The titled appeal pertaining to the taxpayer has been filed, calling in question the impugned order dated 10-6-2011, passed by the learned CIR (Appeals-III), Islamabad. A number of grounds have been agitated by the Taxpayer, however, the main grouse of the appellant appears to be estimation of sales at Rs.88,754,620 against the declared sales of Rs.48,754,620. Additionally, 30% lumpsum addition out of Profit and Loss Expenses has also been objected to, since the same was made without verifying the assertions of the taxpayer.
2. Succinctly, the facts relevant for the disposal of the present appeal are that taxpayer/appellant is an AOP, deriving income as chemist under the name and style of Messrs Shaheen Chemist.
Return for the tax year under appeal was filed declaring net income as under:- Tax year 2007 Sales 4,500,000 Closing Stock 165,000 Opening Stock 150,000 Purchases 3,790,000 Other Trading Exp.50,000 GP 675,000 Less P&L Exp. 325,000 NP 350,000
3. The case of the taxpayer was selected for audit under section 177 of the Ordinance. Requisite statutory notices were issued, as per facts narrated under the amended assessment order, non of the notices were complied with which led to the issuance of notices under section 122(9) read with sections 122(5)/121 of the Ordinance, hence the case of the taxpayer was selected for total audit under section 177 of the Ordinance. Amended assessment was formulated and sales were fixed/estimated at Rs.88,754,620 against the declared sales of Rs.48,754,620 and an B addition of Rs.19,91,176 was also made out of P&L expenses.
4. Feeling dis-satisfied with the aforesaid amended assessment, the taxpayer approached the learned first appellate authority who vide an order dated 10-6-2011 dismissed the appeal of the taxpayer which led to the filing of further appeal before the Tribunal.
5. Both the parties have been heard and relevant orders perused. The learned A.R. Has vehemently argued the case and contended that estimation of sales at such a high figure along with 30% add backs out of P&L account were not sustainable in the eye of law since there was no basis whatsoever for such estimation. The learned A.R. Further submitted that such figure was never confronted to the taxpayer, hence the same is liable to be declared null and void. The learned A.R.
Submitted before the bench that the authorities below ignored the mandatory provision of section 122 of the Ordinance with regard to, the filing of revised return. The learned A.R. Pointed out that there was no bar with regard to the number of times, the taxpayer is entitled to revise return. It was contended that had there been such intention of the legislature, the limitation with regard to the number of times, return could be filed, would have been imposed in this regard. The learned A.R.
Referred to the impugned order passed by the learned CIR and submitted that the only reason which weighed with the learned first appellate authority was that the taxpayer has been filing revised returns again and again. However, enhanced sales of Rs.48,754,620 absolutely ignored by the Taxation Officer. Further submitted that even otherwise section 122(5) does not empower the assessing authority to estimate the sales of any taxpayer. On the issue of add backs, the learned A.R. Contended that lumpsum addition amounting to 30% was also not in conformity with the law, hence the same was also liable to be reviewed because the same lack any legal basis.
6. Conversely, the learned D.R. Has opposed the arguments advanced by the learned A.R. It was contended by the learned D.R. That the taxpayer did not comply with the notices, hence Taxation Officer has no option but to go for such estimation. However, when asked with regard to the basis adopted by the department, the learned D.R. Has no convincing answer except to repeat the observations made by the assessing officer that the taxpayer has been filing revised returns again and again. He pleaded for maintaining of the impugned order.
7. We have heard the learned counsel for both the parties and have also gone through the relevant orders. Before we embark upon discussing the rival arguments tendered at the bar. We would like to reproduce section 122(3) of the Ordinance which envisaged law regarding filing of revised return: Section 122(3):- Where a taxpayer furnishes a revised return under subsection (6) [or (6A)] of section 114-
(a) the Commissioner shall be treated as having made an amended assessment of the taxable income and tax payable thereon as set out in the revised return; and
(b) the taxpayer's revised return shall be taken for all purposes of this Ordinance to an amended assessm ent order issued to the taxpayer by the Commissioner on the day on which the revised return was furnished.
8. Perusal of the impugned order as well as the amended assessment order shows that the whole case of the Revenue hinged upon the premises that since the taxpayer filed revised returns, hence the department was justified to reject the declared version of the taxpayer and to frame an amended assessm ent. We have no hesitation in holding that the department and the assessing authority failed to appreciate true spirit of law as envisaged. Under section 122(3) of the Ordinance.
It is observed that law makers of section 122(3) had allowed the taxpayer to file revised returns and no restriction has been imposed with regard to the number of times, taxpayer could file the revised return. It is further observed that nowhere it has been postulated by the law that an adverse inference would be drawn in case of revised return is filed more than one time. Besides, further perusal of the impugned order does indicate that while fixing the sales at Rs.88,754,620 the department/Revenue authorities did not provide any basis whatsoever. In this regard we tend to agree with the arguments of the learned A.R. That section 122(5) did not empower the Taxation Officer to act whimsically. Similarly, on the issue of add backs out of P&L account, too, a number of judgments of the higher legal fora as well as the Tribunal have categorically held that lumpsum addition out of P&L account cannot be made.
9. In this view of the fact, we vacate the impugned order passed by the learned first appellate authority. The amended assessm ent passed by the Taxation Officer is directed to be cancelled.
10. Appeal of the taxpayer succeeds.