NOOR MUHAMMAD-MUHAMMAD SAED Versus COMMISSIONER, INCOME-TAX, LAHROE

1. MUSHTAQ HUSSAIN, J. -The assessee is a Partnership Firm doing business, in Textiles. It filed its return for the year 1966-67 showing a gross profits of 1.74 per cent., in the preceding years the trading results of the assessee had ranged between 1.4 per cent. for 1964-65 and 1.7 per cent for 196364. Though the percentage of profit bad remained within these limit during, these years the sales were shown to have gone down considerably during the year 1966-67. The reason assigned by the assessee was circumstances arising out of the Rann of Katch dispute and the Indo-Pakistan War. The Income-tax Officer did .not accept the assessment of sales as correct and applied a gross profit rate of 2.5 per cent.

2. The assessee successfully filed an appeal before the Appellate Assistant Commissioner. The Appellate Assistant Commissioner accepted the version of the assessee in respect of the two Wars and its effect on trade and reversed .the order of the Income-tax Officer.

3. The Income-tax Officer moved the Income-tax Appellate Tribunal, which accepted the Income-tax Officer's point of view, increased the estimate of sale to 30 lacs and the gross profit to 2.5 per cent. Aggrieved by this order of the Tribunal the assessee applied to it for stating the following two .questions to this Court for decision:-

(1) Whether on facts and in the circumstances of the case the Tribunal was right in holding that the Income-tax Authorities could take recourse to the proviso to section 13 of the Act and raise the applicant's declared sales from Rs. 23,56,151 to Rs. 30,0),000 and the rate of gross profit from 1.74 % to 2.5 % ?

(2) Whether the order of the learned Tribunal has been vitiated on account of its having relied upon assumptions described as evidence and inconsistent finding ?

4. The Tribunal by its order dated 27-1-1971 rejected the application as they found that a referable question of law did not arise out of the Tribunal's . order. Hence this petition.

5. The assessee consequently moved this Court under section 66(2) of the Income-tax Act praying for the issuance of appropriate orders and direction to the Appellate Income-tax Tribunal to refer the aforesaid questions to the High Court for decision. By that time the Finance Ordinance of 1971 had come into force and section 66 of the Income-tax Act had been amended so as to make direct References to the High Court by the assessee possible. Hence this petition was treated as a Tax Reference.

6. The question referred to is whether it is open to the Income-tax Tribunal to have arrived at the impugned finding by totally ignoring the existence of the plea of the assessee that the sale has gone down on account of the -two Wars referred to above, a fact, which bad been accepted by the Appellate Assistant Commissioner as strong enough for reversing the order of the 'Income-tax Officer.

7. Sh. Abdul Haque, learned counsel for Income-tax Officer has submitted -that it is a pure question of fact and cannot be raised in a Tax Reference -since only questions of law can be agitated before the High Court in this jurisdiction. It is, however, not denied that the Income-tax Appellate Tribunal in deciding the case of the petitioner completely ignored the al ore- 4 said piece of evidence, which was the main factor in influencing the judgment of the Appellate Assistant Commissioner.

8. In Muhammad Afsar and 7 others v. Allah Ditta and 13 others (1970SCMR118) the Supreme Court observed that:

9. "It is true that in a second appeal a finding of facial cannot be reversed unless that finding is vitiated by a misreading of evidence or non consideration of material evidence. In the present case important material evidence bad been ignored."

10. This is a case of non-consideration of material evidence, where for, we have no option but to accept the Reference and to set aside the order of the Income-tax Appellate Tribunal. The Reference is answered in the affirmative. Costs of the assessee shall be paid by the Department.

11. This order shall also dispose of Tax Reference No. 83 of 1973.

12. S. A. H. Reference accepted. Order set aside.