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

----Ss.65 & 13(1)(c)---Additional assessment ---Addition---Permission-- Approval---Assessment was reopened on obtaining permission from the Inspecting Additional Commissioner rather than obtaining approval-- Validity---If "permission" and not "approval" was granted, the order based upon that "permission" was not tenable in law---Due to sheer negligence and casual attitude of the departmental officers the structure of addition under S.13 of the Income Tax Ordinance, 1979 had been built on very weak foundation---Assessment order passed under Ss.62/65 of the Income Tax Ordinance, 1979 was cancelled and order of First Appellate Authority was vacated by the Appellate Tribunal.

2003 PTD (Trib.) 1238 and 1998 SCMR 2013 rel.

1993 PTD (Trib.) 1172 and 1998 PTD (Trib.) 1978 ref.

(b) Wealth Tax Act (XV of 1963)---

----Ss.17 & 16(5)---Wealth escaping assessment---Addition of suppressed value of motor vehicle ---Assessee contended that value of such motor vehicle was not liable to addition being exempt from wealth-tax, as the same was declared in agricultural wealth tax-return in exempt column-- Validity---Duplicate copy of agricultural wealth tax return was submitted by the assessee---Assessee could not produce any evidence to prove that it was filed alongwith the original wealth tax/income-tax return and it was available with the Assessing Officer when original assessment under S.16(3) of the Wealth Tax Act, 1963 was finalized--Assessee even failed to establish that such agricultural wealth tax return was on record at the time of reassessment of wealth under Ss.16(5)/17 of the Wealth Tax Act, 1963---Addition confirmed by the First Appellate Authority was upheld by the Appellate Tribunal.

Abdul Tahir Ansari, A.R. for Appellant.

Sajjad Ahmed Khan, D.R. for Respondent.

Date of hearing: 16th September, 2003.

ORDER

AGHA KAFEEL BARIK (ACCOUNTANT MEMBER).---The assessee has filed an income tax appeal aggrieved of the order of the learned C. I. T. (A) dated, 9-2-2001, whereby he has confirmed an addition to Rs.7,00,000 under section 13(1)(c) vide assessment order under section 62/65 dated 28-6-2002 and another wealth tax appeal against the order of, the learned C.W.T.(A) dated 9-1-2003, whereby he has confirmed addition of Rs.7,0'0,000 as value of another vehicle, allegedly suppressed by the assessee, by the D.C.W.T. vide its order under section 16(5)/16 of the Wealth Tax Act,, 1963 dated 22-6-2002. The assessee has also filed additional ground with relevance to income tax appeal and has also moved an application for stay of demand. The additional grounds are admitted and thus M.A.(A.G.) is allowed.

2. The assessee has filed above income tax appeal on the following grounds:

(a)

(i)That the order under section 62 of Income Tax Ordinance, 1979 is bad in law and on facts.

(ii)That appellant is Zamindar and P/O Al-Sadat Petrol Pump Gadeji.

(iii)That reply of notice under section 62 was also submitted to the Assessing Officer.

(i)That appellant purchased used and second hand vehicle Toyota Corolla No.ABJ-514 Model 1998 for Rs.35,000 for his agriculture purpose and declared in Agricultural wealth `tax return but Assessing' Officer not considered the sane and enhanced its value at Rs.70,000 with out any basis.

(ii)That addition has made under section 13(1)(c).of the ITO 1979 not attracts as it is no account case and clause "C" Pre-Supposes maintenance of books of account:

(iii)That appellant has not concealed value of vehicle as it is declared in agricultural wealth tax return which is exempted as agricultural assets.

(iv)That appellant craves permission to add, amend or alter any other grounds of appeal at the time of hearing.

(b)Apart from above, additional grounds which are also admitted have been taken as under:--

(i)The Assessing Officer failed to obtain approval from IAC of Income Tax Sukkur Range-Sukkur before issuing show cause notice.

(ii)Without prejudice to above there was no definite information available with Assessing Officer with regard to alleged value /cost of Vehicle No.ABJ-514, Toyota Corolla Model-1998.

3. The learned A.R. argued that the assessee being an individual is a Zamindar and beside his agricultural income he is also earning income as Member of AOP running a petrol pump from which he is getting his 50% share of income. He argued that regular returns of income were filed alongwith wealth tax returns and that the DCIT had finalized original assessment of his income under section 62 whereby he had assessed assessee's income at.Rs.131,733, including agriculture income at Rs.60,000 under section 63. Subsequently, the Assessing Officer received a verification note from IAC Sukktir, wherein it was initiated that a motor vehicle Toyota Corolla ABJ-5141 Model 1998 reportedly in the name of the firm has not been declared by the assessee a Member of the AOP in his wealth tax return. Thus the DCIT issued show-cause notice to the assessee and after reopening the case under section 65 made an addition of Rs.7,00,000 under section 13(1)(c) in assessee's income vide order under section 62/65 dated 28-6-2002. Meanwhile he also made addition of the said amount of Rs.7,00,000 in assessee's wealth vide order under section 16(5)/17 of the Wealth Tax Act, 1963.

4. The learned C.I.T.(A) confirmed the addition of Rs.7,00,000 under section 13(1)(c) with his findings as under:--

"In response to intimation the officer has wished not to be heard:

Case papers have been perused. Brief facts of the case are that the original assessment was completed under section 59(1) on total income at Rs.1,31,733 which also includes agricultural income at Rs.60,000. The assessment was reopened on the basis of information about the ownership of the Toyota Corolla Car by the assessee. The officer sought permission from his IAC of income tax and reopened the assessment and finally determined total income at Rs.8,31,733 under section 62/65 of the Income Tax Ordinance, 1979. The assessee being aggrieved has filed this appeal.

The perusal of the case record shows that the officer had conducted the proceedings maticuldusly and in accordance with the law and had only initiated action after seeking permission from his IAC of Income Tax. Moreover while conducting the proceedings and in respect of valuation the officer has given ample opportunities to the assessee and also sought various details and assistance from the assessee for proper assessment and determination of reasonable tax liability of the assessee. But the assessee failed to make cooperation with the officer and necessary details were not filed and frequent adjournments were sought on one pretext or the other and details requisitioned were not filed.

It is further observed that the officer has taken the value of the Toyota Corolla Car which is new one and in facts and circumstances of the case this value was reasonable and not excessive. Before making the addition the officer also sought permission of the IAC. Since there was concealment the officer was also justified in reopening of the case and his action was in accordance with the law. After considering all the facts of the case the addition amounting to Rs.7,00,000 under section 13(1)(c) being justified is hereby confirmed.

Moreover, the perusal of the , assessment order shows that assessee is a member of an AOP Messrs. .Al-Sadat Petroleum Service, Gadeji and enjoying 50% share in it. The total income originally assessed in the hands of the AOP was Rs.1,31,733. The officer while finalizing assessment under section 62/65 has mistakenly taken total income of the AOP instead of half share of the assessee in the above assessed income of the AOP. This is not correct and accordingly the officer is hereby directed to take 1/2 share of the assessee and then add the amount of addition in his total income. In addition to above the assessee will also be entitled to return on the share of tax paid in the status of AOP which is to be added in his total income as the same has already been taxed. Accordingly the assessment is set aside on logical ground to correct the mistake."

5. The learned A.R. argued that the said order of the DCIT suffered from many infirmities particularly legal discrepancies and thus it was not tenable under the law and merits to be declared as null and void. In this regard he argued as under:--

(a)The DCIT issued a show-cause notice dated 27-3-2002, whereas he had obtained formal approval of the IAC under section 65 vide letter of the I.A.C. dated 18-5-2002. He argued that no show-cause notice could be given without prior approval of the I.A.C. which was not obtained before the issuance of show cause notice dated 27-3-2002, to which an explanation was also submitted vide letter dated 17-4-2002. However, the learned A.R. could, not submit the said show-cause notice or the explanation filed by the assessee's counsel to the said show cause notice or even copies thereof to verify the contents of the same. As such, it is treated as an informal letter and as the DCIT had issued a statutory notice under section 65 with the prior approvar of the I.A.C. vide his letter dated 18-5-2002. The earlier notice dated 27-3-2002 is of no value and even if that was without jurisdiction, being issued without approval of the I.A.C., the fact on record that formal notice under section 65 has been issued with the approval of the I.A.C. removes the discrepancy in this regard.

(b)Further the learned A.R. argued that it was explained to the Assessing Officer that the assessee had declared the said motor vehicle in his Agri. W.T. return filed alongwith his wealth tax return at the time of filing his income tax return. He submitted that a duplicate copy of the said agricultural wealth tax return was furnished to the DCIT on 28-6-2002 in which the said vehicle has been declared by the assessee in exempt column. However, the learned A.R. could not prove that the agriculture wealth tax return was originally filed with the income tax and wealth tax returns for 1998-99. Moreover the original assessment order passed under section 16(3) of Wealth Tax Act, 1963, it appears that the said assessment has been framed on the basis of such assets which were declared by the assessee on the basis of his wealth tax return under section 14 without any reference to any agriculture wealth tax return. Had there been any, agriculture wealth tax returns on file the DCIT must have discussed the motor vehicle which is now claimed to have been declared as exempt. It is also pertinent to note that verification note was received on 16-3-2002 whereas duplicate wealth tax return was submitted on 28-6-2002 and that in his explanation dated 17-4-2002 to a show-cause notice dated 27-3-2002 which has not been produced even before the Bench, but has been discussed by the DCIT in his reassessment order, the learned A.R. of the assessee did not take the plea that the said motor vehicle was already declared as per agriculture wealth tax return.

(c)The next objection of the learned A.R. was that the D.C.I.T. moved proposal vide his letter dated 24-6-2002 to seek permission and not approval which is a statutory requirement in such a case. He further submitted that the I.A.C. also granted permission and not approval vide his letter dated 28-4-2002. He presented copies of both the letters before the Bench. He also argued that while the D.C.I.T. had moved the approval for addition of an amount of Rs.7,00,000., I.A.C. granted permission for making an addition of Rs.70,000 only which was another discrepancy in this case.

6. About the discrepancies regarding not obtaining approval and mere permission which would not fulfill the legal requirement, the learned A.R. cited 'the following decisions:--

(i) 2003 PTD Trib. 1238.

(ii) 1993 PTD Trib. 1172.

(iii) 1998 SCMR 2013 (SC Pak.).

(iv) 1998 PTD Trib. 978.

7. In its order reported as 2003 PTD (Trib.) .1238, dated 15-8-2002 the Tribunal has held as under:--

"Ss. 13(1)(aa) and 156---Addition---Permission/approval/ permission was sought by the Assessing Officer to make addition rather. than approval---Validity---Words ' "approval" and "permission" have different meanings and their impact is also quite different---Assessing Officer sought permission for addition and the I.A.C. allowed the same---Addition made after seeking permission from I.A.C. was not tenable in the eye of law---When law requires a thing to be done in a particular manner, that should be done in the manner or not at all, approval had never been sought nor granted and the permission allowed for making addition was not tenable in the eye of law---Miscellaneous application having been decided purely on the legal ground in favour of assessee. Appellant Tribunal rectified its earlier order and deleted the addition made under section 13(1)(aa) of the Income Tax Ordinance, 1979."

8. In its judgment reported as 1998 SCMR 2013 the learned Supreme Court has interpreted the words "permission" and "approval" as under:--

"Mr. Abdul Samad Khan learned Advocate Supreme Court appearing on behalf of the appellants in Civil Appeal No.162 of 1995 and Mr. Muhammad Azam Khan, learned Advocate General, N.-W. F. P., in support of Civil Appeal No. 163 of 1995 contended that the Tribunal had erred to reach the conclusion that the Standing Order No.II having been notified without the approval of the Provincial Government was not warranted. According to them the Provincial Government of N.-W.F.P. would be deemed to have accorded `implied approval' otherwise it would have declared, to have not been approved. In this context; it was-pointed out that this Standing Order had been issued in January, 1987 and had held the ground for over ten years having not been questioned from any quarter and was thus, deemed to be issued with , the `approval of the Provincial Government In this context Mr. Abdul Samad Khan, invited our, attention on `Interpretation of Statutes' Chapter XXXIII, page 1038, 7ih Edn. (1984) by N.S. Bindra wherein the word `approval' had been construed in the following terms:--

"Ordinarily, the difference between "approval and "permission" is that the first the Act holds good until disapproved, while in other case it does not become effective until permission is obtained. But permission subsequently obtained may all the same validate the previous Act."

The bare perusal of the above noted interpretation of approval derived from the case of Shakir Hussain v. Chundoo (AIR 1913 All. 567) is not extensive. On the contrary, it has brought out a difference between approval and permission.

(7)In the Treatise Words and Phrases, permanent Edition, Volume 3-4 at Page 502, ordinarily the term "approval" in its most obvious meaning has been taken

"to commend, confirm, ratify, sanction, or to consent to some act or thing done by another. As used in some statues or texts, the act of "approval" implies the act of passing judgment, the use of discretion, and a determination as a deduction therefrom, unless limited by the statute. As used in other statutes the term implies the exercise of sound judgment, practical sagacity, wise discretion, and final direct affirmative action. In some cases the term implies the exercise of judicial action or discretion, while in other cases the exercise of only an administrative function or capacity and not a judicial sense."

(8)We are, therefore, of the considered opinion that word "approval" occurring in section 12 of the Act implies the act of passing judgment, the use of discretion and a determination as a deduction therefrom, to confirm; ratify, sanction or to consent to some act or thing done by the Inspector General of Police. The word "approval" implies exerciser of sound judgment, practical sagacity wise discretion and final direct affirmative action. Merely because the impugned Standing Order has held the ground for a number of years is not sufficient to assume the grant of "approval" of the issuance of the Standing Order by the Provincial Government."

9. The learned D.R. argued that purpose of notice under section 65 was that no body should be condemned unheard and that although there have been certain omissions in the procedure, there was no flaw about approval obtained by the D.C.I.T, under section 13 and the amount of Rs.7,00,000 added by him under section 13(1)(c) was therefore, based on sound and legal footing. After hearing both the sides, we have to make the following observations:--

(i)Although the D.C.I.T. had finalized assessment order under section 62 of the Income Tax Ordinance, 1979, the reopening of the assessment order under section 65 was justified as the verification notice issued by the I.A.C. regarding investment in motor vehicle was a `definite information' for the purpose of section 65.

(ii)The show cause notice dated 27-3-2002 was an informal notice issued prior to statutory notice under section 65. It is pertinent to note that despite the fact that the D.C.I.T. had mentioned its issuance and explanation filed by the learned A.R. of the assessee vide letter dated 17-4-2002, no mention was made in the said explanation about declaration of the said vehicle in agriculture wealth tax return as subsequently claimed by the learned A.R. before assessee, the C.I.T.(A) and also before us. Also important is the fact that the learned A.R. has no record either of the show-cause notice or the explanation filed by the learned A.R. so that we could know the contents of the said notice. Subsequently the D.C.I.T. issued .a statutory show-cause notice under section 65 with the. approval of the I.A.C. vide his letter dated 18-5-2002. Thus even if the earlier notice dated 27-3-2002 is treated as illegal and redundant the infirmity was made good by a subsequent statutory notice issued under section 65 with the prior approval of the I.A.C.

(iii)The learned A.R. has claimed that the said vehicle was declared in the Agri. W.T. Return by the assessee filed alongwith his regular wealth tax return and income tax return. However, as also observed earlier the D.C.I.T. in his original assessment under section 16(3) has not mentioned such an asset , whether taxable or exempt:

(iv)The only the evidence produced by the learned A.R. about declaration of the said motor vehicle at Rs.3,50,000 as per Agri. W.T. return under section 14 of Wealth Tax Act, 1963 is a `duplicate' copy of the said return which he produced before the learned C.I.T.(A) as well as before us. This has not been substantiated by the documentary proof of filing the original Agri. W.Tax Return alongwith wealth tax return and income tax return with the D.C.I.T. Thus it appears that it was for the first time brought on record on 28-6-2002 without any evidence of filing the original one, much after. the issuance of verification note on 16-3-2002 and initiation of proceedings under section 65 vide approval of the I.A.C. dated 18-5-2002. It was not even mentioned in the explanation of the learned A.R. dated 17-4-2002.

(v)About the figures of Rs.70,000 (seventy thousand) mentioned in the letter of the I.A.C. dated 28-6-2002 produced before us it appears only once in narration, whereas in the subject of the letter the figure appears as Rs.7,00;000 (Rupees seven lacs only) and since it was issued in response to the proposal letter of the D.C.I.T. dated 24-6-2002 in which the figures of Rs.7,00,000 appear at least .3 times, there is no ambiguity to infer that it was a mere typographical mistake in the letter of the I.A.C. dated 28-6-2002. The argument of the learned counsel is therefore, not valid on this issue.

(vi)However, the argument of the learned A.R. regarding "permission" and not "approval" sought by the D.C.I.T. in his letter dated 24-6-2002 addressed to the I.A.C, and subsequently granted by the I.A.C. vide his letter dated 28-6-2002 is quite pertinent. We do not hesitate to observe here that if it was a mistake on the part of the D.C.I.T. who has been identified as an Inspector designated as Special Officer and being a very junior official in the hierarchy of the department the I.A.C. who is a senior officer of supervisory level is supposed to know the exact language of the provisions of law and to implement law in its real form and perspective. As rightly pointed out by the learned A.R. the Appellate Authorities have time and again held that when law requires a thing to be done in a particular manner, that should be done in the manner. or not at all. In section 13 of the Income Tax Ordinance, 1979 the word "approval", is very specific and it is the statutory requirement of law. As the Honourable Supreme Court in its decision reported as 1998 SCMR 200 cited above has interpreted the words "approval" and "permission", the word "approval" connotes different meanings as compared to the word "permission". The Tribunal in its order reported as 2003 PTD 1238 , cited above has specifically deliberated on this issue before holding that ii "permission" and not "approval" is granted, the order based upon that "permission" is not tenable in law. Unfortunately in this very case due to sheer negligence and casual attitude of the departmental officers the structure of addition under section 13 has been built on very week foundation.

10. In view of our findings as above and following the earlier decisions of the Tribunal reported as 2003 PTD Trib: 1238 dated 15-8-2002 referred above we cancel the assessment order passed under section 62/65 and also vacate the order of the learned C.I.T.(A) dated 9-1- 2,003 .

Wealth Tax Appeal

This appeal has been filed against addition of Rs.7,00,000 by the D.C.I.T. in assessee's wealth tax appeal vide order under section 16(5)/ 17 of the Wealth Talc Act. The facts of the case are the same as discussed by us while disposing of assessee's income tax appeal: The wealth tax assessment was originally finalized under section 16(3) whereby assessee's declared wealth of Rs.13,00,000 was accepted. Subsequently, the said assessment was reopened under section 17 with prior approval of the LA.C. vide his letter dated 18-5-2002. However despite being confronted/,by the D.C.W.T. the learned A.R. of the assessee did not submit any explanation and kept on taking adjournments. Thus the Assessing Officer finalized the assessment under section 16(5)/17 of the Wealth Tax Act,.1963, whereby he made addition of Rs.7,00,000 as suppressed value of motor vehicle No.ABJ-514 Model 1998 on the basis of verification note received by him. The learned C.I:T.(A) vide his order dated 9-1-2003 dismissed assessee's appeal as under:--

"Case papers have been perused. Brief facts of the case are that assessee is an individual and member of an AOP having 1/2 share in it. The original return of wealth for the year under appeal was filed on 29-9-1993 declaring total wealth at Rs.7,94,000 and the assessment was finalized under section 16(3) of the Wealth Tax Act, 1963 on total wealth at Rs.13,00,000. The assessment was finalized was reopened under section 17 on the basis of information about the purchase of 1998 Model Toyota Corolla Car, which Was not declared by the assessee in his total wealth. The assessment was accordingly finalized under section 16(5)/17 and total wealth was determined at Rs.20,00,000. The assessee being aggrieved has filed this appeal.

The perusal of the case record shows that the officer issued various letters to the assessee calling for details and documents for the proper and reasonable assessment in the case. But most of these requisitions were ignored by the assessee and compliance was not made. The Officer also issued further opportunity and also allowed number of adjournments on the request of the assessee., but even then proper details were not filed by the assessee. However, in the last the assessee's authorized representative appeared and submitted that the said car was declared by the assessee in his return of agricultural wealth tax. However, the officer's case is that the said car was not declared in the wealth tax return wherein the assessee was obliged to declare it on page No.2,' of the return of wealth: Further perusal of the record shows that the agriculture return was not originally filed by the assessee and assessee filed copy of the same on 28-6-2002 treating the same as duplicate. In the. absence of any evidence of filing the agriculture wealth tax return, the officer rightly rejected the contention of the A.R. and on account of the assessee's failure to declare the car in his wealth tax return, the officer was quite justified to treat it as concealed asset and tax is accordingly.

Besides above the assessee has termed the Toyota Corolla Car No.ABJ-514 Model 1998 as second hand Toyota vehicle, but an 1998 Model car cannot be termed' as second hand while finalizing the assessment for the year 1998-99. Since the assessee has admitted the Model of the car in his grounds of appeal therefore, the officer was quite reasonable in the facts and circumstances of the case. In view of the above the value of the vehicle taken by the officer and its addition in total wealth of the assessee was quite justified and is hereby upheld.

11. The learned A.R. argued that the D.C.I.T. had no definite information to reopen the case and the said asset was declared by the assessee as exempt in his Agri. W.T. return filed alongwith his regular wealth tax return under section 14 of the Wealth Tax Act, 1963. However, as observed by us while disposing of income tax appeal the assessee failed to produce any evidence regarding filing of Agri. Wealth Tax Return alongwith his regular wealth tax return under section 14 in which he claims to have declared the said vehicle as exempt at cost of Rs.3,50,000. As also observed by us earlier, he produced only duplicate unattested copy of the said Agri. W.T. return which was not submitted before the D.C.I.T. during income tax in his wealth tax reassessment proceedings. It is claimed to have been submitted on 28-6-2002, but the D.C.I.T./D.C.W.T. has not discussed even this duplicate copy of the wealth tax reassessment under section 16(5)/17 dated 22-6-2002. However, the learned C.I.T.(A) in his order dated 9-I-2003 has mentioned the filing of the duplicate of the said return on 28-6-2002. Copy of the said duplicate return was also submitted before the Bench, but the learned A.R. could not produce any evidence to prove that it was B filed alongwith the original wealth tax income tax return for 1998-99 and that it was available with the D.C.I.T./D.C.W.T. when original assessments under section 62 of the Ordinance and under section 16(3) of the Wealth Tax Act were finalized. He even failed to establish that this Agri. W.T. Return was on record at the time of reassessment of his wealth under section 16(5)/17 vide order dated 22-6-2002.

12. In view of the above discussion, we do not find any reason to interfere in the order of the learned C.I.T.(A) which is hereby confirmed.

13. As assessee's income tax /wealth tax appeals have been disposed of by us as above, the miscellaneous application for stay No.428/KB of 2003 has become infructuous and is hereby dismissed.

C.M.A./995/Tax(Trib.)Order accordingly