I.T.AS. NOS.747/IB TO 749/IB OF 1999-2000 VS I.T.AS. NOS.747/IB TO 749/IB OF 1999-2000
2001 P T D (Trib.) 2926
[Income-tax Appellate Tribunal Pakistan]
Before Jameel Ahmed Bhutto, Accountant Member and
Karamat Hussain Niazi, Judicial Member
I.T.As. Nos.747/IB to 749/11 of 1999-2000, decided on 31/03/2001.
(a) Income Tax Ordinance (XXXI of 1979)---
----S.13(1)---Unexplained investment---Onus of proof---Onus of proving the fact that assessee had concocted the story was not on the department since the burden was placed upon the assessee under S.13(1) of the Income Tax Ordinance, 1979 to offer satisfactory explanation to the effect that the sum of money admittedly available with the assessee in the relevant year was from a definite source and was not to be treated as unexplained money liable to be added as deemed income.
(b) Income Tax Ordinance (XXXI of 1979)---
----Ss.13(1)(aa) & 19---Addition---Agreement to sell ---Assessee had shown the amount from sale of property as exempt income on the basis of agreement to sell and affidavit from the purchaser but no sale deed in respect of such property was executes--- Assessing Officer made addition under S.13(1)(aa) of the Income Tax Ordinance, 1979 of such declared exempt income as well as income from house property was also assessed in the !antis of the assessee being the owner of such property which was deleted by the First Appellate Authority---Validity---Simple agreement to sell was never acted upon and there was no deed for sale and transfer of the property in question---Such a sham arrangement could not satisfy the requirements of S.13(1) or S.19 of the Income Tax Ordinance 1979 since the house property remained in the ownership of the assessee and the source of money declared by the assessee could not be attributed to any genuine sale of the property---Order of First Appellate Authority was declared unsustainable being devoid of correct interpretation of the provisions of the Income Tax Ordinance, 1979 and based on improper appraisal of evidence and incorrect appreciation of facts of the case and order of Assessing Officer was restored by the Appellate Tribunal.
Bachu Bai F.E. Dinshaw v. CIT 1967 PTD 170; B.D. Avari v CIT 1989 PTD 670 (H.C, Kar.); CIT v. Hans Ri' Gupta (1982) 137 ITR 195 and CIT N Zorostrian Building Society Limited (1976) 102 ITR 499 rel.
Muhammad Tahir Khan, D.R. for Appellant.
Zahid Hussain, A.C.M.A. for Respondent.
Date of hearing: 27th March, 2001.
ORDER
The above captioned appeals at the instance of the department are directed against the appellate order, dated 10-11-1999 passed by the learned A.A.C., Rawalpindi, in respect of the assessment years 1992-93 to 1994-95, whereby the addition of Rs.42,50,000 made under section 13(1)(aa) of the Income Tax Ordinance, 1979 (hereafter the Ordinance) as well as the income from house property estimated by the Assessing Officer have been deleted.
2. The abovementioned appellate order has been assailed on the ground that House No.20-B, Abid Majeed Road, Lahore, was not sold out by the assessee up to 30th June, 1994 and all the utility bills and ownership in M.E.O. Office existed in her name; therefore, income from house property was assessed in view of the annual letting value of adjacent House No.20-A, Bridge Colony, Lahore as per history of the case. For the assessment year 1993-94, however, apother ground of appeal is that the addition of Rs.42,50,000 under section 13(1)(aa) of the Ordinance was rightly made as House No.20-B, Abid Majeed Road, Lahore, was mortgaged with Habib Bank Limited, Central Branch, Karachi, and as per terms and conditions of mortgage deed, the assessee could not dispose of this property. It is also contended that the assessee had not furnished any supporting evidence regarding sale of land in Rawalpindi at Rs.5,00,000. ?????????
3. We have heard the arguments of learned representatives of both the parties and considered the facts and circumstances of the case in light of the orders passed at the lower forums and the material available on the file.
4. The relevant facts leading to these appeals are that the original assessments in this case were completed at the net income of Rs.3,81,840, Rs.46,59,779 and Rs.4,08,480 for the assessment years 1992-93, 1993-94 and 1994-95, respectively. The assessee filed appeal before the learned CIT(A), Rawalpindi who set aside all the assessments with the directions that the assessee may be provided reasonable opportunity to explain her position and the purchaser of the house in Lahore and land in Rawalpindi may also be confronted. The proceedings were started afresh by the Assessing Officer and no less than a dozen notices under section 61 (specified in the assessment order) were issued by the Assessing Officer but on the due dates neither the assessee nor her authorized representative furnished any fresh documents and sought adjournments on one or the other pretext. A notice under section 62 of the Ordinance was also issued to the assessee on 22-3-1999 in the manner stated in the body of the assessment order. In spite of this notice, no compliance was made by the assessee. However, the learned AR of the assessee stated that the requisite documents had already been filed before the completion of the original assessments which had been set aside in appeal. In the written reply, it was stressed that the purchaser of the property may be summoned to verify the facts. The Assessing Officer issued summons under section 148 of the Ordinance on 6-2-1999- for appearance on 22-2-1999. No appearance was made and adjournment was sought for 3-4-1999 and thereafter for 8-4-1999, 13-4-1999, 22-4-1999, 24-4-1999 and 28-4-1999.
5. Subsequently, a letter was received in the office of the Assessing Officer on 24-5-1999 claiming that House No.20-B Bridge Colony, Lahore Cantt. and the plot of land at Adiyala Road, Rawalpindi, were purchased by one Naeem Hussain Malik son of Mr. Ashiq Hussain, resident of 4655, Henri Bourassa in the City of St. Laurent province of Quebec Canada, for a consideration of Rs.38,00,000 and 5,00,000, respectively. It was further stated that the land was disputed by M.E.O and the same had not been transferred pending decision by the Court and that the said property was purchased out' of personal remittances to Pakistan. The Assessing Officer found the new plea as quite unsatisfactory for the reasons recorded in the assessment order.
As discussed in detail, the Assessing Officer came to the conclusion that the assessee had wilfully and deliberately failed to declare property income from House No.20-B, Bridge Colony, Abid Majeed Road, Lahore which in his opinion had never been sold out and never remained vacant. Therefore, considering the ALV of adjacent House No.20-A else belonging to the assessee, net income from house property from both the houses was assessed at Rs.3,81,840, Rs.4,0i,820 and Rs.4,08,480 for the assessment years 1992-93, 1993-94 and 1994-95, respectively. While making the addition of Rs.42,50,000 under section 13(1)(aa) of the Ordinance, it was mentioned in the assessment order that the assessee had shown the said amount as exempt income in Part II of the income tax return and then adjusted the same towards investment/expenses i.e. gift made to the husband etc. The Assessing Officer observed that in this case, neither any registered sale deed had been executed nor there was mutation in revenue record regarding the transfer of properties. A notice under section 13(1), dated 13-4-1999 was issued to the assessee (as reproduced- in the body of the assessment order) calling for explanation as to why the addition of Rs.42,50,000 may not be made under section 13(1)(aa) with the prior approval of the IAC. On the due date, no reply to this notice was received. The Assessing Officer noted that the facts of the case remained the same' as mentioned in the body of the original assessment orders which had been set aside in appeal. However, the case was again examined by him and the position was stated in the assessment order in the following words:--
"The scrutiny of the assessment record reveals that during the course of proceedings, assessee has failed to prove valid sale transaction of H.No. 20-B, Abid Majeed Road, Lahore Cantt., because:---
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(a) No proper registered sale deed has been executed before the Registrar although it was specifically mentioned in the agreement, dated 4-6-1991, that sale deed will be executed within one year.
(b) The house is mortgaged with HBL, Central Branch, Karachi against credit facility of Rs.10.00 (M) in favour of Dascon (Pvt.) Ltd. Lahore and the loan has not been liquidated as yet:
(c) Neither the house has been de mortgaged nor any NOC/Non? recumbrance certificate has been obtained from Bank.
(d) The sale of land in Village Jirahi, Adiyala Road, Rawalpindi has not been attested by the Tehsildar. Further, mutation in revenue record has not been made.
(e) The Letter No. ADV:ASS:171, April 10,? 1995 issued by Mr. Muhammad Ozair, V.P. & Manager. HBL, Central Branch-1, Habib Bank Plaza, Karachi-74000, confirms that the property bearing Plot No.B-20 situated at .bid Majeed Road, Lahore Cants owned by Mrs. Asma Aslam Baig is still under equitable mortgage with-us against credit facility allowed to M/s. Dascon (Pvt.) Ltd. It has also been mentioned in this letter that as far as NOC for the sale is concerned our bank has not given any permissions to settle the mortgaged property and any wilful act for its disposal will be subjected to criminal offence."
In view of the position discussed in the assessment order, the Assessing Officer established the fact that the assessee had concocted a false story and it seemed mocker, with the revenue if the assessee's contentions were to be accepted. In the opinion of the Assessing Officer, the explanation regarding the accretion in wealth amounting to Rc.42,50,000 was not satisfactory and supported by valid reasons and as such the same was deemed to be income o` the assessee for the assessment year 1993-94 under section 13(1)(aa) of the Ordinance and charged to tax accordingly with the prior approval of the IAC accorded vide No. 1820, dated 31-5-1999.
6. The assessment order was contested by the assessee before the learned AAC, Rawalpindi, on the ground that the Assessing Officer was not justified to add rental value of H. No.20-B, Abid Majeed Road, Lahore, it income of the assessee as the assessee never received this income for the assessment years 1992-93 to 1994-95 and that the Assessing Officer was not justified to make addition under section 13(1)(aa) on account of sale of house and land for the assessment year 1993-94.' The learned AC considered the contentions of Mr. Shehzad. Qazi, FCA/AR of the assessee and without appreciating the facts of the case or making proper appratsai of evidence/material available on the relevant record, passed the appellate order in a perfunctory manner with the findings reproduced hereunder:---
'"The appellant has amply clarified and proved documentarily source of Rs.42,50,000 satisfying the provisions and conditions of section 13(1)(aa). The purchaser accepts the purchase of the House No.20-B and plot at' Adiyala. The documents presented by the appellant are an affidavit duly attested by the Consulate in Canada and a sale deed, which should have satisfied the Assessing Officer. Since the house at Lahore is mortgaged, the same cannot be transferred and since the purchaser has bought the same to the present state, the department should not have any objection to this. Thirdly, the department has failed to prove the mala fide (concocted story) of the appellant by pity means or documentary evidence. Merely non-acceptance; of these should not become the basis of rejection of the appellant's claim and version. In view of these facts, the addition under section 13(1)(aa) is deleted for all the years under appeal. The rent estimated in all these years is consequently also deleted. The rent if any could not have been received by the appellant when she does not remain its owner."
Hence , these appeals.
7. Having examined all aspects of the case, we are of the considered view that the learned AAC has fallen in error by holding that the assessee had amply clarified and proved documentarily the source of Rs.42,50,000 satisfying the provisions and conditions of section 13(1)(aa) of the Ordinance. There were no basis to give such a finding and no reliable document was available to prove the source of money claimed to have been received by the assessee. Admittedly, the assessee was found to be the owner of the money amounting Rs.42,50,000 and it was not for the Assessing Officer to prove that the explanation tendered by the assessee was unsatisfactory. The Assessing Officer clearly expressed his opinion that the explanation offered by the assessee was not satisfactory for the purpose of addition of the deemed income under section 13(1)(aa) of the Ordinance. If" was his opinion which really mattered for the purpose of section 13(1) such opinion was expressed on firm grounds. Besides, there was not an iota of evidence produced at any stage of proceedings by the assessee that Rs.42,50,000 were ever received from abroad in foreign exchange or otherwise paid to her in Pakistan in a manner as could be reflected in the bank account or any other authentic record. The learned AAC has also not made correct appraisal of the documentary evidence presented by the assessee. The so-called "Affidavit" had no evidentiary value because it was a piece of paper, not even attested by the Consulate in Canada, and did not prove the alleged fact that there was a genuine purchaser of the assessee's house at Lahore and plot of land at Adiyala (Rawalpindi) for which the entire money was actually paid to her. The learned AAC has also referred to the "sale deed" in the appellate order but no such sale deed was shown to have been made. Even the learned AR of the assessee has admitted before us that such a sale deed never existed. In these circumstances, no purchaser could be deemed to have accepted the alleged purchase of the house property from the assessee. The learned AAC was not justified in observing that since the house at Lahore was mortgaged, the same could not be transferred and since the purchaser had bought the same in the present state, the department should not have any objection to that. No basis whatsoever are available for us to accept such an observation because the purchaser had actually not bought any property. Even now, the learned AR of the assessee concedes the fact that the property in question still remains mortgaged with the bank and there is no claim of any purchaser against the mortgaged property. The onus of proving the fact that the assessee had concocted the story was not on the department since the burden was placed upon the assessee under section 13(1) of the Ordinance to offer satisfactory explanation to the effect that the sum of money admittedly available with her in the relevant year was from a definite source and was not to be treated as unexplained money liable to be added ass her deemed income for the assessment year 1993-94.
The learned AAC has also erred in deleting the property income in respect of House No.20-B, Abib Majeed Road, Lahore, merely with the observation that "the rent, if any, could not have received by the appellant when she does not remain its owner". The property in question remained in the ownership of the assessee. It was mortgaged with the bank. Utility bill continued to be paid in the name of the assessee. There was no evidence that the alleged purchaser had taken possession of the property, given legal notice to the tenants for change of tenancy rights and made any effort to claim ownership rights against mortgaged property. In these circumstances, the annual value of the property in question had to be charged in the hands of the assessee as income from house property and the alleged purchaser could not be treated as the owner of the house property within the meaning of the expression used in section 19 of the Ordinance.
9. The question of ownership of immovable property for the purpose of charge of income tax on rental income from such property has come under consideration in a number of cases. Thus in Bachu Bai F E. Dinshaw v. CIT reported as 1967 PTD 170, the Executors of the Estate of Late F.E. Dinshaw sold that property, received full sale consideration and gave possession of property to the purchaser but no regular sale-deed was executed. The Executors were held to be the owners of property within the meaning of section 9 of, the Income Tax Act. The importance of a registered sale-deed in determining the ownership of property was highlighted in the following words:--
?....the question of ownership of property to dispute shall have to be determined on the law administered in Pakistan and not any broader or general notions of ownership. It is well-established general principle that where the law prescribes a mode of transfer compliance with that mode is necessary in order to confer title against third parties. It seems to us that when the law requires a registered instrument title or ownership cannot be conferred by mere agreement of parties. This is quite clear from the provisions of section 54 of the Transfer of Property Act and section 19 of the Registration Act." In B.D. Avari v. CIT cited as 1989 PTD 670 (H.C. Kar.). the assessee had sold his property to his minor sons through agreement and sale consideration was received by him. No registered sale-deed was, however, executed. It was held that under section 54 off the Transfer of Property Act, a contract of sale does not create any right in the property. The right in property is created on registration of sale-deed. Therefore, the assessee was owner of property and liable to pay tax on rental income from the said property. In CIT v. Hans Raj Gupta (1982) 137 ITR 195, the assessee sold his properties to two companies who had paid full sale consideration but registered sale-deeds were not executed. The assessee was held to be liable to be assessed to tax on income from these properties as he remained owner of properties irrespective of the fact that he was not earning any income therefrom. In another case, cited as CIT v. Zorostrian Building Society Limited, (1976) 102 ITR 499, the assessee had entered into an agreement to sell his property. The buyer had paid full price and taken possession of property. It was held that even though the purchaser was put into possession with all other rights incidental thereto, in the absence of a registered sale-deed, the transferee could not be regarded as owner. "
10. It may also be mentioned that the Registration Act, 1908, requires that the sale of immovable property must be through a registered document. Section 49 of the said Act stipulates that unless such document is registered, the right title or interest of the seller in the property is not extinguished nor that of purchaser created Similarly, under section 54 of the Transfer of Property Act, a contract of sale does not create any right in the property because such right is created only on registration of sale-deed. In this case, there was a simple agreement to sell which was never acted upon and no deed was made for sale and transfer of the property in question. Such a sham arrangement could not satisfy the requirements of section 13(1) or section 19 of the Ordinance since the house property remained in the ownership of the assessee and the source of money declared by the assessee could not be attributed to any genuine sale of the said property.
11. For the facts and reasons stated above, we hold that the impugned order, being devoid of correct interpretation of the provisions of the Ordinance and based on improper appraisal of evidence and incorrect appreciation of facts of the case, is not sustainable in the eye of law. It is, therefore, vacated and those of the Assessing Officer are restored.
12. Resultantly, the appeals of the department succeed.
C.M.A./M.A.K./106/Tax(Trib.)?????????????????????????????????????????????????????????? Appeals succeed