CH. SHAHID IQBAL DHILLON, (JUDICIAL MEMBER).--. This appeal has been filed by the taxpayer against order of the learned. CIR(A), Faisalabad recorded on 31.10.2013.
2. Brief facts of the case are that the taxpayer, an individual, derives income from wholesale on a fee or contract basis and filed return declaring net income at Rs,11,22,813/- without wealth statement, which was mandatory due to the fact that income declared was more than Rs,5,00,000/-. The Federal Board of Revenue, Islamabad in exercise of powers conferred upon it under section 214C of the Income Tax Ordinance, 2001 selected case for audit and intimated vide Board's letter C. No,1(150)TPA-II(Ballot-2011/2012/23743-R dated 25.02.2013 on the basis of following para-meters:- Cost of sales less than 80% of total sales (other than distributor/ supplies).
Total sales are less than previous year by 10%.
Net tax paid is less than 10% in comparison of previous year.
Non filer of wealth statement.
Increase in turnover does not reflect proportionate increase in income (with a margin of 5%)
Various details/documents were required but no compliance was made. However, the taxation officer made assessm ent under section 121(1)(d) of the Income Tax Ordinance, 2001 by enhancing the sales at Rs,3,25,00,000/- and applying G.P. Rate at 15%. In this manner, net income of the taxpayer was assessed at Rs,33,75,000/-. Being aggrieved with the treatment, the taxpayer preferred appeal before the learned CIR(A) who after considering the facts and circumstances of the case reduced the sales with the following observations:-- "(3) Estimation of Sales.
The learned ACIR has estimated the sales of the taxpayer at Rs,32,500,000/- against declared of Rs,27,804,488/-. The learned AR has agitated the treatment meted out in the case without any basis and justification. He further stated that the amending authority has first rejected the trading result of the taxpayer on objective basis. The taxpayer is operative taxpayer and registered under General Sales Tax System. He placed reliance on [(2005) 91 Tax 177 (Trib.)] and [(2006) 96 Tax 57 (Trib.)]. Since the taxpayer failed to provide books of accounts, declared version remains unsubstantiated. The estimate of sales seems to somewhat excessive, hence, it will be fair to reduce sales to Rs,31,000,000/-."
3. Being dissatisfied with the treatment accorded by the learned CIR(A), the taxpayer has come up in appeal before the Tribunal. Hence this appeal.
4. Before the Tribunal, the learned AR vehemently contends that the amending authority did not consider the true facts of the case and assessed the taxpayer on the above parameters without any justification. A quick analysis for the tax years 2010 and 2011 is as under:-- Particular Tax Year 2010Tax Year 2011 Sales 21,385,207 27,804,488 Ratio 1 1.30 Cost of Sales 18,957,987 24,648,688 Ratio of Cost Sales to Sales88.65% 88.65% Gross Profit 2,427,220 3,155,800 Profit and Loss expenses802,220 1,656,300 PTR income 782,822 376,687 Total Income 842,178 1,122,813 Ratio 1 1.33 Supply of Goods 10,302,029 0 Imports 0 2,214,500
5. Out of five parameters, three relate to sale purchase, cost of sales and turnover. A quick look of the above analysis shows that the sales are increased by 1.30 times in the year under consideration and the ratio of cost of sales to the sales are equal in both the years. Regarding 10% decrease in the net tax is baseless as in the previous year, the taxpayer made supplies to the tune of Rs,10,302,029/- and in the year under consideration only imports are made to the tune of Rs,2,214,500. But income is enhanced by 1.33 times. According to the Audit policy guidelines for the tax year 2011 and corresponding period of sales tax and FED the above analysis are clearly shows the parameters as confronted by the taxpayer are satisfactorily explained; hence the audit proceedings in taxpayer case merits closed.
6. The learned AR further submits that the learned CIR(A) was not justified to confirm the order passed by the taxation officer as the taxpayer did not commit any default. It has been vehemently argued that the relief allowed by the learned CIR(A) in reducing the assessed sales from Rs,3,25,00,000/- to Rs,3,10,00,000/- as against declared sales of Rs,2,78,04,488/- is insufficient when the taxpayer is registered with the Sales Tax Department. The learned AR in support of his contention has placed reliance upon the various reported judgments of the honorable Tribunal cited as 2007 PTD 1325, 2005 PTD (Trib.) 745 and 2011 PTD (Trib.) 936.
7. The learned D.R., on the other hand, contends that the learned CIR(A) was not justified to reduce the sales as the taxpayer's case is a no account case. He submits that the taxation officer was fully justified to estimate the sales and he prays for restoration of the taxation officer's order.
8. We have heard both the parties and perused the orders of both the authorities below. The case law relied upon by the learned AR have also been carefully perused. We do not agree with the learned DR that only those sales can be accepted which are supported by the books of accounts.
The audit by the Sales Tax Department does have some sanctity. It is a government department, the decision of which should be respected by other government institutions. We have, unfortunately developed a culture of mistrust up to a very sophisticated level. It has damaged our traditions to a large extent. The recent developments in laws have improved the position to some extent. It has brought a control, a check on the discretionary powers of the amending officer with regard to the determination of the value of the certain properties. It may not be fool-proof method but is definitely a welcome change in development of laws. The remedy it has brought is obviously well-thought and very positive. Similarly, certain businesses have been subjected to Sales Tax on sales declared and assessed by a government agency. In our humble opinion, it should be given respect unless otherwise proof is available with the department otherwise. Now that the government has, decided to develop a culture of mutual trust by accepting each and every declaration of income. The Sales Tax assessment should also be given proper respect while making income tax assessm ents. The application of law through mutual trust and respect always bring happy and positive change in society. While the law, implemented through baton or hammer creates hatred and unhealthy atmosphere. Any power granted to a person without strings leads to damage the system. The maxim that "power corrupts and absolute power corrupts absolutely" is fully applicable on such situations. Reliance was placed in a case reported as 2005 PTD (Trib.) 745; wherein it has been held that:- "Appellate Tribunal shall go with the figure determined by the Sales Tax Department No reason was available for pitching the sales to a figure other than what had been determined by the Sales Tax Department without any other substantial or objective reason or proof. Since, such a proof was missing, Appellate Tribunal directed for acceptance of the declared sales being supported by the Sales Tax Audit."
9. Similar view was also taken by the honourable Appellate Tribunal Inland Revenue, Lahore in a case reported as [2007 PTD (Trib.) 1325]; while dealing with the similar issue, it has been held as follows:-- "Appellate Tribunal had declined the determination of a different figure than the one determined by the sales tax department unless there was some valid proof available with the income tax authorities for deviation."
10. The upshot of the above discussion is that having taken regard to the facts of the case in its entirety and after respectfully following the ratio decided in the referred judgments cited supra, we have no option except to accept the declared sales of the taxpayer for the year under consideration.
11. The appeal of the taxpayer stands disposed of as above.