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Income‑tax Reference No. 37 of 1975, decided on 2nd May,1985.

‑‑‑S. 66(1)‑‑Reference‑‑Question of fact‑‑Assessment‑‑Disallowance of expenses on account of their unverifiable nature‑‑Income‑tax Officer disallowing a certain amount out of cost of production of film produced by assessee‑‑Appellate Tribunal having regard to similar disallowances in case of other alike assessees reaching conclusion that disallowance was excessive and allowing only 12; per cent of cost for inflated expenses‑‑Finding of tribunal neither perverse nor capricious‑‑No question of law involved in matter‑‑Reference answered in the negative.

Miss Assia v. Income‑tax Appellate Tribunal and others P L D 1979 ‑S C 949 ref.

‑‑‑S. 66(1)‑‑Reference‑‑Assessment‑‑Assessee a film producer‑ Income‑tax Officer among other add, back making another addition of a certain sum by way of receipts of a film‑‑Assessee asserting that film in question was an old one and fetched no income and, therefore, nothing was shown as receipt‑Appellate Tribunal ordering outright deletion of addition on finding no justification for said addition by Income‑tax Officer in absence of any information or indication about omission of receipts‑‑Finding of Tribunal based on reasoning and no positive evidence available to controvert finding‑‑No question of law arising for determination by High Court‑‑Reference answered in the negative.

K. Salahuddin for Applicant.

Nemo for Respondent.

Date of hearing: 2nd May, 1985.

.‑‑The respondent is a private limited company which is producer and distributor of films. In the assessment year 1967‑68 the Income‑tax Officer disallowed a sum of Rs.2,50,000 out of the cost of production of film 'Waqt Ki Pukar' claimed by the respondent at Rs.5,22,448. The Assessing Officer found that some of the expenses were unverifiable and the above addition was made as the consequence thereof. The Income‑tax Officer amongst other add‑back made another addition of Rs.40,000 by way of receipts of the film 'Chiragh Jalta Rahay'. The order of assessment was challenged by the respondent in an appeal before the Income‑tax Appellate Tribunal. The Tribunal by its order, dated 8th February, 1974 with regard to the first disallowance of Rs.2,50,000 held that in view of admitted effective position disallowance was called for but it was excessive with regard to similar disallowances in cases of other films. Accordingly, it was directed that only 12 % of the cost may be disallowed for inflated expenses. As regards to the other addition of Rs.40,000 same was ordered to be deleted outright. The following questions were referred under section 66(1') of the Income‑tax Act for the Commissioner of Income‑tax.

"(1) Whether on the facts and in the circumstances of the case, there was any material on record to enable the Appellate Tribunal to hold that only 121 per cent of the cost of film 'Waqt Ki Pukar' should be disallowed

(2) Whether on the facts and in the circumstances of the case, the Tribunal was justified in deleting the additional of Rs.40,000 made by the Income‑tax Officer as estimated receipt from the film 'Chirag Jalta Rahay' "

According to the Income‑tax Officer the books of accounts, which were presented are written haphazardly not in a chronological order. The ledger maintained is for a period of 5 years but surprisingly no entry was found therein for the period under assessment. The Income‑tax Appellate Tribunal disposed of the appeals of the respondent in respect of the assessment years 1967‑68, 1968‑6K 1969‑70 and 1970‑71 by a common order, but we are only concerned with that part of the order of the Tribunal which relates to the assessment year 1967‑68. The income‑tax Officer disallowed Rs.2,50,000 out of the cost of production of the film claimed by the respondent at Rs.5,22,448. An explanation was submitted by the respondent that the additions are excessive as no films can be made for such a petty amount as the Income‑tax Officer has finally determined. The Tribunal came to the conclusion that the disallowance is excessive having regard to similar disallowances in case of other film producers. It was directed that only 121 per cent of the cost may be allowed. The Tribunal, therefore, took into consideration the similar cases and it cannot be said that the decision is contrary.

The next objection relates to an addition of Rs.40,000. The Income‑tax Officer made the above addition as in his opinion this film was being run in the whole of East and West Pakistan and must have necessarily fetched some income. The respondent's case is that this was an old film the rights of which were sold to Messrs Fazli Films, Dacca who did not pay any commission to the appellant during this year and, therefore, nothing was shown as receipts. It has, therefore, been observed by the Appellate Tribunal that they do not find any justification on the part of the Income‑tax Officer for making this addition in absence of any Information or indication about the omission of the receipts. There Is no positive evidence to controvert the finding of the Tribunal which is based on reasoning. In the absence of any evidence it cannot be said that this is a question of law for the determination of this Court.

2. Learned counsel for the applicant has referred to the case of Miss Assia v. Income‑tax Appellate Tribunal, etc., reported in P L D 1979 S C 949 wherein, it has been observed that the law does not impose any burden on the Income‑tax authority to prove the positive evidence that the accounts are unreliable or that the figure at which they assess is the correct figure. On the other hand the question of the unreliability of accounts is a question of fact and primarily falls for determination of the Income‑tax authorities alone. If, therefore, it is once decided by them that the accounts are fictitious or unreliable, their finding cannot be disturbed unless it is altogether capricious and in judicial.

The observations made in this authority does not apply to the facts of the present case. It has been held that the question of unreliability is a question of fact and primarily falls for determination of the Income‑tax authorities. The case in hand was disposed of by the Tribunal on entirely different facts and the finding is neither perverse nor capricious.

3. We, therefore, answer the reference in the negative as no question of law is involved in the matter.

M. Y. H. Reference answered in negative.

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