I.T.A. NO. 1627/LB OF 1986-87, DECIDED ON 3RD APRIL, 1998. VS I.T.A. NO. 1627/LB OF 1986-87, DECIDED ON 3RD APRIL, 1998.
1998 P T D (Trib.) 2091
[Income-tax Appellate Tribunal Pakistan]
Before Nasim Sikandar, Judicial Member and Mansoor Ahmad, Accountant Member
I.T.A. No. 1627/LB of 1986-87, decided on 03/04/1998.
Income Tax Ordinance (XXIO of 1979)---
----S. 65(2) [as amended by Finance Act (VI of 1987)]---Reopening of assessment---Provisions of S.65(2), Income Tax Ordinance, 1979 are procedural in nature---Definite information---Requirement---Approval of I.A.C. having been given some three years earlier to amendment introduced on 1st July, 1987, the change brought about in S.65(2) could not be worked back to destroy an official act done and order made in accordance with law-- Allowing of approval by I.A.C. thus was a past and closed transaction when the amendment was introduced in 1987 which could not be taken to undo the official act already done.
Central Insurance Company and others v. C.B.R., Islamabad 1993 SCMR 1232=1993 PTD 766; Assistant Commissioner of Income Tax and another v. Pakistan Herald Limited 1997 SCMR 1256; Philips Electrical Company of Pakistan Limited v. I.T.O. 1990 PTD 389; 1981 PTD 119; CIT v. Shahnawaz Limited 1993 SCMR 73; 1998 PTD (Trib.) 2113; PLD 1978 Pesh. 1; 1988 PLC 114; Srinivasulu Nidu v. Damodaraswami Nidu and others AIR 1938 Mad. 779 and Dilawar Hussain v. Province of Sindh PLD 1993 Kar. 578 ref.
Shafqat Mahmood Chohan, L.A. for Appellant.
I.N. Pasha and Kh. M. Iqbal, for Respondent.
Date of hearing: 13th December, 1998.
ORDER
NASIM SIKANDAR (JUDICIAL MEMBER). ---These cross appeals in the year 1982-83 are directed against an order of the first appellate authority CIT(A), Zone-I, Lahore recorded on 30-6-1986.
2. The assessee-appellant is a public limited company and derives income from manufacture and sale of cotton yarn and manmade fibre. Original return filed for the assessment year 1982-83 disclosing income at Rs.57,00,638 (before depreciation) was accepted and an assessment accordingly made under section 59(1) of the Income Tax Ordinance on 30-6-1983. It appears that on receipt of a complaint the assessing officer made a visit to the Head Office of the assessee company on 1-2-1984 and impounded a number of books of accounts and certain other documents. A preliminary examination conducted revealed that the assessee had inflated the cost of cotton yarn purchased, machinery parts and had also made a number of manipulations in the books of accounts. For these reasons permission of the controlling officer, I.A.C. Central Zone, Lahore was sought to reopen the assessment under section 65 of the Income Tax Ordinance. On receipt of the approval on 9-2-1984 a letter was issued on the same day requiring the assessee to file a return which was finally filed after seeking a number of adjournments. The assessee reiterated its earlier income at Rs.57,00,638 and the return so filed was also captioned "under protest under section 65".
3. According to the assessment order dated 24-2-1985 framed under section 62/65 of the Ordinance the examination of books of accounts impounded at the time of visit of the assessing officer disclosed that the assessee had wrongly debited the purchase of cotton to the extent of 500 bales, purchase of spare parts was inflated to make a claim of Rs.43,08,981 and that the yield declared at 83.75 % was low when compared to actual yield shown in the record impounded. During the course of proceedings it was also noted that sale of M.M. Fibre had been suppressed by making a reversal entry, income on export of yarn through a subsidiary namely M/s. Rafi Holding was suppressed, that a sum of Rs.7;32,000 was advanced to M/s. Surriya Textile Limited another sister concern but no interest was charged under section 12(7) of the Ordinance, that a wrong entry of stock in transit was made in the ledger account, that closing stock of finished good was undervalued and that sale of packing material had not been faithfully disclosed. On being confronted with these issues the assessee in the first instance kept on making requests for supply of the documents impounded from its Head Office. Finally, the assessing officer as per the assessment order handed over photo copies of general ledger, parties general ledger, cash book (Head Office), cash book (Mills), cotton purchase register and gate inward register. The request of the assessee for provision of copies of other documents was however declined on the ground that these were not needed to make reply to the issues confront.
4. From the reply submitted on 31-1-1985 the assessing officer found that the assessee had failed to explain a number of deficiencies. The first being cost of purchases of 500 bales of cotton debited to the purchase account. The assessing officer noted:
"Entry with regard to the purchase of 500 bales have been made in the ledger of Cotton Purchase Account (Folio-14E) on 30-11-1980 for Rs.10,14,000. A corresponding credit entry is also appearing in the ledger account of Accounts Payable' (Folio 150). The name of the party from whom the purchase was allegedly made had nowhere been recorded in the ledger though in all other cases the names of the suppliers have been duly mentioned and recorded. It is significant that the effect of this purchase of Rs.10,14,000 was not originally reflected in the progressive total of the cotton purchase account. A close examination of the entries drives one to the conclusion that it is a definite interpolation to inflate the cost of cotton. The progressive totals of the cotton purchase account on Folio-14A of the ledger amounted to Rs.1,64,07,376.76 which was scored out to increase the same to Rs.1,74,21,376.76 so as to account for the interpolation of Rs.10,14,000. Likewise the progressive total entry of Rs.207,19,464.38 on Folio-14B of the ledger was scored out and changed over to Rs.217,33,464.38 to include the effect of the interpolated purchase entry dated 30-11-1980 of Rs.10,14,000. In fact the totals of the cotton purchase account on all the ledger folios have been subsequently tampered and changed over to increase them again and again to carry over the effect of Rs.10,14,000. "
The assessee replied that purchase of 500 cotton bales was duly supported by gate pass and that its record in the purchase register was due to the mischief caused by the erstwhile Chief Accountant. On being asked to produce the persons from whom these sales were affected the assessee took up a plea that the purchases were made through one Baha-ud-Din Munshi. When the gentleman was found not available at the address given the assessee was required to produce the persons from whom allegedly said Baha-ud-Din Munshi had made the purchases. Only two of the gentlemen came forward whose documents of ownership and claim that they had supplied to the assessee their self-grown cotton was found unbelievable. The other contention that gate register and other similar documents of accounts were not properly maintained by the Ex-Chief Accountant of the assessee-company was also repelled on the ground that the same gentleman had all along been appearing before the assessing officer and had remained associated with the assessment proceedings till the date of his retirement which apparently happened before finalization of the assessment order. It was also noted that the cotton purchase register contained original entries and there was no track of any manipulation thereon. The assessing officer further noted that the truck freight and incidental charges relating to 500 bales of cotton were not entered in the cotton purchase register nor in the general ledger. From this he concluded that no freight and other incidentals were in fact incurred as all the other purchases made by the assessee were properly recorded except for these 500 cotton bales. The supporting documents produced to show payment of freight and octroi were found fabricated and unreliable. Also it was noted that neither the assessee claimed payment of freight charges nor the alleged suppliers of cotton had made a similar claim. It was further noted that the debit in the books of account was made on 30-11-1980 showing transportation of 500 bales. According to the assessing officer such bulk quantity could not have been made at one time and even if it was so the record clearly indicated that alleged purchase of cotton had been contrived in order to inflate the cost. For these reasons the alleged cost of Rs.10,14,000 was added towards income. In case of machinery spare parts account again the assessing officer doubted the maintenance of accounts in this regard. In his words there had been considerable difference in the consumption when compared with the similar expense in the preceding years. It was also found that record/ consumption register of spares had been manipulated to inflate the expenditure by a sum of Rs.32,00,000. The relevant portion of the assessment order reads:
"The sum total of Rs.36,53,163 of the first 12 entries represents the alleged consumption of stores and spares during the year under assessment. The 13th entry of 10,90,336 represents the reversal of the capitalised expenditure. Originally, stores and spares of this value were capitalised but on finalization of the accounts these have been reversed and claimed as revenue expenditure raising the total consumption to Rs.47,43,489. The consumption of stores and spares is excessive and beyond imagination. Close scrutiny of the accounts reveals that the consumption of stores and spares had been heavily inflated by interpolation and manipulation of the transfer entries. The consumption for the month of October, 1980 as per journal entry No.22 in, fact amounted to Rs.22,658. Later, the assessee added another figure of 3 is quite visible from the transfer entry in the machinery spares account, the consumption account and the journal entry. The original entry for the month of November, 1980 was for 39,388 which was later on converted to 3,39,388. Just by adding the figure 3, the assessee fraudulently increased his consumption claim by Rs.3,00,000. In the month of December, 1980 the transfer entry was for 22,582 only which was subsequently changed over to 3,22,582 so as to inflate the consumption expenses by Rs.3 lac. Consumption for January, 1981 was also increased by Rs.3 lac which altered the original figure of 49,499 to 3,49,699. The consumption for February, 1981 was also inflated by Rs.3 lac. Consumption for each of the months from October to May, was increased by 3 lac and that from June to September by Rs.2 lac each. By this fraudulent manipulation the assessee inflated the expenditure by as such as rupees 32 lac."
5. Further the spare parts register was found to have been written at a stretch. The statement of spare parts was supplied by the assessee on 10-2-1985 while the assessing officer was busy in finalization of the assessment order which was also found to have been tampered with. Lastly he observed that near the closing of the accounting period, September 1981 the assessee made a reversal entry at Rs.10,90,326 of the capitalized expenditure. According to the accounts originally this amount was booked as capitalised expenditure but at the time of finalisation of the accounts its nature was reversed and shown as revenue expenditure. This discrepancy also having not been properly explained. The sum of Rs.10,90,326 was added on this account.
6. The assessee alleged to have made exports of cotton of Rs.4,19,000 through M/s. Rafi Holdings. Local sales of cotton yarn of 7 bags was also made to the same concern and the total of the two sales amounted to Rs.2,24,530. Both of them were properly recorded in the books by way of general ledger. However, instead of taking these amounts to the profits and loss account as ,income the assessee took the said amount and showed it as accrued expenditure. On being confronted it was alleged that the supplies made to M/s. Rafi Holdings for export were rejected by the foreign customers and the exporters M/s. Rafi Holdings Limited had required the assessee company to reimburse the amount. According to the assessee at the time of final settlement an amount of Rs.2,24,530 was kept in suspense account. It was earlier contended that sales to M/s. Rafi Holdings as well as exports were made in the period relevant to the assessment year 1981-82 and therefore these were not related to the period under review. Here again the Assessing Officer was not satisfied. In the first instance no suspense account entry was found in the books of accounts as alleged by the assessee. Secondly it was opined that at least the assessee had accepted that the aforesaid amount of Rs.4,24,530 represented profit of last year which had been accounted for in this year. It was therefore also added towards income.
7. From the books of accounts of the assessee it was further noted that the sales of 80 bales of polyester fibre were made on 31-1-1981 valuing at Rs.5,07,058. A sum of Rs.10,000 was also shown to have been received as advance on the same day namely 31-1-1981. It was further noted that the above entry of sales was reversed on 30-9-1981 while no entry had been passed with respect to the advance received at Rs.10,000. On being confronted the assessee stated that the aforesaid sales were made against advance payment of Rs.10,000 but the buyer refused to honour the transaction due to fall in prices. It was also pleaded that the closing stock shown at 11617 Kgs. was a clerical mistake. The Assessing Officer however was not satisfied. He opined that the assessee had been making frivolous adjustments in the sale account of polyester and a reversal entry of Rs.5,07,058 was quoted as one of the instances. The plea with regard to fall in price of M.M. Fibre was also rejected on the ground that a number of other sales after that day were affected at the same rate. An express instance from the ledger account was also quoted to bring home the point. Therefore, the reversal entry of the amount was considered bogus and accordingly the sum involved at Rs.5,07,958 was added towards income.
8. From the comparison of working of two units of the assessee's Mills it was observed that yieldage shown at 83.57% by Unit No. 1 did not betray the correct position. The Assessing Officer based his opinion on "working paper 1981 file" impounded and taken into possession at the time of the visit of his predecessor to the Head Office of the assessee-company. It was noted that according to the working paper the assessee had shown working of yieldage for eight months commencing from September, 1980 indicating average production at 86.4%. The results disclosed by the assessee when juxtaposed with other books of accounts it was finally concluded that yieldage of cotton yarn worked out to 86.12 % which was the same as declared and worked out by the assessee itself in the aforesaid file. Therefore, the disclosed yieldage at 83.57 % in Unit No. 1 and at 83.9T% in Unit No.2 was held to be incorrect. However, no addition in case of Unit No.l was made and yieldage was considered to have been accounted for in the form of inflated purchases at Rs.10,14,000 already added towards income. In case of Unit No.2 for the aforesaid reasons yieldage at 86% was adopted to make an addition of Rs.15,63,017. A number of profit and loss disallowances were also made. A sum of Rs.6,47,362 was added towards income by resort to the provisions as contained under section 12(7) of the Ordinance after finding that loans and interest free advances to Directors and associates had been made at Rs.53,94,685. Another addition of Rs.58,650 was also made by resort to the same provision after finding that the advanced sum of Rs.7,32,000 made to sister concern namely M/s. Surriya Textile Mills Limited dated 31-1-1991 was also hit by the same provision of the Ordinance. In this manner total income for the year was computed at Rs.1,21,91,003.
7. Learned first appellate authority by way of the impugned order maintained the reopening of the assessment on the ground that the same having been initiated by the approval of the I.A.C. the requirements of law as contained in section 65(2) of the Ordinance at the relevant time had been fully answered. Also it appears that the first appellate authority refused to go into the details if definite-information was available with the assessing officer at the time of the reopening of the assessment. In the view of the first appellate authority since prior approval for reopening had been obtained and since requirement of law had been fully fulfilled the issue if definite information was available with the assessing officer did not require any detailed discussion. On merits the addition made on account of wrong claim of purchase of 500 bales of cotton at Rs.10,14,164 was maintained for almost same reasons which were earlier considered by the assessing officer while making the addition. In case of spare part machinery account learned first appellate authority partly agreed with the assessing officer that some of the entries in the register were manipulated. However, it was further noted that a number of individual items were intact and therefore the assessing officer ought to have found the truth by allowing due credit for the spare consumed where any element of manipulation did not appear from the record. Accordingly the total addition of Rs.42,90,396 under this head was found to be not in accordance with law. It was therefore set aside for passing a fresh order after examination of the issue on the lines given in the order. With regard to third addition made on account of sales made to M/s. Rafi Holding Limited the disallowance of Rs.4,24,530 was found in accordance with law and maintained for similar reasons as noted by the assessing officer while making the additions. In case of the addition of Rs.5,07,058 in polyester fibre account learned first appellate authority agreed with the submissions made before it that the declared closing stock was inadvertently wrongly reported. In this regard the estimated value of the stock was taken into consideration to show that the amount of Rs.8,08,942 could never be for 11617 Kgs., The impugned addition was therefore deleted. The adoption of yield of yarn at 86% in respect of second unit was also found justified and accordingly maintained. Also the disallowance of Rs.58,650 earlier made by resort to the provision of section 12(7) in respect of the interests free loan made to M/s. Surriya Textile Limited was held to be in accordance with law and therefore maintained. The disallowances in profit and loss account under various heads in respect of both units were also found to be fair and in accordance with history of the case.
8. The assessee still feels dissatisfied with the relief allowed while the department considers the same to be excessive and unjustified. Also in cross appeal it is contended that the CIT(A) had wrongly deleted the addition in polyester fibre account.
9. Before us the assessee is represented by Mr. I.N. Pasha, Advocate assisted by Khawaja Muhammad Iqbal. The Revenue has the services of Mr. Shafqat Mahmood Chohan, its Legal Adviser. Learned counsel for the assessee takes strong exception to the reopening of the assessment in the facts and circumstances of the case. In his view no definite information was available which could authorise the assessing officer to proceed to exercise his powers under section 65 of the Income Tax Ordinance. In this regard specific mention of a number of facts emerging from the assessment order are pointed out to say that it vas primarily a fishing attempt on the part of the assessing officer. It is claimed that the raid conducted on the Head Office of the assessee-company was a sequel of a complaint which was totally unfounded. Further that from the documents impounded at the time of raid the assessing officer could not make out a clear and definite case which was indicated from the fact that his first notice was short and pertained only to alleged inflation of purchases, excessive claim of spare parts and lower G.P. rate. All the three objections, according to the learned counsel were totally general in nature and did not crystallize the exact position of accounts nor the intention of the assessing officer who kept on improving his examination of the books of accounts as stands betrayed from successive notices. He is also critical of the. inability of the assessing officer to provide copies of a number of documents required by the assessee to make a proper and effective reply to the notices issued from time to time. It is further stated that the kind of information on the basis of which the assessing officer proceeded to take action was totally against the declared view of the superior Courts as well as this Tribunal. Reliance in this regard is placed upon the examination of the term "definite information" as made by their lordships of the Supreme Court in re: Central Insurance Company and others v. CBR, Islamabad cited as 1993 SCMR 1232=1993 PTD 766. Assistant Commissioner of Income Tax and another v. Pakistan Herald Limited cited as 1997 SCMR 1256 and Philips Electrical Company of Pakistan Limited v. ITO reported as 1990 PTD 389. The views expressed by the Tribunal on the subject are also stressed as find mention in the reported decision cited as 1981 PTD 119. Mr. I.N. Pasha has a further objection to the reopening of the proceedings on the ground that even approval of the concerned I.A.C. was not available at the time and the moment when the assessee was served with a notice under section 65 of the Ordinance. It is stated that the permission to reopen the case having been received in the office of the assessing officer on 12-2-1984 the notice issued under section 65 on 9-2-1984 was totally illegal and therefore coloured whole of the subsequent proceedings.
10. Learned counsel further submits that in this case the assessing officer was required to seek approval of the concerned I.A.C. and was also bound to be in possession of definite information before he could lay his hand upon the assessment already framed. The submissions made in this regard are based upon a reported judgment of the Karachi High Court in re; Philip Electrical Company of Pakistan Limited (supra). Also seeks strength for his contention from the ratio settled by the Supreme Court of Pakistan in re: CIT v. Shahnawaz Limited 1993 SCMR 73. In re: M/s. Philips Electrical Company a Division Bench of the Karachi High Court expressed that the word "or" as used in section 65 of the Ordinance before amendment by Finance Act, 1987 could be taken to read as "and" to give retrospective effect to the amendment made by Finance Act, 1987. In the second case relied upon re: M/s. Shahnawaz Limited the Supreme Court laid down principles of interpretation of remedial statutes. In the course of judgment their lordships allowed retrospective effect to the amendment made in section 17-A(6) as introduced by Finance Act (L of 1973) read with CBR Circular No.6 of'1973 dated 7th July, 1973.
11. On facts learned counsel for the assessee states that the impugned additions were made on presumptions and were therefore not sustainable at law. Reliance in this regard is placed upon a reported judgment of this Tribunal cited as 1998 PTD (Trib.) 2113. Some unreported decisions of this Tribunal are also cited in support of the same principle. Some photo copies of; purchase register and other accounts have been submitted to support the contentions that the aforesaid additions were not in accordance with law and that the results declared by the assessee as evidenced by the books of accounts were better than those returned by a number of the assessees in this kind of business. The objections made with regard to these additions has earlier placed before the assessing officer in the form of replies and submitted before the first appellate authority as arguments are also repeated. In case of addition under the head Kapas he submits that the assessee successfully demonstrated to have made the stated purchases by producing the sellers of the Kapas. Therefore, he continues, the assessing officer could have pursued the sellers if he doubted the transactions instead of burdening the assessee with the aforesaid additions on account of alleged inflation of purchases of Kapas. In this regard copies of the gate passes are again relied upon as it was done before the authorities below. Also places reliance upon 1998 PTD (Trib.) 2113 to state that once the factum of sale had been accepted by the sellers the assessing officer could draw an adverse inference only against them and not the assessee. In case of the sales made to M/s. Rafi Holdings he prays for remand of the issue on the ground that the assessing officer failed to appreciate the fact that these pertained to the assessment year 1981-82 and that actual payment to the said exporter namely M/s. Rafi Holdings to reimburse their loss on account of defect in the goods was made after three years. The comparison of two units for the purpose of yieldage is also agitated on the ground that no specific defect was pointed out by the Assessing Officer and therefore any addition in this regard was a result of pure guesswork. The order of the first appellate authority in deleting the addition made on account of sales of M.M. Fibre is also supported and the objections earlier made by the assessing officer with regard to the reverse entry are countered. Lastly informs that the assessee company is in the process of re-organisation and that a petition for this purpose is pending disposal before the Lahore High Court.
12. Mr. Shafqat Mahmood Chohan learned Legal Adviser, however, controverts the submissions made at the bar as for the seeking of approval of the I.A.C. is concerned. Basing upon the copies of the documents it is stated that the assessing officer made a request to the concerned I.A.C. for approval to initiate action under section 65 of the Ordinance on 8-2-1984 which duly came along on 9-2-1984. It is stated that the approval letter of the I.A.C. was received in the office of the assessing officer on 9-2-1984 and this fact was duly noted in the order sheet. Therefore, he supports issuance of notice on the same day namely on 9-2-1984 when the approval of the I.A.C. was received and the notice for reopening was issued which was duly served upon the assessee on 18-2-1984. To counter the prayer for allowing retrospective effect to the amendment made in subsection (2) of section 65 of the Ordinance learned Legal Adviser places reliance upon PLD 1978 Pesh. 1 wherein it was held that a new law or amendment in law was prospective in operation unless expressly provided for the contrary. Another case cited as 1988 PLC 114 is relied to contend that every legislation and judge-made lawtakes effect from the date when it was announced unless its maker specified otherwise. Reliance is further placed upon AIR 1938 Mad. 779 re: Srinivasulu Nidu v. Damodaraswami Nidu and others. In that case a Division Bench of the Madras High Court explained the principle that portions of statute which were silent with regard to their effect and operation should be taken as indicating prospective intention. Lastly supports the 'Objections earlier made by the assessing officer while making the disallowance on account of profit suppressed in respect of 80 bales of polyester fibre and therefore, complains against the relief allowed by the first appellate authority in this regard.
13. The contentions of the parties have been considered. Taking up the objections of the learned counsel for the assessee against reopening first we find them to be necessarily unacceptable. The argument that the assessing officer received the statutory approval after issuance of notice under section 65 on 12-2-1984 is not supported from the record. A copy of the approval letter No. J-44/CC-111/709 dated 9-2-1984 bears the receipt stamp of the office of the assessing officer and is dated 9-2-1984. It is correct that another note bearing on the face of this letter is to the effect "put up in the file" and is dated 12-2-1984. However, the apparent contradiction can easily be reconciled when seen in the perspective of attending events. The first of the two entries on the order sheet made on 12-2-1984 appear to have been overwritten and therefore, manipulated. Even if these are considered correct still the factual situation will not change that the concerned authority had allowed reopening of the assessment on 9-2-1984. Since the notice under section 65 was issued on the same day the factual controversy with regard to a note on the face of the approval letter dated 12-2-1984 is hardly of any significance. The law, subsection (2) of section 65 of the Ordinance at the relevant time required approval of the concerned I.A.C. for the purpose of initiation of proceedings under subsection (1) thereof. All proceedings including issuance of notice under section 65 having occurred on or after 9-2-1984 we find no substance in the submissions made for the assessee in this regard.
14. The other facet of the contention: that even before amendment brought in subsection (2) of section 65 of the Ordinance by Finance Act (VI of 1987) whereby the word "or" was substituted by the word "and" the two requirements of definite information as well as approval of the I.A.C. were necessary is equally unacceptable. Learned counsel for the assessee has placed a lot of stress on the ratio settled in re: Philips Electrical Company of Pakistan Limited v. ITO (supra). However, he readily admits that the Supreme Court of Pakistan in the other reported judgment cited as CIT v. N.V. Philips Gboilomenfabrian, Karachi set aside the said order of the High Court. In the view of the learned counsel the order of the High Court had three parts and that. the Supreme Court had only disapproved the exercise of Constitutional jurisdiction but the ratio settled and the law pronounced therein was not interfered with. In this regard he attempts to say that the supreme Court itself in a subsequent judgment re: Central Insurance Company and others v. C.B.R., Islamabad (supra) referred with approval the para-meters of definite information as settled by their lordships of Karachi High Court. Therefore contends that the view of the Karachi High Court that the amendment brought about in subsection (2) of section 65 of the Ordinance being remedial in nature it should be allowed retrospective effect remains intact. The principle with regard to retrospectivity of remedial statute as laid down in re: CIT v. Shahnawaz Limited (supra) is also repeated. -
15. The interpretation of the learned counsel however is too liberal and it contains a number of elements with complicated consequences. It cannot be accepted. Even if it is assumed that in spite of having been set aside by the Supreme Court the order of the High Court has a binding force on certain aspects, the fact remains that the issue before us is clearly distinguishable. In that case the very reopening and the notice issued for this purpose was challenged by way of the constitutional petition. On the other hand approval of I.A.C. in the case before us has matured into a past and closed transaction. The legality of an act or order can be seen only in the perspective of the law applicable at the relevant time. Any change before or after the act will have no bearance if it is in accordance with law at the particular point of time. If the proposed interpretation of the learned counsel is accepted the first casualty would be an official act done in accordance with law as prevalent at the relevant time of making of the order. In this case it is giving of an approval for reopening which was perfectly in accordance with law as on 9-2-1984. It is not the case of the assessee that the said approval suffered from any other legal infirmity. Therefore, the approval having been given some three years earlier to the amendment introduced on 1st of July, 1987 the change brought about could not be worked back to destroy an official act done and an order made in accordance with law. To that extent namely the allowing of approval, was a past and closed transaction when the amendment was introduced in 1987 and accordingly even if we agree that the amendment was of remedial nature it could not be taken benefit of to undo an official act already taken. In the case of CIT v. Shahnawaz Limited the Supreme Court while allowing beneficial interpretation and retrospectivity to the amendment made in law favourably noted the observations of the High Court to the effect that "The retrospective effect of amending law would therefore apply only to those cases where assessment had not been made by the ITOs or where an appeal was pending before the Tribunal or a reference was subjudice before the High Court at the time of the amending law was enacted. The cases which had finally been determined or had attained finality i.e. which were past and closed transactions could not be reopened under amending legislation as there are no express words to that effect imply in the amending law". As noted above in this case the amendment was brought in to enlarge the requirement to be fulfilled before an action was taken. Before amendment an alternate was provided. To proceed under section 65 of the Ordinance, the assessing officer was required to be in possession of definite information or he was to obtain permission of his IAC. After amendment both requirements were joined with the result that definite information as well as the approval of I.A.C. was required before an action under section 65 could be taken. The requirement of approval was fully answered as it existed at the relevant time on 9-2-1984. Therefore, it became a past and closed transaction even though the law was amended during the pendency of appeal before us. We would also like to record that if the provisions of subsection (2) of section 65 are taken as procedural, which in fact these are, retrospective effect cannot be given to subsequent amendment to say that the procedure observed at the time though in accordance with law was rendered illegal on account an amendment made at a latter time. It is also not the case of the assessee that on the date of approval any pronouncement of a Court against the alternate requirement was in the field.
16. To say that the amendment brought about by Finance Act (VI of 1987) was of remedial nature also needs further consideration. In re: CIT v Shahnawaz Limited their lordships of the Supreme Court agreed with the finding of the High Court that the amendment in section 18-A(6) as made by Finance Act of 1973 was of remedial nature as it corrected a wrong which was being done to the assessees. Conversely the amendment made in subsection (2) of section 65 in 1987 only provided a further protection to an assessee against capricious and arbitrary exercise of jurisdiction vested in the Revenue to reopen the completed assessments. The providing of further protection and security to the completed assessments does not by itself means that it was remedial in nature. Even if that be so in PLD 1993 Kar. 578 re: Dilawar Hussain v. Province of Sindh it was held that remedial statutes as a genus were not retrospective. Further that where rule of liberal construction was applied, any doubt in favour of retrospective operation was to be resolved only if such operation did not destroy or disturb vested rights, created new liabilities, violated due process of law or contravened a constitutional provision. A remedy is provided only where a wrong has been done while in the amendment before us no specific wrong was sought to be remedied but only further protection and sanctity was clothed to the assessments already framed. The curtailment of power of the Revenue to reopen an assessment already framed or to initiate proceedings in cases involving escapement or under assessment did not per se amount to redress of a grievance when seen in the perspective of the ratio settled in the case of CIT v. M/s. Shahnawaz Limited (supra). In that case the issue before their lordships being if the Tribunal had rightly held that payment of additional tax was a procedural matter and that the amendment made in relation thereto by Finance Act, 1973 was of procedural nature and hence operated retrospectively. The High Court maintained the order with the observation that "a happy and remedial change was brought about by the amendment in this subsection by the Finance Act, 1973 which restricted the period to a maximum of fifteen months for which the aforesaid additional tax at the rate of 2% per month could be charged". This view was approved by the Supreme Court. However, the matter in issue before us does not pertain to the allowing of a monitory relief to an assessee nor it can be said that the issue of approval for reopening of the assessment was in any sense of the term still pending when the amendment was introduced.
17. Learned counsel for the assessee has also addressed at length to contend that "definite information" as expounded by the superior Courts in the earlier mentioned reported judgment was not available in this case and therefore the alternate condition of subsection (2) of section 65 even before amendment was not satisfied. Learned first appellate authority refused to comment upon similar submissions made before it for the reason that in the presence and availability of a valid approval of the concerned I.A.C. at the relevant time the alternate requirement of availability of definite information was not material. We will agree with this finding. Since we have held that the reopening of the case was done after obtaining statutory approval from the I.A.C. and since we have rejected the objections directed on factual aspects as well there is no need to discuss the alternate or the fact if definite information was available with the Assessing Officer at the relevant time or not. The Assessing Officer having not based the reopening of the proceedings on this alternate available to him at the relevant time there is no use to discuss anything which never striked him.
18. In case of the aforesaid additions again we are not persuaded to interfere for the assessee. The Assessing Officer fully succeeded in bringing home that the assessee had inflated cost of cotton. The-defence put up in this regard was not only afterthought but also unconvincing. In the first instance the assessee attempted to introduce a person who was not traceable. At the later stage he produced two of the alleged five sellers of Kapas. Both the gentlemen appearing did not own sufficient land to support their claim that they were growers of the Kapas sold to the assessee. Neither the assessee nor the alleged sellers claimed freight and incidental charges which was rightly taken as one of the factors to conclude that the impugned entry of purchase of Kapas was fictitious. The other factor that the alleged sellers did not make any attempt to recover the price of the cotton supplied for well over one year was again rightly taken as a pointer of inflation of purchases. The attempt of the assessee to malign its Chief Accountant in order to justify various manipulations in record was also self-destructive though inherently contradicted. The gentleman as recorded in the assessment order kept on pursuing the matter before the Assessing Officer on behalf of the assessee for quite some time till his retirement. It was only after his retirement that the aforesaid insinuation was coined to pass on the buck. In the matter of export from M/s. Rafi Holdings Limited again finding of fact that no alleged suspense account was ever provided for nor existed in the books of accounts has not been controverted by the assessee. Instead a prayer has been made for remand of the issue on the ground that the transaction having taken place in the earlier years it could not have been considered in the year under review. This plea was also necessarily contradictory and unworthy of credit. No evidence whatsoever was produced to support the submission that the cotton supplied was ever rejected by the customers or that the exporter M/s. Rafi Holdings had ever made the alleged claim. The record also dial not support the alleged transaction or the claim for reimbursement. From other facts obtaining on record the Assessing Officer appears to have rightly concluded that the assessee attempted to conceal the earlier year's profit by making a wrong book entry of "accrued expenses". The claim that this amount was paid to the said exporter M/s. Rafi Holdings Limited after three years also sounds strange and unbelievable.
19. In case of sale of polyester Fibre we find that the relief allowed to the assessee is totally unfounded as the Assessing Officer had established beyond any doubt that profit on sale of polyester Fibre was suppressed by making frivolous adjustments in the sale account. Even before the first Appellate Authority the assessee failed to disclose the details of the alleged purchaser nor the reason as to why no reverse entry with regard to the advance received at Rs.10,000 was made. The reason for the alleged refusal on the part of the purchaser to honour the transaction was also found incorrect on the ground that during the same period a number of other transactions were made by the assessee at the same rate and were honoured by the purchasers. Learned first appellate Authority on the other hand allowed relief without dealing with the objections of the Assessing Officer. After making narration of the arguments put forth before it learned first appellate Authority proceeded to delete the addition only for the reason that "the declared closing stock figure at Rs.8,08,942 could never be for 11617 Kgs.". This was hardly an answer to the detailed inquiry made by the Assessing Officer and his conclusion which was otherwise supported from record that the reversal entry of Rs.5,07,058 was contrary to facts. The relief allowed by the first appellate Authority in this regard is therefore set aside with the result that the addition earlier made by the Assessing Officer shall stand restored.
20. In case of setting aside of the addition under the head machinery spare parts account again we have concluded that the first appellate Authority made a hasty conclusion although it appears to went along all the way with the Assessing Officer that clear manipulation of record was made by inserting certain figures to increase consumption of spares by 3,00,000 each in 'the first eight months and of 2,00,000 each in the last four months. Its observations that the Assessing Officer had made an addition of Rs.42,90,396 under this head is factually incorrect as the assessment order clearly indicates that the Assessing Officer raised his eye-brow with regard to the treatment of a reverse entry of Rs.10,90,326 which was earlier shown as a capital expenditure but in the month of September which happened to be the last month of assessment period the entry was converted into a revenue expenditure. Instead of making any disallowance he capitalised the said amount as earlier shown by the assessee in the accounts and also directed allowance of depreciation as per rule. The first Appellate Authority does not appear to have appreciated this aspect and instead considered the aforesaid amount as a straight disallowance. However, since the matter stands set aside and the revenue has not objected to this part of the first appellate order we are not inclined to rule upon the issue.
21. The next grievance of the assessee against addition of Rs.15,63,017 in production account of Unit No.2 is however well based. The Assessing Officer appears to have made the addition on comparing the two units and after finding that in another document the assessee had worked out yieldage at 86%. The exact nature of the document referred was never explained. The Revenue has also not produced such a .document for our examination. Therefore, from what has been written in the assessment order we have concluded that it was more in nature of a working paper giving projection and expected working of the two units instead of giving an exact statistics. All comparisons are usually arduous. Before making such an attempt one must establish the similarity of facts of the two things to be compared.. Mere reason that both units were owned by the assessee company hardly meant that these were of the same quality age and were being managed by the same operators. The yieldage of one unit, at any rate cannot be taken as a certain yardstick to determine the yieldage of another unit unless both of them are introduced to the smallest details. In Unit No. 1 the assessee declared a yield at 83.57 % and in Unit No.2 at 83.97 % . In order to raise both of them to 86% the working of one unit was not the total standard. It was better for the Assessing Officer to have made other inquiries. All the more so, when he was to estimate yieldage against the history of the case. The addition in question having not been properly made shall, accordingly stand deleted.
22. The other additions made in profit and loss account as well by resort to the provision as contained in section 12(7) of the Ordinance also appear to have been made in accordance with law. Nothing has come forth at the bar to warrant an interference.
23. Therefore, the assessee succeeds only the extent of deletion of addition of Rs.15,63,017 made under the head yieldage. Rest of the relief claimed under various heads and on various issues will be refused. The Revenue having challenged the impugned order only with respect to the addition made under the head polyester fibre shall succeed as the addition has been restored.
M.B.A./529/Trib. Order accordingly.