ORDER MUHAMMAD ZAMAN KHAN, JUDICIAL MEMBER. -Through this consolidated order, we proposed to dispose of the titled three appeals, which pertain to Assessment Years 1988-89. The assessee in this case is a Director of the above named company. Original assessment was made on 14.1.1989 by the Chairman Panel-03 Companies Lahore for the year under review at an income of Rs.
572953/-. This order was set aside by the Commissioner of Income Tax while exercising the power of I.A.C. U/S. 66-A of the Income tax Ordinance, 1979, as the same was found erroneous and prejudicial to the interest of revenue, on the grounds that the assessee had never proved the fact of genuineness of the sale of shares to the company the valuation of purchase of land made by the assessee at village Arrey, Lahore Cantt. And that the same, was for ownership and not for sale amounting to an adventure in the nature of trade.
2. Subsequently, assessm ent order u/S. 62/132 was passed by the Inspecting Assistant Commissioner of Income Tax Range-II, Lahore in which the income as declared by the assessee from salary and business was considered, besides the amount of Rs. 247000/- shown by the assessee as capital gain on sale of land at Faisalabad. The Assessing Officer found that the assessee was dealing in the real estate which amounts to adventure in the nature of trade and as such the profits arising out of such transactions were liable to tax. The assessee, however, denied to have indulged in property transactions but his plea was not accepted and income of Rs. 247000/- was taken as income from business and added to the total income of the assessee. An amount of Rs. 358719/- was also added in the income of the assessee as capital gain on sale of shares.
3. Besides the divided income etc. An addition on account of unexplained investment amounting to Rs. 512121/- u/S. 13(l)(d) has also been made by the Assessing Officer. Servant allowance at Rs.
42000/- which claimed exempt was held inadmissible by the Assessing Officer as well.
4. The addition of Rs. 512121/- has been made by the Assessing Officer in respect of the purchase of land measuring 3 kanal and 1 maria on 30.6.1988 at Rs. 402879/-, The Assessing Officer found that the price declared by the assessee was restated and thus relying upon some registered deeds as quoted in the assessm ent order, the value of land per kanal was adopted by the Assessing Officer at Rs. 300000/-. As such the difference between the value shown in the wealth statement and the value to be adopted (Rs. 915000/-Rs. 402879)- Rs. 512121/- was taken as unexplained investment and added u/S. 13(1) (d) as according to the Assessing Officer, the assessee had failed to furnish any concrete evidence in support of the declared valuation.
5. Feeling aggrieved by the order passed u/S. 62/132 the assessee had filed appeal before the CIT(A) Zone-I Lahore, who has vide the order dated 5.12.1995 decided the said appeal and which is the subject-matter of two cross appeals in hand out of three appeals which have been filed by the assessee as well as the Department. The CIT(A) has found that the addition made on capital gain at Rs. 247000/- was not tenable because there was no evidence in possession of the Assessing Officer to establish that the profit earned was of revenue nature/character. As such CIT(A) has declared the addition. However, relying on the two parallel cases of Mr. Altaf M. Saleem and Mr. Ahsan M. Saleem who were also Share-holders in the joint property CIT (A) has confirmed the value adopted at Rs. 300000/- per kanal in the case of the assessee/appellant as well and resultant addition of Rs. 512121/- has been confirmed by the CIT(A).
6. Second appeal has been filed by the assessee against the order dated 5.12.1995 in which it has been stated that there was no justification for the passage of order u/S. 66-A addition of Rs.
42000/- on account of salaries to servants and in confirming the addition of Rs. 51221/-. The contrary, in the cross appeal filed by the department the act of CIT(A) in deleting the addition of Rs.
247000/-on account of capital gain has been assailed.
7. We have heard the learned authorized representatives of both the parties and have also gone through the, orders, which have been rendered in this case on different occasions as disclosed above.
8. So far as the objection regarding the setting aside of the assessment 11/S.66-A is concerned, it has been correctly observed by the CIT(A) in his order dated 5.12.1995 ibid that appeal on that point does not lie before the CIT(A). We therefore, confirm this order of the CIT(A) holding that the issue of setting aside of assessm ent u/S. 66 A could not be raised before the CIT(A) while filing appeal against the assessm ent order passed u/S. 62/ 132.
9. Be that as it may the assessee has also challenged the correctness of the order passed u/S. 660A before us. It has been vehemently argued by the learned A.R. Of the assessee that the order passed u/S. 66-A was bad in law and on facts and that the same was without jurisdiction. It has been argued that the order dated;14.1.1989 passed by the Assessing Officer was not erroneous in any manner whatsoever and prejudicial to the interest of the revenue because the same was passed after proper application of mind and considering all the relevant facts. It appears that this position is correct. It is manifest from the assessment order that complete details of capital gain on sale of shares were furnished by the assessee and the same were also offered for tax. It also emerges from the order passed u/S. 66-A that the point of purchase price of land was also considered by the Assessing Officer and the value declared by the assessee was accepted by the panel and it was never suspected that the value was understated. Learned A. R. Of the assessee had, therefore, concluded his arguments regarding the passage of the order u/S. 66-A submitting that there was no justification for it and to direct a fresh assessment to be made, it appears that the line pT arguments which has been adopted on behalf of the assessee is not devoid of force because the order passed u/S. 66-A is based on mere presumptions, surmises and conjectures. All the material and facts were duly considered by the Assessing Officer at the time, of original assessm ent and as such we do not find any justification to maintain the order passed u/S. 66-A.
Learned D.R. Too has not been able to support the order passed u/S. 66-A in any manner whatsoever.
10. As a sequel to the above, the order passed u/S. 66-A by the CIT on 24.3.1602 is hereby cancelled and the order of assessm ent made by the Chairman Panel-02 Companies, Lahore on 14.1.1989 is hereby restored.
11. As a consequence of the above, the order passed by Inspecting Assistant Commissioner of Income Tax Range-II, Lahore u/S. 02/132 and the appellate order delivered by the CIT(A) Zone-I, Lahore on 5.12.1995 have become ineffective, as the order on the basis of which they Were rendered has been declared illegal by us, on the plea that the entire superstructure, which has been raised on an illegal premises must fall to the ground. Hence, the two cross appeals filed against the order dated 5.13.1991 ibid are also liable to. Be dismissed as having become infructuous and we order accordingly.
12. The appeal filed by the assessee against the order passed u/S. 06-A succeeds, as held above.
13. All the titled three appeals stand, determined accordingly.