I.T.A. NO. 3509/LB OF 1995, DECIDED ON 14TH DECEMBER, 1995. VS I.T.A. NO. 3509/LB OF 1995, DECIDED ON 14TH DECEMBER, 1995.
1996 P T D (Trib.) 327
[Income-tax Appellate Tribunal Pakistan]
Before Muhammad Zaman Khan, Judicial Member and Ashfaq Ahmed,
Accountant Member
I.T.A. No. 3509/LB of 1995, decided on 14/12/1995.
Income Tax Ordinance (XXXI of 1979)---
----Ss. 13 & 59---C.B.R. Circular No.7(13) DT-14/93, dated 29-6-1993-- Deemed income---Addition---Purchase of property by assessee---Allegations of under statement of value by assessee---Exclusion of assessee's case from Self Assessment Scheme---Validity---Held, intention of S.13, Income Tax Ordinance, 1979 was to tax concealed income and if the assessee had produced the documentary evidence to establish the price, that price should be accepted for the purposes of S.13, Income Tax Ordinance, 1979, unless the Assessing Officer had some tangible material evidence on which he might legitimately depend to differ from the price mentioned by the assessee which usually widely diverge-- Sale-deed being a very solemn document which based on three statutes viz. Transfer of Property Act, 1882; Registration Act, 1908 and Stamp, Act, 1899-- Assessing Officer could not underrate its evidential value---Assessing Officer could not demolish the recitals of the sale-deed without corroborative evidence on the mere allegations of understatement and such valuation of Assessing Officer was not sustainable in law even if the market value of property was on the higher side---Mere mentioning of "local enquiry" in the assessment order passed by the Assessing Officer would not be sufficient for the proper valuation of the properties---Assessing Officer had failed to justify that the case could be excluded from the purview of Self-Assessment Scheme particularly when there was nothing on the record to show that the assessee had expended more money to purchase the property than the one rectified in the sale-deed and recitals regarding consideration in the deed were also taken as genuine and adequate by the Collector/Sub-Registrar of the District at the time of registration of sale deeds---Criteria which had to be observed and followed to exclude the case of the assessee from the purview of Self-Assessment Scheme was totally missing in the case---Orders passed by the Assessing Officer therefore were not sustainable in law in circumstances---Tribunal vacated the order of A.A.C. and cancelled the assessment with direction that return filed by assessee be accepted in Self Assessment Scheme.
Sohail Babri, I.T.P. for Appellant.
Sartaj Yousuf, D.R. for Respondent.
Date of hearing: 7th December, 1995
ORDER
MUHAMMAD ZAMAN KHAN (JUDICIAL MEMBER). The assessee has filed this second appeal in which the order, dated 7-6-1995 rendered by the then A.A.C. of Income Tax, Faisalabad, has been assailed. Earlier Assistant Commissioner of Income Tax Circle-21, Faisalabad had finalized assessment in this case vide his order, dated 30-4-1995. The assessment pertains to the assessment year 1994-95. The assessee/appellant derives income from sale of cement. The brief facts of the matter are that the assessee had declared net income at Rs.106,230 with gross sales of Rs.5.11 (M) under the Self Assessment Scheme. The assessing officer had received information that the assessee had purchased two plots measuring 5 Kanals 9 Marlas and 6 Sarsahi in May, 1994. The declared value of these plots was Rs.327,000 giving average of Rs.2,984 per Marla. These plots are situated in Square No. 17, Chak No.204/RB, Faisalabad. The assessing officer happened to have in his possession an Iqrar Nama (agreement of sale) of a landlady by the name of Mst. Siddiqan Bibi of the same area which indicated that the landlady had agreed to sell her land at the rate of Rs.13,50,000 per acre thus giving an average of Rs.8,437 per Marla. This relates to the early period of 1990. The assessing officer, therefore, after confronting the assessee set apart the case of the assessee for normal assessment. Sales from cement were estimated at Rs.5.6(M) and after applying G.P. rate at 6.25% and making certain additions out of P&L account, the assessing officer determined the net income from business at Rs.193,147. The assessing officer also estimated the value of plots at the rate of Rs.18,000 per Marla and made an addition of Rs.16,47,000 in the income of the assessee under section 13(1)(d) of the Income Tax Ordinance. 1979.
2. First appeal was lodged by the assessee contending that the assessing officer was not justified in setting apart the case of the assessee for normal assessment since he had no "definite information" in his possession regarding the understatement of the value of plots purchased by the assessee. The mainstay of the assessee was that the assessing officer was wrong in basing his estimation of purchased price of the plots on the said Iqrar Nama, the copy of which was never provided to the assessee. The reply of the assessee was that the statement of the landlady, who had allegedly executed the Iqrar Nama dated 31-1-1989 has not been recorded in the presence of the assessee, that it was not clear whether the Iqrar Nama was really executed between the genuine parties and that since the statement of the persons from whom the assessee had purchased the plots was not recorded to ascertain the genuineness of the price paid by the. assessee, no reliance could be placed on the said Iqrar Nama for the aforesaid reasons and also for a variety of some other reason's. In short the case of the assessee was that the aforementioned Iqrar Nama as such could not be called definite information" as against the registration deeds/documents of the assessee to set apart the case for assessment under the Normal Law.
3. Regarding the estimation of sales from Cement, the plea of the assessee was that the same were excessive. The additions made out of the P&L account expenses, are also alleged to have been made without any objective basis.
4. The first appellate authority, at the conclusion that the assessment made by the assessing officer regarding the value of plots was slightly excessive.` According to him the fair value of the plots of the assessee was Rs.14,000 per Marla and thus the assessing officer was directed by the A.A.C. to modify the addition made under section l3(1)(d) accordingly: Regarding the estimation of Cement sales, the A.A.C. also found the same on the higher side and: reduced .them to Rs:5.4(M) as against the declared sales of Rs.5.1(M). Some of the additions made, out of P&'L account expenses have also been reduced by the first appellate authority.
5. Aggrieved by the order of the A.A.C. the assessee, as indicated above, has filed the second appeal, which is being disposed of by us through this order.
6. In the second appeal the case of the assessee is that the return filed by him qualified for acceptance under section 59(1) and thus it was illegally excluded from the self-assessment scheme, that the addition made under section 13(1)(d)13(2) was illegal, that the gross profit rate applied at 6.25% or sales of Cement was excessive and that the additions/disallowances out of P&L account expenses were illegal and excessive.
7. We have heard the learned authorized representatives of both the parties and have also gone through the orders, which have been rendered in this case by the departmental officers from time to time.
8. As disclosed above, the assessee had filed income-tax return in the status of an individual declaring net income at Rs.106,230 claiming immunity vide para. 5(A) of C.B.R.'s Circular No. 17 of 1994. However, the ease of the assessee was excluded from the purview of S.A.S. with reference to Para. No. l(1) of said Circular with the observations that the evidence of concealment on account of under-valuation of assets was available against the assessee. In these circumstances, the proceedings were completed under the Normal Law, which was contested by the assessee, and assessment was completed under section 62.
9. It has been submitted by the learned A.R. of the assessee that the exclusion of case from the purview of Self-Assessment Scheme was illegal and absolutely improper as the assessing officer had no' definite information to the factum of alleged understatement of the value declared by the assessee. It has been argued that the declared value of the plots was supported by the Registered Deeds and as such the same could not be thrown away merely on the whims and wishes of the department and the valuation of alleged similar other properties could not be considered as definite information in this context as was held by the august Supreme Court in the case reported as 1993 SCMR 1108. Learned A.R. of the assessee has also vehemently argued 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-deeds being public documents according to the Article 85(5) of the said Order, the valuation mentioned in the Registered Deeds ought to have been accepted by the assessing officer in view of the dictum laid down by the Supreme Courts in the cases reported as PLD 1961 Peshawar 62, 1981 SCMR 701, 1980 SCMR 284, PLD 1976 Lahore 6, PLD 1970 Supreme Court 299, PLD 1979 Note 112 at page 83, AIR 1930 PC 217, 1986 PTD 396 and AIR 1934 PC 58.. It has also been submitted that even Income Tax Appellate Tribunal has also favoured the acceptance of the value evidenced by the Sale Deeds as per decisions cited as 198,9 PTD 1233 and 1991 PTD 639 (Trib.). Learned A.R. of the assessee has further submitted that injunctions of Islam also ordain that agreements/contracts duly witnessed between the Muslims should be given effect to and that Surah Al-Baqra of the Holy Qur'an also contained similar injunctions. Regarding the Iqrar Nama of the aforementioned lady, the submission is that the treatment of the same as evidence of concealment was illegal because neither it was in respect of the property purchased by the assessee nor the assessee was party to the said agreement and thus the case was wrongly excluded from the purview of S.A.S. on the basis of said Iqrar Nama.
10. Learned A.R. of the assessee has also referred to the ruling PLD 1961 Peshawar 62 in which it has been held that the "Court should hesitate in the absence of very, strong evidence to the contrary, from rejecting documents which have been executed between the parties with free consent and under which they have parted with their rights in their properties. Written documents, which appear to have been executed without tinge of fraud and compulsion are entitled to great respect in order to confer security on human dealings. If on the mere allegations of persons interested in destroying a transaction, the transaction is destroyed, faith of people in the sanctity of written agreements will be shaken, and there will be no assurance to the parties to the agreement that it will survive baseless attacks and will remain effective. It will be tyranny to the people if they are made to live in a state of affairs under which solemn human dealings are deprived of security of survival".
11. In view of the above, learned A.R. of the assessee has rightly argued that the intention of section 13 is to tax concealed income and if the assessee produces the documentary evidence to establish the price, that price should be accepted for the purposes of section 13 unless the assessing officer has some tangible material evidence on which he may legitimately depend to differ from the price mentioned by the assessee which usually widely diverge. It has been stated that the Sale Deed is a very solemn document which is based on three Acts i.e., Transfer of Property Act, Registration Act and Stamp Act and the assessing officer cannot despise its evidential value and rightly so.
12. Learned A.R. of the assessee has also rightly argued that the assessing officer cannot demolish the recitals of the Sale Deed without corroborative evidence on the mere allegations of under-statement and such valuation is not sustainable in law even if the market value of the property is on the higher side. 1995 PTD (Trib.) 1170; 1995 PTD (Trib.) 1232; 1995 PTD (Trib.) 1179, 1995 PTD (Trib.) 1182, 1991 PTD 639, 1994 PTD 856 and 1993 SCMR 462 (Pakistan's Supreme Court) have been cited in support of the above view. 1993 PTD 952 has also been relied upon to support the contention that even mere inadequacy of the consideration does not render a contract void.
13. Learned A.R. of the assess6e has also referred to various circulars issued by the Central Board of Revenue such as Circular No.7(B)DT-14/93, dated 29-6-1993 in which the assessing officers have been required not to assess the valuation of immovable property in arbitrary manner and they should disagree only if they are in possession of sufficient evidence to establish the basis of adoption of other value. Learned A.R. of the assessee has also submitted that mere mentioning of - "local inquiry" in the order: passed by the assessing officers was not sufficient for the proper evaluation' of the properties.
14. Learned A.R. of the assessee has also contended that the Iqrar Nama of the lady relied upon by the authorities below was in respect of different property and that the sales in respect of that property were in fact made in 1991 at the price ranging from Rs.2;052 per Marla to Rs.2,111 per Marla. Copies of some Sale Deeds in this regard have also been placed on our record by the learner A.R.' of the assessee during the course of arguments. Learned A.R. of, the assessee has also filed copies of various other Sale Deeds in respect of the lane situated in Chak No.204/RB wherein the average sale price is also in the similar range as in the present case. The main thrust of the contention of the learner A.R. of the assessee is on the lack of evidence of concealment as the Iqrar Nama of the lady which is relied upon by the assessing officer did not pertain to the assessee or his land and as such the same could not be held as evidence for concealment and further that evidence of concealment could only he in the shape of definite information and the expression definite information means much more than mere material so as to cause a reasonable belief or even such evidence which might lead to definite belief. In other words mere existence of an evidence, which may. lead to even a certain conclusion will not be converted within the parameters of definite information, which necessarily means a direct information which need not to be put to further trial by supporting material Learned A.R. of the assessee, has, therefore., very pertinently concluded that from the facts of the case in hand it stands established that the lack of availability of definite information remains present all along and the case of the assessee from the purview of S.A.S. could not be excluded on the lone basis of said Iqrar Nama; which was not relating to the assessee or his land and was as such not relevant particularly when the enquiries made were also based on presumptions.
15. Learned A.R. of the assessee has also referred to a case decided by the Income Tax Appellate 'Tribunal and reported as 1988 PTD (Trib.) 987 in which the following view was expressed:---
"Any return which is to be taken out of scheme or denied the facility of Self-Assessment or set apart for normal assessment has to be under exceptional circumstances and after careful examination of all aspects, strict criterion has been prescribed e.g., "positive evidence of concealment". Positive evidence is much more than "information" and something very near to an established fact."
16. Learned A.R. of the assessee has also referred to 1988 PTD (Trib.) 612 and has submitted that the assessing officer was not required to make a detailed enquiry to find out as to whether any concealment has been made by the assessee and then to disqualify his return from the Self-Assessment Scheme. It has been further held in the said regard that in such cases, the assessee's return should be accepted as such and if the assessing officer has any doubt or has any information he can make an enquiry subsequent to the finalization of the assessment and if any concealment is discovered because of the assessee can be re-opened under section 65. It was further observed in the said citation that to sit in judgment at the time of the processing of self-assessment return merely on the basis of suspicion is not visualized by the Self-Assessment Scheme and it was for that reason that under Rule 9 of the Scheme it has been specified that only those cases would fall outside the purview of Self-Assessment Scheme positive evidence of concealment exists.
17. During the course of arguments learned A.R. -of the-assessee has also referred to the immunity chart which was filed before the authorities below. It has been submitted that for the assessment year under consideration the assessee had paid the tax higher by 25 % of the maximum tax payable in the last three years and thus the return filed by him qualified for immunity, as per the Self Assessment Scheme for the assessment year 1994-95.
18. Learned A.R. has, therefore, prayed that the orders of the authorities below excluding the cast, from the purview of Self-Assessment Scheme be struck down.
19. On the contrary learned D.R. has merely supported the orders of the departmental authorities on the grounds, which prevailed with them in making and confirming the impugned assessment. He neither referred to any provision of law nor to any decided case by the superior Courts or by Income Tax Appellate Tribunal to traverse the line of arguments, which has been adopted on behalf of the assessee.
20. As has been observed by us in the foregoing paras. of this order, learned A.R. of the assessee has fully succeeded in making out a case for our interference. We, therefore, respectfully following the decisions of the superior Courts and Income Tax Appellate Tribunal have reached the conclusion that in the present case the departmental officers have miserably failed to justify themselves that the case of the assessee could at all be excluded from the purview of Self-Assessment Scheme, particularly when there is nothing on the record to show that the assessee had expended more money to purchase the pots than .the one which was recited in the sale deeds and the said recitals regarding consideration were also taken as genuine and adequate by the Collector/Sub -Registrar of the District at the time of the registration of the Sale Deeds. The criteria which had to be observed and followed to exclude the case of the assessee from the purview of Self-Assessment Scheme is totally, missing in the case in hand and thus the orders passed by the departmental officers cannot be sustained at law.
21. In the above circumstances, we are irresistibly driven to conclude and feel no hesitation in vacating the order passed by the A.A.C. and we order accordingly. The result is that the assessment under review is cancelled and we direct that the return filed by the assessee shall be accepted under Self- Assessment Scheme.
22. Since we have decided the appeal on the main issue involved in this case; we need not discuss the other points which have been raised by the assessee in- his grounds of appeal.
23. As a sequel to the above, the appeal filed by the assessee succeeds in the manner as indicated above.
M.B.A./160/Trib.
Order accordingly