2000 PLP 3788 (PTD)

NASIM SIKANDAR, J

The following questions of law have been admitted for consideration and answer earlier placed before us under section 136(2) of the Income Tax Ordinance, 1979:

"(1) Whether the Tribunal acted in accordance with law in confirming addition of Rs.1,88;299 to the assessee's income for the assessment year, 1981-82 under the provisions of section 13(1)(a) or under section 13(1)(aa) of the Ordinance, 1979? (2) 'Whether in the circumstances of the case the Tribunal was justified in law to set aside the deletion by the CIT (Appeals) of the addition' by Income-tax Officer of Rs.2,67,637 to the assessee's income under section 13(1) for fresh inquiry by the Income-tax Officer?"

2. The late petitioner Syed Mehmood Shah was a director of a Private, Limited Company viz. West Pakistan Publishing Company, Urdu Bazar, Lahore. For the assessment year 1981-82 agricultural income and income from salary were returned. The Assessing Officer while framing assessment found the aforesaid amount credited in the personal account of the assessee in the books of accounts of the said company. The explanation put forth in this regard that credit was part of the amount earlier withdrawn from the Bank was rejected. Accordingly, the assessing Officer added the unexplained deposits to the other income of the assessee by resort to the provisions as contained in section 13(a) of the Income Tax Ordinance. These provisions provide that where inter alia any sum is found to be credited in the books of an assessee maintained for any income year and the assessee fails to explain it shall be deemed to be his income for that year.

3. The learned First Appellate Authority/C.1.T: (Appeals) Punjab, Zone-I, Lahore on 22-6-1983 maintained the reasons earlier finding favour with the Assessing Officer. However, the amount of the addition was reduced to Rs. 1,88,

299. Further appeal filed before the Tribunal also failed. The contention. of the assessee that unexplained investment/credits could be brought to tax and deemed income only by resort to clause (b) of subsection (1) of section 13 and not under sub clause (a) of that section was rejected by the tribunal.. They also declined the prayer of the assessee for reference of the aforesaid questions on 6-1-1988.

4. After hearing both the parties, we are of the view that both the questions must be answered in the negative. To us it clearly appears that all the forums below failed to consider the basic objection of the assessee and its effect. It was that the books wherefrom the alleged unexplained credit was picked up were not (his book of account) and therefore, sub-clause (a) of section 13(1) of the Income Tax Ordinance was not attracted to this case. The objection of the assessee in other words being that since his case was not covered by sub-clause (a) and the Assessing Officer could have treated the unexplained credit in any of the other sub-clauses including (aa) or even (b) which were subject to approval of the Inspecting Assistant Commissioner. There is hardly any doubt that books of accounts of the covered of which the assessee was a director were not his own books of account and therefore sub-clause (a) of section 13 which empowered the Assessing Officer to treat the credit as unexplained income was not attracted. Rest of the clauses from (aa) to (e) visualize a number of situations and obviously in this case sub clause (c) of the section was attracted. However to make an addition under that clause the Assessing Officer was required to seek approval of the IAC before making any addition. That approval admittedly was not obtained in this case.

5. As observed earlier both the First Appellate Court as well as the learned Tribunal did not address the objection of the assessee and proceeded to maintain the addition which was clearly not warranted by law. An addition requiring the approval of the IAC and made without such approval could not be sustained. It will be seen that the approval of the IAC as contemplated in proviso to section 13 of the Income Tax Ordinance, 1979 is not procedural. It is a condition precedent for exercise of jurisdiction to make an addition under sub-clauses (aa) to (e) of section

13. The absence of such approval, clearly renders the addition to be illegal.

6. That being so, as stated earlier, both the questions are answered in the negative to the effect that the addition of the aforesaid amount under E section 13(1)(a) of the Ordinance was not in accordance with law nor the Tribunal was justified in confirming the same.

7. The Registrar of this Court shall send a copy of this judgment under his signature and seal of the Court to the concerned Bench of the Income Tax Appellate Tribunal. C.M.A./M.A.S./M-380/L Question answered in negatives.