I.TA. NO.1218/LB OF 1988-89, DECIDED ON 7TH NOVEMBER, 1989. VS I.TA. NO.1218/LB OF 1988-89, DECIDED ON 7TH NOVEMBER, 1989.
1991 P T D (Trib.) 308
[Income-tax Appellate Tribunal Pakistan]
Before Ibrar Hussain Naqvi, Judicial Member and Inam Ellahi Sheikh, Accountant
Member
I.TA. No.1218/LB of 1988-89, decided on 07/11/1989.
(a) Income Tax Ordinance (XXXII of 1979)---
----S. 59---Self-Assessment Scheme (1986-87), para. 1---Assessing Officer had not alleged that there was any evidence of concealment of income by the assessee-- Under-statement of the cost of construction could not thus be equated with the concealment of income---If the cost of construction given by the assessee was incorrect, it could not be said that there was an evidence of conce4lment of income by assessee.
(b) Income Tax Ordinance (XXXI of 1979)---
----S. 59---Self-Assessment Scheme (1986-87), para: 2---Return filed by the assessee under Self-Assessment Scheme had fulfilled the requirements of para. 2 of the Self-Assessment Scheme (1986-87)---Assessing Officer, held, could not proceed to assess the income of assessee under the normal procedure unless the assessee's case had been selected for total audit.
(c) Income Tax Ordinance (XXXI of 1979)---
----Ss. 59 & 61---Self-Assessment Scheme (1986-87), paras. 1 & 2---Income Tax Officer, after an enquiry and by issuance of notice under S.61 made discoveries in regard to the cost of construction or understatement etc.---Legality---When a return filed by the assessee was qualified to be accepted under the Self-Assessment Scheme, Assessing Officer was not competent to make any enquiry with regard to the said return---Proper procedure to be adopted by Income-tax Officer stated.
The assessee's return was qualified to be accepted under Self-Assessment Scheme as it did not fall under any of the exceptions given in para (1). The requirements of para (2) were also fulfilled by the assessee when a notice was issued to the assessee in this regard.
Whatever discoveries had been made by the assessing officer in regard to the cost of construction or understatement etc., they were made after an enquiry and by issuance of notice under section 61, although, the assessing officer was not entitled to make an enquiry in regard to the return which is qualified to be accepted under Self-Assessment Scheme. The proper procedure for the assessing officer was that if the return was qualified to be accepted under Self-Assessment Scheme, he should have accepted the return and pass an order before 30th June, 1987. In case he had some material or definite information and/or with the prior approval of the I.A.C., he could reopen the assessee's case under section 65 of the Ordinance but he had no option but to accept the assessee's return if it was qualified to be accepted under that Scheme.
1989 PTD 311 and 1989 PTD 1141 ref.
Rashid Ahmad Sheikh for Appellant.
Munir Ahmad Sheikh, D.R. for Respondent.
Date of hearing: 2nd October, 1989.
ORDER
ABRAR HUSSAIN NAQVI (JUDICIAL MEMBER).---This is an appeal filed by the assessee relating to the assessment year 1986-87. The assessee in this case is an individual deriving income from two sources, namely share in a registered firm .and income from property. The assessee filed his return on 30-10-1986 declaring income as under:--
| 1. 20% share in the Registered Firm | Rs.20,913 |
| 2. Property Income | Rs.20373 |
| Total | Rs.41.286 |
2. The assessee had filed the return under Self-Assessment Scheme. Since the property income had been declared for the first time, the assessing officer required from the assessee the cost of construction of the property and source of investment therein. The assessee furnished the requisite information and documents. The assessing officer, however, did not accept the assessee's return under Self-Assessment Scheme and proceeded to make the assessment under the normal law. The reason for not accepting the assessee's return under Self-Assessment Scheme may here be stated in the assessing officer's own words which are quoted below:-.
"The cost of construction disclosed by the assessee being grossly under-stated, this is being taken up under normal law and the assessee was informed accordingly."
Consequently, the assessing officer issued notice under section 61 of the Income Tax Ordinance, 1979 (hereinafter called the `Ordinance') requiring certain informations and ultimately estimated the cost of construction. As the assessee's sources of investment were also disbelieved, certain additions were made under section 13(1) (d) of the Ordinance by adopting the cost of construction at Rs.200 per sq. ft. as against declared cost of construction of Rs.104 per sq. ft.
3. On appeal, the learned C.I.T. (A) has reduced the cost of construction to Rs.156 per sq. ft.
4. The learned counsel for the assessee has taken number of objections. It was contended that the assessee's return should have been accepted under the Self-Assessment Scheme as it qualified under that scheme. It was further submitted that the cost of construction adopted even by the learned C.I.T. (A) was excessive, the assessment was barred by. time; and that after determining the cost of construction under section 13(2) of the Ordinance, no notice under section 13(l) (d) of the Ordinance had been issued to the assessee nor two approvals; one under section 13(1) and the other under section 13(2) of the Ordinance had been obtained by the assessing officer from the IA.C. in accordance with law. It was submitted that the learned IA.C.'s approval both under sections 13(1) and 13(2) had been obtained on one and the same date, i.e. 31-7-1988 and on the same date the assessment order had been passed.
5. The learned D.R. in his reply submitted that the assessee's return was not qualified under the Self-Assessment Scheme as the assessee had concealed the income in that the cost of construction had been understated. It was further submitted by the learned A.R. that the requisite notice had been issued under section 13 of the Ordinance, the prior approval of the learned I.A.C. had been obtained and that the cost of construction reduced by the learned C.I.T. (A) was unjustified.
6. We have given careful consideration to the contentions raised by both the parties. As for the first contention in regard to the acceptance of the assessee's return under Self-Assessment Scheme it may here be stated that under section 59(1) of the Ordinance it has been provided that if the return filed under section 55 of the Ordinance qualifies for acceptance in accordance with the provisions of the Scheme of Self-Assessment made by the Central Board of Re for that year" ..the Income Tax Officer shall assess, by an order in writing, the total income of the assessee on the basis of such return Subsection (1-A) of section 59 of the Ordinance provides that notwithstanding the provisions contained in subsection (I) certain cases can be selected for assessment under section 62 of the Ordinance in accordance with the scheme referred to in subsection (1). It, therefore, follows that all returns are to be accepted under the Self-Assessment Scheme provided they qualify under that Self-Assessment Scheme. However, certain cases may be selected for detailed scrutiny and in the case of so selected cases the assessment shall have to be made under section 62/63 of the Ordinance. There is no other provision of law under which the assessee's return could be processed under the normal law, i.e. under section 62/63 of the Ordinance. Now, under the Scheme for Self-Assessment for the assessment year 1936-37 it has been provided in para. (1) as under: -
"(1) All returns riled for assessment year 1986-87 shall be self-assessment returns withhe following exceptions:--
(a) Returns which are not filed voluntarily by the due dates, including the extended dates.
(b) Returns where the declared income, before any adjustment for brought forward assessed loss, does not exceed Rs.24,000.
(c) Returns of existing tax-payers in whose cases a legal issue is pending in an appeal/reference in respect of a previous assessment and the same issue exists for the assessment year 1986-87, unless the appeal/reference is withdrawn by the tax-payers or the Department.
(d) Returns selected for Total Audit.
(e) Returns in cases where evidence of concealment is available.
(f) Returns where the requirements as specified in para 2 are not fulfilled and the tax-payer fails to provide such particulars/documents within one month of the date of service of a letter from the Income Tax Officer."
We have already reproduced the reasons given by the assessing officer for processing the case under the normal law. Under para (1) of the Scheme reproduced above, there are six exceptions under which a return may not be accepted under the scheme but none of the exceptions provide that if there is an understatement of income, then the case could be processed under the normal law. The learned D.R has, however, relied upon clause (e) which provides that where there is evidence of concealment the return would not be accepted under Self-Assessment Scheme. However, as is evident from the assessment order, there was no such allegation by the assessing officer that there was evidence of concealment. Even otherwise, the understatement of the cost of construction could not be equated with the concealment of income. This might be a difference of opinion and even it might be true that the cost of construction given by the assessee might be incorrect. But even then, it could not be said that there was an evidence of concealment, Another clause relied upon by the learned D.R. was clause (f). It was submitted that the assessee had not fulfilled the requirements as specified in para (2). Under para. (B) of para. 2 of the Scheme in sub-clause (iii) it has been provided that in case where property income is declared for the first time the detail of investment made in property and description of source of investment has to be provided. In clause (1) of para. (1) of the Scheme it is provided that where the requirements given in para. (2) are not fulfilled then the I.T.O. has to give notice to the assessee to provide such particulars/documents within one month of the date of service of a letter from the I.T.O. In the assessment order the I.T.O. has stated" the assessee was requested to intimate this office the cost of construction of the property and source of investment vide this office letter dated 14-3-1987. In compliance thereto the assessee has furnished the following documents:--
(1) Copy of Site Plan.
(2) Wealth statement as at 30-6-1986 alongwith reconciliation statement.
(3) Written affidavits of the persons from whom loans/gifts given to the assessee.
(4) Certificates regarding prize money won. on prize bonds issued by the State Bank of Pakistan.
It is evident from the reproduction of the above observation of the T.T.O. that he had not rejected the assessee's return on the ground that the assessee had failed to fulfil the requirements of para (2). Therefore, the assessing officer could not proceed to assess the income of the assessee under the normal law unless the assessee's case had been selected for total audit. Admittedly, the assessee's case had not been selected for total audit. The learned counsel for the assessee had also relied upon subsection (4) of section 59 of. the Ordinance which is i reproduced below:--
"(4) No order under subsection (1) shall be made in any case after the thirtieth day of June of the financial year next following the income year in respect of which a return of total income has been furnished under section 55."
According to this subsection, the assessing officer was bound to pass an order before 30-6-1987. There is also force in the contention of the learned counsel for the assessee that whatever discoveries h.4d been made by the assessing officer in regard to the cost of construction or understatement etc. they were made after an enquiry and by issuance of notice under section 61, although, the assessing officer was not entitled to make an enquiry in regard to the return which is qualified to be accepted under Self-Assessment Scheme. The proper procedure for the assessing officer was that if the return was qualified to be accepted under Self-Assessment Scheme, he should have accepted the return and pass an order before 30th June, 1987. In case he had some material or definite information or with the prior approval of the learned IA.C., he could reopen the assessee's case under section 65 of the Ordinance but he had no option but to accept the assessee's return if it was qualified to be accepted under that Scheme. The learned counsel for the assessee has further relied upon a decision of the Tribunal reported as P T D 1989 311. In that case the Tribunal had held that mere fact that the assessing officer did not agree with the cost of construction' shown by the assessee does not amount to concealment. This view is further confirmed by the Karachi High Court in P T D 19891141. We have seen above that the assessee's return was qualified to be accepted under Self-Assessment Scheme as it did not fall under any of the exceptions given in para (1). The requirements of para (2) were also fulfilled by the assessee when a notice was issued to the assessee in this regard.
7. We, therefore, direct that the, assessee's return may be accepted under Self-Assessment Scheme. Since we have accepted the assessee's plea on this legal ground, we do not feel it necessary to go into the other questions raised by the learned counsel for the assessee.
8. As a result of the above discussion, the assessee's appeal is accepted to the extent indicated above.
??/955/TAppeal allowed.