I.T.AS. NOS.2803/LB AND 2804/LB OF 1997, DECIDED ON 13TH DECEMBER, 1997. VS I.T.AS. NOS.2803/LB AND 2804/LB OF 1997, DECIDED ON 13TH DECEMBER, 1997., 1998 PTD-INCOME-TAX-APPELLATE-TRIBUNAL-PAKISTAN 1238 (1997)

(a) Income-tax---

-----'Assessment"---Connotation---Assessment is wider term and includes the entire proceedings and culminates with the signatures and seal on the assessment order.

(b) Income Tax Ordinance (XXXI of 1979)---

----Ss. 160 & 66---Assessment---Computation---Limitation---Computation of limitation period---By virtue of provisions contained under .S.160 of the Income Tax Ordinance, 1979, the period of limitation provided in S.66 of the Ordinance is extended for a period of six months.

(c) Income Tax Ordinance (XXXI of 1979)---

----S. 13(l)(c)---Unexplained investment ---Addition---Justification-- Assessees, partners of a registered firm, had failed to discharge the onus of proving that the amount deposited in Bank in their individual names, which had been added to their total income, actually belonged to the firm and was duly entered in the books of accounts of the firm ---Effect---Assessees having failed to discharge the onus laid on them, Assessing Officer, in circumstances, rightly added the amount with which Bank accounts were opened in the names of the assessees, to their total income.

Irfan Ahmad Sheikh for Appellants.

Shahbaz Butt, L.A. and Abdul Rauf, D.R. for Respondent.

Date of hearing: 10th December, 1997.

ORDER

MUHAMMAD MUJIBULLAH SIDDIQUI (CHAIRMAN). ---The appellants Muhammad Siddique and Muhammad Munir are real brothers and the facts and circumstances in both the appeals are common, therefore, both the appeals have been heard together and are disposed of by this single consolidated order.

2. Heard Mr. Irfan Ahmed Sheikh, Advocate for the appellants and M/s. Shahbaz Butt, Legal Advisor/Abdul Rauf, D.R. for the respondent.

3. The first common objection raised on behalf of appellants is that the assessment orders under section 62/65/135 were completed after the expiry of period of limitation and, therefore, they are liable to be annulled. Briefly stated the relevant facts are that the original assessment orders under section 62/65 were set aside by a Division Bench of this Tribunal vide order dated 5-4-1995 in I.T.A. No.673 and 674/LB of 1995 for fresh assessment after necessary inquiry into the facts. According to the learned counsel for appellant, the orders of the Tribunal setting aside the assessments were received by the assessing officer before 30-6-1995 and, therefore, by virtue of the provisions contained in section 66 of the Income Tax Ordinance, the reassessment could be completed up to 30th of June, 1996 while assessments were completed on 30th of December, 1996 and as such the assessments are barred by time. The development which took place in the meanwhile was that the assessee first applied to the Commissioner of Income Tax for transfer of jurisdiction from the assessing officer which was not accepted and, therefore, a writ petition was filed in the Lahore High Court and the Honourable Lahore High Court made an interim order on 14-5-1996 as follow:

"Subject to notice, in the meanwhile proceedings before the lower authorities shall continue but the assessment shall not be finalized."

The above order of honourable Lahore High Court remained in field up to 23-12-1996 when an application on behalf of Department came for consideration before the Honourable High Court praying that a period of 180 days has expired to the issuance of a stay order and by virtue of the provisions contained in Article 199(4-A) of the Constitution of Islamic Republic of Pakistan, 1973, the stay could not remain operative for a period exceeding 180 days. On 23-12-1996 the counsel for the appellants did not oppose the vacation of stay order, which was a fact already vacated automatically on expiry of the period of 180 days. But further did not press the writ petition with undertaking that the books of accounts shall be produced by the appellants before the assessing officer for examination, provided complete protection of the books is assured to them. The writ petitions were, thus, dismissed. Thereafter, the appellant produced the books of accounts for the first time before assessing officer on 29-12-1996, including the balance-sheet and thereafter, the assessment was completed on 30-12-1996. The assessee/appellant took plea in the first appeal that the assessments were barred by time as they could be completed by 30-6-1996 in pursuance of the provisions contained in section 66 of the Ordinance. The learned CIT(A) did not accept the contention for the reason that the assessing officer has been issuing notices for completion of assessment proceedings, the details whereof are given in the assessment order. At least nine notices were issued from 2-10-1995 to 14-12-1996 but no compliance was made by the assessee, because, of the reason that writ petitions were filed in the High Court and stay order was granted. On the other hand the assessee/appellant filed contempt proceedings against the assessing officer. The learned CIT(A) held that because of the stay order granted by the Honourable Lahore High Court the period of limitation stood extended for six months and thus period of limitation which was to expire on 30-6-1996 under section 66 of the Income Tax Ordinance, 1979 was extended up to 31-12-1996. The reassessment therefore was completed within the period of limitation. The contention that interim order of the Honourable Lahore High Court dated 14-5-1996 did not restrain the Assessing Officer from continuing assessment proceedings but merely stop the Assessing Officer to pass the final assessment order, therefore, the Assessing Officer was bound to conclude assessment proceedings before 30-6-1996 and ought to have signed the assessment order on expiry of the stay order of the Honourable High Court was not accepted.

The contentions raised before the learned CIT(A) have been reiterated before us and Mr. Irfan Sheikh has submitted that since assessment proceedings were not stayed by the Honourable High Court, therefore, the assessing officer ought to have completed the assessment proceedings up to 30-6-1996 and if the assessee had not produced the books of accounts by that date (which were not produced admittedly) the assessing officer ought to have proceeded ex part. According to the learned counsel, the assessing officer should have drafted assessment order under section 63 by 30-6-1996 and as soon as the stay order was vacated, he should have signed the assessment order drafted on or before 30-6-1996. We have pointed out the provisions contained in section 160 of the Income Tax Ordinance, 1979 to the learned counsel for the appellant which contains that while computing the period of limitation the period for which stay of Court was operative shall be excluded. We then asked the learned counsel as to how much period was to be excluded under this provision, to which he replied that a period of six months was to be excluded for the purpose of computing the period of limitation. We then next asked as to what would be the extended period of limitation to which he replied that it would be extended up to 31st of December, 1996. The learned counsel was further pointed out that the Honourable High Court directed that the assessment shall not be finalized and was asked as to what was the connotation of expression assessment according to him the learned counsel conceded that the assessment is wider term and it includes the entire proceedings and it culminates with the signature and seal on the assessment order. In view of the submissions made by the learned counsel for the appellant we are not impressed with the distinction made in the expressions, proceedings and assessment. In the circumstances as narrated above, we are of the opinion that the learned CIT(A) has rightly held that, by virtue of the provisions contained under section 160 of the Income Tax Ordinance, the period of limitation provided in section 66 is extended for a period of six months with the result that the assessment could be completed by 31-12-1996 and as such the assessment completed on 30-12-1996 was within the period of limitation. The contention of the learned counsel for the appellant that the assessing officer could not ask the assessee to join the assessment proceedings between 1-7-1996 and 30-12-1996 is not tenable; first for the reason that when the assessment could be completed by 31st of December, 1996, the assessing officer could exercise all the necessary and ancillary powers for completion of assessment up to that date, and secondly, the assessee has already joined the assessment proceedings after voluntarily giving a statement before the Honourable High Court that the books of accounts shall be produced before the assessing officer and as such it is a fiat accompli. Once the books of accounts have been produced before the assessing officer by the assessee it could be utilized by the assessing officer for all intents and purposes for the finalization of assessment before the expiry of period of limitation. The objections raised on behalf of appellant on the point of limitation are, `therefore, repelled.

The second objection which is in fact the main bone of contention between the assessees and the Department, is to the addition under section 13(1)(c) in the hands of appellant Muhammad Munir at Rs.55,00,000 and in the hands of Muhammad Siddique at Rs.57,00,000. The relevant facts are that both the appellants were partners of a registered firm M/s. BNS Industries, Sialkot in the assessment year 1989-90. After the completion of assessments in respect of the registered firm and in respect of partners of the firm including the appellants Muhammad Munir and Muhammad Siddique, information was received by the Department that appellants Muhammad Munir and Muhammad Siddique opened accounts with United Bank Ltd. Mujahid Road, Sialkot being Account No.8196 and. 8195 respectively with the initial deposit of Rs.55,00,000 and Rs.57,00,000 which were not disclosed either in the accounts of firm or in the wealth statements of the two appellants. On receiving this information, the assessing officer initially made provisional assessment orders under section 60-A and subsequently under section 62/65. The appellants were duly confronted with the opening of the accounts and both of them conceded that accounts were opened in their respective names but contended that the money belonged to firm and not to them in their individual capacity. The contention was not accepted and the additions were made in the hands of two appellants in their individual assessments. The appellants preferred first appeal without any success and thereafter, second appeal before the Tribunal. The assessments were set aside by the Tribunal for further probe into the contention on behalf of appellants that the alleged bank accounts pertained to be registered firm and not to them. It was alleged on behalf of the appellants that the books of accounts were with the other partner namely Muhammad Bashir and since the firm was dissolved and there were disputes between the partners, therefore, the said ex-partner Muhammad Bashir (who is also real brother of the appellants) was not willing to produce the same. The assessments were set aside mainly for examining the books of the firm for ascertaining the plea taken on behalf of the appellants. In the facts and circumstances already narrated above, the appellants ultimately produced the books of accounts and the balance-sheet before the assessing officer on 29-12-1996. The assessing officer held that the balance-sheet of the firm produced by the appellants is totally different from the copy of balance-sheet already available on record which was produced along with the return of the firm for the assessment year 1989-90. According to the contents of the original balance-sheet available on the record of Department the credit balance of Rs.2,38,007 was shown in the United Bank Ltd. account as on 30-6-1989. Thus, the contention of appellants that the bank accounts maintained by them with the initial deposit of Rs.55,00,000 and Rs.57,00,000 were declared in the balance-sheet of the firm for the period ending 30-6-1989 was disproved. This fact was duly intimated to the appellants by the assessing officer vide notices bearing Nos.275 and 276, dated 14-12-1996. It was further intimated to them that neither the amount of deposits were shown in the closing credit balance of the firm as on 30-6-1989 nor the deposits were declared in the wealth statement of the appellants. The assessing officer further examined the books produced by the appellants. It was contended that the deposits in the bank accounts were included in the books of accounts of the firm. The balance sheet produced on 29-12-1996 showed the credit balance in U.B.L. accounts at Rs.1,14,37,999.56. The authorized representative of the appellant when confronted with the fact that the balance-sheet produced on 29-12-1996 differed with the original balance-sheet available on record, as in the original balance-sheet the amount of deposit with the U.B.L. were shown at Rs.2,38,007.56 while in the balance-sheet subsequently produced showed bank accounts with U.B.L. at Rs.1,14,37,999.56. The assessing officer, therefore, asked to produce the books of accounts again on 30-6-1996 in order to verify the veracity of balance-sheet produced on 29-12-1996. The authorized representative of the appellants M/s. Irfan Ahmad Sheikh and Mustafa Rizvi, Advocates produced the books which were examined by the assessing officer in their presence and it was found that the newly produced contents of the books differ with the photo copy of the ledger folios produced by the firm at the time of original assessment. The copies whereof were available on record and were duly signed by the then assessing officer Mr. Muhammad Ryas, who had completed the assessment of the firm on 9-1-1990. In addition to the signature of the then assessing officer the copies of ledger folios were duly signed by the then authorized representative of the firm Mr. Amanullah Malik, Advocate. Various discrepancies which have been reproduced in detail in the assessment order were furnished to the authorised representative of the appellants. For the sake of brevity all the discrepancies found by the assessing officer are not produced by us here. They spread over about two pages and the discrepancies are not disputed by the learned counsel for the appellant. The assessing officer also observed that, "the copies of the ledger folios already produced by the assessee firm and available on record were shown to the A.R. of the assessee and above discrepancies were confronted to him. He did not furnish any explanation except stating that the books of accounts, now produced by him are genuine and he does not own the copy of the ledger folios available on income-tax record which have been shown to him". The assessing officer, thus, rejected the books of accounts and the balance-sheet produced on behalf of appellant on 29-12-1996. The reasons for rejecting the books of accounts, recorded by the assessing officer, in the case of appellant Muhammad Munir are reproduced below:

"The contention of A.R. of the assessee that Books of Accounts now produced by him are genuine and he does not own photo copies of Ledgers already available in the assessment record of the Firm is rejected due to the following reasons:---

(1) The copies of Ledger Folios which are already available in the assessment record of the Firm bear the signatures of the then Income tax Officer who made the assessment as well as signatures of A.R. of the assessee and supporting documents such as photo copies of Electricity, Telephone, Sui-gas and Telex Bills and proof of payment of Old-Age Benefit Fund, Social Security, Factory Insurance, Professional Tax, Motor Licence Fee and Property Tax were also furnished by the assessee along with photo copies of relevant pages of Ledger Book at the time of assessment of the Firm.

(2) Ledger Folio No.34 relating to Custom Rebate which is already available on file shows complete day to day details of Custom Rebate received along with cheque number in respect of each and every entry, whereas Ledger Folio No.63 relating to Custom Rebate now produced shows the figures of Custom Rebate received without any detail of cheque number etc. Thus, it is evident that copy of Ledger Account which is already available on file is genuine, whereas copy of Ledger now produced is fabricated. This is only one illustration of fabricated books now produced by the assessee."

From the above, it is crystal clear that Books of Accounts now produced by the assessee are not same which were produced by him at the time of assessment of the Firm, because they do not match and tally with the copies-of Ledger Folios already available on record. It is established that the assessee has tried to hoodwink the Department by reconstruction of Books of the Firm whereby Bank Account which was not declared by the assessee has now been included in the Books of Accounts of the Firm. Books of Accounts now produced by the assessee as such are not reliable and no sanctity can be attached to them.

It is an established fact that the assessee had concealed Bank Account No.8196 which was opened in U.B.L. Mujahid Road Branch, Sialkot on 21-5-1989 with an initial deposit of Rs.5,500,000.

Although the above grounds are sufficient to reject the assessee's contention that Bank Account under question stood included in the Books of Accounts of the Firm, yet the assessee's version has also been examined. The ssessee has made a futile effort to prove that the said Bank Account belongs to the Firm. This has been done in the following, manner:---

In the Books of Accounts, now produced by the assessee, an Advance Account (Peshgi Khata) in the name of Mr. Muhammad Munir, Partner (the assessee) has been shown at Ledger. Folio No.321 which is reproduced hereunder:------

On different dates, various amounts have been debited to the partner's account. This account has been closed by crediting total amount of Rs.55,00,000 on 21-5-1989. In the Cash Book, on 21-5-1989 cash of Rs.55,00,000 has been received from Mr. Muhammad Munir and the same amount has been shown as deposited in U.B.L. in the account of Mr. Muhammad Munir.

As established from the discussion made above, Books of Accounts, now produced by the assessee be not genuine, as such the entries in Cash Book and Ledger as made above are also fabricated and an afterthought.

The assessee, being a partner in the Firm, has its personal account in the Books of the Firm which is reproduced hereunder:---

Personal Account of Mr. Muhammad Munir, Partner.

As per principles of accountancy, any amount received by him from the Firm or paid to the Firm should have been debited or credited in his personal account and there shouldhave been no occasion to open a separate Advance Account in the name of same partner. Moreover, if at all the amount of Rs.55,00,000 was received back by the Firm, it was to be deposited in the Bank Account of the Firm and not in the Bank Account of same partner, if the amount belonged to the Firm.

The above story has been concocted by the assessee and the aforesaid arrangement has been made since concealment on the part of assessee stood established and the assessee had no convincing justification for concealing the said Bank Account.

From the above, it is very clear that the assessee's contention that credit balance of Bank Account No.8196 at Rs.55,00,000 belongs to Firm is incorrect as the said Bank Account was not included in the Firm's Accounts This, it is very clear that Bank Account No.8196 having opened by the assessee on 21-5-1989 with an initial deposit of Rs.55,00,000 has neither been declared by the assessee in his Wealth Statement as on 30th June, 1989 nor shown in the Balance-Sheet of the Firm. The above amount thus, remained unexplained in terms of section 13(1)(c) of Income Tax Ordinance, 1979. Since the assessee has failed to furnish any plausible explanation in response to specific notice Issued Vide No.276, dated 14-12-1996, an amount of Rs.55,00,000 is addition the total income of the assessee under section 13(1)(c) of the Income Tax Ordinance, 1979 with prior approval of the Inspecting Additional Commissioner of Income Tax and Wealth Tax, Companies Range, Sialkot vide his Letter No.908, dated 30-12-1996.

The appellant assailed the above addition in first appeal reiterating the same contentions as raised before the assessing officer. The main plank -of the argument was that the balance-sheet and the books of accounts produced on 29th and 30th of December, 1996 could not be rejected on the basis of discrepancies in comparison to the balance-sheet and the copies of ledger folios already available on the record of the Department. The contentions were not accepted by the learned CIT (A) and the additions were maintained. Being still dissatisfied, the appellants have assailed the additions before us.

Mr. Irfan Ahmad Sheikh, learned counsel for the appellant has reiterated the same contentions before us. He has submitted that the addition has been made in the hands of the appellants on the basis of photo copy of the balance-sheet of the firm available on the record of the Department which is neither signed by any partner of the firm nor by the assessing officer. He has conceded that according to the entry in order-sheet the balance-sheet was produced with the original return of the firm but has contended that since the photo copy available on record is not authenticated copy, therefore, it cannot be relied upon for rejecting the subsequent balance-sheet produced by the appellant which contains that the deposits in U.B.L. Accounts were at Rs.1,14,37,999 and the amount of sundry .creditors is shown at Rs.1,12,14,981. The photo copy of balance-sheet available with the Department alongwith the return of firm for the assessment year 1989-90 contains the deposits with U.B.L. at Rs.238,007 and no sundry creditors have been shown. So far the discrepancies, as pointed out by the assessing officer are concerned they have not been denied.

On the other hand, Mr. Shahbaz Butt, learned Legal Advisor for the Department has submitted that the reopening of assessment has not been challenged by the appellants in their grounds of appeal spreading over four pages which means that the appellants have conceded that the information which was received by the Department that the two appellants opened account with the United Bank Ltd. with initial deposits of Rs.55,00,000 and Rs.57,00,000 was correct (at this stage we would like to observe that the learned counsel for the appellants has conceded before us during the course of arguments that the appellants did open accounts with U.B.L. with the initial deposits of Rs.55,00,000 and Rs.57,00,000 in their individual capacity but according to him, the accounts were opened on behalf of firm). Mr. Shahbaz Butt has further submitted that the appellants produced books of accounts after considerable delay and for this purpose they filed writ petitions before the Honourable High Court, which were subsequently not pressed and during this period got the books of accounts fabricated. He has submitted that the authorised representative of the appellants vide letter, dated 9-10-1995 addressed to the assessing officer stated that the books of accounts were in the custody of ex-partner of the firm namely Muhammad Bashir and as soon as the books were handed over they shall be produced. However, the authorised representative of Muhammad Bashir informed the assessing officer in reply to notice under section 148 on 14-10-1995 that as a result of settlement among the partners, the factory building and all other assets including accounts books were taken over by Mr. Muhammad Siddique which was evident from the fact that Muhammad Siddique signed and furnished the return of income for the assessment year 1992-93. Mr. Shahbaz Butt has further submitted that in spite of this fact the appellants detained the books of accounts up to 29th of December, 1996 and when produced the same, they contained entirely different entries as compared to the authenticated ledger folios available on the assessment record which was duly signed by the then assessing officer in the year 1990 and the authorised representative of the firm. Mr. Shahbaz Butt has vehemently argued that the learned counsel for the appellant was not right in contending that the addition was being made in the hands of the appellants on the basis of photostate copy of balance-sheet in respect of firm available on the record. He has submitted that in fact the additions were made on the basis of information received that the two appellants opened accounts with U.B.L. in their individual capacity with the initial deposits of Rs.55,00,000 and Rs.57,00,000 which fact has not been denied at all. The balance-sheet and the books of accounts were examined in order to verify and ascertain the veracity of the plea taken on behalf of the appellants that although the bank accounts were opened in their individual capacity but the amount belonged to the firm. Mr. Shahbaz Butt has submitted that even if the photo copy of the original balance-sheet available on the record of the Department is ruled out of consideration for the reason that it is not signed by any of the partners of the firm or the then assessing officer, the fact remains that the balance-sheet prepared on the basis of entries in the books of accounts and the subsequent production of the books of accounts by the appellants shown that the entries do not tally with the ledger folios already available on the assessment record which are duly authenticated as they are signed by the then assessing officer and the authorized representative of the firm. Thus, the contention of Mr. Shahbaz Butt is that the additions have been made not on the basis of photo copy of the balance-sheet already available with the Department as contended by Mr. Irfan Ahmad Sh., Advocate but on the basis of admitted opening of the bank accounts and non-discharging of burden by the appellants that they were mere benami and the amount deposited in the bank belonged to the firm.

We have very carefully considered the material available on record and the contentions raised on behalf of the learned representatives for the parties. We find that the admitted fact is that the two appellants opened accounts with the U.B.L. in their individual capacity and have been operating the bank accounts in their individual capacity. Thus, the burden squarely lay on them to disclose the nature and source of deposits. The appellants' sole explanation was that the amount belonged to the firm and the books of accounts were being called from the appellant in order to ascertain this fact. The appellants successfully avoided the production of the books of accounts for a period of about 1-1/2 years on one pretext or the other including the stay order of the honourable Lahore High Court, Lahore. We find that on one hand the authorized representative of the appellants has taken plea while arguing the issue relating to the period of limitation that the Honourable High Court did not stay the assessment proceedings and on the other hand did not produce the books of accounts till dismissal of the writ petition and after requesting for the production of the books of accounts. There is sufficient material on record that the books of accounts were actually available with the appellants and particularly with appellant Muhammad Siddique as a result of settlement between the partners on the intervention of elders. The non-production c f books for sufficiently long period adversely reflects on the conduct of the appellants on whom the onus of proof was heavily laid. The discrepancies in the books of accounts produced by the appellants on 29th and 30th of December, 1996 as compared to the authenticated photo copies of the ledger folios already available on the assessment record are so numerous and glaring that Mr. Irfan Ahmad Sheikh, Advocate has not argued a single word in this behalf. His only argument was in respect of the photo copy of the original balance-sheet which was not authenticated. The ledger folios available on the assessment record which are duly authenticated have been maintained in ordinary course as a part of the official record and therefore, presumption of genuineness is attached to them. The authenticated ledger folios available on the assessment record which belie the genuineness of the books produced by the appellants could be assailed by the appellants by calling the then assessing officer Mr. Muhammad Ilyas and Mr. Amanullah Malik, Advocate, the authorised representative of the firm and putting them under cross-examination. The appellants have not done so and, therefore, we are of the opinion that the appellants have failed to discharge the onus of proving that the amount of deposits which have been added to their total income actually belonged to the firm and was duly entered in the books of the firm. In addition to this fact, we are of the opinion that the plea taken on behalf of the appellant is not well-founded and suffers from inherent contradiction. If the amounts of deposits were duly entered in the books of the firm as alleged on behalf of the appellants, there could be no reason on earth to open the account in the name of the appellants and more particularly when the source of the fund is attributed to sundry creditors. If the amounts were borrowed in the name of firm, it ought to have been deposited in the Bank accounts in the name of firm and not in the name of individual partners. The plea taken on behalf of the appellants is, in fact, a plea of benami and the law of benami is very clear to the effect that until and unless proved to be otherwise, the ostensible is to be treated as real. As the appellants have miserably failed to discharge the onus laid down on them, therefore, it is held that the Assessing Officer rightly added the amount with which Bank accounts were opened in the names of the appellants, to their total income to which no exception can be taken. The findings of the learned two Officers below are hereby maintained.

Consequent to the above findings, the appeals at the instance of assessees stand dismissed.

M.B.A./474/Trib.Appeals dismissed.