(a) Income Tax Act (XI of 1922)-

---S.66(2)---Reference---Additional questions---Application being time barred additional questions could not be referred to High Court for decision.

Saifuddin Ghulam Ali & Sons v. The Commissioner of Income Tax 1989 PTD 1038 fol.

(b) Income Tax Act (XI of 1922)

----S.22(3)---Assessment---Submission of revised return by the assessee---Mere reference to the original return in the assessment order by the Assessing officer would not mean that the assessment had been made on the basis of the original return.

Dhampur Sugar Mills Ltd. v. Commissioner of Income Tax (1973) 90 ITR 236;1985 PTD 498 and (1982)137 ITR 722 distinguished.

(c) Income Tax Act (XI of 1922)--

----S.66(2)---Reference---Question that the Tribunal had not considered the question raised before it properly was not a question of law requiring decision of High Court.

Rehan Hassan Naqvi for Applicant.

Shaikh Hyder for Respondent.

Date of hearing. 19th September, 1991.

JUDGMENT

MAMOON KAZI, J. --The facts relevant for ou5r decision may be reproduced from the order of the learned Income Tax Appellate Tribunal, dated 2-12-1982 dismissing the assessee's appeal which are as follows:--

"In these cross-appeals relating to the assessment year 1977-78, the assessee-appellant has disputed the validity of the assessment order. He has also disputed certain additions confirmed in the appeal by the Commissioner of Income-Tax (Appeals). The Department, on the other hand, has objected to the deletions made by the learned Commissioner of Income-tax (Appeals) of additions of cash credit and unproved loan obtained from wife and others. The two appeals arise out of common facts and hence the same are disposed of by a combined order.

"2. The assessee-appellant is an individual and derived income from ship- breaking, interest and share income from a registered firm. The objections of the appellant concern the ship-breaking business only. The return of income was filed by the appellant on 1st October, 1977, showing income from the following sources:--

"3This statement was not supported by any statement of accounts but pursuant to notice issued by the Income-Tax Officer under sections 23(2) and 22(4) the appellant filed a receipt and expenditure account on 27-8-1978 indicating the following position:--

"This statement of receipt and expenditure was not supported by any balance sheet and hence the Income-Tax Officer after making repeated requests obtained a copy of the balance sheet on 20-1-1979 as on 30-6-1977. After filing the copy of balance sheet the appellant revised the return of income on 27-1-1979 declaring a total loss of Rs.29,95,684. The Income-Tax Officer has given break up of the value of the vessel named Marrie Anne of 5,000 tons L.D.T. as under:--

"4. During the year under consideration the appellant scrapped only 600 tons of steel and showed the balance quantity in closing stock. The Income Tax Officer has also reproduced in his order the balance sheet wherein the value of 4,500 tons of scrap was shown at the invoice price in US $ at the rate of 103 equivalent to Rs.1,003 per L.D.T. at Rs.46,35,000. As against this asset, the liabilities were shown at Rs.76,50,000. The balance amount of Rs.30,15,000 being difference, was shown as a loss in the revised return. The appellant also explained to the Income Tax Officer the reason for revising the return by submitting that the matter regarding the import of ship was under litigation before the High Court which had issued an injunction restraining him from scrapping or selling the scrap etc. The High Court also granted bond facility to the persons who had a lien over the ship and the scrapping could only be done under their supervision. The Income-Tax Officer after examining the balance sheet and on consideration of the explanation of the appellant, made the following observations:--

"The perusal of the explanation of the assessee and the balance sheet will reveal that the loss declared is fictitious and imaginary. The assessee has disclosed the closing stock only at the invoice value and has not included element of duty in the cost perhaps due to the fact that duty has not been paid as the ship is under bond but at the same time has disclosed a liability of Rs.20,36,764 which, in fact, is the duty payable on the remaining portion of ship and will naturally form part and parcel of the cost of ship and ultimately the closing stock. Similarly the assessee has not included the element of licence fee, NOC and insurance while valuing the closing stock. It may be kept in view that the assessee has purchased a vessel of 5000 LDT out of which only 600 tons of scrap has been sold for a sum of Rs.10,66,149. The rest of the vessel is in the closing stock which has been valued improperly resulting in imaginary notional loss of Rs30,15,000."

"The other ground of appellant relates to the additions of advances of Rs.1,00,000 each made by Mr. Muhammad Gulzar and Mr. Muhammad Hanif which could not be explained and hence were added back and were also confirmed in appeal by the learned Commissioner of Income-Tax (Appeals). The admitted facts as per the Income-Tax Officer's order are that as per the first explanation these amounts represented `dasti loans' obtained from Messrs Muhammad Gulzar and Muhammad Hand: On a further query it was explained that these amounts represented advances made to the appellant against sale of scrap and that this arrangement was made through the brokers. The Income-Tax Officer did not consider this explanation to be satisfactory because at one stage it was stated that these were `dasti loans' and later on, it was submitted that these amounts represented advances against sales. The Income-Tax Officer also sent letters to these persons on the address given but the same were returned unserved. He, therefore, did not accept the appellant's explanation as satisfactory and added these amounts to the appellant's income. Likewise, the Income-Tax Officer noted an amount of Rs.5,25,000 as advances received against forward sale. The names and addresses of the persons who made these advances were also given to the Income Tax Officer. In order to ascertain this fact, the Income Tax Officer examined the books of accounts with reference to bill books and weight notes etc. He noted that the entire sale consideration was paid by these partiesat the time of purchases and no alleged adjustment of the so-called advance was made in the bills. He, however, observed that in the appellant's trade people do make advance payment for the purchase of scrap iron and hence he gave an allowance to the appellant by making an addition of Rs.2,50,000 only against the amount of Rs.5,25,000 shown as having been received in advance. The Commissioner of Income Tax (Appeals) has correctly observed that in the case of loans advanced by Muhammad Gulzar and Mr. Muhammad Hanif no adjustment whatsoever was made during the gear under consideration. In fact, no sales appear to have been made to these persons. Reverting to the advances received from other persons the assessee failed to prove that any adjustments were made against the sale: He also rightly discarded the appellant's explanation that these adjustments were made later on in 1978-79 because it was a no accounts case. We have perused the order of the departmental officers and have also heard the learned counsel of the assessee and we have no hesitation in upholding the additions made by the departmental officers as mentioned hereinabove."

2.After dismissal of the assessee's appeal, the following questions have been referred by the learned Appellate Tribunal for our decision at the instance of the assessee:-

(1)Whether on the facts and in the circumstances of the case the Appellate Tribunal was justified in holding that the manner in which the Income Tax Officer proceeded to compute the income with reference to the returns of income filed was sustainable in law?

(2)Whether on the facts and in the circumstances of the case the Appellate Tribunal was justified in confirming the following additions made to the assessee's income:

(a) Rs.4,12,422 being unexplained capital..

(b) addition of Rs.l Lac each purported to have been received as advance from Mr. Muhammad Hanif and Mr. M. Gulzar. h'~;

(3)Whether on the facts and in the circumstances of the case the Tribunal was justified in adding Rs. 2,50,000 being unproved advances received from the purchasers? ,

Since the Commissioner Income Tax proposed two additional questions to be referred for our decision, the same have also been referred to us as follows:-

(1)Whether on the facts and in the circumstances of the case the Appellate Tribunal was right in deleting addition of Rs.37,52,054.

(2)Whether on the facts and in the circumstances of the case the Appellate Tribunal was right in holding that US $1,50,000 paid by the Habib Bank Ltd. to City Bank Manila was an acceptable arrangement for final settlement when invoice value was $ 5,25,300 = Rs.52,25,054.

3. It may be pertinent to point out that by an application, C.M.A. No.9/86, the assessee made a request to this Court to allow him to add some more questions arising from the facts and circumstances of the case and an order was passed by the learned Division Bench before which the matter was placed for orders on 10-11-1986 as follows:--

"This is an application for considering certain questions mentioned in the annexure thereto. Without prejudice to the respective contention: of the parties, these questions will be reconsidered at the regular hearing of the reference subject to consideration of following further questions:--

(i)Whether these questions arise out of the order of the Tribunal?

(ii)Whether there is any legal bar from hearing these questions?

The application is disposed of in the above terms."

4. So far as the above questions are concerned, learned counsel for the applicant concedes that additional questions referred to us vide order, dated 10-11-1986 passed on the Civil Miscellaneous Application cannot be referred for decision of this Court in view of provisions contained in section 66(2) of the income Tax Act, 19r, the said application being time barred. It is pertinent to paint out that in this regard the counsel have invited our attention to the case reported as Saifuddin Ghulam Ali & Sons v. The Commissioner of Income Tax (1989 PTD 1038) wherein the question has been clearly dealt with at page-1043 of the report. We, therefore, need not dwell further on this issue.

5. Turning to the questions referred to us by the learned Tribunal the first contention of Mr. Rehan Hassan Naqvi is that after filing of the revised return by the assessee only the same could have been taken into consideration by the I.T.O. and reference to the original return filed by the assessee under such circumstances was not justified under the law. Reliance in this respect has been placed by him on the case of Dhampur Sugar Mills Ltd. v. Commissioner of Income Tax (1973) 90 ITR 236 wherein it was observed as follows:--

"The earlier return after a revised return cannot form the basis of assessment although it may be used to indicate the conduct of the assessee. Hence for the purpose of assessment of income tax, the effective return must be the revised return filed by the assessee ultimately."

Two more cases have been cited on the point by Mr. Rehan Hassan Naqvi which are reported in 1985 PTD 498 and (1982) 137 ITR 722 which further support his contention. We are, however, of the view that the said cases are hardly attracted to the facts of the present case because we find that the learned Tribunal has finally assessed the income of the assessee on the basis of his revised return submitted to the I.T.O. Reference in this regard may be made to the following paragraph from the judgment of the learned Tribunal, dated 2-12-1982:

"As a matter of fact, the Income Tax Officer considered the revised return of income, and after rejecting the imaginary loss of Rs.30,15,000 he proceeded on the figures as per the statement of the receipts and expenses. The decisions cited by the learned counsel in support of his contention also do not help his case because the facts obtaining in this case are totally different rather unique. In these circumstances, it cannot he held that the revised return was still pending. We have, therefore, no hesitation in holding that the Income Tax Officer proceeded properly inasmuch as he fully considered the revised return of income and passed an order strictly in accordance with the law. The appellant accordingly fails on this ground."

The above observations of the learned Tribunal make it clear that the final assessment was made in respect of the assessee applicant on the basis of his revised return. No doubt, reference has been made in the order to the original return but mere reference to the original return does not mean that the assessment had been made on the basis of the original return. The first contention of Mr. Rehan Hassan Naqvi does not impress us and the same is, therefore, repelled. We find that our decision in respect of the second question purely depends upon our decision on the first question. Since we have already decided the first question against the applicant the decision, however, on the second question is also made accordingly against the applicant.

6. Turning to the third question referred to us by the learned Tribunal, we find that the question in regard to the addition of Rs.2,50,000 to the income of the applicant/assessee is purely based on consideration of fads and no question of law arises from the decision of the Tribunal. This is supported by the following observations made by the Tribunal.

"He, however, observed that in the appellant's trade people do make advance payment for the purchase of scrap iron and hence he gave an allowance to the appellant by making an addition of Rs.2,50,000 only against the amount of W,25,000 shown as having been received in advance. The Commissioner of Income Tax (Appeals) has correctly observed that in the case of loans advanced by Muhammad Gulzar and Mr. Muhammad Hanif no adjustment whatsoever was made during the year under consideration. In fact, no sales appear to have been made to these persons. Reverting to the advance received from other persons the assessee failed to prove that any adjustments were made against the sale. He also rightly discarded the appellant's explanation that these adjustments were made later on in 1978-79 because it was a no accounts case. We have perused the order of the departmental officers and have also heard the learned counsel of the assessee and we have no hesitation in upholding the additions made by the departmental officers as mentioned hereinabove."

When attention of Mr. Rehan Hassan Naqvi was invited to the aforesaid observations of the Tribunal he argued that the Tribunal has not considered the question raised before it properly. It may be pointed out that even if the contention raised by the learned counsel is accepted, question raised by him would not be a question of law requiring our decision. We are, consequently, of the view that we are not required to give any decision on the third question referred to us.

7. Turning now to the two questions referred to us at the instance of the learned Income Tax Commissioner, we find that the questions do not raise any question of law requiring our decision under section 66 of the Income Tax Act, 1922. Even Mr. Shaikh Hyder, learned Counsel appearing on behalf of the Commissioner of Income Tax, concedes that the questions referred do not raise any question of law. Consequently, we are not under any obligation to answer the said questions. The reference is therefore, answered by us in the above terms and the same stands disposed of with no order as to costs.

M.BA./N-379/KOrder accordingly.