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P.T.Rs. Nos. 89, 70 and 71 of 1985, decided on 24th September, 1985.

‑‑‑S. 56‑‑Income‑tax Act (XI of 1920, S. 22(2)‑‑Notice‑Legality‑ Income‑tax Officer issuing notice to assesses under S.22(2). Income‑tax Act, 1921 instead of under S.56, Income‑tax Ordinance, 1979, in force‑ Legality of notice, held, was not affected‑‑Section 56 of Ordinance contains a provision similar to S.22 of Income‑tax Act‑‑Notice issued to assesses under S.22 of repealed Act could well be related to powers of income‑tax officer under S.56 of Ordinance in force.

‑‑‑S. 136(2)‑‑Assessment‑‑Local sales‑‑Additions made by Income‑tax Officer to total income of assessee on account of local gales‑‑Whether assesses made any local sales or not, a question of fact and finding of Income‑tax Officer and Tribunal thereon flowing from appreciation of evidence and material before Tribunal‑‑Assesses failing to produce any account books before Income‑tax Officer and alleging that he had not maintained any books although he visas engaged in fairly sizable manufacturing and export business‑‑income‑tax Officer taking notice of ambient circumstances before recording his finding, relying upon an inspection note prepared by his predecessor who had visited business premises of assesses‑‑No question of law arising for determination‑ Finding of Tribunal not appearing to be without basis‑‑Petition against order of Tribunal dismissed.

Ali Bin Abdul Qadir for Petitioner.

.‑‑This order will dispose of three petitions under section 136 of the Income‑tax Ordinance, bearing Nos. 69, 70 and 71 of 1985. Common questions of fact and law arise in them and the only distinguishing feature among them is that they relate to three different assessment years.

2. The petitioner is an individual carrying on business at Kasur under the name of Messrs Rainbow Carpets. He is a manufacturer and exporter of carpets and bed sheets. In the years in question he exported goods as indicated below:

He did not file any returns during the years under consideration and consequently he was served with notices under section 56 of the Income‑tax Ordinance. In the statements filed in pursuance of the said notices he took up the position that he had made no local sales during the relevant years. The Income‑tax Officer did not accept this assertion and made his own estimates of the local sales for the three assessment years. His estimates were as follows:‑

In respect of these sales he applied a gross profit, rate of 25% and on that basis made additions to the income of the petitioner in the corresponding years.

3. The petitioner challenged these additions before the Appellate Assistant Commissioner in appeal. The Appellate Assistant Commissioner took the view that there was no basis for the Income‑tax Officer to hold that the petitioner had sold his products in the local market as well. Consequently he deleted the additions made by the Income‑tax officer on account of local sales. From the order of the Appellate Assistant Commissioner the department went in appeal before the Income‑tax Appellate Tribunal. The Tribunal accepted the appeals of the department and restored the order of the Income‑tax Officer in respect of local sales. The petitioner formulated nine questions and asked the Tribunal to make a reference to the High Court for deciding the same. The Tribunal declined to do so. He has now come under section 136 of the Income‑tax Ordinance to this Court and has formulated the following questions for the decision of this Court:‑

(1) Whether on the facts and in the circumstances of the case the Assessing Officer was vested with proper jurisdiction by the issuance of a notice under section 22(2) of the Income‑tax Act, 1922 to make assessment for the years 1979‑80, 1980‑81 and 1981‑82 on the assessee in this case

(2) Whether on the facts and in the circumstances of the case there was material before the Income‑tax Officer to hold that the assessee had engaged in trading locally in his production

(3) Whether on the facts and in the circumstances of the case there was onus on Income‑tax Officer to establish the factum of local sales and whether this onus was legally discharged by him

(4) Whether on the facts and in the circumstances of the case there was any onus on the assessee to establish that the exports fully commensurated with the extent of manufacturing which onus the assessee, had failed to discharge, and whether the assessee's failure, if any, authorized in law the Assessing Officer to estimate local sales

(5) Whether on the facts and in the circumstances of the case the Income‑‑tax Officer was legally right in drawing an inference that because export was allegedly not commensurated with the extent of business and the number of looms installed and the stock found available in the premises, therefore, local sales had been made

(6) Whether the fact that there was a certain number of handlooms and a certain stock of goods at a particular time was material for holding that the assessee had engaged in local sales in the relevant year

(7) Whether on the facts and in the circumstances of the case there was material before the Tribunal for upholding the estimate of the quantum of local sales and the G.P. rate applied by the Assessing Officer

(8) Whether there was material before the income‑tax officer and the Tribunal for holding that the assessee's turn over of exports did not commensurate with the extent of manufacturing

(9) Whether there was any material before the Assessing Officer or the Tribunal for the progressive enhancement of estimate of sales from year to year

With regard to question No.1, the contention on behalf of the petitioner is that on the day he received the notices from the Income‑tax Officer the Income‑tax Act of 1922 did not form part of the statute book as it had been earlier repealed and replaced by the Income‑tax Ordinance, 1979. Consequently, the Income‑tax Officer was not competent to issue any notice under the Act: We find little merit in this contention. No doubt when the Income‑tax Officer issued notices to the petitioner the Income‑tax Act was no longer in force but, then a new Ordinance had taken its place. Admittedly, the Ordinance contained a provision similar to section 22(2) of the Income‑tax Act in section 56 thereof. Thus, the notices issued to the petitioner could well be related to the powers of the Income‑tax Officer under section 56 of the Ordinance. Apart from that, we are also not sure that the notices received by the petitioner specifically mentioned section 22(2) of the Act as the sanction behind A their validity for no copies of the same have been placed before us. On the other hand, in his order the Income‑tax Officer has stated that he had issued the notices under section 56 of the Income‑tax Ordinance. In any event, the recital of the provision of the repealed Act instead of the corresponding provision of the re‑enacted Ordinance could hardly affect the legality of the notices sent to the petitioner. We may also mention that in his appeals before the Tribunal the petitioner had not canvassed this contention. Question No. 1 is decided accordingly.

4. The next eight questions relate to the additions made by the income‑tax Officer to the total income of the petitioner on account of local sales. The learned counsel for the petitioner frankly conceded that all these eight questions raised a common point that is, whether the Income‑tax Officer and the Tribunal had any basis for holding that he made local sales as well. Now the question whether the petitioner had made any local sales or not was essentially one of fact. The finding of the Income‑tax Officer and the Tribunal on this point flow from appreciation of the material before them. Admittedly, the petitioner did not produce his account books before the income‑tax Officer, alleging E that he had not maintained any' books. This was a somewhat strange position to take in view of the fact that he was engaged in fairly sizable manufacturing and export business. However, that may be, the income‑tax Officer took notice of ambient circumstances before recording his finding. In particular he relied upon an inspection note prepared by his predecessor who has visited the business premises of they petitioner. In appeal the Appellate Assistant Commissioner thought that there had been no local inspection and on this finding alone and without noticing the other circumstances mentioned by the Income‑tax officer deleted the additions made by the Income‑tax Officer on account of local sales. On the other hand, the Appellate Tribunal was satisfied about the genuineness of the inspection note. It also relied upon the other circumstances mentioned by the income‑tax Officer in restoring the additions relating to the local sales.

5. As already mentioned despite running a fairly extensive business the petitioner took up the position before the Income‑tax authorities that he had maintained no accounts. That being the position the said authorities had to look around to find out whether the petitioner had made any local sales and, if so, the quantum of income they yielded to the, petitioner. This was a matter of appreciation of evidence and no question of law arises for the determination of this Court particularly when the finding of the Tribunal do not appear to be without any basis. Questions Nos. 2 to 9 are decided accordingly. These petitions are, therefore, dismissed.

M. Y. H. Petitions dismissed.

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