I.T.A. NO.3728/LB OF 1995 VS I.T.A. NO.3728/LB OF 1995, 2000 PTD-INCOME-TAX-APPELLATE-TRIBUNAL-PAKISTAN 2531 (2000)

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

----S. 65---Definite information---Concept---Definite information does not allow inclusion of any, estimate, gossip or surmises.

1997 PTD 47;1997 PTD (Trib.) 1097; 1997 PTD (Trib.) 1994 and 1993 PTD (Trib.) 16.81 rel.

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

----Ss. 65(1), 13(1)(d) & 59(1)---Additional assessment---Addition---Definite information---Assessment completed under Self-Assessment Scheme was re opened under S.65 of the Income Tax Ordinance, 1979 and addition was made under S.13(1)(d) of the Income Tax Ordinance, 1979 by adopting the value of the property estimated by Department in his report, rejecting the value shown in registered sale-deed---Validity---Information used by Assessing Officer for re-opening of assessment could not be said to be "definite information" which was a pre-condition for proceedings under S.65 of the Income Tax Ordinance, 1979 because the report of Inspector was required to be further probed---Assessing Officer neither called the seller of the property to. find out factual position of the transaction nor any corroborative evidence was adduced to justify his action of re-opening of the assessment---Such re-assessment was declared without lawful jurisdiction, void ab initio, illegal and was cancelled by Appellate Tribunal`--Assessment made under S.59(I) of the Income Tax Ordinance, 1979 was restored.

1997 PTD 47; 1997 PTD (Trib.) 1097; 1997 PTD (Trib.) 1994; 1993 PTD (Trib.) 1681; 1998 PTD (Trib.) 973 and 1985 PTD (Trib:) 178 ref.

1993 PTD (Trib.) 1681 and 1997 PTD (Trib.) 1994 rel.

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

----S. 65---Definite information---Further trial or authenticity---Information which was being put to further trial or the authenticity whereof had yet to be determined that piece of information did not fall within the parameters of "definite information."

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

----S. 65---Notice---Non-ticking of relevant clause on the notice ---Effect-- Discarding of registered sale deed without any evidence as well as non -ticking of relevant clause in notice under S.65(1) of the Income Tax Ordinance, 1979, render the assessment illegal.

1997 PTD (Trib.) 1994 rel.

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

----S. 65(1)---Notice---Non-ticking of relevant clause on the notice-- Conclusion/presumption ---Non-ticking of, relevant clause enumerated in notice issued under S.65(1) of the Income Tax Ordinance, 1979 lead to the conclusion that the Assessing Officer was not definite m his mind as to which one clause of the notice was- attracted to the facts of the case

Shahid Abbas for Appellant.

Muhammad Asif, D.R. for Respondent.

Date of hearing: 8th April, 2000.

ORDER

RASHEED AHMED SHEIKH (JUDICIAL MEMBER).---This appeal at the behest of the assessee-appellant is directed against order dated 4-5-1995 passed by CIT (Appeal), Zone IV, Lahore in respect of assessment year 1990-91.

2. As per the original and the amended grounds of appeals, the assessee has mainly contested re-opening of assessment under section 65 to be illegal. Besides, setting aside of re-assessment order by the Appeal Commissioner and the addition made under section 13(1)(d) have also been impugned on account of being not warranted on the facts .of the cage.

3. We have heard the averments advanced by the learned A.R. of the assessee on legal as well as factual grounds. Facts leading for disposal of this very case are that the as assessee was a practising lawyer whose net income returned at Rs.52,000 was accepted under section 59(1) of the Income Tax Ordinance, 1979. Subsequently, while conducting enquiry of another tax payer namely Mr. Attaullah Cheema, who is also a practising lawyer it came to the knowledge of the Circle Inspector that the present assessee also purchased an office on first floor of property bearing No. S.60 P-I for a consideration of Rs.10,00,000 on 9-5-1990. On receipt of this information, the Assessing Officer was satisfied that the assessee was never in a position to make such a huge investment for purchase of the office. After completing administrative formalities, notice under section 65 of the Income Tax Ordinance, 1979 was issued on 27-6-1992. However, the assessee strongly protested re-opening of assessment. Also stated that the office was purchased for a consideration of Rs.1,45,000. However, total cost was incurred at Rs.5,00,000 out of which the assessee's share was at Rs.2,50,000 while the other half share was in wife's name. The entire investment was statedly to have been financed on encashment of F.E.B.C. This contention was disbelieved by the Assessing Officer and he adopted value of the office at Rs.10,00,000 as was reported by the Circle Inspector. The investment to the extent of Rs.5,00,000 was accepted while residual amount of Rs.5,00,000 was added under section 13(1)(d) towards the already assessed income under section 59(1). In this manner total net income was arrived at Rs.5,52,000 by the Assessing Officer. Felt aggrieved with this treatment, the assessee filed appeal before the Appeal Commissioner who confirmed action of the Assessing Officer regarding re-opening of assessment. He, however, set aside the assessment for de novo proceedings with the directions that full opportunity should be provided to the appellant before finalizing the assessment.

4. With regard to re-opening of assessment, it has been contended by the learned counsel that as the conditions precedent for invoking section 65 of the Income Tax Ordinance 1979 were missing, the Assessing Officer had no lawful authority to issue notice under section 65 of the Ordinance. He stated that no proceedings under section 65 can be initiated unless definite information comes into possession of the Assessing Officer. Vague information in no way can take position of definite information. Further stated that the words "definite information have been defined by the higher appellate, authorities in _ quite a number of judgments wherein it has unanimously been held that this means the information which does not allow inclusion of any estimate, gossip or surmises. Reliance in this regard was placed on case-law reported as 1997 PTD 47 (High Court Lahore), 1997 PTD 1097 (Trib.), 1997 PTD 1994 (Trib.) and 1993 PTD (Trib.) 1681. In view of principle laid down therein, the learned A.R. stated that the Income tax Inspector's Report on the basis of which notice under section 65.was issued cannot be termed as definite because the truth of that report had to be ascertained by the- Assessing Officer. Putting the information. to further trial means that the same is not definite. Thus, re-opening of assessment on the strength of such information is liable to be struck down. Reference in this regard was made on a case-law as 1993 PTD (Trib.) 1681.

5. Also argued that unless relevant clause in the notice issued under section 65(1) of the Income Tax Ordinance, 1979 is not ticked, subsequent proceedings inconsequence of the said notice have rendered them void ab initio and of no legal value in the eye of law as held by the appellate authorities in reported judgments as 1997 PTD 47 (High Court Lahore) and 1998 PTD 973 (Trib.). As relevant clause of notice Issued under section 65(1) has not been ticked, thus following the ratio decidendi in these judgments the order made under section 65 may be declared null and void it the instant case.

6. The next contention of the learned counsel for the assessee is that discarding registered sales deed without bringing any documentary evidence to controvert the said documents does not warrant re-opening of a1read3 completed 'assessment. As .the Assessing Officer could not controvert registered sales deed of the office with any enforceable documentary evidence, the order made by the Assessing Officer under section 65. merit; annulment thereof. To support the contention a case cited as 1997 PTD 199 (Trib.) has been referred to.

7. The last contention of the A.R. relates to addition of Rs.5,00,001 made under section 13(1)(d). It has been contended that no notice under section 13(2) was issued prior to making addition under section 13(1)(d) which is sine qua non to do so. As mandatory requirement of issuance of notice under section 13(2) read with section 13(1)(d) has not been complied with, the addition amounting to Rs.5;00,000 made under section 13(1)(d) is liable to be deleted in the present case. A case-law on this point bearing citation 1985 PTD (Trib.) 178 has been referred to.

8. The learned D. R on the other hand, supported the orders of the two authorities below by contending that re-opening of assessment under section 65 on the facts and in the circumstances of the case was justified.

9. We have given anxious thought to the averments advanced by the two learned representatives appearing at the bar and also perused the case law relied upon by the learned A.R. of the assessee. We feel convinced that the assessment was re-opened by the Assessing Officer on conjectures and surmises. The information used by the Assessing Officer for re-opening of assessment in the instant case cannot be said to be "definite information", which being precondition for proceedings under section 65 of the Ordinance, because that report of the Income-tax Inspector was required to be further probed or investigated. In such eventuality re-opening of assessment has been prohibited by various pronouncements given by the higher appellate Courts that the information which is being put to further trial or the authenticity whereof has yet to be determined that piece of information does not fall within the parameter of definite information. It is amazing how come the IAC has granted permission for invoking section 65 in absence of definite information available with the department. Such findings are given by the IAC in his letter dated 15-6-1993, addressed to the ITO concerned the relevant paras of that letter are reproduced hereunder:

But details of their enquiries have not been mentioned in your above letter. On the other hand, scrutiny of record reveals that the assessment was, re-opened in this case on the basis of enquiry report of the Inspector. The said enquiry report dated 27-4-1992 is obtaining on record. An extract from the said report is given below for ready reference:--

"During the course of enquiries in the case of Mr. Inayatullah Cheema, Advocate NTN 1437929 I have come to know that first floor of the same building at 1-Turner Road, Lahore has been purchased by Khawaja Muhammad Shareef, Advocate NTN 1438005 during the period relevant to assessment year 1990-91 at Rs.10,00,000 (Ten Lacs)."

It is evident from the above that the Inspector did not substantiate his estimate of investment in the purchase of office by the assessee with any supporting material. Again the then ITO while recommending for re-opening under section 65 had made the observation that the declared investment of Rs.101 per square Moot was on the lower side. He also simply asserted that the average purchase price of Rs.101 p. s. f. was low. He did not put forth by further evidence in this regard. Subsequently, the assessee declared the value of office. at Rs.5,00,000 which yields an average purchase price at Rs.347 p.s.f.

How you have again relied upon the said enquiry of the Inspector which is merely an estimate Anyhow before proceeding further in the matter your are required to intimate what treatment has been accorded in the case of Mr. Inayatullah Cheema, Advocate (existing at NTN 1437929) who also had reportedly purchased the office in the same building. You may cite some other case as well in support of 'value proposed by you in this case at Rs.10,00,000. (underlined for emphasis).

10. In no way the above contents of the I.T.'s is report constitute definite information rather that was merely an information available with the department. In such-like situation it has been held by the Appellate Tribunal that no case can be reopened on such reports of the ITO as is observed in 1993 PTD (Trib.) 1681:

Income Tax Ordinance 1979 (XXXI of 1979) sections 13(1)(d) and 65---Addition---Definite information s---Re-opening of assessment Assessee an individual filed return for the assessment year 1985-86 which was finalized on 29-3-1986---Subsequently Income-tax Officer issued notice pressing Lyross under-statement of the value of two plots ---Assessee replied that the Department had no definite information on record to re-open the case---Assessing Officer debuted his Inspector to conduct inquiries and proceeded to make addition---C.I.T. (A) confirmed the re-opening of assessment Whether Assessing. Officer had any direct information which need not be nut to further trial by supporting material---Held no---Report of the Inspector whether could be treated as definite information-- Held no----Definite information whether could be given a universal meaning---Held no.

l1. We are also quoting a para. from a case-law reported as 1997 PTD 1994 (Trib.) wherein it has been held that discarding of registered deed without any evidence as well as non-ticking of relevant clause in notice under section 65(1) render the assessment illegal. Relevant para. is as under:--

That the ITO should not reopen the assessment under section 65 on the basis of estimates and must bring evidence which cannot be refuted by arguments as the requirement of law in term of evidence cannot be fulfilled by relying upon the value of some other plot being different from the declared by the assessee. We, therefore, do not agree that there was some definite information available for reopening of assessment under section 65. We also cannot support discarding of registered deed without having some evidence that the same was incorrect. These two lacunas coupled with the defect of not ticking such proposition of section 65 so as to determine whether the assessee is under-assessed or escaped assessment, made the whole proceedings as illegal. The notice under section 65 as such is cancelled. The effect of our finding is that original order prior to reopening shall stand in the eyes of law. The appeal is disposed of in the manner and to the extent as mentioned above.

12. It is also worth-mentioning that as per registered sale-deed incomplete office was purchased by the assessee for Rs.1,45,000. Subsequently, a sum of Rs.3,55,000 was invested to complete the said office. The total cost incurred by the assessee was at Rs.5,00,000. There is no ambiguity of this fact that the case was re-opened by the Assessing Officer on receipt of any information that the assessee had purchased an office at Turner Road, Lahore for Rs.10,00,000 yet the department had miserably failed to substantiate its contention with any supporting material evidence. On the contrary, the assessee produced registered sale deed to refute the contents of the I.T.R's. report by contending that incomplete office was purchased for Rs.1,45,000 and additional expenses were incurred to complete the said office. Neither the seller of the property was called upon by the Assessing Officer to find out factual position of the transaction nor any corroborative evidence was adduced to justify his action of re-opening of the assessment. In addition to the relevant clause enumerated in notice issued under section 65(1) of the Income Tax Ordinance, 1979 has not been scored out by the Assessing' Officer. This leads to the conclusion that the Assessing Officer was not definite in his mind as to which one clause of the notice was attracted to the facts of the present case.

13. Glancing through the foregoing discussion; we hold that the re assessment made by the Assessing Officer on 29-6-1993 was without lawful jurisdiction, void ab initio, illegal and is hereby cancelled and the order originally male under section 59(1) of the Income Tax Ordinance, 1979 stands restored. Consequently, the order of the Appeal Commissioner is vacated.

14. As the appeal of the assessee succeeds on the primary objections, the other issues raised before us are not being dilated upon hereunder.

15. Ordered accordingly.

C.M.A./M.A.K./30/Tax(Trib).Order accordingly