Income Tax Ordinance (XXXI of 1979)‑‑‑

‑‑‑‑S. 136(1) read with S.13(1)(a)‑‑‑Reference/appeal‑‑‑Maintainability‑‑ Finding of Tribunal was primarily based on the appreciation of facts‑‑ Observation of Tribunal in respect of applicability of S.13(1)(a) of the Income Tax Ordinance, 1979 were in accordance with law‑‑‑No substantial point or question of law requiring interpretation or furnishing of opinion by High Court arose out of such order of the Tribunal‑‑‑High Court dismissed the appeal in limine.

Lungnla Tea Company v. The Commissioner of Income‑tax, Dacca 1970 SCMR 872 ref.

Muhammad Fareed for Applicant.

Rehan Hasan Naqvi and Miss Lubna Pervez for Respondent

Date of hearing 26th September 2001.

JUDGMENT

MUHAMMAD MUJEEBULLAH SIDDIQUI, J.‑‑‑In this appeal under section 136(1) of the Income Tax Ordinance, 1979, directed against the order, dated 23‑11‑1999 by the learned Income Tax Appellate Tribunal, Karachi (ITAT) in ITA No.5984/KB of 1991‑92 (assessment year 1989‑90), the following questions have been proposed for our opinion:

(1) Whether on the facts and in the circumstances of the case, the learned ITAT was justified in holding that cash introduced in the shape of benami deposits was not cash credit in terms of section 13(1)(a)?

(2) Whether on the basis of facts and in the circumstances of the case, learned ITAT has correctly appreciated the evidence on record based on which additions were made under section 13(1)(a)?

(3) Whether the learned ITAT was justified in holding that the notices issued to make additions under section 13(l)(a) did not constitute sufficient opportunity and did not relate to the sum or any sums referred under section 13(1)(a)?

Briefly stated the facts giving rise to this Appeal are that the respondent is non‑resident Banking Company deriving income from different sources. The assessment was finalized for the assessment year 1989‑90 under section 62 of the Income Tax Ordinance, 1979 on 20‑6‑1991. During the course of assessment proceedings the Assessing Officer confronted the respondent with a notice under section 13 of the Income Tax Ordinance, 1979. The respondent furnished explanation, which was not accepted and addition was made at Rs.125.803 (m) on account of creation of benami deposits of local and foreign accounts. The respondent feeling aggrieved, preferred an appeal before the learned Commissioner, Income Tax (Appeals), CIT(A) and the learned CIT(A) deleted the addition. The department preferred second appeal before the IT&. The learned ITAT upheld the findings of CIT(A) and dismissed the appeal. Being dissatisfied with the findings of the ITAT, the Department has filed this appeal before this Court.

It is contended in the grounds of appeal that, the Assessing Officer had afforded several opportunities to the respondent to furnish details of local and foreign deposits but the respondent failed to furnish the required details and consequently, the Assessing Officer made the addition on the basis of peak deposits. According to appellant, the deletion of addition by CIT(A) was not justified and ITAT while upholding the finding of First Appellate Authority did not correctly appreciate the evidence on record. It is contended on behalf of appellant that the peak unexplained deposits or benami deposits were deleted and were rightly added to the total income of the respondent under section 13(1)(a) of the Income Tax Ordinance, 1979.

Heard Mr. Muhammad Fareed, learned counsel for the appellant and Messrs Rehan Hasan Naqvi and Miss Lubna Pervez, learned Advocates for the respondent. Perused the impugned order of the ITAT, dated 23‑11‑1999. The perusal of this order, with the assistance of learned counsel for the parties, shows that the respondent filed return of income declaring total income at Rs.294,607,108 alongwith statement of auditor's account. Total revenue receipts of three branches in Pakistan were shown at Rs.1,104,280,628 against which total expenditure was claimed at Rs.1,086,877,240 and a net profit of Rs.18,203,338 was returned. Last year revenue receipts were declared at Rs.932,826,718 against which expenses were claimed at Rs.929,836,287 resulting in profit of Rs.2,990,431. The Assessing Officer, during the course of examination of account, noted that local and foreign currency deposits were increased from Rs.7913.818 (m) as on 31‑12‑1987 to Rs.9765.579(m) as on 31‑12‑1988. The Assessing Officer further noted that the increase was almost 23%, which was very high as compared to parallel cases. He, therefore, asked the assessee to file details of local and foreign currency accounts over Rs.5,00,000. The explanation offered by the assessee/respondent attributed the increase to deposit collection campaign. Details of local deposits amounting to Rs.806(m) and a statement was also filed showing the trend of rise and fall in deposits and the effect of campaign. The assessee/respondent claimed protection of law in disclosing particulars of foreign currency account and asked the Assessing Officer to produce the approval of CIT(A) for requiring the respondent to furnish particulars of any client under section 144 of the Income Tax Ordinance, 1979. The Assessing Officer, however, did not accept the explanation. He observed that the details filed represent 20% of the deposits and further observed that increase in deposits at the end of the last year was only 6% over the balance of deposits in the preceding year and according to him the normal percentage of increase in other foreign banks was around 5% and therefore, did not accept the increase, as a result of deposit collection campaign. He thereafter served a notice on the respondent, asking to furnish the details to department, whether there were any deposits in the benamis. He further intimated the respondent that in case of failure the average increase at 7.5% shall be accepted and remaining 10% shall be taken into deposits in benamis and shall be added to the total income of respondent. In response to the notice it was replied that all computerized and duly audited accounts of respondent‑bank were already furnished and examined by the Assessing Officer. It was further submitted that no addition could be made under section 13(1)(a) of the Income Tax Ordinance, 1979. It was informed that the computerized accounts were audited by the State Bank of Pakistan, as well as auditors of the respondent, who have certified that all the deposits were genuine. It was further contended that the burden is on the department to establish that the deposits were unverifiable.

When the matter was taken to CIT(A), reference was made to the provisions of SRO 1476(1)/73, dated 17th June 1973, to the effect that the interest of foreign currency account by Pakistanis and others residing abroad was exempt from tax and Circular being No. 123, dated 15‑12‑1973 was also issued by State Bank of Pakistan. It was contended that the, addition under section 13(1)(a) holding the increase in deposits of benami transaction was the result of lack of knowledge about the banking. The learned CIT(A) after consideration of the contentions raised before him agreed that the plea taken on behalf of the respondent that the burden of proving a transaction to be benami was on the department and the department had no material whatsoever in this regard. He further observed that under section 13(1)(a) of the Income Tax Ordinance, 1979 an assessee was required to explain the nature and source, which in the case of deposits with the bank are known. He further held that there was no justification to make addition and deleted the same.

The learned Members of ITAT held that the Assessing Officer failed to discharge his onus under section 13(1)(a), as neither any specified sum was pointed out nor any finding was given as to when it was credited in the books of the respondent. They further agreed with the contentions that the Assessing Officer took recourse to guesswork and made the addition on mere presumption and surmises without any basis. The learned Members of ITAT further observed that the assessee had furnished the computerized account for examination of the Assessing Officer and complete particulars of specific entries in book were furnished. They further observed that asking a banking company to furnish a print out of the particulars of the account holders whose balance on a particular date was Rs.5,00,000 or above was unwarranted. They further held that the range of enquiry remained much beyond the confines of clause (a) of subsection (1) of section 13 of Income Tax Ordinance, 1979. It was also held by the learned ITAT that the Assessing Officer has given no finding that out of the account, whose particulars were furnished, any entries, were found unexplained. They ultimately, held that the addition was made on mere surmises and without being possessed of any information warranting addition under section 13(1)(a). Learned ITAT upheld the deletion of additions by learned CIT(A).

We asked Mr. Muhammad Fareed, learned counsel fur the appellant to show as to how any question of law arises out of order of the ITAT, requiring any interpretation by us or justifying invoking advisory jurisdiction of this Court Mr. Muhammad Fareed was not able to deny that ITAT has given its finding on apprecia tion of facts and that the observation in respect of applicability of section 13tl)(a) of the Income Tax Ordinance, 19'79 are in accordance with law.

At this stage, we would like to refer to objection raised by Mr. Rehan Hasan Naqvi, learned counsel for the respondent to the maintainability of the appeal. Mr. Rehan Hasan Naqvi has placed reliance on the judgment of the Supreme Court in the case of has placed Tea Company v. The Commissioner of Income‑tax, Dacca 1970 SCMR 872, wherein it has been held, that every question of law is not to be referred to the High Court. There must be some substance in the question referred to the High Court.

We are of the considered opinion that the finding of the learned ITAT is primarily based on the appreciation of fact and so far the question of‑ law is concerned, no substantial point requiring interpretation has been raised. It has not been shown that the observation about, the applicability of relevant law is incorrect and, therefore, it is held that no question of law, requiring interpretation or furnishing of opinion by this Court, arises out of the order of the ITAT. The appeal is, therefore, dismissed in limine with no order, as to costs.

S.A.K./C‑43/KAppeal dismissed.