I.T.AS. NOS. 9424, 9425 OF 1977 AND 9978/LB/DB OF 1991-92 VS I.T.AS. NOS. 9424, 9425 OF 1977 AND 9978/LB/DB OF 1991-92
1997 P T D (Trib.) 913
[Income-tax Appellate Tribunal Pakistan]
Before Ch. Muhammad Ishaq, Judicial Member
As. Nos. 9424, 9425 of 1977 and 9978/LB/DB of 1991-92, decided on /01/1996.
Income Tax Ordinance (XXXI of 1979)---
----Ss. 22 & 32(3)---Income from business---Rejection of accounts---Estimate of sales---Additions---Gross profit rate---History of trading accounts-- Assessee returned sales for two years by applying 9.75% and 10.19% G.P. rate respectively ---I.T.O. rejected the declared sales and purchases and G.P. rate on basis of history of trading accounts and estimated sales at higher figures and applied 12.25% G.P. rate thereto for each year---Commissioner (Appeals) rejected findings of I.T.O. being based on general and vague remarks and having not found any defect or omission in trading accounts-- Validity---Purchases and sales were fully vouched and verifiable---First Appellate Authority had applied its mind correctly---Every year being an independent entity, history of case in circumstances would not be a relevant factor---Additions had not been made in conformity with facts---Held, gross profit rate declared by assessee being reasonable, should have been accepted by the Department.
Muhammad Yousaf Sheikh, D.R. for Appellant.
Muhammad Akram Tahir, D.R. for Respondent.
Date of hearing: 23rd July, 1996
ORDER
CH. MUHAMMAD ISHAQ (JUDICIAL MEMBER).---Cross Appeals in respect of Assessment years 1989-90 and 1990-91 have been preferred by the assessee as well as the department to call in question the order, dated 23-12-1991 passed by the Commissioner of Income Tax, Appeal Zone-I, Faisalabad.
2. We have heard the parties and examined the record.
3. The assessee in his appeal contests the justification for the addition at Rs.15,000 and Rs.16,000 in the Cartage Account and Rs.20,000 each in the Cash Discount Account in respect of the Assessment years 1989-90 and 1990-91 respectively. Confirmation of the depreciation add-back at 50% in the account of car has also been contested for both the years under appeal.
4. The Revenue, on the other hand, agitates against the justification in accepting the declared trading results as being contrary to the facts and history of the case in respect of both the years under appeal. The Revenue also contests the full depreciation allowance on motorcycle for when it was not used wholly and exclusively for business purposes in respect of both the years under appeal. Reduction/deletion of add-backs under various Heads has also been contested by the Revenue in respect of the year 1990-91.
5. Taking up the Revenue's appeal first, it has been argued before us by the learned D.R. that in the year 1988-89, the assessee has declared loss at Rs.35,100. However, the assessment was framed at an income of Rs.20,000 on agreed basis. It is submitted that the same condition exists for these assessment years as well and placing reliance on the history that trading results should not have been accepted by the learned First Appellate Authority.
6. The learned A.R. appearing for the assessee submits that the declared results have been accepted because of verifiable factors. It is argued that the past history in the context of the instant appeals is not a relevant factor. It is further submitted by the learned A.R. that the declared G.P. is much better than the parallel cases. Therefore, the case has rightly been decided in the first appeal.
7. While deciding the appeals, the learned C.I.T. (Appeals) has discussed the points in an elaborate manner and made the following observations in respect of the trading side of the assessee's account:
"Own Trading In Days and Chemicals"
Total sales in own account are declared at Rs.1,34,570 and Rs.27,50;882 with declared G.P. rates at 9.75% and 10.19% in 1989-90 and 1990-91 respectively. The Assessing Officers rejected the declared version with general and vague remarks about the alleged un-verifiability of part of sales and the absence of stock register and estimated the sales at Rs.1,50,000 and Rs.32 lac in 1989-90 and 1990-91 respectively and applied thereto in each year G. P. rate of 12.25 % . The aforesaid treatment and the rejection of the declared version is vehemently contested as erroneous and unjustified. The purchases are fully vouched and verifiable having been made from Hoechst Pakistan Limited. The sales are fully vouched and predominantly verifiable. No instance of unverifiable nature is quoted in the assessment order of 1989-90, whereas the I.T.O. has himself mentioned in the assessment order of 1990-91 the particulars of the 10 parties to whom sales amounting to Rs.25,44,682 were made on credit basis. Remaining sales of Rs.2,06,200 only are shown on cash basis and even the same are fully vouched and verifiable. The I.T.O. had not pointed out any variations in rates in respect of credit and cash sales. The quantitative and qualitative details are also recorded in the ledgers under the I.T.O. has not been able to find or point out any specific defect or omission whatsoever. Thus, both the purchases and sales being fully vouched and verifiable could not be objected to or rejected. The I.T.O. applied a G.P. rate of 12.25% on the ground that if part of the addition made in the Assessment Year 1988-89 is attributed to the trading account, the same would evolve the G.P. rate of 12.25 %. The learned A.R. contends that in respect of the assessment year 1988-89, the appellant had agreed to a net income of Rs.20,000 and neither to any separate agitations in rite trading are P&L nor to the application of any G.P. rate much less the aforesaid presumed G.P. rates of 12.25%. Perusal of record confirms the learned A.R.'s contention. He further Points out that the Department itself has applied much lower G.P. rates in other cases e.g. 6.25% in the cases at N.T. Nos. 03-01-060358 and 03-25-0675403; 8% in the case at N.T. No. 03-06-0531592 and even in the cases of Importers, G.P. rates are applied at 10% e.g.03-06-0531121 and 0531306.
On the above facts and circumstances and m view of other cases, the G.P. rates declared by the appellant at 9.75% and 10.19% are quite fair and reasonable and should have bon opted, as the purchases and sales are fully vouched and verifiable. Therefore, the declared, results in own trading are accepted in both years."
8. It is, thus, clear that the learned first Appellate Authority has correctly applied its mind and has done no favour any one while deciding, the appeals. It may further be observed that even' year is an independent entity. The acceptance of Rs.20,000 income as against the declared loss of Rs.35,100 in respect of the assessment year 1988-89 does not debar the Appellate Authority from appreciating facts in respect of the subsequent years. The contention of the Revenue that history could be made the basis in the subsequent years as well, therefore, does not appear to hold good in the circumstances of this case. The contention of the learned D.R. to this effect cannot be accepted.
9. Regarding the appeal of the assessee in respect of the additions made in the Cartage Account and the Cash Discount Aunt, it is noticed that the same have not been made in conformity with the facts of the case and the learned C.I.T. (Appeals) has not allowed the requisite relief to the assessee. We, therefore, direct the deletion of the addition m the Car Account and the Cartage Account as being unjustified and without proper basis The Assessee's appeals are, therefore, allowed as indicted above.
10. While deciding the appeal of the Assessee, we have discussed the details pertaining to the Heads agitated by the Revenue. We, therefore, are not inclined to effect any change in this refit. Tire learned C.I.T. (Appeal)'s order, therefore, shall hold the field. Tire contentions of the learned D.R., therefore, are held to have no merit
11. In view of the aforestated reasons, the peals of the Assessee are allowed while those of the Revenue fail and are baby dismissed.
M.B.A./298/TribOrder accordingly.