COMMISSIONER OF INCOME TAX, COMPANIES, LAHORE VS Messrs WAHEED BROTHERS (PVT.) LTD., LAHORE, 2006 PTD-LAHORE-HIGH-COURT-LAHORE 2275 (2006)

Income Tax Ordinance (XXXI of 1979)---

----Ss. 5, 14(1) & Second Sched.---Income from source exempt from tax, quantum of---Determination---Income Tax Officer, jurisdiction of---Scope---Income declared by assessee, if found by Income Tax Officer to be earned from an exempt source, then he would have no jurisdiction to proceed or probe further and determine its quantum, but had to accept declared results of such income-Principles.

Commissioner of Income Tax v. Abdul Majeed 2000 PTD 359 fol.

Sajjad Ali Jafri for Petitioner.

Shahid Pervez Jami for Respondent.

ORDER

Assessee/Respondent derives income from sale of spare parts, brake oil, plastic tapes, tube-lights and poultry farm. Assessing Officer applied flat GP rate in respect of different items in which assessee was trading. The income from poultry farm was reduced. CIT(Appeals) in appeal filed by the assessee, confirmed the action of Assessing Officer. Assessee went on to challenge the assessment order and the order in appeal, before ITAT through second appeal. Learned Income Tax Appellate Tribunal vide order, dated 16-5-1991, directed that different G.P. rate be applied instead of flat G.P. rate. Learned Tribunal has further held that ITO has no jurisdiction to examine the quantum income from an exempt source.

2. Applicant/Revenue through reference application under section 136 of the Income Tax Ordinance, 1979 (now repealed) referred the following question to this Court;---

"Whether on the facts and in the circumstances of the case the learned Tribunal was justified to hold that the Income Tax Officer has no jurisdiction to examine the quantum of income declared from an exempt source?"

3. We have heard the arguments of the learned counsel for the parties and have also perused the record.

4. Identical question was referred to Hon'ble Sindh High Court, Karachi in the case of "Commissioner of Income Tax v. Abdul Majeed" 2000 PTD 359 and the Hon'ble Sindh High Court, Karachi dealt with the question, as under:--

"With regard to question No.2 it is to be observed that the Appellate Tribunal in its order held that it was within the power of the hicome Tax Officer to probe into the question whether the income declared by the respondent/assessee claimed to have been earned from fishing/fish catching was actually and in fact earned from fishing/fish but once it came to the conclusion that the said declared income was actually earned from fishing/fish catching then he had no authority or jurisdiction to proceed or probe further. This finding of the Appellate Tribunal, could not be said to be suffering from any defect in view of total exemption granted to the income earned from fishing/fish catching by clause (99) of the Second Schedule to the Income Tax Ordinance which enumerated various kinds or classes of incomes which cannot be subjected to levy and charge to tax. In this circumstances, the question whether the Appellate Tribunal was justified in holding that the, Income-tax Officer was not entitled to make further probe in the income declared by the respondent from fishing/fish catching, is answered in the affirmative." "With regard to third question, the answer to the same can be found from our discussion relating to question No.2. Once the Income-tax Officer had come to the conclusion that a particular income declared by the respondent, which was claimed to be from fishing/fish catching, was actually found to be from this source then in view of clause (99) of the Second Schedule to the Income Tax Ordinance exempting such income from charge to tax the income-tax Officer had no jurisdiction to proceed or probe further with regard to the declared sales, gross profit rate, etc. in relation to such income. He had no jurisdiction/authority to reject the declared sales or gross profit rate and to make estimation in regard to them and had to accept the declared results of such income. In view of the above, this question is also answered in affirmative."

5. The question of law referred to this Court has already been answered by a learned Division Bench of Hon'ble Sindh High Court, therefore, we are not inclined to dilate upon the issue any more.

6. In view of the above the order of the learned Tribunal, dated 15-9-1993 does call for any interference with the result that question referred to us, is answered in affirmative.

S.A.K./C-29/LAnswer in affirmative.