' This appeal has been filed by the taxpayer against order dated 4-12-2008 passed by CIT (Appeals-II), Islamabad.
2. The taxpayer is an individual and derives income from business as well as remuneration as Director in a Private Limited Company. Return was filed declaring income at Rs,12,141. This return did not qualify for self-assessm ent. Proceedings were, therefore, started for assessment under normal law. During the course of assessm ent proceedings, the taxation officer found that 998-kanal land was sold during the year under consideration and the sale price was understated. He estimated sale'-`price of land at Rs,15,000 per kanal against that declared at Rs,1,950 per kanal. Accordingly, sale price was worked out at Rs,1,49,70,000 and after deduction of expenses, net income from sale of land was as assessed at Rs,1,39,10,000. It was also observed by the taxation officer that bank loan of Rs,2,17,35,205 had been cleared out of unexplained sources. Addition of this amount was made under section 13(1)(aa). For the reasons recorded in the assessment order under section 62 dated 29-6-2005, net income was assessed at Rs,3,56,57,346. The taxpayer filed appeal against this assessm ent, which was rejected by CIT(A) vide his impugned order dated 4-12-2008. The assessee filed second appeal before this forum on the following grounds:--
(1) That all the observations which have been made the basis for such, a harsh assessment by the Assessing Officer as well as confirmed by the learned CIT(A) are arbitrary and baseless.
(ii) That the issuance of demand notice under section 138 is illegal and learned CIT(A) is not justified to hold that assessee's plea regarding the notice under section 138 does not carry weight.
(iii) That the estimation of income from sale of land at Village Dhari Rai Ditta is illegal, arbitrary and unjustified.
(iv) That without prejudice to the above, the estimation of income from sale of land at Village Dhari Rai Ditta is illegal as the sale of land was not completed but only advance was received which is not subject to levy of income tax and the CIT(A) is not justified to confirm the same.
(v) That without prejudice to the ground taken above, the Assessing Officer did not brought any material on record for estimation, of sale price at Rs,1 5000 per kanal and the learned CIT(A) is unjustified to confirm the sale price in the light of the evidence submitted at the time of the hearing.
(vi) That the Assessing Officer as well as the learned CIT(A) deliberately ignored the submission made and documents submitted, just to impose heavy tax on the appellant.
(vii)That the addition made under section 13(1) (aa) is illegal, void ab initio and without jurisdiction.
(viii) That the addition made under section 13(1)(aa) is without the prior approval of 1AC and unjustified.
(ix) That the so-called mentioned approval in the body of order has no legal sanction and termed being not obtained so the order is illegal.
(x) That without prejudice to the above the addition made under section 13(1)(aa) is also illegal as this loan was obtained in 1998 against the Foreign Currency Terms Deposit (FCTDR) and the appellant can dispose of the liability against these FCTDR.
3. Demand Notice Learned AR contends that provisions of repealed Income Tax Ordinance, 1979 applied to the proceedings relating to the year under appeal. He stated that section 239 of the Income Tax Ordinance, 2001 provides that in respect of pending assessments up to assessment year 2002-03, provisions of repealed Ordinance, so far as these relate to computation of total income and tax payable thereon., shall apply in the manner as if the new Ordinance had not come into force. He states that these principles were confirmed in the judgments reported as (i) 2005 PTD 490 (Trib.), (ii) 2005 PTD (Trib.) 1697, (iii) 1997 PTD 821. He further stated that demand notice was issued under section 138 of the new Income Tax Ordinance, whereas it had to be issued under section 137. Therefore, the demand notice was legally defective, hence proceedings in hand suffer from legal infirmities and the assessment in question is liable to be quashed. Learned DR stated that after the introduction of new Income Tax Ordinance, new forms are applicable and there is no dispute about application of provisions of old Income Tax Ordinance for the purpose of computation of income. He states that in this case, income was computed under the provisions of old Ordinance of 1979, hence objection of learned AR is not maintainable. However, the new forms have been used and there is a printing error in the heading of demand notice. Instead of 137, section 138 has been printed, whereas language of the notice is according to the provisions of section 137. He contends that this technicality cannot vitiate the entire proceedings, which were otherwise conducted according to law.
4. We have considered arguments of both the sides and we tend to agree with learned DR that demand notice carries a printing error, which cannot vitiate the assessment proceedings. The language of the demand notice is according to the provisions of section 137. The new form was rightly used and objection of learned AR in this regard is not maintained.
4. Profit on sale of land The Taxation Officer noted that as per sale agreement dated 13-7-2000, land measuring 998-kanals situated at village Dhari Rai Ditta Tehsil Fateh Jhang District Attock was sold to Mr. Zahir-ul-Hassan (who happens to be the real brother of the taxpayer) for a total consideration of Rs,39,46,100 yielding average rate of Rs,1,950 per kanal. A sum of Rs,6,90,000 was received as advance, while the remaining amount was paid within one year of the agreement. The Taxation Officer observed that sale price of land was grossly understated, because in the same vicinity, a Housing Scheme was launched inviting applications from general public, where price of plot of one kanal was fixed at Rs,7,00,000. Moreover, Civil Aviation Authority acquired land in nearby village in 1988 at a price, of Rs,9,000 to Rs,10,000 per kanal. For the reasons recorded in assessment order under section 62 dated 29-6-2005, taxpayer's contention was rejected and income from sale of land amounting to Rs,1,39,10,000 was added to taxable income of the taxpayer. The taxpayer filed appeal, which was rejected by CIT(A) vide his impugned order dated 4-12-2008. Now the taxpayer is in second appeal before us.
5. Learned AR states that sale/transaction was not completed during the year. Only advance payment was received through banking channels. The land was purchased during the period relevant to assessm ent year 1998-99 and purchase price of Rs,1,650 per kanal was accepted by the Department. When the sale price of Rs,1,650 was accepted, the estimate of sale price of the same land at so high figures is not understandable. Learned AR claims that it is a barren land situated in hilly area. Documentary evidence in the shape of `Fard' and mutations of 14 different transactions of the same village were filed in support of taxpayer's claim relating to declared sale price. He states that in the same village, average sale price of land is around Rs,1,800 per kanal and its estimation by the taxation officer at Rs,15,000 per kanal is unrealistically high. He contends that land acquired by Civil Aviation Authority for construction of new airport is situated at a distance of 30 kilometers and that too on the other side of the mountain and comparison bf that land cannot be made with the area under consideration. He states that no evidence was brought on record by the Department to establish that land was transacted at a price estimated by the Taxation Officer.
He argues that in the light of decision reported as 2009 PTD 1656, this estimation is illegal and valuation of agricultural land as made by the Taxation Officer is in total contravention of Rule 207A, which provides that it has to be taken at an amount equal to average sale price of sales recorded in the revenue record of the estate in which the land is situated. Learned AR pressingly stated that sale price declared by the taxpayer was supported with documentary evidence, whereas estimate made by the Taxation Officer was based on guesswork. Thus, notional addition of Rs,1,39,10,000 made by the Taxation Officer is legally unwarranted. Learned DR states that transaction under consideration was not made at arm's length. It was between two associates, who are real brothers.
The Taxation Officer was, therefore, fully justified to make the estimate, which was quite reasonable and realistic. That is why it was confirmed by learned CIT(A).
6. We have considered arguments of both the sides. We have noted that taxpayer has brought documentary evidence in the shape of `Fard' (Copy of Record of Rights) from the concerned Patwari that average sale price of similar land was in the same range on which transaction in question took place. Specific opportunity was provided to the Department, who produced documentary evidence in support of estimate made by the Taxation Officer, but department has produced showing valuation as 18000 to 22000 per kanal on the basis of five year average price w,e,f, 1-7-2000 to 30-6-2005 while translation in hand pertain to year 2002. Thus it is of no avail to rebut contention of assessee showing evidence of particular year. We are, therefore, constrained to hold that estimate made by the Taxation Officer was baseless and against the factual position. In view of facts and circumstances of the case, we hereby vacate orders of both the authorities below on this point and delete the addition made in taxpayer's income on this account.
7. Addition under section 13(1)(aa). The Taxation Officers made addition of Rs,2,17,35,205 under section 13(1)(aa) for the reason that liability in the name of Bolan Bank Limited of this amount was cleared, but no sources were available for liquidation of outstanding liability. Taxpayer's appeal on this point was rejected and second appeal has been filed before us contesting that this addition was not legally justified.
8. Learned AR states that a sum of Rs,2,17,35,205 claimed on the wealth statement as liability was neither acquired during this year nor any asset was created against this liability during the year.
The loan was obtained from Bolan Bank Limited in 1998 by pledging FCTDR of Rs,52,87,000 and it was duly declared in tax record. While passing order under section 62 for assessment year 1998- 1999, the Taxation Officer made following observations in this regard:-- "In respect of source of investment as made by the assessee in the purchase of immovable properties to the tune of Rs,11823317 in aggregate is concerned, the assessee produced loan documents as obtained from Bolan Bank Ltd., showing loan to the tune of Rs,21735205, which were examined and placed on file. Hence it is observed that the available sources in the hands of the assessee far exceeds the declared investment."
9. Learned AR contends that action of the Taxation Officer for addition of very heavy amount is unjustified and it was unduly confirmed by the learned CIT(A). Learned DR states that taxpayer has not come up with any evidence to establish that he had valid sources from which liability in question was liquidated. The action of the Taxation Officer was, therefore, fully justified.
10. Learned AR states that under the repealed Income Tax Ordinance various income tax authorities were empowered to exercise independent jurisdiction. However, under the scheme of things contained in the Income Tax Ordinance, 2001 the income tax laws are now executed through Commissioner, who holds pivotal position and all the powers are now vested with him. The Commissioner may exercise all or any of the powers as Commissioner or he may delegate all or any of his powers to the Taxation Officer under section 210. Any taxation officer including an IAC cannot exercise independent jurisdiction. The definition of Commissioner has been provided in section 2(13) and that of Taxation Officer in section 2(65). Learned AR further states that procedure of making addition under the repealed Ordinance has been laid in section 13 which provides that approval of IAC is mandatory. He contended that Commissioner has to delegate his powers under section 210 to the IAC who is required to grant approval under the repealed Ordinance but delegation of such powers is open to question and contrary to law. He contended that the Tribunal, in its decision in I.T.A. Nos. 86-91(PB) of 2005 (assessment years 1994-1995 to 2001-2002) dated 20- 5-2006 has confirmed the findings of CIT(A) that concept of approval has been dispensed with under the Income Tax Ordinance, 2001. He further states that in another order of the, Tribunal in I.T.A.
Nos. 1902, 1903 and 1910-1913(1B) of 2005 (assessment years 2000-2001 and 2001-2002). Similar decision was given about the concept of approval under the new Ordinance. Learned AR states that addition under section 13(1)(aa) is illegal because it was made with the approval of IAC and such approval was not legally correct. He states that the Tribunal in their judgment reported as 2010 PTD (Trib.) 494 had held as under:-- "We are inclined to agree with the findings of learned CIT(A) in the light of ratio settled by the Tribunal in its orders dated 20-5-2006 in I.T.A. Nos. 1910-1913(IB) of 2005. It has been settled by the Tribunal that the powers of assessment as well as approval cannot vest in one authority i,e, the Commissioner. Therefore, the approval of assessment by the same authority is not legally correct.
In these decisions of the Tribunal distinction was created in respect of judgment reported as 2004 PTD 2004 relied upon by the learned DR and it was held that it does not apply to the matter of approval under the new Income Tax Ordinance, 2001. These decisions of the Tribunal are on all fours with the instant case. We could not find any warrant to hold a difficult view. Keeping in view all the facts and circumstances of the case, and the ratio already settled by the Tribunal we hereby uphold the orders of learned CIT(A) and reject the departmental appeals for both the years for being without any merit."
11. Learned DR states that there were visible contradictions in explanation of the assessee with regard to the amount of addition under section 13(1)(aa) and it was rightly confirmed by the CIT(A).
12. We have considered arguments of both the sides in the light of relevant record and we are of the opinion that the issue of approval for addition under section 13(1)(aa) has already been decided by this forum in the aforesaid judgment reported as 2010 PTD (Trib.) 494. Learned DR failed to put forth any explanation to justify any deviation from the aforesaid judgment. In the light of facts and circumstances of the case we hereby hold that addition of Rs,2,17,35,205 under section 13(1)(aa) is legally incorrect and is hereby deleted.
13. Assessee's appeal is accepted in the manner as indicated above.