I.T.A. No.1611/KB of 2003, decided on 12th March, 2005. VS I.T.A. No.1611/KB of 2003, decided on 12th March, 2005.
2006 P T D (Trib.) 1338
[Income-tax Appellate Tribunal Pakistan]
Before Jawaid Masood Tahir Bhatti, Judicial Member and Shaheen Iqbal, Accountant Member
I.T.A. No.1611/KB of 2003, decided on 12/03/2005.
(a) Income Tax Ordinance (XXXI of 1979)---
----S. 22 & Third Sched., R.7(b)---Income from business or profession---Profit on sale of car---Taxation---Assessee contended in respect of addition made on account of sale of car that car was declared in the wealth statement and was disposed of and its profit was declared as exempt receipt---Profit earned on such sale of car did not fall within the ambit of S.22 of the Income Tax Ordinance, 1979 as profit earned from adventure in the nature of trade nor R.7(b) of the Third Schedule of the Income Tax Ordinance, 1979 for the reason that it was a solitary sale of car and there was no finding that the assessee was dealing in trading of vehicles or any frequent purchase and sale of cars---Addition had rightly been deleted by the First Appellate Authority---Validity---Appellate Tribunal held that addition made in respect of sale of car had rightly been deleted as the Assessing Officer had made the addition without any basis.
(b) Income Tax Ordinance (XXXI of 1979)---
----S. 19(1)(b)---Income from house property---Estimation of Annual Letting Value---Addition---Assessee contended that property was inherited and fully occupied by the tenants---Case for enhancement of rent was pending in the Courts and all tenants were disputing their rent in the Courts---No justification existed for estimating Annual Letting Value---First Appellate Authority had rightly directed to accept the Annual Letting Value on the basis of actual rent---Validity---Directions of First Appellate Authority regarding Annual Letting Value of inherited property were reasonable, as the assessee had explained that property was an inherited property and fully occupied by the tenants, but the Assessing Officer had failed to make any inquiry in this regard and to confirm from the tenants of the property regarding rent---First Appellate Authority had given full justification for the treatment meted out by him---Appellate Tribunal upheld the order of First Appellate Authority.
(c) Income Tax Ordinance (XXXI of 1979)---
----S. 62---Assessment of production of accounts, evidence etc.---Gross profit rate---Income from dairy farm and sale of milk---First Appellate Authority reduced the applied cross profit rate from 33% to 15%, as the Assessing Officer had applied gross profit rate at 33% on the basis of parallel case which in fact was not parallel and had not been confronted to the assessee and the First Appellate Authority had reduced the applied gross profit rate in view of the fact that the history of assessee's own case was of 15% gross profit rate.
(d) Income Tax Ordinance (XXXI of 1979)---
---S. 62---Assessment on production of accounts, evidence etc.---
Income from dairy farm and sale of milk---Quantity of milk---Quantity of milking yield had been reduced as per history of the case by the First Appellate Authority keeping in view the certificate issued by the Dairy Farms Association confirming the milking yield at 8-kg.
(e) Income Tax Ordinance (XXXI of 1979)---
----S. 13(1)(aa)---Unexplained investment etc., deemed to be income---Value of cattle---Addition was made on the basis of conjectures and surmises as the value of cattle had been determined by the Assessing Officer without any basis and the Assessing Officer rejected the explanation of the assessee regarding the value and the number of animals---First Appellate Authority had rightly deleted the addition keeping in view all these factors.
Ms. Farzana Jabeen, D.R. for Appellant.
Salman Pasha for Respondent.
Date of hearing: 12th February, 2005.
ORDER
The Department through this appeal has objected to the impugned order of the learned C.I.T.(A), dated 30-8-2003 on the following grounds:--
(2) That the CIT (Appeals) was not justified to apply GP rate at 15% ignoring the GP rate at 33% declared in the parallel-case N.T. No.11-13-3037288.
(3) That the observations of the learned CIT (Appeals) that case record was not produced is not correct. The fact is that case record of parallel case was not sent to CIT (Appeals) on his requisition.
(4) That the learned CIT(Appeals) was not justified to reduce daily quantity of Milk yield at 8-Kg., while the reasons for adopting 10-Kg. milk yield daily was discussed in detail in the assessment order.
(5) That the contention of the A.R. that daily milk yield per cattle be enquired from D.F.A. or PCSIR is not relevant because both the institutions are not competent to issue such certificate.
(6) That the CIT(Appeals) was not justified to delete the addition made under section 13(1)(aa) of the Income Tax Ordinance, 1979 at Rs.28,35,000. It has been discussed in detail' in the assessment order and addition was made on sound footings.
(7) That the CIT(Appeals) was not justified to delete the profit on sale of car, as this is a taxable profit within the meaning of section 22 of the repealed Income Tax Ordinance, 1979 even if sole transactions. The contention of charge of depreciation is also not relevant, because this is not a machinery being used by the assessee in his business.
(8) That the CIT(Appeals) was not justified to order for taxing the actual amount of rent received by taxpayer against his let out property bearing GK (a), Kharadar, Karachi as the amount of rent value was adopted under section 19(1)(b) of the I.T. Ordinance, 1979 (Repealed).
The assessee, in this case, is an individual deriving income from operating dairy farm and sale of milk on three shops under the name and style of Messrs Chistia Milk and Dairy Farm. Return of total income was filed declaring income at Rs.3,63,708 under Self-Assessment Scheme, but through random computer ballot, the case was selected for total audit and later on, the assessment was made under section 62 of the repealed Income Tax Ordinance, 1979 against which the assessee filed appeal before the learned CIT(A) in respect of GP rate, daily quantity of milk yield, addition made under section 13(1)(aa), the addition in respect of profit on sale of car and regarding addition in respect of amount of rent received by the assessee against his let out property. The learned CIT(A) has reduced the applied GP rate from 33% to 15%, the daily quantity of milk yield adopted at 10-Kg. to 8-Kg. The addition made under section 13(1)(aa) has been deleted. Likewise, the addition in respect of profit on sale of car has also been deleted. The learned CIT(A) has also directed for taxing the actual amount of rent received by the assessee against his let out property. Now the Department has come up before this Tribunal on the grounds as mentioned supra.
Ms. Farzana Jabeen, D.R., the learned representative of the appellant-Department has contendedthat the learned CIT(A),without zany justification, has reduced the applied GP rate from 33% to 15% despite the fact that GP rate was applied by the Assessing Officer on the basis of parallel cases. According to the learned counsel, the learned CIT(A), without any justification, has reduced the daily quantity of milk yield adopted at 10 Kg. to 8-Kg. and the addition made under section 13(l)(aa) of the repealed Income Tax Ordinance, 1979 has also been deleted without any justification. The learned DR has contended that the addition in respect of profit on sale of car has been deleted by the learned CIT(A) despite the fact that this is a taxable profit within the meaning of section 22 even if there is a sole transaction. The learned DR has also contested the directions of the learned CIT(A) to accept the ALV on the basis of actual rent of the years as according to him, the amount of rent has been determined by the Assessing Officer under section 19(1)(b) of the repealed Income Tax ordinance, 1979.
Mr. Salman Pasha, Advocate has appeared on behalf of the assessee/respondent and has contended that the assessee has declared sales at Rs.86,50,000 with GP @ 13.58% on the basis that out of total cows of 220 owned by the assessee, the milking cows and cattle are 158 and the average milk gained per day is 7.5-litres per animal, but the Assessing Officer has estimated the production at 10-litres per day without any basis. He has contended that the estimation as made by the Taxation Officer is based on assumptions, surmises and conjectures. According to the learned counsel, the GP rate applied at 33% referring the parallel case was not justified, as during the assessment proceedings and after the assessment, copy of assessment order of parallel case was not provided to the assessee. He has contended that in case of hotels and restaurants, the GP @ 33% can be applicable, but in case of dairy farming, such excessive GP rate has never been applied and in this case, many parallel cases were referred before the Assessing Officer as well as before the learned CIT(A). According to the learned counsel, the learned CIT(A) keeping in view the parallel cases and the fact that in the assessee's own case, GP rate of 15% has been applied in the previous assessment year has reduced the G.P. to 15%.
Regarding the addition of Rs.28,35,000 made under section 13 (1)(aa), the learned counsel has contended that the assessee has declared 220 animals with a capital of Rs.4,76,138 which includes 126 inherited animals from his late father. According to him, the value of those 126 animals was not more than Rs. 1,50,000 and the value of remaining 86-animals of Rs.1,02,340 being assessee's share in the year, 1993-94. He has contended that the assessee has neither purchased any animal during the year nor there is any under valuation. According to the learned counsel, the purchase price adopted at Rs.15,000 per animal is incorrect and based on assumption, therefore, keeping in view the circumstances, the learned CIT(A) has deleted the addition.
Regarding the addition of Rs.2,60,000 made in respect of sale of car, the learned counsel has contended that the said car was declared in the Wealth Statement and was disposed off during the year on which profit of Rs. 2,60,000 was declared as exempt receipt. According to the learned counsel, as the profit earned on sale of car does not fall within the ambit of section 22 as profit earned from adventure in the nature of trade nor Rule 7(b) of the Third Schedule for the reason that it was a solitary sale of car and there is no finding that the assessee is dealing in trading of vehicles or any frequent purchase and sale of cars and therefore the addition in this respect has also rightly been deleted.
In respect of estimation of ALV in inherited property on which, addition of Rs.20,000 in the income of the assessee under section 19(1)(b) of the repealed Income Tax Ordinance, 1979 has been made, the learned counsel has contended that the property is a five storeyed building consisting of five flats and was inherited by the assessee after the death of his father. According to the learned counsel, it is fully occupied by the tenants who are paying rent @ Rs.230 to Rs.425 per month and the case of the assessee for enhancement of the rent is pending in the courts and all the tenants are disputing their rent in the Courts and therefore, there was no justification for estimating the ALV at Rs.17,000 per month. He has contended that even otherwise the assessee was not being confronted by the Assessing Officer on these issues. According to the learned counsel, the learned CIT(A) has, therefore, rightly directed to accept the ALV on the basis of actual rent for the year. In view of the above facts, the learned counsel has requested that the appeal filed by the Department may please be dismissed.
We have heard the learned representatives of both the sides and have also perused the impugned order of the learned CIT(A) and the assessment order.
We have found that the learned CIT(A) has reduced the applied GP rate from 33% to 15%, as the Assessing Officer has applied GP rate at 33% on the basis of parallel case which in fact is not parallel and has not been confronted to the assessee and the learned CIT(A) has reduced the applied GP rate in view of the fact that the history of assessee's own case is of 15% GP rate. Likewise, the quantity of milking yield has also been reduced as per history of the case by the learned CIT(A) and D keeping in view the certificate issued by the Dairy Farm Association confirming the milking yield at 8-Kg.
Regarding the addition made under section 13(1)(aa), we have found that the Assessing Officer has made the addition on the basis of conjectures and surmises. The value of cattle has been determined by the E Assessing Officer without any basis and the Assessing Officer altogether rejected the explanation of the assessee regarding the value and the number of animals and therefore, the learned CIT(A) has deleted the addition keeping in view all these factors.
Likewise, the addition made in respect of sale of car has rightly been deleted as the Assessing Officer has made the addition without any basis.
The directions of the learned CIT(A) regarding ALV of inherited property are also reasonable, as the assessee has explained that the property is a inherited property and fully occupied by the tenants, but the Assessing Officer has failed to make any inquiry in this regard and to confirm from the tenants of the property regarding rent. The learned CIT(A) has, therefore, directed to accept the ALV on the basis of actual rent for the year.
As the learned CIT(A) has given full justification for the treatment meted out by him, we find no warrant for interference in the impugned order of the learned CIT(A) which is, therefore, upheld and the appeal filed by the Department is dismissed.
C.M.A./520/Tax (Trib.)Appeal dismissed.