I.T.A. No.2594/LB of 2004, decided on 6th January, 2006 VS I.T.A. No.2594/LB of 2004, decided on 6th January, 2006, 2006 PTD-INCOME-TAX-APPELLATE-TRIBUNAL-PAKISTAN 1939 (2006)

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

----S.13(1)(e)---Unexplained investment etc., deemed to be income---Addition---Assessee paid nine days visit to United Arab Emirates and thirty eight days to United States and a sum of Rs.510,000 was shown to have been incurred on such tours---Assessing Officer considered such expenses to be on the lower side and proceeded to estimate such expenses at Rs.10,00,000---Addition of Rs.4,90,000 was made in terms of S.13(1)(e) of the Income Tax Ordinance, 1979 on account of declaring less expenses on foreign tour---First Appellate Authority deleted such addition as the same was made without bringing any material whatsoever on record-Validity-Since, estimate of Assessing Officer holding that expenses of Rs.10,00,000 were incurred on foreign tours, without any shadow of doubt, was based on hypothetical and fanciful assumption same was bound to be deleted--Addition made by the Assessing Officer was nothing but an exhibition of arbitrary powers---Even approval granted by supervisory officer also showed lack of application of mind as he did not bother to check the basis for the estimation of expenditure---Finding of First Appellate Authority was endorsed by the Income Tax Appellate Tribunal in its totality and department appeal was dismissed.

(b) Income-tax---

----Estimation of expenses---Principle---Estimate without details could not be upheld in all circumstances and the department should give at least some definite basis for arriving at the conclusion that higher expenses were incurred viz claimed.

Dr. Shahid Siddique Bhatti, D.R. for Appellant.

Arshad Nauman, I.T.P. for Respondent.

ORDER

RASHEED AHMED SHEIKH (JUDICIAL MEMBER).---Vide this appeal the Revenue has called into question the order passed by CIT (A) Zone-I, Lahore dated 12-3-2004 in respect of assessment year 1999-2000 on account of deletion of addition made under section 13(1)(e) of the Repealed Ordinance.

2. Both the learned representatives appearing at the bar have heard in this regard. The precise question which has been posed for my consideration was as to whether on the facts and in the circumstances of the case the deemed income assessed at Rs. 490,000 under section 13(1)(e) of the late Income Tax Ordinance, 1979 can be sustained in law. The facts which gave rise to this question are that during the year under appeal the assessee respondent paid nine days visits to United Arab Emirates and thirty eight days to United States and a sum of Rs.510,000 was shown to have been incurred on such tours. However, the expenses so incurred were considered to be on the lower side by the Assessing Office and he therefore proceeded to estimate such expenses at Rs.10,00,000. In this manner an addition of Rs.490,000 was made in terms of section 13(1)(e) of the Repealed Income Tax ordinance on account of declaring less expenses on foreign tour. During the course of assessment proceedings it was the assessee respondent's contention before the Assessing Officer that he travelled via Dubai to visit the United States of America and there he stayed with his brother-in-law who was a very senior Cardiologist to whom he used to visit frequently. While justifying travelling expenses, which amounted to Rs.510,000, it was explained that only a sum of Rs.169,530 was spent on air ticket and residual amount of Rs.340,470 was expended during the stay in Dubai and USA. Thus the total expenses declared on travelling was quite reasonable for a period of 47 days, in aggregate, in abroad in particular when he stayed with his brother-in-law. The explanation tendered by the assessee could not convince the Assessing Officer and he accordingly proceeded to make addition of Rs.490,000 (the difference of expenses declared on foreign tours and the estimated by the Assessing Officer) under section 13(1)(e) of the Repealed Ordinance when this treatment was called into question before the first appellate authority, he resorted to delete the impugned addition as that was made in absence of bringing any material whatsoever on record.

3. Anxious thought has been given to the divergent views expressed by the parties in appeal and have also perused the orders passed by the two authorities below as well as the case-law cited at the bar. I have come to an inescapable conclusion that not an iota of direct or indirect evidence has been adduced at the behest of the Revenue to hold the assessee-respondent that he had expanded more expenses viz declared by him. The facts available on record depicts that the departmental anxiety merely relates to declaration of lower expenses by the assessee?-respondent on his foreign tour. Now, the question left for consideration revolves around declaration of lower expenses and their correctness as well as maintainability of the estimated expenditure. It would, therefore, be a question of degree and fact as to whether the expenditure accounted for in a particular case is reasonably adequate or low and nominal depends upon the circumstances of each case. It would certainly be more satisfactory and proper if the Assessing Officer conducts exhaustive or detailed enquiry or investigated and gathered some material and, on the basis thereof, proceeded to estimate the expenditure that must have been incurred on foreign tours. But keep it in mind that such a detailed analysis and investigation is not required in every case.

4. It would not be out of place to state here that an estimate without details cannot be upheld in all circumstances and the department should give at least some definite basis for arriving at a conclusion that higher expenses were incurred viz claimed. It was more probable that the assessee's brother-in-law namely Dr. Abdul Razzaq, who is a cardiologist and resides in the USA, had met the entire fooding, lodging and other related expenditure and there was no reasonable ground for drawing inference that the extra expenditure should have come out of the assessee's income from undisclosed sources. In the given scenario the assessee-respondent was entitled to the benefit of doubt. Since, the estimate of the Assessing Officer holding that expenses of Rs.10,00,000 were incurred on foreign tours, without any shadow of doubt, is based on hypothetical and fanciful assumption which was bound to be deleted. In fact the addition made by the Assessing Officer under section 13(1)(e) of the Repealed Income Tax Ordinance is nothing but an exhibition of arbitrary powers. Even approval granted by supervisory officer also shows lack of application of mind as he did not bother to check the basis for the estimation of expenditure. I, therefore, have no ambiguity in my mind but to endorse the Appeal Commissioner's finding in its totality.

5. Resultantly, the departmental appeal fails and is dismissed being bereft of any merits.

C.M.A./40/Tax(Trib.)?????????????????????????????????????????????????????????????????????????? Appeal dismissed.