Dr. MUHAMMAD YOUSAF vs COMMISSIONER OF INCOME TAX

' MRS. YASMIN ABBASEY, J.---By reference under section 136(1) of Income Tax Ordinance, 1979 two questions have been referred by Income Tax Appellate Tribunal for reconsideration of addition, made by I.T.O. Of income out of property which according to applicant has been gifted by him to his children, which reads as under:

(1) Whether in the circumstances of the case, the Appellate Tribunal did not properly exercise its discretion in not permitting the applicant to take the additional ground which was a question of law and did not involve any further investigation into facts?

(2) Whether the declaration of gift made by the applicant in Part-VI of the return of income for the assessm ent year 1960-61 and the fact that the show-cause notice was ever issued to the applicant by the I.T.O. For non-declaration of income from property No,5/14/D-IV, Nazimabad for the assessm ent year 1977-78, did not establish the gift?

' It is objected by learned counsel for applicant that the plea of gift of assessed property by applicant to his children during the period 1960-61 was not considered and an ex parte order of addition of income from property was made in the assessment years from 1978 to 1982, though under Mohammadan Law oral gift is valid.

The term gift as expressed in section 138 of Mohammadan Law by Mulla means transfer of property with immediate effect. Even if the first two conditions of offer and acceptance of gift by donor and donee are fulfilled, then still the third element of transfer of property in favour of donee is the essence of gift and so it has rightly been observed in order dated 7-9-1989 that such instructions are missing. Admittedly no registered gift deed as required under section 17 of Registration Act has been placed on record. It is because of this reason addition of income out of property was made in the relevant assessing years.

' The fact that assessee in his statement under section 148 of the Ordinance has conceded to have rent receipts of the property at rate of Rs,5500 per month since November, 1977, also at assessing stage was a ground to conclude by the Assessing Officer that property is still in the name of this applicant assessee. And he is enjoying its rent without declaring its income in order to avoid payment of income tax thereon.

' It is pleaded by the learned counsel for applicant that period of filing return of income was curtailed by I.T.O. Without obtaining prior approval of I.A.C. As required under subsection (2) of section 65 of Income Tax Ordinance on the ground that it was not taken before the two officers below. It is contended by Mr. Pasha for applicant that a question of law can be raised at any stage, but the fact that the appeal preferred by a party is always in continuation of the proceeding initiated at trial stage therefore abruptly if a ground is raised at appellate stage it will amount to open a new line of investigation with the utter surprise to other parties, which is not warranted under law. Learned counsel for applicant has no plausible reason to controvert this aspect.

' In view of foregoing reasons, reference made is hereby dismissed.

(Sd.)

(Mrs. Yasmin Abbasey)

(JUDGE)

' ANWAR ZAHEER JAMALI, J.---Though I am in agreement with the conclusion recorded by my learned sister Mrs. Yasmin Abbasey, J. In her judgment proposed to be delivered in this I.T.R., but since my line of reasoning is different. I have opted to write my separate judgment as under.

2. By this reference application under section 136(1) of Income Tax Ordinance, 1979 following two questions have been referred by Income Tax Appellate Tribunal for opinion of this Court: "(1) Whether in the circumstances of the case, the Appellate Tribunal did not properly exercise its discretion in not permitting the applicant to take the additional ground which was a question of law and did not involve any further investigation into facts?

(2) Whether the declaration of gift made by the applicant in Part-VI of the return of income for the assessm ent year 1960-61 and the fact that the show-cause notice was ever issued to the applicant by the I.T.O. For non-declaration of income from property No,5/14/D-IV, Nazimabad for the assessm ent year 1977-78, did not establish the gift?"

3. Mr. Iqbal Salman Pasha learned counsel for the applicant has argued that the plea of gift of assessed property by applicant to his children during the period 1960-61 was not properly considered and an ex parte order for addition of income from property was made in the assessm ent year from 1978 to 1982, though under Mohammadan Law even oral gift is valid. He further argued that rejection of other grounds urged by the appellant regarding curtailment of statutory period for filing the return of income and non-obtaining of prior approval of I.A.C., as required under subsection (2) of section 65 of Income Tax Ordinance, on the ground that same were not taken before the two officers below, was also unwarranted by law as question of law can be raised at any stage of the proceedings.

4. In reply, Mr. Nasrullah Awan made reference to the observations of the Assessing Officer contained in his assessm ent order to show that it was on the basis of admissions regarding title and receipt of rent made by the assessee himself in his statement under section 148 of the Ordinance that the Assessing Officer had come to the conclusion that there was no gift made by the assessee as alleged later on. Mr. Awan further made, reference to the order of C.I.T.(Appeals) dated 11-11-1984 to show that neither before the Assessing Officer nor before the C.I.T.(Appeals) the plea as regards non-obtaining of prior approval from I.A.C. Was urged by assessee, therefore, it was not open for him to agitate such plea, for the first time before the Tribunal.

5. I have carefully considered the arguments advanced by the learned counsel, perused various orders passed in the matter and seen that the issue of gift, relating to Question No,2, raised by the assessee was only question of fact, which was properly addressed by the Assessing Officer/Income Tax Officer, Professional Circle-I, South Zone, Karachi, in his order. The relevant observations are reproduced as under:--- "Accordingly, therefore, to verify this information a notice under section 148 was issued on 3-6-1982 which was compiled by the assessee on 9-6-1982. In the statement recorded under section 148 of the Ordinance, the assessee conceded that he had been in receipt of rent from property at a rate of Rs,5,500 per month since 26th November, 1977. His statement recorded further stated that the property in question is exclusively owned by him and that he had not declared the rental income on the understanding that he was not liable to tax thereon.

' In view of the statement of the assessee recorded on oath as mentioned above, it stands proved beyond any shadow of doubt that the assessee actually received rent from property which was owned by him."

6. After seeing the material placed before us I hold that the above conclusion recorded by the Assessing Officer , confirmed by the C.I.T.(Appeals), is based on proper appreciation of record, thus unexceptionable.

7. The other submission as regards non-obtaining of prior approval from I.A.C. Before initiation of proceedings for additional assessm ent under section 65 has also no force, for the reason that had the applicant raised this plea at the first stage of the proceedings before the Assessing Officer or even before the C.I.T.(Appeals) then it would have been possible for the department to place on record necessary approval to counter such plea. Raising of such plea, which though seems legal but had to be judged on the basis of other material brought on record, for the first time at the stage of arguments, when the proceedings were sub judiced before the Income Tax Appellate Tribunal was thus rightly rejected by the Tribunal. Both the questions are answered accordingly.

8. Foregoing are the reasons for the short order passed on 30-11-2005.