I.T.As. Nos.2266/LB to 2268/LB of 2005, decided on 17th April, 2006. VS I.T.As. Nos.2266/LB to 2268/LB of 2005, decided on 17th April, 2006., 2007 PTD-INCOME-TAX-APPELLATE-TRIBUNAL-PAKISTAN 155 (2006)

Income Tax Ordinance (XXXI of 1979)---

----S. 62(1)---Assessment on production of accounts, evidence etc.---Rejection of books of accounts along with the sales tax record without confronting the assessee through notice under S.62(1) of the Income Tax Ordinance, 1979---Validity---Proper books of accounts were produced before the Assessing Officer---Notice under S.62(1) of the Income Tax Ordinance, 1979 after having examined the same was not issued---Returned version had been rejected without any cogent reasons---Assessments framed were void ab initio illegal---Since notice under proviso to S.62(1) of the Income Tax Ordinance, 1979 was not issued pointing out specific defects in the books of accounts and no intention was shown to make add-back from Profit and Loss accounts, the rejection of accounts and add-backs made were illegal and unjustified---Assessing Officer was directed by the Appellate Tribunal to accept the returned version declared by the assessee.

PTCL 1990 CL 70(9) and (2003) 87 Tax 129 (Trib.) rel.

Mumtaz-ul-Hassan for Appellant.

Muzammal Hussain, D.R. for Respondent.

ORDER

The instant appeals have been preferred by the assessee against consolidated order, dated 30-4-2005 recorded by the learned CIT(A) Zone-II, Lahore relating to the assessment years 1998-99, 2000-2001 and 2001-2002. The assessee has agitated that the rejection of accounts, estimation of sales and various additions made in the profit and loss account expenses in all the years under consideration.

2. Brief facts giving rise to these appeals are that the assessee, a private limited company, derives income from manufacturing and sale of biscuits. Original assessment for the years under consideration framed in the present case were set aside. In the re-assessment proceedings assessment were framed by way of making estimate sales, application of GP rate. Various add-backs in the P&L expenses were also made. The treatment meted by the Assessing Officer was confirmed by the learned First Appellate Authority.

3. The learned AR stated that the assessments for the years under consideration were framed on mere guess work and on presumptions. No evidence whatsoever has been brought on record to estimate the sales and making additions in the profit and loss account expenses. Reliance in this behalf was placed on reported decision of the Karachi High Court reported as PTCL 190 CL 70(9). The learned AR further stated that books of accounts along with the sales tax record were produced before the Assessing Officer and the same were rejected without confronting the assessee through notice under section 62(1) of the repealed Income Tax Ordinance, 1979, which is mandatory under the law. Therefore, the rejection of account and all the add-backs are not maintainable and also against the spirit of law. The learned AR further stated that it is an established principle that where books of accounts were properly maintained the declared version cannot be rejected without specifying any discrepancy therein or bringing on record any material evidence to the effect that the assessee has made some transactions which have not been faithfully recorded in the books of accounts. The assessee must also be confronted on such defects after examination of the books of accounts and explanation tendered by the assessee should be properly rebutted. The learned AR also relied on reported case of the ITAT cited as (2003) 87 Tax 129 (Trib.) to contend that where there is violation of mandatory law the assessment is liable to be cancelled. The learned D.R., on the other hand, has supported the orders of the authorities below for the reasons stated therein.

4. In view of the reported judgment cited (supra) and in view of the fact that proper books of accounts were produced before the Assessing Officer, a notice under section 62(1) after having examined the same was not issued in all the three years under consideration, hence we are in total agreement with the learned AR for the assessee that the returned version has been rejected without any cogent reasons. The reported judgment cited (supra) is on all fours to the case of the assessee, hence we do not hesitate to hold that the assessments framed for the years under consideration are void ab initio illegal. The assessments for the years 1998-99, 2000-2001 and 2001-2002 are therefore, cancelled. Since notice under proviso to section 62(1) was not issued pointing out specific defects in the books of accounts and no intention was shown to make add-back from P & L accounts, the rejection of accounts and-add back made are illegal and unjustified. Hence the Assessing Officer is directed to accept the returned version declared by the assessee for the years 1998-1999, 2000-2001 and 2001-2002.

The appeals filed by the assessee are accepted.

C.M.A./155/Tax (Trib.)Appeals accepted.