2005 PLP (Trib (PTD)

Muhammad Iqbal Ahmad, D.R. for Appellant/ Department. Anwar Ali, I.T.P. for Respondent/Assessee. Date of hearing: 5th March, 2004. INAM ELLAHI SHEIKH (CHAIRMAN). ‑‑‑By this consolidated order, we proceed to decide six cross‑appeals arising out of the order, dated 30‑7‑2003 recorded by the learned CIT(A)‑I, Islamabad, whereby the sale rate of coal in the case of a private limited company was reduced as against the rate adopted by the Assessing Officer and the additions made under section 12(18), of the repealed Income Tax Ordinance, 1979 (hereinafter called the repealed Ordinance) were confirmed. The department has agitated the reduction in the sale rate as directed by the first appellate authority whereas the assessee had agitated the adoption of sale rate by the departmental officials as against the declared sale rate in the three years and also the additions made under section 12(18) of the repealed Ordinance.

2. The relevant facts in brief are that the assessee derived income from coal mining business. The assessee filed returns to declare income at Rs. 4,415 and Rs.8,911 in the assessment years 1999‑2000 and 2000‑2001 respectively whereas in the assessment year, 2001‑2002, a loss of Rs.297,034 was shown. The Assessing Officer discarded the declared version and adopted the sale rate of coal at Rs.1,250 per metric ton in the assessment year, 1999‑2000 and the same rate was increased by Rs.50 in the subsequent years. The learned CIT(A) directed the Assessing Officer to adopt the sale rate by enhancing the rate last fixed by the Tribunal (Rs.840 per metric ton) in the assessment year, 1998‑99 by Rs.50 per metric ton in each year under consideration. Hence the sale rate was fixed by the first appellate authority at Rs.890, Rs.940 and Rs.990 per metric ton in the respective years under consideration against the declared sale rate of Rs.700 per metric ton. The Assessing Officer found that the assessee had shown credit entries as cash advances in the hooks of account. He confronted the assessee with the proposal to the action under section 12(18) of the, repealed, Ordinance in each year and the assessee explained that such credit, though in cash, were in respect of' sales subsequently made and had been received from the customers. The Assessing Officer did not accept such explanation and made the addition of Rs.1,277,500 in the assessment year 1999-2000, Rs.1,370,000 in the assessment year 2000‑2001 and Rs.1,103,750 in the assessment year 2001‑2002. Such addition was confirmed by the first appellate authority in all the three years under consideration.

3. The learned AR of the assessee had strongly objected to the rejection of the declared trading results and the fixation of the sale rate by the departmental officials. The plea of the learned A.R. of the assessee is that no specific defect has been pointed out by the Assessing Officer and the learned AR on this point has conceded that no specific defect has been pointed out. However the learned D.R submitted that the assessee has a history of rejection of declared trading results which plea cannot be accepted. If such a plea was accepted, then the assessee would have a claim of acceptance of declared trading results in every year once accounts are accepted in one year. In each year, the Assessing Officer has to give his reasons and confront the assessee with the defects before the results can be rejected as this is not a no account case and this is the case of a limited company whose accounts are audited by Chartered Accountants. It appears to us that only table exercise has been carried out in this case. No effort has been made to verify the production or the sale rates available in the market or the quality of coal produced by the assessee. Anyhow, since no defect had been pointed our not was assessee confronted on the issue, we direct the acceptance of declared trading results in all the years under consideration.

4. On the issue of the addition made under section 12(18) of the repealed Ordinance, on the surface of the facts, it appears that the assessee had a strong case as all the balances had been adjusted by the close of the year and none of these transactions appeared in the balance sheet. However, the learned DR has pointed out that the assessee was also showing certain balances in the balance sheet as `advances from contractors/customers' which had not been explained and which were changing over the years. The learned AR Was confronted on this issue and he explained that this represented some old balances. However, we are not satisfied with this explanation as the as the amounts are not the same in all the three years. In the first balance sheet as on 30‑6‑1979, this amount is shown as current liabilities of Rs.304,920 from contractors not customers. In the balance sheet as on 30‑6‑2000 current liabilities from customers are shown at Rs.334,961 and in the in the balance sheet as on 30‑6‑2001 liabilities from customers are shown at Rs.316,

116. The assessee has already conceded before the first appellate authority that the provisions of section 12(18) of the repealed Ordinance could be applied to an amount of Rs.100,000 in the assessment year, 1999‑2000. Considering all such facts and circumstances, were are inclined to set aside this issue in all the years and remand the matter back to the Assessing Officer for de novo consideration The Assessing officer should provide the assessee another opportunity to explain and substantiate all these balances and transactions. If necessary, the Assessing Officer may make direct verification from the concerned parties and/or with the assessment records as the situation warrants.

5. No other ground was pressed. 'As a result of above discussion, the departmental appeals are dismissed as infructuous whereas the assessee's appeals succeed partly to the extent that the declared trading results are accepted and partly to the extent that the issue of addition under section 12(18) of the repealed Ordinance is set aside with the above directions. C.M.A./302/Tax (Trib.) Order accordingly.