1. ORDER: MR. MUNSIF KHAN MINHAS, (JUDICIAL MEMBER).--(1). The above titled appeals on behalf of the taxpayer are directed against the orders passed by the learned CIR (Appeals-III),Islamabad dated 6-4-2011 and 25-4-2011 pertaining to the Tax years 2005, 2006 and 2007 on the following common grounds:-
(1) That the cases were selected for audit under section 177(4) of the Income Tax Ordinance, 2001 for the different tax years on the basis of figure of sales, gross profit and expenses declared in the returns.
2. (2)That later on IDR were issued through which books of A/C and others details and documents were called of requires to be maintained under section 174 of the Ordinances.
3. (3)That after lapse of some times, Notices under section 122(9) were issued and impugned formula obtained from OGRA was confronted and Assessing Officers had shown his intention to estimate the sales on the basis of said formula, disallowing trading result, profit and loss expenses were also confronted to make addition.
4. (4)In reply to these notices some of appellants provided the record and some had refused to file the same. However, they have challenged the said formula on the basis of legal as well as factual grounds.
5. (5)While finalizing the amended assessment the Assessing Officer had given same treatment to all type of cases which was not expected from him in cases where complete record was furnished.
2. Brief facts are that the taxpayer in all the cases under consideration derive income from running of CNG Station. Returns for the Tax Years under appeal in all the cases were treated to be assessm ent order issued by the Commissioner under section 120 of the Income Tax Ordinance, 2001. However, the cases of the above mentioned taxpayers for the years under consideration were selected for audit under section 177(4) of the Ordinance. The cases for the years under appeal were selected for audit vide letter dated 3-3-2009. Subsequently, IDR (Information Document Request) were also issued by the Assessing Officer. The taxpayer did not comply with this letter and even to the reminders issued subsequently, nor was received any request from him for adjournment.
6. Accordingly, amended proceedings were initiated by issuing show cause notice under section 122(9) of the Ordinance for the Tax Years under consideration on the basis of discrepancies noticed from the available record but nobody appeared on the specified date, nor the requisite documents filed. Resultantly amended order was passed.
7. 3.Being aggrieved with the treatment given by the learned Taxation Officer, the taxpayer preferred appeal before learned CIR(A), who after considering the facts upheld the amended assessment order passed by the learned Taxation Officer. Now the taxpayer is in 2nd appeal before this Tribunal.
8. 4.Learned AR contends that order of the Assessing Officer is totally illegal, unwarranted, against the concept given in section 174(2) read with section 122(5) of the Income Tax Ordinance, 2001 due to following reasons:-- LEGAL DEFECTS OF THE ORDERS:-
(i) While finalizing the amended assessment the Assessing Officer has not issued any notice under section 176 for calling of information. In fact this is the only section through which any taxpayer can be bound to file any document or record. This is mandatory requirement and without issuance of the same the amendment order is illegal as already held by the Tribunal in case reported as 2011 PTD (Trib.) 321.
9. (ii)That amendments of assessm ent were made merely on the basis of selection and just on the basis of impugned formula. So the said amendments are illegal because as per judgments of appellate courts the selection of cases for audit is not sufficient. For amendment of already completed assessm ent under section 120 some cogent, solid and material evidence is required.
10. Reliance is placed on the following case-law:- 2010 PTD 421, 2010 PTD (Trib.) 1733 and 2010 PTD (Trib.) 1709.
11. (iii)That amendment of assessm ent on the basis of impugned formula or on the basis of agreement is not maintainable same is against the spirit of the Ordinance, 2001 as held in an unreported judgment of this Honourable Tribunal vide I.T.A. No. 81 etc!IB dated 27-04-2010.
12. (iv)As per section 174(2) of the Ordinance, the expenses cannot be curtailed or disallowed on the basis of estimate or percentage and same is out of scope of sections 174(2) and 122(5) of the Ordinance, as held by the Tribunal in following reported judgments:- 2009 PTD (Trib.) 92 7 and 2009 PTD (Trib.) 638.
(v) OGRA information is otherwise not definite and without the availability of definite information the assessm ent cannot be amended as envisaged in subsection (5) of section 122 of the Ordinance. Definite information is not defined in the Ordinance, as such reliance will be placed on the judgments of the courts and dictionary meanings. Reliance is placed on followings judgments:- PLD 1997 SC 700 = 1997 PTD'1693, 1997 SCMK 1256 and 1993 SCMK 1108 = 1993 PTD 1108 The assessm ent was amended on the basis of information provided by the OGRA. The authenticity of formula its definite nature and its compression with the 4% tax formula is as under:- (a)Formula is:- Kg: MMBJUX S.G X 34473 C.V.
13. (b)That out of above mentioned information of formula only MMBTU are available in the Gas Bill issued by the Sui Northern Company. So how the appellant can worked out his sales on the basis of said information, so this formula cannot be applied on the appellant being not provided then on the bills.
(c) If the OGRA formula is definite then why the department opts for taxation on the basis of 4% tax on gas charges instead of this formula. The difference of quantum of income and tax per MMBTU is as under:- ON THE BASIS OF OGRA FORMULA
(i) Net income assessed Net income per MMBTU5,493,602 158.51
(ii) Tax charged Tax per MMBTU1,795,261 51.80 ON THE BASIS OF 4% FORMULA
(i) Gas charges 6494976 And income on above Income per MMBTU1,106,58 31.92
(ii) Tax on gas charges@4% Tax per MMBTU259,799 7.49 The above chart shows a huge difference between both income and tax which shows that the OGRA formula is not definite as such the department opts for assessment on the basis of 4% tax formula instead of OGRA formula in most of the cases. So adoption of much lesser tax shows that the department was not satisfied with the said OGRA formula as such make assessments on the basis of 4% tax even in some cases after the assessment on the basis of OGRA formula, the Commissioner has revised the order under section 122(5A) and charged tax at 4% formula and reduced the tax liability of many taxpayers as such no reliance can be made on such so called OGRA formula by treating it as definite information:-
(d) That while computing the sales the department has allowed wastage at 11% by following the circular of FBR having C. No. 1(53) STT/2002 dated 16-3-2003. The FBR not only issued the said circular but also issued to other circular/ clarification for working of sales of CNG vide No. 4(l)ITP/06-5 dated February 2006 and No. SO-1- 4(13) (31) 2005-2006/5110 dated 14-2-2006 and C.
14. No. 1 (2)M(Audit)2002 dated 6-6-2002. Copies attached. So the treatment of department is not understandable. As per section 214 of the Ordinance, 2001 all the circulars and instructions are binding on subordinate authorities but the Assessing Officer in these cases violated the instruction of FBR. The OGRA information is not binding upon the department so the orders are also illegal on these grounds.
(e) That violation of instruction of FBR is very fatal as per section 214 of the Ordinance, as such order is not maintainable in the eye of law.
15. (f)OGRA is just a regulatory authority and has no concern what-so-ever with billing or any formula as OGRA Ordinance No. XVII of 2002. As per section 42 of the Ordinance the authority can make regulation and as per subsection (b) of the said Ordinance. The authority can design for CNG station for the purpose of regulatory activities. In fact the concerned department distributor companies i.e. Sui Northern, Sui Southern Gas companies are issuing bills to CNG Stations and receiving the bill as such any formula provided by the OGRA has no legal sanction.
16. (g)It is not out of place to mention here that in September 2006 powers for price fixation have been given to OGRA. Prior to this, the authority was with owners of the CNG Stations.
17. In the light of the above legal as well as the factual aspect of the case it is very much clear that amended assessm ents made by the Assessing Officer are illegal, void and without any basis what- so- ever. The definite information is lacking in these cases as such the amendment under section 122(5) is not maintainable.
18. 5.Learned DR contends that OGRA formula is scientific conversion. It may have minor discrepancies with regard to brevity or calorific value at different station in relation to temperature and pressure but it is good yardstick to assessm ent to compute income reasonably.
19. 6.We have heard the arguments and perused the relevant record available on file. The term 'definite information' conveys a meaning which is not the same as change of opinion. A different interpretation of any provision of law or deriving a different conclusion from a given set of facts will not amount to definite information. It will be a change of opinion. In the present case, there is no concealment of facts. Everything had been declared right from the very beginning. Sales as per Gas Meter have been correctly declared. There is no wrong declaration or concealment of facts. In these circumstances, the opinion of the Officer that a definite information has been received as it was discovered that by applying OGRA formula for converting MMBTU into KG, Taxpayer has earned more profit is a different conclusion from same set of facts. Here important fact is that in the beginning Gas was being sold in Bars. This fact has not been ascertained case wise as to when the meter showing measures in Kgs were installed.
20. The expression definite information, and similar other expressions used in the above noticed provisions or other related provisions certainly meant much more than mere material so as to cause a reasonable belief of even such evidence which might lead to a definite belief. Unless there is definite direct information and there is no further need to put the said definite information to trial by putting in further supporting material, process of self assessment could not be reopened.
21. The term 'definite information' has not been defined in the Income Tax Ordinance, 1979 it will be assumed that the Legislature intended to give ordinary dictionary meanings to it, whenever it is required to be dealt with. The word 'information' when it is qualified with the word 'definite', would mean that the said information in all probabilities, is correct in all respects and there is no likelihood of its being wrong or untrue and there is no necessity to conduct probe to be satisfied about its exactness/correctness and there is no chance of its being untrue.
22. After hearing the arguments we are of the considered view that despite scientific conversion, said formula does not fulfil touchstone/yardstick of definite information. Under the law assessment can only be amended on the basis of definite information undoubtedly deemed assessment has its on.
23. Sanctity which is not to be disturbed unless case falls within the strict parameters of the wordings used by the legislature, so in this scenario we have been left with no other option except to annul the amended assessm ent and restore the deemed assessment under section 120(i)(b) of the Income Tax Ordinance, 2001.
24. Sd/- (MUNSIF KHAN MINHAS)
25. JUDICIAL MEMBER (IKRAMULLAH GHAURI)
26. ACCOUNTANT MEMBER DISSENTING NOTE MR. IKRAMULLAH GHAURI (ACCOUNTANT MEMBER).--(7). I respectfully differ with the view expressed by my brother, learned Judicial Member with regard to the characterization of OGRA formula as a definite information. This formula gives a standard of scientific conversion. No doubt factors like specific gravity, temperature and pressure vary from place to place depending on altitude and climatic conditions, but such a variation is negligible. Thus, in my opinion it can validly be characterized as definite information. 8.Secondly FBR has already removed the rigour if any, flowing from OGRA formula by providing taxpayers an option of payment of tax @ 4% of sales revenue. This concessionary rate of tax represents a negotiated settlement between the operators of CNG Stations and the FBR. Most of the Taxpayers have availed this concession, while the appellants in this case have chosen to indulge in litigation instead of availing this concessionary facility. The appellants still have an option of availing of aforesaid tax break by depositing only 4% tax. 9.As difference of opinion has arisen, so file be placed before honourable Chairperson for entrusting to the third Member for resolution of following issues. (i) Whether or not OGRA formula can be characterized as definite information? (ii) If issue No. 1 is answered in negative even then instead of annulment of amended assessment, should not the taxpayer be asked to avail the facility of concessionary payment of tax at the rate of 4%, as most Taxpayers in this line of business have availed this facility.
27. Sd/- (IKRAMULLAH GHAURI)
28. ACCOUNTANT MEMBER Sd/- (MUNSIF KHAN MINHAS)
29. JUDICIAL MEMBER CH. MUNIR SADIQ (JUDICIAL MEMBER).--(10). As difference of opinion arose between the learned members of the Division Bench who heard the cases, therefore, worthy Chairman referred appeals to me for decision as a referee.
30. 11.I have gone through the order proposed by learned Judicial Member as well as dissenting note by learned Accountant Member and have also heard the parties and perused the record with their able assistance. The questions proposed above for adjudication are:- (1)Whether or not OGRA formula can be characterized as definite information?
31. (2)If issue No. 1 is answered in negative even then instead of annulment of amended assessment, should not the taxpayer be asked to avail the facility of concessionary payment of tax at the rate of 4%, as most taxpayers in this line of business have availed this facility.
32. As regard the first question, I am of the view that scientific advancements and the research methodologies should be adopted in order to progress but when a legal question is before a court or tribunal it is bound to apply the law and decide the case according to peculiar facts and circumstances of the case. In the present case, OGRA provides a formula to the tax authorities for determining sales per month by converting the energy units (MMBTU) into mass units (kgs) but OGRA has not associated any of the appellants or representatives of the CNG stations before making such scientific research or during such scientific research/study. It only consulted Sui Northern Gas Company Ltd. And Sui Southern Gas Co. Ltd. Therefore, this formula cannot be used to disadvantage of the appellants because justice should not only be done but it should manifestly seem to have been done. Moreover, this formula provides a mode of determination and assessm ent, but in no terms it could be treated as a definite information. Needless to observe that the tax authorities have themselves opted for taxation on the basis of 4% tax on gas charges instead of this formula and the results mentioned. In earlier part of this order show that tax per MMBTU as per OGRA formula is Rs. 51.80 whereas on basis of gas charges at 4% tax per MMBTU is Rs.
33. 7.49 and each formula depicts result Which shows a huge difference between net incomes as well as the tax chargeable. The scheme of Income Tax Ordinance, 2001 shows that it has given sanctity to the deemed assessm ent under section 120 of the Income Tax Ordinance, 2001 which is not to be disturbed except in accordance with the provisions of section 122 of the Income Tax Ordinance, 2001. Therefore, I agree with learned Judicial Member that despite scientific conversion said formula does not fulfil the yardstick/touchstone of definite information and under the law assessm ent can only be amended on the basis of definite information. Consequently, the amended assessm ent is annulled and the deemed assessment under section 120 of the Income Tax Ordinance, 2001 is restored.
34. 12.Now I come to the second issue, my brother, learned Accountant Member, has proposed that if issue No. 1 is answered in negative even then instead of annulment of amended assessment, should not the taxpayer be asked to avail the facility of concessionary payment of tax at the rate of 4% as most taxpayers in this line of business have availed this facility. Suffice it to say that judicial forums are bound to decide every case as per law and facts of the case. The appellants cannot be forced to follow the option availed by other taxpayers because it is their inalienable right to be treated in accordance with law. No doubt, this tribunal ought to protect the revenue but strictly in accordance with law. In the instant case, as a result of decision on issue No. 1 the deemed assessm ent under section 120 of the Income Tax Ordinance, 2001 stands restored, therefore, issue No. 2 is answered in, negative.
35. For what has been discussed above, the appeals stand accepted. By majority of to to one the appeals are allowed.