Law: Income Tax Ordinance, 1979

Section: 32,66A

(a) Income Tax Ordinance (XXXI of 1979)---S.32---Method of accounting---Rejection of---Inclusion of sales tax in sales in the trading account and claiming it as an expense in the profit and loss account---Validity---Such method of accounting was incorrect for the reason that sales tax being a Federal Government levy and the company being an agent to collect it on behalf of the Government, it could not be included in sales and claimed as expense in the profit and loss account---By claiming it so, the assessee had deprived the Department from deducing profits and gains correctly and, therefore, Department was justified under S.32(3) of the Income Tax Ordinance, 1979 to reject assessee's method of accounting. I.T.As. Nos.3332/LB and 3333/LB of 2001 rel. (b) Income-tax--- ----Gross profit rate ---Modification---G.P. rate should be suitably modified when trading account was recast as in that situation the history of G.P. rate would lose its significance. (c) Income Tax Ordinance (XXXI of 1979)--- ----Ss. 66-A & 32(3)---C.B.R. Circular No. 14 of 1979 dated 7-11-1979--­Powers of Inspecting Additional Commissioner to revise Deputy Commissioner's order---Sales tax was included in the sales in the trading account and it was claimed as an expense in the profit and loss account--­Inspecting Additional Commissioner cancelled the order of the Assessing Officer on the ground that assessee had wrongly claimed sales tax in the profit and loss account as a revenue expense and inclusion of sales tax in declared sales while computing the gross profit had resulted in inflating G. P. rate---Validity---Inspecting Additional Commissioner was justified to take, action under S. 66-A of the Income Tax Ordinance, 1979 against the assessment orders passed by the Assessing Officer in circumstances-­Since the assessee had already been made to go through ordeal of long drawn process of litigation and appeals up to the Tribunal, it would be unfair to make the assessee again go through the same process--­Inspecting Additional Commissioner, in the interest of justice and fair play, was directed to modify the assessment order instead of cancelling the same on the guidelines that trading and…

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