I.T.AS. NOS. 9825/LB OF 1992, 1140/LB AND 1328/LB OF 1996 VS I.T.AS. NOS. 9825/LB OF 1992, 1140/LB AND 1328/LB OF 1996
1997 P D (Trib) 2137
[Income-tax Appellate Tribunal Pakistan]
Before Muhammad Zaman Khan, Judicial Member and
Iftikhar Ahmed Bajwa, Accountant Member
I.T.As. Nos.9825/LB of 1992, 1140/LB and 1328/LB of 1996, decided on 15/09/1996.
(a) Income Tax Ordinance (XXXI of 1979)---
---Ss. 62, 132' & 66-A---Assessee's original assessment was set aside by I.A.C. as same was erroneous and prejudicial to revenue---Matter was objected to in appeal before C.I.T.(A)---C.I.T. (A) correctly found that appeal on that point did not lie---Issue of setting aside of assessment under S.66-A, Income Tax Ordinance, 1979 could not be raised before C.I.T. (A) while filing appeal against assessment passed under Ss. 62 & 132 of the Ordinance.
(b) Income Tax Ordinance (XXXI of 1979)---
----Ss. 13(1)(d) & 66-A---Addition---Add-back---Validity---I.A.C. discarded original assessment made by I.T.O. being erroneous and prejudicial to revenue ---Assessee challenged correctness of order under S.66-A, Income Tax Ordinance, 1979 before Tribunal---Held, order under S.66-A of the Ordinance was based on mere presumptions, surmises and conjectures-- Materials on record and facts were fully considered by Assessing Officer-- No justification was available to maintain order under S-66-A of the Ordinance in circumstances.
Zafar Ahmed, D.R. for Appellant.
Naseem Zafar, I.T.P. and Shakil-ur-Rehman, Tax Manager for Respondent.
Date of hearing: 15th September, 1996
ORDER
MUHAMMAD ZAMAN KHAN (JUDICIAL MEMBER).-- Through this consolidated order, we propose to dispose of the titled three appeals, which pertain to the assessment years 1988-89. The assessee in this case is a Director of the above named company. Original assessment was made on 14-1-1989 by the Chairman Panel-03 Companies, Lahore for the year under review at an income of Rs.5,72,953. This order was set aside by the Commissioner of Income Tax while exercising the power of I.A.C. under section, 66-A of the Income Tax Ordinance, 1979, as the same was, found erroneous and prejudicial to the interest of revenue, on the grounds that the assessee had never proved the fact of genuineness of the sale of shares to the company the valuation of purchase of land made by the assessee at village Corey, Lahore Cant. and that the same was for ownership and not for sale amounting to an adventure in the nature of trade.
2. Subsequently, assessment order under section 62/132 was passed by the Inspecting Assistant Commissioner of Income Tax Range-II, Lahore in which the income as declared by the assessee from salary and business as considered, besides the amount of Rs.2,47,000 shown by the assessee was capital gain on sale of land at Faisalabad. The Assessing Officer found that the assessee was dealing in the real estate which amounts to adventure in the nature of trade and as such the profits arising out of such transactions were liable to tax. The assessee, however, denied to have indulged in property transactions but his plea was not accepted and income of Rs.2,47,000 was taken as income from business and added to the total income of the assessee. An amount of Rs.3,58,719 was also added in the income of the assessee as capital gain on sale of shares.
3. Besides the dividend income etc., an addition on account of unexplained investment amounting to Rs.5,12,121 under section 13(1)(d) has also been made by the Assessing Officer. Servant allowance at Rs.42,000 which claimed exempt was held inadmissible by the Assessing Officer as well.
4. The addition of Rs.5,12,121 has been made by the Assessing Officer in respect of the purchase of land measuring 3 Kanal and 1 Marla on 30-6-1988 at Rs.4,02,879. The Assessing Officer found that the price declared by the assessee was understated and thus relying upon some registered deeds as quoted in the assessment order, the value of land per Kanal was adopted by the Assessing Officer at Rs.3,00,000. As such the difference between the value shown in the wealth statement and the value to be adopted (Rs.9,15,000 -- Rs.4,02,879) = Rs.5,12,121 was taken as unexplained investment and added under section 13(1)(d) as according to the Assessing Officer, the assessee had failed to furnish any concrete evidence in support of the declared valuation.
5. Feeling aggrieved by the order passed under section 62/132 the assessee had filed appeal before the CIT (A) Zone-I Lahore, who has vide the order dated 5-12-1995 decided the said appeal and which is the subject matter of two cross appeals in hand out of three appeals which have been filed by the assessee as well as the Department. The CIT (A) has found that the addition made on capital gain at Rs.2,47,000 was not tenable because there was no evidence in possession of the Assessing Officer to establish that the profit earned was of revenue nature/character. As such CIT (A) has declared the addition. However, relying on the two parallel cases of Mr. Altaf M. Saleem and Mr. Ahsan M. Saleem who were also shareholders in the joint property CIT(A) has confirmed the value adopted at Rs.3,00,000 per Kanal in the case of the assessee/appellant as well and resultant addition of Rs.5,12,121 has been confirmed by the CIT(A).
6. Second appeal has been filed by the assessee against the order dated 5-12-1995 in which it has been stated that there was no justification for the passage of order under section 66-A addition of Rs.12,000 on account of salaries to servants and in confirming the addition of Rs.51,221. To the contrary, in the cross appeal filed by the department the act of CIT(A) in deleting the addition of Rs.2,47,000 on account of capital gain has been assailed.
7. We have heard the learned authorized representatives of both the parties and have also gone through the orders, which have been rendered in this case on different occasions as disclosed above.
8. So far as the objection regarding the setting aside of the assessment under section. 66-A is concerned, it has been correctly observed by the CIT(A) in his order dated 5-12-1995 ibid that appeal on that point does not lie before the CIT(A). We, therefore, confirm this order of the CIT(A) bolding that the issue of setting aside of assessment under section 66-A could not be raised before the CIT(A) while filing appeal against the assessment order passed under section 62/132.
9. Be that as it may, the assessee has also challenged the correctness of the order passed under section 66-A before us. It has been vehemently argued by the learned A.R. of the assessee that the order passed under section 66-A was bad in law and on facts and that the same was without jurisdiction. It has been argued that the order dated 14-1-1989 passed by the Assessing Officer was not erroneous in any manner whatsoever and prejudicial to the interest of the revenue because the same 'was passed after proper application of mind and considering all the relevant facts. It appears that this position is correct. It is manifest from the assessment order that complete details of capital gain on sale of shares were furnished by the assessee and the same were also offered for tax. It also emerges from the order passed under section 66-A that the point of purchase price of land was also considered by the Assessing Officer and the value declared by the assessee was accepted by the panel and it was never suspected that the value was understated. Learned A.R. of the assessee had, therefore, concluded his arguments regarding the passing of the order under section 66-A submitting that there was no justification for it and to direct a fresh assessment to be made. It appears that the line of arguments which has been adopted on behalf of the assessee is not devoid of force because the order passed under section 66-A is based on mere presumptions, surmises and conjectures. All the material and facts were duly considered by the Assessing Officer at the time, of original assessment- and as such we do not find any justification to maintain the order passed under section 66-A. Learned D.R. too has not been able to support the order passed under section ' 66-A in any manner whatsoever.
10. As a sequel to the above, the order passed under section 66-A by the CIT on 24-3-1992 is hereby cancelled and the order of the assessment made by the Chairman Panel-02 Companies, Lahore on 14-1-1989 is hereby restored.
11. As a consequence of the above, the order passed by the Inspecting Assistant Commissioner of Income Tax Range-II, Lahore under section 62/132 and the appellate order delivered by the CIT(A) Zone-I, Lahore on 5-12-1995 have become ineffective, as the order on the basis of which they were rendered has been declared illegal by us, on the plea that the entire superstructure, which has been raised on an illegal premises must fall to the ground. Hence, the two cross-appeals filed against the order dated 5-12-1991 ibid are also liable to be dismissed as having become in fructuous and we order accordingly.
12. The appeal filed by the assessee against the order passed under section 66-A succeeds, as held above.
13. All the titled three appeals stand determined accordingly.
C. M. S./301/Trib. Appeal disposed of.