I.T.AS. NOS.6051/LB AND 6052/LB OF 1991-92, DECIDED ON 5TH AUGUST 1993. VS I.T.AS. NOS.6051/LB AND 6052/LB OF 1991-92, DECIDED ON 5TH AUGUST 1993., 1993 PTD-INCOME-TAX-APPELLATE-TRIBUNAL-PAKISTAN 1681 (1993)

(a) Income Tax Ordinance (IXCI of 1979)---

----S.65---Expression "definite information" as used in S.65---Meaning.

The expression "definite information" cannot be given a universal meaning as it will have to be construed in the context of circumstances of each case, the expression "definite information" as used in section 65 of the Income Tax Ordinance means much more than mere material so as to cause a reasonable belief or even such evidence which might lead to a definite belief. In other words mere existence of an evidence which may lead to even a certain conclusion will not be covered within the parameters of definite information which necessarily means a direct information which need not be put to further trial by supporting material.

Central Insurance Company and others v. Central Board of Revenue and others 1993 SCMR 1232 = 1993 PTD 766; Chamber's 20th Century Dictionary New Edition; Concise Oxford Dictionary, Seventh Edition; New Webster's Dictionary of English Language; Black's Law Dictionary, Fifth Edition; 1990 PTD 889; Income-tax Officer and others v. Chappal Builders 1993 SCMR 1108 and 1990 PTD 155 ref.

(b) Income Tax Ordinance (XXXI of 1979)---

----S.65---Definite information---Notice under S.65 to the assessee alleging that he had understated the price of plot purchased by him---Additional assessment ---Assessee had a solid defence which he put up in reply to the very first notice served upon him---Proceedings conducted prior and subsequent to notice were in fact in furtherance of a preconceived belief that the price of plot purchased by assessee was under-stated by him---Existence of such a belief earlier to any definite information, however, was without any basis whatsoever---Lack of availability of definite information remained present all along as the Assessing Officer had based his reassessment order solely on the report of the Inspector who in turn started working on the presumption that since another sale-deed was available in which price of the plot in the vicinity was stated higher, therefore, assessee had under-stated the value of his purchase ---Held the Assessing Officer was not justified to re-open the case as the assessment was not based upon a definite information---Additional assessment was annulled by the Tribunal with that the fresh demand raised had vanished and the penalty order under S.91(1) of the Ordinance would also go.

1988 PTD 494: 1990 PTD 889; 1988 PTD 1014; 1987 PTD (Trib.) 129: 1993 PTD (Trib.) 50; (1982) 135 ITR 368; 1989 PTD (Trib.) 1233; 1987 PTD 300; 1993 SCMR 1108; 1993 PTD 206; PLD 1961 Pesh 62; 1981 SCMR 701; 1980 SCMR 284; PLD 1976 Lah. 6; PLD 1970 SC 299; PLD 1979 Note 112 at p. 83; AIR 1930 PC 217; 1986 PTD 396; AIR 1934 PC 58; 1991 PTD 639 (Trib.); 1989 PTD 394; Surah Al-Baqra of the Holy Quran; 1986 PTD 855 (Trib.); (1980) 42 Tax 289; PLD 1969 SC 14; 1987 PTD (Trib.) 129; 1993 PTD (Trib.) 50 and (1982) 135 ITR 368 ref.

Dr. Ilyas Zafar for Appellant

Muhammad Asif Hashmi for Respondent.

Date of hearing: 7th August, 1993.

ORDER

NASIM SIKANDAR (JUDICIAL MEMBER).---These two appeals for the assessment years 1985-86 impugned a consolidated order of CTT (Appeals) Range-I, Faisalabad dated 24-12-1991. In the first appeal and addition of Rs.1,60,000 under section 13(1)(d) of the Income Tax Ordinance is agitated against while in the second cancellation of penalty imposed under section 91(1) of the Ordinance is prayed for.

2. The appellant in this case is an individual and derives income from property only. For the assessment year 1985-86 he returned an income at Rs. 14,104 which was accepted and assessment finalised accordingly on 29-3-1986. Subsequently, the assessing officer finding the declared price of two plots of 5 Marlas at Rs.30,000 each to have been under-stated, proceeded to issue a notice expressing gross under-statement of the value actually paid for these plots. In reply the assessee contended that the department had no definite information on record to reopen the case and that the purchase value declared by the assessee was reasonable and in order. Alter conducting inquiries through his Inspector the assessing officer concluded that the value declared was grossly under-stated as one Muhammad Munir Alam purchased a 10 Marlas plot @ Rs.9,000 per Marla on 22-9-1984 (which is earlier than the date of purchase by the assessee) in a nearly Mohallah Warispura, Faisalabad. Also that the President of a Local Mosque Committee stated On oath that the Anjuman purchased a 20 marlas plot at the rate of Rs.20,000 per Marla in the year 1984 for construction of a mosque in that area where the plots purchased by the appellant were situated. The assessing officer further found that the assessee had failed to rebut the aforesaid two cases evidencing much higher value of the land in the vicinity and, therefore, proceeded to adept the value of the plots at Rs.2,26,000 @ Rs.22,000 per Marla after observing usual formalities involved for such cases. A net addition of Rs-1,60,000 was, therefore, made to the income already declared as aforesaid allowing the benefit of the value of plots declared in the wealth statement at Rs.66,000 (including incidental charges). On appeal the learned first appellate authority by way of the impugned order confirmed not only the reopening of the assessment but also the mode and the evidence considered and relied upon by the assessing officer for making the addition. A partial relief of Rs.2,000 per Marla was, however, allowed presumably in view of the fact that the price per Marla as deposed by the said President of Anjuman-e-Farooqia stood at Rs.20,000 only. The objections of the present appellant against procedural infirmities were also rejected. The penalty imposed under section 91(1) of the Ordinance @ 2.5% of the tax demand outstanding was ordered to be reduced under the provisions of section 91(4-A) of the Income Tax Ordinance. The assessee-appellant is in further appeal agitating against the confirmation of the assessment as well as penalty orders as finally determined by tile learned first appellate authority.

3. Parties have been heard. Learned counsel for the appellant has raised a number of legal as well as factual objections to the merits of the case. He contends that reopening of the case was absolutely improper as the assessing officer had neither a definite information nor it possessed even a reasonable clue to the factum of alleged under-statement of the value declared by the assessee. Also that the reopening was result of mere probability which could not be made basis for ignoring substantial documentary evidence as found by this Tribunal in a case reported as 1988 PTD 494; that reopening in this case offended against the concept of finality of the proceedings as a dominant policy of law; that the reopening of the case without definite information was against the intention of law as found by the superior Courts in cases reported as 1990 PTD 889 and 1988 PTD 1014; that in this case no formal assessment order existed on the original return filed and, therefore, in absence of a formal assessment order issuance of notice under section 65 of the% Ordinance for reassessment was per se illegal as found by this Tribunal in cues reported as 1987 PTD (Trib) 129 and 1993 PTD (Trib.) 50 as also by the Allahabad High Court in (1982) 135 ITR 368; that the notice issued under section 13(2) dated 18-8-1990 without expressing the intention of the assessing officer to adopt a particular sum as value of the property was vague and therefore, illegal as held in 1989 PTD (Trib.) 1233; that no notice under section 13(2) was ever issued and the one wrongly issued under section 65 of the Ordinance could not be equated with the notice under section 13(2) of the Ordinance as decided in cases reported as 1989 PTD 1233 and 1987 PTD 300; and that valuation of alleged similar other properties could not be considered as "definite information" in this context as held by the Supreme Court in the case reported as 1993 SCMR 1108. It is further stated that Qanun-e-Shahadat, 1984 being applicable to the proceedings before the assessing officers in terms of the reported case of the Lahore High Court cited as 1993 PTD 206, the registered sale deed being a public document according to Article 85(5) of the said Order, the valuation mentioned in the deed ought to have accepted by the assessing officer in view of the dictum laid down by the superior Courts in cases reported as PLD 1961 Pesh. 62,1981 SCMR 701, 1980 SCMR 284, PLD 1976 Lahore 6. PLD 1970 SC 299, PLD 1979 Note 112 at p.83, AIR 1930 PC 217, 1986 PTD 396 and AIR 1934 PC 58; that this Tribunal has also favoured acceptance of the value evidenced by the sale deeds as per decisions cited as 1989 PTD 1233 and 1991 PTD 639 (Trib.); that injunctions of Islam also ordain that agreements/contracts duly witnessed between the Muslims should be given effect to and respected as held by the Supreme Court of Pakistan in 1989 PTD 394; and that Surah Al-Baqra of the Holy Qur'an also contained similar injunctions. On facts it is submitted that the parallel cases considered by the assessing officer to determine value of the plots purchased by the appellant were patently inapplicable as the land purchased by aforesaid Muhammad Munir was situated at quite a distance from the plot of the appellant and that the plot allegedly purchased by Anjuman-e-Farooqia, 4 Faisalabad for construction of the mosque was located in a commercial area and, therefore, could not be treated as a parallel case. Further, that land in the parallel cases of registered deeds dated 5-5-1985 and 12-10-1985 relied upon by the present appellant was situated in the same Square No.52 of Chak No.224-RB and, therefore, provided a better guide for determination of the sale price in the area. On the authority of CBR Circular No.7(13) DT-14/93 dated 29-6-1993, it is submitted that valuation fixed by the provincial revenue authorities under section 27-A of the Stamp Act, 1899 should be accepted as a guide in similar cases as upheld by this Tribunal in various reported cases including 1989 PTD 1233 (Trib.) and 1986 PTD 855 (Trib.). In connection with the facts of this case the appellant has also submitted a copy of Notification No.116/BRC dated 29-7-1986 issued by Collector Faisalabad whereby valuations of various parcels of land in the District for the purpose of section 27-A of the Stamp Act, 1899 were notified. According to this notification per Marla price of land in Chak No.224/RB, Faisalabad, Square No.52 was fixed at Rs.6,000. In support of the contention that declared value ought to have been accepted by the assessing officer, reliance has also been placed on CBR Circular No.1568-S(WT)/80 dated 22-9-1980 reported in (1980) 42 Tax 289 Statute Part. Lastly as a general preposition the learned counsel relies upon PLD 1969 SC 14 to contend that law did not mean statute law only but also included the principles laid down by the judicial pronouncements of the Superior Courts. Obviously this case has been cited to place emphasis on the other case-law already referred to above.

4. Learned D.R. on the other hand, has supported the orders of the departmental authorities mainly on the grounds that prevailed with them in making and confirming the impugned addition and penalty. It is pointed out specifically that an assessment order does exist in the file and therefore the contention of the appellant based upon the ratio of the reported cases 1987 PTD (Trip.) 129,1993 PTD (Trib.) 50 and (1982)135 ITR 368 that in absence of a formal assessment order proceedings for additional assessment under section 65 of the Ordinance are not legal becomes impertinent. In reply to this affirmation by Revenue learned counsel alleged something against the personal conduct of the Revenue Officer and his staff which we are afraid is not relevant for disposal of this appeal and the assessment order being available on record the objection of the appellant raised in this connection is rejected.

5. The facts as stated at the Bar are recaptulated. Original assessment in the case of the appellant was framed on 29-3-80 as per declared income at Rs.14,101. Subsequently a show-cause notice was issued to the assessee that his declared value of two plots at Rs.30,000 each (excluding incidental charges) was inadequate; reply to this notice was submitted by the assessee on 20-2-1990 in which it was stressed by the assessee That the department had no definite information on record to reopen the case and that the purchase price already declared was reasonable and in order. The assessing officer deputed his Inspector to conduct inquiries who submitted his report on 16-4-1990. During such inquiries the Inspector procured a registration deed dated 22-9-1984 indicating cost of land in the same area at Rs.9,000 per Marla. Also he recorded statement of the President of Masjid Umar situated in the same locality wherein the gentleman deposed to have purchased land for construction of mosque at a rate of Rs.20,000 per Marla in 1984 though the registration deed was executed declaring a rate of Rs5,000 per Marla. The assessing officer found these facts as emerging from the report of the Inspector to be sufficient in the circumstances to reopen the case under section 65 of the Ordinance and sought the permission from his IAC which was accorded on 22-5-1990. A notice under section 65 of the Ordinance was issued on the same day and reply to this notice was submitted on 30-5-1990. It also appears from the assessment order that the assessing officer summoned the said President of Masjid Umar for 14-10-1990 and recorded his statement in which he affirmed his earlier deposition before the Income-tax Inspector. A fresh return was filed in response to notice under section 65 dated 22-5-1990 on 21-6-1990 repeating the declared price of the plots. The assessing officer after hearing the party rejected its factual and legal objections and proceeded to adopt a value of Rs.22,000 per Marla for the aforesaid two plots and after deducting the value already declared as per wealth statement proceeded to make an addition of Rs.160,000. This assessment order was framed on 28-11-1990. As aforesaid the appellate authority allowed only partial relief by reducing the cost of the value per Maria by Rs.2,000 while confirming the reopening of the assessment as well as the other factors that found favour with the assessing officer while determining the valuation.

6. The main thrust of the contentions of the learned counsel for the appellant is on lack of definite information in this case to justify reopening of the assessment and his objections against adoption of the valuation of the land in question are only by way of alternate pleas. His contentions, when seen in the background of the case bear a lot of weight. From the order of the events as stated above it is quite clear that the assessing officer, in the first instance did not have any substantial information in his possession to warrant reopening of the case. At least none appears from the record and hence his observation in the assessment order that after framing of original assessment on 29-3-1986 "it subsequently came to the notice of his office that the assessee purchased two plots whose value was found to be grossly under-stated". After issuance of show-cause notice in this regard on 14-2-1990 the assessing officer, side by side started fishing inquiries through his Inspector and on receipt bf his report based whole of the assessment order thereupon. Even in the notice served under section 65 of the Ordinance on 22-5-1990 no specific valuation was proposed for adoption and this also indicates that the assessing officer by that time was not certain of the value of the land in question. Another contention of the learned counsel for the appellant relevant to the facts bears weight that the assessee duly submitted copies of the identity cards of the sellers of the land, their complete addresses as also their affidavits deposing receipt of the value as declared by the assessee in his return. These documents were not considered at all and instead undue weight was allowed to the statement of the President of the aforesaid mosque. Leaving apart the fact that his statement did or did not amount to definite information, on facts we would not have accepted the statement of a person who described himself to be President of a mosque and in the same breath declared purchase of the land at higher rate but its registration on lower rate simply to avoid incidental charges.

7. The word "definite information" as used in section 65 of the Ordinance has been a moot point as far its meaning and connotation before our superior Courts and by now we can safely say that the matter stands resolved without any ambiguity in this regard. In a recently decided case by the Supreme Court of Pakistan re: Central Insurance Company and others v. Central Board of Revenue and others cited as 1993 SCMR 1232 = 1993 PTD 766 their Lordships examined the case-law from local as well as foreign jurisdictions, also considered the meaning of these words as given in Chamber's 20th Century Dictionary, New Edition, The Concise Oxford Dictionary, Seventh Edition, New Webster's Dictionary of English Language and Black's Law Dictionary, Fifth Edition to conclude that the word "information" has wide connotation and is also used in relation to an accusation of an offence. Their Lordships after finding that the word "definite" carries, inter alia meaning, defined, having distinct limits, fixed, exact, clear, precise, bounded etc. held that since the word "information" was pre-fixed by word "definite" in subsection (2) of section 65 of the Ordinance it controlled the generality of the word `information'. Their Lordships concluded with a note of, caution in this regard in the following words:

"Every information cannot be treated as the basis for reopening of the assessment, but the information should be of the nature which should qualify as a definite information. In other words, mere guess, gossip or rumour cannot be treated as definite information. However, we may observe that the expression `definite information' cannot be given a universal meaning, but it will have to be construed in the context of the circumstances of each case."

8. As to what amounted to "definite information" their Lordships again reviewed a number of cases and then made a specific mention of a Division Bench decision of the Sindh High Court cited as 1990 PTD 889 re: Republic Motors Limited v. Income Tax Officer and others. Following para. of this judgment was reproduced to emphasize that the expression `definite information' may include factual information as well as opinion about the existence of a binding judgment of a competent Court of Law or forum for the purpose of section 65 of the Ordinance but any interpretation of provision of law by a functionary not entrusted with the functions to interpret such provisions could not be treated as definite information:

"It is therefore, well settled that receiving or obtaining certain interpretations of a particular provision of law from any department, be it Ministry of Law or CBR or any Legal Advisor or from his own knowledge and reading of the law books would not constitute information as required by section 65. Bhagwati, CJ. (as he then was) has pointed out to the dangerous results which may follow from a liberal interpretation of the word "information" as sought by the Department as it will give unrestricted discretion in the hands of the assessing officer who may on their own interpretation of law set naught the settled and final assessment."

9. Another case recently decided by the Supreme Court of Pakistan in re: Income Tax Officer and others v. Chappal Builders cited as 1993 SCMR 1108 requires specific mention. In this case the assessee was assessed on proper scrutiny of account books and the other information required by the assessing officer. However, after expiry of nearly three years of the assessment year under question viz. 1984-85 it was served with notices on 8-2-1988 expressing reopening of the assessment on the ground that the purchase price declared by the petitioners for a plot of land was on the lower side. The assessee in that case was again assessed for the year 1986-87 after due scrutiny of account books on 11-7-1987 but its case was reopened under section 65 of the Ordinance again on the ground that the purchase price of the plot discussed in the above assessment year was not correct price and was below the market price. Before the High Court in reply to the petition filed by the assessee the department contended that the said plot of land was purchased at a much higher price but in the documents it was price intentionally below the market rate so as to save incidents of taxation. The department relied upon prices of certain other plots sold in the vicinity during the relevant time. However, their contention was rejected by their Lordships of the Sindh High Court placing reliance upon 1990 PTD 155 re: Edulji Dinshaw Limited v. Income Tax Officer. Before the Supreme Court both of these contentions were repeated by the department, which also pertained to the facts of the case in the light of para. 9 of the Self-Assessment Scheme notified for the assessment year under review. Their Lordships upheld the order of the Sindh High Court with the following observations:

"In this case in order to establish through so-called `definite information', the department had to rely upon further reasoning in order to clothe their information with credibility what to talk of definiteness. They had to make inquiry in regular trial in which all the persons who purchased the other plot (or majority of those, who sold or purchased the other plots) might have been examined in order to know under what conditions they paid prices which were higher than the price mentioned by the respondent in the case. And in any case the seller of the plots in this case had to be examined in order to ascertain whether the price mentioned by the respondent, was not genuinely paid. It partakes of some procedural aspects of the disputes in pre-emption and other land cases where the price of the land is in dispute. There is plethora of law on this aspect of pricing of land. Keeping this in view we agree with the learned Judges of the High Court that definite information in the context of the law under discussion could not mean mere difference of opinion or further reasoning on other exercise of logic or even drawing of conclusions Accordingly, the judgment of the High Court is unassailable in so far as the findings of fact are concerned."

10. From the aforesaid judgments of the highest Judicial Forum of the country two principles emerge; first, that the expression "definite information" cannot be given a universal meaning as it will have to be construed in the context of circumstances of each. Secondly, the expression "definite information" as used in section 65 of the Income Tax Ordinance means much more than mere material so as to cause a reasonable belief or even such evidence which might lead to a definite belief. In other words mere existence of an evidence which may lead to even a certain conclusion will not be covered within the parameters of definite information which necessarily means a direct information which need not be put to further trial by supporting material.

11. From that facts of the case underhand, when seen in the light of both of the principles as emerging from the aforesaid reported cases, we find that the assess-appellant had a solid defence which he put up in reply to the very first notice served upon him. The proceedings conducted prior and subsequent to notice were in fact in furtherance of a preconceived belief that the price was under-stated. The existence of such a belief earlier to any definite information, however, was without any basis whatsoever. Lack of availability of definite information remains present all along as the assessing officer based his reassessment order solely on the report of the Inspector who in turn started working on the presumption that since another sale deed was available in which price per Marla of the plot in the vicinity was stated at Rs.9,000, therefore the appellant had under-stated the value. Reference in this connection can also be made to the letter issued to the assessee on 18-8-1990 wherein the assessing officer mentioned purchase of 10-Marla plot at Rs.9,000 per Marla and statement of the said President of Anjuman-e-Farooqia claiming purchase of land at Rs.20,000 per Marla during the year 1984. The range of difference between the two prices mentioned in the letter itself belies of any definite information. As observed earlier, even on facts we would not have confirmed the action of the assessing officer in giving weight to the statement of the. President of the aforesaid mosque for the reason that he himself admitted to have got a sale decd registered for a lesser sum as against the one actually paid for the plot for construction of a mosque. The sale deed for this land was executed at Rs5,000 per Marla as against the registered deed of the appellant which showed the price at Rs.6,000 per Marla.

12. The objection of the appellant against holding of preliminary inquiry before issuance of notice under section 65 of the Ordinance is also well- founded and is supported by the ratio of a case from Indian jurisdiction re: Gayaram Gabbu Lai v. C.I.T., UP cited as (1951) 19 ITR 114. In this case Division Bench of the Allahabad High Court held that the I.T.O. had no right to make a preliminary inquiry before issuing notice under section 34 of the Indian Income Tax Act, 1922. Their Lordships, however, remarked that if in the course of performance of usual duties, while assessing the income of other assessee or for other years of the assessee himself, definite facts or information came to the knowledge of the I.T.O. which related to a year about which the assessment had already been concluded that I.T.O. could verify the correctness thereof or trace it out further without calling upon the assessee either to supply him the facts or explanation or produce his books. It was ultimately concluded that the definite information in possession of the I.T.O. should lead to the conclusion that income had escaped assessment.

13. Since we have not found the reopening of the assessment to have been based upon a "definite information" contentions of the appellant regarding non-examining of the sellers and not giving due weight to their affidavits does not call for further discussion in this behalf. The case-law cited and the averments made in support of acceptance of registered value of the plots in the circumstances also require no mentioning.

14. In view of what had been stated above we hold that the assessing officer was not justified to reopen the case and also that the learned appellate authority did not ad in accordance with law by confirming the action of the assessing officer only on the basis of general remarks and without adverting to the objections raised by the assessee. His conclusion that the assessing officer was justified in reopening the case as he had a definite material in the form of purchase of plots by Mr. Muhammad Munir Aslam and the President Anjuman-e-Farooqia respectively at a rate of Rs.9,000 and Rs.20,000 per Marla in the same vicinity and in the same income year is all the more cursory. Therefore, both the impugned order as well as the assessment order recorded after reopening of the case are annulled.

15. As far as the appeal against penalty order under section 91(1) of the Ordinance is concerned since we have annulled the additional assessment and with that the fresh demand raised has vanished, the penalty order under section 91(1) of the Ordinance also goes.

16. Both of the appeals stand allowed accordingly.

M.BA./2591/T Order accordingly.