(a) Income Tax Ordinance (XXXI of 1979)---

----S. 62---Survey for Documentation of National Economy Ordinance (XV of 2000), Preamble---Survey---Estimation of sales---Assessment of higher turnover than assessed by the survey team---Validity---No firm basis existed to justify .the turnover as assessed by the Assessing Officer at. Rs.25 lacs when at the time of survey, a turnover of Rs.17 lacs appeared to have been agreed to---If the Department had any firm evidence that the declaration as made by the assessee was not correct, then the same should have. Been confronted to the assessee formally-- Mere reference to a general enquiry conducted by the Inspector was of no consequence in the eye of law---Inspector did not prepare an inventory of stocks statedly available at assessee's business premises and no copy of the same was ever handed over to the assessee for rebuttal ---Assessing Officer had erred in blindly accepting the Inspector's bald recommendations---Appellate Tribunal directed that sales for the year be assessed at Rs.17 lacs, as agreed to in the survey report.

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

----S. 62---Assessment on production accounts, evidence etc.---Profit and loss expenses---Add backs without confrontation---Validity-- Addition made under various heads without confronting the assessee under S.62 of the Income Tax Ordinance, 1979 were not sustainable in law.

Anwar Ali Shah, D.R. for Appellant.

Syed Ali Imran Rizvi for Respondent.

Date of hearing: 30th May, 2003.

ORDER

MUHAMMAD MUNIR QURESHI (ACCOUNTANT MEMBER).---These are cross-appeals by an individual and by Revenue and arise out of order of the CIT(A), Zone-IV, Lahore, dated 14-10-2002.

2. The facts in this case are that assessee's total turnover for the year under all Heads has been appraised by the DCIT at Rs.25 lacs and has been reduced by the CIT(A) to Rs.20,50,000. It is the assessee's contention that survey of assessee's business premises had been duly conducted in March, 2001 and the assessee had agreed to be assessed to a turnover of Rs.17 lacs, which position had apparently been accepted by the Department but subsequently an abrupt addition has been made without any justification allegedly on the basis of Inspector's enquiry when 'no physical stock taking was ever done by the Inspector. Furthermore; it is contended that add backs against P & L expenses were wholly unjustified as these have been claimed reasonably and moreover it is pointed out that the Assessing Officer has failed to interrogate the assessee specifically under section 62 as mandated by express statutory stipulation.

3. According to Revenue, relief in sales as accorded by the CIT(A) is excessive and not justified by the operative circumstances.

4. The DR has been heard.

5. We have heard both sides and have examined the available record and in our considered judgment, there appears to be no firm basis to justify the turnover as assessed by the DCIT at Rs.25 lacs when at the time of survey, a turnover of Rs.17 lacs appears to have been agreed to. If the Department had any firm evidence that the declaration as made by the assessee was not correct, then the same should have been confronted to the assessee formally. Mere reference to a general enquiry conducted by the Circle Inspector is of no consequence in the eye of law. The Inspector did not prepare an inventory of stocks statedly available ac assessee's business premises and no copy of the same was ever handed over to the assessee for rebuttal. Under the circumstances, the Assessing Officer has clearly erred in blindly accepting the Circle Inspector's bald recommendations. Although relief has been accorded by the CIT(A), in our judgment, the relief is not sufficient and it is accordingly directed that sales for the year be assessed at Rs.17 lacs, as agreed to in the survey report.

6. In matter pertaining to P&L expenses, we agree that the Assessing Officer having failed to properly confront the assessee under section 62 with the proposed add backs, additions as made under various Heads are not sustainable in law. The add backs are accordingly deleted.

7. Resultantly, assessee's appeal is accepted and departmental appeal is rejected.

C.M.A./815/Tax (Trib.)Appeal accepted.