Income Tax Ordinance (XXXI of 1979)‑‑‑

‑‑‑‑S. 62‑‑‑Assessment on production of accounts, evidence etc.‑‑ Accounts case‑‑‑Estimation of sales without pointing out any defects in accounts‑‑‑Validity‑‑‑Appellate Tribunal directed the Assessing Officer to accept the declared version of the assessee since no instance of defective nature in accounts had been quoted in the assessment order.  

1974 PTD 45 and 1999 PTD (Trib.) 3892 ref.

Muhammad Shahid Abbas for Appellant (in I.T.A. No.4294/LB of 2003).

M. Akram Tahir, D.R. for Respondent (in I.T.A. No.4294/LB of 2003).

M. Akram Tahir, D.R. for Appellant (in I.T.As. Nos.4976/LB of 2003 and 4550/LB of 2002).

Muhammad Shahid Abbas for Respondent (in I.T.As. Nos.4976/LB of 2003 and 4550/LB of 2002).

Date of hearing: 10th January, 2004.

ORDER

MUNSIF KHAN MINHAS (JUDICIAL MEMBER).‑‑-Cross appeals have been preferred by the assessee as well as the Revenue for the assessment year 2002‑2003 to impugn the Order, dated 22‑7‑2003 and for the assessment year 2001-2002, the Revenue is only in appeal to contest the order, dated 27‑6‑2002. Both the impugned orders have been passed by the Learned CIT, Appeals Zone‑IV, Lahore.

ASSESSMENT YEAR 2002‑2003

2. Firstly, we take up the cross appeals pertaining to the assessment year 2002‑2003 for decision. The contention of the assessee as per grounds of appeal for the assessment year 2002‑2003 is that the Taxation Officer was unjustified to estimate sales at Rs.90,00,000 against declared at Rs.60,59,000 and reduction by learned CIT(A) to Rs.63,61,950 was still excessive and unjustified. The application of G. P. @ 15 % against declared @ 10 % and its confirmation by the learned CIT(A) was unjustified. On the other side, the Revenue has stated in its grounds of appeal that the sales were assessed at Rs.90,00,000 for the assessment year 2002‑2003 keeping in view the history of the case. According to the Revenue, on the basis of Dandekar Formula, sales come to Rs.64,18,263. The contention of the Revenue is that the learned CIT(A) had fixed sales at Rs.88,00,000 for the year 2001‑2002 in this case and he was not justified in directing to estimate sales on the basis of Dandekar Formula without any cogent reason.

3. Relevant facts of the case under consideration are that the assessee, an Individual, derives income from sale and purchase of M.S. Pipe throughout the country. At first appellate stage, learned CIT(A) observed in the impugned order that so far as sales were concerned, as per assessment order, the purchases were verifiable, it was the contention of the assessee's A.R. that Dandekar Formula should have been applied with regard to the application of G.P. rate. It was the contention of the A.R. for the assessee before the learned CIT(A) that in view of heavy sales, 10% G.P. rate should have been applied in the instant case. Learned CIT(A) observed that the assessee did not object to the application of G.P. rate of 15% in the year 2001‑2002. Hence, so far the G.P. rate was concerned, learned CIT(A) had not found any force in the arguments of the learned A.R. for the assessee and upheld the rate applied by the department. Regarding estimation of sales, the findings of the learned CIT(A) are that the Assessing Officer has stated in the body of the assessment order that purchases are 100% verifiable, hence it was observed by the learned CIT(A) that the assessed' sales were on the higher side. The Assessing Officer was directed to compute/estimate sales on the basis of Dandekar Formula and compute the income accordingly by the Learned CIT(A).

4. Learned A.R. for the assessee has contended before this Appellate Bench that it was a no account case in. the previous years. It has been averred by the learned A.R. that the year under appeal is the first year of the business for which accounts have been maintained. According to the learned A.R. the declared version cannot be rejected because, the instant case was an account case. Learned A.R. for the assessee went on to say that without pointing out the defects in the accounts, the declared version could not be rejected and the G.P. rate also could not be disturbed as well. Learned A.R. has also stated that the purchases are verifiable and details of the customers are also present with the assessee. He has relied upon the case‑law reported as 1974 PTD 45 and 1999 PTD (Trib.) 3892.

5. Learned D.R. however, reiterated the contention of Revenue as mentioned supra.

6. We have considered the arguments advanced by both the parties and have also perused the relevant orders. We agree with the contentions of the learned A.R. for the assessee and are inclined to direct the Assessing Officer that the declared version of the assessee be accepted since no instance of defective nature of the accounts has been quoted in the assessment order. It is ordered ass such. Consequently, the appeal of the assessee succeeds while the appeal of the Revenue for the assessment year 2002‑2003 stands dismissed accordingly.

Assessment year 2001‑2002

7. In respect of the assessment year 2001‑2002 the Revenue is in appeal. According to the grounds of appeal taken by the Revenue, learned CIT(A) was not justified in reducing the estimation of sales from Rs.95,00,000 to Rs.88,00,000. It is also the contention of the Revenue that the learned CIT(A) was not justified in deleting the addition made under the Head Salaries.

8. At first appellate stage, it was contested by the assessee that the estimation of sales at Rs.95,00,000 against declared at Rs.48,26,995 was very high and excessive as well as without any substance and without confrontation. According to the assessee, the estimation of sales at Rs.95,00,000 was highly objectionable as all the purchases were fully verifiable and made from only one party, hence the estimation should be made according to the Dandekar Formula. Learned CIT(A) reduced and fixed the sales in appeal at Rs.88,00,000. As far as addition under the Head Salary was concerned, the addition in view of the identification cards of the employees relating to the assessment year 2000‑2001 available with the assessee, this addition was held to be uncalled for by the learned CIT(A) and ordered to be deleted accordingly.

9. Learned D.R. has merely reiterated the contention of the Revenue mentioned supra and has not been able to persuade us with any plausible argument or material evidence warranting inter ference in the impugned first appellate order for the assessment year 2001‑2002.

10. Under these circumstances, we also find no reason to disagree with the learned CIT(A). The relief allowed by the learned CIT(A) appears reasonable and in consonance, with the circumstances of the instant case. We, therefore, uphold the impugned order in respect of both the issues raised by the Revenue i.e. reduction made in the estimation of sales and deletion of the addition made under the Head Salaries. Resultantly, the impugned first appellate order, dated 27‑6‑2002 is hereby affirmed and the departmental appeal for the assessment year 2001‑2002 stands dismissed accordingly.

11. Consequently, the appeal of the assessee for the assessment year 2002‑2003 is allowed while both the departmental appeals for the assessment years 2002‑2003 and 2001‑2002 stand dismissed accordingly.

C.M.A./43/Tax. (Trib.)Order accordingly.