THE COMMISSIONER OF INCOME-TAX, COMPANIES, LAHORE vs PUNJAB
This is a case stated by the Income-tax Appellate Tribunal referring a question of law regarding the deletion of an addition made under the Income Tax Ordinance. The respondent, a manufacturer of cooking oil, purchased a piece of land for the assessment year 1988-89, which the Assessing Officer understated and proceeded to estimate at a higher value, adding an amount of Rs.5,27,000 as income under section 13(1)(d) of the Income Tax Ordinance. The first appellate authority and the Tribunal deleted the addition on the ground that the required statutory procedure, including obtaining two approvals of the Inspecting Assistant Commissioner (I.A.C.), was not fulfilled. The Lahore High Court considered whether the Tribunal was justified in confirming the deletion. Relying on precedent, the Court held that two separate statutory approvals were indeed necessary at the relevant time for making the impugned addition of deemed income. Accordingly, the reference was answered in the negative, holding that the Tribunal was not justified in deleting the addition without the mandatory statutory approvals.
- Whether the Income-tax Appellate Tribunal was justified in confirming the order deleting the addition made under section 13(1)(d) of the Income Tax Ordinance without the required statutory approvals?
- Are two separate statutory approvals of the I.A.C. necessary for making additions to declared incomes under the relevant tax provisions?
- Section 13(1)(d), Income Tax Ordinance
ORDER
NASIM SIKANDAR, J.---This is a case stated by the Lahore Bench of the Income-tax Appellate Tribunal. The following questions of law has been framed for our consideration and reply:-- "Whether on the facts and circumstances of the case the learned Income-tax Appellate Tribunal was justified in confirming the order of the learned CIT(A) by deleting the addition of Rs.5,27,000 which was made under section 13(1)(d) of the Ordinance?"
2. The facts in brief are that respondent is a manufacturer of cooking oil, during the period relevant to the assessm ent year, 1988-89, purchased a piece of land declared at Rs.2,063 per kanal. The Assessing Officer finding the same to have been understated proceeded to estimate it at Rs.33,000 per kanal. In s manner an amount of Rs.5,27,000 was added towards income under clause (d) subsection (1) of section 13 of the Income Tax Ordinance. The learned first appellate authority by relying upon a judgment of the Tribunal found that the addition was made without adopting the required procedure under section 13 of the Ordinance which included obtaining of two statutory approvals of the I.A.C. The learned Tribunal, on further appeal, upheld the findings recorded by the learned first appellate authority.
3. After hearing the learned counsel for the parties, we are of the view that the answer to the proposed question has to be in the negative. In a recent judgment a Division Bench of Karachi High Court in re: CIT v.
Muhammad Kasim (2000 PTD 280) observed that the comparable provision of section 4(2-D) of the Act postulated two separate and independent approvals of the I.A.C. For making additions to the declared incomes.
4. Being in respectful agreement with the finding recorded by our learned brothers we hold that the two statutory approvals at the relevant time were necessary for making the impugned addition of deemed income.
5. Answered accordingly. .