I.T.AS. NOS. 1829 AND 2175/LB/1987-88, DECIDED ON 7TH NOVEMBER, 1994. VS I.T.AS. NOS. 1829 AND 2175/LB/1987-88, DECIDED ON 7TH NOVEMBER, 1994., 1995 PTD-INCOME-TAX-APPELLATE-TRIBUNAL-PAKISTAN 1179 (1994)

(a) Income Tax Ordinance (XXXI of 1979)---

----S.13(1)(d)---Addition---Deemed income---Purchase of property by assessee---Addition on ground of understatement of price by assessee-- Assessee had provided registered deeds for the purchase of property in question---Held, once a legal document like a registered deed had been provided to the department the same could not be thrown away on the pure whims of the Assessing Officer---To reject such deed, department had to ensure that it had brought on record solid evidence td support its point of view---In the absence of any proof regarding the prices- being higher department must abide by the legal document and accept the valuation declared therein.

(b) Income Tax Ordinance (XXXI of 1979)--

----S.12(7)---Deemed income---Addition---Loan advanced by assessee to his brother---Loan was used to purchase the plots, which purchase could not have been for personal use, but with profit-making motive---Deemed interest on loan advanced by the assessee to his brother who invested the said money in all the property was chargeable under S.12(7), Income Tax Ordinance, 1979 in circumstances.

Muhammad Ali Khan and Saadat Ali Khan for Appellants (in I.TA. No.1829/LB of 1987-88) and Ghulam Qazim Hussain, D.R. (in I.TA. No. 2175/LB of 1987-88).

Ghulam Qazim Hussain, D.R. for Respondents (in I.T.A. No.1829/LB of 1987-88) and Muhammad Ali Khan and Saadat Ali Khan (in I.TA. No. 2175/LB of 1987-88)

Date of hearing: 7th November, 1994.

ORDER

SALEEM ASGHAR MIAN (JUDICIAL MEMBER).---These are two cross-appeals for the assessment year 1984-85 by the assessee an individual challenging the order of the C.I.T. (Appeals) in not accepting the declared purchase price of various plots and in confirming the deemed interest charges under section 12(7) by the I.T.O. The I.T.O.'s order has also been challenged on account of prior approval not having been taken from the IA.C. before issuing notice under section 13(2). The Department is aggrieved that the C.I.T. (Appeals) has reduced the price of the plots purchased by the assessee without any justification.

2.The facts of the case are that the assessee has purchased 10 plots in Airline Housing Society, Lahore. She had purchased these plots at the price of Rs.18,000 per plot and after adding the cost for' registration and other incidental expenses, the total value had been declared at Rs.2,05,000. Similarly she had also purchased Plot No.123, Clifton, Karachi, which was on lease for a price of Rs.2,75,000 with incidental charges/registration charges at Rs.5,700 and the total value declared was at Rs.2,80,000. The I.T.O. had found the declared value of the plots as low and he had assessed the same at Rs.60,000 per plot for the. Lahore plots and at Rs.10,00,000 for the plot at Clifton, Karachi. These valuations had been made by the I.T.O. after conducting local inquiries from local property dealers at Lahore and in Karachi the C.I.T. (Appeals) had found that the declared purchase prices appeared to be low and after considering the appellant's pleas he reduced the price per plot at Lahore to Rs.40,000 and the plot at Karachi to Rs.6,00,000. It has been agitated before us that the Assessing officer or the Commissioner of Appeal did not have any basis for the valuation that they had made. The assessing officer had relied on an Inspector's Report and inquiries conducted from real estate dealers. The assessee on her part had provided the registered deeds for the plots at Lahore as well as the plot at Karachi. Once a legal document like a registered deed has been provided to the Department the same cannot be thrown away on the pure whims of the Assessing Officer but to reject the same, the Department should ensure that it bring on record solid evidence to support their point of view. In this case no such attempt has been made. The registered purchase deed shows the purchase price of each plot at Rs.18,000 at Lahore and Rs.2,75,000 for the plot at Clifton, Karachi. In the absence of any proof regarding the prices being higher which could not be presented by the D.R. on behalf of the Department, we feel that we must abide by the legal document which are the registered deeds and order the declared valuation be accepted., This also disposes of the Departmental appeal on this account.

3. The assessing officer had added an amount of Rs.29,200 being deemed interest at 12% per annum on the advanced loan of Rs.6,60,000 made by the appellant to her brother. It has been agitated that the provisions of section 12(7) of the Ordinance were not attracted in this case as the appellant's brother cannot conduct any business with this amount. The. assessing officer and the C.I.T. (Appeals) observed that the said borrower had used this loan for making investment for purchase of plots at Lahore and Karachi. Therefore, the addition made at Rs.79,200 was upheld by the C.I.T. (Appeals). It was stated that the brother to whom the loan was given has never been assessed on property income business. The law has given exemption on such loans which are not used directly or indirectly for business purposes, for investment for securities, stocks and shares, debentures or deposit certificates. The assessing officer had felt that the loan was used for the purchase of plots but it has been agitated by the counsel of the appellant that the assessee's brother has never been assessed as a property dealer or for dealing in real estate. It was also stated that the money had been returned and also close family members keep borrowing from one another whenever the need arises. No doubt there is some merit in these observations but the fact which remains un controverted is that the loan was used to purchase the plots and it is obvious that the quantum of plots purchased could not have been for personal use but with profit-making motives. In these circumstances, the order of the learned CIT (Appeals) on deemed income under section 12(7) is maintained.

4. The appeal by the assessee succeeds to the extent indicated above while the departmental appeal is rejected.

M.BA./118/TOrder accordingly