I.T.A. NO.3564/LB OF 1995 VS I.T.A. NO.3564/LB OF 1995
1997 P T D (Trib.) 2065
[Income-tax Appellate Tribunal Pakistan]
Before Ch. Muhammad Ishaq, Judicial Member and
Saleem Asghar Mian, Accountant Member
I.T.A. No.3564-LB of 1995, decided on 27/02/1996.
(a) Income Tax Ordinance (XXXI of 1979)---
----S. 65---Additional assessment---Service of notice---Mandatory requirement--- Assessing Officer made additional assessment without fulfilling requirement of service of notice, which act was nullity in law-- Held, service of notice could be effective only when prerequisites were fulfilled---Prescribed procedure having not been followed by Assessing Officer and Commissioner of Income-tax having failed to apply mind to that aspect---Tribunal declared action under S.65 of the Income Tax Ordinance,, 1979 as coram non judice.
(b) Income Tax Ordinance (XXXI of 1979)---
----S. 13(1)(d)---Deemed income---Additions---Validity---Cost of plot to the extent of one-third was purchased by assessee---Determination---Law commanded to ascertain investment made or amount expended on purchase of asset---Nothing was found to be wrong in purchasing asset to the extent of share of assessee---Department did not approve to have proceeded on proper lines for creating additional liability---Addition was cancelled as having been made without any basis in circumstances.
Arfan Asghar for Appellant.
Shaukat Ali, D.R. for Respondent.
Date of hearing: 14th February, 1996.
ORDER
CH. MUHAMMAD ISHAQ (JUDICIAL MEMBER).--This appeal, preferred at the instance of the assessee/appellant, pertains to the assessment year 1986-87. It calls in question the order dated 1-3-1995 passed by the Commissioner of Income Tax, Appeals, Zone-III, Lahore on various grounds which are taken for decisions hereunder:
2. Firstly, the learned counsel for the assessee argues 'that the service of notice under section 65 was defective. Subsequent proceedings taken thereon, therefore, were nullity in the eye of law. He submits that the notice is dated as 29-6-1992. It was allegedly served by affixture on 30-6-1992. This notice directed the assessee to appear on 13-7-1992 but before the due date, the assessment proceedings under section 65 of the Income Tax Ordinance, 1979 was finalised on 30-6-1992 which in fact was the last date of limitation for finalising the assessment According to the learned counsel, this resulted into miscarriage of justice as there was no due service of notice to accordance with law. The learned D.R., on the other hand, points out that the assessment framed under section 65 was just and legal and that the I.T.O was, justified to frame the assessment. He therefore, pleaded that the Order for Assessment be declared valid in law.
3. We have examined respective contentions with the assistance of the learned D.R. and the learned Authorised Representative. We really fail to find out as to whether the procedure for service of notice under the law was correctly followed? Service, of notice by affixture can be effected only when the Revenue fails to effect service on the person of the individual, failing which on his Authorised Representative, failing Which on the adult male, member of family usually residing with him. The procedure prescribed for the service of the notice having not been followed, the service of the notice, under the circumstances of this case, therefore, does not warrant any sanity. Accordingly, we hold that the service of notice under section 65 of the Income Tax Ordinance,' 19'79 is defective. The proceedings taken thereafter, in the circumstances of this case, are nullity in the eye of law.
4. It is noticed from the record that the learned first appellate authority did not apply its mind to this vital issue. The impugned order, therefore, can not be supporter: Accordingly, we hold that the observation of the learned C.I.T. (Appeals) in respect of the action under section 65 do not apply the law correctly. The same, therefore, cannot be supported. In view of these reasons, we declare the action under section 65 as coram non judice.
5. The next contention of the learned A.R is that the addition under section 13(1)(d) is not justified under law. It is noticed that the addition has been matte in respect of the cost of the plot to the extent of 1/3rd of the assessee 'share' purchased by him. Although, it is unnecessary to go into the details of this transaction, yet, we feel inclined to make some observations in this respect also in the interest of justice. The learned A.R. submits that the assessee paid only Rs.1,10,000 as shown in the Statement of Assets & Liabilities submitted by the assessee. Subsequently, however, it was ascertained that the market value declared and accepted by the assessee amounting to Rs.6,40,000. Accordingly, Rs.1,03,333 was added to the income of the assessee as the balance amount undeclared. The appellant/assessee explains that although the property was jointly purchased by his brothers for the consideration of Rs.6,40,000, yet, he paid only Rs.1,10,000 for his share. In support thereto an affidavit was also submitted.
6. The learned C.I.T.(Appeals) upheld the addition of Rs.1,03,333 under section 13(1)(d). However, the examination of the impugned order shows that the explanation offered by the, assessee was not considered. The question now arises as to whether the assessee could purchase the said share of the property for a consideration of Rs.1,10,000. In order to ascertain this what was important for the Assessing Officer under law to' ascertain was the amount expended in the purchase of the share by the assessee. Instead of going into this fact, the entire time was lost in finding out the value of the property. The law clearly commands that the Assessing Officer is to ascertain the investment made or the amount expended on the purchase-of the asset by the assessee. Unfortunately, this is not spelt out in any of the orders below. We are of the view that there in nothing wrong in purchasing an asset for a value as declared by the assessee to the extent of the share indicated in the same deal. More particularly so when the statement is collaborated by an affidavit which continues to remain unrebutted. The Authorities below do not seem to have proceeded tin the proper lines for creating additional liability on the assessee against his declared purchase value. The record also is completely silent on this account. In fact, wrong direction was taken up in creating the additional liability saying that the said additional amount was not being shown either as loan or as gift by the assessee from his brother. In our view, it was absolutely unnecessary for the assessee to show the alleged additional amount either as gift or as loan When the assessee is establishing a fact that he had expended only Rs.1,10,000 for the purchase of the share of the property, there was no additional amount that he was required to show as wrongly required by the authorities below. What was expended was shown and duly accounted for. In view of these reasons, we are not inclined to support the addition made under section 13(1)(d) of the Income Tax Ordinance, 1979. Accordingly, the entire addition is cancelled as having been made without any basis.
7. Consequently, the appeal succeeds and is hereby allowed.
C.M.S./304/Trib Appeal accepted.