MUHAMMAD FAYYAZ BUTT VS COMMISSIONER OF INCOME TAX, ZONE-A, LAHORE, 2006 PTD-LAHORE-HIGH-COURT-LAHORE 2828 (2006)

2006 P T D 2828

[Lahore High Court]

Before Nasim Sikandar and Jawwad S. Khawaja, JJ

MUHAMMAD FAYYAZ BUTT

Versus

COMMISSIONER OF INCOME TAX, ZONE-A, LAHORE

P.T.Rs. Nos. 197 and 198 of 2003, decided on 05/09/2006.

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

----S. 135(6)---Assessment, enhancement of---Power of Appellate Tribunal---Scope---Enhancement of assessment relates both to amount and account---Tribunal, if wishes to make an addition on an account on which it was not earlier made by Assessing Officer, then same would be a case of enhancement of assessment---Without serving assessee with show cause notice, Tribunal could not enhance his liability---Enhancement of assessment without notice to assessee would be illegal and liable to be set aside.

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

----S. 13(1)(d)---Addition of an investment made by assessee---Scope---Such addition could be made in cases, when value of investment exceeded amount recorded in books of accounts or when investment was shown in wealth statement---Condition precedent for making an addition under S.13(1)(d) of Income Tax Ordinance, 1979 would be fulfilled, if assessee, who did not file wealth statement for relevant year, indicated in return for subsequent year an investment made in purchase of house in the earlier year.

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

----S. l3(1)(d)---Investment made in property by assessee---Source of income---Particular source of income in respect of such investment, if accepted by Revenue on wealth tax side, then Revenue could not deny such claim on income tax side.

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

----S. 13(1)(d)---Investment made in property, addition of---Proof---Before making such addition, Revenue must establish its case beyond any doubt---Principles.

An addition without determination of the source or at least a safe guess by the Tax Collector is totally bald, and therefore, cannot be approved. Before touching upon the pocket of a tax-payer, the Revenue must establish its case beyond any doubt.

(e) Interpretation of statutes----

---Fiscal statutes---Deeming provisions, interpretation of---Principles.'

While interpreting and enforcing the deeming provisions of a taxing statute, unlike civil case, it is not mere preponderance of evidence or the possibility of happening of certain facts in a certain manner. It is rather a proposition to be answered as a question of mathematics or physics. An extended use of imagination by a Tax Collector to burden a tax-payer is strictly prohibited.

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

----S. 13(1)(aa)---Provisions of S.13(1)(aa) of Income Tax Ordinance, 1979 would be construed very strictly.

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

----S. 13(1)(aa)(d)---Investment in property with currency brought from abroad by assessee---Assessing Officer accepted Form-A indicating bringing into Pakistan foreign currency, but refused to give its credit to assessee for not surrendering foreign currency to State Bank of Pakistan---Validity---Encashing of foreign currency by assessee through Money Changer would prove that money was brought into Pakistan and converted in Pak Rupee---Bringing of currency through banking channel not a legal requirement of Income Tax Law---Revenue failed to establish that such investment was not made with such currency or that assessee had some other source not disclosed by him---Impugned order was set aside in circumstances.

Commissioner of Income Tax/Wealth Tax Companies Zone-II, Lawrence Road, Lahore v. Sarfaraz Ali Sheikh (2000) 81 Tax 341; Asad Hussain v. Commissioner of Income Tax Lahore Zone-B, Lahore 2002 PTD 2418 and Hudabiya Engineering (Pvt.) Limited v. Pakistan through Secretary Ministry Interior, Government of Pakistan and 6 others 1998 PTD 34 ref.

Ch. Muhammad Siddique for Petitioner.

Muhammad Ilyas Khan for Respondent.

Date of hearing: 27th June, 2006.

JUDGMENT

NASIM SIKANDAR, J.---By this order we intend to dispose of PTRs Nos. 197 and 198 of 2003.

2. The petitioner is an individual. By way of a notice under section 56 of the late Income Tax Ordinance, 1979 he was required to file a return of income for the assessment year 1986-87. In reply "Nil" income was returned on the ground that no business was conducted by him during that year. The Assessing Officer then issued notices under sections 61 and 58(1) of the late Ordinance on the ground that the assessee had made investment in purchase of a 12 Marla old house situated at main Allama Iqbal Road, Lahore.

3. Simultaneously proceedings for the assessment year 1995-96 were also initiated. The assessee filed wealth statement for the year 1995-96 while no wealth statement was filed for the year 1986-87. In the wealth statement for the year 1995-96 the assessee declared investment in the said immovable property at Rs.360,000 which was claimed to have been purchased in October, 1985.

4. The Assessing Officer finding the declared investment in the purchase of the said house to be on the lower side served him with a notice under section 13(1)(d) of the late Ordinance to explain the aforesaid investment in the year 1986-87. The reply submitted by the respondent was found unsatisfactory and thereupon the Assessing Officer again confronted the assessee as to why an addition of Rs.840,000 should not be made in his income under section 13(1)(d) on account of under statement of investment. The relevant part of the notice reads as under:--

"In October, 1985 you purchased a house property comprising 12-Marla with superstructure the cost of which is disclosed at Rs.3,60,000. The same is quite low in view of market rates at the material time. Evidence from a parallel case intimated to you through specific notice, dated 14-5-1996. By virtue of the said specific notice you were intimated that the cost of investment made in the purchase of the said house property shall be estimated at Rs.1,00,000 per marla resulting in under-statement to the tune of Rs.8,40,000. The reply furnished to the said specific notice, dated 14-5-1998 is totally unsatisfactory which is, therefore, rejected. By virtue of the instant notice you are intimated that the addition under section 13(1)(d) of the Income Tax Ordinance, 1979 on account of under-statement of the cost of investment made in the purchase of the said house property at main Allama Iqbal Road, Lahore works out to Rs.8,40,000 which is as under:--

Cost esthnated under section 13(1) of

12-Marla house.	Rs.12,00,000
Cost declared.	Rs.3,60,000
Difference.	Rs.8,40,000

The above difference i.e. Rs.8,40,000 which is assessable to tax as income. You are, therefore, required to state your objection as well as explain the sources of investment to the tune of Rs.8,40,000 failing which the said amount shall be added/taxed to your income for the charge year 1986-87."

5. The reply submitted in response to the notice was again found unsatisfactory. Accordingly by way of the assessment order recorded on 29-12-1996 the value of the property was estimated at Rs.12,00,000. On allowing the benefit of the declared investment at Rs.3,60,000 an addition of the balance of Rs.8,40,000 was made towards income for the year 1986-87 by invoking the provisions of section 13(1)(d) of the late Ordinance.

6. As regards the assessment year 1995-96 by way of parallel proceedings the Assessing Officer served upon the assessee a notice under section 56 for a return of income. Subsequently notices under sections 61 and 58(1) are also issued for that year. In reply the assessee declared investment of Rs.28,50,000 in the construction of a marriage hall built upon the said 12 Marlas property earlier purchased by him in October, 1985. The investment disclosed in the return which indicated cost of construction per sq. ft. at Rs.356 on 8000 sq. ft. was found to be on the lower side. Accordingly on 3-11-1996 the assessee was served with the following notice:--

"During the period relevant to the assessment year 1995-96 you completed construction of Hotel and Marriage Hall and the total cost was declared at Rs.28,50,000 for a covered area of 800 sq. ft. yielding per sq. ft. rate of Rs.365.25. By virtue of specific notice, dated 26-3-1996 you were intimated that the cost of construction shall be adopted at Rs.400 per sq. ft. keeping in view that no site-plan available and that construction is of "A" type. The reply furnished is again unsatisfactory and without documentary evidence. The declared cost i.e. Rs.28,50,000 is stated to have been made out of encashment of Foreign Currency during the period 31-7-1993 to 28-12-1994. The acquisition of Foreign Currency was not brought into Pakistan through normal banking channel, hence entire declared cost remains unexplained and warrants addition under section 13 (1)(aa) of the Income Tax Ordinance, 1979. Please explain why any addition of Rs.28,5,000 should not be made under section 13(l)(aa). By virtue of the instant notice you are intimated that the cost of construction of Hotel and Marriage Hall at Allama Iqbal Road, Lahore, comprising total covered area. 8000 sq. ft. shall be taken on the basis of parallel case at Rs.400 per sq. ft. You are, therefore, required to explain as to why total cost of construction should not be adopted under section 13 (2) at Rs.32,00,000 for consequent addition of Rs.3,50,000 (Rs.32,00,000 Rs.28,50,000) on account of under-statement of cost of construction under section 13(1)(d) of the Income Tax Ordinance, 1979."

7. In reply the assessee contested the proposed adoption of construction rate at Rs.400 per sq. ft. It was stated that construction at site was started in July, 1993 and the marriage hall was completed in June, 1995; that the cost of construction declared by the assessee could not be said to be on the lower side keeping in view the period of construction. In the reply a parallel case was cited in which the department had accepted the cost of construction at Rs.375 in agreement with the assessee. As regards the proposed addition of Rs.28,50,000 under section 13(l)(aa) it was contended that the assessee lived abroad for about three decades and during this time while visiting Pakistan he brought foreign currency which was duly declared in Form-A certified by the Customs Authorities at the time of entry into Pakistan. Further that during this period the assessee did not make any other asset out of his foreign exchange earnings except on purchase of the said old house spread on 12 marlas in October, 1985, on which subsequently a marriage hall was constructed. The encashment of foreign exchange was stated to have been made through Taj Jillani, authorized Money Changer, Montgomery Road, Lahore from whom certificates, dated 31-7-1993, 29-3-1994, 18-9-1994 and 29-12-1994 evidencing encashment of 25000 US $, 30,000 DM, 50,000 DM and 41,000 DM respectively, were produced.

8. The Assessing Officer however was not satisfied. It was noted that the assessee arrived in Pakistan on 9-3-1984 and declared 85,000 DM in Form-A, then he brought 20,000 US $ while the date of arrival as mentioned in Form-A was not legible but date of departure was mentioned as 6-6-1983. Then on 3-9-1985 he brought 5,000 US $ and on 12-10-1987 an amount of 35,000 D.M. was brought into Pakistan. Further that after 1987 the assessee had not visited abroad and, therefore, the bringing of any further foreign exchange in Pakistan could not be established.

9. According to the Assessing Officer the foreign currency having not been brought through banking channels or any other recognized mode of foreign remittances it could not be allowed benefit of exemption clauses of Second Schedule Part-IV clauses 6(A) and 86(B) of the late Ordinance. It was further noted that since his arrival in Pakistan in the year, 1987 the assessee had not disclosed any source of income and, therefore, all foreign currency evidenced by Form-A must have been consumed by the assessee in household and personal expenses. Accordingly, in his view at the time of construction of the said marriage hall no foreign currency amount was available with the assessee. For that reason he rejected the certificates procured by the assessee for encashment of foreign currency and proceeded to make an addition of Rs.28,50,000 under section 13(l)(aa) as investment from undisclosed sources. Also another addition of Rs. 3,50,000 was made under section 13(1)(d) of the late Ordinance on account of difference between the declared and determined cost of construction of marriage hall. In this way through the assessment order, dated 29-12-1996 total income for the year 1995-96 was assessed at Rs.32,00,000.

10. The two appeals by the assessee for the years 1986-87 and 1995-96 were heard and disposed of by the CIT(Appeals), Zone Lahore on 31-3-1997 by way of a consolidated order: As far the assessment year 1986-87 the First Appellate Authority CIT(Appeals), noted that against the parallel case referred to by the Assessing Officer another parallel case was available in which the Revenue had accepted the declared purchase price at Rs.52,000 per marla in the case of Messrs Shalimar Plaza, Allama Iqbal Town, Lahore. Therefore, he found it fair and just if the market value of the 12-marla old house was estimated at the rate of Rs.50,000 per marla.

11. For the year 1995-96 CIT (Appeals) disapproved both additions. In the case of addition of Rs.28,50,000 under section 13(l)(aa) he observed that the Assessing Officer never doubted the declarations made by the assessee in Form-A nor the certificates issued by the money changer. Further that the Assessing Officer never confronted the assessee with his reasoning of earlier investment in some other property. He noted that as per wealth statement available on record the appellant/assessee owned a marriage hall as the only immovable property as on 30-6-1995. He also disapproved the view of Assessing Officer that the assessee must have consumed the amount of foreign remittance in his household or personal expenses. In the view of the Appellate Authority such an inference could not be drawn without confronting the assessee in that regard. As far the addition under section 13(1)(d) the Appellate Authority found that the declared rate of Rs.356.25 per sq.ft. for construction was not grossly understated when seen in the perspective of the fact that the Department had accepted the cost of construction at a rate of Rs. 375 per sq. ft. in agreement with the assessee in the case of another plaza. Both additions were, therefore, directed to be deleted.

12. The order of First Appellate Authority was challenged before the Tribunal by way of cross appeals. The Department alleged the reduction in purchase price of house from Rs. l lac to Rs.50,000 per marla and the deletion of addition made under section 13 of the late Ordinance to be unjustified. For the assessee it was contended that as far the purchase of property in the year, 1986-87 was concerned Rule 207-A had in the meanwhile been inserted in the Income Tax Rules, 1982 which placed an embargo on adoption of a price higher than the one notified by the District Revenue Authorities under section 27-A of the Stamp Act, 1899 (added by Punjab Finance Act IV of 1986) for the purpose of levy of stamp duty. The assessee also placed reliance upon two judgments of this Court in re. Commissioner of Income Tax/Wealth Tax, Companies Zone II, Lawrence Road, Lahore v. Sarfaraz Ali Sheikh (2000) 81 Tax 341) and re. Asad Hussain v. Commissioner of Income Tax, Lahore Zone-B, Lahore, (2002 PTD 2418). The learned Tribunal, however disagreed. It was noted that while filing wealth statement under the Wealth Tax Act the assessee had disclosed the value of the old home at Rs.3,60,000 as against its registered value of Rs.1,50,000. That factum, alone according to the learned members of the Tribunal was sufficient to discredit the sale-deed. The case-law cited at the bar was also found distinguishable.

13. The learned members of the Tribunal did not stop there. On going a step further they observed that the adopted value of Rs.50,000 per marla as finally decided by the CIT (Appeals) did not include the value of the superstructure. They agreed with the D.R. that the Assessing Officer had determined the cost of land at Rs.100,000 per marla with reference to a parallel case which included the cost of old structure standing thereupon. In the view of the learned members of the Tribunal the CIT(Appeals) had not disturbed that part of the order recorded by the Assessing Officer. According to them the total price of property after adjudication by the CIT(Appeals) at the rate of Rs.50,000 per marla came to Rs.934,200 plus Rs.334,200 for the superstructure. Therefore, after setting of the declared purchase price at Rs.3,60,000 learned members of the Tribunal held that balance amount of Rs.5,74,200 was to be included in his total income under section 13(1)(d) for the assessment year 1986-87.

14. In the case of investment in marriage hall in the year, 1995-96 learned members of the Tribunal found that there was no direct evidence that the foreign currency got encashed from the money changer in the year 1993-94 was the same foreign currency which was brought into Pakistan by the assessee in the year 1982-83. Also that during this period not only the assessee had been making investments in Pakistan but had also incurred expenditure during the course of his many visits to Pakistan over the years. Therefore, in their view no proof was available with the assessee which could support foreign investment in the marriage hall in the year, 1995. Therefore, the order of CIT(Appeals) was set aside and both additions made in the year 1995-96 were restored.

15. According to the petitioner/assessee the impugned order of the Tribunal gives rise the following questions of law to be considered and answered by this Court.

Assessment year 1986-87

(I) Whether on the facts and in the circumstances, the order passed by the learned ITAT based on the arguments offered by a departmental representative who is not authorized in terms of Rule 2 of ITAT Rules, 1981, can be termed as valid order in the eyes of law?

(II) Whether on the facts and in the circumstances of the case does the onus lies on the Court or not to ascertain the proper authorization in terms of Rule 2 of ITAT Rules, 1981, of the representatives appearing on behalf of the parties to a case?

(III) Whether on the facts and in the circumstances, the learned ITAT was justified in entertaining the departmental appeal made through combined grounds of appeal for the assessment years 1986-87 and 1995-96?

(IV) Whether on the facts and in the circumstances, the provision of section 13(1)(d) of the Income Tax Ordinance, 1979 can be restored to when wealth statement under section 58 of the Ordinance for the relevant year has not been filed nor books of accounts maintained and produced by the assessee?

(V) Whether on the facts and in the circumstances of absence of any independent legislation empowering to evaluate the immovable property at the market rates as against the higher value disclosed than that fixed by the District Collector, the learned I.T.A.T. was justified to deviate from the mandatory provisions laid down under Income Tax Rules 207-A through upholding the valuation at market rates?

(VI) Whether on the facts and in the circumstances, the learned ITAT was justified in entertaining the verbal contention of the Department on account of alleged omission of valuation of the superstructure which was neither raised before it in the grounds of appeal nor before the CIT(A)?

Assessment year 1995-96

(I) Whether on the facts and in the circumstances, the order framed by the learned ITAT based on the arguments offered by a departmental representative who is not authorized in terms of Rule 2 of ITAT Rules, 1981, can be termed as valid order in the eyes of law?

(II) Whether on the facts and in the circumstances of the case it is the Court to ascertain the proper authorization of the representatives appearing or the parties concerned?

(III) Whether on the facts and in the circumstances, the learned ITAT was justified in entertaining the departmental appeal made through combined grounds of appeal for the assessment years 1986-87 and 1995-96 in view of the provisions contained under rules No.7 and 10 of the Income Tax Appellate Tribunal Rules, 1981?

(IV) Whether on the facts and in the circumstances, the foreign exchange encashed through authorized money changer, duly co-relating the period of remittances mentioned in Form A maintained by Customs Department, does not amount to a direct evidence in the eyes of law to explain funds as against contrary view held by the I.T.A.T.?

(V) Whether on the facts and in the circumstances, availability of funds declared on account of encashment of foreign currency in 1993-94 and 1994-95 could be assessed in the assessment year 1995-96 under the Income Tax Ordinance, 1979?

(VI) Whether on the facts and in the circumstances of the case the learned Income Tax Appellate Tribunal was justified in deviating from the principle of law in the matter of exemption of foreign remittances decided in a parallel case by its own forum reported as I.T.A. No. 10 (IB) of 1999-2000, dated 7-9-1999? (Annexure-F)

(VII) Whether on the facts and in the circumstances, it is mandatory to deposit or encash the foreign currency in or through a scheduled bank in order to avail exemption in view of the provisions contained in the Income Tax Ordinance, 1979 or any other law for the time being in force?

(VIII) Whether on the facts and in the circumstances, the learned I.T.A.T. was justified to hold the non-availability of funds on account of foreign remittances in the year under reference when the department had accepted its availability in the immediately preceding years namely assessment years 1993-94 and 1994-95 in the Wealth Tax assessment?

(IX) Whether on the facts and in the circumstances, the foreign currency and its encashment in the years subsequent to 1982 to 1987 and are not covered by the Protection of Economic Reforms Act, 1992 and Income Tax Ordinance, 1979?

(X) Whether on the facts and in the circumstances the I.T.A.T. while disposing of the departmental appeal is not legally obliged to thrash out the entire basis relied upon by the CIT(Appeals)?

16. For the petitioner/assessee it is inter ilia, contended that since in the year 1986-87 no wealth statement was filed, an addition under section 13(1)(d) of the late Ordinance was legally improper; that the Assessing Officer did not doubt the source of investment in purchasing of 12 Marlas old house declared at Rs.3,60,000 while the Tribunal included that amount in the addition while reversing the order of the CIT(Appeals); that in the year 1995-96 the Department approbated and reprobated inasmuch as the availability of funds and acquisition of property from foreign remittance was accepted and the claimed exemption was allowed on wealth tax side in the years 1991-92, 1992-93, 1994-95 and 1995-96. The treatment extended to the petitioner is claimed to be violative of the ratio settled in the Larger Bench judgment of this Court in re. Hudabiya Engineering (Pvt.) Limited v. Pakistan through Secretary, Ministry of Interior, Government of Pakistan and 6 others, (1998 PTD 34). Also states that during pendency of appeal before the Tribunal, Rule 207-A having been added on 25-7-1997 in Income Tax Rules, 1982 the Tribunal ought to have allowed benefit of that Rule on account of its being beneficial to the taxpayer.

17. Learned counsel appearing for the Revenue, however, supports the impugned order of the Tribunal by reiterating its observations that the alleged foreign exchange was enchased through a money changer some 10 years after its remittance or bringing into Pakistan personally. Therefore, according to him the Tribunal rightly observed that there was no nexus between the moneys brought to Pakistan during the years 1982-83 and the encashments made by the assessee from a money changer in the year 1993-94. Further that the learned members of the Tribunal were justified in observing that the foreign exchange alleged to have been brought by the assessee into Pakistan during the aforesaid period must have been consumed or utilized during the course of his many visits to Pakistan over the years.

18. Taking up the assessment year 1986-87 first it will be noted that 12 Marlas old house at Ghari Shahu, Allama Iqbal Road, Lahore was purchased by the assessee in October, 1985 for a registered value of Rs.1,50,000. He was served with notices on 14-5-1996 for filing of returns for the years 1986-87 and 1995-96. No wealth tax return for the year 1986-87 was filed though in the consolidated statement filed for the year 1995-96 a sum of Rs.3,60,000 was shown to have been the cost of the said house. The Assessing Officer did not doubt the availability of funds or source of investment to the extent of declared cost of Rs.3,60,000. However, with reference to another parallel case detailed in the assessment order he estimated the rate per marla at Rs.100,000 and, therefore, the total investment in the old house to Rs.12,00,000. The Assessing Officer did not limit his estimate to the land under the old house. The cost of Rs.100,000 per marla as confronted to the assessee included the old structure available at site as well. Therefore, allowing the benefit of the declared investment of Rs.3,60,000 the difference of Rs.8,40,000 was added towards income under section 13(1)(d) of the late Income Tax Ordinance. Page-2 of the assessment order confirms the fact that the estimated investment of Rs.12,00,000 pertained to whole of the 12 Marlas house and not the cost of land per marla as wrongly observed by the Tribunal.

19. Learned CIT(Appeals) by making reference to a parallel case in which the Department had accepted the declared price at Rs.52,000 per marla, as noted earlier, directed the adoption of Rs.50,000 per marla. Therefore, the total cost of the house including structure was directed to be estimated at Rs.600,000. The addition under section 13(1)(d) was, therefore, reduced to Rs.2,40,000.

20. The Tribunal approved the estimated cost as determined by the CIT(Appeals) which in turn was based upon a parallel case. However thereafter it proceeded to move in a novel way to snatch that relief and restore the addition of Rs.5,74,200. That exercise on their part must have been the first and hopefully last in the history of the Income Tax Appellate Tribunal. In the first place the learned Division Bench was absolutely incorrect in assuming that the Assessing Officer had adopted the cost of land at Rs.8,65,800 evolving a rate of Rs.72,150 per marla. These figures do not find mention in the assessment order nor can reasonably be deduced therefrom. The Bench was equally mistaken to hold that the balance of Rs.12,00,000 was estimated as the price of old structure. There is no mention of any deferential or the cost of structure A in the whole of the assessment order. Even otherwise after having )maintained the relief allowed by CIT (Appeals) learned members of the Tribunal could not enhance the liability of the assessee/taxpayer without serving him with a show-cause notice under section 135(6)of the late Ordinance as the same clearly amounted to enhancement of assessment. An enhancement of assessment is relatable not only to an amount but also to an account. In other words where in a situation like this the learned members of the Tribunal wish to make an addition on an account on which it was not earlier made by the Assessing Officer it would be a case of enhancement of the assessment. No notice in that regard having been given their direction for inclusion of Rs.5,74,200 in the addition under section 13(1)(d) was patently illegal. It shall accordingly be set aside.

21. The contention of the learned counsel for the assessee that the declared cost of Rs.3,60,000 needed to be accepted in this case with reference to Rule 207-A added in 1997 or that no addition of the kind could possibly be made under section 13(1)(d) on account of lack of maintenance of accounts is also unacceptable. It is so for two reasons:

First, Rule 207-A was added in the Income Tax Rules in the year, 1987 in consequence of and in line with the insertion of section 27-A (Punjab Amendment) inserted in the Stamp Act, 1899 through Punjab Finance Act IV of 1986. The property in question on the other hand was purchased in the year 1985, one year earlier to the said amendment when no valuation table notified by the Collector was in the field.

Second, It is not correct that in absence of maintenance of accounts an addition of the kind under section 13 (1)(d) could not have been made. The provisions are very clear that an addition of an investment made by an assessee could be made in both cases where the value of investment exceeded the amount recorded in the books of accounts maintained by an assessee as well as in the case when such investment was shown in the wealth statement. Although the assessee did not file a wealth statement for the year 1986-87 yet. with the return filed for the year 1995-96 the assessee indicated the investment made in purchase of that house in the year 1985-86 at Rs.3,60,000. Thus the condition precedent for making of an addition under that provision was fully answered.

22. In this view of the legal and factual position we will maintain the addition under section 13(1)(d) as reduced by the CIT(Appeals). As against one parallel case the CIT(Appeals) on the basis of another parallel case directed reduction of addition to Rs.600,000 which was approved by the Appellate Tribunal. However, as noted earlier learned members of the Tribunal without any basis directed making of addition of another kind which was totally illegal. The Assessing Officer having not doubted the source of Rs. 3,60,000 the addition under section 13(1)(d) after relief given by the CIT(Appeals) stands reduced to Rs.2,40,000 which, for the reasons discussed above is approved.

23. As far the year 1995-96 is concerned, we are of the view that the case-law cited at the bar re. Hudabiya Engineering (Pvt.) Limited, (supra) is not attracted to the facts in hand. The issue before the Larger Bench of this Court in that case pertained to foreign currency accounts and their immunity from inquiry and security in the perspective of sections 5 and 9 of the Protection of Economic Reforms Act-XII of 1992. In the case in hand foreign currency was brought into Pakistan much earlier to the enforcement of the aforesaid Act. Also it was never deposited in a foreign currency account. Therefore, the ratio settled in that case is hardly of any help to the petitioner.

24. We will however, readily agree with the learned counsel for the petitioner that the Department attempted to approbate and reprobate. A copy of the assessment order made by Wealth Tax Officer, Circle-22, Zone-A, Lahore dated 24-5-2000 has been placed on record. According to that assessment order the appellant as an individual was assessed to wealth tax for various sums in the years 1991-2000. In ease of the old house in question situated at Ghari Shahu, Lahore the Assessing Officer allowed exemption on the ground of the same have been built from foreign remittance. Where the Department accepts a particular source of income in respect of the investment made in the property on wealth tax side it could not deny that claim on the income tax side.

25. There is another reason for our agreement with the sub-missions made at the bar. for the petitioner. The observation of the learned members as regards absence of maintenance of foreign currency account or the time lapse between the bringing of the foreign currency and its encashment through money changer does appear relevant. However, they appear to have looked at only one side of the picture.

26. The petitioner claims to have been working out of country, mostly in Germany for more than 25 years. He claims to have been visiting Pakistan during the period February, 1982 to October, 1987 in which he brought 25800 U.S. $ and 121400 DM which were fully supported by the declaration on form-A made before the Customs Authorities and endorsed by them. It is an admitted position that Form-A did indicate the various sums of foreign currency brought into Pakistan.

Last time on 2-10-1987 the petitioner brought into Pakistan foreign currency as 800 US $ and 3500 D.M. The availability of that amount for investment in construction were brushed aside only on the ground that the petitioner may well have consumed/expended that amount as personal expenses since his last arrival in Pakistan in October, 1987 till the year of construction of marriage hall in the years, 1993 to 1995. It is by now well-established that when the Revenue proceeds to make an addition of the kind it must bring home, or identify the source where from the moneys invested could have been derived.

27. An addition without determination of the source or at least a safe guess by the Tax Collector is totally bald and, therefore, cannot be approved. Before touching the pocket of a tax payer the Revenue must establish its case beyond any doubt. While interpreting and enforcing deeming provisions of a taxing statute unlike civil cases it is not mere preponderance of evidence or the possibility of happening of certain facts in a certain mariner. It is rather a proposition to be answered as a question of mathematics or physics. An extended use of imagination by a Tax Collector to burden a taxpayer is strictly prohibited. The deeming provisiong like section 13(1)(aa) of the late Ordinance are to be construed very strictly inasmuch as the Revenue has been permitted by law to consider an unexplained investment as an income of the assessee. In the hand the investment was made by the assessee in construction of the marriage hall from July, 1993 to June, 1995. The Assessing Officer accepted that form-A relied upon by the assessee indicated bring into Pakistan of various foreign currencies in the years, 1984, 1985 and 1987. However, he refused to give credit for these moneys by observing that by non-surrendering foreign currencies to State Bank of Pakistan the assessee failed to contribute towards foreign exchange reserves. Therefore, he was not entitled to any credit. That observation was completely irrelevant. As a matter of fact the assessee had a very difficult case for acceptance of foreign (sic) law at the relevant time required bringing of foreign currency through recognized banking channels. Even if the view point of the Revenue that foreign currency was got encashed through money changer is accepted as correct, the fact remains that the money was brought into Pakistan and was converted into Pak rupee. On income tax side there was no legal requirement to bring the currency through any banking channel. Also the Revenue having failed to probe or bring home any source of income of the assessee since his last arrival at the end of 1987 till construction of the marriage hall in the year, 1993-95, no addition of the kind could possibly be made. If the assessee had failed to directly connect his investment brought into Pakistan from February, 1982 to October, 1987 with the construction made in the year 1993-95 the Revenue equally failed to establish that it was not that money or that the assessee hade some other source besides the said foreign currency which was not disclosed to it.

28. The second addition in the year 1995-96 at Rs.3,50,000 under section 13(1)(d) was made on account of difference between the declared cost of investment and the one estimated by the Assessing Officer. The assessee declared the cost of construction at Rs:356.25 per sq. ft. while the Assessing Officer estimated the same at Rs.400 per sq. ft. in that way the declared cost of construction at Rs.28,50,000 was enhanced to Rs.32,00,000. Before us the Department has failed to challenge the findings of CIT(Appeals) that in a parallel case it agreed to accept cost of construction at Rs.375 per sq. ft. which showed only a negligible difference. Learned members of the Tribunal do not appear to have addressed that addition at all.

29. In the situation thus emerging we will agree with the learned CIT(Appeals) that the Department having accepted the cost of construction at the rate of Rs.375 per sq.ft. around the same time in another case the cost of construction declared by the assessee at Rs.356.25 per sq. ft. could not be said to have been grossly understated. The deletion of addition under section 13(1)(d) made by CIT(Appeals) is, therefore, approved.

30. For what has been stated above, in the year 1986-87 we will refuse to answer questions Nos.1 to 3 as these do not arise out of the impugned order of the Tribunal Question No.4 as framed is answered in the term that the assessee having disclosed the investment in the wealth statement filed for another assessment year the requirement of the provisions of section 13(1)(d) of the late Ordinance were completely answered, Question No.5 as framed is more in the nature of an argument, rather than formulating a legal controversy. Question No.6 as framed is answered in the negative. Resultantly, in the year, 1986-87 for the aforesaid reasons the addition under section 13(1)(d) shall be maintained at Rs.2,40,000.

31. In the year 1995-96 questions Nos. 1 to 3 need not be answered as these do not arise out of the order of the Tribunal. Questions No.4 to 6 are argumentative in nature and, therefore, need not be replied. Questions Nos. 7 and 8 are answered in the negative. Question No.9 as framed is answered in the term that the foreign currency enchased earlier to its enforcement is not covered by the provisions of Protection of Economic Reforms Act, 1992. Question No.10 need not be answered as it does not arise out of the order of the Tribunal. Resultantly, in the year 1995-96 the assessee succeed in toto.

S.A.K./M-518/LAnswered accordingly.