I.T. A. NO.5612/LB OF 1995 VS I.T. A. NO.5612/LB OF 1995
1997 P T D (Trib.) 2091
[Income-tax Appellate Tribunal Pakistan]
Before Iftikhar Ahmad Bajwa, Accountant Member and
Muhammad Tauqir Afzal Malik, Judicial Member
T.A. No. 5612/LB of 1995, decided on 31/01/1996.
Income Tax Ordinance (XXXI of 1979)---
----S.13 (1)(d)---Deemedincome---Addition---Validity---Held,though S.13.(1)(d) empowered Assessing Officer t6treat any unexplained investment as income but addition was to be based on sound footing because S.13(1)(d), Income Tax Ordinance, 1979 being deeming provisions, was fiction of law which ought to be construed strictly in accordance with letter of law-- Addition based on mere estimate was unsustainable and was deleted in circumstances.
Waqar Azeem for Appellant.
Zafar Ahmad, D.R. for Respondent
Date of hearing: 31st January, 1996
ORDER
IFTIKHAR AHMAD BAJWA (ACCOUNTANT MEMBER).---This appeal is directed against CIT (Appeal's) order dated 1-6-1995 relating to Assessment Year 1990-91.
2. After a long stay abroad appellant had returned to Pakistan during Assessment Year 1990-91 and had started business of dealing in cloth in a shop in Azam Cloth Market which was purchased on 6-2-1990. As against the declared income of Rs.6,000 assessment was made on income of Rs.2,20,000 as under:---
| Sales Estimated | Rs.4, 00,000 |
| GP @ 15 % | Rs. 60,000 |
| Less P&L expenses | Rs. 20,000 |
| Balance Business Income | Rs. 40,000 |
| Addition a/s 13(1)(d) | Rs.1, 80,000 |
| Total Income | Rs.2, 20,000 |
In view of the fact that business had commenced in April, 1990, the CIT (A) reduced the sale to Rs.3,00,000 while the addition under section 13(1)(d) on account of suppression of investment in the shop was confirmed. However, the ITO was directed to give credit for the addition made in the trading account. According to the appellant, the estimate of sales is still excessive the addition under section 13(1)(d) was unjustified and P&L expenses as allowed were inadequate.
3. The objections relating to estimate of sales and P&L expenses were not seriously pressed as adequate relief in respect of business income has already been allowed by the first Appellate Authority. The addition under section 13(1)(d) however, was vehemently disputed on the ground that in estimating the purchase price of the shop the ITO had relied upon a case which was not at all parallel while a number of cases cited by the appellant were ignored. It was argued by the Authorized Representative that appellant had just returned after working abroad for a number of years and he had ample funds to make payment of Rs.3,20,000 as estimated by the ITO. There was no possibility of any undisclosed income which could justify invoking of the provision of section, 13(1)(d).
4. After hearing 'the parties and on examining the records appellant's contentions appear to be quite valid. On 20-1-1993 the ITO had indicated the appellant that he proposed to adopt the value, of the shop at Rs.3,20,000 as according to field inquiry report fair market value of the shop at the relevant time was not less than Rs.3,20,000. In his reply dated 2-2-1993 appellant's AR had requested that the said value was highly excessive and without any basis and had requested to be apprised on the basis of valuation of Rs.3,20,000. On 23-2-1993, the ITO intimated the appellant that the value had been estimated keeping in view the parallel cases at NTN 5-5-1184957 and 5-5-1190020. In another letter dated 6-4-1994, the ITO reiterated that in the case being relied upon by him value of the shop had been declared at Rs.75,00 per sq.ft. during Assessment Year 1990-91 implying that appellant's declared value at the rate of 4,000 per sq.ft was an under statement. In his letter dated 12-4-1993, appellant stated five cases in which shops had been purchased at the rates ranging between 1862 per sq. ft. to Rs.4375 per sq.ft. during assessment year 1987-88 to 1989-90 and NTN number of these cases were also quoted. It was also pointed out that in the case stated by the ITO even the declared value at the rate of Rs.75,00 per sq.ft has not been accepted but had been raised to Rs.1,500 per sq.ft. The appellant however, observed that in the case cited by the ITO the shop was located in main bazar of Azam Cloth Market whereas appellant's shop was in a very small retail bazar i.e., Karachi Block of Azam Cloth Market and thus the two were not comparable. Appellant had invited the ITO to verify this fact by any official of the Department or through any valuer. The above explanation did not impress the ITO who proceeded with the addition under section 13(1)(d). The addition has been justified by the ITO in the following words:---
"The assessee was intimated that the value of the shop was ascertained keeping in view parallel cases at NT. No.1184957 and 1190020. The AR of the assessee vide letter dated 4-3-1993 contested the valuation of the shop and quoted a few cases in support of the declared value. The assessee was intimated vide letter dated 13-3-1993 that explanation offered is not found tenable. The cases quoted by the AR of the assessee were mostly finalized in agreement with the assessee i.e., without proper evaluation of properties under section 13(2) of the Income Tax Ordinance, 1979".
Assessee's plea that the position of shops stated by the ITO was altogether different from that of the appellant has not even been mentioned in the assessment order.
5. The deeming provisions are a fiction of law which ought to be construed strictly in accordance with the letter of law. Section 13(1)(d) empowers the ITO to treat any unexplained investment as income of an assessee. Thus the addition has to be based on a sound footing where under statement of investment can be established. The sale price of a shop in a much better locality certainly did not establish suppression of any investment by the appellant. The addition based on a mere estimate is unsustainable and is, therefore, deleted.
6. The appeal succeeds as above.
C.M.S./284/Trib. Order accordingly.