ITA NO. 473/LB/1994, DECIDED ON 28TH JUNE, 1994. VS ITA NO. 473/LB/1994, DECIDED ON 28TH JUNE, 1994., 1995 PTD-INCOME-TAX-APPELLATE-TRIBUNAL-PAKISTAN 289 (1994)

Per Inam Ellahi Sheikh, Accountant Member, Muhammad Mujibullah Siddiqui, Chairman agreeing; Abdur Rashid Qureshi, Judicial Member, Contra---

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

----S. 13---Addition ---Deemed income ---Assessee had not earned income from undisclosed sources but through business carried on by him---Additions made under S. 13, Income Tax Ordinance, 1979, were, to be set off against the trading addition.

(1963) 7 Tax 1 fol.

Abdul Rashid Qureshi, Judicial Member, Contra---

Per Mujibullah Siddique, Chairman, agreeing with Inam Ellahi Sheikh, Accountant Member---

(b) Income-tax---

----Addition---No additions can be allowed in the total income of assessee on the basis of general state bf morality or immorality prevailing in the society.

(c) Income-tax---

----Second appeal---Concurrent findings by forums below---Principle that concurrent findings by forums below could not be interfered by appellate forum would not apply to appeals under the Income Tax Ordinance, 1979, but to the appeals under Civil Procedure Code.

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

----S. 13(1)---Addition---Mixed question of law and fact---Question whether addition made under S.13(1), Income Tax Ordinance, 1979 could be set off against the trading addition, was a mixed question of fact and law.

(e) Income-tax---

----Taxation---Assessee cannot be subjected to imposition of tax except under the authority of Parliament or under a clear provision of law---Economic crisis or other considerations cannot be a justification for levy of a tax which otherwise cannot be imposed under the law---Law relating to taxation has to be implemented as defined and interpreted by superior Courts, viz. Supreme Court of Pakistan, High Courts and Income Tax Appellate Tribunal---Any other consideration for the purpose of imposition of tax shall amount to travelling beyond the authority vested in law.

(f) Precedent---

---- Law declared by superior Courts remains unaffected by the passage of time until and unless amended by the legislature or interpreted in some different way by the superior Courts.

Latif Oureshi and Ali Bin Abdul Qadir for Appellant.

Mrs. Sabiha Mujahid, D.R. for Respondent.

Date of hearing: 8th May, 1994.

ORDER

A registered firm deriving income from manufacture and sale of iron product, such as `Sarya' and Patti, has filed this further appeal against an order dated 23-12-1993, recorded by the learned CTT (A) Zone-1, Lahore.

2. The relevant facts in brief are that the original assessment in this case was made at an income of Rs.3,25,000 on an agreement basis as against the declared income of Rs.70,226. The assessee had declared the sales at Rs.96,46,750 with a GP rate of 4.37%. Such assessment was cancelled by the IAC under section 66-A of the Income Tax Ordinance (hereinafter called the Ordinance) and the assessee's appeal against such cancellation was rejected as incompetent by the Tribunal in TTA No. 1348/LB of 1990-91 vide an order dated 28-3-1992. In the re-assessment proceedings, an ex parte assessment was made at an income of Rs.9,73,990. The assessing officer estimated the sales at Rs.1,15,00,000 and applied a GP rate of 9%. The assessing officer also made certain additions under section 13 of the Ordinance. The learned CIT (A) reduced the sales estimate to Rs.1,10,00,000 and the GP rate to 8%.

3. The learned counsel of the assessee strongly objected to the cancellation of the original assessment under section 66-A of the Ordinance mainly with the plea that the agreed assessment could not be cancelled under section 66-A of the Ordinance. The learned counsel of the assess relied on a decision of the Tribunal reported as 1993 PTD (Trib.) 125 to support his contention. The issue of sales estimate as well as GP rate was not pressed by the learned counsel of the assessee. The learned counsel of the assessee strongly attacked the addition made under section 13 of the Ordinance mainly on the ground that the assessee should have allowed set-off of such addition against the trading addition made by the Assessing Officer. The learned counsel of the Assessee relied on the following reported decisions to support this contention:--

(1963) 7 Tax 1.

(1963) PTD (Trib.) 152.

The learned DR, however, supported the order of the assessing officer.

4. The arguments of both the parties have been considered. The contention of the learned counsel of the assessee with regard to the cancellation of the original assessment under section 66-A of the Ordinance is not relevant at this stage. The assessee's appeal against such order has already been rejected as invalid for the reasons recorded in the order dated 28-3-1992. The main contention of the learned counsel of the assessee appears to be that the assessing officer should have allowed the set-off of addition made under section 13 of the Ordinance against the trading addition. The assessing officer made two separate additions under sections 13(1)(a) and 13(1)(aa) of the Ordinance aggregating Rs.291,008 whereas the addition in the trading account amounting to Rs.6,12,764. The learned counsel of the assessee was asked to file the copy of the explanation offered to the assessing officer regarding the source of the credit/investment. The learned counsel of the assessee, however, did not have such copy. On the other hand, the learned counsel of the assessee took the plea that any explanation would be irrelevant as the set-off of such an addition against trading addition had to be allowed in view of the reported judgments mentioned above.

5. It may be mentioned here that the additions made under section 13 comprised an addition of Rs.2,69,008 under section 13(1)(a) of the Ordinance in respect of concealment of Sui Gas and Electricity expenses and an addition of Rs.22,000 under section 13(1)(aa) in respect of unexplained credit. The learned counsel of the assessee has relied on two judgments mentioned above. Of these the Tribunal's decision reported as (1963) PTD (Trib.) 152 is not applicable to the circumstances of this assessee as no trading addition was involved in that case. In the other case reported as (1963) 7 Tax 1) the circumstances appear to be somewhat similar as in that case a trading addition of Rs.11,000 was made whereas another addition was also made on account of unexplained credits. The learned Judges of Dacca High Court held, inter alia, that:--(as per the headnotes of the report):

"There is no doubt that the burden of proof lies on the assesses; if he failed to prove satisfactorily that it is not his money but the money of somebody else, the Income Tax Officer is entitled to presume that it is his income. To this extent there is no dispute. The dispute is whether the Income-Tax authority can presume further that it is his income from an undisclosed source, a source unconnected with the known source of income. There is no law or authority for such double presumption. The Income Tax Officer or the authority cannot make any such presumption nor can they draw any such inference simply from the failure of the assessee to explain it, in the absence of circumstances or material on record justifying it."

Thus, the learned Judges further held that the estimated income by the Income-Tax Authority exceeded by Rs.11,000 in the income shown by the assessee in the books of accounts. In the present case, there is no allegation that the assessee had earned such income undisclosed sources than the business carried on by the assessee. Thus, following the judgment of Dacca High Court reported as (1963) 7 Tax 1, we accept the appeal of the assessee and we direct that the additions made under section 13 may be set off against A the trading addition. The appeal succeeds to that extent.

(Sd.)

(INAM ELLAHI SHEIKH) Accountant Member.

(Sd.)

(ABDUR RASHID QURESHI),

Judicial Member.

6. ABDUR RASHID QURESHI (JUDICIAL MEMBER).--I have carefully gone through the order of my learned brother, the Accountant Member, but with utmost regard and respect I cannot persuade myself to agree with his views. The precise issue before us is whether the additions made under section 13 may be set off against the trading addition or not. My learned brothers, while directing that the additions made under section 13 may be set off against the trading addition has relied upon the judgment of Dacca High Court reported as (1963) 7 Tax 1. The circumstances mentioned in the cited judgment do not appear to be similar and identical as in the instant case. In the cited judgment the ITO included a sum of Rs.24,000 shown in the trading account of the assessee as `Amanat Jama from his father but the present case is a case of concealment of Sui gas and electricity expenses. According to the `Qanan-e-Shahadat' (the Evidence Act ) the burden lies on the assessee; if he fails to prove satisfactorily, the ITO is entitled to presume that the concealed income is the income of the assessee.

7. The assessee could not give any plausible explanation about the concealment before the ITO and the learned CTT (A). The learned counsel for the assessee was asked to file copy of the explanation offered to the assessing officer or the first appellate Court regarding the source of the credit/investment but he failed to submit such a copy before this Tribunal as well. This fact .has been admitted by my learned brother, the Accountant Member, in his proposed order as well. The judgment of Dacca High Court on which my learned brother has relied upon was passed in 1962; those were the days when the individuals of Pakistan were in high spirits; they were fully nationalists and did not believe in concealment. Returns were filed honestly as every individual was patriotic and desired the prosperity and the integrity of the country. But, now our society is a deteriorating society. Most of the individuals have become corrupt particularly the traders class and the tax payers feel proud in concealment of their true particulars of income and evasion of revenue taxes. Keeping in view the circumstances prevailing in the society it is incumbent upon the assessee to submit a plausible explanation before the concerned assessing authority about the charges of concealment. In this case the assessee has failed to make a satisfactory explanation about the concealment of electricity and Sui gas charges. On this issue both the ITO as well as the CIT (A) have given concurrent findings and the superior Courts of this country did not feel inclined to interfere in the concurrent findings. Our country is facing economic crisis. The IMF, World Bank, USA and the Western countries have stopped the economic aid to Pakistan. In such like situation the country is to find out her own resources for the achievement of economic stability. Therefore, it is the duty of every individual particularly the tax payers to support the country so that the country may wriggle out of the present crisis.

8. Concealment is to be discouraged at any cost and the persons responsible for concealment should be dealt with accordingly. It is a case of concealment, therefore, section 13 is reproduced as under:

"13. Unexplained investment. etc., deemed to be income--(1) Where-- (a) any sum is found to be credited in the books of an assessee maintained for any income year; or

(aa) the assessee is found to have made any investment or is found to be the owner of any money or valuable articles, in any year;"

The assessee having miserably failed to submit plausible explanation in regard to the detected concealment on account of Sui gas and electricity expenses before the ITO, therefore, he was perfectly justified in making the additions under sections 13(1)(a) and 13(1)(aa), on account of concealment. The objection of the ITO regarding concealment having been remained unsubstantiated before the learned CIT(A), therefore, the learned CIT(A) was also perfectly justified in maintaining both the additions as made by the ITO. Therefore, I do not feel inclined in setting off the additions made under sections 13(1)(a) and 13(1)(aa) against the trading addition.

9. As a result of the above discussion, the appeal filed at the instance o: the assessee is dismissed.

(Sd.)

(Abdur Rashid Qureshi),

Judicial Member.

As a difference of opinion has arisen:

"Whether the additions made under sections 13(1)(a) and 13(1)(aa) may be set off against the trading addition or not".

It is proposed that the learned Chairman may exercise his discretion under subsection c7) of section 133 of the Income Tax Ordinance, 1979.

(Sd.)

(Abdur Rashid Oureshi),

Judicial Member.

(Sd.)

(Inam Ellahi Sheikh),

Accountant Member.

10. MUHAMMAD MUJIBULLAH SIDDIQUI (CHAIRMAN).---On the difference of opinion between Mr. Inam Ellahi Sheikh, learned Accountant Member, Lahore and Mr. Abdul Rasheed Qureshi, learned Judicial Member, Lahore the following question has been referred for resolving the difference of opinion:

"Whether the additions made under sections 13(1)(a) and 13(1)(aa) may be set off against the trading addition or not?"

11. The facts involved are very simple and have been narrated by the Accountant Member, therefore, I need not to repeat the facts for the sake of brevity.

12. Heard M/s. Ali Bin Abdul Qadir and Latif Qureshi, learned Advocates for the appellant and Mr. Muhammad Sadiq Butt, learned Representative for the Department. The learned Accountant Member by placing reliance on the judgment of Hon'ble Dacca High Court reported as (1963) 7 Tax 1 has accepted the contention that the addition made under section 13 may be set off against the trading addition. On the other hand the learned Judicial Member formed a view that setting off of the addition under sections 13(1)(a) and .13(1)(aa) against the trading addition was not to be allowed.

13. Mr. Ali Bin Abdul Qadir, learned counsel for the appellant has supported the view held by the Accountant Member contending that the point in issue already stands decided by the Hon'ble Dacca High Court vide judgment reported as (1963) 7 Tax 1 which has been rightly followed by the Accountant Member. He has further submitted that the same view had been taken by a Division Bench of this Tribunal in the judgment reported as 1988 PTD (Trib.) 477 in the similar circumstances.

14. Briefly stated the relevant facts in the judgment cited above were that the ITO made addition under section 4(2-A) of the Repealed Income-tax Act, 1922 at Rs.1,08,600 and Rs.67,000 in the assessment years 1975-76 and 1976-77. The provisions contained in section 4(2-A) of the Repealed Income Tax Act, 1922 were analogous to the provisions contained in section 13(1) of the Income Tax Ordinance, 1979. At the same time the assessing officer rejected the declared version in both the assessment years under consideration, estimated sales and applied GP rate thereby making additions in trading account as well. When the matter reached the Tribunal, it was held as follows:

"5. With this observation in mind let us now turn to the fact of these appeals. From perusal of the assessment orders it appears that the ITO discovered Rs.1,82,600 and Rs.1,59,944 standing in the names of various persons mentioned by him in each assessment order. He, however, added Rs.1,08,600 and Rs.67,000 in each assessment year respectively. It is thus clear that the accepted explanation of the respondent regarding Rs.74,000 and Rs.92,944 in each assessment year. From perusal of the assessment orders it is also very obvious that the names of the parties against whom cash credits were found were mentioned in regularly maintained accounts looks of the wholesale business of cloth of the respondent. Now if these facts are considered in the light of the explanation offered by the respondent, which was to the effect that the amounts represented various transactions and dealing with the amounts parties and which had been partly accepted by the ITO, it inevitably appears to us that the addition of unexplained cash credit is emerging out of the business accounts of the respondent. In our judgment, the ITO made the addition because the respondent failed to explain satisfactorily that all the cash credits were genuine but they pertained to the business of the respondent stands very much proved by the fact that some of them have been accepted by ITO. We are of the view that in such case it was the duty of the ITO to record specific finding that the additions, which he was making, were regarding these unexplained cash credits which were not covered by the business income of the respondent. While making this observation, we have in our mind the principle of law stated by their Lordships regarding burden of proof. With due respect to their Lordships it is a general statement of law and, if we may say so states the law very correctly. However, in the instant case since the ITO was accepting the part of the explanation and since he intended to add the unexplained cash credits on top of additions to be made by him in trading accounts of the respondent, it was his duty to show that the cash credits were not covered by the additions to the trading accounts. Since he has failed to do so, we are left with no alternative but to agree with the learned CIT(A) that the addition of unexplained cash credits stands covered by the addition made to the trading accounts of the respondent."

15. In view of the judgment by Hon'ble Dacca High Court and a Division Bench of this Tribunal Mr. Ali Bin Abdul Qadir has submitted that the view taken by the learned Accountant Member is the correct view and he has rightly directed for allowing set off in respect of the additions under section 13 against the trading addition. He has further submitted that so far the learned Judicial Member is concerned he has considered extraneous matters while coming to the contrary conclusion which cannot, be termed as judicial approach. Mr. Ali Bin Abdul Qadir has contended that the learned Judicial Member has not assigned any reason for deviating from the view expressed by Hon'ble Dacca High Court except that the judgment was delivered in 1962 when the individuals of Pakistan were in high spirits; they were fully nationalists and did not believe in concealment. According to the learned Judicial Member in those days returns were filed honestly as every individual was patriotic and desired the prosperity and the integrity of the country. But now our society is a deteriorating society. Most of the individuals have become corrupt particularly the traders class and the tax payers feel proud in concealment of their true particulars of income and evasion of revenue taxes. According to the learned Judicial Member, keeping in view the circumstances prevailing in the society it is incumbent upon the assessee to submit a plausible explanation before the concerned assessing authority about the charges of concealment. He has further observed that in this case the assessee has failed to make a satisfactory explanation about the concealment of electricity and Sui gas charges. According to the learned Judicial Member on this issue both the ITO as well as the CIT(A) have given concurrent findings and the superior Courts of this country do not feel inclined to interfere in the concurrent findings. He has gone to the extent of observing that our county is facing economic crises. The IMF, World Bank, USA and the Western Countries have stopped the economic aid to Pakistan. In such like. situation the country is to find out her own resources for the achievement of economic stability. Therefore, it is the duty of every individual particularly the tax payers to support the country so that the country may wringle out of the present crisis.

16. Mr. Ali Bin Abdul Qadir has vehemently argued that all the observations of the learned Judicial Member contained in para. 7 of the order are absolutely irrelevant and extraneous. He has submitted that the learned Judicial Member has not considered the principle of law in issue but has entered in the general discussion on the site of affairs prevailing in the society and has made sweeping statement which are absolutely uncalled for Mr. Ali Bin Abdul Qadir has further submitted that the observation of the learned Judicial Member that the concurrent findings of facts are normally not interfered by the superior Courts is also misconceived as the principle is applicable to civil appeal preferred before the Hon'ble High Court under the Civil Procedure Code and not to the second appeals preferred before the Tribunal under the Income-tax Ordinance, 1979. The proceedings in civil cases and tax cases are entirely different and the principles for consideration as well as the law applicable are also independent to each other. So, for the economic crisis and stoppage of economic aid to Pakistan by the International Agencies and the Western Countries is concerned it cannot be made a ground for levy of tax on a subject otherwise than in due course of law. Mr. Ali Bin Abdul Qadir has thus fully supported the view taken by the learned Accountant Member and has submitted that the learned Judicial Member has taken the contrary view by ignoring the earlier judgments which are binding and his view is not sustainable in fact and law.

17. On the other hand the learned D.R. has supported the view of learned Judicial Member but he had no option except to concede that the observations made by the learned Judicial Member in para.7 of the order are not relevant for the purpose of interpreting the law as it stands. He has further conceded that the facts the present case and the case decided by the Dacca High Court as well as in the earlier judgment of this Tribunal reported as 1988 PTD (Trib.) 477 are similar.

18. I have carefully considered the contentions raised on behalf of the parties and have gone through the material available on record. I am in full agreement with the view held by the learned Accountant Member. The point in issue already stands decided by the Hon'ble Dacca High Court and a Division Bench of this Tribunal in the judgment cited above. I, therefore, need not to dilate on the issue any further. I am further persuaded to agree with the contention of Mr. Ali Bin Abdul Qadir that the observations made by the learned Judicial Member are totally irrelevant and extraneous. Such general observations should always be avoided scrupulously as such extraneous considerations are likely to lead to misdirected conclusions. No additions can be allowed in the total income of assessee on the basis of general state of morality or immorality prevailing in the society. Likewise an entire class of person or persons cannot be allowed to be condemned as dishonest in the same manner, as an entire class cannot be certified to be honest and straight?forward. Every individual and every assessee as well as every transaction conducted by an individual or assessee has to be considered on its own merits from case to case and transaction to transaction. I am not inclined to agree with the observations of the learned Judicial Member that concurrent findings are not interfered by the superior Courts, as it is absolutely misplaced. The reason being that first, the principle is applicable to the civil appeals preferred before the Hon'ble High Court under the Code of Civil Procedure and not to the Income-tax Appeals preferred before the Tribunal under the Income-tax Ordinance, 1979. Secondly, even in civil appeals the principle is applicable to the concurrent findings of facts does not apply to the concurrent findings on the point of law. There are large number of cases in which the Hon'ble Supreme Court of Pakistan reversed the view held by original Courts: First Appellate Court and the Hon'ble High Court on the point of law. Thirdly, the principle is not absolute because if the concurrent findings of fact is the result of misreading of facts or is the result of non-consideration of facts available on record or so is so perverse that it cannot be maintained on judicial considerations then even the concurrent finding of facts are interfered with. The prime consideration is always the dispensation of justice and not the upholding of technicalities. The reasons being that the technicalities are meant to promote and advance the ends of justice and not to thwart and throttle the dispensation of justice. In the present case the issue for consideration if the addition made under section 13(1) can be set off against the trading addition, is a mixed question of fact and law and as rightly shown by the learned Accountant Member the view taken by the learned two officers below is against the judgment of Hon'ble Dacca High Court and as pointed out before me by Mr. Ali Bin Abdul Qadir is not in consonance with the view taken by this Tribunal, is liable to be interfered with, so far the economic conditions and the stoppage of economic aid to Pakistan are concerned these are also totally irrelevant and extraneous considerations. The reasons being that under Article 4 of the Constitution of the Islamic Republic of Pakistan 1973 it is provided that "to enjoy the protection of law and to be treated in accordance with the law is the inalienable right that of every citizen, wherever he may be, and of every other person for the time being within Pakistan". It is further provided in clause (2) of the Article 4 of the Constitution that "no action detrimental to the life, liberty, body, reputation or property of any person shall be taken except in accordance with law". The expression "property" is defend in Article 260 of the Constitution as follows:

"`property' includes any right, title or interest in the property movable or immovable, and any means and instruments of production."

19. It is further provided in Article 77 of the Constitution that "notice shall be levied for the purpose of the Federation except by or under the authority of Act of (Majlis-e-Shoora) (Parliament)". Thus, it is very clear that no assessee can be subjected to imposition of tax except under the Authority of Majlis-e?-Shoora (Parliament) and otherwise than under a clear provision of law. The economic crisis or other considerations cannot be a justification for levy of a tax which otherwise cannot be imposed under the law. The law relating to taxation is to be implemented as defined and interpreted by the Income-tax Appellate Tribunal, Hon'ble High Courts and the Hon'ble Supreme Court of Pakistan. Any other consideration for the purpose of imposition of tax shall amount to travelling beyond the authority vested in law.

20. For the above reasons I am not persuaded to agree with the view held by the learned Judicial Member that the law as declared by the Dacca High Court in 1962 has become inapplicable in the year 1994. The law shall remain same, unaffected by the passage of time until and unless amended by the Legislature or interpreted in some different way by the Tribunal or the superior Courts. Consequent to my findings it is directed that the addition made under section 13 may be set off against the trading addition made by the assessing officer. The appeal is allowed as above.

M.BA./67/T.T????????????????????????????????????????????????????????????????????????????????????? Appeal allowed.