I.T.A. No. 5156/LB of 2004, decided on 6th June, 2006. VS I.T.A. No. 5156/LB of 2004, decided on 6th June, 2006., 2007 PTD-INCOME-TAX-APPELLATE-TRIBUNAL-PAKISTAN 213 (2006)

Income Tax Ordinance (XLIX of 2001)---

----Ss. 114(6), 122(3)(b) & 239(1)---Income Tax Ordinance (XXXI of 1979), Ss. 61, 62 & 57---Return of income---Assessment year 2001-2002---Revised return---Assessee contended that Assessing Officer illegally assessed the revised return filed under S.114(6) of the Income Tax Ordinance, 2001 which was to be an amended assessment order under S.122(3)(b) of the Income Tax Ordinance, 2001---Validity---Income Tax Ordinance, 2001 had come into force on 1-7-2002 and under the saving provision of S.239(1) of the Income Tax Ordinance, 2001---Taxation Officer had rightly not accepted the revised return, as it was not obligatory to accept the same under the Income Tax Ordinance, 1979---Sales estimated being still excessive were reduced by the Appellate Tribunal and GP rate applied @ 25% was directed to be applied @ 20% keeping in view the parallel cases.

Yawar Mehdi Naqvi for Appellant.

Mrs. Sabiha Mujahid, D.R. for Respondent.

ORDER

JAWAID MASOOD TAHIR BHATTI (JUDICIAL MEMBER).---The appellant through this appeal has objected to the impugned order of the learned CIT(A), dated 6-7-2004 for the assessment year 2001-2002 on the following grounds:--

(2) That the lower authority was illegally assessed the revised return under section 114(6) which is to be an amended assessment order under section 122(3)(b) of the Income Tax Ordinance, 2001. The learned CIT(A) has confirmed the action of the Taxation Officer without any reason.

(3) That the estimation of sales at Rs.22,00,000 is still excessive and unjustified as against declared sale of Rs.15,00,000. That the learned CIT(A) was not justified to confirm the GP rate at 25% when in number of cases, the GP has been reduced from 25% to 20% in same nature of business.

Mr. Yawar Mehdi Naqvi, Advocate representing the appellant has contended that appellant, in this case, has filed revised return under section 114(6) of the Income Tax Ordinance, 2001, which has to be accepted by the Taxation Officer as declared by the assessee under section 122(3)(b) of the Income Tax Ordinance, 2001. He has contended that Taxation Officer, in this case, has rejected the revised return without any justification and has made the assessment. On the merits of the case, the learned counsel has contended that estimation has been made on the basis of electricity consumption, but in the case of the appellant, basis made by the Taxation Officer is not justified, as the assessment in the parallel cases has been made on the basis of agreement with the Association of Power Looms Factories, as the assessee in this case is also deriving income from running power loom, therefore, his case should also be estimated on the basis of that agreement.

On the other hand, learned DR, is supporting the impugnedorder of the learned CIT(A). She has contended that sales have been estimated on the basis of electricity consumed and the learned CIT(A) has already allowed relief while reducing estimation of sales and the addition made under the head "Salary Expenses" has been deleted.

I have heard the learned representatives from both the sides and have also perused the impugned order of the learned CIT(A) and the assessment order.

While perusal of subsection (6) of section 114 of the Income Tax Ordinance, 2001, I have found that in this section, it has been provided that "any person, who has furnished return, discovers any omission or wrong statement therein, may furnish revised return within five years of the date, when the original return was furnished". While in subsection (3) of section 122 of the Income Tax Ordinance, 2001, it has been provided that "where a tax payer furnishes revised return under subsection (6) of section 114:--

(a) the same shall be treated as having made an amended assessment of the taxable income and tax payable therein as set out in the revised return;

(b) the tax payers' revised return shall be taken for all purposes of this Ordinance to be an amended assessment order issued to the tax payer by the Commissioner on the date on which, the revised return was furnished.

After considering the above said provisions of law, I am of the considered view that in sub-para (b) of subsection (3) of section 122 of the Income Tax Ordinance, 2001, it has been specifically legislated that revised return furnished under subsection (6) of section 114 shall be taken for all purposes of this Ordinance to be an amended assessment order issued to the tax payer by the Commissioner on the date on which, the revised return was furnished, but in this case, the assessee has filed return declaring net income at Rs.11,00,000 under the Self Assessment Scheme, but the case was processed under normal law for the reason that the income declared is less than as compared to income assessed for the last year and further that the required increase in terms of tax has not been shown. The Taxation Officer in the assessment order passed on 29-4-2004 under section 62 of the repealed Ordinance, 1979 has mentioned that to finalize the assessment, notice under section 61 was issued in response to which, representative of the assessee attended the proceedings and the revised return of income and other documents were filed. The assessee has declared sales of Rs.15,00,000, which were rejected for the reason that against electricity consumption of Rs.7,92,090, the figure of declared sales is very much low and therefore, sales were estimated at Rs. 24,00,000 and disallowances out of claimed expenses out of P&L A/c were also made and taxable income was estimated at Rs.3,47,900 after charging Workers Welfare Fund.

After considering the above said provisions of the law as provided under sub-para (b) of subsection (3) of section 122 of the Income Tax Ordinance, 2001, the revised return as filed by the assessee should have been accepted by the Taxation Officer, as it should have to be taken for all purposes of new Ordinance, 2001 to be an amended assessment order issued to the tax payer by the Commissioner on the date on which, the revised return to be furnished. In case of any discrepancy, illegality, the order in this respect if required under the law being erroneous in so far prejudicial to the interest of revenue, or otherwise not in accordance with law that order may be amended in accordance with law.

But I am afraid, this provision of law is not helpful to the appellant in the present case, as the new Ordinance, 2001 has come into force from 1st July, 2002 and under the saving section 239, subsection (1) "In making any assessment in respect of any income year ending on or before the 30th June, 2002, the provisions of the repealed Ordinance insofar as these relate to computation of total income and tax payable thereon should apply, as if this Ordinance had not come into force. And in subsection (9), it has been further said that" Anything done or action taken under the repealed Ordinance insofar it is not consistent with the provision of this Ordinance shall, without prejudice to anything already done or any action already taken, be treated as having been done or taken under this Ordinance". I am, therefore, of the view that in the present case, the revised returns filed by the assessee will be treated as filed under section 57 of the repealed Ordinance, 1979, which is nearly parameteria with subsection (6) of section 114 of the new Ordinance, 2001, but in this new section, the period of "five years of the date that the original return was furnished" has been given as against section 57 of the repealed Ordinance, 1979, where the revised return can be filed before the assessment is made. The provisions of para (b) of subsection (3) of section 122 of the new Income Tax Ordinance, 2001 are not applicable in this case and the contention made in this regard by the learned counsel for the assessee is repelled.

In view of the above legal position, I am of the view that despite .the fact that the revised return was admittedly filed by the assessee the Taxation Officer has rightly not accepted the revised return, as it was not obligatory to accept the same under the repealed Ordinance, 1979 I am, however, of the view that sales estimated at Rs.24,00,000 as against declared at Rs.15,00,000 as reduced by the learned CIT(A) to Rs.22,00,000 are still excessive keeping in view the previous history and other relevant facts of the case. The estimated sales are, therefore, further reduced to Rs.20,00,000.

Likewise, no basis has been given by the Taxation Officer for applying GP rate at 25% while on behalf of the appellant, it has been contended that in the parallel cases, GP is applied at 20%. It is, therefore, directed that in the case of the assessee also, to apply G.P. at 20% for the year under review.

The appeal tiled by the assessee is allowed to the extent and in the manner referred supra.

C.M.A./151/Tax (Trib.)Order accordingly.