I. T. A. NO.6078/LB OF 1995, DECIDED ON 18TH JUNE, 1998. VS I. T. A. NO.6078/LB OF 1995, DECIDED ON 18TH JUNE, 1998., 1998 PTD-INCOME-TAX-APPELLATE-TRIBUNAL-PAKISTAN 3191 (1998)

(a) Income Tax Ordinance (XXXI of 1979)---

-----S.66-A---C.B.R. Circular C. No.7(32)-DT-14/1992, dated 24-7-1994-- Direction by Inspecting Additional Commissioner to revise assessment order ---Assessee was a private limited company dealing in yarn on commission basis ---Assessee's case finalized under normal law---Assessment was cancelled by the Inspecting Additional Commissioner to be assessed in terms of the agreement between the C.B.R. and the Yarn Merchants Association at a rate of 12% on gross receipts---Validity---Agreement between the Chairman, C.B.R. and the Chairman, Pakistan Yarn Merchants Association could not result into ousting any of the provisions of the Income Tax Ordinance, 1979 or the rates notified for levy of income-tax in the First Sched. of the Ordinance.

1990 PTD 903 and 1990 PTD 383 ref.

(b) Income Tax Ordinance (XXXI of 1979)---

----S.59-C(a)(b)---Fixed tax---Agreement reached between Chairman, C.B.R. and Chairman of Traders Association for payment of fixed tax would not bind the members of the Association as well as non-members, although they were fully represented, if they wished to be assessed under normal law.

Dr. Ilyas Zafar for Appellant.

Mrs. Fiza Muzaffar, D.R. for Respondent.

Date of hearing: 21st May, 1998.

ORDER

NASIM SIKANDAR (JUDICIAL MEMBER).---This appeal arise out of order recorded by I.A.C. Companies Range Gujranwala whereby the assessment framed on 24-4-1995 at an income of Rs.1,59,603 in respect of a private limited company dealing in yarn on commission basis was cancelled. The assessing office was directed to frame fresh assessment "considering the provisions of Circular C. No.7(32)-DT-14/1992, dated 24-7-1994.

2. The assessee company returned net income for the year 1994-95 at Rs.6,803,39. Gross commission receipts disclosed at Rs.26,32,243 were accepted on account of their being verifiable. However, a number of profit and loss account additions were made to compute total income for the year at Rs. 1, 59,603 by way of assessment order dated 24-4-1995.

3. On 27-5-1995 the aforesaid revising authority issued a notice expressing its intention to revise the aforesaid assessment on the ground that the same should have been completed in terms of the agreement between the C.B.R. and the Yarn Merchants Association as circulated vide the aforesaid letter. In the view of the revising authority if the assessing officer had framed an assessment in accordance with the agreement reached between the Revenue and the said association the assessee would have been liable to pay tax at Rs.1,09,847. The terms of the aforesaid agreement allegedly provided for a rate of 12 % on gross receipts. In reply to the notice the assessee denied any liability to pay further tax on the ground that the assessment was completed in accordance with law and that it had neither any dealing with the Yarn Merchants Association nor it was one of its members. Therefore, it was stated that the assessee company was not in any manner bound by the alleged agreement reached between the C.B.R. and the said association which was subsequently circulated by way of the letter dated 24-7-1994. The revising authority, however, described and held the reply of the assessee as irrelevant and baseless. Finding that the C.B.R. having settled the mode and procedure for finalization of assessments of commission agents of yarn it was held that there was no reason to make a depart in the case of the assessee. Therefore, as noted earlier the assessment framed was cancelled and the assessing officer was directed to frame a fresh one. This has brought the assessee in appeal before us.

4. Parties have been heard. Learned counsel repeats the defence which was earlier taken up while replying the notice of the revising authority. It is stated that the assessee company is neither a member of the said association nor it had any dealing with any of its members. Also submits that in fact the assessee company does not have any kind of dealing with the yarn merchants based at Karachi. Learned counsel also attempts to say that commodity in which the assessee company is dealing is totally different from the one in which the Yarn Merchants Association based at Karachi dealt with and had agreed to be assessed at a certain straight tax rate on gross receipts. According to him the assessee is dealing in polyester yarn while the said association represented the dealers in other kinds of yarn. Further states that in the first instance an agreed formula for framing of an assessment is not within the contours of the Income Tax Ordinance nor the C.B.R. was competent to reach an agreement which was otherwise definitely not contemplated in the S.A.S. circulated for the year. To support his contention that an agreed assessment has not solid basis to stand upon reliance is placed upon two reported judgments of the Lahore High Court cited as (1990 PTD 903 re: Afzal Construction Company v. Chairman C.B.R. and 1990 PTD 383 re: Tanveer Brothers Oil Dealers v. CIT. In the first case a Division Bench of the Lahore High Court found that agreed assessment did not fit into the brought contours of the Ordinance though certain exceptions were visualized. In the second reported judgment the same learned Division Bench concluded that agreed assessment having not been provided in the Ordinance the assessing officer had to assess the total income of the assessee on the strength of the material on record and such other evidence on specific points, as was required by him. Lastly, learned counsel contends that the assessment framed by the assessing officer being in accordance with the procedure provided by law could not be said to have been erroneous if the view of the I.A.C. is accepted as correct that it was prejudicial to the interest of the Revenue.

5. Learned D.R. on the other hands supports the revisional order. It is stated that the assessing officer was bound by instructions issued by the C.B.R. as contemplated in section 8 of the Income Tax Ordinance. Therefore, in his view any deviation from such course rendered the assessment framed not only erroneous but also prejudicial to the interest of the Revenue inasmuch as admittedly the higher tax liability would have fallen if the assessing officer had acted in accordance with the agreement reached with the Chairman Pakistan Yarn Merchants Association.

6. Having considered the submissions made at the Bar we find no substance at all either in the impugned revising order or in the submissions made at the Bar for the Revenue. Learned counsel for the assessee is correct in pointing out that even if the assessment already framed in the case of the assessee is considered prejudicial to the interest of the revenue it could never be held as erroneous. In fact the revising authority did not point any error in the assessment except that its completion did not result in the light of the said agreement with the yarn association. We are also inclined to agree with him that an individual, the Chairman of the Yarn Association had no authority to speak for any person in the trade who was not a member of the association. This fact was clearly brought into the knowledge of the revising authority on the first available opportunity when the assessee replied to the notice served upon it under section 66-A of the Ordinance. However, the revising authority ignored the plea without any justifiable reason. The submissions made at the Bar against agreed assessment also finds support from view of their Lordships of the Lahore High Court as expressed through the aforesaid reported judgments. The revising authority definitely moved on a premises which was not supported by any provision of the Ordinance. The C.B.R. is authorized to make a Self-Assessment Scheme as contemplated under section 59 of the Income Tax Ordinance. Also 59-C permits the C.B.R. to make a Scheme or Schemes for fixed tax. However, the kind of arrangement reached between the Chairman C.B.R. and the Chairman Pakistan Yarn Merchants Association is not provided for in any of the provisions of the Ordinance inasmuch as the arrangement could be made only as a result of a scheme in respect of a limited number of assessees detailed in subsections (a) and (b) of section 59-C. The kind of assessee before us or the yarn merchant association is not covered by a scheme or schemes of fixed tax. Even otherwise, an isolated arrangement between the Revenue and a particular class of assessees cannot said to have bound those who were not fully represented and had no say in the arrangement.

7. The assessee not being a member of such association could be roped in by reference to an agreement to which it was a stranger. Mere fact that certain persons of his class agreed to be assessed at a particular rate did not render the assessment already framed in his case as erroneous. No other element of error having been pointed out we will hold that the agreement between the Chairman C.B.R. and the Chairman Pakistan Yarn Merchants Association could not result into ousting any of the provision of the Income Tax Ordinance or the rates notified for levy of Income Tax in the First Schedule. The kind of arrangement, before us it may be stated could, have even been challenged by the members of the associations if they wished to be assessed under normal law. The assessee company not being one of them could not have been treated as such. The assessment already framed did not suffer from any legal or factual lacuna. Therefore, the action of the revising authority for the aforesaid considerations cannot be approved.

8. It shall accordingly be set at naught. Resultantly, the assessment in the case of the assessee already framed on 24-4-1995 shall stand restored.

C.M.A./548/Trib. Order accordingly.