(a) Wealth Tax Act (XV of 1963)---

----S. 5(1) (xvi)---Wealth Tax Rules, 1963, R.8---Residential house-- Exemption---Option for ---Assessee returned value of residential house and one-half share in commercial building---Assessing Officer finding that exemption was claimed in respect of residential house in the preceding year but for the year under review no such claim was made, rejected the returned value of the property and adopted his own valuations under R.8 of the Wealth Tax Rules, 1963---Contention of assessee was that despite his claim for exemption, Assessing Officer had not allowed exemption and even if the claim was not made, the Assessing Officer was duty bound to allow the exemption---Held, claimed exemption would be available only where the assessee exercised the option for exemption---Absence of such option could not be said to cast upon the Assessing Officer a duty to exclude the property---No such carte blanche was intended for the assessee nor an obligation was intended to be cast upon the Assessing Officer to allow such relief even if it was not claimed---Allowing of exemption to the assessee with respect to residential house was subject to the condition of exercise of an option ---Assessee having failed to exercise the option at the assessment stage his claim for exemption after completion of assessment was not tenable at law.

(b) Interpretation of statutes---

---- Fiscal statutes---Provisions

granting exemptions, have to be interpreted in the narrow sense.

Messrs Army Welfare Sugar Mills and others v. Federation of Pakistan 1986 SCMR 1917 and Salim & Company v. C.B.R. 1997 PTD 1901 rel.

(c) Wealth Tax Act (XV of 1963)---

----S. 5---"Exemption" and "Statutory allowances"---Distinction---Exemption and statutory allowance in taxation system, do not rank at par in all situations---Assessing Officer is duty bound to grant statutory allowance, unlike exemption even in the absence of an express claim---Claim not made in the original proceedings can be made during appeal during which an order is certifiable under S.156 of the Income Tax Ordinance, 1979.

(d) Wealth Tax Act (XV of 1963)---

----S. 5---Exemption---Not claimed---Effect---Exemption not claimed gives rise to alternate presumption---Where options are allowed, its absence gives rise to a presumption that the alternate is acceptable to the person failing to exercise option---In the absence of exercise of option before completion of assessment, assessment so framed shall be final as the alternate will automatically come into motion.

(e) Wealth Tax Act (XV of 1963)---

----S. 5---Exemption---Exercise of option---Disallowing the exercise of option of exemption after the completion of assessment----Reasons detailed and discussed.

(f) Wealth Tax Act (XV of 1963)---

---S. 5---Exemption---"Option"---Description and exercise of---Option has been described more with reference to sale or purchase of property---Exercise of option wherever available is always subject to a specified time limit.

1988 PTD (Trib.) 6; (1978)-114 ITR 415; CIT, Gujarat-II v. Sayagi Mills (1974) 94 ITR 26 and Singer Sewing Machine v. CIT, Karachi 1965 PTD 321 distinguished.

Messrs Army Welfare Sugar Mills and others v. Federation of Pakistan 1986 SCMR 1917; Salim & Company v. C.B.R. 1997 PTD 1901; Black's Law Dictionary 5th Edn.,p. 986 and 1993 PTD 37 ref.

Ahmad Nouman, I.T.P. for Appellant.

Shahid Zaheer, D.R. for Respondent.

Date of hearing: 16th July, 1997.

ORDER

NASIM SIKANDAR (JUDICIAL MEMBER).---This further appeal for the assessment year 1990-91 assails an order recorded by CIT (A) Zone-3, Lahore on 27-10-1991.

2. The facts in brief are that the assessee an individual inter alia returned the value of a 4 Kanals house at Gulberg-II Lahore at a sum of; Rs.1,03,300. Also one half share in a commercial building at Badami Bagh, Lahore was disclosed at Rs.1,41,000. The assessing officer found that the first property viz the residential house was claimed exempt in the immediate preceding year. However, for the year under review no such claim was made. Therefore, keeping in view the relevant considerations he estimated the G.A.L.V. of the house at Rs.12,00,000 and therefore the capitalised value at Rs.14,40,000 under rule 8 of the Wealth Tax Rules 1963. The declared value in case of the commercial building at Badami Bagh, Lahore was also rejected and adopted at Rs.2,00,000 by reference to the same provision of the Wealth Tax Rules. In this manner to tax taxable wealth for the year was computed at Rs.26,60,194.

3. Before the first appellate authority the assessee averred that exemption was claimed in respect of the self-occupied house and that specific request in this regard was made to the Wealth Tax Officer. Therefore, the assessing officer ought to have allowed the claimed exemption. However, learned first appellate authority found it as a matter of fact that a claim of exemption was not proved from the record. It was also recorded that exemption in respect of the said residential house was neither claimed in wealth tax return nor before the assessing officer. Therefore, the claim was rejected and the value determined was maintained keeping in view the location, nature and the accommodation available in the demised property. The first appellate authority also maintained the estimation of value of the share of commercial property at Rs.2,00,000 after opinion that the value adopted was very reasonable and was rather- on the lower side. This has brought the assessee in further appeal before us.

4. Parties have been heard. Learned counsel for the assessee contends that the first appellate authority was not justified in refusing to allow the claimed exemption in respect of the residential house. It is also stated that even if the claim of exemption was not preferred before the assessing officer or was not indicated on the return the first appellate authority was obliged in law to allow the same. In support of the submission reliance is placed upon a reported judgment of this Tribunal cited as 1988 PTD (Trib.) 6. With respect to the valuation of the share in the commercial property at Badami Bagh, Lahore the value determined by the assessing officer and maintained by the first appellate authority is described as excessive and without any basis.

5. Learned D.R. controverts the submissions made at the bar. It is submitted that the option envisaged in Section 5(1) (xvi) had to be exercised in the original proceedings. In absence of the option according to the learned D.R. no relief claimed in this regard is allowable to the assessee. The value estimated in respect of both the immovable assets is supported for the reasons detailed in the assessment as well as first appellate order.

6. The submissions made at the bar for the Revenue bear weight. Section 5 of Wealth Tax Act, 1963, at the relevant time provided for exemption in respect of certain assets. Subsection (1) (xvi) of section 5 provided for exemption of a residential house in self-occupation of an assessee where an option in this regard was expressed. The provision was framed in the following words:---

"5(1) (xvi). One residential house owned and occupied by the assessee for purposes of his own residence where such assessee opts to exclude such house from his assets;

Provided that the option may be exercised by either of the (spouse). "

A plain reading of the provision directs to the conclusion that the claimed exemption would be available only where an assessee exercised an option 'for exclusion of a residential house owned and occupied by him which was being used as his own residence. The absence of such an option cannot be said to cast upon the assessing officer a duty to exclude the property of the kind from the total assets of an assessee. In the aforesaid case relied upon by the assessee the facts of the case were clearly distinguishable. In that case the house in which the assessee resided belonged to his wife. However, it was included in his assets by reference to a fiction of law created by Explanation I to clause (m) of section 2 of the Wealth Tax Act. It was contended that since the assessee resided in the house with his wife and children it was to be allowed exemption under section 5(1) (xvi) of the Act. It was further stated that when the house in question was deemed as the property of the assessee by said fiction of law it should also be deemed to belong to the assessee by another fiction of law contained in clause (xvi) of subsection (1) of section 5. Before the Tribunal a reported decision of the Karnataka High Court cited as (1978) 114 ITR 415 re: Commissioner of Wealth Tax v. K.M. Eapen was relied upon. In that case the value of the house owned by an assessee but transferred in favour of his wife was included in his net wealth by resort to fiction created by section 4 (1) (a) of the Indian Wealth Tax Act, 1957. Section 5(1) (iv) of that Act provided:

"Wealth tax shall not be payable by an assessee in respect of the following assets, and such assets shall not be included in the net wealth of the assessee:

(iv) one house or part of a house belonging to the assessee exclusively used by him for residential purposes:

Provided that where the value of such house or part, situate in place with a population exceeding ten thousand, exceeds one lakh of rupees, the amount that shall not be included in the net wealth of an assessee under this section shall be one lakh of rupees."

The claim of the assessee for exemption was refused by the assessing officer. On appeal the learned A.A.C. accepted the plea of the assessee and allowed the exemption. The Tribunal upheld the view of the A.A.C. Their Lordships of the Karnataka High Court on reference held that where the house was to be assumed "as belonging to the assessee" for the purpose of section 5(1) (iv) of the Act the assessee was entitled to exemption which had to be allowed in his hands.

7. Before the Tribunal reliance was also placed upon another decision from the Indian jurisdiction in re: C.I.T. Gujrat-II v. Sayagi Mills reported as (1974) 94 (ITR 26). In that case the assessee company ran two Textile Mills. The Assessing Officer brought to tax the surplus realised by the assessee on the sale of machinery of one of the Mills. Before the A.A.C. it was contended that profit realised on sale of machinery was not taxable because the business was not in existence at any time during the relevant previous years. The A.A.C. rejected the submission for the reason that this contention was not raised before the LT.O and that the issue involved investigation new questions of fact. On further appeal the Appellate Tribunal held that the contention went o the root of the matter and that substantial justice required that the assessee should be given an opportunity to make good his contentions. Accordingly the A.C.C. was directed to consider the claim. On reference by the department a Division Bench of the Gujarat High Court maintained the order of the Tribunal. It was found that all questions whether of law or of fact, which related to assessment of the assessee should ordinarily to be allowed to be raised in appeal even though even these were not raised before the I.T.O. The only condition visualized by their Lordships being that grant of relief should be available on determination of facts present before the forum. Therefore, the direction of the Tribunal to the A.A.C. to consider the claim against computation of surplus was maintained although it was found that the contention had been advanced for the first time before the appellate authority i.e. the A.A.C.

8. In the reported judgment of the Tribunal relied upon by the assessee, as said above, the facts were distinguishable from those before us. The cases cited from the Indian jurisdiction and relied upon by the learned Division Bench of this Tribunal also demonstrate that it was only a contention going to the root of the matter, which was allowed to be raised at the next forum. In the case before the Tribunal the house in respect of which the exemption was claimed did not belong to the assessee himself. It was only by a fiction of law that the property was deemed as one of the assessee and included in his assets. By relying upon the first reported decision re: C.I.T. Mysore vs K.M. Eapen the learned Division Bench at Karachi found for the assessee for similar reasons which prevailed with their Lordships of the Karnataka High Court that when the law provided for inclusion of the assets in the total wealth of as assessee then a claim for exemption of a house used for his residence would be available to him. In the second reported decision re: C.I.T. Gujarat II v. Sayagi Mills (supra) the assessee raised a plea of fact as well as of law against computation of surplus in his hands. The first appellate authority refused to entertain the claim only on the ground that it was not raised or preferred before the assessing officer. Their Lordships of the Gujarat High Court as noted earlier held for the assessee on the ground that all questions whether of law or of fact which related to an assessment should ordinarily be raised in appeal even though' These were not raised before the assessing officer. Both these decisions from the Indian jurisdiction as relied upon before this Tribunal also indicate that no carte blanche was intended for an assessee nor an obligation was intended to be cast upon an assessing officer to allow such relief even if it was not claimed.

9. The proposition whether claim of a relief is a condition precedent for claiming it before a subordinate authority has authoritatively been ruled upon in the negative by Supreme Court of Pakistan in re: Singer Sewing Machine v. CIT Karachi reported 1965 PTD 321. In that case their Lordships were considering the scope of revisional jurisdiction as contained in section 33-A (2) of the late Income-tax Act of 1922. On the facts stated

before them their Lordships concluded that it was the duty of, the Commissioner to grant relief if the entitlement was clear. Also considering the power vested in the Commissioner under section 33-A it was held that there was no provision to the effect that the relevant claim should have been made in the first instance before the subordinate authority. Therefore, there is no dispute at all that a party entitled to a relief can claim the same even 'before the higher forum if necessary facts and documents are available before the authority to dispose of the claim.

10. However, the nature of claim in the case before us is totally different as to attract the ratio settled in the aforesaid decision from the Indian jurisdiction or the last cited decision of the Supreme Court of Pakistan in re: Singer Sewing Machines (supra). Section 5 of the Wealth Tax Act as reproduced above provides for exemption of certain kind of assets. The allowing of exemption to an assessee with respect to residential house is subject to the condition of exercise of an option.

11. In the first place all provisions granting exemption, have to be interpreted its a narrow sense as held by the Supreme Court of Pakistan in re: Messrs Army Welfare Sugar Mills and others v. Federation of Pakistan cited as (1986) SCMR 1917 and relied upon by the Lahore High Court in recent judgment in re: Salim & Company v. C.B.R., 1997 PTD 1901. Secondly exemptions and statutory allowances in our taxation system do not rank at par in all situations. A statutory allowance like depreciation or 1/5th of the annual value of building which is subject of assessment as income from property is available to an assessee when his entitlement is not disputed on facts. Therefore, where a machinery is found used in the relevant period or income in respect of building is assessed under section 19 of the Income Tax Ordinance, a duty is cast upon the assessing officer to grant the allowance even in absence of an express claim to that effect. If a claim is not made in the original proceedings it can be made or raised during appeal or at any subsequent time during which an order is rectifiable under section 156 of the Ordinance.

12. In cases of exemptions or exceptions to general rules, which are subject to the performance of an act on the part of a party td the proceedings the position is different. Generally speaking where options are allowed to a party, the absence of option gives rise to a presumption that the alternate is acceptable to the person failing in or refusing to exercise an option. For example in Income-Tax matters where a party does not opt out of presumptive tax regime the provisions of regular assessment shall automatically come into play. To us it appears that where options are available, unless a different expression is made in the law granting the option it remains available till a final and decisive action is taken by the authority with whom the option is to be lodged. In the kind of provisions before us this option is available to an assessee till the assessment is made. If an assessee does not exercise the option before completion of the proceedings the assessment so framed shall perfectly be in accordance with law as the alternate will automatically come into notion. The above provision by no means allows an assessee to keep his fingers crossed, it the assessing officer complete the assessment and to raise claim after finding that exercise of option would have lessened the tax liability. The claim of exemption of a house it may be noted is beneficial where the value of the house is more than the basic exemption available as an alternate to an assessee. The desire to exercise an option late in the date and after completion of assessment will always give birth to a conclusion that the assesses deliberately went for wait and see policy to raise the claim if it suited his interest. This hardly appears to be the intention of the legislature in allowing the option. The provision of a separate column in the wealth tax return for exercise of option also negates the submission made for the assessee.

13. The prayer for exercise of option after framing of assessment cannot be allowed for a number of other reasons. In our estimation such a prayer militates against the concept of finality of assessment. Any inaction on the part of the assessee deliberately or otherwise, cannot be allowed to reverse the rule of finality of assessment for the only reason that an option was available to the assessee, which he failed to exercise. The availability of the right and its use to the best advantage to an assessee is not denied. However, once an assessee has filed return and paid tax under section 14-A of the Wealth Tax Act on the basis of such return, offering the self-occupied house for taxation he shall not be allowed to say that the right to opt for its exclusion was still available with him. He shall be estopped from making such submission except by way of a revised return under section 15 of the Act, which has to be done before an assessment is made. To allow an assessee to make the kind of assertion at appeal stage, first or second would amount to concede a right to revise a return after completion of assessment for which no statutory provision or authority can be found to the Wealth Tax Act. Also if the supposed principle being claimed at the bar is accepted the assessee will be allowed a right to get the assessment rectified at any time within the stipulated period provided in law for this purpose. This again does not appear to be the intention of law. The claim of exemption for the first time taken before an appellate forum, also means to exercise the option through a memo of appeal. It is again improper. An appeal is a complaint made before a higher forum against the order of a lower forum. It lies only when the objection to the order is expressed. An appeal under section 23 of the Wealth Tax Act to the A.A.C./C.I.T. and under section 24 to this Tribunal lies only where an assessee, or in the later case both assessee as well as the Revenue "object" to an order passed by the assessing officer or the A.A.C. respectively. Where an assessee does not exercise the option and the assessing officer, frames the assessment accordingly he cannot be said to have an "objection" to the assessment order. For, lack of expression of option automatically brings in the alternate provided in law, which gives a basic exemption while computing the net wealth.

14. Looking at the issue from another angle we find that the proposition addressed at the bar for the assessee is not acceptable. An assessing officer, it may be noted cannot allow exemption in respect of a self occupied house, on his own if the option to that effect has not been exercised. In case he does so an assessee will have a good ground of appeal that exemption had been allowed without being asked for it. In fact such an order on the part of the assessing officer would be patently illegal. In this way as well an exemption under section 5(1) (xvi) of the Act is distinguishable from other statutory allowance mentioned earlier.

15. In Black's Law Dictionary 5th Edition at page 986 the word, "option" has been described more with reference to sale or purchase of property. However from the cases cited in the treatise it appears certain that exercise of an option wherever available is always subject to a specified time limit. In case of the provision before us as well the right to exercise their option is not open ended. It is qualified with the completion of assessment. Any submission for exercise of this right after that stage shall be considered an after thought. In 1993 PTD 37 re: CIT Lahore vs National Typewriters Company entertainment of a new point of fact by the Tribunal was disapproved by the Lahore High Court. The assessee in that case claimed cash credit appearing in his books as loans from various parties but failed to substantiate them before the assessing officer as well as the A.A.C. On further appeal a fresh plea was raised before the Tribunal that the amounts shown were a result of intangible. The contention was accepted. On reference at an instance of the Revenue their Lordships disapproved the same on account of the plea being an afterthought.

16. The assessee before us failed to exercise the option at the assessment stage and before the completion of assessment proceedings. The submission that in the order sheet entry the assessing officer recorded no charge in assets does not mean that an option exercised in respect of the residential house in the earlier year extended to the year under review. It rather negates a presumption of over-sight or proper attention at the time of filing of return. The assessee having exercised the option in the immediate preceding year was fully aware of his right and also of the consequence of the lack of the exercise of option. His plea was rejected by the A.A.C. as exercise of option was not established from the record. The contention that the assessee has a right to exercise this option even after completion of assessment or at later stage of the proceedings in the form of first or second appeal, for the reasons aforesaid, is not tenable at law. Noting the fact that the assessee exercised option in respect of the same house in the immediate preceding year but no mention of the option in the year under review was made we entertain no doubt that the assessee did not exercise the option deliberately.

17. Learned counsel for the assessee has not addressed us on the valuation adoption in respect of the identical house. To us the treatment meted out to the assessee appears rather charitable when seen in 'the perspective that house in question is spread at four Kanals and is located in one of the prime residential localities of the city of Lahore. Same appears to be the case with the value of share in the commercial building situated at Badami Bagh, Lahore which is a known commercial center for various articles including Auto Spare parts etc. The mere fact that rent declared in respect of this property was accepted on Income Tax side hardly appears to be a good ground for interference in the estimated value which otherwise appears to be reasonable and in accordance with Rule 8(3) of the Wealth Tax Rules, 1963. At any rate the assessee has not objected to the valuation on the ground that it was not computed in accordance with the relevant rules. The appeal in the circumstances fails on all counts.

C.M.S./397/Trib.Appeal dismissed.