1988 PLP (Trib (PTD)

Amount Period

1. Sunset Beach Project, P.O. Box 272, Alkhobar Rs.15,000 21-1-1980 2. -do- Rs.11,000 3-3-1980

3. Asmari Trading and Contracting Est. Alkhobar S.A. Rs.11,500 17-2-1980 28 4 -do- Rs. 2,000 17-2-1980 5.Come Trading Contracting Import Commission Representative, P.O. 7054, Jeddah Saudi Arabia Rs. 2,300 From this statement it appears that this amount was realized on account of commission of 23 persons exported by the assessee. This fact also needs verification and on this issue the orders of the officers below are set-aside. The Income Tax Officer is directed to verify as to whether this commission is on account of persons exported or on account of indenting commission. According to the assessee this amount is included in Rs.49,500 which fact may also be verified.

12. Assessment year 1981-82: The assessee in this assessment year declared his total receipts at Rs.2,94,

350. The assessee declared number of persons exported at

165. The learned Assessing officer found that actual number of persons exported were

237. Consequently the learned Assessing Officer added the commission received from the foreign principals at Rs.71,300 and local commission for these persons at the rate of Rs.1.450. The total receipts adopted were at Rs.4,14,950 and addition of Rs. 1,20,600 was made on account of local as well as foreign commission. The learned Assessing Officer also made an addition of Rs. 2,55,464 on account of unexplained expenditure under section 13(1)(e) of the Income Tar Ordinance.

13. This case was selected for detailed scrutiny and thorough investigation was made in this case. The Assessing Officer obtained information from the State Bank on the basis of which he came to the conclusion that in fact 237 persons were exported by the assessee. The learned counsel for the assessee however contended that in fact 219 persons were approved by the Protector of Emigrations out of which 1 person could not proceed abroad and in fact 218 persons were exported. It was stated that local commission for 218 persons at the rate of Rs.1,450 per person works out to Rs.2,94,350 which was duly declared by the assessee. However, it was conceded that foreign commission received by the assessee in this assessment year could not be inadvertently declared by the assessee in his return. The learned counsel however, disputed the figure of Rs.71,300 allegedly received by the assessee as foreign commission. He contended that this amount was billed to the foreign principals but actual amount received by him was Rs.48,

221. The learned counsel also contended that no notice was given to the assessee to provide an opportunity to explain that figure of 237 persons was incorrect. It was submitted, that had an opportunity been given to the assessee he would have explained the correct position. The learned Departmental Representative pointed out that a notice was duly given to the assessee that he had not declared correct number of persons in reply to this objection the learned counsel for the assessee point out that notice given to the assessee was in regard to 219 persons allegedly exported by him which was duly replied. The assessee was neither asked nor confronted to explain that he had sent abroad 237 persons. Even now before us the learned counsel vehemently contended that he had in fact sent abroad 218 persons, which is evident from the statements sent to the State Bank and can be verified. The factum of actual number of persons exported should not be a disputed fact because it can be verified from various agencies including the State Bank. We therefore, feel that there is a room for further inquiry on this issue. We therefore set aside the order of the officers below and remit the case back to the Income Tax Officer with the directions that thorough inquiry should be made to find out as to the actual number of persons exported by the assessee in this assessment year. We are setting aside this order also because the assessee was not provided an opportunity to explain that he had not sent 237 persons but had sent 218 persons. We also hold that since it is a case of no account the income could not be assessed on accrual basis but should be assessed on actual receipt basis. The Assessing Officer should also verify as to what are the actual receipts of the assessee, which should be taken as receipts of the assessee for this assessment year

14. Addition of Rs. 2,52, 464: The allegation of the Assessing Officer was that the assessee had purchased Air tickets of 73 persons for an amount of Rs.2,52,464 through Travel Agents detail of which was supplied to the Assessing Officer by these Travel Agents. According to this detail the assessee purchased Air passage tickets for the amount in question against the miscellaneous cash order. When the assessee was asked to explain, he completely denied to have purchased these tickets. The contention of the assessee was that for all these persons PTAs had been received and these P.T.As. were only processed by the Travelling Agents and tickets were issued by the P.I.A. against these PTAs. In support of his contention, the assessee produced a certificate from the P.I.A. who certified that these persons had travelled by P.I.A. on the basis of PTAs issued. The Assessing Officer however, disbelieved this certificate on the ground that no P.T.A. numbers were specified and the persons to whom the PTAs relate are not identified. The learned Assessing Officer was also of the view that it was not proved that these PTAs were actually utilized.

15. The case of the Assessing Officer was based on mere entry in the travel agent's accounts in which it was shown that the tickets were purchased by the assessee under miscellaneous cash order. The whole case has been built up by the Assessing Officer on the basis of these entries. The entire assumption of the Assessing Officer in this regard was incorrect. When the assessee had denied to have purchased these tickets and when it is admitted that PTAs have been issued in regard to these persons, the burden of proof shifted on the department that these PTAs had not in fact been utilized. On the contrary, the Assessing Officer has placed the burden on the assessee to prove that these PTAs were utilized. The Assessing Officer himself admitted that once a PTA is issued the ticket cannot be issued again for the same person whose Air passage was already covered by PTA. The learned Assessing Officer has only generalised the proposition that generally the recruiting agents "as a class are systematically involved in such purchase of airline tickets." The Assessing Officer instead of bringing some evidence on record to prove that these PTAs remained unutilized he bypassed the issue by making observation that it is none of the concern of the department to know as to whether the PTAs had been utilized or misused or not. The learned Assessing Officer has assumed certain facts and then used them as a reason for coming to the assumed conclusion. As stated above the only evidence available with the assessing Officer was an entry in the Travelling Agent's Account Books. The learned counsel for the assessee has drawn a distinction between the tickets purchased against cash payment and tickets purchased against the miscellaneous cash order. The learned counsel explained that the tickets which are purchased through cash are entered in Travel Agents accounts as such while the tickets purchased against PTAs are entered by them under miscellaneous cash order. It was stated by the learned counsel that the Assessing Officer did not make an enquiry in this case either from the Travelling Agents or from the PTA. it was contended that if the Assessing Officer was not satisfied with the certificate issued by the P.I.A. he should have made further probe into it in order to find out whether the tickets were issued by the P.I.A. against PTAs or had in fact been purchased by the assessee. We are again in agreement with the learned counsel for the assessee on this issue. The Assessing Officer assumed that the assessee had purchased the tickets for 73 persons in spite of the fact that P.T.As had been received for these persons. This assumption was made without making any attempt to verify from the Travelling Agents or from the P.I.A. authorities. The Assessing Officer could very well find out from the Travel Agents as to whether any payments were received by them from the assessee and if so whether this payment had been shown by them in their receipts. Similarly this fact could also be verified from P.I.A. The State Bank could also provide relevant data as to whether these PTAs had been utilized or not.

16. We would have set aside the order of the officers below on this issue but we are not doing so because of another legal flaw in making this addition by the Assessing Officer which is dealt with below: -

17. The learned counsel has taken a legal objection that Mr. Munir Qureshi, an Inspecting Assistant Commissioner of Income Tax, was appointed as special officer in the case of Recruiting Agents under section 5 (1) (c) of the Ordinance which provides that an Inspecting Assistant Commissioner and an Income Tax Officer is normally to perform their functions in respect of persons and class of persons and the area as the Commissioner may determine. It has further been provided that the Commissioner, with the prior approval of the C. B. R. or if the C.B.R. so directs, with the prior approval of the Regional Commissioner. by general or special order, can direct that powers conferred an Income Tax Officer may be exercised by an Inspecting Assistant Commissioner and the Commissioner respectively in regard to the specified cases. But in such a situation reference under the Ordinance to Income-tax Officer and Inspecting Assistant Commissioner would be deemed to be reference to the Inspecting Assistant Commissioner and Commissioner respectively. The aforesaid clause is reproduced below:- "5(1)(c). The Inspecting Assistant Commissioner and the Income Tax Officer shall perform their functions in respect of such persons or classes of persons of such areas as the Commis sioners, to whom they are subordinate, may direct, and (the Commissioner may, with the prior approval of the Central Board of Revenue (or, if the Central Board of Revenue so directs, of the Regional Commissioner) by general or special order in writing direct that the powers conferred on the Income Tax Officer and the Inspecting Assistant Commissioner by or under this Ordinance shall, in respect of all or any proceedings relating to specified cases or classes of cases or specified persons or classes of persons, be exercised by the Inspecting Assistant Commissioner and the Commissioner respectively, and, for the purposes of any proceedings in this Ordinance or in any rules made thereunder to "Income Tax Officer" and "Inspecting Assistant Commissioner" shall be deemed to be reference to "Inspecting Assistant Commissioner" and "Commis sioner" respectively; and" It was argued that normally an assessment is made by the Income-tax Officer who has jurisdiction to assess. But in regard to the cases of Recruiting Agents an Inspecting Assistant Commissioner was appointed as Special Officer to make the assessment. In other words an Inspecting Assistant Commissioner has been assigned the duties of 9-n Income-tax Officer to complete the assessments. In such a situation it has been laid down that for the purposes of any proceedings under the Ordinance, a reference to Income-tax Officer and Inspecting Assistant Commissioner would be deemed to be the reference to Inspecting Assistant Commissioner and Commissioner respectively. Therefore where the addition is to be made with the prior approval of the Inspecting Assistant Commissioner under section 13(e) it has to be read as with the prior approval of the Commissioner because the Assessing Officer is an Inspecting Assistant Commissioner. It was submitted that while making this addition by the Special Officer (Inspecting Assistant Commissioner) the prior approval of the Commissioner was to be obtained but in this case the prior approval of an Inspecting Assistant Commissioner has been obtained. The learned Departmental Representative has however, contended, that in the definition clause a Special Officer is included in the definition of Income-tax Officer. Therefore, an assessment made by a Special Officer would be deemed to have been made by an income-tax Officer and the prior approval of the Inspecting Assistant Commissioner was rightly obtained. No doubt under the definition clause an income-tax Officer includes a Special Officer however, who has been appointed a Special Officer has also to be seen. It is possible that an Income-tax Officer of one circle may be appointed as Special Officer for the cases not falling in his jurisdiction. Thus, an Income-tax Officer can also be appointed as Special Officer. But in the present case it is an Inspecting Assistant Commissioner who has been appointed as Special Officer. Section 50 (1)(c) categorically lays down (and for good reasons) that where an Inspecting Assistant Commissioner has been assigned the duties of an Income-tax Officer, a reference to income-tax Officer and Inspecting Assistant Commissioner will be deemed to be reference to Inspecting commissioner in place of Income-tax Officer and Commissioner in place of Inspecting Assistant Commissioner. Since in the present case the Special officer happens to be an Inspecting Assistant Commissioner and in such a case wherever occurring the reference to Inspecting Assistant Commissioner shall be deemed to be reference to the H Commissioner. Therefore, under section 13(1)(e) where it is required that the prior approval of an Inspecting Assistant Commissioner has to be obtained, instead of an Inspecting Assistant Commissioner, the Commissioner has to be read. Since no prior approval of the Commissioner of Income-tax has been obtained before making this addition the addition is against the legal requirement and has to be deleted. We, therefore, direct that addition should be deleted on this technical ground.

18. Assessment year 1982-83: In this assessment year the assessee had declared the number of person; exported as 425 which figure has also been adopted by the Assessing Officer. The, assessee filed his return under Self -Assessment Scheme and claimed that he was qualified under Self Assessment Scheme. However, the learned Assessing Officer did not accept the return under that scheme on the ground that specific information was available that the assessee had concealed his income by not disclosing the expenditure on purchase of Air Tickets and the commission received from the Travel Agent. The Income-tax Officer, in his assessment order, observed:- "The assessee had actually incurred business expenditure for purchase of Air passage for persons sent abroad and had concealed the same in the computation of the income appended with the return and the commission received from the travel agent the purchase of such airline tickets had also been concealed " The third ground taken by the Assessing Officer was that the assessee had made a fare claim of expenses on account of salary as it had never been claimed in the earlier years. But after making detailed inquiry in the case the receipts as disclosed in the revised return at Rs.6,64,540 were accepted. The Income-tax Officer however, made add backs of inadmissible expenditure to the tune of Rs.3,10,100 and also made an addition of Rs.1, 53,222 on account of unexplained expenditure for the purchase of tickets under section 13(i)(e).

19. As for the addition on account of unexplained expenditure the same reasons hold good on this issue as has been discussed in the assessment year 1981-82. However, without going into the merits of the case we would deal with the issue as to whether the assessee; return was qualified for Self-Assessment Scheme or not. Under Circular No.10, dated 2nd of August, 1981. Self-Assessment Scheme for the assessment year 1982-83 was announced. It was laid down in that scheme that all returns filed for the assessment year 1982-83 would be Self-Assessment returns unless they suffered from any of the disqualifications listed in para. 4. 'there is no dispute that assessee's return fulfilled all the conditions required for acceptance under Self-Assessment Scheme. Under clause (d) of para. 2 of the Schem4in the case of an individual where no accounts were maintained, the following requirements were to be fulfilled"- (1) Trading, and profit and loss account on estimate basis, or receipt and expenditure statement where trading account cannot be prepared. (2) Evidence of claim for investment allowance. Under para. 4(1) of the Scheme the disqualification provided .by clause (c) is reproduced below: (c) "Cases where evidence for concealment is available as specified in para. 9." para. 9 of the Scheme is reproduced below. "9 Notwithstanding anything contained in the preceding paragraphs the cases where positive evidence of concealment exists or comes into the possession of the department during the pendency of the assessment such cases shall fall outside the purview of the Self-Assessment Scheme as well as from immunity from scrutiny, irrespective of the quantum of income declared. " From the perusal of this para it is evident that only those cases were hit under this para. where "positive evidence of concealment was available." In the present case no such positive evidence was available though certain information was available with the assessed officer. Obviously there is a distinction between "information" and evidence'. Again there is distinction between 'evidence' and 'positive Evidence'. The assessing officer in the present case has only referred to specific information available with him in regard to the concealment of certain expenditure. The relevant portion of the assessment order is reproduced below:- "Shortly after the return for assessment year 1982-83 was filed by the assessee specific information became available to this charge that in the period relevant to the assessment year under reference the assessee had actually incurred business expenditure for purchase of Air passage for persons sent abroad and had concealed the same in the computation of income appended with the Return, Additionally, commission received from the travel agent on the purchase of such airline tickets had also been concealed. Also scrutiny of the computation revealed that the assessee had charged an amount of Rs.86,400 as salaries in the expense account when enquiries already conducted indicated the claim to be false. Never before had the assessee preferred any Salary claim." It is evident that there is no positive evidence available with the assessing officer (or at least it has not been disclosed in his order) within the meaning of para.

9. This is also evident from the fact that subsequent inquiries were also made and certain material was brought on record to establish this fact. But the assessing officer at the time of processing the return had only some information the truth of which was yet to be established. Such an information cannot be called positive evidence available with the department even though after inquiry such an information might ultimately be found to be correct. But an information remains an information and can never take the place of established fact or positive evidence. For instance the fact that assessee had claimed salary in this assessment year which he had not claimed in the earlier years cannot be said to be a positive evidence. This claim might be correct or incorrect. Mere fact that no salary was claimed in the earlier years does not debar the assessee to claim it in the subsequent year. Similarly there is no evidence or material ors record that the assessee had charged certain commission from the Travel Agent on the purchases of Air Tickets as even the purchase of Air tickets was yet to be proved. We have already dealt with this issue of purchase of tickets in regard to the persons for whom PTAs had been received in the assessment year 1981-82, and it has been shown in that year that even after thorough investigation still positive evidence was not available with the Assessing Officer to prove that assessee had in fact purchased the Air tickets in respect of persons for whom PTA` had been received. Thus, when after all the material has been collected by the Assessing Officer, even then it could not be conclusively established that the assessee had in fact purchased air tickets, how could it be said before the investigation that positive evidence was available that the assessee had concealed the expenditure on purchase of tickets? The Self-Assessment Scheme has been framed for the facility of the assessees. Provisions have been made for reopening of the cases once finalized under Self-Assessment Scheme where concealment is discovered. In clause (e) of para. 7 it has been provided that deemed income can he included by an assessee under' Self-Assessment Scheme return and failure to include such income in their return, if later discovered by the Department, would amount to concealment of income. This shows that the Assessing Officer has not to make a detailed inquiry to find out as to whether any concealment: has been made by the assessee and then to disqualify his return from the Self-Assessment Scheme. In such cases the assessee's return should be accepted as such and if he has any doubt or has any, information, he can make an inquiry subsequent to the finalization of: the assessment and if any concealment is discovered the assessee's case can be re-opened under section

65. To sit in judgment at the time of the processing of the Self-Assessment return merely on the basis of suspicion is not visualized by the Self-Assessment Scheme. It is why that under para. 9 of the Scheme it has been specified that only those cases would fall outside the purview of the Self- Assessment Scheme where positive evidence of concealment exists. We, therefore, direct that the assessees return should be accepted under the Self-Assessment Scheme if there is no other disqualification. However, we make it clear that if the Assessing Officer discovers any concealment he can re-open the case of the assessee under section 65 of the Ordinance.

20. As a result, the appeals are disposed of accordingly. M.B.A. /5231T Order accordingly