I.T.A. NO 3364/LB OF 1995 VS I.T.A. NO 3364/LB OF 1995
1997 P T D (Trib.) 2235
[Income Tax Appellate Tribunal]
Present: M. Saleem Shad Qureshi, Judicial Member and Ahsan Alam, Accountant Member
I.T.A. No. 3364/LB of 1995, decided on 28/08/1996.
Income Tax Ordinance (XXXI of 1979)----
----S. 13(1) (d)---Addition---Validity---Benefit of doubt ---Assessee was engaged in manufacturing agricultural implements---Income from such engagement was exempted from tax till 1988-89 whereas appeal related to year 1987-88---Assessee also purchased agricultural land whereby he was asked to file return of total income for year 1987-88 which was filed---Again assessee was asked to file wealth statement and explanation regarding reconciliation within 3 days---Such exercise went on without having clearance of mind and ultimately additions were made which the C. I.T. (A) confirmed---Held, benefit of doubt went in favour of assessee as no tax by intendment or implication would be levied---While taxing department had to look in closely at what was clearly stated ---Assessee having clearly made out his case, orders of department were vacated by Tribunal in circumstances.
PLD 1990 SC 68 ref.
Ahsan-ul-Haq, I.T.P. for Appellant
Masood Ali Jamshed, D.R. for Respondent
Date of hearing: 28th August, 1996
ORDER
M. SALEEM SHAD QURESHI (JUDICIAL MEMBER)---The assessee/appellant has preferred this appeal against the order of the learned A.A.C., Sahiwal vide his A.O. No. 378, dated 13-6-1995 pertaining to assessment year 1987-88.
2. Main grievance of the appellant/assessee is that there is no justification to make the addition of Rs.4,45,300 under section 13(1)(d) just on flimsy grounds and relying on a bogus wealth statement which had never been filed by the appellant, thus the addition made is highly excessive, harsh and unjust., It is also contended that the personal expenditure's vivid description by the learned A.A.C. is misleading and against the facts of the case. It is also further objected that the assessment of business income at Rs.40,000 is just on flimsy grounds and excessive. It is further argued that the purchase of properties was made during the period, the income of the assessee was exempted from Income Tax under clause 98 of the Second Schedule of the Income Tax Ordinance, 1979.
3. Brief facts of the case are that the appellant was a member of an A.O.P. named as Madina Mechanical Works, Hujra Road, Depalpur engaged in the business of repair and manufacturing of agricultural implements and appliances. Income from the manufacturing of agricultural implements was exempted from the levy of tax under clause 98 of the Second Schedule of the Income Tax Ordinance, 1979 till the year 1988-89 whereas the appeal relates to the assessment year 1987-88 meaning thereby that the same stood exempted during the year under appeal.
4. The appellant/assessee purchased agricultural land measuring 58 Kanals, 8 Marlas and 5 Kanals, 7 Marlas on 10-1-1987 and 26-3-1987 for Rs.2,75,200 and Rs.1,09,000 respectively. The Department on receipt of information regarding the purchase of the abovesaid agricultural land, issue a notice under section 56 whereby the appellant was asked to file a return of total income for the charge year 1987-88 so as to initiate the income-tax proceedings against him. The return was filed declaring income as per following:---
50% share from A.O.P. named ??????????? Rs.76,700
M/s. Madina Mechanical Works,
Hujra Road, Depalpur.
The appellant/assessee, thereafter, was asked by the Assessing Officer to file the wealth statement which was filed declaring net wealth at Rs.7,11,600. The I.T.O. vide his letter dated 25-11-1991 asked to file explanation regarding the reconciliation made on 30-6-1987 relying on the wealth statement filed as a member of the A.O.P. named as Madina Mechanical Works on 30-6-1984 amounting to Rs.4,92,400 whereas the wealth statement available .with the Department was of Rs.54,100 only meaning thereby that a sum of Rs.4,38,300 remained unreconciled. It is quite interesting to note that the appellant was asked to file the reply within 3 days of the receipt of the letter otherwise proceedings under section 65 would be initiated whereas no assessment had ever been made in the name of the appellant. In these circumstances the validity of the abovesaid notice is doubtful as void ab initio. The learned counsel of the appellant vehemently argued on this point and pointed out that the then counsel of the appellant replied vide his letter No.437, dated 2-12-1991 whereby the wealth statement available with the Department amounting to Rs.54,100 was challenged as no such wealth statement was ever filed by the appellant. An affidavit in this regard was also filed by the appellant whereby he had denied having filed any such wealth statement amounting to Rs.54,100 but a wealth statement amounting Rs.4,92,400 for the charge year 1984-85 was filed. The appellant, thereafter, got copy of the wealth statement available with the Department. It is also pertinent to mention here that the wealth statement available with the Department was lacking any signatures of the then I.T.O. rendering it doubtful: Copies of both the wealth statements have been placed before us. The signatures on the so-called wealth statements available with the Department do not tally with the signatures of the appellant.
5. The learned I.T.O. issued show cause under section 13(2) whereby he showed his intention to make the addition of Rs.4,38,300 under section 13(1)(d) as the wealth statement filed on 30-6-1987 was unreconciled. The addition made thereafter was to the tune of Rs.4,45,300 whereas the show-cause notice in this regard was issued for Rs.4,38,300 meaning thereby that the approval obtained from the learned I.A.C. Income Tax/Wealth Tax was for Rs.4,38,300 and the addition made was Rs.4,45,300 meaning thereby that the addition made under section 13(1)(d) was void ab initio as no such approval in this regard was sought. It is also argued that the addition under section 13(1)(d) of Rs.4,45,300 reflects that the wealth statement available with the Department should be of Rs.47,100 instead of Rs.54,100. In these circumstances the benefit of doubt goes in favour of the appellant rather than the Revenue as no tax by intendments or implications can be levied as held by the Supreme Court of Pakistan in PLD 1990 SC 68 that for taxing Act one has to look merely at what is clearly stated, thus there is no room-for intendments. We find that the Assessing Officer failed to apply his mind in this regard and did not consider the followings:---
That the income from the manufacturing of agricultural implements was exempted from the levy of income tax under clause 98 of the Second Schedule of the Income Tax Ordinance, 1979 whereas the assessment relating to the year 1987-88 which stood exempted. The appellant was not supposed to conceal his income on account of the fear of levy of tax.
The appellant received 50% share from the declared income of Rs.8,88,250 for the charge years 1976-77 to 1984-85 and Rs.4,88,603 for the period from 1985-86 to 1987-88 meaning thereby that he received a sum of Rs.6,88,426 up to 1987-88 as his share from the A.O.P. whereas on the wealth statement available with the Department, the personal expenditure as allegedly declared by the appellant was Rs.8,000. In these circumstances sufficient amount was available with the appellant at the time of purchase of the properties.
The learned A.A.C. vide his appellate orders has disagreed with the 50 % share of the appellant for the charge years 1976-77 to 1984-85 amounting to Rs.4,44,125 as per page 3 of the appellate orders but Rs.3,31,375 as per page 6 of the appellate order and has not disagreed with the share received thereafter for the period 1985-86 to 1987-88. All these circumstances was reflect that sufficient resources were available with the appellant to purchase the impugned properties. The reply to the show-cause notice was filed by the appellant on 10-6-1992 whereas the learned Assessing Officer has denied to have received any such reply as per gage 5 of the assessment order. These circumstances show that the doctrine of audi alteram partem has been ignored. In the case of Bireshwar Mookarji v. Inspecting Additional Commissioner of Income Tax (1982-135 ITR 29) the Allahabad High Court held that the principle audi alteram partem applied only to proceedings in which is involved some element of decision making which may adversely affect the party concerned. The pre-requisite to the application of the principle of the right to be heard is that the proceedings should require the resolution of some controversy which might jeopardise some legal right of a party. The proceedings in which such a right is asserted must entail some enquiry resulting in some order which has at least rudiment or milieu of adjudicatory action. It is highly unjust to take any decision without putting the reply of the appellant which makes the whole exercise void in toto.
The addition has been made under section 13(1)(d) amounting to Rs.4,45,300 having the difference of wealth statements available with the Department and the appellant. It is interesting to note that by making the addition of Rs.4,45,300, the department has itself weakened its case as this amount reflects that the wealth statement should be of Rs.47,100 rather than Rs.54,100. In fact the Department was not sure of which wealth statement was available at the time of making the addition. The learned A.A.C. arrived at the conclusion that the appellant should be having Rs.1,59,226. In fact he committed a mistake by considering the gift received amounting t6 Rs.80,000 as expenditure. If we add this figure to the net in flow of cash as calculated by the learned A.A.C., the total cash in hand as on 30-6-1984 should be Rs.2,39,226. This would be interesting to note that the Department has shown cash in hand as on 30-6-1984 at Rs.700 which has no relationship whatsoever with the amount calculated by the learned A.A.C. whereas the said figure of Rs.2,39,226 has some relationship with the cash declared by the appellant on the wealth statement available with him i.e. Rs.3,35,000.
6. We have thoroughly considered both the wealth statements and the cash flow statements. We have also considered affidavit filed by the appellant before the learned A.A.C. (A).
7. After considering all the facts and circumstances of the case and also going through the record obtained before us while perusing the orders of the authorities below, we are of the considered opinion that the appellant rightly made out his case in the light of above discussion. We, therefore, in the light of above discussion vacate the orders of the authorities below and delete the addition under section 13(1)(d). We allow this appeal accordingly.
C.M.S./299/Trib. ??????????????????????????????????????????????????????????????????????????????? Appeal allowed.