COMMISSIONER OF INCOME-TAX, MULTAN ZONE; MULTAN VS AL-MAKHDOOM INDUSTRIES, MULTAN
2001 P T D 1437
[Lahore High Court]
Before Nasim Sikandar and Jawwad S. Khawaja, JJ
THE COMMISSIONER OF INCOME‑TAX, MULTAN ZONE; MULTAN
versus
Messrs AL‑MAKHDOOM INDUSTRIES, MULTAN
C.T.R. No.35 of 1993, decided on 05/12/2000.
Income Tax Ordinance (XXXI of 1979)‑‑‑
‑‑‑‑S.13(1)(c)‑‑‑Addition‑‑‑Variance between the quantities of stocks in the books of account and those shown in the "pledge statements" filed with the Bank‑‑‑Effect‑‑‑Assessing Officer was justified in making addition under S.13(1)(c) of the Income Tax Ordinance, 1979 on account of variance between the quantities of goods purchased and recorded in the books and those shown in the pledge statement filed with Bank.
Muhammad Ilyas Khan for the Revenue.
Nemo for Respondent.
ORDER
NASIM SIKANDAR, J.‑‑‑This is a case stated by the Lahore Bench of Income‑tax Appellate Tribunal at the instance of the revenue. The question framed for our consideration and answer reads as under:‑‑‑
"Whether in the facts and in the circumstances of this case the ITO acted legally in making an addition, under section 13(1)(c) of the Income Tax Ordinance, 1979 on account of variance between the quantities of 'raw cotton purchases' recorded in the books of account and those shown in the 'pledge statements' filed with the bank?"
2. The assessee is a registered firm and derives income from cotton ginning business. While framing assessment for the years 1987‑88 the Assessing Officer found difference in the stock declared and pledged with the Banker to enjoy over draft facility. The hypothecation statement obtained from the Bank indicated pledging of more stock with the Bank as compared with the one shown by the assessee in its books of accounts. In reply to the show cause, the assessee contended that C.F. limit was given by the Bank on the basis of estimated weight of cotton per Bora and that these Boras were of different weights. The Assessing Officer, however, concluded that the reply made by the assessee was not convincing inasmuch as on a particular date the hypothecation statement indicated a much higher stock of certain value while in the books of accounts it was recorded at a much lower rate. Accordingly he concluded that the petitioner had wrongly disclosed its purchases and, therefore, "the difference between the purchases shown in the books of accounts and the hypothecation statement provided by the Bank was treated as unexplained investment. The amount so determined was added as income by invoking the provisions of section 13(l)(c) of the Income Tax Ordinance, 1979. The assessee succeeded before the first Appellate Authority and the order so made was maintained by the Tribunal.
3. Learned counsel for the revenue in support of the submissions that the Tribunal wrongly maintained the deletion of addition earlier made by the Assessing Officer relies upon the ratio settled by the Hon'ble Supreme Court of Pakistan in re: Commissioner of Income‑tax, Rawalpindi Zone, Rawalpindi v. Messrs Haji Maula Bux Corporation Limited, Sargodha (PLD 1990 SC 990). In that case the apex Court maintained the opinion expressed by this Court in T.R. No.70 of 1993.while answering an identical question. This Court had observed that "in these circumstances we find no hesitation in holding that the Tribunal was justified in relying on the material supplied by the Bank and the findings by the Tribunal that the assessee had 64,491 maunds, 14 seers of grams in excess of the declared closing stock of 21,653 maunds, 26 seers is based on cogent and relevant evidence adduced on the record. The Tribunal in agreement with the Income Tax Officer was justified in rejecting the accounts produced by the assessee". The addition on account of difference between the declared and the stock reported by the Bank was, therefore, maintained. The Hon'ble Supreme Court of Pakistan on the petition of the revenue, rather disapproved the findings of this. Court in which the assessee was found entitled to the deduction of purchase price of the grams from the impugned addition.
4. The issue having been considered at length in the aforesaid tax reference and the view adopted by this Court having been approved in the aforesaid judgment of the Hon'ble Supreme Court of Pakistan the answer to the question has to be in the affirmative. The Assessing Officer is found legally justified in making the aforesaid addition under section 13(1)(c) of the Income Tax Ordinance, 1979 on account of variance between the quantities of cotton purchased and recorded in the books and those shown in the pledge statement provided by the Bank. .
Answered in. the affirmative.
M.B.A./C‑62/L??????????????????????????????????????????????????????????????????????????????????? Reference answered.