RAJA WEAVING MILLS LIMITED, KARACHI VS COMMISSIONER OF INCOME TAX, KARACHI, 2010 PTD-KARACHI-HIGH-COURT-SINDH 674 (2009)

Income Tax Ordinance (XXXI of 1979)---

----Ss. 25(c) & 133---Addition in income by Assessing Officer without confronting same to assessee---Non-raising such question before appellate authority---Dismissal of appeal by Tribunal for reason that such ground being factual in nature could not be raised as a legal ground for first time before Tribunal---Validity---Record showed that before making impugned addition and finalizing assessment order, assessee had been confronted same through various notices, but he had failed to offer any explanation therefor---Findings of fact given by Tribunal would not require any interference by High Court---Reference application was dismissed in circumstances.

Messrs Ahmed Karachi Halwa Merchant Ahmed Food Products v. Commissioner of Income Tax South Zone, Karachi 1982 SCMR 489; Japan Storage Battery Limited v. Commissioner of Income Tax Karachi, 2003 PTD 2849 and Lungla (Sylhet) de Company v. Commissioner of Income Tax Dacca 1970 SCMR 872 rel.

Mukhtar Ahmed Kuber for Applicant.

Jawaid Farooqi for Respondent.

ORDER

AQEEL AHMED ABBASI, J.---This Reference Application under section 133(1) of the Income Tax Ordinance, 2001 is filed by the applicant, being dissatisfied by the order passed by the learned Income Tax Appellate Tribunal in I.T.A. No.282/KB of 2006 (Assessment year 2001-2002) dated 19-6-2007. The following questions of law are said to arise out from the impugned order.

(i) Whether on the facts and in the circumstances of the case, the learned Income Tax Appellate. Tribunal was right in not recording any finding/decision on the following additional ground of appeal submitted before it at the time of hearing of appeal.

"That the learned Commissioner of Income Tax (Appeals) has erred in not recording her finding on the ground in respect of ex parte order passed under section 63 of the repealed Income Tax Ordinance, 1979 as contained in the memorandum of appeal and which goes to the roots of the matter."

(ii) Whether on the facts and in the circumstances of the case, the learned Income Tax Appellate Tribunal was justified to treat the addition of Rs.145,583,077 made under section 25(c) of the repealed Income Tax Ordinance, 1979 as factual ground raised in the memorandum of appeal before the learned Income Tax Appellate Tribunal although it was a legal ground and could be raised at any appellate fora.

(iii) Whether on the facts and' in the circumstances of the case, the learned Income Tax Appellate Tribunal was right to confirm the addition of Rs.145,583, 077 made under section 25(c) of the repealed Income Tax Ordinance, 1979 by the Assessing Officer, without confronting it to the applicant under section 62 of the repealed Income Tax Ordinance, 1979 which is a statutory requirement.

(iv) Whether on the facts and circumstances of the case, the learned Income Tax Appellate Tribunal was right to uphold the disallowance made by the Commissioner of Income Tax (Appeals) of 50% expenditure of Rs.11,306,602 claimed on account of fuel, electricity, gas and water charges when the Assessing Officer has accepted the explanation submitted by the applicant vide letter dated 19-6-2002 and had also accepted the trading results of the applicant.

2. Learned counsel for the applicant after having read the proposed questions, referred to the orders passed by the Taxation Officer, Commissioner Income Tax (Appeals) and the order of the learned Tribunal, impugned through this reference.

3. While confronted as to how the proposed Question No.(i) arises out of the impugned order, as there is no- finding on the such proposed question nor the same was raised before the learned Income Tax Tribunal as additional ground of appeal. Learned counsel for the applicant conceded that such question is not arising out of the order of the learned Tribunal, hence he does not press, question No.(i). Similarly, while confronted as to how the Question No. (iii) arises out of the impugned order, as neither the same was raised before the learned Tribunal nor there is any finding relating to non-issuance of notice under section 62 of the Income Tax Ordinance, 1979, while making addition under section 25(c). Learned counsel for the applicant could not offer any explanation, on the contrary, learned counsel for the respondent has drawn our attention at typed page 3 of the assessment order, whereby it has specifically mentioned that the taxpayer was confronted on the issue of addition under section 25(c) and since the assessee did not file relevant details/evidences, the said addition was made on the basis of facts of the case and strictly in accordance with law.

4. In view of the above factual position, learned counsel for the applicant frankly conceded that he would not press any question except Question No.(ii), which according to him is a legal question and does arise from the impugned order,

5. Since the learned counsel for the applicant does not press the proposed questions Nos.(i) (iii) and (iv), we would only examine the Question No.(ii), which according to the learned counsel for the applicant is a legal question and arises from the impugned order, the same is reproduced for the sake of convenience:--

(ii) Whether on facts and in the circumstances of the case, the learned Income Tax Appellate Tribunal was justified to treat the addition of Rs.145,583,077 made under section 25(c) of the repealed Income Tax Ordinance, 1979 as factual ground raised in the memorandum of appeal before the learned Income Tax Appellate Tribunal although it was a legal ground and could be raised at any appellate fora.

6. Learned counsel for the applicant submitted that the Income Tax Appellate Tribunal while dealing with the ground relating to addition under section 25(c), was not justified to observe that since this ground was not raised before the Commissioner of Income Tax (Appeals) the same could not be agitated for the first time before the Income Tax Appellate Tribunal. It was further argued that the learned Income Tax Appellate Tribunal fell in error while observing that the ground is factual in nature hence could not be raised as a legal ground for the first time before the Income Tax Appellate Tribunal. It was, therefore, argued that the above proposed question is a legal question, which requires an authoritative pronouncement by this Court.

7. Conversely, learned counsel for the respondent has vehemently opposed the instant reference application, as according to the learned counsel no question of law arises out of the impugned order. It was further argued that even the remaining question of law as mentioned hereinabove is also a question of fact and has been dealt with by the authorities below strictly on the basis of facts. According to learned counsel since there is concurrent finding of fact relating to the merits of the addition under section 25(c) the same cannot be disturbed by this Court in reference proceedings. It was submitted that the instant reference application is misconceived and the same may be dismissed.

8. We have heard both the learned counsel and examined the record. It appears that while finalizing the assessment order the assessee was confronted through various notices issued under sections 61 and 62 of the Income Tax Ordinance, 1979. Similarly, while making addition under section 25 (c) the assessee was specifically confronted relating to the details and evidences of the trading liabilities outstanding since 30-9-1997 as per following chart.

9. Since the assessee in spite of repeated opportunities, did not' offer any explanation, the Assessing Officer was left with no option except to make addition under section 25(c), which reads as follows:--

(c) such trading liability or a portion thereof is found not to have been paid within three years of the expiration of the income year in which it was allowed, such liability or portion thereof, as the case may be, shall be deemed to be income from business or profession of the year in which such finding is made or any other year (not being a year commencing after the expiration of five years from the end of the said three years) as the Deputy Commissioner may think fit.

10. By virtue of the provisions of section 25(c) such trading liability or a portion thereof found not to have been paid within three years of the expiration of the income year in which it was allowed the same shall be deemed to be income from business or profession of the year in which such finding is made. In the instant case such trading liability was admittedly outstanding since 30th September 1997 and was accordingly added in the assessment year 2001-2002. On perusal of the order of the Commissioner of Income Tax (Appeals) it transpires that the assessee neither offered any explanation nor came forward with any plausible ground for not making such addition, on the contrary, it was observed by the Commissioner of Income Tax (Appeals) that the attitude of the assessee has remained non-co-operative before the Assessing Officer as well as before the Commissioner of Income Tax (Appeals) towards compliance of notices in this regard. While hearing the instant reference application also, the learned counsel for the applicant was specifically confronted to point out any error in the impugned order or any ground for interfering with the impugned finding on the issue. He was not in a position to satisfy the Court except contending that such addition will have financial implication for the assessee and the said addition could have been made after expiration of five years from the end of the said three years. We are afraid that in the instant case we are not seized of any such legal issue. Moreover, the same was never agitated before the Deputy Commissioner, who could have in his discretion, consider such request of the assessee at the relevant point of time of assessment proceedings.

11. The Honourable Supreme Court in its reported judgment Messrs Ahmed Karachi Halwa Merchant Ahmed Food Products v. Commissioner of Income Tax South Zone, Karachi 1982 SCMR 489 has elaborately dealt with the issue as to what questions can be referred for opinion by the High Court in reference jurisdiction. It has been held by the Honourable Supreme Court that question which was neither raised, argued or decided by the Tribunal cannot be regarded as a question of law arising from the order of the Tribunal. Similarly in another judgment by Division Bench of this Court reported as Japan Storage Battery Limited v. Commissioner of Income Tax Karachi, 2003 PTD 2849, it has been held that only substantial question of law which arise out of the order of the Tribunal and are of general importance could be referred to High Court for an opinion. It was further held that a "point of law" could not be equated with the "question of law" and further to affirm a question of law in real sense the question referred must be "disputable question of law". The Honourable Division Bench in this regard placed reliance on a judgment of the Honourable Supreme Court reported as Lungla (Sylhet) de Company v. Commissioner of Income Tax Dacca 1970 SCMR 872.

12. In view of hereinabove, we are of the considered opinion that the learned Income Tax Appellate Tribunal has rightly decided the issue, which otherwise is based on the finding of facts hence does not require any interference by this Court in its referral jurisdiction under section 133(1) of the Income Tax Ordinance, 2001. Accordingly, the reference is dismissed in limine with no order as to cost.

S.A.K./R-42/KReference dismissed in limine.