1998 PLP 382 (PTD)

Sameera Yasin, D.R. for Respondent. Date of hearing: 24th October, 1996. KHALID MAHMOOD (ACCOUNTANT MEMBER).

This appeal by a private limited company deriving income from manufacture of ready-made garments calls in question the order, dated 3-9-1992 recorded by the CIT (A)-I, Lahore whereby the ex parte assessment framed against the company was upheld. However, at the time of hearing, the learned counsel for the appellant, Mr. Aslam Malik, C.A. did not question the ex parte action against the assessee but pleaded only against the excessiveness of estimate of sales, gross profit rate and curtailment of some profit and loss account expenses. For the year under appeal, the assessee disclosed a G.P. rate of 20.65% on sales of Rs.17,91,

381. Out of the declared sales, the local sales were to the extent of Rs.835,781 while the balance represented export sales. The assessing officer after observing that the local sales were not open to verification and the purchases as well as the expenses on account of stitching material, packing, repair and maintenance etc., as debited to the trading account were not substantiated, estimated the sales at Rs.19,00,000 and subjected them to a G.P. rate of 40% as in the past. On appeal, the learned first appellate authority confirmed this treatment as the assessee had failed to comply with the statutory notices served on it from time to time and failed to produce any evidence in support of the declared version.

3. The learned AR of the assessee contended that the estimation of sales by the assessing officer was excessive and the G.P. rate was arbitrary as it had been applied without citing any parallel case. It was pleaded that usually a G. P. rate of not more than 20 % was applied in assessee's line of business and this being only the second year of business, the G.P. rate as disclosed was quite reasonable. The learned AR referred to the assessment for the preceding year i.e., 1990-91 which was challenged in appeal before the Tribunal and was set aside vide ITA No.1064/LB/1991-92 (Assessment year 1990-91) with the direction to resolve the issue of G.P. rate in the light of parallel cases as available with the assessee as well as the Department. The learned AR submitted that a G.P. rate of 20% had been applied in re assessment but failed to produce copy of the order passed by the assessing officer. The learned DR, on the other hand, is without assessment record and therefore, not in a position either to confirm or contradict this position.

4. Having heard both the parties, we are of the opinion that even if a G. P. rate of 20 % was applied in assessee's case in assessment year 1990-91, Sit could not have been without regard to the fact that it was the first year of business. That the assessee's business is showing improvement is evident from the declared turn over as well as from the declared rate which has gone up from 19.33 % in 1990-91 to 20.65 % in the year under appeal. We feel that in assessee's line of business involving manufacturing as well as exports, a G. P. rate of 25% should be considered reasonable and we, therefore, direct that the rate as applied by the assessing officer in the year under appeal should be reduced to this level. As regards the estimation of sales and curtailment of profit and loss account expenses, no interference is called for as the assessee failed to substantiate its declared version despite adequate opportunity allowed by the assessing officer.

5. As a consequence, appeal succeeds to the extent as indicated above. C.M.C./417/Trib. Appeal accepted.