1988 PLP (Trib (PTD)

SIKANDAR HAYAT KHAN (ACCOUNTANT MEMBER),-- Brief facts giving rise to this appeal are that the assessee, a private limited company, derives income from a rent of building known as Saeeda Chamber. It filed a return to declare net income of Rs.2,16,000 in respect of the previous year relevant to the charge year 1984-85. However, the Income-Tax Officer by virtue of order dated 23-5-1987, passed under section 62 of the Income-Tax Ordinance, 1979 (hereinafter called the Ordinance) determined net income of the assessee at Rs.4,10,000 in agreement with, it. In this connection, relevant part of assessment order is set out below:- "In view of above discussion, the declared version of the expenses is not worth reliance and is rejected. During the course of assessment proceeding, the Managing Director, as per order sheet entry, dated 30-4-1987, agreed to be assessed at net income of Rs.4,10,

000. This means that the assessee agreed to total addition of Rs.1,22,

547. The offer being reasonable is accepted."

2. Notwithstanding the above agreement, income as assessed was contested in appeal before learned CIT (Appeals), who by virtue of Appeal No.38, dated 30-8-1987, confirmed assessment relating to the charge year 1984-85, in the following words:- "The company wad being represented by the director as well as company's counsel and the latter was quite competent to understand the implication of giving consent to the income proposed to be assessed by the Income-Tax Officer at Rs.4,10,

000. It is quite clear that income of the company has been determined with the consent of the director as well as the authorised representative. I therefore do not find any reason to make interference therewith."

3. Having failed to get relief from learned CIT (Appeals), the assessee filed second appeal before the Tribunal which after hearing has been disposed of today and a finding on it fellows in the paras hereafter.

4. Learned counsel of the assessee has brought to our notice that three conditions are necessary for a valid contract namely:- (i) offer; (ii) acceptance; and (iii) consideration.

5. He has admitted at the Bar that while offer and acc6ptance of the contract were present in agreement dated 30-4-1987, there was absence of consideration, and therefore, the said agreement was not valid in the eyes of law. In saying so he has placed reliance on two cases reported as 1987 P T D 653 (Trib.) and 1988 P T D 22 (Trib.). He has, therefore, prayed that orders of both the officers below may be vacated by the Tribunal. This line of reasoning has been contested with equal force by learned DR who has stated that even the third condition essential for making a contract namely, consideration, was present because the Income-Tax Officer on the basis of scrutiny of expenditure could have made assessment on a figure higher than the assessed income in agreement with the assessee. In support of this contention, he has relied on the fact that total expenditure under various heads of accounts amounted to Rs.7,91,376 and as the expenditure under the heads, salary and wages, repairs and maintenance (general) and other expenditure, was not open to verification, disallowance at the rate of 20% and 25% could have resulted in an addition of Rs.1,58,275 and Rs.1,97,844 respectively. However, in view of the offer giver, by the assessee to be assessed at net income of Rs.4,10,000, the Income-Tax Officer did not make a further probe which he could have made in accordance with law thereby resulting in surrendering of a valuable right. Based on these reasons, he has submitted that ratio of decision in cases reported as 1987 P T D 653 (Trib.) and 1988 P T D 22 (Trib.), was not attracted to the facts of this case. He has therefore, made a strong submission that order of both the officers below may be maintained.

6. Having heard both the parties at some length, we have not been persuaded to accept what has been stated by learned counsel of the assessee. His contention simply is that while two conditions, namely, offer and acceptance of the contact were present in respect of the case before us, the third condition namely, consideration was non-existent. However, on the basis of evidence that is available on record, we have noted that even consideration for making of a contract was present. In arriving at this conclusion, we have drawn support from the fact that expenditure claimed in all to the extent of Rs.7, 91,376 was not open to verification under certain heads of accounts mentioned in the assessment order. Therefore, the assessee with a view to saving itself from a further probe, gave an offer of Rs.4,10,000 which was accepted for making of assessment for the charge year 1984-85. It had the consent of assessee's Managing Director namely, Mr. Zia Rajput and Mr. Khalid Waheed, Advocate, learned counsel for the assessee at the relevant time by virtue of order sheet entry, dated 30-4-1987. By accepting this offer, the Income-Tax officer did not make a further probe and as pointed out by learned DR it could have resulted in making assessment on a higher figure. In consequence thereof, the assessee in return was saved from botheration of close scrutiny of books of accounts. In this view of the matter, it is our considered opinion that assessment dated 23-5-1987, could not by any stretch of imagination be said to be unilateral. Since in respect of the case before us, all the requirements for making of a valid contract were present, ratio of decision in the two reported cases namely, 1987 P T D 653 (Trib.) and 1988 PTD 22 (Trib.) was not attracted. Consequently, assessment is held to have been made in accordance with law on a sum of Rs.4, 10,000 as a result of which assessee's appeal stands dismissed. M.B.A./543/T Appeal dismissed