VS, 2010 PTD-INCOME-TAX-APPELLATE-TRIBUNAL-PAKISTAN 91 (2009)

(a) Income Tax Ordinance (XXXI of 1979)---

----S.156-Rectification of mistake---Un-adjudicated ground of appeal--Mistake apparent on the face of record---Since the grounds taken up by the assessee on the issue of gross profit rate remained unadjudicated, the Appellate Tribunal committed a mistake which could be treated as `mistake apparent on the face of record'---Miscellaneous application of the assessee was accepted and earlier order on the issue of gross profit rate was recalled by the Appellate Tribunal.

(b) Income-tax---

----Gross profit rate---Rejection of accounts---Parallel cases---While rejecting declared version no plausible reasons were given by the Assessing Officer---Citations of parallel cases was not in accordance with law for the reason that in parallel cases cited by the assessee in the same locality were not taken into account at all and Assessing Authority proceeded to rely upon the cases of units located at other cities, which were not parallel in stricto sensu---Rejection of declared version and the resultant application of gross profit rate was not in consonance with law---Order of First Appellate Authority was vacated by the Appellate Tribunal and Assessing Officer was directed to accept the declared gross profit rate.

1998 PTD (Trib.) 2106; 2002 PTD 407; 1985 PTD 516; 1984 PTD 150; 2009 PTD (Trib.) 838; 1994 PTD 123; 2003 PTD (Trib.) 1972 and, 2001 PTD (Trib.) 1972 ref.

Sajid Ijaz Hotiana for Appellant (in M.As. Nos. 18/LB/2009, 19/LB/2008, 20/LB/2008, 21/LB/2008, 22/LB/2008, M.As. Nos.451/LB/2008, 452/LB/2008, 453/LB/2008, 454/LB/2008, 455/LB/ 2008, I.T.As. Nos.7029/LB/2005, 7030/LB/2005, 5156/LB/2003, 1031/LB/2004, 5072/LB/2005.

S.A. Masood Raza Qazilbash, D.R. for Respondent in M.As. (A.G.) Nos. 18/LB/2009, 19/LB/2008, 20/LB/2008, 21/LB/2008, 22/LB/2008, M.As. Nos. 451/LB/2008, 452/L13/2008, 453/LB/2008, 454/LB/2008, 455/LB/2003, I. T. As. Nos.7029/LB/2005, 7030/LB/2005, 5156/LB/2003, 1031/LB/2004, 5072/LB/2005.

S.A. Masood Raza Qazilbash, D.R. for Appellant (in I.T.As. Nos. 5462/LB of 2003 and 1039/LB of 2004).

Sajid Ijaz Hotiana for Respondent (in I.T.As. Nos. 5462/LB of 2003 and 1039/LB of 2004),

ORDER

SYED NADEEM SAQLAIN, (JUDICIAL MEMBER).---Titled miscellaneous applications bearing M.As. Nos. 451 to 455/LB/08 for the assessment years 1997-98, 1998-99, 2000-2001, 2001-2002 and 2002-2003 have been filed seeking rectification in the consolidated judgment passed by the Tribunal vide order, dated 13-4-2006 in I.T.A. Nos. 7029, 7030, 5072/LB/OS, 5156, 5462/LB/03 and 1031 and 1039/LB/04. The assessee also filed miscellaneous applications for all the assessment years under consideration with the request that the same may be allowed to submit amended grounds since the grounds in the original miscellaneous applications were argumentative and repetitive.

2. The facts in brief are that the assessments for the years under consideration were finalized under section 62 of the repealed Income Tax Ordinance, 1979 (hereinafter called the repealed Ordinance). The assessing authority rejected the declared version; estimated the sales at Rs.4,60,000,000, Rs.6,46,000,000, Rs.9,06,180,246, Rs.8,68,000,000 and Rs.9,64,763,184 respectively for the assessment years 1997-98, 1998-99, 2000-2001, 2001-2002 and 2002-2003 and applied G.P. @ 7% against the declared G.P. at the rate of 3.41%, 2.62%, 5.24%, 5.90% and 5.99% for the years under consideration. The assessee challenged the assessment orders before the learned First Appellate Authority who on order, dated 4-10-2000, confirmed the rejection of accounts and allowed relief on the issue of estimation of sales. However, with regard to the issue of G.P. rate, the learned CIT(A) remanded the matter to the Assessing Officer for afresh adjudication. The department assailed the order of the learned first appellate authority before the Tribunal who vide an order, dated 5-4-2003 dismissed the departmental appeals and maintained the remand order passed by the learned First Appellate Authority. While making the re-assessment order, dated 4-3-2004, the Assessing Officer repeated the treatment accorded to the assessee and once again applied G.P. rate of 7% as was done in the original assessment. In the second round of litigation, on appeal filed by the assessee, the case was once again remanded to the Assessing Officer to have an afresh appraisal regarding the issue of application filed by the applicant/assessee, it is the plea of the assessee that without considering the specific grounds of appeal agitated by him, appeals of the assessee were dismissed. Besides a mistake apparent on the face of record was committed while making directions that application of G.P. rate of 7% was quite justified.

2. Both the parties have been heard and relevant orders perused. The learned A.R. has vehemently argued the case and contended that there was a mistake apparent on the face of record which warrants rectification under section 156 of the repealed Ordinance. It was submitted by the learned A.R. that the Tribunal failed to take notice that it was assessee who filed the appeal and that at the most the Tribunal could dismiss the appeal and uphold the order of the learned CIT(A) who had remanded the matter for afresh adjudication. The learned A.R. further argued that the tribunal erred in law while dismissing the appeal but without adjudicating the issue of G.P. rate in the light of grounds of appeal urged by the assessee.

3. The learned D.R. has also been heard in support of the department.

4. After hearing the learned counsel for both the parties and going through the relevant orders passed by the Tribunal, we find ourselves in full argument with the contentions raised by the learned A.R. Undoubtedly, the Tribunal committed a mistake which could be treated a mistake apparent on the face of record since the grounds taken up by the assessee on the issue of G.F. rata: remained unadjudicated.

5. For the foregoing; reasons, we accept the miscellaneous applications of the assessee and recall our earlier order on the issue of G.P. rate and dispose of the same as follows:--

I.T.As. Nos. 7029, 7030 and 5072/LB/2005 and I.T.As. Nos. 5156/LB/03 and 1031/LB/04

6. While continuing his arguments, the learned A.R. stated that the issue of application of G.P. rate was remanded twice to the Assessing Officer who instead of following the directions of the higher authorities, confined himself in repeating the treatment meted out to the assessee. The learned A.R. further submitted that in this view of the fact it would be appropriate that the issue is decided by this forum. The learned A.R. pointed out that the Assessing Officer acted in disregard of facts of the case as well as the ratio settled by different forums 'with regard to the rejection of accounts as well as application of G.P. rate. It was argued that application of G.P. rate at 7% on Ghee/Cooking Oil and 25% on allied products was not only arbitrary and capricious but without any reason. The learned A.R. reiterated that unit run by the assessee situated at Islamabad while applying G.P. rate, comparison was made with units of Lahore and Faisalabad which could not be considered as parallel cases. In this respect, the learned A.R. referred to 3 parallel cases which were situated at Islamabad but were absolutely ignored by the assessing authority. The learned A.R. further submitted that other factors such as procurement of raw-material from Karachi, the market where product is to be sold was also not looked into. In support of his contention the learned A.R. referred to a number of judgments reported as under whereby it has been held:--

(1998) PTD (Trib.) 2106.

"Audited accounts duly certified by a chartered accountant could not be rejected without bringing concrete evidence on record."

2002 PTD 407 (Karachi High Court):

"Past history no ground for rejection of accounts": 2002 PTD 407 (Karachi High Court):

"Adverse past history of assessee is no ground o reject the accounts as rule of res judicata is not applicable to income tax proceedings.

1985 PTD 516

"Lowness of gross profit rate no ground for rejection of accounts."

1984 PTD 150 (Karachi High Court) 2009 PTD (Trib.) 838: "When a case can be said to be parallel-applicable to all assessment years."

1994 PTD 123 (Karachi High Court)

"Declared version could not be rejected where a regular method of accounting is regularly employed relevant to all assessment years."

1994 PTD 123

"Declared version cannot be rejected on mere suspicion and general observations and without pinpointing specific defects in the books of accounts."

2003 PTD (Trib.) 1972.

"Without any attempt to verify any allegedly unverifiable sales account version cannot be rejected."

2001 PTD (Trib.) 1972 (L.H.C.)

"Where only small portion of sales unverifiable declared account cannot be rejected."

7. The learned D.R. has also been heard on behalf of the Revenue and he supported remand order.

8. After hearing both the parties as well as having gone through the relevant orders, we feel ourselves persuaded by the arguments advanced by the learned A.R. It is matter of record that despite the fact that the case was remanded twice, the Assessing Officer did not comply with the directions given by the learned CIT(A). On the contrary, the Assessing Officer repeated the assessments verbatim. It is also pertinent to note that while rejecting declared version no plausible reasons were given by the Assessing Officer. Citations of parallel cases by the assessing authority was not in accordance with the law for the reason that in the parallel cases cited by the learned A.R. which are situated at Islamabad were not taken into account at all and the Assessing Authority proceeded to rely upon, the cases of the units located at Lahore and Karachi, obviously which were not parallel in stricto senso. In this view of the fact we must observe that the Assessing Authority acted against the ratio laid down by the superior Courts at all levels. The Assessing Officer also failed to take into account parallel case cited by the assessee in support of their version. Hence rejection of declared version by the Assessing Officer and the resultant application of G.P. rate was not in consonance with the law.

9. In the light of aforesaid discussion, we vacate the impugned order passed by the learned First Appellate Authority and direct the Assessing Officer to accept the declared G.P. rate for all the years under consideration.

I.T.A. No.5462/LB/03 and I.T.A. No. 1039/LB/04.

10. As far as departmental appeals are concerned, the Revenue has challenged the reduction in sales for the two years under consideration and G.P. rate for the assessment year 2000-2001, however, 'since we have already directed for acceptance of the declared G.P. rate for the years under consideration while disposing appeals of the assessee, the appeals of the Revenue have become infructuous on this point. .Similarly, reduction in sales by the learned CIT(A) for the two years were confirmed by the Tribunal vide order, dated 13-4-2006, hence no indulgence is required on this issue also. Appeals of the Revenue being devoid of any merit stand rejected.

11. It is ordered accordingly.

C.M.A./128/Tax(Trib.)Order accordingly.