pointed out that either whole of the income shall be seemed under section 80-C or the income shall be assessed under section 23 in respect of the business of the assessee.
5. The learned L.A. agreed with the contentions raised by the assessee and has pointed out that in case the assessee had opted to be assessed under section 80-C whole income shall be deemed under section 80-C or otherwise he deserves to be assessed under section 23 in respect of who receipts being a manufacturer.
6. After hearing both the parties we are of the view that both the assessments pertaining to years 1992-93 and 1993-94 are set aside and the case is remitted back to the learned Assessing Authority with the direction to inquire into the contention of the assessee for determination whether the payments received by the assessee are of the nature on which tax is deductible at source. If the contention of the assessee is found to be correct, he shall be assessed under section 80-C and if the assessee to be assessed under section 23, the whole income of the assessee shall be assessed under section 23 in the facts and circumstances of the business of the assessee. The assessee will be allowed opportunity to explain the verifiability of the receipts.
7. Both the appeals filed at the instance of the assessee succeed in the manner as indicated above.
C.M.S./303/Trib. Order accordingly.