Messrs SUPERIOR STEEL, KARACHI VS COMMISSIONER OF INCOME TAX, ZONE-D, KARACHI and another
2007 P T D 1577
[Karachi High Court]
Before Anwar Zaheer Jamali and Muhammad Athar Saeed, JJ
Messrs SUPERIOR STEEL, KARACHI
Versus
COMMISSIONER OF INCOME TAX, ZONE-D, KARACHI and another
Income Tax Case No. 3 of 1996, decided on 05/04/2007.
(a) Income Tax Ordinance (XXXI of 1979)---
----S. 136(2)---Reference to High Court---Questions proposed before Tribunal changed before High Court---Effect---After rejection of reference application by Tribunal, applicant was required to propose same questions before High Court and had no power to change same in any manner---Such change would render reference application before High Court non-maintainable---Principles.
(b) Income Tax Ordinance (XXXI of 1979)---
---S. 136(2)---Reference to High Court---Additional question, raising of---Scope---Additional question could not be raised after expiry of period of limitation for filing of reference application.
Messrs Ahmad Karachi Halva Merchants and Ahmad Food Products v. The Commissioner of Income Tax, South Zone, Karachi 1982 SCMR 489 ref.
Messrs Saifuddin Ghulam Ali and Sons v. The Commissioner of Income Tax, Hyderabad Zone 1989 PTD 1038; Messrs N.A. Industries, Karachi v. Commissioner of Income Tax 1992 PTD 50 and Commissioner of Income-Tax, Faisalabad v. Messrs Rashid Textile 2005 PTD 1456 rel.
(c) Income Tax Ordinance (XXXI of 1979)---
----S. 13(1), second proviso----Chargeability of income to tax in cases referred to in S.13(1)(aa) to (e) of Income Tax Ordinance, 1979---Pre condition of obtaining second approval by Income Tax Officer in such cases stated.
The question for second approval only arises where the Income Tax Officer considers that the value of any investment or article referred to in clauses (aa), (b), (c) or (d), amount of expenditure referred to in clauses (e) of subsection (1) of section 13 of Income Tax Ordinance, 1979 is too low and intends to determine a reasonable value or the amount thereof.
The Commissioner of Income Tax, Companies, Lahore v. Punjab Cooking Oil Ltd., Lahore 2001 PTD 2161; Commissioner of Income TO Zone-B, Lahore v. Messrs East Pakistan Chrome, Lahore 2002 PTD 2312; Income Tax Officer and another v. Chappal Builders 1993 SCMR 1108 = 1993 PTD 1108; Messrs Jennings Private School v. Income Tax Officer, Salary Circle-III, Central Zone-D and another 1990 PTD 873: Messrs National Beverages (Pvt.) v. Federation of Pakistan 2001 PTD 633; Messrs Pakistan Tobacco Co. Ltd. v. Government of Pakistan and other T 1993 SCMR 493; Messrs Pakistan Insurance Corporation v. Commissioner of Income Tax and Commissioner of Income Tax v. Pakistan State Oil Ltd. in I.T.As. Nos.60 and 61 of 1999 ref.
(d) Income Tax Ordinance (XXXI of 1979)---
----S. 136(2)---Reference to High Court---Question raised in reference based on finding of fact rendered by Tribunal---Validity---High Court in its advisory jurisdiction could not adjudicate such question---Principles.
Chief Secretary, Government of the Punjab v. Commissioner of Income Tax, Lahore Zone, Lahore 1976 PTD 56 ref.
Muhammad Farid for Applicant.
Aqeel Ahmed Abbasi for Respondents.
Date of hearing: 8th March, 2007.
JUDGMENT
MUHAMMAD ATHAR SAEED, J.---This Income Tax Reference Application has been filed under section 136(2) of the Income Tax Ordinance, 1979, seeking the opinion of this Court on the following proposed questions said to be arising out of the order of the Income Tax Appellate Tribunal dated 4-12-1994 in I.T.A. No.7313/KB of 1992-93:
(i) Whether in the facts and circumstances of the case the learned Income Tax Appellate Tribunal was justified in holding that assessment has been correctly reopened under section 65 of the Income Tax Ordinance, 1979, in this case'? If not what would be its effect?
(ii) Whether the learned Income Tax Appellate Tribunal had any jurisdiction/material/evidence for observing that the Inspecting, Assistant Commissioner concerned from whom prior approval was obtained by the Income Tax Officer has been described as IAC Service Wing by mistake, is immaterial?
(iii) Whether the learned Income Tax Appellate Tribunal was justified in saying that such mistake are to be just ignored as they have no effect on the assessment proceedings whereas the law requires that for re-assessment proceedings proper issuance of notice under section 65 of the Income Tax Ordinance, and its proper service on the assessee is sine qua non?
2. Vide his application under section 151, C.P.C. filed on 31-1-2007 (C.M.A. No.13 of 2007), the applicant has also requested this Court to give its opinion on the following additional question of law:-
Whether the learned Tribunal was justified in refusing to accept the objection taken by the applicant that the ITO was wrong in making addition of deemed income without obtaining two approvals from the IAC?
3. Brief facts of the case are that the original assessment in the case was finalized under section 59(1) of the Income Tax Ordinance. The Income Tax Officer, after arriving at the conclusion that the applicant had not disclosed true particulars of her income inasmuch as, holdings of her business assets did not reconcile with the capital investment in SNF Bonds and even the alleged borrowed money and the bank interest were also not included in profit and loss expenses, reopened the assessment under section 65 of the Income Tax Ordinance with the approval of the Inspecting Additional Commissioner and finalized the assessment at an income of Rs.41,09,681 against income originally assessed at Rs.120,000. He also made addition under section 13(i)aa after obtaining approval of Inspecting Additional Commissioner.
4. Being aggrieved by the order of the Income Tax Officer, the applicant filed an appeal before the CIT (Appeals), who vide his order dated 10th December, 1991 in Income Tax Appeal No.236 of 1989 dismissed the appeal. Being aggrieved by the order of the CIT (Appeals), the applicant filed an appeal before the Income Tax Appellate Tribunal, who vide their order mentioned above dismissed the appeal and upheld the order of the Income Tax Officer and the CIT (Appeals). Being aggrieved by the order of the Tribunal, applicant filed a reference application before the Tribunal requiring the Tribunal to refer the identical questions to this Court for its opinion. The Tribunal vide its order dated 27-6-1995 refused to refer the questions holding that there is no point of law involved in the first question and the other two questions were refused to be referred because in the opinion of the Tribunal it is an established principle of law that such trivial mistakes do not vitiate the proceedings. Hence this reference application.
5. We have heard Mr. Muhammad Fareed learned counsel for the applicant and Mr. Aqeel Ahmed Abbasi learned counsel for the respondent.
6. Initially, the learned counsel for the applicant argued on the merits of his application filed on 31-1-2007 i.e. more than eleven years after filing the reference application under section 136(2). He submitted that it is apparent from the order of the Income Tax Officer and the Tribunal that the Income Tax Officer had only acquired one approval from Inspecting Additional Commissioner under section 13 of the Income Tax Ordinance, 1979 whereas for making such an addition two approvals are required. He, therefore, argued that this question arises from the order of the Income Tax Appellate Tribunal and should be adjudicated by this Court. Defending his action for proposing this question for the opinion of this Court for the first time more than eleven years after filing the application under section 135(2), he said that he was confused by the Tribunal, but after going through the judgments of the various superior Courts, he discovered that it is a settled law that two approvals are required for making addition under section 13 and, therefore, since this question goes to the very root of the ease, it can be raised at any stage. He, therefore, prayed that this Court may allow him to argue on the merits of the above question and give its opinion on the above question. In support of his contention that a question of law, which goes to the very root of the case, can be raised at any stage, he relied on the following judgment of the Lahore High Court:---
Chief Secretary, Government of the Punjab v. Commissioner of Income Tax, Lahore Zone, Lahore 1976 PTD 56.
7. In support of his contention that two approvals are needed for making addition under section 13, he relied on the following case-laws:--
(1) The Commissioner of Income Tax, Companies, Lahore v. Punjab Cooking Oil Ltd., Lahore (2001 PTD 2161)
(2) Commissioner of Income Tax Zone-B, Lahore v. Messrs East Pakistan Chrome, Lahore (2002 PTD 2312)
8. The learned counsel then proceeded to argue on the question raised by him in his application under section 136(2). He stated that it is a settled law that cases cannot be reopened on mere change of opinion and the definite information should come into the possession of the Income Tax Officer subsequent to the passing of the original assessment. According to the learned counsel a perusal of the assessment order reveals that the Income Tax Officer has only considered the information which was on record at the time of passing the original order, therefore, the order of the Income Tax Officer is against the judgments of the Superior Courts on this point. In this connection, he relied on the following judgments:
(i) Income Tax Officer and another v. Chappal Builders 1993 SCMR 1108 = 1993 PTD 1108
(ii) Messrs Jennings Private School v. Income Tax Officer, 'Salary Circle-III, Central Zone-D and another (1990 PTD 873)
9. The learned counsel then went on to point out that the ITO in the assessment order had sought the approval from the then IAC Service Wing-01 (Zone-B), Karachi. He pointed out that the Tribunal had wrongly held that it was a trivial mistake which will not affect the assessment proceedings whereas for initiating of assessment proceedings the law requires that approval must be obtained from the concerned/relevant Inspecting Additional Commissioner.
10. Mr. Aqeel Ahmed Abbasi learned counsel for the respondent opposed the admission of the additional question proposed by the learned counsel for the applicant vide his miscellaneous application filed on 13-1-2007. He submitted that in its advisory jurisdiction this Court can only adjudicate and give its opinion in respect of the questions which were raised before the Income Tax Appellate Tribunal and which have been either referred by or refused to be referred by the Tribunal and it has been held in a number of cases that even in' cases where the question of law is materially different from the question of law which were referred before the Tribunal, this Court will not entertain such questions. On this point, he relied on the following case-laws:-
Messrs Ahmad Karachi Halva Merchants and Ahmad Food Products v. The Commissioner of Income Tax, South Zone, Karachi (1982 SCMR 489).
11. The learned counsel submitted that the case had been re-opened by the Income Tax Officer in accordance with law under the provisions of section 65. He stated that the initial order was finalized under section 59(1) of the Income Tax Ordinance, 1979 and such an order was passed without consciously considering the facts of the case and the only criteria was whether the case qualifies to be assessed under the self-assessment scheme or not. He argued that in such a case the ITO did not form an opinion and passed an unconscious order and, therefore, there can be no question of change of opinion in the re-opening of the case. Without prejudice to the above arguments, he stated that the applicant had not disclosed full particulars of her income as holdings of her business assets did not reconcile with the capital investment in SNF Bonds and bank interest etc. were also not included in the profit and loss expenses. He argued that there was enough material before the Income Tax Officer for reopening the assessment under section 65:---
12. On this point he relied on the following case-laws:
(1) Messrs National Beverages (Pvt.) v. Federation of Pakistan 2001 PTD 633;
(2) Messrs Pakistan Tobacco Co. Ltd. v. Government of Pakistan and others (1993 SCMR 493);
(3) Unreported judgment dated 27-4-2006 in I.T.C. No.245 of 1991 Messrs Pakistan Insurance Corporation v. Commissioner of Income Tax;
(4) Unreported judgment dated 12-12-2006 in I.T.As. Nos. 60 and 61 both of 1999 Commissioner of Income Tax v. Pakistan State` Oil Ltd.
13. We have examined the case in the light of the arguments of the learned counsel and have perused the records of the case including the impugned order, the memo. of reference application, the application filed by the applicant and the judgments relied on by the learned counsel.
14. We will first take up the question proposed by the applicant vide his Miscellaneous Application No.13 of 2007, which was filed on 31-1-2007 i.e. almost eleven years after the filing of the reference application under section 136(2). We have gone through the judgments on which reliance has been placed by both the learned counsel for and against proposition that at this late stage this Court in its advisory jurisdiction can render its opinion on the question raised through this miscellaneous application. In our opinion, the case relied on by the learned counsel, which is completely identical to the present case, is the unreported judgment of this Court dated 27-4-2006 in I.T.C. No.245 of 1994 titled Pakistan Insurance Corporations v. Commissioner of Income Tax. In this case in which incidentally both the present counsels were appearing for the applicant and the respondent, this Court has held as under:
"A bare perusal of the questions proposed before this Court and proposed before the Tribunal shows that the applicant has changed the questions which is not permissible in law. After rejection of the application under section 136(1) by the tribunal, the party was entitled to submit the reference application before the High Court under section 136(2) of the repealed Income Tax Ordinance, 1979, to consider whether the Tribunal was justified in rejection of the reference application. If the questions are changed then High Court cannot consider whether the tribunal was justified in rejecting the reference application or not. By now it is settled that a party approaching the High Court with reference application, after rejecting reference application by the Tribunal, is required to propose the same questions and is not empowered to change the questions in any manner. Since the applicant in this case has proposed the question before the High Court which were not proposed before the Tribunal, therefore, reference application is not maintainable and stands dismissed accordingly."
15. We have also been able to lay our hands on two judgments of this Court and one judgment of the Lahore High Court in which it has been held that additional questions, which are raised, have to be raised during the period of limitation for filing the reference application and cannot be considered if they are filed after expiry of such period of limitation. These judgments have been pronounced in the following cases:---
(1) Messrs Saifuddin Ghulam Ali and Sons v. The Commissioner of Income Tax, Hyderabad Zone (1989 PTD 1038);
(2) Messrs N.A. Industries, Karachi v. Commissioner of Income Tax (1992 PTD 50) and
(3) Commissioner of Income-Tax, Faisalabad v. Messrs Rashid Textile (2005 PTD 1456).
16. In the second mentioned case where the facts are completely identical to the present case this Court held as under:--
"(3) It may be pertinent to point out that by an application, C.M.A. No.9/86, the assessee made a request to this Court to allow him to add some more questions arising from the facts and circumstances of the case and an order was passed by the learned Division Bench before which the matter was placed for orders on 10-11-1986 as follows:-.
(i) whether these questions arise out of the order of the Tribunal?
(ii) whether there is any legal bar from hearing these questions? The application is disposed of in the above terms.
4. So far as the above questions are concerned, learned counsel for the applicant concedes that additional questions referred to us vide order, dated 10-11-1986 passed on the Civil Miscellaneous Application cannot be referred for decision of this Court in view of provisions contained in section 66(2) of the Income Tax Act, 1922, the said application being time-barred. It is pertinent to point out that in this regard the counsel have invited our attention to the case reported as Saifuddin Ghulam Ali and Sons v. The Commissioner of Income Tax (1989 PTD 1038) wherein the question has been clearly dealt with at page-1043 of the report. We, therefore, need not dwell further on this issue."
17. In the judgment of the Lahore High Court in the case of Chief Secretary Government of Punjab v. CIT (supra) although the Lahore High Court had allowed permission to the respondent to raise objection on all together new plea which was raised for the first time, but this judgment is distinguishable inasmuch as the Court has not given a decision on whether the applicant can be allowed to raise a new question of law which was not raised before the Tribunal and this point has not been adjudicated by the Court. Even otherwise, we subscribe to the judgments of this Court in ITC No.245 of 1991 extract of which has been reproduced above and also the judgments of this Court and Lahore High Court which had laid down the ratio decindi that additional questions cannot be raised after the expiry of the period of limitation. We would, however, also like to add that even if we had considered this question, we would have upheld the decision of the Tribunal on that point because the question for second approval only arises where the Income Tax Officer considers that the value of any investment or article referred to in clauses (aa), (b), (c) or (d) amount of expenditure referred in clause (e) of subsection (1) is too low and intends to determine a reasonable value or the amount thereof whereas in the present case no such opinion has been expressed by the Income Tax Officer nor has he determined a reasonable value or the amount of any investment made but has, given a finding that the applicant has not been able to explain the amount invested in the business and, therefore, the provisions of subsection (2) of section 13 will not apply and only one approval as provided in the second proviso to the section 13(1) shall suffice.
18. For the above reasons C.M.A. No.13 of 2007 is dismissed.
19. Coining now to the questions proposed by the applicant in the reference application, in our opinion the Tribunal has given a factual finding that the applicant had not filed all the requisite details and the assessment since it qualified under section 59(1) had been computed unconsciously by the income Tax Officer without. consciously considering the facts of the case. After finalization of the assessment, the Income Tax Officer discovered that at the time of making imports the applicant did not have cash available to make such imports and the Tribunal has specifically mentioned in the appellate order and in the impugned order of refusing the reference application that the learned A.R. of the applicant when confronted with these facts could not deny the same. The cases relied on by the learned counsel also do not help him because in the case of ITO v. Chappal Builders (1993) 68 Tax 1 SC Pak relied on by the learned counsel the Honourable Supreme Court on appreciation of the factual position of the case has held that the definite information on the basis of which the case was re-opened required further enquiry and was not enough to reopen the case under section 65 whereas in the case of Jennings Private School v. ITO quoted supra this Court had also on the appreciation of the factual position of the case held that, the petitioner had disclosed all material facts by producing the Photostat copies of sale-deeds, balance certificate of bank and prize winning bonds and the Income Tax Officer had reopened the assessment on the reappraisal of the same material facts and, therefore, this Court quashed the notice under section 65. However, in the present case the Tribunal has given definite finding of facts that the applicant had not provided all the material facts and the assessment was completed under section 59(1) unconsciously on the basis of incomplete facts because it qualified to be assessed under self-assessment scheme. We, therefore, agree with the Tribunal that the question No.1 raised by the applicant is based on a finding of fact and cannot be adjudicated by this Court in its advisory ' jurisdiction. We, therefore, refuse to answer the above question.
20. Coming to questions Nos.2 and 3, from a perusal of the order of the tribunal and the assessment order we find that the applicant had raised the objection that the approval was sought from IAC Service Wing who was also the Chairman of the panel and it is nowhere agitated by the applicant that such IAC was not the relevant IAC who was supervising officer of the Income Tax Officer who had passed the impugned assessment order. In fact, from a perusal of the Tribunals order it seems that before the Tribunal the applicant had argued that the approval had to be taken from the commissioner but this objection of the applicant was rejected by the Tribunal and no question has been framed by the applicant on this point. In our opinion, therefore, the two questions proposed by the applicant are misconceived and do not require any opinion from this Court. We therefore, refuse to answer these two questions also.
21. On the basis of the above discussion this Income tax reference application being devoid of merits is dismissed.
S.A.K./S-25/KReference dismissed.