E.M. OILS MILLS AND INDUSTRIES LTD. VS COMMISSIONER OF INCOME TAX, AUDIT DIVISION II, COMPANIES III, KARACHI
2011 PTD 2708
2011 PTD 2708
[Sindh High Court]
Before Mushir Alam, C J and Salman Hamid, J
Messrs E.M. OILS MILLS AND INDUSTRIES LTD. through Director
Versus
COMMISSIONER OF INCOME TAX, AUDIT DIVISION II, COMPANIES III, KARACHI
Income Tax Reference Application No.597 of 2009, decided on 17th May, 2011.
(a) Income Tax Ordinance (XLIX of 2001)--- ----S.177---Selection of case for audit---Scope---Commissioner could select any case for audit after recording reasons in writing, if upon examination of a statement of accounts, he came to- conclusion that same did not depict true state of affairs---Legal requirement would stand duly adhered to once such exercise was done by Commissioner and notice thereof sent to taxpayer.
(b) Qanun-e-Shahadat (10 of 1984)---
----Arts. 117 & 118---Burden of proof---Scope---Person asserting a fact would be bound to prove same.
(c) Income Tax Ordinance (XLIX of 2001)---
---Ss. 109, 122 & 177---Selection of completed assessment for audit---Addition of profit on disposal of land by assessee---Assessee's plea that he was not provided sufficient time to produce complete details of such sale and that Taxation Officer had proceeded in haste---Remand of case by Appellate Tribunal to Taxation Officer for its decision afresh after considering evidence produced by assessee---Reference application against such remand order---Maintainability---No assessment order was in field, rather same was yet to be finalized---Such reference for being premature and misconceived was dismissed in circumstances.
The Commissioner of Income Tax v. Electronic Industries Ltd. 1988 PTD 111 rel.
Anwer Kashif Mumtaz for Applicant.
Jawaid Farooqi for Respondent.
Mohsin Imam, Advocate.
Date of hearing: 17th May, 2011.
JUDGMENT
SALMAN HAMID, J.---The case of the applicant is that it is a tax payer and is a quoted limited company, engaged in the business of extraction and marketing of edible oils and banaspati ghee etc., being assessed to tax as a Large Taxpayers Unit, Karachi. Tax return for the year 2003 was filed, wherein a loss of Rs.8,443,734 was shown. The taxing authority in terms of section 177 of the Income Tax Ordinance 2001 (Ordinance, 2001) selected the case of the applicant for the tax year 2003, This selection was challenged by the applicant on the, ground that the same does not conform with the parameters abounded by the C.B.R. press release dated 13-5-2004 (C.B.R. Circular). Applicant's request was not appreciated. Order under section 122 of the Ordinance, 2001 was passed, wherein an amount of Rs.93,123,764 was added towards profit on disposal of land in terms of section 109 of the Ordinance, 2001. Appeal was preferred. It was dismissed by CIT(A). This too was challenged before ITAT, Karachi but to no avail. It is the Order of ITAT which is before us under section 133 of Ordinance, 2001, wherein following questions were raised:
(i)???????? Whether on the facts and in the circumstances of the case, the respondent was justified in selecting the case for audit under section 177 by deviating from the parameters announced for Corporate Cases by C.B.R. for selection of audit?
(ii)??????? Whether on the facts and the circumstances of the case, the C.B.R. directives is binding on respondent or not?
(iii)?????? Whether on the facts and the circumstances of the case, the action of the respondent is against the ratio decindi of the judgment of the Honourable Lahore High Court?
2. The case of the applicant had been that the Taxation Officer was not empowered to conduct audit proceedings in view of section 120(1-A) and that only commissioner was empowered in selecting a person for audit under section 177 of Ordinance, 2001. Therefore, it was contended that the audit proceedings were void ab initio. The next contention of the learned counsel for the applicant was that the Taxation Officer had violated the instructions of C.B.R., issued by it in terms of C.B.R. Circular, which were not appreciated by the forum below. It was also urged that the audit proceedings, which were initiated be annulled as case of the applicant does not fall with the parameters for corporate returns.
3. We have heard arguments and have gone through the record. Taking up the first question, reproduced above, we may observe that it would be evident from the record that in terms of the intimation Notice dated 27-6-2007, the applicant was duly informed by the Commissioner that after examination of its (Applicant's) audit accounts some issues required examination and clarification. Such issues and discrepancies were highlighted and pointed out, and the applicant was informed that its case has been selected under the provision of section 177 of Ordinance, 2001 for audit. Language of section 177 would reveal that the Commissioner is fully empowered and authorized to select any case for audit after recording reasons in writing. Once such is done and communicated, the legal requirement was duly adhered to. Legal machinery having been followed, strictly, which is an admitted position, patent from the record, we do not agree with the proposition of the learned counsel, representing the applicant that the Commissioner had no authority under the law to have selected the case for audit (section 177 of the Ordinance, 2001) or that there was no sufficient material available with him (Commissioner) for selecting the case. Therefore so far as selecting the case of the applicant under section 177 of the Ordinance 2001 is concerned, we have reached to the conclusion, given the circumstances, that the case of the applicant was selected within the bounds of section 177 of the Ordinance, 2001 inasmuch as that the main purpose of section 177 of the Ordinance, 2001 is to empower the Commissioner to select any case for audit, if upon examination he Comes to the conclusion that the statement of accounts submitted by an assessee do not depict true state of affairs. Therefore, the first question to the extent of selecting applicant's case under section 177, of the Ordinance, 2001, in view of our above observations is decided against the applicant and in favour of the department.
4. As to the second question and part of the first question i.e. parameters of C.B.R. Circular and directives of C.B.R. in respect thereof (raised in question No.2), we may observe that the C.B.R! Circular, under-point, clearly stipulates that an opportunity to the tax payer whose case in their opinion has not been selected on the basis of above parameters would be given. Suffice to say that when the case of the applicant was selected for audit on 27-6-2007 and intimation notice sent, a letter was addressed by the counsel for the applicant to the effect that its case fulfilled the parameter for Corporate Return, thus the mischief of section 177 of Ordinance, 2001, in view of the C.B.R. Circular was not attracted. However, it is pertinent to note that the applicant hopelessly failed to raise plausible explanation, whereby the parameters, under view were said to have been met. Nothing was mentioned in applicant's Letter/Reply save vague and scanty submissions to the effect that their return fulfilled the parameter, laid down by the C.B.R. Circular. It is a trite proposition of law that the onus lies on the person who asserts it. In the present case it is seen that the onus was on the applicant, which was not discharged. The learned counsel before us failed to demonstrate as to how the return filed by the applicant fulfilled the parameter as laid down by the C.B.R. Circular. In view of the above, we answer this question in affirmative i.e. in favour of the department and against the applicant.
5. So far as Question No.3 is concerned, it may be observed that it was not a question of law and does not arise from the impugned order and, therefore require no answer.
6. Though we are not, in face of the three questions raised by the applicant, obliged to go further on, may mention that the impugned Order dated 15-6-2009 would clearly show that the intention of the applicant at the time of purchase of the land was looked into and it was clearly established that no measures had been taken by the applicant for running the sick unit inasmuch as that no staff, engineers and consultants had been appointed/engaged for overhauling the project. It is clear from the impugned Order that the applicant having, pleaded that sufficient time was not accorded to it to produce complete details of sale of land and other assets as the same were voluminous and the principle of audi aulteram partem was not looked into and/or appreciated and addition in I tax had been made without any documentary evidence and that no evaluators and/or valuer was appointed to find out fair market value and that Taxation Officer proceeded in haste, the ITAT remanded the case back to the Taxation Officer with the direction to summon the purchaser and confront them after providing reasonable opportunity and it (applicant) be heard and that the applicant was also directed to provide complete details to the Tax Officer, and finalize the assessment soonest possible after considering evidence and that the Appeal before ITAT was disposed of in the above feshion, there was hardly any ground to maintain the present Reference as there was no assessment order in the field. The question in issue is still to be decided by the Taxation Officer in terms of the observation of the ITAT, Karachi. Reliance is put on (1988 PTD 111) The Commissioner of Income Tax v. Electronic Industries Ltd. wherein Division Bench of this Court held that since no assessment Order is in the field and that the case was remanded back to the Income Tax Officer to decide the issue afresh the Reference was not maintainable being misconceived. In the present case as well by way of impugned Order, the ITAT has remanded back case to the Taxation Officer with the direction to summon the purchaser and confront them after providing reasonable opportunity of hearing and that the applicant is also directed to provide complete details of the Taxation Officer and that the Taxation Officer finalize the assessment as soon as possible. Thus, the assessment Order is yet to be finalized. Hence, the present Reference is premature and misconceived, therefore, dismissed on this fundamental score also in limini, however with no order as to costs.
S.A.K./E-6/K????????????????????????????????????????????????????????????????????????????????????? Reference dismissed.