SAEEDUZZAMAN SIDDIQUI, J. --- The Department has referred the following question to us for decision under section 66(1) of the Income-tax Act in the above references: - "Whether on the facts and in the circumstances of the case the Tribunal was justified is deleting the addition made in the case of Company?"
The above question as framed however does not spell out the question of law involved in these cases and is not very specific and, therefore, to order to appreciate the controversy involved in the case we would like to state in brief the facts and circumstances leading to the filing of present References by the Department.
These three References relate to the years 1962-63 to 1964-65. The Income-tax Officer did not accent the book results shown by the assessee in its income-tax return for these: years and after rejecting the same made certain additions to the net profits shown in the returns. These additions made by the Income-tax Officer are fully shown both in the order of Income--tax Officer and the of the Tribunal. The respondent challenged these additions made by the Income-tax Officer before the Income-tax Tribunal in appeals. While the appeal filed by the respondent were still pending before he Tribunal, M. L. R. 32 was enforced and taking advantage of that, the shareholders of respondent filed declarations showing excess income to the tune of Rs. 56 Lacs for the years 1962- 63 to 1968-69 alleged to be arising from the affairs of the Company. They also declared a sum of Rs. 7 Lacs as excess income for the year 1969-70. It was the case of respondent/ assessee before the Tribunal that the declaration submitted by the shareholders of the respondent under M. L. R. 32 was duly examined and accepted by the processing authority appointed under M. L. R. 32 and the disclosed excess income was considered as an income arising to the Company. On the other hand the contention of the Department was that although the income was treated by the processing authority under M. L R. 32 as an income arising to the Company but since the deductions of the intengible claimed by it assessee before the processing authority in respect of the charge years 1962-63 to 1964-65 were Clot allowed, it should be presumed that the declara--tion of excess income for the years 1962-63 to 1964-65 was not accepted by the processing authority. The Tribunal, however, did not accept the above contention of Department. .
Mr. Hyder Ali Pirzada the learned counsel for the Department contended before us that in the present case there was no declaration filed by the Company under M. L. R. 32 for the years 1962-63 to 1964-65, and, therefore, the order of the Tribunal giving benefit of the said declaration to the respondent-Company was wholely without jurisdiction. However, from the order of the Tribunal we find that this was not the Department's case before the 'Appellate Tribunal. We will here reproduce the following passage from the order of the Tribunal to show that the case of Department before the Appellate Tribunal was that the appeal filed by the assessee against the charged years 1962- 63 to 1964-65 should be dismissed as not maintainable as the excess income for these years was already declared by the assessee under M. L. R. 32: - "The Department's case on the other hand, was that in the first instance these appeals were not competent before the Tribunal as excess income for these years had already been declared and it was one of the conditions attached to such declarations that the pending appeals were to be withdrawn. In the second plea it was argued that whatever was done under the Martial Law Regulation was outside the ambit of adjudication by the present Tribunal. Finally it was argued that when this declaration was trade the above additions had already been made to the book results, and, therefore, the excess income declaration would be deemed to be over-and above the assessed incomes."
It will further appear from the above-quoted passage that it was also argued before the Tribunal by the department that at the time the declaration of excess income was tiled the assessee under M. L. R. 32, the assessm ent for these years were already finalises by the Income-tax Officer and, therefore, the excess declaration of income made by the assessee under M. L. R. 32 should be treated over and above the additions mad in the assessment order for these years by the Income- tax Officer. We also find from the reference that the case of the department is that in so far the assessm ent for the years 1965-66 to 1968-69 are concerned, the trading results declared by the assessee were accepted by the Income-tax Officer in view of the declaration made under M, L. R.
32, Mr. Ali Athar the learned counsel for the respondent drew our attention to the case of Commissioner of Sales Tax v. Crescent Pak Soap and Oil Mills Ltd. 1982 PTD 1 which was a Sales tax reference in respect of the assessme nt years 1961-62 to 1963-64. In that case also the above declaration filed by the respondent came up for consideration and the contention of the department was that no declaration was filed by the Company but it was only the shareholders of the Company who filed declaration under M. L. R.
32. This contention of the department was repelled in that case and it was held that the return submitted under M.L.R 32 (which is. Now under consideration before us) was a return filed by the Company. It is an admitted position that there was only one declaration submitted under M. L. R. 32 which was for the years 1962-63 to 19968-69 and the sari-to was accepted by the Processing Authority. In view of these admitted facts we are unable to accept the contention of Mr. Hyder Ali Pirzada that there was no return filed by the Company under M, L. R. 32 and in any case there was no order of Processing Authority in respect of the assessm ent years 1962-63 to 1,964-65. Mr. Hyder Ali Pirzada also contended before us that the order of processing authority passed under M. L. R. 32 was misread by the Tribunal inasmuch as it considered the same also covering the period 1962-63 to 1964-65. Although no such question is referred to us and it also does not arise from the facts stated in the reference but in order to satisfy us if there was any misreading by the Tribunal in construing the order of Processing Authority passed under 24. L. R. 32, we directed Mr. Pirzada to produce before us a copy of the order of the Processing Authority passed on the declaration filed under M. L.R.
32. The learned counsel as now placed before us the order of the Processing Authority, dated 30th December, 1969 which is reproduced below. - PROCESSING ORDER UNDER MARTIAL LAW REGULATION NO. 32 IN RESPECT OF DIRECTORS AND SHAREHOLDERS OF MESSRS CRESCENT PAK INDUSTRIES LIMITED, KARACHI Excess Income in respect of Directors and Shareholders of Messrs Crescent Pak.Industries Ltd.
Karachi, has been tiled at Rs. 56,00,000 as follows: - S. No.Name Period Excess Income Declared 1 Qazi Muhammad Ibrahim (Managing Director).1962-63 to 1968-6919,26,904 2 QaziMuhammad Ismail (Director) 11,13,267 11,13,267 3 Mir Yousuf Ali 5,65,246 4 Mir Akbar Ali 5,64,3389 5 Syed Abdul Baqi 1962-63 to 1968-694,99,046 6 Qazi Ghulam Jilani 1,14,285 7 Qazi Ghulam Mohiuddin 1,14,286 8 Mir Usman Ali (Director) 51,429 9 Qazi Muhammad Iqbal 1964-65 to 1968-6951,429 10 Qazi Muhammad Usman 51,429 11 Qazi Muhammad Khalid 51,429 12 Qazi Muhammad Rizwan 51,429 13 Qazi Muhammad Farooq 51,429 14 Qazi Muhammad Tariq 51,429 15 Qazi Muhammad Imran 51,429 16 Zaibunisan 11,429 17 Badrunnisan 5,714 18 Shamim Akhtar 5,714 19 Tajwar Sultana 3,143 20 Shariefunnisan 3,143 21 Qamarunnisan 3,143 22 Naima 3,143 23 Mir Muhammad Ali 38,286 24 Mir Sadiq Ali 57,143 25 Mir Shahid Ali 35,686 26 Akhtar Begum 5,143 27 Razia Sultana 3,743 28 Ruksana 1,429 29 Maqbool Ahmed Baber 71,42 30 Suriya Baqi 42,157
2. The Directors and Sharcholders are from one family group and it has been claimed that the Excess Income is from the affairs of the Company Messrs Crescent Pak. Industries Limited. In the case of Director Qazi. Ghulam Jilani, another item of Excel' Income has been declared amounting to Rs. 50,000 from Saba Chemical which is a defunct concern. . The Directors and the Shareholders have also claimed that intangible additions should be allowed to them.
3. The Committee considered the care in detail and cam to the conclusion that the Excess Income 4x declared by the Director; mad Shareholders mentioned above should be accepted. (The underlining is by us.) There being, no intangible additions in the cans of these Directors and Shareholders arc such additions are allowed. It was claimed during the course of hearing that intangible additions made in the- case of the Company should be allowed against the Excess Income now declared. This claim could not be admitted as it is not admissible under Martial Law Regulation. Net Excess Income, therefore, stand at Rs. 56,50,000 for the assessment years for which they have been declared by various declarants to be divided equally in respect oil year for which they have been declared.
4. Excess Income of Rs. 7,00,000 pertaining to 1969-70 assessment year will be considered in the normal assessm ent for that year.
5. The pending assessm ent of the Company from 1965-66 to 1968-69 will be made by accepting the trading accounts and making additions, if any, in the profit and loss account only."
From the reading of the above order it is abundantly clear that the Process--ing Authority accepted the return filed under M. L. R. 32 by the shareholders of the Company as it is. The Tribunal accepted the book results shown by the assessee in its return of income for the years 1962-63 to 1964-65 in view of the order of Processing Authority accepting the excess declaration of income made by the assessee under M. L. R. 32 for the aforesaid period and we find no illegality in the order of Tribunal in doing so. We accordingly answer the question referred to us in the affirmative but there will be no order as to costs.