M.As.(A.G.) Nos.566/LB to 568/LB of 2006, I.T.As. Nos. 1959/LB to 1961/LB of 2005, decided on 3rd August, 2006. VS M.As.(A.G.) Nos.566/LB to 568/LB of 2006, I.T.As. Nos. 1959/LB to 1961/LB of 2005, decided on 3rd August, 2006., 2006 PTD-INCOME-TAX-APPELLATE-TRIBUNAL-PAKISTAN 2884 (2006)

Income Tax Ordinance (XXXI of 1979)---

----Ss, 62 & 134---Assessment on production of accounts---Appellant/assessee who derived income from running a hotel, disclosed its net sales in addition to income from telephone---Assessing Officer did not accept said return of income holding that no supportive documentary evidence, including books of account were furnished by assessee to substantiate his returned version---Declared results was held by Assessing Officer to be unverifiable---To arrive at said conclusion, reference was made by Assessing Officer to enquiry report---On filing appeal by assessee against findings of Assessing Officer, Appellate Commissioner remanded case to, Assessing Officer for de novo assessment---Assessee had filed appeal before Appellate Tribunal against judgment of Appellate Commissioner-Validity-No useful purpose would be achieved by setting aside assessment for de novo consideration reason being that such cases never resulted into reasonable assessment---Assessee was maintaining books of accounts as were prescribed for payment of Sales Tax, bed Tax etc---Apart from those books of accounts, maintenance of passenger register was the pre-requisite to run hotel business and customer register was always open to inspection---Books of accounts were even open to inspection by other departments---Rejection of declared receipts in circumstances was not at all warranted---Assessing Officer was directed to accept the declared receipts.

(2006) 93 Tax 165 (Trib.) and I.T.A. No.5776/LB of 2002, decided on 18-6-2003 ref.

Azhar Ehsan Sheikh for Appellant.

Bashir Ahmad Shad, D.R. for Respondent.

ORDER

Vide this order the above titled three appeals which are instituted at the instance of the assessee-appellant against the consolidated order passed by CIT(A) Zone-V, Lahore, dated 11-4-2005 in respect of assessment years 2000-2001, 2001-2002 and 2002-2003 besides the three miscellaneous applications are disposed off here-under.

2. Facts leading for disposal of the applications are that prior to hearing of the appeals, amended grounds of appeal were filed by the assessee-appellant reason being the grounds originally raised in the memorandum of appeals were not only narrative but were also in the argumentative form. Since, the grounds of appeal have been set forth concisely and under distinct heads without any argument or narrative and are numbered consecutively, therefore, those having been filed in conformity with the Income Tax Appellate Tribunal's Rules are hereby admitted for hearing. The learned A.R. was ordered to proceed further.

3. Facts are that the assessee-appellant in the instant case, derives income from running a hotel at Cavalry Ground Lahore Cantt., Lahore. Net sales, as per the assessment order, were disclosed at Rs.962,382, Rs.977,020 and Rs. 947,042 respectively. In addition to income from telephone for the latter two assessment' years 2001-2002 and 2002-2003 have been declared at Rs.145,200 and Rs.136,851. According to the Assessing Officer, no supportive documentary evidence whatsoever including books of accounts were furnished to substantiate the returned version. Accordingly, the declared results were held to be unverifiable which could not be accepted. However, before formulating the assessment, a notice under section 62 was issued by the assessing Officer showing his intention to adopt netroom rent receipts at Rs.1,03,14,900, Rs.1,05,12,000 and Rs.1,04,33,160 respectively for the years under appeal. These receipts were worked out after taking into account number of double and single rooms and multiplying with room rent charges and also after allowing vacancy @ 20% therefrom. On account of food etc., the assessee was confronted with regard to adoption of annual sales of Rs.803,000 for assessment year 2000-2001 and Rs.912,500 for assessment year 2001-2002 after adopting daily receipts at Rs.2,200 and Rs.2,500 respectively. However, for the subsequent assessment year 20024003, annual receipts under this head were proposed to be estimated at Rs.15,76,800. It was responded that since the assessee's receipts were subjected to Central Excise Duty, Sales Tax and bed tax, thus estimation of receipts in such circumstances was not maintainable. Also stated, that neither breakfast nor lunch or snacks were ever served in the years under appeal owing to closure of kitchen, hence the receipts estimated were unjustified. The pleas taken could not convince the Assessing Officer and he proceeded to estimate total receipts at Rs.20,00,000 in respect of each year under appeal. To arrive at this conclusion reference was made to the survey report whereby total annual receipts were agreed to be adopted at Rs.20,00,000. Moreover, element of lenient treatment was also statedly involved to arrive at this conclusion. This treatment had prompted the assessee-appellant to come up in appeal before the first appellate authority. The learned Appeal Commissioner, after considering the rival arguments advanced from the two sides, deemed it appropriate to remand the case to the Assessing Officer for de novo assessment. This dispensation has compelled the assessee-appellant to come up in appeal before the Tribunal.

4. It was vehemently contended by the learned counsel for the assessee that setting aside the assessments for de novo consideration would not deliver a fruitful result because such direction amounts to vexing the assessee-appellant twice. According to him in such eventuality there is always every likelihood of repetition of the original treatment by the Assessing Officer. Further stated that the entire superstructure of the assessment has been built up on the basis adopted by the survey team which cannot be maintained in view of the judgment rendered in a reported case in re: (2006) 93 Tax 165 (Trib.). In that judgment it was held that the sales agreed to be adopted in the survey form did not constitute an agreement with the survey team and as such had no locus standi in the eye of law. Relevant paras of the said judgment have been highlighted with yellow ink by the learned counsel for the assessee. Also pleaded that since the assessee was maintaining all the registers and the record as were prescribed by the Sales Tax/Central Excise Authorities besides the books of accounts as were provided under the Income Tax Rules, there was no justification on the part .of the Assessing Officer to estimate the receipts. Strength in this regard was sought from an unreported judgment of the Tribunal bearing I.T.A. No.5776/LB of 2002 (Assessment Year 2000-2001), dated 18-6-2003. In that case the declared receipts were directed to be accepted for the reasons recorded therein. Strongly asserted by the learned counsel for the assessee that the books of accounts were not only produced for examination before the Assessing Officer but were also furnished at the time of hearing of the appeal before the first appellate authority. Another plea advanced was that since estimation of receipts by the Assessing Officer were in direct contradiction and disregard to the contents narrated in the notice issued under section 62 of the Income Tax Ordinance, 1979 dated 20-3-2003, thus, the assessments made by the Assessing Officer was not legally tenable in law. It was therefore earnestly prayed that the declared receipts may be directed to be accepted.

5. Conversely the learned D.R. supported the impugned appellate order by contending that no prejudice would cause to the assessee appellant by the direction given by the learned Appeal Commissioner for finalizing the reassessment. Rather the assessee-appellant will get another opportunity to plead his case for acceptance of the declared receipts. Thus, no interference is warranted in the circumstances of the case.

6. We have deliberated the divergent views expressed by the parties in appeal as well as perused the facts of the case available on record. To straighten the record this case for the first time came up for hearing on 27-6-2006 and the books of accounts were produced for our examination in order to substantiate the contention that the books of accounts were duly maintained. On transfer of the learned Accountant Member this case came up for fresh hearing on 3-8-2006 and once again books of accounts have been produced for re,-examination. Anyhow, we are convinced that no useful purpose would be achieved by setting aside the assessment for de novo consideration reason being such cases never results into reasonable assessment. Actually pushing the taxpayer into another chain of litigation generally aggravates miseries of the taxpayer instead of redressal of the grief. The Appeal Commissioner's order is therefore vacated and the learned counsel for the assessee argued the case on merits.

7. There is no denying the fact that the assessee-appellant is maintaining books of accounts as are prescribed for payment of sales tax bed tax etc. Apart from those books of accounts, maintenance of passenger register is the prerequisite to run the hotel business. It is imperative to `state here that all identifying particulars of the passengers including their NIC are recorded therein. Moreover the customer register is always open to inspection by the concerned police authorities in which the hotel is located. The books of accounts are even open to inspection to other departments as well such as Income Tax, Sales Tax etc. We have examined all those registers and the allied documents produced before us.

8. It is also interesting to note that the Assessing Officer of his owned repelled the rationale of computing the receipts. Assessment order vividly spells out that suddenly a "U" turn was taken by the Assessing Officer while adopting the receipts. The entire edifice of the assessment has been made statedly on the receipts agreed before the survey team which were at Rs.20,00,000. Had the Assessing Officer intended to adopt annual receipts of Rs.20;00,000, he was under legal obligation to confront with the proposed treatment. Although the receipts so adopted by the Assessing Officer were beneficial to the assessee-appellant nevertheless, denial of Doctrine of' audi alteram partem has never been looked upon favourably.

9. In view of foregoing discussion and the principle and the ratio decidendi in the reported and also in the unreported case, cited supra, we have no ambiguity in our mind but to hold that rejection of declared receipts in such circumstances was not at all warranted. We, therefore, direct the Assessing Officer to accept the declared receipts in the two heads mentioned supra.

10. Resultantly, not only the three miscellaneous applications but also the main appeals are succeeded.

H.B.T./199/Tax (Trib.)Applications and appeals succeeded.