' JAWAID MASOOD TAHIR BHATTI, (JUDICIAL MEMBER).---The department through this appeal has objected against the impugned order of the learned CIR(A), dated 24-9-2010 on the following grounds:- "(ii) That the CIR(A) was not justified to reduce the assessed income of Rs,400,000 to below taxable limit.
(ii) That the relief allowed by the learned CIR(A) was not justified and against the facts of the case."
2. The Taxpayer in this case is an individual, deriving income from running a photo studio. The return for the tax year under review was not filed therefore, the Taxation Officer issued notice under section 114(4) for filing of return but no compliance was made and the Taxation Officer framed ex parte order under section 121 determining the net income at Rs,400,000. The Taxpayer filed first appeal before the learned CIR(A)' on the following grounds:-- "(1) That the ex parte order passed under section 121 of the Income Tax Ordinance, 2001 is illegal and unjust. No statutory notice issued/served and assessment finalized without having definite information and any other material on records, hence unjustified.
(2) That alternatively annual sales and net income estimated at Rs,1,500,000 and Rs,4,000 respectively are imaginary and against the facts of the case as appellant is running a small photographer shop with very nominal capital investment and mostly earns services charges and not sales as estimated by the officer concerned.
(3) That appellant obtained NTN certificate in April, 2008 and business conduced only for 2 months in tax year, 2008 and not filed tax return as there was no taxable activities during these initial two months of business.
(4) That GP estimated at Rs,600,000 which means gross profit rate 40% which is not understandable and against the factual position and parallel cases of identical nature.
(5) That operating expenditures allowed at Rs,200,000 are also incorrect treatment as no such expenses incurred or claimed during the year under appeal."
3. The learned CIR(A) has allowed the appeal through the impugned order directing the Taxation Officer that income of the Taxpayer be treated as below taxable limit. The Taxpayer Mr. Masood Khan has personally appeared and has submitted that he is only 23 years of age and after passing his (B.Com) examination only a year back has started the photography business after obtaining the Shop No, 07 Cantonment Market GPO, Road, Abbotabad on 11-3-2008 and started the business in the end of April, 2008. He has contended that NTN certificate from Department was obtained in April, 2008 and photography business under the name and style of Messrs New SIMCO Photo Studio was started in the end of April, 2008 and only two months period was involved in the tax year under review i,e, 2008. He has contended that the nature of business of the Taxpayer is photography and there is no sales, as the Taxpayer charged only commission/receipts from photography work and about 80% of receipts went to color lab owner and only 15% to 20% margin is with the present Taxpayer. He has submitted that there is no saleable stock kept in shop during the year relevant to tax year 2008. The Taxpayer is therefore supporting the impugned order of the learned CIR(A). He has contended that directions made are in accordance with law keeping in view the facts and circumstances of the case.
4. On the other hand the learned DR. Is supporting the order passed by the Taxation Officer under section 121. He is of the view that as the Taxpayer failed to appear before the Taxation Officer therefore there was no option except to assess the income keeping in view the location, nature of business and other facts of the case.
5. I have heard the learned representatives from both the sides and have also examined the impugned order of the learned CIR(A), the order passed by the Taxation Officer under section 121 of the Ordinance, and other relevant record of the case. I have noted that only a single opportunity was provided by the Taxation Officer through notice under section 114(4) asking the Taxpayer in this case to file the return. No other notice has been mentioned by the Taxation Officer to be sent to the Taxpayer and the ex parte order has been passed under section 121 without affording reasonable opportunity of being heard to the Taxpayer and without bringing any material evidence regarding the Taxpayer's business activity. 1 have noted that the Taxation Officer has passed the order of six lines without mentioning any basis for his estimation. I am therefore of the view that the action of the Taxation Officer is absolutely unjustified and against departmental procedure as the impugned order under section 121 has been passed without keeping in view the relevant provision of law. As for the invocation of section 121, the Taxation Officer should mention the basis of his estimation, available information or material and to the best of his judgment make assessment of the taxable income of the person and the tax due thereon. But in this case neither the principle of audi alteram partem " no body to be punished unheard"' has been followed nor any basis for the assessment has been given. The principle of audi alteram partem has been enshrined in various judgments of higher courts to be a principle of universal application regarding affording opportunity of hearing to the parties and it is now an established law that the person should be heard before taking any decision affecting him. In the instant case this is not happened, therefore, the impugned order is illegal. I have further noted that the Taxpayer in this case is a young man having passed his graduation (B.Com) only a year before and has started business voluntarily obtaining from department NTN certificate which shows his interest in the business and faithfulness to the country but the department officials instead of encouraging such young people in the society where there is high scale unemployment has tried to haras him. I have further noted that the Taxpayer in this case has conducted business for only two months during the period relevant to tax year, 2008, but contrary to this the Taxation Officer estimated the taxpayer's income for the whole year without bringing any material evidence on record regarding business volume of the taxpayer. The Taxpayer has submitted before this Bench that in the subsequent year he has paid the income tax in accordance with law keeping in view these facts and circumstances of the case I find no warrant for interference in the impugned order as the learned CIR(A); has rightly held the action of the Taxation Officer being not justified and not sustainable in the eyes of law as the Taxpayer in this case has worked for only two months and the income was not taxable, hence no return was filed and the assessed income by the Taxation Officer is pure guess work. The appeal filed by the department in the circumstances is therefore dismissed.