I.T.As. Nos.2169, 0878 and 2477/LB of 2005, decided on Ist March, 2007. VS I.T.As. Nos.2169, 0878 and 2477/LB of 2005, decided on Ist March, 2007., 2007 PTD-INCOME-TAX-APPELLATE-TRIBUNAL-PAKISTAN 2165 (2020)

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

-----S.13(1)(aa)---Unexplained investment etc., deemed to be income---Addition---Life long saving---Plea taken on behalf of the assessee that amount of Rs.2,22,731 was his life long saving would sufficiently meet the ends of justice because a person having a considerable property in his name and also earning income from agriculture and cinema business could not be denied to have such a little amount of saving in his hands---Remaining addition of Rs.2,22,731 made under S.13(1)(aa) of the Income Tax Ordinance, 1979 was deleted by the Appellate Tribunal.

(b) Income tax---

----Business income---Reliance on history---Declared business income at Rs.75,000 was discarded and assessed at Rs.2,00,000---First Appellate Authority by placing reliance on history allowed relief to the assessee by restricting the figure at Rs.1,75,000---Validity---Reliance was placed on history and not on immediately preceding assessment---Action of both the authorities below was based merely on guess work---Minor relief was granted by the Appellate Tribunal by restricting the business income to Rs. 1,50,000 in circumstances.

(c) Income tax---

----Adventure in the nature of trade---Principles.

Vol.7 No. l2 Tax Forum 58 of December 2003 rel.

(d) Income lax---

----Adventure in the nature of trade---Agricultural land, sale of---Addition---Validity---Documentary evidence regarding purchase of lands lit the years 1979, 1981 and 1988 as well as its sale in the year 2001 were provided in the shape of registered deed---Nature of land having remained unchanged, there was no course left with the Assessing Officer to disagree with the assessee despite the fact that copy of Khasra Garciawari of the said land was furnished showing the status of the land to be still agricultural land and being cultivated by the assessee himself and no improvement had been made in the land---Deletion of addition by the First Appellate Authority was upheld by the Appellate Tribunal in circumstances.

Vol.7 No.12 Tax Forum 58 0l' December 2003 rel.

1989 PTD (Trib.) 460; 2001 PTD 1534 and 1975 PTD (Trib.) 6 ref.

Anwar Ali Shah, D.R. for Appellant.

Abid Raza Kazmi for Respondent.

ORDER

For the assessment year 2001-02, cross-appeals have been filed at the instance of the assessee as well as department against the impugned order dated 4-4-2005 whereas for the assessment year 2002-03 only the Revenue has come up in appeal before us against the impugned order dated 22-8-2005. Both the appellate orders impugned before us have been passed by CIT(A) Sialkot. Since, the representatives on behalf of both parties arc present, therefore, the same are being disposed off in the following manner:--

Assessment Year 2001-02

For the charge year, cross appeals have been preferred before us. As per memo. of appeal, the assessee has raised the following issues for adjudication:--

*That all the observations regarding estimation of business income at Rs.175,000 and addition under section 13(1)(aa) at Rs.2,22,731 as determined by CIT(A), are incorrect and untrue.

*That the business income determined by CIT(A) at Rs.175,000 is excessive unjustified and without any basis.

*That the addition under section 13(1)(aa) at Rs.222,731 as ordained by CIT(A) is without lawful authority and justification.

On, the contrary, the Revenue is aggrieved on the, following grounds taken as per memo. of appeal:--

* That the learned CIT(A) is not justified to delete the profit, earned by the taxpayer from dealing in business of real estate without any cogent reason.

* That the frequent transactions of sale of land made by the taxpayer during .the assessment year under consideration (total 15 in number) clearly indicate that he was engaged in business of real estate. Income earned by him from purchase/ sales of property was therefore, rightly assessed. The learned CIT(A) is not justified to delete the said addition.

Brief facts of the case arc that the assessee, an individual, deriving income from running a Cinema as well as Cultivation of Agricultural land, filed return for the charge year declaring income at Rs.95,700 to be accepted under SAS. The Assessing Officer Finding the tax liability lesser than that of the immediately preceding year, took out, the cases of the assessee from the purview of SAS and finalized assessment under normal law as under:--

---Feeling aggrieved, the assessee preferred appeal before CIT(A) 'Sialkot, who allowed relief to the assessee as under:--

The learned AR has furnished .before us written arguments, which are reproduced as under:--

(1) That the appellant never indulged in the purchase and sale of properties.

(2) That the gain assessed on the land soled in the year 2001 which were purchased in the years 1979, 1981 and 1988 respectively and were used for agricultural purposes which even at the time of sale was agricultural land. The agricultural income earned were duly disclosed and assessed by the Department during the proceeding years.

(3) That the, Higher Courts vide their judgments have not appreciated the assessment of gain under the Umbrella of adventures in the nature of wade. The reported judgments are as under:--

The Honourable High Court Rawalpindi in a reported (Vol.7 No.12 Tax Forum 58 of December 2003).

1989 PTD (Trib.) 460; 2001 PTD 1534 and 1975 PTD (Trib.) 6

(4) The Honourable Lahore High Court in the reported case Vol.7 No.12 Tax Forum 58 of December, 2003 has set .out the principles and factors to be seen for assessment of capital gain on sale of property under the umbrella of adventure in the nature of trade as under:--

*Whether the purchaser or trader had purchased the commodity and subsequent sale was allied to was his usual trade or business.

*Whether he had brought about any improvement, after the purchase of the property so as to make its value more fattish.

*Nature, quantity and circumstances in which a commodity/land was purchased and re-sold.

* Whether the person concerned has repeated the said activity and the ingredients which were associated with purchase and resale were there.

.That the appellant sold out his properties detailed hereunder:--

The properties sold out as mentioned above at serial Nos.1 to 14 were purchased by the appellant in the years 1979 and 1988. The property sold out by the appellant at serial No.15 above was purchased by the appellant in 1981. The appellant remained cultivating the land on his own from the years of purchase to the date of its sale.

It is worth-mentioning here

*That no improvement in the said land was made after its purchase.

*Nature of the land remained the same even after 22 years of its purchase.

*The appellant was in intense need of lands at the time of Sale.

*The appellant never undergone repeated purchase and sale of land.

*The appellant's intention at the time of purchase was of cultivation and not sale after retaining some periods.

The documentary evidence regarding purchase of lands in the years 1979, 1981 and 1988 as well as its sale in the year 2001 were provided in the shape of registered deeds. Copy of Khasra Gardawari of the said land was also provided which shows that the status of the said land is still agricultural land and being cultivated by the appellant himself'. No improvement has been made in the said land.

The factor to be seen as set out by the Honourable Lahore High Court Lahore in the above mentioned reported case is not at all applicable in the case of appellant for treating gain on sale of agricultural land of the appellant, hence the learned CIT(A) while probing the facts deleted the addition made on account of adventure in the nature of trade.

The addition made under section 13(1)(aa) was also not based on facts as the appellant was having sufficient funds available with him in the shape of Prize Bonds and Cash and Advances received from [he sale of properties which was ultimately registered in the names of the purchasers and addition made by the DCIT were not based on facts. The learned CIT(A) Sialkot while deleting the addition to the extent of Rs.22,00,000 only was earned because of the facts that the appellant was having Funds available with him at Rs.24,22,731 and the addition made should have been deleted by the learned CIT(A) in toto."

On the contrary, the learned DR has termed the action of both authorities below to be justified by maintaining that in view of plausible reasons put forth on behalf' of the assessee before learned CIT(A), the addition of Rs.24,22,731 was restricted at Rs.222,731, which remained unsubstantiated. He has argued that for deletion of remaining addition of Rs.222,731 the learned AR of the assessee termed the same to be saving, which camiot be acceded to in the absence of any documentary evidence. He, therefore, prays for confirmation of action of learned CIT(A) and dismissal of appeal preferred by the assessee.

We have heard the arguments advanced on behalf of rival parties and also carefully gone through the relevant record available on file. The assertions made by learned AR are forceful being supported by plausible reasons. On this aspect of the case that the assessee had sufficient funds available with him in the shape of Prize Bonds, cash and advances received from the sale of properties to invest the same in purchasing of land measuring 23.38 Marlas at Sialkot for a consideration of Rs.24,55,000 and this fact was also admitted by learned CIT(A), who restricted the addition amounting to Rs.24,22,731 made under section 13(1)(aa) at Rs.222,731. With regard to remaining addition made under section 13(1)(aa), if we entertain the plea taken on behalf of the assessee that said amount of Rs.222,731 was long life saving, the same would sufficiently meet the ends of justice because a person having a considerable property in his name and also earning income from agriculture and cinema business cannot be denied to have such a little amount of saving in his hands. Therefore, in view of fore-going reason, we delete remaining addition of Rs.222,731 made under section 13(1)(aa).

With regard to business income, the perusal of record reveals that the assessee declared the same at Rs.75,000, which was .discarded and' assessed at Rs.200,000. In appeal, the learned CIT(A) by placing reliance on history pertaining to assessment year 1996-97 allowed relief to the assessee by restricting the figure at Rs.175,000. It is pertinent to note that learned CIT(A) has placed reliance on history pertaining to assessment year 1996-97 and not relied on immediately preceding assessment i.e., 2000-01. On the issue under the consideration, the action of both authorities below seems to be based merely on guess work. Therefore, we deem it justified to grant minor relief by restricting the business income at Rs.150,000.

With regard to objection raised by the Department for non-taxing of profit earned by the assessee from dealing in business of real estate, we do not find ourselves in agreement with the assertions made by learned DR. The sole reason for disagreement is that the assessee had purchased the properties from S. Nos.1 to 14 in the years 1979 and 1988 and Property at S. No. 15 was purchased in 1981 and since then the said properties were remained under cultivation upto the date of their sale. The capital gain on sale of properties could only be taxed if the case of the assessee comes under the principles laid down by Honourable Lahore High Court vide its reported case Vol.7 No.12 Tax Forum 58 of December 2003, which are reproduced below:--

* Whether the purchaser or trader had purchased the commodity and subsequent sale was allied to was his usual trade or business.

*Whether he had brought about any improvement after the purchase of the property so as to make its value more fattish.

*Nature, quantity and circumstances in which commodity/land was purchased and re-sold.

*. Whether the person concerned has repeated the said activity and the ingredients which were associated with purchase and re-sale were there.

--- The above mentioned principles laid down in the reported judgment of Honourable Lahore High Court are not applicable in the instant case in view of the following reasons:--

*That no improvement in the said land was made after its purchase.

*Nature of the land remained the same even after 22 years of its purchase.

*The appellant was in intense needs of funds at the time of sale.

*The appellant never under gone repated purchase and sale of land.

*The appellant intention at the time of purchase was of cultivation and not sale after retaining some periods.

The documentary evidence regarding purchase of lands in the years 1979, 1981 and 1988 as well as its sale in the year 2001 were provided in the shape of registered deeds.

--- Since, nature of land remained unchanged, therefore, there was no course left with the Assessing Officer to disagree with the assessee despite the fact that a copy of Khasra Gardawari of the said land was furnished showing the status of the said land to be still agricultural land and being cultivated by the appellant himself and No improvement has been made in the said land. In view of forgoing reasons the impugned order on the issue under consideration is upheld.

Assessment Year 2002-03

For the year under consideration, the appeal has been preferred by the department. As per memo. of appeal, the following issues have been raised for adjudication.

*That the learned CIT(A) is not justified to delete the profit earned by the taxpayer from dealing in business of real estate " without any cogent reason.

* That the frequent transactions of sale of land made by the taxpayer during the assessment year under consideration (total 15 in number) clearly indicate that he was engaged in business of real estate. Income earned by him from purchaser sales of property was therefore, rightly assessed. The learned CIT(A) is not justified to delete the said addition.

The above mentioned issues have already been decided in favour of the assessee while disposing off the appeal pertaining to assessment years 2001-2002. Since, the issue under consideration is of identical nature to that of the disposed off issues, therefore, the snore decision will be applicable for the charge year too.

C.M.A/106/Tax (Trib.) Order accordingly.