Mian KAMAL ANWAR, SARGODHA ROAD FAISALABAD VS INCOME TAX APPELLATE TRIBUNAL, LAHORE
2002 P T D 1895
[Lahore High Court]
Before Naseem Sikandar and Muhammad Sair Ali, JJ
Mian KAMAL ANWAR, SARGODHA ROAD FAISALABAD
versus
INCOME TAX APPELLATE TRIBUNAL, LAHORE and others
I. T. A. No. 130 of 1998, heard on 28/02/2002.
(a) Income Tax Ordinance. (XXXI of 1979)---
----Ss.59 & 136(1)--C.B.R. Circular No.1(3)DT-14/91, dated 1-4-1991- Self-Assessment Scheme---Selection of case for audit---Assessment made under audit---Selection of case after 5-4-1991, the target date fixed by Central Board of Revenue in Circular No. 1(3)DT-14/91, dated 1-4-1991---Legality---Central Board of Revenue had directed the authorities to finalize the selection of cases by 5-4-1991 but the case of the assessee was selected for total audit-on 10-4-1991---Validity---Such selection of case was in clear violation of the direction issued by the Central Board of Revenue which was the apex body in revenue collecting hierarchy---Central Board of Revenue was Authorised under Income Tax Ordinance, 1979 to frame Self-Assessment Scheme for every assessment year---Every instruction issued by the Board in furtherance of Self- Assessment Scheme was to be read as a part of the Scheme---Any deviation on the part of Revenue Authorities could not be seen with favour ---Assessment made under the audit was set aside in circumstances.
(b) Income Tax Ordinance (XXXI of 1979)---
----Ss.59 & 136(1)---Self-Assessment Scheme---Appeal---Assessment on the basis of total- audit---Selecting case of assessee for total audit on a wage and general ground that the returned income of the assessee was less than the one returned by other persons engaged in the similar business---Validity---Such consideration was not the requirement for selection of cases for audit---Suspicion about under statement of income in the present case was neither based upon definite information not there was any material to support the same---Question so framed was answered in the negative.
Siraj-ud-Din Khalid for Appellant.
Muhammad Ilyas Khan for Respondents.
Date of hearing: 28th February, 2002.
JUDGMENT
NASEEM SIKANDAR, J.---The appellant in this further appeal under section 136(1) of the Income Tax Ordinance, 1979 (since amended) is an individual. For the assessment year 1990-91, he returned an income of Rs.75,000 from the running of 16 cotton power looms of 72 inches size, besides income from property. The return filed under Self-Assessment Scheme was set apart for the assessment under total audit under para.4(II) of the Circular No.5 dated 25-6-1990 detailing the self-assessment for the year 1990-91. Para. Ii of the Circular provided for selection of case for process under normal law "with the approval of Regional Commissioner of Income-tax; where gross under statement of income is suspected on the basis of definite information based on material evidence".
2. In the proceedings that followed the Assessing Officer through an assessment order, dated 18-12-1991 computed net income of the assessee at Rs.1,86,080.
3. His first appeal before CIT (Appeals), Faisalabad failed on 31-12-1991 though some relief was allowed in profit and loss account expense as also in the estimation of sales.
4. On further appeal a Division Bench of the learned Appellate Tribunal also maintained the selection of the case for total audit. The relief allowed in estimation of sales and profit and loss account was found adequate.
5. Hence this further appeal by the Revenue alleging that following questions of law have arisen out of the said order of the Tribunal dated 14-2-1998:---
(i)Whether the selection of the case of the appellant for audit under para. 4(ii) of Circular No.5 of 1990 by the respondent 2 was valid and in accordance with Scheme?
(ii)Whether the selection of the case of the appellant for audit under para.4(ii) of Circular No.5 of 1990 without disclosing even on request from ' the assessee the "definite information based on material evidence" was valid?
(iii) If the answer to the questions is in negative whether the assessment made on 18-12-1991 under Audit was valid?
(iv) Whether there was any material to pitch the sales at Rs.10,00,000 against declared at Rs.4,50,000?
(v) Whether there was any justification to confirm the pitching of income at Rs.1,69,920 by the ICT(A) from 16 looms when much lower incomes have been assessed in other cases?
(vi) Whether the Income-tax Appellate Tribunal was justified to uphold that allowance of P&L expenses to the extent of claim only when the sales and business income have been enhanced considerably?
5-A. After hearing the learned counsel for the patties, we are inclined to reply Question No. l in the negative. Firstly, it is noted that through a Letter C. No. 1(3) DT-14/91, dated 1st April, 1991 the Central Board of Revenue directed the concerned Regional Commissioner of Income-tax to finalize the selection of cases by 5th April, 1991. Also that after that date no further case should be selected for audit. The D.R. of Income tax Appellate Tribunal Bench-V, Lahore vide his letter dated 31-5-1997 addressed to the Accountant Member of that Bench informed that the case of the assessee was selected for total audit on 10-4-1991. That was a clear violation of the direction issued by Central Board of Revenue which is apex body in revenue collection and under the Income Tax Ordinance is authorised to frame Self-Assessment Scheme notified for every assessment year. Every instruction issued by the Board in furtherance of that scheme is, therefore, to be read as a part of the Scheme. Any deviation on the part of the local Revenue Authorities including Regional Commissioner of Income-tax or Commissioner of Income-tax cannot be seen with favour.
6. Secondly, the selection of case for total audit happened on a vague and general ground that the returned income was less than the one returned by other persons engaged in the same business. That observation could hardly answer the requirement for selection of cases for audit as reproduced above. The suspicion of under statement of income in the given situation was neither based upon definite information nor there was any material to support the same. Accordingly as said above, Question No.(i) is answered in the negative. Rest of the questions in the given situation need not be answered.
7. Appeal succeeds in the above form.
Q.M.H./M.A.K./K-125/L
Appeal allowed.