Per Khalid Waheed Ahmad, Judicial Member; Muhammad Sharif Chaudhry, Accountant Member agreeing‑‑‑

Income Tax Ordinance (XXXI of 1979)‑‑‑

‑‑‑‑Ss. 62, 50(4A) & Chaps. VII, [Ss.50 to 54] & VIII [Ss.68 to 84]‑‑ C.B.R. Circular No.63 of 1994, dated 10‑8‑1994‑‑‑Assessment on production of accounts, evidence etc. ‑‑‑Assessment on the basis of agreement between the Pakistan Yarn Merchants Association and the Central Board of Revenue, the consent to which was denied by the assessee‑‑‑Validity‑‑‑Agreement reached between the Pakistan Yarn Merchants Association and the Central Board of Revenue was not applicable to the assessee as it was not member of the said Association‑‑ Case was set aside by the Tribunal and the matter was sent back to the Assessing Officer for de novo action‑‑‑Assessing Officer was directed to assess the income of the assessee in accordance with law on the basis of accounts of the assessee and work out tax liability of the assessee on the basis of income assessed by him and not' on the basis of tax rate agreed between Pakistan Yarn Merchants Association and the Central Board of Revenue‑‑‑Assessing Officer, before doing so, would summon and examine the record of the Association to ascertain whether assessee was really not member of the said Association during the period under consideration‑‑‑If it turned out that the assessee was really member of the Association then the assessment order based on agreement between Central Board of Revenue and the Pakistan Yarn Merchants Association would stand restored.  

1988 PTD (Trib.) 1010 ref.

Per Khalid Waheed Ahmad, Judicial Member‑‑‑

Income Tax Ordinance (XXXI of 1979)‑‑‑

‑‑‑‑Chaps. VII [Ss.50 to 54] & VIII [Ss.68 to 84]‑‑‑C.B.R. Circular No. 63 of 1994, dated 10‑8‑1994‑‑‑Assessment‑‑‑Tax liability in special cases‑‑‑Assessment of yarn commission agents‑‑‑Central Board of Revenue's Circular No. 63 of 1994, dated 10‑8‑1994 issued on the subject of assessment of yarn commission agents in consequence of agreement reached between, the Central Board of Revenue and Pakistan Yarn Merchants Association was not in conformity with the procedure for assessment of income provided under Chaps. VII & VIII of the Income Tax Ordinance, 1979.

Income Tax Ordinance (XXXI of 1979)‑‑‑

‑‑‑‑Ss. 62, 50(4A), Chaps. VII [Ss.50 to 54] & VIII [Ss.68 to 84]‑‑ C.B.R. Circular No.63 of 1994, dated 10‑8‑1994‑‑‑Assessment on production of accounts, evidence etc. ‑‑‑Assessment on the basis of agreement between the Pakistan Yarn Merchants Association and, the Central Board of Revenue‑‑‑Validity‑‑‑Assessment framed on the basis of an agreement which had no binding force because of not being in accordance with the scheme of assessment provided under the relevant provisions of the Income Tax Ordinance, 1979, was not maintainable in law particularly when the assessee had not given his consent to pay the tax in terms of agreement reached between the Pakistan Yarn Merchants Association and the Central Board of Revenue.  

Per Imtiaz Anjum, Accountant Member. ‑‑‑[Minority view].

Nauman Yahya, I.T.P. for Appellant.

Anwar Ali Shah, D.R. for Respondent.

Date of hearing: 25th June, 2002.

ORDER

IMTIAZ ANJUM (ACCOUNTANT, MEMBER). ‑‑‑The appeal by appellant‑company has been preferred on the grounds that CIT (A) while rejecting the appeal ignored the facts and history inasmuch as that books of accounts were maintained on regular basis as a result of which declared commission being verifiable was accepted. Rejection of the accounts without specific defects pointed out and confronted alongwith add backs out of P & L Account has further been challenged to be unjustified and uncalled for. Calculation of income on the basis of Circular No.63, dated 10‑8‑1994 has also been objected to be illegal, harsh, excessive and without any basis.

2. We have heard Mr. M. Nauman Yahya, ITP, A.R. of the assessee and Mr. Anwar Ali Shah D.R.

3. The facts briefly are that appellant Private Limited Company derived income from selling agency of yarn on behalf of other parties mentioned on first page of assessment order under section 62, dated 19‑11‑1995. Assessing Officer on the basis of certificate from the principals accepted the commission declared at Rs.6,79,095 against commission of Rs.13,17,030 for the immediately preceding year. However, on examination of books of accounts particularly non- production of cash memos., bill books etc., the transactions inasmuch as whether sales were effected at rates fixed by the principal were not considered verifiable. In view of such position Assessing. Officer was of the opinion that appellant was in a position to manipulate the sale price. Coupled with this that details of brokerage commission having not been furnished, trading results were considered liable to be rejected. A specific notice under section 62, dated 6‑4‑1995 was issued. A reply, dated 13‑4‑1995 was found unsatisfactory. Keeping in view .the arrangement made by Pakistan Yarn Merchants Association with C.B.R. for uniform treatment vis‑a‑vis withholding of tax under section 50(4A) was charged on that basis.

4. CIT (A) after considering the objections of the appellant and similar grounds recorded on page II of the appellate order and relying upon the findings of the Assessing Officer in the second last para. was of the view that declared version was rightly discarded. Appeal was rejected. Before proceeding further it is considered pertinent to record the relevant para. reproduced by the CIT (A) as under:‑‑‑

"The contention of the assessee is not convincing as the declared version is not reliable in the light of defects and circumstances noticed in the account books as discussed in detail in this order. It is hardly believable that the assessee is earning only commission as declared when the rates of yarn are not settled in black and white and the assessee has also failed to produce any record of sales in the form of cash memos and bill book."

Learned A.R. has argued that Assessing Officer ignored various submissions made during the assessment proceedings thus the impugned order is not only against the facts but also against the principle of justice and fairplay. Elaborating further the A.R. has pointed out that Messrs Jamil Brothers is not member of the association, therefore, any agreement by the association was not binding. Besides that agreement being without consent was not unilaterally applied. In support of this contention reliance has been placed on reported case 1988 PTD (Trib.) 1010. A.R. has emphasized that it has been laid down by' Honourable ITAT in Full Bench judgment that agreement for assessment at particular quantum can be a binding contract when both the sides give wiling consent for some consideration. An agreement signed by one party does not qualify to be an agreement which at best can be treated as proposal. At this point A.R. was specifically called upon to state as to whether the contention/facts of being not member of association was duly pointed our to the assessing authority. The replay was not in affirmative. Similarly the facts of comparable case for normal assessment whether was pointed out the answer was again the same. The case of the appellant sis thus distinguishable on facts and circumstances of the case relied upon.

6. We have considered the facts of the case and related aspects and contentions of the learned A.R. Since the appellant failed to establish before the Assessing Authority the facts of being not member of association and also keeping in view that such agreements with C.B.R. are in the larger interest of the majority of taxpayers we feel that a waiver of individual opinion can be presumed. We are of the view that assessment framed in line with the agreement of the Yarn Merchants Association with C.B.R. need not to be interfered with. We find it exactly in line with principal of conformity and against discrimination. As appellant has not been able to make out a case for any relief we are persuaded to dismiss the instant appeals.

(Sd.) (Sd.)

KHALID WAHEED AHMED, (IMTIAZ ANJUM),

JUDICIAL MEMBER.ACCOUNTANT MEMBER.

With profound respect for my learned brother, sitting Accountant Member, I do not agree with his findings given on the issue regarding validity of assessment framed on the basis of agreement for assessment of income arrived at between the Pakistan Yarn Merchants Association and the Central Board of Revenue (C.B.R.). In my opinion, the Circular No.63, dated 10‑8‑1994 of the C.B.R. issued on the subject of Assessment of Yarn Commission Agents in consequence of agreement reached between the C.B.R. and Pakistan Yarn Merchants Association is not in conformity with the procedure for assessment of income provided under Chapters VII and VIII of the Income Tax Ordinance, 1979, therefore, not binding in the case before us. It is pointed out that withholding Tax deducted @ 10% under section 50(4A) of the Income Tax Ordinance, .1979 on payments representing commission was not the final liability of tax at the relevant time. Tax liability in cases of Yarn Commission Agents was to be determined by the Assessing Officer under Chapter VII of the Income Tax Ordinance, 1979.

According to the procedure of assessment provided in section 62 under which the assessment, has been framed in the case before us, the income was first required to be assessed and then tax liability was to be worked out by the Assessing Officer on the basis of income assessed him. Agreement to frame the assessment by working back the income on the basis of tax charged on the amount of commission receipts at a rate not provided under the Ordinance in my opinion had no binding force. It is also pointed out here that reasons given in the assessment order by the Assessing Officer for not accepting the declared version is the rejection of accounts books whereas the assessment has been framed solely on the basis of commission income declared by the assessee at Rs.6,79,095 which has been accepted as such. In my opinion, the assessment framed on the basis of an agreement which had not binding force because of not being in accordance with the scheme of assessment provided under the relevant provisions of the Income Tax Ordinance, 1979 is not maintainable in law particularly when the assessee had not given his consent to pay the tax in terms of agreement reached between the Pakistan Yarn Merchants Association and the C.B.R.

(Sd.)

(KHALID WAHEED AHMED),

JUDICIAL MEMBER.

Since difference of opinion has arisen, the case is referred to the Hon'ble Chairman for third Member's opinion on the following issue:

"Whether under the facts and circumstances of the instant case the assessment framed on the basis of the above mentioned agreement reached between the Pakistan Yarn Merchants Association and the C.B.R. the consent to which is denied by the assessee, is maintainable in law or not?

(Sd.)

(KHALID WAHEED AHMED),

JUDICIAL MEMBER.

(Sd.)

(IMTIAZ ANJUM),

ACCOUNTANT MEMBER.

I.T.A. No.636/LB of 1997

Date of hearing: 12th December, 2002.

As per Muhammad Sharif Chaudhry Accountant Member

I have heard both the parties and have considered the relevant facts. I have also consulted the record and have gone through the view of my learned brothers the learned Accountant Member and the learned Judicial Member. I agree with the view‑point of the learned Judicial Member in holding that the agreement reached between the Pakistan Yarn Merchants Association and the C.B.R. is not applicable to the case of the appellant‑assessee as it is not member of the said Association. The case is, therefore, set aside and the matter is sent back to the Assessing Officer for de novo action. The Assessing Officer is directed to assess the income of the assessee in accordance with law on the basis of accounts of the assessee and work out tax liability of the assessee on the basis of income assessed by him and not on the basis of tax rate agreed between Pakistan Yarn Merchants Associations and C.B.R. However, before doing so he would summon and examine the record of the Association to ascertain whether assessee was really not member of the said Association during the period under consideration. However, if it turns out that the assessee was really member of the Association then the present assessment order based on agreement between C.B.R. and the Association then the present assessment order based on agreement between C.B.R. and the Association would stand restored.

C.M.A./606/Tax (Trib.) Order accordingly.