1997 PT D (Trib) 1115 (PLP)

7. At the time of hearing the A.R. drew the attention of the Court to the evidence on record regarding the acquiring of the two plots and the investment thereof. Briefly, it was explained:

I. Plot No. S-247 (i) It was originally allotted to Syed Salim Akhtar Jafri on the basis of Overseas Pakistanis quota by the Government of Punjab in 1980. As the allottee was not residing in Pakistan. He, through a general power of attorney, executed on 14-9-1984 and attested by the Embassy of Pakistan Accra, authorised his younger brother Syed Tariq Siraj Jafri to settle all matters regarding this plot. (ii) Syed Tariq Jafri, on the basis of General Power of Attorney then applied for construction on this plot. In the meantime the appellant company i.e., M/s. Koldcraft (Pvt.) Limited was incorporated on 21-5-1986 and the plot was taken-over by the company in lieu of which Syed Salim Jafri was allotted shares in the newly floated company. The plot was accordingly declared in the first balance sheet of the company. i.e. as on 31-12-1986. (iii) When assessment proceedings in case of the company or the first year of business i.e., 1987-88 were taken up this aspect of acquiring of land and investment thereof was considered. In support of the appellant's A.R., referred to letter dated 8-12-1987 filed before the I.T.O., Central Circle, Lahore in response to his queries. Assessment was accordingly framed vide order under section 62 wherein on account of difference in the declared cost of construction of the factory building on Plot S-247 as addition of Rs.634,282 was made under section 13(1)(d). The assessee company went into appeal against this order, which was adjudicated -by the C.I.T. (A), Zone-I; Lahore vide order dated 23-6,1988 .wherein. the addition under section 13(1).(4).was directed to be reduced from Rs.188 per sq. ft. to Rs.150. per sq: ft: :It was further maintained that no second: appeal was preferred. (iv) Subsequently the land alongwith the building continued to be declared in the balance sheet of the company. There was thus, it was emphasised, that no investment had been made in the acquiring of the immovable property by assessee during the year under consideration i.e., 1993-94. (v) Regarding the different values i.e. Rs 44,000 and Rs.11,44,000 noted and mentioned by the , assessing officer was explained that- there was no tampering and neither was there any wilful concealment. The- necessity and purpose of executing a sale-deed arose out of the requirements of the company to obtain a running finance facility from the bankers the Bank of Punjab for which they had to mortgage the property. As the property stood in the name of one of the Directors. Syed ,Salim Jafri holding General Power of Attorney and the bankers required a change in the title of the said plot, therefore, to fulfil this requirement and condition the sale-deed was executed. As the value of the plot had been settled at Rs.53,000 by its owner with the company at the time of its incorporation, therefore, it was shown that the same amount as shown in the sale-deed. At the same time as the date of registration was March, 1992, therefore, in order to fulfil the conditions of the Stamp Act and get it registered judicial stamp paper had to be purchased keeping in view the rates fixed bye the District Authorities for registration purposes. Accordingly judicial paper amounting to Rs. 97,240 was purchased. There was no tampering or manipulation in the sale-deed as was evident froth its certified copy wherein the value of the plot has been shown at Rs.11,45,

000. The amount of Rs.44,000 taken by the Department to have been erased from Rs.11,44,000 was the actual price of the said plot and it could in no way be inferred that the appellant had actually invested Rs.11,44,

000. II. Plot No.S-246 (i) This plot was originally acquired by, a sister company, M/s: Amesco (Pvt.) Limited through an agreement to sell on 6-6-1989. The general power of attorney in case of this plot was the same as in case of Plot No.S-247 i.e., Syed Tariq Siraj Jafri who also happened to be a Director in M/s. Amesco (Pvt.) Limited Syed Tariq Jafri is thus a Director in both the companies: (ii) Plot No.S-246.,,was declared in ,the statement of accounts of M/s. Amesco. filed for the first year of the assessment year ending 31-12-1989 wherein it has already been discussed, accepted and assessed vide order under section 62, dated 30-5-1991 of the I.T.O. Company Circle 19, Lahore. On the acquiring of this plot and construction thereof an addition of Rs.4,11,750 was made under section 13(1)(4) wherein the value was adopted at Rs.3,00,000 and of construction at Rs.150 per sq. ft: In appeal, the C.I.T: (A) Zone-I, Lahore vide order dated 8-8-1994 reduced the value 6f plot from Rs.3,00,000 tier Kanal to Rs.2,75,000 per Kanal -while the rate of 'construction at Rs.I50 per, sq.ft was upheld. The assessee then went into revisions where the Member Income Tax Judicial vide order dated 19-6-1995 reduced the addition under section 13(1)(4) from Rs.2,79,780 to Rs.1,00,

000. Based on these documentary evidences it was emphasised that the appellant company, M/s. Kolderaft had neither acquired the plot, nor was its owner and neither it has made any investment in it which led to the conclusion that the action under section 13(1)(4) was not called for. (8) The explanation of the assessee regarding the observations of authorities below that the sale-deed had been tampered- with and the amount changed from Rs.11,53,000 to Rs.53,000 was on the same lines as, in the case of Plot S-247 i e. , the plot was with one of the Directors Syed Tariq Jafri holding general power of .attorney and. as it required refinancing facility from the Bank of Punjab, therefore, the property had to be registered. In the meantime M/S. Amesco (Pvt.) Ltd. has closed down its business. It was a dormant company and for facilitating the running finance facilities the said property was mortgaged in the name of M/s. Kolderaft. The appellant's A.R. referred to the balance-sheet of M/s. Amesco (Pvt.) Limited wherein Plot S-246 has been shown as on 31-12-1992 to further' strengthen its submission that no investment had been made by M/s. Koldcraft in the acquiring of this asset' which even did not appear in the books of accounts of the company.

9. The arguments made before us, the submission and reference to the records of the Department inclusive of the action of the Revenue including the action taken vis-a-vis the two plots under appeal have been considered and examined. The conclusions/emerges show that the appellant company during the year under appeal did not make investment in the purchase of two plots and shown at Rs.11,44,000 and Rs.11,53,000 respectively. Both the plots had been acquired earlier--one by the appellant company and the other by its sister concern--in the periods relevant to the assessment years 1987-88 and 1990-91. In the two companies Syed Tariq Jafri was a Director and at the same time holder of general power of attorney for both the plots. These two plots had been allotted and acquired under similar and identical circumstances i.e., allotted against Overseas Pakistani quota, for the management of it Mr. Tariq Jafri was authorised. On becoming a Director in both the companies he made his investment in the form of land in lieu of which he was allotted shares. Till the year under appeal the said properties were not registered, they stood in the name of the two limited companies and were reflected in their balance-sheets. But as far as documentation was concerned it was Syed Tariq Jafri who was authorised to act. When the need and necessity of obtaining a running finance facility from the bankers arose, mortgage of property was an essential requirement. As the running finance facility was required by M/s. Kolderaft and had to be extended to it, therefore, the bankers required that the property to be mortgaged should stand in its name and for this the essential requirement was a duly validly executed sale-deed. For this purpose the company then executed the deeds; details of which purpose the company then executed the deeds; details of which have been discussed in the foregoing paragraphs. As the companies did not pay anything, other than the original price of allotment converted into value of shares in the name of the common Director, Syed Tariq Jafri, therefore, the value transacted was accordingly reflected. It was only for the purposes of Stamp Act that the market value was as per the judicial stamp papers. To this extent we would agree and concur with the appellant no investment as price was made but the assessee company is not fully correct to claim that no investment was made in the year under appeal which has not been reflected in the books of accounts. From its own submissions that the judicial stamp paper was purchased as per requirements of law and incidents expenditure was incurred which has not been reflected. Thus, by its own submission a sum of Rs.1,37,280 for Plot No. S-247 and Rs.1,38,360 for Plot No.S-246 has no plausible explanation: Therefore, the additions under section 13(1)(b) is reduced to Rs.2,75,640. 9-A. The other issue raised by the appellant regards the add-backs made out of the P and 1_ Account on the plea that these were excessive and had been made without having examined them in detail. The appellant company thereby admits that the claim is not fully verifiable. At the same time we find that the disallowances are reasonable and are in line with the assessee's own history, At the time of hearing the learned A.R. was not able to make out any case before us either on merits or fact. The additions made are maintained and confirmed.

10. With the above observations and conclusions the appellant company's appeal for the assessment year 1993-94 is disposed of in the manner and to the extent indicated above. C. M.S./261/Trib. Order accordingly.