ORDERMUHAMMAD IQBAL KHAN, J.- In this appeal before us relating to the charge year 1991-92, the appellant, an individual, who derives income from the sale of sanitary tiles,etc; is aggrieved on the following grounds:"
1. That selection of the case under para 4(11) of the policy of SAS is wrong and illegal as no definite information was brought on record.
2. That sales estimated is highly excessive and unjust.
3. G.P.Rate applied 20% is highly excessive and harsh.
4. Profit. &loss expenses allowed are inadequate.
5. The Inspector report is irrelevant to the year under appeal and the appellant was not confronted to the report which is baseless and not relevant to the appellant's assessment.
"2. Brief facts leading to this appeal are that the appellant furnished a return declaring net income at Rs37,000/- for the assessm ent year 1991-92, under the self assessment scheme. The return was accompanied with the computation chart,etc: The assessee's case could not be processed under SAS in view of its selection for total audit under para 4(ii) for the period under consideration. The assessee was accordingly informed that his case was selected for total audit under para 4(ii) vide the Assessing Officer's letter No.1306 dated 22.2.1992. The Assessing officer there-after noted that the case was selected for total audit on the following grounds:"
(a) The declared income is grossly under-stated.
(b) Never assessed under normal law.
(c) For assessm ent year 1990-91, total sales were declared at Rs.26,50,000/- with the G.P rate at 6.25%. No sales have been declared for the year.
(d) Declared G.P. Rate is very low in this line of business."
3. The appellant's AJ1, appeared before the Assessing Officer from time to time and various documents/information,etc; called for were produced and placed on file. The Circle Inspector also conducted enquiry whereininfer alia, it was reported that the "Salesman verbally admitted stock at Rs.150,000/- and daily sales in average at Rs.4,000/-. The Circle Inspector xxx estimated daily sales at Rs.13,000/- and stock at Rs.700,000/-." A notice u/s 62 was issued vide letter No.180 dated 5.9.1992 to bring this fact to the notice of the assessee. Thereafter, sales were estimated at Rs.27,00,000/-, G.P. Rate was applied at 20%, P&(1) expenses were allowed at Rs.1,35,000/- on proportionate basis to the G.P.Worked out and net income was thus worked out at Rs.4,05,000/-.
4. Feeling aggrieved with this treatment the appellant files an appeal before the learned CLF(A) one while adjudicating on the grounds raised before us simply noted vide his appellate order No.1639 dated 31.1.1993 "as U.P. Rate declared in this line of business is on the lower side as compared to other parallel cases and this case has no history of its own, thus its selection under para 4(ii) appears to be proper in the circumstances of the case. By not declaring the sales for the year under appeal and G.P. Rate caused suspension about the declared version and gross under- statement of income was suspected." No objection as to the sales estimated was raised. The application of the G.P. Rate was, however, contested on this account as well. The learned CTT(A) was not moved and maintained the treatment of the Assessing Officer.
5. Both the learned A.R. Of the appellant, Mr .Rustam Khan. Advocate and D.R. Mr.Qaisar Ali were heard at length.
6. The learned A.R. Vehemently contended that since no definite information based on positive evidence/meterial was available with the Assessing Officer, the selection of the case was illegal and void ab initio. He also argued that approval of the Regional Commissioner under para 4(ii) amounts to assessm ent < by him and since the Regional Commissioner stands at higher pedestal in gradeno appeal could be heard by the learned CIT(A) who according to the learned A.R. Was a lower pedestal in grade. On the other hand, the learned D.R. Contended that as per assessment order of the Assessing Officer, there was definite information based on positive evidence and material which was enough to suspect that the income retained was under-stated.
7. Before selection of the case under para 4(ii)of self assessment. Circular No.22 of 1991-92 is adjudicated upon, it may be observed that the argument of the learned A.R. Of higher and lower pedestal is fallacious for the reason that the Commissioner of Income Tax (Appeals) is completely independent and has the jurisdiction to hear appeals against the order passed by the assessing officer. The association of the learned RCIT in selection of the case for total audit is mere procedural in nature and certainly does not amount to the approval of the assessment order as such. No assessm ent order can be passed by RCIT or even CBR. Assessment order can only be passed by the Assessing Officer and the order under appeal was duly passed by the Assessing Officer.
8. Coming to para 4(ii) of the self assessment Circular No.22 of 1991-92,it may be noted that cases can be selected for total audit under para 4 from among those qualifying for SAS either under para 4(i) or 4(ii). Under para 4(i) (returns may be selected for total audit in random ballot through computer, and under para 4(ii) with the approval of the RCIT where gross under-statement of income is suspected on the basis of definite information based on meterial evidence.
9. The cardinal words are that gross understatement of income must besuspected on the basis of definite information and that information must be based on material evidence. The definite information means conclusive evidence which does not require further probe, investigation or enquiry and that definite information must be in the shape of material evidence and material evidence means crucial, critical, considerable, decisive, effective in nature. The grounds for selection given in the assessm ent order by the Assessing Officer certainly do not come into the definition of definite information based on material evidence. This provision has been laid down with a view to take away the arbitrary and capricious power of the Assessing Officer in selection of cases for total audit. This issue has been amply discussed and adjudicated upon by the learned Sindh High Court, , Karachi in the case of Pakistan Society, Karachi Vs. Government ofPakistan through Chairman and Secretary, Revenue Division, Islamabad and other reported as (1993) 67- Tax-311(N.C.Karachi).
10. We are, therefore, of the view that the very selection of the case under para 4(ii) of Circular No.22 of the self assessm ent of 1991r92 was, ab initio, void and hence not justified.
11. As a result of our adjudication on the selection of the case under para 4(ii) as the first ground of appeal, we need not go into the other objections raised or facts of the case.
12. The appeal stands disposed of as above.