2003 PLP 2617 (PTD)

Total Units Consumed ‑ 972,376 100 Kgs. Bags production @ 5.25 Power unit per 100 K.G. Bag ‑ 185,214 Net profit @ 13 per 100 Kgs. Bag ‑ 2,407,788 Less Depriciation/Lease amount ‑ 310,602 Balance Net Income (likely to be assessed)‑ 2,097,186" The complainant vide a letter, dated 4‑1‑2003 applied for further two weeks for filing of explanation as the AR was statedly abroad. By another letter, dated 23‑1‑2003 the RCIT was requested to fix the case for any other date as the AR was not available on the original date. The case was, however, selected for audit by the RCIT and the complainant was informed accordingly. In the complaint the selection of the case for audit has been contested on the following grounds:‑‑‑ (i) It has been wrongly stated by the RCIT (in his letter intimating selection of the case) that the case has been discussed with the AR/complainant and that the income declared was not commensurate with the magnitude of the business. In fact no discussion took place between him and the AR or the complainant. (ii) The complainant is not a signatory to the formula agreed by the Flour Mills Association. The formula was revised at a much later stage i.e. at least six months after the SAS was announced. (iii) The complainant has shown a progressive increase in income as the declared income of Rs.228,660 represented a 26.84% increase over the income declared in the preceding years. (iv) The complainant's mills is situated in a backward area of Attock where the margin of profit is low and it is not comparable with the mills which had accepted agreed formula. (v) All the parameters for selection upheld by the superior Courts have not been followed inspirit. (vi) The complainant is apprehensive that the treatment to be meted out to him would amount to maladministration. It has been prayed that the selection of the case for audit be declared as null and void and the return be ordered to be accepted under the Self Assessment Scheme.

3. In the respondent's reply the selection of the case has, been defended and it has been reiterated that if the formula agreed to by other flour mills is applied in the complainant's case the income would work out to Rs.2,097,186 as against only Rs.228,650 declared by the complainant. During the hearing the respondent's representative also referred to the findings/decision in Complaint No.559 of 2002 in which the selection of the case of a flour mill was held to be valid as the declared net profit rate of 0.36% was considered to be too low. It was pointed out that in the complainant's case the net profit rate was only 0.216% and was thus definitely low particularly in view of the fact that according to the formula devised in agreement with the Flour Mills Association the complainant's income would be almost ten times higher. The contentions of the respondent are found to be quite valid and RCIT is found to have had valid reason for his prima facie view that the complainant's income had been suppressed. While making the assessment of course the Assessing Officer would consider the facts in the complainant's .case and would allow the complainant adequate opportunity of showing why in its case there could be, a deviation from the formula agreed to by other flour mills.

4. As regards the complainant's contention that it .was not afforded a hearing by the RCIT and also that it was wrongly stated in the RCIT's letter intimating the selection for audit that the case had been discussed with the AR, the fact is that the matter of selection for audit could not be kept pending for long by the RCIT and if the particular Chartered Accountant dealing with the case was abroad the matter could have been represented by a member of the AOP or by some other partner of the relevant firm of Chartered Accountants. The selection being otherwise valid can, therefore, not be nullified for the reason that the hearing in the matter was not adjourned by the RCIT. Similarly the reference to a discussion with the AR/complainant is contained in the pro forma of the letter of intimation regarding selection for audit and any inaccuracy in this r9gard cannot be considered to vitiate the selection itself.

5. In the light of the above no reason has been found to intervene in the case and the complaint is accordingly rejected. C.M.A./846/FTO Complaint rejected.