2003 PLP 1762 (PTD)

(1) Your sales as per sales tax record stands at Rs.717848866 inclusive of Central Excise & Sales Tax amounting to Rs.235547073. However, as per Income Tax .record you declared total sales at Rs.677873617. Hence the figure of sales disclosed to the Sales Tax Department and Income Tax Department to not reconcile and there is a different of Rs.39975249. In view of the position it is evident that you did not disclose true particulars of your income and therefore, evaded tax on the same. (2) Salaries to Directors have been declared at Rs.23520,

00. However, no deduction' under section 5(1) was apparently made. The default of deduction under section 50(1) renders the expense in admissible and liable to be added under section 24(e) of the Income Tax Ordinance, 1979. However, the ITO failed to take cognizance of the same. . (3) You have executed an agreement with Messrs Mashroob Agency, Jaranwala Road, Faisalabad and your entire sales are effected through the above agency. This ideas to the conclusion that no selling expense are admissible in your hands Whereas you claimed the following expenses which were allowed to you incorrectly:-- (a) Selling staff salary Rs.2126652 (b) Vehicle running & Maintenance Rs.3716778 (c) Other selling expenses. Rs.9310857 (4) You also claimed sales promotion publicity and advertisement expenses at Rs.10967175. It is observed that publicity and advertisement expenses are capital in nature and therefore, were not to be allowed. However, Assessing Officer while fir4alizing the assessment failed to tax the same accordingly: (5) You have shown due to directors at Rs.4849400. As per the details available on record these amounts were not received through crossed cheque or normal banking channels, hence attracted the provisions of section 12(18) of the Income Tax Ordinance, 1979. No addition however, was made on this. account under section 12(18). (6) You have also shown short term bank finance at Rs.17928720 from Messrs Muslim Commercial Bank. However, no bank statement was acquired from you. Instead a certificate from the Bank was provided. Since this was the position, no Proper investigation as regard to the genuineness of the loan account has been made and action taken as per the law accordingly. (7) Financial charges to the, tune of Rs.29081279 were claimed and allowed. No documentary. evidence was either filed by you or obtained by the Assessing Officer. (8) It is observed that you created the following rescues for expenses at Rs.1103292 which were being inadmissible were not to be allowed. However, the same have erroneously been allowed while finalization of the assessment thereby causing loss of Revenue.

5. Through these Constitutional petitions the initiation of the proceedings under section 66-A of the late Income Tax Ordinance, 1979 on the stated grounds are assailed. The respondent-Revenue in their reply have merely repeated the above objections confronted to the assessee. It has however not been stated as to how the agreed assessments which had the blessing. of the IAC as well as the Commissioner, a sudden became erroneous and prejudicial to the interest of the Revenue.

6. After hearing the learned counsel for the parties I will agree that the proposed action is completely uncalled for in view of the fact that the assessments had been framed in agreement with the department. It appears that on receipt of an audit objection the concerned Officer proceeded to issue the aforesaid shove-cause notices. Learned counsel has pointed out with the support of a copy of the reply to audit para that even after the initiation of these proceedings, the Assessing Officer himself replied to the Deputy Director Audit & Inspection, AGPR, Lahore on 26-6-2000 that the assessments having been finalized under section 62 on agreement basis and with the approval of the concerned Commissioner it would be a bad case for an action under section 66-A of the late Income Ordinance 1979.

7. Learned counsel for the petitioners has also recounted the alleged infirmities in the assessment order as confronted to the assessee through show cause notices under section 66-A. He submits and I will agree that the audited accounts, balance sheet, profit and loss account and depreciation chart etc, alongwith the details of tax paid under section 53 of the Income Tax Ordinance, 1979 having been submitted with their returns,, which fact was duly noted in the assessment orders, the aforesaid objections are flimsy and mala fide. It will be noted that in the notices under section 66-A the assessee was not alleged to have cheated upon the department or having misguided them while entering into an agreement. All the objections confronted to him pertain to the aforesaid documents which were duly considered by the department before agreeing to accept the offer of the assessee to be assessed at a certain "income". The figures at which the assessee agreed to be assessed as against the disclosed version also indicate that it was very well considered action on the part of the Revenue as well as the assesses. Thereafter to proceed against the assessee merely on the ground of, a draft para appears wholly un-acceptable.

8. The provisions of section 66-A requires that an assessment order should be erroneous in so far as it is prejudicial to the interest of the Revenue. The Revenue having accepted the offer of the assessee after due probe it had no business at all to describe the same assessment as erroneous and prejudicial to the interest of the Revenue. All the more so when according to the assessment orders the offer of the assessee was accepted by the concerned DCIT. after consultation and with the prior approval of the IAC as well as the concerned Commissioner of the Zone. The initiation of those proceedings, as the learned counsel has effectively demonstrated from the record are in fact an attempt on the part of the concerned officer to make a justification to be put forth before the AGPR to defend himself against the draft para. Whatever happens between the two official functionaries is their own business. The assessee cannot be allowed to be made a scape goat for the reason that some gentlemen in the office of the AGPR were not satisfied with the agreement made by the Revenue. To make an assessment keeping in view the facts of a particular case is the privilege of the Revenue. That privilege and discretion appears to have rightly been exercised by them in this case.

9. Be that as it may it is for the Revenue Officers to justify their order before the audit people but the assessee cannot be forced to bear I the brunt. Both the notices are declared to have been issued without jurisdiction.

11. Petition accepted.

12. This judgment will also govern Writ Petition No.4360 of 2002. S.A.K./P-132/L Petition accepted.