2005 PLP 1033 (PTD)

4. The explanations/clarifications of the complainant s Authorised Representative were not found satisfactory and the order under section 122(1) was passed by making addition of Rs.4,00,000 under section 13(1)(aa) of the repealed Ordinance, 1979 as unexplained investment for acquiring agricultural land on Muqatta.

5. The complainant has alleged that the addition of Rs.4,00,000 under section 13(1)(aa) of the repealed Ordinance, 1979 was against the provision of law and facts of the case and amounts to maladministration. The complainant thereafter filed revision application under section 122A of the Income Tax Ordinance, 2001 on 3-12-2003 before the Commissioner of Income Tax Hyderabad Zone which was turned down with the observation that the order passed under section 122 was appealable before the competent forum of appeal provided under the Income Tax Ordinance, 2001. The complainant has prayed for redressal of his grievances.

6. The respondents have filed parawise comments prepared by the Regional Commissioner of Income Tax, Southern Region, Karachi. It is stated therein that the complainant had admitted non-ownership of any agricultural land but had stated that the agricultural income was Muqatta (land taken on lease) for the last two/three years. The complainant filed an affidavit along with the copy of agreement/Muqatta deed which was found to be in the name of some other person. It is further stated that the explanation offered by the Complainant was not found tenable by the concerned Additional Commissioner who held that as no investment in acquiring the land on lease had been declared by the complainant, addition of Rs.4,00,000 was made as undisclosed/unexplained investment in the order passed under section 122 of the Income Tax Ordinance, 2001. It is reported that the complainant s application for revision under section 122-A was rejected by the Commissioner of Income Tax Hyderabad as he did not find it to be a fit case for revision/intervention under the said section.

7. The case has been discussed with the complainant s A.R. as well as departmental representatives. The records produced by the Departmental Representative have also been examined.

8. The Additional Commissioner of Income Tax Nawabshah invoked the provision of section 122(1) of the Income Tax Ordinance 2001, when he noted that the complainant had declared agricultural income of Rs.1,00,000 for rate purpose in his return of income for the assessment year 2002-2003 without owning any agricultural land as the same was not shown in the wealth statement filed for the year ending 30-6-2002. This discrepancy was to be explained and reconciled by the complainant. The complainant s A.R conceded in this reply, dated 26-6-2003 that his client did not own any agricultural land and therefore the same was not declared in the relevant wealth statement. Agricultural income was however, derived from agricultural land taken on Muqatta (lease) for the last two/three years which was declared in the return of income. The complainant filed copies of Muqatta agreement and affidavit of the Muqattidar namely Abdullah son of Murid Ahmed in support of his plea regarding declaration of agricultural income. The perusal of the documents revealed that the agricultural land was taken on lease by one Mr. Abdullah and the name of the complainant did not appear anywhere in the lease agreements. Mr. Abdullah however had stated in his affidavit that Mr. Hotumal, the complainant had joined him as 50% partner in the cultivation of land taken on lease from August, 2000. The taxation officer categorically rejected the explanation of the complainant s A.R. finding it as unsatisfactory, fabricated and an afterthought. The contents of his letter No.313, dated 14-10-2003 on this specific issue are reproduced hereunder: (1) The affidavit, dated 11-9-2003 of Mr. Abdullah S/o Mureed Ahmed R/o Jhole, along with two copies of lease agreements of Agricultural Lands executed between the landlord and lessee filed have no relevance with you as you are not the party in the said agreement. (2) Verbal agreements between the lessee and you are not valid in the eye of law as claimed by the lessee., (3) The facts as per your counsel s letter under reference, are misleading, afterthought and concocted, you have tried to twist the acts in your favour on false grounds which have no footing at all, hence your explanation cannot be considered. (4) In order to finalize the matter pending since long proposed addition of Rs.4,00,000 under section 13(1)(aa) of the Income Tax Ordinance, 1979 shall be made in your income as per this office letter No. Jud/AC-NWS/2003-2004/162, dated 8-9-2003. He accordingly made addition of Rs.4,00,000 under section 13(1)(aa) of the repealed Ordinance, 1979 as proposed by him earlier in various notices in this regard.

9. It is pertinent to point out that the taxation officer was convinced that the complainant neither owned any agricultural land nor had taken any such land on lease and the evidence produce by him in support of his version in this regard was fabricated and concocted. But still he made addition of Rs.4,00,000 as unexplained investment in the acquisition of land on Muqatta/lease. His action was self-contradictory in the circumstances stated above. Addition under section 13(1)(aa) could be made if the taxpayer was found to have made any investment or found to be owner of any money or valuable article in any year. In the case under consideration investment of any amount for acquiring the land on lease was not established. The complainant however, could not explain the source of income of Rs.1,00,000 declared in the return of income. Appropriate action could be taken in this behalf as provided in the aforesaid provision of law.

10. Notwithstanding the facts stated above it is also to be pointed out that the lease money payable to the lessor was an admissible expenditure as correctly pointed out by the complainant s Authorised Representative in his letter, dated 11-9-2003. The lease money paid to the landlord was not to be reflected in the relevant wealth statement. It is also noted with concern that the complainant s revision application was turned down by the Zonal Commissioner, Hyderabad without examining the facts of the case otherwise he could have redressed the genuine grievance of the complaint. Maladministration is established and it is therefore recommended as under:-- (i) The C.B.R. to direct the Commissioner of Income Tax Hyderabad Zone to set aside the order passed under section 122(1) by Additional Commissioner of Income Tax, Nawabshah dated 20-11-2003 under section 122A of the Income Tax Ordinance, 2001 with the direction to pass a fresh order considering the facts of the case and after providing opportunity of being heard to the complainant. (ii) The compliance be made within 30 days and reported within a week thereafter. M.I./335/FTO Order accordingly.