COMMISSIONER (LEGAL) INLAND REVENUE, L.T.U., KARACHI VS INTERNATIONAL FOUNDATION GARMENTS LTD., KARACHI, 2010 PTD-KARACHI-HIGH-COURT-SINDH 2427 (2010)

(a) Income Tax Ordinance (XLIX of 2001)---

----S. 133---General Clauses Act (X of 1897), S.24-A---Reference to High Court---Exercise of power under enactments---Nome Tax. Appellate Tribunal, in the present case, had observed in its order that "Departmental Representative, who represented the appellant department before the Tribunal, had not much to say to support the grounds of appeal and after perusing the order of the Commissioner of Income Tax (Appeals), the Tribunal was of the opinion that the order of the Commissioner of Income Tax was very clear on the issues and did not require any interference" which meant that the Tribunal fully subscribed to the reasons given by the Commissioner for dismissing the appeal, Tribunal presumably adopted them---Departmental Representative had not argued before the High Court that Commissioner had not given any reason for allowing the appeal which had led to the filing of the appeal before the Tribunal by the appellant--Held, impugned order of the Tribunal did not violate the provisions of S.24-A, General Clauses Act, 1897.

(b) Income lax Ordinance (XLIX of 2001)---

----S. 133---Reference to High Court---Questions which had arisen from the factual findings of the forums below being questions of facts could not be adjudicated by High Court in advisory jurisdiction under S.133 of the Income Tax Ordinance, 2001.

Ali Mumtaz Shaikh for Applicants.

ORDER

MUHAMMAD ATHER SAEED J.---We had on 26-8-2010 passed the following short order in Court:--

"By these Income Tax Reference Applications filed against the order of the Tribunal dated 20-11-2009 in I.T.A. No.686/KB/2009 the following questions said to be questions of law arising out of the order of Tribunal, order have been proposed for the opinion of this Court:--

(1)Whether under the facts and circumstances of the case the learned Tribunal was justified in deleting addition on account of gain on disposal of fixed assets, without giving any reasons as required under section 24-A of the General Clause Act, 1897?

(2)Whether under the facts and circumstances of the case the learned Tribunal was justified in deleting addition on account of fixed assets when the same was made due to valid reason discussed in the order under section 122(1) of the Income Tax Ordinance, 2001 after giving taxpayer an opportunity of being heard?

(3)Whether under the facts and circumstances of the case the learned Tribunal was justified in deleting addition out of profit and loss expenses due to valid reason discussed in the order under section 122(1) of the Income Tax Ordinance, 2001 after giving taxpayer an opportunity of being heard?

We have heard Mr. Ali Mumtaz Shaikh the learned counsel for the applicant. For reasons to follow this Income Tax Reference Application is dismissed in limine. "

2. Now we would like to highlight the reasons for which we had dismissed the above reference application.

3. Brief facts of the case are that the present respondents are a private limited company engaged in the business of manufacturing of garments. Return of income was filed at the declared taxable income of Rs.52,443,000. The case was selected for total audit under section 177(4) and on the basis of the alleged findings of the audit, order under section 122(1) was passed by rejecting the applicant's declared income and assessing the total income at Rs.55,611,003.

4. Being aggrieved by the assessment order the present respondent filed an appeal before the CIT (Appeals) who vide his Order No.11 dated 1-7-2009 deleted the additions made on account of disposal of fixed assets, addition made out of profit and loss account and upheld the addition made on account of exchange loss.

5. Being aggrieved by the order of the CIT(Appeals) the present applicant filed an appeal before the Appellate Tribunal Inland Revenue (Pakistan) Karachi which was dismissed being devoid of merits and the order of the CIT (Appeals) was upheld. Hence this reference application.

6. We have heard Mr. Ali Mumtaz Shaikh the learned counsel for the applicant.

7. Arguing on proposed question No.1 the learned counsel referred to the impugned order and submitted that the Appellate Tribunal had disposed of the applicant's appeal in three lines which he read out for our benefit and which are reproduced below:-

"We have heard both the sides and find that order of CIT(A) is very clear on issues and does not require any interference, hence departmental appeal being devoid of merit is hereby dismissed."

8. He submitted that the authorities passing an order are expected to give reasons for passing such an order and passing bald order or non-speaking order in which reasons have not been enumerated violates the provisions of section 24-A of the General Clauses Act and therefore a legal question which has arisen is whether the impugned order has been passed in violation of section 24-A of General Clauses Act. The learned counsel submitted that he will be satisfied if only question No.1 is admitted to regular hearing as this Court had expressed its prima facie view that both the other questions are questions of fact which cannot be adjudicated by this Court in its advisory jurisdiction under section 133 of the Income Tax Ordinance, 2001.

9. We have examined the case in the light of the arguments of the learned counsel and have perused the records of the case and the law on the subject.

10. Section 24-A of the General Clauses Act reads asunder:--

24-A Exercise of power under enactments.---(1) Where, by or under any enactment, a power to make any order or give any direction is conferred on any authority, office or person such power shall be exercised reasonably, fairly, justly and for the advancement of the purposes of the enactment.

(2) The authority, officer or person making any order of issuing any direction under the powers conferred by or under any enactment shall, so far as necessary or appropriate, give reasons for making the order or, as the case may be for issuing the direction and shall provide a copy of the order or, as the case may be, the direction to the person affected prejudicially.

11. The learned counsel submitted that since the Tribunal has not given any reason for dismissing the appeal and therefore the powers vested in the Tribunal have not been exercised reasonably therefore the impugned order cannot be sustained.

12. Before giving our opinion on the requirements of section 24-A, we perused the assessment order, the order of the Commissioner (Appeals) and the order of the Tribunal to examine whether the contention of the learned counsel that the Tribunal has not given any reason for passing the order. From a perusal of the order of the CIT(Appeals) we find that the CIT(Appeals) had allowed the appeal filed by the 'present respondents by giving factual findings in respect of the reasons given by the Income Tax Officer for making various additions. It will be appropriate to reproduce these findings of the CIT(Appeals) which reads thus:--

"(1) Additions on account of disposal of fixed assets

The Taxation Officer while amending the assessment has made addition of Rs.471,977 on account of disposal of vehicles and computers by adopting the fair market value under section 68 of the Income Tax Ordinance 2001.

In this regard since the appellant submitted details of buyers of vehicles along with copies of CNICs, the onus rested on the Taxation Officer to verify the same by -issuing notice under section 176 of the Income Tax Ordinance, 2001. In the absence of the same, the Taxation Officer despite having verifiable particulars of buyers bf vehicles and its receipts being through banking channels, the additions made without any basis cannot be endorsed being contrary to law. Therefore, declared sale value shall now be accepted. Ordered accordingly.

(2) Additions out of P&L account expenses under section 174(2)

The Taxation Officer made additions out of P&L account expenses amounting to Rs.1,561,550. It is noted that the appellant produced complete record vouchers reflecting mode of payment through banking channels, which are subjected to tax deduction at source wherever applicable. It is beyond comprehension the Taxation Officer resorted to action by use of stock phrases without refuting the evidence produced in support of the claim. The superior judicial fora have time and again disapproved such additions made by using stock phrases like unverifiability or personal and non-business use etc.

In a judgment reported as 1007 PTR 377 (Trib.) the learned ITAT observed as under:

'Expenses under profit and loss account have been disallowed without pointing out any specific defects through notice under section 62, which were responded to by providing of vouchers to the department. The Assessing Officer is duty bound to point out specific defects. Therefore, arbitrary disallowances without giving any specific reasons or pointing out specific defect is not permissible"

In view of the above discussion and respectfully following the dictum laid down in the case-law quoted supra, the additions made by invoking the provisions of section 174(2) on account of administrative expenses and selling and distribution expenses are deleted."

13. A perusal of the order of the Tribunal reveals that the Tribunal has observed that the Departmental Representative who represented the present appellant before the Tribunal, had not much to say to support the grounds of the department's appeal and after perusing the order of the CIT(Appeals), the Tribunal was of the opinion that. the order of the CIT(Appeals) is very clear on issues and does not require any interference which means that the Tribunal fully subscribed to the reasons given by the CIT(Appeals) for dismissing the appeal and had presumably adopted them. It has not been argued before us that the CIT(Appeals) had not given any reason for allowing the appeal of the present respondent which had led to the filing of the appeal before the Tribunal by the present applicant. We are therefore, of the considered opinion that the impugned order does not violate the provisions of section 24-A of the General Clauses Act.

14. Since on the factual position we have already held that the impugned order has not violated the provisions of -section 24-A therefore since the interpretation of section 24-A has become of academic nature only, we will not go into 'it presently and will consider it in some other appropriate case.

15. From the perusal of the three orders of the forum below it is seen that the Assessing Officer had passed the assessment order by making additions allegedly for the factual reasons that the present respondents had not been able to substantiate its claim. However, the Commissioner (Appeals) had rebutted the contentions of the Assessing Officer by giving factual findings that the claim of expenses had been substantiated and the Tribunal had adopted the factual reasons given by the Commissioner Income Tax (Appeals).

16. We are therefore of the considered opinion that the two questions i.e. questions Nos.2 and 3 which have been proposed arise from the factual findings of the forums below and being questions of facts cannot be adjudicated by this Court in its advisory jurisdiction under section 133 of the Income Tax Ordinance, 2001. This Income Tax Reference application therefore does not merit consideration and was dismissed by our short order reproduced above.

M.B.A./C-8/KOrder accordingly.