I.T.As. Nos. 6284/LB and 6285/LB of 2005, decided on 6th June, 2006. VS I.T.As. Nos. 6284/LB and 6285/LB of 2005, decided on 6th June, 2006., 2006 PTD-INCOME-TAX-APPELLATE-TRIBUNAL-PAKISTAN 2670 (2006)

Income Tax Ordinance (XXXI of 1979)---

----S.13(1)(aa)---Addition---Detail of source of investment were furnished that those were the result of life long savings and selling of jewelry and in this respect sale receipts were also furnished---Taxation Officer rejected the explanation and made the addition---Validity---Addition had been made despite the fact that assessee had submitted all the details but Taxation Officer without confirming from persons to whom the jewelry was sold/purchased had made the addition on the basis of presumptions and surmises---First Appellate Authority had not considered this fact although it had reduced the addition made by the Taxation Officer but there was no justification for the addition which was deleted by the Appellate Tribunal---Appeal of assessee was allowed.

Muhammad Shahid Abbas for Appellant.

Mrs. Sabiha Mujahid, D.R. for Respondent.

ORDER

JAWAID MASOOD TAHIR BHATTI (JUDICIAL MEMBER).---The appellant through these two appeals has objected to the two separate impugned orders of the learned CIT(A), dated 7-6-2005 for the assessment years 2000-2001 and dated 17-5-2005 for the assessment year 2001-2002. The common objection for both the years is regarding estimated sales while for the assessment year 2000-2001, the appellant has also objected the upholding of addition made under section 13(1)(aa) which has been reduced from Rs.485,000 to Rs.385,000.

I have heard the learned representatives from both the sides and have also perused the impugned orders of the learned CIT(A) and the assessment orders.

Regarding the estimated sales, I have found that declared sales at Rs.520,000 for the assessment year 2000-2001 and at Rs.580,000 for the assessment year 2001-2002 has been estimated by the Taxation Officer at Rs.2,000,000 for both the assessment years under review which has been reduced to Rs.1,500,000 and to Rs.1,800,000 by the learned CIT(A) for the assessment years 2000-2001 and 2001-2002 respectively.

I have found that in the subsequent years, the return version has been accepted wherein the sales has been declared at Rs.692,000 for the assessment year 2002-2003, at Rs.1,003,320 for the assessment year 2003, at Rs.1,049,010 for assessment year 2004 and at Rs.1,265,760 for the assessment year 2005.

Keeping in view these facts of the case, sales estimated by the Taxation Officer are reduced to Rs.1,000,000 for assessment year 2000-2001 and at Rs.1,500,000 for assessment year 2001-2002.

Regarding addition made under section 13(1)(aa), I have found that assessee filed wealth statement as on 30-6-2000 declaring net wealth at Rs.485,000. The Taxation Officer confronted the assessee through notice under section 13(1)(aa), dated 6-1-2005 to furnish the details of source of investment. On behalf of the assessee it was contended that these are from life long savings and selling of jewelry and that in this respect the sale receipts were also furnished. The Taxation Officer has rejected the explanation filed by the assessee and has made the addition at Rs.485,000 under section 13(1)(aa) of the late Ordinance, 1979 and during course of first appeal before learned CIT(A), the addition has been reduced to Rs.380,000. On behalf of the appellant it has been contended that addition had been made without an justification as all the details were furnished before the Taxation Officer, there was no justification to reject the explanation without confirming it from the persons from whom the source of income was claimed by the assessee. Learned counsel has submitted that addition has been made under section 13(1)(aa) without keeping in view the proviso section 13 wherein it has specifically legislated that "where any income referred to clause (a) to (e) is discovered after the assessment of the income of the income year to which the said act relates has been made, the income chargeable to tax under this section shall be included in the total income of the income year relevant to assessment year in which the said discovery is made." He has contended that in view of above proviso the addition in the present case cannot be made for the year under review as the investment, if any, found to be made was in the previous assessment years for which the addition cannot be made for the year under review.

I find force in the contentions made by the learned counsel and I am of the view that addition in this case has been made despite the fact that assessee has submitted all the details and Taxation Officer without confirming from persons from whom the jewelry was sold/purchase has made the addition on the basis of presumptions and surmises. I am of the view that learned CIT(A) has also not considered this fact although he has reduced the addition made by the Taxation Officer, but I find no justification for the addition under section 13(l)(aa) which is deleted and appeal filed by the assessee for the assessment year 2000-2001 in this regard is allowed.

Both the appeals filed by the assessee are allowed to the extent and in the manner as indicated above.

C.M.A./114/Tax (Trib.)Appeal accepted.