I.T.A. No. 4203/LB of 2003, decided on 29th November, 2005. VS I.T.A. No. 4203/LB of 2003, decided on 29th November, 2005., 2006 PTD-INCOME-TAX-APPELLATE-TRIBUNAL-PAKISTAN 689 (2005)

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

----S.13 (1)(aa)---Unexplained investment etc., deemed to be income---Accretion in wealth---Assessee contended that amount had arisen from agricultural lease land---Necessary corroboration from pertinent Revenue Record was not made to substantiate such contention---Assessing Officer rejected such assertion of the assessee and included the amount in assessee's total income as being unexplained as to source---First Appellate Authority accepted assessee's contention that the amount represented agricultural income from land obtained on lease by referring to a statement from the landlord (lessor) that he had given land to assessee (lessee)--Validity---Simple statement by one person that he had given his land on lease to another person would not be sufficient in accretion in wealth---Contract between landlord and assessee appeared to be in the nature of an afterthought and artificially contrived when assessee was questioned on the accretion in his wealth by the Assessing Officer--No documentary evidence was furnished by the assessee to establish that land obtained by him on lease was in fact used for agricultural cultivation by him and that agricultural produce grown on land was actually disposed of in the market that resulted in accretion in his wealth---Document from "Patwari" was wholly suspected as the same threw no light on the exact nature of the land and on the cultivation made thereon---Said document did not clarify whether it was canal irrigated land or otherwise or whether it was "Banjar" land and document appeared to be hastily filed in and no attention appeared to have been paid to the various columns---Appellate Tribunal vacated the order of the First Appellate Authority and restored the order of the Assessing Officer.

1991 PTD 488 not applicable.

(b) Income-tax---

---Contract---Contract between two parties---Third party does not have any right to interfere with regard to the modalities/terms and conditions of the said contract---However, the first condition is that there should be a bona fide, "arms length", transparent contract between two genuine parties.

1991 PTD 488 rel.

S.A. Masood Raza Qizalbash, D.R. for Appellant.

Syed Nisar Gillani for Respondent.

Date of hearing: 29th November, 2005.

ORDER

MUHAMMAD MUNIR QURESHI (ACCOUNTANT MEMBER).---This appeal by Revenue arises out of order passed by the C.I.T.(A) and it is the departmental contention that the First Appellate Authority has unjustifiably deleted addition made under section 13(1) (aa) amounting to Rs.342,897.

2. According to the D.R., the Assessing Officer had given full opportunity to the assessee at assessment stage to explain accretion in wealth amounting to Rs.342,897 and the assessee had deposed that the said amount had arisen to the assessee from agricultural lease land. However, necessary corroboration from the pertinent Revenue Record could not be made to substantiate assessee's contention and resultantly the Assessing Officer rejected the assessee's assertion and included the amount in assessee's total income under section 13(1)(aa) as being unexplained as to source. In first appeal, however, the C.I.T.(A) accepted assessee's contention that the said amount represented assessee's agricultural income from land obtained on lease and the C.I.T.(A) has referred to a statement from the landlord (lessor) that he had indeed given land measuring 115 Acres to the assessee (lessee). However, this statement was not further corroborated before the C.I.T.(A) and no Revenue Record was referred to nor placed before him and it is the departmental contention that mere statement of the landlord was not enough as this was a statement obtained by the assessee in a collusive manner simply to obtain tax benefit and such a bald assertion cannot therefore be made basis for allowing credit to the assessee in the manner done by the C.I.T.(A) in the appellate order. In this context, it is explained that the alleged lessor is a close relative of the assessee and the reliability of this statement from the alleged lessor is thus suspect.

3. The A.R. of assessee/respondent has referred to Supreme Court of Pakistan judgment cited as (1991 PTD 488) in support of his contention that the land given out on lease by the landlord to the assessee was in the nature of a contract between the assessee and the landlord and the income tax department had no power to interfere in the modalities or the terms of said contract. It is explained that the land was given out to the assessee on lease @ Rs.3,500 per Acre and front such lease land the assessee was able to realize agricultural income and the accretion in wealth for the amount of Rs.342,897 represents the net amount realized by the assessee from such land.

4. The A.R. of assessee/respondent has submitted a document statedly issued by the "Patwari" to substantiate the contention that the land in question had in fact been obtained on lease by the assessee. This document was examined by the D.R. and he has pointed out several defects/deficiencies therein; (1) The document. purportedly issued by the "Patwari" has not been properly authenticated. The identity of the "Patwari" statedly issuing the certificate is not readily established at all. (2) The document does not specify precisely the exact amount of land given to the assessee on lease. In column 5, it is stated that "approximately 100 Acres" of land is involved. According to the assessee, he had obtained 115 Acres land on lease. Whenever, the "Patwari" certifies land given on lease, the exact area is invariably specified and there can be no "approximate" entry in this regard. (3) The lease period is no where specified in the document. It is not readily apparent as to which period it relates to. (4) It is not at all clear whether the land allegedly obtained on lease by the assessee is irrigated land or otherwise Column 4 makes no clarification in this regard. If it is not irrigated land but "Banjar land" then how can it be reasonably expected to yield "income" to the extent claimed by the assessee. (5) In column 3, no personal details of the lessor allegedly giving land on lease to assessee have been entered. Only particulars of the lessee had been entered. (6) The top portion of the document has not been filled in at all and there is no entry against "Mauza", "Tehsil" and "District".

5. These defects/deficiencies were confronted to the A.R. of assessee/respondent and by way of rebuttal, the A.R. submitted that the so-called defects/deficiencies cited were not substantive in nature and the essential contention of the assessee was in fact properly established through the said document.

6. The D.R. reiterated that assessee's contention as to source of amount in question treated as unexplained by the Assessing Officer was not properly established as required under the law and that the C.I.T.(A) had wrongly deleted the said amount. It was emphasized that the document now being placed before the Tribunal had not been earlier placed before the Assessing Officer or before the C.I.T.(A) and that this document was wholly defective.

7. I have heard both sides and have examined the available record and in my considered judgment, the deletion of the amount in question by the C.I.T.(A) is not proper as the assessee has indeed not been able to establish conclusively that the accretion in the wealth to the extent of Rs.342,897 represented assessee's income from agriculture. No reliable documentary evidence regarding assessee's alleged agricultural income has been placed either before the Assessing Officer or before the C.I.T.(A) and the document now being placed before the Tribunal again does not conclusively and properly establish assessee's contention. No doubt, in the case of a contract between two parties a third party does not have any right to interfere with regard to the modalities/terms and conditions of the said contract. However, the first condition is that there should be a bona fide, "arms length", transparent, contract between two genuine parties and there should be no doubt that the contract had been artificially contrived to illegally benefit one party with regard to its income tax liability. In the present case, as explained (supra), at the appropriate forum i.e. income tax assessment officer, the assessee was not able to properly substantiate his contention that there was in fact a genuine contract in existence at the material time and that the assessee was actually able to realize agricultural income to the extent being claimed as a direct consequence of the contract entered into by him with the owner of the land in question. A simple statement by one person that he has given his land on lease to another person would not be sufficient in the context of the case of the present assessee's accretion in wealth. The ambient circumstances are strongly against the assessee. The alleged "contract" appears to be in the nature of an afterthought and appears to have been artificially contrived when assessee was questioned on the accretion in his wealth by the Assessing Officer. No documentary evidence whatsoever was furnished by the assessee before the Assessing Officer to establish conclusively that the land allegedly obtained by him on lease was in fact used for agricultural cultivation by him and that agricultural produce allegedly grown on this land was actually disposed off in the market at a net gain of Rs.342,897 that resulted in accretion in the assessee's wealth. The document from "Patwari" is wholly suspect. It throws no light whatsoever on the exact nature of the land and on the alleged cultivation made thereon. The document does not clarify whether it is canal irrigated land or otherwise or whether it is "Banjar" land. The alleged document appears to be hastily filled in and no attention appears to have been paid to the various columns, as detailed Supra. Looking at the matter in its totality, therefore, given the facts and circumstances obtaining in assessee's case. I am of the considered opinion that the Honourable Supreme Court of Pakistan judgment referred to Supra, is not properly applicable at all. That being so, I hereby vacate the order of the C.I.T.(A) and reinstate the order of the Assessing Officer.

8. The departmental appeal is accepted.

C.M.A./670/Tax(Trib.)Appeal accepted.