2020 PLP 772 (PTD)

Through this Reference Application under Section 133 of the Income Tax Ordinance, 2001 ("Ordinance of 2001"), following questions of law, asserted to have arisen out of impugned order dated 22.06.2018, passed by learned Appellate Tribunal Inland Revenue, Lahore Bench, Lahore ("Appellate Tribunal"), have been proposed for our opinion:- (i) "Whether on the facts and in the circumstances of the case, the learned ATIR was justified to hold that information received from SECP in the shape of audited accounts which were not filed along with the statement under section 115(4) of the Income Tax Ordinance, 2001, was not a definite information in terms of subsection (5) of the section 122 of the Income Tax Ordinance, 2001? (ii) Whether on the facts and in the circumstances of the case, the learned ATIR was justified to hold that taxpayer is entitled for benefit of Circular No.5 of 2000 and Circular No.20 of 1992 as its local sales are less than the bench mark of 20%, ignoring the fact that yarn was not manufactured for exports while the basic condition for benefit of rate of export is available when the local sale is out of goods manufactured for the purpose of exports?"

2. Brief facts of the case are that respondent-taxpayer filed return of income for Tax Year 2011, which was treated to be deemed assessment in terms of Section 120(1) of the Ordinance of 2001. Subsequently, the assessing officer allegedly acquired definite information in terms of Section 122(8) that respondent-taxpayer had offered / declared local sales / receipts which have been offered under Final Tax Regime by wrongly availing the benefit of Circular No.20, dated 01.07.1992 and Circular No.5 of 2000. On the basis of these alleged discrepancies, show-cause notice dated 30.03.2017 was issued to respondent-taxpayer, which culminated in amended assessment vide order dated 15.06.2017 and re-computed taxable income. Feeling aggrieved, respondent-taxpayer filed appeal before learned CIR (Appeals), but the same was rejected vide order dated 29.01.2018. Being dis-satisfied, respondent-taxpayer filed second appeal before learned Appellate Tribunal, which has been allowed vide order dated 22.06.2018. Hence, this reference application.

3. Learned counsel for respondent-taxpayer, at the very outset, submits that no question of law is arising out of impugned Appellate Tribunal's order, which is even otherwise based on findings of facts. When confronted, learned Legal Advisor for applicant-department, despite effort, he could not give any satisfactory reply.

4. Heard. Available record perused.

5. Learned counsel for applicant department, at the very outset, was confronted with the following portion of impugned order passed by learned Appellate Tribunal, wherein findings of facts have been given that information of sale of yarn in the local market is duly available in the audited accounts of respondent-taxpayer and statement so filed is as per audited accounts, thus, case of applicant-department did not qualify in the ambit if 'definite information'. The relevant part of impugned order is reproduced hereunder- "

7. We have heard the arguments of both sides and have perused the available record. After due consideration, we find that the legal as well as factual issues involved in the present appeal has already been decided by this Tribunal in taxpayer's case pertaining to tax year 2010. By following the rule of consistency, the appeal of the taxpayer for tax year 2011 is liable to be accepted for this simple reason. However, we would like to again observe that the whole case is made out by the department only on the ground that the taxpayer had not filed audited accounts with the statement and these accounts were allegedly obtained from SECP and from the perusal of these accounts, the alleged definite information was required that the taxpayer had made local sales. Whereas, the information available in the audited accounts does not fall in the ambit of 'definite information' as confined under subsection (5) of section 122 of the Ordinance. The information of sale of yarn in the local market is duly available in the audited accounts of the taxpayer and the statement so filed is as per audited accounts. Thus, in our considered view, the case of the department does not qualify in the ambit of 'definite information'. The case law relied upon by the learned AR 'on all fours' applicable in the instant case. After carrying on all the requisite exercise we have been left with no other alternative except to respectfully follow the decisions of the Honourable Superior Courts quoted before us and to hold that revenue has failed to prove that there is any material or thing in existence to be termed as "definitive information" in the instant case for proceeding under section 122(5) as "definitive information" being duly defined in quoted judgments is sine qua non for undertaking legally valid proceedings under section 122(5). In our considered view, the better course for the department in case it feels that the case of the taxpayer company does not fall under FTR in terms of above Circulars, they were required to invoke the provisions of sub-section (5A) of section 122 of the Ordinance and not the provisions of subsection (5) of section

122. After careful perusal of the language of the above circulars instructions, we are of the view that even on merits of the case, the taxpayer has very strong case for qualification under said circulars. From the bare perusal of the language of the above circulars, it reveals that the benefit of these circulars is available to those taxpayers whose local sales of goods, manufactured for export as well as waste material not constituting not more than 20% of such production. The learned AR has made out a case to show that it had made local sales less than 20%. As per detail working, it transpires that the taxpayer declared export at 85.26% and local sales at 14.74%. Even, if the working of the department is taken for the purposes of calculation, as confronted to the show-cause notice, the ratio of local sales 18.269% which is obviously less than the benchmark of 20% to qualify the benefit as available under above said Circulars: [emphasis supplied]

6. It has not been shown to us that above findings are perverse, contrary to record or suffer from any other legal infirmity or impropriety warranting interference in reference jurisdiction. This Court has to decide Reference Application in the exercise of its advisory jurisdiction, on facts and circumstances founded by the Appellate Tribunal, which is the last fact finding forum. High Court cannot change findings of facts arrived at by the Appellate Tribunal. Reliance in this regard can be placed upon Messrs F.M.Y. Industries Ltd. v. Deputy Commissioner Income Tax (2014 SCMR 907).

7. Since the decision by learned Appellate Tribunal is based on findings of facts, therefore, we decline to exercise advisory jurisdiction. This Reference Application is decided against applicant department.

8. Office shall send a copy of this order under seal of the Court to the Appellate Tribunal as per Section 133(5) of the Income Tax Ordinance, 2001. SA/C-12/L Reference dismissed.