(a) Income‑tax‑‑‑

‑‑‑‑Ex parte decision‑‑‑Principle‑‑‑Merits of the .case to be considered‑‑ First Appellate Authority should have examined the merits of the case to thrash out the issue agitated by the assessee, even though the ex parte decision by the Assessing Officer was justified.

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

‑‑‑Ss.52, 86, 50(4), 80C, 80CC & 143‑B‑‑‑S.R.O. No. 368(1)/94, dated 7‑5‑1994‑‑‑Order passed by the Assessing Officer under Ss.52/86 of the Income Tax Ordinance, 1979 was declared without lawful jurisdiction on the ground that the capital of the company was below 1.5 million‑‑‑Order passed by the First Appellate Authority was vacated while the order by the Assessing Officer was cancelled by the Tribunal.

2001 PTD (Trib.) 1480 rel.

Muhammad Ajmal Khan for Appellant. Nemo for Respondent.

Date of hearing: 4th January, 2002.

ORDER

JAVED TAHIR BUTT (ACCOUNTANT MEMBER). ‑‑‑These two appeals have been filed by the assessee for the assessment years 1998‑99 and 1999‑2000 against the order of the CIT (Appeals) on the following common grounds:‑‑‑

(a)That the dismissal of appeal by the CIT(Appeals) on the basis of ex parte is unwarranted in the eye of law as he ignores rest of grounds of appeal agitated before him (for the assessment year 1998‑99).

(b)That the ex‑parte order passed under section 52 unlawful, illegal and without lawful jurisdiction.

(c)That the appellant is not responsible for making deduction under section 50(4) as capital employed in the business is less than 1.5 million and the appellant is not recipient.

(d).That the exercise of jurisdiction by the DCIT under section 52 is unwarranted in the eye of law as the DCIT failed to identify the names of parties recipient from whom the appellant did not deduct tax under section 50 of the Income Tax Ordinance, 1979.

(e)That the working back, of purchases by the DCIT giving the margin of GP at a rate of 15 % is not maintainable in the eye of law as the margin is much higher than considered by the DCIT as appellant is manufacturer.

(f)That the assumption of jurisdiction under section 52 is without legal effect as S.R.O. No. 368(1)/94 is applicable in the case of appellant.

(g)That the additional tax imposed under section 86 is ab initio null and void as the appellant did not fail to perform its duties under subsection (4) of section 50 of the. Income‑tax Ordinance, 1979.

2. Mr. Muhammad Ajmal Khan, Advocate present for the assessee appellant while none present for the Revenue/respondent. The appeals are therefore, decided ex, parte on merits under Rule 20(2) of the I.T.A.T. Rules, 1981.

3. Brief facts of the case are that the order under sections 52/86 was passed through a combined order for the assessment year 1998‑99 and 1999‑2000 by the Assessing Officer. However, the order under sections 52/86 was passed ex parte after allowing sufficient opportunity to the assessee to present his case. The Assessing Officer observed that the assessee is a private limited company deriving income from supply and export and statement under section 143‑B were filed in the assessment years 1998‑99 and 1999‑2000 and assessed under sections 80C/80CC. A notice under section 52 was issued to the assessee for providing details of purchases relating to the supplies and position of deduction of tax under section 50(4). As no compliance was made, the Assessing Officer worked back the purchases after considering the 15 margin of profit and giving further 20 % margin for purchases below taxable limit. The purchases on account of contract receipt were worked out at Rs. 2,15,800 and supplies at Rs. 1,135,310 in the assessment year 1998‑99. In the assessment year 1999,2000 supplies were worked out at Rs. 3,787,105 while the contract receipts were nil. Tax under section 52 Rs.3.5 % was charged at Rs. 47,269 on both supplies and contract receipts in the assessment year 1998‑99 and at Rs.132,548 in the assessment year 1999‑2000 on supplies. Additional tax was also charged under section 86 at Rs. 16,985 in the assessment year 1998‑99 and Rs.15,660 in the assessment year 1999‑2000. In appeal, the CIT (Appeals) observed that the assessee chose not to pursue the case at the level of the Assessing Officer and the contention of the assessee did not find favour before the CIT(Appeals) who dismissed the appeal by upholding the decision of the Assessing Officer.

4. We have heard the D.R. and also carefully gone through the relevant record Available be on file.It is observed that, though the ex-parte decision b the Assessing Officer was justified still the CIT (Appeals) should have examine the merits of the case to thrash out the issue agitated the assesse, The contention of the assessee that the capital of the company is below 1.5 million and as such was not liable to deduct tax under section50(4) as per S.R.O. No. 368 (I)/94, dated 7-5-1994. The copies of the Company s balance-sheet as on 30-6-1998 and 30-6-1999 have been furnished which show that the capital of the company is below 1.5 million and as such the S.R.O. No. 368(2)/94 is fully applicable in this case. The assessee has referred to the case decided by the I.T.A.T.2001 PTD (Trib.).1480 in support of his contention. Thus we are convinced that the assessee has been erroneously declared as assessee in default in both the years under appeal and the order passed by the Assessing Officer under section 52 for both years under appeal was without lawful jurisdiction. Consequently the order passed by CIT (A) is vacated and order passed under sections 52/86 by the Assessing Officer is cancelled for both years under appeal.

The assessee s appeals succeed.

C.M.A./M.A.K./242/Tax(Trib.) Appeal accepted.