MESSRS AHMAD & AHMAD, MULTAN Versus THE COMMISSIONER OF INCOME-TAX, LAHORE ZONE, LAHORE

MUHAMMAD AFZAL LONE, J . ‑These two cases arise out of the Tribunal's same order, and are therefore, dealt with together.

2. The assessee is a registered firm doing business as distributors of Messrs Khyber Tobacco Company Ltd. For the assessment years 1970‑71 and 1971‑72, the firm declared the sales at Rs. 28,03,730 and Rs. 39,84,711 and gross profit as 2.25 % and 2.8 % respectively. The Income‑tax Officer 'A' Circle, Multan who made the assessment for the first year vide his order dated 31‑3‑1971, held that the assessee dealt in two brands of cigarettes namely "Richmound" and "Sports" of which "Sports" is a popular brand carrying a higher margin of profit. He considered the declared gross profit as low. He also found that the sale version particularly the sale made through vendors was riot verifiable. Consequently, he rejected the declared version and assessed the sales at Rs. 28,25,000 to which he applied the gross profit rate of 3.25%. As regards the assessment for the second year, the Income‑tax Officer found that almost the entire sale comprised of "Sports" brand and that out of the declared sale of Rs. 39,84,711, the retail sale stood at Rs. 10,06,850 which were unverifiable. The Income‑tax Officer vide his order dated 28‑10‑1971, discarded the assessee's books of accounts and estimated the sales at Rs. 40,10,000. According to the Income‑tax Officer, as the Income‑tax Appellate Tribunal is another similar case considered G. P. rate of 3.25 % as fair, he therefore, applied the same rate to the years under assessment.

3. Two separate appeals filed by the firm were disposed of by the Income‑tax Appellate Tribunal through the same order dated 4‑9‑1972. Before the Tribunal, the assessee questioned the rejection of the accounts so also the estimation of sales and the G. P. rate. The Tribunal upheld the rejection of the accounts and also maintained the enhanced G. P. rate. The estimated sales for the Ist year were held commensurate with the increase in the Gross Profit rate, but the estimate of sales for the second year was however, reduced to Rs. 4,00,000 as being slightly excessive.

4. The following two questions of law said to be arising out of the Tribunal's order, have been referred to this Court for its opinion by the assessee, under section 66 (1) of the Income‑tax Act,‑

(1) Whether on the facts and in the circumstances of the case, there was any material for the rejection of the accounts.

(2) If the answer to the above question is in the negative, whether on the facts and in the circumstances of the case there was any material for the application of the gross profit rate of Rs. 3.25 % and for enhancing the sales.

5. It appears that at the admission stage the learned counsel for the assessee relied on the provisions of the West Pakistan Tobacco Vend Act, 1958 to contend that the retailers are licensed vendors and therefore, the sales made to them were readily verifiable. In this respect on 14‑3‑1973, a report was called for by the Court from the Tribunal. In its report dated 25‑4‑1973, the Tribunal stated that during the course of arguments before them the petitioner neither placed reliance on West Pakistani Tobacco Vend Act, 1958, nor contended that the retailers were licensed vendors and that, therefore, the sales made to them were verifiable. The Tribunal further explained that the Cash Memo. No. 1044 dated 19‑12‑1969 referred to in its order dated 4‑9‑1972, merely showed that the sale was made through the salesman and that no subsidiary cash memos referred to in the said cash memo despite demand were produced nor was it ever claimed that those subsidiary cash memos contained the names and addresses of the retailers.

6. The learned counsel for the assessee argued that all the retailers to whom sales were made held dealer's licences under section 3 of the West Pakistan Tobacco Vend Act, and that their names and addresses were verifiable. The finding as to the unverifiability of retail sales was also assailed. He contended that factually it was incorrect that the sales were riot verifiable. In any case, according to the learned counsel, the assessee was not under any obligation to record the addresses of the purchasers and for this proposition he sought support from a judgment of the Bombay High Court, in the case of P. B. Jassaram Fateh Chand v. Commissioner of Income‑tax (1974) 29 Taxation 161. It was further submitted that even if the sales were not verifiable this fact alone could not justify rejection of the accounts unless it was shown that the rates relatable to unverifiable sales were lower than the rates charged for the veri fiable sales. The comparability of the rates of the two sets of the transactions was also advocated on the ground that the assessee was allowed only a fixed margin of profit by the manufacturing company. The argument proceeded, that it was the duty of the departmental authorities, to have found out the proportion of the unverifiable cash sales to the verifiable sales and that inference adverse to the assessee, could only be drawn if the proportion of the unveri fiable sales was substantial enough to cast doubt on the genuineness of the accounts. It was submitted that in the absence of such finding, the rejection of accounts could not be sustained. 1n this regard, reference was made to S. M. Yousuf & Brothers v. Commissioner of Income‑tax 1974 P T D 45.

7. The precise point involved in adjudication of the first question, is to determine whether there was any material before the Tribunal to reject the accounts. The main basis for rejection of the accounts by the Income‑tax Officer, was unverifiability of the cash sales and the lower G. P. Rate, The sale was largely of Sports brand which was a popular brand. This finding as is obvious, from the 'Tribunal's order could not be dislodged in appeal by the assessee. No evidence was produced before the Tribunal to controvert that the retail sales were verifiable. Although in its order the Tribunal ha referred to only one cash memo yet this single voucher was seemingly pick up by the Tribunal as a specimen of the retail sale made through the sales man. This is evident from the Tribunal's order: ‑‑

"The retail sales were admittedly unverifiable. We have seen a cash memo. No. 1044 dated 19‑12‑1969 showing sales of Rs. 846.20 through a salesman. The particulars of the customers are not available with regard to these sales. Such sales during the first year alone were Ks. 1,00,850. On appellant's own showing, i. e. 1/4 of the total, turn over, we therefore, find that the rejection of account version in these circumstances was by no means unjustified."

S. H. Yousaf s case is distinguishable, as in that case the cash sales were partly verifiable and partly unverifiable. But in the instant case the entire retail sale have been found unverifiable. Even otherwise there is nothing on the record to show that the assessee produced any material, before the Tribunal in sup port of his allegation, It may also be observed that although the assessee has B filed an affidavit denying the admission categorically referred to in the Tribunal's order yet neither the statement of facts made mention of this denial nor any question was framed with regard thereto. In the proceedings under section 66 of the Income‑tax Act, this Court cannot go behind the finding o fact, recorded by the Tribunal.

8. The Tribunal's order demonstrates that in appellate proceedings, the petitioner never relied on the West Pakistan Tobacco Vend Act, 1958 to sub stantiate that the names and addresses of the retailers were available from the firm's record. The copy of the grounds of appeal has also not been filed to show that this point was taken before the Tribunal. We will, therefore, have to infer, that this specific point was not urged by the assessee before the Tribunal and thus cannot be raised now. In Bachu Bar F. E. Dinshaw v. Com missioner of Income‑tax P L D 1967 Kar. 372 at the reference stage the assessee sought the exclu sion of income from a sub‑plot, on the plea that it had earlier been sold by her to M/s. Electronics and Film Equipments Ltd. and that she ceased to be its real owner. The Court relying on Raja Bahadur Sir Rajendra Narayan Bhanj Deo's case A I R 1940 P C 158 observed: ‑

" ..it is to be decided whether the assessee is entitled to claim any allowance in respect of the income of the above‑mentioned sub‑plot sold to Electronics Film Equipment Co. We are satisfied that the assessee did not claim any exemption on this ground before the subordinate Income tax authorities and this point was not even specifically taken or urged before the Appellate Income‑tax Tribunal. 1t is quite clear that it does not arise from the order of the Tribunal. In such circumstances it is not open to this Court to adjudicate upon it even if there is material before it for so doing,"

Even otherwise the petitioner s reliance on the Tobacco Vend Act, is not much helpful to him. There is nothing on the record to show that the sales were really made to the licensed vendors and the rates charged from them were in accordance with the margin of profit allowed by the company or were comparable with other sales. In this respect, any investigation of facts is undeniably beyond the scope of these proceedings.

9. It is on the record that the assessee's sales were mostly of "Sports" brand which is popular brand, and the margin of profit given by the company was with reference to the quantity sold. For applying G. P. rate of 3.25 % to each year, the Tribunal relied on its own decision in another parallel case. The petitioner unsuccessfully tried to differentiate that case pleading that there the assessee was dealer of Pakistan Tobacco Company, which offered a higher margin of profit. This contention was however, negatived by the Tribunal. The learned counsel before us also reagitated that the case referred to in the Tribunal's order, because of the distinguishing feature could not constitute the proper basis for applying the G. P. rate of 3.25. The matter is however, clinched by the Tribunal's observation that:

"It is also admitted before us that the same rate of profit was applied in cases where the agencies both of Pakistan Tobacco Company and Khyber Tobacco Company are held by one and the same dealer."

10. The declaration of lots gross profit rate militates against the acceptance of the books of account. The unverifiability of cash sales, coupled wit lower gross profit rate cumulatively constituted the material for rejection o the accounts. In such like vases the correctness or otherwise of the conclusions reached by the Tribunal is not to be adjudged by weighing each fact detachedly but the accumulative effect of all the facts is to be measured to gether as intrinstic components of the same portrait. In Edwards (Inspector of Taxes) v. Bairstow (1955) 28I T R 579 Lord Radcliff observed: ‑

"I think that it is rather misleading to speak of there being no evidence to support a conclusion when in cases such as these many of the facts are likely to be neutral in themselves, and only to take their colour from the combination of circumstances in which they are found to occur."

Viewed in this light, it cannot be said that the Tribunal was not possessed of any material while discarding the assessee's books of accounts. Tile questions of sufficiency or insufficiency or the quality of evidence is riot to be looked F into by the High Court. In Gurmukh Singh v. Commissioner of Income‑tax A I R 1944 Lah. 353 a Full Bench of this Court laid down:

" .......On all questions of facts, the Income‑tax .authorities are the sole arbitrators and the only question of law that arises in respect of the findings of facts recorded by them is whether there was material to support it. If they can point to any material on which their order could be founded, the sufficiency or insufficiency of it, is neither within the competency of the assessee to attack nor within the functions of the High Court to determine."

11. It is apparent from the frame of the questions that the second question arises only if the answer to the first question is in the negative. The pivotal point in this case is whether there was material before the Tribunal to sustain its findings. The arguments advanced by the learned counsel largely relate to the appreciation of evidence rather than highlighting the lack of such evidence. In this view of the matter his submissions were off the tan gent. The question whether there is evidence to sustain a finding of fact will depend on the facts and circumstances of each case. The case‑law therefore, in this regard, can be of little assistance to the petitioner. In the precedent cases cited by the learned counsel for the assessee, the questions of law referred to the High Court for opinion were quite different from the one falling for consideration in this case. These cases therefore, do not render any help in: adjudicating upon the matter in issue.

12. In view of the above discussion our answer to the first question is in the affirmative. The second question which is contingent upon the answer to the first question, therefore, does not arise. The petitioner shall pay costs to the respondent.

Reference answered in affirmative.