I.T.A. No.387/IB of 2005, decided on 1st March, 2006. VS I.T.A. No.387/IB of 2005, decided on 1st March, 2006., 2006 PTD-INCOME-TAX-APPELLATE-TRIBUNAL-PAKISTAN 2565 (2006)

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

----Ss. 80D & 62--Minimum tax on income of certain persons---Normal assessment---Assessee contended that there being non-obstante clause, once an assessee had paid tax @ 0.5% of his declared turnover the Department was precluded from making a regular assessment and. no estimation of turnover or charge of tax over and above what the assessee had voluntarily paid along with the return could be made--Validity---Possibility of regular assessment remained applicable in cases where the earning was more than what could be subjected to 0.5% tax on annual turnover---Assessees who were earning more than an amount that attracted 0.5 % tax remained liable to file income tax return or to get their assessment orders framed in terms of the other provisions of the Income Tax Ordinance, 1979---Assessee itself had filed a return of income falling in line with the said rule---Nothing existed in law requiring acceptance of turnover as declared by an assessee---Assessees remained liable to be assessed in terms of the law contained in the Income Tax Ordinance, 1979.

1998 PTD 1804 and Messrs Ellahi Cotton Mills and others v. Federation of Pakistan etc. PLD 1997 SC 582 = 1997 PTD 1555 Not applicable.

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

----S. 13(1)(aa)---Addition was made under S.13(1)(aa) of the Income Tax Ordinance, 1979, keeping in view the admitted fact that assessee was unable to produce evidence in support of the claimed version---Order of First Appellate Authority noted that the amount in question was received in cash and was shown as a loan and that the amount remained unexplained as no document was filed nor explanation offered during the assessment proceedings--No interference was called for by the Appellate Tribunal in circumstances.

Muhammad Aslam Sheikh for Appellant.

Muhammad Tahir Khan, D.R. for Respondent.

ORDER

SYED AQEEL ZAFAR-UL-HASAN (ACCOUNTANT MEMBER).---The appellant-assessee has impugned the order passed by the learned Commissioner Appeals, Zone-I, Islamabad in Appeal No.4813 on 29-12-2004. The issues raised in the grounds of appeal are as under:

"(i) That the payment of tax @ 0.5% of the total declared turnover entitles the assessee to acceptance of declared version.

(ii) That the addition under section 13(l)(aa) of the Income Tax Ordinance, 1979 (hereinafter called the repealed Ordinance) on account of receipts shown from the different accounts was untenable in law; and

(iii) That the addition made under section 12(18) was uncalled for as it was the payment made by a Director (of the) company to the bank by way of bank instalment to settlement of bank loan."

2. Parties have been heard. The learned AR dwelt at length on the claimed right of the assessee to acceptance of declared version under section 80D of the repealed Ordinance. Being a non-obstante clause, he claimed that once an assessee had paid tax @ 0.5% of his declared turnover the Department was precluded from making a regular assessment. No estimation of turnover or charge of tax over and above what the assessee had voluntarily paid along with the return could be made, he maintained. Placing reliance on cases cited as 1998 PTD 1804 and PLD 1997 SC 582 = 1997 PTD 1555, he claimed that the learned Commissioner Appeals had erred in law in confirming the regular assessment made by the Assessing Officer.

3. On the issue of addition made under section 13(1)(aa), he clarified that it was based on the credit entries in the ledger account maintained by the assessee in respect of an informal market arrangement known as "Committee". Money so received had been recorded in the ledger account, and could not be termed as an unexplained investment of the assessee, he claimed. On a Court query he, however, conceded 'that no evidence to substantiate the claimed source of receipts could be produced other than the ledger account entries in the books of the assessee. No other ground was pressed by him.

4. The learned D.R. on his part pointed out that the case law referred to by the assessee does not preclude probing into the authenticity of the declared version nor is there any bar on regular assessment in cases where the assessee might claim invoking the provisions of section 80D of the repealed Ordinance. In this regard he recalled that the learned AR had referred specifically to para. 45 of the Supreme Court judgment reported as PLD 1997 SC 582 1997 PTD 1555 in; re: Messrs Ellahi Cotton Mills and others v. Federation of Pakistan etc. and stated that it had been held therein that only where an assessee is liable to pay tax more than 0.5% on its turnover could regular assessment be made. Seen in this context, the determination of liability to pay tax, itself required probing. There is no bar placed by the apex Court on such probing. In the other case quoted by the learned AR and cited as 1998 PTD 1804, the honourable High Court merely states that section 80D provides a simplified assessment process. It does not lead to the inference that turnover itself cannot be probed into while completing an assessment under sections 62/80D of the Ordinance. He accordingly urged that the assessee had no case and the assessment made under section 62 of the repealed Ordinance was in accordance with law. As regards the cash statedly received from the "Committee", the same had also been rightly taxed under section 12(18) of the Ordinance as no evidence to support the claimed sources of receipts was furnished at the assessment stage. The appeal of the assessee, therefore, merits to be rejected, he maintained.

5. Having heard the arguments of the parties and examined the case law referred to by the learned, AR, we tend to agree with the learned Department Representative. The assessee has not been able to produce any direct authority to state that an assessee was entitled to acceptance of declared version under section 80D of the Ordinance. The case law referred to by the learned AR makes no such pronouncement. The relevant para. 45 of the judgment of the apex Court in the Ellahi Cotton Mills case records the contention of the assessee that under section 80D an assessee whose earning is more than which can be subjected to 0.5% tax on annual turnover, remains subject to a regular assessment whereas the assessees whose earnings are lesser are not subject to any assessment. Aster examining the contention of the parties, the apex Court has observed as under:--

"However, if there is one transaction amounting to Rs.1,00,000 in a year his liability under the above provision would be to pay Rs.500 i.e. half per cent of the turnover in the assessment year involved. The minimum tax is payable at the rate of 1/2 % by those assessees who do not declare their income equivalent to the amount which can be subject to tax at the rate of half per cent on the basis of turnover. Payment at the rate of half per cent by them under section 80D is in the total discharge of their minimum tax liability. However, the assessees who earn more than the above amount, they remain liable to file income tax returns or to get their assessment orders framed in terms of the provisions of the Ordinance."

6. The foregoing clearly shows that according to the litigant assessee, the possibility of regular assessment remained' applicable in cases where the earning is more than which can be subject to 0.5% tax on annual turnover. At the same time, the Supreme Court has clearly held that the assessees who are earning more than an amount that tracts 0.5% tax remain liable to file income tax return or to get their assessment orders framed in terms of the other provisions of the Ordinance. The very fact that the assessee itself filed a return of income falls in line with this observation of the apex Court. There is nothing in law requiring acceptance of turnover as declared by an assessee. The assessees remain liable to be assessed in terms of the law contained in the Income Tax Ordinance, 1979.

7. As regards the case cited as 1998 PTD 1804, the learned AR has made specified reference to the observation of the honourable High Court at page 284 thereof. We have carefully examined the relevant judgment and note that it contained no observation that may help infer for purposes of section 80D, that the turnover declared by an assessee must be accepted without probe. In fact, in the cited case the discussion is confined to the rationale of enacting the provisions of sections 80C, 80CC and 80D of the Income Tax Ordinance, 1979. The honourable High Court has observed that the referred provisions are neither unreasonable or discriminatory nor do they appear to be confiscatory. Accordingly, we observe that the reliance by the learned AR on the cited case is of no avail to the assessee in the present facts of the case. All that has been observed in that judgment with regard to section 80D is to state that non-obstante clause inserted therein purports to include such companies or registered firms in the tax net in whose case no tax is payable or has not been paid for nay reason enumerated in section 80D of the Ordinance. This is no way helps to support the claim that a return filed under section 80D cannot be subjected to any probing by the Assessing Officer.

8. As regards the addition made under section 13(1)(aa), keeping in view the admitted fact that the assessee is unable to produce evidence in support of the ,claimed version, no interference is called for. The order of the learned Commissioner Appeals noted that the amount in question was received in cash and was shown as a loan and that the amount remained unexplained as no document was filed nor explanation offered during the assessment proceedings, requires no interference.

9. As a result of the foregoing, we find no merit in the assessee's appeal. It is accordingly rejected.

C.M.A./127/Tax(Trib.)Appeal rejected.