I.T.A. No.46/IB of 2005, decided on 24th May, 2004. VS I.T.A. No.46/IB of 2005, decided on 24th May, 2004., 2006 PTD-INCOME-TAX-APPELLATE-TRIBUNAL-PAKISTAN 52 (2004)

Income Tax Ordinance (XLIX of 2001)---

----Ss. 120, 121, 130(8) & 131---Assessment---Appeal to Appellate Tribunal---Income Tax Officer, though was not bound to accept the Sales Tax record, but since the present taxation system was in the phase of development in the manner that the Department was going to accept whatever was declared by assessee as correct income, the reports prepared by other governmental agencies in said background could not straightway be thrown away---Estimate was not a substitute of Sales Tax Audit party report---Department of Sales Tax, was equal in status and competency to Income Tax Department--Ignorance of their finding by Assessing Officer in Income Tax proceedings without some tangible proof could not be appreciated---One should respect statement of tax-payer supported by another agency which was equally responsible and respectable---Since everybody should play his role in making said new improvement of taxation system in the country a success, Assessing Officer should also come out with pragmatic approach, which would not mean that taxpayers should be left unchecked, but things should now improve and Department must use its limits for collecting evidence against persons who were misusing facilities which had been brought to accelerate progressive system of taxation in the country---Government had decided to repose full confidence in the taxpayers by accepting income as declared by them---Betrayal of said confidence should be brought to, task, but on basis of direct proof---Keeping in view the spirit of mutual respect, harmony, success of progressive taxation system in the country and removal of mis-trust between taxpayers and Tax Department, the reports of the sister agencies should not be dis respected---Declared sales of assessee for relevant year, should be accepted, in circumstances.

Muhammad Aslam Anwar for Appellant.

Shahid Zaman, D.R. for Respondent.

Date of hearing: 24th May, 2005.

ORDER

KHAWAJA FAROOQ SAEED (CHAIRPERSON).---This appeal filed by the assessee speaks as follows:--

"That the appellant derives income mainly from sale of service shoes and very small number locally manufactured shoes are sold for which proper record/sales tax invoices are kept. As such estimate of local sales at Rs.4,00,000 as reduced by CIT(A) from Rs.5,93,125 as against declared at Rs.2,72,758 is totally unjustified.

That add-backs under the head entertainment and conveyance are highly excessive and unjustified."

2. The AR says that the assessee purchases and sales all are fully verifiable and are subject to sales tax as well. He added that for the impugned year the sales tax audit team has audited the assessee accounts which have been found correct. The sales tax has been imposed on the said declared sales which alone prove assessee's claim that his accounts are correctly maintained. Moreover, the Income Tax Officer has accepted assessee's sale with regard to his purchase from Service Industries and has only reflected other local sales, which also is on the basis of verifiable purchases.

3. The DR says that the assessee history is of rejection of accounts and the evidence does not support his local sales. It was confronted to him that the audit team report has been ignored without bringing on record any other contradictory element. He said that the record of sales tax is not binding on the income tax proceedings.

4. It is correct that Income Tax Officer is not bound to accept the sales tax record. However, since our taxation system is in the phase of development in the manner that the department is going to accept whatever declared by the assessee as is correct income. The reports prepared by other governmental agencies in the above background cannot, straightway be thrown away. An estimate is not a substitute of the sales tax audit party report. The department of the sales tax is equal in status and competency to the Income Tax Department. Ignorance of their finding by the Assessing Officer in Income Tax proceedings without some intangible proof cannot be appreciated. Be that binding or not, this, controversy should now come to an end. (One should respect the statement of the taxpayers supported by another agency of the country which is equally responsible and respectable. I know that at this stage of the development such finding may not look welcome to the assessing authorities. However, since everybody should play his role in making this new improvement of taxation system in the country a success, the Assessing Officer should also come out with pragmatic approach. It does not mean that the taxpayer should be left unchecked. However, things should now improve and the department must use its limbs for collecting evidence against persons who are misusing the facilities. which have been brought to accelerate the progressive system of taxation in country. Government has decided to repose full confidence in the taxpayers by accepting the income as declared. Betrayal of the said confidence should be brought to task but on the basis of direct proof. Nobody shall be unhappy if some examples are made of the people who are cheating the revenue and the country. However, this would require proof, in tangible form and the regime of estimates, presumptions, surmises and general remarks should now come to an end. Keeping in view the spirit of mutual respect, harmony, success of the progressive taxation system in the country and removal of mis-trust between taxpayers and tax department, the reports of the sister agencies should not be disrespected. Keeping in view above observation and discussion I have no hesitation in directing that the declared sales for this year be accepted as declared. The appeal stands accordingly decided.

H.B.T./466/Tax (Trib.)Order accordingly.