I. T. A. NO. 6250/LB OF 1995 VS I. T. A. NO. 6250/LB OF 1995
1997 P T D (Trib) 1120
[Income-tax Appellate Tribunal Pakistan]
Before Iftikhar Ahmad Bajwa, Accountant Member and Malik Muhammad Tauqir Afzal, Judicial Member
I.T.A. No.6250/LB of 1995, decided on /01/.
th
February, 1996. (a) Income Tax Ordinance (XXXI of 1979)---
----Ss.66---A, 12(16) & 80-D---Income from other sources---Travel agent-- Assessee received amount for vacating its previous business place---1/10th of the amount was declared as income from other sources within terms of S.12(16) of the Ordinance which was accepted by the Assessing officer ---I.A.C. considering assessment erroneous and prejudicial to revenue in exercise of his powers under S.66-A of the Ordinance, directed LT.O. to adopt gross turn over for levying tax under S.80-D of the Ordinance---Receipts on account of vacation of premises---Held: I.A.C. had invoked the provision of S.66-A unnecessarily were not relevant for adopting gross turn-over in circumstances.
(b) Income Tax Ordinance (XXXI of 1979)---
----Ss.66-A & 80-D---Turn-over---Assessee, a travelling agent ---Commission-- I.A.C. directed I.T.O. to adopt all receipts of travelling agent for purpose of levying tax under S.80-D of the Ordinance---Validity---Held, for purpose of levying tax under S.80-D, turn-over of travelling agent was his commission and not the entire payments received on behalf of principal carrier.
(c) Income Tax Ordinance (XXXI of 1979)---
----S.66-A---Assessee declared purchase price of office which was more than the price envisaged in registered deed of sale ---I.A.C. directed Assessing Officer to adopt market price and to take action under S.13 of the Ordinance---Held, such order could be considered erroneous and prejudicial to revenue, only if purchased price declared by assessee had been too low---Neither facts nor order under S.66-A suggested any understatement of purchase price ---Finding based on whims was clearly unsustainable ---Order under S.66-A was annulled by Tribunal.
1994 PTD (Trib.) 758 ref.
Munawar Mir in person.
Zafar Ahmad, D. R. for Respondent.
Date of hearing: 15th February, 1996.
ORDER
This appeal is directed against Inspecting Additional Commissioner's order under section 66-A in respect of assessment year 1991-92.
2.Appellant, a private limited company, deriving income from Travel business as an approved I.T.A.T., agent, had declared a loan of Rs.3,59,602 for the year under appeal. During this year the assessee had received an amount of Rs.33,00,000 for vacating its previous business premises and 1/10th of this amount i.e., Rs.3,30,000 had been declared as income from other sources within the terms of section 12(16) of the Income Tax Ordinance. In regular assessment under section 62 the declared amount of income from other source being verifiable and being in accordance with the provisions of section 12 (16) was accepted while certain P and L expenses were curtailed. On examining the records the Inspecting Additional Commissioner of Income Tax considered the assessment to be erroneous and prejudicial to the interest of revenue on the grounds:---
(i) That the I.T.O. had neither looked into nor discussed in the assessment order the fair market value of the office at 6-Rehman Plaza as compared to the purchase value declared by the appellant.
(ii) That the I.T.O. had charged tax under section 80-D on a turnover of Rs.24,73,032 whereas the actual turnover was Rs.2,85,91,587.
3. In reply to the show-cause notice incorporating the abovementioned reasons for invoking section 66-A, appellant had replied that purchase of the office at Rehman Plaza had been thoroughly examined by the I.T.O., in the course of assessment proceedings. Appellant had claimed to have declared the actual purchase price of Rs.31,51,756 although the registered deed of sale was on the basis of consideration of Rs.16,00,000 only. It had also been explained that the declared cost of the appellant reflected average price of Rs.4,667 per sq. ft. whereas average sale price of Rs.3,300 per sq.ft in the same plaza had been accepted by the Department. Regarding the turnover it had been explained that out of the total value of tickets amounting to Rs.2,52,91,587, appellants receipts amounted to Rs.21,43,032 only which had been rightly treated as appellants turnover by the Assessing Office-.
4.The above explanation was rejected and the I.A.C., proceed to pass the following order:---
"Assessee's reply has been examined and found to be not acceptance. Deduction of tax under section 50(4) has nothing to do with the application of section 80-D. Total receipts from B.C.C.I., also are Rs.3,300,000 and not Rs.3,30,000 as assessed by the then Income Tax Officer. Therefore, the Assessing Officer is directed to adopt gross turnover of Rs.28,591,587 for the purpose of levying tax under section 80-D of the Income Tax Ordinance, 1979. The assessment order for the year under consideration stands modified to this extent on the point of charging tax under section 80-D. The Assessing Officer is further directed to determine fair market value of the office at 6-Rahman Plaza, Shahra-e-Fatima Jinnah Road, Lahore purchased by the assessee during the year under consideration and take necessary action as provided in section 13 of the Income Tax Ordinance, 1979. "
5.It is evident that provisions of section 66 were invoked in this case without any justification. I.A.C.'s observations that actual receipts from B.C.C.I., also are Rs.33,00,000 and not Rs.3,00,000 as assessed by the then A Income Tax Officer was totally irrelevant and reflective of I.A.C.'s confused mind. The inspection of those receipts had been discussed in the assessment order as under:---
"That certificate from bank shows that the assessee in fact received Rs.33,00,000 in the shape of goodwill to vacate the premises. As per section 12(16), that where an assessee receives any amount in consideration for vacating the possession of a building or a part thereof which he is a tenant, the said amount as reduced by the amount, if any, paid by the assessee for acquiring possession of such building or part thereof shall be deemed to be the income of the assessee and chargeable to tax under the head 'Income from other sources' in the income year in which is received and nine income years next following the said income year in equal proportion. Since the assessee-company as per record did not pay anything for acquiring the possession of premises, therefore, an amount of Rs.3,30,000 i.e., 1/10th of the principal amount is treated as income from other sources which has, been correctly claimed in the Trading Account. "
It is obvious that I.T.O. had taken into account total receipts of Rs.33,00,000 but only an amount of Rs.3,30,000 could be treated as income from other sources for this year under section 12(16) of the Income Tax Ordinance. It is interesting that after making the observation regarding the receipts from B.C.C.I., the I.A.C. processed to remark; therefore, the assessing officer is directed to adopt gross turn over of Rs.2,85,91,587. It is difficult to imagine as to show the receipts from B.C.C.I., on account of vacation of premises were relevant for adopting the gross turnover of Rs.2,85,91,287.
6. So far as the question of turn over in the case of a Travel Agent is concerned this issue has already been examined by the Tribunal and in the case reported as 1994 PTD (Trib.) 758, it was held that for the purpose of levying tax under section 80-D of the Income Tax Ordinance, 1979 the turn over of the Travel Agent is its commission only and not the entire payment received by the agent on behalf of the principal carriers.
7. I.A.C., direction to determine fair market value of office of 6-Rehman Plaza, Shahra-e-Fatima Jinnah Road, Lahore purchased by the assessee during the year under consideration and taken necessary action as provided in section 13 of the Income Tax Ordinance, 1979 is also violative of the power conferred under section 66-A of the Ordinance. In an earlier part of the order I.A.C., had observed that while finalizing the assessment the I.T.O., had neither looked into nor discussed in the assessment order the fair market value of the office at 6-Rehman Plaza, Shahrah-e-Fatima Jinnah Road, Lahore as compared to the purchase value declared by the appellant. From the facts on record it is abundantly clear that I.T.O. was well-aware of the acquisition of new business promises during this year. But apparently regarded it unnecessary to discuss the same in the observation order as the declared consideration for the new premises was prima facie quite reasonable and involved no tax angle. The amount received on account of vacation of old premises did involve a tax angle and had been duly discussed in detail. There was no basis for the assumption that the I.T.O. had not looked into the acquisition of the business premises.
8. So far as its discussion in the assessment order is concerned, it was not at all necessary and the I.T.O. justifiably did not burden the assessment order with an unnecessary discussion. I.A.C.'s direction to determine fair market value of the' business premises is without any sanction in law and clearly in excess of the powers provided under section 66-A of the Ordinance. Had the facts on record indicated that the amount paid for the acquisition of, the business premises had not been recorded for the amount recorded was too low, the I.A.C. could have some justification in invoking the provisions of section 66-A. In this case, there was nothing on record to show that the purchase price had been understated nor was any material with the I.A.C., to come to such a conclusion. The extraordinary provisions of section 66-A empowering the I.A.C., to interfere in a completed assessment cannot be invoked at the wish of the I.A.C., for action under section 66-A the order passed by the I.T.O. must be erroneous and prejudicial to the interest of revenue. The order of the I.T.O., could be considered to be erroneous and prejudicial to the interest of revenue had the purchase price declared by the appellant been too low. Neither the facts on record nor the discussion recorded in the order under section 66-A suggest any understatement of the purchase price of the business premises. A finding based on mere whims is clearly unsustainable.
9. As shown above, the proceedings under section 66-A were invoked on erroneous assumptions. The order under section 66-A in respect of assessment year 1991-92 is, therefore, annulled.
C.M.S./256/Trib. Order accordingly.