1983 PLP (Trib (PTD)

Total : 24,147 1977-78 From Property (Loss) Rs.‑24,824 24,524 24,000 From Property (loss). Professional income. Total : 524‑(Loss) 1978‑79 From Property (Loss) Rs. 56,906 25,282 27,000 From Property (loss). Professional income. Balance income ‑‑‑ 1,718 1979‑80 (‑) 8,244 30,000 1,59,000 From Property (loss). Professional income. Unexplained source. Total : 1,80,756 In regard to the main and the basic objection that instead of setting aside the orders the learned Commissioner of Income‑tax should have disposed of the appellant's grievances on merits, we strongly feel that all the facts and material being substantially available on record, the learned Commissioner of Income‑tax (Appeals) should have taken pains to consider and decide the issues on merits instead of' leaving the appellant's fate in the hands of the assessing officer. It is also patent from the record that the assessing officer has drawn inferences against the appellant without carefully taking into consideration of rebutting the explanations given at the assessment stage, which prima facie, appear to ‑ have resulted in harsh assessments. In any case, when, the matter was carried before the learned Commissioner of Income‑tax (Appeals), failed to exercise his .powers properly inasmuch as instead of redressing the grievance of the appellant by disposing of the appeals on merits, lie simply set aside the orders and remitted the matter to the assessing officer with the directions to re‑examine the position and pass fresh orders on merits and without any prejudice or favour. Keeping in view the facts and circumstances under which the assessments were made, we fell compelled to vacate the order of the learned Commissioner of Income‑tax (Appeals) and proceed to dispose of the appeals on merits on the basis available on record and the submissions made by the parties. In the assessment year 1975‑76 the first objection relates to the addition of Rs. 1,00,000 being a loan obtained from Mr. S ..M ..K .N ..which was treated as income from an unexplained source and consequently subject to tax. While making the assessment. The Income‑tax Officer discussed the facts relating to the acquisition of the plot of land, demolition of the old building, the source of the investment and the availability of fund etc. In regard to the availability of funds the Income tax Officer observed that the appellant declared cash in hand at Rs. 5,00,000 which is not in dispute. Besides this amount the appellant also showed an amount of Rs. 1,00,000 received as a loan/amount in 1972 from said M .N ..in his wealth statement as on 30th June,. 1975. The appellant explained that the lender was an old friend and the Amanat was given in the presence of some persons. To verify the fact, the Income‑tax Officer summoned Mr. S .N .and recorded his statement, who affirmed having. given the aforesaid amount as an Amanat. From the statement of Mr. S ..N .the Income‑tax Officer noted that he was unemployed in those days and was supporting a .family of four members and under these circumstances she did not accept the loan/amanat to be genuine and hence treating that amount to be an unexplained income, , added the same to the declared income. The learned Authorised Representatives of' the Appellant referring to the sources of investment etc., contends that the appellant had clearly shown in his explanation and the wealth statement the cash in hand at Rs: 6,00,000. out of which an amount of about Rs. 1,00,000 was invested in the property. The amount of Amanat/loan was also shown as a liability payable to Mr. S ..M N Besides submitting that the Income‑tax Officer failed to dislodge the explanation of the appellant, the learned Authorised Representative contends with vehemence that, in any case, this amount given to the appellant in 1972 which has not been disputed by the assessing officer and as such she erred in subjecting to tax the foresaid amount during the year under consideration. The learned Authorised Representative also makes reference to the sources of investment as discussed in detail by the Income tax Officer in the assessment order for the year 1979‑80, which shows that the appellant was in possession of about Rs. 9,00,000 in hard cash. Which she completely ignored to take into consideration and in this view o1 the matter was little justification for making the addition of Rs. 1,00.0;. ‑ 4s income from undisclosed source. The learned Departmental Representative tries to support the order of the Income‑tax 0fii:er but he is not in a position to explain as to how an addition could be made to the appellant's income in the assessment year 1975‑76 when the loan; amount was given in the year 1972. The Income tax Officer has not pointed out the section under which the additions was made. From the relevant provision of law, however, it appears that the addition appears to have been made under subsection (2‑D) of section 4 of the repealed Income‑tax Act. For the sake of convenience the aforesaid provision of law is reproduced hereunder :‑ "Where the assessee has made investments in any previous year or is found in respect of any previous year to be the owner of any valuable article and the Income‑tax Officer finds that the amount expended on making such investments or in acquiring such valuable article exceeds the amount recorded in this behalf in the books of account maintained by the assessee or shown in any statement furnished by him under subsection (4‑.A) of section 22, and the assessee offers no explanation about such excess amount or the explanation offered by him is not, in the opinion of the Income‑tax Officer, satis factory, the excess amount may, with the prior approval of the Inspecting Assistant Commissioner, be deemed to be the income of the assessee for such previous year." As is apparent from section 4(2‑D) the alleged unexplained amount could "be deemed to be the income of the assessee for such previous year." Apparently, in this case the alleged unexplained amount could not be subjected to tax in the previous year relevant for the assessment year under consideration. It may also be mentioned that before an addition could be made under this provision of law the Income‑tax Officer should hay obtained the prior approval from the Inspecting Assistant Commissioner. It appears that such an approval was not obtained from the Inspection Assistant Commissioner which also recorded the addition as improper and' not sustainable in law. Without therefore, going into further detail regarding genuineness or otherwise of the loan/amanat we have no hesitation in holding that the department was not justified in making the addition of Rs. 1,00,000 in the assessment year under consideration and hence we direct that the aforesaid addition should be deleted. The next common objection concerns the additions of professional income added by the Income‑tax Officer in different years as indicated in the statement reproduced earlier. The facts as could be considered relevant aria are also evident from the order of the assessing officer are that the appellant could not produce any books of account because none were maintained and that it appeared to be unbelievable that such a highly qualified barrister would not practise as a lawyer and earn income therefrom. The Income‑tax‑ Officer, therefore, did not accept the appellant's categorical denial that he ever earned any income from practise as a lawyer and she estimated professional income in all the years under consideration and subjected the same to tax as mentioned in the aforesaid statement contained in an earlier paragraph. As a matter of fact, in support of his contention the appellant besides filing an affidavit, also produced certificates from the Registrar, Peshawar High Court and the President, District Bar Association, Peshawar, etc. Evidently, instead of bringing any material on record to prove that the appellant earned income as a practising lawyer the assessing Officer expel led him to prove something which was negative. The only reason for estimating the professional income was that the appellant was a highly qualified lawyer and that be failed to keep any accounts. On perusal of the certificate filed by the appellant and the submissions made by the learned Authorised Representative of the appellant we are clearly of the view that the Income‑tax Officer had no material whatsoever for making the additions without any basis and hence the same are deleted in all the years under consideration.

5. The next objection relates to the determination of income from property in the assessment years 1978‑79 and 1579‑

80. In the assessment year 1978‑79, in computing the income from property, the Income‑tax Officer, inter alia, adopted the monthly rent of shop occupied by K Salt Merchant to Rs. 200 when according to the learned Authorised Representative, the rent received as per lease deed was only per month. From the order of the Income‑tax Officer it appears that he proceeded on the basis of information collected from the tenant at the back of the appellant an without providing an opportunity to him to rebut the same. In our opinion, it will be just and fair if in respect of the rent of this shop the appellant is provided with a reasonable opportunity to prove his contention. For this purpose we vacate the order of the departmental officers on the issue and remit the matter to the Income‑tax Officer to do the needful as mentioned above. The learned Authorised Representative of the appellant does not dispute the amount of rent adopted in respect of other shops, etc.

6. Similarly in the assessment year 1979‑80, the appellant's grievance is that the income from rent of 8 shops was disclosed on the basis of lease deeds whereas the Income‑tax Officer considered that income from only four shops. The submission made by the learned Authorised Representative appears to be correct inasmuch as in his appellate order the learned Com missioner of Income‑tax has also made a mention of this grievance of the appellant as also the fact that frequent and long vacancies of certain shops were also not taken into consideration while computing the rental income. Since this matter would require examination of documentary evidence which the learned Authorised Representative is not in a position to readily produce before us we agree with the finding of the learned Commissioner of Income tax (Appeals) that this matter should be re‑examined on merits and thereafter should be decided strictly on the basis of reliable evidence and after allowing an opportunity to the appellant. The Income‑tax Officer is accordingly directed to do the needful.

7. The last objection of the appellant relates to the valuation of property which resulted in an addition of Rs. 1,59,000 being unexplained investment. The material facts relevant for disposing of this issue are that the total covered area of this building was 24,800 sq. ft. which cost the appellant Rs. 9,00,000 including the cost of the land. This estimate of value was supported by a certificate from Civil Engineer. Government Transport Service, Peshawar, who worked the value of the property at Rs. 8,18,400 which, apparently, was even below the cost declared by the appellant. The average cost of construction of the appellant worked at about Rs. 3: per sq ft. The income‑tax Officer, however, observed that the cost of construction prevailing during the years 1975 to 1979 was Rs. 60 per Sq, fit for ordinary construction. Keeping in view, therefore, the very low quality construction as was also evident from the different reports published in daily newspapers regarding this building, she adopted a rate of Rs. 40 per sq. ft. which gave the total cost at Rs. 9,92,

000. The cost as declared by the appellant was however only Rs. 8,33,

000. The difference of Rs. 1,9,000, according to the assessing officer remained unexplained and as such was added as income from unexplained source. The learned Authorised Representative vehemently contends that the appellant had given reliable basis for valuing the cost inasmuch as he produced a certificate from a Civil Engineer to justify the same whereas the Income‑Tax Officer had no basis whosoever for adopting the basis of valuation @ Rs. 40 per sq. ft. which according to the learned Authorised Representative of the appellant was arbitrary and without any basis and as such could not be maintained.

8. We have given our earnest consideration to the facts of the case and we have no hesitation in holding that the basis adopted by the assessing officer was vague, arbitrary and not supported by any material. The fact that the appellant used some material salvaged from the demolished building which resulted in reducing the cost of construction, does not seem to hay been seriously disputed by the assessing officer. On the contrary, the very poor quality finds support from the comments of some local newspapers and hence cost as declared by the appellant seems to be at least supported by the certificate of an expert, being a Civil Engineer, although there is some difference between the cost shown by the appellant and as per certificate of the Civil Engineer. In these circumstances, the most equitable and fair basis for working out the value of this property would be to adopt a rate of Rs. 36 per sq. ft. which would give more or less the same value as has been declared by the appellant. We, therefore, direct that the valuation of the property as shoe by the appellant may be accepted and no addition; should be made on account of any unexplained investment.

9. In the result, the five appeals are disposed of as indicated above. Appeal accepted.