Law: Income Tax Ordinance, 1979

Section: 59,59(1),80

Law: Federal Tax Ombudsman Ordinance, 2000

Section: 2(3)

Income Tax Ordinance (XXXI of 1979)----Ss. 59(1) & 80-CC---C.B.R. Circular No. 7 of 2002, dated 15-6-2002 [Self-Assessment Scheme], para. 9(a)(ii)---C.B.R. Letter C. No.7(7)/S.Asstt/2002 dated 17-12-2002---C.B.R. Circular No.20 of 1992 dated 1-7-1992---Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000), S.2(3)---Self-assessment--Setting apart---Case was set apart by the Regional Commissioner of Income Tax for total audit on the ground that expenses claimed under various heads of accounts had not been properly prorated in accordance with the ratio of local processing and exports to find out the right figure of total taxable income and that sale of scrap/empties under the head of other income had been added to export income, whereas the same should have been included in local income---Validity---Separate accounts had been maintained for export business and for local processing---Relevant expenses under different heads relating to each segment were charged to relevant account i.e. exports or local sales---Accounts were certified by the practising chartered accountants and the financial statement reflected both the segments [export or local] separately---Since there was no overlapping or mixing up of expenses of export and local business and expenses pertaining to each account were being charged separately the principle of prorating the expenses towards export and local business would not apply---Local sales of goods as well as waste material, not constituting mere than 20% of such production, may also be treated as export sales if the assessee opts to pay tax one such sales at the rate applicable to export sales under S. 80CC of the Income Tax Ordinance, 1979---Local sales formed 3.8% of total production for export sales---Sale of scrap/waste was rightly shown in the export sales---Workers a Welfare Fund was also rightly charged to normal business income which was offered for taxation---Law did not envisage charging of Workers Welfare Fund on presumptive income---Selection of case for total audit was arbitrary, baseless, contrary to law and based on irrelevant grounds---Federal Tax Ombudsman recommended that the Complainant's case be…

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