| Case ID |
03eb1264-d721-4d55-bdf8-431298b89f8f |
| Body |
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| Case Number |
Income-tax Reference No. 188 of 1974 |
| Decision Date |
Sep 30, 1984 |
| Hearing Date |
Sep 05, 1984 |
| Decision |
The High Court ruled that the rejection of the accounting method by the Income Tax Officer was unjustified. The court emphasized that the burden of proof lies with the department to provide sufficient material for rejecting an established accounting method. It was determined that merely low gross profits or variations in yield do not suffice to invalidate the accounts maintained by the assessee. The appellate tribunal's decision to uphold the rejection due to unexplained variations was also found to be erroneous. The court directed that the income computation must rely on the method of accounting regularly employed by the assessee unless substantial evidence suggests otherwise. |
| Summary |
In the case of Income-tax Reference No. 188 of 1974, the Sindh High Court examined the rejection of the accounting method used by Messrs Pakistan Oil Mills Ltd. The case revolved around the gross profit rate disclosed by the company, which was considered low by the Income Tax Officer. The court highlighted the importance of maintaining a consistent accounting method and the necessity for the department to substantiate any claims of irregularity. The decision clarified that fluctuations in profit margins do not automatically warrant a rejection of accounts. This case is pivotal in understanding the application of the Income Tax Act, 1922, and the Income Tax Ordinance, 1979, particularly concerning the rights of taxpayers to maintain their accounting practices without arbitrary dismissal by tax authorities. The ruling reinforces the principle that tax assessments must be based on credible evidence and not merely on subjective interpretations of profitability. Keywords: Income Tax, Accounting Methods, Tax Assessment, Sindh High Court, Legal Precedents. |
| Court |
Sindh High Court
|
| Entities Involved |
THE COMMISSIONER OF Income Tax (WEST), KARACHI,
Messrs PAKISTAN OIL MILLS Ltd.
|
| Judges |
AJMAL MIAN,
HYDER ALI PIRZADA
|
| Lawyers |
Iqbal Naeem Pasha,
Shaikh Haider
|
| Petitioners |
Messrs PAKISTAN OIL MILLS Ltd., HYDERABAD
|
| Respondents |
THE COMMISSIONER OF Income Tax (WEST), KARACHI
|
| Citations |
1985 SLD 56,
1985 PTD 320
|
| Other Citations |
C.I.T. v. Sarangpur Cotton Manufacturing Company Ltd A I R 1938 P.C. 1,
Commissioner of Income tax v. S. Zoraster & Co. 1982 P T I 339,
Nazir & Co. v. C.I.T. 1982 P T D 185,
Messrs Ibrahim Brothers v . C. I. T. Karachi 1979 P T D 1,
Messers Coronet Paints & Chemicals Ltd. 1984 P T D 355
|
| Laws Involved |
Income Tax Act, 1922,
Income Tax Ordinance, 1979
|
| Sections |
13,
32
|