COMMISSIONER INLAND REVENUE, ZONE-I, LTU-II INCOME TAX VS TRIPLE TREE ASSOCIATES, 2017 PTD-KARACHI-HIGH-COURT-SINDH 662 (2016)

Income Tax Ordinance (XLIX of 2001)---

----Ss. 174 & 133---Reference---Factual controversy---Expenses, disallowance of---Non-issuance of show-cause notice---Concurrent findings of facts by two forums below---Authorities were aggrieved of concurrent findings of Commissioner Inland Revenue (Appeals) and Appellate Tribunal Inland Revenue, whereby additions made under S. 174(2) of Income Tax Ordinance, 2001, were deleted for want of supporting evidence and for non-issuance of show-cause notice---Validity---Concerned authority failed to confront taxpayer by issuing any show-cause notice in such regard, therefore, any disallowance or addition made by authorities under such circumstances was not justified in law and fact---Such disallowance of expense by authorities without providing opportunity of being heard to taxpayer amounted to denying fair trial, which was against principles of natural justice---Appellate Tribunal Inland Revenue concurred with findings as recorded by Commissioner Inland Revenue (Appeals) in respect of subject additions, which prima facie referred to a factual controversy---No substantial legal question of law had arisen from orders by Appellate Tribunal Inland Revenue---Questions proposed were questions of fact and not question of law---Reference was dismissed in circumstances.

S. Irshad-ur-Rehman for Applicant.

ORDER

AQEEL AHMED ABBASI, J.---Through instant Income Tax Reference Application, following questions have been proposed, which according to learned counsel for the applicant, are questions of law arising from the impugned order dated 23.01,2016 passed by the Appellate Tribunal Inland Revenue (Pakistan) Karachi Bench, in I.T.A. No.285/KB/2013, whereby the appeal filed by the Commissioner, Inland Revenue, Zone-I, RTO, Karachi, against the appellate order dated 29.01.2013 passed by the Commissioner (Appeals-II), Inland Revenue, Karachi, was dismissed:--

"i.Whether under the facts and circumstances of the case, the learned ATIR was justified in upholding the decision of CIR(A) in respect of additions deleted by CIR(A) which were made by the DCIR under section 174(2) for want of supporting evidence after affording sufficient opportunity of being heard to the appellant.

ii.Whether under the facts and circumstances of the case, the learned ATIR was justified in upholding the decision of CIR(A) who has wrongly deleted the additions made by the DCIR on the alleged ground of non issuance of show-cause notice without looking into the facts narrated in the body of amended order wherein the DCIR has duly discussed the proper rebuttal in respect of contentions made by the taxpayer in response to the notice issued under section 122(9) of the Income Tax Ordinance, 2001."

2.Learned counsel for the applicant submits that since the Deputy Commissioner Income Tax (DCIT) has the power to disallow certain expenses under Section 174(2) of the Income Tax Ordinance, therefore, Commissioner (Appeals) and the Appellate Tribunal were not justified to delete additions made by the DCIT, as according to learned counsel, payments were made through case, hence the same were not verifiable. It has been argued that questions proposed may be answered in negative in favour of the applicant, whereas, the impugned order may be set-aside and the order passed by the DCIT in the instant case may be restored.

3.We have heard the learned counsel for the applicant, perused the impugned order as well as orders passed by the Commissioner (Appeals) and the DCIT, Inland Revenue in the instant case with his assistance. From perusal of the order passed by the DCIT, it appears that while disallowing the Site office expense and other miscellaneous expenses to the tune of Rs.7,754,444/, the DCIT has not confronted, the taxpayer with such proposed additions nor any effort appears to have been made to gel such expenses duly verified either from taxpayer or by the DCIT himself, inspite of the fact that such details of expenses were available on record along with book of accounts submitted by the taxpayer before the concerned Deputy Commissioner. We are of the opinion that the concerned DCIT in the absence of any material, and without providing proper opportunity or confronting the taxpayer with such proposed additions, found it convenient to disallow such expenses by invoking the provision of Section 174(2) of the Income Tax Ordinance, 2001, which provides that if a taxpayer is unable, without reasonable cause, to provide a receipt or other record or evidence of the transaction or circumstances giving rise to the claim for the deduction, only then the Commissioner may disallow or reduce a taxpayer's claim for a deduction. Admittedly, concerned DCIT has tailed to confront the taxpayer by issuing any show-cause notice in this regard, therefore, any disallowance or the addition made by the DCIT under the circumstances was not justified in law and fact. Such disallowance of expense by the DCIT without providing opportunity of being heard to the taxpayer amounts to denying fair trial, which is against principles of natural justice. We may further observe that the Appellate Tribunal, Inland Revenue through impugned order has concurred with the findings as recorded by the Commissioner (Appeals) in respect of subject additions, which prima fade refers to a factual controversy, whereas, no substantial legal question of law arises from the impugned order passed by the Appellate Tribunal, Inland Revenue (Pakistan), Karachi.

4.We do not find any substance in the instant Income Tax Reference Application, whereas, questions proposed are question of fact and not question of law. Accordingly, instant Income Tax Reference Application is dismissed in limine along with listed application.

MH/C-12/Sindh Reference dismissed.