I.T.AS. NOS.8302/LB, 9873/LB OF 1991-92, 1230/LB OF 1992-93 AND 4134/LB, 4135/LB, 4136/LB OF 1996 VS I.T.AS. NOS.8302/LB, 9873/LB OF 1991-92, 1230/LB OF 1992-93 AND 4134/LB, 4135/LB, 4136/LB OF 1996
1997 P T D (Trib.) 2326
[Income-tax Appellate Tribunal Pakistan]
Present: Muhammad Zaman Khan, Judicial Member and Khalid Mahmood, Accountant Member
I.T.As. Nos. 8302/LB, 9873/LB of 1991-92, 1230/LB of 1992-93 and 4134/LB, 4135/LB, 4136/LB of 1996, decided on 15/08/1996.
Income Tax Ordinance (XXXI of 1979)---
----Ss.22 & 63---Income from business---G. P. rate ---Add-backs---Validity-- Assessee returned his versions on sale & G.P. rate ---Assessee's versions were not accepted in all the years under review---Assessing Officer estimated sales at high figures and applying his own G.P. rate and made add-backs in P&L Accounts---Commissioner of Income-tax (Appeals) upheld findings of Assessing Officer by giving partial relief---Assessing Officer was justified in completing ex pane proceedings under S.63 of the Income Tax Ordinance, 1979 in circumstances---Even-handed justice had been done by First Appellate Authority---Relief allowed was found quite reasonable---No interference warranted.
Rashid Sarwar, C.A. for Appellant (in I.T.As. Nos.8302/LB, 4134/LB to 4136/LB of 1996).
Mrs. Samara Yaseen, D.R. for Respondent (in I.T.As. Nos.8302/LB, 4134/LB to 4136/LB of 1996).
Mrs. Samara Yaseen, D.R. for Appellant (in I.T.As. 9873/LB and 1230/LB of 1992-93).
Rashid Sarwar, C.A. for Respondent (in I.T.As. 9873/LB and 1230/LB of 1992-93).
Date of hearing: 12th August, 1996
ORDER
MUHAMMAD ZAMAN KHAN (JUDICIAL MEMBER).-- Through this joint order we propose to dispose of the titled six appeals in which the parties are the same and the issue involved are also of identical nature. The relevant assessment years are 1990-91. 1991-92, 1992-93, 1993-94 and 1994-95. The assesee in this case is a private limited company which had derived income during the years under review from grinding and crushing of fireclay marbles stone and salt mining in a machine known as ball mill, imported from Germany.
2. The following chart would show the Assessment Years in which assessment orders were passed and the dates when first appeals were disposed of by the first appellate authorities respectively:---
| Assessment Year | Date of Assessment Order | Date of Order of the First Appellate Authority |
| 1990-91 | 16-12-1991 under S.63 | 9-02-1992 |
| 1991-92 | 26-4-1992 under S.62 | 10-6-1992 |
| 1992-93 | 28-6-1993 under S.62 | 14-5-1996 |
| 1993-94 | 31-1-1996 under S.62 | 14-5-1996 |
| 1994-95 | 6-4-1996 under S.62 | 14-5-1996 |
3. The brief facts of the matter are that due to the defects as pointed out in the assessment orders and the reasons given therein, the declared version of the assessee has not been accepted in all the Assessment Years under review. In the circumstances, sales had to be estimated by the respective Assessing Officers. The assessee, therefore, filed first appeals in all the five years under review against estimate of sales applied G.P. rate and various add-backs made out of the expenses estimated in P&L Account. The case of the assessee was that the decisions of the Assessing Officers were arbitrary and unjustified. The assessee had also contested the framing of assessment under section 63 as unjustified and against the facts of the case for the assessment year 1990-91. Although partial relief has been granted to the assessee by the first appellate authorities in all the years under consideration but still dissatisfied, the assessee has come up in second appeals so far as the assessment years 1990-91, 1992-93, 1993-94 and 1994-95 are concerned. On the other hand, the department has also assailed the orders passed by the first appellate authorities pertaining to the assessment years 1990-91 and 1991-92. The case of the department in these two appeals is that the assessee was not entitled to the grant of relief, which has been allowed to the assessment by the first appellate authorities in these two years. It might be needless to emphasise here that as per contention of the assessee, the quantum of sales, the G.P. rate fixed and the add-backs confirmed by the first appellate authorities were unjustified and excessive. We have heard the learned authorized representatives of both the parties and have also gone through the orders, which have been passed in this case at the two forums below for the years under reference.
4. Before entering into full-fledged discussion for the disposal of the titled appeals, we may point out here that even in the assessment years 1988-89 and 1989-90, the declared version of the assessee was not admitted due to which sales were estimated. In the Assessment Year 1988-89, sales were estimated at Rs.2,00,00,000 as against the declared sales of Rs.1,99,28,734. Similarly, in the assessment year 1989-90 sales were estimated at Rs.1,75,00,000 as against the declared sales of Rs.1,69,18,440. In these two years the declared G. P. rate at 19.95 % and 20.16 % was adopted at 23.11 % in each year by the Assessing Officers and in appeal, the same was confirmed in 1988-89, whereas it was reduced in the assessment year 1989-90 to 22.59 % . Sales were, however, confirmed by the first appellate authorities as estimated by the Assessing Officers in both these years. It appears that the said orders of the first appellate authorities were not assailed by the assessee by filing second appeals. In any case, the G.P. rate, which was fixed by the first appellate authorities in the immediately preceding year i.e. 1989-90 is 22.50% .
5. With the above state affairs in the background, we now proceed to dispose of the respective appeals as under:-----
(Assessment Year 1990-91 Cross Appeals)
6. It is manifest from the orders passed at the two forums below that the assessee did not peruse the matter in the right perspective at the assessment stage and had been playing the game of hide and seek before the Assessing Officer. The assessee had ultimately decided not to participate in the assessment proceedings and, thus, under the circumstances, the Assessing officer 'was justified to complete the assessment proceedings as required under section 63 of the Income Tax Ordinance, 1979. The first appellate authorities has also confirmed this act of the Assessing Officer. We also do not find any legal ailment in this order and thus the action under section 63 is confirmed.
7. In this year, the assessee had declared sales at Rs.1,48,62,895 showing G. P. rate at 20.33 % . The declared turnover of the assessee as such had gone down when compared with the sales of Assessment Year 1989-90 at Rs.1,69,18,440. As such the sales were estimated at Rs.2,10,00,000, based on two factors i.e. the raw material consumed and the consumption of fuel and power, when compared with the previous years it was found that these factors were almost on equal footings with the proceeding years and thus on that view of the matter, the declared sales were considered to have been grossly understated. However, the first appellate authority has observed that the estimate of sales was excessive and the same has been reduced to Rs.1,90,00,000. We find that as per history of the cases, the quantum of sales as determined by the CIT(A) is still slightly excessive and thus we reduce the same to Rs.1,85,00,000.
8. So far as the G.P. rate is concerned, the first appellate authority has already shown indulgence to the assesee while reducing the applied G.P. rate of 23.11 % to 22.50% which we find is quite fair and reasonable and in consonance with the past history of the assessee.
9. In the above circumstances, we reject the pleas of the department that CIT (A) was not justified either to reduce the sales or to reduce the G.P. rate. On the contrary, the prayer made by the assessee on the point of sales has been favourably considered by us and adequate relief has been allowed to the assessee, as observed above.
10. So far as the order of the first appellate authority on the point of add-backs is concerned. We find that the same is also in order as partial relief has already been allowed to the assesee under some heads such as "staff salary" and "freight" etc., whereas the remaining add backs have been found proper and confirmed. In these circumstances, we feel that there is no occasion for us to interfere in this order end thus the prayers made by both the parties for modifying the order of the first appellate authority on this issue are hereby declined.
11. No other point is at issue in this appeal requiring our determination.
12. On account of what has been said above, the appeal filed by the department in regard to the Assessment Year 1990-91 is dismissed whereas the appeal filed by the assessee partially succeeds in the manner and to the extent, as indicated above.
Assessment Year 1991-92
11-A. In this year, the declared trading version of the assessee has been rejected as a consequence of which, the returned sales at Rs.1,53,97,334 and G.P. rate of 21 % were discarded and sales have been estimated at Rs. 1,85,00,000 and G.P. rate has been applied at 23.11 % . Some add backs were also made out of P&L Account.
12-A. In the first appeal, keeping in view the various defects of accounts as demarcated in the assessment order and also as per history of the case, the rejection of declared version has been upheld by the first appellate authority for this year as well. However, for the reason that the assessee had made addition in plant and machinery the estimate of sales made at Rs.1,85,00,000 was found on the higher side and the first appellate authority has reduced the same to Rs.1,80,00,000. The applied G.P. rate of 23.11 % was also found excessive and the CIT(A) has also reduced the same to 22.50%. We find that this decision of the CIT(A) on both the said counts is quite in line with the previous history of the case and as such does not call for any interference at our stage.
13. Besides the above, the indulgence which has been shown to the assessee by the first appellate authority by reducing the addition of Rs.75,000 to Rs.50,000 under the head "salaries" and the addition of Rs.75,000 to Rs.50,000 under the head "freight"' respectively is quite judicious and the learned D.R. has not been able to pin point any lacuna in it. The relief, which has been allowed to assessee as such also appears to be fair and reasonable and the same is accordingly confirmed.
14. No other point is involved in this departmental appeal for our consideration.
15. As a result thereof, the departmental appeal for the Assessment Year 1991-92 is hereby dismissed.
Assessment Years 1992-93, 1993-94 and 1994-95.
16. As pointed out above, the first appeals filed by the assessee in respect of these three assessment years were decided by the then CIT(A) through a joint order dated 14-5-1996. As such we are also deciding these appeals through a consolidated order.
17. The position of declared and assessed trading results for these three years is as under:---
1992-931993-941994-95
| Sales declared | Rs.1,36,75,929 | Rs.1,30,01,092 | Rs.1,33,87,905 |
| G. P. declared | 19.28 % | 20.07 % | 18.90 % |
| Sales estimated. | Rs.1,70,00,000 | Rs.1,70,00,000 | Rs.1,75,00,000 |
| G.P. applied | 23.11 % | 23.11 % | 23.11 |
18. In these appeals, the assessee has contested the rejection of declared version, estimate of sales made and G.P. rate applied as unjust and excessive. Various add-backs made out of expenses claimed in P&L account have also been contested as arbitrary and excessive. It may be pointed out here that the assessee had declared loss of Rs.10,26,646, Rs.9,47,148 and Rs.8,58,650 for the assessment years under review.
19. As in the previous years, the assessee's cash sales and cost of sales were not fully open to verification. Similarly purchases of raw materials were found mostly made through cash and as such were not appropriately vouched. The disclosed G.P. rate was also found to be on the lower side. The assessee did not maintain any day to day production record. No stock register was maintained, in the absence of which inflow/outflow of the goods also remained unverifiable. The assessee has also got a consistent history of rejection of books of accounts.
20. Be that as it may, after giving a careful consideration to the facts of the case and also keeping in view the past history of the assessee, particularly, in the Assessment Years 1990-91 and 1991-92, the CIT(A) came to the conclusion that the estimate of sales in the three years under consideration were excessive and thus the same were reduced to Rs.1,37,00,000 for the assessment year 1992-93, Rs.1,40,00,000 for the assessment year 1993-94 and Rs. 1,42,00,000 for the assessment year 1994-95 respectively. Learned CIT(A) has also found the applied G.P rate at 23.11 % in all the three years as excessive and thus keeping in view the past history of the case has directed that the same be applied at 22.50% in each year. The first appellate authority has also allowed relief to the assessee in the add-backs made under the heads "freight" and" octroi" "staff salary" and "advertisement" and the disallowances were appropriately reduced by him. However, the rest of the add-backs made were found in order and the same were accordingly confirmed by the CIT(A) in all the three years under reference.
21. According to the learned A.R. of the assessee, the relief allowed to the assessee by the first appellate authority was not adequate. We, however, find that this position is not correct. A careful scrutiny of the order made by the first appellate authority would reveal that even handed justice has been done by the first appellate authority, keeping in view the quantum of sales fixed in the previous years and the G.P. rate declared to be applied. The declared version of the assessee was rightly discarded for the reasons stated in the orders of the departmental officers and the assessee had failed to assign any good cause for the decline in the turnover in these three years -as compared to the previous years, for instance assessment years 1988-89, 1989-90, 1990-91 and 1991-92. Regarding the G.P. rate, it may be stated here that in the assessment year 1989-90, the same was applied at 22.5 % by the first appellate authority and the assessee did not file any second appeal in that respect. Similarly, the assessee has not filed any appeal against the order of CIT (A) in regard to the assessment year 1991-92 in which the G.P. rate was determined at 22.5 % also. In these circumstances, the assessee would be deemed to have accepted the G.P rate of 22.5% being the history of this case. It would also be worth mentioning that while disposing of the cross appeals in regard to the assessment year 1990-91, as above, we have also maintained the order of the first appellate authority applying the G.P. rate al 22.50% . We are, therefore, of the considered view that the order dated 14-5-1992 passed by the then CIT (A) covering the three years under review and reducing the applied G.P. rate at 23.11 % in each year to Rs. 22.50% is correct and also fully in line with the past history of the assessee. So far as the grievance of the assessee pertaining to add-backs is concerned, adequate relief has already been allowed to the assessee by the first appellate authority under the various heads as discussed in the order of the first appellate authority whereas the remaining add-backs have been kept intact. We have considered the submissions made by the learned A.R' of the assessee on this issue item wise and have reached the conclusion that the order passed by the CIT(A) does not admit of any interference, being fair and reasonable.
22. On account of what has been observed above, we find that the relief, which has already been allowed to the assessee in the three years under review is quite appropriate and as such further indulgence cannot be shown to the assessee on any of the issues raised in these appeals on behalf of the assessee. The order of the CIT(A) is, therefore, confirmed.
23. As a sequel to the above, the three second appeals filed by the assessee pertaining to the Assessment Years 1992-93 1993-94 and 1994-95 deserve to be dismissed and we order accordingly.
24. In view of the above, all the six titled appeals stand decided in the above terms.
C.M.S./337/Trib Order accordingly.