I.T.AS. NOS. 1692, 1702 AND 2(101 TO 200:1/LB OF 1987-88, DECIDED ON 13TH OCTOBER, 1994. VS I.T.AS. NOS. 1692, 1702 AND 2(101 TO 200:1/LB OF 1987-88, DECIDED ON 13TH OCTOBER, 1994.
1995 P T D (Trib.) 1170
[Income-tax Appellate Tribunal Pakistan]
Before Ch. Irshad Ahmad, Judicial Member
and Saleem Asghar Mian, Accountant Member
I.T.As. Nos. 1692, 1702 and 2(101 to 200:1/LB of 1987-88, decided on 13/10/1994.
(a) Income Tax Ordinance (XXXI of 1979)---
----Ss. 56, 65 & 166(2)(c)(ii)---Escaped assessment for the year before the commencement of the Income Tax Ordinance, 1979---Additional assessment-- Procedure---Where in respect of any assessment year any income chargeable to tax under the Income-tax Act, 1922 had escaped assessment and no proceedings under the said Act were pending at the commencement of Income Tax Ordinance, 1979, a notice under S.65 of the Ordinance was to be issued to the assessee with respect to the relevant assessment years and all the provisions of the Ordinance should apply accordingly---Proceedings in respect of any assessment year prior Co the assessment year 1979-80, therefore, could be initiated only by complying with the requirements of S.65(2)(3)(4) of the Income Tax Ordinance, 1979.
(b) Income Tax Ordinance (XXXI of 1979)---
----S.154(6)---Service of notice---Provisions of S.154(6), Income Tax Ordinance, 1979 only refers to the form or mode of service of a notice and not to the requirement of law for issuing any notice.
(c) Income Tax Ordinance (XXXI of 1979)---
----S.13(1)(d)---Deemed income---Addition---Principles---Held, before an addition is made under S.13(1)(d) of the Income Tax Ordinance, 1979, the assessing officer has to find out that the amount expended at making an investment exceeded the amount shown in the assessee's wealth statement furnished under S.58 of the Income Tax Ordinance, 1979---Mere fact that the market value of an asset is allegedly higher than the price the assessee paid for its acquisition does not justify addition under S.13(1)(d) of the Ordinance-- Value of the asset shall be taken as recorded in the sale-decd in the absence of any material on record to justify addition.
Before an addition is made under section 13(l)(d), the assessing officer has to find that the amount expended at making an investment exceeded the amount shown in the assessee wealth statement furnished under section 58. The mere fact that the market value of an asset is allegedly higher than the price the assessee paid for its acquisition does not justify addition under section 13(1)(d) of the Ordinance. Under section 13(1)(d) the black money by which an asset is acquired n liable 'to tax and not the asset itself. Therefore, before an addition is made under the above section, the I.T.O. has to find that the assessee had really expended more money to acquire the asset than he had shown in his papers.
1990 PTD (Trib.) 260 ref.
Muhammad Ali Khan for Appellants (in I.T.As. Nos.1692 and 1702/LB of 1987-88).
Amjad Malik, D.R. for Appellants (in I.T.As. Nos. 2001 to 2004/LB of 1987-88).
Amjad Malik, D.R. for Respondents (in I.T.As. Nos. 1692 and 1702/LB of 1987-88) with Muhammad Ali Khan (in I.TAs. Nos. 2001 to 2004/LB of 1987-88).
Date of hearing: 5th October, 1994.
ORDER
CH. IRSHAD AHMAD (JUDICIAL MEMBER).---This order disposes of 15 appeals out of which 11 have been filed by the assessee relating to the assessment years 19`76-77- to 1986-87 and 4 by the Income Tax Officer relating to the assessment years 1976-77 to 1979-80.
In 1986 it came to the notice of the Income Tax Officer that the income of the assessee has during the assessment years 1976-77 to 1986-87, been in excess of the limit which was not chargeable to tax. The assessee had not filed any return of income during the above years. The I.T.O. accordingly required the assessee through a notice under section 56 of the Income Tar Ordinance, 1979 to furnish the returns of his income for the aforesaid year The I.T.Os. direction was complied with by the assessee and the returns were filed, declaring income during various years. After usual proceedings, the assessing officer made following assessments on the assessee:---
Assessment year 1976-77:
| Rental income from property | Rs. 25,100 |
| Unexplained investment under section 13(1)(d) | Rs. 33,000 |
| Unexplained investment under section 13(1)(aa) | Rs. 17,001 |
| | Rs. 75.101 |
Assessment year 1977-78:
| Rental income from property | Rs. 25,100 |
| Unexplained investment a/s 13(1)(d) | Rs.114,000 |
| Addition under section 13(1)(aa) | Rs. 36,000 |
| | Rs.175,100 |
Assessment year 1978-79:
| Rental income from property | Rs. 25,100 |
| Unexplained investment under section 13(1)(d) | Rs. 17,500 |
| Addition under section 13(1)(aa) | Rs.50,000 |
| | Rs.92,600 |
Assessment year 1979-80:
| Rental income from property | Rs.25,100 |
| Unexplained investment under section 13(l)(d) | Rs.340,000 |
| | Rs.365,100 |
For each of assessment years 1980-81, 1981-82, 1983-84, 1984-85, 1985-86 and 1986-87:
| Rent from 10 quarters | Rs.15,600 |
| Rent received from 1ttehad School | Rs. 3,600 |
| Total ALV | Rs.19,200 |
| Less 1/5th repair | Rs. 3,200 |
| Net Income | Rs. 16,000 |
On appeal by the assessee Commissioner of Income Tax (Appeals) gave some relief in. computation of income for the assessment years 1976-77, 1977-78, 1978-79 and 1979-80. The assessments for the remaining years were confirmed. The I.T.O. has objected to the order of the C.I.T.(A) whereby he has given relief to the assessee in computing assessee's income for the aforesaid four years. The assessee's objection as before the C.I.T.(A) is that the assessments made by the I.T.O. for the aforesaid eleven years were void as the proceedings had been initiated by issuing notice under section 56 of the Income Tax Ordinance rather than' section 65 of the Ordinance, and also that the computation of income made by the assessing officer for various years was without any basis.
We have heard Mr. Amjad Malik, D.R. for the ITO and Mr. Muhammad Ali Khan, Advocate for the assessee.
Section 166(2)(c)(ii) of the Ordinance provides that where in respect of any assessment year any income chargeable to tax under the Income-tax Act, 1922 had escaped assessment and no proceedings-under the said Act were pending at the commencement of this Ordinance, a notice under section 65 of the Ordinance may be issued with respect to the assessment years and all the provisions of the Ordinance shall apply accordingly. Learned counsel for the assessee stated that in view of the above provisions the assessing officer could not initiate proceedings against the assessee in respect of any assessment year before the year 1979-80 except through a notice under section 65 of the Ordinance, and only in accordance of provisions of that section. And, since the requirements of subsections (2) to (4) of the said section particularly of subsection (2) were not complied with, the assessment proceedings in respect of all the said three years were void ab initio. This objection was raised before the C.I.T. (A) but he rejected it by relying on section 154(6) of the Ordinance which provides that the validity of any notice issued under the Ordinance or the validity of service of any such notice shall not be called in question. There is no doubt that in view of the command contained in section 166(2)(c)(ii) of the Income Tax Ordinance, 1979 proceedings in respect of any assessment year prior to the assessment year 1979-80 could be initiated only by complying with the requirements of subsections (2) to (4) of section 65 of the Ordinance. Section 154(6) ibid only refers to the form or mode of service of a notice and not to the requirement of law for issuing any notice. It is an admitted position, that the I.T.O. has not obtained the approval of the I.A.C. for initiating the proceedings in respect of the assessment years 1976-77 to 1978-79. The assessee's appeals for the aforesaid three years are, therefore, accepted and the assessments for the said three years are annulled. Consequently, the LT.O.'s appeals for the aforesaid years stand rejected.
The learned counsel for the assessee conceded that in view of this Tribunal's decision reported in 1990 PTD (Trib.) 260 the I.T.O. was competent to initiate proceedings in respect of the assessment year 1979-80 and subsequent years, by issuing notice to the assessee under section 56 of the Ordinance. Coming to the merits of the assessments relating to years 1979-80 to 1986-87, the assessee's counsel stated that he would press the appeal only in respect of the assessment year 1979-80 and no other appeal, for the assessment year 1979-80 only the addition made under section 13(1)(d) of the Ordinance. During the period relating to the aforesaid year the assessee had purchased a house for a consideration of Rs.160,000. The assessing officer estimated the value of Rs.500,000 and added the difference between the estimated value and the declared value. The C.I.T.(A), however, reduced the estimated value of the house to Rs.300,000.
The purchase of the house by the assessee is evidenced by a registered deed. The assessing officer has not brought anything on record to show that the assessee had in fact bought the said house for higher price. Before an addition is made under section 13(1)(d), the assessing officer has to find that the amount expended at making an investment exceeded the amount shown in the assessee wealth statement furnished under section 58. The mere fact that the market value of an asset is allegedly higher than the price the assessee paid for its acquisition does not justify addition under section 13(1)(d) of the Ordinance. Under section 13(1)(d) ibid the black money by which an asset is acquired is liable to tax and not the asset itself. Therefore, before any addition is made under the above section, the I.T.O. has to find that the assessee had really expended more money to acquire the asset than he had shown in his papers. There is no such material on record. We would, therefore, direct that the value of the bungalow purchased by the assessee shall be taken as recorded in the sale-deed. The assessee's appeal for the year 1979-80 is accordingly accepted to the above extent, and the I.T.O.'s appeal is rejected. The assessee's appeals for the remaining years are dismissed as the same were not pressed at hearing.
M.BA./99/TOrder accordingly.