COMMISSIONER INLAND REVENUE-II, KARACHI VS ROYAL INTERNATIONAL EXCHANGE COMPANY (PVT.) LTD., KARACHI, 2013 PTD-KARACHI-HIGH-COURT-SINDH 1614 (2013)

(a) Income Tax Ordinance (XLIX of 2001)---

----S. 133---Reference application---Facts found and accepted by Appellate Tribunal---Interference in such facts by High Court---Scope---HighCourtcouldconsideronlyquestionoflaw---Misreadingornon-reading of any material evidence by Tribunal would be a question of law---High Court would be bound to accept such facts.

(b) Income Tax Ordinance (XLIX of 2001)---

----S.133---Reference application---Additional questions raised subsequently by applicant before High Court---Validity---Such questions being an attempt by applicant to re-agitate factual issues casted in different form, could not be permitted---High Court declined to consider such questions in circumstances.

Australasia Bank Ltd.'s case 1962 PTD 575 and Commissioner of Income Tax, Karachi v. Shabbir & Company, Karachi (1966) 13 Tax 197 ref.

Ch. Nazir Ahmed for Applicant.

Abid H. Shaban for Respondent.

Date of hearing: 22nd January, 2013.

ORDER

MUNIB AKHTAR, J.---This Income Tax Reference Application has been filed by the Inland Revenue Department impugning the order of the Appellate Tribunal dated 18-6-2012. In the Reference Application, the Department has proposed the following questions of law, which are said to arise out of the impugned order:--

(a)Whether on facts and under the circumstances of the case, the taxpayer's version of robbery constituted credible evidence under the Qanun-e-Shahadat, and the Tribunal was justified to rely on such evidence?

Whether on facts and under the circumstances of the case, the loss due to robbery was incidental to the respondent's trade and had rightly been accepted by the Tribunal?

Whether on facts and under the circumstances of the case, the Tribunal had rightly adjudged that the loss due to robbery was of revenue in nature and constituted an allowable business expense?

(d)Whether on facts and under the circumstances of the case, the Tribunal was justified to hold that the amount robbed off constituted stock-in-trade?

The proposed questions, and the order made, arise out of the following facts.

2.The respondent taxpayer carries on the business of foreign currency and currency exchange. It appears that during the relevant period it was carrying on such business from various branches in Pakistan including Karachi, Peshawar and Rawalpindi. A certain amount of foreign currency (equivalent to Rs.40,039,511) was being transported by the respondent from its Peshawar branch to its Rawalpindi branch in an armed car belonging to another company engaged in the same business, being MessrsPakistan Currency Exchange Company (Pvt.) Limited. During the course of the transportation the armed car was waylaid by eight armed dacoits near Akora Khattak. A violent incident took place in which four of the armed guards who were guarding the armed car lost their lives on account of firing of rockets and shooting by the dacoits and two other persons also sustained injuries. The dacoits succeeded in robbing the armed car and took away (as presently relevant) two bags in which the foreign currency belonging to the respondent was being transported. An F.I.R. was lodged the same day. However, the money was never recovered nor, apparently, were the dacoits apprehended. The result was that in the Tax Year 2009 (to which the present Reference Application relates) the respondent claimed the robbed foreign currency as a business loss (in the amount in terms of Pakistani currency as noted above). However, the Taxation Officer impugned this claim in terms of section 122 of the Income Tax Ordinance, 2001 ("2001 Ordinance") and after giving an opportunity to the respondent to present its case disallowed the loss that had been claimed by the latter. The Taxation Officer did so on the following basis:--

"The taxpayer has claimed an amount of Rs.40,039,511 as loss due to robbery in Profit and Loss Account as well as column 73 of the return. In this regard the taxpayer has submitted copy of F.I.R., according to which the robbery occurred during the transit of foreign currency from Peshawar to Rawalpindi. As per the details provided the currency was transferred by another money changer to the taxpayer on the condition that, in the course of transfer of money, the loss due to any unwanted incident would be borne by the recipient, that is, the taxpayer. The claim in this regard is based only on the F.I.R. that also involves other money changer which in absence of any other evidence cannot be allowed. Hence, rejected and the amount is proposed to be added in the income of the taxpayer."

3.Being aggrieved by this decision the respondent preferred an appeal before the CIT (Appeals). The Appeal was allowed. The CIT (Appeals), after reproducing the extract from the order of the Taxation Officer noted above, observed as follows:--

"From the observation embodied above, it is transpired that the Officer Inland Revenue while resorting to action did not doubt the evidence in the shape of F.I.R. lodged filed by the appellant. Therefore, the undersigned is unable to comprehend that which additional/further evidence was required by the Officer Inland Revenue for acceptance of the incidence occurred and loss sustained the appellant. If the Officer Inland Revenue was dissatisfied with the evidence submitted by the appellant, the proper recourse available with him was to verify the contents of the F.I.R. lodged from the other money changer who was involved in this transaction. This has not been done by the Officer Inland Revenue. Therefore, in the circumstances the impugned disallowance of loss claimed cannot be allowed to sustain.

Further in the impugned order, the Officer Inland Revenue has not dilated upon the issue of nature of loss sustained by the appellant by identifying whether the same is in capital nature or otherwise. In this context, during the appeal proceedings, the learned AR of the appellant explained that since the appellant's main business activity is running of an Exchange Company and as such the currency involved in the business is stock in trade and cannot be treated as capital in nature...."

In support of his conclusion in particular that the nature of the loss sustained by the respondent was not of a capital nature, the learned CIT (Appeals) relied on and cited at length from a decision of the Lahore High Court reported as In re: assessment of Australasia Bank Ltd. 1962 PTD 575 and then concluded as follows:--

"Considering the above proposition and legal/factual position, the facts of this appellant are also exactly identical as of the case referred in the above judgment. Respectfully following the dictum laid down by the Hon'ble High Court Lahore in above referred judgment and in view of the observations embodied above, I hold that the Officer Inland Revenue was not justified to disallow the loss sustained by the appellant on account of theft of foreign currency, which was appellant's stock in trade. Therefore, the Officer Inland Revenue is directed to allow the same."

4.Being aggrieved by the aforesaid decision the Inland Revenue Department preferred an appeal to the Appellate Tribunal which was disposed off by means of the impugned order. It appears that a hearing in the appeal took place on 19-4-2012. At that hearing, the Tribunal, being the final forum in the hierarchy entitled to determine questions of fact, noted that the Taxation Officer had not marshalled the complete facts and directed the concerned Commissioner to conduct a further inquiry, obtain the relevant details and file a comprehensive report within 30 days. It appears that the Commissioner, in turn, marked the matter to an Assistant Commissioner who gave notice to the respondent and the Department seeking additional information and explanation. The respondent duly provided the same by means of a reply dated 30-5-2012 enclosing therewith various documents and material supporting and confirming the facts as noted above and forwarding a copy of the same also to the Tribunal. However, it appears that the Department itself did not choose to adduce any other or further evidence or material at all and indeed on the next date of hearing before the Tribunal chose to stay away from the proceedings altogether. In these circumstances the Tribunal itself carried out a detailed review of the evidence and material as was available on the record before it (see para 7 of the impugned order) and carefully considered all the relevant factual aspects of the case (see para 8 thereof). The Tribunal then concluded as follows:--

"8. ... Hence, the claim of loss of foreign currency equal to Pak Rupee 40039511 due to armed robbery considering the facts and evidence on record is bona fide and correct. The CIR(A) hence was justified in directing the OIR to allow the revenue loss on account of robbery of foreign currency equal to Rs.40039511 as claimed. Considering the facts and evidence filed, we hold that the claim of loss of Rs.40039511 due to armed robbery is bona fide, correct and proper and requires to be allowed.

9. Dealing in foreign currency is business of the respondent taxpayer and as such foreign currency is stock in trade as has been correctly held by the CIR(A) and the loss of foreign currency is revenue loss. This view finds support from ratio of decisions of Hon. Lahore High Court (1962 PTD 575) relied upon by the CIR(A) and also ratio of decision of Hon'ble Supreme Court of Pakistan in case of Commissioner of Income Tax, Karachi v. Shabbir and Company, Karachi reported as (1966) 13 Tax 197 (SCP) relied upon by the learned A.R.

10. Considering the above facts and the evidence, we hold that the claim of revenue loss by the respondent taxpayer of foreign currency equal to Rs.40039511 due to armed robbery was bona fide, correct and justified and we see no reasons to interfere with the findings of the CIR(A) who allowed the loss."

Accordingly, the appeal filed by the Department was dismissed which has led to the filing of the present Reference Application.

5.Learned counsel for the department submitted that the questions as had been proposed by it were questions of law which arose directly from the impugned order. Learned counsel referred to the various material and documents referred to by the Appellate Tribunal and sought to make out a case that the Appellate Tribunal had erred in dismissing the department's appeal. During the course of hearing (which took place on 16-1-2013) it became clear to us that essentially learned counsel for the Department was seeking to reopen and re-agitate, and have determined afresh, questions of fact which of course is somethingoutside the scope and purview of the jurisdiction of this Court under section 133 of the 2001 Ordinance under which a Reference Application was filed. The hearing in the matter was adjourned to 22-1-2013 in order to enable learned counsel for the department to marshal his case in order to further assist the Court. The matter was heard on the adjourned date, on which learned counsel for the department sought permission to raise certain additional questions said to arise out of the impugned order. Learned counsel for respondent opposed this request submitting that no additional questions could be allowed to be raised in this manner and at a belated stage. At the conclusion of the hearing we granted permission to learned counsel for the parties to submit brief synopses along with case-law and at the specific request of learned counsel for the department, permitted such written submissions to be filed by or before 26-2-2013. Learned counsel for respondent taxpayer filed written synopsis along with case-law amplifying the submissions that had been made by him in support of the findings recorded first by the CIT (Appeals) and then confirmed by the learned Appellate Tribunal in favour of the taxpayer. However, we may note that learned counsel for the department did not file any written synopsis.

6.We have heard learned counsel as above, examined the record with their assistance and considered the case-law relied upon. We are of the view that there can be no doubt that the questions said to arise out of the impugned order are essentially questions of fact which seek to re-agitate and have determined afresh the factual issues that were involved in the present case. Learned counsel for the taxpayer referred to various decisions in support of his contention that such questions could not be raised or addressed by the High Court in exercise of its jurisdiction under section 133. However, since this proposition is well-established, there is no need to consider the cited decisions in any detail. We are bound to accept the facts as found andapplied by the Appellate Tribunal and can only consider questions of law that are said to arise from its order. Of course, any material misreading or non-reading of evidence is itself a question of law but, in our view, no such situation arises in the present case. There can hardly be any dispute with regard to the facts which were thrashed out in great detail by the forums below. The Appellate Tribunal even went to the extent of directing the concerned Commissioner to prepare a comprehensive report after allowing both the Department and the taxpayer to furnish such additional documents and material as they wished to do and it is to be noted that the Department did not at all avail itself of this opportunity. The learned Tribunal then examined the record in great detail carefully considering the material that was placed before it. In our view therefore, no question arises of there having been any material misreading or non-reading of the evidence. The Tribunal (and indeed the learned CIT (Appeals) were fully justified and entitled to consider and examine the record and facts that were before them and did so in meticulous detail. Insofar as the additional questions sought to be subsequently raised by learned counsel for the Department, in our view it is impermissible to raise these questions in such a manner and at such a belated stage, and learned counsel for the taxpayer has correctly referred to the relevant applicable principles in this regard. Again, since the matter is well-settled the case-law cited does not need to be examined in any detail. Even otherwise, the additional questions sought to be raised are in essence nothing more than another attempt to re-agitate factual issues, cast in a different form, and as already noted above this is impermissible.

7.In view of foregoing position, we are satisfied that no questions of law live been raised before us by means of the present Reference Application and that even otherwise the questions as raised do not merit being allowed since the Appellate Tribunal has carefully and thoroughly dealt with all aspects of the matter. Accordingly, the questions proposed by the department are all answered against it and in favour of the respondent taxpayer with a result that the present Reference Application is hereby dismissed.

SAK/C-7/KReference dismissed.