I.T.A. No.934/IB of 2006, decided on 18th January, 2007. VS I.T.A. No.934/IB of 2006, decided on 18th January, 2007., 2007 PTD-INCOME-TAX-APPELLATE-TRIBUNAL-PAKISTAN 1325 (2007)

(a) Income Tax Ordinance (XLIX of 2001)---

----Ss.122 & 177---Amendment of assessment---Audit---Estimation of sales---Sales were declared excluding sales tax---Audit party found that sales before the sales tax authority were different from the sales declared before Income Tax Authorities---Sales were enhanced in regular assessment and suppressed sales had directly been added in the total income---Validity---Not only the reconciliation statement submitted by the assessee had totally been ignored but directions given by the Appellate Tribunal in various judgments not to go beyond the sales tax authorities' assessment except in the presence of distinguishing circumstances had also not been given due care---Order was neither judicious nor properly reasoned---Appellate Tribunal cancelled the assessment and Assessing Officer was directed to accept the declared sales and consequent income declared by the assessee.

2005 PTD 152 rel.

(b) Income Tax Ordinance (XLIX of 2001)---

----S.122--Amendment of assessment---Assessment of sales different than the declared/determined by the Sales Tax Department---Validity---Tax Collector had been directed by the Tribunal not to disrespect the figures disclosed and object to the sales declared before one department by the other sister departments---Appellate Tribunal had declined the determination of a different figure than the one determined by the sales tax department unless there was some valid proof available with the income tax authorities for deviation.

(c) Income Tax Ordinance (XLIX of 2001)---

----Preamble---General Clauses Act (X of 1897), S.24A---Exercise of power under enactments---Provisions of law contained in S.24A of the General Clauses Act, 1897 was of binding nature and Income Tax Officer as well as all others in the hierarchy of the tax administration were bound to be fair, just, reasonable and to work for the advancement of the purpose of enactment.

(d) Income Tax Ordinance (XLIX of 2001)---

----Preamble---Purpose of law was charge of tax for a subject which is due from him---Creation of charge against someone which is not due is not the purpose---Charging a person beyond the legal requirement can neither be the spirit of law nor the said order can be called as a fair, judicious or a reasonable order.

Aamir Ahmed, I.T.P. for Appellant.

A.A. Sheikh, D.R. for Respondent.

ORDER

This appeal on behalf of the assessee is on the basis of a number of grounds. However, the main issue therein is with regard to miscalculation and misinterpretation of the information given by the assessee as well as the sales tax department.

2. The assessee declared sales excluding sales tax as was required by law on the basis of directions obtaining in the return of total income pro forma prescribed under the Income Tax Rules. The income statement as per its column 7 requires declaration of sales of the assessee with the specific direction `excluding sales tax'. The assessee, therefore, complying with the same declared the sales at Rs.2,62,590. While making desk audit the audit party found that the sales of the assessee before the sales tax authority were different than the sales declared by him before the Income Tax Authorities. The case, therefore, was taken up for regular assessment and the same was assessed at total sales of Rs.2,81,55,787. The suppressed sales as the Deputy Commissioner of Income Tax/Taxation Officer calls it, have directly been added in the total income.

3. Notwithstanding the fact that the method adopted by the Assessing Officer has resulted in direct addition of the so-called suppressed sales in the net income which could only be done under some other provisions of the Income Tax Ordinance, 2001, even otherwise there appears to be a lot of misconceptions in the mind of the audit officers. While discussing the total sales they have ignored the assessee's claim that the information collected by them is inclusive of the sales of June, 2004 amounting to Rs.21,72,622 which was reported to sales tax department on June 4. The assessee had declared its sale results starting from July, 2004 on the basis of its statement filed in July in which the sales for the said month were declared at Rs.26,55,515. As a result and on the basis of final calculation of 12 months the sales declared by the assessee were Rs.2,62,56,590, while information gathered by the department ended on sales at Rs.2,57,88,864. The difference which in fact actually resulted in lesser sales was properly explained but the Assessing Officer ignored it for its reasons best known to him.

4. The D.R. came out with the arguments that the information might have resulted in lesser sales but the discrepancy being there, the department had full right to make an assessment. When confronted that there was no discrepancy and in fact it was on account of wrong addition of the sales of June, 2004, while the assessee had started from July, 2004 which was obviously correct, he made no further comments. The assessee in fact had disclosed correct figure of the sale which was required by law and rules and the same should have been appreciated without unnecessary and incorrect interference. The permission to do audit does not mean finding faults by showing mussels, the audit should be very clean and bona fide. If we see in this case the declaration of the assessee's sale the same is as follows:---

The figure actually transacted including sales tax, therefore, comes to Rs.3,02,19,860 which obviously is the correct and actual one in view of the acceptance of the statements of the assessee by the sales tax department. Needless to mention here that this Tribunal supporting the Central Board of Revenue for its effort of developing harmony between the taxpayer and tax collector has directed not to disrespect the figures disclosed and not objected before one department by the other sister departments. This Tribunal, therefore, has never allowed determination of a different figure than the one determined by the sales tax department unless there is some valid proof available with the Income Tax Authorities for deviation. This case is a classic example of the audit party's mind set. The previous era which was based upon the estimates, gossips, opinions and display of discretion available with the taxation officers is still enchanting on the minds of some of them. The message of the higher-ups in the last six years starting from 2001 has not apparently properly being appreciated by the said audit/taxation officers. The vision of the C.B.R. to be efficient transparent cannot smoothly be achieved if such like assessments are framed under the garb of faulty audit like the one in this case. This style may hamper and delay the process of re-organization which is statedly likely to end in 2009. The known maxim that the justice should not only be done but it should appear to have been done now needs to be understood by the audit parties/taxation officers so as to convey that the spirit behind development process has been understood and the public at large is likely to get the fruits of the same. All officers assigned with the duty involving judicial as well as administrative functions are legally obliged to act promptly, judiciously and for the application of the law in its true and actual spirit. A Tax Officer obviously is no exception to the above rule. He is equipped with the quasi-judicial functions which is to create in many of the cases demand against assessee i.e. payment of sum to the revenue. He should, therefore, be very fair and all his intentions should be to charge tax on the basis of support and information with him. The charge, should not be beyond the requirements of law, rules, justice and fairplay. It is a requirement in all walks of life but, however, while performing a legal duty one is legally bound to be judicious and well-reasoned. In this regard section 24A of the General Clauses (X of 1897) provides the guideline which speaks as follows:---

"S.24A. Exercise of power under enactments.---(1) Where, by or under any enactment, a power to make any order or give any direction is conferred on any authority, office or person such power shall be exercised reasonably, fairly, justly and for the advancement of the purposes of the enactment."

4. Above provision of law is of binding nature and Income Tax Officer as well as all others in the hierarchy of the tax administration are bound to be fair, just, reasonable and to work for the advancement of the purpose of enactment. The purpose of Income Tax Laws is charge of tax from a subject which is due from him. Creation of charge against someone which is not due is not the purpose. Charging a person beyond the legal requirement can neither be the spirit of law nor, the said order can be called as a fair, judicious or a reasonable order. In the present case not only the reconciliation submitted by the assessee have totally been ignored but directions given by ITAT in various judgments to not go beyond the sales tax authorities assessment except in the presence of distinguishing circumstances have also not been given due care. The order, therefore, is neither judicious nor properly reasoned. The assessment suffers from certain other lacunas also in the light of the decision of Hon'ble High Court reported as 2005 PTD 152 in terms of non-issuance of show-cause notice and directly sending the case to the Taxation Officer etc. However, we are not touching these points for the reason of the discussion in the earlier part. In any case this case cannot stand the test of appeal in either of the situations and also for the reason of ignorance of the binding judgment i.e. As a result we hereby cancel the assessment. The Assessing Officer is directed to accept the declared sales and consequent income declared by the assessee.

5. This obviously means acceptance of the appeal of the assessee in the manner and to the extent mentioned above.

C.M.A./24/Tax(Trib.)Appeal accepted.