COMMISSIONER (LEGAL) INLAND REVENUE, KARACHI VS DIGRI SUGAR MILLS LTD., 2015 PTD-KARACHI-HIGH-COURT-SINDH 690 (2014)

Income Tax Ordinance (XLIX of 2001)---

----S. 133(1)---Reference---Jurisdiction of High Court---Factual dispute---Scope---Authorities were aggrieved of decision made by Appellate Tribunal Inland Revenue and preferred reference to High Court---Questions framed in reference did not contain any question of law---Effect---No error or illegality existed in order passed by Appellate Tribunal Inland Revenue---No substantial question of law had arisen from the order of Tribunal which required any interference by High Court---Reference jurisdiction under S. 133(1) of Income Tax Ordinance, 2001, was limited to the extent of examining questions of law which could arise from the order passed by Appellate Tribunal---Reference was dismissed in circumstances.

Muhammad Altaf Mun for Applicant.

Nemo for Respondent.

Date of hearing: 8th May, 2014.

ORDER

AQEEL AHMED ABBASI, J.---Through instant Reference Application following questions have been proposed which according to the applicant are questions of law arising from the impugned order passed by the Appellate Tribunal Inland Revenue (Pakistan), Karachi in I.T.A. No.805/KB/2009 (Assessment Year 2000-2001) and I.T.A. No. 806/KB/2009(Assessment Year 2002-2003):--

(1)Whether under the facts and circumstances of the case the learned Tribunal was justified to hold that the declared trading results may be accepted in this case despite repeated failure in making compliance to the notices by the taxpayer during the assessment proceedings?

(2)Whether under the facts and circumstances of the case, the learned Tribunal was justified in reply upon the history of the case for acceptance of trading result, when the doctrine of res judicata is not strictly applicable to income tax proceedings?

2.Learned counsel for the applicant submits that in the earlier round of proceedings Taxation Officer confronted respondent with the defects in the accounts where after assessment order was finalized, which was assailed before the CIT(Appeals) who confirmed the order of the Taxation Officer, which was again assailed by the respondent by filing an appeal before the Tribunal and the matter was set aside by the Appellate Tribunal with the directions to the Taxation Officer to re-examine the details and evidence filed by the respondent and to pass the order in accordance with law. Per learned counsel, after remand of the case by the Tribunal, the Taxation Officer again confronted the respondent with the defects in the accounts, however, since no reasonable explanation was given by the respondent, the Taxation Officer finalized the assessment accordingly. However, the said assessment was again assailed by the respondent before Commissioner of Income-Tax (Appeals-I), Karachi, who was pleased to allow the appeal of the respondent in relation to the trading results and defects in the accounts. Per learned counsel, the department being aggrieved by the order of CIT (Appeals) preferred an appeal before the Appellate Tribunal, who vide impugned order dated 19-11-2009 has confirmed the order of the CIT(A). Learned counsel for the applicant argued that the Appellate Tribunal was not justified to accept the trading results of the respondent by placing reliance on the past history of the case, for the reason that every year is an independent year whereas principle of res-judicata is not applicable in tax matters. It has been further contended by the learned counsel that since the respondent could not furnish reasonable explanation regarding defects in accounts therefore, the additions made by the Taxation Officer were justified.

3.We have heard learned counsel for the applicant, perused the orders passed by the Taxation Officer, CIT(A) as well as impugned order of the Appellate Tribunal Inland Revenue. After perusal of the record it is noted that in the first round of proceeding, Appellate Tribunal Inland Revenue was pleased to set aside the order passed by the CIT(A) and the Taxation Officer, and remanded the matter to the Taxation Officer for de novo proceedings with the directions to re-examine the details and evidences already filed and available on record and thereafter to controvert the respondent with the specific defects in the accounts. However, from perusal of the order passed by the Taxation Officer under sections 62/135, it appears that the directions of the Appellate Tribunal have not been complied with in letter and spirit as the details which were already furnished by the respondent with regard to trading results were not taken into consideration nor the respondent was specifically confronted with the defects in the accounts. The order of the Taxation Officer was assailed before the Commissioner Appeals who vide order dated 31-8-2009 set aside the order of the Taxation Officer in the following terms:--

"13. From the above discussion I have arrived at the conclusion that the facts and circumstances of the appellant's case for the assessment years 1998-99 to 2001-2002 and for the assessment year 2002-2003 under appeal are identical. In my view the Taxation Officer was not justified in re-assessment proceedings asking for filing of the details/documents once again from the appellant, and not considering the details/documents already filed by the appellant which facts had been acknowledged in the original order passed under section 62, rejecting the declared manufacturing trading results. In doing so the Taxation Officer has committed two mistakes. One he has not followed the specific directions of the learned ITAT vide order No. 1432/KB of 2004 dated 20-10-2005 and secondly he has not acknowledged the history of assessment in the appellant's case where the acceptance of declared version of books of accounts has been confirmed by the highest judicial forum i.e. Supreme Court of Pakistan, wherein the leave for appeal was declined to the department for assessment years 1998-99 to 2000-2001.

14. For the reasons, mentioned supra and respectfully acknowledging the directions of the learned Income Tax Appellate Tribunal for the earlier years, the action of the Taxation Officer is held as unjustified, unwarranted and void. The declared results for the assessment years 2002-2003 is, therefore, directed to be accepted."

4.The Commissioner Income Tax being aggrieved by the order of CIT(Appeals) preferred the appeal before the Appellate Tribunal who vide impugned order dated 19-11-2009 had dismissed the appeal of the applicant in the following terms:--

"6. The learned CIT(A) while adjudicating the respondent/taxpayer's case for the above year has observed as under:-

"From the above discussion, I have arrived at the conclusion that the facts and circumstances of the applicant's case for the assessment years 1998-99 to 2001-2002 and for the assessment year 2002-2003 under appeal are identical in my view the taxation officer was not justified in reassessment proceedings asking for filing of details/documents once again from the appellant and not considering the details/documents already filed by the appellant which facts had been acknowledged in the original order passed under section 62, rejecting the declared manufacturing trading results. In doing so the taxation officer has committed two mistakes. Once he has not followed the specific directions of the learned ITAT vide Order No.1432/KB of 2004 dated 20-10-2005 and secondly he has not acknowledged the history of assessment in the appellant's case where the acceptance of declared version of books of accounts has been confirmed by the highest judicial forum i.e. Supreme Court of Pakistan, wherein the leave for appeal was declined to the department for assessment years 1998-99 to 2000-2001.

For the reasons mentioned supra and respectfully acknowledging the directions of learned ITA for the earlier years, the action of the taxation officer is held as unjustified, unwarranted and void. The declared results for the assessment year 2002-2003 is therefore directed to be accepted.

7. Considering the above observations of the learned CIT(A), we are of the opinion that the learned CIT(A) has rightly directed to accept the trading results of the company pointing out that the Taxation Officer has not followed the specific direction of the learned ITAT vide order No.1432/KB of 2004 dated 20-10-2005 and has not acknowledged the history of assessment in the respondent/taxpayer's case where the acceptance of declared version of books of accounts has been confirmed by the highest judicial forum i.e. Hon'ble Supreme Court of Pakistan. Hence, the appeal filed by the department is dismissed."

5From the perusal of the impugned orders passed by the CIT(A) as well as the impugned order of the Appellate Tribunal in the instant case, it appears that the concurrent finding of facts has been recorded by the two forums below to the effect that Taxation Officer could not point out specific defects in the accounts of the respondent nor the Taxation Officer examined the record and the material already available on the record. Whereas, by following past history in the case of the respondent and in view of confirmation of trading results up to Hon'ble Supreme Court in the case of the respondents for the earlier years, impugned treatment given by the Taxation Officer has been set aside. Learned counsel for the applicant could not point out any specific defects or refer to any material which could distinguish the facts of the Tax Year 2002-2003 from the facts of earlier years which could justify any deviation or different treatment from the past history of the respondent with regard to their trading results. We may observe that in the absence of any distinguishable facts, or the specific defects in the accounts, Taxation Officer cannot be allowed to deviate from the past history of the case which constitutes a better guide and provides a reasonable basis regarding the trading results which in the instant case already stood approved up to Hon'ble Supreme Court for the earlier years.

6.In view of hereinabove facts and circumstances of this case, we are of the opinion that there is no error or illegality in the impugned order passed by the Appellate Tribunal Inland Revenue, whereas, no substantial question of law arises from the impugned order of the Tribunal, which may require any interference by this Court in exercise of reference jurisdiction under section 133(1) of the Income Tax Ordinance, 2001, which is limited to the extent of examining questions of law which may arise from the order passed by the Appellate Tribunal. Accordingly we do not find any substance in the instant Reference Application which is dismissed in limine, whereas, both the questions as proposed are answered in affirmative against the applicant.

MH/C-8/SindhOrder accordingly.