W.T.AS. NOS. 12(IB) TO 15(IB) OF 1993-94, DECIDED ON 30TH JANUARY, 1996. VS W.T.AS. NOS. 12(IB) TO 15(IB) OF 1993-94, DECIDED ON 30TH JANUARY, 1996.
1996 P T D (Trib.) 750
[Income-tax Appellate Tribunal Pakistan]
Before Rasheed Ahmed Sheikh, Judicial Member and Tariq Aziz, Accountant
Member
W.T.As. Nos. 12(IB) to 15(IB) of 1993-94, decided on 30/01/1996.
(a) Wealth Tax Act (XV of 1963)---
----S.17-B---Power of revision of Inspecting Assistant Commissioner---Scope and application of S.17-B, Wealth Tax Act, 1963---Nature of S.17-F3 of. the Act is revisional which has been enacted to prevent the loss to revenue-- -Barrier has, however, been put against the powers of Inspecting Assistant Commissioner that he would only revise that order of the Wealth Tax Officer which is erroneous and prejudicial to the interest of revenue.
(b) Wealth Tax Act (XV of 1963)---
----S. 17-B---Powers of revision of Inspecting Assistant Commissioner--- Scope---If the assessment in a particular case is made under the supervision and with consultation of the Inspecting Assistant Commissioner (predecessor-in office) then the successor I.A.C. is, ipso facto, -debarred to revise such assessment.
The I.A.C. has not been given free hand to invoke the provisions of section 17-B of the Wealth Tax Act in each and every assessment/order made by the assessing officer but his powers are exclusively confined to the assessment/order passed by the assessing officer firstly, which is erroneous and secondly it must be prejudicial to the interest of revenue. The words "in so far as" used by the Legislature in subsection (1) of section 17-B of the Act signify that simultaneous existence of both the conditions is required for invoking the provisions of the said section by the I. A. C. concerned. If in a particular case one condition exists and the other is missing, the I. A. C. is prohibited by law not to invoke the provisions of the said section- in that case.
If the assessment in a particular case-is made under the supervision and with consultation of the I.A.C. (predecessor-in-office), then the successor I.A.C. is, ipso facto, debarred to revise such assessment, If such eventuality goes on recurring then no order of the subordinate officer would attain finality. It would not only aggravate the miseries of the taxpayer but also lead to multiple series of assessments which is not the intention of the Legislature. The every purport and tenor of the said section is to safeguard the interest of revenue and for that purpose the I.A.C. is vested with the power to revise the order of the subordinate officer where he has acted with flagrant violation of law and in disregard of facts. Merely disagreeing by the I.A.C. with the conclusion of the assessing officer arrived at by him in the assessment order of a particular case would not suffice in law. It would also frustrate the very purpose of the said section where the successor I.A.C. after assuming charge, calls and examines the-record of a particular case and on similar set of facts, which have already been considered by the earlier I.A.C. and with his consultation a conscious assessment has been framed by the W.T.O., cancels that assessment and directs fresh assessment to be made or enhances or modifies the assessment. Undoubtedly it amounts to change or difference of opinion which is not tenable in law and the successor I.A.C. should refrain from invoking the provisions of section 17-B of the Wealth Tax Act in that case.
In the present case, though the approval granted by the I.A.C. was not the statutory requirement of the Act, yet, par excellence, he had not only supervised but was also fully involved while finalizing the assessment. Therefore, there was a very heavy onus probandi on the successor I.A.C. to establish that the assessments in question were erroneous in so far as these were prejudicial to the interest of revenue.
The successor I.A.C. had abused his powers by invoking the provision` of section 17-B of the Wealth Tax Act. The assessments were finalized by the W.T.O. under the supervision and with consultation of the I.A.C. (predecessor- in-office) and besides that approval of such assessments was also accorded by him. As such, the order of the I.A.C. in cancelling the wealth tax assessments is not sustainable in law. Mere disagreeing by the I.A.C. with the method of valuation of property made or adopted by the W.T.O. and the liabilities allowed by him would amount to change of opinion to which the provisions of section 17-B are not attracted.
W.T.A s. Nos. 795-796/KB of 1986-87 and 1993 PTD (Trib.) 125 ref.
(c) Wealth Tax Act (XV of 1963)---
----S.17-B---Power of revision of Inspecting Assistant Commissioner---Agreed assessment---Interference by Inspecting Assistant Commissioner---Condition precedent---Cancellation of assessment by I.A.C. without adducing any new facts or material on record which may warrant invoking of provision of S, 17-B of the Wealth Tax Act, 1963---Such being the case of change of opinion, I.A.C. was not justified in cancelling the assessment---Income Tax Appellate Tribunal vacated the order of I.A.C. and restored the Wealth Tax Officer's order.
Jawaid Anwar, FCA for Appellants.
Gul Muhammad, D.R. for Respondent.
Date of hearing: 30th January, 1996.
ORDER
The abovementioned four wealth tax appeals have been instituted against the combined order of the I.A.C. of Wealth Tax Rawalpindi Range, Rawalpindi, dated 5-8-1993 passed under section 17-B of the Wealth Tax Act, 1963 in respect of assessment years 1988-89 to 1991-92. The appellant has assailed the order of the I.A.C. on the following common grounds:---
(i) That the order passed by the I.A.C. of Wealth Tax under section 17-B of the Act is bad in law, illegal and without lawful jurisdiction.
(ii) That on the facts and in the circumstances of the case the I.A.C. of Wealth Tax was not justified in cancelling the original wealth .tax assessments framed by the W.T.O. and directing him to recompute assessee' s net wealth in the light of his (IAC) directions.
(iii) That the order passed by the W.T.O. is neither erroneous in law nor prejudicial to the interest of revenue as the wealth tax assessments were framed by the W.T.O. after considering the relevant material and documents furnished before him.
(iv) That the I.A.C. has fallen in grave error in directing to evaluate the property in question on the basis of market value particularly when it was under construction at the relevant time.
(v) That the I.A.C. was not justified in disbelieving the genuineness of the claim of liabilities as all the necessary proof regarding receipts of advances from the proposed buyers of building/units were furnished by the assessee and after examining the same it was allowed by the W.T.O. as such.
2. Parties have been heard and the record perused.
3.Facts in brief for the disposal of these appeals are that the assessee, an AOP, consisting of three members namely Mr. Abdul Majeed, Ch. Muhammad Sharif and Mrs. Tasneem Jawaid purchased a commercial plot bearing No.30-D, West Half (F-6/F-7), Blue Area, Islamabad and a building was constructed thereon. Accordingly net wealth for each year under appeal was declared by the assessee in the following manner:---
| Wealth declared | 1988-89 | 1989-90 | 1990-91 | 1991-92 |
| | Rs. | Rs. | Rs. | Rs. |
| Cost of plot | 1038934 | 1038934 | 1038934 | 1038934 |
| Cost of Construction | 3080677 | 4371934 | 4810522 | 4810522 |
| Gross wealth | 4119611 | 5410868 | 5849456 | 5849456 |
| Liabilities | 1596650 | 2887915 | 3326503 | 3326503 |
| Net wealth | 2522953 | 2522953 | 2522953 | 2522953 |
4. During the course of assessment proceedings reasons for declaring valuation of the said plot at cost, documents regarding cost of construction and liabilities claimed by the assessee were furnished. On assessments, the W.T.O. in view of para. 3(d) of C.B.R.' s Circular No. 14(7)/WT/IT-VI/79, dated 21-8-1979 accepted the declared value of the plot in each year under appeal. He, however, considered the declared cost of construction for the assessment year 1988-89 on the lower side while it was accepted by him for the subsequent two assessment years. As regards liabilities, the W.T.O. after giving various reasons in the assessment orders abated the claim in the first three years under appeal. So far as charge year 1991-92 was concerned, the assessment was framed in agreement with the assessee. It is also pertinent to mention here that the assessments relating to charge years 1988-89 to 1990-91 were framed by the W.T.O. with the approval of the I.A.C. concerned and no approval of the I.A.C. was involved in the assessment year 1991-92. Consequently, assessee' s net wealth was computed by the W.T.O. as under:---
| Wealth assessed | 1988-89 | 1989-90 | 9190-91 | 1991-92 |
| | Rs. | Rs. | Rs. | Rs. |
| Cost of Plot | 1038934 | 1038934. | 1038934 | 1038934 |
| Cost of Construction | 3210710 | 4371934 | 4810522 | 4810522 |
| Gross Wealth | 4249644 | 5410868 | 5849456 | Net wealth was determinedat Rs.3200000in agreement with the assessee. |
| Liabilities | 1021180 | 2500000 | 3000000 | |
| Net Wealth | 3228464 | 2910868 | 2849456 | |
4. After finalization of these assessments the successor I.A.C. examined the record and it was noticed by him that the assessments framed by the W.T.O. for the years under appeal were not only erroneous -but were also prejudicial to the interest of revenue. He accordingly, confronted the assessee with a show cause notice that value of the plot declared at Rs.10,38,934 was too low as Ch. Muhammad Sharif, one of the member of the AOP, who is holding 1 /3rd share in the said plot, paid the sum of Rs.8,00,000 for the purchase of his share vide agreement to sell, dated 23-6-1985: It was, thus, concluded by him that if one share of the said plot was worth Rs.8,00,000 in June, 1985, then the value of the other two shares should also be worth Rs.16,00,000 on that particular date. Accordingly, the value of the entire plot should have been determined at least Rs.24,00,000 in the assessment years 1988-89 to 1991-92. He also, after referring to a Plot No. 85(West) F-7/G-7, Blue Area, Islamabad, measuring 5376 sq. ft. which was auctioned by the CDA, Islamabad for Rs.80,93.887 on 3-9-1986, concluded that the assessee had declared value of the said plot abnormally lower at the relevant time. As regards liabilities, the IAC found that out of 8 units constructed over the said plot, the first four units (i.e. 1 to 4) were intended to be sold for Rs.48,25,000 against which the sum of Rs.26.00,000 was received as advance money during the assessment year 1988-89. The balance amount was receivable either up to 30-6-1989 or at the time of registry of the units intended for sale. He, thus inferred that the declared and assessed position of these advances was contrary to the amounts as were settled in the agreements to sell and the W.T.O. had allowed these liabilities without (i) ascertaining any confirmation from the intended purchasers, (ii) obtaining receipts of advances issued and (iii) confirming whether the said four units were actually sold to the intended purchasers or not. With this background, the assessee was required by the I.A.C. to explain as to why there was difference in the amount of advances received as per agreements to sell and the amounts declared in the wealth tax returns. He also directed the assessee to produce receipts of advances or any other evidence to prove that the said four units were actually sold or not otherwise these advances would be considered as bogus and liabilities to such an extent shall be disallowed. A detailed reply was furnished by the assessee to the queries raised by the I.A.C. in the show-cause notice which was considered unsatisfactory and he (IAC) after giving various reasons in his order cancelled the originally framed wealth tax assessments for such years.
6.Now the question has arisen whether the provisions of section 17-B of the Wealth Tax Act, 1963 were legally and rightly invoked by the successor I.A.C. particularly when the original assessment for such year was framed by the W.T.O. after obtaining approval from the predecessor I.A.C.
7.Originally under Wealth Tax Act, Zonal Commissioner was vested with the powers to revise any order passed by the W.T.O. in terms of subsection (2) of section 25 of the Act. However, a new section i.e. 17-B has been inserted by Finance Act, 1992 by virtue of which the powers to revise the wealth tax assessment has been delegated to the I.A.C. provided 'the assessment/order which is sought to be interfered by the IAC should be erroneous and it must be prejudicial to the interest of revenue.
8.Coming to section 17-B of the Wealth Tax Act, subsection (1) of the said section envisages that the I.A.C. may call for and examine the record of any proceedings under this Act, and if he considers that any order passed therein by the W.T.O. is cancelling the assessment and directing a fresh assessment to be made erroneous in so far as it is prejudicial to the interests of revenue, he may after giving the assessee an opportunity of being heard and after making, or causing to be made, such enquiry as he deems necessary, pass such order thereon as the circumstances of the case justify, including an order enhancing or modifying the assessment, or
9. From plain reading of the above said section, it is abundantly clear that 'the nature of the provisions is revisional which have been introduced to prevent the loss of revenue. But a barrier has also been put on the powers of the I.A.C. that he would only revise that order of the WTO which is erroneous in so far as it is prejudicial to the interest of revenue. Now we would have to look into the facts whether the I.A.C. was involved at the time of framing wealth tax assessments and whether the conditions precedent for invoking section 17-B of the Wealth Tax Act existed in the instant case or not. On perusal of assessment record it is found that as per order sheet entries the drafts assessment order for the year 1988-89 was submitted by the W.T.O. on 12-10-1989 while for the years 1989-90 and 1990-91 it was forwarded on 27-11-1990 to the I.A.C. concerned for his approval which were accorded by writing the word "approved" therein and initials were also made by him underneath. Besides, at the bottom of the assessment orders in respect of assessment years 1988-89 to 1990-91, it has also been mentioned by the W.T.O. as under:---
Assessment year 1988-89.
"Draft assessment order has been approved vide order sheet entry, dated 12-10-1989 for the assessment year 1988-89.
(Sd.)
W. T. O.
Dated 12-10-1989."
Assessment years 1989-90 and 1990-91
"The draft has been approved by the IAC (WT) vide order sheet entry, dated 27-11-1990.
(Sd.)
W. T. O."
10. However, for the assessment year 1991-92 no approval was obtained from the I.A.C. as the assessment for such year was made by the WTO in agreement with the assessee.
11. We have given anxious thought to the averments advanced by both the learned representatives appearing at the Bar and would like to observe that if the assessment in a particular case is made under the supervision and with consultation of the I.A.C. (predecessor-in-office) then the successor I.A.C is, ipso facto, debarred to revise such assessment If such eventuality goes on befalling then no order of the subordinate officer would attain finality. It would not only aggravate the miseries of the taxpayer but also lead to multiple series of assessments which is not the intention of the Legislature. The very purport and tenor of the said section is to safeguard the interest of revenue and for that) purpose the I.A.C. is vested with the power to revise the order of the subordinate 'officer where he has acted with flagrant violation of law and fact merely disagreeing by the I.A.C. with the conclusion of the assessing officer arrived at by him in the assessment order of a particular case is not warranted by law. It would also frustrate the very purpose of the said section where the successor I.A.C. after assuming charge, calls and examines the record of a particular case and on similar set of facts, which have already been considered by the earlier I.A.C. and with his consultation a conscious assessment has been framed by the W.T.O., cancels that assessment and directs fresh assessment to be made or enhances or modifies the assessment. Undoubtedly, it amounts to change or difference of opinion which is not tenable in law and the successor I.A.C. should refrain not to invoke the provisions of section 17-B of the Wealth Tax Act in that case.
12. We would also like to observe that the I.A.C. has not been given free hand to invoke the provision of section 17-B of the Act in each and every assessment/order made by the assessing officer but his powers are exclusively confined to the assessment/order passed by the assessing officer firstly, which is erroneous and secondly it must be prejudicial to the interest of revenue. The words "in so far as" used by the Legislature in subsection (1) of section 17-B of the Act signify that simultaneous existence of both the conditions as referred ante are present for invoking the provisions of the said section by the I.A.C. concerned. If in a particular case one condition exists and the other is missing, even in that situation, the I.A.C. is prohibited by law not to invoke the provisions of the said section in that case.
13. Reverting to the question mentioned at para. 6 of this judgment, our answer is negative. It is so because though the approval granted by the IAC was not the statutory requirement of the Act yet par excellence he had not only supervised but was also fully involved while finalizing the assessments in respect of assessment years 1988-89 to 1990-91 are concerned. Therefore, there was a very heavy onus probandi on the successor IAC to establish that the assessments in question were erroneous in so far as these were prejudicial to the interest of revenue. This onus has however, not been discharged by the IAC as the method of valuation adopted by the WTO in his orders framed under section 16(3) of the Wealth Tax Act is in accordance with the method approved by this Tribunal e.g. in WTA Nos. 795 to 796/KB of 1986-87, dated 16-4-1989, relevant portion of which reads as under:---
"Succinctly stated the principle approved by us is that in case of incomplete construction/projects the correct method of valuation is to take the cost of land and the cost of construction only. However, in the year of completion of construction/project the market value of such projects is to be taken and the method of arriving at the market value of such projects should be the profit earned plus the cost of land and the cost of construction. "
14. We also draw analogy from a case-law reported as 1993 PTD (Trib.) 125, though it deals with sections 65 and 66-A of the Income Tax Ordinance, 1979 whereas the instant case transacts section 17-B of the Wealth Tax Act but the ratio decidendi therein is mutatis mutandis applicable to the facts of the present case. In that case the IAC was also involved while framing agreed assessment and subsequently the IAC by invoking the provisions of section 66-A of the Ordinance cancelled the assessment. While disposing of that issue the ITAT held by majority as under:---
"Now the question is should we allow an IAC to invoke his powers under section 66-A while he himself or his predecessor-in-office has been involved in the process of arriving at an agreed assessment. My answer to this question is in an emphatic "No". I have two reasons in support to my conclusion: The first is supported by Doctrine of Finality and the second is based on prohibition against change of opinion. When an ITO has arrived at agreed assessment .in consultation with or with approval of his IAC or CIT as the case may be, they have done so with their eyes wide open and keeping into consideration the advice of the C.B.R. contained in clause (vi) of paragraph 4 of Circular No. 17 of 1990 regarding maximum possible utilization of both the internal and external sources before arriving at an agreed assessment, in my humble opinion, he should not be given one more opportunity of forcing an assessee to undergo the mental torture of another assessment proceedings in the name of revenue interest for both the reasons given above."
15. For the reasons recorded above, it is held that the successor I.A.C. had abused his powers by invoking the provisions of section 17-B of the Wealth Tax Act. The assessments in the instant case were finalized by the W.T.O. under the supervision and with consultation of the I.A.C. (predecessor-in-office) and besides that approval. of such assessments was also accorded by him. As such, the order of the I.A.C. dated 5-8-1993 in cancelling the wealth tax assessments for the years, 1988-89 to 1990-91 is not sustainable in law. We would also like to hold that merely disagreeing by the I.A.C. with the method of valuation of property made or adopted by the W.T.O. and the liabilities allowed by him would amount to change of opinion to which the provisions of section 17-B are not attracted in the instant case. Thus, our answer to the questions mentioned at para. 9 is also in negative because the IAC was duly involved, in the finalization of these assessments and the conditions enumerated in section 17-B for invoking the provisions of the said section do not exist in the present case.
Assessment year 1991-92
16. In-this year net wealth was determined by the WTO at Rs.32,00,000 against declared at Rs.25,22,953, in agreement with the assessee. Though the IAC' s approval was not involved in this particular case, but the basis for revising the wealth tax assessment by the IAC are the same which have been enumerated in the earlier part of this judgment.
17. After having gone through the facts and the circumstances of the case, we have observed that an offer was made by the assesses to be assessed at net wealth of Rs.32,00,000 which was considered reasonable and was accepted by the Department as such. The agreement and the resulting assessment were, however, not approved by the IAC of Wealth Tax. But the fact remains that both the parties had compromised for mutual interest with free consent and without undue influence and subsequently it cannot be assumed by the Department that the agreed assessment was erroneous in so far as it was prejudicial to the interest of revenue. Since the IAC has not adduced any new facts or material or record which may warrant invoking of provisions of section 17-B of the Act, therefore, he has acted illegally in doing so. If on the similar facts and circumstances of the case, the IAC cancels the agreed assessment by invoking the provisions of section 17-B of the Act then a climate of mistrust would be widened between the assessor and the assessee. We, therefore, hold that it is mere a changt3"'of opinion and the provisions of section 17-B of -the Act are F not attracted to such a situation. Accordingly, the IAC was not justified ,in cancelling the assessment for the year 1991-92 as well.
18. Since all the above-referred appeals have been decided on legal plain, as such, the other grounds raised in the memorandum of appeals are not adjudicated upon.
19. Consequently, the order passed by the I.A.C., dated 5-8-1993 under section 17-B of the Wealth Tax Act, 1963 stands' vacated and that of the WTO s, dated 12-10-1989 for the assessment year 1988-89. 18-12-1990 for the assessment years 1989-90 and 1990-91 and 21-7-1991 for the assessment year 1991-92 respectively are restored.
M,B.A./202/Trib.Order accordingly.