AZAD KASHMIR LOGGING AND SAW MILLS CORPORATION (AKLASC), MUZAFFARABAD VS COMMISSIONER INCOME TAX, INLAND REVENUE, MUZAFFARABAD, 2017 PTD-HIGH-COURT-AZAD-KASHMIR 1058 (2015)

Income Tax Ordinance (XXXI of 1979)---

----Ss. 62, 65, 134, 135 & 136---Reference to High Court---Revised assessment---Assessee corporation filed return of its income for relevant assessment year; which subsequently was revised and Taxation Officer enhanced the amount of tax---On filing appeal by the assessee, appellate authority below allowed some expenses, but disallowed most of the claim of assessee---Assessee feeling dissatisfied by the order of appellate authority below filed appeal before Appellate Tribunal, which appeal was accepted, but case was sent back to the Taxation Officer to calculate the amount of tax on the basis of revised return---Reference to High Court---Question of law which arose out of the order of the Tribunal was; "whether the Tribunal after accepting the version of the assessee corporation in toto, was justified to direct the Taxation Officer to re-calculate the amount of tax, specially with reference to Proviso to S.62(1) of Repealed Income Tax Ordinance, 1979"---Tribunal had finally resolved that the Tribunal was satisfied that the documents furnished before the Taxation Officer were sufficient explanation of expenditure under different heads and that Taxation Officer was not competent to reject the audited revised returns without solid reasons---Tribunal was not justified to direct the Taxation Officer to re-calculate the tax amount; rather it was manifest to order the acceptance of the revised return---Revised returns had been accepted as correct by the Tribunal, and those observations had attained finality for having not been challenged by the department---Impugned remand order, with direction for re-calculation of the tax amount passed was likely to push the assessee to another endless round of an unnecessary proceedings---Question of law referred by the assessee and formulated by the High Court, was answered in the negative---Judgment of the Tribunal to the extent of re-calculation of the tax amount, was set aside---Revised return filed by assessee stood accepted---Order accordingly.

1971 SCMR 681; 1984 PTD 355; 2011 PTD 2612; 2005 PTD 2534; 2001 PTD 987; 1995 PTD 752 = (1995) 71 Tax 156 (H.C. Kar.); (1970) 21 Tax 1; 1994 SCMR 229 = 1994 PTD 174; PLD 1992 (sic) 954; PLD 2011 (sic) 2161; 2006 PTD 2654; 2005 PTD 2368; 1991 PTD 463; 1998 PTD 1014; Messrs Shahab Industries Ltd. Karachi v. The Commissioner Income Tax 1991 PTD 463 and Ch. Muhammad Sadiq v. Income Tax Officer and others 1988 PTD 1014 ref.

Raja M. Arif Rathore and Iqbal Suleman Pasha for Appellant.

Syed Nazir Hussain Shah Kazmi for Respondent.

JUDGMENT

SARDAR ABDUL HAMEED KHAN, J.---The above titled appeal has been filed against the judgment of the Income Tax Appellate Tribunal dated 17.09.2012.

2.Concisely, the facts building up the background of the instant appeal are that Messrs Azad Kashmir logging and Saw Mills Corporation (AKLASC) is a Public company assigned with the task of extraction and sale of timber. It is alleged that the AKLASC filed return of its income for the assessment year 2002-03 in the tune of Rs.278,177,226/- which was subsequently revised to an amount of Rs. 274,293,582/- The Taxation Officer concerned issued notice and enhanced the amount of tax to the tune Rs.556,865,028/-. AKLASC filed an appeal before the learned CIT (Appeals) and the learned CIT allowed some expenses to the corporation and disallowed most of the claims. Feeling dissatisfied, the assessee/Corporation filed second appeal before the learned Appellate Tribunal Inland Revenue, wherein which was accepted and the case was sent back to the Taxation Officer to recalculate the amount of tax on the basis of revised return filed by the corporation, hence, the above titled income Tax appeal/reference before this Court.

3.Mr. Iqbal Suleman Pasha, the learned counsel for the appellant argued that the assessee department was not heard before passing the impugned order by Income Tax Officer, hence, the order was hit by rule of audi alteram partum. The learned Counsel while discussing the facts and grounds of appeal in detail argued that the claim of the appellant/ assessee department has also been admitted by the learned Appellate Tribunal Inland Revenue but the case has been remanded for recalculation of tax amount, which cannot be ordered in the circumstances of the case. Referring to Part II of the impugned order of the learned Appellate Tribunal Inland Revenue. The learned counsel contended that even if the report of Chartered Accountant is not binding on the assessee officer, even then, such report could not be rejected without any substantial material and cogent reasons. The learned counsel finally craved for acceptance of the appeal and referred following case law.

1971 SCMR 681, 1984 PTD 355, 2011 PTD 2612, 2005 PTD 2534, 2001 PTD 987, 1995 PTD 752 = (1995) 71 Tax 156 (H.C. Kar.), (1970) 21 TAX 1, 1994 SCMR 229 = 1994 PTD 174, PLD 1992 (sic) 954, PLD 2011 (sic) 2161, 2006 PTD 2654, 2005 PTD 2368, 1991 PTD 463 and 1998 PTD 1014.

4.On the other hand, the learned counsel for the respondent/ Income Tax Department defended the impugned judgment. The learned counsel contended that the learned ATIR has accepted the appeal filed by the assessed department and has remanded the case to the Taxation Officer for recalculation of the tax amount, hence, grievance of the tax payer-department has been redressed and the instant reference has become infructuous. The learned counsel argued that the Taxation Officer had passed the impugned order in line with the provisions of the relevant law, which was also upheld by the Commissioner Income Tax (Appeals) but the learned ATIR, while accepting the appeal of the present appellant, has remanded the case for recalculation of the tax amount, and the Tax department has bowed its head before the said Court. The learned counsel finally, craved for dismissal of the reference/ application with costs.

5.We have heard the learned counsel for the parties and gone through the record of the case as well as law governing the matter in hand, with due care.

6.In the instant application for reference, following questions of law have been formulated by the petitioner for answer/decision:--

"(i) Whether the Income Tax Appellate Tribunal had acted judicially and correctly in not directing to accept the declared trading results and income as "declared in revised income tax return filed for assessment year 2002-03.

(ii) Whether violation of mandatory requirement of law as envisaged in Proviso to section 62(1) of Repealed Income Tax Ordinance, 1979 is curable and whether the Appellate Tribunal was justified in not directing the Taxation Officer to accept the declared trading results and the income as declared in revised income tax return.

(iii) That no specific defect was either confronted, nor was detected in books of accounts and other records, nor any specific notice after examining books of accounts as required per proviso to section 62(1) was issued, nor the method of accounting the assessment order instead of directing the Taxation Officer to accept the declared trading results.

(iv) Whether the provision of section 32(3) of repealed Ordinance, 1979 was correctly invoked by the Taxation Officer without confronting the Appellant with mandatory requirement of law as per Proviso to section 62(1) and whether the appellate Tribunal was justified in not directing the taxation Officer to accept the declared trading results.

(v) Whether the books of accounts regularly maintained could be rejected specially when neither the method of accountancy regularly followed was not found defective, nor the appellant was confronted at any stage, nor the burden of prove as per section 32 and proviso to section 62(1) was discharged by the Taxation Officer and whether the appellate Tribunal was justified in not directing the Assessing Office to accept the declared trading results and income declared in revised return."

7.It may be stated that no notice under section 62, after examining the books of account as required under proviso to section 62(1) Order 1979, (Repealed) was issued to the assessee/Corporation. In appeal before the Commissioner Income Tax, though the main prayer was not granted but some disallowances were reduced wherefrom it was obvious that the order of Taxation Officer was subject to modification/ consideration.

8.The learned Appellate Tribunal Inland Revenue has observed in Paras 7 and 8 which are reproduced as under:--

7. Learned D.R. has further provided the assessment orders of the preceding years regarding Appellant Corporation and the adjudication orders of the Collector CE&ST along with different notification regarding determination of royalty rates and the notification issued by the Forest Secretariat. He has also furnished an agreement between the Forest Department and AKLAS relating to the period between 1979 and 1984.

8. After hearing the rival arguments of the parties and having gone through the relevant record. It looks appropriate to discuss the rationale of the assessment order item wise.

A. Sales

AKLASC corporation was required to furnish the following details with respect to declared sales of Rs.625,095,269/-

(a)Classification of timber

(b)Rupees and rate wise breakup.

(c)Timber/rupees wise detail at each sales points.

(d)Details of parties purchasing the timber (name and Addresses along with the amounts of timber sold.)

9.In light of above discussion after summing up the all above questions of law, referred by the assessee/applicant, only question of law which arises out of the order of the learned tribunal is framed as under:--

"Whether the learned tribunal after accepting the version of the appellant/corporation in toto, was justified to direct the Taxation officer to re-calculate the amount of tax specially with reference to proviso to section 62(1) of Ordinance, 1979.

10.It is pertinent to mention that in the light of impugned order the learned tribunal finally resolved that, the tribunal is satisfied that the documents furnished before the learned Taxation Officer bore sufficient explanation of expenditure under different heads and Taxation Officer was not competent to reject the audited revised return without solid reasons.

11.The above findings of the tribunal when read with proviso to section 62(1) ibid, we have reached the conclusion that the learned tribunal was not justified to direct the Taxation Officer to re-calculate the tax amount rather it was manifest to order the acceptance of the revised return. It is proper to add that revised returns have been accepted as correct by the learned Tribunal, and these observations have attained finality for having not been challenged by the respondent. Hence, the impugned remand order with direction for recalculation of the tax amount, passed by the learned Tribunal is likely to push the assessee to another endless round of un-necessary proceedings. This view is fortified by law, to be discussed in the succeeding paras.

12.The controversy in hand; got attention of Karachi High Court in Messes Shahab Industries, Ltd. Karachi v. The Commissioner Income Tax case, [1991 PTD 463], wherein, it was observed as under:-

"From the above quoted observations of the Income Tax Appellate Tribunal it is quite clear that the ground on which the trading results were rejected by the Income Tax Officer were not accepted by the Tribunal. The Income Tax Appellate Tribunal also found that most of the purchases were vouched and greater part of the sales was fully proved. The Appellate Tribunal was, however, of the view that Gross profit declared by the applicant at 11.70% was ridiculously low and accordingly, after setting aside the assessment order the case was remanded back to the Income Tax Officer for reconsideration of the case.

The grievance of the petitioner before us is that the Income Tax Appellate Tribunal having reversed the reasons on which the account books and trading results were rejected by the Income Tax Officer and the Tribunal having further found that the purchases and sales are fully verifiable there was hardly any ground for sending the case back to the Income Tax Officer for framing of a fresh assessment. In support of his above contention the learned counsel for the petitioner has referred to the case of (i) Indus Textile Mills Ltd., v. Commissioner of Income Tax 1989 PTD 567 (ii) Tanvir Textile Mills Ltd. v. Commissioner of Income Tax 1990 PTD 254 (iii) SM Yousaf and Brothers v. Commissioner Income Tax 1974 PTD 45 (iv) Ch. Muhammad Siddiq v. Income Tax Officer and others 1988 PTD 104 and (v) Maharani Kanak Kumari Sahibs v. Commissioner of Income Tax 1951 ITR Volume XXVIII page 462.

13.The Lahore High Court in case titled Ch. Muhammad Sadiq v. Income Tax Officer and others 1988 PTD 1014 pleased to observe as under:--

(e) Income Tax Ordinance: (XXXI of 1979)

S.135 Remand---Power of remand by tribunal is discretionary nature---Such discretion has to be exercised reasonably and fairly indicating the reasons for remand.

(f) . S.135---Constitution of Pakistan, Art.199---Order of remand by Tribunal was illegal and was likely expose assessee to another and of cumbersome proceedings and unnecessary harassment---Such order held, could be struck down in exercise of constitutional jurisdiction of High Court.

14.Result of the above discussion is that the questions of law referred by the applicant and lastly formulated by this Court in Para 9 supra is answered in negative. Therefore, the application stands accepted/allowed. Resultantly, the judgment/order of the learned ATIR dated 17.09.2012 to the extent of re-calculation of The tax amount is hereby set aside hence, the revised return filed by AKLASC/appellant stand accepted. A copy of this judgment shall be sent to the Commissioner Inland Revenue, (CIR), under the seal of Registrar for passing the appropriate order to the Taxation/Assessing Officer concerned to do the needful, conformably to this judgment. No order as to costs.

16.Order announced the file shall be consigned to record after due completion.

HBT/30/HC(AJ&K) Application allowed.