The appellant, husband of the deceased taxpayer, has preferred the titled appeal against the order dated 21-10-2013 passed by the learned Commissioner. Inland Revenue (Appeals-III), Lahore.
2. Facts of the case, in brief, are that the taxpayer for the year under appeal filed return declaring nil income/Wealth on 6-5-2010 which was firstly treated as deemed order in terms of section 120(1) of the Income Tax Ordinance, 2001. However, considering the fact that the taxpayer had made un- explained investment to the tune of Rs,3,75,04,926 with Messrs Wasi Securities (SMC-Pvt.) Ltd., the original assessm ent was amended under sections 122(1)/122(5) read with Section 111(1)(b) creating a tax demand of Rs,93,76 232. A penalty of equal amount of tax sought to be evaded was also imposed under section 182(1) of the Ordinance vide order dated 26-4-2011. Being dissatisfied with this treatment, the taxpayer filed appeal before the learned CIR(A) who vide order dated 29-7-2011 has remanded the case for de novo proceedings with the following observations`-- "In view of the above, it would meet the ends of justice if the impugned order passed by the Taxation Officer under section 122(5) read with section 111(1)(b) of the Ordinance dated 15-6-2010 is remanded back (in view of ITAT's judgment bearing Nos,420 and 421/LB/2009 dated 1-12-2009) for de novo proceedings in the light of facts discussed above with the direction to afford adequate opportunity of being heard to the appellant and ascertain title as well as valuation of shares after summoning and examining the complete record from Messrs Wasi Securities (Pvt.) Ltd."
In compliance to the above order, fresh proceedings were initiated and verification letters to Messrs Wasi Securities (SMC-Pvt.) Ltd., and Central Depository Company of Pakistan Ltd. were also issued. According to the Taxation Officer, the information so obtained suggested A that the appellant's claim regarding making of investment by her late father and that the investment in question she received as inheritance was incorrect. Therefore, the Taxation Officer through various notices requested the taxpayer to furnish details of legal heirs of her father and to furnish the evidence regarding making of investment by her father but as per the impugned order no such evidence was ever produced. Hence, the Taxation Officer finalized the amended order by making the addition of Rs,3,75,04,926 as was originally made. Again feeling aggrieved, the taxpayer filed appeal before the first appellate authority who vide order dated 21-10-2013 confirmed the treatment accorded by the Taxation Officer. Hence, this appeal.
3. The learned A.R, vehemently, assailed the impugned order as unjustified and arbitrary. He submitted that the Taxation Officer had inadvertently ignored the factual position inasmuch as after remand of the case by the learned first appellate authority the taxpayer had furnished enough evidence to prove that the investment in question was made by the taxpayer's late father in the shares of various listed-companies through Messrs Wasi Securities (Pvt.) Ltd., which was later on transferred and settled as inheritance. Therefore, the impugned addition made by the Taxation Officer and upheld by the learned CIR (A) was not sustainable in the eyes of law. In this regard our attention was drawn towards reply furnished by the taxpayer on 15-4-2013 duly mentioned in the assessm ent order at page 8 that following documents were submitted:-- (i)Receipt Nos,1202 and 2482 (ii)Agreement dated 14-1-2009 (iii)Decision of Panel of Arbitrators dated 1-9-2009 (iv)Death Certificate of Late Qamar-ud-Din Farook (v)Marriage Certificate of taxpayer (vi)Decision of Appeal Commissioner Appeals dated 29-7-2011
(vii) Old NIC of Late Mr. Qamar-ud-Din Farook
(viii) Copy of Passport and visas of Qamar Farook (ix)Sale deed of 112 Ravi Road.
(x) Receipt Nos,47 and 93 of Messrs Wasi Securities: The objection of the Taxation Officer that no documentary evidence was produced by the taxpayer is frivolous. Explaining the factual aspect of the case the learned AR stated that unfortunately the complainant was the same person from whom the amount in question was received as inheritance. According to him, after death of her father she was contacted by Mr. Wasiullah proprietor of Messrs Wasi Securities and told about the investment made by her father. As the taxpayer was the sole nominee, Messrs Wasi Securities made full payment to Mr. Qamarud-Din Farooq vide payment Voucher No,2482 dated 8-12-2008 and at the same time similar amount was shown as received from the taxpayer as investment made by her vide receipt No,1202 dated 8-12- 2008. The dispute arose only when the taxpayer knew about the personality of Mr. Wasiullah (on whose statement whole case revolves) that he is a fraud and trying to leave the country after closing his business. The taxpayer made demand for return of the money and since that was avoided on one pretext or the other but ultimate, an agreement was made. Since the agreement was also not fulfilled a complaint was lodged against Mr. Wasiullah and the Panel of Arbitrators decided the case in favour of the taxpayer. The entire story is discussed in the decision of the Panel of Arbitrators whereby it was decided that Receipts Nos,1202 and 2482 were actually issued by Messrs Wasi Securities in order to pay off the investment made by the father of the taxpayer; In support of his contention Paras Nos,14 and 15 of the decision of the Panel of Arbitrators have been referred. Rebutting the other objection of the Taxation Officer regarding failure of the taxpayer to inform about the legal heirs the learned. A.R, submitted that the taxpayer was the sole nominee and there was no dispute amongst the legal heirs, therefore, the point raised by the Taxation Officer has no validity at all. Had there been any dispute amongst the legal heirs the matter would have been pursued in the Court of law. From the documentary evidences produced above, it is evident that there being no dispute amongst the legal heirs the investment made by the taxpayer was out of explainable sources which she had received as a nominee after the death of her father.
4. The learned D.R., on the other hand, supported the impugned order for the reasons stated therein. He also stated that adequate opportunity of hearing was afforded but the taxpayer had failed to furnish any documentary evidence in support of his contention. Therefore, no interference is warranted.
5. Having heard the rival arguments and perusing the available record we have observed that the re-assessm ent was finalized without appreciating the facts of the case and examining the evidence produced by the taxpayer. We have also observed that the appellant has enough evidence in support of his contention that she had received the amount in question as inheritance being nominee of the investment made by her father and the objection raised by the Taxation Officer that nothing has been adduced to substantiate the contention is also contrary to the facts and circumstances of the case. The agreement between the taxpayer and Messrs Wasi Securities and the decision of the Panel of Arbitrators has endorsed the submissions advanced by the taxpayer. In order to arrive at the correct decision we have also perused the decision of Panel of Arbitrator whereby in para 14 it has been held that:-- "..........It is abundantly clear that the agreement was executed to honour the Receipt No,1202 issued by the respondent. After perusing the evidence at hand and the submissions of the parties we are of the opinion that since the agreement, the execution of which was accepted by both the parties, was to honour the liability accrued under Receipt No,1202 therefore, the receipt Nos,1202 and 2482 also stand proved as having duly been issued by the respondent."
Para 15 of the decision of Panel of Arbitrator also speaks about the receipt of the payment from Messrs Wasi Securities as inheritance in the following words:-- "........The payment voucher No,2482 shows that a business transaction was closed by the respondent as a "full and final settlement" and the amount of Rs,3,75,04,926.67 was shown as paid to Mr. Qamar Farooq in cash and the same amount to the extent or paisas on the same date was received from the complainant who was issued receipt No,1202. Clearly, this transfer of money took place only in the books of the respondent as both the receipts are being issued on the same day and the amount stated therein is the same Therefore, the receipt No,1202 was issued by the respondent to the complainant as its client for investing in the securities at Exchange and not a deposit...."
6. From the facts narrated above, it is abundantly clear that the investment was made out of explainable sources which she had received as inheritance after the death of her father. The documentary evidence produced by her at the assessment stage was deliberately ignored in order to burden her with a huge amount of tax liability which cannot be termed as justified by any stretch of imagination. The learned first appellate authority has also upheld the treatment accorded by the Taxation Officer in a summary manner without consulting the evidence produced before him. For the reasons recorded supra, the addition made by the Taxation Officer is not sustainable and the learned CIR(A) has erred in law to uphold the same. Accordingly, the addition made under section 111(1)(b) is deleted and the appeal is accepted.