1990 PLP (Trib (PTD)

The brief facts giving rise to these two appeals, relating to the assessment years 1983‑84 and 1984‑85, are that the assessee‑appellant is an individual deriving income as a property dealer. Originally, the assessments were made under section 59(1) of the Income Tax Ordinance, 1979 (hereinafter called the Ordinance). The case was however, reopened under section 65 of the Ordinance on the ground that the appellant had purchased 240 kanals land in the name of his wife, namely, Mst. Rasool Bibi, and it was declared in his wealth statement, as on 30‑6‑1984. A notice was accordingly sent to the appellant, on 27‑1‑1984, in response to which his counsel, Ch. Abdul Latif, appeared and submitted copies of the relevant sale deeds about the purchase of land by his wife. Vide his letter, dated 2‑9‑1987, the appellant declared the purchase of 234.7 kanals land during the period from 18‑10‑1980 to 27‑11‑1985 for an aggregate price of Rs. 1,63,

400. In the wealth statements for the period ending on 30‑6‑1983 and 30‑6‑1986 as also in the revised wealth statement for the period ending on 30‑6‑1984, the appellant incorporated the properties purchased in the name of his wife to the tune of Rs. 1,22.100. These properties had not been declared earlier in the original wealth statement, as on 30‑6‑1984. Explaining the position regarding this aspect of the matter, the appellant disclosed that the initial investment in land had been made in October, 1980, against a loan of Rs. 1,00,000 obtained from Mr. Saidan, resident of village Khatna, Tehsil and District Rawalpindi, and the subsequent purchases of land had been made out of the agricultural income realised from an area measuring 146 kanals purchased in 1980. On being summoned by the Income‑tax Officer, Mr. Saidan stated that he had advanced the loan of Rs. 1,00,(100 to the appellant's wife out of the compensation received for his acquired land. The Income‑tax Officer, however, doubted the genuineness of this loan on the ground that the compensation money had been withdrawn from the bank by the said creditor, Mr. Saidan, as far back as 7‑11‑1977 and he had not been able to provide any proof of having an adequate, regular and substantive source of income. The Assessing Officer also did not accept the plea that the land had, in fact, been purchased by the appellant's wife herself, and treated the sales in her favour as benami transactions. Placing reliance on the Khasra Girdawari in respect of the cropping season 1986‑87, a copy whereof had been issued by the Patwari on 26‑3‑1986, the Income‑tax Officer also rejected the appellant's claim that the annual yield from his agricultural land was to the tune of Rs. 60,

000. Taking into consideration the annual income of Rs. 32,920 disclosed in the copy of the Khasra Girdawari and also keeping in sight the fact that the prices of the various agricultural commodities were comparatively less during the period preceding the cropping season 1986‑

87. The assessing Officer fixed the annual agricultural income of the appellant at Rs. 20,000, as against Rs. 60,000 claimed by him for the purpose of investment made in the purchase of agricultural land. This way, the Assessing Officer proceeded to add in each year the difference of Rs. 40,000 under section 13(1)(aa) of the Ordinance on account of (sic) income from undisclosed sources and finalised the appellant's assessments as under: Assessment year 1983‑84: Income assessed. = Rs. 19,200 Addition under section 13(1)(aa) of the Ordinance. = Rs. 40.000 Net income = Rs. 59.200 Assessment year 1984‑85 Income assessed. = Rs. 19,400 Addition under section 13(1)(aa) of the Ordinance. = Rs. 40.000 Net income = Rs. 59.400

2. The appellant challenged in separate appeals before the learned Commissioner of Income‑tax (Appeals), Rawalpindi, the additions made by the Assessing Officer under section 13(1)(aa) of the Ordinance in both the years. He examined the matter and, vide his order, dated 17‑12‑1988, set aside the assessments on the issue of additions for de novo proceedings within the ambit of law by upholding the objections of the appellant to the effect that the disputed additions were bad in law for want of double approval by the IAC concerned in terms of subsection (1) of section 13 and subsection (2) of section 13 of the Ordinance and also for the reason that the Department had not brought forth any evidence on record to refute the appellant's contention in this regard and establish in a positive manner that the land purchased in the name of his wife were in fact benami transactions. This has obliged the appellant to seek indulgence of the Tribunal by way of second appeals with the proof that the impugned order of the learned Commissioner of Income‑tax (Appeals) may be quashed and the additions illegally made by the Income‑tax Officer may be deleted in consequence thereof.

3. I have heard the learned counsel for the appellant, Ch. Abdul Latif, and the learned Departmental Representative, Mr. Aftab Ahmed Kohati, and have also examined the record in detail.

4. The learned counsel for the appellant has contended that the landed property was actually purchased by the appellant's wife out of the agricultural income and the sales were not benami transactions, that the Income‑tax Officer had made the disputed additions in both the charge years under appeal by enhancing the appellant's investment in landed property under clause (aa) of subsection (1) of section 13 of the Ordinance, and in this situation it was obligatory on him to have obtained double approval from the Inspecting Assistant Commissioner concerned in terms of subsection (1) of section 13 and subsection (2) of section 13 of the Ordinance and afforded the appellant an opportunity of being heard, that on account of the failure of the Assessing Officer to obtain two approvals and give the appellant a chance of explaining his position, rendered the questioned additions a nullity in the eyes of the law, that the appellate authority below had no other alternative but to order the deletion of addition instead of making a direction for re‑assessment, as held by the Tribunal in ITA No. 903(IB)/1986‑87, decided on 4‑7‑1989, and in the case reported as 1987 P T D (Trib.) 300.

5. The learned Departmental representative has maintained that the Income‑tax Officer had not, in any manner, increased the quantum of the appellant's investment in the purchase of lands but had only disbelieved the latter's version regarding unexplained amount of Rs. 40,000, in each year, treating it as deemed income from undisclosed sources, that only one approval from the Inspecting Assistant Commissioner was needed in the present case for making the additions and the same was obtained by the Assessing Officer and that, in the circumstances of the case, deletion of the disputed additions was not justified and the learned Commissioner of Income‑tax (Appeals) has rightly ordered de novo proceedings for a proper probe into the nature of sales of land shown in the name of the appellant's wife.

6. On a careful appraisal of the averments of the learned representatives of the parties, I am unable to see eye to eye with this contention of the appellant's learned counsel that the Assessing Officer had enhanced the appellant's investment in land and, for this reason, it was incumbent on him to have obtained two separate approvals from his Inspecting Assistant Commissioner‑‑‑first, under section 13(1) and, second time, under section 13(2) of the Ordinance. The facts of the case make it manifestly clear that the Income ‑tax Officer has not touched and criticized the quantum of appellant's investment in the purchase of landed property and has rather accepted the claim in this regard. He has, in fact, disbelieved the appellant's assertion about the source utilized to finance the purchases of land. After rejecting the appellant's claim about the annual agricultural income of Rs. 60,000, the Assessing Officer proceeded to add the disputed amount of Rs. 40,000 in each year as deemed income of the former from undisclosed sources. In this situation, the law did not enjoin on the Income‑tax Officer to get two approvals from his Inspecting Assistant Commissioner. Only one approval was required in this case, in terms of subsection (1) of section 13 of the Ordinance, as the provisions of subsection (2) of section 13 are not attracted at all.

7. A close examination of clause (aa) of section (1) of section 13 of the Ordinance would reveal that it covers three elements, namely, "any investment: made by the assessee and the assessee's "ownership of any money" or "valuable article". An addition under this clause on account of deemed income can be made by an Income‑tax Officer if, in any year, the assessee is found to have made "any investment" or is found to be the owner of "any money" or "valuable article". The provisions of subsection (2) of section 13 of the Ordinance would come into play in relation to clause (aa) of subsection (1) of section 13 only when the value of "any investment" or "valuable article" falling thereunder is sought to be increased on the ground of being too low. In that event alone would there arise the necessity of obtaining double approval from the Inspecting Assistant Commissioner concerned before making an addition on this score. The Assessee would then be entitled to get a reasonable opportunity of being heard to explain his position with regard to the contemplated addition. But the position would be totally different where an addition under clause (aa) of subsection‑(1) of section 13 ibid is intended to be made by the Assessing Officer of account of the assessee having been found to be the owner of "any money", in any year. A careful perusal of subsection (2) of section 13 of the Ordinance would show that this provision is relevant in relation to clause (aa) of subsection (1) of section 13 of the Ordinance only in a situation where the value of any "investment" or "article", referred to in this clause, is sought to be increased by the Income‑tax Officer for the purpose of making an addition on the assessee. The omission of the words "any money" occurring in clause (aa) of the Ordinance alongside the words "any investment" and "valuable article" from subsection (2) of section 13 of the Ordinance is ample proof of the fact that the Legislature, in its wisdom, did not intend to make the provisions of subsection (2) of section 13 of the Ordinance applicable to an addition on account of deemed income made by an Assessing Officer to the income of an assessee under clause (aa) ibid for having been found to be the owner of any money, in any year. It is evident therefore, that the Income‑tax Officer was under the law required to obtain, in this case, only one approval from his Inspecting Assistant Commissioner in relation to the addition of Rs. 40,000 made in such year on account of the appellant's deemed income from undisclosed sources. The record is clear on the points that the Assessing Officer had obtained the requisite prior approval of the Inspecting Assistant Commissioner, on 30‑6‑1988, for making the additions in question, and had also given the appellant a chance of being heard in connection therewith. This constitutes due compliance with the statutory provisions by him as no double approval, in terms of subsection (2) of section 13 of the Ordinance, is involved in the instant case. This being the legal position of the matter, the learned counsel for the appellant cannot capitalize on the cases cited by him.

8. It seems to be pertinent to add at this juncture, for the sake of elaboration, that the contents of subsection (1) of section 13 of the. Ordinance, vividly reflect that an addition under clause (e) thereof can be made even without obtaining prior approval from the inspecting Assistant Commissioner concerned, and the additions contemplated by clauses (aa) to (e) cannot be made without his prior approval, to be sought once only, after providing an opportunity to the assessee to explain his position with regard thereto. In other words, only one approval is needed to make straight additions for deemed income under clauses (aa) to (e) ibid. The second approval of the Inspecting Assistant Commissioner is necessary under subsection (2) of section 13 of the Ordinance only when the value of any investment or article referred to in clauses (aa), (b), (c) or (d) or the amount of expenditure referred to in clause (e) of subsection (1) is intended to be increased by the Assessing Officer on the ground of being too low, and not otherwise. Reiterating the position with regard to an addition of deemed income to be made under S. 13(1) (aa) on account of the assessee having been found to be the owner of "any money", it is pointed out that no second approval under subsection (2) of section 13 of the Ordinance was involved at all in connection with such addition

9. It is noteworthy that even after upholding the appellant's objection as to the want of double approval in respect of the questioned additions, the appellate authority below has issued a direction for re‑assessment instead of ordering the deletion of the additions, in conformity with the ratio decidendi in the case‑law relied on by the appellant. Where an appellate authority comes to the conclusion that an addition made by the Income‑tax Officer on account of deemed income under section 13 of the Ordinance is bad in law for want of double approval, it is left with no‑other option but to order the deletion thereof, and a direction for re assessment in such situation would not be legally tenable.

10. I now advert to the direction for de novo proceedings given by the learned Commissioner of Income‑tax (Appeals). After holding the disputed addition to be bad in law for want of double approval, lie was not justified in setting aside the assessments on the issue of additions. Since only one approval from the Inspecting Assistant Commissioner was required to make the disputed additions in the present case, as hereinabove held, the action of the learned Commissioner of Income‑tax (Appeals) in setting aside the assessments for de novo proceedings on the ground that the disputed additions were bad in law for want of double approval is of no legal consequence. The action is, however, fully justified on the other ground, viz. the failure on the part of tile Income‑tax Officer in bringing any evidence on record to disprove the appellant's stand that sales of land standing in the name of his wife were genuine and not benami transactions. I find myself in agreement with the learned Commissioner of Income‑tax (Appeals) on the point that before treating a transaction as benami, the onus rests squarely on the Departmental authorities to establish it positively to be so by bringing cogent and convincing proof on record. It, thus, goes without saying that in the absence of strong and weighty evidence to the contrary, it would not be possible to dislodge the appellant on this issue and draw an inference adverse to I his interest. The impugned order of the learned Commissioner of Income‑tax (Appeals) is, therefore modified to the extent that the assessments for both the years under consideration shall be deemed to have been set aside for de novo proceedings not on the issue of the disputed addition but for a proper determination of the question whether or not the sales of landed property in favour of the appellant's wife are benami transactions, the burden of proof thereof falls heavily on the Departmental authorities. The Assessing Officer must resolve this question after bringing on the file adequate material for the purpose. The appeals stand disposed of accordingly. M.B.A./880/T Order accordingly.