COLONY SARHAD TEXTILE MILLS LIMITED VS COMMISSIONER OF INCOME-TAX, RAWALPINDI
2001 P T D 1504
[Lahore High Court]
Before Nasim Sikandar and Jawwad S. Khawaja, JJ
COLONY SARHAD TEXTILE MILLS LIMITED
versus
COMMISSIONER OF INCOME‑TAX, RAWALPINDI
P.T.R. No.21 of 1979, heard on 17/01/2001.
(a) Income‑tax Act (XI of 1922)‑‑‑
‑‑‑‑S.66(2)‑‑‑Reference to High Court‑‑‑Scope‑‑‑Question of fact‑‑ Assessee a company running a textile mill‑‑‑Rejection of accounts‑‑‑Addition‑‑ Assessing Officer, after scanning the accounts had observed that there was heavy. fall in the yield shown in the relevant years‑‑‑Corresponding increase in the wastage was also noticed ‑‑‑Assessee when called upon to explain made vague and evasive answer‑‑‑Claim of assessee that non‑use of wastage resulted into an achievement of better quality was also found to be factually incorrect rather it was found that there was a decrease in the sale rate of year‑‑‑Comparison of production results of the assessee in the earlier years showed fall in average count of yarn during the relevant year while there should have been a corresponding improvement in wastage‑‑‑Heavy increase in the wastage shown as found to be unsubstantiated on account of absence of day to day record of wastage‑‑‑Tribunal in its order had found that reasons mentioned by the Assessing Officer were sufficient to discard the disclosed version; that production of yield was not only low but in fact was lowest in the last 12 years and the only explanation put forth that wastage was not re used during the relevant year was found to be factually wrong; that claim of wastage determined in the last six years when compared with one allowed by the revenues during the relevant year was still more than the similar claims made by the assessee in previous years and such finding of fact had not been questioned on any acceptable ground and it was not alleged that there was no material on record to support such findings‑‑‑Rejection of account of assessee, in circumstances, had not raised any question of law.
(b) Income‑tax Act (XI of 1922)‑‑‑
‑‑‑‑S. 66(2)‑‑‑Reference to High Court‑‑‑Scope‑‑‑Finding of fact ‑‑‑Assessee, a company engaged in business of textile mills‑‑‑Rejection of accounts‑‑ Stores consumption account‑‑‑Claim of assessee was found by the Assessing Officer to be disproportionate and exclusively high when compared with the similar claims in the previous years‑‑‑First Appellate Authority set aside the issue and the Tribunal maintained the same after having found itself in agreement with the revenue of its being in line with the history of the case‑‑ No cogent reason at the bar had been stated against the finding so recorded by the Tribunal while maintaining the remand‑‑‑View adopted by the Tribunal, in circumstances, did not give rise to any legal controversy.
(c) Income‑tax Act (XI of 1922)‑‑‑
‑‑‑‑S. 66(2)‑‑‑Reference to High Court‑‑‑Scope‑‑‑Finding of fact‑‑‑Claim of sales tax liability‑‑‑Tribunal had recorded a finding of fact that admittedly the claimed liability pertained to the assessment years 1959‑60, 1960‑61, 1963‑64 to 1965‑66, and therefore, could not be claimed in the current assessment year viz. 1971‑72‑‑‑Such findings of fact by the Tribunal did not give rise to an legal controversy.
In case of sales tax liability the Tribunal recorded a finding of fact that admittedly the claimed liability pertained to the assessment years 1959‑60, 1960‑61, 1963‑64 to 1965‑66 and, therefore, could not be claimed in the current assessment year viz, 1971‑72. It was also noted that the amount claimed for the year 1965‑66 as an expenditure even if accepted could not have been allowed in the year under review on account of demand having been created on 12‑4‑1971 which was after the end of the previous year. That sum was claimed as sales tax only for the reason that the return for the yei'1971‑72 was filed after creation of the demand. Also it was noted by the Tribunal that in case of demand of earlier years, 1959‑60 and 1963‑64 the Department had created the liability before starting of the accounting period under review but no debt entry in respect thereof was either passed or recorded. It was further seen that out of the total claim of Rs.16,25,823 a sum of Rs.30,628 only was deposited by the company during the .accounting period towards the sales tax liability and the same was allowed by the Assessing Officer. No further amount on account of sales tax having been paid during the accounting period nor any entry as liability or provision having been brought from the previous year, the findings of fact so recorded by the Tribunal did not give rise to any legal controversy.
(d) Income‑tax Act (XI of 1922)‑‑‑
‑‑‑‑S. 66(2)‑‑‑Reference to High Court‑‑‑Scope‑‑‑Non‑recording of finding on an issue could not be a subject‑matter of reference to High Court under S.66(2), Income‑tax Act, 1922‑‑‑Principles.
Syed Raza Kazim for Appellant.
Shafqat Mahmood Chohan for Respondent.
Date of hearing: 17th January, 2001.
JUDGMENT
NASIM SIKANDAR, J.‑‑‑This petition has been made under section 66(2) of the Income‑tax Act, 1922. Following questions are stated to have arisen out of the impugned order of the Income‑tax Appellate Tribunal
(i) Whether in the facts and circumstances of the case, the Tribunal was justified in confirming that adequate opportunity was afforded to the applicant although no notice was issued to the counsel engaged for the specific purpose?
(ii) Whether Mr. Sidratullah and/or Mr. S.H. Zaidi were legally authorized representative of the applicant in accordance with the provision of section 61 of Income-tax Act, 1922
(iii) Whether there was any material for the Tribunal to confirm the rejection of the applicant s account version relating to production of yarn and wastage in the said processes?
(iv) Whether in the facts and circumstances of the case, there was any material before the Tribunal to justify the confirmation of an addition in yarn production account?
(v) Whether in the facts and circumstances of the case the Tribunal was justified on the basis of any material on record to confirm the disallowance of Rs.2,33,379 out of the stores consumption account?
(vi) Whether the Tribunal was justified, in the facts and circumstances of the case, in disallowing Rs.2,33,379 out of stores consumption account and not capitalizing it in conformity with the previous history of the case?
(vii) Whether in the facts and circumstances of the case, the Tribunal was justified in declining to exercise its appellants jurisdiction with regard to the setting aside of the assessment by the Appellate Assistant Commissioner in respect of deferred revenue expenditure amounting to Rs.5,85,621?
(viii) Whether the Tribunal was justified in not allowing the entire claim in respect of sales tax liability?
(ix) Whether the Tribunal was justified in not recording any finding with regard to Grounds Nos.12,13,14 and 15, which were duly argued and were not given up by the applicant's counsel who appeared before the Tribunal?
2. The petitioner is a public limited company. For the assessment year under consideration viz 1971‑72 as against the declared income of Rs.27,60,791 an assessment was framed on 30‑5‑1974 at total income of Rs.94,54,851. In the process, the Assessing Officer made a number of additions. The petitioner received partial relief in first appeal while its second appeal was decided by the Tribunal on 30‑3‑1976. Thereupon, its application under section 66(1) of the late Income‑tax Act, 1922 for reference of the aforesaid questions to this Court was rejected on 23‑12‑1978. Hence this petition.
3. Learned counsel for the petitioner on 22‑9‑1979 opted not to press Questions Nos.(i), (ii) and (vii).
4. For the petitioner it is inter alia contended that the Assessing Officer wrongly rejected the accounts, particularly the addition made on account of low yield was totally unjustified; that past history of the case was wrongly followed and that explanation put forth to explain low production was rejected on facts, which were totally irrelevant. It is further stated that the Assessing Officer failed to appreciate that as a result of improvement the quality of yarn had improved. Lastly that history of the case followed while making other similar additions under the head consumption of stores was totally illegal and unjustified.
5. Learned counsel for the Revenue on the other hand contends that none of the aforesaid questions as claimed raised any legal controversy. He maintains that all additions to income were made after the assessee failed to satisfy the Revenue on the issues confronted to it. Particularly those relating to the causes 4or low production excessive claim on account of consumption of stores and the claimed sales tax liability.
6. We will agree with the learned counsel for the Revenue. It will be seen that while rejecting the application of the petitioner under section 66(1) of the Income‑tax Act a Division Bench of the Tribunal found that none of the issues raised before them gave rise to any question of law. These very questions have now been submitted before us under section 66(2) of the late Income‑tax Act, 1922.
12.(sic) The claim that no addition under the head yarn could have been made does not give rise to any legal controversy in as much the Assessing Officer after scanning the accounts observed that there was heavy fall in the A yield shown this year. There was also a corresponding increase in the wastage. The assessee when called upon to explain, made vague arid evasive answer. The claim that due to non‑use of wastage a better quality was achieved was also found to be factually incorrect. Rather it was found that there was a decrease in the sale rate of yarn. After comparing the production results of the assessee‑company in the earlier years it was noted that with the fall in average count of yarn during the year there should have been a corresponding improvement in the wastage. Also the heavy increase in the wastage shown was found to be unsubstantiated on account of absence of day to day record of the wastage. Accordingly it was allowed at 9.50% as against the claim made by the assessee 10.1 %. The Tribunal in its order found that the reasons mentioned by the Assessing Officer were sufficient to discard the declared version. Also they noted that production or yield was not only low but in fact was lowest in the last 12 years and the only explanation put forth that wastage was not reused during the year under review was found to be factually wrong. From the average sale price of yarn per LB during the year at 2.14 as against Rs.2.35 LB in the earlier year it was found that low yield had remained unexplained. Lastly it was found as a fact that claim of wastage determined in the last six years when compared with one allowed by the Revenue during the year was still more than the similar claims made by the assessee iri previous years. These findings of fact have not been questioned on any acceptable ground. Also it is not alleged that there was no material on record to support these findings.
13. Therefore, we will agree with the learned counsel for the Revenue that as far as rejection of accounts is concerned, no question of law has arisen in the facts and circumstances of the case.
14. As regards the disallowance of Rs.2,33;379 out of the stores consumption account again a finding of fact was recorded by the Assessing Officer that the claim was disproportionate and excessive high when compared with the similar claims in the previous years. Learned first appellate authority set aside the issue and the Tribunal maintained the same after they found themselves in agreement with the Revenue of its being in line with the history of the case. No cogent reason at the bar has been stated against the finding so recorded by the Tribunal while maintaining the remand order. The issue if the Tribunal ought to have allowed capitalization of the amount disallowed does not arise out of the order of the Tribunal inasmuch as no such claim/plea was ever raised before them.
15. That being so, as said above, the view adopted by the Tribunal does not give rise to any legal controversy.
16. In case of sales tax liability also the Tribunal recorded a finding of fact that admittedly the claimed liability pertained to the assessment years 1959‑60, 1960‑61, 1963‑64 to 1965‑66, and therefore, could not be claimed in the current assessment year viz. 1971‑72. It was also noted that the amount claimed for the year 1965‑66 at Rs.7,43,566 as an expenditure even if accepted could not have been allowed in the year under review on account of demand having been created on 12‑4‑1971 which was after. the end of the previous year. That sum was claimed as sales tax only for the reason that the return for the year 1971‑72 was filed after creation of the demand. Also it was noted by the Tribunal that in cases of demands of earlier years, 1959‑60 and 1963‑64 the Department had created the liability before starting of the accounting period under review but no debt entry in respect thereof was either passed or recorded. It was further seen that out of the total claim of Rs.16,25;823 a sum of Rs.30,628 only was deposited by the company during the accounting period towards the sales tax liability and. the same was allowed by the Assessing Officer. No further amount on account of sales tax, having been paid during the accounting period nor any entry as liability or provision having been brought from the previous year, the findings of fact so recorded by the Tribunal again do not give rise to any legal controversy.
17. Lastly if the Tribunal had failed to decide any of the grounds of appeal it was for the appellant to approach them for rectification of the order. The non‑recording of finding on an issue cannot be a subject‑matter of reference to this Court under section 66(2) of the Income‑tax Act. LearnedMembers while refusing a reference under subsection (1) of section 66 of the Act rightly observed that the best course for the assessee was to make an application before the Tribunal. However, this was never done. In the circumstances the Tribunal felt that there was no error on the part of the Tribunal and we find no exception to their observation recorded in this behalf.
18. For what has been discussed above, Questions Nos. 1, 2 and 7 are not answered. Questions Nos.3,4,5, and 6 are found to be those of fact, and therefore, are declined to be answered. Question No.8 is again a question of fact; while Question No.9 does not raise any legal controversy. Therefore, both of them are also declined to be answered.
M.B.A./C‑67/L Order accordingly.