Law: Income Tax Ordinance, 2001

Section: 177,174(2),120,Chap.X,Part-VIII

Law: Income Tax Rules, 2002

Section: 30(3)

Income Tax Ordinance (XLIX OF 2001)---Ss. 177, 174(2), 120 & Chap. X, Part-VIII---Income Tax Rules, 2002, R.30(3)---Audit---On desk audit of tax return it was observed that assessee claimed profit and loss expenses at the rate of 65% of the gross private medical practice receipts---Case was selected for audit under S.177 of the Income Tax Ordinance, 2001---Books of account were not produced and evidence in support of expenses was not furnished by the assessee---Declared version was rejected and assessment was finalized by allowing expenses at the rate of 15% of the gross private medical practice receipts---First Appellate Authority observed that ex parte assessment was finalized without following the due process of law and assessee's claim of expenses was curtailed in total disregard of the facts and treatment meted out in other parallel cases---Selection of case for audit was upheld by the First Appellate Authority and ordered that profit and loss account expenses should be allowed at the rate of 60% of the receipts---Validity---First Appellate Authority had unrealistically directed to allow expenses @ 55% of the receipts---Assessing Officer, without following the procedure laid down in Part-VIII of Chapter X of the Income Tax Ordinance, 2001, disallowed/curtailed the expense under S.174(2) of the Income Tax Ordinance, 2001 claimed by the assessee under various heads---Spirit of changes with regard to audit proceedings brought about through Income Tax Ordinance, 2001 was altogether overlooked by the assessee, by the Taxation Officer and also by the First Appellate Authority---No taxpayer could now state that account books were not maintained by him because in the verification part of tax return form he testifies that account books were properly maintained---While carrying out audit, it was essential that such books were produced for examination of Taxation Officer---Taxation Officer had to examine these books and give a clear finding about admissibility as well as verifiability of every item of expenditure---Expenses had to be allowed only to the extent of admissibility and verifiability---Expenses, which failed to stand the test of admissibility and…

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