Wealth Tax Act (XV of 1963)‑‑‑

‑‑‑‑Ss.17‑B, 16(3) & 2(16)‑‑‑Wealth Tax Rules, 1963, R.8(3)‑‑‑C.B.R. Circular No. 11 of 1994. dated 17‑7‑1994, para. 1 (b)(1)‑‑‑Powers of Inspecting Assistant Commissioner to revise Wealth Tax Officer's order‑‑‑Purchase of property through agreement to sell‑‑‑Advance payment‑‑‑Declaration of such agreement in wealth tax return‑‑‑ Property was in civil litigation on account of agreement to sell with another party by the seller‑‑‑Assessing Officer rejected the declared version. And adopted higher value on the basis of preceding assessment years‑‑ Inspecting Assistant Commissioner cancelled the assessment on the ground that value of the property in question had been adopted without taking into account the provisions of R.8(3) of, the Tax Rules, 1963 as he inferred from the contents of power of attorney at since the seller had no interest whatsoever in the property under consideration, he was no more owner of the property‑‑‑Civil suit had no bearing on agreement to sell and possession of the assessee and other co‑sharers‑‑ Validity‑‑‑orders passed by the Inspecting Assistant Commissioner while exercising his revisional powers under S.17‑B of the Wealth Tax Act, 1963 and cancelling the assessment order framed under S.16(3) of theta Wealth Tax Act, 1963, were not sustainable in the eye of law‑; ‑Assessee admittedly' purchased the property in question through. an agreement to sale‑‑‑Agreement to sell though was registered, with the Sub‑Registrar but, it. would not be considered equivalent to a registered sale‑deed which transfers the title of the property from seller to the purchaser and without which a mutation in the Revenue Record could not take place Agreement to sell could not confer any right on the assessee and he could not be considered to be a full owner of the property‑‑‑Mere possession of the property or declaration by the assessee in his wealth tax return was not sufficient to bring the property within the definition of "net wealth" as defined in section 2(16) of the Wealth Tax Act, 1963‑‑‑Inspecting Assistant Commissioner also lost sight ‑of the fact that a similar agreement to sell had Also been executed in favour of other person who had initiated litigation in a Civil Court which had stopped the assessee from dealing with the property as an independent and full owner‑‑‑If a person cannot deal with the property or cannot dispose of freely, he could not be considered as full owner‑‑‑ Appellate Tribunal vacated the orders passed by the inspecting Assistant Commissioner under S. 17‑B of the Wealth tax Act 1963 in circumstances.

1996 PTD 905 2000 PTD 1 and 1991 PTD 650 rel.

Rizwan Bashir F.C.A for appellant.

Mehboob Alam D.R for Respondent

Date of hearing : 19^th February 2002.

ORDER

SYED NADEEM SAQLAIN (JUDICIAL MEMBER).-----‑‑‑Titled three appeals for the assessment years 1997‑98, 1998‑99 and 1999‑2000 are directed against the impugned orders dated 17‑11‑2001. The assessee has contested the re‑opening of assessment under section 17‑B of the Wealth Tax Act, 1963 (hereinafter called as the Act) completed under section 16(3) of the Act dated 2‑1‑1998, 10‑2‑1999 and 24‑12‑1999 respectively.

2. Briefly stated the facts of the case .are that the assessee filed Wealth Tax Returns declaring net assets as under:

ASSESSMENT YEAR

3. The assessee declared value of his share in plot situated at Zafar Ali Road, Sialkot at Rs.2,50,000 for all the years under appeal. The Assessing Officer rejected the declared version and adopted the same at Rs.10,00,000, Rs.11,00,000 and .12,00,000 respectively for the reason that the same has been assessee at Rs.8,00,000, Rs.10,00,000 and Rs.11,00,000 in the preceding assessment years. Later on assessment record in the instant case was called for and examined by the learned I.A.C. who found that the assessee and seven other persons purchased a plot measuring 34 Kanal (680 Marlas) situated at Z ..A .R ..S C for a consideration of Rs.32,00,000 vide sale agreement registered with Sub‑Registrar, S .... on 20‑3‑1988. He was of the view, that the value of the property in question had been adopted without taking into account the provisions of Rule 8(3) of the Wealth Tax Rules read with contents of para. 1(b)(1) of Circular No. 11 of 1994, dated 17‑7‑1994. He observed that the rate of land in the vicinity for the years under consideration had been notified by the District Collector. S at Rs.80,000 per Marla thus the value of the 1/8th share of the assessee should have been worked out at Rs.68,00,000, 1,07,95,000 and Rs.1,07,95;000 respectively for the three years under appeal instead of Rs.10;00,000, Rs.11,00,000 and 12,00,000 respectively for the years under review. For the aforesaid reasons, the I.A.C. considered the assessment framed under section 16(3) of the Act to be erroneous insofar as prejudicial to the interest of Revenue and while invoking section 17‑B of the Act issued a show‑cause notice to the assessee wide an office Letter No. 122 dated 20‑8‑2001, requiring the assessee to show cause as to why the assessment so finalized may not be cancelled/modified in view of provisions of section 17‑B of the Act. In response to the said notice the assessee furnished written explanation stating as under:

" 1. That the assessee entered into an agreement with Mr. M..........A through his general power of attorney in shape of an Iqrar Nama/Sale Agreement, on stamp paper of Rs.5 to sell the Plot No.20 at Z A . R S .. C , measuring 4.25 acres (680M) on 20‑3‑1988 with seven other persons for total consideration of Rs.32,00,000 out of which the assessee paid Rs.2,50,000. So, his proportionate share comes to 53, 75 Marlas and not 85 Marlas as mentioned in the abovesaid notice (photo copy of the Sale Agreement is enclosed for ready reference).

2.According to clause No.5 of the Sale Agreement, the sale‑deed shall be completed when the property shall be transferred in the name of the purchaser by the General Power of Attorney.

3.Unfortunately, before the Execution of this agreement a civil suit was lodged by another person Maj. (Retd.) P .I .. for execution of similar agreement for the same land (photo copy of the letter of M.E.O. G .C ..and copy of GLR Register is enclosed herewith which is self‑explanatory).

4.The property under question never became the asset of the assessee because of litigation and non‑transfer in the name of assessee in the GLR of the Military Estates Office, wherein the title of property still remains with the seller. The assessee has wrongly been declaring this Advance Money in his net wealth under the head Non‑Agriculture Assets instead of the head of Advances.

5.This mistake was kept in mind by the Assessing Officer while framing assessment and the honourable Assessing Officer over applied his mind and wrongly assessed the value of advance money Rs.2,50,000 to Rs.12,00,000 resulting in loss to assessee instead of being erroneous and prejudicial to the interest of Revenue."

4.Finding the reply of the assessee as unsatisfactory, the learned I.A.C. while exercising his revisional powers under section 17B of the Act, proceeded to cancel the assessee it framed under section 16(3) of the Act. The learned I.A.C. was of the view that agreement of sale was duly registered with Sub‑Registrar, S ....: and the assessee alongwith other, co‑sharers is in the possession of the said plot, thus he was the rightful owner of the plot. In coming to this conclusion he was influenced by the clauses Nos.5, 6 and 8 of the Agreement to sell which are also being reproduced as under:‑‑‑

"Clause No. 5:

The sale‑deed shall be completed by my General Attorney M ...... K P son of . F .E Resident of .E ..H ..B .No.44, S .. K . S .. R . , S .C ..power of attorney has been executed before the Sub‑Registrar, S .... which is irrevocable. Whenever the purchasers will demand the execution of the sale‑deed of abovesaid Bungalow, my attorney will be bound to execute the same according to their wishes.

Clause No.6:

The vendor and his heirs, successors‑in‑interest will have absolutely no right over the said Bungalow and will be bound to honour this General Power of Attorney and Agreement to sell as well.

Clause No.8:

Possession of the Bungalow has been given to the purchasers through in witness whereof the parties hereto have signed this deed on the date mentioned above."

5. The learned I.A.C. also observed that irrevocable power of attorney duly registered with the Registrar has been given by the seller to M K .P F E who is a close relative of the assessee. From the contents of the power of attorney the I.A.C. inferred that since the seller has no interest whatsoever in the plot under consideration, he is no more owner of the said `plot. As regards assessee's contention that the property which is the subject‑matter of the appeals has become disputed for the reason that a civil suit has been filed by a person namely Mr. P ..I .. has no bearing on agreement, to sell and possession of the assessee and other co‑sharers. The learned I.A.C. also took notice of the fact that the assessee had been declaring ownership of the plot in his Wealth tax returns over the years which was assessed on estimated basis but this treatment accorded to the assessee has never been contested before any Appellate Authority not even before the Assessing Officer.

6. Both the parties have been heard and relevant orders perused. The learned A.R. has strongly contested the impugned re‑opening of the assessment order passed under section 16(3) by the learned I.A.C. He submitted that agreement to sell though registered with Sub‑Registrar, S does not confer any title on the assessee. He submitted that Clause No.5 of the sale agreement provided that the sale‑deed shall be completed when the property shall be transferred in the name of the purchaser by general power of attorney. He stated that before the execution of agreement a civil shit was lodged by another person namely P . I . claiming that a similar agreement to sell for the same property has also been entered into in favour of said P .I He argued that without completion of sale‑deed and transfer of the property in the name of the assessee, the property could not be considered to be belonging to the assessee for the wealth tax purposes. He pleaded that at the most the amount of Rs.2,50,000 paid to the seller to be treated as an advance money for the purposes of Wealth Tax and not the property which is subject‑matter of agreement to sell. He also assailed the observation made by the learned I.A.C. that the power of attorney being irrevocable could not be revoked or it could be equated with the transfer of title through formal sale‑deed or mutation in the name of the assessee in the relevant Revenue Record, thus declaring him to be full owner of the property for all intent and purposes.

7. In support of his contention the learned A.R. appearing on behalf of the assessee relied upon various judgments of the Tribunal reported as 1996 PTD 905; 2000 PTD 1 and 1991 PTD 650. In the reported judgment 1996 PTD 905 the facts were somewhat similar to the case of the assessee before us wherein it was considered whether an agreement to sell would make an assessee complete and rightful owner. Besides, word "belonging" as used in subsection (16) of section 2 was also looked into. It was held by the Tribunal that the word "belonging" used in section 2(m), Wealth Tax Act, 1963 while defining "net wealth" refers to a complete and full owner. It was also observed that mere agreement to sell does not confer any right or title in the property. It was also highlighted that mere possession or joint possession unaccompanied by a right to or ownership or property would not bring the property within the definition of "net wealth" for it would not be an "asset". It was categorically elaborated that all permanent interest, to or in an immovable property require solemnizations of the acquisition by certain prescribed mode regulated by tradition and registration. In another judgment of the Tribunal reported as 2000 PTD 1, relied upon by the learned A.R., the facts which came up for adjudication were that the assessee was allotted a plot by C.D.A. for a consideration of Rs.1,25,000. The assessee declared value of the plot at the same figure which he paid at the time of allotment of the plot. The Assessing Officer considering that the value of the plot, declared by the assessee extremely low, he concluded that the assessee being a rightful owner of the said plot its value should be adopted in view of prices prevailing in the market and thus value of the plot was adopted at Rs.20,00,000. It was held by the learned Chairman of the Tribunal, to whom the question for resolving the deference of opinion between the Accountant Member and the Judicial Member was referred to, that the assessee was not the legal owner of the plot in question as the title therein was not transferred to him and therefore, it could not be included in his net wealth. It was further observed that the money invested to acquire the plot be included in his .net wealth and not the value of the plot which does not belong to him. The learned A.R. also sought strength from the judgment reported as 1991 PTD 650 wherein the question arose as to whether the property held by the assessee under agreement to sell was liable to tax under wealth tax proceedings. It Was held that no title could be conferred on a person found to be in possession on the basis of an unregistered contract of sale. The learned D.R. on the other hand opposed the arguments advanced by the learned A.R.

8. After hearing the learned counsel for both the parties and having gone through the orders of the authorities below as well as the case‑law cited at the bar, we have no hesitation in holding that the impugned orders passed by the learned I.A.C. while exercising his revisional powers under section 17‑B of the Act and cancelling the assessment order framed under section 16(3) of the Act are not sustainable in the eye of law. Admittedly, the assessee has purchased the property in question through an agreement for sale. Though the agreement to sell was registered with the Sub‑Registrar, Sialkot but it could not be considered equivalent to a registered sale‑deed which transfers the title of the property from seller to the purchaser and without which a mutation in the Revenue Record cannot take place. The ratio laid down in the supra judgments cited by the learned A.R. at the bar also indicate that it is now consistent view of the Courts/Tribunals that the agreement to sell cannot confer any right on the assessee and he could not be considered to be a full owner of the property. Mere possession of the property or declaration by the assessee in his wealth tax return is not sufficient to bring the property within the definition of net wealth as defined in section 2(16) of the Act. The learned I.A.C. also lost sight of the fact that a similar agreement to sell has also been executed in favour of other person who has initiated litigation in a Civil Court which has stopped the assessee from dealing with the property as an independent and full owner. Obviously if a person cannot deal with the property or cannot dispose of the same freely, he could not be considered as full owner as per principles lay down in the supra judgments.

9. In the light of above discussion and the case‑law cited at the bar we hereby vacate the impugned orders passed by the learned I.A.C. under section 17-B of the Act.

10. Appeals of the assessee succeed in the manner indicated above.

C.M.A./M.A.K./348/'Tax(Trib.)Appeals succeeded.