VS, 2008 PTD-INCOME-TAX-APPELLATE-TRIBUNAL-PAKISTAN 1111 (2008)

Income Tax Ordinance (XXXI of 1979)---

----Ss.129 & 62 ---Appeal to Appellate Additional Commissioner--Setting aside of assessment by the First Appellate Authority by observing that "Assessing Officer failed to fulfil procedural requirements of confronting the assessee with the intention of making additions in the profit and loss expenses through notice under S.62 of the Income Tax Ordinance, 1979 and in absence of statutory and procedural formalities, this mode of arbitrary additions in the profit and loss account were not sustainable in the eye of law"---Validity---By recording such categorical finding, additions were not sustainable in the eye of law; there was hardly any occasion to set aside such issue for fresh adjudication---Appropriate course was to delete the addition---Certain documents were furnished, on the strength of which profession receipts stood accepted---Books of accounts were also maintained and it was mandatory to confront the assessee with the proposed addition to be made out of profit and loss expenses---Addition was deleted by the Appellate Tribunal and appeal of assessee was accepted.

Azhar Ehsan Sheikh for Appellant.

Nemo for Respondent.

ORDER

RASHEED AHMED SHEIKH (CHAIRPERSON).---The assessee-appellant has filed further appeal against the order passed by CIT(A) Zone-V, Lahore dated 21-7-2005 in respect of assessment year 2002-03.

2. The impugned appellate order has been assailed on the sole ground of making disallowances out of the profit and loss expenses by the department. Facts leading for disposal of the issue in hand are that the assessee-appellant is practising lawyer who filed his return declaring net income of Rs. 320,000. However, the return was processed under normal law. As per the assessment order professional receipts were disclosed at Rs. 20,62,250 which stood accepted by the department being open to verification. However, disallowances were made out of certain heads of the profit and loss expenses which constituted at Rs. 270,000 in aggregate. Resultantly, net income was computed by the Taxation Officer at Rs. 650,000. Felt aggrieved by this treatment, appeal was filed before the first appellate authority who set aside the impugned addition, with certain directions, for de novo consideration. This has compelled the assessee-appellant to come up in appeal before the Tribunal.

3. On deliberating the rival contentions put forth by the learned representatives appearing at the bar, I find that the learned Appeal Commissioner, after considering the facts of the case and after examination of assessment record has concluded as under:

"Perusal of assessment record and examination of record indicates that the assessment was finalized in haste. It was further observed that the assessing officer failed to fulfil procedural requirements of confronting the appellant with the intention of making additions in the profit and loss expenses through notice under section 62. In the absence of statutory and procedural formalities, this mode of arbitrary additions in the profit and loss account were not sustainable in the eye of law."

In view of categoric findings recorded by the first' appellate authority that the impugned additions were not sustainable in the eye of law, there arises hardly any occasion to set aside this issue for fresh adjudication. Appropriate course available, in such circumstances, with the learned Appeal Commissioner was to delete the additions which where challenged before him. Although certain documents were furnished during the course of assessment proceedings on the strength of which the professional receipts stood accepted by the department nevertheless, the books of accounts, as are prescribed under the rules are also maintained by the assessee in such circumstances. It was mandatory on the part of the assessing officer to confront the assessee with the proposed addition to be made out of the profit and loss expenses. Non adherence thereof merits deletion of addition made in each head of account of the profit and loss expenses. Considering the facts of the case in its entirety, it is deemed appropriate to delete the addition made by the A assessing officer under the heads postage at Rs. 5,000 travelling at Rs.30,600 travelling at Rs.25,000 stationery at Rs. 5,000, entertainment at Rs. 5,000 and rent at Rs. 188, 400.

4. This would result into acceptance of the appeal filed by the assessee for the assessment year 2002-03 to the extent indicated above.

C.M.H./31/Tax (Trib.)Appeal accepted.