COMMISSIONER (LEGAL) INLAND REVENUE, LARGE TAXPAYER UNIT VS SHIELD CORPORATION LTD., 2015 PTD-KARACHI-HIGH-COURT-SINDH 2275 (2015)

Income Tax Ordinance (XLIX of 2001)--

---S.133---Sales Tax Act (VII of 1990), S. 47---Customs Act (IV of 1969), S. 196---General Clauses Act (X of 1897), S. 24-A-Reference to High Court---New plea---Question of law, non framing of---Speaking orders---Authorities were aggrieved of finding of Appellate Tribunal and raised new pleas which were not raised before forums below---Validity---No question of law had arisen from the order passed by Appellate Tribunal, whereas questions proposed were questions of fact---While hearing reference application either under S. 47 of Sales Tax Act, 1990, or under S. 133 of Income Tax Ordinance, 2001, and under S. 196 of Customs Act, 1969, High Court could not exercise powers of appellate or revisional court or a Constitutional court---High Court had limited powers to examine and submit response only to substantial question of law which could arise from order passed by Appellate Tribunal---Question which was neither raised nor there had been any finding recorded by Appellate Tribunal, could not be raised for the first time before High Court in Reference particularly a question which involved scrutiny of disputed facts---High Court declined to interfere in order passed by Appellate Tribunal---Reference was dismissed in circumstances.

Commissioner of Income Tax v. Electronic Industries Ltd. Karachi 1988 PTD 111 and E.M. Oil Mills and Industries Ltd. v. Commissioner of Income Tax, Audit Division H, Companies III, Karachi 2011 PTD 2708 rel.

Jawaid Farooqui for Applicant.

Ms Lubna Pervez for Respondent.

Date of hearing: 9th March, 2015.

ORDER

AQEEL AHMED ABBASI, J.---Through instant Reference Application the applicant department proposed three questions for consideration of this Court, however, at the time of arguing the matter, learned counsel for the applicant submits that he will press questions Nos.2 and 3 only, which according to learned Counsel, are questions of law arising from the impugned order passed by the Appellate Tribunal the same are reproduced hereunder:--

"(2) Whether under the facts and circumstances of the case the learned Tribunal was justified to uphold the deletion of capitalization of repair and maintenance expenses despite the fact that the amount had been transferred through JV from sales incentive account to repair and maintenance account without any justification?

(3) Whether under the facts and circumstances of the case the learned Tribunal was justified to confirm the deletion on account of discounts/rebates despite the fact that the same was not reflected in audited accounts?"

2. It is contended by the learned counsel for the applicant that the Appellate Tribunal Inland Revenue has erred in law while upholding the deletion of capitalization of repair and maintenance expenses despite the fact that the amount was transferred through JV from sales incentive account to repair and maintenance account, whereas no justification was given in this regard. It is further contended by the learned counsel that the Appellate Tribunal has also erred in law and fact while confirming the deletion made by the Taxation Officer on account of discounts/ rebates despite the fact that neither the same was reflected in the audited accounts nor any proper evidence was produced by the respondent. It is contended by the learned counsel that the impugned order passed by the Appellate Tribunal, to the extent of aforesaid deletions, may be set aside and the questions proposed may be answered in negative in favour of the applicant and against the respondent.

3. Conversely, learned counsel for the respondent has raised an objection as to the maintainability of instant Reference Application as, according to the learned counsel, the questions proposed are questions of facts and no question of law arises from the order passed by thy Appellate Tribunal, Inland Revenue in the instant case. Learned counsel has argued that the concurrent finding of fact has been recorded by the forums below which do not call for any interference by this Court while exercising Reference Jurisdiction under section 133 of the Income Tax Ordinance, 2001. It has been further contended by the learned counsel that the query raised by the Taxation Officer in respect of the aforesaid deletion was duly responded by the respondent in writing, however, the Taxation Officer, instead of accepting the explanation offered by the respondent, has disallowed such expense on extraneous grounds and considerations which were not even confronted to the respondent in the show-cause notice issued by the Taxation Officer in this regard. Learned counsel has referred to the order passed by the Taxation Officer, with particular reference to para 3 at page 75 and submits that the finding of the Taxation Officer is contrary to the record as, according to the learned counsel, the respondent was never confronted with such proposed deletion through show-cause notice, whereas, this aspect of the matter was duly taken cognizance by the Commissioner (Appeals) in his order, who has been pleased to set aside such deletion by observing that since the respondent was not confronted with such proposed deletion, therefore, the same was not justified. It is further contended by the learned counsel that the alleged discrepancy in this regard in the figures was duly explained by submitting reconciliation; however, such aspect of the matter has been totally ignored by the Taxation Officer. Learned counsel for the respondent has also referred ' to the finding of the Taxation Officer as contained in para 3 of his order, available at page 75, relating to deletion of claim of repair and maintenance and submits that such deletion is without any factual justification or legal basis whereas query made by the Taxation Officer in the show-cause notice in this regard was duly responded by the respondent in writing, whereas, such aspect of the matter has duly been taken cognizance by the Commissioner (Appeals) who has been pleased to hold that the deletion of claim of expenses in this regard was without any basis, whereas, respondent was never confronted by the Taxation Officer to furnish the audited accounts or further vouchers, therefore, according to learned Counsel, such deletion was rightly set aside by the Commissioner (Appeals), which has duly been confirmed by the Appellate Tribunal Inland Revenue through the impugned Order. While concluding her arguments, learned counsel submits that no question of law arises from the order passed by the appellate Tribunal in the instant case, hence, this Reference Application filed by the applicant department may be dismissed in limine.

4. We have heard the learned counsel for the parties, perused the record and the orders passed by the forums below as well as the impugned order passed by the Appellate Tribunal Inland Revenue. From perusal of the questions proposed hereinabove by the applicant and the finding as recorded by the forums below, the contention of learned counsel for the respondent that the decision of the Appellate Tribunal is primarily based on concurrent findings of facts appears to be correct, which otherwise, depicts the correct legal position. We have also observed that while disallowing the aforesaid expenses, the Taxation Officer has travelled beyond the queries made in the show-cause notice issued in this regard to the respondent, whereas, it further reveals that the discrepancy noted by the Taxation Officer was duly explained by the respondent by filing written reply along with necessary documents. It appears that the Taxation Officer in the absence of any evidence or material contrary to the audited accounts and the plausible explanation offered by the respondent, has made the deletion of such expenses without any factual or legal basis merely on assumptions, surmises and conjunctures. We may observe that the respondent had discharged its onus satisfactorily by submitting reply to Show Cause along with relevant documents and the explanation, hence, onus was shifted upon the Taxation Officer to dislodge the reply and documents furnished by respondent. which has not been properly discharged by the applicant, whereas, no valid reasons to discard the contention of the respondent or drawing any adverse inference pursuant to the audited accounts and the material placed on record by the respondent in 'the instant case, have been recorded in its order.

5. Learned counsel for the applicant has not been able to point out any perversity, patent illegality or error in the concurrent findings of facts as recorded by the Commissioner (Appeals) and Appellate Tribunal Inland Revenue in respect of the above additions in expenses, therefore, we are of the view that no question of law arises from the order passed by the Appellate Tribunal Inland Revenue whereas the questions proposed are questions of facts. It is well established that while hearing a reference application either under Section 47 of the Sales Tax Act or section 133 of the Income Tax Ordinance, 2001 and Section 196 of the Customs Act, 1969, this Court does not exercise powers of Appellate and Revisional Court or a Constitutional Court and has limited power to examine and submit response only to substantial question of law, which may arise from the order passed by the Appellate Tribunal, whereas a question which was neither raised nor there has been any finding recorded by the Appellate Tribunal on such question, cannot be raised for the first time before this Court under its reference jurisdiction, particularly, a question which involves scrutiny of disputed facts. Reference in this regard can be made to the case(s) of Commissioner of Income Tax v. Electronic Industries Ltd. Karachi (1988 PTD 111) and E.M. Oil Mills and Industries Ltd. v. Commissioner of Income Tax, Audit Division II, Companies III, Karachi (2011 PTD 2708). Accordingly instant Reference Application is dismissed in limine along with the listed applications.

MH/C-7/SindhReference dismissed.