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I.T.As Nos. 2939 to 2945/LB and 3697 to 3703/LB of 1984-85, decided on 31st March, 1987.
---S. 65--Assessee, a re-rolling mill--Additional assessment- Information--Assessing Officer received information from vigilance wing of the Department that assessee had understated consumption of energy--Income-tax Officer obtained approval of I.A.C. before re-opening the case--No exception, held, could be taken in circumstances against re-opening of the case on the ground that I.T.O. had no definite information.
Eastern Newspaper v. C.I.T. 1981 P T D 237 distinguished
---S. 34(2)--Assessee, a re-rolling mill--Allegation of suppression of energy consumption by assessee--Assessee never declared any consumption of energy in his computation of income but had only declared receipts and expenditure--Contention that since consolidated expenditure had been declared by assessee which included expenditure on consumption of energy, there was no question of suppression of energy being correct, case was not a case of suppression of income or expenditure but at best it could be a case of under-assessment and be re-opened under S. 34.
---S. 34(2)--Income-tax Ordinance (XXXI of 1.979), Ss. 166(2) & 65---Case of under-assessment--Reopening of case--Limitation--Income-tax Officer is not empowered either by S. 166 or 65 so as to revive his power to re-open ease in which remedy is barred by time before coming into force of the Income-tax Ordinance, 1979.
This was case of under assessment, which would fall under section 34(1) of the Income-tax Act, 1922. The limitation for re-opening the case provided under section 34(2) of the Act was two years from the end of the year in which the income was first assessable. The income was assessable for the assessment year 1976-77 upto 30-6-1977. Therefore, the limitation for re-opening of the case under section 34(2) of the Repealed Income-tax Act was up to 30-6-1979. Thus, before the Income-tax Ordinance came into force, the limitation to re-open the case of the assessee had already expired. Unless a statute expressly so provides or unless there is a necessary implication, retrospective operation cannot be given to the statute so as to affect, alter or destroy any right already acquired of to revive any remedy already lost by efflux of time. Neither section 166(2) nor section 65 of the Ordinance gives such a power to the I.T.O. so as to revive his power to reopen the case in which the remedy is barred by time before coming into force by the Income-tax Ordinance.
For the assessment year 1976-77 the I.T.O's. remedy to reopen the case was already time-barred under section 34(2) of the Repealed Income-tax Act before Income-tax Ordinance came into force and, therefore, the I.T.O. could not reopen the assessee's case for that assessment year and the assessment is liable to be annulled .for the assessment year 1976-77.
J.P. Jani, Income-tax Officer v. Induprasad Devshanker Bhatt 72 I T R 595; S.S. Gadgil v. Lal & Co. (1964) 53 I T R 231 - 240 (S C); Manik Chand Nahatav. I.T.O. 78 I T R 204 and C.M. Rajgharia and another v. I.T.O. 98 I T R 486 ref.
--S. 34--Assessee, a re-rolling mill--Re-assessment--Rough estimate by I.T.O. --Effect--No material available on record to show estimate of production nor there was any material to adopt the sale rate-- Assessee producing Excise record duly certified by Authority which showed the production of the assessee--Assessing Officer, in the absence of any material on record, therefore, was not justified to disbelieve production duly authenticated by Excise Department in circumstances--Mere guess-work of the I.T.O. held, was not sufficient to reject the authentic record of the Excise Authorities--Re assessment was annulled.
The I.T.O. has estimated the production of the assessee on the basis of the consumption of the energy. The Assessing Officer has no material on record to make an estimate of production nor there is any material to adopt the sale rate. As against this the assessee had produced the Excise record duly certified by the Excise Authorities, according to which the production of the assessee was 92.6 tons in the assessment year 1976-77 and 180 tons in the assessment year 1977-78. In the absence of any material on record the Assessing Officer was not justified to disbelieve the production duly authenticated by the Excise Authorities. The I.T.O. has only given one reason for disbelieving the Excise record i.e. consumption of energy. The assessee has given detailed reasons that the consumption of energy depends on various factors and production may not be necessarily uniform on the basis of the consumption of energy. In any case the formula adopted by the I.T.O. in regard to the production with reference to the consumption of energy is only a rough estimate as against the concrete evidence of the Excise Authority in regard to the production. Therefore, if at all the production could be adopted it could be on the basis of the Excise Record unless the I.T.O. had concrete material to discard this record. Mere guess work of the I.T.O. is not sufficient to reject the authentic record of the Excise Authorities. The sale rate adopted by the I.T.O. in both these assessment years is reasonable. The re-opening of the case of the assessee for the assessment year 1976-77 was without jurisdiction, the re-assessment for assessment year 1.976-77 was annulled.
---S. 13(1)(d)--Assessee acquired a plot in 1977 and showed cost of the plot as 1,10,000--Income-tax Officer, on basis of "statement of a property dealer in 1984 estimated value of plot as 5,00,00,0 thus adding Rs.4,00,000 as unexplained investment--Held, benefit of intangible additions should also be given before making addition--Assessee should also be provided an opportunity of being 4ieard before any addition is made.
---Ss. 65 & 59--Assessee, a re-rolling Mill--Self-assessment Scheme--Re opening of assessment on the ground that assessee has suppressed his expenses, incurred on payment of electricity and Sui gas and has understated the price paid for property he acquired--Held, it was not a prima facie case of concealment of income- -Assessee had never declared expenses on Sui gas and electricity separately, therefore, it could not be said that assessee had concealed the income--Since there was no prima facie case of concealment and Commissioner of Income-tax's approval had not been obtained before re-opening of the case, the whole action of the Assessing Officer was without jurisdiction and re-assessment was annulled.
--Ss. 65 & 59--Assessee, a re-rolling Mill--Self-assessment Scheme 1981-82 & 1982-83--Concealment--Positive and concrete evidence--Re opening of assessment-- Powers of Assessing Officer--Assessing Officer conceding in assessment order that otherwise assessee's return was immune from detailed scrutiny but re-opening case--here fact that Assessing Officer differs with the resultant production with relation to the energy consumption, cannot be called a positive evidence of concealment of income particularly when production of assessee is duly certified by Excise Authority--"Evidence of concealment" and "positive evidence of concealment"--Distinction--Where enough material was not available with Assessing Officer to hold that production certified by Excise Authority was incorrect, a mere conjecture of the Officer that such a production, in the absence of any material on record, was low as compared to the energy consumption, the guess work cannot be regarded as positive evidence of concealment of income--Assessing Officer having conceded that otherwise assessee's returns were immune from detailed scrutiny, Tribunal directed that assessee's returns should be accepted under Self-Assessment Scheme for years 1981-82 and 1982-83 accordingly.
Mere fact that an Assessing Officer differs with the resultant production with relation to the energy consumption cannot be called a positive evidence of concealment of income particularly when the production of the assessee is duly certified by the Excise Authority. Production as per Excise record should be accepted. Therefore, the Assessing Officer's assumption that possibly more production might have been made by the assessee on the basis of the energy consumed by him, cannot be treated as positive evidence of concealment of income. Here a distinction must be drawn between the evidence of concealment and positive evidence of concealment. Two phrases do not carry the same meaning. Positive evidence of concealment means something more than the evidence of concealment. In other words not only it should be the evidence of concealment but it should be concrete and positive. This is obviously so because, if a concealment of income is detected besides the penalty, even prosecution may follow. In the present case, there is no positive or concrete evidence available with the I.T.O. on the basis of which it could be said that the assessee had concealed his income. The Assessing Officer conceded in the assessment order that the assessee's return was immune from the detailed scrutiny as he had declared 20% higher income as compared to income in the immediately preceding assessment year. However, he reproduced stereotype two reasons on the basis of which he stated that certain evidence was available that the assessee's sales were less than two times of the expenses incurred on the energy bills. These two reasons are reproduced:--
(i) That assessee grossly suppressed his expenses incurred on payments of electricity and Sui gas bill.
(ii) Properties were purchased by the assessee during the assessment years 1976-77 to 1980-81 for lacs of rupees but the value declared to the department is too low and the registered value was highly understated.
While re-opening the cases for earlier years the same two grounds have been given. Although in this assessment year no property was purchased by the assessee and even according to ground No. 2 the property was allegedly purchased by the assessee between 1976-77 to 1980-81. Therefore, it appears that the Assessing Officer without applying his mind just followed the earlier assessment order. There is no question of suppression of expenses on payments of electricity and Sui gas bills as the assessee has never declared such expenses as such separately. Therefore, it could never be said that the Assessing officer had positive evidence with him for the concealment of income. Similarly in the assessment year 1982-83, as well the same streotype two grounds have been given by the Assessing Officer for not accepting the assessee's return under Self-Assessment Scheme. In this assessment year as well the Assessing Officer conceded that the assessee's return was immune from the detailed scrutiny. The ground No.2 is not available at all and even the ground No.l has no application. A mere conjecture of possibility of suppression of expenses cannot be termed as positive evidence of concealment of income. Assuming that there was low production as compared to the consumption of energy, there could be numerous explanations, which in fact were given by the assessee. However, since enough material was not available with the Assessing officer to hold that the production certified by the Excise Authority was incorrect, a mere conjecture of the Assessing Officer that such a production in the absence of any material on record, was low as compared to the energy consumption this guess work cannot be regarded as positive evidence of concealment of income. Since the Assessing Officer has conceded that otherwise the assessee's returns for both the assessment years were immune from the detailed scrutiny, Tribunal directed that the assessee's return should be accepted under the Self-Assessment Scheme for the assessment years 1981-82 and 1982-83.
---S. 65--Re-opening of assessment--Positive and concrete evidence--Reports of Vigilance Wing working under Central Board of Revenue" constitute definite information and in fact indicate usually on the basis of documentary evidence how the assessee has suppressed the income or concealed the particulars of income.
--S. 34--Concealment of income- -Assessee, a re-rolling mill--Energy consumption-- Vigilance Wing of C.B.R. indicated certain amount paid by assessee for consumption or energy-- Assessee deliberately furnished inaccurate particulars of such consumption or omitted or failed to disclose all material facts necessary for assessment--Income-tax Officer, held, was competent to issue a notice under S.34 within 6 years from end of the year in which the assessment for such a year was first made--Assessee, having failed to disclose all material facts it amounted to concealment of income.
--S. 65--Income-tax Act (XI of 1922). S.34--Re-opening of assessment-- Limitation-- Assessee's action amounted to concealment of income or furnishing inaccurate particulars thereof or omission or failure to disclose all material facts necessary for assessment--Assessment for 1976-77, held, could be re-opened and assessed not within two years upto 30-6--119'19, but could be re-opened within 6 years from the end of the year in which the assessment was first made as laid down in S. 34(1-A)(b) of the Act--Assessment, therefore, could be reframed upto 30-6-1983.
The assessee's action amounted to concealment of income or furnishing inaccurate particulars thereof or omission or failure to disclose all material facts necessary for assessment, therefore, the assessment for 1976-77 can be re-opened and assessed not within two years upto 30-6-1979, but it can be re-opened within 6 years from the end of the year in which the assessment was first made as laid down in clause (b) of subsection (1-A) of section 34 of the Income-tax Act. The assessment can, therefore, be reframed upto 30-6-1983. In other words the period to re-open the case had not expired on 1-7-1979 when the Income-tax Ordinance, 1979 came into operation on 1-7-1979. Incidentally the Income-tax Ordinance further extends the period under which a revised assessment can be made under section 65 within 10 years from the end of the assessment year in which the total income of such year was first assessable. Therefore, the revised assessment, which was made under section 62/65 prior to 30-6-1983 was validly made both under the Income-tax Act, 1922 as well as under the provisions of the Income-tax Ordinance, 1979.
---Ss. 65 & 56--Income-tax Act (XI of 1922), S. 34(1-A) (b)--Assessment year 1976-77--Re-opening of assessment--Concealment of income by assessee or where deliberately inaccurate particulars were furnished and assessee omitted or failed to disclose all the material facts necessary for the assessment--Assessment of such case can be made within six years from the end of the year in which the assessment was first made as laid down in S.34(1-A)(b) of the Income-tax Act, 1922 but notwithstanding this position, Income-tax Ordinance, 1979 also permits retroactively just as the Act of 1922 permitted rest respective/operation under S.34--Provisions of S.65 read with S.56 show that it covered a period of 10 years prior to 1--7-1979 though subject to certain limitations placed on the I.T.O. under which the assessment for the year prior to 1-7-1979 could be framed--Retrospective effect of the statute can be partial and may apply to an assessment made before the commencement of the Act--Assessment for the year 1976-1977 was, therefore, validly made and could not be annulled--Case should have been examined on merits alongwith other cases for other years.
J. P. Jani The I.T.O. v. Induparasad Dev Shanker Bhatt (1972) I T R 595 distinguished.
Regina v. General Commissioner of Income-tax 40 T ,C 225/228 ref.
---Ss. 65 & 59--Income-tax Act (XI of 1922), S. 34--Central Board of Revenue Circular No.11, dated 6th August, 1981--Central Board of Revenue Circular No.10, dated 2-8-1982--Self-Assessment--Assessment years 1982-83--Assessee had concealed particulars of income or had deliberately furnished inaccurate particulars and omitted or failed to disclose all material facts necessary for assessment--Case of assessee, held, would fall outside scope of Self-Assessment Scheme.
The Circular No.11 of 6th August, 1981 lays down in para. 4(iii) that the cases where evidence of concealment is available would fall outside the scope of Self-Assessment Scheme. Here even the "word" positive is not mentioned and. therefore, any evidence, which gives a clear indication to the concealment would suffice to place the case outside the scope of Self-Assessment Scheme. In this case the assessee has concealed the particulars of income or has deliberately furnished inaccurate particulars and omitted or failed to disclose all material facts necessary for assessment, which coupled with the evidence furnished by the Excise record, is sufficient to place the case within the mischief of the provisions of section 34(1-A)(b) as a case of concealment of income. So far as the assessment year 1982-83 is concerned para. 4(c) of Circular No.10 of 2nd August, 1982 is also to the effect that "cases where evidence of concealment is available, as specified in para. 9" will not qualify for Self--Assessment Scheme. In para. 9 the words "positive evidence of concealment" have been used but evidently these have to be read in the context of the circular and in conjunction with, not only, para. 4(c) of the Circular No.10 of 2nd August, 1982, but also para. 4(iii) of the Circular No.11 of August 6 1981. There being positive evidence of concealment, the returns could not be accepted under Self-Assessment Scheme and that these were rightly assessed under the normal law.
---Ss. 34 & 23--Income-tax Ordinance (XXXI of 1979), S. 65--Re-opening of assessment--Income-tax Officer computed net income of assessee under S. 23(3)--information was received by Income-tax officer subsequently from Directorate of vigilance that assessee had consumed Sui gas and electricity worth Rs.81,690--Such amount did not figure anywhere in the computation of income--Assessment was re-opened with approval of I.A.C. under S.65 of the Ordinance and re-assessment was made by estimating production of assessee--Whether information conveyed by the Directorate of vigilance to the Income-tax Officer, that the assessee had consumed Sui gas and electricity worth Rs.81,690 constituted definite information so as to require re-opening of assessment under S.65 of the Ordinance.
A sum of Rs.81,690 on account of Sui gas and power consumption, did not figure anywhere in the computation of income for the charge year 1976-77. Therefore, on the basis of this information, which was not before the Income-tax Officer at the time of making original assessment, assessment for the charge year 1976-77 was reopened with the prior approval of the concerned I.A.C. in accordance with law. Contention of assessee that as the assessee was engaged in re-rolling for others, the Income-tax Officer by holding that re-rolling was undertaken on own account, had committed an error and, therefore, re-opening of assessment being based on a change of opinion is not legally maintainable. This contention examined carefully in the light of the Income-tax Officer's order for the charge year 1976-77 and the computation of business income filed with the return. Based on this analysis, the Income-tax Officer had not held in the said assessment that re-rolling was done for others. What the Income-tax Officer has really stated in assessment relating to the charge year 1976-77, is that, the assessee also derives income from re-rolling. This thing apart, the assessee has not furnished any evidence to establish that re-rolling was undertaken on behalf of other parties. This onus could only be discharged by making available names and addresses of the parties and the amount charged from each on account of re-rolling undertaken for them. In the absence of this information having been provided the assessee was actually involved in the manufacture of M.S. Bars and other allied products and re-rolling on own account only. Therefore, there was no change of opinion on the part of successor-in-office anti consequently assessment was rightly re-opened in accordance with law.
---Ss. 28(1-A) & 34--Income-tax Ordinance (XXXI of 1979), Ss4. '119, 65 & 186--Concealment of income or furnishing of inaccurate particulars thereof--Under assessment of income--Re-opening of assessment- Assessment year 1976-77 --Limitation--Assessee, a re-rolling Mill- Computation of net income by Income-tax Officer--Information was received by Income-tax Officer subsequently from Directorate of Vigilance that assessee had consumed Sui gas and electricity worth Rs.81,690--Such amount did not figure anywhere in the computation of income--Whether non-disclosure of information with regard to expenditure on consumption of Sui gas and power was a mere under-assessment of income or it amounts to concealment of income or furnishing of inaccurate particulars thereof and re-opening of case justified--Whether additional assessment framed by I.T.O. could be annulled.
The assessee while filing its computation charge, deliberately concealed particulars in connection with consumption of Sui gas and power so that the Income-tax Officer was prevented to make a correct appreciation of assessee's manufacturing business. Therefore, the omission of Rs.81,690 on account of consumption of Sui gas and power, not disclosed by the assessee in the computation chart, filed with the original return, does amount to furnishing of inaccurate particulars of income which is punishable under section 28(1-A) of the Act and section; 119 of the Ordinance.
The assessee had made a plea for adoption of excise record o production as the basis for working out sales. Therefore even on this basis, disclosed turnover did not reveal correct picture of the assessee': turnover for the charge year 1976-77. On account of this reason also re-opening of assessment is held to be legally valid as there is concealment of turnover resulting eventually in suppression of income. In other words, this was not a case of under-assessment but concealment of income. Since non-disclosure of information with regard to expenditure on Sui gas and power has been held to amount to furnishing of inaccurate particulars thereby resulting in suppression of turnover and consequently of income, the provisions of section 34(1-A)(b) of the Act are attracted. Therefore, notice under the said section of the Act, could be issued and assessment finalized upto 30-6-1983.
This case is governed by the provisions 'of section 166(2)(C)(II) of the Ordinance and, therefore, notice under section 65 of the Ordinance could be issued in this case for making an additional assessment for the charge year 1976-77.
Since, however, section 65 has been held to be applicable on the facts of this case, period of limitation is governed by subsection (3-A) of section 65 of the Ordinance.
In this case, notice under section 65 of the "Ordinance having been issued on 1-2-1983 and having been served on the assessee before 15-2-1983, an additional assessment could be made upto 30-6-1984.
Therefore, on the facts of this case assessment dated 28-6-1984, is within the period of limitation and, therefore, could not be annulled.
--Ss. 65 & 59--Income-tax Act (XI of 1922), S. 34--Central Board of Revenue Circular No.11, dated 6-8-1981--Central Board of Revenue Circular No-10, dated 2-8-1982--Self-assessment (1981-82 and 1982-83)-- Assessee, a re-rolling Mill--Assessee, concealing positively its turnover and consequently Income for charge year--Case of assessee, held, would fall beyond scope of Self-Assessment Scheme as visualised by C.B.R. Circular Nos. 11 of 1981 and 10 of 1982.
M. Arshad Pervaiz, A.C./D.R. for Appellant.
Siddique Ch. I.T.P. for Respondent.
Dates of hearing: 21st July, 1985 and 24th March, 1987.
. --These are fourteen appeals, seven by the assessee, and seven by the department relating to the assessment years 1976-77 to 1982-83. For the assessment years 1976-77 to 1980-81 the assessment was originally made by the Assessing Officer on various dates but subsequently the cases were re-opened under section 65 of the Income-tax Ordinance on the ground that the assessee had suppressed sales receipts as they were not commensurate with the consumption of energy namely Sui gas and electricity. The proceedings were started on the receipt of the report froth the vigilance wing. Another reason for re-opening the case was that the assessee had made certain investments in property in the assessment years 1976-77, 1977-78 and 1978-79, and the value of these investments was under stated. Assessments for the assessment years 1981-82 and 1982-83 were framed under the normal law under section 62 of the Income-tax Ordinance.
2. Brief facts may here be stated under which these appeals have arisen. The assessee is an individual deriving income from running a Steel Re-rolling Mills. No accounts were maintained by him. The declared and assessed position upto the assessment year 1980-81 is as under:-
1.
.
The assessee declared receipts at Rs.1,46,520 with G.P. rate of 20% and net income of Rs.19,540 on 25-3-1977. The I.T.O. estimated the net income at Rs.23,000 under section 23 (3) of the repealed Income-tax Act (hereinafter referred to as the act). In the assessment year 1977-78, the assessee declared his receipts/sales at Rs.2,00,000 with G.P. rate of 18% and net income at Rs.23,000. The I.T.O. estimated the net income at Rs.27,000 under section 23 (3) on 6-11-1977. For the assessment year 1978-79 the declared income was accepted by the I.T.O. under section 23 (1) and under section 59 (1) for the assessment years 1979-80 and 1980-81. The declared and accepted incomes for these years were as under:-----
| 1978-79 | 1979-80 | 1980-81 |
| Rs.28,000 | Rs.28.200 | Rs.33,840 |
On 1-2-1983 the Assessing officer issued notices for the assessment Years 1976-77 to 1980-81 under section 65 of the Income-tax Ordinance and assessment was finalized for the assessment years 1976-77 to 1978-79 on 28-6-1984 and for the assessment years 1979-80 and 1980-81 on 16-4-1984. The revised assessments were made as under:
| Production estimated | 200 tons |
| Sale rate adopted | Rs.4,000 per ton |
| Sales estimated | Rs.8,00,000 |
| Applied G.P. rate | 12% |
| Expenses allowed | Rs.25,000 |
An addition of Rs.80,000 was also made on account of unexplained investment in property under section 13 (1) (d) of the Income-tax Ordinance. On appeal, the learned C.I.T. (Appeals) maintained the production, sales and sale rate but reduced the G.P. rate to 8%. The value of property estimated was also maintained but he directed to give benefits of the intangible additions.
| Production estimated | 300 tons |
| Sale rate adopted | Rs.4,000 per ton |
| Sales estimated | Re.12,00,000 |
| G.P. rate applied | 12% |
| Expenses allowed. | Rs.35,000 |
Addition of Rs.4,00,000 was made under section 13 (1) (d) of the Ordinance on account of unexplained investments in property. The C.I.T. (Appeals) reduced the G.P. rate of 8%.
| Production estimated | 400 tons |
| Sale rate adopted | Rs.4,000 per ton |
| Sales estimated | Rs.16,00,000 |
| G.P. rate applied. | 12% |
| Expenses allowed. | Rs.42,000 |
Addition of Rs.1,62,000 was made under section 13 (1) (d) of the Income-tax Ordinance, 1979, on account of unexplained investment. The C.I.T. (Appeals) reduced the G.P rate to 8%.
:
| Production estimated | 400 tons |
| Sale rate adopted | Rs.5,000 per ton . |
| Sales estimated | Re. 20,00,000 |
| G.P. rate applied | 12% |
| Expenses allowed | Rs.60,000 |
The Learned C.I.T. (Appeals) reduced the G.P. rate to 8%.
| Production estimated | 600 tons |
| sale rate adopted | Rs.6,000 per ton |
| sales estimated | Rs.36,00.000 |
| G.P. rate applied | 12% |
| Expenses allowed | Rs.90,000 |
Learned C.I.T. (Appeals) reduced the G.P. rate to 8%.
| Production estimated | 800 tons |
| Sale rate adopted | Rs.4,500 per ton |
| Sales estimated | Rs.36,00,000 |
| G.P. rate applied | 12% |
| Expenses allowed | Rs.90,000 |
Learned C.I.T. (Appeals) reduced the G.P. rate to 8%
| Production estimated | 400 tons |
| Sale rate adopted | Rs.4,500 per ton |
| Sales estimated | Rs.18,00,000 |
| G.P. rate applied | 12% |
Learned A.A.C. reduced the G.P. rate to 8%
The learned counsel for the assessee has argued the case on legal as well as on factual plane. He has raised a number of legal objections, against the re-opening of the case of the assessee. His first contention was that for the assessment years 1976-77 and 1977-78, the original assessment was made under section 23 (3) of the Act and the Assessing Officer accepted that the assessee was engaged in re-rolling for others. It was, therefore, contended that subsequently the I.T.O. could not re-open the case on the ground that the assessee was engaged in re-rolling on own account. It is contended that this amounts to change of opinion. This contention is devoid of any force for the simple reason that in the original assessment there is no such finding of the Assessing Officer that the assessee was engaged in re-rolling for others. As such there is no question of change of opinion.
The next legal objection raised by the learned counsel for the assessee was that there was no legal information on the basis of which the assessee' case had been reopened. It is contended that the report of the Vigilance Wing on the basis of which the assessee's case had been re-opended cannot be termed as information within the meaning of section 65 of the Income-tax Ordinance. Reliance has been placed on the case of Eastern Newspaper v. C.I.T. reported as 1981 PTD 237. In that case information of an Audit party was not considered as information by the Supreme Court. This case has no relevancy and the case of the assessee is distinguishable. In the present case Vigilance Wing submitted the report. In any case this argument is wholly irrelevant as the Assessing Officer had taken the required approval of the I.A.C. before re-opening of the case. The next contention of the learned Counsel for the assessee was that no fresh enquiry could be made for the purpose of re-opening of the case of the assessee. It was submitted that the Assessing Officer had no evidence of suppression of income. This objection could be disposed of on the short ground that the Assessing Officer had received information from the Vigilance Wing that the assessee had understated the consumption of energy. Now this information might or might not be correct. What section 65 requires is that there should be definite, information, which may not necessarily be correct. Since it was an information supplied to the Assessing Officer no exemption could be taken against re-opening of the case on this ground.
4. The learned counsel for the assessee has also argued that there was no question of suppression of energy consumption by the assessee as it never declared any consumption of energy in his computation of income. The assessee had only declared the receipts and expenditure. It was submitted that since consolidated expenditure had been declared by the assessee, which included the expenditure on consumption of energy, there was no question of suppression of energy. This contention appears to be correct. Therefore, this is not a case of suppression of income or expenditure but at best it can be a case of under assessment. It may be noted that the assessment had been finalized for the assessment year 1976-77 on 25-3-1977. The assessee's case could be re-opened under section 34 of the Act, upto 30-6-1979. The assessee's case was time-barred when the Income-tax Ordinance came into force on 1st July 1979. Therefore, no notice under section 65 could be issued against the assessee for the assessment year 1976-77. It may be noted that the Act was repealed under section 166 (1) of the Income-tax Ordinance. Subsection (2) of section 166 saves certain provisions of the repealed Income-tax Act. Section 166 (2) (c) (ii) lays down that where an income chargeable to tax had escaped assessment or '2:4d been under assessed etc. or the tax payable had been determined under subsection (1) of section 23 and no proceeding under section 34 of the Act were pending as on 1-7-1979, a notice under section 65 could be issued. In that case all the provisions of the Ordinance would be applied. Section 166 (2) (c) (ii) of the Ordinance is reproduced below:
(2) Notwithstanding the repeal of the Income-tax Act, 1922 (XI of 1922) and without prejudice to the provisions of section 6 or section 24 of the General Clauses Act, 1897(X of 897),
(a) x x x x x x x x x x x x x
(b) x x x x x x x x x x x x
(c) Where in respect of any assessment year
(i) x x x x x x x x x x x x
(ii) "any income chargeable to tax had escaped assessment, or had been under assessed or assessed at too low a rate, had been the subject of excessive relief or refund of the total income or the total world income and the tax payable had been determined under subsection (1) of section 23 of the repealed Act and no proceedings under section 34 of the said Act in respect of any such, income are pending at the commencement of this Ordinance apply accordingly:
As stated above this was case of under assessment which would fall under section 34 (1) of the Act. The limitation for re-opening the, case provided under section 34 (2) of the Act was two years from the end of the year in which the income was first assessable. The income was assessable for the assessment year 1976-77 upto 30-6-1977. Therefore, the limitation for re-opening of the case under section 34 (2) of the repealed Income-tax Act was upto 30-6-1979. Thus, before the income-tax Ordinance came into force, the limitation to reopen the case of the assessee had already expired. This is settled law that unless a statute expressly so provides or unless there is a necessary implication, retrospective operation cannot be given to the statute Sol as to affect, alter or destroy any right already acquired or to revive any remedy already lost by efflux of time. Neither section 166 (2) nor section 65 of the Ordinance gives such a power to the I.T.O. so as to revive his power to reopen the case in which the remedy is barred by time before coming into force by the Income-tax Ordinance. This question was considered by the Supreme Court of India in J.P. Jani, Income-tax Officer v. Induprasad Devshanker Bhatt reported as 72 ITR 595. In that case in the similar circumstances the case was reopened under the new Income-tax Act, 1961 which came into force on 1st April. 1962. The Assessing Officer issued notice under the new Act which empowered him to reopen the case and under which the limitation period for reopening the case had been enlarged but under the repealed law the limitation to re-open the case had expired before coming into force of the new law. In that case the saving clause corresponding to section 166 (2) (c) (ii) of the Income-tax Ordinance, 1979 was section 297 (2) (d) (ii) of the Indian Income-tax Act. 1961. Corresponding to section 65 of the Income-tax Ordinance 1979 was section 1-18 of the Indian Income-tax Act. The assessee challenged the re-opening of his case and the High Court accepted the plea of the assessee against which the appeal was filed before the Supreme Court. Supreme Court referring to the judgment of the High Court observed:-
"The high Court took the view that on a true construction of section 297 (2) (d) (ii) of the new Act. The Income-tax Officer could not issue a notice under section 148 in order to reopen the assessment in a case where the right to open the assessment was barred under the old Act at the day when the act came into force. The High Court observed that the right of the Income-tax Officer to reopen the assessment of the respondent in the present case was admittedly barred under section 34 (1) (a) of the old Act at the commencement of the new act and it was, therefore, not competent to the income-tax officer to issue a notice under section 148 of the new Act in order to reopen the assessment of the respondent relying on the provisions enacted under section 297 (2) (d) (ii) of the new Act."
8. Before the Supreme Court it was argued by the counsel for the state that intention of the legislature was that the assessment in respect of any assessment year could be reopened under the new law and such cases should be decided with reference to the new provision of law. It was argued before the Supreme Court that under the new law all such cases could be reopened irrespective of the position in regard to the old law. Dealing with this argument, the Supreme Court observed:
"In our opinion, the argument put forward by Mr. Narasaraju is not warranted. It is admitted in this case that the right of the Income-tax Officer to reopen the assessment for the year 1947-48 was barred under the old Act before the new Act came into force. In our opinion it is not permissible to construe section 297 (2) (d) (ii) of the new Act as reviving the right of the Income-tax Officer to reopen the assessment, which was already barred under the old Act. The reason is that such a construction of section 297 (2) (d) (ii) would be tantamount to giving of retrospective operation to that section which is not warranted either by the express language of the section or by necessary implication. The principle is based on the well-known rule of interpretation that unless the terms of the statute expressly so provide or unless there is a necessary implication, retrospective operation should not be given to the statute so as to affect, alter or destroy any right already acquired or to revive any remedy already lost by afflux of time."
It was further observed by the Supreme Court:-
"We considered that the language of the new section must be read as applicable only to those cases where the right of the Income-tax Officer to reopen the assessment was not barred under the repealed section."
In arriving at this conclusion the Supreme Court referred to its earlier decision is S.S. Gadgil v. Lal & Co., reported as (1964)-53-ITR-231-240 (S. C.)
9. This decision was subsequently followed by the Calcutta High Court in Manik Chand Nahata v. I.T.O. and reported as 78 ITR 204 and by the Patna High Court in C.M. Rajgharia and another v. I.T.O. reported as 98 ITR 486.
To sum up for the assessment year 1976-77 the I.T.O.s remedy to reopen the case was already time-barred under section 34 (2) of the Repealed Income-tax Act before Income-tax Ordinance came into force and therefore, the I.T.O. could not reopen the assessee's case for that assessment year and the assessment is liable to be annulled for the assessment year 1976-77.
10. On merit, the I.T.O. has estimated the production of the assessee on the basis of the consumption of the energy. The Assessing Officer has no material on record to make an estimate of production nor there is any material to adopt the sale rate. As against this the assessee had produced the Excise record duly certified by- the Excise Authorities, according to which the production of the assessee was 92.6 tons in the assessment year 1976-77 and 180 tons in the assessment year 1977-78. In the absence of any material on record the Assessing Officer was not justified to disbelieve the production duly authenticated by the Excise Authorities. The I.T.O. has only given one reason for disbelieving the Excise record i.e., consumption of energy. The learned counsel for the assessee has given detailed reasons that the consumption of the energy depends on various factors and production may not be necessarily uniform on the basis of the consumption of energy. In any case the formula adopted by the I.T.O in regard to the production with reference to the consumption of energy is only a rough estimate as against the concrete evidence of the Excise Authority in regard to the Production. Therefore, in our view, if at all the production could be adopted it could be on the basis of the Excise record unless the I.T.O. had concrete material to discard this record. Mere guess work on the I.T.O. is not sufficient to reject the authentic record of the Excise Authorities. The sale rate adopted by the I.T.O. in both these assessment years is reasonable.
11. Since we have already held that the reopening of the case of the assessee for the assessment years 1976-77 was without jurisdiction we direct that the re-assessment for assessment year 1976-77 be annulled.
12.
Since we have already dealt with the legal objections raised by the learned counsel for the assessee in regard to the reopening the case in the earlier year the same view holds good in this assessment year as well but in the assessment years limitation had not expired before coming into force of the Ordinance. Therefore, re-opening of the case was legally- correct. The Assessing officer has estimated the production at 300 and 400 tons respectively for the assessment years 1977-78 and 1978-79. For the same reasons recorded in the assessment year 1976-77, we direct that the production as shown in the Excise record should be adopted which is 180 and 264 tons respectively. The sale rate adopted by the I.T.O. at Rs.4,000 per ton is reasonable and is maintained for both the years. In regard to the G.P. rate the learned counsel for the assessee has filed a number of parallel cases showing that much lower G.P. rate is applied in other cases. These are:
(1) Messrs Ravi Steel Re-rolling Mills, Lahore for the assessment year 1981-82 the C.I.T. (Appeals) has, applied a G.P. rate of 6.25%.
(2) G.I R. No.1727-VII:
In this case G.P. rate of 6.5% has been applied by the I.T.O. on sales estimated at Rs.11,25,000 for the assessment year 1976-77.
(3) G.I.R. NO. 1220-VII:
For the assessment year 1976-77 G.P rate of 6.25% has been applied by the I.T.O. himself.
(4) I.T.A. No. 3955 of 1981-82:
Relating to the assessment years 1978-79 and 1979-80 decided on 30-1-1983. In this case G.P. rate applied was 12% but the Tribunal accepted the declared trading results of the assessee in which G.P. rate at 4% and 4.3% had been declared by the assessee. In the aforementioned cases, the Tribunal had dealt with all the parallel' cases which are relied upon by the department. In view of the above parallel cases, we direct the G.P. rate of 6.5% be applied as at least in one of the cases relied upon by the learned counsel for the assessee himself G.P. rate of 6.5% had been applied.
In the assessment year 1977-78 the assessee also acquired a plot measuring 8 Kanals 2 Marlas and 66 sq. ft. The cost of the plot was shown at Rs.1,10,000. The I.T.O. estimated the value of the plot at Rs.5,00,000 and accepted the assessee's explanation to the extent of I Rs.1,00,000 and added Rs.4,00,000 as unexplained investment.
The learned A.R. contended that firstly the Assessing Officer had no basis for disbelieving the documentary evidence ire regard to the valuation of the plot purchased by the assessee. Secondly, it was contended, that the Assessing Officer has based his valuation on irrelevant consideration. It was submitted that the I.T.O. is stated to have relied upon the statement of the property dealer made in 1984. It was contended that the statement of the property dealer was absolutely incorrect inasmuch as no adjacent plot was available for sale in the vicinity as there is no passage for those plots. Therefore there was no question of valuation of any such plot. It was further contended by the learned A.R. that the plot in question was not on the main road. The learned counsel has also relied upon various registered sale-deeds relating to the locality where the plot is situated. He has filed 15 registered deeds, which are made between 4-6-1975 to 8-6-1986 the sale rate shown in these deeds ranged from Rs.7,200 per Kanal in 1975 to Rs.1,00,000 per Kanal in June 1984. The nearest date of value shown in the registered deed is dated 19-8-1978 according to which the plot of 16 Marlas and 119 sq. ft. was purchased for Rs.18,000 which is situated at G.T. Road Lahore. According to this deed the value of the plot per Marla was Rs.1,090 or Rs.21,800 per Kanal. As for the contention of the learned A.R. that the value given in the registered deed should be adopted, we do not contribute to this view. This is common Knowledge that in the registered deed correct value of the property is not shown. At the same time there is some force in the arguments of the learned counsel for the assessee that the property dealer's statement was not based on any particular instance. The transaction was made as back as in June 1977 and the plot is not situated on the main G.T. Road. It is common knowledge that in June 1977 there were political disturbances and the value of the property was much less than the market value We feel that the value adopted by the I.T.O. is excessive which is reduced to Rs.3.00.000. It is further directed that the benefit of intangible additions should also be given before making any addition. The assessee should also be provided an opportunity of being heard before any addition is made.
The next contention of the learned counsel for the assessee for the assessment year 1978-79 is in regard to the addition made under section 13 (1) (d) of the Income-tax Ordinance. The assessee in this assessment year purchased a plot measuring one banal 5 marlas on 4-4-1978. The assessee showed its purchase price at Rs.18.000 The I.T.O. adopted the value of this plot at Rs.1,80,000 (10 times the value declared by the assessee). The I.T.O. therefore, made an addition of Rs.1,622,000 (Rs.1,80,000 minus Rs.18.000). The learned C .T. (Appeals), however, on appeal considered this valuation as excessive and reduced it to Rs.1,25,000 with the result that addition of Rs.1,07.000 was maintained. The learned C.I.T. (Appeals) also directed to give benefit of the intangible addition made in the trading account.
12. The learned counsel for the assessee vehemently contended that the value adopted even by the C.I.T. (.appeals) is excessive. The learned counsel for the assessee contended that this was a residential plot. The contention of the learned counsel for the assessee was that the plot was purchased through registered sale-deed and, therefore, the I.T.O. could not arbitrarily estimate to the value of the plot against the value given in the registered deed. It was further contended that the learned Assessing Officer had no material with him to adopt the exorbitant value of the plot. In support of his contention the learned counsel has produced photo copies of various registered deeds from 4-6-1975 to June 1984 in that area. The earliest sale-deed produced is dated 29-4-1975 under which a plot, measuring one Kanal was stated to have been purchased for Rs.14,000 which works out tee Rs.700 per Marla. The latest sale-deed is dated 8-6-1984, in which the plot of 2 Kanals 5 Marlas was purchased @ Rs.5,000 per Marla. The sale-deed which is nearest to the assessee's date of purchase is dated 19-3-1978 which was purchased at the rate of Rs.1,090 per Marla-. On the basis of these sale-deeds, learned counsel for the assessee contended that the assessee had given correct purchase price of his plot, which works out to Rs.720 per Marla. The learned D.R. on the other hand contended that the Assessing Officer had himself visited the spot and he estimated the value of the plot after seeing the locality himself. We have considered the arguments of the parties and feel that in April 1978 the price as has been adopted by the I.T.O. and even by the C.I.T. (Appeals) is still excessive. It is true that the price given in the registered deed is not binding on the Assessing Officer and he can arrive at his independent conclusion. But at the same time the price in such a far flung area in April 1978 could never be at Rs.12,500 per Marla or even at Rs.5,000 per Marla as has been adopted by the C.I.T. (Appeals). At the same time we are not inclined to accept the assessee's contention that plot was purchased by him for Rs.18,000 as it is common knowledge that generally the value shown in the registered deed is lower than the actual market value. We, therefore, direct that the value should be adopted at Rs.3,000 per Marla. The value of the plot would work out to Rs.75,000. The benefit of intangible addition should also be given to the assessee as directed by the learned C.I.T. (Appeals).
The assessee for this assessment year declared his receipts/sales at Rs.2,80,,000 with G.P. rate of 18% and net income at Rs.28,200 which was accepted by the I.T.O. under section 59 (1) under the self-assessment Scheme on 1-3-1980. Subsequently, the I.T.O. re-opened the case of the assessee under section 65 of the Ordinance on the ground that the assessee has suppressed his expenses incurred on payment of electricity and Sui-gas and secondly the assessee had acquired properties during the assessment years 1976-77 to 1980-81, and their value was understated. Consequently, the Assessing Officer made his own estimate of production at 400 tons and estimated the sales at the rate of Rs.5,000 per ton at Rs.20,00,000 and G.P. rate of 12% was applied and after allowing expenses at Rs.60,000 net income was assessed, at Rs.1,80,000: It may be mentioned here that as for the second ground on the basis of which the case was re-opened it was not available nor there is any mention in the entire re-assessment order. It seems that ground was baseless as no addition was made on that account nor any discussion has been made to that affect. Therefore, the only reason for which the case of the assessee was re-opended was the alleged suppression of expenses on Sui-gas and electricity. From the perusal of the order of the Assessing Officer it is found that "cording to his thinking the production of 239.7 metric tons was low compared to the energy consumption amounting to Rs.1,91,499. It may further be mentioned that the assessee does not maintain any accounts. The assessee had claimed re-rolling and cutting charges at Rs.2,80,000 on which G.P. rate of 18% has been declared which in other words meant that the assessee had claimed total expenses at Rs.2,29,600. It was argued that since the assessee had not declared expenses on Sui-gas and electricity separately, therefore, there was no question of any suppression. The learned counsel for the assessee, therefore, contended that the Assessing Officer was not competent to re-open the case of the assessee under section 65 of the Income-tax Ordinance on the ground that under self-assessment scheme for the charge year 1979-80 it was specifically prohibited under para. 6 of that scheme that the assessment completed under self-assessment scheme would not be re-opened unless there was a prima facie case of concealment of income. The second condition in that case was that such cases would be selected only with the approval of the C.I.T. It was, therefore, contended that in the present case neither there was prima facie evidence of concealment nor the C.I.T.'s approval has been obtained.
14. The learned D.R. on the other hand contended that the Assessing Officer had rightly reopened the case of the assessee, as there was prima facie evidence of concealment of income inasmuch as the assessee had suppressed the expenses on Sui gas and electricity. In regard to the approval of the C.I.T. he conceded that no such approval of the C.I.T. had been obtained. However, he contended that the scheme is ultravires of section 65 of the Income-tax Ordinance under which only L.A.C's. approval is necessary.
15. As for the first point, we are inclined to agree with the learned counsel for the assessee that this was not a prima facie case of concealment of income. It was at best a case of difference of opinion. The assessee had never declared expenses on Sui gas and electricity separately. Therefore, it cannot be said that this was suppression of expenses and for that matter it could not be said that the assessee had concealed the income. It may be a case of under assessment but certainly not of concealment of income. The department's case-in nutshell) seems to be that the assessee's income, to the estimate of I.T.O. was more than what had been declared under the self-assessment scheme or in other words to the estimation of the I.T.O. it could be more than the declared income on the basis of Sui gas and electricity consumption This is at best a change of opinion in the estimation of income and not a case of concealment of income. The concept of concealment of income is entirely different. As for instance if an assessee has two sources of income but declares only one or where there is a positive evidence, of concealment of even certain part of income. In the present case it was merely the I.T.O's. conjecture that on the basis of the consumption of energy possibly the income could be more than what had been declared by the assessee. This guess work may even be correct. Still it cannot be said that this is evidence on the basis of which a finding could be given that this was a case of concealment of income. In regard to the second issue as to whether the C.I.T's. approval was necessary or not we have to examine the D.R.'s contention in regard to the vires of this provision of the scheme. Section 59 (l) lays down that the income declared by an assessee in the given circumstances is qualified for acceptance and the I.T.O. is bound to assess the income on the basis of such return. In the original section 59(1) there was no mention about the self-assessment scheme which finds mention in the substituted section 59 (1) which was replaced by the Finance Ordinance 1980. The main difference between the old section 59 (1) and the substitute section is that in the old section it was discretion with the I.T.O. to accept or not to accept the income declared. The revised subsection (1) has made it obligatory on the I.T.O. to accept the income declare if qualifies for acceptance and is in accordance with the provisions of self-assessment scheme made by the C.B.R., The contention of the learned D.R. was that in order to re-open a case under section 6 prior approval
of the I.A.C. is necessary under subsection (2) of section 65. According to him, para. 6 of the scheme is directly in conflict with section 65(2) as it lays down that before reopening a case already assessed under the self-assessment scheme, prior approval of the C.I.T. is necessary. It was, therefore, submitted that this para of the scheme is ultra vires of subsection (2) of section 65 and therefore, has no legal effect. This contention is completely devoid of any force. It may be stated here that the assessee's case was re-opened in 1983 and the re-assessment was completed on 16-4-1984 for this assessment year. By the Finance Ordinance, 1980 subsection (4) had been added to section 65 of the Income-tax Ordinance, which has changed the complete Complexion in regard to the re-opening of the case assessed under section 59 (1) of the Income-tax Ordinance. It provides that subsection (2) shall not be applicable in respect of cases or class of cases to which clause (c) of subsection (1) of section 65 applies, and which may be specified by the C.B.R.
The self-assessment scheme was prepared by the C.B.R. vide notification dated 13-8-1979. The C.B.R. specified that the cases covered by clause (c) of subsection (1) of section 65 could only be re-opened only on two conditions. Firstly, there must be prima facie case of concealment of income and secondly selection of such cases has to be made with the prior approval of the C.I.T.
Therefore, we see no conflict between subsection (2) of section 65 and para. 6 of the self-assessment scheme. On the contrary the scheme has conformity with the subsection (4) of section 65 which excludes the application of subsection (2) meaning there where clause (c) of subsection (1) applies subsection (2) does not apply and prior approval of the I.A.C. is not necessary but then the prior approval of the C.I.T. is necessary. It may further be stated that the directions given in the scheme are more than the administrative instructions. It is a full-fledged scheme, which gives certain rights and imposes corresponding liabilities on the tax-payers. An assessee in certain cases is liable to certain penalties. This is sort of an undertaking on behalf of the Government that if an assessee voluntarily pays certain taxes in given circumstances there is an immunity. This is to attract the tax-payers and to encourage them to pay proper taxes voluntarily. It is for this reason that in case certain concealment of income is detected besides penalty even a prosecution is possible. It is for this reason that the interest of the tax-payers is safeguarded. In such cases, the assessee should not be left on the mercy of the arbitrary action of the Assessing Officer. Since serious consequences flow from the action of the Assessing Officer, therefore, it has been made obligatory that in such a case the C.I.T's. prior approval should be obtained.
17. For the foregoing reasons we hold that since there was no prima facie case of cancealment and since the C.I.T's. approval has not been obtained before re-opening of the case, the whole action of the Assessing Officer was without jurisdiction and re-assessment order is, therefore annulled.
In this assessment year the assessee declared his receipts at Rs.4,00,000 with G.P. rate of 12% and net income at Rs.33,840. The assessees declared income was accepted under section 59 (i) of the Income-tax Ordinance on 23-11-1980. The assessee's contention for this assessment year was that the I.T.O. was not justified to re-open the case and that the assessment of income was excessive in regard to the re-opening of the case we have already held for the assessment year 1978-79 that a definite information was available with the Assessing Officer and, therefore, he was competent to re-open the case of the assessee. In regard to the production we have already held in the assessment year 1977-78 and 1978-79 that the production on the basis of excise record should be accepted. For the same reasons we direct that the production as given in the excise record should be accepted. Similarly in regard to the G.P. rate, we have already held that that G.P. rate of 6.5% is reasonable. The same should be applied in this assessment year.
The next contention of the learned counsel for the assessee was about the sale rate adopted by the I.T.O. at Rs.6,000 per ton which is stated to be excessive. In support of his contention the learned counsel has cited parallel cases where much lower sale rate had been adopted for the same assessment year. In the case of Messrs Ravi Steel Re-Rolling Mills, Lahore for the assessment year 1980-31 the learned C.I.T. (Appeals) has maintained the sale rate at Rs.5,000. We, therefore, direct that the same sale rate should he adopted in this assessment year.
19. ASSESSMENT YEARS 1981-82 AND 1982-83:
For these two assessment years the learned counsel for the assessee contended that the case had been wrongly dealt with under normal law-as the returns were filed under self--assessment scheme and should have been accepted under section 59 (1). Para. I of the scheme contained in Circular No. 11 lays down that all the returns for the assessment year 1981-82 would be self-assessment returns subject to certain condition, and unless such cases were selected for detailed scrutiny. In clause (a) of Para. I it is provided that all returns for the assessment year 1981-82 would be accepted unless disqualified under pare. 4 of the Circular. It was pleaded that none of the four disqualifications mentioned in para. 4 of the Circular were available it the assessee's case. The learned D.R. on the other hand relied upon disqualification No.3 of para. 4 which says that evidence of concealment is a disqualification for acceptance under self-assessment scheme. The learned D.R. has also relied upon para. 9 of the scheme which provides that where positive evidence of concealment exists and comes into possession of the department during the pendency of the assessment return in such cases shall fall outside the purview of self-assessment scheme as well as from immunity from scrutiny. The learned counsel on the other hand contended that there was no positive evidence with the Assessing Officer of concealment of income. 'Here fact that an Assessing Officer differs with the resultant production with relation to the energy, consumption cannot be called a positive evidence of concealment of income particularly when .the production of the assessee is duty certified' by the Excise Authority. We have already held in earlier years that production as per Excise Record should be accepted. Therefore, the Assessing officer's assumption that possibly more production might have been made by the assessee on the basis of the energy consumed by him, cannot be treated as positive evidence of concealment of income. Here a distinction must be drawn between the evidence of concealment and positive evidence of concealment. Two phrases do not carry the same meaning. Positive evidence of concealment means something more than the evidence of concealment. In other words not only it should be the evidence of concealment but it should be concrete and positive. This is obviously so because, as stated above if a concealment of income is detected besides the penalty, even prosecution may follow. In the present case, there is no positive or concerete evidence available with the I.T.O. on the basis of which it could be said that the assessee had concealed his income. It may be stated that the Assessing Officer conceded in the assessment order that the assessee's return was immune from the detailed scrutiny as he had declared 20% higher income as compared to income in the immediately preceding assessment year. However, he reproduced stereotype two reasons on the basis of which he stated that certain evidence was available that the assessee's sales were less than two times of the expenses incurred on the energy bills. These two reasons are reproduced:-----
(i) That assessee grossly suppressed his expenses incurred on payments of electricity and Sui-gas bill.
(ii) Properties were purchased by the assessee during the assessment years 1976-77 to 1980-81 for lacs of rupees but the value declared to the department is too low. The registered value was highly understated.
20. It may here be noted that while re-opening the cases for earlier years the same two grounds have been given. Although in this assessment year no property was purchased by the assessee and even according to Ground No.2 the property was allegedly purchased by the assessee between 1976-77 to 1980-81. Therefore, it appears that the Assessing Officer without applying his mind just followed the earlier assessment) order. We have already held that there is no question of suppression) of expenses on payments of electricity and Sui-gas bills as the assessee has never declared such expenses as such separately. Therefore, it could never be said that the Assessing Officer had positive evidence with him for the concealment of income. Similarly in the assessment year 1982-83, as well the same stereotype two grounds have been given by the Assessing Officer for not accepting the assessee's return under Self-Assessment Scheme. In this assessment year as well the Assessing Officer conceded that the assessee's return was immune from the detailed scrutiny. We have shown above that the ground No.2 is not available at all and even the ground No.l has no application. A mere conjecture of possibility of suppression of expenses cannot be termed as positive evidence of concealment of income. Assuming that there was low production as compared to the consumption of energy, there could be numerous explanations, which in fact were given by the learned counsel for the assessee's before us. However, since we have already held that enough material was not available with the Assessing Officer to hold that the production certified by the Excise Authority was incorrect, a mere conjecture of the Assessing Officer that such a production in the absence of any material on record, was low as compared to the energy consumption this guess work cannot be regarded as positive evidence of concealment of income. Since the Assessing Officer has conceded that otherwise the assessee' returns for both the assessment years were immune from the detailed scrutiny, we direct that the assessee's return should be accepted under the self--assessment scheme for the assessment years 1981-82 and 1982-83.
21
: The department has contested the reduction of G.P. rate from 12% to 8%. Since we have already further reduced the G.P. rate in the assessee's appeals and have accepted the assessee's appeals, the same reasons hold good in the departmental appeals, which are dismissed.
--I agree with the findings of my learned brother except with regard to three issues. The first relates to the question of annulment of the assessment order for the year 1976-77 arid second in regard to G.P. rate applied by the I.T.O. at 12% and reduced by the learned C .I .'T . (A) to 8% and which has further been reduced to 6.5% in the above order. The third issue relates to the question of acceptance of the returns for tile assessment years 1981-82 and 1982-83 under tile self-assessment scheme. In regard to assessment year 1976-77 the Judicial Member has annulled the assessment order on the plea that tile re-assessment could be made within the two years i.e. upto 30-6-1979 before coming into operation of the Income-tax Ordinance, 1979, with effect from 1-7-1979. In regard to assessment years 1977-78 and 1978-79 he is, however, of the view that limitation had riot expired before coming into force of the Income-tax Ordinance. Therefore, reopening of these two cases was legally correct. Since I do not agree with his view regarding 1976-77 assessment year hence this dissenting order.
2. In regard to assessment year 1,976-77 the facts briefly stated are that tile assessee filed return showing an income of Rs.19,540 which was assessed by the Assessing Officer on an income of Rs.23,000 but which was later assessed under section 65 at Rs.1,51,000. This is a case where accounts have not been maintained by the assessee and none were produced. After framing the original assessment the I.T.O. received a report about an enquiry conducted by the Directorate of Vigilance Wing Lahore. The enquiry report indicated--
(i) that the assessee has grossly suppressed his expense: incurred on payment of electricity and Sui-gas bills.
(ii) that properties were purchased by the assessee during tile assessment years 1976-77 to 1980-81 for lakhs of rupees, but the value declared to the Department is too low as the registered value was highly under-stated.
3. On the basis of this report the I.T.O. issued a notice under section 65 of the Income-tax Ordinance, 1979 with the prior approval of the I.A.C. In response to his notice fresh return was filed declaring the same figure of income which as per chart, was computed as under:
| Sales of M.S. Bars and re-rolling charges | 1,46,520 |
| G.P. rate at 20% | Rs. 29,304 |
| Less expenses. | Rs. 9,764 |
| Rs. 19,540 |
From tile report of Vigilance Wing the I.T.O., however, observed that total expenditure on consumption of Sui Gas and electricity was Rs.81, 189 as against which the assessee had shown sales of Rs.1,46,520. The sales were even less than two times of the expenses incurred on energy bill which proposition was not acceptable as sales are noted to be 8 to 10 times of the consumption of energy. The I.T.O. observed as follows in the assessment order:-
"Perusal of enquiry report shows that assessee during the year under consideration spent Rs.68,852.80 for Sui gas and Rs.12,837.12 for electricity. Whereas declared sales are only to the extent of Rs:1,46,520 on account of sale of M.S. Bar and re-rolling charges etc. as per computation chart attached with the return. Total of these two expenses are at Rs.81,189 and declared sales are even less than two times of the expenses incurred on energy bills. Usually sales are taken from 8 to 10 times of the energy bills consumed. These figures clearly indicate that assessee has concealed the true particulars of his income."
4 The assessee had not maintained any accounts, nor had he produced any details before the I.T.0 or before any other authority. In regard to non-maintenance of books his observations were as follows:
"The plea of the A.R. that assessee is not maintaining any accounts and as such no details can be furnished is entirely baseless as the products manufactured by the assessee is an excisable item and under the central excise rules proper record of production and clearance is maintained in prescribed register and as well as inflow and outflow of raw material and finished goods is also maintained from where re-rolling done for others can be ascertained. Moreover, goods cleared from the factory are sent after issuing of gate pass, where the name of the parties is mentioned to whom goods are delivered."
"In view of the above the plea taken by the A.R. in respect of re-rolling for others is rejected and the same will be treated as assessee's own production."
According to the excise record the production was 92,600 metric tons.
5. The I.T.O. estimated the sales at Rs.8,00,000 to which a G.P. rate of 10% was applied and business income was computed at Rs.71,000. The assessee also purchased property of one Kanal which was stated to have been purchased for a consideration of Rs.20,000. The I.T.O. estimated the value at Rs.1,00,000 and added to income the unexplained difference of Rs.80,000 under section 13(1) (d) of the Income-tax Ordinance thus arriving at the total income of Rs.1,51,000. No income from property was assessed in the original assessment.
6. While disposing of the appeal the learned C.I.T. (A) observed as follows:
"The above chart clearly shows that the receipts declared by the assessee were not commensurate with the consumption of the energy i.e. Sui gas and electricity. As the assessee had made a deliberate effort not to disclose the figures of energy consumption the Income-tax Officer was justified in taking action under section 65 of the Income-tax Ordinance, 1979."
7. The C.I.T. (Appeals) confirmed the estimate of sales but reduced G.P. rate to 8% and the estimate of property income was, however, confirmed
8. While disposing of the appeal my learned brother has taken the following views. My own views on the points have been given simultaneously:
(i) The assessee's plea that the I.T.O. earlier accepted that re-rolling was done for others, but later changed his view and came to the conclusion that he had done his own production amounted to charge of opinion. He could not issue a notice under section 65. My learned brother has given the finding that it was not a. change of opinion. I also agree with this view.
(ii) As regards the assessee's view that there was no legal information on the basis of which the assessee's case could be reopened, as the Vigilance Wing's information cannot be treated as information for reopening the case under section 65 of the Income-tax Ordinance, 1979, reliance was placed on the case reported as Eastern Newspapers v. C.I.T. reported as 1981 PTD 237. In that case information of Audit Party was not considered as an information by the Supreme Court of India. The learned Judicial Member considering the case as distinguishable has not accepted the assesse6's view. I agree with his view and would like to add that the Vigilance Wing is not an Audit party but it is a department functioning under the Central Board of Revenue and its main function is to check the evasion of taxes and duties. On the basis of information, which comes to their knowledge they conduct enquiries and pass on the results of the enquiries to the Commissioner of Income-tax concerned. Their reports, in my view, constitute definite information and in fact indicate usually on the basis of documentary evidence how the assessee has suppressed the income or concealed the particulars of income.
(iii) The next finding is in regard to the question of energy consumption. My learned brother accepting the view of the assessee that expenses claimed included cost of energy consumption in so far as the assessee had declared receipts and expenses and the energy expenses were included in the total expenses. He has given the finding that the assessee's contention appears to be correct and at best it is a case of under-statement. I am afraid I do not agree with this view in so far as the Vigilance Wing has indicated the consumption of energy at Rs.81,189 and this figure was not given by the assessee. He deliberately furnished inaccurate particulars thereof or omitted or failed to disclose all material facts necessary for assessment for such a year. The provision permits an I.T.O. to issue a notice under section 34 within 6 years from the end of the year in which the assessment for such a year was first made. As the assessee had failed to disclose all material facts it amounted to concealment of income.
(iv) On the basis of his assumption that it was a case of under assessment, my learned brother has taken the plea that the assessment for 1976-77, which has originally been completed on 25-3-1977 could be reopened under section 34 and finalised upto 30-6-1979. The case was, therefore, timebarred. I am however, of the view that as the assessee's action amounted to concealment of income or furnishing inaccurate particulars thereof or omission or failure to disclose all material facts necessary for assessment, therefore, the assessment for 1976-77 can be reopened and assessed not within two years upto 30-6-1979, but it can be reopened within 6 years from the end of the year in which the assessment was first made as laid down in clause (b) of subsection (1-A) of section 34 of the Income-tax Act. The assessment can, therefore, be reframed upto 30-6-1983. In other words the period to reopen the case had not expired on 1-7-1979 the Income-tax Ordinance, 1979 came into operation on 1-7-1979. Incidentally the Income-tax Ordinance further extends the period under which a revised assessment can be made under section 65 within 10 years from the end of the assessment year in which the total income of the such year was first assessable. Therefore, the revised assessment which was made under section 62/65 prior to 30-6-1983 was validly made both under the Income-tax Act. 1922 as well as
under the provisions of the Income-tax Ordinance 1979.
(v) It has been observed in the above order that neither section 166 (2) nor section 65 of the Income-tax Ordinance gives such a power to the I.T.O. so as to revive his power to reopen the case under which it has been barred by time before coming into force of the Income-tax Ordinance. He has relied on the decision of the Supreme Court of India in J.P. Jani the I.T.O. v. Induparasad Dev Shanker Bhatt reported as (1972) l.-T.O. 595. This case has been referred to show that the Indian Income-tax Act, 1961 was declared to be not applicable to cases where the assessment had already become barred by time before the new Act came into force. I am of the view that the ratio of this case would not apply to the case under consideration before us since the schemes of the operation of the corresponding provisions under the Indian Income-tax Act, 1961, are different from those of the Pakistan Income-tax Ordinance. 1919. In India under section 139 (2) of the Income-tax Act the I.T.O. could issue a notice for filing the return of income of the previous year only as was the case under section 22 (2) of the Indian Income-tax Act and not for any year. On the other hand whereas section 22 (2) of lie Pakistan income-tax Act, 1922 permitted the I.T.O. to issue notice only for the previous year, but the corresponding section 56 permits the I.T.O. to issue the notice for any year. In section 65 the limitation is laid down as 10 years within which the revised assessment can be made. Therefore, the position' obtaining under the new Indian Income-tax Act, 1961 is different from that obtaining under the Income-tax Ordinance, 1979.
(vi) An opinion has also been expressed in the above order that unless there is a necessary retrospective operation allowed in an Act it cannot alter or destroy any right which had already been acquired or to revive any remedy already lost by afflux of time. Although I have taken the view that this being a clear case of concealment of income or a case where deliberately inaccurate particulars were furnished and the assessee omitted or failed to disclose all the material facts necessary to the assessment, therefore, it can be assessed within 6 years from the end of the year in which the assessment eras first made as laid crown in section 34(1-A) (b) of the Income-tax Act, but notwithstanding this position the Income-tax Ordinance, 1979 permits retroactivity also just as the Income-tax Act, 1922, permitted retrospective operation under section 34 of the Act. Section 65 read with section 56 shows that it covers a period of 10 years prior to 1-7-1979 though subject to certain limitations placed on the I.T.O. under which the assessments for the years prior to 1-7--1979 could be framed. That the taxation statutes can have retrospective effect cannot be doubted. The retrospective effect of the statutes can be partial and, therefore, it may apply to an assessment made before the commencement of the Act as was laid down by Mac Kanna Judge in the case of Regina v. General Commissioner of Income-tax, 40 T.C. 225/228.
9. For these reasons I am of the view that the assessment for the year 1976-77 was validly made and that it cannot be annulled Instead. I am of the view that the case should have been examined on merits alongwith other cases for other years
10. In regard to question of G.P rate the position is that tae I.T.O. has applied a G.P: rate of 12% for all the years 1976-77 to 1982-t33. This has been reduced to 6.5% by my learned brother.
11. While hearing the first appeal the learned C.I.T. (A) observed that the assessee had quoted certain cases in which the G.P. rate applied in the case of re-rolling mills varied from 6 to 9%. Normally the G.P. rate applied in such cases is 8%. Keeping that in view he reduced the rate to 8% for all the years and observed that the cases quoted by the assessee in support of application of G.P. rate of 6.25% and 6.5% were not relied upon as they were not exactly identical with that of the assessee the Tribunal had an opportunity to deal with similar cases and has observed that where the sales are substantial a G.P. rate of 8 to .9% is reasonable. The Tribunal had, in fact, applied a G.P. rate of 9% in the case of I.T.A. No.2466 of 1981-82 (Assessment year 1980-81) dated 14-10-1985. In that case the sales estimated were Rs.52,00,000 which estimate was confined, yet a rate of 9% was considered reasonable. On the other hand in this case the sales estimated by the I.T.O. vary from Rs.8,00,000 in the years 1976-77 to Rs.36,00,000 in the year 1981-82. The sales estimated in 1982-83 amounted to only Rs.13,00,000. I would agree with the learned C.I.T. (Appeals) that the cases quoted by the assessee were not parallel and would restore the order of C.I.T. (Appeals.): on- the issue of G.P. rate.
In regard to the assessment years 1981-82 and 1982-83 my learned brother has reached the conclusion that the returns filed under the self-assessment scheme should be accepted as this was not the case of concealment the case should not have been dealt with under the normal law. He has referred to the enquiry report of the Vigilance Wing, which has earlier been referred in my order and taken the view that this was not a positive evidence of concealment.
13. The facts of these two cases have been given by the I.T.O. in his order. The I.T.O. has stated that for 1981-82 the assessee incurred Rs.3,80,395 on the energy consumption bill relating to Sui gas and electricity. Against this figure the sales declared were only Rs.5,30,000 which are less than two times of energy consumption bill. Usually this ratio is 8 to 1() times of the consumption. As per the Excise Department record the production shown was 706.7 tons. The sale price at the average rate of Rs.4,500 per metric ton would work out to Rs.31,77,000. It isagainst this figure that the sales figure declared by the assessee at Rs.5,30,000 will appear fake. My learned brother has already given the findings that the assessee's plea that the I.T.O. has changed his opinion about own production and re-rolling done on behalf of others, cannot be entertained. Likewise for the year 1982-83 the assessee declared sales of Rs.3,00,000 against energy consumption bill of Rs.1,77,399 For this year the production according to the Excise Register was 348.7 tons and at the average rate of Rs.45,000 per ton the sales of 348 tons would work out to Rs.15,64,000 which have to be viewed against the sales declared by the assessee at Rs.3,00,000. These figures are not based on any conjecture but on the Excise Record, which cannot be disowned by the assessee. In fact he even insisted before the learned C.I.T. (A) at the time of hearing of his appeal for adoption of excise record figures of production as the basis for working out the sales. This fact alone proves, if any proof is necessary, that the assessee has concealed the particulars of income.
14. I do not subscribe to the view taken by the learned J.M. as the circular of the Central Board of Revenue, on the subject dealing with the self-assessment scheme, very clearly lays down that the cases of concealment will fall outside the scope of self-assessment scheme.
The Circular No.11 of 6th August, 1981 lays down in para. 4(iii) that the cases where evidence of concealment is available would fall outside the scope of self-assessment scheme. Here even the "word" positive is not mentioned and, therefore, any evidence which gives w clear indication to the concealment would, in my view, suffice to place the case outside the scope of self-assessment scheme. I have otherwise given a finding that in this case the assessee had concealed the particulars of income, or has deliberately furnished inaccurate particulars' and omitted or failed to dispose all material facts necessary for assessment, which coupled with the evidence furnished by the excise record, is sufficient to place the case within the mischief of the provisions of section 34(1-A) (b) as a case of concealment of income. So far as the assessment year 1982-83 is concerned para. 4 (c) of Circular No. 10 of 2nd August, 1982 is also to the effect that "cases where evidence of concealment is available, as specified in Para. 9 "will not qualify for self-assessment scheme. In para. 9, the words "positive evidence of concealment" have been used b-u-t evidently these have to be read in the context of the Circular and in conjunction with, not only para. 4 (c) of the Circular No. 10 of 2nd August, 1982 but also para. 4 (iii) of the Circular No. 11 of August 6, 1981. There being positive evidence of concealment. I am of the view that the returns could not be accepted under Self-Assessment Scheme and that these were rightly assessed under the normal law. On that view of the matter the appeals should have been decided on merits so far as these two assessments are concerned.
(1) Whether in the circumstances of this case bases are available for concluding that the assessee has concealed the particular of his income or deliberately furnished inaccurate particulars thereof or omitted or failed co di-3close ail material facts necessary for the assessment /ear 1976-77 or whether it was a case of mere under assessment
(2) If it was a Case of concealment then whether notice for assessment for 1976-77 could be issued under section 34 (1-A) (b) of the Income-tax Act upto 30-6-1983 and assessment made thereafter within the time allowed in that section, or whether the assessment was required to have been completed before 30-6-1979
(3) If time for framing the assessment for 1976-77 was available till after 1-7-1979 when the Income-tax Ordinance came into operation on that date then whether the limitation in this case has not been extended to 10 years as laid down in section 65 of the Income-tax Ordinance, 1979
(4) If for the revised assessment for 1976-77 a notice could be issued till 30-6-1983 and assessment made within one year thereafter, as laid down in section 34 (1-A) (b) of the Act and since the assessment in this case was completed on 28-6-1984, whether the assessment could be annulled
(5) Whether in view of comparatively smaller quantum of sales, declared by the assessee, varying from Rs.1,46,520 to Rs.3,00,000 for the years 1976-77 to 1982-83 and assessed on an estimate of Rs.8 lacs to Rs.36 lacs by the I.T.O: and as reduced subsequently, in appeals, the appropriate G.P. rate for all the years should have been 9% or 6.5% which was applied in cases with much larger sales exceeding Rs.1 crore
(6) Whether in view of assessee's own admission before the learned C.I.T. (Appeals) for adopting the sales receipts on the basis of the production shown in the Excise Record which work out to a figure much more than those declared by the assessee himself, it was a positive evidence of concealment of income and, therefore, the case for the assessment years 1981-82 and 1982-83 fell outside the scope of self-assessment scheme under the C.B.R's Circulars No.11 of 6th August, 1981 and No.10 of 2nd August, 1982
Since a difference of opinion has arisen, the matter may be placed before the learned Chairman for nomination of a third Member for resolving the issues.
36.
-In respect of this case, difference of opinion having arisen between my learned brothers, the Judicial Member and the Accountant Member, the following questions on the point of difference have been referred to me as to evolve a majority view:-
(i) Whether in the circumstances of this case, bases are available for concluding that the assessee has concealed the particulars of its income or deliberately furnished inaccurate particulars thereof or omitted or failed to disclose all material facts necessary for the assessment year 1976-77 or whether it was a case of mere under-assessment
(ii) If it was a case of concealment then whether notice for assessment for 1976-77 could be issued under section 34(1-A) (b) of the Income-tax Act, upto 30-6-1983, and assessment made thereafter, within the time allowed in that section, or whether the assessment was required to have been completed before 30-6-1979
(iii) If time for framing the assessment for 1976-77 was available till after 1-7-1979, when the Income-tax Ordinance, came into operation on that date then.' whether the limitation in this case has not been extended to 10 years as laid in section 65 of the Income-tax Ordinance, 1979
(iv) If for the revised assessment for 1976-77, a notice could be issued till 30-6-1983, and assessment made within one year thereafter, as laid down in section 34 (1-A) (b) of the Act and since the assessment in this case was completed on 28-6-1984, whether the assessment could be annulled
(v) Whether in view of comparatively smaller quantum of sales, declared by the assessee, varying from Rs.1.46,520 to Rs.3,00,000 for the years 1976-77 to 1982-83 and assessed on an estimate of Rs. 8,00,000 to Rs.36,00,000 by the Income-tax Officer and as reduced subsequently, in appeals, the appropriate G.P. rate for all the years should have been 9% or 6.5% which was applied in cases with much larger sales exceeding Rs.1,00,00,000.
(vi) whether in view of assessee's own admission before the learned C.I.T. (Appeals) for adopting the sales receipts on the basis of the production shown in the Excise record which worked out to a figure much more than those declared by the assessee itself, it was positive evidence of concealment of income and therefore, the cases for the assessment years 1981-82 and 1982-83 fell outside the scope of self-assessment scheme under the C.B.R's.
Circular No. 11 of the 6th August, 1981 and No. 10 of 2nd August, 1982
37. Since all the material facts necessary with the object of answering questions of difference of opinion have been stated at some length by my learned brothers, the Judicial Member and the Accountant Member, I will not succumb to the temptation of repeating them once. Suffice it to say that the assessee disclosed a net income of Rs.19,540 for the charge year 1976-77 in the following manner:-
| (i) Sales of M.S. bars and re-rolling | Rs. 1,46,520 |
| (ii) Gross profit at the rate of 20% | Rs. 29,304 |
| Less expenditure | Rs.9,764 |
| Net income | Rs.19,540 |
38. On the disclosed income the assessee claimed rebate for life Insurance Premium and under section 15 H.H. of the Income-tax Act, 1922 (hereinafter called the Act) amounting in all to Rs.9,524. The Income-tax Officer, however, computed net income of the assessee at Rs.23,000 under subsection (3) of section 23 of the Act. In this connection, finding of the Income Tax Officer in respect of the assessment year 1976-77 dated 25-4-1977 is set out below:----
"The computation chart has been attached with the return in which sales of M.S. bars and re-rolling income has been shown at Rs.1,46,520 on which gross profit rate of 20% has been disclosed at Rs.29,304 Expenses to the extent of Rs.9,764 have been claimed. No accounts are being maintained. Income and expenses are all unvouched. Hence rejected. Capital invested is admitted at Rs.45,000. The assessee runs a steel re-rolling mill. Four persons are working on daily wages. Considering the facts disclosed net income is assessed at Rs.23,000.
39. Subsequently information .was received by the Income-tax Officer is from the Directorate of Vigilance that, the assessee had consumed Sui gas and electricity worth Rs.81,690 during the previous year relevant to the charge year 1976-77. As this amount did not figure anywhere in the computation of income mentioned in para. 37, assessment relating to the charge year 1976-77 was reopened under section 65 of the Income-tax Ordinance, 1979 (hereinafter called the Ordinance). In consequence thereof, re-assessment was made for the said year by estimating production of MS bars and other allied products at Rs.8,00,000. This turnover was subjected to gross profit rate of 12% so as to compute gross income of Rs.95,000 which was adjusted against P&L expenses allowed at Rs.25,000. In this manner net income from business was assessed at Rs.71,000. To the business income was added a sum of Rs.80,000 on account of unexplained investment under section 13 (1)(d) of 'the Ordinance. In this way, net income of the assessee from all sources was computed at Rs.1,51,000. Income so assessed was contested before learned C.I.T. (Appeals) who by virtue of Appeals Nos.971, 972, 973, 974/11-A, 1152, 1153. 1154/11-A, 1161, 1162, 1163 and 1164i11-A, dated 16-2-1985, confirmed estimate of turnover for the charge year 1976-77, as also for the subsequent assessments. In se far as gross profit rate is concerned, it was reduced from 12% to 8% in respect of all the years in the following words:-
"Normally, gross profit rate applied in such cases is 8%. Keeping in view gross profit rate applied is reduced to 8%. The cases quoted in support of application of gross profit rate of 5.25% and 6.50% were not relied as these were not exactly identical, with that of the assessee.
40. On second appeal, at the behest of the assessee, the learned Judicial Member, proposed the annulment of assessment on a preliminary objection. Therefore, no finding with regard to. quantum of assessed income for the charge year 1976-77 was recorded. Since, the learned' Accountant Member, did not see eye to eye with the finding of the, Judicial Member, .he case is now before me so as to evolve a majority the, view.
41. Having put on record some of the material facts which in my opinion are necessary with a view to answering the questions that have' been referred to me for adjudication, it is now desirable to examine' whether the information conveyed by the Directorate of Vigilance to the Income-tax Officer that the assessee had consumed Sui gas and electricity worth Rs.81,690 constituted definite information so as to require re-opening of assessment under section 65 of the Ordinance or not Having heard both the parties, this question, is answered in the paras that follow hereunder.
42. As has been stated in para. 39, a sum of Rs.81,690 on account of Sui gas and power consumption., did not figure anywhere in the computation of income for the charge year 1976--77. Therefore, on the basis of this information, which was not before the Income Tax Officer at the time of -making original assessment, assessment for the charge year 1976-77 was reopened with the prior approval of the concerned I.A.C., -in accordance with law. Before proceeding further, I may add here that it has not been possible for me to agree with the contention of learned counsel of the assessee that as the assessee was engaged in re-rolling for others, the Income Tax Officer by holding that re-rolling was undertaken on own account, had committed an error and, therefore, reopening of assessment being based on a change of opinion is not legally maintainable. This contention has been examined carefully in the light of the Income-tax Officer's order for the charge' year 1976-77 and the computation of business income filed with the return. Based on this analysis, I have reached the irresistible conclusion that the income-tax officer had not held in the said assessment that re-rolling was done for others. What the Income-tax Officer has really stated in assessment relating to the charge year 1976-77, is that, the assessee also derives income from re-rolling. This thing apart learned counsel of the assessee has not furnished any evidence to establish that re-rolling was undertaken on behalf of other parties. This onus could only be discharged by making available names and addresses of the parties and the amount charged from each on account of re-rolling undertaken for them. In the absence of this information having been provided to me, I agree with the opinion already expressed on this point by the learned Judicial Member, that the assessee was actually involved in the manufacture of M.S. bars and other allied products and re-roiling on own account only. Therefore, there was no change of opinion on the part of successor-in-office and consequently assessment was in my opinion, rightly re-opened in accordance with law.
43. Next question for consideration here is as to whether non-disclosure of information with regard to expenditure on consumption of Sui gas and power is a mere under-assessment of income a as has been held by my learned brother, the Judicial Member or it amounts to concealment of income or furnishing of inaccurate, particulars thereof as held by my learned brother, the Accountant Member. To resolve this controversy, it is desirable to first refer to the computation of income filed alongwith the return for the charge year 1976-77. On going through this computation, it has been noted that the assessee nowhere disclosed expenditure on the consumption of Sui gas and power to the extent of Rs.81,690. The suggestion of learned counsel of the assessee that saler of M.S.' bars and re-rolling charges were declared after taking into consideration expenses on account of Sui gas and power is however, misconceived as it -has not been supported by any evidence. Therefore, I have reached the inevitable conclusion that, the assessee while filing its computation chart, deliberately concealed particulars 'in: connection with consumption of Sui gas and power so that the Income-tax Officer was prevented to make a correct appreciation of assessee's manufacturing business. Therefore, the omission of Rs.81,690 on account of consumption of Sui gas and power, not disclosed by the assessee in the computation chart, filed With the original return, does amount to furnishing of inaccurate particulars of income which is punishable under section 28 (1-A) of the Act arid section -119 of the Ordinance.
44 It has been further gathered from record and this fact is not in dispute between the assessee and the department that before the learned C.I.T. (Appeals), the assessee had made a plea for adoption of excise record of production as the basis for working out sales. Therefore, even on this basis, disclosed turnover did not reveal correct, picture of the' assessee's turnover for the charge year 1976-77. On account of this reason also reopening of assessment is held to be legally valid as there is concealment of turnover resulting eventually in suppression of income. In other words, this was not a case of under assessment but concealment of income.
45. Since non-disclosure of information with regard to expenditure on Sui gas and power has been held to amount to furnishing of inaccurate particulars thereby resulting in suppression of turnover and consequently of income, the provisions of section 34 (1-A) (b) of the Act are attracted. Therefore, notice under the said section of the act, could be issued and assessment finalized upto 30-6-1983. However, as ease of the assessee is governed by the provisions of section 166 (2) (C) (11) of the Ordinance, question framed for adjudication is merely hypothetical. The question in the present form could have reality only if a notice under section 34 (1-A) (b) of the Act had been actually issued. Since this is not the case here, second question is purely of an academic interest and has been answered accordingly.
46. This case, as has been stated in para. 45 is governed by the provisions of section 166 (2) (C) (11) of the Ordinance and, therefore, notice under section 65 of the Ordinance could be issued in this case for making an additional assessment for the charge year 1976-77. Therefore, my reply to the third question is in the affirmative.
47. Having concluded that this case is governed by the provisions of section 65 of the Ordinance, next question for adjudication before me relates to the fact whether an additional assessment framed by the Income--tax Officer by virtue of order dated 28-6-1984, could be annulled Having given my earnest consideration to the question framed by my learned brothers, I cannot help saying that question No.4 has not been appropriately formulated. This conclusion is based on the understanding that in this case section 34 (1-.A) (b) of the Act is not attracted. Since, however, section 65 has been held to be applicable on the facts of this case, period of limitation is Governed by subsection (3-A) of section 65 of the Ordinance which is set out below for facility of reference:-
"Where a notice under subsection (1) is issued on or after the first day of July 1982, no order under this subsection shall made after the expiry of one year from the end of the financial year in which such notice was served."
48. In this case, notice under section 65 of the Ordinance having been issued on 1-2-1983 and having been served on the assessee before 15-2-1983, an additional assessment could be made upto 30-6-1984. Therefore, on the facts of this case, assessment dated 38-6-1984, is within the period of limitation, and therefore, could not be annulled. Hence, my reply to question No.4 is in the negative.
49. The Income-tax Officer computed gross profit by applying rate of 12% on the estimated turnover in respect of the charge years 1976 77 to 1982-83, which was reduced to 8% by the learned C.I.T. (Appeals) by virtue of Appeals Nos. 971 to 974/11--A and 1152 to 1154/11-A, 1161 to 1164/11-A, dated 16-2-1985. However, on second appeal by the assessed, my brother, the Judicial Member, proposed that gross profit rate should be reduced to 6.5%. The proposed reduction as opposed by my learned brother the Accountant Member who observed as under:----
" I would agree with learned C.I.T. (Appeals) that the case quoted by the assessee were not parallel and would restore the order of learned C.I.T. (Appeals) on the issue of gross profit rate."
50. In I.T.As. Nos. 576 and 577 (I-B)/1985-86, dated 7-2-198 reference to a parallel case was made in which the following results were shown for the charge years 1981-82 to 1984-85:-
| | | | |
| 1981-82 | 4.06% | 9.92% | The assessee disclosed loss of Rs.11,87,184 but eventually assessment was made on net income of Rs.6,241,223 on agreed basis except addition on account of gain on sale of shops. |
| 1982-83 | 5.79% | 958 | The assessee disclosed net loss of Rs.7,66,602 while income was assessed at Rs.11,00,000 on agreed basis vide I.T.O.'s order dated 28-2-1984. |
| 1983-84 | 11% | - | Accepted under section 59 (1). |
| 1984-85 | 9.24% | 10% | G.P. rate was accepted by the assessee. |
51. In view of the above parallel case where disclosed turnover was also substantial, gross profit rate after addition to the trading account stood at 9.92% and 9.58% for the charge years 1981-82 and 1982-83 respectively. For the next two years rate of disclosed profit was 11% and 9.24% for the charge years 1983-84 and 1984-85 respectively. In view of this parallel case and non-maintenance of books of accounts, my learned brother, the Accountant Member, rightly proposed restoration of gross profit rate held reasonable by the learned C.I.T. (Appeals). Therefore, appropriate rate of profit for all these years would undoubtedly appear to be 8% and not 6.5%.
52. The last question relates to the fact whether adoption of turnover on the basis of Excise record is a positive evidence of concealment of income as a result of which case of the assessee fell outside the scope of self-assessment as visualised by C.B.R.'s Circular No.11 of 6th August, 1981 and No.10 of 2nd August, 1982. This question is disposed by relying on relevant observation of my learned brother, the Accountant Member who in para. 13 of the dissenting order has stated as under:-
"These figures are not based on any conjecture but on the Excise record which cannot be disowned by the assessee. In fact, he even insisted before the learned C.I.T. (Appeals) at the time of hearing of his appeal for adopting of Excise figure' of production as the basis of working out the sales. This fact alone proves, if any proof is necessary, that the assessee has concealed the particulars of income."
53. There is no controversy with regard to the fact that according to Excise record, certain figures of production were available with the assessee in respect of the charge years 1976-77 to 1982-83. These figures were not doubted either before the learned C.I.T. (Appeals) or in second appeals before my learned brothers, the Judicial Member "d the Accountant Member. Even before me, correctness of production figures as per excise record, have not been challenged by learned counsel of the assessee. Since bases on average sale rate of M.S. bars, etc. per metric ton, turnover of the assessee would be far in excess in comparison to the declared turnover, there could be no other basis in concluding that it had concealed positively its turnover and consequently income for the charge years 1976-77 to 1982-83. Therefore. I agree with my learned brother, the Accountant Member that the case' of the assessee for the charge years 1981-82 and 1982-83 fell beyond the scope of Self-Assessment Scheme as visualised by C.B.R's. Circular No. 11 of 6th August, 1981 and No. 10 of 2nd August, 1982.
54. The questions of difference of opinion referred to me for adjudication are disposed of as above.
M.B.A./386/T Order accordingly.
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