Present
Mr. Justice Mushir Alam.
Mr. Justice Aqeel Ahmed Abbasi.
Date of hearing : 22.12.2009
Date of order : 19 .01.2010
Applicant : Jamshed Ahmed Azmi
through Mr. Anwer Kashif Mumtaz,
Advocate.
Versus
Respondent : The Commissioner Income Tax,
(Appeals) Appeals-VII,
through Mr. Nasrullah Awan, Advocate
O R D E R
Aqeel Ahmed Abbasi, J. Through this Income Tax Reference application under Section 136 (2) of the Income Tax Ordinance, 1979, the applicant being aggrieved and dis-satisfied by the order of Income Tax Appellate Tribunal dated 15.1.1994, has proposed the following questions of law said to arise out of the impugned order.
(i) Whether on the facts and circumstances of the case the learned Income Tax Appellate Tribunal was justified in holding that a sum of Rs.2,03,000/- could be added in the Applicant income u/s 13(II) for the assessment year 1987-88?
(ii) Whether on the facts and circumstances of the case, the learned Income Tax Appellate Tribunal was justified in making the addition of Rs.2,03,000/- u/s 13(II) without following the procedure outline in Section 13(1) and 13(II)?
Brief facts of the case as stated by the Tribunal are that the Income Tax Officer, Salary Circle-8, Central Zone-D, Karachi passed the order in respect of Jamshed Ahmed Azmi, the assessee, in respect of assessment year 1987-88, as he had filed the return on 19.1.1988 after expiry of due date showing income at Rs.1,44,650/- which was processed under normal law, during which it came to light that the assessee had failed to declare his Flat No.A-17,Sec-II, Al-Falah Apartment, North Nazimabad, purchased for Rs.2,03,006/-. Accordingly, a show cause notice dated 11.6.1988 was issued and in reply to which the assessee sent a letter dated 19.6.1988 admitting that he had purchased for the aforesaid amount and had failed to declare it in the wealth statement filed for the period ending on 30.6.1987. On this, an addition to the tune of aforesaid amount was made by the I.T.O with the prior approval of the I.A.C. Range-3, Central Zone-D, Karachi. Against this order, the assessee filed first appeal which was allowed vide order dated 2.4.1990 in Appeal No.473/199/VII by the learned C.I.T (A), Zone-VII Karachi on the ground that double approval of the I.A.C. as required by section 13 was not obtained although in the said order, it has been held that the said asset should have been duly declared in the wealth statement. Against this order, the Department filed Appeal No.146-A/KB of 1990-91 while the assessee filed Appeal No.146/KB of 1990-91 against the order of penalty before the learned Tribunal which were disposed of by a joint order dated 15.1.1994, whereby the appeal of the assessee /applicant was dismissed. Being aggrieved by such order, the assessee/applicant filed Reference Application i.e. R.A.No.214/KB of 1993-94 before the learned Income Tax Appellate Tribunal. The learned Tribunal after examining the facts of the case dismissed the reference application, hence the instant reference application under Section 136(2) of the Income Tax Ordinance, 1979 has been filed by the applicant seeking opinion of this Court on the proposed questions mentioned herein above.
Learned counsel for the applicant has argued that amount of Rs.203000/- could not be added in the income of the assessee for the assessment year 1987-88 as the procedure provided in terms of Section 13(1) and (2) was not followed by the department. It is further argued that the said addition could not be made in the income of the applicant for the assessment year 1987-88 as according to learned counsel asset was not purchased during the year. Learned counsel for the applicant also argued that without prejudice to the above fact, the addition was not justified as according to the learned counsel two approvals were not sought before making such addition. In this regard he has placed reliance on the case of Commissioner of Income Tax v. Muhammad Kassim (2000) 81 Tax 229 (High Court Karachi), and Commissioner of Income Tax Zone-B Lahore v. East Pakistan Chrome, Lahore (2001) 84 Tax 27 (High Court Lahore). Learned counsel for the applicant accordingly argued that in view of the above cited judgments the legal issue stands decided in favour of the applicant, therefore, this reference application may be allowed and the questions proposed may be answered in negative and in favour of the applicant.
Conversely, learned counsel for the respondent opposed the instant reference application for being misconceived. Learned counsel for the respondent argued that the Question No.1 is purely a question of fact, which on the basis of admission of the assessee/applicant with regard to purchase of property for a sum of Rs.203,006/- which admittedly he had failed to declare in the Wealth Statement filed for the period ended as on 30th June 1987, hence the said amount was rightly added under Section 13 with the prior approval of I.A.C, Range-III, Central Zone "D", Karachi in the assessment year 1987-88. It was further argued that this finding of fact has been approved by the Commissioner of Income Tax (Appeals) and the learned Income Tax Appellate Tribunal, and the same cannot be agitated before this Court in its reference jurisdiction. Learned counsel for the respondent argued that the question of fact cannot be decided by this Court particularly concurrent finding of fact unless same is perverse, and only question of law can be referred for an opinion under Section 136 of the Income Tax Ordinance, 1979.
As regards Question No.2, learned counsel for the respondent argued that the question as such proposed does not arise from the impugned order as under the facts and circumstances of this case there was no need of seeking two approvals of the IAC, as the amount added under Section 13 is the non-declared amount by the assessee/applicant and there was no estimate or valuation made by the Income tax Officer. It was further argued that the reliance placed on the case law cited by the learned counsel for the assessee/applicant is misplaced as the facts of those cases are distinguishable from the facts of this case.
We have heard both the learned counsel and perused the impugned order as well as the orders passed by the Income Tax Officer and the Commissioner of Income (Appeals) in this case. As per record it is an admitted fact that the assessee/applicant has purchased the property in question during the period ending on 30th June 1987, which assessee/applicant admittedly had failed to declare in the Wealth Statement filed for the assessment year 1987/88. It is also evident from the facts that while making the addition under Section 13 the prior approval of I.A.C, Range-III, Central Zone "D", Karachi, was obtained. It is also an admitted fact that no estimation or evaluation of the amount added under Section 13 was made in this case and the actual amount i.e. Rs.203,006 has been added to the income of the assessee/applicant for the relevant year i.e. assessment year 1987/88.
In order to appreciate the scope and application of Section 13 it will be appropriate to re-produce the same hereunder:-
"13. Unexplained investments etc., deemed to be income- (1) Where,
(a) any sum is found to be credited in the books of an assessee maintained for any income year; or
(aa) the assessee is found to have made any investment or is found to be the owner of any money or valuable article, in any year; or
(b) the assessee is found to have made by investment in any income year which is not recorded in the books of account maintained for that income year or is not shown in the wealth statement or return of wealth furnished under Section 58 in respect of that year; or
(c ) the assessee is found in respect of any income year to be the owner of any money or valuable article which is not recorded in the books of account, if any, maintained by him or is not show by him in any wealth statement furnished under Section 58 in respect of that year; or
(d) the assessee has made investment in any income year or is found in respect of any such year to be the owner of any valuable article and the Deputy Commissioner finds that the amount expended on making such investment or in acquiring such valuable article exceeds the amount recorded in this behalf in the books of account maintained by him or shown in the wealth statement furnished under section 58 in respect of that year; or
(e) an assessee has during any income year; incurred any expenditure, and the assessee offers no explanation about the nature and source of such sum investment acquisition of the money or valuable article, excess amount or the money from which the expenditure was met, as the case may be, or the explanation offered by him is not, in the opinion of the Deputy Commissioner, satisfactory, the sum so credited, the value of the investment, the money or the value of the article, the excess amount or the amount of the expenditure, as the case may be, shall be deemed to be the income of the assessee of such income year chargeable to tax under this Ordinance.
Provided that, where any act referred to in clauses (a) to (e) is discovered after the assessment of income of the income year to which the said act relates has been made, the income chargeable to tax under this section shall be included in the total income of the income year relevant to the assessment year in which the said discovery is made.
Provided further that in cases referred to in clauses (aa) to (e) such income shall not be chargeable to tax unless approval of the Inspecting Additional Commissioner has been obtained.
(2) Where 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 sub-section (1) is, in the opinion of the Deputy Commissioner, too law, the Deputy Commissioner may determine after giving a reasonable opportunity to the assessee of being heard a reasonable value or the amount thereof, as the case may be and all the provisions of subsection (1) shall have effect accordingly.
(3) The Central Board of Revenue may by rules provide for the determination of the value of any property or article for the purposes of this section.
On perusal of the provisions of this section it emerges that two independent approvals of the Inspecting Assistant Commissioner are required where the Income Tax-officer intends to make any addition after estimating or making addition in the declared value of the asset. The first approval is provided by subsection (2) of section 13 and the second approval is provided in by the second proviso to clause (e) of Section 13(1) of the Income Tax Ordinance, 1979. It is relevant to mention that the provisions of these two approvals remained in the statute book since promulgation of the Income Tax Ordinance, 1979 on 1.7.1979 till 1992, when by Finance Act, 1992, a provision for obtaining first approval required by subsection (2) of section 13 of the Ordinance was deleted. Since in the instant case admittedly there is no estimation or enhancement and increase in the value of the amount/property, there is no occasion for seeking two approvals of the I.A.C. This conclusion finds support even from the reported judgment referred by the learned counsel for the applicant himself i.e. (2000) 81 Tax 229 relevant page 233, wherein it has been held as under:
"It will also not be out of place to refer to section 13 of the Income Tax Ordinance, 1979, the provisions of which are similar and analogous to the provisions of section 4(2d) of repealed Act. Section 13 of the Ordinance before its amendment by the Finance Act, 1992, provided for two separate and independent approvals of Inspecting Assistant Commissioner in the case where the income-tax Officer intended to make any addition to the declared income of assessee by way of enhancement or increase in the value of any property. The first approval was provided by subsection (2) of section 13 and the second approval was provided in by the second proviso to clause (e) of section 13(1) of the Ordinance. The Income Tax Ordinance was promulgated on 1.7.1979 and the aforesaid provision relating to two prior approvals of the Inspecting Assistant Commissioner for making additions on the basis of enhancement/re-determination of the value of any property on valuable article continued to be operative and remained in the force till 1992 when by the said finance Act, 1992, the provision for obtaining the first approval required by subsection (2) of section 13 of the Ordinance was deleted."
In view of the above facts and circumstances of this case and on perusal of the provisions of section 13, we are of the considered opinion that the order passed by the learned Income Tax Appellate Tribunal is based on correct appreciation of facts and proper application of law. It does not suffer from any factual impropriety or legal defect hence require no interference by this Court in its reference jurisdiction. Accordingly, we answer both the proposed questions in affirmative against the applicant. Reference Application filed by the applicant is dismissed in limine with no order as to cost.
Let copy of this order be sent to the Registrar of Income Tax Appellate Tribunal for compliance.
JUDGE
JUDGE
Karachi
Dated: 19-01-2010