2005 PLP (Trib (PTD)

These two appeals have been filed by the assessee-appellant for the assessment years 2000-2001 and 2001-2002, against the combined order, dated 3-3-2004 recorded by the learned CIT(Appeals-Zone-III), Lahore whereby the assessee-appellant has agitated the following common grounds of appeal:-- "That the DCIT/WT has erred in law to reject declared trading versions and upheld by the CIT (Appeals) without confronting, hence the action of Authorities below is void ab initio and illegal. That the DCIT/WT is unjustified to estimate sales at Rs.1,06,00,000 and Rs.1,30,00,000 against declared at Rs.84,67,425 and Rs.1,24,14,610 and reduced to Rs.1,00,00,000 during 2000-2001 while the same figure i.e. Rs.1,30,00,000 was confirmed by the learned CIT(Appeals) during the assessment year 2001-2002 are still very high and excessive, whereas purchases are fully verifiable. That the DCIT/WT has illegally made an addition under section 12(18) of the Repealed Income Tax Ordinance, 1979 at Rs.39,21,041 and Rs. 1,29,466 and confirmed by the learned CIT (Appeals) is against all canon of justice as under section 12(18) is not applicable on this score, hence the addition is illegal.". Brief and relevant facts leading to these two appeals are that the assessee-appellant, a private limited company, derives income from manufacturing and sale of G.I. and M.S. Pipes. The returns for the two years under consideration were filed declaring loss at (Rs.11,98,545) for 2000-2001 while for the assessment year 2001-2002, income of Rs.1,55,645 was declared. The assessee-appellant declared sales at Rs.8,467,425 and Rs. 12,141,610 for the years 2000-2001 and 2001-2002 respectively. The Assessing Officer after examining the books of accounts held that the sales are not fully open to verification and the books of accounts of the assessee suffer from the same defects as in the previous years. Therefore, the Assessing Officer proceeded to assess the sales at Rs.10,600,000 and Rs.13,000,000 for the years, 2000-2001 and 2001-2002 respectively. The Assessing Officer after detailed reasons as discussed in the assessment order for the two years under consideration and need not to reproduce here, rejected the accounts of the assessee and also made addition under section 12(18) on account of advances received by the assessee from the customers amounting to Rs.39,21,041, and Rs.1,29,466 respectively, in the two years. Aggrieved by the assessment orders for both of the years, the assessee preferred appeals for the two years under consideration before the learned CIT(Appeals) who vide orders cited supra, upheld the rejection of accounts after observing the fact that the Assessing Officer has clearly mentioned in the assessment order that parties to whom the sales were made were found not properly recorded in the books of accounts and the similar is the case of purchases. Regarding estimation of sales, the learned CIT(Appeals) observed that assessee's declared sales were estimated on the basis of history of the case because in the immediately preceding year sales declared at Rs.8,022,760 were estimated at Rs.10,000,000 which was reduced in appeal to Rs.9,500,

000. So in this context, the learned CIT(Appeals) found the sales estimated by the Assessing Officer in respect of assessment year 2000-2001 to be slightly excessive and he reduced the same to Rs.1,00,00,000 whereas sales estimated at Rs.13,000,000 for the year 2001-2002 were confirmed by the learned CIT(Appeals) as being reasonable. The learned CIT(Appeals) confirmed the action of the Assessing Officer regarding additions made under section 12(18) amounting to Rs.39,21,041 and Rs.1,29,466 for both the assessment years i.e. 2000-2001 and 2001-2002 respectively after observing that assessee had received the advances from customers in cash and this advance was shown in the books of accounts as such, therefore, the receipt of advances from the customers by way of advances and are in cash which attracts the provisions of section 12(18), therefore, the learned CIT(Appeals) confirmed the additions made by the Assessing Officer. We have heard the rival arguments of both the parties at great length. The learned AR of the assessee-appellant has strongly emphasized on the issues as set forth in the memo. of grounds of appeal by making reliance on certain case-laws i.e. 2004 PTD (Trib.) 1642 (pertaining to estimation of sales, 2002 PTD 407 (pertaining to rejection of accounts) and ITA Nos. 5075 and 5076/LB/2002, decided on 5-3-2005 whereby the ITAT has deleted the addition made under section 12(18) by respectfully following the two reported judgments i.e. (2002) PTD 877 (SC) and (2003) PTD 1527 (H.C. Lah). The learned AR of the assessee ' has also relied on a judgment of the ITAT vide ITA No.1031/LB/2001 (Assessment year 1999-2000) whereby the Tribunal has deleted the addition under section 12(18) on the basis of a reported judgment in re: (1973) PTD 375 (H.C.) In this context, we hereby decide the issues under consideration as under. The provisions of section 12(18) of the repealed Ordinance are not attracted in the instant case where the amount received represent trade advances and ultimately, which is undisputed that same were adjusted against the sales made to the same parties. The case-law as cited is squarely applicable, even otherwise it has become ratio decidende that the amount received as advance against the sales of goods/products do not attract the provisions of section 12(18). So, keeping in view such A findings on record, the additions under section 12(18) amounting to Rs.39,21,041 in the year, 2000-2001 and Rs:1,29,466 during the year, 2001-2002 in both of the years under appeal are not sustainable and the same are deleted accordingly. Regarding the issue of sales and declared trading results, we hereby maintain the same treatment as accorded by the learned First Appellate Authority and not inclined to disturb the same in view of which the same are confirmed accordingly. The appeals filed by the assessee-Company are succeeded to the extent as dilated above. H.B.T./446/Tax (Trib.) Order accordingly.