VS, 2009 PTD-INCOME-TAX-APPELLATE-TRIBUNAL-PAKISTAN 638 (2008)

(a) Income Tax Ordinance (XLIX of 2001)---

----Ss.121(1)(d), 174(2) & 177---Best judgment assessment---Case was selected for total audit by observing that expenses claimed were approximately 95% of the receipts which were exorbitantly high and assessment was amended by disallowing all the Profit and Loss account expenses---Validity---While making best judgment assessment, Assessing Officer treated the entire receipt as Income and disallowed all the expenses claimed---Order was totally silent as to why all expenses were disallowed and why entire receipt was treated as income---No reasons were recorded for such treatment---Assessment did not meet the requirement of law as order was totally non-speaking---Relief in respect of add backs was allowed by the First Appellate Authority in accordance with the previous history of the case after giving due consideration to the facts of the case and on examination of books of accounts and evidence submitted by the assessee---No interference was warranted by the Appellate Tribunal in circumstances.

(b) Income-tax---

----Appeal---Vague grounds---Grounds of appeal were vague as neither any specific disallowance was pointed out nor any specific grievance had been mentioned.

Gohar Ail, D.R. for Appellant.

Haji Yousaf and Arshad Malik, ITP for Respondent.

Date of hearing: 7th October, 2008.

JUDGMENT

The department through this appeal has objected to the learned CIT(A)'s order, dated 3-7-2006 on the following grounds:--

(1) That the learned CIT(A) was not justified to conduct audit of the case and entertain evidence, details, documents and books which were not produced before Assessing Officer, and that too behind the back of the Taxation Officer in violation of section 128(5) of the Income Tax Ordinance, 2001.

(2) That the learned CIT(A) was not justified to conduct audit make add backs in violation of the provisions of section 128(5) of the Income Tax Ordinance, 2001.

(3) That the learned CIT(A) while framing the detailed assessment order erred not to discuss and give finding under each head of account, regarding the applicability of various subsections/ clauses of section 21 of the Income Tax Ordinance, 2001.

(4) That the learned CIT(A) has indulged in misreading/misquoting the case record since on page No.1, para III of her order, she has stated:--

"Accordingly taxpayer was informed regarding selection of case for audit was asked to submit various details, documents, evidences and explanations. Appellant submitted the same which were examined by the Taxation Officer".

While in paragraph II of page 2, she has stated:--

"It was observed that non-compliance by assessee to furnish is a fact"

Both statements are in contradiction to each other

(5) That without prejudice to above, that the CIT(A) has erred, not to invoke the provisions of section 128(4) of the Income Tax Ordinance, 2001, to do complete justice, and to avoid multiplication of litigation.

The assessee in this case is an individual engaged in the business of providing training services. The return of income declaring at Rs.645,240 were filed by the assessee wherein the receipts have been declared at Rs.1,20,90,392 while the profit and loss account expenses have been declared at Rs.1,14,45,152. The Taxation Officer observing that the expenses claimed are approximately 95% of the receipts which are exorbitantly high therefore case was selected for audit under section 177 of the Income Tax Ordinance, 2001 and finally assessment was amended under section 121(1)(d) of the Income Tax Ordinance, 2001 disallowing the P&L account expenses under section 174(2) amounting to Rs.1,20,70,947. Against which the assessee filed appeal before the CIT(A) who has allowed relief while reducing certain disallowances of the claim of P&L expenses while the disallowances made under the head salary and allowances, trainers fee, rental car charges, website charges, legal and professional charges, management association annual fee, office rent, medical expenses for staff, depreciation allowances made under the head advertisement expenses had been deleted for the reasons that all these expenses are verifiable. Now the department has filed an appeal on the grounds mentioned above we are of the view that the grounds filed by the appellant/department are vague as neither any specific disallowance has been mentioned nor any specific grievance has been mentioned. Even otherwise, by perusal of the impugned order of the learned CIT(A) we find that at page-1 it has been mentioned that "the Taxation Officer intimated that case of the assessee for the Tax year, 2005 is selected by Commissioner under section 177 for Audit and advised assessee for submission of various details. On the other hand, counsel of assessee challenges the validity of very selection of case for audit. The learned counsel contended that no evidence can be used against the assessee without prior confronting to assessee". It has further been Mentioned at page 2 of the impugned order of the learned CIT(A) that "Learned Taxation Officer completely avoided any reply on this specific subject. On the plea that since appellant has not submitted any details, he has treated entire receipts as income and disallow all expenses." We have further noted that at page 11 of the impugned order the following para has been given regarding justification of the learned CIT(A) to allow the relief to the assessee.

"During the year total receipt stand to Rs.12,716,187 which represent receipt from participants. Expenses include salary to staff, Telephone Expenses, Postage Expense as well as professional charges paid to specialist etc. etc.

Receipt is wholly verifiable and withholding Tax @ 5% was deducted while remitting the professional fees. Each and very evidence to substantiate the expense incurred are available and proper Cash book/Ledger etc. are maintained.

What appear from the treatment of the Assessing Officer is that assessment proceeding is not initiated to comply the Income Tax Ordinance, 2001 but assessment is made to penalize the assessee for alleged non-compliance of notice by assessee.

Assessee engaged in most uncommon and specialized nature of business. Reputed professional of the reputation and calibre of Tom Peter are among the trainers whose charge per programmer normally is not less than hundred thousand dollars. Further participants include mostly are Senior Executives of Multinationals and professional charges per program from Rs. 10,000 to Rs.25,000 for participants as per nature of training Centre of training is always a Five Star Hotel with minimum lunch, dinner and other refreshment for all trainees during the course of seminar/training.

The expenses above quoted are so self-speaking that denial thereof OR disallowing thereof demonstrate that official who is culprit of such treatment is highly incompetent, inefficient and lacked the in-depth knowledge of assessee's profession or is involved in intentional and deliberate adventure with mala fide intention and with motive of "Extraneous Consideration". No reasonable person of moderate knowledge/competency and ability can resort to such ridiculous treatment.

While making best judgment assessment, Assessing Officer treated the entire receipt as income and disallowed all the expenses claimed. The order is totally silent as to why all expenses are disallowed and why entire receipt is treated as Income. No reasons are recorded for this ridiculous treatment. Assessment meets no requirement of law as order is totally non-speaking."

Likewise the learned CIT(A) has considered the previous history of the case also regarding which following observation has been given at page 15 of the impugned order.

"In the absence of any reasons to the contrary, the treatment meted out to an assessee ought to be in line with the past history of the case. If any departure is to be made, there have to be very strong reasons for the same and material evidence has to be very strong reason for the same. A result shown by another assessee or acceptance of a certain treatment by another Taxpayer alone is no justification for departing from the past history. Messrs Sensei is an old assessee. They are regularly assessed since 1995-96 and always given the treatment that just small portion of expense disallowed and rest is accepted. No change took place in the nature of business and for all this year along with Tax year, 2005, everything remains' unchanged. During the -long period such treatment is never meted out. Declare receipt is always accepted. At no stage, Assessing Officer even shown his intention to treat entire receipts as Income or to disallow all the expense. This is NOVRL treatment never heard of. Assessment deserve right for similar treatment as per past history of the case."

And finally, the learned CIT(A) after giving due consideration to the facts of the case and on examination of books of accounts and evidences submitted by the assessee has allowed relief in respect of the add backs in accordance with the previous history of the case which requires no interference.

The appeal filed by the Department in view of the above facts and circumstances of the case is, therefore, dismissed.

C.M.A./9/Tax (Trib.)Appeal dismissed.