I.T.AS. NOS.280 AND 884 OF 1994, DECIDED ON 17TH AUGUST, 1994. VS I.T.AS. NOS.280 AND 884 OF 1994, DECIDED ON 17TH AUGUST, 1994.
1995 P T D (Trib.) 1
[Income-tax Appellate Tribunal Pakistan]
Before Nasim Sikandar, Judicial Member and Muhammad Mushtaq, Accountant Member
I.T.As. Nos.280 and 884 of 1994, decided on 17/08/1994.
(a) Income-tax---
----Jurisdiction---Assessee, a company---Income Tax Officer (Companies Circle), by a letter addressed to Commissioner of Income-tax as his administrative head, requested for assignment of jurisdiction over the case of A.O.P. comprising of the two shareholders of the company on the ground that same would facilitate the examination of other related issues likely to arise in the case of the Company----Such seeking of permission by the Income Tax Officer which never came along, would not support the object of lack of jurisdiction on the part of assessing officer---Merely because the assessing officer was not permitted to ensnare the directors of the Company as A.O.P. for matters which might arise out of the proceedings in case of the Company, would not by itself disentitle the assessing officer (Company Circle) to exercise his powers qua the assessee-Company.
1987 PTD (Trib.) 1; PLD 1965 Lah. 390; (1964) 10 Tax 50 (Trib.).and 1962 PTD (Trib.) 125 ref.
(b) Income-tax---
---Company---Lifting of corporate veil---Necessity---Corporate veil is lifted when it so required by the provisions of a statute or otherwise necessitated by contentious move of creditors or shareholders or when the circumstances of a case so required.
Salomon v. Salomon & Company (1897) AC 22 (HL) ref.
(c) Income-tax---
----Company---Lifting of corporate veil---Once the posture of an artificial person or juristic legal entity has been assumed by natural persons, they cannot be allowed to throw away the cloak at their fancy and show up their faces to claim as advantage which is no more available to them due to diversity in the role adopted.
Persons who seek advantages of corporate personality must accept the corresponding burden. Once the posture of an artificial person or juristic legal entity has been assumed by natural persons, they cannot be allowed to throw away the cloak at their fancy and show up their faces to claim an advantage which is no more available to them due to diversity in the role adopted.
To say that a company sustains a separate person and yet in the same breath to argue that in substance the person holding the shares is the company is an attempt to have it both ways which cannot be allowed.
Ochberg v. C.I.R. 1931 AD 215 ref.
(d) Income-tax---
----Approbate and reprobate ---Assessee cannot shift position only in order to defeat the provisions of law and, therefore, the incidence of proper taxation-- Assessee, a company having itself filed its return in the Companies Circle of the department as a private limited company, could not object to the jurisdiction of Income-tax Officer of that circle by shifting the position.
The assessee cannot be permitted to shift positions only in order to defeat the provisions of the Ordinance, and therefore, the incidence of proper taxation.
A party litigating must act consistently. It is wholesome doctrine of law that a party cannot be allowed to play fast and loose, blow hot and cold, approbate and reprobate to the detriment of his opponents. Where a person knowingly and wilfully invites the Court to adopt the procedure he cannot be permitted to turn around and blame the Court for the very same procedure which he himself invited the Court to follow.
Sh. Abdul Hakeem v. C.B.R. PLD 1975 Lah. 287 and Hafeezuddin v Mian Khadim Hussain PLD 1965 Lah. 439 ref.
Kishan Das Sakuio v. C.I.T. and others 1987 PTD 485 and Sh. Muhammad Amin, Lyallpur v. I.T.O. 1968 PTD 741 distinguished.
(e) Income Tax Ordinance (XXXIX of 1979)--
-----S. 2(26)(b)---Income year--Assessee has a choice to adopt a particular period as its income year---Option once exercised under S. 2(26)(b), Income Tax Ordinance, 1979 cannot be revised or changed at the whim of an assessee.
Mustafa Prestressed RCC Pipe Works Limited, Karachi v. Commissioner of Sales Tax (Investigation), Karachi 1990 PTD 974; 1989 PTD 311 and CIT, Delhi v. Maha Luxmi Sugar Mills Company Limited (1986) 160 ITR 920 distinguished.
Binodi Ram Balchand v. C.I.T. (1962) 44 ITR 249 and (1970) 77 ITR 128 ref.
(f) Income Tax Ordinance (XXXIX of 1979)--
----S. 57---Return---Revising a return under S.57, Income Tax Ordinance, 1979 requires discovery of "any omission or wrong statements therein".
(g) Words and phrases---
---- Fait accompli---Meaning.
Fait accompli means "accomplished fact, something done and, for this reason not reverseable". To say that a party was confronted with fait accompli means that requirements of natural justice were not fulfilled as what the party was asked to explain was a mere formality inasmuch as the decision had already been taken.
Black's Law Dictionary, 5th Edn. Chamber's Twentieth Century Dictionary, New Edn., 1983; Oxford Advanced Learner Dictionary of Current English, 20th Impression, 1985 and Lima Leitao & Company Ltd. v. Union of India (1968) 70 ITR 518 ref.
(h) Income Tax Ordinance (XXXIX of 1979)--
----S. 13(1)(2)---Deemed income---Addition---Procedure---Proposed value of investment etc. has to be certain and definite---Definite sum of money had to be conceived by the Assessing Officer and then expressed in unequivocal words to the assessee before making any addition under S.13(2), Income Tax Ordinance, 1979---Confronting the assessee by Income-tax Officer after involving the Inspecting Assistant Commissioner could not be a fait accompli or prejudicial to the assessee, for Income-tax Officer could always accept a legitimate contention assailing the proposed value.
1986 PTD (Trib.) 576; 1987 PTD (Trib.) 300; 1989 PTD (Trib.) 150 and 1989 PTD (Trib.) 1233 ref.
(i) Income Tax Ordinance (XXXIX of 1979)---
----S. 13(1)(2)---Deemed income---Addition---To ask assessee for his reply, explanation or defence, every allegation, charge or proposed action and the facts leading to such allegation charge or proposed action are to be told in clear and certain terms.
(j) Income Tax Ordinance (XXXIX of 1979)---
----S. 13(1)(2)---Deemed income---Addition---Purchase of property by assessee- --Sale-deed--- Value---No irrebuttable presumption of truth is attached to a registered sale-deed---Revenue is not absolutely bound by the recital contained in sale-deed---Assessing Officer is not restrained from questioning the price which in all probability ought to have been received or paid by an assessee---Ascertaining the correct and true valuation for the purpose of taxation without frustrating a contract between the parties was not an un-Islamic act.
1986 PTD (Trib.) 855; 1989 PTD (Trib.) 1233; Ali Muhammad v. Malik Sanwal and others PLD 1961 (W.P.) Pesh. 62; Nafees Bakers v. Deputy Collector, Excise and Taxation 1986 PTD 396; Malik Hussain and others v. Lala Ram Chand and others PLD 1970 SC 299; 1991 PTD (Trib.) 639; 1991 PTD 488; Mian Aziz A. Sheikh v. CIT (Investigation), Lahore 1989 PTD 894 and 1994 PTD (Trib.) 535 ref:
(k) Income Tax Ordinance (XXXIX of 1979)--
----S. 13---Deemed income---Addition---Purchase of property by assessee---Sale deed---Value---Acceptance of value declared in sale-deed by other official agencies is not binding upon an Assessing Officer who can always reject same for valid considerations and keeping in view the obtaining circumstances in each case.
1993 PTD (Trib.) 952 ref.
Dr. Ilays Zafar for Appellants (in both ITRs).
Shahbaz Butt, L.A., Zahid Pervaiz L.A. and Imtiaz Ali Khan, D.R. for Respondent (in ITA No.280 of 1994).
Shahbaz Butt, L.A. and Imtiaz Ali Khan, D.R. for Respondent (in ITA No.884 of 1994).
Date of hearing: 9th June, 1994.
ORDER
These cross-appeals impugne an order recorded by the CIT(A), Lahore on 18-12-1993.
2. The assessee in this case is a private limited company incorporated at Lahore on 14-1-1989. It comprises of only two shareholders, husband and wife, of one ordinary share of Rs.10 each. The shareholders are also the two Directors of the company. For the assessment year 1990-91 the company filed a return declaring nil income. It was accompanied with a balance-sheet as on 31-12-1989 wherein a piece of land alleged to have been purchased out of loans from the aforesaid Directors was also declared. Subsequently another return was filed to declare nil income for the period ending on 30-6-1990 as no business was statedly carried out since the incorporation of the company till 30-6-1990'. In this return it was also stated that a marriage hall on the aforesaid plot was under construction. The assessing officer after asking for the explanation of the assessee qua change of income year from 31-12-1989 to 30-6-1990 discarded the same and proceeded to frame assessment keeping in view .the income year as declared in the return filed on 10-10-1990 i.e. 31-12-1989.
3. The aforesaid property commonly known as 9, Egerton Road, Lahore comprised of open land measuring 17 Kanals 3 Marlas and 189 sq. ft. It was purchased by the assessee-company on 5-1-1989 from M/s. Hatta Construction Company for a declared value of Rs.22,3507000 excluding stamp duty and other incidental charges of Rs.2,536,311. The assessing officer found, the declared value to be grossly understated and, therefore, after considering the contentions made in support of the registered value and taking into account some parallel cases, estimated the cost of land per Marla at Rs.2,25,000 as against the declared cost per Marla at Rs.65,160. In this way the total price was computed at Rs.77,362,000 and the difference between the declared and estimated value at Rs.55,012,000 was assessed in the hands of the assessee-company under section 13(1)(d) of the Income Tax Ordinance as income from undisclosed sources.
4. Before the first appellate authority the assessee repeated its contentions which were earlier made before the assessing officer; that out of the total area of plot in question only 5 Kanals were commercially utilisable as the rest of the area was landlocked and without any approach; that rejection of sale price evidenced by registered deed was illegal; that the declared price was not doubted in the relevant year; that parallel cases mentioned by the assessing officer to estimate the price in question were not comparable and therefore, the estimated price was whimsical and without any basis. On legal plain it was contended that proper opportunity was not allowed to the assessee inasmuch as the determined price was got approved from the concerned IAC even before issuance of notice under section 13(2) of the Ordinance. It was further contended that the investment having been made in the year 1989-90 no addition in the year 1990-91 could have been made. It was also stated that the seller M/s. Hatta Construction Company declared the sale price of land at Rs.21,173,667 in the assessment year 1989-90 which was duly accepted by the Revenue. According to the assessee, the Revenue could not blow hot and cold in the same breath by accepting the value declared by the seller but doubting the same when declared by the purchaser.
5. Learned first appellate authority rejected all the legal objections raised by the assessee. However, on facts the estimated price was found to be somewhat excessive and, therefore, reduced to Rs.170,000 per Marla (wrongly) stated as Rs.180,000 per Marla in the grounds of departmental appeal. The assessee and the Revenue being dissatisfied with this order are in cross-appeals as stated above. The former describes the addition to be illegal per se while the latter, the Revenue, feels aggrieved of the reduction in the estimated cost per Marla by a margin of Rs.55,000 as ordered by the first appellate authority. Hence these appeals.
6. Before us the assessee has raised all the legal and factual grounds which were taken earlier before the first appellate authority except for its grievance that the addition was not made in the relevant year 1989-90. However, by way of additional grounds the following two contentions have also been made:
(1) That the ITO had no jurisdiction to assess the income of an AOP in the status of a private limited company;
(2) that the addition made under section 13(1)(d) is illegal and unjustified as the same has not been made in the relevant assessment year.
7. The Revenue, on the other hand, per grounds of appeal contends that the assessing officer having relied upon a parallel case which incidentally happened to be that of one of directors/shareholders of the assessee-company, reduction in estimated value by the appellate authority is improper. It is also stated that in view of immense commercial value of the plot in question the price determined by the assessing officer is more than fair and just. The Revenue also objects to the raising of additional grounds for the reason that these are necessarily based upon factual matters which cannot be considered or probed into at this stage of second appeal.
8. We have heard the learned Legal Advisor Mr. Shahbaz Butt assisted by Mr. Imtiaz Ali Khan, DR as also Mr. Ilyaz Zafar, the learned counsel for the assessee.
9. Learned counsel for the assessee in support of his submission that both of the additional grounds are legal and being relatable to jurisdiction aspect of the proceedings can be raised at any stage of proceedings relies upon a reported decision of this Tribunal cited as 1987 PTD (Trib.) 1. In that case this Tribunal benefited from the distinction drawn by late Manzoor Qadir, C.J. in PLD 1965 Lahore 390 re: Akhtar Ali v. Altaf-ur-Rehman between the objections raised to the proceedings and the one raised "in the proceedings". And, it was held that objection to the jurisdiction could be taken at any stage of the proceedings. Learned Legal Advisor, on the other hand, stresses that these grounds would require further investigation and, therefore, cannot be allowed to be raised in second appeal as laid down in (1964) 10-Tax-50-Trib. It is a wholesome principle of law that a fresh ground should not normally be allowed to be taken in appeal when for adjudication thereon it would be necessary to send the case back to the lower authorities for a finding which could only be given after holding fresh investigation into the matter." Reference has also been made to another case reported as 1962 PTD (Trib.) 125 wherein a Division Bench of this Tribunal refused to allow raising of additional grounds involving question of fact which was well within knowledge of the assessee and was not raised at an earlier stage. These cases, however, do not support the stand taken by the Revenue before us because in both of these cases the additional questions revolved round a factual controversy whereas in the facts and circumstances before us neither a remand will be required for determination of any fact nor any additional evidence has been requested to be admitted at this stage. In elucidation of the additional grounds the learned counsel of the assessee has, not relied upon or otherwise prayed for entertainment of any evidence or a document which is already not available on record. Therefore, the additional grounds are allowed to be raised for consideration and adjudication.
10. Taking up the first additional ground we find that there is not much force in it. This ground is based upon a letter written by the assessing officer, ITO Circle Companies-1, Lahore to his Administrative Head the CIT, Lahore on 19-5-1992. In this letter the ITO requested for assignment of jurisdiction over the case of AOP comprising of the two shareholders of the company on the ground that the same would facilitate the examination of other related issues likely to arise in the case of the company. However, this seeking of permission which never came along, hardly supports the objection of lack of jurisdiction on the part of the assessing officer, Companies Circle, Lahore. Merely because the assessing officer was not permitted to ensnare the directors of the company as AOP for matters which might arise out of the proceedings in case of the company does not by itself disentitle the assessing officer Companies Circle Lahore to exercise his powers qua the assessee company. There is another angle of the objection which the learned counsel for the assessee rather numbered and avoided pinpointing in exact terms. It may be understood to mean that the assessee wants to have best of both: that the ITO Companies was not competent to frame assessment in the status of a limited company because as per his aforesaid letter impliedly he agreed that the plot in question having been purchased by the directors from their own funds and before the incorporation of the company factually belonged to them as individuals. And, if the property belongs to AOP then the period for netting in the AOP into an assessment has already gone.
11. It is an admitted position that the plot in question was purchased in the name of the assessee-company some nine days before its actual incorporation. The assessing officer through the said letter brought this fact to the knowledge of his Commissioner. However, this aspect of the matter that the assessee company is the owner of the property in question has never been disputed before the authorities below nor even before us. The assessee-company continues to hold out and claimed title to the property in question though purchased out of the money advanced by its aforesaid two directors and while it was still in the process of incorporation. Presumably the assessee-company has avoided such a disclaimer to avail the benefits of the protection of section 20 of the Transfer of Property Act (IV of 1882). Therefore, an absolute estoppel in the circumstances of the case has matured against the assessee-company in this regard. Thus even if the aforesaid objection of the learned counsel for the assessee is allowed for argument's sake, the request by the assessing officer was at best his expression of an intention to lift the corporate veil which was not allowed to him by his controlling officer. Since the decision in the famous case of Salomon v. Salomon & Company (1897) AC 22-HL, wherein the doctrine was introduced for the first time, there has never been a single decision in England or other common law countries including the sub-continent holding a Court or authority to be bound to lift the corporate veil. The corporate veil is lifted when it is so required by the provisions of a statute or otherwise necessitated by a contentious move of creditors or shareholders or when the circumstances of a case so require. The real question, therefore, would be as to whether the assessing officer was bound, or on his motion the Commissioner of Income Tax to order lifting of the corporate veil. The reply is a big no. As observed above such request has not been made even before us. Even if it had been made by the assessee-company, in the circumstances of the case, we would have refused to entertain the same and to lift the corporate veil. For, those who seek advantages of corporate personality must accept the corresponding burden. Once the posture of an artificial person or juristic legal entity has been assumed by natural persons, they cannot be allowed to throw away the cloak at their fancy and show up their faces to claim an advantage which is no more available to them due to diversity in the role adopted. A similar feeling was expressed by Villiers, C.J. in the South African case Ochberg v. C.LR (1931) A.D 215 at 232: "to say that a company sustains a separate persons and yet in the same breath to argue that in substance the person holding the shares is the company is an attempt to have it both ways which cannot be allowed".
In reply to the submissions made by the learned counsel for the assessee the Revenue has very rightly pointed out that the defence is too late in the day in fact as well as in law because whatever be the legal status of the assessee company on the date of registration of the sale-deed, neither the husband nor his wife the only shareholders and directors can sell or dispose of any inch of the property in question though purchased by the funds provided by them. The sale deed was registered in favour of the assessee-company whose incorporation was underway at that time and, therefore, all interest in the property vested in it the moment it was borne by way of incorporation on 14-1-1989. In the balance-sheet filed for the relevant period, the assessee itself declared ownership of the property. And, till this day it is neither ready to part with it nor it has offered to disclaim its right qua the property. It is also stated by the Revenue that in spite of claim to the title of the property the objection in question has only been raised in order to get the assessment barred by time for the period relevant to the purchase of this property. Learned Legal Advisor further contends and we tend to agree with him that the assessee cannot be permitted to shift positions only in 1995 Appellate Tribunal Pakistan order to defeat the provisions of the Ordinance, and therefore, the incidence of proper taxation. A Single Bench of the Lahore High Court in Sh. Abdul Hakeem v. CBR PLD 1975 Lah. 287 reproduced with favour the principle stated in the case of Hafeezuddin v. Mian Khadim Hussain cited as PLD 1965 Lah. 439: "a party litigating must act consistently. It is wholesome doctrine of law that a party cannot be allowed to play fast and loose, blow hot and cold, approbate and reprobate to the detriment of his opponents. Where a person knowingly and wilfully invites the Court to adopt the procedure he cannot be permitted to turn around and blame the Court for the very same procedure which he himself invited the Court to follow". The assessee itself filed the impugned return in the companies circle as a private limited company and till this day continues to assume the title as also the legal implications incidental to a private limited company.
12. To repeat, we find that the assessing officer did not ask the Commissioner for jurisdiction to assess the assessee-company as an AOP as repeatedly stressed by Mr. Ilyas Zafar. The plain language of the letter does not need an interpretation. The assessing officer simply wanted that both husband and wife who were the only directors and shareholders of the company and otherwise independent assessees in another circle be allowed to be proceeded as an AOP in their capacity as natural persons. Because, in the words of the ITO the conferment of jurisdiction would facilitate him to examine other related issues likely to arise in the case of the company". This being so the reliance of the learned counsel for the assessee on 1987 PTD 485 re: Kishan Das Sakuio v. CIT and others on lack of jurisdiction of the assessing officer does not 'appear proper. In this reported case a Division Bench of the Karachi High Court held that the assessing officer having jurisdiction at the time of filing of return might not have jurisdiction at the time of passing of the assessment order. It was further found that due to change in the jurisdiction of the concerned CIT who was to confer local jurisdiction on the assessing officer he could not proceed and frame an assessment order unless it was shown that he was specifically authorised to process the return filed by the applicant. There appears no dispute with the proposition. And, equally no relevance to the facts and circumstances before us. Another case relied upon by the learned counsel on this subject is reported as 1968 PTD 741 re: Sh. Muhammad Amin, Lyallpur v. ITO, Jhang and another. In this case their Lordships of the Lahore High Court found that even an agreement by an assessee could not confer a jurisdiction upon an assessing officer who was otherwise not vested with the jurisdiction according to law. Relying on this judgment the learned counsel for the appellant contends that the assessing officer having himself once found that this was a case of an AOP mere fact that the property was declared and hold out to be owned by the assessee-company could not confer jurisdiction on the assessing officer. The general preposition is again not disputed. However, its aid to the assessee cannot be upheld inasmuch as the assessee cannot be allowed to sail against the waves set in motion by itself. The objection is otherwise fallacious because, as observed above, the assessing officer never held the case of the assessee to be that of an AOP. The objection is overruled.
13. The other additional ground that the impugned addition was illegal as the same was not made in the relevant period is again misdirected. The back ground of the submission is that through the return filed on 10-10-1990 the assessee not only declared its accounting period as 31-12-1989 but also submitted a copy of the balance-sheet drawn uptill that day. Subsequently, allegedly, in reply to a notice under section 56 of the Ordinance another return was filed to again declare nil income but with a different accounting period i.e instead of 13-12-1989 it was declared to be 30-6-1990. The case of the assessee is that having revised the return as per requisition of the assessing officer the earlier filed return automatically became redundant and, therefore, could not be made a basis for framing-of the assessment. The actual position however, is different. The assessee duly declared the calendar year as its income year. The financial year as accounting period was declared for the first time in the year 1991-92. The changed accounting period having been pointed out to the assessee, in order to avoid involved permission for the change it revised earlier return filed for the year 1990-91 and changed the period to 30-6-1990. The reply of the assessee dated 27-2-1993 affirms this fact. In this very reply the assessee attempted to disown its earlier return and to take a refuge in the far fetched interpretation of subsection (261 of section of the Income Tax Ordinance. It was stated that since the assessing officer had required the assessee through his notice dated 3-11-1990 to file returns for the year 1990-91 till 30-6-1990, it had only complied, with the requisition. These positions arc contrary and destructive of each other. And. at any rate imply that the assessee never wanted to declare the financial year as income year but for the alleged direction issued by the assessing officer by way of the said notice under section 56 of the Ordinance. The stand taken by the Revenue before the first appellate authority, as observed above, is that the intention behind the change of accounting period was nothing but to get the assessment covering the period of purchase to be time-barred. Learned first appellate authority agreed with the submissions made by the Revenue and held that there being nothing it, section 2(26) of the Ordinance which permitted assessee to change once adopted and declared accounting period held against the assessee.
14. Learned counsel for the assessee contends that no business having been conducted by the assessee during the year 1989 its adoption of calendar year as accounting period was illegal and therefore the assessing officer by way of the aforesaid notice under section 56 of the Ordinance rightly demanded from the assessee to file fresh returns showing financial year as income year. The contention that the assessing officer ever asked the assessee to do the same, however, is not supported from the record. Learned counsel also skips the last phase as used in section 2(26)(b) of the Income Tax Ordinance: "and the accounts of the assessee have been made up to the last day of the said calendar year" as inserted by Finance Ordinance, 1980. If the assessee had drawn up accounts and then filed them for the calendar year 1989 then how it took upon itself to change the period is 'not replied by the learned counsel for the assessee. A return can definitely be revised before framing of assessment but option once exercised under section 2(26)(b) cannot be so revised or changed at the whim of an assessee. Revising a return under section 57 of the Ordinance requires discovery of "any omission or wrong statements therein". Here the case of the assessee has all along been that the period was changed in reply to the notice of the assessing officer dated 3-11-1990. Therefore, the contention is not only factually incorrect but also adverse to the assessee in legal implication. The other contention of the learned counsel for the assessee that there having been no business in the year 1990-91 the assessing officer ought to have discarded the calendar year as income year being violative of the provisions of section 2(26)(b) of the Ordinance also appears superficial. In support of his contention he places reliance on a reported case cited as 1990 PTD 974 re: Mustafa Prestressed RCC Pipe Works Limited, Karachi v. Commissioner, Sales Tax (Investigation), Karachi. In this case it was held that a Court has not to rely on the parties and their advocates for producing documents but to make research to fiend out state of law applicable to a case. According to the learned counsel for the assessee the assessing officer should have thrown away the return indicating calendar year as accounting period since it had done no business in the year under review although a statement of accounts had duly been drawn up to the last day of that period. The contention cannot be accepted. The ratio of the case relied upon is not at all relevant to the facts of this case. Most important thing is that under the provisions of the Ordinance an assessee has a choice to adopt a particular period as its income year. In the reported case, it was held that the Income Tax Appellate Tribunal had to pass order on the basis of the record made available to it. It was only with regard to matters of which a Judicial notice is taken of i.e. statutes, rules or Gazette notifications that their Lordships desired a research by a Court or Tribunal. Their Lordships also specifically held that the documents produced by the parties may not be looked into if not produced at the relevant time. Another case relied upon in this regard is cited as 1989 PTD 311. In this case this Tribunal held that an investment had to be taxed in the year in which it was made. The ratio is a general statement of law and when seen in the perspective of the facts before us lends no help to the assessee.
15. In the next case relied upon by the learned counsel a Division Bench of the Supreme Court of India in (1986) 160 ITR 920 at 928 re: CIT Delhi v. Maha Luxmi Sugar Mills Company Limited found that a duty was cast upon the ITO to apply the relevant provisions of the Indian Income Tax Act for the purpose of determining the true figure of assessee's taxable income and the consequential tax liability. This general statement of law again had a reference to the framing of assessment where an assessee failed to claim benefit of set-off. Their Lordships held that the assessing officer in such a situation was not absolved of his duty to apply section 24 of the Indian Income Tax Act merely because the assessee had failed to claim set-off. The facts and the ratio of this case also do not fit in the set of pattern before us. To accept the proposition advanced by the learned counsel would amount to declare an assessing officer to be a tax advisor to every assessee. Still more difficult to accept is the contention that even in those matters where the assessee has an option, adoption of the accounting period in the case before us, an assessing officer should enter in consultation with the assessee counseling him .on pros and cons of the adoption of a particular period before entertaining the return and framing an assessment. This is too imaginative a concept to be accepted.
16. The Revenue in defence relies heavily upon certain observations of the Madhya Pradesh High Court in re: Binodi Ram Balchand v. CIT (1962) 44 ITR 249 at pages 254 and 255. The real issue before their Lordships related to the question of taxability of income earned by the assessee an undivided Hindu family in States grouped in different categories made in the Indian Constitution. The assessee before extension of the Indian Income Tax Act, 1922 to Part 'B states wherein its head office and some of the branches were situated was assessed as a non-resident for the purpose of determining of part of its income from agency commission from a company outside British India. For this purpose Dewali year used to be taken as the previous year for ascertaining its total world income. In the year 1950-51 after extension of the Income Tax Act to these states as aforesaid the assessee claimed that in respect of agency commission from the said company, its previous year was the one ending March 31, 1950 and not the Dewali year ending October 21, 1949. The Appellate Tribunal held that it was not open to the assessee to vary the previous year which had once been adopted. On- reference their Lordships of the Madhya Pradesh High Court, inter alia, found that in the circumstances the assessee could not be said to have been previously assessed within the meaning of the expression "has once been assessed" as used in proviso to section 2(II) (i) (a) of the Income Tax Act, 1922 merely because the income from the said source was included in its total world income for determining the rate of tax applicable to it in the assessment years before 1948. While dilating upon the issue of exercise of option their Lordships remarked: "for the validity of an option, it is essential that the party opting should be cognizant of his rights. The party must have the knowledge of his or her right to opt and of those circumstances, which would influence the exercise of an option. Even if it is held that such an express statement is not essential there can be no doubt that the exercise of option must be demonstrably plain either by express or implied act involving the utter improbability of the party adopting the other choice open to it." At page 255 of the reported case it was further remarked: "The option can be exercised in any case until the filing of the return and under section 22(3) the assessee has the liberty to furnish a revised return at any time before the assessment is made if he discovers any omission or wrong statement therein. " The obitor dicta in this case which was affirmed by the Supreme Court in (1970) 77 ITR 128 thus support the submission of the Revenue as discussed above. The exercise of option for a calendar year is not denied. It is also not the case of the assessee that accounting period was changed due to discovery of any omission or wrong statement therein. The accounts were admittedly made up and filed to the last day of the calendar year so adopted. In the circumstances since period of purchase squarely falls in the assessment year under review as declared by the assessee itself, we find no force in the objection made for the assessee.
17. Before proceeding further two other objections of the assessee relating to the proceedings in this case need to be considered. The first cont6ntion is that the assessing officer having got the estimated price approved by his Controlling Officer, the IAC, the notice confronting the price was a mere fait accompli and as such was unfair. The other objection is that the price of the plot as evidenced by a registered sale-deed and also confirmed by the District Collector could not be rejected or disbelieved by the assessing officer.
18. The emphasis of the learned counsel for the appellant that notice under section 13(2) of the Ordinance confronting the assessee with the price already determined and confirmed by the controlling officer of the assessing officer was a mere fait accompli cannot be accepted in the circumstances of the case. Fait accompli is a French word though in frequent use in English language. According to Black's Law Dictionary, Fifth Edition it means "factor deed accomplished, presumably irreversible". In Chambers' Twentieth Century Dictionary, New Edition, 1983 fait accompli is described to mean "accomplished fact, a thing already done". And per Oxford Advanced Learners Dictionary of Current English, 20th Impression, 1985 fait accompli means "accomplished fact, something done and, for this reason not reverseable". To say that a party was confronted with fait accompli means that requirements of natural justice were not fulfilled as what the party was asked to explain was a mere formality inasmuch as the decision had already been taken. Learned counsel for the assessee in support of his submission relies upon reported case from Indian jurisdiction cited as (1968) 70 ITR 518 at 530 re: Lima Lietao & Company Limited v. Union of India. In this case the question before the Judicial Commissioners Court of Goa, Daman and Diu precisely was whether a non resident time chartered who chartered a ship for a single voyage for carrying the charterers own goods from a port in India on payment of daily hire to the owners of the ship was liable to pay income-tax under section 172 of the Income Tax Act, 1961. The Commissioners- found that the amount paid to the owner of the ship by a time or voyage charterer by way of daily hire was not freight for carriage of goods but was in nature of rent and therefore could not form basis for an assessment under the aforesaid provisions of the Act. The petitioner company in that case acted as an agent of the Charterers M/s. General Ore International Corporation, Lichtenstein. The ship was chartered for a single voyage from Cochin to Japan. From the terms of agreement it emerged that time charterer was the disponee owner and the master of the ship its agent. The appellant as an agent for the charterers also became a guarantor and undertook that in case of default by the principal in payment of the sum payable as income tax it shall be liable to pay the said amount to the President of India. Before the learned Commissioners it was argued that the petitioner-company was not given a hearing before it was asked as a guarantor to pay the tax assessed. In reply the Government Pleader appearing for the Revenue relied upon the letter issued by the assessing officer to the appellant-company wherein they were informed that the amount for hire payable to the owners of the ship by the charterers would be basis of assessment under the said provisions of law. The Judicial Commissioners found the letter and its contents to be a mere fait accompli and therefore, held that no proper compliance with the principles of natural justice was made before burdening the guarantor company with the liability to pay the tax payable by the principal.
19. In the case of the assessee before us the notice confronting the proposed value was a statutory requirement as contemplated under subsections (1) and (2) of section 13 of the Income Tax Ordinance. It was observance of the principles of natural justice rather than a denial. This Tribunal in a number of cases of which 1986 PTD (Trib.) 576, 1987 PTD (Trib.) 300 and 1989 PTD (Trib.) 150 can be referred to, has explained the procedure which an assessing officer is supposed to follow before holding unexplained investments etc. to be deemed income. The case-law that has developed on the modes and modalities of confronting the assessee in such situations clearly indicates that the proposed value of investment etc. has to be certain and definite. In 1989 PTD (Trib.) 1233 we held that a definite sum of money had to be conceived by the assessing officer and then expressed in unequivocal words to the assessee before making an addition under section 13(2) of the Ordinance. Confronting the assessee with such amount after involving the I.A.C. cannot be a fait accompli because the assessing officer can always accept a legitimate contention assailing the proposed value. Although the exact procedure described by this Tribunal in the above noted cases has lost part of its significance due to changes introduced in section 13 of the Ordinance by the Finance Act, 1992, the method adopted by the assessing officer in this case was perfectly in accordance with our suggested mode and, therefore, the norms of natural justice. Prior approval of the IAC has not remained a part of the aforesaid section yet its receipt by the assessing officer as a matter of precaution was rather a beneficial factor and did not at all result into any prejudice to the assessee. If the general thesis of the learned counsel is allowed to prevail, the principle of natural justice that no one shall be condemned unheard and the myraid of case-law evolved on the principle will become redundant. Because, to ask a person for his reply explanation or defence, every allegation, charge or proposed action and the facts leading to such allegation charge or proposed action are to be told in clear and uncertain terms. In the reported case relied upon by the learned counsel for the assessee the assessing officer only "informed" the basis on which the tax liability of the principal had already been determined and the guarantor was asked to pay the sum so determined. The situation cannot be equated with the one before us as the assessee was time and again asked to explain why a particular sum should not be adopted as a price of his plot. Factually a chain of notices was issued and voluminous replies were submitted by the assessee on this issue. The assessing officer fairly recounted the objections raised and attempted to justify rejection of the submissions made in support of the declared value. The reference to the impugned approval in the assessment order indicates that the assessing officer was under the impression and considered himself obliged to obtain prior approval of the IAC although the same had already been done away with by the Finance Act, 1992. As explained earlier, obtaining of prior approval which was in vogue earlier to the amendment in section 13 of the Income Tax Ordinance in 1992 was neither prejudicial to the interest of the assessee nor its confrontation to the assessee amounted to fait accompli and therefore a denial of natural justice.
20. Next contention that the price evidenced by the registered deed and accepted by some of the State functionaries including District Collector/Registrar, Lahore should have been accepted is sought to be supported from 1986 PTD (Trib.) 855 and 1989 PTD (Trib.) 1233. In all these cases it was held by this Tribunal that the assessing officer though not bound by the valuation adopted by the other official agencies yet he could discard the value so adopted only for valid reasons to be recorded. To support the other side of the same submission that a registered sale-deed being a public document and therefore entitled to be respected as such, a number of decisions have been cited at the Bar. These are discussed in the order of their presentation.
21. In PLD 1961 (W.P.) Pesh. 62 re: Ali Muhammad v. Malik Sanwal and others a Single Bench of the Peshawar High Court in a pre-emption suit found that an allegation that the transaction was different from the one described in the deed must be based upon evidence of very strong character. In 1986 PTD 396 re: Nafees Bakers v. Deputy Collector, Excise and Taxation, a Single Bench accepted the contention of sale of business in a Constitutional petition challenging levy of sales tax on the basis that the assessee had sold the business through a registered deed. In this case the learned Judge accepted the sale-deed as an evidence of transfer of business by the assessee as no counter-affidavit was filed by the Revenue. In PLD 1970 SC 299 re: Malik Hussain and others v. Lala Ram Chand and others a Full Bench of the Supreme Court in a pre-emption suit found that where the price mentioned in the deed was shown to have been paid by the vendee, Court in such cases need not determine the market value of the property. In 1991 PTD (Trib.) 639 a Division Bench of this Tribunal held that registered deed being a public document, price mentioned therein carried an element of sanctity unless it was controverted by evidence.
22. None of the cases relied upon by the assessee, however, directly or indirectly mandate acceptance of the value declared in registered sale-deeds without a qualification. It has nowhere been held that an irrebuttable presumption of truth attaches to a registered sale-deed or that the Revenue is absolutely bound by the recitals contained therein: neither the assessing officer has been restrained from questioning the price which in all probability ought to have been received or paid by an assessee.
23. At this juncture learned counsel for the assessee moves on to his most favourite argument: that Islamic law having been declared to be supreme in the country all acts and functions of public authorities are subservient to the Injunctions of Islam. The State and its organs according to the learned counsel cannot interfere in any manner in a transaction which is not prohibited by Islam. It is also stated that a lawful agreement/contract entered into by two Muslim parties is not amenable to State intervention in any guise whatsoever. The insertion and declaration of Article 2A (and therefore of the Objectives Resolution) to form part of substantive provisions of the Constitution is forcefully referred to. Specific mention is also made of two reported decisions of Supreme Court of Pakistan. These are 1989 PTD 894 and 1991 PTD 488. In 1989 PTD 894 re: Mian Aziz A. Sheikh v. CIT (Investigation), Lahore while discussing the canvas of Article 227 of the Constitution the Supreme Court of Pakistan found that no authority including the tax authorities had any power to lay down an un-Islamic rule. Advancing his argument on the ratio of this case the learned counsel submits that the transaction in question being not un-Islamic the Revenue exceeded its authority by substituting its own price for the one settled between the two parties with their free will. This argument cannot hold us long. Confronted with a similar argument and to a similar situation this Tribunal has recently explained the ratio of the other cases decided by the Supreme Court of Pakistan cited as 1991 PTD 488 CIT v. Siemen A.G. In that case cited as 1994 PTD (Trib.) 535 after considering various sources of Islamic jurisprudence and their implication, it was opined that there was nothing un-Islamic in ascertaining the correct and true valuation of property for the purpose of taxation without frustrating a contract between the parties. It was held:
"The State is authorised to levy taxes and in doing so can enact the laws for estimating the reasonable value of the properties as prevailing at a particular time in a particular locality. When State is empowered to levy the-taxes it is empowered to take all necessary acts in furtherance thereof without infringing the rights of individual parties, accruing to them under the freely concluded contracts/transactions and without doing any violence to any of the rights conferred on the individuals or any other person under Shariah. "
24. Being in full agreement with these findings we will adopt them to reject the contentions made by the learned counsel that the assessing officer was bound to accept the price evidenced by the sale-deed or was otherwise not competent to determine the price actually paid.
25. This brings us to the consideration of the value of the plot in question. On this issue the arguments of the parties have already been given above. Precisely the assessee contends that the Revenue having accepted the price declared by the seller could not reject the price when declared by the purchaser. Secondly that in the parallel case referred to in the assessment order the price estimated in respect of 3 Kanals 12 Marlas plot was further reduced in appeal from Rs.2 lacs - to Rs, l lacs per Marla. The instructions issued by the RCIT Central Region, Lahore through Circular No.23 of 1988 are also referred to in support of the submission. However, this circular has nothing to do with the question of valuation of plot in the hands of the assessee. The other submission that the Deputy Commissioner/Registrar/Collector, Lahore in his letter to Chief Officer, Municipal Corporation. Lahore dated 26-1-1989 supported the registered value of the property at Rs.22,350,000 has also been repeated. The rates notified by the District Collector, Lahore under section 27-A(1) of the Stamp Act, 1899 are also cited to say that the registered value of the property in question was in accordance with the prevalent market rate and that no under valuation had been attempted by-the assessee.
26. We have already dealt with the question of acceptance of certain value by the official agencies. These are not binding upon an assessing officer who can always reject them for valid considerations and keeping in view the, obtaining circumstances in each case. In 1993 PTD (Trib.) 952 this Tribunal decided that a person may have so many reasons for acquiring a property at a lower rate than the prevalent market rate. And that the assessing officer is to see the price actually paid and received by the parties. In such case the burden shall be on the assessee to explain the reasons for acquiring the property for inadequate consideration. The explanation by the assessee that M/s. Hatta Construction Company, the sellers wanted to sell the plot in question on account of financial difficulties and, therefore at a cheaper price has also not been established on record. In a number of cases we have held that the prices notified by the District Collector under the aforesaid provisions of the Stamp Act being the minimum rates acceptable for levy of stamp duty are not binding upon an assessing officer. These could at best be one of the considerations for estimating or determining the market value or the price actually paid. The other submission that the seller M/s. Hatta Construction Company Limited declared the price of the plot as evidenced by the registered deed and was accepted by the Revenue is not a plain truth. It is in this regard submitted by the Revenue that M/s. Hatta-Construction Company did not declare any capital gain on this deal and therefore, their value was not strained at by the assessing officer. Learned Legal Advisor has also brought to our notice that in the year 1987-88 M/s. Hatta Construction Company declared purchase price of the same land at Rs.2 crore although the registered deed dated 12-7-1986 evidenced the value of the plot at Rs.1 crore only. The assessing officer accepted the declared purchased price at Rs.2 crore in the assessment order for the year 1987-88. The average purchase rate according to the declared price worked out at Rs.58,309 per Marla and, therefore, it appeared reasonable to him in that year.
27. Parties before us have attempted their best to identify the plot in question in a divergent manner. According to the Revenue the situation of the plot is the most attractive one in the city. On the other hand, the assesee enumerates a number of demerits including the proximity of the plot in question to the Governor's House and, therefore, it s being subject to, building control regulations. According to the assessee a multi-storey building cannot be constructed at the site and in fact the civic authorities (LDA) of the city have refused a plan submitted for construction of a multi-storeyed building. However, the map produced before us does not indicate that the plot in question is in immediate neighborhood of the Governor's House. The contention of the learned counsel that the LDA refused construction of a multistory building has also not been established on record. No document has been produced to support the contention. Even if the phrase 'tremendous commercial value' as used by the assessing officer is accepted with reservations the ideal location of the plot cannot be denied. The comparison of this property by the assessing officer with a smaller plot located at Wahdat Road is as much improper as its comparison by the assessee with the residential house purchased by one of the Directors and allegedly situated in a 15, foot lane at Empress Road. Also the submission by the assessee that only an area of 5 Kanals was worth using as commercial property is not borne out from the record. The contention otherwise appears unnatural in the circumstances that a party would purchase a big chunk of 17 Kanals 3 Marlas 191 sq. ft. of valuable land out of which only one, third is usable as commercial property.
28. After hearing the parties on the issue we find that the assessing officer keeping in view the locality of the plot in question as also some of the parallel cases cited in the body of the assessment order, was justified in rejecting the declared sale price. However, we do feel that certain facts most important of which being the size of the plot was ignored by the assessing officer. Generally a purchaser of such a big chunk of valuable land is scanty and very few in number. All the more so when the sale was in one lot and apparently whole price was paid at the time of execution of the sale-deed. The immediate use of the property as declared has not resulted into any windfall for the assessee. At the same time the fact remains that even the seller of the plot M/s. Hatta Construction Company Limited as against ostensible purchase price of Rs.1 crore declared the same at Rs.2 crore in the year 1986. The time lapse between the purchase by the said construction company and then its sale to the assessee company before us comes around three years. In this period appreciation in price though not at the rate visualised by the assessing officer, it has definitely been there.
29. Learned first appellate authority 'allowed the relief being agitated against by both of the parties in view of the said considerations. He reduced the estimated purchase price by a margin of Rs.55,000 per Maria. This relief when seen in the perspective of the size, the location of the plot and of the price ultimately settled in respect of another plot purchased by one of the Directors appears reasonable and in consonance with the prevalent market price.
30. Therefore, we will reject the cross-appeals.
M.B.A./63/T.T.Cross Appeals rejected.