MA (STAY) NO.104/LH OF 1995, DECIDED ON 20TH APRIL, 1995. VS MA (STAY) NO.104/LH OF 1995, DECIDED ON 20TH APRIL, 1995.
1996 P T D (Trib.) 5
[Income-tax Appellate Tribunal Pakistan]
Before Muhammad Mushtaq, Accountant Member and Muhammad Tauqir Afzal Malik Judicial Member
MA (Stay) No.104/LH of 1995, decided on 20/04/1995.
Income Tax Ordinance (XXXI of 1979)---
-----S. 134(6)--Appeal before Appellate Tribunal---Stay---Application for stay of demand created---Commissioner of Income-tax (Appeals) in his order had indicated that assessee, appellant in the case, was not traceable and all the efforts made to serve the notice on him had failed as such he was deciding the appeal ex parte---Held such manner was not proper one on the part of the Commissioner to decide the appeal, for if the process-server of the Commissioner could not trace the assessee he could serve the notice through income Tax Officer or substituted service could be effected by the Commissioner---Prima facie it appeared that the Commissioner decided the appeal without allowing the assessee an opportunity of hearing---Demand, being also heavy, Income Tax Appellate Tribunal, in the circumstances, stayed the demand created against the assessee till specified date or decision of appeal whichever was earlier.
Mian Ashiq Hussain for Applicant.
Mrs. Sabiha Mujahid, D.R. for Respondent.
Date of hearing: 19th April, 1995.
ORDER
This application has been filed on behalf of Dr. Muhammad Aslam (hereinafter also referred to as the assessee) praying that income-tax demand created against him be stayed.
2. The brief facts leading to this application are that the assessee in this case is an individual, earning his income from medical profession as a Dental Surgeon. For the assessment year under consideration, the assessee filed income-tax return declaring net income at Rs.35,000 from profession and Rs.40,000 from agriculture income. Original assessment in this case was completed under SAP. However, as per assessment order subsequently during the assessment proceedings for the assessment year 1990-91 the assessee filed wealth statement and re-conciliation statement. According to the ITO in this re-conciliation statement the assessee had indicated that he completed the house No.76 Garden Block, New Garden Town, Lahore as shown to be completed by 30-6-1988. As per assessment order the total covered area of this house was 6157 sq. ft. and the assessee declared cost of construction at Rs.425,000. The cost of construction per square foot declared by the assessee was Rs.69 which was considered to be low by the I.T.O. and he issued a notice under section 65 for the assessment year 1988-89. The I.T.O. took the view that the assessee had constructed the house in 1988 because the assessee in the re conciliation statement as mentioned above indicated that house was completed by 1988. He adopted the cost of construction at Rs.175 per sq. ft. and made an addition of 652,475 under section 13(1)(d) of the Income Tax Ordinance, 1979 to the other income of the assessee.
3. During the re-assessment proceedings the assessee contended before the I.T.O. that I.T.O. had wrongly presumed that house was completed in 1988. According to the assessee it was completed prior to 1982 and in support of this contention the assessee furnished completion certificate from the LDA, receipts for payment of property tax prior to 1982, evidence for Sui Gas connection but the I.T.O. discarded the evidence produced by the assessee Before the I.T.O. and he completed re-assessment as above.
4. Aggrieved by this treatment the assessee preferred first appeal. The learned CIT(A) made an ex parte order and rejected the appeal of the assessee.
5. Mian Ashiq Hussain, Advocate, the learned counsel of the assessee has vehemently contended that action taken -by the I.T.O. as well as by the learned CIT(A) was illegal and entire proceedings were null and void. Re-assessment completed by the I.T.O. was capricious, harsh and vindictive. The learned counsel of the assessee contended that there is prima facie case of stay of income-tax demand in favour of the assessee on the following grounds,---
(1) That in this case the I.T.O. had re-started proceedings only on the ground that during the assessment proceedings for the assessment year 1990-91' the assessee furnished wealth statement and reconciliation statement indicating that the House No.76, Garden Block, New Garden Town, Lahore ways completed by 1988 but this was a slip of pen and a mistake. The assessee had produced before the I.T.O. completion certificate from L.DA. indicating that the above house was completed before 1982. The assessee also produced receipts for payment of property tax before 1982 in respect of the above house. The assessee also produced evidence for Sui Gas connection but all these documents were ignored by the I.T.O. The I.T.O. admitted inculpatory evidence whereas he totally ignored exculpatory evidence produced by the assessee.
(2) The learned counsel for the assessee contended that ITO gathered the information from reconciliation furnished by the assessee which incorrectly indicated that house was completed by 1988. This information according to the learned counsel of the assessee was obtained from internal source and not from external source. In these circumstances, the information on which the ITO relied was not at all an information warranting action against the assessee under section 65 of the Income Tax Ordinance, 1979. The learned counsel of the assessee in respect of this view relied on a case of Hon'ble Supreme Court of India reported as (1967) 65 ITR (Sh. N.) (Re CIT, Gujrat v. A. Rehman & Co.) wherein the Hon'ble Supreme Court of India held that expression `information' in the context in which it occurs must in lour judgment mean instruction or knowledge derived from an external source concerning facts or particulars, or as the law relating to a matter bearing on the assessment. The learned counsel of the assessee argued that the ITO had no information at all whereas the action under section 65 can only be taken if the ITO had any definite information but in this case there was no question of definite information. The ITO did not have any information at all.
(3) The next argument developed by the learned counsel of the assessee was that for action under section 65 information must relate to a particular year for which notice is issued. In this ease ITO proceeded on the basis of information obtained for the assessment year 1990-91 which was not correct. The learned counsel of the assessee relied on a reported case 77 ITR 955.
(4) The next argument of the learned counsel is that the word `definite information' was defined by the Hon'ble Supreme Court of Pakistan in a case reported that as 1993 SCMR 1108 (ITO v. Chappal Builders) for action under section 65 the ITO must conform to the principles laid down by the Hon'able Supreme Court in the above case.
(5) The learned counsel of the assessee also contended that in the assessment order the I.T.O. has admitted that the construction of the above house was started in 1984 and it was completed in 1988 but surpisingly the I.T.O. brought to tax the entire unexplained investment in the assessment year 1988-89---According to the learned counsel of the assessee the order of the I.T.O. is contradictory and arguments given by the I.T.O. are self-destroying. According to the learned counsel of the assessee the concept of the changeability of the I.T.O. was quite dim. He did know in which year the alleged un-explained investment had to be taxed.
(6) The next argument given by the learned counsel of the assessee was that while making the addition under section 13(1)(d) the procedure laid down under section 13 and elucidated by the ITAT in various decisions, has not been adhered to by the I.T.O. inasmuch as the I.T.O. has not obtained prior approval from the IA.C in arriving at conclusion. He arrived at conclusion first and then the approval taken from the I.A.C. subsequently which is against the letter and spirit of law, laid down by the appellate Courts regarding the provisions of section 13 of the Income Tax Ordinance, 1979.
(7) The learned counsel of the assessee contended that the IA.C gave the approval mechanically without applying his mind. Thus, the approval given by the IA.C for making addition under section 13 was no approval at all.
(8) The learned counsel of the assessee contended that in this case reassessment relates to assessment year 1988-89 prior to amendment in section 13 brought about by Finance Act, 1992 hence I.T.O. had to obtain prior approval of I.A.C. Before arriving at any conclusion for addition under section 13 of Income Tax Ordinance, 1979.
(9) The learned counsel of the assessee also contended that in this case re-assessment was completed by the I.T.O., Okara whereas the assessee had shifted from Okara to Lahore and this fact has been acknowledged by the I.T.O. on last page of the assessment order. Since the assessee had shifted to Lahore the I.T.O., Okara did not have any jurisdiction. The re-assessment made by the I.T.O., Okara was without any jurisdiction and nullity in law.
(10) However, most serious attack made by the learned counsel of the assessee was in respect of appeal order. The learned counsel of the assessee contended that in this case a strange appeal order was made by the learned CIT(A) which had no precedent inasmuch as the appeal was decided by the learned CTT(A) without affording any opportunity of being heard to the assessee. The learned counsel brought our attention to the first few lines of the order which read as 'under:---
"The appellant is not traceable and all efforts were made to serve the notice at given address failed. Appeal will be decided ex parte "
The learned counsel of the assessee has taken most serious objection to this manner of completion of appeal proceedings. He has contended that these proceedings were in respect of construction of House No.76 Garden Block, New Garden Town, Lahore The assessee was living in this house prior to re assessment proceedings and there was no question that assessee was not traceable. If the Process-Server of the learned CIT(A) could not contact the assessee the learned CIT(A) could have sent notice to the I.T.O. for prior service who completed re-assessment proceedings under section 62/65 of the Income Tax Ordinance, 1979. The learned counsel of the assessee contended that it was a represented case and there was no question of non-availability of the assessee. However if it is presumed that the assessee was not traceable then a substituted service could be effected by the learned CTT(A) before deciding this appeal. Hence, the order made by the learned CIT(A) was a nullity in the law.
(11) The learned counsel of the assessee contended that in this case tax demand of Rs.4, 60,627 has been created by the Income Tax Department against the assessee for the assessment year under consideration and a notice under section 93 has also been issued against the assessee vide order, dated 19-2-1995. The Income Tax Department has started coercive measures against the assessee whereas the assessee is not in a position to liquidate the above tax demand.
(12) The learned counsel of the assessee contended that since the income- tax proceedings are different from civil proceedings. In the income-tax proceedings coercive measures adopted for recovery of tax result is irreparable loss to the assessee.
(13) The learned counsel of the assessee further argued that re-assessment proceedings taken against the assessee and the appeal order made by the learned CIT(A) was nullity in law and if interim injunction is not given to the assessee it would be oppressive. The learned counsel of the assessee also relied on a case reported as PLD 1982 Lah. 49 (Jamil Ahmad v. Government of Pakistan) wherein it has held by the Hon'able Lahore High Court: "The principle appears to be that where an order is prima facie ultra vires the refusal to issue injunction, would be oppressive in such case to the plaintiff and not oppressive to the defendant if the injunction is issued." The learned counsel also prayed for early hearing of appeal in this case.
6. The learned D.R. on the other hand, opposed the stay application and contended that in this case re-assessment proceedings were made on the basis of admission of the assessee inasmuch as the assessee during the assessment proceedings for the assessment year 1990-1991 himself indicated in the wealth statement and re-conciliation statement that he completed the house in the assessment year 1988-89. Now when the proceedings were started by the I.T.O. the assessee had an afterthought and resiled from the earlier stand taken by him. The learned D.R. also pointed out that the I.T.O: adopted cost of construction at a very reasonable figure. The addition made by the I.T.O. under section 13(1)(d) was after fulfilling all legal formalities and it was on the basis of facts available. Hence, the applicant did not have any case for stay.
7. We have carefully considered the application made by the assessee and arguments advanced from both the sides. Although the merit of this case will be considered at the time of hearing of appeal, however, the fact, which has weighed in mind most is the impugned order made by the learned C.I.T. (A). A perusal of the order of the learned CIT(A) indicates that the learned CIT(A) has observed in first few lines that appellant in this case was not traceable and all the efforts made to serve the notice on appellant have failed. Hence, he was deciding the appeal ex parte. This was-not proper on the part of the learned CIT(A) to decide the appeal in the above manner. The learned counsel of the assessee has rightly pointed out that if the Process-Server of the learned CIT(A) could not trace the assessee he could serve the notice through I.T.O. or substituted service could be effected by the learned C.I.T.(A) Although the full facts can only be known after examination of the file of the learned CIT(A), however, prima facie it appears that the learned CIT(A) decided the appeal without allowing the assessee an opportunity of ,hearing . The demand created against the assessee is also heavy. Because of these reasons, the income-tax demand created against the assessee is stayed till 31-5-1995_ or decision of appeals whichever is earlier. In the meantime the appeal of the assessee should be fixed before 31-5-1995 before any available bench.
M.BA./123/T
Order accordingly.