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I. T. As. Nos. 2133/ KB and 2398/ KB of 1984-85, decided on 14th February, 1987.
---K. 39(4)(b)(1)(aa)--Use of company's car for personal use by Director of Company--Addition to assessee's income for use of such car--Assessing Officer, held, was duty bound to call for an explanation of assessee as to whether he was using company's car wholly for his personal and private use before making such addition.
---Ss. 13 & 7--Deemed income--Unexplained investment--To determine as to whether such investment was income of the assessee, it was tile opinion of Assessing Officer which was material--Opinion of Assessing Officer, however, was subject to the opinion of Inspecting Assistant Commissioner who may either approve it or suggest any modification in it or may even direct the Assessing Officer to re-frame his opinion after making additional enquiry.
1986 P T D (Trib.) 578 applied.
---Ss. 13 & 4--Deemed income--No explanation by assessee--Addition under S. 13--Prior approval of Inspecting Assistant Commissioner Procedure involved stated.
The Legislature has taken the precaution that the Inspecting Assistant Commissioner should remain involved in the assessment proceedings. This conclusion is further fortified by the requirement of two approvals as envisaged by section 13(1) and section 13(2) of the Ordinance. An Income-tax Officer is firstly required to ask an assessee to show cause as to why an addition should not be made under section 13 of the Ordinance according to the facts and circumstances of each case which is contemplated in clauses (aa) to 7(e) of section 13(1) of the Ordinance. When such explanation is offered to him, he should form his opinion on the basis of the material available to him and the explanation offered and if he comes to the conclusion that an addition should be made, he should seek the approval of his Inspecting Assistant Commissioner. Here the law requires him to offer his proposal regarding quantum of addition so that Inspecting Assistant Commissioner may scrutinise it in the light of the explanation. It appears from perusal of subsection (2) that if the Inspecting Assistant Commissioner agrees to the proposal of the Income-tax Officer, the latter should then once again serve a notice on the assessee so that he could be given a reasonable opportunity of being heard. If after giving the opportunity of hearing to an assessee the Income-tax Officer comes to the conclusion that the amount originally proposed by him and approved by his Inspecting Assistant Commissioner was in his opinion justifiable even then he should again seek the approval of his Inspecting Assistant Commissioner. This procedure emerges out from the use of the words "and the assessee offers no explanation in subsection (1) and "after giving a reasonable opportunity to the assessee of being heard'" as used to subsection (2) of section 13 of the Ordinance. From the use of these expressions it appears that firstly the Income-tax Officer calls for an explanation of the assessee to form his opinion about the quantum of the addition. Here the assessee does not know what is in the mind of the Income-tax Officer except that he was not satisfied with his drawings. However, when he gives the assessee an opportunity of being heard, he does so after disclosing his mind regarding the quantum of the proposed addition. At the first instance the Legislature has insisted merely on calling for an explanation but on the second occasion the opportunity of being heard is given to an assessee. But as far as the Inspecting Assistant Commissioner is concerned, he has got power to super impose his opinion on that of the Income-tax Officer on both occasions. He can issue such directions to Income-tax Officer as he deems fit but surely the Income-tax Officer is supposed to follow the procedure discussed above.
--S. 13--Deemed income--No explanation by assessee--Addition by Assessing Officer--Prior approval of Inspecting Assistant Commissioner-- Not incumbent on Inspecting Assistant Commissioner to either call an explanation from an assessee or to afford him an opportunity of being heard; it was, however, for the Assessing Officer to call for explanation at the first instance and then to afford an opportunity of being heard at second stage.
--Ss. 13 & 4--Deemed income--No explanation by assessee--Addition by Assessing Officer--Prior approval of Inspecting Assistant Commissioner--Assessment order made pursuant to direction of Inspecting Assistant Commissioner though not recorded specifically regarding addition made--Procedure--Where record showed the involvement of Inspecting Assistant Commissioner in the process of assessment and the proposed assessment order is endorsed by the I. A. C. it would, held, be taken that S. 4(2-F) was complied with--Requirement of prior approval does not envisage a detailed note in writing giving reasons for approval--If the assessment order is approved as a whole, there is no necessity for separate approval regarding addition made under any of clauses of S.13(1) of the Ordinance.
If the record shows the involvement of Inspecting Assistant Commissioner in the process of assessment and the proposed assessment order is endorsed by the Inspecting Assistant Commissioner, it would be taken that section 4(2-F) has been complied with. The requirement of prior approval does not envisage a detailed note in wiring giving reasons for the approval.
If the Inspecting Assistant Commissioner puts the word "approved" on the draft Assessment Order, or puts his signature thereon or even otherwise communicates in writing his approval to the Income-tax Officer, he would be deemed to have, approved the proposed assessment and the assessment framed under such circumstances would be a valid and legal assessment order.
---Ss. 13 & 4--Deemed income--No explanation by assessee--Addition by Assessing Officer--Prior approval of Inspecting Assistant Commissioner--Income-tax Officer should disclose his mind regarding quantum of addition, which he proposed to add as deemed income.
---Ss. 13 & 4--Deemed income--Low drawings by assessee--Standard of living of assessee--No explanation by assessee--Addition by Assessing Officer--"Standard of living"--Determination of--Points to be considered by Assessing Officer--No addition should be made on account of low drawings by using stock phrases of "standard of living" or "posh locality" or "school-going children" etc.--Procedure to be adopted by Assessing Officer detailed.
It is the duty of Income-tax Officer to collect circumstantial evidence regarding the standard of living of an assessee. The expression "standard of living" is a comparative term. It depends upon status consciousness, habits idiosyncrasies and way of living in the same locality may lead different type of lives, as far as the expression "standard of living" is concerned. These days a jungle of flats is coming up in even the so-called posh localities of the city. A person living in a flat may have a different standard of living than a person living in a bungalow built on a plot of 1000 sq. yds. Similarly, a person whose children go to most expensive school of the city would be having a higher standard of living than a person whose children receive their education in ordinary schools. Likewise, a person may be spending more money on his food by eating mutton and poultry etc., but another person may confine himself to ordinary food. A person having air-conditioners in all bed-rooms would be maintaining higher standard of living than a person having no air-conditioners at all, though living in the same locality. Again, a person may spend a lot of money on his electricity bills if he is levish in its consumption but, on the contrary, a person with careful use may cut appreciably his electricity expenses. No addition should be made on account of low drawings by using stock-phrases of "standard of living" or "posh locality." or "school-going children", etc. An Income-tax Officer has at his disposal enough staff who can make private investigations to ascertain the correct standard of living of a particular assessee by checking the electricity, telephone and gas bills; by finding out the number and capacity of the cars used by him; by knowing the exact number of the family members of the assessee. He should further collect information as to how many members of the family of an assessee are earning members and how many school-going. In case of school-going children, it can be found out as to whether the children were going by school-bus or by public transport. If the children are having any tuition, this fact can also be kept into consideration. The number of domestic servants is also indicative of the standard of living of a person. Whether a person is living in a bungalow or a flat is also a very relevant question. Eating, habits of one community are different from another. Other habits of life are also very important as far as the house-hold expenditure is concerned. A careful Income-tax Officer would collect the material on the abovenoted points which are definitely not exhaustive.
---Ss. 13 & 4--Deemed income--No explanation by assessee--Addition by Assessing Officer--Prior approval of Inspecting Assistant Commissioner--- Function of Inspecting Assistant Commissioner stated.
While guiding the Income-tax Officer on such matters the Inspecting Assistant Commissioner should never issue any direction to Income-tax Officer. On the other hand, he could make various suggestions for the guidance of Income-tax Officer but the final opinion should be left open for the Income-tax Officer. After all the opinion of the Income-tax Officer is not final and would be subject-matter of his approval. Where the Inspecting Assistant Commissioner issued direction and the Income-tax officer following it which under the law he was bound to follow whether there was in his opinion, any sufficient evidence on the record to support his finding or not. Both officers have got right to form their own opinion on the basis of the material available on the record.
I.T.A. No. 2133 of 1984-85
Iqbal Naeem Pasha for Appellant.
Muhammad Farid, D. R. for Respondent.
I. T. A. No. 2398 of 1984-85
Iqbal Naeem Pasha for Appellant.
Muhammad Farid, D. R. for Respondent.
Date of hearing: 3rd February, 1987.
These cross-appeals are arising out of consolidated order of learned Commissioner of Income-tax (Appeals) recorded by her on 24th February, 1985 regarding assessment years 1980-81, 1981-82 and 1982-83 in so far it relates to assessment year 1980-81.
2. The brief facts giving rise to these appeals are that the assessee (hereinafter referred to as "the appellant") derived his income as a partner of a registered firm. Moreover, he was also director in 9 other private companies. Originally he filed his return declaring his income of Rs.40,575 under section 59(1) of the Income-tax Ordinance, 1979 (hereinafter referred to as "the Ordinance",) and the same was accepted vide assessment order 14th May, 1981. However, as luck could have it, his case was selected for detailed scrutiny and notice under section 65 was issued to him. It also appears that the Income-tax Officer, after framing the assessment under section 65 read with section 62 of the Ordinance, sent it to his Inspecting Assistant Commissioner for his approval but the latter sent it back to him, the draft assessment order remaining unapproved, with the direction, which is relevant for our purposes, that he should look into the house-hold drawings of the appellant which were low and that the same should be estimated at Rs.5,000 per month. Pursuant to the order of Inspecting Assistant Commissioner the Income-tax officer called upon the appellant to show cause as to why addition under section 13(1)(e) of the Ordinance should not be made as his drawings, as declared by him, were low. There is no dispute on the point that the appellant submitted his explanation but the Income-tax Officer rejected it and estimated monthly expenses of the appellant at Rs.5,000. The appellant had declared Rs.29,335 as his annual drawings. The Assessing Officer, therefore, after deducting this amount from Rs.60,000 made addition of Rs.31,665 (which according to learned Commissioner of Income-tax (Appeals) should have been Rs.30, 665) and then sent his draft assessment order to the learned Inspecting Assistant Commissioner for his approval which was accorded this time.
3. It further appears that the Assessing Officer added-back Rs.2,400 under rule 39(4)(b)(i)(aa) as excess perquisites. Having been aggrieved and dissatisfied the appellant went up in appeal. Firstly it was contended before learned Commissioner of Income-tax (Appeals) that the entire assessment proceedings initiated under section 65 of the Ordinance were void ab initio. However, the learned Commissioner of Income-tax (Appeals) repelled the contention of the appellant and rejected the appeal on this point. The appellant, however, still felt aggrieved and came up in second appeal before us. However, Mr. Iqbal Naim Pasha, the learned counsel for the appellant, did not press his appeal on this ground.
4. Regarding the addition made under rule 39(4)(b)(i)(aa) of the Income-tax Rules, the learned counsel for the appellant submitted before the learned Commissioner of Income-tax (Appeals) that the addition of R8.2,400 was not justified in law because no additions were made in the case of other Directors. Alternatively, he conceded that if any addition was to be made at all, it could only be to the extent of one-half of the claim. The learned Commissioner of Income-tax (Appeals) after scrutiny of the assessment record and discussion of the case accepted the alternative submission of the learned counsel for the appellant and brought down the addition of Rs.2,400 to Rs.1,200. This part of the order has aggrieved both the appellant as well as the Department and both of them have come up in appeal before us.
5. Mr. I.N. Pasha, the learned counsel for the appellant submitted before me that since in the assessment order of the company no disallowance had been made regarding car expenses on ground of involvement of personal element of the directors, therefore, it could not be held by learned Commissioner of Income-tax (Appeals) that the appellant enjoyed the car for his personal use, hence addition of Rs.1,200 was illegal. Mr. Muhammad Farid, -the learned Departmental Representative, on the other hand, vehemently contended that since no evidence was given before the Income-tax Officer that the appellant was using the car for the purposes of company as well as for his personal errands, the learned Commissioner of Income-tax (Appeals) was not justified in bringing down the addition of Rs.2,400 to Rs.1,200.
6. I have heard both the learned counsel for the appellant as well as learned Departmental Representative on this point. In my view since the learned counsel for the appellant himself conceded though in the alternative to an addition of Rs.1,200 under the rule mentioned above, the learned Commissioner of Income-tax (Appeals) took it for granted that the concession was because of the use of the company's car by the appellant as its director for his personal use as well. It is true that the offer was made in the alternative but the learned Commissioner of Income-tax (Appeals) was very much justified in coming to this conclusion after scrutiny of the assessment record. The other argument of the learned counsel for the appellant that since no addition was made in the case of other directors, hence it could not be made in the case of the appellant, does not appear to be convincing because it is based on the premises that the facts and circumstances of each director have been same or similar. As far as the submission of Mr. Muhammad Farid, the learned Departmental Representative is concerned, I think it is also devoid of any merit. It was the duty of the Income-tax Officer to call for an explanation of the appellant as to whether he was using company's car wholly for his personal and private uses before making addition of d.s.2,400. Presently there appears nothing on record to show that he called for such an explanation. Under these circumstances addition of Rs.1, 200 appears to be more probable for the simple reason that use of company s' car for personal purposes could not be completely overruled. I would, therefore, maintain the order to learned Commissioner of Income-tax (Appeals) on this point and both the appeals stand rejected accordingly.
7. This discussion takes us to the last point involved in these appeals. It appears that the learned counsel for the appellant as well as learned Departmental Representative have crossed their words on three points, viz.
(1) Whether the direction of learned Inspecting Assistant Commissioner to Income-tax Officer to estimate the monthly expenses at Rs. 5,000 per month without considering the evidence on record and without affording an opportunity to the appellant to show cause was illegal
(2) Whether the initiative regarding proposed addition under section 13 (1) (e) of the Ordinance should have originated from the income-tax Officer and ,
(3) Whether the approval of the assessment order made pursuant to the direction of learned Inspecting Assistant Commissioner concerned was, legal although it was not accorded specifically regarding addition made under section 13 (1) (e) of the Income-tax Ordinance
The learned Commissioner of Income-tax (Appeals) has answered all the three questions in the affirmative and ordered deletion of Rs.30,665. Mr. Muhammad Farid, the learned Departmental Representative, however, insists that the answer to all the three questions should come in the negative. Mr. Pasha, the learned counsel for the appellant has, of course, supported the order of learned Commissioner of Income-tax (Appeals).
8. I have heard both the learned Departmental Representative as well as the learned counsel for the appellant at length. Taking up the first issue it appears from the perusal of the impugned order that the learned Commissioner of Income-tax (Appeals) answered the first question in the negative because the proposal for, addition originated from Inspecting Assistant Commissioner. She observed:-
"It is quite clear that the proposal for making the addition on account of low drawings has to come -from the I. T. O. and not from the I. A. C. The words in the section quoted above are "in the opinion 'of the I.T.O."
With due respect of learned Commissioner of Income-tax (Appeals) think that her approved is not correct. However, before discussing the merits let me reproduce here the relevant part of section 13(1)(e). It reads:----
--(1) where, in the course of any proceedings under this Ordinance-
(a) ..............................................................
(aa) ..............................................................
(b) ...............................................................
(c) ...............................................................
(d) ...............................................................
(e) an assessee has, during any income year, incurred any expenditure, and the assessee offers no explanation about the nature and source of such sum, investment, acquisition of the money or valuable article, excess amount or the money from which the expenditure was met; as the case may be, or the explanation offered by him is not, in the opinion of the Income-tax officer; satisfactory, the sum so credited, the value of the investment the money or the value of the article, the excess amount or the amount of the expenditure, as the case may be, shall be deemed to be the income of the assessee of such income year chargeable to tax under this ordinance:
Provided that in cases referred to in clauses (aa) to (e) such income shall not be chargeable to tax unless prior approval of the Inspecting Assistant Commissioner has been obtained. "
From perusal of the section quoted above it appears that initially it is the opinion of the Income-tax officer, which is material. However, his opinion is subject to the opinion of his Inspecting Assistant Commissioner who may either approve it or suggest any modification in it or may even direct the Income-tax officer to re-frame his opinion after making additional enquiry. Although this interpretation is emerging out clearly from the provision of, law quoted above but if it is read with section 7 of the ordinance, as suggested by Mr. Muhammad Farid, there remains no room for two opinions on this point. Section 7 of the Ordinance is as under:-
"
-- In the course of any proceedings under this Ordinance, the Income-tax officer may be assisted, guided or instructed by any other Income-tax Authority to whom he is subordinate or any other person authorised in this behalf by the Central Hoard of Revenue. "
At this juncture, I feel tempted to refer to a decision of this Tribunal reported as 1986 P T D (Trib.) 578. In this case the learned Members of the Bench who, originally heard the appeal fell apart, and finally the matter was placed before me for resolving the difference of opinion. The issue involved was as to whether the approval of Inspecting Assistant Commissioner to be made under sections 4(2-A), 4(2-13), 4(2-C), 4(G-U) and 4(2-E) should have been in writing. The learned Judicial Member of the Bench had come to the conclusion that such prior approval should be in writing. Agreeing with my learned brother I also made the following observation, which could profitably be reproduced here:-
It is well-known that section 4 (2-F) was brought on statute book alongwith other section 4(2-A), 4(2-B) , 4(2-C) , 4(2-U) and 4(2-E) though not at the same point of time. As is clear from sections 4(2-A) to 4(2-E) that the Legislature introduced these amendments in the repealed Income-tax Act, to meet such type of cases of income which is known as deemed Income. Since the concept of deemed income was being introduced for the first time the Tex Fabric of Pakistan, it was felt by the Legislature that this taxation with the aid of fiction of law should not be used as instrument of harassment or oppression by the Income-taxi Officer. It was with this idea in mind that the Legislature insisted not only on the prior approval of the concerned Inspecting Assistant Commissioner but the provision was made for hearing an assessee also after giving him a reasonable opportunity for it. It appears that the Legislature laid down the condition of prior approval of the concerned Inspecting Assistant Commissioner simply with a view to get him involved in the process of assessment. It also appears that the assessments framed under any of these sections were exposed to scrutiny of appellate Courts. As such, the practice which was evolved in the Tax Department was to the effect that the Income-tax officer used to consult Inspecting Assistant Commissioner from time to time whenever he thought his advice necessary in the process of making enquiry and then finally when he came to a conclusion The would send the draft assessment order to him for his approval. The Inspecting Assistant Commissioner would endorse his approval thereon and then send it back to Income-tax officer who would frame assessment accordingly."
I think that the abovequoted observation applies mutatis mutandis inl the case of additions to be made under section 13 of the Ordinance. Here also the Legislature has taken the precaution that the Inspecting Assistant Commissioner should remain involved in the assessment proceedings. This conclusion is further fortified by the requirement of two approvals as envisaged by section 13 (1) and section 13 (2) of the Ordinance. An Income-tax Officer is firstly required to asken assessee to show cause as to why an addition should not be made under section 13 of the Ordinance according to the facts and circumstances of each case which is contemplated in clauses (aa) to (e) of section 13(1) of the Ordinance. When such explanation is offered to him, he should form his opinion on the basis of the material available to him and the explanation offered and of he comes to the conclusion that an addition should be made, he should seek the approval of the Inspecting Assistant Commissioner. Here the law requires him to offer his proposal regarding quantum of addition so that Inspecting Assistant Commissioner may scrutinise it is the light of the explanation. It appears from perusal of subsection (2) that if the Inspecting Assistant Commissioner agrees to the proposal of the Income-tax Officer, the latter should then once again serve a notice on the appellant so that he could be given a reasonable opportunity of being heard. If after giving the opportunity of hearing to an assessee the Income-tax Officer comes to the conclusion that the amount originally proposed by him and approved by his Inspection Assistant Commissioner was in his opinion justifiable even than he should again seek the approval of his inspecting Assistant Commissioner: This procedure emerges out from the use of the words "and the assessee offers no explanation in subsection (1) and "after giving a reasonable opportunity to the assessee of being heard as used in subsection (2) of section 13 of the Ordinance. From the use of these expressions it appears that firstly the Income-tax Officer calls for an explanation of the assessee to form his opinion about the quantum of the addition. Here the assessee does not know what is in the mind of the Income-tax Officer except that he was not satisfied with his drawings. However, when he gives the assessee an opportunity of being heard, he does so after disclosing his mind regarding the quantum of the proposed addition. At the first instance the Legislature has insisted merely on calling for an explanation but on the second occasion the opportunity of being heard is given to an assessee. But as far as the Inspecting Assistant Commissioner is concerned, he has got power to super impose his opinion on that of the Income-tax Officer on both occasions. He can issue such directions to Income-tax Officer as he deems fit but surely the Income-tax Officer is supposed to follow the procedure discussed above. I am, therefore, of the view that if the interpretation offered by learned Commissioner of Income-tax (Appeals) is accepted then any unscruplous Income-tax officer could deliberately ignore any possible addition of deemed income to the helplessness of his own officer, who is supposed to advice and guide him in framing an assessment. Thus, my answer to the first question emerges out in the negative.
9. Now turning to question No.2, I again, with respect to the learned Commissioner of Income-tax (Appeals), beg to differ with her when she observes as under:--
"While doing so the Inspecting Assistant Commissioner nod not taken into consideration the facts as available on records and also did not give the appellant an opportunity of being heard or explaining as to why the additions as suggested by the Inspecting Assistant Commissioner should not be madd. ",
I am afraid, the law has nowhere made it incumbent on an Inspecting Assistant Commissioner to either call an explanation from an assessee or to afford him an opportunity of being heard. I have already discussed the entire procedure involved and here it would be enough to say that it is for the Income-tax Officer to call for an explanation at the first instance and then to afford an opportunity of being heard at the second stage. However, I respectfully agree with learned Commissioner of Income-tax (Appeals) with her when she observes:-
"According to Order Sheet entry it is not quite obvious that the Income-tax Officer did not make his intention clear to the assessee regarding the quantum of the addition that was to be made and also the fact that the explanation given regarding the so to say low drawing was not accepted."
I have already discussed this aspect it detail and should not repeat it here.
10. Now, coming to the third question I would against like to refer to my decision reported as 1986 P T U (Trib.) 578, mentioned above. In order to answer this question the following passage could be reproduced with advantage. It reads:--
"I therefore, think that if the record shows the involvement of inspecting Assistant Commissioner in the process of assessment and the proposed assessment order is endorsed by the Inspecting Assistant Commissioner, it would be taken that section 4(2-F) has been complied with. In may humble opinion, the requirement of prior approval does not envisage a detailed note in wiring giving reasons for the approval."
After discussing the practice evolved in the 'fax Department I further observed as follows:-
"Thus, if the Inspecting Assistant Commissioner puts the word "approved"; on the draft Assessment Order, or puts his signature thereon or even otherwise communicates in writing his approval to the Income-tax Officer, he would be deemed to have approved the proposed assessment and the assessment framed under such circumstances would be valid and legal assessment order."
I am, therefore, of the view that if the assessment order is approved as a whole, there is no necessity for separate approval regarding addition made under any of the clauses of section 13 (1). Thus, I have answered all the three question in the negative agreeing with" the learned Departmental Representative
11. However, this is not the end of the matter. When I turn to the merits, I find no force in this departmental appeal. The first defect, which has been highlighted by Mr. Iqbal Naim Pasha is that the Income-tax Officer should have disclosed his mind regarding quantum H of the addition which he proposed to add as deemed income, but he did not do so. The learned Commissioner of Income-tax (Appeals) has upheld this contention of the learned counsel for the appellant and I have already confirmed it.
12. Mr. Muhammad Farid, the learned Departmental Representative supporting the departmental appeal contended before us that the Income-tax Officer was very much constrained to issue notice under section 65 to the appellant and called upon him to explain his low drawings vis-a-vis the personal expenditure but he failed to give any details whatsoever. Mr. Pasha, the learned counsel for the appellant, however, invited our attention to the statement of personal expenses of the appellant. However, from perusal of the assessment order it appears that the Income-tax Officer has not considered them at all. On the other hand, he has used stock phrases, like, standard of living, etc., which is generally done in such type of cases. He observed:-
"The personal drawing of the assessee Rs.10,000 are very low. The accountant of the assessee contended that all family members are earning-members and are being assessed either as a partner or as a director also made total drawing amounting to Rs.54,000 and expenses incurred on joint family system are sufficient to meet the expenses for meals and other items. But keeping in view the living standard of the assessee and low purchasing power of rupees, the drawing appears very low. I therefore, estimate his house-hold expenses @ Rs.5,000 which comes, to Rs.60, 000 yearly and after deducting the declared amount of Rs.29,335 and an addition of Rs.31,665 is being made under section 13 (1) (e) with the prior approval of the Inspecting Assistant Commissioner, Companies Range 11, Karachi.
Mr. I. N. Pasha, the learned counsel for the appellant taking serious objection to above-quoted observation submitted that the appellant was living in Joint Family System and full details of all the family members alongwith personal expenses were given to the Income-tax Officer, According to him since cts.54, 000 were shown to be the drawings of all the partners of the firm, therefore, the Income-tax Officer was not justified at all to add Rs.30,665 to the total income of the appellant alone. His contention has substantial force. If the drawings were low at all, then they were low for other partners of the firm as well. As such, the addition should have been made in the total income of all of them. Here again, the income-tax Officer has committed mistake. Mr. Muhammad Farid, the learned Departmental Representative facing this situation submitted that I could divide the addition and then add only that much to the total income of the appellant, which falls in his share. I do not think that I would be justified in doing this in view of the fact that the Income-tax Officer has made the addition only on the basis of use of stock phrases. Here, I would like to reproduce from my decision which has been extensively relied upon by learned Commissioner of Income-tax (Appeals) and which was recorded in I. T. A. No. 1123/KB of 1983-84 and others, on 21st October, 1984. Dealing with the use of these stock phrases and what the Income-tax Officer should do I observed as under:-
"At this stage let me point out is the duty of Income-tax Officer to collect circumstantial evidence regarding the standard of living of an assessee. The expression standard of living is a comparative term. It depends upon status consciousness, habits, idiosyncrasies and way of living in the same locality may lead different type of lives, as far as the expressing 'Standard of Living' is concerned. These days a jungle of flats is coming up in even the so-called posh localities of the city. A person living in a flat may have a different standard of living than a person living in a bungalow built on a plot of 1000 sq. yds. Similarly, a person whose children go to most expensive school of the city would be having a higher standard of living than a person whose Children receive their education in ordinary school. Likewise, a person may be spending more money on his food by eating mutton and poultry etc., but another person may confine himself to ordinary food. A person having air-conditioners in all bed-rooms would be maintaining higher standard of living than a person having no air-conditioners at all, though living in the same locality. Again; a person may spend a lot of money on his electricity bills if, he is lavish in its consumption but, on the contrary, a person with careful use may cut appreciably his electricity expenses. The discussion may go on like this but the upshot of all this is that no addition should be made on account of low drawings by using stock-phrases of 'standard of living' or 'posh locality' or 'school-going children' etc. An Income-tax officer has at his disposal enough staff who can make private investigations to ascertain the correct standard of living of a particular assessee by checking the electricity, telephone and gas bills; by finding out the number and capacity of the cars used by him; by' knowing the exact number of the family members of the assessee. He should further collect information as to how many members of the family of an assessee are earning members and how many school-going. In case of school-going children it can be found out as to whether the children were going by school-bus or by public transport. If the children are having any tuition this fact can also be kept into consideration. The number of domestic servants is also indicative of the standard of living of a person. Whether a persons is living in a bungalow or a flat is also a very relevant question. As I have pointed out earlier, eating habits of one community differ from another. Other habits of life are also very important as far as the house-hold expenditure is concerned. A careful Income-tax Officer would collect the material on the above noted points, which are definitely not exhaustive.
Since the Income-tax Officer has not collected any material on record to support his findings, I am afraid, I cannot uphold the submission of Mr. Muhammad Farid, the learned Departmental Representative.
13. At his juncture, let met also point out that the learned Inspecting Assistant Commissioner fell in error when he directed the Income-tax Officer to estimate monthly drawings of the appellant at Rs.5,000 per month. This direction was binding on the Income-tax Officer and he has faithfully followed it. It is always advisable that while guiding the Income-tax Officer on such matters the Inspecting Assistant Commissioner should never issue any direction to Income-tax Officer. On the other hand, he could make various suggestions for the guidance of Income-tax Officer but the final opinion should be left open 'for the Income-tax Officer. After all the opinion of the Income-tax Officer is not final and would be subject-matter of his approval. In this case, unfortunately, the learned Inspecting Assistant Commissioner issued direction and the Income-tax Officer followed it which under the law he was bound to follow whether there was in his opinion, any sufficient evidence on the record to support his finding or not. However, let me also hastily add that both officers have got right to form their own opinion on the basis of the material available on the record.
14. In view of discussion made above, I respectfully agree with the learned Commissioner of Income-tax (Appeals) that the addition of Rs.30,665 should stand deleted as such I find no force in this departmental appeal and it is rejected accordingly.
M.B.A./363/T Appeals dismissed.
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