I. T. A. NO. 1121/LB OF 1992,93, DECIDED ON 4TH MARCH, 1997. VS I. T. A. NO. 1121/LB OF 1992,93, DECIDED ON 4TH MARCH, 1997., 1998 PTD-INCOME-TAX-APPELLATE-TRIBUNAL-PAKISTAN 388 (1997)

Income Tax Ordinance (XXXI of 1979)---

----Ss.22 & 32(3)---Income from business---Estimate of sales---G. P. rate-- Mark-up ---Add-backs---Assessee returned sales with application of his own G. P. rate---Assessing Officer, rejecting the same made estimate of sales on higher rate with 30 % G. P. rate and made addition in P & L Account-- C.I.T.(A) maintained the same---Assessee, feeling aggrieved, went into second appeal---Appellate Tribunal taking into account its order for the preceding year directed that sales being verifiable be accepted; 30% G.P. rate be adopted as confirmed by Tribunal in the preceding year; mark-up be deleted in the light of observation in the said order of preceding year-- Add-backs, being unverifiable and unvouched, called for no interference.

I.T.A. No.553/LB of 1991-92 and I:T.A. No.1069/LB of 1991-92 ref.

Nazir Ahmad Ch., C. A. for Appellant.

Asad Ali Jan for Respondent.

Date of hearing: 13th February, 1997.

ORDER

This appeal has been filed by the assessee against the order of the CIT(A) for the assessment year 1991-92. The appellant has agitated the rejection of accounts application of G.P. rate at 30% , estimation of sales and the following add-backs in the profit and loss account. The disallowance of mark-up Rs.111,603 has also been agitated.

2. The brief facts of the case are that the appellant is a manufacturer of crockery items. Sales were declared at Rs.2,137,850 yielding a G.P. rate of 29,83 % . The assessing officer rejected the declared version as separate. Stock register and Production details were not provided, power and fuel charges had been increased and the wages and benefits were more when compared with the increase in receipts. The assessing officer, therefore, estimated the sales at Rs.40 lac to which G.P. rate at 30% was applied. After making the additions in the profit and loss account the income of the appellant was determined at Rs.128,890 as against loss declared at Rs.194,157. The appellant being aggrieved filed an appeal before the CIT(A) who maintained the treatment accorded by the assessing officer.

3. During the course of the hearing the learned A.R. vehemently urged that the sales have been effected to 17 parties, complete details of which has been supplied to the assessing officer and the CIT(A), a copy of which was also submitted to us. He stated that the facts and circumstances of the case are identical to those of the assessment year 1990-91 where the assessee's Account version had been rejected by the assessing officer and confirmed by the learned CIT(A). It was further stated that the assessing officer has stated in the body of his order that "the assessee has a history of rejection of accounts, estimation of sales and application of G.P. rate. In the previous year the A.R. did not contest rejection of accounts and position remains the same in the current year. Sales estimated and G.P. applied in the year 1990-91 were confirmed in appeal". It was stated in this context that assessing officer was not aware that the assessee preferred an appeal before the Tribunal who by their order in ITA No.553/LB/1991-92 (assessment year 1990-91) dated 10-1-1994 accepted the assessee's declared sales with the following observations:

"It was claimed that the sales were totally verifiable as the same were subjected to levy of sales tax which requires maintenance of elaborate record. He stated that the defects pointed out in the books related only to the debit side of the accounts as a consequence of which G.P. rate was applied at 30% against declared G.P. rate of 22.43% which is not pressed by the learned A.R. The learned D. R. also admitted that no defect-was found in the sales by the assessing authority. In view of the verifiable nature of the sales and the assessing authority having failed to point out any defect in this behalf, it is directed that the declared sales be accepted."

4. With regard to the addition of Rs.1,11,603 under the head mark-up/Bank charges it was stated that for the assessment year 1990-91 the learned CIT(A) deleted the addition. The department being aggrieved preferred an appeal before the Tribunal vide ITA No.1069/LB/1991-92 (assessment year 1990-91) dated 10-1-1994. This Tribunal rejected the appeal of the department with the following observations:

"In the departmental appeal, the learned CIT(A) order in deleting the addition of Rs.90,829 on account of mark-up has been contested to be legally untenable'. The learned CIT(A) allowed this amount after observing that although the mark-up was not paid, yet the same was admissible. The appellant has maintained the books of accounts on mercantile basis. The learned D.R. had nothing to say in support of the ground raised by the Department and since there is no legal infirmity in the observation of the learned CIT(A) in this behalf, the departmental appeal is found to be devoid of any merit. "

5. Considering the arguments put forth by the learned A.R. and also taking into account the order of the ITAT for the immediately preceding year the declared sales being verifiable are directed to be accepted whereas the G.P. be adopted as 30% as confirmed by the ITAT for the assessment year 1990-91. With regard to addition of mark-up at Rs.1,11,603 the same is deleted in the light of the observation of the Tribunal mentioned above. The' add-backs in the P & L Account being unverifiable and unvouched calls for no interference.

C.M.S./405/Trib.Order accordingly.