I.T.AS. NOS.234/KB, 588/KB AND 589/KB OF 1998-99, DECIDED ON 11TH MARCH, 1999. VS I.T.AS. NOS.234/KB, 588/KB AND 589/KB OF 1998-99, DECIDED ON 11TH MARCH, 1999.
1999 P T D (Trib.) 2859
[Income-tax Appellate Tribunal Pakistan]
Before Shahid Jamal, Accountant Member and Tahseen Ahmed Bhatti, Judicial Member
I.T.As. Nos.234/KB, 588/KB and 589/KB of 1998-99, decided on /01/.
th
March, 1999. Income Tax Ordinance (XXXI of 1979)---
----Ss.65 & 13(1)(aa)---Additional assessment ---Addition---Assessee was running a shop for selling products made by some manufacturer on commission basis---Commission, Freight, cash incentive, bonus received from manufacturer was not mentioned separately in the Trading and Profit and Loss Account but claimed that all these figures were included in the purchases---Addition made by Assessing Officer---Validity---Order of addition was set aside by Income-tax Appellate Tribunal with direction that the Assessing Officer should obtain copies of ledger accounts from manufacturer of the products and examine whether the said amounts were debited against purchases or were offered in cash on achievement of certain targets---If the amounts were debited against purchases and the said amounts and the purchases tally with the figures reported by the assessee, then there was no case for reassessment---If, however, the said amounts were paid in cash or were over and above the purchases reported by the assessee to manufacturer, the same may be held to be income liable to be assessed.
Shaukat Soomro, D.R. for Appellant.
Abdul Tahir Ansari, I.T.P. for Respondent.
Date of hearing: 11th March, 1999.
ORDER
SHAHID JAMAL (ACCOUNTANT MEMBER).---The above three appeals have been filed at the instance of the Department and are directed against learned A.A.C. Sukkar's order, dated 22-8-1999. The learned A.A.C., in his impugned order has held that assessments completed under section 62 read with section 65 were based on the change of opinion and were not legally valid. The same were cancelled and original orders under section 59(1) of the Income Tax Ordinance were restored.
2. We have heard Mr. Shaukat Soomro, learned D.R. for the appellant and Mr. Abdul Tahir Ansari for the respondent.
3. The facts giving rise to above appeals are that the assessee, an individual, was running a shoe shop for selling Bata Products. His returns for the assessment years 1995-96 and 1996-97 were filed under Self- Assessment Scheme showing income of Rs.45,000, Rs.62,400 and Rs.67,000 and were accordingly assessed under section 59(1). Subsequently, the Department received information from Bata Head office about commission, freight, cash incentives and bonus having been given to the respondent amounting to Rs.1,01,605, Rs.33,869, 60,183 and Rs.1,30,250 respectively for the assessment years 1994-95, 1995-96, 1996-97 and 1997-98, which according to the Assessing Officer were not declared of assessed and hence all the completed assessments were reopened under section 65 of the Income Tax Ordinance. The assessee did not file return in response to notice under section 65 and contested the reassessment proceedings. The Department conducted a detailed enquiry through Inspector of Income-tax who reported that the assessee was not only purchasing from Bata Pakistan Ltd. but also from other shoe manufacturers of the market and was making sales both on wholesale and retail basis. The Inspector's Report was confronted to the assessee and a detailed notice under section 62 for the Income Tax Ordinance dated 18-6-1998 was issued wherein the A.C.I.T. expressed his intention of adding the following amounts under section 13(1)(aa) of the Income Tax Ordinance:---
| Assessment Years | Amount |
| 1994-95 | Rs.1,90,433 |
| 1995-96 | Rs.3,90,454 |
| 1996-97 | Rs.7,10,260 |
4. The above notice was not satisfactorily responded by the assessee hence, the A.C.I.T. finalized the assessment under section 62/65 after making additions under section 13(1)(aa) as discussed supra. Being aggrieved the respondent filed appeal before the A.A.C. and took the plea that proceedings initiated under section 65 were not valid as these were not based on any definite information, but merely on change of opinion, the learned, A.A.C. accepted his plea and cancelled all the orders on the ground that proceedings under section 65 were not validly initiated.
5. Mr. Shaukat Soomro, learned D.R., pressing the appeals submitted that the respondent had failed to disclose commission, bonus and cash incentives and hence this was definite information obtained from Bata Pakistan Ltd. and the proceedings were validly initiated after fulfilling all the requirement of law. Mr. Abdul Tahir Ansari, A.R., reiterated that all the amounts which the Department had tried to tax under section 65 was originally declared and assessed. We have referred to the assessment record which was shown to us by the learned D.R. The perusal of the record shows that return for 1994-95 was originally filed on 2-08-1994 at an income of Rs.43,600 without any statement of account. Subsequently, the revised return was filed on 12-16-1994 declaring income of Rs.45,000. This was again without prescribed statement of income and expenditure account. Hence, a requisition letter was issued on 25-3-1995 and in compliance to such notice an estimated trading account was filed showing purchases, bonus, cash incentive and freight as under:---
| Total purchases | Rs. 33,86,853 |
| Bonus | Rs. 1,01,605 |
| Cash incentives | Rs. 60,124 |
| Freight | Rs. 33,33,869 |
6. The amount of bonus was added to purchases and the same were shown at Rs. 34, 88,458 on which estimated income was declared at Rs.1,40,000 and expenses were-claimed at Rs.95,000 and net income was offered on 45,000. The return for 1995-96 was filed on 29-9-1995 showing income of Rs.62,400 alongwith an estimated trading P&L Account which showed purchases at Rs.53,65,438, sales at Rs.60,00,000, G.P. of Rs.5,33,714 and net profit of Rs.62,400. There was no separate mention of commission, freight, cash incentive or bonus in the attached account. The return for the year 1996-97 was filed on 30-6-1996 at Rs.67,000. This return too was accompanied by estimated trading P&L Account disclosing sales at Rs.1,04,77,819 and purchases of Rs.99,20,667 G.P. of Rs.6,00,000 and net profit of Rs.67,000. It was mentioned that purchases included bonus cash incentive, freight and commission but no separate figures were given. It shows that the assessee had partly mentioned and disclosed the figures of commission, freight, cash incentive and bonus but we fail to understand the accounting procedure employed by the assessee so as to determine whether said amounts were included in the originally assessed income or not. When we specifically asked Mr. Ansari to explain to us whether the amounts of commission, freight, cash incentive and bonus, hereinafter referred to the said amounts, were included in sales or debited against purchases he was unable to reply to us. Under the circumstances we consider it appropriate to" set aside all the assessments with direction that the Assessing Officer should obtain copies .of ledger accounts from Bata Pakistan Ltd., and examine, whether the said amounts were debited against purchases or were offered in, cash on achievement of certain targets. If the same were debited against purchases and the said amounts and the purchases tally with the figures reported by respondent, then there is no case for reassessment. However, if the said amounts were paid in cash or were over and above the purchases reported by the respondent to M/s. Bata Pakistan Ltd., the same may be held to be income liable to be assessed with these direction we set aside all the impugned assessments.
C.M.A.158/Tax(Trib.) Order accordingly.