Income Tax Ordinance (XXXI of 1979)‑‑‑

‑‑‑‑Ss. 136(1), 66A, 62/135 & 50(4)(5)‑‑‑Reference to High Court‑‑ Question of fact‑‑‑Issue regarding assessee's claim that he was an indentor and commission agent and not importer/supplier was accepted by the Assessing Officer under Ss. 62/135 of the Income Tax Ordinance, 1979 as directed by the First Appellate Authority and appeal against the order of First Appellate Authority was rejected by the Tribunal‑‑‑ Revision of such assessments under S. 66‑A of the Income Tax Ordinance, 1979 by the Inspecting Additional Commissioner was also cancelled by the Appellate Tribunal‑‑‑Application for Reference to High Court by the Department‑‑‑Validity‑‑‑Section 66‑A of the Income Tax Ordinance, 1979 in its subsection (IA) clearly states that action under said section could not be taken by the Inspecting Additional Commissioner on the issues which had been subject‑matter of appeal before the Commissioner of Income Tax and before the Appellate Tribunal‑‑‑Issue in the present case i.e. "whether assessee had earned income from commission on imports as indentor or he had earned income as importer and supplier" had already been subject‑matter of appeal before the First Appellate Authority as well as before the Appellate Tribunal‑‑‑Assessment orders passed by the Assessing Officer under Ss. 62/135 of the. Income Tax Ordinance, 1979 in accordance with the instructions of the First Appellate Authority on the said issue could not be revised by the Inspecting Additional Commissioner under S. 66‑A of the Income Tax Ordinance, 1979‑‑‑Said issue was a question of fact and not a question of law which had already been decided by the Appellate Tribunal in favour of the assessee‑‑‑Regarding credit of deduction of tax under Ss. 50(4) & 50(5) of the Income Tax Ordinance, 1979 to the assessee, the stand taken by the department was absolutely against the law‑‑‑Imports had been made in the name of the assessee as the principals of the assessee who could not make imports in their own name because of restrictions imposed by the Government under the import policy‑‑‑Credit of the withheld tax would naturally go to the assessee and this fact had also been approved by the agreement which was executed between the assessee and its principals‑‑Appellate Tribunal, in circumstances, did not agree with the Revenue that the questions of law as framed by Revenue arose from the appellate order of the Appellate Tribunal‑‑‑Reference applications filed by Revenue were dismissed by Tribunal as barred by time as well as being devoid of any merits and substance.

Muhammad Zulfiqar Ali, D.R. for Appellant.

Haroon Mirza for Respondent.

Date of hearing: 24th July, 2002.

ORDER

MUHAMMAD SHARIF CHAUDHRY (ACCOUNTANT MEMBER). ‑‑‑Applications for the years 1987‑88 to 1989‑90 under section 136(1) of the Income-Tax Ordinance, 1979 have been filed at the instance of Revenue urging this Tribunal to file reference under the above mentioned provisions of law before the. Honourable High Court on the following questions of law which statedly arise from the order of the ITAT, dated 31‑8‑2001 in I.YAs. Nos.2220‑2222/LB of 2001 relating to the, said assessment years.

(a) Whether on the facts and in circumstances of the case the learned ITAT, is justified to cancel the order passed under section 66A of the Income Tax Ordinance?

(b) Whether the learned ITAT, is justified to maintain the order of the Assessing Officer, while the assessee is not entitled for credit of tax deduction under sections 50(4) and 50(5)?

(c) Whether on the facts and circumstances of the case any person can claim credit of tax deduction under sections 50(4) and 50(5) on imports and supplies made on behalf of another person when he is an indentor and not importer/supplier?

2. The above mentioned reference applications have been filed on 27‑4-2002 whereas the impugned ITAT order dated 31‑8‑2001 was served on the Commissioner on 19‑9‑2001. The Revenue was required under subsection (1) of section 136 to submit reference applications within 90 days of the receipt of the ITAT order but the applications filed by, Revenue are delayed by more than four months. Conscious of this fact of delay, the Revenue has already filed applications for condonation of delay on the ground that the delay was caused due to filing of miscellaneous applications by it before the learned ITAT for redressal of its grievances arising out of the impugned appellate order dated 31‑8‑2001. It has been prayed that since the miscellaneous applications of the petitioner were disposed of by the ITAT vide its order dated 16‑2‑2002, so the applications filed for reference on 27‑4‑2002 should be treated in time and the said delay should be condoned. The excuse for delay offered by Revenue is neither forceful nor convincing as the miscellaneous applications to whom the delay is being attributed were not based on sound footing or on any merit or substance. In fact the miscellaneous applications were not competent in the sense that all the issues raised in the miscellaneous applications had already been decided by the ITAT in its appellate order dated 31‑8‑2001. The said order of the ITAT was passed after hearing both the parties and hence there was no good cause to recall it. Neither this order suffered from any mistake apparent from record which could be rectified under section 156 of the Income Tax Ordinance. Therefore, these miscellaneous applications were rightly rejected by the ITAT vide its order dated 16‑2‑2002. In these circumstances the miscellaneous applications advanced by Revenue cannot be accepted as a valid pretext for delay in filing present reference applications. However, we do not deem it fit to reject the reference applications of Revenue merely on the basis of technical defect of delay without going into the merits of the case, as in our opinion, the case of Revenue does not stand the text of merit even.

3. Brief facts of the case which have led to the prolonged litigation between the assessee and Revenue and also .led to the impugned appellate order of tile ITAT dated 31‑8‑2001 are that the original assessments for the years 1987‑88 to 1989‑90 were made by the Income‑tax Officer rejecting assessee's claim of income from commission on imports as indentor and treating the assessee as importer cum‑supplier of machinery/spare parts. Against these assessments appeals were, filed before the Commissioner and it was contended that the assessee had earned income from commission on imports made by him for Messrs Tetra Pak Ltd. and had not made the said imports on his own account. It was also submitted before the learned Commissioner that, an agreement with Messrs Tetra Pak Ltd. had been made on 31‑11‑1986 for imports of spare parts required by Tetra Pak Ltd. for their machinery Messrs Tetra Pak Ltd. were unable to make the said imports on their own account because of certain restrictions which had been imposed by Government under its import policy. Therefore, the imports were made in the name of the assessee and all the funds for investment in imports and expenses etc. were provided by Messrs Tetra Pak Ltd. The assessee was allowed commission at the rate of 2 % as well as the benefit of tax deducted under sections 50(4) and 50(5) of the Income Tax Ordinance. Accepting these contentions of the assessee the learned Commissioner set aside the assessments with certain instructions and directed the I.T.O. to make fresh assessments in, accordance with the said instructions. Further appeals were filed against this action of the learned Commissioner before the ITAT but the ITAT rejected the appeals and confirmed the appellate orders of the learned Commissioner. Consequently the Income‑tax Officer completed the assessments under sections 62/135 for all these years in accordance with the directions of the Appellate Authorities and accepted assessee's claim that he was an indentor and commission agent and not an importer/supplier. However, the Range I.A.C. invoked section 66A and cancelled the assessment orders of the I.T.O. which he had made under sections 62/135. Against this treatment of the learned I.A.C. appeals were filed by the assessee before the ITAT. It was contended before the ITAT that the action taken by the IAC under section 66A to revise the assessments framed by the ITO under sections 62/ 135 was ab initio illegal and void as the issues on which the IAC had taken the action had already been considered and decided by the Commissioner and the ITAT in their previous appellate orders. The ITAT agreed with the contentions of the assessee, allowed assessee's appeals and cancelled the orders of the IAC under section 66A. Later on miscellaneous applications filed by Revenue, as discussed above, were also rejected by the ITAT.

4. The learned D.R. of the petitioner has strongly pleaded the case of Revenue but his pleas are merely a repetition of the arguments given in the reference applications and given by the IAC in his orders ' under section 66A. The D.R. agrees that the points on which the IAC has taken action under section 66A have been the subject‑matter of dispute between the assessee and the Revenue, but according to him this dispute was not decided by the CIT nor by the ITAT and the matter was left open for the ITO to decide it.

The A.R. of the assessee has also reiterated the same arguments which had been given before the IAC during section 66A proceedings and before the ITAT during appeal proceedings.. The main emphasis of the A.R. is on the contention that in identical circumstances and with similar facts the case of Messrs Punjnad Marketing Company bearing NTN 5‑5‑1136153 had been accepted as commission agent of Messrs Tetra Pak Ltd. by the Revenue. The A.R. has also reiterated his contention that whenever the assessee approaches the Department for refund of its tax the Department starts forestalling it by taking illegal actions and delaying tactics. For example the assessments for the years 1988‑89 and 1989‑90 were reopened under section 65 with the approval of the IAC but when the Appellate Authorities gave relief to the assessee in these years together with assessment year 1987‑88 the IAC proceeded to invoke section 66A. When IAC's orders of section 66A were cancelled by the ITAT, Department filed miscellaneous applications before the ITAT. When the miscellaneous applications were rejected by the ITAT then the Department has filed the present reference applications.

5. In view of the facts stated and discussed in the immediately preceding para. we do not think that the reference applications filed by Revenue have any merit‑Section 66A in subsection (IA) clearly states that action under this section cannot be taken by the IAC on the issues which have been subject‑matter of appeal before the Commissioner or/and before the ITAT. The issue in the instant case, "whether assessee has earned income from commission on imports as indentor or he has earned income as importer and supplier" has already been subject‑matter of appeal before the CIT as well as before the ITAT as discussed above. The assessment orders passed by the ITO under sections 62/135 in accordance with the instructions of the Appellate Authorities on the said issue cannot be revised by the IAC under section 66A as already held by us in our appellate order dated 31‑8‑2001. Moreover, this issue is a 'question of fact and not a question of law which has already been decided by the ITAT in favour of the assessee. Regarding credit of deduction of tax under sections 50(4) and 50(5) to the assessee the stana taken by the department is absolutely against the law. The imports have been made in the name of the assessee as the principle of the assessee Messrs Tetra Pak. Ltd. could not make imports in their own name because of restrictions imposed by the Government under the import policy. Therefore, the credit of the withheld tax would naturally go to the assessee and this fact has also been approved by the agreement which was executed between the assessee and his principal.

6. In view of the foregoing discussion, we do not agree with the Revenue that the questions of law as framed by Revenue stated above arise from the said appellate order of the ITAT dated 31‑8‑2001. It would be, therefore, in the fitness of things if the reference applications filed by Revenue are dismissed as barred by time as well as being devoid of any merits and substance.

C.M.A./M.A.K./437/Tax(Trib.) Applications dismissed.