2009 PLP 2205 (PTD)

() Evidence of tax paid under sections 54/50(7E) was not filed within 15-days of issue IT-106. In response to notice under section 61 the assessee/AR of the assessee Mr. M. Ramzan attended without books of accounts which- are denied td have .been maintained. Case discussed. This year sales are declared at Rs.1031000 on which G.P. shown Rs.206,200 at the rate of 20%. Expenses are claimed Rs.106,

000. No evidence of declared sales and expenses furnished and claimed that this is no account case. The declared income being un-verifiable is rejected. Keeping in view above facts net income is estimated on summary basis at Rs.160,

000. Total income assessed. Rs.160,

000. Assessed under section 62 of I.T. Ord.1979. Issue Demand Notice and Challan as per I.T. 30 accordingly." No basis was given for the estimation of income at Rs.160,000.

3. Subsequently, the Additional Commissioner issued notice to amend order under section 62 by invoking the provision of (5A) of section 122 of the Income Tax Ordinance, 2001, as in his opinion, the assessee claimed wages and electricity bills in the profit and loss account and also in the Trading account. He therefore, processed the return and enhanced income to Rs.256,000 raising the tax demand by an amount of Rs.17,

380. Similar treatment has been given' to the return for the assessment year, 2002-2003.

4. Mr. Zulfiqar Shah, D.R. has brought assessment record of the proceedings and the circulars. The A.R. and D.R. went through the circulars issued' by the C.B.R. on self-assessment. Consensus was there that returns for 2001-2002 and 2002-2003 apparently qualified under Self-assessment Scheme.

5. The D.R., however, raised objections that taxpayer had availed himself of the remedy of the first appeal and could have pursued the matter at the Tribunal level. He stated that the complaint was hit by the time limitation. The A.R. on the other hand maintained that the Advocate who was representing the assessee expired in the year, 2005. The taxpayer was not informed about the proceedings under section.62 or 122(5A) and when the complaint was asked to be taken up for the blatant mistakes committed and illegal orders made to create exaggerated tax demand, the request for condonation of delay was granted.

6. The Honourable Supreme Court in the judgment cited as CIT v. Elilly Pak. (Pvt.) Limited, 2009 PTD 1392, has held that for amendment in assessment, relating to any assessment year prior to tax year, 2003, the provisions of section 65 or 66A of the repealed Income Tax Ordinance, 1979, could be invoked. Therefore, action taken under section 122(5A) is not sustainable. Even on the basis ,of facts, the action under section 122 (5A) was not warranted as the statement of accounts furnished with the return did not show any head of Expense with regard to wages and electricity in the trading account/manufacturing account, but these heads were mentioned in the pro forma in the profit and loss account. The learned IAC thought that claim of wages and electricity has been made twice i.e. trading account as well as in the profit and loss account which observation is also not correct. By claiming wages in electricity in the profit and loss account, although GP rate was effected, there was no effect on net profit as the claim was made only once. Since the pro forma of the accounting statement has been filed by some non accounting persons, therefore the Additional Commissioner should have appreciated this fact being a senior officer. Recommendations: Based on the ;hove discussion, maladministration is established. It is therefore recommended that Revenue Division may direct the D F.B.R.:-- (i) to cancel the order of CIT(Appeals) and also cancel the order under section 122(5A) in terms of section 214B, as these are against facts and law as laid down by the Supreme Court; (ii) direct cancellation of order under section 62 which was also illegal; (iii) to accept declared income for the two years under Self-Assessment Scheme. (iv) Action be completed within 3 weeks, and compliance reported within one week thereafter. H.B.T./150/FTO Order accordingly.