I.T.AS. NOS. 1348 TO 1350 OF 1985-86, DECIDED ON 16TH NOVEMBER, 1987. Versus I.T.AS. NOS. 1348 TO 1350 OF 1985-86, DECIDED ON 16TH NOVEMBER, 1987.
ORDER
1. These three appeals are directed against consolidated order, aced 15-7-1985 relating to assessment years 1980-81, 1981-82 and 1982-83 whereby income was determined at Rs.792,000, Rs.140,000 and Rs.140,000 respectively in the three years. The Appellant (individual) is said to be a commission agent in vegetables.
2. The learned counsel for the Appellant explained that returns were not filed as required by Section 55 of the Income Tax Ordinance. When notices were received under section 56 of the Ordinance, due compliance was made declaring income at Rs.65,000 in the year 1980-81, 1Is.60,000 in 1981-82 and Rs.65,500 in 1982-83 but exemption was slimed as the entire income represented income from agriculture. The assessing Officer did not accept this position and treating the Appellant as a Commission Agent in vegetables, estimates sales in the three years under consideration and meted the treatment as under:--
2. 1980-81
3. 1981-82
4. 1982-83
5. Estimates sales
6. Rs.2,5000,000
7. Rs.3,000,000
8. Rs.3,000,000
9. G.P. @ 6%
10. 150,000
11. 180,000
12. 180,000
13. Revenue Expenditure
14. 30,000
15. 40,000
16. 40,000
17. Business Income
18. 120,000
19. 140,000
20. 140,000
21. Unexplained Income
22. 672,000
23. -
24. -
25. Total Income
26. Rs. 792,000
27. Rs. 140,000
28. Rs.140,000
29. On appeal the learned C. I. T. (A) confirmed the assessments both as respects business income and the addition under section 13. The learned counsel assailed the orders by the two officers below by advancing arguments which are discussed and adjudicated hereunder:-
EXEMPTION FOR INCOME FROM AGRICULTURE
30. It was argued that although the Appellant did not own any agricultural land, he secured the same on lease on which vegetables were grown and the product sold at the Vegetable Market in Baghbanpura. Therefore, the activity and the accruing income fell beyond the ambit of the Income Tax Ordinance, as Agricultural Income is exempt as per clause 1 of the Second Schedule (Part I) read with section 14(1) of the Ordinance. The learned counsel referred to a decision of Indian Jurisdiction reported as (1975) 32-Tax-157 wherein it was held that a very liberal interpretation should be placed on the term 'agricultural Income' as contained in the Income-tax Legislation. The learned counsel was at pains to explain to us that the Appellant entered into agreement with several landlords to secure lease of land aggregating 160 Kanals 4 marlas and the marketing of the produce therefrom was clearly within the scope of agricultural income which stood exempt.
31. The D. R. on his turn supported the assessment as also the order of the learned Commissioner (Appeals). It was submitted that the Appellant is a registered 'Arhatia' who has carried on this business for a long time admittedly since 1971-72, but did not care to file the returns of Income. When he acquired substantial properties, the matter came to the knowledge of the Department hence additional assessment proceedings were initiated The D.R. expressed the opinion that shifting stands were taken in an effort to go around the law by abusing the exemption available in law to income from agriculture. It was vehemently asserted that what the assessing officer did was to ascertain (and to establish) the real nature and source of income. Admiring the intelligence and the patience with which the assessing officer conducted the proceedings, according to the D.R., the Appellant was confronted with full facts, extended every opportunity to lead evidence and then facts were examined objectively to draw conclusions with diligence and in accordance with law. Therefore, the assessment had to be confirmed by the learned Commissioner (A) and, the same treatment must be meted out by the Tribunal.
32. We have given our single minded attention to the arguments advanced from the two sides and have perused the orders of the two officers below. There appears to be no doubt that the assessing officer left nothing in the realm of ambiguity, nor did he held back anything from the Appellant. Necessary statutory notices under sections 56, 58, 61 and 62 were issued, adjournments allowed (whenever sought) to facilitate the Appellate to collect the evidence as summoned on different occasions. Details about these have been faithfully recorded in the assessment. The most crucial notice, to our mind, which clinches the' issue, was the one issued under section 62 on 3-3-1983 whereby--
33. "Summing up all the earlier proceedings and calling for explanation from the assessee alongwith the documentary evidence wherever necessary on the following points.
(1) When the assessee does not own any agricultural land of his own and he has furnished photo copy of only one agreement dated 1-5-1977 without any supporting documentary evidence allegedly between him and one Muhammad Saddique for acquiring agricultural land on lease measuring 100 kanals 4 marlas, why the claim that he is only as agriculturist should not be rejected.
(2) With a view to get margin of agricultural income for building up assets as declared and for the house hold expenditure his claim in the statement of assets and liabilities should produce' documentary evidence to give support to the claim that he acquired agricultural land on lease in the shape of "Khasra Gardawary" etc. This document as required was cultivated by the assessee with the nature of crops cultivated.
(3) To justify annual agriculture income declared as per returns for the assessment years 1980-81, 1981-82 and 1982-83 at Rs.65,000, Rs.60,000 and Rs.65,500 respectively.
(4) To explain the reason for disposing of the total agricultural impliments during the period beginning from 1-7-1981 appearing in the wealth statement as on 30-6-1981 as Rs.40,000 agricultural equipments, live stock at Rs.40,000 with seeds for an amount of Rs.16,000 when he himself states that basically by profession he is an agriculturist.
(5) To explain as to why he should not be treated solely a businessman doing business in the vegetable market as a commission agent and dealer in the vegetable, products being registered as such and not having any agricultural land of his own or having acquired sizeable land on lease/BATAI etc. for the purpose of cultivation.
6. In the light of the above points the assessee was required vide the said notice to explain as to why the total assets appearing in the wealth statements as on 30-6-1980, 30-6-1981 and 30-6-1982 should not be -treated as income taxable under the Income-tax Ordinance, 1979 from undisclosed source after disallowing the claim for building up asset from agricultural source and also after disallowing the claim of loan having been taken from 3 parties as discussed above in the absence of any documentary or circumstantial evidence to give support to the claim."
34. To these pertinent and specific queries, the Appellant replied on 20!22-3-1983 which though short (and not touching upon all the points) contained admissions to the effect that (i) no agricultural land was owned by the Appellant, and (11) he was a registered commission agent Vegetable market Baghbanpura. The points on which the Appellant preferred to remain silent (or evasive) and which have significant were bearing on the nature of income (from agriculture or otherwise listed at number 1, 2 and 3 of notices dated 3-3-1983, partly reproduced above. The result is that despite specific demand by the assessing officer.
35. : neither the original copy of the agreement nor any separate documentary evidence was produced to conclusively establish that agricultural land was obtained on lease;
36. : nor documentary evidence such as Khasra Gardawary' was substantiate the claim that the land allegedly obtained on lease was cultivated by the .Appellant and the nature of crops grown.
37. It is well-settled by a long time of authorities that the law covering exemption /concession in fiscal statutes are to be interpreted strictly and the claimant is under a legal obligation to show beyond reasonable doubt that he fully qualifies to the exemption /concession. If any authorities are needed one may refer to (1966) 13-Tax-281 (SCP), (1973) 28 Tax 168 (Lah.), 1973 P T D 453 and 1974 S C M R 127. It has further been held by the Supreme Court of Pakistan in re: Sardar Anjuman-i-Ahmadiya (1977) 36 Tax 117 (Lah.) that even when an assessee claims his income to be exempt under the provisions of law, he must file a return of income wherewith, in addition to the sources of income, he should place relevant material before the assessing officer so that the claim for exemption could be decided after examining the relevant material. This the Appellant before us undoubtedly failed to do as, admittedly returns were never voluntarily filed in the past and when the assessing officer initiated proceedings under section 65, though returns were filed claiming exemption, positive proof and necessary details were not furnished despite full opportunity. The learned Commissioner (Appeals), therefore, rightly observed:
38. "The I. T .O. asked him to produce relevant documents to establish the factum of possessing any agricultural land, but no evidence was produced and so he did not accept the assessee's reply that his only source of income is agriculture."
39. Before us the learned counsel has, for the first time, filed photo-copies of certain documents, which include extract from "Register Haqdaran". These, however, do not anywhere show the name of the Appellant but contain names of those persons who are said to have leased out land to the Appellant. In column 4 the words "Khud Kasht" appear and there is no indication about agricultural land having been leased out. Moreover, there is no mention of the nature of crops grown. However, before passing any verdict on the above mentioned documents submitted at this belated stage, it is necessary to determine whether entertaining new evidence for the first time, which was not produced at the two earlier proceedings, is permissible in law. The superior courts have held that new grounds or evidence may either be admitted suo motu or at the invitation of the parties. In the latter situation there must be some ground for admitting new evidence in the sense that there must be explanation to show that failure to adduce grounds earlier was not wilful and not unreasonable: Refer to 1976 102 I T R 525 = Rai Kumar Srimal; 1976 P T D 1 = Hameeduddin Samiuddin; PLD 1976 Lah. 547 M. Iqbal Saigol and 1976 P T D 206 Jallo Rasin & Turpentine.
40. In the case before us the undeniable fact is that evidence was specifically called for, full and appropriate opportunity extended for its submission, but the same, if it existed, was withheld without any valid reason. In these circumstances we feel that Rule 24 of the Income-tax Appellate Tribunal Rules, 1982 precludes us from admitting fresh evidence and from adjudicating upon it.
41. The upshot of the foregoing discussion is that the finding by the two officers below rejecting the claim for exemption being an agriculturist remains unexceptionable as it is based on the evidence as tendered at the assessment stage.
42. VALID1TY OF PROCEEDINGS
43. An attempt was made to argue that the initiation of proceedings through issuance of notices under section 56 was not valid. This argument could not be persued much further when confronted with the fact that returns in response to these notices were filed and, therefore, as per provisions of subsection 6 of section 154 the validity of the notices could not be called in question. In addition, this point was never agitated before the two officers below. The stand by the Appellant is thus rejected.
ADDITION FOR UNEXPLAINED INCOME
44. The learned counsel submitted that the assessing officer worked out the total assets of the appellant as on 30-6-1980, at Rs.792,000 out of which he deducted the income separately determined by him from business and added the remaining Rs.672,000 as deemed income on account of unexplained investment (etc) by resort to section 13(1)(aa) of the Ordinance. It was submitted that in all fairness the wealth as on 30-6-1980 should have been accepted to judge the accretion in the assessment year 1980-81. This was not done with the result that the assets acquired over a period of years were added as deemed income in one year. The learned Commissioner (A) confirmed this treatment for the reason that no statement of wealth as on 30-6-1979 was filed by the Appellant hence was not available on record. The learned counsel pleaded that the assessing officer did not call for the statement of wealth as on 30-6-1979 and, therefore; it was not fair to penalise the Appellant for a lapse on the part of the assessing officer. Another point which the learned counsel made was with regard to the addition at Rs.100,000 included in the unexplained addition of Rs.672,000 in respect of 70 tola of jewellery declared by the Appellant in the wealth as on 30-6-1980. The learned counsel argued that no notice of the value to be assigned to jewellery was served on the Appellant. He, however, could not press his argument further when the D.R. produced, from record, a notice under section 62 dated 3-3-1983 in which it was specifically mentioned by the assessing officer that addition would be made for unexplained assets in addition to the cost of gold/jewellery declared, at 70 tola. The appellant, however, failed to furnish any satisfactory' explanation or to offer any other basis of his own. Similarly A.R.'s argument assailing the validity of the approval from I.A.C. as is mandatory under section 13, was eroded when the D.R. produced I.A.C.'s letter dated 3-4-1983 which specifically mentioned his approval about the quantum to be added.
45. We have given our earnest consideration to the pleadings by the two Representatives and have carefully perused the record. We may at the outset mention that the learned counsel for the Appellant made no attempt to establish the financial worth of the two gentlemen claimed to be creditors to the extent of Rs.300,000 nor was the finding by the assessing officer about them, and the reasons for disbelieving their capacity to advance loans, assailed in any manner. Similar position prevailed about loan from wife at Rs.150,000.
46. Before proceeding further it would be of advantage to reproduce (for ready reference) the provision of law, which the assessing officer invoked to make additions on account of deemed income.
47. Section 13(1)(aa). Where, in the course of any proceeding under the Ordinance... the assessee is found to have made any investment or is found to be the owner of any money or a valuable article in any year... and the assessee offers no explanation about the nature and source of such investment, acquisition of money or valuable article ...or the explanation offered by him is not in the opinion of the ITO, satisfactory... the value of investment, the money or the value of the article... shall be deemed to be the income of the assessee of such income year chargeable to tax under the Ordinance.
48. It is evident from a plain reading of the above piece of legislation that the assessing officer is empowered to treat the unexplained investment etc. as deemed income of "such income year" in which "the assessee is found to have made any investment" (etc.). The words "such income year" is clearly relatable to the expression "in any income year". Therefore, when the assessing officer served a notice of his intent to include the investment (etc.) as deemed income in the year mentioned by him (and for which year he was in the mids of "the course of proceedings under this Ordinance"), the onus clearly fell on the appellant to make all reasonable efforts to offer 'explanation about the nature and source of such Investment' not only in regard to the manner and method but also the time of acquisition' so as to clearly relate these to a specific year of income As we discover from record, the assessing officer not simply extended full opportunity but left no ambiguity about his intent. If the appellant offered an explanation, which was not "in the opinion of the ITO" "satisfactory" and made no discernable attempt to relate the investment (etc.) to any specific year, he has none else to blame for these lapses. In our view the circumstances before us are similar to those in the case of Mrs. Samina Shaukat Ayub Khan (1981) 43-Tax-18 which came up for consideration by the learned judges of the Supreme Court of Pakistan. Their Lordships in their wisdom spelled out the law as under:----
49. " ..It was for the Appellant to show that she was covered by the exemption....She clearly failed to do for the reason that she could not satisfactorily explain the source of entire amount of cash found in her hands, nor of the total accretion thereto in subsequent years."
50. " ....All the factors and attributes can be ascertained only if the assessee places all the relevant facts before the Income Tax Authorities, for otherwise the nature of the income and. its source are clearly left in the realm of speculation."
51. As it is, no evidence has been led before us to establish that the assessing officer acted arbitrarily or capriciously or that he did not exercise his satisfaction in an impartial or detached objective manner. Therefore, in deference to the pronouncement by the Supreme Court of Pakistan in a case reported as P L D 1979 S C 949 111 re: Miss Assia, where it was held that finding of facts recorded by the assessing officer and the discretion exercised by him could not be disturbed unless found to be altogether capricious or injudicious. We feel no hesitation in Dismissing the appeal on this issue.
QUANTUM OF INCOME FROM BUSINESS
52. It was submitted with considerable vehemence that without prejudice to the foregoing arguments regarding exemption of income, the basis adopted for computation of income was harsh and excessive. It was pleaded that the assessing officer estimated the turn-over without regard to the fee paid by the Appellant to the Market Committee. It was asserted that from the market report it was possible to work out the maundage of the products sold and thus to determine the turn-over in each year. Instead, the assessing officer, as noted in the assessment, took into consideration "the stock in the nature of vegetable, products as well as cash-in-hand" to estimate the sales and the commission thereon, which was not a fair method to determine the Income accurately. Further, the learned counsel assailed the G.P. rate adopted at 6% for which, according to him, no identical cases were cited nor any justification mentioned in the assessment. The DR on his turn maintained that the assessing officer placed reliance on the admitted quantum of stock-in-trade and the cash-in-hand to judge the extent to the working capital available with the Appellant who in fact, made purchases from Badamibagh Market for sale in Baghbanpura Market and also made purchases from far away fields as is done by the regular 'arhaties' of market.
53. We have considered the acverments by the two Representatives and have formed the view that notwithstanding the contradictions in the stand taken by the Appellant as respects his source of income and also conceding that the evidence; documents summoned by the assessing officer were not furnished, still such acts of omission and commission should not have detracted the assessing officer from his duty to determine the income as near to the correct figure as possible. Surely, the assessing officer had in mind the admitted stock and the cash-in-hand while estimating total sales arid commission thereon but the assessment order bears no imprint of the effort to discover any material from external sources to judge the extent or volume of business. No attempt seems to have been made to ascertain from the market committee of Badamibagh (or of Baghbanpura) as to the amount of fee paid in each year to the Retail Market in respect of the business conducted there. Moreover, no separate estimates have been made for income by direct sales and by commission (as Agent) though a reference to these two types of activities was made by the assessing officer in his letter dated 3-3-1983.
54. For the aforementioned deficiencies we deem it fit to set aside all the three assessments for re-determination of income from business.
C O N C L U S I O N
55. For the reasons recorded hereinabove the three appeals fail as respects legal objections regarding exemption of income, the validity of proceedings and against deemed income for unexplained investment. All the three appeals, however, succeed as far as determination of income from business is concerned.
56. ABRAR HUSSAIN NAQVI, (MEMBER) .-- I agree with the conclusion though I do not contribute to all the observations made by my learned brother, the A.M.
57. M.B.A./449/T Order accordingly.