1997 PLP (Trib (PTD)

159783 75,000 Muhammad Afzal 4. 22-1-1987 239396 70,000 Pervaiz Danish Gill Vakilan No.5, Katchery Bazar,Fsd. 5. 23-8-1996 159784 40,000 Shahbaz Ahmad. 6. 22-1-1988 396687 50,000 Muhammad Afzal 7. 13-1-1988 396668 50,000 Muhammad Aslam, After obtaining appellant's explanation deposits mentioned at No. 1, 4, 5 and 7 were found to be unrelated to the appellant. Deposits of Rs.35,000 and Rs.75,000 made on 19-8-1986 and 23-8-1986 which fell during the period relevant to assessment year 1987-88 were considered to be unexplainable and deemed as income under section 13(1)(aa) for Assessment Year 1987-88. The deposit of Rs.50,000 made on 22-1-1989 was similarly deemed as income for Assessment Year 1988-89 and another amount of Rs.75,000 claimed to have been obtained from a friend was also charged to tax under section 13(1)(aa). At the same time, investment for acquisition of a house estimated at Rs.1,95,000 was 'added under section 13(l)(d) of the Income Tax Ordinance in first appeals. Addition of Rs.1,10,000 for Assessment Year 1987-88 was confirmed while additions of Rs.50,000 and 75,000 for. Assessment Year 1988-89 were deleted and the addition of Rs.1,95,000 in the said year was reduced to Rs.1,45,000.

6. According to the AR the deposits of Rs.35,000 and Rs:75,000 on 19-8-1986 and 23-8-1986 were receipts of the business which were kept in the bank as short-term-deposits. It was contended that appellant was a vendor having no facility of any place for storage of cloth. The deposits in question were claimed to be part of the capital of the business for which allowance ought to have been given in accordance with the scheme of simplified procedure. This contention had been rejected by the Assessing Officer on the ground that capital was involved in the shape of stock day to day dealings (etc) and, therefore, the two sums were deemed as funds outside the business which were not covered by the simplified procedure. ITO's assumption was apparently. without any basis. Being a vendor having no place for keeping the stocks appellant was mainly engaged in sale and purchase of cloth on wholesale basis and was thus in a position to have such amounts which as a matter of expediency were placed in short-term-deposits. Considering the facts and circumstances of the case, the addition of Rs.1,10,000 was apparently unjustified. Credit to the extent of the declared capital of Rs.90,000 ought to have been allowed to the assessee. The addition is accordingly reduced to Rs.20,000.

7. So far as investment in the house is concerned, appellant had shown purchase of a house of a 4 1/2 Marlas plot for Rs.1,40,000 which was estimated at Rs.3,35;000 as under:

Purchase value of plot at Rs.35,000 per Maria. Rs.1,40,000 Cost of Construction @ Rs.195 per sq. ft. Rs.1.95.000 Total Rs:3.35.000 While adopting the above estimates the ITO had mentioned. "It has been ascertained from local enquiries got conducted through Circle Inspector that the assessee had actually purchased this house for a consideration of Rs.4,15,

000. However, taking a lenient view, purchase value is adopted at Rs.3,35,000." The CIT (Appeals) had disposed of appellant's objection with the ground: "ITO has not given any solid reasons for this estimate, as it is merely based on Inspectors report. On the other hand AR has also not given any solid material for acceptance of declared value, except that he is critical of the manner, in which ITO has estimated it. But no doubt, it is a known fact that 'properties are undervalued. However, considering all facts, its value is ordered to be taken at Rs.2,85,000 by adopting the value of land at Rs.30,000 per marla, and constructed area at Rs.165 per sq. ft. reducing this addition to Rs.2,85,000 (Rs.1,40,000) = Rs.1,45,

000. The addition under section l3 (l) (d) made in such a non-chalet manner is unsustainable. No details of the local enquiries were brought on record. If the appellant had purchased the house for a consideration of Rs.4,15,000 as reported by the Inspector no provision of law empowered the ITO to take a lenient view and fix the value at Rs.3;35,

000. To justify an addition under section 13(1)(d), the minimum that ITO should have done was to verify the consideration from the seller of the house and if he regarded the declared consideration to be a conclusive arrangement he ought to have placed on record the sale prices of similar properties of the same area and the sale rates notified by the Provincial Authorities. In any case estimate on the basis of the area of the plot and the cost of the construction was unwarranted in the case of the purchase of an old constructed house. At the time of hearing appellant's. AR produced copies of certain transfer deeds showing transactions at about the same rate as declared by the appellant. Taking into account the nature of the property, its location and size, its value could at best be estimated at Rs.2,00,

000. The addition under this head is, therefore, reduced to Rs.60,000.

8. The appeal succeeds as above. C.M.S:/282/Trib Order accordingly.