1980 PLP 422 (PTD)

S. Ansar Hussain for Respondent No. 1 Muzaffar Hussain Shah for Respondents Nos. 3 to 5 Ghulam Ali H. Agha for the State. Date of hearing: 21st October, 1978. This application under section 561‑A, Cr. P. read with section 439, Cr. P. C. seeks to impugn the proceedings being taken against the two applicants in the Court of the Special Judge (Customs &. Taxation), Karachi cm a complaint filed against them by the Income‑tax Officer (Inves.) Circle 1V, Karachi, under sections 51(2), 52 and 52‑A of the Income‑tax Act, 1922. This complaint has been filed on the basis of two orders passed on 20‑1‑1975 by the Commissioner of Income‑tax (Inves.), Karachi, one; in respect of each of the applicants, according approval under section 53(1) of the Income-tax Act, for their prosecution on the ground that they had filed false returns and concealed particulars of income of Messrs Muhammad Amin. Muhammad Bashir, Limited for the assessment year 1971‑72. The Commissioner of income tax had also passed or, 20‑1‑1975 similar orders according approval to the prosecution of the 3rd, 4th and 5th respondents. 2. The complaint against the two applicants specifically refers to 3 items in the returns filed by them which are considered to be false. Tile first is in respect of an amount of Rs. 6,64,188 which amount was claimed by the Company, of which the two applicants are Directors, to be a business loss fair by the Company, if: the firm of Messrs Pak. Cotton Company on account of cotton difference settlement against the business of future settlement transactions, popularly known as Cotton Satta. According to the complaint, this was bogus loss and claim and in fact the amount i n question was later on paid by the 3rd and 5th respondents to the applicant and their Company. The second item was a claim of an expenditure of Rs. 1,07,208 by way of deduction from the taxable income of the company on account of the expenses allegedly incurred on the bailing of cotton and bailing hoops. It was alleged in the complaint that this amount was unreasonable and bore no proportion to the expenditure incurred by other factories of the applicants. The last item was a sum of Rs. 3,000 said to have been received from Messrs Karnal Commission Shop by way of settlement of rate difference. According to the complaint, this amount was not reflected in the books of the applicants' company. 3. The sole ground urged by Mr. Nafisuddin, the learned counsel for the applicants, in support of the application was that the applicants had filed an appeal to the Income‑tax Appellate Tribunal, and it had, by its order, dated 11‑2‑1976, accepted the appeal and set aside the assessment order passed against the applicants, which was the basis of complaint against them. The learned Income‑tax Appellate Tribunal took the view that the conclusion of the Income‑tax Officer was far‑fetched and was based on mere conjectures and guesses. It specifically held that the Income‑tax Officer had totally misdirected himself in regard to the applicants' claim of having incurred a loss of Rs. 6,64,188. At another place, the Income‑tax Tribunal has observed that the company of the applicants, of course, cannot be required to stand a trial for the failures and the shortcomings of others. 4. Mr. Nafisuddin submitted that in view of the assessment order, on the basis of which the applicants were being prosecuted, having been wholly set aside by the learned Income‑tax Appellate Tribunal, the proceedings against the applicants have become misconceived and are therefore liable to be quashed. In support of this contention, the learned counsel relied upon the decision in the cast of Zafar Ahmad Khan v. State 1975 P Cr. L J 1300(2) and Muhammad Hussain v. State (1976) 33 Taxation 57 (Kar.) and Shaikh Fazal Illahi v. Assistant Income‑tax Officer, Karachi 1977 P Cr. L J 538. All of these decisions undoubtedly support the contention of the learned counsel and in identical circumstances the proceedings against the assessee being taken before the learned Special Judge (Customs and Taxation) were quashed. 5. For the foregoing reasons, the proceedings against the applicants and the 3rd, 4th and 5th respondents are quashed and this application is allowed. Application allowed.