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

‑‑‑‑S. 62‑‑‑Assessment on production of accounts, evidence etc.‑‑ Rejection of trading accounts on general nature of objections ‑‑‑Validity‑-Large number of purchases pertained to import‑‑‑Sales were effected through broker, agents and distributors‑‑‑Department only laid hand to the quantum of production, variation in rates, utilization of certain material more in quantity than the earlier years‑‑‑All these reasons were of general nature and not a single instance to doubt the purchases or sales was given‑‑‑Department was right in saying that history did not have any bearing but at the same time Appellate Tribunal did not favour the department just for the reason that they claimed to have found variation in rates of the product on the same date and that the production in weight was lower‑‑‑Appellate Tribunal held that there was no proper reason for rejection of accounts and directed for its acceptance.

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

‑‑‑‑S. 12(18)‑‑‑Income deemed to accrue or arise in Pakistan ‑‑‑Loan‑--Claim‑‑‑Unless the assessee claimed the amount to be loan, same could n be treated as such and the provision of S.12(18) of the Income Tax Ordinance, 1979 would not come into force.

(c) Income Tax Ordinance (XXXI of 1979)‑‑‑

‑‑‑‑Ss. 12(18) & 13‑‑‑Income deemed to accrue or arise in Pakistan‑‑ Purpose and background‑‑‑Provision of S.12(18) of the Income Tax Ordinance, 1974 was introduced to tax the fictitious loans shown by certain taxpayers to avoid the incidence of taxation ‑‑‑Legislation was obviously not against verifiable amounts, since S.13 of the Income Tax Ordinance, 1979 had proved to be insufficient, the provision was so drafted to cure the lacunas apparently seen in the said deemed income provision‑‑‑Section 12(18) of the Income Tax Ordinance, 1979 came out with another deemed income changed with the language.

(d) Income Tax Ordinance (XXXI of 1979)‑‑‑

‑‑‑‑S. 12(18)‑‑‑Income deemed to accrue or arise in Pakistan ‑‑‑Loan‑‑Establishment of loan by arguments‑‑‑Validity‑‑‑Emphasis in language of S.12(18) of the Income Tax Ordinance, 1979 was on sum claimed, sum shown and received as loan which established that assessee himself with full clarity shows an amount as loan‑‑‑No other person came into picture so as to declare an amount which had not been posted as loan to establish by arguments that it was a loan‑‑‑Accounting standard did have a clear system for debit and credit in respect of liability and assets‑‑‑Since the introduction of the provision of S.12(18) of the Income Tax Ordinance, 1979, the fact remained that the assessee should claim that he obtained a sum as cash and that the same was a loan and the Department or any other authority did not figure anywhere.  

(e) Income Tax Ordinance (XXXI of 1979)‑‑‑

‑‑‑‑S. 12(18)‑‑‑Income deemed to accrue or arise in Pakistan‑‑‑Sister concern‑‑‑Business transaction being payments by one company on behalf of the other sister concern‑‑‑Addition‑‑‑Validity‑‑‑Such was a payment of oneself on behalf of himself though for the accountancy purposes it was so indicated in the accounts of the two different legal persons i.e. separate limited companies‑‑‑Practically this was a payment unto himself‑‑‑Even enlargement of the scope of S.12(18) by way of addition of words "advance or gift" did not affect the part of provision i.e. "where any sum claimed or shown, to have been received as loan" for the two reason, firstly, the same were applicable for 1998‑99 besides they just came in addition to the words "loan" and had no effect on the words "claimed or shown".

(f) Income Tax Ordinance (XXXI of 1979)‑‑‑

‑‑‑‑S. 12(18)‑‑‑Income deemed to accrue or arise in Pakistan‑‑‑Loan‑‑ Claim or shown‑‑‑Department had right to look into the actual nature but for determining the same, the declaration of the assessee was not to be ignored‑‑‑Language of S.12(18) of the Income Tax Ordinance, 1979 starts from the words "claimed or shown" which even if were seen from the angle of the department, could not be ignored under any method of interpretation of the language of law.

(g) Income Tax Ordinance (XXXI of 1979)‑‑‑

‑‑‑‑S. 12(18)‑‑‑Income deemed to accrue or arise in Pakistan‑‑ Interpretation‑‑‑Purposive approach‑‑‑Purposive approach did not find any place in the rules of interpretation and even under International Accounting Standards no one could change the nature of the entry under the garb of such an approach.

(h) Income Tax Ordinance (XXXI of 1979)‑‑‑

‑‑‑‑S. 12(18)‑‑‑Income deemed to accrue or arise in Pakistan‑‑‑Loan‑‑‑Sister concern‑‑‑Amount paid by sister concern on behalf of assessee was definitely a liability but could not be covered within the term "loan".

(i) Income Tax Ordinance (XXXI of 1979)‑‑‑

‑‑‑‑S. 12(18)‑‑‑Income deemed to accrue or arise in Pakistan‑‑‑Loan‑‑ Sister concern‑‑‑Trading transactions between the two sister concerns was not covered within the definition of `loan'.

(j) Income Tax Ordinance (XXXI of 1979)‑‑‑

‑‑‑‑S. 12(18)‑‑‑Income deemed to accrue or arise in Pakistan‑‑‑Nature of provision‑-‑Tendency of indiscriminate use of the deemed income provisions, which in fact were not meant for generation of Revenue on regular basis‑‑‑Provision of S. 12(18) of the Income Tax Ordinance, 1979 are punitive in character and penal in nature‑‑‑Purpose of the same was more regularization hence should not be considered as a substitute of main charge and regular assessment‑‑‑Such provision could neither be liberally interpreted against the assessee nor the language therein could be ignored by applying it against the intendments which was curling the fictitious loans.

(k) Income Tax Ordinance (XXXI of 1979)‑‑‑

‑‑‑‑S. 12(18)‑‑‑Income deemed to accrue or arise in Pakistan ‑‑‑Loan‑‑ Assessee and its sister concern had made some inter related entries in their books wherein payments had been made by one company on behalf of the other and the adjustment entries were accordingly made in the books‑‑‑Addition‑‑‑Validity‑‑‑Fact that if the language so permitted the deemed income provision could not be left inapplicable but where under a clear direction the law says that no one could proceed unless, the condition of `shown and claimed' firstly stands fulfilled, one could not just apply the balance part of the provision of law‑‑‑Addition made could not stand on the test and the same was deleted by the Appellate Tribunal.

(l) Income‑tax‑‑‑

‑‑‑‑Profit & Loss account‑‑‑Add back‑‑‑Principles‑‑‑Department, for add backs in profit & loss account, should not just leap in the dark by making estimates and subjective determinations‑‑‑Facts finding should properly be made by determining the unverifiable element on the basis of documents produced and other allied details in terms of quantity of business, quality required, extent of turnover etc. etc.  

(m) Income‑tax‑‑‑

‑‑‑‑Profit & Loss account‑‑‑Add back ‑‑‑ Commission ‑‑‑ Payment of Commission against sale was neither found excessive nor unverifiable if viewed in comparison to the turnover as well as the documents respectively‑‑ ‑Add backs in various heads specially in vehicle running and sale commission was not maintainable in any sense.  

(n) Income‑tax‑‑‑

‑‑‑‑Profit & Loss account‑‑‑Add back‑‑‑Commission‑‑‑Addition just for the reason that claim was excessive than the earlier year ‑‑‑Validity‑‑ Factors which should have been brought into discussion, were as to whether the same was fake or bogus and in. this regard the documents submitted should have been brought under discussion‑‑‑Mere objection that they were unverifiable was not enough‑‑‑Reduction by way of estimation was also not to be approved‑‑‑Disallowance made was deleted as a whole by the Appellate Tribunal.

(o) Income‑‑tax‑‑‑

‑‑‑‑Profit & Loss account‑‑‑Add back‑‑‑Vehicle‑‑‑Personal use‑‑‑Element of personal use of the vehicle and the history did warrant additions, which were confirmed by the Appellate Tribunal.

Shabbaz Butt for Appellant (I.T.As. Nos.1853/LB of 2001, 276/LB and 277/LB of 2003).

Muhammad Asif, D.R. for Respondent (I.T.As. Nos.1853/LB of 2001, 276/LB and 277/LB of 2003).

Muhammad Asif, D.R. for Appellant (I.T.As. Nos.2694/LB of 2001, 707/LB and 708/LB of 2003).

Shahbaz Butt for Respondent (I.T.As. Nos.2694/LB of 2001, 707/LB and 708/LB of 2003).

Date of hearing: 19th December, 2003.

ORDER

KHAWAJA FAROOQ SAEED (JUDICIAL MEMBER).‑‑‑The cross appeals in respect of 1997‑98 to 1999‑2000 have been filed by the assessee as well as the Department. The same are decided respectively for each year separately.

The assessee appeals are against rejection and confirmation of the accounts by the Assessing Officer and CIT(A) respectively, however, without prejudice to the same, estimate of sales, application of G.P., add back in insurance claim and certain other P&L heads have been challenged. Further, the addition under section 12(18) made under the garb of the argument that the same is loan received other than cross cheque is challenged to be as unjustified. The department, on the other hand, is against deletion of the trading addition, insurance claim and partial reduction in addition made under section 12(18).

The A.R. while challenging the rejection of book version first of all said that the latest position of this assessee is that for, all the years except for 1997‑98 the accounts of the assessee have been accepted. This, he said, is as a result of the orders of the higher and superior Courts in which the assessee accounts have been considered as liable to acceptance having been rejected on the basis of whimsical grounds and without reference to any material defect. Further the so‑called calculations and observations with regard to weight of material, production, difference in rates etc., have been duly discussed, considered and dilated upon by the higher and superior Courts in the other years. Since these factors are common and the style of accounts and nature of transactions is similar in all the years besides the nature of business and objections of the department being the same rhetoric, there is no reason for an exceptional treatment for the year under discussion. He remarked that the department's stand would‑obviously be that every year has got its own circumstances but, however, in the present case not only the method adopted by the assessee and. presentation of his case remained the same but the objections and style of assessment of the department also was identical. The cancellation and its confirmation, therefore, can be reversed even for this single reason.

Coming to the particular circumstances of this case the A.R. referred pages 3 and 4 of the order of the Assessing Officer. He said that Assessing Officer has objected to the increase of charge of freight of chemicals. This charge for the year was Rs.10,20,122 as against Rs.2,08,631 of the previous year. He said that it was properly explained before him that an amount of Rs.7,09,816 pertained to other raw material. The accountant earlier was not particular in maintaining a separate entry for the other purchases but, however, on pointing out by the department it was explained to their satisfaction. The other objections which were again in respect of the claim of freight etc., he remarked, are in respect of the weight of the goods produced and not the purchases. He added that the assessee had furnished complete details alongwith the addresses of the persons to whom this amount had been paid. There is not even a single objection so as to consider it as unverifiable or that the amount is falsely claimed in the books. Furthermore, the assessee claims that all recipients of the freight are mostly taxpayer hence the question of its un‑verifiability does not arise has not been rebutted. "These facts coupled with the others including damage to the main plant, which started leaking, increased the cost of sales. Since the damages could not be repaired more Hexane was used. He said that the ratio of Hexane during the year is definitely more than the previous year but the same cannot be made as base for rejection as the reason was genuine besides the argument was never considered as not. satisfactory. The fact that there was a damage in the plant, which could be repaired after the end of the peak season is never challenged. Besides, the fact remains that the assessee purchased Hexane, acid, colors and Baroza from known and open to verification parties, the addresses of whom were duly furnished. Regarding objection of packing material that the' cost is higher he said that conversely the department has made an addition in sale of tin also. The assessee had purchased certain packing material which was totally verifiable, however, a part of the same was sold and shown in the accounts in which addition has been made. He further remarked that it is also not the case of the department that any of said packing material seller was ever confronted to be as bogus to create doubt about the accounts preparation. He said that increase in consumption of raw material by 2.19% is not a reason at all for rejection of accounts. The assessee is working with a huge plant in which a small damage or leakage affects the entire results. Further to above the entire purchases of the assessee are shown in R.G. 2 while the production and its ultimate clearance also is obviously subject to the control and audit by the Excise Department. The sale rate is not the same in respect of different buyers some of them are direct purchasers while some are agents or distributors. The cost of the product cannot be the same in respect of each one of them. Furthermore, the fluctuation in palm oil prices which normat1y features for the period October to May keeps on changing after minutes and seconds because of readily available information on Internet continuously. The price change is to stay at par with the international fluctuation. However, he added that the entire emphasis of the department is on finding faults in the total amount spent either in freight purchase of Hexane etc. The other objections are reduction in average production, difference in prices etc. No effort has been done to pin point even a single transaction in respect of any of them to hold that the same is either unverifiable or forged or incorrect. The assessee is a public limited company which is under an effective audit. Besides the Excise Department has a complete check being a source of millions of Revenue to them. Purchases, production, its clearance and sale, entirely are based upon said Excise record. The rejection of accounts, therefore, is absolutely without any reason, he finally remarked.

Coming to the other issues he said that above argument apply on all fours on add backs also. Now that in this modern era and development the department must also come out of the old style of making estimates and adopting arbitrary figures. The additions under all the heads, therefore, needs acceptance.

Regarding rejection of the trading account we have already discussed the arguments of the two sides and have expressed our view in earlier part. The assessee accounts and departmental objections remained identical in earlier as well as in the subsequent years. Not only that this Tribunal has held that same to be as liable to acceptance but the same has also been supported by the Honourable High Court. The objections of the Assessing Officer in respect of trading accounts were of general nature. The discussion with regard thereto has already been made at the earlier part of this order above. A large number of assessee purchases pertain to import and the sales have also been effected through brokers, agents and distributors. The department only laid hand to the quantum of production, variation in rates, utilization of certain material more in quantity than the earlier years. All these reasons were of general nature and not a single instance to doubt the purchases or sales was given. The learned DR is right in saying that the history does not have any bearing but at the same time we cannot favour the department just for the reason that they claimed to have found variation in rates of the product in the same day and that the production in weight was lower. We, therefore, consider ourselves convinced and hold that there was no proper reason for rejection of accounts and direct for its acceptance.

With regard to the addition under section 12(18) the main emphasis remained that this issue has now been set at rest by the Honourable High Court. There is a very clear finding that unless the assessee claims the amount to be as loan, it cannot be treated as such and the provisions of section 12(18) does not come into force. He referred various judgments which we shall discuss in latter part of the order.

The department was represented by learned L.A. as well as learned D.R. The learned L.A. first of all challenged the ratio of the judgments given by the High Court. It was argued by learned L.A. that the first judgment was given under a misconception and the second judgment being follow up, therefore, stands at the same footing. He was quite vehement in his argument, however, we cannot agree with him for the reason of the very clear and speaking language of the section 12(18) itself. Besides, various judgments of the Honourable High Court on the subject have now come to surface. We do not agree with learned L.A. that there was any misconception at any stage of proceedings. Be that as it may the same are binding on us being by Lahore High Court. Our agreement even otherwise is for the reason that we ate aware of the background of the legislation also. This provision was introduced to tax the fictitious loans shown by certain taxpayers to avoid the incidence of taxation. The legislation was obviously not against verifiable amounts but; however, since section 13 had proved insufficient the provision was so drafted to cure the lacunas apparently available in said the deemed income provision. This section i.e. S. 12(18), therefore, came out with another deemed income charge with the language:‑‑

"where any sum claimed or shown, to have been received as loan".

The emphasis in the above language is on sum claimed, sum shown and then received as loan. Any subsequent language of this section, therefore, would be read after it is established that the assessee himself with full clarity shows an amount as loan. No other person, therefore, comes into picture so as to declare an amount which has not been posted as loan to establish by arguments that it was a loan. It is correct that the accounting standard does have a clear system for debit and credit in respect of liability and assets. However, ever since introduction of the provision the fact remained that the assessee should claim that he obtained a sum as cash and that the same was a loan. In this regard the department of Income Tax or any other authority does not figure anywhere. We are conscious of certain decisions of this Tribunal also wherein the Honourable Members of this Tribunal have held that nobody can be allowed to conceal an entry under the garb of some other specific connotation. But, however, keeping in view the fact and of course a chain of the latest judgments by the superior Courts, this spirit of the legislation cannot be ignored. Our observation finds support from assessee's own case for the year 1996‑97 in PTR No.2 of 2001. The Honourable High Court while deciding assessee's appeal held that on facts the Tribunal might have been correct in setting aside the case as the then it was so done but on legal premises it required adjudication in clear and unambiguous terms. The proposition was that the assessee never claimed it as loan hence provision of section 12(18) did not attract. Even before the Honourable High Court the department never denied that the assessee had not claimed it as loan. The fact, therefore, remained that these transactions were business transactions being payments by one company on behalf of the other which in fact was a sister concern.

This was a payment of oneself on behalf of himself though for the accountancy purposes it was so indicated in the accounts of the two different legal persons i.e. separate limited companies. Practically this is a payment into himself. Furthermore, even enlargement of the scope of section 12(18) by way of addition of words "advance or gift" did not affect the above part of the provision. This was for two reasons. Firstly, the same were applicable for 1998‑99 besides they just came in addition to the words "loan" and had no effect on the words "claimed or shown".

In the present case there is absolutely no change in the facts. The debit and credit entries are among the same two limited companies i.e. our assessees and the Net Cot (Pvt.) Limited; another sister concern. Moreover, the payments have also been made for the same or similar items as well as under the same fashion and arrangement. The same, therefore, would apply in full force on the facts of the present case.

In this regard the argument of learned L.A. that the department is fully authorized to determine the nature of transaction has also been dilated upon by the High Court. The judgment he has discussed in support of his claim is Micro Pak (Pvt.) Limited by the Supreme Court of Pakistan decided in 2002. He says that the Honourable Supreme Court has just confirmed the finding of the High Court on the same arguments as have been appreciated by Mr. Justice Nasim Sikandar, the learned author. He said that since the same was under the misconception he has referred earlier the finding continued up to the Supreme Court which makes the entire proceedings as per incurium.

We are unable to subscribe his views. The Honourable Supreme Court in the said judgment has confirmed the treatment and that obviously is on the basis of discussion made therein by the High Court but, however, has appreciated each one of them after discussion. The agreement of the August Court in this Micro Pak judgment reported as 2002 PTD 877 is for the reason of the following finding of the High Court:‑‑

"We are also in agreement with the contentions of the appellants that at the relevant time the express mention of the word `loan' excluded all other similar or equivalent terms, transactions, or nature of the receipts. According to the findings of this Court re: Chairman, Evacuee Trust Property v. Muhammad Din and another (supra) no maxim of law was of more general and uniform application than `expressio unius est exclusio alterius'. According to their Lordships wherever a statute limits a thing to be done in a particular form, it necessarily includes in itself a negative, viz., that the thing shall not be done otherwise. Therefore, in our view both the I.A.Cs. stretched their powers under section 66‑A unnecessarily to hook the appellants before us. They even acted in disregard of the Circular No.6 of 1987, dated July 5, 1987 which explained the provisions of section 12(18) when these were introduced. That being the first reaction of the Revenue and its interpretation of the provision, it had to be given serious thought at least by the "Revenue Officers".

Regarding his comment that department is authorized to determine the nature we revert back to the finding of the High Court which has been confirmed in the above referred judgment reported as 2001 PTD 1180 wherein learned Mr. Justice Nasim Sikandar speaking for the Bench categorically held:‑‑

"However, we do not subscribe the view of the Tribunal which was based upon the so‑called purposive approach in interpreting the provisions. Even if that approach was justified, it was only fictitious loans which were intended to be curbed and that too which had so been "claimed" or "shown".

Further our observation that the provision was added to check the fictitious loans and it was quite later that the scope of the provision was enlarged by adding the words "advance and gift" also finds support from the same judgment. The relevant para is at page 1187 which speaks as follows:‑‑

"Learned counsel for the appellants also appear correct in suggesting that the purpose of introduction of the provisions of section 12(18) at the relevant time was to check fictitious loans and it was after quite sometime that it was realized that the scope of the provisions needed to be expanded. It is also our opinion that no addition of the kind could possibly be made nor the defence taken by the appellants rejected without recording a finding of fact that these sums were injected in the business and were used as capital, circulating or otherwise. In other words the defence of the appellants/assesses could have been demolished only by recording a finding of fact that the alleged share deposit monies were factually used in the business and therefore, could be taken as "loan" taken for catering the capital needs of the companies. Such an exercise is absent in the cases of the appellant before us."

Above paras make it clear that it is but the assessee who is to decide as to the nature of the amount booked by him in his books. The department does have right to look into the actual nature but for determining the same obviously the declaration of the assessee is not to be ignored. The language of the section starts from the words "claimed or shown", which even if are seen from the angle of the department, cannot be ignored under and method of interpretation of the language of law. The purposive approach does not find any place in the rules of interpretation and even under International Accounting Standards no one can change the nature of the entry under the garb of such an approach. The issue has now been seen from another angle by the Tribunal. In a recent judgment this Tribunal has found that deposit of share deposit money is a transaction under Sales of Goods Act. Section 12(18), therefore, does not apply on such a payment. What we wish to emphasise in that the law even after modification and addition of words "advance" and "gift" has not changed. It is only that advance or the gift in addition to loan, that can be brought into charge which the assessee either claims or shows it to be as such. This we have dilated upon in the judgment registered with the ITAT as I.T.A. No. 1545/LB of 2003.

We, therefore, without any further discussion come back to the facts of this case. The assessee and its sister concern have made some inter related entries in their books wherein payments have been made by one company on behalf of the other and the adjustment entries are accordingly made in the books. The amounts thus paid by Net Cot Limited on behalf of the company under discussion is definitely a liability but cannot be covered within the term loan as discussed by us even earlier. In this regard our reliance is more on the finding of the Honourable High Court in an earlier year in the case of the assessee. Since there is consensus between assessees as well as the department that the facts in both the years are the same, we have no reason to distinguish from the finding given therein. The transactions are trading transactions between the two sister concerns which having held to be as not covered within the definition of `loan' by the High Court for 1996‑971 are applicable on all fours for this year also.

We have already discussed it in quite a few cases that recently there is tendency of indiscriminate use of the deemed income provisions which in fact are not meant for generation of Revenue on regular basis. These provisions are punitive in character and penal in nature. The purpose of the same is more regularization hence should not be considered as a substitute of main charge and regular assessment. Such provisions, therefore, can neither be liberally interpreted against the assessee nor the language therein can be ignored by applying it against the intendments which was curbing the fictitious loans for this year. There is no doubt about the fact that if the language so permits the deemed income provision cannot be left un‑applicable but where under a clear direction the law says that no one can proceed unless the condition of `shown and claimed' firstly stands fulfilled, one cannot just apply the balance part of the provision of law under discussion. The accumulative discussion, therefore, leads to the conclusion that the addition made under this head does not stand the tests discussed supra. The addition, therefore, is deleted.

The assessee has challenged the above addition from another angle. It is said that many of the transactions even otherwise were through the normal banking channels hence the provision does not attract. This argument stand merged with our above finding. Since we have directed for deletion of the entire addition under section 12(18) obviously it does not require any more determination as to which part of the same was not through the normal banking channel.

The assessee has challenged additions under P&L account. The argument in respect thereto is that the assessee nature of accounts does not require any modification in any heads whatsoever. There is now consensus in the Income Tax Appellate Tribunal that even for add backs in P&L the department should not just leap in the dark by making estimates and subjective determinations. The fact finding should properly be made by determining the unverifiable element on the basis of documents produced and other allied details in terms of quantity of business quality required, extent of turnover etc. etc. Not only that the Assessing Officer has failed to nominate properly the discrepancy in either of the accounts but also has failed to appreciate that the assessee during the year has declared his turnover at Rs.15,00,00,000. The add backs in various heads specially in vehicle running and sale commission, therefore, is not maintainable in any sense. The sales Commission claim was Rs.9,52,284 which is paid to brokers and agents in addition to the other selling staff. He said that the only comment while making addition is that it is excessive which obviously is not a correct appreciation of the claim as Rs.952,284 is neither excessive nor unverifiable if viewed in comparison to the turnover as well as the documents respectively. Similarly, under the head vehicle running an unnecessary and un lawful addition has been made. We have perused the record in the light of the arguments of the A.R. as well as the D.R. We do not agree with learned D.R. that the addition in Commission was warranted just for the reason that the claim was excessive than the earlier years. The factor, which should be brought into discussion, was as to whether the same was fake or bogus and in this regard the documents submitted should have been brought under discussion. Mere objection that they are unverifiable is not enough. Furthermore the reduction by way of estimation also is not to be approved. We, therefore, direct that the disallowance under this head may be deleted as a whole. In the other heads including vehicle running the addition seems to be quite justified. The clement of personal use of the vehicle and the history did warrant these additions which we confirm.

The departmental appeal for the year as already mentioned was in respect of deletion of trading addition as well as certain other heads of Profit and Loss. So far as reduction in the addition under section 12(18) and the add backs are concerned we have allowed further relief in the head of sales Commission and have found that relief allowed by the First Appellate Authority in respect of some of them is based upon sound reasons. The insurance claim of the assessee was added back without any hint or reason. The objection is that the amount had been accounted for in the receipts. This payment was obviously a necessary requirement for a plant of such a big size and commercial importance. There was no doubt about its verification while as already said it had protected the possibility of damage by any unforeseen or unfortunate event. There is no denial that it was paid and that it is a necessary expenditure for the safety, security and satisfactory running of the factory. The deletion, therefore, is fully justified. Similar is the position of the other findings of the learned CIT(A).

Since we have directed for acceptance of accounts departmental appeal on this issue shall also obviously fail.

Regarding addition under section 12(18) we have given a very detailed finding. The same is applicable in respect of departmental appeal as well.

Assessment Year 1998‑99

The assessee appeal for 1998‑99 is against setting aside of the addition under section 12(18) and partial confirmation of some of the add backs. The department on the other hand is against acceptance of trading results set aside on the subject of section 12(18) and deletion in add back's.

We have discussed all these issues in detail for the above year and in our opinion no further dilation is required. The parties in issue and the facts being identical the findings given by us for 1997‑98 shall apply on 1998‑99 in respect of acceptance of accounts as well as addition under section 12(18).

Regarding Profit and Loss additions for the year learned A.R. has not contested the same for the year under discussion.

Assessment Year 1999‑2000

The departmental ground speaks as follows:‑‑

"That the CIT(A) was not justified in directing to accept the declared trading results of the assessee without sound reasonings. The trading results were rejected due to un verifiability of purchases and sales and in the light of verdict of Superior Court."

The assessee ground is that the CIT(A) after observing that the round addition of Rs.21,13,266 in the add backs is illegal and improper should have been deleted the same and set aside is not proper.

So far as the departmental appeal is concerned for the year the same is against acceptance of accounts. The issues in hand have already been settled by us in the earlier years which finding shall be applicable in respect of this year also. So far as the set aside on add back made on estimate basis at Rs.21,13,266 is concerned obviously the Assessing Officer action was not to be maintained. Since, however, in earlier years certain additions have been made in some particular claims and in fact for 1998‑99 the assessee has not contested some of the additions there is, therefore, some element of doubt with regard thereto. However, the Assessment Officer while re‑determining the additions Profit and Loss claim shall not deviate from the earlier history. Moreover, if the assess is in a position to satisfy through documents, the Assessing Officer may accept the declared version. This obviously means that the action of set aside in respect of add backs stands confirmed, however, with the directions as above. On all other issues the appeals are rejected.

This disposes all the appeals filed by the assessee as well as the department.

C.M.A./55/Tax (Trib.) Order accordingly.