I.T.A. NO. 1502/KB OF 1998-99, DECIDED ON 18TH JUNE, 1999. VS I.T.A. NO. 1502/KB OF 1998-99, DECIDED ON 18TH JUNE, 1999.
1999 P T D (Trib.) 4163
[Income-tax Appellate Tribunal Pakistan]
Before S. M. Sibtain, Accountant Member and Jawaid Masood Tahir Bhatti Judicial Member
I.T.A. No. 1502/KB of 1998-99, decided on 18/06/1999.
Income Tax Ordinance (XXXI of 1979)---
--Ss.65 & 59(1)---Additional assessee---Assessment was made under Self-Assessment Scheme---Assessment was reopened or: the ground that assessee had been allowed discount on purchases, opening stock was wrongly known and expenses claimed in computation of income was less than aggregate of expenses incurred as per statement of profit and loss account-- "lessee explained that discount received had been passed on to the retailers and further submitted that discount was adjusted in the cost of sales in trading account because it was a trade discount, opening stock was inadvertently mentioned on the one page return and cost of telephone and travelling, non-incidental to business, had been excluded from the profit and loss account in computing the income---Assessing Officer dismissed/rejected explanation on the ground that assessee had shown purchases less than the amount on which, as per certificate, discount was allowed ---Assessee, in appeal, contended that proceedings initiated under S.65, Income Tax Ordinance, 1979 were ab initio void in law because no definite information of concealment of income was available to the Assessing Officer---First Appellate Authority concluded that no new information was available at the time of re-opening the assessment and explanation offered was reasonable-- Validity---First Appellate Authority, in circumstances, was not justified in holding that no new information was available to the Assessing Officer-- Information received about discount on purchases by the Assessing Officer after original assessment, was definite information---Order of First Appellate Authority was vacated and appeal was remanded by Appellate Tribunal.
Muhammad Umar Farooq, D.R. for Appellant.
Abdul Tahir, I.T.P. for Respondent.
Date of hearing: 18th June, 1999.
ORDER
S. M. SIBTAIN (ACCOUNTANT MEMBER).---This appeal is instituted at the instance of the Department against the order of the learned A.A.C. for holding that the proceedings initiated under section 65 of the Income Tax Ordinance are ab initio void in laws because no definite information of concealment of income, is available to the learned D.C.I.T. for initiating the proceedings that has not been available on record since the culmination of original assessment proceedings.
2. We have heard the learned representatives of the two parties.
3. Briefly, the facts are that the appellant is an individual, engaged in wholesale of glass sheets etc. mainly of Nowshera Glass and Gunj Glass Works. Original assessment is made under section 59(1) of the Ordinance at total income of Rs.64,000. The learned DCIT has recorded in his order that later, information is collected from M/s. Nowshera Glass Sheet and M/s. Gunj Glass Works Ltd. that the assessee has been allowed a discount of Rs.2,99,470 on purchases of Rs.7,409,308 made from these two companies, Further the scrutiny of the case record has shown that the assessee has wrongly shown the opening stock at Rs.30,000 for the assessment year 1996-97 whereas the closing stock shown in the return for the assessment year 1995-96 is at Rs.1,00,000 further it is noted that the aggregate of expenses incurred as per statement of P&L Account is Rs.2,47,300 but the respondent has claimed only Rs.2,42,000 in the computation of income. The learned D.C.I.T., therefore, has issued notice under section 65 with prior approval of the I.A.C.
4. The learned D.C.I.T. has further recorded in his order that the assessee has failed to file the revised return. However, in response to notice under section 61 Mr. Tahir Ansari, the learned A.R. of the assessee has attended and contended vide order sheet Entry No. 11 dated 26-8-1998 that the discount amount received from M/s. Nowshera Glass Sheet and M/s. Gunj Glass Works has been passed on to the retailers but the learned A.R. according to the D.C.I.T., has completely failed to produce even a single evidence to support his claim. Rather, he has changed his stance and contends that the assessee sells goods at price less than the listed price of the company. The evidence provided by the learned A.R. in this respect is totally misleading and seems to be an afterthought, according to the D.C.I.T.
5. The respondent, according to the learned D.C.I.T., has further submitted that the discount is adjusted in the cost of sales in Trading A/c. because it is a trade discount. The learned D.C.I.T., however, has dismissed the explanation on the ground that the respondent has shown purchases of Rs.14,000,000 in the trading A/c. while discount as per certificate has been allowed to the respondent on purchases amounting to Rs.7,609,308 and the respondent has not been able to identify the other parties whom the purchases are made from and the amount of discount, if any, allowed by such other parties.
6. Regarding the discrepancy in the closing and opening balances of stock (supra), it has been, admittedly, explained that the figure of opening stock is inadvertently mentioned on the one-page-Return of income for 1996-97 at Rs.1,00,000. While in the statement of trading A/c. enclosed with it the figure is Rs.50,000 only.
7. Regarding the difference of Rs.5,300 it has been explained that the reason for claiming only Rs.2,42,000 as against overhead expenses amounting to Rs.2,47,300, recorded in the books, is that cost of telephone and travelling non-incidental to business has been excluded.
8. The learned A.A.C., on the foregoing facts, has concluded that no new information is available with the Assessing Officer at the time of reopening the assessment under section 65. Also the explanation offered by the appellant with regard to the discrepancies pointed out by the Assessing Officer appears to be reasonable. The action under section 65 having been prompted by a change of opinion, is not tenable legally in the light of various decisions of the higher Appellate Authorities cited by the A.R. of the appellant.
9. The impugned assessment is accordingly cancelled restoring the original order framed under section 59(1).
10. We find, on the facts and circumstances supra, that the learned A.A.C. is not justified in holding that no new information is available to the D.C.I.T. warranting action under section 65 of the Ordinance. We have no doubt in our mind that the information about discount supra is received by the D.C.I.T. after the original assessment and it is definite information.
11. Accordingly, we vacate the impugned order of the learned A.A.C. and remand the appeal to him for deciding it on other grounds taken by the assessee.
12. The appeal is allowed in the manner supra.
C.M.A./M.A.K./88/Tax(Trib.)Appeal allowed.