I T-AS. NOS. 3783/LB TO 3785/LB OF 1995 VS I T-AS. NOS. 3783/LB TO 3785/LB OF 1995
1997 P T D 859
[Income-tax Appellate Tribunal Pakistan]
Before Nasim Sikandar, Judicial Member
LT.As Nos 3783/LB to 3785/LB of 1995, decided on 14/12/1995.
(a) Income Tax Ordinance (XXXI of 1979)---
----Ss.59, 65, 13(1)(aa) & 13(1)(d)---Additions---Validity---Assessee returned income under Self-Assessment Scheme (1987-88)---Assessing Officer accepted the income but later on, case was re-opened and explanation was sought about other source of income which assessee gave to the satisfaction of Revenue and assessment was accepted ---Assessee returned income for 1988-89 and 1989-90, under simplified assessment procedure-- Assessing Officer accepted the income but again re-opened all the three' assessments on ground of concealment and made additions under different provisions of S.13 of the Income Tax Ordinance, 1979---First Appellate Authority confirmed additions to the grievance of assessee---Held, that assessee having been required to snake explanation and Revenue having once accepted same could :got be allowed to take U turn to the detriment of assessee---Re-opening of assessment under S.65 was not in accordance with law and additions were deleted in circumstances.
(b) Income Tax Ordinance (XXXI of 1979)---
----S.13---Addition---Validity---Valuation of construction of property-- Assessee constructed market---Revenue took covered area for valuation as indicated in approved plan---Upper floor was still incomplete and as such rate of construction declared by assessee was rejected---Held, mere fact that plan was approved for certain covered area would not by itself establish that actual construction was carried out to same extent in single phase and thus was unnecessary tinkering with declared version.
1993 PTD 766; 1993 PTD 1; (1994) 69 Tax 258 (Trib.) and Central Insurance Company v. C.B.R. (1993) 68 Tax 86 ref.
M.S. Babar for Appellant.
Qaiser M. Yahya, D. R. for Respondent.
Date of hearing: 14th December, 1995.
ORDER
In these further appeals for the assessment years 1987-88 to 1989-90 an individual deriving income from dealing in coal in the first year and in soap in the later two years assails in consolidated order recorded by C.I.T.(A) Sialkot on 5-6-1995.
2. In the assessment year 1987-88 the returned income at Rs.34,000 was accepted under section 59(1) of the Ordinance. The case was reopened on the ground that the assessee had shown much higher rate of property income when compared with immediate preceding year. It was also found that the assessee constructed a market comprising of 15 shops on the ground floor and eight rooms on first floor on a self-owned plot. According to the Assessing officer the assessee failed to explain the sources where from investment in construction was made. Accordingly after reopening of the case two additions under section 13(1)(aa) at Rs.3,25,000 and 13(1)(d) at Rs.2,87,000 were made on disbelieving the sources as well as the rate of construction per sq ft. Also the income from business was determined at Rs.1,00,000 by adopting sales at Rs.4,00,000 and subjecting them to a rate of 15 %. Income from property was estimated at Rs.84,000 to frame assessment at Rs.7,96,000. In the Assessment years 1988-89 and 1989-90 incomes returned at Rs.34,300 and Rs.34,500 respectively were accepted under simplified assessment procedure. However, the assessments in both of the years were also reopened after finding that the assessee had failed to declare income from agriculture. This non-declaration according to the consolidated assessment order recorded in respect of the two years 1988-89 and 1989-90 amounted to concealment. After observing usual formalities income from this source was determined at Rs.10,000 and income from property at Rs.84,000. The sales of soap in this year were estimated at Rs.4,00,000 and subjected to a rate of 15%. In this manner net income was assessed at Rs.1,94,000 in the year 1988-89. In the year 1989-90 again the same treatment was extended to the assessee with regard to three sources assessed viz. business income, income from property and agriculture income to repeat assessment at Rs.1,94,000 in this year as well.
3. Learned first appellate authority by way of the impugned order confirmed both of the additions earlier made by the Assessing Officer in the year 1987-88 under various provisions of section 13 of the Ordinance. Also the estimated income from the said sources was confirmed in all the three years. This has brought the assessee in further appeals before us.
4. Parties have been heard. Learned counsel for the assessee forcefully contends that there did not exist any reason whatsoever to justify reopening of the case and that the reasons assigned in this behalf in the year 1987-88 in fact related to the year 1988-89. Further contends that this is a clear case of change of opinion inasmuch as after filing of return under S.A.S. in the year 1987-88 the assessee was required to explain the source of investment in the abovesaid plot and construction and on reply the assessing officer felt satisfied and therefore, did not proceed in the matter any further. A specific reference is made to the order sheet entry, dated 8-1-1989 which reads as under:---
"Present Abdul Ghani, requisite documents filed alongwith site plan, proof of investment has been filed. The average cost of construction at Rs.147 per sq. ft. is reasonable and accepted. The investment of Rs.3,25,000 stands explained. No adverse inference is drawn."
5. On merits it is stated that the alleged reasons stated for reopening of the case in all the three years were clearly misconceived by the Assessing Officer. First the increase in property income was shown for the first year 1988-89 and not in the year 1987-88 as recorded in the assessment order. Also the Assessing Officer itself found that investment in construction was made in the year 1986-87 and therefore, he could not examine the same in the year 1987-88. Further contends that the assessee having discharged its burden on providing complete and full details of the persons from whom he obtained advances and received foreign remittances, the Assessing officer after reopening the case could not burden him with the addition without making an objective inquiry. The one adopted in this regard is described as one sided and un-realistic. As per alleged non-declaration of agricultural income in the later two years, learned counsel contends that the assessee did not own a single inch of agricultural land anywhere in Pakistan in the three years under review. A small piece of land comprising a little more than 10 Kanals was disposed of by way of a registered sale deed, dated 10-10-1968. This was however regained by his son Muhammad Sarwar through a suit for pre-emption instituted on 3-11-1969 and finally decreed in his favour on 10th day of December,1973. In support of his submission he refers to proceedings in the said suit for possession through Pre-emption No.870 of 1969 a copy of the plaint, the judgment as well as the decree sheet of Civil Court at Sialkot. It is also claimed that the assessee duly submitted an affidavit in support of his aforesaid submissions to say on oath that no agricultural land was possessed by him after the one disposed of by him in 1968.
6. On legal plaint learned counsel for the assessee seeks support from reported decisions cited as 1993 PTD 766, 1993 PTD 1 to say that no definite information was available with Revenue to reopen the case in the year 1987-88 as well as rest of the two years. A judgment of this Tribunal cited as (1994) 69 Tax 258 (Trib.) is also relied upon to stress that reopening of the assessment particularly the first year viz. 1987-88 is a clear case of change of opinion: a basis which has persistently been disapproved by higher judicial forums as a guise to exercise powers vested in Revenue Authorities under section 65 of the Ordinance.
7. Learned D.R. on the other hand supports the orders of the authorities below for the reasons stated therein.
8. The contentions made at the bar for the assessee bear weight. The facts in hand stand in close proximity with those examined by this Tribunal in (1994) 69 Tax 258 (Trib.). The fact that after filing of return under section 59(1) of the Ordinance in the year 1987-88 the assessee was required to submit details of his investment in the property and no adverse inference was drawn thereafter is established on record. Although such requisition in the perspective of a return filed under section 59(1) of the Ordinance has surprised us, the fact remains that the assessee was required to produce the said details and the Revenue did not consider it to a matter to be probed any further. In the case relied upon by the assessee, in exactly similar circumstances the Assessing Officer required certain informations with respect to purchase of a property and then dropped proceedings. However, after sometime he again issued notices expressing his intention to reopen the case and in fact obtained approval of the Administrative authority to do the same. Finally an addition was made alleging non-disclosure of investment and its sources in the purchase/construction of a property. This Tribunal on the authority of other two cases relied upon before us, Central Insurance company v C.B.R. (1993) 68 Tax 86. 1993 PTD 766 Eduljee Dinshaw v.s I. T.O. knocked off the addition holding it to be case of change of opinion. file situation before us is quite similar so far as the Revenue is concerned. The assessee having been required to make an explanation and the Revenue' having once accepted the same, a U-turn cannot be allowed to be taken to the detriment of rights of the assessee. If reopening on the basis of change of opinion is permitted the whole structure will fall apart, as the finality of an assessment order shall always remain in jeopardy leaving the tax-payer un secured. Therefore, we will allow the preliminary objection for the year 1987-88 and hold that reopening of the assessment under section 65 of the Ordinance was not in accordance with law and the established judicial opinion held in this behalf
9. Even on merits we find the Revenue to be in a precarious position. Its the first place total covered area of the shops and the rooms etc. constructed on the first floor was taken as indicated in the approved map. Vile contention of the assessee that upper floor was still incomplete was rejected without any rhyme or reason. Mere fact that a plan was approved for certain covered area will not by itself establish that actual construction was arrived wit to the same extent in a single phase. The estimation of rate of 'Instruction at Rs.150 per sq. ft. as against the declared at Rs.147 again appears unnecessary tinkering with the declared version. The income assessed from business in the three years after reopening is totally in a void and is not supported by an iota of evidence or material on record. The fact is that even the exact nature of business of the assessee has not been discussed at all. The computation of income from agriculture in the remaining two years is rather lamentable. The contention of the assessee that he owned some agricultural land which was sold in the year 1968 but regained by his son through a suit for possession in the year 1973 stands established on record beyond any shadow of doubt. Mere fact that the assessee returned income from some source in one year at his tax consultant repeated tire same after a couple of years will not by itself give a licence to the Assessing Officer to hook the assessee and estimate income from this source in all the years to "'rue. The framing of assessment in the year 1987-88 and also in rest of two years leaves a lot to be desired. In our opinion the Assessing Officer stretched himself unnecessarily to entrap the assessee. The conduct of the assessee in not submitting wealth statement as required under section 58(1) of the Ordinance in the last two years cannot be condoned at any rate. However, the manner in which the Revenue acted in this case cannot be approved. The treatment of the impugned assessments by the first Appellate Authority is equally unfortunate. It appears that the learned first Appellate Authority hesitated in applying its mind to the plain facts before it. It appears to have done nothing except to reproduce the assessment order, the submissions made in writing before it and its blind approval to the action taken by the authorities below.
10. The reopening of the assessments in all the three years being without any justifiable cause and rather being offensive to the safeguards provided to the tax payers in the mechanism provided in section 65 of the Ordinance, we will allow all the three appeals. Resultantly the consolidated impugned order, dated 5-6-1995 is set aside and the three assessments framed after reopening of the case are cancelled.
M . B. A. /264/Trib.