I.T.A. No.718/LB of 2004, decided on 14th December, 2005. VS I.T.A. No.718/LB of 2004, decided on 14th December, 2005., 2006 PTD-INCOME-TAX-APPELLATE-TRIBUNAL-PAKISTAN 641 (2005)

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

----S.62---Survey for Documentation of National Economy Ordinance (XV of 2000), Preamble---Assessment on production of accounts, evidence etc.---Assessee was confronted by issuing notice under S.62 of the Income Tax Ordinance, 1979 whereby proposed estimated sales were based on local inquiry report---After lapse of almost two years from the date of issuance of the first notice, the assessee was once again confronted with higher sales viz. the earlier one on the ground that assessee had agreed before the Survey Team to be assessed at such sales---Validity---No implicit reliance could be placed on the contents recorded in the Survey Form, which could merely be considered a piece of information having some evidentiary value and nothing more---Contents recorded in Survey Form had no binding force, reason being usually and generally extent of business in each and every case was adjudged considering the multidimensional factors---Agreement recorded in the Survey Form on the point of estimation of sales was brushed aside by the Appellate Tribunal for purpose of disposal of appeal.

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

----S.129---Appeal to the Appellate Additional Commissioner---Remand of case---Case should have not been remanded where neither the new facts were required to be brought on record nor there was a case of further inquiry or investigation.

(c) Survey For Documentation of National Economy Ordinance (XV of 2000)---

----S.302(2)---Contract Act (IX of 1872), Ss. 10, 14 & 19---Filing of questionnaire---Agreement of sales---Voidable contract---Section 10 of the Contract Act, 1872, provided that only those agreements had binding force which were made by free consent of the parties---Under S.14 of the Contract Act, 1872, the consent could only be said to be free if it was not caused by coercion and undue influence---Agreement of sales made with Survey Team was voidable contract being caused by coercion and undue influence as had been envisaged in S.19 of the Contract Act, 1872---Sales agreed in Survey Form lacked legal sanctity.

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

----S.62---Assessment on production of accounts, evidence etc.---Sales be estimated considering overall facts of the case---Circle Inspector reported stock lying at shop at Rs.600,000 and the declared capital was at Rs.600,000---Appellate Tribunal deemed appropriate and fair to fasten the sales at Rs.48,00,000 in circumstances.

Azhar Ehsan Sheikh for Appellant.

Dr. Shahid Siddiqui Bhatti, D.R. for Respondent.

Date of hearing: 14th December, 2005.

ORDER

RASHEED AHMED SHEIKH (JUDICIAL MEMBER).---This appeal at the instance of the assessee-appellant is directed against the order passed by C.I.T.(Appeals) Zone-IV, Lahore dated 20-11-2003 in respect of assessment year 2000-01.

2. The impugned appellate order has been attacked by the learned counsel for the assessee on legal as well as on factual grounds. The question posed was as to whether the sales agreed to be adopted in the Survey Form constitutes an agreement with the Survey Team or not? Facts forming background of this question was that the assessee respondent derives income from selling artificial jewelry on wholesale basis. Net income was returned at Rs.1,70,000 on estimated sales of Rs.45,00,000 and by claiming profit and loss expenses of Rs.1,90,000. As the assessee could not substantiate his returned version with any documentary evidence, a local inquiry was got conducted through the Circle Inspector who, inter alia, reported that four persons were employed at the shop, stock in shop was at Rs.6,00,000 and capital employed in business was at Rs.6,20,000. The assessee-appellant was, accordingly, confronted by issuing a notice under section 62 dated 6-9-2001 whereby sales were proposed to be estimated at Rs.60,00,000 considering the contents of the local inquiry report. After the lapse of almost two years from the date of issuance of first notice under section 62 dated 6-9-2001, the assessee was once again confronted by issuing another notice under section 62 on 3-5-2003, as to why the sales should not be estimated at Rs.1,00,00,000. This occasion of issuing second notice under section 62 arose when copy of the Survey Form was received in the office of Taxation Officer. Reason for confronting higher sales viz. the earlier one was that the assessee had agreed before the Survey Team to be assessed at net sales of Rs. 1,00,00,000. In response thereto it was stated that the so-called agreement was made under compelling circumstances which may please be ignored for all practical purposes. Further stated that since the sales, as were confronted in the first notice dated 6-9-2001, was issued after getting conducted thorough inquiry, therefore, the sales allegedly agreed upon have no locus standi in the eye of law. Thus the assessment may please be made ignoring the so-called facts recorded in the Survey Form. However, the contention raised by the assessee-appellant could not convince the Assessing Officer and he, therefore, proceeded to estimate sales at Rs.1,00,00,000, as were proposed in the second notice under section 62. In this manner net income was computed at Rs.5,60,000.

3. Felt aggrieved by the order of the Assessing Office, the appeal was preferred before the first appellate authority. Before the Appeal Commissioner the contentions earlier raised were reiterated and he, after examination of assessment record, came to the conclusion that the pleas taken by the assessee-appellant, did lend support. The Appeal Commissioner, however, opted to remand the case to the Assessing Officer for de novo consideration with the direction to consider the appellant's contentions before finalizing the reassessment. Also directed that proper inquiries are required to be conducted in order to ascertain exact quantum of the appellant's business. This has compelled the assessee-appellant to assail the said order in further appeal before the Tribunal.

4. After giving anxious thought to the divergent views expressed by the parties in appeal, I have come to the conclusion that this is the case which should have not been remanded because neither the new facts are required to be brought on record nor this is a case of further inquiry or investigation. Thus, no occasion arises to shove down the respectable taxpayer into another series of litigation. Hence, the Appeal Commissioner's findings are vacated in this regard.

5. Coming to the sales agreed before the Survey Team, I have serious reservations the way the survey of business premises has been conducted by a team comprising personnels of Army and Income Tax as well as Sales Tax Department. Admittedly the Survey Team is a high powered viz. the assessee, hence balance of convenience leans in the assessee's favour. It is also imperative to state here that how come in a such-like situation if a respectable citizen spits out true state of affairs nevertheless nobody is going to believe his statement. Thus element of free will, which is one of the essential ingredients of a valid contract, lacks in such eventuality and this was all-along the assessee's contention not only before the Bench but also before the two authorities below. According to section 10 of the Contract Act, only those agreements have binding force which are made by free consent of the parties. Under section 14 of the Contract Act the consent can only be said to be free if it is not caused by coercion and undue influence. In this case both these factors are available, therefore, the agreement so made with the Survey Team is a voidable contract as has been envisaged in section 19 of the Contract Act. Thus in the given circumstances the sales agreed in the Survey Form lack legal sanctity.

6. On the other hand the facts and figures generated by virtue of a fresh inquiry, got conducted through the Circle Inspector, were by free will and no excuse can be acceptable for departing from those facts and figures. Inter alia, it was categorically reported that stock lying in the shop was at Rs.6,00,000 and capital employed in business was at Rs.6,20,000. When glanced the reported facts viz. recorded in the Survey Form, one can safely smell therefrom the aroma of undue influence and pressure. This is also evident from the duly sworn affidavit filed by Mr. Saeed Iqbal son of Muhammad Iqbal, the assessee appellant. It has vehemently been deposed therein that the Survey Form was signed under undue influence of Army and Tax Departments officials as it was threatened to seal the shop. In the given scenario I am of the considered view that no implicit reliance can be placed on the contents recorded in the Survey Form. Those can merely be considered a piece of information having some evidentiary value and nothing more. I further hold that the contents recorded in the Survey Form have no binding force reason being usually and generally extent of business in each and every case is adjudged considering the multidimensional factor. Hence, the so-called agreement recorded in the Survey Form on the point of estimation of sales is hereby brushed aside for the purpose of disposal of this appeal.

7. As regards other segment of the contention that the sales be estimated considering overall facts of the case. When viewed in the perspective that the Circle Inspector had reported stock lying at shop at Rs.6,00,000 and the declared capital was at Rs.6,00,000, I deem it appropriate and fair to fasten the sales at Rs.48,00,000. Consequently, the Assessing Officer's order is modified to the extent indicated above.

8. In the result the assessee's appeal partially succeeds.

C.M.A./12/Tax(Trib.)Order accordingly.