Income Tax Ordinance (XXXI of 1979)---

----Ss.13(1)(b) & 13(1)(d)---Deemed income---Unexplained investment-- Addition--- Assessee a lady professor and Visiting Surgeon of a Medical College returned income- --Assessing Officer discarding the declared version, estimated higher figure and thus made additions under different provisions of S.13 of the Income Tax Ordinance---First Appellate Authority gave some relief in some accounts and for the remaining accounts remanded the case for assessment afresh ---Assessee and department both went in cross-appeal-- Held, assessee being house wife also could not be expected to work like robot the way Assessing Officer found her working round the clock advising patients and operating patients in hospital and at number of clinics in the city which was simply ridiculous---First Appellate authority also hesitated in allowing adequate relief to the assessee---Income from private practice was adopted at 8 patients per day, fee per patient at Rs.100 and working days at 260---Assessing Officer's observation qua assessee's competency might be true but a human being could not be expected to be present at number of clinics and hospitals in a day doing strenuous, physical and mental work---Taxpayer's pocket could not be touched on mere personal views and notion of Assessing Officer ---Assessee had all rights to controvert the allegations---Considerable relief was allowed to the assessee in circumstances.

A. Mueed Khawaja for Respondent (in I.T.A. No. 3945/LB of 1 991-92) .

Nemo for Appellant (in I.T.A. No.3945/LB of 1991-92).

Nemo for Appellant (in I.T.A. No.3881/LB of 1991-92).

A. Mueed Khawaia for Respondent On I.T.A. No. 3881/LB of 1991-92).

Date of hearing: 16th May, 1996.

ORDER

NASIM SIKANDAR (JUDICIAL MEMBER).---The appellant in these cross appeals is a Professor. of Gynaecology and a visiting surgeon of Nishtar Medical College, Multan. In the assessment year 1988-89 she returned income from salary and hospital share at Rs.1,96,247, from private practice at Rs.45,000 and from property at Rs.15,000. From the wealth statement filed with the return the assessing officer found an accretion of Rs.10,68,568 in the wealth acquired by the assessee during the period relevant to the assessment year under consideration. The assessee made investment in further construction of a Clinic at Nusrat Road, Multan and also purchased a plot at Kot Warns Shah. A house in Shadman Colony, Lahore was purchased as one of the four purchasers. The Revenue further found the assessee to have furnished the aforesaid clinic at Nusrat Road, Multan with furniture and fittings. The investments made in acquiring these assets were found to be under-stated. Therefore, an addition of Rs.3,43,130 was made under section 13(1)(d) after rejecting the declared cost of construction at Rs.7,27,000 allegedly incurred on partial construction of the clinic at Nusrat Road, Multan. The fittings and fixtures installed in that clinic were also found to have been made by the assessee herself and therefore, a sum of Rs.50,000 added towards her income under the said provision of the Ordinance. The assessee declared a sum of Rs.15,200 as income from property. This was stated to be rent receipt from the lessee whom the said clinic was allegedly rented out at a sum of Rs.2,000 per month. The assessing officer found tire arrangement to be fake and computed a sum of Rs.1,S1,200 as income from property. This included room rents, charges for normal delivery cases and also for operation in delivery cases. The returned cost per Marla at Rs.4,000 in respect of 15 Marlas plot at Kot Waris Shah Ehsan Colony was also found to be understated and therefore raised to Rs.6,500 per Marla resulting into an addition of Rs.37,500 under section 13(1)(d) of the Ordinance. The assessee alongwith her husband and two minor children jointly purchased a house at Shadman Colony, Lahore on 9-3-88 for a consideration at Rs.15,00,000. The cost of two Kanals plot was shown at Rs/11,63,000 and the value of the building at Rs.3,35,000. The assessee returned her share at Rs.4,15,000. The assessing officer on the basis of a report received from another wing of the Revenue estimated the total cost of the property at Rs.28,00,000 and accordingly the share of the assessee at Rs.7,00,000. After allowing benefit of the declared cost of Rs.4,15,000 the difference of Rs.2,85,000 was added towards her income. Also in case of receipts from private practice those declared at Rs.45,000 were not found acceptable. In absence of proper books of accounts required to be maintained under Rule 29 of the Income Tax Rules. 1982 the Circle Inspector was directed to conduct an inquiry and submit his report. In, report the computation of receipts from this source was proposed on the basis of 20 patients per day at a rate of Rs.200 per patient for 300 days. Also a sum of Rs.2,00,000 was proposed for addition as income from operation. However, the Assessing Officer worked out the receipts from this source by adopting 10 patients per day and a rate of consultation fee at Rs. 150 for 300 days. Receipts from operation were adopted at Rs.1,50,000 to estimate total receipts at Rs.6,00,000 from this source. The expenses on estimate basis were allowed at Rs.30,000 and rest of the amount i.e. Rs.5,70,000 were added towards income as receipts from private practice. After accounting the returned receipts at Rs.45,000-as aforesaid an addition of Rs.5,25,000 was made towards income of the assessee. In this manner total income was computed at Rs.16,08,109 as against declared at Rs.2,51,497.

2. Learned first Appellate Authority CIT (A) Zone-2 Multan through his older recorded on 10-10-1991 set aside the addition made on account of investment allegedly incurred in construction in Nusrat Clinic, Multan. However, the remand was coupled with a direction that cost should be at Rs.176 and Rs.165 respectively for A & B class of construction. The addition of Rs.50,000 made for alleged non-declaration of installation and fixture at the Clinic was also set aside for some-what similar reasons that proper inquiries in this behalf had not been conducted at the same stage. The report submitted by the Circle Inspector to probe the income of the assessee from Nusrat Clinic was however not approved in toto. It was in this regard also found that the assessee had not been, able to establish the leasing out of the clinic to another person for a sum of Rs.2,000 per month. The addition made on account of investment made in 15 Marlas plot at Kot Waris Shah Road, Ehsan Colony was also set aside and the assessee was directed to be allowed a fair opportunity to present documentary evidence in support of the declared price. The other addition made on account of understatement of the value given in respect of the house at Shadman Colony, Lahore was also set aside. It was in this regard directed that the Assessing Officer should obtain necessary information with respect to the sale rates of properties in Shadman Colony, Lahore during the relevant period by contacting the Provincial Excise and Taxation Authorities, Lahore and the officer of the Sub-Registrar of the concerned area. The estimated income from private practice was however reduced by directing that amount of fee per patient should be restricted to Rs.100 and the working days to 260. The number of patients adopted at 10 per day were however confirmed. Also income from operations was reduced from Rs.150,000 to Rs.80,000.

The assessee still feels dissatisfied while the Revenue complains that the first Appellate Authority was not justified in directing adoption of the said construction rates nor it was justified in remanding the issues pertaining to under-statement of value of the aforesaid immovable properties. The reduction in receipts from Nusrat Clinic, number of working days as well as the operation fee is also described as unjustified in the circumstances of the case.

4. Parties have been heard. Learned counsel for the assessee contends that the remand of the issue with respect to cost of construction was unjustified inasmuch as all the contentions before the Appellate Authority were duly substantiated. The submissions bear weight. Learned first appellate authority remanded the issue even after observing that schedule of rates for similar building projects as circulated by Chief Engineer Punjab would come to or around Rs.160 per sq.ft. Therefore, direction. that two different rates should be adopted for A & B class of construction was improper. In Clinics and Hospitals, particularly of the smaller sizes as the one in question before us, fine piece of construction work is neither expected nor factually carried out. The submissions made by the learned counsel are correct that except for the operation room and the bath rooms the construction involves mere superstructure without any fine tapestry. Even otherwise the Assessing Officer failed to substantiate his own estimate of Rs.190 per sq.ft for the total constructed area during the period under review at 7727 sq.ft. The plea taken before the authorities below that construction work in question could not be compared with residential houses was also ignored without any justifiable reason. The Revenue having failed to support the, adopted rate of Rs. 190 per sq. ft. by any cogent reason we will direct that the rate of Rs.160 per sq. ft. shall be adopted with respect to the construction carried out during the period under review. According to the assessment order the assessee admitted that part of construction was made after 30-6-1988 which fell in the assessment year 1989-90. Also the assessing officer worked out the cost of such construction at Rs.3,00,000 and deducted this amount from the total cost worked out for 7727 sq. ft. at a rate of Rs.190 per sq.ft. at Rs.14,68,130. The Assessing Officer shall therefore restrict the addition to the construction carried out during the period under review only at a rate of Rs.160 per sq.ft. as directed above. In case of the addition of Rs.50,000 under head fittings and fixture again the remand order was not justified inasmuch as the first Appellate Authority found that exact date of installation of such machinery /fixtures was not indicated from the report of the Circle Inspector. After such observations the remand of the matter amounted to allowing the Revenue another chance to fill in the lacunas. The Revenue having failed to bring him the exact period as well as the fact that the fittings and fixture were actually made by the assessee herself, the order of the first appellate authority in remanding the issue cannot be approved. We have also noted that the submissions made

before the authorities below that these fittings and fixtures were installed by the lessee of the assessee were rejected in a slip shod manner. Even if the lease arrangement did not find favour with the Assessing Officer he must have summoned the person who allegedly owned them. The addition made in this behalf, on the face of it appears unfounded and without any material on record. Learned first appellate authority having disapproved the report of the Inspector on the basis of which the addition in question was made nothing remained to be done except to delete the addition. We have also noted that the learned first appellate authority in a way found that the addition in question was not relevant and therefore could be made in the period under discussion. Learned D.R., has not been able to controvert these findings recorded by the first appellate authority while both the patties agree that the remand of the assessee was not justified/appropriate in the circumstances. Therefore, we find no other alternate but to direct that the addition of Rs.50,000 made under the head fittings and fixture shall be deleted.

5. As for the estimation of income from Nusrat Clinic, Multan is concerned, we will agree that the assessee failed to establish the lease arrangement in favour of one Mr.Saeed Qureshi for a sum of Rs.2,000 per month. The submissions made in this behalf that the statements of some of the witnesses while rejecting the lease arrangement were recorded at the back of the assessee do bear weight. It is also correct that the law does not require a short term lease to be recorded in writing. However, the failure of the assessee to produce or to make convenient the production of the alleged tenant raised legitimate doubt against the lease arrangement. Its rejection therefore by the first appellate authority is confirmed. The gross property income computed at Rs.60,000 from this source also appears reasonable and therefore, justified in the circumstances of the case. The direction that the Assessing Officer shall allow proportionate property tax paid and other allowances in case of this income are also upheld.

6. As for the income from private practice is concerned we find a lot of force in the submissions made for the assessee that the assessee being a house wife as well could not be expected to work like a robot. The way the Assessing Officer found her working round the clock, advising her patients and also undertaking operations, both simple and complicated in Nishtar Hospital, Multan as well as number of other private clinics in the city is simply ridiculous. We also agree that the Assessing Officer kept on improving his view about the volume and extent of the private practice of the assessee. His notice dated 12-2-1991 confronted the assessee that he intended to adopt a gross sum of Rs.2,08,000 as income from private practice. This was worked out with 8 patients per day and the fee at Rs. 100 for 260 days. In this very notice a sum of Rs.80,000 was confronted as alleged income from operations. In this manner total sum of Rs. 2,58,000, after allowing expenses on estimate basis at Rs.30,000 was confronted to the assessee while at the time of assessment the amounts calculated in this regard were pitched at Rs.5,70,000. The learned first appellate authority als3 hesitated in allowing adequate relief when it confirmed the adoption of 10 patients per day. The Assessing Officer having himself confronted the assessee at the proposed number of 8 patients per day we will allow the submissions made in this behalf and direct that income from private practice shall be adopted at 8 patients per day. The fee per patient reduced to Rs.100 and the working days at 260 by the first appellate authority being already in line with the contents of notice dated 12-2-1991 are upheld. As observed earlier the Assessing Officer estimated income from operation at Rs.150,000 without bringing adequate material on record. His observations qua competency of the assessee may be wholly correct but a human being, cannot be expected to be present at a number of clinics and hospitals in a day doing strenuous physical and mental work like operating upon human babies. The speciality of the assessee concerns birth of human babies and therefore is of the most delicate nature one can imagine. The paying capacity of people in general is also much less than the one adopted by the Assessing Officer for simple and comparatively complicated operations. There being otherwise no scientific method to estimate income from the source, we find the figure determined by the first Appellate Authority at Rs.80,000 to be still on the higher side. It shall accordingly be reduced to Rs.50,000.

7. Both the parties feel aggrieved of the remand order with respect of additions made under section 13(1)(d) of the Ordinance. We will readily agree with them that in the given circumstances the learned first appellate authority was not justified in setting aside the additions made with respect to the property at Multan. The Assessing Officer found the returned version in respect of this plot as unacceptable without any justifiable reason. His observation that local inquiries revealed a higher rate per marla for similar properties in the locality hardly means anything. All the more so when his own adopted rate per marla could at best be his personal opinion and a tax payer's pocket cannot be touched on mere personal view and notion of an assessing officer. Therefore, the addition made in this regard shall be deleted. In case of the house located at Shadman Colony, Lahore however, we find that the remand was directed at the request of the assessee which claimed denial of proper opportunity. The assessee deserves a chance to controvert and challenge the alleged auction rates on which the plots were sold by LDA in the vicinity. Therefore, in absence of any prejudice shown to the Revenue, we will confirm and uphold the remand order to the extent of this property.

8. This being so, the departmental appeal shall fail in toto while the one filed by the assessee shall succeed to the extent indicated in various para, above.

C.M.S./382/Trib. Order accordingly.