INCOME-TAX APPEAL NO. 776/KB OF 1982-83, DECIDED ON 12TH MARCH, 1986: Versus INCOME-TAX APPEAL NO. 776/KB OF 1982-83, DECIDED ON 12TH MARCH, 1986:
ORDER
These two appeals are directed against two separate orders recorded by same learned Commissioner of Income‑tax (Appeals) on 1st December, 1982 and 30th January, 1983. The first impugned order arises out of assessment completed under section 62 and the second from proceedings under section 91(1) of the Income‑tax Ordinance, 1979.
2. The brief facts giving rise to these appeals are that the appellant, an individual, filed his return for assessment year 1980‑81 declaring its sales from export and local sales of carpets amounting to Rs.1,62,607 with G.P. rate of 89.97%. However, the appellant failed to disclose income from property, which was discovered by the Income‑tax Officer. Ultimately on 30th June, 1981 agreed assessment was arrived at in the following terms:‑‑
"Agreed to be assessed on income of Rs.1,20,695 including concealed income of Rs.43,500 with penalty under section 111 at the rate of 150%of the tax concealed income of Rs.43,500."
From perusal of the order‑sheet it appears that aforesaid agreement was signed not only by the assessee but also by his learned counsel. It also appears that approval of inspecting Assistant Commissioner was also obtained.
3. The Income‑tax Officer framed assessment accordingly which was confirmed by learned Commissioner of Income‑tax (Appeals) in view of the agreement reproduced above.
4. Mr. Salman Pasha, the learned counsel for the appellant submitted that the case of the appellant was selected for detailed scrutiny in violation of para.8 of Circular 18 of 1980, dated 28th July, 1980. According to learned counsel, the Income‑tax Officer had to frame assessment first under section 59(1) of the Ordinance and Then after issuing due notice should have reopened it under section 65 of the Ordinance. In this connection he put his reliance on a Single Bench decision of this Tribunal recorded in I.T.A. No. 715/KB of 1981‑8G dated 4th November, 1984. Turning to the merits of the case the learned counsel argued that both the purchases and sales of the appellant were 100% verifiable. He further contended that the G.P. rate declared in immediately preceding year was 20% as such the G. P. rate declared in the relevant, assessment year was not ridiculously low. The learned counsel, therefore, concluded that his trading results should have been accepted. Regarding the merit of the other appeal he contended that penalty at the rate of 150% was highly excessive and exorbitant. He invited our attention to a Circular No. 5 of 1953 and submitted that the penalty should not be at a rate of more than 2.5%.
5. Mr. Muhammad Farid, the learned Departmental Representative, on the other hand, submitted that in view of the agreed assessment, the order of learned Commissioner of Income‑tax (Appeals) was unexceptionably sound. In this connection he also relied upon a decision of this Tribunal reported as (1964) 9 ,Taxation 15 (Trib. ). As far as the rate of penalty is concerned, the learned Departmental Representative submitted that 9ny suitable rate could be adopted by us.
6. We have heard both the learned counsel for the appellant as well as learned Departmental Representative. We agree with the learned counsel for the appellant that if the return filed by the appellant was qualified for self‑assessment scheme, it should have been first accepted under section 59(1). However, under the facts and circumstances of the case and in view of section 155 of the Income‑tax Ordinance, we do not think that any prejudice has been caused to the appellant. We pointedly enquired from Mr. Pasha as to whether the interest of the appellant was in any way prejudicially affected and his answer was in the negative. The Income‑tax Officer had discovered concealment and he could have proceeded according to law against the appellant which might have culminated in serious consequences. The appellant, therefore agreed in his own interest to an assessed income of Rs.1,20,695. In our judgment the agreed assessment has all the ingredients of a valid and binding contract, namely an offer, an acceptance, a consideration and, of course, free consent of the appellant. The appellant, therefore, could not be allowed to wriggle out of it on mere technicalities which are neither substantial in nature no prejudicially affecting his interest, We do not think that we would be advancing the cause of justice if to set aside the impugned order and direct the Income‑tax officer accept the return under self‑assessment Scheme and then issue notice under section 65 of the Ordinance. We, therefore, agree with the learned Departmental Representative that the impugned order of learned Commissioner of Income‑tax (Appeals) called for no interference of far as the decision of this Tribunal reported in I. T. A. No. 715/ KB 481‑82, dated 14th November, 1984 is concerned, it revolves round its own facts and is distinguishable.
7. Now turning to the other appeal regarding penalty, we have no hesitation in allowing it. From perusal of the order of the Income‑tax Officer it appears that the amount of tax payable was Rs.50,767. He therefore, levied a penalty of Rs.5,397 at the rate of 10%. The learned Commissioner of Income‑tax (Appeals) has, however, wrongly mentioned that Rs.83,970 was the amount of tax payable. The contention of Mr. Salman Pasha is well fortified by the Circular mentioned by him. Since it is first penalty, therefore, it should be levied at the rate of 5%. Both the appeals stand disposed of as indicated above.
8. In view of the discussion made above, both the appeals are disposed of as indicated above.
M. Y. H. Appeals disposed of accordingly.