I.T.As. Nos. 804/IB and 805/IB of 2006, decided on 22nd February, 2007. VS I.T.As. Nos. 804/IB and 805/IB of 2006, decided on 22nd February, 2007., 2007 PTD-INCOME-TAX-APPELLATE-TRIBUNAL-PAKISTAN 1444 (2007)

Income Tax Ordinance (XXXI of 1979)---

----Ss.52, 86, 143-B, 59-A, 108 & 144C---Liability of persons failing to deduct or pay tax---Assessee engaged in business of supply of goods had filed statement under 5.143-B of the Income Tax Ordinance, 1979--Assessing Officer sought information regarding sellers of goods---No information was filed---Purchases supposed to have been made were worked out back (from, the amount of supplies) and levied income tax deductible @ 3.5 per cent as well as additional tax---Validity---No column existed in the prescribed statement under S.143-B of he Income Tax Ordinance, 1979, wherein the assessee could disclose the figures of purchases---Statement was different from trading profit and loss account---Non-declaration of purchases was not a default on the part of assessee---Declared receipts being covered under the provisions of S.80C of the Income Tax Ordinance, 1979, no further information was required to be filed by the taxpayer---If the assessee had not cooperated, independent inquiry could have been conducted in order to find out the exact quantum of purchases attracting the relevant provisions of law---Such tax could not be levied on mere guess work---Department had shifted the onus of proving the default under Ss.52/86 of the Income Tax Ordinance, 1979 on the assessee---Failure to file information under S.144C of the Income Tax Ordinance, 1979 entailed penalty under S.108 of the Income Tax Ordinance, 1979 and did not call for invocation of the provisions of Ss.52/86 of the Income Tax Ordinance, 1979---Depart mental action was not legally justified---Orders of both the authorities were vacated by the Appellate Tribunal.

Sajid Ali, ITP for Appellant.

A.A. Sheikh, DR. for Respondent.

ORDER

Through these appeals the tax payer has assailed combined Orders Nos.8698 and 8692, dated 7-6-2006 passed by the CIT(A) whereby the departmental action under section 52 read with section 86 of the repealed Income' Tax Ordinance, 1979 was upheld. The decision of the first appellate authority has been challenged on the following grounds:--

(i) That the Assessing Officer was not justified to charge tax under sections 52/86 as statement under section 143-B was filed and tax deducted under section 50(4) constituted final discharge of liability.

(ii) That the Assessing Officer was not justified to pass separate and independent order either under section 52 or 86 as held by the Tribunal. Furthermore, provisions of this section can only be invoked when definite finding of default during the course of assessment proceedings is given.

(iii) That the learned Assessing Officer himself accepted the statement filed under section 143-B and credit of tax deduction was allowed. The impugned order under sections 52/86 is therefore, contradictory to the case finalized under presumptive tax regime and also tantamount to double jeopardy.

(iv) That the Assessing Officer was not justified to charge tax under sections 52/86 by adopting the estimated amounts of purchases on the basis of assumptions and guess work in which provisions of section 50(4) were not attracted.

2. The facts in brief are that the petitioner, a private limited company, engaged in the business of supply of goods had filed statements under section 143-B declaring receipts at Rs.14,181,942 and Rs.28,703,134 for the Assessment years 1998-99 and 1999-2000 respectively, which were accepted under section 59A. Later on the Assessing Officer observed that the declared supplies could not possibly be made without purchasing the goods from the market. He issued letter seeking information under section 144C regarding the sellers of goods. No information was filed by the assessee. In the given circumstances, he proceeded ex parte. The amount of purchases supposed to have been made were worked back (from the amount of supplies) at Rs.12,054,651 and Rs.24,397,666 and income tax deductible @ 3.5 per cent as well as additional tax liability under section 86 at Rs.697091 and Rs.1206523, respectively. In first appeal the taxpayer's contentions against the order under sections 52/86 did not find favour and the appeal were dismissed. The petitioner did not accept the findings of the learned first appellate authority, hence these appeals.

3. The learned authorized representative of the taxpayer has contended that the levy of tax under section 52/86 was not justified because there was no provisions in law under which the amount of purchases could be worked back (from the amount of declared supplies) for the purpose of such levy. He contended that the assessee had declared the receipts under section 143-B. The amount of alleged purchases was not required to be disclosed in the statement, as there was no such column provided in the prescribed form. In these circumstances, the tax charged on the basis of supplies was not legally tenable. He further contended that the learned CIT(A) had erred in upholding the departmental action on the basis of default under section 144C. It was also argued that failure to file the required details under the said section entails penalty under section 108 and does not authorize the department to charge tax under sections 52/86. The learned D.R., on his turn, defended the departmental action by stating that since, supplies could not be made without purchases and the information called for under section 144C, in order to find out the assessee's liability under sections 52/86, had not been furnished, therefore the Assessing Officer was justified in charging the tax in question and the First Appellate Authority had rightly upheld the levy.

4. After hearing the parties and going through the available record, we find that the views of the learned A.R. carry weight. Firstly, there was no column in the prescribed statement under section 143-B, wherein the assessee could disclose the figures of purchases. Secondly, the statement under section 143-B was different from the trading profit and loss account, therefore non-declaration of purchases was not a default on the part of the assessee. Since, the declared receipts were covered under the provision of 80C, therefore no further information was required to be filed by the taxpayer. If the assessee had not cooperated, independent B inquiry could have been conducted by the Assessing Officer in order to find out the exact quantum of purchases attracting the relevant provisions of law. The tax under question cannot be levied on mere guess work. The department had shifted the onus of proving the default under sections 52/86 on the assessee. The failure to file information under section 144C entails penalty under section 108 and does not call for invocation of the provisions of sections 52/86. In view ,of above facts and circumstances of the case we had that the departmental action was not legally justified hence, we accepted the assessee's appeals and vacate the orders of both the officers below.

As a result both the appeals succeed.

C.M.A./23/Tax(Trib.)Appeals accepted.