1997 PLP (Trib (PTD)

Date of hearing: 17th May, 1995. This appeal at the instance of assessee, who is a partner in a R.F. M/s. Hussain Brothers is preferred against the order of the learned C.I.T.(A) upholding validity of initiation of proceeding under section 65 and re assessment of his total income at Rs.13,62,117 by the learned assessing officer (A.O.). Heard Mr. Muhammad Farid, learned counsel for the appellant and Mr. Yousuf Butt, the learned D.R.

2. Briefly the facts are that the appellant purchased plots of land bearing NOSAD-I and 4D-II, Boulevard, Phase IV, D.H.A., Karachi vide sale-deed executed for a total consideration of Rs.15,97,000 from one Mr. Tahir Anwar Shamim, through her attorney. He declared these plots in his wealth statement as on 30-6-1992 and in subsequent years. For assessment year 1985-86, he filed his return of income showing his total income at Rs.13,717 on account of his share income from the R.F but did not file and wealth statement. Assessment was finalised under section 59-A. Subsequently it was noted that the aforesaid plots were declared by the R.F in its balance sheet as assets of the firm at Rs.15,97,

000. Asked by the assessing officer, it was stated that actually these plots were purchased by the R.F. in the name of the appellant and these were formally transferred at cost to the R.F. vide a Sale Agreement, dated 30-6-1985. This statement was found contrary to appellant's wealth statement dated 30-6-1982 and the enclosed reconciliation statement wherein Mr. Muhammad Hussain the appellant had shown even interest paid on money borrowed from Bank for purchase of plots, in his expenses. The A.O., therefore, saw something more in the transfer of plots to the R.F. than was mentioned in the Sale Agreement which in his own words was "designed to evade income-tax by showing the transfer of plot on cost price". He further held "the assessee was under obligation to show the transaction between the partner and the Firm at arms length". We, therefore, initiated preceding under, section 65 of the Ordinance, with prior approval of the I.A.C. accorded vide I.A.C'.s letter dated 20-6-1991. Discarding the claim that the original purchase was Benami for the R.F. and that the transfer of plots to the R.F. on 30-6-1985 was at cost, the A.O. determined the sale price at Rs.2,946,000 Rs.1,500 per sq. yard for total area of land measuring 1964 sq. yards. He treated the difference of estimated price and the cost price as profit from a venture in the nature of trade and Rs.1,349,000 were treated as chargeable income under section 22 of the Income Tax Ordinance.

3. Before us Mr. Muhammad Farid, the learned counsel has contended that as long as any transaction of sale is verifiable the learned D.I.C.T. has no authority to reject the seller's version. He can neither impute any motive nor can put his own estimates over the verifiable consideration of the deal. According to him no action has been initiated in the case of the Registered Firm. The learned D.R. supports the orders of the two officers below but he is unable to controvert the foregoing facts..

4. On the foregoing facts we are pursuaded to agree with the learned counsel that the learned D.I.C.T. had no information whatsoever, what to say of definite information, in his possession, that any income chargeable to tax under the income Tax Ordinance had escaped assessment. The appellant had neither conceded nor had furnished any inaccurate particulars of his income. Since the plots of land already declared by him in his earlier wealth statement were transferred to the R.F. in which he himself was a partner, at cost, no gain had accrued to him. Accordingly, we find that the initiation of proceeding under section 65 of the Ordinance were unwarranted and ab initio void in law. The impugned order of the learned CIT(A) is accordingly vacated and the impugned assessment order is annulled. M.B.A./242/Trib Petition accordingly.