FINDINGS /DECISION This complaint alleges arbitrary conduct in the set-apart of the Return for the assessment year 2000-2003 by resort to para. 9 of the SAS.
2. Briefly the facts are that the Complainant-AOP is engaged in crushing of seeds for oil. The books of account are maintained. Income for the assessment year 2002-2003 was declared under SAS at Rs.193,660 and the result compared with the preceding year is as under:-- 2002- 20032001-2002 Income DeclaredRs.193,660Rs.161,200 Sales 24.65 (M) 2A.56 (M)
GP Rate 3.46% 3.46% A show-cause notice, proposing set-apart of Return for Total Audit by resort to para. 9 of SAS, was issued by the R-CIT on 13-1-2003 indicating the following reasons for the proposed set-apart:--
(i) The GP declared is extremely low in the light of sales declared at Rs.24,653,000.
(ii) GP rate declared at 3.46% is extremely low as 8.5% is confirmed at ITAT level in other parallel cases existing in the same Circle.
The reply, dated 25-1-2003 having been considered unsatisfactory, final order of set-apart was passed on 25-1-2003 for the same reasons as mentioned in the show-cause notice. With this the Complainant is aggrieved.
3. The Respondent have forwarded para-were comments by R-CIT, Central Region, Multan which deny "maladministration" and justify resort to para. 9 of C.B.R. Circular No.7 of 2002 because "the Complainant failed to justify the low GP rate as compared to other parallel cases" and "sufficient material was brought to record to B justify the selection of the case for Total Audit". The selection has been characterized as in line with the Guidelines issued by the C.B.R.
4. None was present for the Respondent when called out. At an earlier hearing for 6-11-2003, none had attended for the Revenue and now also on the second opportunity, none has showed up. The investigation is, therefore, conducted with the help of Counsel for the Complainant.
5. Mr. M. Ajmal Khan (Adv.) appearing for the Complainant explained that the only reason was split in two heads for the proposed set-apart. This related to GP rate which was said to be lower than the one fixed by the Appellate Tribunal in a so-called identical cases. According to AR, reply, dated 25-1-2003 informed the RCIT that the GP rate in two other identical cases existing on NTN 20-15- 0866919 and NTN 20-15-0866957 were the same as by the Complainant and Returns in those cases were accepted under SAS. Moreover, the show-cause notice was based only on presumptions and no material evidence was conveyed to the Complainant for rebuttal. The AR emphasized that the quantum of Sales was almost the same as in the preceding year in respect of which a chart was submitted to the R-CIT (also brought on record) which was not considered. The learned counsel placed reliance on Finding/Decision on C. No. 662 of 2003, dated 8-9-2003 to canvass that lowness of GP rate alone cannot be a valid basis for set-apart of a Return. Reference was made to Findings/Decision on C. No.433 of 2003, dated 30-8-2003 to plead that the taxpayer has to be confronted with the material evidence made a basis for set-apart of a Return. Finally, the learned counsel drew attention to Karachi High Court decision in re: Karachi Textile, Dyeing and Printing Works reported as (1984) 49 Tax 18 where it was ruled: "identical and comparable cases can be relied upon against the assessee only when such materials are disclosed , ........... Rule of justice demands that before any adverse order , penalty or liability is passed or imposed upon a party, he should be afforded full opportunity to meet the case and to rebut the evidence used against him". It was pleaded that since proper opportunity was not afforded to examine the so- called parallel cases and to rebut these, the final selection with reference to cases mentioned in the show-cause notice was an arbitrary conduct.
6. The arguments by the learned counsel and documents brought by him on record leave no room for doubt that. Return for the assessme nt year 2002-2003 was set-apart without extending proper opportunity as approved by the high judicial forums. Moreover, the Complainant's results are in line with the past, both in respect of GP rate as also the quantum of Sales. Again, in the two identical cases, which the Complainant quoted and the R-CIT did not contradict, the same GP rate was accepted under SAS as declared by the Complainant. The circumstances thus clearly reveal discrimination and arbitrary conduct. It may be mentioned that the process of selection of the return fix total audit is a completely independent proceeding from assessment. Against such process or order passed in pursuance thereof is not appealable. Where a process is arbitrary, discriminatory or in violation of principles of natural justice the proceedings stand vitiated and amounts to mal-administration which stands established in this case. Intervention is therefore, justified. It is, therefore, Recommended that:--
(i) Order of set-apart, dated 25-1-2003 be withdrawn/cancelled.
(ii) The Return filed by the Complainant for the assessment year 2002-2003 be accepted under SAS.
(i.e) The Departmental functionaries who failed to attend the proceedings on the two above mentioned dates of hearing be asked to explain their conduct.
7. Compliance report be submitted within 30 days of receipt of this order.