Income Tax Ordinance (XXXI of 1979)‑‑‑

‑‑‑‑S. 131(4)‑‑‑procedure in appeal‑‑‑Admission of documentary evidence‑‑‑First Appellate Authorities admitted

evidence which was not produced before tile Assessing officer and which was barred to be admitted under the provisions of S.131(4) of the Income Tax Ordinance. 1979‑‑‑Validity‑‑.provisions of S.131(4) of the Income Tax Ordinance, 1979 were mandatory inasmuch as these bar the First Appellate Authority from admitting an evidence, except in special circumstances which did not exist in the present case‑‑‑Neither the appellant/assessee was prevented by sufficient cause from producing any evidence, nor the First Appellate Authority had mentioned any such eventuality in his order‑‑‑During the hearing of the appeal of the assessee the First Appellate Authority totally ignored the written reply/comments of the Assessing Officer and even did not allow her attendance to represent the Department case during hearing of the appeal‑‑‑Maxim "audi alteram partem" applied to all proceedings of judicial or quasi‑judicial nature and it squarely applies even when an appeal of the assessee against the Department was heard by the AAC or Commissioner of Income‑tax (Appeals), as the Department was a party to the case‑‑Appellate Tribunal set aside order of the First Appellate Authority with the direction to . examine the written reply/comments of the Assessing Officer, the author ‑of the assessment order, and also give the Assessing Officer a fair opportunity of being heard and represent the case of the Department and should, after hearing both the sides, pass such a judicious order as required under the law.

1993 PTD (Trib.) (sic) distinguished.

Sajjad Ahmed, D.R. for the Complainant.

Abdul Tahir, I.T.P. for Respondent.

Date of hearing: 28th August, 2002.

ORDER

These two departmental appeals have been filed against orders of Appellate Additional Commissioner, Sukkur Range, Sukkur on the following grounds of appeal which are common .in both the appeals:

(1)The written reply submitted before AAC on 30‑4‑2001 was not entertained.

(2)Worthy AAC accorded no chance of personal hearing through requested.

(3)Rectification applications regarding the presumptive income in the midst of assessment proceedings shows that A.R: is trying to justify purchase of assets.

(4)The documentary evidence placed before AAC, Sukkur Range regarding flat stamped, dated 10‑4‑2001, whereas assessment finalized on 24‑3‑2001.

(5)The evidence regarding flat that was not produced before AAC pertains to 11 pages whereas only page No. II was evidence submitted before Assessing Officer.

(6)The documentary material or evidence, which was not produced before the Assessing Officer, was not admissible under section 131(4) as admitted by worthy AAC.

(7)Sufficient time allowed to the assessee (5 months) confronting the action and despite proper service of show‑cause letters/notices, the observations of AAC regarding above facts are not correct.

(8)No evidence regarding sale purchase deed of cars was submitted by the A.R. of the assessee during the course of proceedings and contention accepted by the learned AAC is not justified as apparent from the record.

(9)The appellant requests permission to add or amend grounds of appeal at the time of hearing or before.

2. The learned D.R. submitted that the Assessing Officer had reopened the assessments for both the years on receipt of an information regarding ownership of a Pajero car and a flat by the assessee. The Assessing Officer, thus issued show‑cause notices and accorded opportunity to justify assessee's claim who denied the ownership of flat arid also claimed that purchase of vehicles was covered under presumptive tax regime as he is a contractor and original assessment was completed under section 80C. Since compliance was not made by the assessee to various show‑cause notices issued by the DCIT assessments were completed under sections 63/65 by the DCIT for both the years. The learned AAC, on assessee's appeal admitted certain evidence in support of assessee's, contention that ownership of the flat was in the name of Mrs. Ashraf Jabeen w/o Mr. Akber Siddiqui. The AAC, therefore, deleted addition of Rs.7,50,000 made by the DCIT under section 13((1)(aa) on account of unexplained investment in Pajero vehicle.

3. Arguing on the issue of the documentary evidence or material admitted by the A.A.C., which was not otherwise admissible under section 131(4) of Income Tax Ordinance, 1979. The learned D.R. argued that the words of subsection (4) of section 131 are quite clear and it is mandatory provision which cannot be violated. Subsection (4) of section 131, reads as under:‑‑‑

"The Appellate (Additional Commissioner) shall not admit any documentary material or evidence which was not produced before the (Deputy Commissioner), unless he is satisfied that the appellant was prevented by sufficient cause from producing such material or evidence before the (Deputy Commissioner)."

4. It was argued that as laid down in the said subsection (4) of section 131 neither the assessee was prevented from producing such documentary evidence nor the learned AAC, has given any remarks to 1is effect about the documentary evidence which was not originally produced before the DCIT. The learned D.R. further argued that in fact the DCIT, the author of the assessment order, has submitted written comments on the grounds of appeal filed by the assessee before the learned AAC which were totally ignored by him. In fact he has not mentioned the instance of the department taken by the DCIT in his order. Further, the DCIT while giving written reply before the AAC and also urged that "further ground still be confronted at the time of appeal". But the learned AAC ignored her plea and did not accord her an opportunity of representing departmental case before him. The comments/written reply filed by the DCIT before the AAC were as under:‑‑‑

"The grounds of appeal taken by the A.R. of the `A' are not well taken because:

The order passed under sections 63/65 was justified because A.R. of the `A' was granted ample opportunity of being heard, number of adjournments were granted to him to furnish plausible explanations, proceedings were initiated by my predecessor in response to the Verification Notes, received from the Office of the Commissioner of Income‑tax, Sukkur. "

First adjournment was granted on 2‑11‑1999 for 16‑12‑2000. On due date A.R. of `A' filed documents that were not satisfactory, proceedings were initiated by me personally when I took the charge of Circle Khairpur, and received letter No.3560, in response to which I sought permission from IAC to re‑open the case on 18‑1‑2001 vide Letter No.910. Permission was granted vide Letter No. 1556, dated 23‑1‑2001.

The A.R. has taken plea that no show‑cause was issued, nor permission from JAC was obtained to re‑open the case, in this regard, I want to point out that show‑cause was issued to the `A' twice first by my predecessor, and secondly by me.

Notice under sections 65/61 and intimation letter was issued for said assessment year vide Letter No.940, dated 29‑1‑2001.

Notice under section 62 alongwith Notice under section 61 and a photocopy of notice under section 65 (as a reminder) was issued again to the 'A' on 8‑2‑2001 and Letter No. 969 for compliance on 29‑2‑2001. Contention of A.R. that no Notice under section 65 was issued is baseless.

A.R. of 'A' appeared on 22‑2‑2001 and asked for adjournment that was granted up to 3‑3‑2001.

A.R. of the `A' also states that addition of Flat at Erum Villas assessment year 1998‑99 is not justified in this regard I want to state that it is justified because the documentary evidence submitted by him is such that can be prepared by anybody, i.e. a photocopied paper with a Header `Permission to Mortgage Assign' with a fill in the blanks sort of language and at the end of the page there is written name of a person/signature of Mrs. Ashraf Jabeen. No witnesses to verify the document are available, it is not a sale‑deed nor a transfer letter or a registry. I think if the A.R. can furnish one document relating to the said property he can also furnish some authentic proof which' he failed to provide till the last moment.

A.R. of the 'A' said that valuation of used Mitsubishi Pajero 92 @ 7,50,000 instead of declared version is not warranted. The market value of the car was still 12,00,000 to 15,00,000, but keeping lenient view it was assessed @ only 7,50,000.

A. R. of the ' A' regrets the addition of Kia Pride 97 and states that it was purchased and sold out in the same year. The A.R. of the `A' could not furnish any evidence regarding the sale and purchase of the said car. He also did not deny that the car was purchased, even if it was purchased investment was procured by the assessee any way.

Further grounds will be confronted at the time of appeal."

5. The learned A.R. argued that the Tribunal in its decision reported as 1993 PTD (Trib.) (sic) had decided that the AAC can admit documentary evidence which was not produced before the DCIT. However, it is noted that the learned Tribunal in the said case has held that an "additional evidence may be led before the AAC if it is required to judge the legality of finding given by the forum appeal". Here it is observed that in the present case the, assessee has been given full opportunity by the DCIT to submit all the documentary evidence but he did not avail the same. Besides, the AAC has admitted, not the additional evidence, but the original evidence regarding the ownership of the flat and the purchase of vehicle covered under presumptive tax regime. Thus the cited case is not on all fours with the present case. Besides, the learned counsel quoted various authorities on reopening of the assessment already finalized under presumptive tax regime under section 65 and also about valuation of movable property and documentation of ownership of immovable property. However, these citations and references pertain to other issues and facts of the case which were to be examined at the lower stage. The main issue before us in the departmental appeal is whether the AAC was justified to admit such evidence which was not produced before the DCIT and to which he vas barred to admit under the provisions of section 131(4) of Income Fax Ordinance, 1979.

6. After hearing both the parties we are of the opinion that the provisions of section 131(4) are mandatory inasmuch as these bar the AAC from admitting an evidence, except in special circumstances which did not exist in this case. As learned D.R. rightly argued neither the appellant was prevented by sufficient cause from producing any evidence, nor the AAC has mentioned any such eventuality in his order. Further, it is also evident that during the hearing of the appeal of the assessee the AAC totally ignored the written reply/comments of the DCIT. He even did not allow her attendance to represent the departmental case during hearing of the appeal.

7. The learned D.R. argued that dictum audi alteram partem applies to all proceedings of judicial or quasi‑judicial nature and it squarely applies even when an appeal of the assessee against the department is heard by the AAC or Commissioner of Income‑tax (Appeals), as the department is a party to the case.

8. In view of the above observations we set aside, the order of the AAC with the direction to the First Appellate Authority to examine the written reply/comments of the DCIT, the author of the assessment order, and also give the DCIT a fair opportunity of being heard and represent the case of the department. He should, after hearing both the sides, pass such a judicious order as required under the law.

9. Both the departmental appeals are disposed of as above.

C.M.A./523/Tax(Trib.)Order accordingly.