1989 PLP 1243 (PTD)

SALEEM AKHTAR, J.--The applicants are engaged in the business of manufacturing and selling welding electrodes at .Karachi. For the assessment years 1970-71 and 1971-72 ending on 31st March, each year the applicants filed returns of income and assessment orders were passed under section 23 (3) of the Income Tax Act on 31-5-1981 and 25-3-1983 respectively. The disclosed trading results for both the years were accepted by the Income-tax Officer. On 1st December., 1973, a notice under Section 34 of the Income Tax Act was served on the applicants on the ground that their income for these two years had escaped assessment. The applicants filed return declaring the same income as had been originally declared for these two years. The Assessing Officer held that the applicants had concealed the entire receipt of wire drawing job done for the other parties and they had also not declared true income from the welding electrodes business. The Income-tax Officer issued notice under section 23 (4) on 1-12-1973 calling upon the applicants to produce gate pass book for the relevant period' for ascertaining the volume of wire drawing job business. As the applicants did not comply with the notice the Income-tax Officer made the best judgment assessment under Section 23 (4) and estimated receipts from wire drawing job done for other parties, gross profits and sales of welding electrodes. Certain disallowances were also made out of the profit and loss account under section 10 (3) (vii) and 4A of the Income-tax Act. The Income-tax Officer also assessed additional tax under Section 18 A(8) for both these years. The appeals filed by the applicant before the Appellate Assistant Commissioners were dismissed by order dated 27-12-1974. The applicants then filed appeal before the Appellate Tribunal in respect of both these years and they were disposed of by a consolidated order dated 19-5-1977. It was held that the Income-tax Officer was wrong in making the best judgment assessment under section 23 (4) for non-production of the gate passes which were not the books of account. The Tribunal also did not approve of the observation of the Income-tax Officer whereby he held that the closing stock had grossly been under valued, but did not make any addition on account of under-valuation on the closing stock nor pointed out any instance in which the applicants had under valued the closing stock at lower than the cost. The Tribunal in its order while dealing with the gate passes observed that they are not the books of account and therefore, the Income-tax Officer could not have completed the assessment under Section 23 (4) as there was no compliance of Section 22 (4). He was directed that the assessment be completed under Section 23 (3). The applicants filed application under Section 66 (1) of the Income Tax Act and the following questions in respect of both the assessment years have been referred:- (1) Whether in the facts and circumstances of the case there was any evidence or material on record in support of the Tribunal's finding that the assessee earned income from drawing wire for others for charges. (2) Whether there was any evidence on record to justify the estimate of capacity and of the rate of charges for wire drawing. (3) Whether in the facts and circumstances of the case there was any material or evidence on record to support the finding that the applicant sold scrap and gunny bags in the relevant previous year. (4) Whether on the facts and circumstances of the case the Tribunal was justified in holding that additional tax under section 18A (6) be charged for 15 months. QUESTION No.l: One of the main grounds for reopening the assessment was that the applicant had earned the income from drawing wire for others but did not disclose it in the return. In this regard the contention of the learned counsel for the applicants is that there was no evidence to show any receipt or income from the job of wire drawing for others. According to the learned counsel the gate passes only established that the quantity of wire mentioned in it were being taken out but it did not prove the charges which are alleged to have been recovered by the assessee for wire drawing job. The question is whether the applicant had performed the job of drawing wire for others and whether they have received charges for such job. The question as framed merely challenges the Tribunal's finding that the applicant had earned income from drawing wire for others. In this regard it would be necessary to refer to the order of the Income Tax Officer who has dealt with the matter in great detail. The Assessing Officer while making inquiries in respect of wire drawing business called for particulars from which he could arrive at a conclusion. After considering the particulars supplied by the applicants, the gate passes and the statement of one Afzal Kizalbash who was the General Manager of the applicant he came to the conclusion that the applicants were performing the job of wire drawing for others and were also charging for it. The Assessing Officer had taken into consideration material facts, which have been discussed in detail, and therefore, it cannot be said that there was no evidence or material on record to support the Tribunal's finding that the assessee earned income from drawing wire for others. We answer the Question No.l, in the affirmative. QUESTION No.2: This question relates to evidence in respect of estimate of capacity and the rate of charges for wire drawing. All the facts for such estimate have been discussed in the order of the Income-tax Officer who has taken into consideration the evidence of Kizalbash and also drawn conclusion from the particulars and statement supplied by the applicants. In the face of this material on record from which conclusion has been drawn it is difficult to hold that there was no evidence to support the finding of the Tribunal. Our answer to question No.2 is in the affirmative. QUESTION No.3: So far this question is concerned, the applicant's claim was that scraps were not sold each year, but were sold at intervals for two to three years. The Assessing Officer did not accept this contention and holding that nobody would like to keep all kinds of junk in his premises for two to three years concluded that the sale of drums, scrap, and gunny bags has been suppressed. In our view this finding is based on assumption and there was no material available on record to support it. Our answer is in the negative. QUESTION No.4 So far Question No.4 is concerned, the learned counsel has relied on 1987 P T D

739. In view of the aforestated judgment, we answer the question in the affirmative. M.Z.S./P-118/K Reference answered accordingly.