1989 PLP (Trib (PTD)

FARHAT ALI KHAN (JUDICIAL MEMBER).-- The appellant is j subsidiary company of UK Ltd., having its Head Office at Karachi and branches scattered all over the country. The grievance of the appellant before us is that both the learned Commissioner of Income-tax (Appeals) as well as the Income tax Officer- erred in disallowing the claim of Rs.6,000, Rs.25,000 and Rs.5,000, regarding office expenses, sundry expenses and premises expenses, respectively.

2. Mr. Z.H.Jafri, appearing for the appellant, submitted before us that both the Income-tax Officer and the learned Commissioner of Income Tax (Appeals) had seriously erred in disallowing the amounts mentioned above particularly in view of the fact that being a subsidiary of British company the accounts of appellant were subjected to strict scrutiny both in Pakistan and England. According to the learned counsel the Income-tax Officer asked for details of accounts regarding the three items mentioned above and the appellant by its letter dated 28th.February, 1978, complied with it. Mr. Jafri contended that in case of all the details available with him it was incumbent upon the Income-tax Officer to point out the items which were, unverifiable or in which the personal element was involved. According to him, it was the duty of Commissioner of Income Tax (Appeals) to mention such details in his order if Income Tax Officer had failed to do so. Developing his arguments further Mr. Jafri pointed out that in assessment years 1975-76, 1976-77 and then in 1978-79 and 1979-80 the amounts as claimed under heads of sundry expenses, office expenses and premises expenses were allowed either by the income-tax officer himself or in appeal by the learned Commissioner of Income Tax (Appeals.) Mr. Jafri further submitted that in the year 1976-77 the total turn over was to the tune of Rs.112.25 lacs, whereas in the year 1977-78, which is under appeal before us; it went up to Rs.139 lacs. According to the learned counsel the increase in the claim of these expenses was the result of the increase in total turn over. He also took us through the details of all the expenses claimed by the appellant which were furnished to Income Tax Officer as well.

3. Mr. Amin-e-Ajam, the learned Departmental Representative, however argued before us that the Income-tax Officer and the learned Commissioner (Appeals) were justified in disallowing the amounts in dispute because some of them were unverifiable and because in some the personal element was involved:

4. We have gone through the assessment order, the order of the learned Commissioner of Income-tax (Appeals) recorded in I.T.A. No. C.I.T. (Appeals) Z-2/697 dated 4th March, 1981, and have also gone through the record. We have also heard the representatives of both the parties at length.

5. In our view it was the duty of the Income-tax Officer as well as the learned Commissioner of Income-tax (Appeals) to point out the items in which the personal element was involved or which were unverifiable. We fell that in face of all the details provided to the Income-tax Officer his cryptic and vague order should not have been upheld by the learned Commissioner of Income Tax (Appeals) regarding the disallowances in dispute before us. The learned Commissioner was right when he rejected the finding of learned Income Tax Officer regarding disallowance of Rs.5,000 and Rs.10,000 because, to use his own words, the Income-tax Officer "did not give any reason except stating the stock phrase of being personal and unverifiable". However, regarding the disallowances in dispute before us he found them reasonable, of course to our astonishment, on the ground that personal element could not be ruled out.

6. We have gone through the details of all the expenses and have failed to find out any item in which personal element might be involved. Mr. Amin-e-Ajam, the learned Departmental Representative has also failed to point out any such item. Under the facts and circumstances of the case we feel that the appeal has force and must be allowed. However, before recording our finding we may point out that Mr. Jafri cited at Bar 1966 P T D (Trib.) 40, 1976 P T D (Trib.) 77 and 1982 P T D 78 But we do not think that in view of our discussion made above we should deal with them in details.

7. To conclude the appeal is allowed and the impugned order of the learned Commissioner of Income-tax (Appeals) is hereby set aside on the issue and the amount claimed as office, sundry and premises expenses are allowed as claimed.

8. The appeal stands disposed of accordingly. M.B.A./558/T Order accordingly