Income-tax---

----Addition---Amount in form of a trading discount allowed to assessee-- Separate addition of such amount as a profit was wholly uncalled for being double addition.

Ch. Muhammad Ishaq for Petitioner.

Ahmad Shuja Khan for Respondent.

Date of hearing: 17th November, 1992.

JUDGMENT

M: MAHBOOB AHMAD, CJ. ---This reference petition under section 136(2) of the Income Tax Ordinance, 1979 has been filed by the Commissioner of Income Tax, Faisalabad Zone, requesting this Court to frame the following question: ---

"Whether on the facts and in the circumstances of the case the Tribunal was justified in holding that a separate addition on account of bonus was a double addition?"

stated to have arisen out of the order of the learned Income Tax Appellate Tribunal, dated 26-9-1979 passed in ITA No. 1802 of 1978-79 and answer the same.

2. The facts necessary for the purposes of this petition briefly are that the respondent assessee fled the return pertaining to the assessment year 1977-78 with the Income Tax Officer Circle-V, Faisalabad, who finalized the assessment by his order, dated 3-5-1978. Disbelieving the accounts, the Income Tax Officer estimated the sales at Rs.10 lac and on it applied Gross Profit 5% and determined the gross profit at Rs.50 thousand. He added a sum of Rs.23,527 as bonus on purchases and taxed the assessee on a gross income amounting to Rs.73,527. The assessee felt aggrieved of this assessment and filed an appeal before the learned Appellate Assistant Commissioner of Income Tax, Faisalabad. The appeal was however rejected on 7-1-1979.

3. Still dissatisfied, the assessee filed a second appeal before the learned Income Tax Appellate Tribunal which was allowed by order dated 26-9-1979.

4. The Department feeling aggrieved of this order of the learned Income Tax Appellate Tribunal made an application to it under section 66(1) of the Income Tax Act, 1922 requesting for the framing of the above question for opinion of this Court. This application was rejected by the learned Tribunal by its order, dated 22-11-1981 hence the present petition by the assessee.

5. Learned counsel for the petitioner has contended that the orders of the Income Tax Officer and the Appellate Assistant Commissioner were justified on the facts and circumstances of the case and that there was no addition of the bonus so as to make a case of twice over tax on the same amount. It was in the same context contended that bonus could not be considered as an admissible item in the trading account and therefore had been rightly added as profit in the assessment.

6. On the contrary, the learned counsel for the respondent has raised the following contentions: ---

(i) that the reference petition to this Court was filed out of the time prescribed under the law and that the same could not be entertained under section 66 of the Income-tax Act, 192;

(ii) that no question of law as such has arisen out of the order of the Income Tax Appellate Tribunal and therefore the question being purely one of fact does not merit to be answered;

(iii) that in any case the amount in question was not a bonus but a discount on the purchase made by the assessee from the Bata Shoe Company and therefore had been rightly taken into account in the trading account of the assessee.

7. In reply, learned counsel for the petitioner has only contended that the reference petition has been correctly filed under section 136 of the Income Tax Ordinance, 1979 and having been instituted after 118 days of the service of the order of the Tribunal made under section 136(1) of the Income Tax Ordinance, 1979 was well within time; the period prescribed for such a petition being 120 days. In -support of the contention that the petition under section 136(2) of the Income Tax Ordinance, 1979 had been filed properly, the learned counsel has placed on record a judgment of a Division Bench of this Court passed in Writ Petition No. 4450 of 1985.

8. The objection as to the filing of the petition beyond period of limitation and its maintainability under section 136(2) of the Income Tax Ordinance, 1979 stands squarely answered in the judgment of this Court referred to above and need not further detain us. The objection is accordingly overruled.

9. The contention raised by the petitioner however on the merits of the case does not appear to have force. It had been correctly pointed by the learned counsel for the respondent that the bonus in question was not a matter of addition to the sales of the petitioner or an independent bonus not relatable to the business of the assessee but in fact as given in the grounds of appeal before the learned Income Tax Appellate Tribunal a discount on the purchase made by the assessee from Bata Shoe Company. It has also been further correctly pointed out by the learned counsel that this aspect of the matter was not adverted to by the learned Income Tax Appellate Tribunal while deciding the issue in question.

10. In the face of the position that a specific ground No. (iv) has been taken by the assessee before the Income Tax Appellate Tribunal, the matter should have been properly adverted to and decided. In the light of the record before us, it is clear that the amount in question i.e. Rs.23,527 was in fact a discount allowed by Bata Shoe Company to the assessee on the purchase made by it from the said Shoe Company. There being no denial of this position and nothing having been placed on record to persuade us to hold that the amount in question was a bonus independent of the business of the assessee, it has of necessity to be held that the amount was in the form of a trading discount allowed to the assessee by the Bata Shoe Company. That being so, the addition of the amount as a profit was wholly uncalled for and the finding of the learned Income Tax Appellate Tribunal in this regard appears to be unexceptionable.

11. Resultantly we answer the question aforementioned in the affirmative, i.e. that the learned Income Tax Appellate Tribunal, on the facts and circumstances of the case was justified in holding that a separate addition on account of bonus in the assessment of the assessee was double addition. There will however be no order as to costs.

M.B.A./C-38/L

Order accordingly.