2010 P T D (Trib.) 747
[Income-tax Appellate Tribunal Pakistan]
Before Jawaid Masood Tahir Bhatti, Judicial Member and Zareen Saleem Ansari, Accountant Member
I.T.As. Nos.951/KB and 1151/KB of 2005, decided on 16/06/2009.
Income Tax Ordinance (XLIX of 2001)---
----Ss.184, 205 & 131---Making additions on account of unexplained business capital gain---Imposition of penalty---Appeal to Appellate Tribunal---Appellant/assessee filed returns showing income of Rs.108,000, which were assessed by the Taxation Officer at Rs.3,288,100 by making addition on account of unexplained business capital gain on sale of shop---Taxation Officer also made additions on account of construction on plot and on account of deemed rental income---On filing appeal by the assessee, Commissioner Income Tax (Appeal) set aside assessment made by the Taxation Officer, with specific direction to the Taxation Officer to verify from the purchaser of shop---Re-assessment was framed after original order being set aside without following instructions given by the First Appellate Authority while setting aside the assessment regarding purchase of shop---Taxation Officer had neither exhausted the means to verify the actual amount of sale nor the date of transaction---Transaction of the property had taken place in financial year 1999-2000, capital gain of which was shown in wealth reconciliation statement in the year 2000-2001, but the Taxation Officer had added gain in the assessment year 2001-2002---Main activity of the assessee was of selling cloth and he was not involved in trading activity of selling and purchasing of shop or property---Commissioner Income Tax (Appeals), had upheld the treatment meted out by the Taxation Officer without any reason---No justification existed for making the addition, holding that the solitary transaction was adventure in the nature of trade---Addition Made in that respect, was deleted, in circumstances---Regarding the addition on account of construction on plot, Taxation Officer had made addition without any basis, as the plot was acquired in 1996 by the assessee and to protect the same from encroachment and the non-utilization fee, boundary wall and temporary room was built in the year 1997; but the Taxation Officer had assumed the construction on said plot in the year 2000; and without any basis had estimated the cost of construction at Rs.400,000, without bringing any material evidence to substantiate the addition in totality---Commissioner Income Tax (Appeals) had also upheld said addition without giving any reason---Addition made in that respect was also deleted---With regard to concealment of income by the assessee, Taxation Officer on the one hand had treated the income of the assessee as business income in the nature of trade and on the other hand he had treated that income as concealed income---Department must be in possession of such evidence as would convince a reasonable-minded person that assessee had concealed his income by consciously misstating the facts---Mere difference of opinion between the Income Tax Officer and the assessee, were not sufficient evidence for levy the penalty---Penalty having been levied by the Taxation Officer without any basis, was deleted.?
Salman Pasha and Nadeem Dawoodi for Appellant.
Nazeer ahmed Soomro, D.R. for Respondent.
ORDER
Through these two appeals, the appellant has objected against the two separate impugned orders of the learned CIT(A) of the same assessment year i.e. 2001-2002. One order is dated 24-5-2005 against which the following grounds have been taken by the appellant:
"(2) The learned Taxation Officer was not justified in making addition of Rs.1,350,000 in total income on account of business in nature of trade. The appellant had contested before C.I.T appeals, on this issue who set aside the case giving direction to Taxation Officer to verify from Registrar of Properties in Lahore regarding acquisition of shop and sale of shop.
(3) The learned Taxation Officer ignored the direction of CIT appeal and repeated the same figure of Rs.1,350,000 treating it as income, while it was a capital gain on sale of shop. The appellant had purchased shop at Chuna Mandi Mall Market Lahore in 1995-96, which he disposed of in financial year 1999-2000, on which he earned a capital gain Rs. 1,350,000.
But the learned Taxation Officer while re-assessing the income added the same in total income, which is unjustified. The capital gain was shown in assessment year 2000-2001, appearing in the wealth reconciliation as on 30-6-2001. But the Taxation Officer added it in assessment year 2001-2002, though the transaction was finalized in 1999-2000.
(4) The CIT appeal Zone V followed the version of Taxation Officer and rejected the grounds of appeal submitted by appellant. The CIT appeal in her order dated 13-5-2005 did not exhaust the means to provide justice to appellant and gave favour to Taxation Officer.
(5) The Taxation Officer was not justified in making addition of Rs.400,000 on account of construction on plot in colony. The temporary construction on the said plot took place in 1997 with the intention to save the plot from encroachment, and a sum of Rs.150,000 was spent, but the learned Taxation Officer estimated the construction value at Rs.400,000 without any materialistic reason. The CIT appeal Zone V did not give clear findings on this issue and followed the version of Taxation Officer."
While regarding the impugned order of learned CIT(A) dated 30-8-2005 the following two grounds have been framed:
"(2) The Taxation Officer was not justified in imposing penalty under section 184(1) of the Income Tax Ordinance amounting to Rs.124,299 levied on concealed income based on mere assumption.
(3) The learned Taxation Officer was not justified in treating the capital gain of Rs.1,350,000 as conceded income and was not justified in imposing penalty thereon."
2. Regarding the first appeal, the learned counsel representing the appellant, has contended that appellant in this case is an individual and has filed the returns showing income of Rs.108,000 which were assessed by the Taxation Officer at Rs.3,288,100 by making additions under section 13(1)(aa) of the repealed Income Tax Ordinance, 1979 on account of unexplained business capital, gain on sale of shops at Rabi Centre, Karachi, gain on sale of shop at Choona Mandi, Lahore and the additions under section 139(1)(e) on account of cost of construction on Plot No.99/E, P&T Colony, Karachi total amounting to Rs,2,314,000. The Taxation Officer has also made the addition under section 19(2)(b) on account of deemed rental income at Rs.300,000 and add backs out of Profit & Loss Account expenses were made at Rs.8,600.
3. The learned counsel has contended that the Taxation Officer has made the additions despite the fact that the assessee has filed the wealth reconciliation statement as on 30-6-2001 and 30-6-2002 wherein the total wealth, gain on sale of shops etc. were given in detail. The learned counsel for the assessee has also placed before us this, the details of which are reproduced hereunder.
Wealth Reconciliation Statement as on 30-6-2001 and 30-6-2002
| Total wealth as on 30-6-1999 | 16,40,000 |
| Add income declared for the year 2000-2001 | 2,13,000 |
| | 18,53,100 |
| Add gain on sale proceeds of shops in Rabi Centre, Karachi | 14,000 |
| | 18,67,100 |
| Add gain on sale proceeds of shops in Chuna Mandi, Lahore | 13,50,000 |
| | 32,17,100 |
| Less drawing & taxes | 3,00,000 |
| Wealth as on 30-6-2000 | 29,17,000 |
| Add income declared for the year 2001-02 | 1,08,000 |
| | 30,25,000 |
| Less drawings | 1,50,000 |
| Wealth as on 30-6-2001 | 28,75,000 |
| Add income declared for the year 2002-03 | 1,50,000 |
| | 30,25,000 |
| Less drawings | 1,50,000 |
| Wealth as on 30-6-2002 | 28,75,000 |
4. The learned counsel for the assessee has contended that some part of this wealth statement has been reproduced in the original order under section 62 of the Repealed Ordinance. But the Taxation Officer has made the additions without considering the fact that the assessee has already been declared in the assessment- year 2000-2001 but the addition in this respect has been made again. He has contended that the assessee filed appeal before the CIT(A) and vide order dated 18-11-2003 the learned CIT(A) has set aside the assessments with specific direction to the taxation officer to verify from the purchaser of shop at Choona Mandi, Lahore, the exact sale consideration of the amount declared by the purchaser in Lahore before Registrar of Properties. As it was contended that the appellant had purchased a shop on 14-11-1998 but later on sold the shop in the year 2000 in which he received and declared the receipt amount in wealth reconciliation statement. The Learned counsel has contended that the capital gain on the shop has been declared in the year 2000 in wealth reconciliation statement but the Taxation Officer has made the addition in the year 2001-2002 which is not justified.
5. According to learned AR, the Taxation Officer while passing the order under section 132/62 of the Repealed Income Tax Ordinance, 1979, has made the addition for the reason that instead of making addition under section 13(1)(aa) the said capital gain on sale of disposal of shop at Choona Mandi, Lahore be taxed in the hands of the taxpayer being adventure in the nature of trade. According to learned counsel, the Taxation Officer has admitted in the assessment order that the taxpayer has purchased the shop on 9-11-1995 and has sold it out on 14-10-1998 i.e. assessment year 1999-2000. The learned counsel has contended that the addition if made in this respect can only be made by reopening the assessment for the assessment year 1999-2000. The learned counsel has also objected to the addition made on account of cost of construction of Plot 99/E, P&T Colony, Karachi, on the ground that no notice under section 13(IVd) or 13(2) of the repealed Qrdinance has been sent to the assessee, neither approval in this respect has been obtained from the IAC under section 13(1) or 13(2). But the learned counsel has upheld the additions made by the Taxation Officer without considering the fact that the original assessment was set aside with specific directions which should have to be followed.
6. On the other hand, the learned DR is supporting the impugned orders of the officers below in this respect. He has contended that the Taxation Officer has passed the speaking order wherein all aspects of the case have been discussed on both the issues raised by the appellant and, therefore, the learned CIT(A) has rightly upheld the additions made on both the issues.
7. We have heard the learned representatives from both sides and have also perused the impugned orders of learned CIT(A) dated 24-5-2005, the order passed by learned CIT(A) in the first round dated 18-11-2003 and both the orders passed by the Taxation Officer.
8. We have found that the reassessment is famed after the original order being set aside without following instructions given by the first appellate authority while setting aside the assessment regarding purchase of shop at Choona Mandi, Lahore. The Taxation Officer has neither exhausted the means to verify the actual amount of sale nor the date of transaction. Admittedly the transaction of the property has taken place in financial year 1999-2000 whose capital gain was shown in wealth reconciliation statement in the year 2000-2001 but the Taxation Officer has added capital gain in the assessment year 2001-2002. We have further noted that the main activity of the appellant is of selling cloth and he is not involved in trading activity of selling and purchasing of shops or property. We have further noted that the learned CIT(A) has upheld the treatment meted out by the Taxation Officer without any reason. We, therefore, find no justification for making the addition holding that the solitary transaction being adventure in the nature of trade. The addition made in this respect is, therefore, delated.
9. Likewise, regarding the addition on account of construction on plot in P&T Colony, Karachi, we have found that the Taxation Officer has made the addition without any basis. The plot measuring 1000 sq.yds, was acquired in 1996 by the appellant and to protect the same from encroachment and the non-utilization fee, a boundary wall and temporary room was built in the year 1997 but the Taxation Officer has assumed the construction on said plot in the year 2000 and without any basis has estimated the cost of construction at Rs.400,000 without bringing any material evidence to substantiate the addition in totality and the learned CIT(A) has also upheld the addition without giving any reason. The addition made in this respect is, therefore, also deleted.
10. Regarding the second appeal against the impugned order of the learned CIT(A) dated 30-8-2005, we have found that the Taxation Officer has imposed, penalty on concealed income treating the capital gain of Rs.1,350,000 as concealed income.
11. The learned counsel representing the assessee has contended that the Taxation officer has imposed penalty without issuing penalty order under section 84 to the appellant which could reveal the exact nature of income on which penalty was levied. He has contended that on one hand, the Taxation Officer has treated the income of the assessee as business income in the nature of trade, and on the other hand, he has treated the concealed income as mentioned in the assessment order under section 62 of the Repealed Ordinance. The learned counsel has contended that the penalty order is neither comprehensive nor in accordance with law as the order has been passed without elaborating the sources of income on which the penalty was levied. The learned counsel in this regard has placed before the two unreported decisions of this Tribunal dated 17-11-2001 in ITA No.678/KB/2000-01 wherein it has been held that the proceedings under section 111 of the Repealed ordinance 1979 are of the penal nature and onus of proving that the assessee has concealed memo lies on the Department thus the department must be in possession of such evidence as would convince a reasonable-minded person that the assessee has concealed his income by consciously mis-stating the facts. Mere difference of opinion between the ITO and the assessee are not sufficient evidence for levy of penalty. In another decision dated 17-2-2001 in I.T.A. No.926 KB 1994-95 (assessment year 1993-94), similar views have been repeated.
12. On the other hand, the learned DR is supporting the impugned orders of the officers below but he is unable to controvert the above said submissions made by the learned counsel for the assessee. We have found force in the contentions made by the learned counsel in this case that the penalty has been levied by the Taxation Officer without any basis which is, therefore, deleted and the appeal filed by the assessee in this respect is also allowed.
13. Both the appeals filed by the assessee are allowed.
C.M.A./195/Tax(Trib.)???????????????????????????????????????????????????????????? Appeal allowed.