I.T.AS. NOS.3203/LB/DB AND 1387/LB OF 1991-92 VS I.T.AS. NOS.3203/LB/DB AND 1387/LB OF 1991-92
1997 P T D (Trib.) 2197
[Income-tax Appellate Tribunal Pakistan]
Before Inam Ellahi Sheikh, Accountant Member, Abdul Rashid Qureshi
and Nasim Sikandar, Judicial Members
I.T.As. Nos.3203/LB/DB and 1387/LB of 1991-92, decided on 14/11/1995.
(a) Income Tax Ordinance (XXXI of 1979)---
----S. 13(1)(d)---Addition---Validity---Assessee purchased plot---Income Tax Inspector reported higher market value ---Assessee was confronted with such position---Finding explanation unsatisfactory, addition Was made by the Assessing Officer--- Commissioner of Income Tax reduced addition to half--- -Held, Assessing Officer had relied on Income Tax Inspector's Report which was made almost 2-1/2 years after purchase of plot, thus report was not relevant to the period under consideration---Assessing Officer- should have asked assessee to explain source of investment which was not done-- Inspector's Report was in circumstances, being irrelevant, assessee's appeal was accepted by the Tribunal.
(b) Income Tax Ordinance (XXXI of 1979)---
--S. 13(1)---Addition---Justification---To justify, addition under various provisions of S.13, Income fax Ordinance. 1979, it was Assessing Officer who would have to determine actual investment made by Assessee- Determination should never be a wild guess or fanciful estimate but must stand test of reason and rationality---Even guess has to be based on some material---Burdening subject with heavy taxation on personal view could not be sustained---Reasons for estimating value of property were as much material as determination price, itself---Absence of basis on record often tempts Appellate Authorities to have long arm of notorious phrase "somewhat excessive" in order to substantiate their own opinion for one expressed by Assessing Officer---Estimate without basis would not change its colour and assume respectability for mere reason of its having been made by still higher official functionary---Two wrongs do not make a right.
Javed Rehman, D.R. for Appellant (in I.T.A. No.3203/LB of 1991-92).
Abdul Qudus Abid, I.T.P. for Respondent (in I.T.A. No:3203/LB of 1991-92).
Abdul Qudus Abid .P. for Appellant (in T.A. No. 1387/LB of 1991-92).
Javed Rehman, D.R. for Respondent (in T.A. No.1387/LB of 1991-92)
Date of hearing: 24th October, 1995.
ORDER
INAM ELLAHI SHEIKH (ACCOUNTANT MEMBER) --These two cross-appeals are directed against an order dated 24-9-1991 recorded by the learned CIT(Appeals), Zone-III, Lahore whereby the addition made under section 13(1) of the Income Tax Ordinance (hereinafter called the Ordinance) in the case of an Individual assessee was reduced from Rs.1,00,000 to Rs.50,000.
2. The relevant facts in brief are that the assessee purchased a plot of one Kanal in the Government Employees Housing Society, Township on 17-7-1987 for a declared value of Rs.2,50,000. The Income Tax Inspector reported on 24-12-1989 that the fair market value of the plot was of Rs.3,50,000. The assessee was confronted with this report and the proposal to adopt the value of the plot at Rs.3,50,000. However, the reply was not found to be proper. Hence, an addition of Rs.1,00,000 was made under 'section 13(1)(d) of the Ordinance. The learned CIT (Appeals) found the valuation to be excessive and reduced the addition to Rs.50,000.
3. The learned A.R., of the assessee has strongly agitated the addition to be without any justification. It was argued by the learned A.R., that the Assessing Officer had not given any valid reasons for discarding the declared value. The report of the Inspector was also agitated to be irrelevant to the period involved. The learned A.R. of the assessee further argued that the assessee was not asked -to explain the source of investment in the alleged under valuation for which he had employed the source. The learned D.R., on the other hand, relied-on the Inspector's Report and general nature of the reply of the assessee as discussed in the impugned order to support the Departmental Appeal.
4. The assessee had agitated the addition as reduced by the learned CIT (Appeals) whereas the Department has agitated the reduction in the addition made under section 13(l)(d) of the Ordinance. The Assessing Officer has relied on the report of the Inspector dated 24-12-1989 whereas the property was purchased on 17-7-1987. Thus, clearly the report is not relevant to the period under consideration. On the other hand, the arguments of the learned A.R. are found to be forceful. Even if the valuation of Rs.3,00,000 or Rs,3,50,000 was to be considered, the Assessing Officer should have asked the assessee to explain the source of investment. Since this was not done and the Inspector's Report is held to be irrelevant, the addition made under section 13(1)(d) is deleted. As a result the assessee's appeal is accepted whereas the Departmental appeal is dismissed.
(Sd.)
(Inam Ellahi Sheikh)
Accountant Member
5. ABDUL RASHID QURESHI (JUDICIAL MEMB.ER).---I have carefully and minutely gone through the order passed by my learned brother, the Accountant Member, but with utmost respect and regard, I cannot persuade myself to agree with this view. The precise issue before us is that an addition made under section 13(1)(d) of the Income Tax Ordinance, 1979 (hereinafter called the Ordinance) is sustainable or not. It is an established fact that the assessee purchased a plot measuring 1-Kanal in the Government Employees Housing Society, Township Lahore on 17-7-1987 for a declared value of Rs.2,50,000. The assessee in his wealth statement made on 30-6-1988 had disclosed the purchase of above said 1-Kanal plot in lieu of Rs.2,50,000. Circle Inspector after conducting inquiries submitted report dated 24-12-1989 according to which the fair market value of the said plot was estimated at Rs.2,50,000. On the basis of the fair market value, the assessee was duly confronted vide show-cause notice dated 21-6-1990 requiring him to explain why the value of the said plot may not be adopted at Rs.3,50,000 as the declared value was grossly understated. The reply of the assessee's A.R. dated 25-6-1990 is of general nature. After obtaining statutory approval under section 13(2) of the Income Tax Ordinance, 1979, from the learned I.A.C. Range-VI Companies Lahore, the assessee was again confronted vide show-cause notice dated 15-5-1991. He was provided an opportunity to show-cause as to why the value of the plot should not be adopted at Rs.3,50,000 on the basis of inquiry report of the Circle Inspector. The assessee through his learned A.R. again submitted the reply of general nature. The assessee was provided with two opportunities but he miserably failed to produce evidence in his favour. It was the duty of the assessee to submit the copy of the registered sale-deed with regard to the plot or to produce a certificate issued by the competent Authority of the Government Employees Housing Society, Township. Generally in such like housing societies price is fixed for a plot, which is to be paid in 3/4 instalments. If the version of the assessee with regard to the declared value of the plot was correct, he could have produced the receipts about the payment of instalments. The assessee submitted his reply of general nature twice and he could easily explain the source of investment. If the report of the Circle Inspector was without any basis, the assessee should have submitted an affidavit, but he did not do so. The Circle Inspector is not found inimical towards the assessee. The plot is situated in Township where the market value of one Kanal is more than the estimated value. Keeping in view this situation, the report submitted by the Circle Inspector seems to be genuine.
The assessee has miserably failed to support his version. He has already been given relief by the learned first appellate authority who reduced the value of the plot from Rs.3,50,000 to Rs.3,00,000 and also reduced the addition made under section 13(1)(d) from Rs.1,00,000 to Rs.50,000. Undoubtedly the plot was purchased on 17-7-1987 and the Circle Inspector submitted the report on 24-12-1989. Between the period of 17-7-1987 to 24-12-1989 there was not difference in tile value of property situated at Township area Lahore, if there was a difference, it would have been very slight. The assessee had not quoted any parallel case and he has also failed to produce the copies of payment receipts. Therefore, the value of the property was properly assessed by the learned first appellate authority having taken a lenient view. Keeping in view these facts, I am of tile opinion that the order of learned CIT(Appeals) lone-III Lahore, is an exceptionable order, which does not call for any interference.
6. As a result both the cross-appeals filed by the assessee as well as the department are dismissed as being devoid of force and merits.
(Sd.)
(Abdul Rashid Qureshi)
Judicial Member.
As a difference of opinion has arisen:
"Whether the declared value of the plot in dispute was in accordance with the market value and the addition made under section 13(1)(d) of the income Tax Ordinance, 1919 (hereinafter called the Ordinance) was properly reduced from Rs.1.00.000 to Rs.50,000 "
It is proposed that honourable Chairman may exercise his discretion under subsection (7) of section 133 of the Income Tax Ordinance. 197 (hereinafter called the Ordinance) so that the learned 3rd Member may settle the controversy.
(Sd.) (Sd.)
(Inam Ellahi Sheikh), (Abdul Rashid Qureshi),
Accountant Member.Judicial Member.
7. NASIM SIKANDAR (JUDICIAL MEMBER)---The above question lids been referred to me under section 133(7) of the Income Tax Ordinance.
8. I have gone through the proposed order by the learned Division Bench. Learned A.R. of the assessee Mr. Abdul Qudus Abid has also been heard. Since the facts are not disputed and since these have already been stated with precision in earlier paras. no useful purpose will be served in repeating them. Therefore, I will proceed to answer the question without involving into preliminaries.
9. The returned price of the demised plot at Rs.2,50,000 was not supported by any evidence as no registered deed was executed at the time of its purchase. The assessee could not have made any other answer except to support his declared price. This was described as vague reply by the Assessing Officer. However, the assessee identified the seller and, therefore, the Assessing Officer instead of making a wild guess to pitch the price at Rs.3,50,000 could verify it from the seller. The report of the Inspector being late in time by almost two years could not be accepted as a gospel truth. He made a guess and the Assessing Officer adopted it as if it was based upon a scientifically proved fact. Learned first appellate authority substituted its own estimate as against the one made by the Assessing Officer, which, in turn was based upon the guess made by the Inspector.
10. Time and again the Assessing Officer refers to vague report of the assessee without realising, as said above, that the assessee could not do further than repeating his declared cost as no registered deed was involved. Ordinarily, after having been informed of all the details of seller, the assessing officer could examine him to make out a case for disbelieving the declared cost if such a conclusion did arise in the circumstances. Also, he could lay his hands upon similar other transfers made by the members of the Housing Society. Even the Society administration could have been asked to assist him in reaching the real market value of the plot in question. Such an exercise was not at all difficult with the armoury available with the assessing officer under various provisions of the Ordinance. However, instead of exercising any of these options, he resorted to the easiest possible way to require report from the Circle Inspector. The facts on which this report was based, if any were actually there, were not confronted to the assessee. So nothing really came out of these proceedings. The assessee kept on insisting its returned version and the assessing officer its own estimate.
11. The law on the given set of circumstances is clear and outspoken. To make and justify an addition under various provisions of section 13, particularly subsection (10)(d) it is the assessing officer who will have to determine" the actual investment made by an assessee. This determination can never be a wild guess, or a fanciful estimate. Whatever he determined must stand the test of reason and rationale. Even a guess has to be made on some basis or material brought home. The report of the Inspector could have formed a reasonable basis if it was formed on any acceptable mode of inquiry. Burdening a subject with heavy taxation on personal views of the officials involved, irrespective of the position in the hierarchy, cannot be sustained. It is for this reason that judicial proceedings are not allowed to be transformed into record. For if a slightest exception is allowed to make in road, the results at the end of the line would be disastrous. The reasons for estimating the price of the property are as much material as the "determined" price itself. Absence of basis on record often tempts the appellate authorities to use long arm of the notorious phrase, "somewhat excessive" in order to substitute their own opinion for the one expressed by the assessing officers. This is what happened at the first appellate stage in this case as well. An estimate without basis will not change its colour and assume respectability for the mere reason of its having been made by the still higher official functionary. Two wrongs do not make a right.
12. Learned Accountant Member having reached the same conclusion though for some different reasons, I will join him in saying that the departmental appeal should be dismissed and the one by the assessee be accepted.
13. The reply of the referred question, therefore, is in the negative and the result of cross-appeals expressed in para. 4 (ante) is subscribed.
C.M.S./320/Trib. Order accordingly.