I.T. A. NO. 1939 OF 1982, DECIDED, ON 12TH FEBRUARY, 1986. Versus I.T. A. NO. 1939 OF 1982, DECIDED, ON 12TH FEBRUARY, 1986.

ORDER

MIAN ABDUL KHALIQ (MEMBER) ‑‑In this further appeal pertaining to assessment year 1979‑80, order passed by the learned C.I.T. (Appeals) Zone-II, Rawalpindi, has been assailed.

2. The appellant who is an individual 'derived 30% share income from a registered firm styled as Messrs Ehsan Karim & Sons, Rail Bazar, Faisalabad. The firm's case was selected for detailed scrutiny and during scrutiny proceedings it transpired that on 6‑8‑1978 the appellant had purchased one half share of shop No.135, Rail Bazar, Faisalabad. Purchase price as mentioned in registered sale‑deed at Rs.20,000, was noticed to be low. Area Inspector reported that the investment made by the appellant was under‑stated and in his opinion purchase price of half shop could be Rs.1,25,000. The I.‑T.O. issued notices under section 61/62 of the Income‑tax Ordinance, 1979 (hereinafter referred as the 'Ordinance') and in reply thereto the appellant adduced evidence to establish the purchase price of one‑half share at Rs.20,000. The appellant tendered in evidence a judgment of the Guardian Judge, Faisalabad, dated 30‑7‑1978 whereby ‑the seller Mst. Asmat Bibi who was co‑owner of the shop alongwith two minors sought permission to 'sell the share of the minors. Sale price of whole shop was mentioned before the Guardian Judge, Faisalabad: as Rs.40,000. Assessment order passed by the Excise and Taxation Officer on 27‑‑2‑1978 regarding sale price of whole shop at Rs.40,000 was produced. The appellant also took up plea that shop purchased by her was situated away from the main bazar wherein adjoining shops were of petty business i.e. cycle repairs, tea stalls, fruit and vegetable etc. and as such sale price in that area was fairly lesser" than 'the shops situated in the main bazar. The I.‑T.O. did not accept the appellant s plea and held that mutation deed is not truth tint presumption is truth. Evidence of judgment of Guardian Judge was repelled by the I:‑T.O. holding that therein no issue of sale price was involved rather permission was sought to sell the whole shop for Rs.40,000. Assessment made by the Excise and Taxation Officer for the purposes of Gains Tax was also not accepted by the I.‑T.O. on the basis on general observation that prices in registered sale‑deeds are usually under‑stated. The I.‑T.O. took into consideration the sale price of another shop sold on 13‑5‑1978 for Rs.3,52,000. On this analogy, the I.‑T.O. held that price of the shop purchased by, the appellant was under‑stated in the registered sale‑deed. Valuation of the appellant's one‑half share in the shop was fixed at Rs.1,25,000. Accepting share income from the firm at Rs.20,745, the I.T.O. made addition of "deemed income" at Rs.1,05,000. This addition was made with prior approval of the I.A.C.

The learned C.I.T. (Appeals) confirmed the I.‑T.O's. treatment on the basis as given in the assessment order. It was also observed that in Rail Bazar even 'Pagri' offered is more than value of the shop as adopted by 'the Assessing Officer.

3. The appellant's A.R. challenged the adopted valuation of one‑half shop to be unjustified and addition made as deemed income to be illegal and erroneous. It was contended that addition made as 'deemed income' under section 13(1)(d) of the Ordinance is fallacious as the appellant case was not covered by that provision. The appellant's A;R. further argued that "investment" is fairly distinguishable from "expenditure" as .expenditure is .always of personal nature and investment is in business, purchase of property or value of articles. The appellant's A.R. stated that, provision of sub‑clause(aa) of section 13 covered the unexplained "investment" made in purchase of property but for the year under consideration that provision being not there in the Ordinance both the officers below erred in making the impugned addition. The A.R. , in his turn, contended. that addition made by ‑the officers below was fully covered by sub‑clause (d) of section 13 (1) of the Ordinance and prior approval of the I . A . C . was duly obtained.

4. We will firstly take up the appellant's objection on merits." s per registered sale‑deed valuation of the appellant's one‑half share of shop was at Rs.20,000 and for the purposes of gains‑tax another agency of the Government had also determined the same valuation. Assessment made by the Excise & Taxation Authorities may not be strictly binding on the Income‑tax Authorities but valuation determined by one agency of the Government will have to be discarded on some solid basis and material. In the instant‑ case, another aspect of, the matter is that property purchased by the appellant was owned by a widow alongwith two minors and the Guardian Judge while allowing sale of the property had observed in his order as under "as is evident from the evidence of the petitioner the shop is in a bad condition and remains closed and there is no income out of it."

The appellant had also takers up specific plea to that effect before the I ‑‑T.O. in paragraph‑7 of her reply; dated 5‑6‑1982. submitted in response to notice under section 62 of the Ordinance. It is pertinent to bring on record that reply which runs as under:‑

"Property mentioned in your notice bearing No.27. of Rail Bazar has no similarity with my case because of evidence and is as follows:

Shop No. 27 falls in Ward No.2 and is at the nearest place to the Clock Tower‑‑‑a most flourishing business centre of the Rail Bazar. On the contrary shop in question i.e. P/135 falls in Ward No.1 and is in the backward area; it is surrounded by such shops as cycle repairs, tea stall, fruit and vegetables etc. Near to the shop is the Cooperative Bank in the same area which remains closed because of little business activity."

The only material available on record is Inspector's report wherein value of the appellant': share of shop was estimated at Rs.1,25,000. The Solitary basis Of that report is registered sale‑deed Of shop No.27.; Khewat No.257, Khatooni No.259, Rail Bazar, Faisalabad measuring, 352 .sq. ft sold for Rs.3,52,000 vide registered sale‑deed dated 13‑5‑1978. The Inspector was of the view that on that basis value of the appellant's entire shop No.135 having area of 298 sq. ft. could be at Rs.2,50,'000. We are clearly of the view that the Inspector's report does not advance the department's case on merits. For the purposes of sale, main factors are location and condition of the property. In the Inspector's report property mentioned is situated in the main bazar and is in Ward No.2 whereas the shop purchased by the appellant is on the back side and is situated in Ward No.l. This difference in itself is enough to hold that valuation of both the properties could not be at par. Taking up the aspect of condition, the shop purchased by the appellant has been held by the Guardian Judge to be in a bad condition. For the purpose of comparison average sale price of similar property of the same vicinity was the best criterian and that could have been done on the basis of some sale‑deeds of the same area. The solitary sale‑deed picked up by the inspector had no relevancy for fixing purchase price of the appellant's shop and merely on that basis price as mentioned in registered sale‑deed and accepted by the Excise Authorities for the purposes of levy of gains‑tax has been erroneously discarded. Order of the Guardian Judge in itself was reliable piece of evidence to establish sale price of whole shop at Rs.40,000. All these legal and factual aspects could not be appreciated at appeal stage. The learned C.I.T. (Appeals) fell in error on holding that even 'Pagri' of the shop was much more than declared sale valuation. The appellate Court has not properly appreciated the factual position. 'Pagri' of a business premises is always higher than sale price obviously for the reason that therein black money can conveniently be consumed by the parties without any written contract whereas for the purposes of sale amount invested by purchaser is always subject to check and explanation. In commercial properties purchase price is thus always less than Pagri.

5. Taking up the legal aspect of the matter, we have no doubts in holding that amount spent in purchase of some property comes within the ambit of "Investment". For the year under review assessment had to be made under the Ordinance and therein provision for making additions as "deemed income" is under section 13. Sub‑clauses (a), (b) and (c) are applicable to cases wherein books of accounts are maintained. Sub‑clause (e) (teals with expenditure and investment made in purchase of shop cannot be termed to be an expenditure. 'This conclusion gets support from the fact that the Legislature has itself provided different provisions for investment and expenditure. If investment and expenditure were synonymous terms there was no sense making provision of sub‑clause. (e). In the. instant case, on going through the record, we find that neither any notice was issued under section 58 nor the appellant had filed any wealth‑statement. The solitary source of the appellant's income was share from a registered firm for which she had not maintained any accounts. Sub‑clause (d) of section 13 as applied by the officers below reads as under:‑ "the assessee has made investment in any income year or is found in respect of any such year to be the owner of any valuable article and the Income‑tax Officer finds that the amount expended on making such investment or in acquiring such valuable article exceeds the amount recorded in this behalf in the books of account maintained by him or shown in the wealth‑‑statement furnished under section 58 in respect of that year."

A perusal of the afore‑mentioned clause establishes that the same is applicable only in cases where amount spent in investment or acquiring; of any valuable article exceeds the amount recorded in that behalf in the books of accounts maintained by an assessee or shown in the wealth‑statement in the appellant's case, neither any books of accounts were maintained nor any wealth‑statement was obtained. Provision of sub‑clause (d) was thus not attracted. Provision of sub‑clause (e) regarding incurring of arty expenditure being not applicable' to the investment made by any assessee, there did not exist any provision of law to cover investment made by any person in whose case neither books of accounts were maintained nor wealth‑statement was obtained. Realising this lacuna the Legislature incorporated following sub‑clause (9a) by Finance Ordinance, 1980:

"(aa) The assessee is found to have made any investment or is found to be the owner of any money or valuable articles in any year."

Sub‑clause (aa) of section 13 of the Ordinance being a charging provision will be applicable with effect from the date of inception i.e. 1‑7‑1980 A charging provision of law is always prospective and cannot have retrospective application. In the case of an assessee who does not have any independent source of income except share income and who neither maintained any accounts nor filed any wealth‑statement, there did not exist any provision of law for taking unexplained investment as deemed income for the charge year 1979‑80. In this view of the matter, we hold that even on legal score both the officers below erred in attributing to the appellant "deemed income" of Rs.1,05,000 for the investment made in the charge year 1979‑80.

6. As a result of the above discussion, the addition made by the officers below as "deemed income" being illegal is deleted. The appeal filed at the instance only the assessee succeeds to that extent.

GHULAM MURTAZA KHAN (.MEMBER). ‑‑I have perused the order written by my learned brother and with respect do not agree with the conclusion drawn by him either on merits or on legal grounds. In regard to the merits, I oar firmly of the opinion that the Income‑tax Officer alone has to work out the market price of a particular premises. No doubt for estimating a fair value he may take assistance from other facts and records including the valuation adopted by the) Provincial Department of Excise and Taxation. I am, also firmly of they view that so far as the sale prices shown in the registered sale deeds' the same seldom represent the actual 'value at which transaction has been made' The reasons for doing so are too well‑known and do not require any further comments. In my opinion the I.‑T.O. took into consideration a similar property in the same area although as per the submission made before us it was explained that the shop mentioned by the I.‑T.O. faced the main market whereas the assessee's shop was at the backside and did not face the main market. The area of the shop retied upon, by the I.‑T.O. was 352 sq.ft. whereas the area of the assessee shop is 298 sq.ft, whereas the area of shop relied upon by the I.‑T.O. bearing No‑27 Khewat No.257 was sold for Rs.3,52,000. Even if the value of the impugned shop is adopted at 1/3rd, it would work at more than Rs.1.25,000 if it is taken at 1/4 th the price it should not cost less than Rs.90,000. In my‑opinion keeping in view all the facts and circumstances of the case, the value of the 'assessee's shop could be adopted at least at Rs.85;000.

My learned brother is of the opinion that for purposes of taxing the deemed income the assessee‑appellant's case could neither be covered under sub‑clause(d) of section 13 nor sub‑clause(e) of section.

13. He has given detailed reasons for holding this view. According to my learned brother the appellant's case could only fall under clause (aa) of section 13 (1) which unfortunately was not available on the statute book, in the year under consideration and hence the unexplained source of, income could not be subjected to tax under any of the provisions of section 13 of the Income‑tax Ordinance.

I am of the opinion that any unexplained income or investment could not go untaxed even when specific provision for subjecting to tax such deemed income were not available on the statute book. Such; unexplained incomes either in the form of cash or assets were being taxed on .the principle that if a person is in possession of money oil some assets whose source could not be explained satisfactorily was treated as income of the year in which such assets was acquired and was also subjected to tax in that assessment year. After the enactment of the provisions of section 13 money or assets /investment etc under' different situations were to be taxed under different subsections. In the instance case the Income‑tax Officer subjected to tax the unexplained assets without mentioning any subsection of section 13. The issue regarding the subsection was not raised before the C .I. T. (A) as‑well but it was raised for the first time before the Tribunal. The learned A.R. of the appellant argued that unless unexplained assets could fall under any of the subsections of section 13 it could not be taxed.

I am of the opinion that the appellant's case would be squarely covered by clause (e) of section 13 (1) of the Income‑tax Ordinance.) My learned brother is of the view that the word 'expenditure' is not synonymous with investment and that expenditure was something quite different from making an investment. In my humble opinion expenditure is a word carrying a wide connotation and cannot be confined to expenditure for consumption alone, when it very clearly covers the expenditure for acquiring assets or for making investment etc. The meaning of the word expenditure as given in "Legal Theasurus" by Burton has been given as under:‑ "expenditure: amount, cash paid, charged, cost incurred funds paid out, investment, outgo, outlay, payment, prices..."

In the Black's Law Dictionary, Fifth Edition, the meaning of the word 'expenditure' are given as below: "expenditure: spending or payment of money; the act of spending, disbursing, or laying out of money, payment."

Clause (e) of subsection (1) of section 13 lays down that "where in the: course of any proceeding:; under this Ordinance, an assessee has during any income year, incurred any expenditure and the assessee offers no explanation about the nature and source of some --------excess amounts or the money from which expenditure was met as the carp may be or the explanation offered by him is not satisfactory, the value of the article the excess amount or the amount of the expenditure shall be deemed to be the income of the assessee.

As mentioned above, the word expenditure clearly covers the amount spent for not only consumption but for acquiring valuable assets also. Thus, any unexplained payment made for acquiring any investment would clearly fall within the ambit of clause (e) of section 13(1).

In view of these facts in my humble opinion the unexplained amount of income as mentioned in an earlier paragraph would fall to be taxed as deemed income under section 13 (1) (e) of the Income‑tax Ordinance, 1979.

FARHAT ALI KHAN (MJEMBER).‑ ‑This appeal has been placed before me as per direction of learned Chairman of the Tribunal under the following circumstances.

2. The appellant, an. individual, being a partner in a registered firm during the assessment of the firm, was found to have purchased half share of shop No.135‑Rail Bazar, Faisalabad for Rs.20.,000. On investigation the Income‑tax Officer came to the Conclusion that the shop was worth Rs.2,50,000 and Rs.1,25,000 were added accordingly to the total income of the appellant. On appeal, inter alia, the addition was confirmed by the learned Commissioner of Income‑tax (Appeals), but the appellant still felt aggrieved 'and came up in second appeal. The learned Judicial Member was of the view that there was enough evidence on record to show that the property was worth Rs.40,000 whereas the learned Accountant Member came to the conclusion that the property was., in any case, worth not less than Rs.85,000. Again, the learned Judicial Member regarding section 13 (1) (e) of the Income‑tax Ordinance made the following observation:

"Provision of sub‑clause (e) regarding incurring of any expenditure being not applicable .to the investment made by any assessee, there did not exist any provision of law to cover investment made by any person in whose case neither books of accounts were maintained nor wealth‑statement was obtained."

On the contrary, the learned Accountant Member was of the opinion that:‑ "any un‑explained income or investment could not go un‑taxed even when specific provision for subjecting to tax such, deemed income were not available on the statute book."

Moreover, the learned Member was of the view that the case of the appellant was squarely covered by clause (e) of section 13(1) of the Income‑tax Ordinance. In view of difference of opinion arising between the learned Judicial and Accountant Members, following three points have emerged out before me:

(1) Whether the correct sale price of the shop in dispute was Rs.40,000 or Rs.85,000?

(2) Whether investment made by the assessee could be subjected to tax as deemed income in assessment year 1979‑80 even if it was not covered by section 13(1)(d). or section 13(1)(e) of. The Income‑tax Ordinance'.'

(3) Whether un‑explained payment made for acquiring an asset was covered by clause (e) of subsection (1) of section 13 of the Income‑tax Ordinance, 1979?

4. I have heard both Mr. M.R. Farooqi appearing for the appellant and Mr. M. Sarwar Khawaja. I have also perused the record as well as dissenting orders of both the learned Members.

5. Starting with the first question it appears from the order of my brother the learned Judicial Member that he accepted the price of the shop at Rs.40,000 because of the following four reasons:

(1) The Order of learned Guardian Judge.

(2) The Order of Excise and Taxation Officer.

(3) Location‑of the shop.

(4) Condition and area of the shop.

Let me point out at this juncture that the Income‑tax Officer had taken into consideration the sale price of another shop sold on 13th May,1978 for Rs.3,52,000. He also had before him the report of his Inspector. His order was confirmed by learned Commissioner of Income‑tax (Appeals) firstly because he thought that the under‑statement of price. was a well‑known fact and, secondly, because even the "Pugree" offered for the shop was more than the alleged price of sale of the shop.

6. My brother the learned Accountant Member, however; was of the view that the Income‑tax Officer alone had to work out the marker price of a particular property. He, however, conceded that in estimating a fair value of a property the Income‑tax Officer might take assistance from other facts and records including the valuation adopted by the Provincial Department of Excise and Taxation. But he was again of the view that the sale price as shown in the registered sale deeds seldom represented the actual value at which the transaction was entered into. But my learned brother, the Accountant member estimated the value of the shop at Rs.85,000.

7. I have given my careful consideration to the views of my learned brothers. With profound respect for my learned brother; the Accountant Member, I feel very much reluctant to endorse his view that the sale deeds seldom represent the actual value. I think that this observation is neither based on any material available on record nor it can be accepted as universal truth. If we read the provisions of the Stump Act (Act II) of 1899, we find that to sell and purchase a property at a lower value has been made a penal offence by various section of, Chapter VII of aforesaid Act. If this observation is allowed to and then it would have a tendency to expose all the persons, having transaction of sale and purchase of immovable properties, without affording them an opportunity of hearing, to investigation to be Carried out by various authorities constituted under the Stamp Act, which might ultimately culminate in their prosecution. I am, therefore, of the view that aforesaid observation of my learned brother is an obiter, dictum without any legal value attached to it. Nevertheless, I am in respectful agreement with him that it is the Income‑tax Officer alone who was to work out the market value of a particular property. But, with due respect, I am of the view that he would have to find out some basis for his estimated value.

8. Now turning to the facts of the instant case when I go through the assessment as well as tame order of learned Commissioner of Income‑tax (Appeals) I do not find any satisfactory basis to have been evolved by either of them for estimating the value of the shop at Rs.2.50,000. The same position appears to be for the estimated value of Rs.85,000.

On the contrary, my learned brother, the Judicial Member has taken into consideration various factors in accepting the sale price mentioned in the sale‑deed. It is true that the Guardian Judge was not called upon to look into the question of the value of the shop. However, he was under the law, supposed to safeguard the mirrors' interest. If he accepted the price of the shop at Rs.40,000 it means that it was not adverse to the interest of the minors. Similarly, my learned brother, the Accountant Member had no good reason to discard the valuation arrived at by Excise and Taxation Officer. To arrive at it in exercise of his statutory duties it would be presumed, unless contrary is proved, that the Excise and Taxation Officer acted according. to law. The reasoning of my learned brother, the Judicial Member for not accepting the sale price of another shop is also based on very sound reasoning as the shop in dispute was not only located in another ward but its condition was bad and area was lesser than the shop the market value of which was relied upon by Income‑tax Officer. I, therefore, hold that the correct sale price of the shop in dispute was Rs.40,000.

9. Now turning to the second question, I find the following observation in the order of my learned brother, the Accountant Member:

"I am of the opinion that any unexplained income of investment could not go un‑taxed even when specific provision for subjecting to tax such deemed income were not available on the statute book."

As an observation generally made, I am in respectful agreement with it because it reminds me of the case of Mrs. Samina Shaukat Ayub Khan v. C.I.T. Rawalpindi P L 17 1981 SC 85 in which our Supreme Court made the following observation:

"Once a finding is recorded that the amounts in question could be treated as income within the meaning of charging section, namely, section 3 of the Income‑tax Act, the burden of proving that the income qualified for exemption under any of the clauses of the Act was on the assessee."

10. However, as far as the facts of the case are concerned, aforesaid observation appears to be distinguishable.' In Samina Ayyub's case (Supra), the observation was made regarding returns about assessment years 1963‑64 to 1968‑69. But, from perusal of the repealed Income‑tax Act it appears that the Legislature introduced subsections (2‑A), (2‑B), (2‑C), (2‑D), (2‑E) and (2‑F) in section 4 of the repealed Income‑tax Act to made special legislation for bringing to tax certain type of unexploited income or investment. It appears that subsection (2‑A) of the repealed Act was brought on statute book in 1966. But since it dealt with some fund credited in the books of .an assessee maintained for a previous year, the case of Samina Ayyub was trot covered by it as she did not maintain any books of account at all. AS far as subsections (2‑B), (2‑C), (2‑D), (2‑E) and (2‑F) are concerned they were brought on statute book much after the last assessment year involved in her case. Thus, when there was no specific provision made by the Legislature, the above quoted observation‑of their Lordship of Supreme Court applied with all its rigour in cases of all types of unexplained income or investment. I am of the view that if the Legislature, in addition to the charging section, decides in I.T.S. wisdom to make: special provisions regarding all types of unexplained incomes or investment it would tantamount to defending them if resort it taken to the charging section. In my judgment therefore, if an unexplained to income or investment is not covered by any clauses of section 13(1) of the Income‑tax Ordinance, it cannot be subjected to tax under charging section. I would, therefore, answer second question also in the negative.

11.Now coming to the last question f again find myself in respectful disagreement with my learned brother the Accountant Member. White I agree with him that the word "expenditure" is of wider connotation but every expenditure is not necessarily an investment though every Investment is essentially an expenditure. Moreover, the Legislature has used the word "investment" in contra‑distinction of the word "expenditure" clauses of section 13(1) of the Income‑tax Ordinance. Hence, they cannot be taken to be synonymous with each other. The Legislature found a gap in the provisions of Q section 13(1) of the income‑tax Ordinance and clause (aa) was added by Finance Ordinance, 1980, to fill it in. I, therefore, feel very much inclined to agree with my learned brother, the Judicial Member, that there did not exist any provision of law for exposing any unexplained investment to tax as deemed income in charge year 1979‑80. However, let me again state, even at the cost of repetition, that the position would have been different had the Legislature not brought section 13 on the statute book. The position of a charging section is not like section 151 of Civil Procedure Code, which empowers a court with inherent powers. If a civil court in administration of justice comes across a situation which is not covered by any of the provisions of Civil Procedure Code and rules framed thereunder, it can, take resort of its inherent powers as provided under section 151 of civil Procedure Code so that the ends of justice could be met. On the other hand, sections 9 and 13 of the Income‑ tax are charging sections. The Legislature has contemplated certain situations under which an Income‑tax Officer can take resort to the clause of subsection (1) of section 13. Now after insertion oft (aa) in section 13(1) of the Income‑tax Ordinance all possible S types of unexplained incomes or investments have been covered. Thus, section 9 lays down the provision for charging income generally whereas section 13(1) of the Income‑‑tax Ordinance has been enacted to charge special to the incomes which are designated as deemed income. Section 9, therefore, cannot be taken to be vesting in inherent powers to charge Income‑tax Officer income which is not covered by section 13(1). Had ft been intention of Legislature then it should have confined itself to the main charging section for all types of unexplained incomes and investments, without enacting section 13. Now to conclude I am of the view that n the relevant assessment year since clause (aa) of subsection (1) of section 13 of the Income‑tax Ordinance was not on statute book and since sub‑clause (e) of subsection (1) of section 13 of the Income‑tax Ordinance did Trot apply under the facts and circumstances of the ease, no addition could have been made to the total income of the appellant had the occasion arisen for it. In view of my answer to question No.l, the discussion on question 2 or 3 is more or less academic in nature.

12. To conclude my answer to all the three questions are as under:‑

(i) The correct sale price of the shop in dispute is Rs.40,000.

(2) No investment made by the assessee could be subjected to tax in assessment year 1979-1980 as it was not covered by section 13 (1) (e) of the income tax Ordinance.

(3) That the alleged unexplained payment made for purchasing the shop was not covered by clause (e) of subsection (1) of section 13 of the Income‑tax Ordinance.

13. Since I have agreed with the findings of my learned brother, the Judicial Member, the appeal is allowed and the addition made by both the officers below is ordered to be deleted.

M. Y. H. Appeal allowed.