2009 P T D (Trib.) 1837
[Income-tax Appellate Tribunal Pakistan]
Before Jawaid Masood Tahir Bhatti, Judicial Member and Mazhar Farooq Sherazi, Accountant Member
I.T.As. Nos.493/LB, 520/LB and 521/LB of 2009, decided on 01/06/2006.
(a) Income Tax---
----Books of accounts---Direction for estimation---Requirement of books of accounts---No books of accounts were required when there were directions regarding estimation.
(b) Income Tax Ordinance (XXXI of 1979)---
----S.62---Assessment on production of accounts, evidence etc.---Gross profit rate--Direction regarding--Violation of--Taxation Officer in assessment order referred the reply of taxpayer in compliance to notice under S.62 of the Income Tax Ordinance, 1979 wherein the assessee had taken specific plea that "computerized books of accounts presented at the time of first round of assessment were never returned to us" but the Taxation Officer without confronting the plea of taxpayer had observed that neither books of accounts had been presented nor copies of the Sales Invoices/Vouchers were produced---No justification was available for applying Gross Profit rate as the appellant had referred parallel cases where Gross Profit rate at 15.51% and 5.5% had been applied which had been in the order---Specific directions were given to Assessing Officer to refer the parallel cases or any other basis of estimation but the Taxation Officer had failed to refer any parallel case or any other basis for estimation---Parallel cases referred by the taxpayer were to be accepted and declared Gross Profit rate was directed to be accepted.
1987 PTD 638 and 1984 PTD 150 ref.
(c) Income Tax---
----Sale rate---Value determined by the Sales Tax Department---Adoption of---Assessee declared average sale per chassis as they were manufacturers of chassis only---Department applied price of whole rickshaw inclusive of body of rickshaw, route numbers and change of various parts---Value determined by the Adjudication Officer on the sales tax side was upheld by the Customs, Excise & Sales Tax Appellate Tribunal---Value determined by another department of the similar nature should be accepted regarding the similar transitions of the same articles---Income Tax Appellate Tribunal directed that the same value be applied for the Income Tax purposes.
(d) Income Tax Ordinance (XXXI of 1979)---
----S.13(1)(a)---Addition---Consequential addition---Addition under S.13(1)(d) of the Income Tax Ordinance, 1979 could not be made at any later stage as no consequentional addition had been made in the original assessment order---Appellate Tribunal directed that no addition could be made under the head of advance from customers under S.13(1)(a) of the Income Tax Ordinance, 1979.
(e) Income Tax Ordinance (XLIX of 2001)---
----S.122(5A)---Amendment of assessments---Tax year 2003---Filing of return as on 7-1-2004---Amendment of---Assessee contended that provisions of S.122(5A) of the Income Tax Ordinance, 2001 was not applicable from the tax year 2003---Validity---Section 122(5A) of the Income Tax Ordinance, 2001 having been inserted with' effect from 1-7-2003 was not applicable to the assessments finalized before 1-7-2003 but in the present case return had been filed on 7-1-2004 which was taken to be an assessment order under S.120(1) of the Income Tax Ordinance, 2001---Assessments finalized before 1-7-2003 could not be reopened/revised/amended but this was not the position in the present case---Ground taken by the assessee was rejected by the Appellate Tribunal.
2008 PTD 1420 and 2009 PTD 1 ref.
(f) Income Tax Ordinance (XLIX of 2001)---
----S. 21(c)---Deductions not allowed---Repair, maintenance and advertisement---Assessee contended that addition had been made without considering the fact that the payments were made below taxable limit to various parties and complete ledger accounts were provided-Taxation Officer had not denied that the payments had been made below the taxable limit but had made the addition on the basis of stock phrases on presumption and surmises which could not be upheld---Order was vacated by the Appellate Tribunal and addition made by the Taxation Officer under S.21(c) of the Income Tax Ordinance, 1979 was deleted.
(g) Income Tax Ordinance (XLIX of 2001)---
----S.111---Unexplained income or assets---Suppression of purchases---Addition of---Assessee contended that purchases of finished goods fell under the final tax regime and tax calculated at input stage became final tax and no further tax was to be charged on such inputs---Validity---Ledger account of inputs were provided--Amounts booked under Presumptive Tax Regime were also appearing in the ledger account---Inputs being covered under Presumptive Tax Regime tax had been duly deducted at input stage---No loss of revenue had arisen as the assessee had explained the position---Taxation Officer had made addition without any justification---Addition made was deleted by the Appellate Tribunal.
(h) Income Tax---
----Initial allowance/depreciation---Assessee claimed initial allowance according to the months whereas the Taxation Officer had restricted the same according to the number of days---Taxation Officer did not have any material wherein the date of addition had been available---Disallowance under the head depreciation was based on mere guess work arbitrarily on presumption, and surmises which was deleted by the Appellate Tribunal.
(i) Income Tax Ordinance .(XLIX of 2001)---
----S.161---Failure to pay tax collected or deducted---Provision of S.161 of the Income Tax Ordinance, 2001 could not be invoked in respect of payments to fixed assets.
2008 PTD 1683 rel.
(j) Income Tax Ordinance (XLIX of 2001)---
---S.153---Payment for goods and services---Provisions of S.153 of the Income Tax Ordinance, 2001 were not attracted in the transaction of fixed assets.
2008 PTD 1683 rel.
(k) Income Tax---
---Purchases---Store and spares---Addition of---Taxation Officer had charged tax under raw material purchases, and purchases of store and spares without pointing out any single instance of payment---Assessee himself declared an amount of tax deducted but not deposited---Assessee conceded that amount needed reconciliation---Tax deducted appearing as payable in the balance sheet was as certain payments were made in the end of year and certain amounts of tax deducted appearing as payable in balance sheet included tax paid during previous years but entry for payment could not be booked--Assessment order to the extent of tax deducted appearing as payable in the balance sheet was set aside for fresh consideration with the directions that actual payable be determined after making reconciliation from the payments already made by the assessee---Charge of additional tax was also set aside with the directions to recalculate same afresh.
2008 PTD 787 rel.
Tipu Sultan for Appellant.
Ghazanfar Hussain, D.R. for Respondent.
ORDER
JAWAID MASOOD TAHIR BHATTI, JUDICIAL MEMBER.--The appellant through these appeals has objected against the three separate impugned orders of the learned CIT(A) dated 30-3-2009 for the assessment year, 1998-1999, dated 30-4-2009 for the Tax year, 2003 and dated 13-4-2009 for the Tax year, 2007. All the three appeals are decided through this consolidated order as follows:--
ASSESSMENT YEAR, 1998-1999.
The appellant has framed following grounds for this year:
(1) "That the orders passed by both the authorities below are bad in law and against the facts of the case.
(2) That, appellant order passed is without application of mind.
(32) That, impugned appellate order is without lawful jurisdiction as framed keeping in view original assessment order against which specific directions were already issued by the appellate forums.
(4) That the appellate order has been framed to cover the defects apparent in the body of the assessment order, hence CIT(A) has acted illegally.
(5) That order of the CIT(A) confirming the assessment order which has been framed by the Taxation Officer after drawing powers from two legislations, is bad and against the law.
(6) That order of the CIT(A) confirming the assessment order which was framed by the Taxation Officer when he was on leave on 22-8-2008 being the date of hearing for notice under sections 61/62 of the Repealed Ordinance, hence no order can be framed without providing any hearing opportunity.
(7) That the upholding the assessment order by CIT(A) which has been framed by the Taxation Officer ignoring the directions of the appellate forum is without lawful authority and void.
(8) That onus to justify application of higher G.P. rate as compared to declared G.P. rate was shifted to Taxation Officer by superior courts. The Taxation Officer failed to justify the same but CIT(A) in appellate order tried his best to justify the same on the grounds which were not the part of assessment order, hence declared G.P. rate merits acceptance.
(9) The Taxation Officer has failed to arrive at price in accordance with the direction of superior Courts but CIT(A) in appellate order tried his best to justify the same on
(10) The grounds which were not the part of assessment order, hence declared sales merits acceptance.
(11) That intention to apply or not to apply section 13(1)(a) of the Repealed Ordinance, has no relevance with set aside proceedings."
While perusal of the impugned order of the learned CIT(A) we have found that the learned CIT(A) has upheld the treatment meted out by the Taxation Officer in the following manner:--
"After having considered the rival arguments adduced by the AR of the appellant in the presence of rebuttal filed by the Revenue and the impugned assessment order dated 28-8-2008 which was passed on the basis of original assessment order dated 15-5-2000 completed under section 62 of the repealed Income Tax Ordinance, 1979, I am of the opinion that:--
"No fresh evidence is available on record to reject and dislodge the information available in original order dated 15-5-2000 regarding quantum of business conducted by appellant during the year under appeal.
The only reliable evidence regarding this business is in the shape of original order passed under section 62 of the repealed Income Tax Ordinance, 1979 which contained the maximum material to arrive at fair assessment of income.
A long period of nine (9) years has elapsed since the passing pf first order dated 15-5-2000, the best and most reliable record and evidence available for utilization of safe reliance is the original order supra.
While framing the original assessment, the assessing officer thrashed out all the issues in a comprehensive manner and made all out efforts to arrive at the right conclusion. Local as well as spot inquiries were got conducted, information for Excise and Taxation Authority was obtained and the appellant's own admission of sale price of auto Rikshaw was also a solid evidence which was agreed during the immediately preceding year in the presence of his AR besides contacts made with the commission agents and cross verification of sale price from the purchasers, the names of which were given by the appellant.
The assessing officer rebutted the contentions of the AR of the appellant with concrete evidence and solid reasoning by affording ample opportunity of being heard and element of understatement of sale price as well as declaration of lower G.P. Rate was successfully established.
The original assessment order was passed with utmost care and application of mind duly confronting the appellant with the intended treatment to be meted out in the light of evidence gathered by the assessing officer.
In the nutshell I am of the firm opinion that the impugned order was passed in a legal manner and the AR of the appellant has not been able to rebut the findings of assessing officer with the help of solid evidence to warrant any interference by this appellate forum. I do not feel any hesitation in holding that the arguments put forth by the AR of the appellant do not carry any weight to justify allowance of relief and the impugned order passed under sections 124/132 is accordingly maintained."
We have noted from the record of the case that the above referred impugned order of the learned CIT(A) has been passed in the third round and before this Tribunal is the second round of appeal. The facts of the case are that the return for the assessment year under appeal i.e. 1998-1999 was filed declaring taxable income at Rs.555,368 which were subsequently revised wherein the taxable income was declared at Rs.178,641. The revised return was accepted. The original assessment order was framed under section 62 of the repealed Ordinance on 15-5-2000 rejecting the books of accounts, discarding the sale rate and G.P. declared by the assessee. The tax demand was created at Rs.64,83,364. Assessee filed appeal before the learned CIT(A) who vide order dated 20-9-2001 upheld the rejection of books of accounts, however allowed some relief regarding P&L accounts and set aside the assessment order on the issue of Sale Rate and G.P. Rate with specific directions. During the second round while re-assessment under sections 62/132 on 30-6-2004 the assessing officer repeated the original assessment. Assessee filed complaint before Federal Tax Ombudsman wherein following observation and recommendation was given:--
"From a perusal of the order of the learned CIT(A), letter dated 21-5-2004 from the Taxation Officer and relevant part of the reassessment order it is quite evidence that specific directions issued by the learned CIT(A) have not been complied with thus rendering the reassessment order as arbitrary and unjust falling within the domain of maladministration within the provisions of section 2(3)(i)(b) of the F.T.O. Ordinance. The Revenue Authorities have failed to prove that above action of the assessing officer was bona fide and for valid reasons. The onus to prove that no maladministration was involved in this case law with the Revenue Authorities which onus has not been discharged.
It is therefore recommended that:
(i) The concerned CIT takes action under section 122A of the Income Tax Ordinance, 2001 suo motu and set aside the reassessment order dated 30-6-2004 to be completed afresh after complying with the directions of the CIT(A).
(ii) The compliance report be submitted within 40 days of the receipt of these recommendations by the Revenue Division."
As the assessee has simultaneously filed appeal before the learned CIT(A) also regarding the above referred assessment therefore in the second round the learned CIT(A) vide order dated 21-5-2005 which was subsequently rectified vide order dated 30-11-2005 directed to accept the declared results of the appellant/assessee having declared the assessment order as legally and factually ab initio, illegal and void. The Department filed appeal against that order of the learned CIT(A) before this Tribunal and vide order dated 30-1-2008 while deciding the appeal for the year under review i.e. 1998-1999 along with the appeals filed by the department for the assessment year, 2001-2002 I.T.A. No.5803/LB of 2005 in I.T.A. No. 5802/LB of 2005 (assessment year, 1998-1999) and another appeal for the assessment year, 1998-1999 in I.T.A, No. 353/LB of 2006 has remanded back the assessment for the year under review for fresh order with the following observations: --
"We have heard both the learned representatives and have perused the relevant record. Findings as recorded in the first appeal stage vide order dated 20-9-2001 has attained the finality as these have not been contested by any of the parties before any higher forum, so it was simply a question of properly implementation of such directions in the second round which has not been done. A plain look at reassessment order is suffice to prove that no attempts for the implementations of such directions has ever been made by both the parties which is quite improper. The learned first appellate authority in the impugned order before us despite referring to the directions in the first round has yet preferred to move on a quite different line which cannot be approved by us. The learned first appellate authority has erred in placing reliance for compliance to provisions of section 62(1) of the Repealed Ordinance, when patently no vouchers i.e. the basic documents upon which the summary form of accounts or computer print-out could be prepared have not been produced earlier as well as now in this round. So in the given circumstances, we are compelled to remit the matter back to the assessing officer for strict compliance to the directions recorded at the end of first round, also reproduced in the earlier para from the order dated 20-9-2001. The respondent-assessee is directed to extend the maximum cooperation to the satisfaction of the assessing officer and the later is directed to remain within the directions ibid."
During the third round the Taxation Officer made the assessment under sections 124/132 and the tax demand has been created at Rs.60,28,757. The assessee has again agitated the assessment before learned CIT(A) who has upheld the same in the third round vide impugned order which is the subject-matter of this appeal.
The learned counsel representing the appellant has contended that during the third round, the learned CIT(A) instead of adjudicating the order of Taxation Officer against which appeal was filed has spent all his energies to uphold the original assessment under section 62 without considering the fact that the matter was remanded back by this Tribunal with specific directions which has to be followed. He argued that the original assessment after the tests of consequence of appeal to the extent of decided issues could not be again reopened and only the issues which were remanded back should have to decide in accordance with the directions of learned CIT(A) in the first round and the directions of this Tribunal only. In this regard which arguing adjudication of addition made under section 13(1)(a) learned counsel has contended that while framing original 'assessment the Assessing Officer has ignored the addition therefore now at this belated stage addition cannot be made as the Assessing Officer has to restrict himself to the above-referred directions only. On the issue of G.P. rate learned counsel has contended that during the first round the learned CIT(A) in its order dated 20-9-2001 has set aside the assessment with specific direction. He has in this respect referred paras. 21, 23, 25 and 26 of the order which are reproduced hereunder:--
"21. Adjudicating upon the issue of sales, certain facts are to be considered. The appellant has categorically emphasized that he does not have a single dealer in Pakistan. He simply sells his product. Purchasers of his product resell it after making certain alterations or resell it as it is. Their sale price is inclusive of their profit margin which-should be taxed in their hands. The department could not establish that the appellant was paying any commission to such dealers. The relationship between the appellant and people who re-sell his product can at best be termed as that of a seller and a reseller. Sales of the appellant should be estimated on his sale price and not on the market price and it is directed so. However, the department should arrive at that price in a judicious manner considering the facts put before it by the appellant. The cost of body, registration and route permit should be excluded and only cost of chassis should be worked out in order to arrive at appellant's sale price. The above should be followed in letter and spirit.
22. The statements recorded by the Assessing Officer under section 148 of the Income Tax Ordinance, 1979 are not valid in so far as the Assessing Officer failed to provide an opportunity to the appellant to cross-examine those witnesses. Moreover, the appellant was not present when the statements were recorded.
23. On the issue of sale price and estimation of sales, the order of the Assessing Officer is set aside. He is directed to follow the foregoing directions while estimating the sales as well as sale price, afresh."
24. -------------
25. Appellant during the assessment proceedings provided parallel case of Messrs Momen Associates Foundary near Taj Hotel Naka Hyderabad where assessed G.P. rate was 5.50% which was not rebutted by the Assessing Officer. At appeal stage A.K. submitted an affidavit by the director of the company wherein G.P. rate of Messrs Raza Auto Cars at NTN 01-02-0014196 at Mirpur was assessed at 15.51%. Reported case of Income Tax Appellate Tribunal at 1987 PTD 638 and 1984 PTD 150 have also been relied upon.
26. Considering the facts and circumstances of the case, I find the declared G.P. rate of the appellant reasonable. However assessment on this issue is set aside with the express directions that the Assessing Officer should quote parallel cases of the same trade where higher G.P. is being declared or applied. In case the Assessing Officer fails to do so, he is directed to accept the declared G.P. rate of the appellant."
Learned counsel has contended that there was no appeal filed by the department against the above-referred order of the learned CIT(A) dated 20-9-2001 therefore that order to the extent of remaining issues which were not remanded back have attained finality. Learned counsel has contended that the assessee has provided the parallel cases in respect of G.P. rate which are Raza Auto Cars Limited NTN: 01-02-0014196 who are also assembler/manufacturer of auto Rickhsaw chassis and has declared G.P. at 15.16% which has been assessed at 15.51% in assessment year, 1996-1997 while the G.P. rate declared at 15.43% has been assessed at 15.51% for the assessment year, 1997-1998. In another case of Messrs Munawar Associates Foundary NTN: 08-08-1026141 who are also assembling Auto Rickshaws, the declared G.P. at 4.99% has been assessed at 5.5% in the assessment year, 1996-1997. Learned counsel has contended that the Taxation Officer has rejected the declared G.P. rate without any basis. Regarding the sale rate the learned counsel has argued that the appellant declared average sale rate at Rs.47,345 perchassis which has been discarded and per Rickshaw Rs.90,000 has been applied by the Taxation Officer. He has argued that the rate declared by appellant is of chassis as they are manufacturers of chassis only but the Assessing Officer has applied the price of rickshaw inclusive of body of the rickshaw, rout number and change of various parts which in no way is the job of the appellant as per request of individual buyers are done in open market by other individuals and not by the appellant. He is of the view that the directions of the learned CIT(A) in this respect was very clear but the Assessing Officer has not made the assessment as per directions and therefore the assessment is liable to be cancelled.
On the other hand, learned DR is supporting the impugned orders of the officers below. He has contended that no fresh evidence was produced by the assessee to dislodge the information already available on record. A long period of nine years has elapsed since the passing of the first order therefore the best and most reliable record and evidence available before the Assessing Officer was the original assessment therefore according to him the Assessing Officer has rightly made the assessment which has rightly been upheld by the learned CIT(A).
We have heard the learned representatives from both the sides and have also perused the impugned order of learned CIT(A), the assessment orders during the first two rounds, the orders of the learned CIT(A) during the first two rounds, the order of this Tribunal dated 30-1-2008, the order of the Customs, Excise and Sales. Tax Appellate Tribunal dated 26-3-2003 in the case of the assessee and other relevant record of the case. We have found that the appellant is a Private Limited Company. The principal business of the company is to derive income from manufacturing; assembling and sale of auto rikshaws. Original assessment in this case was set aside for fresh consideration only on two issues i.e. Sales and G.P. rate. In this regard specific directions were made by the learned CIT(A) but as the Assessing Officer in the second round exceeded his jurisdiction while making fresh assessment on the issues which were not the subject-matter of the assessment therefore the assessee filed complaint before the Federal Tax Ombudsman as well agitated the reassessment before the learned CIT(A) and in second round the assessment order was declared by the learned CIT(A), ab initio, illegal and void and declared results were directed to be accepted vide order dated 21-5-2005 but the department filed appeal against that order of the learned CIT(A) before this Tribunal and the assessment to the extent of issue of Sale and G.P. rate was remanded back for fresh consideration by this Tribunal vide order dated 30-1-2008. We have found that the Taxation Officer has once again exceeded his jurisdiction and has made the assessment on the issues which were not even the subject of original assessment which has already been tested during the consequence of appeal upto this Tribunal. We have noted that the appellant in this case has not agitated the rejection of books of accounts. The observations of the Taxation Officer that no books of accounts were provided is of no use because the books of accounts were rejected in the first round and action was upheld by the learned CIT(A) in the first round and no appeal was filed against that order of the learned CIT(A). We are therefore of the view that no books of accounts are required when directions are regarding estimation. We have further noted that the Taxation Officer in the impugned assessment has referred the reply of the Tax Payer in compliance to notice under section 62 wherein the assessee has taken the specific plea that the "computerized books of accounts presented at the time of first round of assessment are never returned to us." But the Taxation officer without confronting the above plea of the Tax Payer has observed that neither books of accounts have been presented nor copies of the Sales Invoices/Vouchers were produced. We therefore find no justification for applied G.P. rate as the appellant has referred parallel cases where the G.P. at 15.51% and 5.5% has been applied which has been mentioned in the above paras. of this order. We are of the view that the specific directions were given to the Assessing Officer to refer the parallel cases or any other basis for estimation but the Taxation officer has failed to refer any parallel case or any other basis for estimation. We are therefore of the view that the parallel cases referred by the taxpayer are to be accepted. In these circumstances of the case the declared G.P. is directed to be accepted.
Regarding the sale rate we have found that the taxpayer in this case has declared average sale rate per chassis as they are manufacturers of chassis only but the department has applied the price of whole rickshaw inclusive of body of the rickshaw, route numbers and change of various parts without considering the fact that these are done in open market as per request of individual buyers and the taxpayer has no concern in this regard. On behalf of the assessee, the order of the Customs, Excise and Sales Tax Appellate Tribunal dated 26-3-2003 in the case of the assessee has been placed before the Bench wherein the value of Rs.62,000 per Rickshaw excluding sales tax determined by the adjudicating officer has been upheld for the same period under appeal. We are of the view that the value determined by another department of the similar nature should be accepted regarding the similar transitions of the same articles. It is therefore directed that same value be applied for the Income Tax purposes also which is Rs.62,000 per Rickshaw.
Regarding the addition under section 13(1)(d) we are of the view that this cannot be made at any later stage as no consequential addition has been made in the original assessment order. It is therefore directed that no addition can be made under the head of advance from customers under section 13(1)(a) of repealed Ordinance, 1979 in the year under review.
The appeal filed by the taxpayer for the assessment year, 1998-1999 is allowed to the extent and in the manner referred above.
Tax year, 2003.
The Tax Payer has objected against the impugned order of the learned CIT(A) dated 30-4-2009 on the following grounds:--
(1) "That the orders passed by both the authorities below are bad in law and against the facts of the case.
(2) That the learned Commissioner of Income Tax (Appeals)-I is not justified to reject the plea of the appellant that section 122(5A) is not applicable to the Tax Year under appeal, hence order framed under section 122(5A) is illegal and without lawful jurisdiction.
(3) That, the learned Commissioner of Income Tax (Appeals)-I is not justified to reject the plea of the appellant that already completed assessment under section 120 of the Ordinance is neither erroneous nor prejudicial to the interest of the revenue, hence amended assessment is without lawful authority.
(4) That, the learned Commissioner of Income Tax (Appeals)-I is not justified to reject the plea of the appellant that taxation authorities assumed jurisdiction without any definite information and proceedings completed after detailed enquiries, hence action to amended assessment does not fall under the ambit of section 122(5A) of the Ordinance.
(5) That, the learned Commissioner of Income Tax (Appeals)-I is not justified to reject the plea that the action of the learned Additional Commissioner to invoke provisions of section 122(5A) of the Ordinance on mark-up on financial lease is against the law and fact of the case.
(6) That, the learned Commissioner of Income Tax (Appeals)-I is not justified to reject the plea of the appellant that the action of the learned Additional Commissioner to invoke provisions of section 122(5A) of the Ordinance on other lease expenses are against the law and fact of the case.
(7) That, the learned Commissioner of Income Tax (Appeals)-I is not justified to reject the plea of the appellant that the action of the learned Additional Commissioner to invoke provisions of section 21(c) of the Ordinance on Donations are against the law and fact of the case.
(8) That, the learned Commissioner of Income Tax (Appeals)-I is not justified to reject the plea of the appellant that the action of the learned Additional Commissioner to invoke provisions of section 21(c) of the Ordinance on Repair and Maintenance are against the law and fact of the case.
(9) That, the learned Commissioner of Income Tax (Appeals)-I is not justified to reject the plea of the appellant that the action of the learned Additional Commissioner to invoke provisions of section 21(c) of the Ordinance on Advertisement is against, the law and fact of the case.
(10) That, the learned Commissioner of Income Tax (Appeals)-I is not justified to reject the plea of the appellant that the action of the learned Additional Commissioner to disallow the claim of initial Investment under the head initial depreciation under section 20(4) of the Ordinance is against the law and fact of the case. Jurisdiction has been assumed by the learned Additional Commissioner under section 20(4) of the Ordinance which is not available in statutes.
(11) That, the learned Commissioner of Income Tax (Appeals)-I is not justified to reject the plea of the appellant that additions under the head purchases which fall under final tax regime is without lawful jurisdiction, illegal and against the fact of the case.
(12) That, the learned Commissioner of Income Tax (Appeals)-I is not justified to reject the plea of the appellant that without prejudice to the above learned Additional Commissioner is failed to prorate expenses in accordance with law.
(13) That, the learned Commissioner of Income Tax (Appeals)-I is not justified to reject the plea of the appellant that learned Additional Commissioner levied WWF incorrect."
Learned counsel representing the appellant regarding his first two grounds of appeal has contended that the assessment in this case has been amended by the Taxation Officer without any justification. Placing reliance on the decisions of the Honourable High Court reported as 2008 PTD 1420 and 2009 PTD 1 he has argued that the Finance Act, 2003 is applicable from the first July, 2003 which pertains to the Tax Year, 2004. According to learned counsel the provisions of section 122(5A) of the Ordinance is not applicable from the Tax year, 2003.
On the other hand, learned D.R. is supporting the impugned order in this respect. He is of the view that even inserted through Finance Act, 2003 the provisions of section 122(5A) being procedural are applicable to Tax year, 2003 also.
After considering the arguments of both sides on this legal issue and perusal of the impugned orders and the case-law referred we are of the view that the said section 122(5A) being inserted with effect from 1-7-2003 is not applicable to the assessments finalized before 1-7-2003 as has been held by the Honourable High Court in the above referred decisions but in the present case returns have been filed on 7-1-2004 which was taken to be an assessment order under section 120(1) of the Ordinance, 2001 and therefore assessments finalized before 1-7-2003 cannot be reopened/revised/amended but this is not the position in the instant case so this ground taken by the Tax Payer is rejected.
On the merits of the case learned counsel has contended that the addition under section 21(c) of the Ordinance, 2001 under the head Repair and Maintenance and advertisement has been made by the Taxation officer without considering the fact that all the payments were made below taxable limit to the various parties and completed ledger accounts were provided. We have also noted that the Taxation Officer has not denied that the payments have been made below the taxable limit but has made the addition on the basis of stock phrases on presumption and surmises which cannot be upheld. The impugned order in this respect is therefore vacated and addition made by the Taxation Officer under section 21(c) is deleted.
Regarding the addition made under suppression of purchases under section 111 of the Ordinance the learned counsel has contended that purchases of finished goods fall under the final tax regime and tax calculated at input stage becomes final tax and no further tax is to be charged on such inputs. He has contended that during the proceedings ledger account of the inputs were provided and the amounts booked under Presumptive Tax Regime were also appearing in the ledger account. He is therefore of the view the inputs being covered under Presumptive Tax Regime and tax has been duly deducted at input stage hence there is no loss of revenue in the case. Explaining the position he has submitted that at input stage tax was paid at Rs.7,95,317. The imputable income comes to Rs.1,84,91,434 where as suppression of purchase are alleged at Rs.1,44,81,537. According to learned counsel the imputable income calculated at tax rate of 43% duly covers so-called suppressed purchases under section 169(4) of the Income Tax Ordinance, 2001 which remained in statute till June 30, 2004.
On the other hand learned D.R. is supporting the impugned order. He has contended that the Taxation Officer has made the addition after discussing the matter at length and affording reasonable opportunity of being heard to the Tax Payer.
We have considered the rival arguments and have also perused the relevant record of the case. We have found that it is admitted that during the proceedings ledger account of the inputs were provided. The amounts booked under Presumptive Tax Regime were also appearing in the ledger account. We find force in we contention of the learned counsel of the Tax Payer that inputs being covered under Presumptive Tax Regime and tax has been duly deducted at input stage hence no loss of revenue can be arisen in this respect as the assessee has explained the position. We are therefore of the view that the Taxation Officer has made the addition without any justification. The addition made in this respect is therefore deleted.
Likewise regarding initial allowance/depreciation we have found that the taxpayer has claimed the initial allowance according to the months whereas the Taxation officer has restricted the same according to the number of days. We have noted that the Taxation Officer did not have any material wherein the date of addition has been available. We are therefore of the view that the disallowance under the head depreciation is based on mere guess work arbitrarily on presumption and surmises and is therefore deleted.
The remaining additions made by the Taxation Officer as upheld by the learned CIT(A) are however upheld.
The appeal for the Tax year, 2003 is partially allowed to the extent and in the manner referred above.
Tax Year, 2007.
The appellant has objected the impugned order of the learned CIT(A) dated 13-4-2009 for this year on the following grounds:--
(1) "That the orders passed by both the authorities below are bad in law and against the facts of the case.
(2) That the learned Commissioner of Income Tax (Appeals)-I is not justified to reject the plea of the appellant that order has been framed under section 161 (1A)/205 of the Ordinance instead under section 161(1)/205 of the Ordinance, hence illegal.
(3) That, the learned Commissioner of Income Tax (Appeals)-I is not justified to reject the plea of the appellant that single order charging tax under two different sections of the Ordinance is without lawful jurisdiction and illegal.
(4) That, the learned Commissioner of Income Tax (Appeals)-I is not justified to reject the plea of the appellant that the order has been framed by issuing premature notices under section 161(1A) of the Ordinance. Which deals recovery of tax after framing order, hence order has been framed on notices which has no validity in the eyes of law.
(5) That, the learned Commissioner of Income Tax (Appeals)-I is not justified to reject the plea of the appellant that Taxation Officer has no power to call for ledger accounts under section 161(1A) of the Ordinance, hence orders framed on such notices are also without jurisdiction and void.
(6) That, the learned Commissioner of Income Tax (Appeals)-I is not justified to reject the plea of the appellant that provision of section 161 of the Ordinance, cannot be invoked in respect of payment to fixed assets. Order charging taxes on additions to fixed assets are against the Law and decisions of Superior Courts."
(7) That, the learned Commissioner of Income Tax (Appeals)-I is not justified to reject the plea of the appellant that Taxation Officer has framed order on the basis of presumptions and stock phrases and not a single instance of payment has been specifically pointed out.
(8) That, the learned Commissioner of Income Tax (Appeals)-I is not justified to reject the plea of the appellant that the demand of tax deducted appearing in the balance sheet is against the facts of the case."
The facts leading to this appeal are that as per the assessment order the annual statements of tax deduction filed under section 65 of the Ordinance, 2001 were examined by the Taxation Officer and compared with corresponding expenses claimed in the return of income for the year under review. Since the amounts could not be reconciled the appellant was held to be assessee in default. The learned counsel representing the Tax Payer has contended that the provision of section 161 cannot be invoked in respect of payments to fixed assets. He has in this respect referred the decision of this Tribunal reported as 2008 PTD 1683 wherein the assessee while making certain payment in the fixed assets like computer, furniture and vehicles etc. had not withheld the tax. It I was held by this Tribunal that provisions of section 153 of the Ordinance are not attracted upon the transaction of fixed assets. It was further held I that assessment was made under sections 161/205 of the Ordinance, 2001 by amending the order which was held to be illegal being passed against the spirit of provision of section 122 of the Ordinance. As the issue in this respect is already decided by this Tribunal. Keeping in view the above referred decision the addition made by the Taxation Officer in respect of assets is deleted.
Likewise regarding the addition in respect of purchases under raw material and out of store and spares the learned counsel for the Tax Payer has placed reliance on the judgment of this Tribunal reported as 2008 PTD 787 wherein it has been held that addition made on the basis of presumption and stock phrases without giving single instance of payment are not maintainable. In this case the tax has been charged by the Taxation Officer on the basis of presumption.
We have found that the Taxation Officer has charged tax under raw material purchases, and purchases of store and spares without pointing out any single instance of payment. We have further noted that the taxpayer has himself declared an amount of Rs.96,87,161 being amount of tax deducted but not deposited in balance sheet. In this regard learned counsel of the Tax Payer concedes that this amount needs reconciliation. He has submitted that tax deducted appearing as payable in the balance sheet is, as certain payments were made in the end of the year and certain amounts of tax deducted appearing as payable in balance sheet includes tax paid during previous years but entry for payment could not be booked. Keeping in view these facts of the case the assessment order to the extent of tax deducted appearing as payment in the balance sheet amounting to Rs.96,87,161 is set aside for fresh consideration with the directions that actual payable be determined after making reconciliation from the payments already made by the appellant. The charge of additional tax is also set aside with the directions to be recalculated afresh.
The appeal filed by the Tax Payer for the Tax Year, 2007 is decided in the manner referred above.
All the three appeal filed by the taxpayer are decided in the manner referred supra.
C.M.A./92/Tax(Trib.)Order accordingly.