1990 PLP (Trib (PTD)

M. Sarwar Kh. AC/DR for Respondent. These three appeals are directed against the consolidated order of learned CIT (A) recorded by him, on 22nd May, 1986 relating to assessment years 1982‑83. 1983‑84 and 1984‑85.

2. The brief facts giving rise to these appeals are that the appellant, an individual, derived his income from selling of ladies Chappels in the relevant assessment years and declared his income at Rs. 1‑1,100, Rs. 8,000 and Rs. 18,200 in each assessment year respectively. The returns were tiled on estimate basis under section 59(1) of the Income‑tax Ordinance, 1979, hereinafter referred to as the Ordinance, as no accounts were maintained by the appellant for assessment years 1982‑83 and 1984‑85 which were accepted accordingly. However, for assessment year 1983‑84 an agreement was arrived at to the effect that the assessee should be assessed at an income of Rs. 20,000 as is evidenced by order sheet entry dated 22nd January, 1985. The appellant was given a challan signed by the I.T.O. and he deposited Rs. 300 as tax on 24th January, 1985. It appears that the agreed assessment was not accepted by the I.T.O. and he proceeded with the assessment and finally assessed the income of the appellant at Rs. 1,46,

848. Thus, he not only estimated the business income at Rs. 41,250 but also made an addition of Rs. 1,11,598 under Section 13(1)(aa) of the Ordinance.

3. Now as far as assessment years 1982‑83 and 1984‑85 are concerned, the I.T.O. issued a notice on 19th November, 1985 calling upon the appellant to show cause as to why an addition of Rs. 15,595 and Rs. 1,11,598 be not made because these amounts were found in his bank account which he, at the time of assessment under Section 59(1) of Ordinance, did not disclose. Subsequently, the I.T.O. also served a notice under Section 65 of the Ordinance on 31st December, 1985. The appellant offered his explanation vide his letter dated 29th January, 1986. The I.T.O., however, did not find it satisfactory. He, therefore, reassessed the income of the appellant at Rs. 48,969 and Rs. 2,43,206 under Section 65 of the Ordinance for assessment years 1982‑83 and 1984‑85 consisting of income from business and additions made as proposed. Having been aggrieved and dissatisfied, the appellant went up in appeal against all the three years as mentioned above. The learned CIT (A) deleted the addition of Rs. 15,599 but maintained the business income of Rs. 33,370 for assessment year 1982‑

83. Similarly, for assessment year 1983‑84 he again confirmed the business income but brought down the addition to Rs. 80,999 thus thereby assessing the appellant to an income of Rs 1,46,848 under Section 62 of the Ordinance. As far as assessment year 1984 85 is concerned the learned CIT (A) again brought down the addition to Rs. 70,968 but maintained the business income at Rs. 40,

700. The appellant still felt aggrieved and has come up in second appeal before us.

4. Mr. Fayyaz Ahmad, Advocate submitted that as far as the business income declared on estimate basis was concerned, the I.T.O. had no jurisdiction to assess it at a higher amount. Regarding addition in assessment year 1982‑83 he pointed out that he had no grievance as the learned CIT (A) had ordered the deletion of addition made under Section 13(1)(aa) of the Ordinance. However, regarding assessment year 1984‑85 he vehemently argued that the learned CIT (A) was not correct in bringing down the addition of Rs. 70,968 as no notices under Sections 13(1)(aa) and 13(2) of the Ordinance were given to the appellant regarding assessment year 1983‑

84. He contended that since an agreed income was arrived at and the appellant also acting upon it deposited the amount of tax, the I.T.O. was not competent to proceed further with the matter under Section 62 of the Ordinance without serving a notice under Section 65 of the Ordinance. He further contended that in the assessment year 1984‑85 the appellant had offered his explanation as to wherefrom he got the money deposited in bank and the I.T.O. failed to appreciate it. He further contended, relying upon a decision of this Tribunal recorded in ITA Nos. 4253 & 4254/LB/84‑85 dated 14th July, 1986 that in any case the I.T.O. should have enhanced the sales rather than making the additions. Mr. M. Sarwar Kh. the learned D.R. firstly contended that the assessment for 1983‑84 was not reopened but finalised under Section 62 of the Ordinance. According to him since agreed assessment in itself is not sufficient the I.T.O. was justified in going ahead with the matter and frame assessment under Section 62 of the Ordinance. Defending the orders of both the officers below, he submitted that it was the duty of the appellant to declare the bank account but the appellant deliberately concealed this fact. According to him the additions were made legally in all the three assessment years. As far as the explanation offered by the appellant for assessment year 1984‑85 is concerned, Mr. M. Sarwar Kh. has submitted that the jeweller produced by the appellant was a notorious man who gives this type of statements to support the assessees. As far as the amount belonging to Maqsooda Begum was concerned, he submitted that there was no evidence on record to prove that she had the means to give the amount to the appellant as loan.

5. We have heard both the counsel for the appellant as well as the learned D.R. Now taking up the issue of the reassessed business income, we find that in the letter which the I.T.O. addressed for the first time to the appellant on 19th November, 1985 he simply mentioned that the appellant had failed to disclose that fie was maintaining a bank account in Habib Bank Limited Krishan Nagar Branch, Lahore and he also mentioned the amounts which he proposed to add in all the three years namely Rs. 15,599, Rs. 1,11,598 and Rs. 2,02,565 in each assessment year involved. However, in the concluding paragraph of this letter he wanted the appellant to explain as to why the assessment for assessment years 1982‑83 and 1984‑85 should not be reopened as provided under Section 65 of the Ordinance. He has nowhere mentioned that he had discovered anything about the business income of the appellant which he had not disclosed earlier. We are, therefore, of the view that as far as assessment years 1982‑83 and 1984‑85 were concerned the I.T.O. was not competent to reassess the business income as he did not serve a show cause notice on the appellant as to why his declared income be' not reopened. As such both the officers below have condemned the appellant' heard and thus have violated the basic principle of natural justice that nobody would be condemned unheard. We, therefore, allow these appeals and direct the I.T.O. to accept the declared business income in assessment years 1982‑83 and 1984‑85.

6. Now as far as the additions under Section 13(1)(aa) of the Ordinance are concerned, we again feel that miscarriage of justice has been caused by the I.T.O. The contention of Mr. Fayyaz Ahmad, the learned counsel for the appellant, that since no notice under Section 13(1)(aa) of the Ordinance was served regarding assessment years 1982‑83 and 1984‑85, therefore, no addition could be made in both the years is not wholly without substance. It is true that the I.T.O. has mentioned in his notice dated 19th November, 1985 that hr discovered Rs. 15,599, Rs. 1,11,598 and Rs. 2,02,565 standing in his account in June, 1982, 1983 and 1984 respectively. However, he nowhere mentioned that he intended to add that amount under Section 13(1)(aa) of the Ordinance. We are, therefore, of the view that the I.T.O. should be given an opportunity to issue the notice under Sections 13(1) and 13(2) of the Ordinance as discussed in a recent ruling of the Tribunal reported as (1987) PTD

300. Needless to say that he would re‑examine the issue in both the assessment years 1982‑83 and 1984‑85 before making any addition in the light of the explanation offered by the appellant. For ready reference of the I.T.O. let us mention that for assessment year 1982‑83 the appellant had contended that the balance in assessment year 1982‑83 stood at Rs. 15,599 whereas the sales for this period were to the tune of Rs. 1,20,

800. Similarly, he should re‑examine the issue regarding sale of gold and Amanat of Maqsooda Begum again and if he wants to discard the statements of both the persons, he should record cogent reasons for doing so. The contentions of Mr. M. Sarwar Kh. that the jeweller was a notorious person and Maqsooda Begum did not give proof of her capability of giving an Amanat of Rs. 40,000 carry no force. The statement of the jeweller cannot be discarded simply on this ground. Similarly if Maqsooda Begum was supposed to have no means to have advanced a sum of Rs. 40,000 by way of Amanat she should have been asked to offer an explanation to that effect which has not been done. The I.T.O. should keep in mind that in order to offer an explanation regarding an unexplained credit the duty of an assessee is to produce the person from whom he allegedly took the loan. In this case the jeweller is a regular assessee and he has been produced before the I.T.O.. Now if he wants to reject his statement, he should give his reasons for doing so. Similarly Maqsooda Begum was also examined before him but he rejected her statement without giving her an opportunity to prove that she was having that much money with her at the relevant time. Thus miscarriage of justice has been caused.

7. Now as far as the assessment year 1983‑84 is concerned, we again agree with Mr. Fayyaz Ahmad, Advocate That the agreed assessment should be taken to have been made as Rs. 20,

000. It is true that no formal order has been made in this case but the fact that the I.T.O. gave the challan to the appellant to deposit the tax clinches the issue in favour of the appellant. Agreed assessment is nothing but a contract. A contract consists of an offer which is accepted and is coupled with consideration. The offer and acceptance are clearly established from the order sheet of 22nd January, 1985. Now as far as the consideration is concerned, it is established by the fact that the appellant deposited Rs. 300 by way of tax. Thus there exists all the three ingredients of a contract namely offer, acceptance and consideration. The agreed assessment, therefore, is binding on the Department. If we allow the I.T.O. to proceed with the assessment as he did, we shall not only be instrumental in destroying the credibility of the assessing officer but would also be violating the principle of estoppel. The appellant acting on the representation of the assessing officer changed his position by making payment of additional tax. Thus, now it did not lie in the mouth of the assessing officer to discard it simply on the ground that no formal order was drawn and to proceed with the assessment under Section 62 of the Ordinance. We, therefore, direct him to accept the assessment at Rs. 20,000 as agreed upon. Since no notice under Section 65 of the Ordinance has been given regarding assessment year 1983‑84, the I.T.O. had no jurisdiction to make addition of Rs. 1,11,598 and assess the income at Its. 1,46,

848. However, he can do so if otherwise there is no other legal impediment.

8. Thus in view of the discussion made above, all the three appeals stand disposed of to the extent and in the manner as indicated above. M.B.A./859/T Order accordingly.