The assessee as well as the Revenue are in cross appeals for the assessment years 1996-97 to 1998-99 while the assessee is also in appeal for the assessment year 1999- 2000. Since the issues involved are somewhat different in these appeals, the same are being disposed of in the following manner.
Asstt. Years-1996-97 and 1997-98 Cross Appeals
2. Titled appeals pertaining to the assessment years 1996-97 and 1997-98 have been directed against the combined impugned order dated 23-02-2004, passed by the learned CIT(A) Zone-ll, Lahore. The assessee has challenged the impugned assessment by contending that the learned first appellate authority was not justified in confirming the assessment framed by the assessing officer whereby the declared version of the assessee was rejected. In the alternative estimation of sales as well as application of G.P. Rate @11 % has also' been objected to. The department is also in appeal for the assessm ent years 1996- 97 and 1997-98, challenging the deletion of additional tax by the learned first appellate authority.
3. Right at the outset, the learned A.R. Assailed the impugned assessments with the submission that notice u/s. 62 of the repealed Income Tax Ordinance, 1979 as per requirement .Of law was not issued. It was submitted by the learned A.R. That a notice requiring the assessee to produce books of accounts is a notice which could be termed as a notice u/s 61 of the repealed. Ordinance.
Further elaborated that notice u/s 62 could only be issued after examining the books of account as well as pointing out all defects in those books. The learned A.R. Further argued that since mandatory statutory law was not complied with, all the subsequent proceedings conducted by the assessee were coram non judice. In support of his contention the learned A.R. Relied upon a number of judgments of the Lahore High Court as well as Tribunal. The learned D.R. On the other hand opposed the arguments advance by the learned A.R.
4. We have heard the learned counsel for both the parties and have perused the relevant orders.
After hearing the contentions of the respective parties, we are of the view that arguments tendered by the learned A.R. Carry weight. Admittedly, the notice which was issued by the department was stated to be issued u/s 62 of the repealed Ordinance but it did not fulfill the requirement as envisaged under the law. In the present case notice u/s 62 was issued by the department requiring the assessee to provide books of account while under this section the assessing officer could only proceed after examination of books of account in order to point out defects, if any. The section under which the assessing officer could require an assessee to produce books of account is Section 61 of the repealed Ordinance and not Section 62 of the repealed Ordinance. Though notice u/s 62 was issued but it since did not fulfill the requirement as envisaged under the law, the same would be presumed that it was not issued, It would not be out of place to reproduce the extracts from the certain reported judgments cited as under:
(i) . ITA NO.366 of 2000 (Sindh High Court Karachi)
"We are of the view that the procedure adopted by the Income Tax Officer-is not the procedure provided by the proviso to Section D'Andre. Since the assessing officer has failed to follow the .Mandatory procedure provided, the Tribunal has- rightly deleted the additions made by the'
Income Tax Officer in the trading account and out of the profit and loss account. This Court in an unreported judgement, dated 12-08- 2005. In FTA No.493 to ITA 500 of 1979 in the case of Newsline Publication '(Pvt.) Ltd. Vs. DCIT has held that the additions made in the trading account and out of the profit and loss, account without following the procedure prescribed under the proviso to Section 62 cannot be sustained and have to be deleted. The order of the Tribunal is therefore, unexceptionable and no interference is called for by this Court. Since the above issue has already been settled by this Court, therefore, we need not answer the proposed questions."
(ii). PTCL 2007 CL. 313 (Lahore High Court)
"After fully examining books account the Assessing Officer cannot make add-backs out of profit and loss account expenses without confronting the assessee and a notice under Section 62 is mandatory for confronting the assessee."
(iii) 2006 PTD 2706 "It was obligatory for the Assessing Officer to issue notice u/s 62 by pointing out specific defects and to obtain the explanation for proper consideration, which was not done in the present case.
Held -As the requirements of Section 62 have not been fulfilled it was directed to accept the declared trading results."
(iv) . 2007 PTD 1016 "Notice under section 62- based on general observation. Could not be' equated with the notice to be issued confronting the assessee .With the. Defects noted in the books of accounts.
Mere mentioning notice u/s 62 on' the face of the notice, without adhering to the condition to confront the assessee with the defects in the account is illegal."
(v) . 2007 PTD 345 "If a notice is titled notice under section 62 it does not mean that the statutory requirement of notice under Section 62 have been fulfilled - The department has to pinpoint the specific defects noted In the accounts and the specific-instance of non-verifiable nature
(vi) . PLJ 2000 Cr.C 1556 (Quetta)
"When law provides procedure for doing a thing in a particular manner then it must be done in the manner and not otherwise or it should be not done at all."
5. Keeping in view of the facts of the case and the reported judgments, cited supra, we are of the considered view that though in the present case notice u/s 62 was issued but the procedure as envisaged under the law was not fulfilled, In this view of the matter all the proceedings initiated are held to be null and void, therefore, we vacate the impugned order and cancel the assessments for the assessm ent years 1996-97 and 1997-98 and direct to accept the declared results.
6. Since we have cancelled the assessments framed for the assessment years 1996-97 and 1997- 98, the appeals filed by the. Revenue having become infructuous, are consequently, dismissed.
Assessment Year-1998-99 Cross Appeal As far as estimation of sales by the learned CIT(A) is concerned, the learned A.R. At the very outset submitted that he did not want to press this issue. Even otherwise sales fixed by the learned CIT(A) at Rs. 1,75,00,000/- against the declared at Rs. 1,49,56,564/- is more than justified, hence no interference is required on behalf of the department on the issue of sales.-With regard to P&L add backs, it is observed that this issue has not been pressed by the learned A.R. Of the assessee at the first appellate level, hence we refrain to interfere on this issue also.
8. As a result of above discussion cross appeals for the assessment year 1998-99 are rejected.
Assessment Year 1999-2000 Assessee's appeal
9. The learned A.R. Did not press the issue of sales. The P&L add backs were also not pressed before the learned first appellate authority, hence no interference is required. The only objection raised for the year under consideration is with regard to application of G.P. Rate, It was submitted that the learned CIT(A) was not justified to confirm the application of G.P. Rate at 11%, as applied by the assessing officer, against the declared rate of 8.37%. The contention of the learned A.R. Is not sustainable since the learned first appellate authority confirmed the G.P. Rate of 11% in view of the history of the case. The Division Bench of the Tribunal while deciding the appeals of the instant assessee, for the assessm ent years 1989-90 and 1990- 1991, fixed the G.P. Rate at 11% against the applied at 12.5%. The G.P. Rate applied being in accordance with the history of the case calls for no indulgence. Appeal of the assessee for this year also merits rejection.
10. It is ordered accordingly.