Advocate Ali Azam Vs. Commissioner of Taxes, 53 DLR (2001) 92

Case No: Income Tax Reference Application No. 47 of 1992

Judge: Syed Amirul Islam ,

Court: High Court Division,,

Citation: 53 DLR (2001) 92

Case Year: 2001

Appellant: Advocate Ali Azam

Respondent: Commissioner of Taxes

Subject: Income Tax,

Delivery Date: 1999-8-17

 
Supreme Court
High Court Division
(Special Original Jurisdiction)
 
Present:
Syed Amirul Islam J
SANM Rahman J
 
Ali Azam, Advocate
………………Applicant
Vs.
Commissioner of Taxes
………………Respondent
 
Judgment
August 17, 1999.
 
Income Tax Ordinance (XXXVI of 1984)
Section 32 (5) (b) (i)
In the instant case the property of the assessee was exchanged with the properties of two other persons of equal value. Hence the applicant is entitled to get the benefit of section 32 inasmuch as by the exchange he acquired an immovable property of the same value which is an investment as provided by the section in that view no capital gain taxes can be charged in respect of the transaction. ….. (5)
 
Lawyers Involved:
AFM Firojuddin Bhuiyan, Advocate — For the Applicant.
Not represented- the Respondent.
 
Income Tax Reference Application No. 47 of 1992
 
JUDGMENT
Syed Amirul Islam J.
 
1. This reference application at the instance of the Assessee appellant arises out of assessment made by the Assistant Commissioner of Taxes, Noakhali, Circle-1, Noakhali, for the assessment year 1987-88 vide his order dated nil under section 83(2) of the Income Tax Ordinance, 1984 on a total income of Taka 3,24,388.00 and being aggrieved by the said assessment the applicant preferred an appeal before the Appellate Joint Commissioner of Taxes Comilla Range, Chittagong (South) Zone, Comilla whereupon the Joint Appellate Commissioner of Taxes accepted the appeal and reduced the income made by the Assistant Commissioner of Taxes by his order dated 19-2-91. The respondent being aggrieved by the aforesaid order of the Appellate Joint Commissioner of Taxes filed an appeal before the Taxes Appellate Tribunal and the Additional Bench No.2, Chittagong of Taxes Appellate Tribunal after hearing the parties modified and set aside the order of the Appellate Joint Commissioner of Taxes by its order dated 28-11-91 and being aggrieved by the said order of the Income Tax Appellate Tribunal the assessee applicant preferred this reference to answer the following questions:
 
(i) Whether the Assistant Commission of Taxes, Appellate Joint Commissioner of Taxes and Taxes Appellate Tribunal were justified in estimating professional income without giving any basis whatsoever.
(ii) Whether the Assistant Commissioner of Taxes has been justified in imposing income from house property though the petitioner has neither been legal or beneficial owner of the property and the Taxes Appellate Tribunal was justified in maintaining the imposition.
(iii) Whether the Assistant Commissioner of Taxes has been justified in estimating the value of the property without giving any basis for such estimate and the Taxes Appellate Tribunal was justified in law to set aside the order of the learned Appellate Joint Commissioner of Taxes and ordering restoration of the order of the Assistant Commissioner of Taxes in spite of the fact that the learned Appellate Joint Commissioner of Taxes based the estimate on Inspector’s report made through local enquiry.
iv) Whether the Assistant Commissioner of Taxes was justified in estimating family expenses without any basis and the Taxes Appellate Tribunal was justified in maintaining the estimate.
 
2. Mr. AFM Firojuddin Bhuiyan, the learned Advocate appearing for the applicant, submits that the applicant is an old man of about 70 and is widower and lives with his lone servant in the mofassil town of Noakhali and he is by profession an Advocate and now-a-days rarely comes to the Court and, as such, his professional income ought to have been accepted by the Assistant Commissioner of Taxes as shown in the return. The learned Advocate further submits that the Assistant Commissioner of Taxes on a misreading of all the materials on record illegally added the income of building. The learned Advocate further submits that as usual the learned assessee advocate did not maintain any books of account and failed to produce any documentary evidence in support of his declared income and the Assistant Commissioner estimated his provisional income as lawyer at Taka 70,000.00. No basis whatsoever has been disclosed by the Assistant Commissioner for assessing his income on that figure nor was any opportunity given to the Assessee applicant to explain his position. The Appellate Joint Commissioner of Taxes estimated the Income at Taka 40,000.00 considering the old age of the assessee applicant but this was also done without any basis and the Appellate Tribunal estimated the income at Taka 48,000.00 holding that the estimates of professional receipt at Taka 40,000.00 is a bit low. This was also done without material basis. The learned Advocate for the applicant submits that there is no dispute that the applicant is an old man of about 70 and the fact that he rarely attends the Court and that without giving any opportunity to explain his position the Assistant Commissioner of Taxes as well as the Appellate Tribunal arbitrarily fixed the professional income at Taka 70,000.00 and 48,000.00 respectively without any basis and hence this cannot be sustained in law as the same is against the principle of natural justice. Considering the facts and circumstances of the Case and submission made by the learned Advocate for the applicant, we find that in the instant Case the Revenue authority without giving any opportunity to the applicant and without also any material basis arbitrarily fixed the professional income of the applicant as aforesaid. Hence we answer the question raised in paragraph 10(i) in the negative and in favour of the assessee applicant.
 
3. The learned Advocate appearing for the applicant submits that the Assistant Commissioner as well as the Appellate Tribunal most illegally included the income from house property which did not belong to the applicant.
 
4. It appears that the Assistant Commissioner of Taxes as well as the Appellate Tribunal on misconception of law and facts included the income of the property of Hajipur in the total income of the applicant but the Appellate Joint Commissioner of Taxes, taking a correct view of the fact, deducted the said income on the ground that the property did not belong to the applicant, rather it belonged to the Sons and a brother of the applicant and for the assessment year in question the said three sons have also filed Income Tax Returns in respect of the said property showing that property as their own property. It is; therefore, clear that both the Assistant Commissioner of Taxes and the Appellate Tribunal most illegally taking an erroneous view of facts included said income in assessing the total income of the applicant since applicant is neither legal nor beneficial owner of the property. The Income as derived from that property cannot be added to the income of the applicant and, therefore, we answer the question raised in paragraph 10(ii) also in the negative and also against the Revenue authority and in favour of the assessee.
 
5. The learned Advocate then submits that the Assistant Commissioner of Taxes as well as the Appellate Tribunal assessed gain taxes in respect of the property exchanged by the applicant on 23-12- 86 and on 4 -1-87 with one Khitish Chandra Ghosh and Mr Noni Gopal Saha, assessee of Noakhali Circle-2 and Noakhali Circle-I respectively and for that exchange the Assistant Commissioner of Taxes estimated the capital gain tax at Taka 1,59,388.00. This order was maintained by the Appellate Tribunal. The learned Advocate for the applicant submits that in view of section 32(5) (b) (ii) Income Tax Ordinance, 1984 no capital gain tax can be levied upon the applicant for the exchange of property in question. In section 2(66) of the Income Tax Ordinance, 1984 the word ‘transfer’ in relation to a capital asset include the sale, exchange or relinquishment of the asset or extinguishment of any right therein. Section 32 of the Ordinance lays down the procedures for computing a capital gain as well as for expenditure. In the instant Case the property of the assessee has been exchanged with the properties of two other persons of the equal value. Hence the applicant is entitled to get the benefit of sub-section 5(b) (i) of section 32 inasmuch as by the said exchange he has acquired an immovable property of the same value which is an investment as provided by sub-section 5 of section 32 of the Ordinance and in that view of the matter no capital gain taxes can be charged in respect of the said transaction. We, therefore, answer the question raised in para 10(iii) of the application in the negative and in favour of the assessee applicant.
 
6. The Assistant Commissioner of Taxes enhanced the declared family expenses of the assessee without any basis and that order was also maintained by the Appellate Tribunal. The learned Advocate for the applicant submits that the Assistant Commissioner of Taxes has no valid authority in law to estimate family expenses without pinpointing any specific expenditure in fact incurred by the assessee within the assessment year which has not been included in the return. In the instant Case the Assistant Commissioner of Taxes arbitrarily and without material basis subjectively and without giving any opportunity to the applicant assessed the family expenses at Taka 50,000.00 simply saying that this figure is in keeping with the standard of living of the applicant and cost of prices. The learned Advocate for the applicant submits that in assessing the family expenses of the applicant at Taka 50,000.00 the Assistant Commissioner of Taxes failed to comply with the provision as contained in section 19(3) of the Ordinance inasmuch as he has failed to point out in particular any expenses or expense incurred by the applicant during the assessment year which was not included in the family expenses and, as such, the enhancement of the family expenses by the Assistant Commissioner of Taxes is absolutely illegal and without jurisdiction. It is further asserted that in computing the family expenses the Assistant Commissioner of Taxes did not at all take into consideration the fact that the applicant lives in his own house with a single servant and enjoys paddy grown in his agricultural land and spends a small amount for daily necessaries of life. The learned Advocate also submits that in other Cases the Tribunal took the view that without pinpointing any particular expenditure which has not been included in the family expenses the revenue authority cannot assess family expenses and in assessing family expenses as well the applicant is entitled to a pre-hearing which has admittedly not been given in the instant Case. Considering the facts and circumstances of the Case and the submissions of the learned Advocate we find force and substance in his submission and it appears that both the Assistant Commissioner of Taxes as well as the Appellate Tribunal most illegally and in flagrant violation of the provision of section 19(3) of the Ordinance as well as principle of natural justice have assessed the family expenses of the applicant. Therefore, we answer the question raised in paragraph 10(iv) of the application in the negative and in favour of the assessee applicant.
 
Accordingly, the reference is answered aforesaid and the parties will bear their own costs.
 
Ed.