Income Tax Ordinance (XXXI of 1979)---

----Ss.50(4), 80(c), 136(2) & 143---Reference to High Court---Credit sales not being treated as supplies---Questions "whether Income Tax Appellate Tribunal was justified to hold that credit sales could not be treated as supplies for the purpose of application of S.80(c) of Income Tax Ordinance, 1979, when tax had already been deducted under S.50(4) of said Act" and also that a penalty for default in submission of statement under S.143 of Ordinance, as framed, did not arise out of order of Income Tax Appellate Tribunal---No ruling was recorded on application of provisions of S.80(c) of Income Tax Ordinance, 1979 to credit sales---Effect---Question of law could be said to have arisen out of an order of Tribunal only when it was duly raised before and ruled upon by Tribunal---Tribunal in the present case had not discussed nature of credit sales nor the issue as to why provisions of S.80(c) of Income Tax Ordinance, 1979 were not attracted in the case of assessee---Since findings on the issue or at least the reasons which weighed with Tribunal while deciding ease, were not before High Court it was not in a position to judge legality or otherwise of those questions---Tribunal should not have made reference to High Court in circumstances.

Muhammad Ilyas Khan for Appellant.

Syed Abrar Hussain Naqvi for Respondent.

Date of hearing: 3rd June, 2003.

JUDGMENT

NASIM SIKANDAR, J.---The Lahore Bench of the Income Tax appellate Tribunal at the instance of the Commissioner of Income Tax/Wealth Tax Companies Zone-III, Lahore has referred the following questions of law under section 136(2) of the late Income Tax Ordinance. 1979 which statedly arise out of their order recorded on 9-8-1995:--

"(1) Whether under the circumstances and on the facts of the case the learned ITAT was justified to hold that credit sales cannot be treated as supplies for the purpose of application of section 80-C when tax had already been deducted under section 50(4) of the Income Tax Ordinance, 1979?

(2) Whether the learned ITAT was justified to rely on its Order No.I.T.A. No. 540/LB of 1986-87, dated 29-9-1987 which involved the question of penalty under section 108 for default in submission of statement under section 143, while deciding the issue of applicability of section 80-C of the Income Tax Ordinance, 1979 to the circumstances of this case?"

2. The assessee/respondent is a private limited company and at the relevant time derived income from the sale of seamless pipes. For the assessment years involved viz. 1991-92, 1992-93 and 1993-94 it appears that after rejecting the returned version the Assessing Officer proceeded to estimate the sales which were bifurcated into two. Receipts on which tax had been deducted under section 50(4) were found covered by the provisions of section 80-C and therefore, were not touched. However, credit sales were taken as supplies and were subjected to a rate of 2-1/2% under section 80-C of the late Income Tax Ordinance, 1979.

3. Learned first appellant authority however, disapproved the application of the provisions of section 80-C to the credit sales.

4. On cross appeal by way of the impugned order learned Tribunal maintained the order of the learned first appellate authority. As far the treatment of credit sales as supplies under section 80-C was concerned it was held:--

"So far as the treatment which has been meted out to the assessee in regard to the credit sales as supplies which have been subjected to tax under section 80(c) at 2-1/2% is concerned, the action taken at the assessment levels has not been approved in both the years by the first appellate authorities. This has been done in view the decision on this issue in favour of the assessee at the level of the Tribunal which was rendered for the year, 1985-86. In these circumstances, the assessing authorities have been directed to vacate this action and to apply gross profit rate at 9.5% on credit sales as well. As indicated above, the findings of the authorities below in this respect have been assailed on behalf of the Revenue. However, as we have pointed out in the foregoing lines, none had appeared on behalf of the Revenue at the time of hearing of these appeals meaning thereby that the department has nothing to say in this regard. As such we are left with no alternative but to confirm the findings of the Commissioner of Income Tax (Appeals) for both the years under consideration, as the objection raised on behalf of the Revenue in the grounds of appeals has remained un substantiated. "

5. Thereafter, as noted earlier, at the request of the Revenue the aforesaid questions were referred to this Court under section 136(2) of the late Income Tax Ordinance, 1979.

6. After hearing the learned counsel for the parties, we are of the view that the questions as framed do not arise out of the order of the Tribunal. As the relevant portion of the impugned order indicates, no ruling was recorded as to the application the provisions of section 80-C to credit sales. Learned members of the Tribunal maintained the first appellate order only on account of absence of the departmental representative and the fact that in the case of the assessee in the previous order they had adopted a view which was followed by the first appellate authority.

7. It is established law that a question of law can be said to have arisen out of an order of the Tribunal only if it was duly raised and ruled upon before the Tribunal. As noted earlier, the Tribunal in this case has not discussed the nature of the credit sales nor the issue as to why the provisions of section 80-C were not attracted in the case of the assessee. Since their findings on the issue or at least the reasons which weighed with them while deciding the case of the assessee in the previous years is not before us, we are not in a position to judge the legality of these reasons.

8. In such situation in our considered view the Tribunal should not have made a reference to this Court. If they wanted to make a reference then at least in the statement of the case they should have reproduced their findings recorded in respect of the assessee in the previous order which they followed in the impugned order.

9. Therefore, we will refuse to answer the aforesaid questions.

10. Answer declined.

H.B.T./C-33/LAnswer declined.