I.T.AS. NOS.4161/LB AND 4162/LB OF 1991-92, VS I.T.AS. NOS.4161/LB AND 4162/LB OF 1991-92,
1997 P T D (Trib.) 864
[Income-tax Appellate Tribunal Pakistan]
Before Shariq Mahmood, Accountant Member
I. T. As. Nos. 4161/LB and 4162/LB of 1991-92,. decided on 11/02/1996.
(a) Income Tax Ordinance (XXXI of 1979)---
----S. 32(3) & 134---Income Tax Appellate Tribunal Rules, 1981, R, 20(2)-- Appeal---Ex parte proceedings ---Assessee, appellant despite knowledge of date of hearing, was not present to substantiate his grounds of appeal and controvert discrepancies in accounts---Held, presumption would be that revenue was justified in not placing reliance on declared version and rejecting same.
(b) Income Tax Ordinance (XXXI of 1979)---
----Ss.22, 32(3) & 134---Allowances---Additions and add-backs---Appeal to Appellate Tribunal---Assessing Officer, being dissatisfied, and finding defects and discrepancies in various heads of accounts rejected declared version of assessee and made additions and add-backs---C.I.T.(A) confirmed same to the grievance of appellant ---Assessee despite the acknowledgement of date of hearing, by him did not appear before the Tribunal---Held, as the appellant did not appear to substantiate his grounds and remove discrepancies, order of C.I.T.(A) was upheld and appeal was dismissed.
Nemo for Appellant.
Nemo for Respondent
Date of hearing: 11th February, 1996.
ORDER
The assessee a Private Limited Company. (Head Office at Lahore), running a cotton ginning and pressing oil crushing unit at Lodhran Bahawalpur Road, is in appeal against the combined appellate decision of the C.I.T.(A) Range-I, Lahore, dated 8-10-1991 for the assessment years 1989-90 and 1990-91.
2. On the date of hearing neither the appellant nor its A.R. was present in spite of the acknowledgement noted for the date filed for hearing. The D.R. was also absent. The appeals are, therefore, being disposed of by resorting to provisions of Rule 20(2) of Income Tax Appellate Tribunal Rules, 1981.
3. The issues, as per grounds of appeal are:---
1989-90:
(i) Rejection of accounts is not justified.
(ii) Addition of Rs.32,026 in the purchase of ' Kapas' account is not justified.
(iii) Addition of Rs.268,887 in the yield of oil account has been wrongly maintained.
(iv) Addition of Rs.235,208 in the sales of oilcake account is against the facts of the case.
(v) Addition in the P&L account are excessive and arbitrary
1990-91:
(i) Rejection of accounts is not justified.
(11) Addition of Rs.114,940 in the price of 'Kapas' account is excessive.
(iii) Addition of Rs.91,997 in the cotton seed account is also excessive.
(iv) Addition of Rs.575,830 in the yield of oil account is without any basis.
(v) Addition of Rs.217,940 in oilcake account is arbitrary.
(vi) Estimate of sale at Rs.3,600,000 and application of G.P, rate of 8% in the pesticide account is excessive.
(vii) Add backs out of the P&L account are not justified.
4. The two abovementioned assessment orders have been disposed oil through a combined decision at the first forum, therefore, we intend to dispose of the appellant's contention through one consolidated order.
1989-90:
REJECTION OF ACCOUNT:
5. The Assessing Officer, as further examined and decided by the, C.I.T.(A) observed noted various defects and discrepancies in the declared version and books of account of the assessee e.g. purchase of ' Kapas' was not fully verifiable sales of oil and oilcake were riot verifiable, gate pass and stock registers were neither, maintained nor produced, purchases and sale were not verifiable or vouched for, expenses under P&L account were not verifiable and declared results indicating the yield under various heads were not adequate. These deficiencies could not be controverted in spite of a specific notice issued under section 62 and neither was the appellant present to substantiate its submissions before us. In view of these facts, which could not be controverted, we feel that the Revenue was justified in not placing reliance on the declared version and rejecting the same.
PURCHASE OF KAPAS:
6. During the year under consideration 355,848 mounds of Kapas valuing Rs.8,25,89,061 was purchased. Average purchase price came to Rs.232.09 per maund. Quantity of 3720 mounds purchased was not verifiable and herein the purchase price, Rs.238.48 per maund, was more than the declared average purchase price, For this discrepancy the appellant company had no plausible explanation which resulted in restricting the purchase price to Rs.232 per maund and on the basis of curtailment of Rs.0.09, per maund an addition of Rs.32,026 was made Against this addition the only contention of the assessee is, as per grounds of appeal that except for the purchase 3720 maunds the rest was verifiable. This explanation, we find, has already been considered by the authorities below. The appellant company has no explanation as to why the purchase price was more than the average price in case of unverifiable purchases. At the same time the rates as circulated and announced by the relevant market committees for the year under appeal have not been furnished. The addition is thus proper and confirmed.
ADDITION IN YIELD OF OIL ACCOUNT:
7. After ginning the ' Kapas' the appellant company crushed the oil seeds where in the following results were obtained:---
| | Seer | Chatank | Tolas |
| Oilcake | 34 | 1 | 4 |
| Oil | 4 | 2 | 4 |
| Wastage issued | - | 8 | 4 |
| Shortage | 1 | 2 | 3 |
| | 40 | --- | -- |
8. The Assessing Officer found the wastage, in comparison to other cases, on the higher side and thereby curtailed it by 2 Chatank per maund and is to the yield of oil account which was thus increased by 657 maunds 32 seer 8 chatank and multiplied it by the sale rate of oil at Rs.408.76 per maund at an addition of Rs.268.887. Again, regarding the addition under this head the appellant's explanation is only available from the grounds of appeal where it has been pleaded that C.I.T.(A) was correct in curtailing the wastage by 2 chatank. The order of the authorities shows that the assessee was afforded fair and reasonable and ample opportunities to justify its higher contents of wastage and due consideration was given to it. In fact the body of the assessment order shows that where the explanations filed by the appellant, in response to notice under section 62, are justified the declared results having been accepted. In the instant case we feel no need to interfere on behalf of an assessee who has not even come forth to substantiate its case. This addition is also confirmed.
SALE OF OILCAKE
9. After crushing of cotton seed oilcake produced was 179548 maunds which was sold at Rs.70.69 per maund. The entire sale was unverifiable and did not compare favourable with the prevailing market rates. This aspect was brought to its notice and explanation found untenable. We agree with the action of the authorities below and uphold the addition of Rs.235.208 under this head.
P&L ACCOUNT ADD BACKS
10. The appellant company does not deny the fact that the expenses claimed under various heads are not verifiable. The plea is that the additions are arbitrary and excessive. The disallowances have been considered and examined.
The C.I.T.(A) has further observed that there is an element of personal nature in the expenses claimed details and particulars of the same have not been submitted and the quantum of add backs are reasonable. Under this head where the declared version is not reliable and is unverifiable the additions being reasonable are confirmed.
ASSESSMENT YEAR 1990-91:
REJECTION OF ACCOUNTS:
11. The appellant's nature of business during this year also remains the same. Business of ginning, pressing and crushing was carried on in the same unit. The defects in the account version were on the same lines as in the immediately preceding year. For reasons.and factors discussed by us in the order 1989-90 we feel no hesitation in confirming the rejection of accounts by the authorities below.
PURCHASE OF 'KAPAS':
12. Total quantity purchased was 280.342 maunds for a sum of Rs.68,238,715 wherein the average price came to Rs.243.41 per maund. Out of this quantity purchase of 39.709 maunds of the value of Rs.9,551,961 are affected from "Arhtees" where these were not verifiable. The purchases rate stood at Rs.232.09 per maund in 1989-90 which has also not been accepted. The Assessing Officer curtailed rate of ' Kapas' purchased to Rs.243 per maund and thus added a sum of Rs.114,940. The I.T.O., before finalising assessments, confronted the appellant company with the deficiencies and discrepancies in the declared version and obtained its point of view. The position under this head remains the same as for 1989-90 and we, therefore, upheld this addition also.
COTTON SEED:
13. The ' Kapas' purchased was put to ginning were the following results were shown:
1990-91
| | Seer | Chatank | Tolas |
| Lint | 12 | 15 | - |
| Seed | 24 | 12 | 03 |
| Wastage lint | - | 05 | 04 |
| Cleaner | - | - | - |
| Wastage stick | - | - | - |
| Machine | - | 12 | - |
| Shortage | 01 | 02 | 03 |
| | 40 | - | - |
The above in comparison to 1989-90 ;
1989-90
| | Seer | Chatank | Tolas |
| Lint | 12 | 13 | 01 |
| Seed | 25 | 01 | 02 |
| Wastage line | | | |
| Cleaner | 01 | 05 | 03 |
| Shortage | - | 12 | 04 |
| | 40 | - | - |
14. The shortage had increased from 12 chatank 4 tolas to 1 seer 2 chatank and 3 tolas. The assessee's explanation that the variety of ' Kapas' ginned accounted for higher shortage was not substantiated by an quantitative details or evidence. From operation of the same machinery in the same factory in the second year of business the higher wastage could not be properly accounted for. The assessing officer still accepted the yield of lint but reduced the shortage by 2 chatank and added the different to the cotton seed account whereby addition of Rs.91.997 was arrived at. The objection to this treatment was repeated as per grounds of appeal, we need not repeat our observations and conclusion regarding the treatment but only confirm the addition as the facts and circumstances have not changed.
OIL YIELD ACCOUNT:
15. The production results, in comparison to the immediately preceding year reflect the following:
1990-91 1989-90
| | Seer | Chatank | Tolas | Seer | Chatank | Tolas |
| Oil cake | 4 | 35 | 2 | 34 | 01 | 04 |
| Oil | 03 | 13 | 0 | 4 | 02 | 04 |
| Wastage | 01 | 03 | 03 | 01 | 11 | 02 |
| shortage | | | | | | |
| | 40 | - | - | 40 | - | - |
16. From the above? it was observed that the yield of oil has shown a considerable decrease. Explanation of the assessee was that the expellers had developed a fault and this consumed time with the result the cotton seed was heated resulting in lower yield of cotton seed oil. This explanation was not substantiated by any evidence. Besides, any prudent businessman does not hold on either to 'Kapas or carton seed which is in the danger of hearing but in such eventualities disposes it of in the open market. When the explanation filed was not substantiated the yield of oil enhanced by 5 chatank bringing it to the same level as of the assessee's declared results for 1989-90. Result was an addition of Rs.486.148. On these findings and treatment we find ourselves in concurrence with the action of the authorities below and therefore, uphold this addition
SALE OF OIL-CAKE:
17. The declared average male rate was Rs.73.39 per maund. The declared sale rate for the same item in 1989-90 was Rs.70.69 per maund but as the entire sale was unverifiable it was adopted at Rs.72 per maund. This addition in 1989-90 has been upheld. The assessee was required to substantiate the sales which was not done. We uphold his treatment on merits and facts.
PESTICIDES ACCOUNT:'
18. During this year the assessee also traded in pesticides and showed the following results:
| Purchase | Rs.33,99,463 |
| Sales | Rs.34,42,963 |
| G.P. | Rs.43,500 |
| G.P. Rate | 1.26% |
19. On scrutiny of the results it was found that the entire sales were unverifiable as no details had been found. At the same time the declared G.P. rate of 1.26% was ridiculously low. The Assessing Officer ascertained the prevailing rate of profit and ginning allowance for any discount he estimated the turnover at Rs.36,00,000 and subjected it to a G.P. rate of 8%. Before doing so the point of view of the appellant company was also obtained. The plea that the pesticides had been dump by the principal companies was not substantiated and neither could be 'explained satisfactorily as to why a company primarily engaged in the business of cotton ginning, pressing and crushing would hold its capital in a venture which was not alternative. Based on the position of accounts, unverifiability for transactions, we deem the action of the authorities below to be fair and reasonable. The addition stands confirmed.
P&L ACCOUNT:
20. The position regarding the disallowances made remains the same as discussed by us under this head for 1989-90. There is nothing, as per grounds of appeal, which would strengthen the assessee's plea that the add excessive and not called for we uphold the action of the authorities backs below.
21.In the light of the foregoing discussion and observations we find no in the issue raised by the appellant company for both the assessment went years action of the authorities below is upheld. Both the appeals are dismissed.
M,B.A./268/TribAppeals dismissed.