Income Tax Ordinance (XXXI of 1979)

‑‑‑--Ss. 65, 13(1)(d) & 59(1)‑‑‑Additional assessment‑‑‑Definite information‑‑‑Purchase of property at a cheaper price‑‑‑Re‑opening of assessment‑‑‑Addition‑‑‑Assessee contended that information regarding purchase of property at a cheaper price did not amount to definite information as required under the provision of S.65 of the Income Tax Ordinance, 1979‑‑‑Validity‑‑‑No definite evidence being available with the Assessing Officer to prove that the assessee invested more amount than the one declared by him for the purchase of property, the action taken under S.65 of the Income Tax Ordinance, 1979 was unjustified‑‑ Proceedings initiated under S.65 of the Income Tax Ordinance, 1979 being without any definite information were cancelled and assessment framed under S.59(1) of the Income Tax Ordinance, 1979 was restored by the Tribunal.

1997 PTD (Trib.) 1097; P.T.R. No. 17 of 1997 and 1997 PTD (Trib.) 1133 rel.

Shahid Abbas and Ahsan Imdad Sh., I.T.P. for Appellant.

Mrs. Iram Adnan, D.R. for Respondent.

Date of hearing: 6^th February, 2002

ORDER

KHALID WAHEED AHMAD (JUDICIAL MEMBER).‑‑‑The original assessment in the case of the assessee/appellant an individual for the assessment year 1998‑09 was finalised at net income of Rs. 94,000 under section 59(1) of Income Tax Ordinance, (hereinafter called the Ordinance). Later on the case of the assessee was reopened under section 65 of the Ordinance and reassessment was framed at total income of Rs. 28,20,000 is the following manner:‑‑

2. On the fist appeal filed by the assessee the CIT (Appeals) Zone‑IV Lahore confirmed the action of the Assessing Officer to reopen the assessment under section 65 of the Ordinance. However, the assessment on the issue of addition made towards business income as well as on the issue of addition under section 13(1)(d) of the Ordinance was remanded back to the Assessing Officer for de novo consideration with the directions that the issue of doing business on labour basis be properly thrashed out and for estimation of sales on own account, the Assessing Officer was directed to make out a solid case and also apply a proper G.P. Rate as warranted by facts of the case.. The impugned order of CIT (Appeals) is contested by the assessee/appellant on the following grounds:

(1)That the CIT(Appeals) was not justified in confirming the application of section 65 of the Ordinance.

(2)That, the addition made by the Assessing Officer under section 13(1)(d) is unjustified.

(3)That the remanding back of the case on the ground of estimation of sales is unjustified.

(4)That the directions of CIT (Appeals) for application of G.P. rate on the receipts of the assessee on labour basis are unjustified.

3. In his arguments learned AR vehemently contended that the application of the provisions of section 65 of the Ordinance was unjustified being unwarranted under the circumstances of the case. According to learned AR the reopening of assessment under section 65 and the addition made under section 13(1)(d) of the Ordinance was without any‑basis. Learned AR submitted that the information regarding purchase of property at a cheaper price does not amount to definite information as required under the Provision of section 65 of the Ordinance. In this context the learned AR relied upon a decision reported as 1997 PTD (Trib.) 1097. Learned AR stated that distinction in the proceedings in the case of pending assessments and finalised assessments has been made by the Tribunal in its above‑quoted decision. According to learned AR there was no evidence that the assessee has invested more money than the amount shown by him in the wealth statement the re assessment proceedings initiated were illegal and unjustified, because of there being no definite information in terms of the provision of section 65 of the Ordinance available with the Assessing Officer. Learned AR also cited the judgment of Honorable Lahore High Court in PTR No. 17 of 1997, dated 30‑10‑2001 wherein while refusing the reference application tiled by the CIT under section 136(2) of the Ordinance the Honorable High Court has observed that addition of the kind could not be made without pointing out the source wherefrom the alleged investment as made. Learned AR further contended that the addition under section 13(1)(d) could not be made in view of the provisions of rule 207A of Income Tax Rules, 1981. According to learned AR the assessee has already declared more amount than the amount shown in the registered sale‑deed.

4. With regard to estimation of sales it is the contention of learned AR that the assessee was doing business only on laboured receipts. According to the learned AR it has been admitted by the Assessing Officer in the order that as per ITI report stock available at premises bear different names which revealed that the assessee was also conducting business for other shops on labour basis. According to learned AR, however, while framing the assessment the Assessing Officer framed the assessment by estimating the sale only in the hands of the assessee. It is also the contention of learned AR that the inquiry report did not relate to the period under consideration and thus no sales could be estimated on the basis of such reports. Learned AR further contended that the Assessing Officer was not justified to revise the entire income: In this context the learned AR referred to the judgment of the Tribunal reported as 1997 PTD 1133 (Trib.). Learned AR also pointed out discrepancy in the date of approval by the IAC obtained for addition under section 13(1)(d) as 29‑6‑2001 with the date of assessment mentioned on the order as 20‑6‑2001.

5. Learned AR in her arguments, however, defended the impugned order. According to learned DR the provisions of rule 207A were not applicable in the case of the assessee/appellant. According to learned DR no rates of the constructed properties were prescribed by the District Collector. Learned DR further contended that by declaring the higher amount of purchase, assessee has himself negated the value declared as per registered sale‑deed. Learned DR further submitted that in the absence of any evidence in support of the declared value of Rs. 96,000 of the property purchased the Assessing Officer was justified to estimate the value on the basis of parallel case as quoted by him. Learned DR further submitted that the business income was rightly estimated by the Assessing Officer in view of the report of the Circle Inspector. Arguments of learned representatives of both the parties have been heard and the orders of the authorities below as well as the law cited by the learned AR have also been perused. We are inclined to agree with the contention of learned AR that there was no definite evidence with the Assessing Officer to prove that the assessee invested more amount than the some declared by him for the purchase of property, the action taken under section 65 of the Ordinance was unjustified. The relevant part of the order of the Tribunal in the case reported as 1997 PTD (Trib.) 1097 is reproduced as hereunder:‑‑

"There is no rule of law to assume that if anyone buys an asset cheaper than its fair market value he had necessarily bought it the market value but was disclosing its lesser value to suppress his real income. Finalized proceedings can be reopened under section 65 of the Ordinance only if a definite information has come to the possession of the Assessing Officer that the assessee's income has escaped assessment. There is a wealth of authority to establish that there is a clear distinction between the cases where the assessment proceedings are pending with the Assessing Officer and the cases where the proceedings have concluded and are required to reopened. In‑matters of pending proceedings if an Assessing Officer can show that an asset required of the assessee was acquired at the price lower than its fair market value the burden of proof to show that the assessee did not expend the money equal to the fair market value of the asset will lie on the assessee and if the assessee fails to discharge the burden that he acquired the asset at its full market value or had the reason to acquire it for a lesser price the Assessing Officer will be quite justified to hold that the assessee had expended more money to acquire the asset than shown in his books of accounts, and had shown its lesser value in his books of accounts to suppress his real income. However, where the proceedings have been finalized whether after scrutiny or by fiction of law under any scheme before they are reopened the Assessing Officer has to show that he had definite information that the assessee had concealed his income and in the context of acquiring asset by the assessee the Assessing Officer will have to show that the assessee had in fact paid more money to acquire any asset than shown in his books of accounts. It appears that in the assessee's case the only basis on which the proceedings were reopened was iliac the Assessing Officer doubted that the assessee might have expended more money to acquire the shop than that shown in its books of accounts. Whenever may be the position it was mere the Assessing Officer's doubt or suspicion suspicion on doubt does not qualify as a definite information that the assessee had in fact expended more money to buy the shop at higher price and that he had paid more money to the seller. We are thus of the opinion that the Assessing Officer was not justified to reopen the finalized proceedings for this assessment year. The assessment order made under section 65 of the Ordinance is cancelled and originally made under section 62 of the Ordinance is restored."

7. Learned DR was unable to draw any distinction between the facts of the instant case and those of the case as cited above: Under the and the assessment proceedings initiated under section 65 of the Ordinance there being without any definite information are hereby cancelled and original assessment framed under section 59(1) of the Ordinance stands restored. Since the appeal of the assessee has been accepted on the above ground there is no need to adjudicate upon the other issues agitated by the learned AR of the assessee.

8. As a result the appeal of the assessee succeeds.

M.A. (Stay) No. 49/LB of 2002.

9. Since the main appeal of the assessee has been disposed of through this consolidated order, the Miscellaneous Application for stay filed by the assessee stands dismissed having become infructuous.

C. M. A. /M. A. K./222/Tax(Trib.)Order accordingly.