2005 PLP (Trib (PTD)

(ii) On assessee's appeal the CIT(A) vide his order, dated 31-1-2002, reduced estimate of sales from Rs.7,200,000 to Rs.,2,860,000, whereas he set aside the issue of addition of Rs.1,40,000 under section 13(1)(e) with the following findings:-- "The officer also made an addition of Rs.1,40,000 under section 13(1)(d) in the year under appeal. The officer has made addition on account of the fact that declared drawings of the assessee at Rs.60,000 were considered very low. In this regard the officer estimated the drawings of the assessee at Rs.2,00,000 and after deducting the drawings claimed by the assessee at Rs.60,000 he arrived at the figure of the drawings at Rs.1,40,

000. The officer also confronted the addition to the assessee vide his letter, dated 6-6-2001 but since no reply was filed by the assessee he made addition of Rs.1,40,000 in the total income of the assessee under section 13(1)(e) with the prior approval of the IAC of his range. In this regard it is observed that addition made in above circumstances is of general nature based on the presumptions of the officer which cannot be upheld in appeal. Because the officer has first of all to establish the drawings being low with proper reasoning and should conduct a specific inquiry to know as to under what heads these expenses have been made. He should also collect evidence in this respect to establish the fact beyond any doubt so that addition can stand the test of appeal. In this regard the officer has not done any effort to collect any evidence and it is not clear under what heads the assessee made expenses for which he is making the addition. Besides above this addition also forms the-concealed income which is liable to penalty under the provision of law.. In view of this fact the addition which amount to concealment of income cannot be upheld on the basis of presumptions made by the officer. In this regard valuable judgments of the learned ITAT reported as 1987 PTD. (Trib.) 36 and (1992) 66 Tax Page 53 are before me. On this principle the learned members of the learned ITAT have given their findings that addition under section 13(l) specially under section 13(1)(e) cannot be upheld on the basis of mere presumptions of the officer. Therefore, very respectfully following the above judgments of the learned ITAT addition in question cannot be sustained. The same is hereby set aside for de novo proceedings with the direction to the officer to follow the Instructions as given above and if there is any foolproof evidence then addition be made in the income of the assessee." (iii) Aggrieved of the order of the CIT(A) the Department filed appeal before the Tribunal on both the issues i.e. reduction in sales as well as setting aside the addition under section 13(1)(e). This departmental appeal was heard on 9-4-2003. (iv) Meanwhile, before the hearing on departmental appeal, the DCIT passed an order on 21-5-2002 which bears section 132 apparently as it was passed to give effect to the appellate order of the CIT(A), dated 31-1-2002. By this order the DCIT reduced estimate of sales to Rs.28,60,000 as directed by the CIT(A). However, on the issue of addition under section 13(1)(e) which was set aside by the CIT(A) passed an order which apparently indicates that the A.R. of the assesses did appear before him and as mentioned by the DCIT himself, explained the reasons for low drawings of the assessee, which were attributed to joint family system, family residing in Shikarpur and family having joint agricultural land etc. Thus the DCIT gave his clear verdict that "the explanation of the A.R. is forceful, therefore, the same is accepted". The findings of the learned DCIT are as under:-- "Regarding addition under section 13(1)(e) of the Income Tax Ordinance, 1979 on account of low drawings at Rs.140,000 the, A.R. stated that the whole family of the above named assessee resides at Shikarpur under a joint family system and all the brothers of the assessee are agriculturists and having thousand acres of agriculture land in District Shikarpur and the above named assessee does not contribute any penny, therefore, the question of addition under section 13(1)(e) does not arise. The explanation of the A.R. is forceful, therefore, the same is accented." (v) When the hearing of departmental appeal was conducted by the Tribunal on 9-4-2003, the Tribunal took exception of the order passed by the DCIT, dated 21-5-2002 (which date appears on one copy of the IT-30 and not on the order itself) and gave the finding that the said act of the DCIT i.e. recording explanation of the A.R. and accepting the same and deleting addition under section 13(1)(e), had rendered the departmental appeal infructuous. The Tribunal has recorded its findings as under:-- "The learned counsel also pointed out that very surprisingly the Assessing Officer Cir. 13, Zone-E, who has signed and filed this appeal before the Tribunal against order of the CIT(A) reducing sales for assessment year, 2000-2001 and also setting aside the addition under section 13(1)(e) wrongly mentioned as 13(1)(a) in the grounds of appeal has subsequently himself passed an order under section, 132, in pursuance to impugned appellate order of the CIT(A) dated 31-1-2002. Through this order the DCIT has not only given effect to the direction of CIT(A) reducing the sales but has also passed de novo assessment on the set aside issue i.e. addition under section 13(1)(e), whereby he has accepted the explanation offered by the learned A.R. and deleted the said addition at his level, blatantly ignoring the fact that he had filed the departmental appeal before the Tribunal against the same order of the CIT(A) which was still pending for disposal. Thus after passing de novo assessment under section 132 accepting the explanation of the A.R. and deleting the addition under section 13(1)(e) the DCIT has rendered the departmental appeal infructuous. "

4. In this background this departmental application for rectification of the order of the Tribunal, dated 9-4-2003 appears to be an effort to cover up the maladministration in the hierarchy of officers from the lowest cadre to the higher ranks who are unable to guide and supervise the high fliers. In the miscellaneous application it has been stated that the order of the DCIT, dated 21-5-2002 was passed to give effect to the order of the CIT(A) and is titled as order under section 132 and that "the perusal of the order would reveal that it does not mention of any action taken by the Assessing Officer leading to a belief that the de novo assessment proceedings were ever initiated by him because there is no mention of issuance of call notice for hearing, date of appearance and name of A.R. etc." It is also mentioned that "the order sheet entry, dated 21-5-2002 gave only appeal effect to the order of the CIT(A) subject to revision/re-assessment". In the same application it has also been stated that "an Assessing Officer is not empowered to make any assessment under section 132 of the Income Tax Ordinance, which deals with the powers of appellate authorities while disposing of the first appeal."

5. The learned D.R. also argued that the DCIT had not passed any de novo assessment as there was no mention of section 62 on the said order, which bears of section 132 on it.

6. The arguments taken by the learned D.R. and the basis on which the miscellaneous application has been moved are not based on proper appreciation of facts. In this regard we want to make following observations before disposing of this application: (i) Effect to the order of the CIT(A), dated 31-1-2002 would be justified only to the extent of reduction of sales as directed by the CIT(A), although the department was in appeal before the Tribunal on the said issue also. (ii) The second issue i.e. addition under section 13(1)(e) was set aside by the CIT(A) with his finding and the certain direction since the department was in appeal before the Tribunal, it was quite unjustified and in fact illegal to delete the said addition, unless the departmental appeal on the said issue was' withdrawn. (iii) It is pertinent to note that the original assessment order was passed ex parte under section 63 on 29-6-2001, as the assessee or his A.R. had not made any compliance to any notice under sections 61 and 62, specifically a notice under sections 62/13(2), dated 6-6-2001 as recorded by the DCIT in his order and quoted above. The assessee or his A.R. had not submitted any explanation regarding his low drawings ascribed to joint family system and agricultural land even before the CIT(A) who has observed that the addition made in the circumstances was of general nature based on presumption -of the officer. But while passing order under section 132, apparently to give effect to the order of the CIT(A), the DCIT in his order, dated 21-5-2002 has recorded the statement of the A.R., although his name has not been mentioned, about the joint family system of the assessee residing in Shikarpur and having thousands Acres of agricultural land in District Shikarpur. The learned DCIT was very much convinced with the said explanation and accepted the same with the finding that "the explanation of the A.R is forceful, therefore the same is accepted". If there was no notice issued under section 61 and no proceedings were recorded on the order sheet then how the DCIT got information about assessee's joint family system and his agricultural land. It was only because the authorized representative of the assessee, whose name is not mentioned in the order, appeared before the WIT so and his explanation was found by the learned DCIT so "forceful" that he accepted the same and deleted the addition. As discussed above this explanation recorded by the DCIT is not borne either from the original order under section 63 or from the appellate order of the CIT(A) or from any document submitted by the assessee during original assessment proceedings. It was the DCIT who subsequently obtained fresh evidence and recorded the same and accepted explanation of the A.R. as "forceful" at his own level to pass an order, dated 21-5-2002. Thus it is an order passed with conscious mind, and not merely an order giving effect to order of CIT(A). If the department is of the view that as stated in para-D of the miscellaneous application, that "an Assessing Officer is not empowered to make any assessment under section 132", then the concerned authority should have taken corrective measure to nullify such order which was passed by the DCIT transgressing his powers. In our opinion this order, dated 21-5-2002 which although carries the title "order under section 132" is in all its ingredients a de novo assessment order passed after the set aside order of the CIT (A), dated 31-1-2002. It is immaterial that section 62 is not mentioned in the order and that notice under section 61 was not issued and that the name of the A.R. has not been mentioned. Once the A.R. submitted an explanation before the DCIT and same has been accepted by him as "forceful" and the DCIT has recorded his decision not to take any adverse inference it is a complete assessment order. An assessment/re assessment order need not to be spread over several pages. It can be as precise as recorded in one sentence. In this case the DCIT has made elaborate discussion on the issue and it is totally incorrect view of the department that it was not a de novo assessment on the issue of addition of under section 13(1)(e).

7. Before parting we would like to observe that filing appeals without there being any merit and then after dismissal of such appeals filing rectification applications on frivolous grounds, as has been done in this case, has become a practice, not on the part of the assessees but also on the part of the department, which is very unhealthy and it is sheer waste of time, energy and public money. The higher-ups in the department should look into such matters where the officers indulge in unnecessary litigation and appellate authorities are engaged in unnecessary arguments, apparently to cover up blunders of the officers.

8. In view of the above discussion and our findings recorded in our order, dated 9-4-2003 we do not find any substance in the miscellaneous application of the department which is hereby dismissed. H.B.T./326/Tax (Trib.) Application dismissed.