2010 PLP (Trib (PTD)

Titled appeals, pertaining to the assessment years 1996-97 to 1999-2000 & Tax Year 2003 have been filed by the assessee appellant calling in question the impugned consolidated order dated 28-1-2006 passed the learned C.I.T/W.T (A), Zone-II, Faisalabad. As per memo. of respective appeals, following issues have been raised. (i) That the learned C.I.T.(A) was not justified in confirming the net assessed income from bricks kiln which is highly illegal and baseless. (ii) That the addition under section 13(1)(a) is illegal and without jurisdiction so that confirmation by the learned C.I.T.(A) is highly unjustified. (iii) That the addition under section 13(1)(a) without the approval of IAC is illegal and against the provisions of law. (iv) That the estimate of cost of construction and estimation of house at Fim Kasar is illegal and without any basis, accordingly confirmation by the learned C.I.T.(A) is illegal. (v) That the addition on account of bank balances is not understandable, working given in the order is not correct so the action of both the authorities is illegal and unjustified. (vi) That the order under section 121 is illegal as no proper opportunity was provided. The learned C.I.T.(A) has failed to appreciate this aspect of the matter.

2. Learned counsel for both the parties have been heard.

3. Briefly stated facts of the case are that the assessee an individual, derived income from running brick kilns. Original assessments were framed in respect of one brick kiln at Fim Kasar under section 63 of the repealed Income Tax Ordinance, 1979' (hereinafter called the repealed Ordinance). Subsequently, it was revealed during local enquiries that the assessee is also running another brick kiln at Saral and suppressed income earned therefrom. Therefore, the said assessments were reopened with the prior approval of IAC. Accordingly additional assessments were framed under section 65 vide order dated 18-6-2001, whereby net income was assessed at Rs.194,000, Rs.194,000, Rs.260,000 & Rs.260,000 respectively for the assessment years 1996-97 to 1999-2000. Being aggrieved, the assessee went in appeal before learned First Appellate Authority, who remanded the case back for de novo decision with the observations that reopening of assessments under section 65 of the repealed Ordinance is confirmed yet income assessed as mentioned above has not properly been substantiated. Return for Tax Year 2003 was neither filed suo motu nor in response to notice under section 114(4) of the Income Tax Ordinance, 2001. During re-assessment proceedings a complaint was also received wherein details of different assets required by the assessee were also given. Assessee was confronted with different issues through notices under sections 62/13(1)(a) of the repealed Ordinance and under sections 121/111(1)(b) of the Income Tax Ordinance, 2001. Explanation furnished on behalf of the assessee was found unsatisfactory. Assessment for the year 2003 was finalized ex parte for non-filing of return. For the reasons, recorded in the assessment order, business income was adopted from two brick kilns. Additions on account of investment made in construction of market, land purchased, bank balances not disclosed etc. were made in the relevant years after detailed discussion. Net income of the assessee was assessed at Rs.438,000, Rs.632,355, Rs.270,000, Rs.16,95,716 and Rs.29,84,054, respectively for all the assessment years under appeal. At first appellate level, whole action of the assessing officers for all the years under reference was confirmed. This had aggrieved the assessee to come up in second appeal before this forum.

4. We have heard the rival parties and also perused the orders of the authorities below. As regards, assessed income from brick kilns, the learned A.R. of the assessee could not rebut the assertions made by both the officers below by tendering plausible arguments to deny the ownership with regards to brick kiln at Saral. While estimating the income on account of brick kilns, the assessing officer has based his action on the letter of the Taxation Officer. Zilla Council as well as local enquiry conducted by the then taxation officer, informing that the assessee is running another brick kiln at Saral in addition to brick kiln at Fim Kasar. Since, income has been assessed on account of brick kiln on the basis of documentary evidence, we, therefore, uphold the action of the assessing officer in this respect.

5. As regards additions under section 13(1)(a), it is observed that both the officers below were not justified to make and confirm the said addition, as the case of the present assessee is a no account case where additions under section 13(1)(a) are not attracted in accordance with law, as is held in a reported judgment cited as 2002 PTD (Trib.) 3142, whereby it was held that "since, this is a no account case, we, therefore, feel no hesitation in deleting the impugned addition under section 13(1)(a) on the sole ground that the addition had not been lawful made by the assessing officer. The addition under section 13(1)(a) of the repealed Ordinance attracts in account cases only. "In this view of the matter, we delete the said additions made under section 13(1)(a) of the reported Ordinance, being illegal and unjustified. Even, we want to uphold these additions under the pretext of mis-quotation of proper section, we cannot, because necessary approval from learned IAC was also not acquired in this regard.

6. As far as addition on account of bank balances, it is observed that the assessing officer has not applied correct provision i.e. 13(1)(a) for making said addition. The learned C.I.T.(A) has also not taken aspect of this matter while confirming the said addition. When a bank account is not disclosed, the most logical way to treat it is to take the peak deposit appearing in that account in. the relevant accounting period as the amount un-explained. This treatment will mean that an addition under section 13(1)(c) will have to made and it is non-existent. In case of addition of peak balance, section 13(1)(c) was to be applied and in case if difference of pending and closing amount is added, section 13(1)(aa) was to be applied. Again, necessary approval is absent on record. Hence, this addition merits to be deleted, being unlawful, which is hereby deleted.

7. As regards estimate of cost of construction and estimation of house at Fim Kasar, section 13(1)(d) was to be applied which also needs approval. Again it is missing. Hence, addition stands deleted.

8. As regards the Tax Year 2003, perusal of assessment order under section 121 reveals that the assessment was framed ex parte by the assessing officer condemning the assessee unheard by not providing opportunity to defend. Hence, it would be fair and justified to remand the case to the assessing officer for de novo proceedings after affording the assessee opportunity of, being heard, Order accordingly.

9. Assessee's appeal succeeds partially to the extent and in the manner indicated above. C.M.A./173/Tax (Trib.) Order accordingly.