ORDER M. SALEEM SH VD QURESHI, JUDICIAL MEMBER.- The assessee/appellant has preferred this appeal against the order of the learned AAC, Sahiwal vide his A.O. No. 378 dated 13.6.95 pertaining to Assessm ent Year 1987-88.
2. Main grievance of the appellant/assessee is that there is no justification to make the addition of Rs.4,45,300/- u/S. 13 (1) (d) just on flimsy grounds and relying on a bogus wealth statement which had never been filed by the appellant, thus the addition made is highly excessive, harsh and unjust.
It is also contended that the personal expenditure's vivid description by the learned AAC is mis- leading and against the facts of the case. It is also further abjected that the assessment of business income at Rs.40,000/- is just on flimsy grounds and excessive. It is further argued that the purchase of properties was made during the period, the income of the assessee was exempted from Income Tax under clause 98 of the Second Schedule of the Income Tax Ordinance, 1979.
3. Brief facts of the case are that the appellant v/as a member of an AOP named as Madina Mechanical Works, Hujra Road, Depalpur engaged in the business of repair and manufacturing of agricultural implements and appliances. Income from the manufacturing of agricultural implements was exempted from the levy of tax under clause 98 of the Second Schedule of the Income Tax Ordinance, 1979 till the year 1988-89 whereas the appeal related to the Assessment Year 1987-88 meaning thereby that the same stood exempted during the year under appeal.
4. The appellant/assessee purchased agricultural land measuring 58 kanals, 8 marlas and 5 kanals, 7 marlas on 10.1.1987 and 26.3.1987 for Rs. 2,75,200/- and Rs.1,09,000/- respectively. The department on receipt of information regarding the purchase of the above said agricultural land, issued a notice u/S. 56 whereby the appellant was asked to file a return of total income for the charge year 1987-88 so as to initiate the income tax proceedings against him. The return was filed declaring income as per following:- 50% share from AOP named Rs. 76,700/- M/s. Madina Mechanical Works, Hujra Road, Depalpur.
The appellant/assessee, thereafter, was asked by the Assessing Officer to file the wealth statement which was filed declaring net wealth at Rs.7,11,600/-. The to vide his letter dated 25.11.1991 asked to file explanation regarding the reconciliation made on 30.6.1987 relying on the wealth statement filed as a member of the AOP named as Madina Mechanical Works on 30,6,1984 amounting;o Rs.
492400/- whereas the wealth statement available with the Department was of Rs. 54,100/- only meaning thereby that a sum of Rs. 4,38.300/- remain unreconciled. It is quite interesting to note that the appellant was asked to file the reply within 3 days of the receipt of the letter otherwise proceedings u/S. 65 would be initiated whereas no assessment had ever been made in the name of the appellant. In these circumstances the validity of the above- said notice is doubtful as void ab-initio. The learned counsel of the appellant vehemently argued on this point and pointed out that the then counsel of the appellant replied vide his letter No 437, dated 2.12371 whereby the wealth statement: available with the department amounting to Rs. 54,100/- was challenged as no such wealth statement was ever filed by the appellant. An affidavit in this regard was also filed by the appellant whereby he had denied having filed any such wealth statement amounting to Rs. 54, 100/- but a wealth statement amounting to Rs..492400/- for the charge year 1984-85 was filed. The appellant, thereafter, got copy of the wealth statement available with the department. It is also pertinent to mention here that the wealth statement available with the department was lacking any signatures of the then to rendering it doubtful. Copies of both the wealth statements have been placed before us. The signatures on the so-called wealth statements available with the department do not tally with the signatures of the appellant.
5. The learned to issued show-cause u/S. 13 (2) whereby he showed his intention to make the addition of Rs. 4,78,300/- u/S. 13 (1) (d) as the wealth statement filed on 30. 6.1987 was unreconciled. The addition made thereafter was to the tune of Rs. 4, 45,300/- whereas the show cause notice in this regard was issued for Rs. 4,38,300/- meaning thereby that the approval obtained from the learned IAC Income Tax/Wealth Tax was for Rs. 4,38,300/- and the addition made was Rs. 4,45,300/- meaning thereby that the addition made u/S. 13 (1) (d) was void ab-initio as no such approval in this regard was sought. It is. Also argued that the addition u/S. 13 (1) (d) of Rs.4,45,300/- reflects that the wealth statement available with the department should be pf Rs.47100/- instead of Rs.54,100/-. In these circumstances the benefit of doubt goes in favour of the appellant rather than the revenue as no tax by intendments or implications can be levied as held by. The Supreme Court Pakistan, in PLD 1990 SC 68 that for taxing act one has to look merely at what is clearly stated, thus there is no room for intendments. We find that the Assessing Officer failed to apply his mind in this regard and did not consider the followings:-- That the income from the manufacturing of agricultural implements was exempted from the levy of income tax under clause 98 of the Second Schedule of the Income Tax Ordinance, 1979 whereas the assessm ent relating to the year 1987-88 which stood exempted. The appellant was not supposed to conceal his income on account of the fear of levy of tax.
The appellant received 50% share from the declared income of Rs.8,88,250/- for the charge;years 1976-77 to 1984-85 and Rs. 4,88,603/- for the period from 1985-86 to 1987-88 meaning thereby that he received a sum of Rs. 6, 88.426/- up to 1987-88 as his share from the AOP whereas on the wealth statement available with the department, the personal expenditure as allegedly declared by the appellant was Ks. 8000/-. In these circumstances sufficient amount was available with the appellant at the time of purchase of the properties.
The learned AAC vide his appellate orders has disagreed with the 50% share of the appellant for the charge years 1976-77 to 1984-85 amounting to Rs. 4,44,125/- as per page 3 of the appellate orders but Rs. 3,31,375/- as per page 6 of the appellate order and has not disagreed with the share received thereafter for the period,1985-86 to 1987-88. All these circumstances reflect that sufficient resources were available with the appellant to purchase the impugned properties. The reply to the show-cause notice was filed by the appellant on 1QA.1992 whereas the learned Assessing Officer has denied to have received any such reply as per page 5 of the assessment order. These circumstances show that the doctrine of audi alteram parten has been ignored. In the case of Bireshwar Mookarji Kv. Inspecting Additional Commissioner of Income Tax (1982-135 ITR 29) the Allahabad High Court held that the principle audi alteram parten applied only to proceedings in which is involved some element of decision making which may adversely affect the party concerned. The pre-requisite to the application of the principle of the right to be heard is that the proceedings should require the resolution of some controversy which might jeopardise some legal right of a party. The proceedings in which such a right is asserted must entail some enquiry resulting in some order which has at least radiment or milieu of adjudicatory action. It is highly unjust to take any decision without putting the reply of-the appellant which makes the whole exercise void in toto.
The addition has been made u/S. 13 (1) (d) amounting to Rs. 4,45,300/- having the difference of wealth statements available with the department and the appellant. It is interesting to note that by making the addition of Rs. 4,45,300/-, the department has itself weakened its case as this amount reflects that the wealth statement should of Rs. 47100/- rather than Rs.54100/-. In fact the Department was not sure of which wealth statement was available at the time of making the addition. The learned AAG arrived at the conclusion that the appellant should be having Rs.
1,59,226/-. In fact he committed a mistake by considering the gift received amounting to Rs.
80000/- as expenditure. If we and this figure to the net in-flow of cash as calculated by the learned AAG, the total cash in hand as on 30.6.1984 should be Rs.2,39,226/-. This would be interesting to note that the department has shown cash in hand as on 30.6.1984 at Rs. 700/- which has no relationship what soever with the amount calculated by the learned AAC whereas the said figure of Rs. 2,39,226/- has some relationship with the cash declared by the appellant on the wealth statement available with him i. e. Rs. 3.35000/-.
6. We have thoroughly considered bah. The wealth statements and the cash flow statements. We have also considered affidavit filed by the appellant before the learned AAC (A).
7. After considering all the facts and circumstances of the case and also going through the record obtained before us while perusing the orders of the authorities below, we me of the considered opinion that the appellant rightly made out his case in the light of above discussion. We, therefore, in the light of above discussion vacate the orders of the authorities below and delete the addition u/S. 13 (1) (d). We allow this.