BOSTAN INTERNATIONAL VS COMMISSIONER OF INCOME TAX, ZONE C, KARACHI
2010 P T D 1275
[Karachi High Court]
Before Gulzar Ahmed and Irfan Saadat Khan, JJ
Messrs BOSTAN INTERNATIONAL
Versus
COMMISSIONER OF INCOME TAX, ZONE C, KARACHI
Income Tax Reference No.186 of 2006, decided on 10/03/2010.
Income Tax Ordinance (XXXI of 1979)---
----Ss.13, 22, 62, 65 & 136(2)---Income Tax Ordinance (XLIX of 2001), S.133---Reference to High Court---Self assessment, re-opening of---Re-assessment order making additions to income to assessee under Ss.13 & 22 of Income Tax Ordinance, 1979---Appellate Authority set aside re-assessment order and remanded case to Assessing Officer for its fresh trial---Tribunal upheld such rert and order---Validity---Tribunal had not given any finding thus, there was no final order, which could be said to have given rise to any question of law for determination by High Court---Reference under S.133 of Income Tax Ordinance, 2001 and S.136 of Income Tax Ordinance; 1979 would lie only against final order, but not against an interlocutory or remand order as no question of law would arise therefrom---Assessing Officer, while examining case afresh would consider all legal aspects arising in such matter---High Court disposed of reference application with directions of Assessing Officer that before making any addition to .income of assessee, he should be provided full opportunity of hearing and decision should be based on sound reasoning, proper appreciation of legal aspect, facts and evidence on record.
Abdul Ghani and Company v. C.I.T. PLD 1962 (WP) Kar. 635 and C.Y.T. v. National Refinery Limited 2003 PTD 2020 ref.
Gap. Inc. Daware Corporation USA v. Gap Departmental Store, Karachi 2006 CLD 1477; Muhammad Akram Malik v. Dr. Ghulam Rabbani PLD 2006 SC 773; The Commissioner of Income Tax, Central Zone `B', Karachi .v. Messrs Electronic Industries Ltd. 1988 PTD 111; Islamuddin and 3 others v. The Income Tax Officer and others 2000 PTD 306; Dr. Abdur Rauf Hamid v. Commissioner of Income Tax, Faisalabad 65 Tax 207; Haji Muhammad Yousaf v. Commissioner of Income Tax and Wealth Tax Companies Zone, Faisalabad 2006 PTD 72; Commissioner of Income Tax and Wealth Tax, Sialkot Zone v. Messrs Maqbool Ahmad Gill 2007 PTD 1757; Commissioner of Income Tax v. Bihar Alloy Steels Ltd. 1993 PTD 1189 and Commissioner of Income Tax v. Grand Bazaar (1991) 187 ITR page 471 rel.
Muhammad Naseem for Applicant.
Mohsin Imam for Respondent.
ORDER
IRFAN SAADAT KHAN, J.---This Income Tax Reference Application (ITRA) has been filed against the order dated 21-4-2005 passed in R. A No.413-KB/2004 by the Income Tax Appellate Tribunal (ITAT). The following questions of law have been referred for determination by the this Court:---
(1) Whether on the facts in the circumstances of the case the Tribunal decided correctly that the transfer of jurisdiction to the ACIT, Circle C-5, vide order dated 15-6-2000 was legal and correct and also that CITA (A) had unlawfully and incorrectly decided the issue of transfer of jurisdiction?
(2) Whether on the facts and in the circumstance of the case of the assessment completed under the Self-Assessment Scheme could not be re-opened, more particularly against the assessment?
(3) Whether on the facts and in the circumstances of the case the Tribunal decided correctly:--
(a) That the alleged recommendation of CIT Zone-F, constituted definite information towards re-opening of assessment under section 65 of the Income Tax Ordinance, 1979?
(b) That the DCIT, Circle C-5 held any authority and jurisdiction to decide and recommend exclusion of the case from the purview of Universal Self-Assessment Scheme and particularly when the Self-Assessment had already been ordered/accomplished?
(c) That there was positive concealment and filing of wrong particulars when no information of the sales/investment was furnished in the Return filed?
(d) That the DCIT, Circle C-5, possessed positive and definite information or it was not only a fishing and roving enquiry for issuing notice under section 65 of the Income Tax Ordinance?
(4) Whether the DCIT and IAC who made recommendations to Regional Commissioner of Income Tax for exclusion of the case from the purview of Universal Self-Assessment Scheme and had personally canvassed before the Regional Commissioner of Income Tax against the applicant could still exercise powers under section 65 and other powers under Income Tax Ordinance, and could frame a fair assessment?
(5) Whether on the facts and in the circumstances of the case approval granted by the IAC Range-III, Zone-C, Karachi, Mr. Shahid H. Jatoi is an approval in the eyes of law and whether he was to grant such approval? (sic)
(6) Whether on the facts and in the circumstances of the case the curtailment of 30 days statutory time of compliance in the absence of recording any justification rendered the notice to be materially and substantially deficient, rendering it to be ab initio and so also the proceedings and assessment? (sic)
(7) Whether on the facts and in the circumstance of the case the Tribunal decided arbitrarily and incorrectly in holding that the transactions of Forex Association of Pakistan were not proved?
(8) Whether on the facts and in the circumstances of the case the Tribunal has correctly drawn the interference and conclusions against the applicant?
(9) Whether on the facts and in the circumstances of the case the Tribunal correctly decided the Protection of Economic Reforms Act, 1972 was not available to the applicant? (sic)
(10) Whether on the facts and in the circumstances of the case the Tribunal correctly set aside the matters for another round of cumbersome proceedings by way of a second peril particularly in violation of Constitutional guarantee and the limitation involved in relation to:
(i) any alleged rate of profit per dollar overlooking and bypassing the entire evidence placed on record;
(ii) addition of Rs.54,31,87,715 under section 13(1)(a)(a) of the Income Tax Ordinance;
(iii) profit of Rs.29,29,807 allegedly prior to dealings with State Bank of Pakistan;
(iv) alleged profit of Rs.3,37,85,805 from business transaction with State Bank of Pakistan;
(v) deleted.
(vi) Alleged profit from sale of US dollars at Rs.27,30,000
(vii) Alleged profit of Rs.12,59,883 from transaction other than State Bank of Pakistan;
(viii) Alleged profit from swap transactions of Rs.42,59,988.
(11) Whether on the facts and in the circumstances of the case the Tribunal correctly ordered that the declared gross profit of Rs.2,44,39,041 may be ignored on flimsy and untenable arguments:
(12) Whether on the facts and in the circumstances of the case the assessment proceedings were controlled and commanded and hence were a nullity in law?
(13) Whether on the facts and in the circumstances of the case the Tribunal was right in disposing of the claims in the P&L account without discussing the merits of each claim?
(14) Whether on the facts and in the circumstance of the case the Tribunal was correct in not deciding the objections that it was not a case of setting the issue for de novo consideration?
2. Mr. Muhammad Naseem, learned senior counsel appearing for the applicant submitted that he would address the Court on all the above questions separately and in support thereof has filed paper books, which are taken on record. His summarized submissions are as under:
(i)On question No. 1 he submitted that the case of the assessee was wrongly transferred from the jurisdiction of Circle 12, Zone C, Karachi to Circle 5, Zone C, Karachi which, according to the learned counsel, was not only arbitrary but also illegal.
(ii)On question No. 2 the learned counsel submitted that the Department was not justified in denying the benefit of Self-Assessment Scheme and illegally re-opened the assessment under the provisions of section 65 of the Income Tax Ordinance, 1979 (the repealed Ordinance).
(iii)Apropos question No.3, the learned counsel submitted that as the original return was accepted under the Self-Assessment Scheme hence the Department was not justified in re-opening the same and as an order has already been passed under the said scheme a vested right accrued in favour of the assessee which has all together been ignored by the authorities below.
(iv)While making his arguments on question Nos.4 and 5, the learned senior counsel submitted that the Regional Commissioner of Income Tax, (RCIT), was not justified in not providing adequate opportunity to the assessee and also influenced the subordinate authorities in making a totally illegal order against the assessee.
(v)On question No.6 the learned counsel submitted that the legal requirements of section 65 of the Ordinance have not been complied with by the Department.
(vi)On question No. 7 he argued that the learned Tribunal has failed to consider the evidence placed before it and has incorrectly and arbitrarily ignored the same.
(vii)On question No.8 the learned counsel submitted that the learned Tribunal was not justified in not accepting the affidavit filed by the assessee which remained unrebutted.
(viii)On question No.9 the learned counsel submitted that though it has been held that no record was submitted whereas complete record was furnished to dislodge the various additions made by the Department.
(ix)On question No.10 the learned counsel submitted that the learned Tribunal was not justified in setting aside the issues for re-consideration which, according to him, should have been decided by the Tribunal in favour of the assessee.
(x)On question No. 11 the learned counsel submitted that the order passed by the learned Tribunal was based on mere conjectures and surmises, hence the same be disapproved by this Court.
(xi)On question No.12, the learned counsel submitted that the learned Tribunal was not justified in not recording the facts of the case properly.
(xii)On question No.13, the learned counsel for the applicant submitted that the Tribunal has not looked into the merits of the claim made by the assessee in respect of certain expenditures claimed by him.
(xiii)On question No. 14, the learned counsel submitted that instead of confirming the setting aside of the case, the learned Tribunal should have annulled the order passed by the authorities below.
3. In the end the learned counsel for the applicant prayed that as the order passed by the learned ITAT suffers with a number of legal and factual infirmities, therefore, the same may be set aside and the questions raised by him may be answered in favour of the assessee and against the Department.
4. Mr. Mohsin Imam, learned counsel for the Department, at the very outset submitted that this ITRA is not maintainable as in his view the questions of law raised by the assessee before the Tribunal were materially different from the questions of law posed before this Court and hence this ITRA is misconceived and is liable to be dismissed in limine. In this regard, the learned counsel has given a comparison of the questions of law taken before the learned ITAT and the questions of law now raised before this Court. In support of his contention the learned counsel has relied on the decisions reported as (i) Abdul Ghani & Company v. C.I.T. PLD 1962 (WP) Kar. 635 and (ii) C.I.T. v. National Refinery Limited 2003 PTD 2020. He therefore, prayed that this TTRA, being misconceived, may be dismissed in limine. It was however quite strange on the part of Mr. Mohsin Imam that though he was specifically asked by the Bench that in addition to the legal objection raised by him would he be also addressing the Court on the merits of the case but he insisted that the Court should first pronounce about the maintainability of this ITRA and only then he will argue the matter on merits.
5. It may be pertinent to note here with dismay the conduct of Mr. Mohsin Imam in proceeding with this case. On 15-12-2009, learned counsel for the applicant concluded his arguments and the case was adjourned to 21-12-2009. On 21-12-2009, Mr. Mohsin Imam requested for adjournment on the ground that he has not been able to prepare himself with the case and that he even does not have the full record of the case. He also filed a statement of the same date wherein he requested for time "till the end of the winter vacations". This Court, very feluctantly and in order to do complete justice, adjourned the matter to 19-1-2010 i.e. much after the winter vacations. The learned counsel was directed to be prepared with the case on the next date of hearing to proceed with the same. However, when the case was taken up on 19-1-2010 yet again Mr. Mohsin Imam requested for grant of same more time and was not willing to proceed with the case on merits. It was in the above circumstances that we declined his unreasonable request and reserved the matter for decision. To say the least, such changing attitude of the counsel for the Department is undesirable.
6. We have heard both the learned counsel and have perused the record so also the paper books filed by the learned senior counsel appearing for the applicant.
7. Briefly stated, the facts of the case are that the applicant/ assessee was a dealer in the foreign exchange and during the assessment under consideration he was also the President of Forex Association of Pakistan. The return of total income was filed by him at a total income of Rs.650,000 under the provisions of Self-Assessment Scheme with Circle 12, Zone C, Karachi. Thereafter the jurisdiction of the case was transferred to Circle 5, Zone C, Karachi but without any notice to the assessee. Afterwards, on receipt of certain information, the case of the assessee/applicant was re-opened under the provisions of section 65 of the Ordinance and certain additions were made to the income of the assessee under sections 13 and 22 of the Ordinance as either unexplained incomes/investments of the assessee or business income of the applicant. A detailed and lengthy correspondence in this regard took place between the assessee and the Assessing Officer (A.0), who vide his order dated 17-4-2001, finalized the assessment under sections 62/65 of the Ordinance at an income of Rs.570,276,411. Being aggrieved with the said order, an appeal was preferred before the Commissioner of Income Tax (Appeals) who, vide his order dated 22-5-2002, after an exhaustive and erudite order, came to the conclusion that the additions made by the A.O. in the income of the assessee require further investigation and detailed inquiry with' regard to the facts of the case. He, therefore, remanded the case back to the A.O. for de novo proceedings on certain issues and further ordered deletion of certain additions made by the A.O. from the income of the assessee. Learned counsel for the applicant has accepted that no re-assessment proceedings till date have taken place in this regard. An appeal against this order of remand was filed by the assessee as well as the by Department before the learned ITAT. The learned ITAT after hearing the counsel for the parties at considerable length came to the conclusion that the case requires thorough investigation and reappraisal not only with regard to the various legal objections raised by the learned counsel but also with regard to the factual controversies involved in the case. The ITAT, therefore, set aside the case for de novo proceedings with the direction that ample opportunity should be provided to the assessee before finalizing the assessment and before making any addition to the income of the assessee. The ITAT, therefore, did not interfere in the order passed by the learned CIT (A) and affirmed the same by observing that the A.O. should make fresh adjudication in respect of the matter and remanded the matter back to the A.O. for fresh trial thereof.
8. We first take up the preliminary objection raised by the counsel of department regarding the maintainability of this ITRA. The decisions relied upon by the learned counsel for the Department are not on all fours with the facts of this case. In the case 2003 PTD 2020 the Hon'ble High Court has disapproved material changes made in the questions of the law taken before the Tribunal and the questions of law referred to this Court. However, we have noted from the comparison chart given by Mr. Mohsin Imam that there is no material difference in the questions except adding or deleting a few words in some questions with no material difference with regard to the essence of the questions. Even .Mr. Mohsin Imam could not point out any material difference when he was asked the specific question by the Bench to pinpoint the material difference in the questions. In the other decision PLD 1962 (W.P.) 635, a Division Bench of this Court comprising of the then Justice Anwar-ul-Haq and the then Justice Inamullah, observed that those questions which were neither raised nor considered by Tribunal are not referable to High Court. In the instant ITRA however the applicant has taken almost the same questions as were raised by him before the ITAT. Hence, this preliminary objection raised by the learned counsel being bereft of any consideration is hereby repelled.
9. Though the learned senior counsel appearing for the applicant has raised a number of legal and factual objections and has very vehemently contended that the learned Tribunal was not justified in confirming the remand order passed by the CIT(A) we, however, are of the considered opinion that it is a trite law that no reference is maintainable in respect of a remand order passed by the Tribunal. In this regard, we would like to cite a few cases on this legal proposition as under:
(i) GAP. Inc. Daware Corporation USA v. GAP Departmental Store, Karachi (2006 CLD 1477)
In this decision the Hon'ble High Court after examining the case in detail remanded the case back to the Registrar, Trademark for making a fresh decision. The petitioner filed an appeal before the Hon'ble Supreme Court of Pakistan and the Hon'ble apex Court observed as under:
"High Court has only remanded the case to the Registrar to decide opposition in accordance with law on merits as such no prejudice would be caused to the petitioner if matter was decided on merits after hearing the parties -- Supreme Court declined to interfere in the judgment passed by High Court as there was no legal or factual infirmity therein -- Leave to appeal was refused."
(ii) Muhammad Akram Malik v. Dr. Ghulam Rabbani (PLD 2006 SC 773).
In this case also the Hon'ble High Court while exercising its discretion remanded the case back to the trial Court for re-examination, the Hon'ble Supreme Court while affirming the order of the High Court observed as under:
"High Court had exercised its discretion judiciously and its order being well-based did not warrant interference as no prejudice whatsoever had been caused to the petitioner who would have ample opportunities to canvas his point of view and substantiate his claim and rebut the allegation of misrepresentation and fraud before the Courts concerned---Supreme Court declined to interfere in the order passed by High Court---Leave to appeal was refused."
(iii) The Commissioner of Income Tax, Central Zone `B', Karachi v. Messrs Electronic Industries Ltd. (1988 PTD 111)
In this case a Division Bench of this Court comprising of the then Mr. Justice Ajmal Mian and the then Mr. Justice Haider Ali Pirzada, while dealing with a similar proposition observed as under:
"It is an admitted position that at present there is no assessment order in the field and the question in issue is to be decided by the Income Tax Officer in terms of the above quoted observation. In our view the reference is misconceived."
(iv) Islamuddin and 3 others v. The Income Tax Officer and others (2000 PTD 306)
In the instant case, which was interestingly represented by the senior counsel appearing in this case, a Division Bench of this Court comprising of the then Mr. Justice Saiyed Saeed Ashhad and the then Mr. Justice Abdul Ghani Shaikh, while dealing with a similar proposition observed as under:
"Order of Appellate Tribunal setting aside assessment framed and remanding the case to the Assessing Officer for fresh assessment after further examination of the evidence and material and verification of the facts on record could not be challenged by way of Reference Application under 5.136 of the Income Tax Ordinance, 1979."
(v) Dr. Abdur Rauf Hamid v. Commissioner of Income Tax, Faisalabad (65 Tax 207).
In this case the assessment made by the Income Tax Officer as well as the order passed by the learned Commissioner were set aside and the case was remanded to the Income Tax Officer for decision afresh. The Tribunal refused to refer the questions to the High Court under section 136(1) of the Income Tax Ordinance. Therefore, the assessee filed an application under section 136(2) of the Ordinance. A learned Division Bench of the Lahore High Court dismissed the same, holding as under:
"It is thus obvious that the questions now sought to be pressed into service were neither agitated nor decided by the Tribunal, therefore, the request to formulate all these questions for answer is wholly misconceived. The Income Tax Appellate Tribunal while dismissing the application under section 136(1) of the Income Tax Ordinance observed that:
The questions as now posed by the applicant do not arise out of the Tribunal's order as no finding was recorded on the additions made under section 13(1)(aa) of the Ordinance. It was specifically stated by the Tribunal that the matter was being set aside without entering into merits of the case and without expressing any opinion thereon. All the questions posed by the applicant thus do not arise out of the Tribunal's order."
4. We do not feel persuaded to disagree with the tribunal and therefore dismiss this application without any order as to costs."
(vi) Haji Muhammad Yousaf v. Commissioner of Income Tax and Wealth Tax Companies Zone, Faisalabad (2006 PTD 72)
In this case the Hon'ble Lahore High Court while dealing with the issue observed as under:
"Remand order of Appellate Tribunal - Validity - Such order would not give rise to a question of law to be considered by High Court."
(vii) Similar observation has been made in the decision in the case of Commissioner of Income Tax and Wealth Tax, Sialkot Zone v. Messrs Maqbool Ahmad Gill (2007 PTD 1757)
(viii) Commissioner of Income Tax v. Bihar Alloy Steels Ltd. 1995 PTD 1189.
In this case the Hon'ble Supreme Court of India observed as under: "Tribunal remanding case to pass order after making enquiries - Order of remand does not give rise to a question of law."
(ix) Commissioner of Income Tax v. Grand Bazaar (1991) 187 ITR page 471)
In this case Hon'ble Madras High Court of India in a referencefiled by the department against a remand order of the Tribunal observed as under:
"Dismissing the application, that the effect of the order of the Tribunal was merely to set aside the matter and remit the same to the Officer with the direction that, in the course of the de novo proceedings, it would be open to the Officer to examine all the aspects including the applicability of section 68 of the Income Tax Act to the cash credits and no prej lice would be caused to the Department by the course adopted by the Tribunal."
10. A perusal of the above judgments show that it is only a final order against which a reference lies and not against a remand order. Provisions of section 133 of the Income Tax Ordinance, 2001 and section 136 of the repealed Ordinance 1979 are quite clear in this regard which specifically state that only those matters are referable to the High Court in respect of which a question of law arises for determination. It is a settled principle of law that no question of law arises from an interlocutory order or a remand order. The present ITRA being an out-come of a remand order simpliciter in respect of the various additions made in the income of the applicant is concerned. Hence, in our view, no question of law arises from the impugned order passed by the learned Tribunal. Now, that the orders of the Commissioner of Income Tax (Appeals) and the assessment order made by the A.O. having been set aside, and the learned Tribunal having not given a finding, there is no final order holding the field which could be said to have given rise to any question of law for determination by this Court and the matter is wide open which will be decided after giving the assessee full opportunity of participation in the proceedings. It may further be noted that though the CIT(A) and the ITAT has dismissed the appeal filed by the assessee on the legal issues by the assessee on the aspects of jurisdiction, exclusion of case from Self-Assessment Scheme, initiation of proceedings under section 65 of the Ordinance, however, while examining the case afresh the A.O. will also consider these issues as in our view these issues have direct nexus with the additions made under sections 13 and 22 of the Ordinance. For instance, if it is held that the assumption of jurisdiction and initiation of proceedings under section 65 of the Ordinance and exclusion of case from Self-Assessment Scheme etc. was illegal then the additions made under sections 13 and 22 of the Ordinance would automatically vanish but if it is held that the additions under sections 13 and 22 of the Ordinance were illegal then the very re-opening of the case would become illusionary and a mere futile exercise on the part of the department. Hence when confirming the remand order of the ITAT we would direct that while proceeding afresh the A.O. would also consider the legal aspects of the case with regard to assumption of jurisdiction, exclusion of return from Self-Assessment Scheme, proceedings under section 65 of the Ordinance and other legal aspects of the case arising in the matter.
11. In view of the above, we dispose of this ITRA in the above terms with direction that prior to making any addition to the income of the assessee, he should be provided full opportunity of hearing and the decision should be based on sound reasoning and proper appreciation of the legal aspects, facts and evidence in the case. The A.O. is also directed to decide the matter within a period of two months after the receipt of copy of this order.
14. Before parting with the order we would like to record our appreciation for the able assistance provided to us by the learned senior counsel appearing for the applicant.
S.A.K./B-5/KReference dismissed.