ITAS. NOS.1386/KB TO 1388/KB OF 1993-94 Versus ITAS. NOS.1386/KB TO 1388/KB OF 1993-94
ORDER
ASSESSMENT YEAR 1985-86:
ABDUL MALIK (ACCOUNTANT MEMBER) .---This is an appeal by the assessee against order passed by the CIT(A) upholding the order of the ITO.
2. The facts of the case are that the assessee filed return of income declaring embroidery and stitching as source of income for 1986-87. Since the assessee had never been assessed before assessment year 1986-87 proceedings were initiated under section 56 and notice under section 58(1) issued. The ITO found that the assessee acquired property. The ITO obtained information of payments made through cheque and cash as follows:--
Receipt No. and date granted by M/s. Kashif Limited
Amount
Mode of payment
No.09, dated 22-4-1985
Rs.15,000
Cash.
No.10, dated 22-4-1985
Rs.10,000
Cheque No.55641651, dated 22-4-1985 of UBL.
No.11, dated 22-4-1985
Rs.1,00,000
Cheque No.51315338, dated 22-4-1985 of U.B.L.
No.15, dated 25-4-1985
Rs.1,00,000
Cash.
No.43, dated 27-6-1985
Rs.1,00,000
Cash.
No.44, dated 27-6-1985
Rs. 30,000
Cheque No.641653, dated 30-6-1985 of UBL.
No.46, dated 27-6-1985
Rs. 30,200
Cash.
Total:
Rs.3,85,200
In reply to various requisitions the assessee filed the following sources of payment:
1. Mr. Sulman Rashid
Rs.2,50,000
2. Haji Khairuddin
Rs.4,00,000
3. Mr. Ghulam Rasool
Rs.1,00,000
4. Mr. Abdul Tahir
Rs. 80,000
5. Syed Ali Shah
Rs. 75,200
Total:
Rs.9,05,200
It was also stated by the assessee that since no income was earned no return is to be filed. Under these circumstances the ITO estimated income at Rs.3,85,000 as income from undisclosed sources. However, it is very important to note that the assessee did not comply with the notice under section 56 and no return was filed. The income was estimated by the ITO at Rs.3,85,000. The learned CIT(A) in his order narrated the various notices issued to the assessee and mostly dilated on the facts of the case for 1986-87.
3. Before us the learned A.R. of the assessee addressed his argument mostly on the issues relating to 1980-87. The grounds of appeal before us agitated at No.2 that the ITO did not issue notice under section 13(1)(aa). The second leg of argument is that the assessee started her business in 1986-87. The third ground is that the action is barred by limitation. However, at the time of arguments the learned A.R. did not elaborate on the point as to how the assessment is barred by limitation. Notice under section 56 could have been issued at any time as the income of the assessee had not been assessed and after issue of notice according to section 64(3) in case of failure to furnish A return in response to notice under section 56 assessment can be made within two years of the end of the financial year in which, notice under section 56 was served. According to assessment order no date of service of notice has been indicated. However, a letter in pursuance of the notice was served on 30-12-1991 whereby the assessee was informed of the contents of section 56 counting from this date the action of the ITO is valid and legal.
4. The learned A.R. also challenged that notice under section 13(1)(aa) was not issued to him. In fact no such notice could have been issued to the assessee as the. assessee was not complying with the requisitions of the ITO under section 56 how could the ITO be expected to issue him a notice under B section 13(1) or (2). Ground at No.5 is that the duly submitted evidence of money having been received from various properties which are named as follows:--
1. Mr. Sulman Rashid
Rs.2,50,000
2. Haji Khairuddin
Rs.4,00,000
3. Mr. Ghulam Rasool
Rs.1;00,000
4. Mr. Abdul Tahir
Rs.80,000
5. Syed Ali Shah
Rs.75,200
Total:
Rs.9,05,200
However, it has to be seen that mere providing names of certain parties. is not enough unless the assessee comes forward with full facts. In the present case the assessee continued to agitate that the proceedings initiated by the ITO are illegal. On the other hand, the assessee himself filed return of income declaring income from embroidery and stitching business for the year 1986-87. It is only logical to say that the assessee invested funds in acquisition of property which -he did not explain and the ITO was justified in assessing Rs.3,85,000 as' undisclosed income of the assessee. Appeal of the assessee for year is dismissed.
ASSESSMENT YEAR 1986-87:
5. Regarding the facts of 1986-87 which are the subject of fierce contention between the Department and the assessee it has been stated that the assessment was originally made on an income of Rs.35,000. Subsequently, the ITO received information whereby it was found by the ITO that the lady had made investment of Rs.3,85,000 in the assessment year 1985-86 for acquisition of property in a shopping Centre named as Rushna Shopping Centre, Sukkur. Further investment was made during the year under assessment. The ITO came to know that the assessee had acquired properties mentioned above and issued notice under section 65 on 18-6-1991. The assessee objected to the issue of notice under section 65 on the ground that no new information had come to the notice of the ITO. The information regarding properties was available with the Department earlier on but no action was taken on the receipt of ITO 93 Slip. According to the ITO the information regarding acquisition of property was not before the ITO when he framed assessment on an income of Rs.35,000. The wealth statement filed along with return according to the ITO showed the balances as follows:--
Capital
Rs. 2,000
Cash
Rs.120,000
Jewellery
Rs.5,000
Rs.1,27,000
Liabilities
NIL
Rs.1,27.000
The balances, which have been shown above are appearing in a photocopy of wealth statement. At the same time another wealth statement is available on the file of the same date received in the office on the date on which the photocopy was received. The Number and date is No.561, dated 16-12-1986. The wealth statement which the assessee claims to be genuine shows an i addition to the abovementioned balances investment of Rs.10,25,000 in property and liabilities of Rs.9,05,20n as payable to creditors. The issue in dispute, therefore, revolves around the fact whether the wealth statement was available at the time of original assessment before the ITO or appeared on the record subsequently. The learned A.R. argued as follows:---
(i) The ITO in his correspondence did not point out any stage that a changed wealth statement had appeared on the record.
(ii) The photocopy of the wealth statement, which according to the ITO s was before the assessing officer at the time of original assessment was not confronted to the assessee.
(iii) Signatures appearing on the photocopy and wealth statement claimed by the assessee to be genuine were not got subjected to the opinion of a handwriting expert.
6. Under the circumstances the learned A.R. argued that the-action of the ITO amounted to change of his opinion and no new information had come into his possession.
7. On the other hand the learned D.R. argued that in view of the fact that in the order sheet the ITO had noted the word "gross" assets at Rs.1,27,000 and the fact that the word "gross" was tampered which shows that the disputed wealth statement was not on file of the ITO when he made first assessment The learned D.R. also drew our attention to the fact that the wealth statement which is now in the form of a photocopy on record was duly initialed by the ITO whereas the second one has not been initialed by the ITO. His third argument was that the signatures on the wealth statements and returns do not tally with each other.
8. Keeping the above contentions of the Quarries in view it has been further found from record that the ITO noted in his order that the property was originally purchased by Mr. Sulman Rashid who paid Rs.2,50,000 on 25-4-1985 to M/s. Kashif (Pvt.) Limited as advance for the purchase of the property. Later on these offices Nos.301 to 312 were transferred to Mst. Naseem Akhtar who paid the balance amount to M/s. Kashif (P.4.) Limited and Rs.2,50,000 were returned to Mr. Sulman Rashid. The ITO further stated elaborately the dates on which further payments were made up to 31-12-1985; 3 part of the payment was made on 19-3-1987. The learned D.R. was asked whether any action has been initiated, against the official responsible for introducing the changed wealth statement. The learned D.R. answered in the negative.
9. In addition to the cash available from the creditors, which the assessee claimed during the year 1985-86 certain deposits were also taken from the tenants. To summarise the position of the parties the whole issue boils down to the fact whether wealth statement appeared on the record subsequently or it was before the ITO at the time of making original assessment. It can be safely stated that the ITO neither confronted assessee with photocopy of the wealth' statement nor made any effort to corelate the contents of the photocopy with any other facts. No action has been taken against the official responsible for introducing the new wealth statement as claimed by the ITO. Important facts like property having been purchased by Mr. Ghulam Rasool and later on being transferred to lady assessee were ignored. The ITO only ran away with the idea of photocopy being available on record without realising that a photocopy document alone does not constitute evidence. Under these circumstances there is no way out except to hold that no new information had come into the possession of the ITO and his action in initiating proceeding under section 65 was unwarranted. The addition is deleted.
10. In view of the order passed in the main appeal, the penalty levied is hereby cancelled.
11. The appeals are disposed of as discussed above.
M.BA./45/T.T. Order accordingly.