COMMISSIONER OF INCOME TAX, SPECIAL ZONE, CORPORATE REGION, KARACHI VS SHAISTA ESTATE (PVT.) LTD., 2010 PTD-KARACHI-HIGH-COURT-SINDH 704 (2009)

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

----S. 111(1)(c)---Addition in income by authority without notice to assessee---Validity---Assessee must have been given an opportunity of hearing before making any addition---Impugned addition was deleted in circumstances.

(b) Income Tax Ordinance (XLIX-2001)---

----S.133---Reference to High Court---Findings of fact by Tribunal---Validity---High Court could not disturb such findings, unless same were found to be perverse or contrary to record.

Javed Farooqui for Appellant.

Khaleeq Ahmed for Respondent.

ORDER

IRFAN SAADAT KHAN, J. ---By this Income Tax Reference Application, the appellant has challenged the order dated 21-6-2007, passed by the learned Income Tax Appellate Tribunal (ITAT) in I.T.A. No.56/KB of 2007. Following questions of law have been raised in the memo. of reference application:--

(1) Whether on the facts and in the circumstances of the case, the learned ITAT was justified in vacating the order of officers below.

(2) Whether on the facts and in the circumstances, the learned ITAT was justified in resorting to restoration of the assessment under section 120 of Income Tax Ordinance, 2001, although the Taxation Officer and the appellate authority gave definite and conclusive finding, whereby it was established that the tax payer failed to provide the "Audited Accounts" for the year 2004, a mandatory requirement for filing returns in respect of companies vide S.R.O. 651 dated 30-7-2004 and could not substantiate his contention with documentary evidence regarding addition made at Rs.4,832,250 under section 111(1)(b), Rs.5,001,658 under section 111 (1) (c) and Rs.451, 663 towards rental income.

2. Mr. Javed Farooqui the learned counsel appeared on behalf of the department and contended that the ITAT Was not justified in allowing the appeal without considering the fact that the taxpayer has failed to provide the audited accounts for the tax year 2004, which is a mandatory requirement of the law. He further submitted that during the assessment proceedings the taxpayer has failed to substantiate with documentary evidence in respect of the additions made by the A.C. which in his opinion were made after fulfilling the requirements of the law and hence the ITAT was not justified in deleting the additions. Therefore in his view the matter not only requires consideration by this Court but also gives rise to question of law.

3. Mr. Khaleeq Ahmed, learned counsel, appeared on behalf of the respondent, and submitted that no question of taw is arising from the order passed by the ITAT, as the ITAT has given the decision after going through the entire facts and circumstances of the case: He invited our attention to para. 5 of the ITAT's order and submitted that the learned ITAT had categorically observed that the A.C. has not only misconstrued the facts of the case but has made the addition without giving specific notice to the respondent company. He therefore submitted that the order passed by the ITAT was based on pure and simple appreciation of the facts of the case hence, no question of law requiring opinion of this Court is warranted in the said reference application which may be dismissed accordingly.

4. We have considered the submissions made by the learned counsel and have gone through the record.

5. Briefly stated the respondent company is deriving income from the business of builder and constructer. The Additional Commissioner of Income Tax (A.C.) while examining the accounts of the company observed that the company has claimed certain expenses against rental income and has also not "offered certain receipts from its customers as its taxable income. The A.C. noticed that the value of five shops which previously was shown in the balance sheet for the period 30-6-2004 was not declared in the balance sheet for 30-6-2005, he thereafter opined that this difference is taxable under the provisions of section 111 of the Income Tax Ordinance, 2001 (the Ordinance). The A.C. thereafter asked the respondent company to file its explanation of the said discrepancy and after finding the explanation of the assessee to be unsatisfactory added an amount of Ra.4832250 under the provisions of section 111(1)(b) of the Ordinance. The A.C. further observed that the respondent company has paid off liabilities to the extent of Rs.11749374 whereas the total receivables along, with withdrawals from the bank amounted to Rs.6747716 only hence in his opinion the payment of liability from unknown sources stood at Rs.5001658 which amount was added under the provisions of section 111(1)(c) of the Ordinance. In addition to the above the A.C. further observed that the respondent company has claimed certain expenditures against its rental income which are not permissible under the provisions of section 17 of the Ordinance, hence an amount of Rs.451663 was further added to the income of the respondent company.

6. An appeal thereafter was filed by the respondent company before the Commissions of Income Tax (Appeals who vide his order dated 30-10-2006 confirmed the treatment meted out by the A.C. A further appeal thereafter was filed by the respondent company before the Income Tax Appellate Tribunal (ITAT) which after hearing the arguments of both the sides and perusing the orders of the authorities below observed that the A.C. has misconstrued the facts of the case and have made the additions without any legal and lawful justification.

7. It appears that the precise objection of the A.C. while passing the order was that the respondent company has not declared the receipts in respect of the sale of five shops made by it during the year, whereas on the other hand the department itself has admitted in the order passed under section 122(1) of the Ordinance for the tax year 2004 that the receipts from the sale of five shops had already been declared in the tax year 2004, hence having taxed this amount in the year 2004, same amount could not be again taxed in the tax year 2005. The A.C. further observed in his order that certain liabilities were paid off by the respondent company for which sufficient funds were not available with the company, however while making the addition in respect of this alleged discrepancy no notice as required under the law has been issued by the A.C. It is a trite law that before making any addition the aggrieved party has to be given an' opportunity' of hearing as enunciated in the principle "audi alteram partem". As no such notice was given by the A.C. the Tribunal was justified in deleting the said addition made under the provisions of section 111(1)(c) of the Ordinance by the A.C. The Tribunal has further observed that the addition in respect of inadmissible expense claimed against rental income was also not correct since on the face of the record no such expense has been claimed by the respondent company. The decision therefore given by the Tribunal in our view is based upon ascertainment of the facts only and this Court under the provisions of section 133 cannot disturb those findings' until and unless those are found to be perverse or contrary to the record, which in the present reference application has not been so demonstrated.

8. In over view the ITAT has given its decision on the basis of simple appreciation of the facts of the case and has quite elaborately vide para. 5 of its order has dealt with the issues in an unexceptional manner. During the course of the hearing we specifically asked a question from the learned counsel of the department Mr. Javed Farooqui that what precise question of law is arising in the said R.A. and he neither could give any plausible explanation in this regard nor could controvert the fact that the Tribunal has given its decision on the basis of the appreciation of the facts only.

9. We, therefore, keeping in view our above observation dismiss this reference application in limine by observing that no question of law requiring opinion of this Court is required in this matter.

10. In our short order dated 23-10-2009 we have already announced dismissal of this. reference application and the above are the detailed reasons for the same.

11. Let a copy of this order, under the seal of this Court, be sent to Registrar Tribunal.

S.A.K./C-31/KReference dismissed.