ORDER IFTIKHAR AHMAD BAJWA, ACCOUNTANT MAMBER. - This appeal is directed against CIT (Appeal's) order dated 28.2.1994 whereby assessment for Assessment Year 1990-91 under Section 62/65 was confirmed.
2. Appellant, a Registered Firm, derived income from rice husking business. For the year under appeal, assessm ent as originally made on income of Rs. 1,20,000/- as against declared income of Rs. 84,500/-. Subsequently, on receipts of information that appellant conceited sales to the tune of Rs. 3,01,528/- the assessm ent was responed and after obtaining appellant's explanation the aforementioned amount of Rs. 3,01,528/- was deemed as income under Section 13(1) (c) and added to the already assessed income of Rs. 1,20,000/-. This action was confirmed by the first Appellate Authority also.
3. The original assessm ent in this case was made on 7.5.1991. On 8.3.1992, a show-cause notice was issued wherein a concealment of Rs. 3,01,528/- was intimated in the following words:- "Information available with this office which was provided by Anwar Corporation in response to notice under Section 154 of the Income Tax Ordinance, 1979 showing that you have made the sales to the above-mentioned party. The detailed of which is an under: Rate of Sale. Amount.
26.11.1988 Rs. 60,560/- 22.11.1988 Rs. 2,21,168/- The details of sales reveals that you have not disclosed the sales which were made to M/s. Orient Oxidant (Pvt) Limited and AL-Din Rice Mills (Pvt) Limited through M/s. Anwar Corporation Muridke during the period relevant to Assessment Year 1990-91 which amounts to concealment and furnishing of inaccurate particulars of your income.
In his reply dated 22.3.1992, appellant specifically denied having made any sale to M/s. Orient Oxidant (Pvt) Limited and Al-Din Rice Mills (Pvt) Limited and contended that the sales to M/s. Anwar Corporation mentioned in the show-cause notice had been made out of the opening stock of Rs.
15,15,178/- and thus there had been no concealment of income. This explanation was found to be unsatisfactory on the ground that appellant had not declared analysis of the opening stock. The to vide his letter dated 7.6.1993 further observed:- "In addition to above you yourself mentioned in the balance sheet as at Rs. 1,08,1989 stock of Rs.
12,53,175/- as previous stock. If this amount is deducted from closing stock for the Assessment Year 1989-90 of Rs. 15,15.178/- the balance amount would come to Rs. 2,62,003/- and not the sales of Rs.
3,01,528/-. Thus it is established that you suppressed the sales to the tune of Rs. 3,01,528/- which intend to and in your assessed income".
In reply to this notice the appellant vide his letter dated 14.6.1993 reiterated that out of the opening stock of Rs. 15,15,178/- sales to the tune of Rs. 2,98,395/- had been made by the appellant to M/s. Anwar Corporation who in turn might have sold the same to M/s. Orient Oxidant (Pvt) Limited and Al-Din for Rs. 3,01,528/- and thus nothing had been suppressed. After rejecting the above explanation the amount of Rs. 3,01,528/- was deemed as income under Section 13(l)(c).
4. Appellant's contention that the cogent explanation had been rejected without justification appears to be correct. Profit and loss statement for the year under appeal included an amount of Rs. 4351/- as loss under the head stock khatha." The copy of the stock khatha was produced to show that opening balance of Rs. 15,15,178/- had been disposed of for Rs. 15,11,025/- and the loss of Rs. 4351/- had been taken to the P&L account. Copy of the ledger account of M/s. Anwar Corporation was also produced wherein sales of Rs. 2,98,393/- were shown to have been made to the said member and October, 1988 against which payments of Rs. 20,000/-, Rs. 15,000/-, 50,000/-, Rs. 8,000/- and Rs. 70,395 were shown to have been received on various dates. Thus explanation dated 22.3 1992 which regularly backed us by entries recorded in the books during the course of business was rejected without any justification. The assumpt on that appellant-made any sale to M/s. Orient Oxidant (Pvt.) Limited and Al-Din Rice Mills Limited was not supported by any material.
ITO's assumption that the position of opening and classing stock left a finance of sales to the tune of Rs. 2,62,003/- as against Rs. 3,01,528/- was totally misconceived. The sales out of the opening stock of Rs. 15.15,178/- had been separately recorded in the account books while the closing stock of Rs. 12,53,175/- was left over of the purchases made during the year. Thus the facts on record did not justify proceedings under Section 65. The order under Section 62/65 in respect of Assessment Year 1990-91 is, therefore, annulled.