THE COMMISSIONER OF INCOME TAX AND SALES TAX, LAHORE ZONE A, LAHORE vs Messrs LASSANI COTTON MILLS LTD. LYALLPUR
This appeal by leave of the Supreme Court challenged a High Court judgment regarding a tax exemption dispute. The respondent, a cotton yarn manufacturer, claimed a sales tax exemption for sales made to a purported entity, M/s. Ghazi Industries, for the assessment year 1964-65. The Income-tax Officer denied the exemption, finding that the purchasing entity did not exist and that the respondent failed to produce the original sales tax licence despite opportunities to do so. While the Appellate Assistant Commissioner initially allowed the exemption, the Appellate Tribunal reversed this decision. The High Court subsequently overturned the Tribunal's order, relying on a photocopy of a certificate. The Supreme Court, however, disagreed with the High Court's reasoning. The Court held that the burden of proof lay with the assessee to substantiate the claim for exemption. By failing to produce the original licence at any stage of the proceedings, the respondent failed to discharge this burden. Furthermore, the Court affirmed the factual finding that the purchasing entity did not exist, thereby restoring the Appellate Tribunal's order denying the exemption.
- Does the burden of proof lie with the assessee to substantiate a claim for tax exemption?
- Can a photocopy of a certificate suffice as proof when the original document is required and not produced?
- Is a finding of fact by an Income-tax Officer regarding the non-existence of an entity open to challenge without contrary material?
- Section 4, Sales Tax Act 1951
ABDUL OADEER CHAUDHRY, J.---This appeal by the leave of the Court is directed against the judgment of the High Court dated 3-11-1976.
2. The facts, in brief, are that the respondent is carrying on with the manufacture of cotton yarn. In its return of income-tax for the assessment year 1964-65, the respondent claimed exemption under S.4 of the Sales Tax in respect of sales of yarn to M/s. Ghazi Industries. The Income-tax Officer came to the conclusion that no firm in the name of Ghazi Industries existed and also that no licence was issued to the said firm by the Sales Tax Officer. The respondent was directed to produce the original sales tax licence but he failed to do so. The Sales Tax Officer, therefore, refused to grant any exemption to the respondent. The respondent's appeal against the order of the Sales Tax Officer was accepted by the Appellate Assistant Commissioner who allowed the exemption claimed by the firm. The appellant preferred an appeal before the Appellate Tribunal which was.
Accepted by means of order dated 23-4-1971. The respondent challenged this order in a Constitution Petition. The learned High Curt accepted the petition and observed as under:-- "Tile only question requiring adjudication was whether the photo copy of the certificate produced by the petitioner was genuine or not. The Sales Tax Officer found as a fact that the said certificate was not issued by the Sales Tax Officer, Additional-F Division, Karachi. The Appellate Assistant Commissioner on the other hand found that the enquiry had been made from the Sales Tax Officer, F-Division, Karachi, and not from Sales Tax Officer, Additional-F Division."
3. The learned High Court observed that "as the Appellate Tribunal also made the same mistake, the onus was on the assessee to prove but the same would stand discharged as soon as he produced a photo copy of the certificate".
4. We have considered the reasoning of the learned High Court but we are unable to agree with the same. There is a finding of fact recorded by the Income-- Tax Officer that M/s. Ghazi Industries did not exist and the original sales tax licence was not produced. It was incumbent upon the respondent to have produced the original licence if any granted to hl/s. Ghazi Industries, Karachi but the respondent failed to produce such certificate. Only a photo copy was produced in spite of the fact that the matter went up to the High Court but at no stage, the respondent produced the original document to the Income Tax Officer, As such, there is no escape from the conclusion that the alleged licence was spurious.
5. The finding of the Income-tax Officer that there did not exist any Ghazi Industries is also not open to question because there is no material to show that in fact there was such industry which was doing the business. In view of the above facts, we accept this appeal and set aside the order of the High Court impugned in this appeal and restore that of the Income Tax Appellate Tribunal. There will be no order as to costs.