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

----Ss. 62, 65 & 13(1)(d)---Re-opening of case---Definite information-- Purchase of property by assessee---Deemed income---Addition---Want of definite information ---Assessee returned income---Assessment was completed---Case was re-opened subsequently on the ground that purchased property was grossly under-stated, while the value of the property was fixed after due enquiry by Revenue Authority---Assessing Officer observed that determined value adopted for the purpose of stamp duty, could not be considered as correct value and made addition under S.13(1)(d) of the Income Tax Ordinance, 1979---Validity---Held, assessment having already been made under normal law, there did not appear any valid reason for re opening the assessment merely on ground of under-statement of value of purchased property while assessment was made after due scrutiny of relevant record---Consciously completed assessment could not be re-opened in the absence of definite information.

(b) Income-tax---

----Re-opening of case---Definite information---Circle Inspector's report cannot be treated as definite information.

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

----S. 65(2)---"Definite information "---Meaning of.

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

----S. 13---Registered deed---Value/consideration evidenced by sale-deed would be accepted unless contrary is proved by Revenue Authority.

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

----S:65---Re-opening of case---Legal requirement---Recording of finding-- Assessing Officer is legally required to record his finding that amount expended exceeds the amount disclosed.

1989 PTD 1141; I.T.O. and another v. Chappal Builders 1993 SCMR 1108; 1993 PTD (Trib.) 1681 and 1995 PTD (Trib.) 1182 ref.

Imtiaz-ul-Hassan for Appellant. Nemo for Respondent.

Date of hearing: 6th February, 1997.

ORDER

NASIM SIKANDAR (JUDICIAL MEMBER).---This further appeal by an individual deriving income from dealing in grey cloth and share income from an AOP calls into question the inadequacy of the relief allowed by the first 'Appellate Authority CIT(A)-II, Faisalabad through order recorded on 7-11-1996.

2. The assessee's returned income from business of grey cloth as well as from AOP at Rs.31,250 was accepted and an assessment framed under section 62 of the Income Tax Ordinance Subsequently this case was reopened on the ground that the purchased property during the period relevant to the assessment year 1989-90 had grossly been under-stated. After usual proceedings the assessee was served with a notice expressing intention to adopt the value of the property purchased by the assessee at Rs.4.00,000 per Marla. The relevant passage from the notice issued reads as under:

"The property in question is situated in centre of Jhang Bazar, Faisalabad at corner which is the busiest place of the city. The property under reference is Regal Cinema has been constructed of a corner plot of Regal Road and Jhang Bazar. Both these roads are highly commercial in nature and prices of the properties are very high which is evident from the rates of Deputy Commissioner. Faisalabad fixed for stamp duty purposes. Although the rates of the D.C. Faisalabad are far below market rates even then I intend to adopt the same for estimating the value of the property under section 13(2) e.g. at Rs.4,00,000 per Marla. According to which total value of the property (53/100) comes to Rs.77,09,162 and your share at 6.50 comes to Rs.945,463. Hence, I intend to add the difference (i.e. adopted - declared) Rs.457,063 in your total income. If you have any objection, please furnish the same".

In reply to the notice ,the assessee controverted the proposed action of reopening of the assessment as well as the intended price to be adopted in respect of the property purchased. It was explained that the property purchased during the period under review share in land and building properly known as Regal Cinema was purchased on 29-1-1989. Statedly the registration deed sought to be got registered at Rs.14,00,000. However, on receipt of a complaint the Deputy Commissioner/Collector, Faisalabad held an inquiry through ADC(G) who after making thorough probe reported that the property had actually been purchased for a sum of Rs.28,00,000. According to the assessee this was in fact the main grievance of the complainant against him that the property purchased at Rs.28,00,000 was being got registered through a sale deed evidencing a price at Rs.14,00,000 only. It was further stated that on receipt of report of ADC(G), Faisalabad the assessee was required to pay enhanced stamp duty at a sum determined by the enquiry officer. Accordingly, it was pleaded that the registered sale-deed having been registered for the real and actual consideration paid in this behalf and accepted by the Provincial Revenue Authorities, the proposed action in enhancing the value was totally illegal. These contentions were however not accepted by the assessing officer who proceeded to observe that the determined value adopted for the purpose of stamp duty could not be considered as correct value. Therefore, keeping in view the rate allegedly fixed by the Deputy Commissioner /Collector, Faisalabad at Rs.4,00,000 per Marla for the year under review the assessing officer proceeded to make addition at Rs.4,57,063 under section 13(1)(d) towards income already disclosed and determined. In this manner total assessment for the year completed at Rs.4,88,313.

3. Learned first Appellate Authority through the impugned order not only maintained the action of the assessing officer in reopening the case but also his finding that the price of the property in question was under stated. However, before parting with the order learned first Appellate Authority allowed some margin for the alleged difference in period of notification of the District Collector referred to by the assessing officer and therefore, directed that the estimated price of the property or the addition under section 13(1)(d) should be restricted to Rs.12,00,000. This has brought the assessee in further appeal before us.

4. Learned A.R. for the assessee vehemently contends that the assessing officer was not at all possessed with any definite information justifying in reopening the assessment framed under normal law; that the inquiry conducted through Circle Inspector, Faisalabad after initiation of proceedings was totally illegal and could have no bearing qua the sanctity of the assessment already framed in the year under review. On facts it is submitted that the price of the property having been settled after inquiry through ADC(G), Faisalabad there was no occasion for the assessing officer to dispute the same and enhance the value of a property which is simply fabulous. The service of notice under section 65 of the Ordinance is also disputed. It is further stated that the learned first Appellate Authority erred both in law as well as in fact by upholding the reopening of the assessment as well as the bulk part of the addition made under section 13(1)(d) of the Ordinance. In support of legal submission against reopening of the assessment reliance is placed upon a number of reported decisions from the superior Courts as well as this Tribunal.

5. After hearing the learned counsel for the assessee and having gone through the orders of the authorities below, we are persuaded to agree with the submissions made at the bar for the assessee. The assessment in question having already been made under normal law there did not appear any valid reason for reopening of the assessment on the mere ground that "subsequently it was found that the value of the property purchased was grossly under-stated". In Jeson International Limited v. ITO, Karachi reported as 1989 PTD 1141 a Division Bench of the Karachi High Court held that where an assessment was framed after due scrutiny of the relevant record service notice for reopening was not legal. The contention that the assessing officer was not possessed with any definite information is sought to be supported by 1993 SCMR 1108 re: ITO and another v. Chappal Builders. In this case as well their Lordships of the Supreme Court found that where assessment had been consciously completed it could not be reopened in absence of any definite information and merely on the basis of change of opinion. While deciding the matter their lordships observed that in the case before them in order to establish their so-called "definite information" the department had to rely upon further reasoning in order to clothe the information with creditability what to talk of definite information. Further observed that in such process the department had to make inquiry in regular trial in which all the persons who purchased the other plots (or majority of those who sold or purchased the other plots) might be examined in order to know under what conditions they had paid prices which were higher than the price mentioned by the respondent (assessee). In the view of their lordships where such-like inquiry was conducted after reopening of the case, the availability of definite information could not at all be assumed. In a similar situation in as 1993 PTD (Trib.) 1681---this Tribunal held that the Department had no definite information at the time of reopening of the assessment except for the view that the price evidenced by a registered sale -deed was understated. It was further found that the report of Circle Inspector in this regard could not be treated as definite information. After relying on the aforesaid judgment of the Supreme Court in re: Chappal Builders if we concluded that the expression "definite information" as used in section 65 of the Ordinance meant much more than mere material so as to cause a reasonable belief or even such evidence which might lead to a definite belief or even such evidence might lead to a definite information. Also that mere existence of an evidence which might lead to even a certain conclusion will not be covered within the parameters of definite information which necessarily means a direct information which need not be put to further trial by supporting material. In that case the assessing officer proceeding on the report of his Circle Inspector that in the vicinity another property had been transacted at a higher price than the one evidenced by the sale-deed executed between the assessee and the seller.

6. The situation in hand appears identical. The assessing officer proceeded on his own assumption that the price evidenced by the sale-deed was not a fair market value of the same. No definite information of the kind as contemplated in the provisions of section 65 of the Ordinance was available with him. He could have proceeded to disbelieve the stated price while framing assessment under normal law. However, once the assessment was completed his jurisdiction to reopen the case, subject to other formalities provided in the Ordinance, could be set in motion only if definite information was available with him that the price evidenced by the sale-deed was incorrect and that a higher price for the property actually changed hands. Mere comparison with some of the other sale-deeds after reopening of a case can hardly be treated as definite information available at the time of reopening of the assessment. His reliance upon the rates notified by the District Collector also appears incorrect inasmuch as the rates so notified by the District Collector, Faisalabad under section 27-A of the Stamp Act, 1899 on 29-10-1989 and 5-7-1989 indicate a much lesser rate fixed for transacting properties in the same area. The observations of the first appellate authority .n this regard also appear far from the truth. At the time of filling of the original return, according to the learned counsel, the assessee duly disclosed the fact that property in question was purchased for a lesser amount though District Revenue Authorities got affixed higher rate of stamp duty after the complaint and the inquiry conducted by ADC(G) as aforesaid. However, this fact was not challenged at the time of framing of original assessment.

7. Be that as it may, where an acquisition of a property is made by a registered deed, ordinarily the consideration evidenced by the sale-deed would be accepted as the value of the property unless Income Tax Authorities can prove that consideration shown in the deed was too low and the assessee had acquired the property by expending more move. It was so concluded by a Division Bench of this Tribunal in a case reported as 1995 PTD (Trib.) 1182. The kind of proof by the Revenue Authorities to establish that a much higher price A transacted is definitely lacking in the case before us. The finding that a higher price was paid by purchasers of properties in similar area can be one of the considerations but not the sole criterion to burden the assessee with an addition under section 13 of the Ordinance by enhancing the value of property in question.

8. Even on merits we are of the view that the authorities below ignored the fact that the property in question as owned by Central Government to the extent of 47/100 share. The rest of the share namely 53/100 was transferred in small shares in favour of the assessee and some of his family members. We have also been informed that the property in question is and is also under litigation between the Government and private parties. This important aspect having not been considered by any of the authorities below, we have no doubt that the price adopted by the assessing officer was not only excessive. But unnatural in the circumstances of the case as well.

9. The competency of the assessing officer to determine fair market value of a property while proceedings under section 13 of the Ordinance is not questioned. The legal requirement however is that he must record a finding that amount expended on making such investment or acquiring such valuable article exceeded the amount recorded or disclosed to the Revenue. The findings recorded in this behalf in the case before us however do not stand the test of conditions settled or laid down by various superior Courts in the country and this Tribunal.

10. Therefore, we will hold that in the first instance the initiation of action under section 65 of the Ordinance was not competent as it was under taken without availability of definite information as contemplated under section 65 of the Ordinance. On merits as well we hold that the assessing officer failed to bring home any acceptable justification, reason or basis to enhance price evidenced by the registered sale-deed.

11. This appeal accordingly succeeds and the addition under section 13(1)(d) is directed to be deleted.

C.M.S./407/Trib. Appeal accepted.