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Income-tax References Nos.13 to 16 of 1974, decided on 12th October, 1985.

Income-tax Act (XI of 1922)--

---Ss. 10, 23 A 34--Assessee, a Director of a limited company also carrying on business in his individual capacity-- Assessee claiming his ".net wealth" inclusive of remuneration received from said limited company--Income-tax Officer and Appellate Tribunal accepted wealth statement of assesse6 showing total wealth and also accepted the plea of assessee that said wealth was inclusive of remuneration so received from the limited company--Held, once the Income-tax Officer and Appellate Tribunal accepted the total wealth inclusive of amount of remuneration, they could not make further addition of same amount holding that remuneration received by assessee was for his personal expenditure--Act does not envisage addition of same amount twice over.

Iqbal Naeem Pasha for Applicant.

Nasiruddin Awan for Respondent.

Date of hearing: 6th February, 1984.

-- These Income-tax cases raise the common questions for decision. The assessee is a Director of M/s. Qureshi Salt and Chemical Works Ltd. and is also carrying on business in his individual capacity under the name and style of Messrs Qureshi Motor Agency, at Karachi. Income-tax Cases Nos.13, 14, 15 and 16 refer respectively to the assessment years 1967-68, 1968-69, 1969-70 and 1970-71. The claim put forward by the assessee before the Tribunal was that as "Net Wealth" of the assessee was inclusive of "remuneration" of Rs.30,000 per annum received during the four assessment years (1967-68, 1968-69, 1969-70 and 1970-71), a further addition of Rs.30,000 to the income of Rs.39,074 as computed on "Net Wealth" basis tentamounted to double assessment of the same amount. The Tribunal held that the amount has been taken into account twice over is Rs.14,000 in each year and not Rs.30,000. The assessee file: these reference applications stating therein that the following question., arise out of the decision dated 5th June 1973:-

(i) "Whether there was any evidence on record to hold that, remuneration of Rs.30,000 was for personal expenditure

(ii) Whether the Tribunal misdirected itself in law in confirming addition of Rs.14,000 to income of the applicant

(iii) Whether on the facts and in the circumstances of the case the determination of the applicant's income at Rs.53,074 is erroneous "

The Tribunal dealt with the assessments for all the six years by a common order and we propose to answer the references for all these four years by a common judgment as the point arising for decision in all these years is the same.

The assessee had filed returns for the assessment years 1965--66 to 1970-71 showing losses but in response to notice a/s 34 the assessee had filed revised returns showing an income of Rs.26,900 for the assessment year 1965-66 along with wealth statement for the period ending 31-3-1970 and a reconciliation of the increase in Wealth from 3,17,342 (shown in the wealth statement ending 31-3-1964) to 4,55,78,6 (in the wealth statement for the period ending 31-3-1979) .

The assessee also filed estimated expenditure for six years that is from 1-4-1964 to 31-3-1970 at Rs.16,000 per annum. The assessee also filed an explanation before the Income-tax Officer whit is reproduced as under:

This is inclusive of remuneration of Rs.30,000 for three years (1967-68 to 1970-71).

The Income-tax Officer did not accept the net wealth amounting to Rs.1,61,444 as declared by the assessee but added the sum of Rs.73,000 as the assessee had no evidence to prove that, the amount was available in cash with him. He added this amount to the net amount income of Rs.1,61,444 declared by 'the assessee.

The Income-tax Officer rejected a sum of fts.30,000 on the and that this amount was not shown in the wealth statement for period ending '31-3-1964. He also added a sum of Rs.27,100 which was declared by the assessee on account of sale proceeds. The Income-tax Officer estimated the income of Rs.96,174 each year.

The assessee went in appeal before Income-tax Appellate Tribunal. It was contended before the Tribunal that Income-tax Officer had fallen into error in estimating the personal expenses of the assessee at Rs.30,000 per annum. The Tribunal held that the Income-tax Officer had taken only Rs.16,000 per. year as pers8nal expenses and the amount which can be said to have been taken twice over for taxation purpose is Rs.14,000 in each year and not Rs.30,000 and the Tribunal reduced the income to Rs.53,974. The assessee moved this Court u/s. 66 (1) of the Income-tax Act, 1922.

Mr. Iqbal Naeem Pasha, the learned counsel for the assessee contends that once the Tribunal has accepted the wealth statements as on 31-3-1970 showing total wealth aggregating to Rs.4,55,786 and also accepted the plea of the assessee that the said wealth was inclusive of remuneration of Rs.96,000 for the period 1967-68 to 1970-1971 from Qureshi Salt Chemical Works Ltd. and further addition of Rs.30,000 per annum tentamounted to double assessment of the same amount. Mr. Nasrullah Awan, the learned counsel for the department, has accepted the above position and has conceded that the said appraisal of facts was conclusive.

We have given our thoughtful consideration to the submissions made by the learned counsel for the parties and have gone through the entire record accompanying the application under section 66 (1) of the Income-tax Act.

The Income-tax Officer and the Tribunal were wrong in addition of Rs.30,000 per annum as his total wealth aggregating to Rs.4,55,786 as on 31-3-1970 which was inclusive of the said remuneration. We have no hesitation agreeing with the learned counsel for the assessee that the addition of Rs.30,000 tentamounted to double assessment of the same amount as the Income-tax Officer and the learned Tribunal accepted the Wealth statements as on 30-3-1970 showing total wealth aggregating to Rs.4,55,786 and also amount was inclusive of remuneration of Rs.96,000 for the period of 1966-67 to 1970-71. Once the Income-tax Officer and the learned Tribunal accepted the total wealth inclusive of remuneration as such they cannot make further addition as the Act does not envisage additions of the same twice over.

The learned counsel for the assessee contended that there being no nexus between the remuneration received by the assessee and his personal expenses, the Tribunal has acted in violation of fundamental principles of justice by holding that the assessee was in receipt of Rs.30,000 for personal expenditure and the Tribunal has also committed a manifest error in holding that personal expenditure hasin fact been taken at Rs.16,000 per year. The Income-tax Officer hasdetermined personal expenses of the assessee at Rs.1,69,000 for years and not Rs. 96, 000.

We are, therefore, of the opinion that the Income-tax Officer and the Appellate Tribunal erred in holding that Rs.30,000 was for personal expenditure. The Tribunal also acted erroneously in confirming addition of Rs.14,000 to the income of the assessee.

In view of the foregoing discussion and on a careful review the entire record, we are of the opinion that there was no legal material on record to hold that remuneration of Rs.30,000 was for personal expenditure and the Tribunal was also not right in law in sustaining the addition of Rs.14000.

We, therefore, answered the question No.l in the negative and the questions Nos. 2 and 3 in the affirmative and in favour of the assessee by our short order dated 6-2-1984. In the circumstance of the case, the parties will bear their own costs.

M.B.A./A-80/K Reference answered.

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