I.T.A. NOA033/LB OF 1991-92 VS I.T.A. NOA033/LB OF 1991-92
1997 P T D (Trib.) 2180
[Income-tax Appellate Tribunal Pakistan]
Before Abdul Rashid Qureshi, Judicial Member and
Ashfaq Ahmad, Accountant Member
I.TA No.4033/LB of 1991-92, decided on 01/02/1996.
Income Tax Ordinance (XXXI of 1979)---
----S.22---Estimate of sales and G.P. rate---Past history- --Assessee returned sales with G.P. rate on his own---Assessing Officer rejecting same, estimated sales at high altitude with higher G.P. rate ---C.I.T. (A) reduced sales a little but maintained G.P. rate---Income-tax Appellate Tribunal during preceding years and in identical circumstances had accepted declared sales of assessee---Declared sales-being more than double called for no interference and assessee's declared results were directed by Tribunal to be accepted.
Muhammad Saleem for-Appellant.
Abdul Rauf, D.A. for Respondent.
Date of hearing: 1st February, 1996.
ORDER
ASHFAQ AHMAD (ACCOUNTANT MEMBER). ---This appeal is directed against the order of the CIT(A) for the assessment year 1989-90. The appellant is aggrieved on account of estimate of sales and adoption of G.P. rate by the Department. In addition the assessee is aggrieved on account of following add backs:
| Item | Claimed Rs. | Disallowed by I.T.O. Rs. | upheld reduced by CIT(A) Rs. |
| Salaries and benefits | 9,25,505 | 50,000 | 50,000 |
| Printing & stationery | 59,692 | 10,000 | 10,000 |
| Entertainment | 3,83,687 | 70,000 | 70,000 |
| Vehicle running & main | 1,52,734 | 30,000 | 30,000 |
| Travelling & Con. | 1,98,079 | 35,000 | 20,000 |
| Postage & Telephone | 42,692 | 6,404 | 6,404 |
| Staff Welfare | 5,95,672 | 50,000 | 50,000 |
| Repair & maint | 3,40,802 | 30,000 | 30,000 |
| Selling expenses | 8,75,276 | 75,000 | 50,000 |
| Legal & Professional | 1,56,000 | 25,000 | 10,000 |
2. The brief facts of the case are that the appellant derives income from running a steel re-rolling mills and for the year under consideration declared sales at Rs.65,583,600 yielding a G.P. rate of 6.9%. The Assessing Officer after pointing out certain defects in the body of the assessment order which may not be repeated for the sake of brevity estimated the sales at Rs.6,80,000,000 and applied a G.P. rate at 8%. The assessee being aggrieved preferred an appeal before the CIT (A) who reduced the sales at Rs.6,70,000,000 and confirmed the G.P. rate at 8%. Certain relief was allowed in the P & L account as well which has been reproduced above.
3. During the course of the hearing the learned A.R., vehemently urged that the treatment meted out by both the I.T.O. and the CIT (A) was contrary to the past history of the case. He stated that in the preceding year viz., 1987-88 the following results were declared (for the assessment year 1988-89 the assessment was completed on agreement basis and, therefore, it does not constitute previous history of the case.)
| Sales | Rs.27, 923,983 |
| Gross profit G.P. rate 7.30% | 2,039,564 |
In this year the sales were estimated at ks.32,000,000 quid were subjected to a G.P. rate of 9%. The same defects had appeared in the assessment order as in the impugned year. The assessee preferred appeal before the CIT (A) who vide his order dated 13-6-1988 directed for the acceptance for the declared sales as well as G.P. rate with the following observations:
"Last year the G.P. rate declared by the assessee was less than 5% and it was applied at 5%. The means that the assessee has an honest approach in life and tries his best to file true particulars of income. The rate declared this year being better then the preceding year does riot need any interference. The I.T.O is directed to accept the G. P. rate of 7.30 % .
Coming to the sales it is an established principle that when the verifiable an addition can be made in the sales unless fierce is addition made in the gross profit. Consequently the directed to accept the declared sales. "
4. The Department being aggrieved preferred an appeal before this Tribunal who vide their order in ITA Nos.462 and 463/LB of 1988-89 dated 18-1-1995 rejected the Department appeals by making the following observations:
"Learned A.R., for the assessee ahs submitted that for the year 1986-87 the G-P. was declared at 3.66 by the assessee and it was adopted at 9% by the I.T.O. which reduced by the learned CIT (A), to 5%. The Department has gut come up in appeal against this application of G.P rate 5%. The department has come in second appeal only on the point of imposition of penalty. Keeping this important fact in mind the learned CIT (A) maintained that in the year 1987-R8 the assessee has declared G.P. rate at 7.35k on his own whereas for the last year it was fixed at 5% by the learned CIT (A). Thus, it is established that good results had been declared by the tax-payer on this score and hence the learned CIT (A) ordered acceptance of the declared sales and G.P. rate. Therefore, no interference is warranted on our behalf on the issue of G.P, rate and declared sales."
5. The learned A.R., has pointed out that in the impugned year the declared sales are much higher than for the assessment year 1987-88 and also G.P. rate declared though less by 4% adopted for the assessment year 1987-88 is again much more than 5% applied by the learned CIT(A) for the assessment year 1986-87 in which the Department did not prefer any second appeal. The learned A.R., has also cited two parallel cases at NTN 7-7-1733647 and 07-11-1279686 in which G.P. rate has been applied at 5% and 5.5% respectively. The learned D.R. on the other hand, stated that since the books of account were found to be defective the I.T.O. was justified in estimating sales and adopting higher G.P. rate.
6. We have examined the plea of the appellant as well as that of the D.R. We find force in the A.R.'s plea in view of the fact that for the assessment year 1986-87 in identical circumstances the learned Tribunal had accepted the declared sales of the appellant. In the year under appeal the declared sales are more than double and, therefore, call for no interference. The G.P. rate is also reasonable considering that for the assessment year 19186-87 the G. P. rate adopted by the CIT (A) was 5 % which was not contested by the Department and also 'taking in view the parallel cases quoted by the learned A.R., which the D.R., was unable to controvert. Taking these facts into consideration the assessee's declared results are directed to be accepted.
7. The appeal is allowed in the above stated manner.
C. M. S./310/Trib. Appeal allowed.