2006 PLP 1753 (PTD)

(being an owner of 12-1/2 acre of agri. Land since 1960)

2. Savings out of salary???????????????????????????????????? Rs.50,000

3. Commutation at the time of?????????????????????????? Rs.65,000 retirement

4. Sale proceeds against House???????????????????????? Rs.400,000 No.45, Block No.30, Sargodha in 1990 (belonged to wife)

5. Sale proceeds of agri. Land????????????????????????????????????? Rs.850,000 ??????????????????????????????????? Total??????????????????????????????????????? Rs.2,000,000." It was further pointed out in the complainant's reply to the notice under section 13 that he thus had sufficient sources to make investment against the assets declared in the wealth statement and that copies of necessary documents had already been furnished and were available on record. According to the assessment order another show-cause notice under section 13 was issued in which it was stated that the value of the properties was shown in the revised wealth statement at Rs.685,505 but it was intended to adopt the original declared value of Rs.350,

000. The cost of construction was, however, now proposed to be adopted at the lower figure of Rs.300 sq ft and the addition under section 13(1)(d) was thus proposed at Rs.568,

700. The portion of the assessment order dealing with the addition under section 13(1)(d) further reads as under:

"On due date Mr. Nasir Iqbal son of the assessee attended the office and filed written reply and the case was discussed with him in detail. The assessee in his reply again reiterated that his revised value of properties may be taken into account. Moreover, he has sources more than declared even in the revised wealth statement. He further stated, the addition under section 13(1)(d) does not based on facts and completely against the relevant provisions of law and absolutely illegal. The explanation of assessee has been considered in view of the circumstances of the case. It has been found that as the assessee's quality of construction is B-Class and ordinary. Therefore, rate of construction is adopted at Rs.250 as against Rs.300 which (was) intimated to the assessee. As regard assessee's version for adoption of revised value, it is not correct and according to law. The revision is made after issuance of notice from Department and is an after thought story. Therefore, the value of the construction is adopted @ Rs.250 per sq ft having considered the type of construction. Thus the addition under section 13(1)(d) is determined as under:-- Total cost construction Covered area = 2349 x 250=?????????????????????????????????????????????????????????????? Rs.587,250 Add cost of land including incidental charges???????????????????????????? Rs.215,705 Total:??????????????????????????????????????????????????????????????????????????????????????????????????? Rs.802,955 Less already shown in original wealth??????????????????????????????????????? Rs.350,000 statement Balance is added under section 13(1)(d) with??????????????????????????????????????? Rs.452,955 the prior approval of the IAC-II, Sargodha which was. Accorded vide his office letter No.4755, dated 28-6-2003." In view of the above addition under section 13(1)(d) no enhancement was made in the declared business income of Rs.30,072 and the complainant's total income was assessed at Rs.483,

027. It was also noted that a notice under section 116(b) would be issued for furnishing of inaccurate particulars.

4. The above observations in the assessment order reflect a complete unawareness of law and it is surprising that the Additional Inspecting Commissioner gave his approval to the addition .under section 13(1)(d) on this basis. The maladministration involved in the assessment is discussed as under: (i) The Assessing Officer was wrong in his view that the wealth statement originally filed by the complainant could not be revised by him. In this context subsection (2) of section 58 of the repealed Income Tax Ordinance, 1979 read as under:-- "(2) Where a person, who has furnished a wealth statement as required under subsection (1), discovers any omission or wrong statement therein, he may, without prejudice to any liability incurred by him under any provision of this Ordinance, he may furnish a revised wealth statement at any time before the assessment is made." The subsection was inserted through the Finance Ordinance, 2001 i.e. much before the finalization of the assessment on 30-6-2003 and the Assessing Officer was not justified in his observation that the revision of the wealth statement was not c valid because it had been made after the issuance . of a notice under section 13(1)(d). Obviously there is nothing in the law to suggest that wealth statement could not be revised after a notice relating to it had been issued as long as it was revised before the assessment had been made. Of course, the language of the subsection suggests that if there had originally been a deliberate furnishing of inaccurate particulars the liability incurred under any provision of the Ordinance in this regard would not be affected. This, however, does not mean that the revised wealth statement can be ignored by the Assessing Officer who can otherwise take such action for originally furnishing inaccurate particulars as may be feasible. (ii) Apart from the above, the Assessing Officer has also totally ignored the provisions of law relating to an addition under section

13. In this context the relevant provisions of section 13(1)(d) of the repealed Ordinance were as under: "(13) Unexplained investments, etc., deemed to be income.

(1) where, (d) The assessee has made investment in any income year or is found in respect of any such year to be that owner of any valuable article and the Deputy Commissioner finds that the amount expended on making such investment or in acquiring such valuable article exceeds the amount recorded in this behalf in the books of account maintained by him or shown in the wealth statement or return of wealth furnished under section 58 in respect of that year and the assessee offers no explanation about the nature and source of such investment or valuable article or the explanation offered by him is not satisfactory, the value of the investment, the money, the excess amount or the amount of the expenditure, as the case may be, shall be deemed to be the income of the assessee of such income year chargeable to tax under this Ordinance." It is evident from the above that even where the Assessing Officer finds that the amount expended on making an investment or in acquiring a valuable article exceeds the amount recorded in the books of account or wealth statement etc. and addition can only be made under section 13 if the assessee offers no explanation about the nature and source of the difference between the declared investment etc. and the investment found by the Assessing Officer to have actually been made. It is evident from the complainant's reply to the first notice under section 13 that while the complainant had been confronted with an addition of Rs.568,700 on the basis of the valuation of properties at Rs.918,700 the complainant had claimed that his available sources amounted to Rs.2,000,

000. The Assessing Officer was thus required to examine the genuineness of these sources and the extent to which these could be considered to have been invested in the properties. In this context the acceptance or otherwise of the revised value of properties in the second wealth statement was immaterial because an addition under section 13 could be made even in the context of the revised value if the sources of the revised value were not explained while on the other hand even if no revision of the value of the assets had been made no addition could be made under section 13 if the complainant had adequate explanation for even the value proposed by the Assessing Officer.

5. In the light of the above it is evident that the addition under section 13(1)(d) was contrary to law, arbitrary, unreasonable and unjust and was also based on irrelevant grounds. It is thus covered by the definition of "maladministration" contained in section 3(1)(a), (b) and (c) of the Establishment of Office of Federal Tax Ombudsman Ordinance, 2000 and it falls within the jurisdiction of this Office.

6. In the light of the above, it is recommended that:-. (i) The assessment, dated 30-6-2003 for the assessment year 2000-2001 be cancelled under section 122A of the Income Tax Ordinance, 2001 and a fresh assessment be made in accordance with law after allowing the complainant an opportunity of being heard and after considering the complainant's explanation in the light of the actual provisions of law. (ii) Compliance be reported within 60 days. C.M.A./272/FTO???????????????????????????????????????????????????????????????????????????????? Order accordingly.