Law: Income Tax Act, 1922

Section: 35,23(3)

Law: Income Tax Ordinance, 1979

Section: 151

Income Tax Act, 1922 -- Sections 10, 23 -- Trading receipt -- Entertainment duty -- Assessee engaged in business of film exhibition -- Entertainment duty collected from customers on behalf of Provincial Government -- Entertainment duty not paid to Government and the amount explicitly recorded in the liability side of the balance sheet as 'Provincial Government Entertainment Duty' -- Amount declared in the return as 'income claimed to be exempt'-- Entertainment duty whether ceased to be a liability or alternatively became a trading profits or a trading receipts of the assessee -- Held no -- ORDER The order was passed by MUHAMMAD MAZHAR ALI, President.-- This Miscellaneous application, under Section 35 of the Income Tax Act, 1922 read with Section 151 of the Income Tax Ordinance, 1979 has been presented on behalf of the assessee-appellant, stating that while arguing appeal for charge year 1975-76, the counsel for the appellant had made elaborate submission for the Bench in regard to ground No. 3 regarding maintenance of addition on account of entertainment duty and welfare case. We have consulted our notes relevant to date of hearing of this appeal, and we find that the grievance of the applicant is well-founded. The learned counsel for the appellant had in fact pressed that ground before us and that it has escaped adjudication in our order dated 2-6-1979 passed in ITA No. 965/KB of 1978-79. We shall take up that issue and proceed to decide it. 2. The relevant facts pertaining to this issue are these. While examining the assessee's books of account the Income Tax Officer found that in the liabilities side of the Balance Sheet and amount of Rs. 3,86,354 had been shown as Provincial Government's entertainment duty. This very amount in the Return of Income was declared "as income claimed to be exempt". The Income Tax Officer observed that this amount was actually surplus of excise duty which was income liable to tax and the assessee had himself offered such surpluses for tax in the preceding years. He therefore, issued notices under Section 23(3) calling upon the assessee to clarify the position and also at the same time disclosing his mind to charge it to tax,…

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