The Taxpayer has filed this appeal against the order dated 25-11-2011 passed by learned CIR (A-III), Islamabad for the Tax year 2009 on the following grounds:--
(1) That it is very well settled law limitation starts running from date of service of the order on the Taxpayer appellant for the first time, upon his application obtained certified copy on 25-2-2011 and filed appeal on 25-3-2011 within prescribed period of 30 days.
(2) That the Ex parte order is illegal. It should be kept in mind that mere issuance of a notice is not sufficient unless it is validly served.
(3) That it is a golden principle of natural justice that no one should be condemned unheard and Superior Courts have laid a great emphasis on it. Guidance may be sought from the cases reported as 1994 SCM R 2232, PLD 1990 SC 666, PLD 1964 SC 673, 1988 CLC 1318, 1981 CLC 909 and 1981 CLC 1654.
(4) That when issuance of notice is a statutory requirement the subsequent proceedings taken on the basis of that notice without its valid service are without jurisdiction and ab initio null and void.
(5) That the order under sections 122(1)/122(5) is illegal void ab initio.
(6) That the learned Deputy Commissioner has erred, and misdirected himself under the facts/law and circumstances of the case by invoking section 122(5) of the Income Tax Ordinance, 2001
(7) That there was no definite information available with Taxation officer nor obtained from any other source as such action under section 122(5) is not sustainable so the order is illegal.
(8) That the Learned Assistant Commissioner was not justified to make Addition under section 111(1)
(b) of Rs.5,000,000 on account of unexplained Investment in the hands of appellant whereas same was duly declared in wealth statement.
(9) That the learned Assistant Commissioner Inland Revenue was not justified to estimate purchase price of vehicle without any basis.
(10) That the appellant correctly declared the value of vehicle in wealth statement on 30-6-2008 as confirmed by the ACIT. The delivery letter produced by the appellant is for subsequent sale of vehicle on 10-12-2009.
(11) That the learned ACIT was not justified to ignore the purchase receipt of vehicle which was produced during the course of hearing.
(12) The law does not empower the Assessing Officer to ignore the purchase price in case of verifiable transaction unless it is proved to be sham or of collusive nature to deprive exchequer of its lawful dues and taxes.
(13) That no incriminating evidence has been brought on record to show that transaction between the appellant (purchaser) and the seller was a sham transaction.
2. Brief facts of the case are that the taxpayer is an individual who derives his income by publishing Newspapers. The taxpayer has purchased Mercedes car bearing Registration No. NG-725, a notice under section 116 was issued to the taxpayer to file wealth statements for the tax years 2007, 2008 and 2009 by 18-3-2010. No compliance was made even after seeking so many adjournments.
Under the circumstances, the Taxation Officer was left with no option but to finalize the assessment under section 122(1) read with section 122(5) on the basis of information available on. Record. Being dissatisfied with the treatment given by the learned Assistant Commissioner Inland Revenue, the Taxpayer preferred appeal before the learned CIR(A-II), Islamabad who after considering the facts observed as under:-- "I have perused the case file and heard the AR of appellant. It has been observed that the impugned assessm ent order was made on 31-5-2010, copy of which along with demand notice was issued to assessee on the same date at his address as given in the form of Appeal vide UMS 15105161. The appeal in hand has been filed after about 10 months of passing of the assessment order. Moreover, no documentary evidence in support of purchase value of the vehicle and its declaration in the relevant return/wealth statement has been provided. The appeal is therefore rejected being time barred and devoid of any substance and merit."
3. Feeling aggrieved with the treatment given by the learned CIR (A-III) the Taxpayer has come up in appeal before this Tribunal on the grounds raised supra.
4. The learned AR argued that income Tax proceedings in this case were initiated on the basis of information that the appellant purchased Mercedes Benz and got registered on 30-6-2008. The taxation officer confronted the Taxpayer that in his view the market value of this car was not less than Rs.5,000,000. On due date, the Taxpayer filed written reply along with wealth statement for Tax years 2008 and 2009 same is reproduced here:-- "your contention that assessee has not declared Mercedes car registration No.NG-725 Model 1999 for Rs.5,000,000 is incorrect this car was purchased by Taxpayer mere for Rs.1,500,000 vide purchase receipt No.021 dated 27-8-2007 from Motor Mart as the car was more then eleven year old. The Taxpayer duly declared the same in wealth statement."
5. Learned AR argues that nature of contract intended by the parties could not be changed by presumptions or self-created understandings. There was no definite information with the Taxation Officer. Basic condition for assuming jurisdiction under section 122(5) is acquisition of definite information. If the information obtained /available is definite then the Taxation Officer can proceed further. The learned AR further argues that the learned Assistant Commissioner Inland Revenue was not justified to estimate purchase price of vehicle without any basis. The appellant correctly declared the value of vehicle in wealth statement on 30-8-2008 as confirmed by the ACIT. The delivery letter produced by the appellant is for subsequent sale of vehicle on 10-12-2009. The law does not empower the Assessing Officer to ignore the purchase price in case of verifiable transaction unless it is proved to be sham or of collusive nature to deprive exchequer of its lawful dues and taxes. No incriminating evidence has been brought on record to show that transaction between the appellant (purchaser) and the seller was a sham or collusive one.
6. The learned AR also argues that the learned CIR(A) rejected the appeal being time barred with view (sic) the order was served on 31-5-2010 vide UMS No. 15105161. Whereas the order was not served on Taxpayer, the tracking record of UMS Service shows that the order was not served on Taxpayer. Appellant for the first time, upon his application obtained certified copy of the order on 25-2-2011 and filed appeal on 25-3-2011 within prescribed period of 30 days. It is very well settled law that limitation starts running from date of service of the order on the Taxpayer. Reliance is placed on 2007 PTD 1 L.H.0 relevant portion is reproduced here for ease of reference:-- "We have heard the learned counsel for the parties and find that under section 132(7) of the Income Tax Ordinance, 2001, the order of the Income Tax Tribunal is to be served upon the tax payer and not the A.R. Resultantly, when for the first time, the applicant upon his application was given the certified copy of the order on 11-4-2004 and filed application for reference to High Court on 11-5- 2004 within prescribed period of 90 days -Time would commence from 11-4-2004 when copy of impugned order was obtained---"
The learned DR has opposed the arguments of learned AR.
8. We have heard the arguments and perused the relevant record available on file. Firstly on the question of limitation, learned AR has produced the record of UMS which does not show any delivery of order passed by first appellate authority upon the taxpayer. In case of non service, limitation will start from the date of delivery of certified copy of the order passed by learned CIR(A- III).
9. Secondly, upon the issue of valuation, Officer Inland Revenue has not shown any basis of valuation of Rs.5,000,000 of said vehicle. Reply of the taxpayer was rejected by observing as follows:-- "The reply of the taxpayer is rejected on the basis that delivery letter appended with his reply is totally incorrect as the particles of the delivery letter shows that car was purchased on 10-12-2009 whereas the taxpayer has himself declared the said car in the revised wealth statement as on 30- 6-2008, this shows that taxpayer was the owner of the said car as on 30-6-2008 and as per information received from Motor Registration Authority, Islamabad, Mercedes car was registered in the name of Mr. Aamir Hussain on 30-6-2008. All these facts show that there is a contradiction in the documents submitted by the taxpayer."
The version of taxpayer is that delivery letter pertained to subsequent sale and not to the purchase of said vehicle. Moreso, officer Inland Revenue has not even preferred to deduct the declared value of Rs.1,500,000 from 50 lacs while making addition. Addition if desired was to be made only up to the estimation of Rs. 35 lacs and not of the 50 lacks. The vehicle is stated to be 11 years old. Even by applying depreciation chart, the said value cannot be tuned more than Rs. 15 lacs.
Originally this vehicle was imported under baggage scheme. Learned AR has produced import document. Valuation of the vehicle has been shown as 2500 pound. Fee of clearing agent is Rs.4,500. Invoice showing assessed valuation in Pak. Rs.283,077, Custom Duty Rs.285.481, Sales Tax at Rs.50,100, Income Tax at Rs.59,846, CVT at Rs.79,296, Examination fee at Rs.3500/-, Warehousing charges Rs.20,600, Wharfage at Rs.4,424, Demurrage at Rs.14,280, Infrastructure fee at Rs.2409, Amendment fee at Rs.3,500, T.H.C./ CES/D.O and Insurance Charges at Rs.14,150, Delivery Expenses at Rs.6,500 and Agency Commission at Rs.800. Hence valuation of the vehicle in 2008 at Rs.827,463. Assessing Officer has not given basis of his valuation.
9. We feel no hesitation to say that when declared version is rejected, the officer is to verify the facts from seller to prove the transaction as collusive and not being an arm's length transaction.
After rejecting the declared record, again it is incumbent upon the tax officer to make the addition evolving a proper and reasonable basis which is found missing in this case. With these observations, when collusiveness of the transaction is not evident from the record, declared version is not to be rejected. Again reasonable basis of the estimation at Rs.50 lacs is also missing. In this scenario, we have been left with no other alternative except to delete the demand raised and subsequently confirmed by 'learned CIR(A-III).
10. Taxpayer's appeal succeeds accordingly. .