Income Tax Ordinance (XXXI of 1979)‑‑‑

‑‑‑‑Ss. 65, 63, 108(b) & 111‑‑‑Additional assessment‑‑‑Grant of loan‑‑ Wealth statement‑‑‑Initiation of proceedings on the basis of wealth statement available on record at the time of original assessment‑- Validity‑‑‑Proceedings under S. 65 of the Income Tax Ordinance, 1979 were uncalled for not only because the entries pertained to a year subsequent to the year assessed but no new facts had been brought on record to justify action under S.65 of the Income Tax Ordinance, 1979‑‑ Order passed under Ss. 65/63 of the Income Tax Ordinance, 1979 was cancelled by the Appellate Tribunal alongwith other two orders under Ss. 111 & 108(b) of the Income Tax Ordinance, 1979.

1998 PTD (Trib.) 123; 1993 PTD (Trib.) 689; 1995 PTD (Trib.) 318; ITA No. 1514/LB of 1987‑88 and Edulji Dinshaw Ltd. v. Income Tax Officer 1990 PTD 155 rel.

Siraj‑ud‑Din Khalid for Appellant.

Noor‑ul‑Amin Hotyana, D.R. for Respondent.

Date of hearing: 22nd May, 1999.

ORDER

NAZEER AHMED SALEEMI (ACCOUNANT MAMBER)--‑‑ The appellant, an individual is Director with Messrs Khan Brothers Ltd., Lahore. He has come up in three appeals against orders passed under sections 63/65. Under section 111 and under section 108(b) of the Income Tax Ordinance.

2. The assessee‑appellant had advanced Rs..13,50,000 to the company on 29‑7‑1989. The DCIT doubted that the assessee had no resources with him to invest on the due date i.e. 29‑7‑1989. The IAC's approval was sought under section 65 and necessary notices were issued to the assessee followed by notice under section 61. There was no compliance to the show‑cause notice. Specific notice under section 62 was also issued confronting the assessee/appellant with the alleged unexplained cash of Rs. 11,80,000. In his explanation, the assessee's A.R. took the following stand:‑‑

"You are hereby informed that facts of the case have not been properly understood. The fact is that assessee, Mr. Amanat Ullah Khan is director of more than one company simultaneously. He is existing assessee of income tax and wealth tax. He had filed his wealth statement for 30‑6‑1989 (under National Tax No. 7‑10‑1721880) which has been referred in your said notice and disclosed total wealth of Rs.31,57,762.

In this wealth statement under column "investment" he has also declared balances lying with limited companies at Rs.24,52,762. This huge amount available has escaped your kind attention. The fact is that sum of Rs.13,50,000 was withdrawn from one company and credited in Khan Brothers (Pvt.) Ltd. This entry is verifiable from the books of accounts of Ghulam Rasool and Co. (Pvt.) Ltd. Photocopy of Ledger Account No. 18 is annexed herewith indicating that said amount was withdrawn by the assessee which was debted in his account with corresponding credit in Khan Brothers (Pvt.) Ltd. It is totally denied that assessee had no sources with him to provide or arrange sum of Rs.11,80,000 which you wrongly intend to assess in the hands of the assessee?"

3. In support of above contention, the assesee's A.R. submitted copy of the directors ledger account which according to the learned DCIT was not acceptable for want of signatures of the Director and missing company's seal on the letter, another notice was issued and the assessee was asked to co‑relate the drawing from Messrs Ghulam Rasool and Co. Ltd. to Messrs Khan Brother (Pvt.) Ltd. Even the encashment of FEBCs worth Rs.15,75,000 was doubted. Another reminder was issued in response to which the assessee's A.R. sought an adjournment on the plea that the required documentation/information was under collection/preparation. On request, one day's adjournment was granted for 27‑3‑1995 on the basis of adjournment application, dated 26‑3‑1995. There was no compliance and the DCIT proceeded ex parte and the following income was assessed:‑‑

In second appeal, addition under section 13(1) was set aside to be re‑considered in the year when the amounts were discovered. Orders under sections 111 and 108(b) were confirmed.

4. The assessee came up in miscellaneous application requesting for recalling of the above orders praying that the following undisputed issues may be decided after hearing the two parties. We concluded that ground No. 3 in the original grounds of appeal could not be adjudicated upon. The orders were thus recalled.

5. The learned A.R. filed the following documents in the support of his contention.

(i) 1998 PTD (Trib.) 123.‑‑‑Wherein our, learned brothers had held that unexplained investment can be treated deemed income of the income year in which the assessee is found to have made any investment.

(ii) 1993 PTD (Trib.) 689.‑‑‑Wherein our learned brothers held that under statement of investment in purchase of property has to be assessed to tax under section 13 in which year the property was purchased by assessee by considering it as income.

(iii) 1995 PTD (Trib.) 318.‑‑‑Wherein the Full Bench considered this aspect and decide that unexplained investments made during an income year can be deemed as an income of that year alone.

(iv) I.T.A. No.1514/LB of 1987‑88.‑--(Assessment year 1986‑87) order, dated 21‑6‑1997 wherein our learned brothers (wherein the worthy Judicial Member was author of the order) held that the property impugned had been purchased by the assessee in an earlier year and the same was not to be added in the subsequent year.

6. Perusal of the appellate orders show that the learned CIT(A) did not take up this matter in detail and simply confirmed the order of the lower officer holding that the treatment at the hands of the Assessing Officer was in order.

7. We have considered the arguments of the two sides and the facts available on record and are convinced that there is no doubt that the loan was advanced by the assessee/appellant to Messrs Khan Brothers (Pvt.) Ltd. on 29‑7‑1989 falling in the assessment year 1990‑91. There is no doubt that these facts were well‑known to the Assessing Officer at the time of initial assessment also. These were apparent from the wealth statements of the assessee and from the books of accounts of the company. The learned A.R. relied upon the following judgment of their Lordships of Supreme Court of Pakistan in his support:‑‑

Edulgi Dinshaw Ltd. v. Income Tax Officer, reported as 1990 PTD 155 (SCP).‑‑Wherein their Lordships of Supreme Court of Pakistan had held that once all the facts had been fully disclosed by the assessee and considered by the Income Tax Authorities and the assessment had been consciously completed and no new facts had been discovered, there can be no scope for interference with this concluded transaction under the provisions of section 65 on the ground that the income chargeable to tax under Ordinance has escaped assessment or has been under assessed ; in the meaning of section 108(b) of the Ordinance. He also relied on another case‑law reported as PTCL 1997 CL.P. 67.

8. The perusal of the assessment orders does not show at any stage that this loan of Rs.13,50,000 to Messrs Khan Brothers (Pvt.) Ltd. was ever concealed. The proceedings under section 65 were taken up on the basis of wealth statement already available on record.

9. Respectfully following the decision of their Lordships of Supreme Court of Pakistan as well as large number of orders discussed above of our learned brothers, we are convinced that proceedings under section 65 were uncalled for not only because the entries pertain to a subsequent year other than the year assessed but no new facts had been brought on record to justify action under section 65 of the Ordinance. The appeal thus succeeds and the orders passed under sections 65/63 stand cancelled. Accordingly, the other two orders under section 111 and 108(b) also lack the legs to stand and are hereby cancelled. All the three appeals succeed as above.

C.M.A./973/Tax (Trib.) Appeals accepted.