ITA NO. 1511/LB-OF 1994, DECIDED ON 28TH JUNE, 1994. VS ITA NO. 1511/LB-OF 1994, DECIDED ON 28TH JUNE, 1994.
1995 P T D (Trib.) 318
[Income-tax Appellate Tribunal Pakistan]
Before Muhammad Mujibullah Siddiqui, Chairman, Iftikhar Ahmad Bajwa, Accountant Member and Abdul Rashid Qureshi, judicial Member
ITA No. 1511/LB-of 1994, decided on 28/06/1994.
Per Iftikhar Ahmad Bajwa, Accountant Member; Muhammad Mujibullah Siddiqui, Chairman agreeing; Abdur Rashid Qureshi, Judicial Member, Contra--
(a) Income Tax Ordinance (XXXI of 1979)--
----S. 13---Deemed income---Burden of proof---Income-tax inspector in his survey report, dated 15-12-1987 had reported the existence of a Plaza of the assessee and the obvious presumption was that substantial if not the entire investment must have been made during the period up to 30-6-1987---Not an iota of evidence was available on record to show that any investment had actually been made by the assessee during the income year relevant to assessment---Income-tax Officer issued notice for assessment years 1986-87 and 1987-88 but filed the proceedings for these years; not only that, proceedings for subsequent years were also filed---Income Tax Officer, thus had no doubt that assessee had no regular income liable to tax ---Held, in such a case, there was heavy burden on the Income Tax Officer to bring credible evidence on record before invoking the deeming provisions of law.
(b) Income-tax---
----Deemed income---Adequate opportunity to assessee---Held, question of opportunity, adequate or otherwise, would arise after an assessee had been found to have made an investment during an income year---Question of 'deemed income would not arise in the absence of material justifying the finding of investment during the income year.
(c) Income Tax Ordinance (XXXI of 1979)---
----S. 13(1) read with Second Sched., Part IV, C1.7 [as amended by S.R.0.838(1)/87, dated 26-10-1987]---Deemed income---Unexplained investment made during an income year can be deemed as income of that year alone.
Per Abdur Rashid Qureshi, Judicial Member, Contra---
Per Muhammad Mujibullah Siddiqui, Chairman...
(d) Income Tax Ordinance (XXXI of 1979)---
----S. 134---Appeal to Appellate Tribunal---Site inspection by Member of the Tribunal without notice to the parties and conducted in their absence---Not valid---No reliance can be placed eon such site inspection.
(e) Income Tax Ordinance (XXXI of 1979)
----Ss.131, 134 & 135---Appeal---Procedure---Nature of the proceedings under Income Tax Ordinance, 1979 are entirely different and the principles for appreciation of facts are also quite distinct and separate from those applying to proceedings and appeals under Civil Procedure Code---Principles of law applicable to civil appeals are not attracted to the appeals under the Income Tax Ordinance, 1979:
(f) Income Tax Appellate Tribunal Procedure Rules, 1961---
----R. 16---Appearance of authorised representative---Retired Chairman/ Member of the Income Tax Appellate Tribunal is not debarred from appearing before the Income-tax Appellate Tribunal for no restriction on such appearance exists.
Abrar Hussain Naqvi for Petitioner.
Saadat Saeed, D.R. for Respondent.
Date of hearing: 27th June, 1994.
ORDER
IFTIKHAR AHMAD BAJWA (ACCOUNTANT MEMBER).---This appeal is directed against CIT (Appeal's) order, dated 26-2-1994. Whereby assessment for assessment year 1988-89 made on income of Rs.36,79,750 was ,confirmed.
2. Appellant an individual had constructed a commercial plaza styled as Ali Plaza at Main Market, Gulberg, Lahore. Proceedings were stated on the basis of a survey report, dated 15-12-1987. As per assessment order there was no proper compliance of various statutory notices and eventually the assessment was completed on 30-6-1992 wherein amount of Rs.36,79,750 was charged to tax as unexplained investment under section 13(1)(aa) with the prior approval of the IAC.
3. The legality of assessment is challenged on the grounds that the notice under section 56 on which the assessment is based was never served on the appellant and absolutely no investment whatsoever had been made during the income year which could warrant action under section 13(1)(aa).
4. Appellant's contentions are borne out by the records. The notice under section 56, dated 9-1-1990 a copy of which is lying in the file was indisputably not served on the appellant or any authorized person. Even the subsequent notice were also not served on the appellant. The departmental representative, however, urged that the notices had been served by affixture, which, under the circumstances, was proper service. Appellant's authorized representative questioned the validity of these notices also and at the same time argued that even if, for the sake of argument, service of call notice is held to be valid, it cannot prop up an assessment lacking proper service of a notice under section 56.
5. So far as unexplained investment is concerned, ITO had estimated cost of land and cost of construction at Rs.25,00,000 and Rs.11,79,750 respectively. Though the file had been started in December, 1987 on the receipt of survey report and assessment was completed in June, 1992, there is not an iota of evidence on record to support the finding that any investment had actually been made during the income year relevant to assessment year 1988-89. Since the survey inspector had reported the existence of a plaza in his report dated 15-12-1987, the obvious presumption was that substantial if not the entire, investment must have been made in the period up to 30-6-1987. The ITO had issued notice for assessment years 1986-87 and 1987-88 also but due to reasons best known to him, he filed the proceedings for these years. In fact proceedings for the subsequent year were also filed. Thus, the ITO had no doubt that appellant had no regular income liable to tax. In such a case there was indeed a heavy burden or the ITO to bring credible evidence on record before invoking the deeming provisions of law.
6. The departmental representative argued that the appellant failed to explain the investment in spite of adequate opportunity. However, the question of opportunity, adequate or otherwise, arises after an assessee is found to have a made an investment during an income year. In the absence of material justifying the finding of investment during the income year, there can be no question of any deemed income.
7. It may be pointed out that under proviso to section 13(1) unexplained investment can be taxed in the income year 'relevant to assessment year in which it is discovered. However, operation of this proviso was discontinued 1 with the insertion of clause 7 in Part IV of the Second Schedule vide Notification No.SRO. 838(1)/87, dated 26-10-1987. Now there is no escape from the condition that unexplained investment made during an income year can be deemed as income of that year alone. In this case the ITO did not care to support his finding that the investment in question had actually been made during the income year relevant to assessment year 1988-89.
8. At the time of hearing appellant's A.R. produced documentary evidence to show that the plot of land was actually purchased in 1981 and construction had been completed in 1985. It was pointed out that the appellant was admittedly out of the country when the show-cause notice was issued and in the two days time given for this purpose it was impossible to produce the evidence before the ITO. The registered deed showing purchase of land in 1981 and documents regarding completion of the building in 1985 were seen by the D.R. who was at a loss to explain the basis for treating the investment in question as income for assessment year 1988-89.
9. In view of the uncontrovertible evidence available with the appellant and the facts and circumstances discussed earlier, the assessment for assessment year is unsustainable and is hereby cancelled.
10. The appeal succeeds as above.
(Sd.)
(Iftikhar Ahmed Bajwa),
Accountant Member.
(Sd.)
(Abdur Rashid Oureshi),
Judicial Member.
11. ABDUL RASHID QURESHI (JUDICIAL MEMBER):----I have carefully gone through the order proposed by my learned brother, the Accountant Member, but with utmost regard and respect I cannot persuade myself to agree with his views. The precise history of the case is necessary to be repeated.
12. Undisputedly the appellant, an individual, had constructed a commercial plaza known as 'Ali Plaza' at Main Market, Gulberg, Lahore. Proceedings were initi9ted on the basis of a survey report, dated 15-12-1987. It was reported that a plaza was constructed on a plot of land measuring one Kanal approximately in Main Market, Gulberg, Lahore, known as 'Ali Plaza'. Total converted areas was 4719 sq. ft. i.e. 3120 sq. ft. for shops and on the ground floor and 1599 sq. ft. for offices on first floor.
13. The ITO issued notice under section 56 of the Income Tax Ordinance, 1979 (hereinafter referred as the `Ordinance') for the assessment year 1988-89 on 9-1-1990 for 18-1-1990 but despite valid service compliance was not made. Again notices under section 61 of the Ordinance on 24-10-1991 for 10-11-1991 and 16-5-1992 for 28-5-1992 were issued but the assessee did not make any compliance. Last notice was served by affixture in the presence of the two witnesses by the Circle Inspector. In these circumstances as there was no alternate left for completing the assessment, ex parte assessment was framed on 30-6-1992 making an addition of Rs.36,38,750 under section 13(1)(aa) of the Ordinance.
14. Aggrieved by the impugned order, the assessee preferred an appeal before the learned CIT(A) Zone-II, Lahore, which was dismissed vide order, dated 26-2-1994, hence this further appeal.
15. (Expunged).
Paras. Nos. 1 and 2 of the order proposed by my learned brother are related to the facts and grounds of appeal, therefore, there is no need to make any comment upon these paras.
In para. 4 my learned brother has discussed the point raised by both the learned D.R. and A.R. regarding service of notice under section 56 of the Ordinance.
In para. 5 it was observed by my learned brother with regard to the unexplained investment that there was not an iota of evidence on record to support the finding that any investment actually was made during the income year relevant to the assessment year 1988-89. It was also observed that in such a case there was indeed heavy burden on the ITO to bring credible evidence on record before invoking the deeming provisions of law. The assessee, however, had been avoiding to make appearance before the assessing authority under the pretext that he was not available in the country it is proved from the record that Mr. Tabbassum, his brother-in-law had been looking after his interests and his fact is proved by an application dated 29-6-1992 (Annexure D/7) moved by Mr. M.Y. Tabbassum. During the arguments some queries regarding the record were made from the learned D.R. who submitted that the record seemed to be tampered with. The Annexures produced before this Tribunal and relied upon by the assessee are not duly certified. Even in the light of the annexures, the conduct of the assessee is not plausible as the validity of the documents is doubtful. On the back of page 22 of Annexure `E' during the proceedings of sale-deed about the disputed property, the commission comprising of Mr. Abbas Zaidi, Advocate, who recorded the statement of the vendor lady, General Attorney on 16-8-1981, and on the bottom of which Sheikh Ishrat Ali (the present assessee) had put his signatures and the date was given as 8-1-1974. This makes the documents as doubtful as a whole. Furthermore, the signatures made by Sheikh Ishrat Ali on the bottom of the back side of page 22 (Annexure E) do not tally with the signature made on other papers which have become the part of the file. This conduct of the assessee proves that he had come to the spring of justice with dirty hands. During the time of filing of the proceedings Mr. Tabbassum had been making the appearance and at the time of framing the present assessment same Mr. Tabbassum does not own any responsibility on his shoulders. Therefore, this attitude of Mr. Tabbassum makes whole of the situation doubtful. The service of the notice was effected properly. It was the duty of the assessee to make an appearance in person or through his representative before the assessing authority in which he has miserably failed and the law does not help the claiming persons in the absence of the material in favour of the assessee. It was the duty of the assessee to produce the same and finding on investment and deemed income during the income year cannot be disturbed as the assessee had tried to convert history into fiction.
19. It is not proved before any forum by the assessee that the ITO or other, Survey Inspector were inimical towards him and there was no need for the two officers named above to move against the assessee. Undoubtedly, the plot was purchased in 1981 but the construction was not completed in 1985. I had inspected the spot on 27-6-1994 and found that the abovesaid plaza was not complete as there was no shuttering to the shops. The plaza needs white washing, painting and renovation which was not found at the time of inspection. Our society is heading towards deterioration and the individuals of the society feel proud in concealment and evasion of correct income. The assessee in this case had been working in England and other Western countries from where he might have earned handsome amount which was spent in the construction of this plaza without giving any declaration to the Income Tax Authorities. In the light of the conduct of the assessee he does not deserve any leniency or mercy. There are concurrent findings on question of fact and it is a general practice that the superior Courts do not interfere in such findings.
20. As a result of the above discussion, the order passed by the learned CIT(A), Zone-II, Lahore on 26-2-1994 is hereby maintained. The appeal is dismissed as being devoid of force and merits.
PER IFTIKHAR AHMAD BAJWA (ACCOUNTANT MEMBER).--In view of our different findings, the Chairman may kindly refer the case to another Member for deciding the following question:
"Whether the material on record justified assessment for assessment year 1988-89 on income of Rs.36,79;750."
(Sd.
(Iftikhar Ahmed Bajwa),
Accountant Member.
(Sd.)
(Abdul Rashid Qureshi),
Judicial Member.
21. PER MUHAMMAD MUJIBULLAH SIDDIQUI (CHAIRMAN).--- On a difference of opinion between Mr. Iftikhar Ahmed Bajwa, learned Accountant Member, Lahore and Mr. Abdul Rashid Qureshi, Judicial Member, Lahore the following question has been referred for resolving the difference of opinion:
"Whether the material on record justified assessment for the assessment year 1988-89 on income of Rs.36,79,750."
22. Heard Mr. Abrar Hussain Naqvi learned counsel for the appellant and Mr. Muhammad Sadiq Butt, learned representative for the department.
23. Briefly' stated the facts as gleaned from the record are that I.T.O. Circle-14, Zone-B, Lahore issued notices under section 56 for the assessment years 1986-87 to 1989-90 to the appellant. Thereafter, several notices were issued under section 61 but no compliance was made and, therefore, the assessing officer proceeded ex parte on the basis of material available on record. She made the following order:
"Total area of plot on which Ali Shopping Centre has been constructed is, one Kanal. This plot was acquired in the year relevant to the assessment year 1988-89. During the year 1988-89 the assessee constructed shops on ground floor and flats on first floor. The assessee was confronted with the prior approval of the IA.C. the following valuation:
| Value of land | Rs.25,00,000 |
| Cost of construction | Rs.11,79,750 |
| | Rs.,36,7 9,750 |
No reply was received. The same value was, therefore, adopted under section 13(2) with the prior approval of L.A.C. vide his letter No.2256 dated 28-6-1992. The assessee was also asked to explain sources of above investment. In reply one Mr. M.Y. Tabbassum brother-in-law of the assessee intimated that owner of the plaza was out of country. No explanation with regard to source of above investment was furnished. In view of above fact the investment of Rs.36,79,750 remained unexplained. Addition under section 13(1)(aa) of said amount is therefore made with prior approval of IA.C. Range-1, Zone-B, Lahore vide his Letter No.2285, dated 30-6-1992.
Assessments for the years under consideration are completed as under:---
| 1986-87 & 1987-88 | Proceeding filed |
| 1988- 89 Addition under section 13(1)(aa) as discussed above. | Rs.36,79,750 |
| 1989-90 | Proceedings filed." |
24. As is evident from the perusal of above order the assessing officer filed proceedings relating to the assessment years 1986-87, 1987-88 and 1989 90. She made addition under section 13(1)(aa) at Rs.36,79,750 in the assessment year 1988-89. Being aggrieved with this treatment the appellant preferred first appeal assailing the addition for the reason that no notice was served on the appellant and, therefore, the assessment order was void for want of service of notice. It was further contended that the addition under section 13 (1) (aa) was made without fulfilling the requirements of law and, therefore, it is liable to be deleted. The learned C.I.T. (A) Zone-2, Lahore observed in her order dated 26-2-1994 that the I.T.O. issued notice under section 56 and several notices under section 61. According to her such notice was served by affixture in the presence of two witnesses by the Inspector of the Circle hence ex parte assessment and the addition under section 13(1)(aa) was justified. The service of notice on the appellant was held to be valid and proper. The learned C.I.T. (A) further observed that the appellant was confronted with the proposed value of the plot and the construction thereon but no explanation was furnished and, therefore, it was adopted with the prior approval of IA.C. and hence the addition was' fair and justified. The appeal was thus dismissed by the learned CIT(A). Being still dissatisfied the appellant preferred second appeal before this Tribunal assailing the ex parte assessment, addition on account of unexplained investment in the assessment year 1988-89 and specifically pleading that the service of notice on the appellant was fake and forged.
25. The learned Accountant Member came to the conclusion that the legality of assessment has been properly challenged as no notice under section 56 was served on the appellant and no investment was made during the income year f988-89 which could warrant action under section 13(1)(aa). The learned Accountant Member observed that the notice under section 56 dated 9-1-1990, a copy of which is lying in the file, was unjustifiably not served on the appellant or any authorised person. According to the learned Accountant Member even the subsequent notices were also not served on the appellant. The learned D.R. took plea that the subsequent notices were served by affixture and, therefore, the service of notice was proper but the learned Accountant Member came to the conclusion that even if the subsequent notices are held to be proper the assessment is not sustainable for lack of proper service of notice under section 56 so far the investment on the cost of land and cost of construction is concerned the learned Accountant Member observed that the proceedings were initiated in December, 1987 on receipt of survey report and assessment was completed in June, 1992 but there was not an iota of evidence on record to support the finding that any investment had actually been made during the income year relevant to the assessment year 1988-89. The learned Accountant Member further observed that since the Survey Inspector had reported the existence of plaza in his report dated 15-12-1987 the obvious presumption was that substantial if not the entire, investment must have been made prior to the period dated 30-6-1987. The learned Accountant Member further observed that the I.T.O. had issued notices for the assessment years 1986-87 and 1987-88 also but for the reasons best known to her the proceedings were filed for these years. The learned Accountant Member observed that the contention on behalf of the department that the assessee failed to explain the investment in the asessment year 1988 89 was unfounded because the question of explanation shall arise only when any investment is shown in the income year corresponding to the assessment year .1988-89. According to the learned Accountant Member in the absence of material justifying to finding of investment during the income year there can be no question of any deemed income. The learned Accountant Member further observed that during the course of arguments the appellant's A.R. produced documentary evidence to show that the plot of land was actually purchased in 1981 and construction had been completed in 1985. It was further pointed out that the appellant was admittedly out of the country when the show-cause notice was issued and in the two days time. given for the purpose of furnishing explanation it was impossible to produce 'the evidence before the I.T.O. The registered deed showing purchase of land in 1981 and documents regarding completion of the building in 1985 were produced and the D.R. was not able to give any explanation as to how the investment in question was relevant for addition in the assessment year 1988-89.
26. For the above reasons the learned Accountant Member held that in the facts and circumstances of the case assessment for the assessment year 1988-89 was unsustainable and was cancelled. On the other hand, the learned Judicial Member arrived at the contrary conclusion. The learned Judicial Member did not advert to the issue pertaining to the service of notice under section 56 of the Income-tax Ordinance. He dilated on the merit of the case anti observed that the record appears to be tampered with. According to him, validity of documents produced on behalf of the appellant was doubtful. In support of his view he observed as under:
"On the back of page 22 of Annexure B during the proceedings of sale-deed about the disputed property the commission comprising of Mr. Abbas Zaidi, Advocate who recorded the statement of the vendor lady, general attorney on 16-8-1981 and on the bottom of which Sheikh Ishrat Ali the present assessee had put his signatures and the date was given as 8-1-1974. This makes the document as doubtful as a whole:"
27. Mr. Abrar Hussian Naqvi, learned counsel for the appellant has contended before me that the learned Judicial Member has misread the document as the date 8-1-1974 is of the issuance of Identity Cards of Mr. Sheikh Ishrat Ali. I have examined the document with the assistance of learned representatives for the parties and the learned D.R. has also conceded that the observation of learned Judicial Member regarding the date 8-1-1974 is result of misreading of the document. This date has nothing to do with the execution of sale-deed in respect of the plot under consideration but the date referred to the issuance of Identity Card in favour of Mr. Sheikh Ishrat Ali. Thus, the 'observation of learned Judicial Member that appearance of the date as 8-1-1974 on the sale-deed makes the entire document doubtful is absolutely misconceived and is a result of misreading of the documents. The learned Judicial Member has further observed that the signatures made by Mr. Sheikh Ishrat Ali on the bottom of the back side of page 22 (Annex. E) do not tally with the signatures made on other pipers which have become the part of the file. According to him this conduct of the assessee proves that he had come to the spring of justice with dirty hands. Mr. Naqvi has submitted that his observation is also uncalled for and factually incorrect. He has produced signature of Sheikh Ishrat Ali on the sale-deed and on other documents addressed to town planner as well as applications submitted before this Tribunal and the memo. of appeal to show that the signatures of Mr. Sheikh Ishrat Ali are the same. I have shown-this document to learned D.R. and he has conceded that signatures of Mr. Sheikh Ishrat Ali are similar and they are not different. Mr. Abrar Hussain Naqvi has submitted that it is admitted position that the plot was purchased in the year 1981 and that the survey report dated 15-12-1987 Annexure 'A' shows that the survey report dated 15-12-1987 Annexure `A' shows that according to survey report Ali Shopping Centre was already existing on that date meaning thereby that prior to that date the construction was already completed and thus no investment was made in the income year corresponding to the assessment year 1988-89 and, therefore, no addition could be made in the assessment year 1988-89. The learned D.R. is not able to deny this contention of Mr. Abrar Hussain Naqvi.
28. In support of his contention that the notice under section 56 was not served on the appellant, a photo copy of the office copy notice under, section 56 has been produced as Annexure `B' a perusal thereof shows that all notices under section 56 were served on some Mr. M. Din on 14-1-1990. The learned D.R. is not able to explain as to who Mr. M. Din is. In any case there is nothing to show on record that Mr. M. Din had authority to receive any notice on behalf of the appellant and thus I am of the considered opinion that the learned Accountant Member has rightly held that any notice under section 56 was served on the appellant and, therefore, the entire assessment proceedings became invalid. Mr. Abrar Hussain Naqvi has drawn my attention to the following finding of learned Judicial Member:
"Undoubtedly the plot was purchased in 1981 but the construction was not completed in 1985. I had inspected the spot on 27-6-1994 and found that the above spot on 27-6-1994 and found that the abovesaid plaza was not complete as there was no shuttering to the shops. The plaza needs white-washing, painting and renovation which was not found at the time of inspection. Our society is heading towards deterioration and the individuals of the society feel proud in concealment and evasion of correct income. The assessee in this case had been working in England and other western countries from where he might have earned handsome amount which was spent in the construction of this plaza without giving any declaration to the income tax authorities. In the light of the conduct of the assessee he does not deserve any leniency or mercy. There are concurrent findings of question of fact and it is general practice that the superior Courts do not interfere in such findings."
29. Mr. Abrar Hussain Naqvi, has vehemently assailed the site inspection by the learned Judicial Member on 2T6-1994, the day on which appeal was heard, without notice to the parties. He has submitted that the site inspection by the learned Judicial Member has no legal validity as it was done at the back of the parties and no inspection notes were prepared. I am I persuaded to agree with the contention of Mr. Abrar Hussain Naqvi, The site I inspection made by the learned Judicial Member was not proper as admittedly it was without notice to the parties and was conducted in their absence. No reliance can be placed on such site inspection. The site inspection should be, conducted in the presence of parties only and any inspection in the absence of parties should be strictly avoided. Mr. Abrar Hussain has further argued very rightly that the finding of learned Judicial Member is contradictory in terms as he has himself observed that the plot was purchased in the year 1981 but still he has confirmed the addition on account of purchase of plot as well in the assessment year 1988-89 which has been valued by the I.T.O. at Rs.25,00,000. The observation of the learned Judicial Member that the concurrent findings on fact are generally not interfered with by the superior Courts is also misplaced and uncalled for. It appears that the learned Judicial Member has made this observation taking the appellate proceedings under the Income Tax Ordinance at par with the second appeal preferred under the Civil Procedure Code. The nature of two proceedings are entirely different and the principles for appreciation of facts are also quite distinct and separate. The principles of law applicable to civil appeals are not attracted to the appeals under the Income-tax Ordinance.
30. For the reasons stated above I am in respectful agreement with the finding of learned Accountant Member that the plot was purchased in the year 1981 and the construction was completed in the year 1985 and, therefore, no addition to the total income can be made on account of investment in the assessment year 1988-1989.
31. The appeal is allowed and the addition stands deleted.
32. Before parting with this order I would like to consider the application of Mr. Abrar Hussain Naqvi, which he has submitted requesting that observations made by the Judicial Member in para. 15 of the order relating to the appearance by Mr. Syed Abrar Hussain Naqvi before the Tribunal may be expunged. A perusal of para. 15 shows that the learned Judicial Member has made very unfortunate and uncalled for observations. There is no law under which Mr. Abrar Hussain Naqvi or any Chairman/Member of the Tribunal is debarred from appearing before the Tribunal after retirement. Even at present some Ex-President/Chairman and Member of the Tribunal are practising before this Tribunal. There is nothing illegal or immoral in it as the law has not placed any restriction on their appearance before the Tribunal. The observation made by the learned Judicial Member on para 15 of the order being absolutely uncalled for are hereby expunged from the order.
33. The appeal is allowed as above.
M.BA./68/T.T. Appeal allowed.