I.T.A. NO.2990/LB OF 1991-92 VS I.T.A. NO.2990/LB OF 1991-92
1997 P T D (Trib.) 2069
[Income-tax Appellate Tribunal Pakistan]
Before Ashfaq Ahmad, Accountant Member and
Abdul Rashid Qureshi, Judicial Member
I.T.A. No.2990/LB of 1991-92, decided on 23/05/1996.
(a) Income Tax Ordinance (XXXI of 1979)---
----Ss. 13(1) & 13(2)---Notice before making additions under provisions of S.13---Two notices under S. 13 of the Ordinance whether requirement of law---Appellant agitated issue of notices at appellate forums and stated that he received notices under S.13(2) only but notice under S.13(1) was not issued by department, before making addition, therefore, proceedings became nullity in eye of law---Held, record belied assessee as both notices were on record even otherwise two separate and distinct notices before making addition were not requirement of law.
(b) Income Tax Ordinance (XXXI of 1979)---
----S. 13(1)(d)---Addition as deemed income---Validity---Production of registered deed---Effect---Appellant presented registered deed showing value of property but tax authority rejected same and adopted value of its own-- Held, record showed that assessee had been urging that property under consideration should not be equated with property having different nature and location---Department having ample time and opportunity, failed to verify, enquire and determine value of property---Assessment made only on conjectures was invalid and unsustainable in law---Addition deleted.
(c) Income Tax Ordinance (XXXI of 1979)---
----S. 13(1)(as)---Addition---Validity---Cash payment ---Assessee's version of cash payment for property sold and addition made was held by Tribunal to be afterthought and could not be accepted in view of fact that payment had not been made through verifiable channels and amount was received through cash---So, addition made was accordingly confirmed.
1993 PTD (Trib.) 1681; 1995 PTD (Trib.) 1182; 1995 PTD (Trib.) 1179; 1995 PTD (Trib.) 1170; M.A. Stay No.253/LB of 1986-87; ITA No.3468/KB of 1993-94 and (1979) 31 Tax 132--Karachi H.C. ref.
Younis Paracha for Appellant.
Shaukat Ali Sheikh, D.R. for Respondent.
Date of hearing: 18th April, 1996.
ORDER
ASHFAQ AHMAD (ACCOUNTANT MEMBER).---This appeal has been filed by the assessee to assail an order of the learned CIT(A) for the assessment year 1984-85. The appellant feels aggrieved on account of estimation of income additions under section 13(1)(d) and 13(1)(aa) and share in the shop not being considered. The additions under section 13(1)(d) and 13(1)(aa) have been challenged both on technical and factual grounds.
2. The brief facts of the case are that for the year under consideration the assessee filed nil return in response to notice under section 56. In response to notice under section 61 the assessee pleaded that no business was conducted as the business premises was purchased on 14-1-1984. As the contention of the assessee was verifiable the proceedings were filed. As per wealth statement filed, the business premises purchased by the assessee was in the assessee's name and in the name of his wife with equal share. The value was shown at Rs.250,000 as per registered sale deed. The ITO not satisfied by the sale price got inquiries conducted through his Inspector and confronted the assessee. It was stated briefly;
(1) The assessee was confronted that in a parallel case of Mst. Iffat Bakhsh NTN 06-09-1478100. Property No.41-E. Gulberg-III measuring 17 marla 175 sq.ft. is purchased for Rs.20 lacon 18-6 1983. Per sq.ft cost of property works out in the said case at Rs.500 as against disclosed cost of Rs.277.
(2) Another property was purchased by M/s Glamar House National Tax No.06-09-1479233. The assessee purchased a shop of 500 sq.ft. The said shop is purchased during the income year ending 30-6-86 on the basis of agreement concluded in 1985. The purchase price of the said property is disclosed at Rs.7 lac meaning that per sq:ft cost comes to Rs.1,166.
After confronting the assessee and discarding his explanations, the ITO.-made two additions. The addition under section 13(1)(d) was calculated as under.
| Value adopted @ Rs.1,500 per sq.ft. | Rs.1,350,000 |
| 1500 x 900 |
| Less value shown | 275,000 |
| Addition a/s 13(1)(d) | 1,075,000 |
Addition of Rs.200,000 was made under section 13(1)(aa) as out of the value shown at Rs.275,000 an amount of Rs.200,00 shown as loan remained unexplained. Therefore, the same was added under section 13(1)(aa). The assessee being aggrieved filed an appeal before the CIT(A) who set aside the case after considering that the impugned assessment order for this year needs further scrutiny in the light of above mentioned ground of appeal.
3. During the course of the reassessment the Assessing Officer issued notice under section 13(2) showing his intention to adopt the value at Rs.900 per sq.ft and the addition of Rs.200,000 under section 13(1)(aa) as this amount of loan remained unexplained. The reply submitted by the assessee does not find favour and consequently the Assessing Officer made two additions. The addition under section 13(1)(d) was made at Rs.560,000 The addition was arrived at in the following manner;
| 900 x 900 | = Rs. 810000 |
| Value declared | 250000 |
| | Rs; 560000 |
addition under section 13(1)(aa) was made at Rs.200,000 as no documentary evidence was provided by the assessee for this loan.
4. The assessee being aggrieved filed appeal before the CIT(A) in which the order of the Assessing Officer was assailed both on technical grounds and factual basis. On the point of fact it was agitated before the CIT(A) that the parallel cases cited by the. ITO were not relevant to the assessee's case as the said shops were located in the heart of Liberty Centre whereas the appellants' shops has located in isolated area of the same market.
5. During the course of the hearing before us it was agitated by the learned AR that the ITO's attempt to make parallel case out of H.Karim Bakhsh which works out to Rs.500 per sq.ft. was totally arbitrary and unjustified as H.Karim Bakhsh is located in the prime area of Liberty Market and is considered to be one of the biggest departmental store not only of Lahore but whole of Pakistan. It was stated that the building in which the assessee's strop was located vas ' L shape and the assessee's shop was in the side street. It was further pleaded that all the shops of Chenab Centre had C' class construction and not a single well known or posh shop is located in that building.
6. It was stated that only notice under section 13(2) was issued and no notice under section 13(1) was received by the assessee, therefore, the whole proceedings become nullity in the eyes of law. It was urged by him that even otherwise the Tribunal has adjudicated in a number of cases that in the presence of sale deed the ITO cannot reject the same without assigning any cogent reasons. In support of his contention the AR submitted the summary of the following reported decisions;
(1) 1983 PTI) (Trib.) 1681 (assessment year 1985-86) decided on 7-8- 1993. It was held that report of the Inspector could not be treated as definite information and it had not been put to further trial by the supporting material.
(2) In 1995 PI'D (Trib.) 1182, it was held that where an acquisition of property is made by registered deed ordinarily the consideration evidenced by the sale deed should be accepted as the value of the property by the tax authorities unless they prove that the consideration shown in the deed is too low and the assessee had acquired the property by expending more money.
(3) In 1995 PTD (Trib.) 1179 it was held once a legal document like registered deed has been provided to the department the same cannot be thrown away on pure whims of the Assessing Officer but to reject the same the department should ensure that it bring on record solid evidence to support its point of view in the absence of any proof regarding the price being higher, one must abide by the legal document which is registered deed and the declared valuation be accepted.
(4) In 1995 RED (Trib.) 1170 it was held that the mere fact that market value of an asset is allegedly higher than the price the assessee paid for its acquisition does not justify addition under section 13(1)(d) of the Income Tax Ordinance, 1979.
(5) In 1995 PTD (Trib.) 1232. it was held that estimation of value of any asset based on information collected from various property dealers is not justified and the value declared by the assessee may be accepted.
(6) In M.A. Stay No.-'53 1/4LB/1986-87 etc, the Chairman ITAT directed the Assessing Officer to accept the valuation of the sate deed as declared by him.
(7) As per C.B.R. Circular No.7(13)DT-14/93 dated June 29 1993which is binding on all officers it has been held; "It has been observed in general that valuation of immovable properties are being made by the Assessing Officers in an arbitrary manner without giving in order in a clear cut manner on the basis of such valuation. As a result such orders do not stand the test of appeal besides it leads to a non-uniform treatment of tax-payers.
In cases where the Assessing Officer is of the opinion that the value of property is higher than that fixed by the provincial authorities the; higher value may be adopted. That, he never, should be done if there is sufficient evidence with the Assessing Officers to conclusively establish the basis for adoption of such other valuation. "
7. With regard to addition under section 13(1)(aa) the learned AR of I the assessee submitted that the CIT(A) was not justified to confirm the addition of Rs.200,000 made by the ITO as proper documentary evidence was placed on record in ;he shape of sale of inherited property worth Rs.300,000 and an affidavit of' the creditor Mr. Muhammad Ashram who was the general attorney on behalf of all the family members regarding advance of loan of Rs.200,000. It was also brought to the notice of the ITO that the elder brother i.e. the creditor Mr. Muhammad Ashraf instituted a civil suit in the Civil Court Lahore which also confirms that Rs.200,000 were paid by the plaintiff No. 1 to defendant No. 1, It ":2s further urged by the learned AR that the appellant was only the owner of hall' share in the shop, the ITO however treated the said shop to be exclusively owned by the appellant and the learned CIT(A) overlooked this aspect being assailed in the grounds of appeal.
8. We have considered the argument put forth by the learned Alt. There is no merit in his contention that the whole exercise is nullity in the eye of law as no notice under section 13(1) was issued by the ITO, As per record both the notices under sections 13(1) and 13(2) were issued to the, assessee. Even otherwise as per the latest decision of the Full Bench of ITAT reported as 1995 PTD (Trib.) 624, I.T.A. No.3468/KB of 1993-94 it has been held "Whether two separate and distinct notices at two different stages are required to be issued before making additions under sections 13(1) and 13(2). Held No."
The assessee's appeal fails on this point.
9. However, there is some merit in the appellant's contention with regard to his plea of acceptance of the sale deed. A perusal of the orders of the officers below show that all along the appellant has been urging that the shop should not be equated with the shops facing the Liberty Market as the building in which the shop was located was 'L' shape and was located in the side street. The department was accorded not one but two opportunities to determine the value of the shop (if it was higher than the declared price) but they tailed to do as they were referring to cases which were not comparable in the instant case. In this context it would not be out of place to cite reported judgments (1959 37 ITR 288 Supreme Court of India and (1979)) 31 Tax 132-Karachi H.C. in which it has been held.
"assessment based on mere conjecture, surmises, suspicions or on irrelevant and inadmissible evidence and material is invalid and unsustainable in law."
10. Even the CBR Circular referred to above has expressed similar views.
11. In the instant case if the ITO were to disbelieve the purchase price stated by the assessee the right course for the ITO would have been to ascertain the rate at which other shops were disposed of in the Chenab Centre itselfChenab Centre as per details cited has five similar shops plus eight shops in the basement. Another way of coming to a fair conclusion vas to find out as to what rate has been adopted for the disposal of shops in face of Chenab Centre itself. This having not been done the department has failed to establish that the declared price of the shop was under stated. Taking into count the aforementioned facts and reported cases cited by the AR the purchase price of the 'ale died is directed to be accepted and the addition under section 13(1)(d) stands deleted.
12. The assessee's grievance regarding addition under section 13(1)(aa) calls for no interference as the same appears to be an afterthought and collusive arrangement between two brothers and cannot be accepted specially in view of the fact that the payment has not been through verifiable channel and the whole amount is admittedly received in cash. It would not be out of place to mention that in the various judgments of the Tribunal it has been held that the onus in such transactions is on the assessee to prove his contention.
13. The issue of half share of wife is also not tenable as she is neither an assessee nor has the AR has agitated at any stage that she was in a position to purchase this property with her own resources.
14. To conclude the addition under section 13(1)(d) stands deleted and the addition under section 13(1)(aa) is confirmed.
C.M.S./262/Trib. Order accordingly.