2005 PLP (Trib (PTD)

KHAWAJA FAROOQ SAEED (JUDICIAL MEMBER).‑‑‑The petitioner in this case is the assessee who has filed these appeals against the order of the IAC finalized by him under section 66A of the Income‑Tax Ordinance, 1979. Since learned IAC is very particular in his objections we will start out order from the same. The objections are as follows:‑‑‑ (1) That the assessee conducting business under the name and style of Messrs Rizwan Bakers bearing NTN 6‑15‑0164641 in the same building wherein Messrs Good Luck Bakers is conducting business of bakery manufacturing under a different NTN i.e. 06‑15‑0164560. (2) That the assessee and Messrs Good Luck Bakers are utilizing Sui‑gas jointly for his business and paying monthly bills collectively. (3) That assessee and his brother Mr. Liaqat Ali are conducting business in the premises jointly. (4) That the assessee is paying electricity and telephone bills jointly with Messrs Good Luck Bakers. (5) That Karigars/employees engaged were being paid salary jointly by assessee as well as Messrs Good Luck Bakers. These discrepancies were confronted to the assessee and after obtaining reply the order was cancelled. The assessee reply to above discrepancy and his argument in rebuttal are as follows:‑‑ (1) That Rizwan Bakers is admittedly doing business in the same building but at different floor. Further Rizwan‑Bakers are doing manufacturing business while Good Luck Bakers i.e. impugned assessee is not doing any manufacturing business at all. (2) The Sui‑gas is used by Rizwan Bakers and the entirely bills is being paid by him: Neither from the assessment record not from the subsequent proceedings the so‑called jointly bills have been brought on record. Even the Inspector report does not prove that the meter of Sui‑gas installed in the buildings is in the name of two of them nor payment sharing has been proved. (3) Both of them are brothers, is not being denied but they are not doing business in one premises as already said. (4) Electricity and telephone bills are paid by both of them separately and there is no sharing. (5) There is no joint‑arrangement of making the payment either to Karigars or to other employees. This is for the simple reason that one is manufacturer and the other is doing trading separately. The learned A.R. then brought out attention to the last page wherein the learned IAC had finally concluded as follows:‑‑ "All the above facts lead to believe that business is being run by the real brothers in the status of an AOP but to avoid proper incidence of taxation returns are being filed separately under the name of Messrs Good Luck Bakers and Rizwan Bakers after separate NTNs. The assessee in his reply referred above did not provide, any solid evidence regarding separate business activities. The above facts and figures are sufficient proof that the Assessing' Officer while framing assessment had to club the income of both the above‑noted assessees but the Assessing Officer did not take cognizance of it and finalized illegal assessment. Moreover, if the assessment could have been framed by taking into consideration the transactions of both the cases a considerable demand of tax would have been created against tax paid by both the assessees. Therefore, the assessment finalized by the Assessing Officer is also prejudicial to the interest of Revenue. In view of the facts and circumstances mentioned above and after taking into consideration, assessee's reply, I am of the view that the business is being conducted jointly. I, therefore, by invoking provisions of section 66A of the Income Tax Ordinance, 1979 cancel the assessment for the Assessment Years 1998‑99 to 2000‑2001 with directions to the Assessing Officer to finalize afresh assessment after assigning the status of an AOP and affording reasonable opportunity of being heard." He said that IAC himself has used the language that the above facts lead to believe that the business is being run in the status of an AOP. He does not categorically say that the orders which he tend to cancel are erroneous and has not referred any particular instance of the bills or the name of the employee/Karigars which has been shared by two of them. Both of them are legal separate entities and the practical position is that they both cannot even sit together for resolving their differences on account of personal reasons. He said that the brother of the assessee Mr. Liaqat Ali after 30‑6‑2000 has shifted his business to 960‑C, Faisal Town, Lahore. Without prejudice to above argument the learned A.R said that even sharing the electricity bills or sharing employees cannot be used for holding that the business is being done in the status of AOP. The AOP is a special status which requires pre‑existence of a sort of partnership between more than one persons for sharing profit and loss. At no stage of the proceedings learned IAC has developed his case from this angle. His emphasis is on sharing of premises, sharing of bills as well as of employees. This also is on his self‑generated assumption. Such assumptions and self‑created ideas cannot be made base for reopening of case to which finality has been attached. The superior Courts in a chain of cases have held that an apparent should be accepted unless proved otherwise. Reference 2002 PTD 1428 Kerala High Court, 1968 PTD 93, 1968 PTD 78, 1967 PTD

160. It was further said that the survey has been conducted in 2002 when Mr. Liaqat Ali, the owner of Good Luck Bakery was not in that premises at all which alone is enough to prove the fact that Inspector report was bias and against the facts and circumstances on file which could have been inspected by the IAC before invoking jurisdiction. The learned DR says that the facts narrated by the IAC in the order are sufficient to hold that the assessee was doing business in association with his brother and only to avoid the limit of higher tax slab the business has been shown as separate from each other. He further said that volition is not necessary for an AOP and the same can be assessed from the relationship of the persons working together. We have heard both and have perused the record also. The very fact that the two persons are doing business in two separate names in itself is pointer of the independence. It is not the case of the department that both of them were partner in each business but it is that they are sharing building and expenses. Even two separate individuals not related to each other can have separate businesses at one place with sharing of electricity, telephone and employees etc. Determination of AOP is only possible where one is in a position to hold in unequivocal terms that the members are jointly sharing profit and loss of the business. In the absence of any such evidence and ultimate finding holding that two persons are doing business in the status of an AOP cannot be supported by us. It is trite law that a return filed in individual status cannot be converted into the status of an AOP even otherwise. Such a provision does not exist in Income Tax law at all under the garb of which one can hold persons doing business at one place as an AOP unless one is in a position to hold that said persons are doing business jointly for the purpose of sharing profit and loss of the business. Since this factor is totally missing in this case before us we without any further discussion told that the cancellation under section 66A is highly unjustified. The cancellation of the order finalized earlier is disapproved and the original orders are restored. Appeals stands accordingly allowed in the manner and to the extent as mentioned above. C.M.A./305/Tax (Trib.) Appeal Accepted.