COMMISSIONER INLAND REVENUE, KARACHI VS EASTERN CARGO CENTRE, 2015 PTD-KARACHI-HIGH-COURT-SINDH 995 (2014)

Income Tax Ordinance (XLIX of 2001)---

----S.131(1)---Reference---Maintainability---Question of law---Scope---Income Tax Authorities were aggrieved of order passed by Appellate Tribunal Inland Revenue whereby order passed by Collector Income Tax was maintained---Validity---Question which was neither raised, discussed, argued or decided by Appellate Tribunal, could not be termed as question of law arising from order of Appellate Tribunal, which required any opinion of High Court---One of the proposed questions did not arise from order passed by Appellate Tribunal whereas second question was otherwise not pressed by authorities---Question raised by authorities was not a substantial legal question and did not require any opinion of High Court under its reference jurisdiction in terms of S. 131(1) of Income Tax Ordinance, 2001---Reference was dismissed in circumstances.

Noble (Pvt.) Ltd., Karachi v. Federal Board of Revenue through Chairman and others 2009 PTD 84 ref.

Messrs Ahmad Karachi Halva Merchants and Ahmad Food Products v. The Commissioner of Income Tax, South Zone, Karachi 1982 SCMR 489 and Messrs Japan Storage Battery Ltd. v. Commissioner of Income Tax, Companies Zone-I, Karachi 2003 PTD 2849 rel.

Jawaid Farooqui for Applicant.

Ubedullah Abro for Respondent.

Date of hearing: 19th August, 2014.

ORDER

AQEEL AHMED ABBASI, J.---Through instant reference application, the following two questions have been formulated by the applicant, which according to learned counsel for the applicant, are questions of law arising from the impugned order dated 20-1-2010 passed by the Appellate Tribunal, Inland Revenue (Pakistan) Karachi, in I.T.A. No.710/KB/ 2009 (Tax Year 2004):--

(1)Whether under the facts and in the circumstances of the case the Tribunal was justified in passing the impugned order ignoring the reported judgment of Honourable High Court of Sindh reported as 2009 PTD 84 wherein it was held that before promulgation of subsection (1-A) of section 120 of the Income Tax Ordinance, 2001 the Commissioner had power to select the case under section 120 for audit for previous tax year and sub-section (1-A) was inserted with retrospective effect?

(2)Whether under the facts and in the circumstances of the case the Tribunal was not justified to uphold the deletion of additions made by the assessing officer under section 174(2) of the Income Tax Ordinance, 2001?

2.Learned counsel for the applicant submits that the provision of subsection (1A), which was introduced through Finance Act, 2005 is applicable to the previous tax years including the tax year 2004, therefore, per learned counsel, the learned Appellate Tribunal has erred in law by not deciding the said controversy in favour of the applicant in spite of a decision of this Court in the case of Noble (Pvt.) Ltd., Karachi v. Federal Board of Revenue through Chairman and others reported as 2009 PTD 84. It has been further contended by the learned counsel for the applicant that deletion of additions made by Taxation Officer is also not justified under the facts and circumstances of the case.

3.Conversely, learned counsel for the respondent submits that the questions proposed through instant reference application do not arise from the impugned order passed by the learned Appellate Tribunal, hence, the same may be dismissed limine.

4.We have heard both the learned counsel, perused the impugned order passed by the Appellate Tribunal as well as the orders of two forums below.

5.From perusal of the impugned order passed by the Appellate Tribunal in the instant case, it has been noted that the applicant department did not raise any ground relating to effect and application of subsection (1A) of Section 120 of the Income Tax Ordinance, 2001 on the case in hand nor the Appellate Tribunal has recorded any finding in this regard. On the contrary, per learned counsel, the Commissioner (Appeals) as well as the Appellate Tribunal have decided this controversy relating to selection of the case of the respondent for audit, keeping in view the facts and circumstances as well as the merits of the case and not on the basis of questions as proposed. It will be advantageous to reproduce the finding of the Commissioner (Appeals) hereunder:--

"The arguments advanced by the learned counsel for the appellant are considered and impugned order perused. The objection that the additions by discarding the declared version have been made without being in possession of definite information to justify the mode of action confronted through notice under section 122(9) of the Income Tax Ordinance, 2001, is correct.

It is further noted that the Taxation Officer issued notice under section 122(9) of the Income Tax Ordinance, 2001, for the year under appeal for amendment of order under section 120 of the Income Tax Ordinance, 2001, which was duly complied as admitted by the Taxation Officer, wherein the selection of case under audit was challenged in detail. The Taxation Officer while rejecting the said objection drew adverse inference by recording non-compliance on part of the appellant. It is further observed that the Taxation Officer resorted to action on compliance of letter fixed for hearing on 10-4-2009, but the impugned order has been passed on 30-4-2009.

Therefore, I hold that Taxation Officer was under legal obligation to refute the appellant's objection and should have allowed further opportunity on the issue of working back of receipts on the basis of tax deducted under section 233 of the Income Tax Ordinance, 2001, between 10-4-2009 to 30-4-2009 as admittedly the case was getting barred by limitation on 30-9-2009, but the impugned order has been passed after the lapse of 20 days i.e. on 30-4-2009."

6.The Appellate Tribunal Inland Revenue (Pakistan), Karachi has concurred with the finding recorded in the instant case by the Commissioner (Appeals) in the following terms:--

"7. We have considered the arguments of both the learned representatives and have also perused the impugned order and available record. We are of the considered opinion that after taking into consideration the arguments of learned AR the learned CIT(A) was justified to hold that the order of Taxation Officer suffered from legal and factual infirmity and thus was not sustainable in the eyes of law. In the circumstances we uphold the order of learned CIT(A) and accordingly the appeal of the department is dismissed."

7.It may be observed that a question which has neither been raised, discussed, argued or decided by the Appellate Tribunal cannot be termed as a question of law arising from the order of the Appellate Tribunal, which may require any opinion of this Court. Reference in this regard can be made in the cases of Messrs Ahmad Karachi Halva Merchants and Ahmad Food Products v. The Commissioner of Income Tax, South Zone, Karachi 1982 SCMR 489 and Messrs Japan Storage Battery Ltd. v. Commissioner of Income Tax, Companies Zone-I, Karachi 2003 PTD 2849.

8.Accordingly, we are of the opinion that the proposed question No.1 does not arise from the impugned order passed by the Appellate Tribunal whereas, question No.2, which otherwise has not been pressed or argued by the learned counsel for the applicant is not a substantial legal question, hence does not require any opinion of this Court under its reference jurisdiction in terms of section 131(1) of the Income Tax Ordinance, 2014. Accordingly, we are of the opinion that instant reference application is devoid of any merits, which is hereby dismissed along with listed application.

MH/C-13/SindhReference declined.