Income Tax Ordinance (XXXI of 1979)---

----Ss. 65, 111 & 136---Reference---Question of fact---Re-opening of assessment Concealment of income---Imposition of penalty---Question of fact---Controversy compelling filing of the reference was that the assessee had wrongly declared his income as earned from poultry farm-- Revenue Authorities on the basis of report of a revenue official did not accept the income as declared by the assessee and-re-opened the case under S.65 of the Income Tax Ordinance, 1979---Validity---Questions as framed did not raise any legal controversy to be answered by High Court---Question whether an assessee derived income from a particular business in a particular assessment period was a pure question of fact and the same did not raise any legal controversy---Report of the revenue official was never a moot point before the Tribunal---Question of law was said to be raised only when it was either properly raised and ruled upon by the Tribunal or it otherwise had arisen as a natural consequence of the order of the Tribunal---Where neither of the two conditions were available High Court would refuse to entertain the question as framed---Question as to the availability of an information justifying reopening of assessment was a predominantly question of fact, and therefore, could not be a subject-matter of reference under S.136(2) of the Income Tax Ordinance, 1979---Reference was answered in negative.

Al-Imtiaz Foundation (Regd.) v. I.T.O., Abbottabad 1992 PTD 1292 and Inspecting Assistant Commissioner and another v. Pakistan Herald Ltd. 1997 SCMR 1256 ref.

Muhammad Ilyas Mian for Appellant.

Malik Muhammad Nawaz for Respondents.

Date of hearing: 28th January, 2002.

JUDGMENT

NASEEM SIKANDAR, J. ---Through this judgment we intend to dispose of Tax References Nos. l, 2 and 3 of 1995.

2. The applicant/petitioner is a registered firm. For the assessment year 1985-86 a return was filed disclosing income of Rs. 2,82,717 which was claimed exempt on account of its having been driven from a poultry, farm. Subsequently on inquiries however, it was concluded that the, assessee did not derive any income from poultry farm but was actually engaged in sale and purchase of poultry. Accordingly the nill assessment was re-opened under section 65 of the Income Tax Ordinance, 1979 and finally that the income was worked out at Rs. 7,15,952. Also the assesses was found liable to penalty under section 111 of the Income Ta: Ordinance, 1979.

3. In the assessment year 1986-87 the assessment framed by the Assessing Officer was set aside in the first appeal on the ground the prima facie the assessee had not been running any poultry farm when from supplies could have been made by him. Accordingly the assessment for the year was set aside for further inquiries on various points. As far assessment year 1985-86, learned First Appellate Authority directed that declared income by the assessee at Rs. 2,82,717 should be accepted and taxed accordingly. The petitioner failed before the Tribunal except ii case of penalty which was directed to be determined in relation to the final computation of the income after scrutiny of the expenses in the yea 1985-86.

4. The three applications under section 136(1) of the Income Ta; Ordinance, 1979 requiring reference of questions of law were subsequently refused by tile Tribunal on 11-1-1994.

5. Through these applications the assessee petitioner claims that following questions of law arise out of the aforesaid consolidated order of the Tribunal, dated 27-7-1992 and 11-1-1994:--

For the Assessment year 1985-86 questions of law

"(i)Whether in the facts and in the circumstances of the case, the learned Tribunal was legally justified in confirming the action o the Commissioner of Income-tax (Appeals) vis-a-vis the rejection of the claim of exemption of income?"

"(ii)Whether in the facts and in the circumstances of the case, the learned Tribunal was legally justified in holding the proceedings under section 65 are applicable to the returns of income covered by the exemption clauses as envisaged in the Ilnd Schedule annexed to the Income Tax Ordinance, 1979?"

"(iii)Whether in the facts and in the circumstances of the case, the learned Tribunal was legally justified in holding the validity of notices under section 65 vis-a-vis proceedings, `filed by the Assessing Officer'?"

(iv)"Whether in the facts and in the circumstances of the case, the learned Tribunal was legally justified in holding that the enquiries got conducted by the Inspector in 1986 are relevant to the assessment year 1985-86?"

For the Assessment year 1985-86 (Penalty) Questions of Law

(i)"Whether on the facts and in the circumstances of the case the learned Tribunal was justified to hold that the assessee had committed an offence under section 111 of the Income Tax Ordinance, 1979, and therefore, was liable to penalty?"

(ii)"Whether on the facts and in the circumstances of the case the Learned Tribunal was justified in vacating the order of the Commissioner of Income Tax (Appeals) vis-a-vis the penalty order under section 11 of the Income Tax Ordinance, 1979?"

(iii)"Whether on the facts and in the circumstances of the case the learned Tribunal was justified in vacating the order of the Commissioner of Income Tax (Appeals) vis-a-vis the penalty order under section 111 of the Income Tax Ordinance, 1979?"

For the Assessment year 1986-87 Questions of Law

(i)"Whether on the facts and in the circumstances of case, the learned Tribunal was legally justified in confirming the action of the Commissioner of Income Tax (Appeals) vis-a-vis the rejection of the claim of exemption of income?"

(ii)"Whether on the facts and in the circumstances of the case, the learned Tribunal was legally justified in upholding the order of the Commissioner of Income Tax (Appeals) vis-a-vis the setting aside of the assessment order?"

6. Learned counsel for the petitioner claims that once assessment proceedings were filed for the year 1985-86 the Revenue never came across a definite information on the basis of which that order could have been re-opened. He claims that re-opening proceedings were initiated only when the petitioner made an application for refund. Instead the Department proceeded to start reopening proceedings only in order to avoid payment of refund. In support of his submissions the learned counsel relies upon re: Al-Imtiaz Foundation (Regd.) v. I.T.O., Abbottabad 1992 PTD 1292 and Inspecting Assistant Commissioner and another v. Pakistan Herald Ltd. 1997 SCMR 1256.

7. Learned counsel for the Revenue, however, supports the order of the Tribunal. Also supports the last order through which the Tribunal refused to make a reference of any of the aforesaid questions on the ground that none of them raised any legal controversy.

8. After hearing the learned counsel for the parties, we are of the view that the questions as framed do not raise any legal controversy to be answered by this Court. The question if an assessee derived income from / a particular business in a particular assessment period is a pure question of fact and it does not raise any legal controversy. All the moreso when at least two appellate forums have maintained that finding of fact. The other contention of the learned counsel that reassessment proceedings having been initiated upon the report of Inspector made for a subsequent period also cannot be considered/taken into consideration at this stage. It will be noted that before the Tribunal the report of the Inspector as a basis for reopening of proceedings was never a moot point. It is settled law that a question of '.aw is said to raise only which was either properly raised land ruled upon by the Tribunal or it otherwise arises as a natural consequence of the order of the Tribunal. Neither of h the two conditions being available in this case we will refuse to entertain the questions as framed. As noted earlier, the question as to the availability of an information justifying reopening of assessment is predominantly a question of fact, and therefore, can hardly be a subject -matter of reference under section 136(2) of the Income Tax Ordinance, 1979.

9. In. the assessment year 1986-87 the Tribunal having simply maintained - the setting aside order of CIT (Appeals), no question of law can possibly be said to have arisen out of that order. All the moreso when the learned CIT (Appeals) had remanded the matter to undertake certain facts/inquiries which had earlier been disputed by the assessee.

10. Accordingly we will refuse to answer any of the questions as proposed in three reference applications.

11. Answer declined.

Q.M.H./M.A.K./A-438/L

Answer declined.