(a) Income Tax Ordinance (XXXI of 1979)---

----S.14---Appeal to Appellate Tribunal---Question of law ---Jurisdiction-- Question of law which goes to the root of the case or raises a question with regard to the jurisdiction of a particular forum to proceed with the matter or with- a particular issue can be raised at any stage of the proceedings-- Assessee could raise such question even at the stage of second appeal before the Appellate Tribunal and the Appellate Tribunal was competent to entertain the question and decide whether the Assessing Officer had jurisdiction to proceed with the assessment of such income and to bring the same within tax net..

Sabir Shah v. Shad Muhammad Khan PLD 1995 SC 66 and Commissioner of Income-tax v. Abdul Karim Transport Co. Ltd. 1993 PTD 508 rel.

(b) Income Tax Ordinance (XXXI of 1979)---

----S.14 & Second Sched., C1.99 & S.136(2)--Exemption---Reference-- Income from source of "fish catching "---Assessee had taken additional ground verbally before Appellate Tribunal that income declared by assessee from source of "fish catching" was exempt under cl.99 of the Second Sched. of the Income Tax Ordinance, 1979 while said plea was not taken up by the assessee either before the Assessing Officer or in the grounds of appeal filed before First Appellate Authority---Appellate Tribunal found that question as to whether income earned from fishing/fish catching was exempt from charge to income-tax was a question of law and even if the assessee had not raised the same before Assessing Officer or First Appellate Authority, there was no bar for the same being raised before the Appellate Tribunal and the Appellate Tribunal had jurisdiction to decide the same and direct the Assessing Officer to accept the declared income under the head "fish catching" in toto as the Assessing Officer was not entitled to probe into the income declared by the assessee---Validity---Once the Assessing Officer came to the conclusion that declared income Was actually earned from fishing/fish catching then he had no authority or jurisdiction to proceed or probe further with regard to declared sales, gross profit rate etc. in relation to such income and to make estimate with regard thereto---Appellate Tribunal, therefore, was justified in allowing the assessee to raise plea of income from fishing/fish catching being exempt from tax and beyond the jurisdiction of the Assessing Officer---Order of the Appellate Tribunal was confirmed by High Court.

Sabir Shah v. Shad Muhammad Khan PLD 1995 SC 66 and Commissioner of Income-tax v. Abdul Karim Transport Co. Ltd. 1993 PTIJ 508 rel.

Shaikh Haider for Appellant.

Rehan Hassan Naqvi and Miss Lubna Pervaz for Respondent.

Date of hearing: 4th September, 1998.

JUDGMENT

These reference applications under section 136(2) of the Income Tax Ordinance, were filed by the applicant/department referring the following three questions of law to this Court for seeking its opinion. The questions of law referred to this Court- are asunder:

(i) "Whether the learned Income-tax Appellate Tribunal was justified it accepting the additional ground verbally taken by the Advocate of the assessee that the Income-tax Officer was not authorised to probe into the income declared by the assessee from the source of 'Fist Catching' specially, when this plea was not taken up by the assessee either before the Income-tax Officer or before the learned C.I.T. (Appeals) or in the grounds of appeal filed before the Income-tax Appellate Tribunal.

(ii) Whether on the facts and in the circumstances of the case the learned Tribunal was justified in holding that the Income-tax Officer was not entitled to probe into the income declared by the assessee from the source of 'Fish Catching'.

(iii) Whether on the facts and in the circumstances of the case the learned Tribunal was justified in directing that the income declared by the assessee under the head of 'Fish Catching be accepted in toto."

The facts leading to the filing of the above reference applications are that the Income-tax Appellate Tribunal by its order dated 24-9-1988 in I.T.As. Nos.307 and 308/KB, of 1985-86 pertaining to assessment years 1980-81 and 1981-82 allowed the appeals filed by the respondent/assessee challenging the finding of the income-tax Officer whereby he had subjected to tax income earned by the respondent/assessee from fishing/fish catching which was claimed by him to be exempted from being subjected to tax. The Tribunal in its aforesaid order held that it was within the power of Income tax Officer to ascertain as to whether income from fishing/fish catching claimed to be exempted was actually earned from fish catching but once it was concluded by him that it was the income derived from fishing/fish catching then it had no jurisdiction to proceed further with the matter. The department/applicant feeling aggrieved and dissatisfied with the aforesaid order filed two separate Reference Applications being R. As. Nos.2 and 3/KB of 1988-89. The Appellate Tribunal by its order dated 13-1-1990 dismissed the Reference Applications on the ground that the questions proposed to so referred to this Court did not arise out of its order dated 24-9-1988. The applicant/department finding itself aggrieved and dissatisfied with the order of the Appellate Tribunal approached this Court directly by way of Reference Application under section 136(2) of the income Tax Ordinance.

We have heard the arguments of M/s. Shaikh Haider and Rehan Hassan Naqvi, learned counsel for the parties and have also perused the material on record.

With regard to question No. 1, we are of the view that the dispute as to whether the income claimed by the respondent/assessee to, have been earned from fishing1fish catching was exempt from charge to income-tax was a question of law and even if the respondent/assessee had not raised the same before the Income-tax Officer or the Commissioner of Income-tax (Appeals), there was no bar in the same being raised before the Appellate Tribunal and the Appellate Tribunal had jurisdiction to consider and decide the same. This is in view of the established principle that a question of law which goes to the root of the case or raises a question with regard to the jurisdiction of a particular forum to proceed with the matter or with a particular issue can be raised at any stage of the proceedings. The; respondent/assessee had claimed the income earned by it from fish catching to be exempted from charge to tax in view of clause (99) of the Second Schedule to the Income Tax Ordinance, which exempts income derived by an assessee from the business of fish catching from charge to tax. The question whether the income or the profits earned by the respondent/assessee from fish catching was exempt from charge to tax was a question of law. As such the assessee could raise the same even at the stage of second appeal before the Appellate Tribunal and the Appellate Tribunal .was competent to entertain the question and decide whether the Income-tax Officer had jurisdiction to proceed with the assessment of such income and to bring the same within Tax Net. If any authority be required in support of the above then reliance is placed on the case of Sabir Shah v. Shad Muhammad Khan, decided by the Supreme Court reported in PLD 1995 SC 66. A learned Division Bench of the Lahore High Court in the case of Commissioner of Income-tax v. Abdul Karim Transport Co. Ltd reported in 1993 PTD 508, held that the High Court could not sit in appeal upon discretionary order of the Appellate Tribunal in allowing objection as to the jurisdiction of the Income-tax Officer for the first time before it by way of an additional plea.

In this view of the matter this question is answered in the affirmative and it is held that the Appellate Tribunal was justified in allowing the respondent/assessee to raise the plea of income from fishing/fish catching being exempt from tax and beyond the jurisdiction of the Income-tax Officer to subject it to tax.

With regard to question No.2 it is to be observed that the Appellate Tribunal in its order held that it was within the power of the Income-tax Officer to probe into the question whether the income declared by the respondent/assessee claimed to have been earned from fishing/fish catching was actually and in fact earned from fishing/fish but once it came to the conclusion that the said declared income was actually earned from fishing/fish catching then he had no authority or Jurisdiction to proceed or probe further. This finding of the Appellate Tribunal could not be said to be suffering from any defect in view of total exemption granted to the income earned from fishing/fish catching by clause (99) of the Second Schedule to the Income Tax Ordinance, which enumerates various kinds or classes of incomes which cannot be subjected to levy and charge to tax. In this circumstance, the question whether the Appellate Tribunal was justified in holding that the Income-tax Officer was not entitled to make further probe in the income declared by the respondent from fishing/fish catching, is answered in the affirmative.

With regard to the third question, the answer to the same can be found from our discussion relating to question No.2. Once the Income-tax Officer had come to the conclusion that a particular income declared by the respondent, which was claimed to be from fishing/fish catching, was actually found to be from this source then in view of clause (99) of the Second Schedule to the Income Tax Ordinance exempting such income from charge to tax, the Income-tax Officer had no jurisdiction to proceed or probe further with regard to the declared sales, gross profit rate, etc in relation to such income. He had no jurisdiction/authority to reject the declared sales or gross profit rate and to make estimation in regard to them and had to accept the declared results of such income. In view of the above, this question is also answered in affirmative.

Upon the above discussion, we are of the view, that the order of the Appellate Tribunal dated 24-9-1989 in I.T.As. 307 and 308/KB of 1985-86 does not require to be interfered with. All the three questions in both the Income Tax Cases are answered in the affirmative. The Income Tax Cases/Applications being without any substance were dismissed by a short order. These are the reasons for such dismissal. The order of the Appellate Tribunal dated 24-9-1989 is confirmed.

C.M.A./95/K/(Tax) Questions answered.