I.T.As. Nos.3561/LB, 3562/LB, 4105/LB and 4106/LB of 2002, decided on 25th March, 2004. VS I.T.As. Nos.3561/LB, 3562/LB, 4105/LB and 4106/LB of 2002, decided on 25th March, 2004.
2004 P T D (Trib.) 2231
[Income‑tax Appellate Tribunal Pakistan]
Before Muhammad Tauqir Afzal Malik, Judicial Member and Imtiaz Anjum, Accountant Member
I.T.As. Nos.3561/LB, 3562/LB, 4105/LB and 4106/LB of 2002, decided on /01/.
th
March, 2004. (a) Income Tax Ordinance (XXXI of 1979)‑‑‑--
‑‑‑‑S 62‑‑‑Assessment on production of accounts, evidence etc.‑‑ Rejection of accounts on the grounds that sales and purchases of the assessee were partially unverifiable and assessee failed to produce comprehensive quantitative and qualitative details of purchases, raw material consumed, work in progress and finished goods‑‑‑Validity Complete postal addresses of the purchasers/sellers were provided to the Assessing Officer and verification letters were duly sent to such parties‑‑‑Such exercise had not been mentioned in the assessment order by the Assessing Officer‑‑‑Copies of ledger accounts of the parties were also produced before the First Appellate Authority‑‑ Payments of sales and purchases made through proper banking channel were duly accepted‑‑‑Bulk of purchases and sales were made from and to a verifiable limited company‑‑‑Assessing Officer failed to determined the percentage of allegedly unverifiable sales and purchases.
1997 PTD (Trib.) 1408; Messrs Ayenbee (Pvt.) Ltd. v. ITAT 2002 PTD 407; Barry Brothers v. CIT 2001 PTD 2612 and Messrs Solvex Pakistan Limited v. CIT in PTR 2 of 2001; Vel Matel Industries v. The State of Tramil Nadu 68 STC 55 (Mad.); Agrawal Bhatta Company v. Commissioner of Sales Tax, U.P. Lucknow 93 STC 423 (All); K. Ramlinga Mudaliar and Co. v. State and another 86 STC‑475 (Mad); Solvex Pakistan Limited v. Commissioner of Income‑tax in PTR No. 2 of 2001 and 79 Tax 263 (Trib.) ref.
(b) Income Tax Ordinance (XXXI of 1979)‑‑‑--
‑‑‑‑S. 62--Assessment on production of accounts, evidence etc.‑‑ Rejection of accounts‑‑‑Without there being any allegation of suppression of sales or sale rate or inflation of purchases, the declared version could not be rejected on account of partial un‑verifiability of sales and purchases.
(c) Income Tax-----
‑‑‑‑Gross profit‑‑‑Gross profit rate of ghee manufacturer could not be applied to an assessee who runs only a solvent plant.
1984 PTD 150 ref.
(d) Income Tax Ordinance (XXXI of 1979)‑‑‑
‑‑‑‑S. 62‑‑‑Assessment on production of accounts, evidence etc.‑‑ Rejection of accounts‑‑‑When First Appellate Authority had rejected the estimation of sales by the Assessing Officer, as without any basis it should have directed the acceptance of the declared sales instead of only reducing the same.
(e) Income Tax Ordinance (XXXI of 1979)‑‑‑
‑‑‑‑S. 62‑‑‑Assessment on production of accounts, evidence etc.‑‑ Addition in Profit & Loss account‑‑‑No addition could be made by relying on stock phrases such as un‑verifiability, excessiveness and element of personal use without pointing out specific instances and also quantifying the ratio of the same‑‑‑Such an ad hoc approach was in violation of the mandatory provisions of S.62 of the Income Tax Ordinance, 1979.
(2003) 88 Tax 48 (Trib.) rel.
Bashir Ahmed Shad, D.R. for Appellant.
Sajid Ejaz Hotiana for Respondent.
Date of hearing: 13th March, 2004.
ORDER
MUHAMMAD TAUQIR AFZAL MALIK (JUDICIAL MEMBER).‑‑‑These are four cross appeals pertaining to the assessment years, 1999‑2000 and 2000‑2001. Two have been filed at the instance of the assessee and. two cross appeals by the Revenue impugning the consolidated appeal order in Appeals 'Nos. 27 and 29, dated 5‑6‑2002 of the Commissioner of Income‑tax (Appeals)‑I, Lahore.
As the common issues are involved in all the four appeals therefore, the same are being disposed of through a consolidated order.
During the proceedings of the case the learned counsel for the appellant/assessee filed an application for furnishing of amended grounds of appeal for both the years alongwith the amended grounds of appeal. The amended grounds don't raise any new ground rather these are only a refined form of the original grounds. A copy of the amended grounds was provided to the learned D.R. who had no objection to it; therefore, the appeals are being disposed off on the basis of the amended grounds which are as under:‑‑
1999‑2000
(1)That the order of the learned CIT(Appeals‑1), Lahore is bad in law and against the facts of the case.
(2)That the order of the learned CIT (Appeals‑1), Lahore is based on wrong inferences from the facts of‑the case.
(3)That the learned CIT (Appals‑1), Lahore was not justified in upholding the rejection of accounts.
(4)That without prejudice to ground No. 2 the learned CIT (Appeals‑1) Lahore has erred in upholding the rejection of sales.
(5)That without prejudice to the ground No.2 the learned CIT (Appeals‑1), Lahore had misdirected herself in directing the application of gross profit @ 8.15 %.
(6)That the learned CIT (Appeals‑1), Lahore was not justified In confirming the add‑back under the heads printing, traveling, vehicle running and repair‑maintenance without assigning any cogent reason.
(7)That the leaned CIT (Appeals‑1), Lahore was not justified in confirming the addition of Rs.100,000 under the head other expenses.
(8)That the Appellant seeks permission to add or amend, any of the grounds of appeal.
The Revenue is in cross appeal against the reduction of estimation of sales, directions for, acceptance of declared G.P. rate of assessment year 2000‑2001 and reduction in addition made under the head "Other Income".
2000‑2001
Grounds Nos. 1, 2, 3, 4, 6 and 8 are common for both the years. Ground No.7 is also the same except for the difference of amount involved which for this year is 70,000. As the declared G.P. rate was accepted for this year therefore, the same is not impugned in this appeal. For this year the appellant had claimed extra shift allowance which was curtailed to 121 days. This curtailment of extra shift allowance is impugned as ground No.7 of the appeal.
The Revenue is in cross appeal on the same grounds as are in 1999‑2000.
Brief facts of the case are that the appellant/assessee is a quoted Public Limited Company, which was incorporated on 31‑8‑1990 with the object of carrying on the business of extraction, refining, processing, and sale of edible oils etc. under the brand name of the company. The income of the company was exempt under clause 118D of the Second Schedule to the repealed Income Tax Ordinance, 1979 up to the assessment year, 1999‑2000.
Uptill the assessment year, 2000‑2001 the company could not sell am, branded product of its own and continued to engage it: the extraction and refining of raw edible oil from local as well imported oil seeds; the oil was sold to the manufacturers of Ghee and edible oil as their raw material. The by ‑products of oil extraction like meal, hull and oil dirt etc. were also sold in the market to the manufacturers of poultry feed and soap.
The appellant filed its original Returns of Income Tax for the assessment years, 1999‑2000 and 2000‑2001 declaring a loss of Rs.14,954,739 and Rs.15,967,591 respectively, thereafter the Assess‑‑e revised its Return with the explanation that in the original Returns depreciation was not correctly claimed. The revision of Returns was duly allowed by the Assessing Officer. As per the revised returns the following results were declared for‑the two years:‑‑
1999-20002000‑2001
Sales224,902,745342,213,799
Cost of sales229,769,997325,361,126
Gross profit/loss(4,819,368)16,852,673
Gross profit rate ‑4.92 %
During the assessment proceedings notices under sections 61 and 62 of the repealed Income Tax Ordinance, 1979 Were issued which were complied by the AR of the assessee who alongwith the books of account also produced various details as requisitioned by the Assessing Office, however, the Assessing Officer was not satisfied with the details/records produced by the AR of the assessee and he therefore, rejected the declared version of the assessee and estimated the sales at Rs.235,000,000 and Rs.352,000,000 respectively for both the years. He also applied the G.P. @ 11 % for both the years. Giving the reasons for the rejection of the declared version the Assessing Officer has observed that the assessee had failed to furnish the comprehensive quantitative and qualitative details of purchases, raw material consumed, work in progress, finished goods and sales as well as purchases due to incomplete addresses of parties. Regarding the application of the G.P. rate the Assessing Officer relied, as per his opinion, on a parallel case existing at NTN 7‑9‑0453059, certain additions were also made from the expenses claimed under the heads printing and, stationary, travel and conveyance, vehicle running, repair and maintenance and other expenses on the contention that the expenses claimed lacked in complete verification and due to the involvement of cash transactions. For estimation of sales the Assessing Officer made general observations like the apparent manufacturing capacity, the quantum of funds available with the assessee company and other relevant facts without specifying the same.
Feeling aggrieved with both the orders of assessment the appellant/ assessee filed appeals before the Commissioner of Income Tax Appeal‑1, Lahore; and agitated (so for as is relevant for the disposal of these appeals) the rejection of books of accounts, estimation of sales, application of G. P. @ 11 % , additions out of profit and loss account and curtailment of extra shift allowance for the assessment year, 2000‑2001 only.
Before the Commissioner of Appeals the appellant contested the rejection of accounts on the alleged grounds that the assessee failed to producer comprehensive detail of its manufacturing activity; and that the purchases and sales of the assessee were not totally verifiable. The assessee also contested the application of G.P. @ 11 % on the basis of an allegedly parallel case of Messrs Effef Industries; and also the additions made from profit and loss expenses etc. Regarding the contention of the Assessing Officer that the assessee had failed to produce comprehensive details of its manufacturing activity the assessee drew the attention of the Commissioner of Appeals to the fact that it had duly produced complete books of accounts before the Assessing Officer on more than one occasion and that the books were examined and then returned to the assessee. Furthermore as a requirement of the Assessing Officer it also prepared and furnished to the Assessing Officer consolidated production statements of cotton seed, sun flower and rapeseed crushed during the period; physical stock report of stores and spares as on August, 31, 1998 and August 31, 1999; and statements showing the value of items of stores and spares consumed, their pending balances and value of closing balances, of finished goods as on August, 31, 1998 and August 31, 1999.
Regarding the contention of the Assessing Officer that sales and purchases of the assessee company were not totally verifiable and that the same involved certain cash transactions the assessee submitted before the Commissioner that the assessee being a quoted public limited company the entire sales and purchases of the assessee were through proper banking channel. The assessee further contended that it had provided complete postal addresses of the parties to the Assessing Officer who even sent letters of verification to the selected parties however he has omitted to discuss this fact in the orders of assessments which shows that through this exercise he failed to gather any adverse material against the assessee which belies the contention of the Assessing Officer. To substantiate its arguments the assessee also produced copies of ledger accounts of the parties before the Commissioner of Appeals The assessee further contended that bulk of its purchases and supplies were affected with Messrs Pakistan Tobacco Company Limited.
Regarding the application of G.P. @ 11 % the assessee distinguished its case from the case of Messrs Effef and further submitted that the Department applied the G.P. rate of 11 % in the case of Messrs Solvex Pakistan Limited on the basis of the case of Messrs Eff Eff labelling it a parallel case; however the same has not sustained the test of appeal before the Hon'ble Lahore High Court Lahore. The assessee further submitted that its case is more akin to the case of Messrs Solves as the assessee as well as Messrs Solvex are involved in oil extraction only whereas Messrs Eff Eff not only extracts oil but also utilizes it to manufacture Ghee. After recording the arguments of the assessee in detail and also her own observations on the case she observed in the concluding lines on page 8 of the appellate order that "I agree with the arguments of the appellant in respect of a. Nomination of sale and application of G.P. rate." Thereafter she reduced the sales to Rs.22,75,00,000 and Rs.34,50,00,000 respectively for 'both the years, directed the acceptance of ‑the declared G. P. @ 8.15 % for the assessment year, 2000‑2001 and application of the same G.P. rate to the assessment year, 1999‑2000. Regarding the rejection of book version she upheld the findings of the Assessing Officer. On the issue of additions from profit and loss account she reduced the addition from other expenses from Rs.150,000 to Rs.100,000 for the assessment year, 1999‑2000.
Feeling aggrieved with both the appellate orders the assessee has preferred second appeal on the grounds mentioned above.
Arguments heard, record perused.
AR of the assessee first of all submitted that the appellant is a quoted public limited company and its accounts have been prepared after application of stringent audit tests applicable to quoted public limited companies; and that the rejection of accounts of such a concern by the Assessing Officer on the basis of conjectures, surmises and whims is totally unjustified. Complete books of account for both the years duly audited were produced before the Assessing Officer who examined the same. Neither the notices under section 62 nor the assessment orders contain any allegation that any book of account was required which the assessee failed to produce. Not only this even certain specific details as required by the assessee were also produced before the Assessing officer which was otherwise not a requirement of law for acceptance of the declared accounts as complete books of accounts had been produced. The repeated assertions of the Assessing Officer that complete particulars of manufacturing activity were not produced by the assessee are baseless and tantamouns to misstatement then. The learned counsel drew our attention to the notices under section 62 of the repealed Ordinance for both the years and submitted that even as per the admission of the Assessing Officer the only defect which he could detect in the appellant's books of accounts was that complete postal addresses of some of the parties from whom purchases were made or to whom sales were made were missing. He further states that picking of a few odd names of parties whose full postal assesses were not appearing in the books of accounts cannot be made the basis of rejection of accounts of quoted public limited company. To seek support from the precedent he has relied on the judgments reported as 1997 PTD (Trib.) 1408, Messrs Ayenbee (Pvt.) Ltd. v. ITAT 2002 PTD 407, Barry Brothers v. CIT 2001 PTD 2612 and Messrs Solvex Pakistan Limited v. CIT in PTR 2 of 2001. He has additionally submitted that the case of the appellant is not of partial unverifiability of sales and purchases rather in the case the appellant provided complete postal addresses of the parties to the Assessing Officer and he even issued letters, of verification, which must have been positively replied as the Assessing Officer has avoided mentioning this fact in the assessment orders.
The AR next submits that in the case of the appellant the accounts could not be rejected on account of sales and purchases unless there was a specific finding regarding inflated purchases or suppressed sales. Conversely if there was no such finding even trade loss could not be made a reason for rejection of accounts. In support of these submissions the AR has relied on three judgments of the Indian High Courts in Sales Tax reported as Vel Matel Industries v. The state of Tramil Nadu. 68 STC 55 (Mad); Agrawal Bhatta Company v. Commissioner of Sales Tax, U.P. Lucknow 93 STC 423 (All), and. K. Ramlinga Mudahar and Co. v. State and Another 86 STC 475 (Mad.).
The AR has further submitted that to reject the accounts of an assessee there should be positive evidence of any manipulation of the accounts if the same has to be rejected. Even if it is admitted for argument's sake that complete postal addresses of a few parties were not available with the appellant it shows that the accounts produced by the appellant are genuine and the same are not sanitized ones, for the consumption of the Department. Reliance is placed on the judgment of the Hon'ble Lahore High Court in the case of Solvex Pakistan Limited v. Commissioner of Income Tax in PTR No. 2 of 2001. In this Judgment the Hon'ble Lahore High Court has further held that where accounts are to be rejected on the basis of un verifiability of sales or purchases, the Assessing Office has to quantify the volume of such parties which has not been done in this case.
The AR further submits that even after examining the cash book and ledgers of the appellant company the Assessing Officer was not sure whether any cash transactions were involved in sales and purchases; therefore, he has made his entire case on "prima facie" opinions which is highly inappropriate.
The AR then submits that in support of the declared version an assessee is obliged to maintain proper books of accounts and produce the same before the Assessing Officer at the time of assessment. The entire transactions relating to the business of an assessee are recorded in the books of accounts. The Assessing Officer is obliged to minutely examine the books of accounts and then confront the specific defects as noticed by him in the books of accounts to the assessee; and once an assessee furnishes his explanation the Assessing Officer is required to consider such explanation and if he finds the explanation unsatisfactory on solid grounds then he may reject the books of account and compute the income accordingly. In this context the AR submits that the allegation of the Assessing Officer in the show‑cause notices that the assessee has not provided complete particulars regarding manufacturing activity is not correct. When books of accounts were produced and the same were examined and then returned to the asscssee then how could the Assessing Officer say that complete particulars of manufacturing activity were not produced? If the books of the assessee had not recorded the manufacturing activity correctly he must have confronted the assessee regarding this fact and sought its explanation accordingly which has not been done simply because he failed to find defects in the books of the assessee.
The AR next submits that the allegation that the assessee failed to provide complete particulars of manufacturing activity is belied by certain observations in the assessment orders themselves. In both the assessment orders the Assessing Officer has calculated and given the recovery percentage of oil from the, various seeds crushed by the appellant. This is something, which particularly relates to the manufacturing activity of the appellant Then he specifically referred to the assessment order for the assessment year. 2000‑2001 and submitted that in the notice under section 62 for this year the Assessing Officer had specifically confronted the assessee that an analysis of the cost of sales had revealed that in this year more than double the expenses had been incurred on raw material consumed as compared to the corresponding expenses during the immediate proceeding assessment year. The appellant properly replied to this query of the Assessing Officer and after considering the reply of the assessee this objection was dropped and the contention of the assessee was accepted that there was no abnormal increase in the cost of sales over the last year. This shows that opening and closing balances of the raw material inventory, purchases of raw material made during the two years and raw material consumed in. the manufacturing activity during the two years were available with the Assessing Officer. In view of these facts the Assessing Officer could not hold that the assessee, had not provided complete detail of the manufacturing activity. Even otherwise no such detail has been specifically mentioned which the Assessing Officer, specifically requisitioned and the assessee did not provide.
The AR has further submitted that the Assessing Officer has illegally assumed that the recovery percentage of oil from cotton seed, sunflower seed and rape seed should be the same not only with reference to each seed but also from year to year. While making this assumption the Assessing Officer has not referred to any technical literature or facts of some other similar case; and that it is just a wild assumption to concoct at least some basis for the rejection of the declared ‑manufacturing/ trading account of the appellant company. The AR further submits that the Assessing Officer totally misdirected himself in failing to consider that these oil seeds were botanical goods which have varying degrees of oil contents; and further that each type of seed does not have a uniform content of oil rather the content of oil in each type of seed varies with each crop depending upon a number of factors 'such as area‑wise location of the crop, weather conditions prevailing during the life of the crop, health of the crop etc. etc.
On the issue of G.P. rate the learned Aft has submitted that against the declared gross loss for the assessment year 1999‑2000 and gross profit for the assessment year, 2000‑2001 the learned Assessing Officer applied the G. P. rate of 11 % by relying on the case of Messrs Eff Eff Industries dubbing that to be a parrallel case. The contention of the A.R. is that this not a parrallel case because the appellant only extracts oil from oil seeds and then sells the same to the Ghee manufacturers whereas Messrs Eff Eff is a Ghee manufacturing unit which first extracts oil from oil seeds and then itself consumes the same for Ghee manufacturing; therefore it is a travesty of facts to hold that both the cases are parallel cases. This also shows the predetermined approach of the Assessing Officer to reject the declared accounts of the appellant. The AR has further submitted that for application of certain G.P. rate on the basis of parallel case there is a judicially approved methodology. Before relying on a parallel case an Assessing Officer is required to discuss the nature of business, machinery employed, location and all other factors governing the accounting results. Where none of these factors has been considered nor any opportunity allowed to assessee to meet the case and rebut the evidence used against him the rejection of declared G.P. rate on the basis of parallel case cannot be allowed. Reliance is place on the judgment of Hon'ble Sindh High Court in the case reported as Karachi Textile Dying and Printing Works, Karachi v. Commissioner of Income Tax (Central) Karachi reported as (1984) 49 Tax 18 (H.C. Kar.). The learned Commissioner of Appeals accepted the appeal of the assessee on this account for the assessment year 2000‑2001 by directing the acceptance of the declared G. P. rate at 8.15 % whereas for the assessment year, 1999‑2000 she did not accept the contention of the assessee on this account and directed the application of the declared G.P. rate for the assessment year, 2000‑2001 to the assessment year, 1999‑2000 which is absolutely illegal and unjustified. Without pointing out any specific defect in the accounts of the assessee for the assessment year, 1999‑2000 the declared gross loss could not be rejected.
The AR has further submitted that the Assessing Officer has failed to comply with the mandatory provision of section 62 of the repealed Income Tax Ordinance which has rendered the assessment order void ab initio. The Proviso to section 62(1) mandates that where an assessee produces books of account as evidence in support of its return then the Assessing Officer before disagreeing with such accounts, give specific notice to the assessee to explain his point of view about such defects and record such explanation and basis of computation of total income of the assessee in the assessment order. He has further submitted that proviso to section 62(1) is a mandatory provision of law and the non‑compliance of this provision renders the assessment framed as void ab initio and illegal. In support of this contention the AR has pointed out that the variation in recovery ratio of oil from various types of seeds crushed by the appellant has been made as one of the reason for the rejection of the declared accounts whereas this issue was never confronted to the appellant/assessee in the notices issued under section 62 for both the years. Reliance is placed on the judgment of this Tribunal reported as 1999 PTD (Trib.) 3892.
On the issue of additions from Profit and loss account the AR has submitted that despite the production of complete books of accounts not a single instance of any such unverifiable expense has been pointed out.
He has further submitted that the additions have been made by relying on stock phrases as "unverifiability, excessiveness and element of personal use" instead of defects in the books of accounts. Therefore, the Assessing Officer has failed to comply with the provisions of section 62(1) and therefore, all the additions are to be declared as null and void in the light of the recent decision of the Income Tax Appellate Tribunal reported as (2003) 88 Tax 48 (Trib.).
DR has opposed both the appeals. He has further contended that he also reiterates the grounds taken in his cross appeals and has requested to cancel the, order of CIT(A) on the issues raised by them in appeal and restore that of the Assessing Officer.
We have heard both the learned counsels at length. The record of the case was requisitioned and the same has been examined and the case law referred to by the learned counsel for the assessee has been perused. The main grievance of the appellant is that. while it maintained and produced proper books of accounts, its manufacturing/trading accounts has been rejected without assigning any solid reasons. First of all we would like to record our disapproval of the manner in which the Assessing Officer has dealt with this case. The audited adcounts of a quoted public limited company deserved better treatment than these met in the hands of the Assessing Officer. The Assessing Officer appears to have rejected the accounts of the assessee mainly on two grounds; firstly that sales and purchases of the assessee were partially unverifiable and secondly that the assessee failed to produce what the Assessing Officer has called comprehensive quantitative and qualitative details of purchases, raw material consumed, work in progress and finished goods. Regarding the first issue even before the First Appellate Authority the assessee submitted that complete postal addresses of the parties were provided to the Assessing, Officer and he even sent verification letters to the parties, however, this exercise has not been mentioned in the assessment orders. In support of his contention the assessee also produced copies of ledger accounts of the parties before the First Appellate Authority. The learned First Appellant authority also accepted the contention of the assessee that the payments vis‑a‑vis sales and purchases were received and made through proper banking channel. She also accepted the contention of the assessee that the bulk of purchases and sales were made from and to Pakistan Tobacco Company Limited. The alternative argument of the AR that without there being any allegation of suppression of gales or sales rate or inflation of purchases the declared version could not be rejected on account of partial unverifiability of sales and, purchases is also very convincing. Furthermore the Assessing Officer has failed to determine the percentage of allegedly unverifiable sales and purchases.
Now coming to the issue of non‑furnishing of comprehensive quantitative and qualitative details of purchases, raw material consumed, work in progress and finished goods. When the assessee had produced books of accounts the Assessing Officer could cull oat any sort of detail of purchases from the books of accounts. For this purpose he did not have to depend on the assessee or wait for his reply. On this issue the assessment orders are very intriguing. Without the production of qualitative and quantitative details of purchases, raw material consumed, work in progress and finished goods how did the Assessing Officer work out the recovery, percentage of oil from various seeds crushed be the appellant for both the years. Similarly how did the Assessing Office without these details calculated the manufacturing expenses for the assessment year, 2000‑2001? The AR of assessee has also submitted that as a requirement of the Assessing Officer it also prepared and furnished to the Assessing Officer consolidated production statements of cotton seed, sun flower and rapeseed crushed during the period physical stock report of stores and spares as on August, 31, 1998 and August 31, 1999, and statements showing the value of items of stores and spares consumed, their pending balances and value of closing balances of finished goods as on August 31, 1998 and August 31, 1999.
After rejection of the declared accounts the Assessing Officer estimated sales at Rs.235,000,000 against the declared sates of Rs.224,902,745 and Rs.352,000,000 against the declared sales of Rs.342,213,799 for the assessment years 1999‑2000 and 2000‑2001 respectively. In this estimation the Assessing Officer was statedly guided by the overall manufacturing capacity of the assessee company, the quantum of funds available and the other factors but the Assessing Officer has failed to quantify these factors. Regarding the application of G. P. @ 11 % on the basis of the case of Messrs Eff Eff suffice it to say that the G.P. rate of a Ghee manufacturer could not be applied to the case of the appellant as it" run only a solvent plant The learned First Appellate Authority directed' the application of the declared G.P. rate for the assessment year 2000‑2001 but she misdirected herself in directing the adoption of the same G.P. rate even for the previous year i.e. 1999‑2000 without assigning any solid reason. Similarly when the learned First Appellate, Authority had rejected the estimation of sales by the Assessing Officer, as without any basis then, she should have directed the acceptance of the declared sales instead of only reducing the same.
On the issue of additions from profit and loss account we are in agreement with the AR of the assessee that no addition can be made by relying on stock phrases such as unverifiability, excessiveness; and element of personal use without pointing out specific instances and also quantifying the ratio of the same. Even otherwise such an ad hoc approach is in violation of the mandatory provisions of section 62 of the repealed Income Tax Ordinance. The issue of curtailment of the extra shift allowance to 121 days in the assessment order for the assessment year, 2000‑2001 is not pressed therefore we don't express any opinion on this issue.
The upshot of the above discussion is that both the appeals of the assessee for the assessment years 1999‑2000 and 2000‑2001 stand accepted on the issues discussed supra and consequently that of the Revenue has become infructuous.
C.M.A./140/Tax (Trib.)Assessee's appeal accepted.