I.T.AS NOS.210, 211, 212, 213, 214 AND 215 (PB.) OF 1984-85, DECIDED ON 10TH FEBRUARY 1985. Versus I.T.AS NOS.210, 211, 212, 213, 214 AND 215 (PB.) OF 1984-85, DECIDED ON 10TH FEBRUARY 1985.

ORDER

1. These six appeals pertaining to charge years 1976-77 to 1981-82, are directed against the combined order of the learned Commissioner of Income Tax (Appeals), Peshawar. The assessee-appellant, an individual, was originally assessed for all these years in respect of share income from Novelty General Store as detailed below:-

2. Share incomes

3. 1976-77

4. Rs.10,064

5. 1977-78

6. Rs.11,004

7. 1978-79

8. Rs.12,037

9. 1979-0

10. Rs. 4,868

11. 1980-81

12. Rs.10,076

13. 1981-82

14. Rs. 9,637

15. Later on, the Income Tax Officer having learnt that the assessee has purchased a plot alongwith others on 14th February, 1977 and 2/3 rd share income in a house in Gulberg, re-opened the assessments for all these years as in his opinion, the assessee did not appear to have sufficient sources for acquiring the said properties. Re-assessment proceedings were admittedly commenced after acquiring the prior approval of the Inspecting Assistant Commissioner. The assessee, in his explanation submitted that he had come in possession of the funds through payment of prize money against National Prize Bonds. In support of his plea he filed before the Assessing Officer photostat copies of several letters issued by the State Bank of Pakistan to him for obtaining delivery of the payment or order of different amounts being the amount of prize money against Prize Bonds in various denominations held by him. The Income Tax Officer observed that the assessee's withdrawals from the books of the firm was hardly sufficient to meet his personal household expenses and hence it was not possible for him to have made investment in purchase of prize bonds. He, therefore, inferred that the assessee had been purchasing lucky bonds from real winner in order to justify investment in the purchases of property. He further held that earnings from prize bonds was not of casual or non-recurring natures and being a regular type of business, it was liable to income-tax with regard to "?purchase of house, the assessee's stand was that he had obtained loan from Muslim Commercial Bank. In this connection the Income Tax Officer noted that the sale-deed of the house was executed on 19th May, 1980 and that, later on, the same house was mortgaged for Rs.3,00,000. He, therefore inferred that some valuable securities might have been tendered much before the purchase of the house. For k reasons stated in the assessment order, the Income Tax Officer reached the conclusion that the entire transaction of obtaining loan from Muslim Commercial Bank Limited, was fake and "intended to secure from incidence of lawful tax liability". He, therefore, made re-assessment by determining the net income of the years as follows: -

16. Asst. Year

17. Income Originally assessed

18. Addition made

19. Total asses?sable income

20. Nature

21. Amount

22. 1976-77

23. Rs.10,064

24. P. Bonds

25. 10,000

26. 20,064

27. 1977-78

28. Rs.11,004

29. P. Bonds

30. 36,500

31. 1/3rd share in plot at Gul?berg Peshawar

32. 1,00,000

33. 1,47,504

34. No credit on investment as the amount was not withdrawn from the books of the firm. ??? 21, 200

35. Asst. Year

36. Income Originally assessed

37. Addition made

38. Total asses?sable income

39. Nature

40. Amount

41. 1978-79

42. Rs.12,037

43. P. Bonds

44. 20,000

45. 33,037

46. 1979-80

47. Rs. 4,868

48. P. Bonds

49. 21,000

50. 25,868

51. 1980-81

52. Rs.10,076

53. P. Bonds

54. 41,000

55. 51,076

56. 1981-82

57. Rs. 9,637

58. P. Bonds

59. 5,000 ??

60. 14,637

61. ???????????

62. On appeal, the learned Commissioner of Income Tax (Appeals) upheld the Income Tax Officer's impugned order of assessment with the observations that it was not possible to believe such an improbable story of winning prize bonds as advanced by him. He then observed: "secondly if it is assumed that the assessee was doing this business of prize bonds or lottery on the regular basis the same could not be considered as casual and non-recurring income. The prize money won occasionally by a genuine prize bond holder is no doubt, exempt from income-tax but not a money won on regular basis and on bonds purchased from lucky winner. It was probable for this reason that prize money on prize bonds was not given any specific exemption in the Second Schedule of the Income Tax Ordinance."

2. While dealing with the issue of investment on purchase of plot in Gulberg Colony in the assessment year 1977-78, the learned Commissioner of Income Tax (Appeals) held that the Assessing Officer had not brought on record findings in support of the price adopted by him. He, however, held that "there is no doubt that the appellant had grossly under-stated the price of land which is centrally located in the Cantonment area". Consequently, he reduced the appellant's estimated investment in purchase of plot from Rs.1,00,000 to Rs.50,000.

3. I have heard the .parties Representatives at length who advanced the same arguments before me which were made before the officers below. Learned counsel for the appellant drew my attention to paragraph 20 of Ministry of Finance Notification SRO 241(K)/71, dated 10th. February, 1971, wherein it is stated that 'prize money will be free from income-tax and super tax'. He also submitted before me for my perusal the original letters alongwith photo copies (which have been retained on appeal file) of the State Bank of Pakistan addressed to the appellant on various dates in 1976 to 1981 in response to his application regarding payment of prize money, whereby he was asked to obtain delivery of the payment order and prize bond in question on surrender of their receipts duly discharged on reverse thereof. He also drew my attention to the fact that on 31st March, 1975 the assessee had withdrawn. Rs.10,000 from partnership for purchase of bonds and that it was duly mentioned in the balance-sheet of the firm for that year. With regard to the addition made towards the purchase price of plot, the learned counsel submitted that the plot in question was purchased by the co-owners on 3rd January, 1977 for Rs.40,000 through duly registered sale-deed and hence the officers below were not entitled to discard the registered sale-deed without bringing any definite evidence on record. The learned Departmental Representative, on the contrary, as already stated, reiterated the same contentions before me, which were adopted by the officers below justification of their action.

4. I have given my earnest consideration to the submissions made by the parties' representatives as well as perused the impugned orders of both the officers below. No doubt, on the face of it, it seems somewhat improbable that a person may be so lucky as to win prize on National Prize Bonds so frequently as it has happened in the case of appellant above named. But there can be no denying the fact that the appellant is in possession of sufficient documentary evidence of having won the prize on different prize bonds that he was paid the prize money against the prize bonds, which were held by him either in due course or otherwise. However, there is no justification for holding or recording a finding, as has been done by the officers below, that the assessee had purchased prize bonds from some other lucky winners. The authority responsible for paying the prize money did not dis-doubt the fact that the assessee was the lawful holder o the prize bonds in question and that it was for this reason that he was paid the prize money from time to time through the payment orders vide State Bank of Pakistan's letters prevalent on record. The orders of the officers below are thus based on mere conjectures and surmises and cannot, therefore, be legally upheld. The mere probability howsoever strong it may be cannot be made the basis for ignoring the substantial documentary evidence. I would, therefore, reverse the findings of the officers below in this behalf and hold that the assessee has successfully proved that he had won the prizes on National Prize Bonds and came in possession of the prize money through lawful means. Consequently, all the appeals succeed on this issue.

5. With regard to the value of the plot of land I consider it fit' to set aside the order of the learned Commissioner of Income-tax (Appeals) as I find that it is also not based on any reliable evidence or material. I would remit the case to the Income-tax Officer with a direction that the investment of the appellant in the purchase of this' plot be adopted at the same figure as it has been assessed in the', case of the otter co-owners. The appeal on this point is also accordingly decided.

6. In the result; all the six appeals stand disposed to the extent and in the manner indicated above.

63. M. B.A./505/T ?????????????????????????????????????????????????????????????????????????????????? Order accordingly.