Income Tax Ordinance (XXXI of 1979)‑‑‑

‑‑Ss.66A, 13(2) & 59(1)‑‑‑Wealth Tax Act (XV of 1963), S. 16(3)‑‑‑ Wealth Tax Rules, 1963, R.8(3)‑‑‑Assessee declared his share in house under construction in wealth statement which was accepted and assessment was finalized under Self‑Assessment Scheme‑‑‑Subsequently, such share in property was assessed in wealth tax side, at higher value than the declared one‑‑‑Inspecting Additional Commissioner proceeded to hold that the assessment order passed by the Assessing Officer under S.59(l) of the Income Tax Ordinance, 1979 was erroneous and prejudicial to the interest of Revenue as the Assessing Officer did not take into consideration the value of the house subsequently assessed during wealth tax proceedings and thus he ignored the element of concealment ‑‑‑Assessee contended that action could not be taken under S.66A of the Income Tax Ordinance, 1979 on account of the subsequent inquiries /proceedings/events which were not before the Assessing Officer when he passed assessment order as assessment order could not be held erroneous and prejudicial to the interest of Revenue on account of the subsequent facts‑‑‑Validity‑‑‑Action taken by the Inspecting Additional Commissioner was absolutely illegal and against the provisions of S.66‑A of the Income Tax Ordinance, 1979‑‑‑Assessing Officer passed assessment order in question under S. 59 of the Income Tax Ordinance and this order of the Assessing Officer could not be held erroneous and prejudicial to the interest of Revenue on the basis of a wealth tax assessment order subsequently made‑‑‑Method of valuation of an asset or property under S. 13 of the Income Tax Ordinance, 1979 was quite different from method of valuation under R. 8(3) of the Wealth Tax Rules, 1963‑‑‑Section 13(2) of the Income Tax Ordinance envisaged that where the value of any investment or article referred to in any clause from (aa) to (d) or the amount of expenditure referred to in cl. (e) of subsection (1) was, in the opinion of the Assessing Officer too low, the Assessing Officer could determine a reasonable value or the amount thereof, as the case may be, while the valuation of immovable property as laid down under R.8(3) of the Wealth Tax Rules, 1963 was quite different‑‑‑Rule 8(3), Wealth Tax Rules, 1963 provides that value of an immovable property comprising lands and buildings shall be estimated with due regard to the nature and size of the property, the amenities available and the price prevailing for similar property in the same locality or in its neighbourhood provided it did not exceed 10 times of Annual Letting Value of such property‑‑‑Method of valuation of properties in both the enactments being quite different, Appellate Tribunal did not agree with the Inspecting Additional Commissioner that assessee's share in the house subsequently assessed in wealth tax assessment at higher value could justify action against Assessing Officer's order who accepted the value of assessee'9 house as declared‑‑ When the property was incomplete the action under S. 13(2) of the Income Tax Ordinance, 1979 did not lie‑‑‑Order passed by the Inspecting Additional Commissioner under S. 66‑A of the Income Tax Ordinance, 1979 being contrary to law was annulled and assessee's appeal was accepted by the Tribunal.

Ganga Properties v. Income‑tax Officer ITR II, 1979 page 447 and (1991) 63 Tax 154 (Trib.) ref.

Mian Muhammad Azeem for Appellant.

Ahmed Kamal, D.R. for Respondent.

Date of hearing: 6th April, 2002.

ORDER

MUHAMMAD SHARIF CHAUDHRY (ACCOUNTANT MEMBER)‑‑‑Appeal has been filed by an assessee to challenge order passed by the JAC under section 66A of the Income Tax Ordinance for the year 1996‑97. It has been contended in the grounds of appeal that the learned IAC has not appreciated the facts of the case. The house in question was shown to be under construction on 30‑6‑1996 and, therefore, the Assessing Officer had not made any error or caused any loss of Revenue by accepting it as such. It has that the action taken by the tax assessment order for the year 1996‑97 which was framed some three years later is ill‑founded as on the date of passing assessment order the DCIT had no knowledge that three years later wealth tax assessment would be made on higher value of the house.

2. Appellant's AR and respondent's DR have been heard. Available records have been perused.

3. It has been pleaded by the AR of the assessee that action cannot be taken under section 66A on account of the subsequent inquiries/proceedings/events which were not before, tie ITO when he passed assessment order as assessment order cannot be held erroneous and prejudicial to the interest of Revenue on account of the subsequent facts. Therefore, according to the AR. action taken by the JAC under section 66A in the instant case for the year 1996‑97 against assessment order under section 59(1) of the Income Tax Ordinance which was passed on 21‑6‑1997 on the basis of wealth tax assessment order which was made on 2‑1‑1999 is absolutely unjustified and' illegal. The AR has also pointed out‑that the house in question was under construction during the year 1996‑97 and a further investment of Rs.50,000 to the completion of the house was made in the .subsequent year. When the property is not complete, it has been stressed by the AR, the question of its valuation under section 13(2) does not arise. In support of his contention the AR of the assessee has relied upon the following case‑law:

(a) Ganga Properties v. Income Tax Officer ITR‑II, 1979 page 447, wherein it has been held by Calcutta High Court that subsequently report cannot be made basis for revision proceedings.

(b) (1991) 63 Tax 154 (Trib.)

Wherein it was held that action under section 66A cannot be taken against assessment order passed by ITO on the basis of subsequent enquiries.

4. The above mentioned contentions of the assessee and the arguments of the AR have been vehemently contested by the learned DR. However, the learned DR has recited the same facts and figures which have been discussed by the IAC in his assessment order.‑

5. We have considered the contentions of both the parties in the light of the facts available on record. According to the facts, as briefly stated, the assessee declared his share in a house at Muslim Town No. 1, Faisalabad showing value of Rs.342,803 in the wealth statement as on 30‑6‑1996. The Assessing Officer accepted the declared value of the house and processed return filed by the assessee at an income Rs.102.00C under Self‑Assessment Scheme under section 59(1). Later on the IAC of the Range examined the records and he found that assessee's share in the house had been assessed for the purpose of wealth tax under section 16(3) at an amount of Rs.821,742. He, therefore, proceeded to hold that the assessment order passed by the ITO under section 59(1) was erroneous and prejudicial to the interest of Revenue as the Assessing Officer did not take into consideration the value of the house subsequently assessed during wealth tax proceedings and thus he ignored the element of concealment. It is against this action of the learned IAC that the assessee has come up in appeal before us.

6. We agree with the AR of the assessee that the action taken by the IAC is absolutely illegal and against the provisions of section 66A of the Income Tax Ordinance. The reasons why we have arrived at this decision are as follows:‑

(i) The ITO passed assessment order in question on 21‑6‑1997 under section 59 of the Income Tax Ordinance and this order of the ITO cannot be held erroneous and prejudicial to the interest of Revenue on the basis of a wealth tax assessment order subsequently made on 2‑1‑1999.

(ii) Method of valuation of an asset or property under section 13 of the Income Tax Ordinance, 1979 is quite different from method of valuation under Wealth Tax rule 8(3). According to section 13(2) of the Income Tax Ordinance, where the value of any investment or article referred to in any clause from (aa) to (d) or the .amount of expenditure referred to in clause (e) of sub section (1) is, in the opinion of the DCIT too low, the DCIT can determine a reasonable value or the amount thereof, as the case may be. However, the valuation of immovable property as laid down under Wealth Tax rule 8(3) is quite different. According to this rule, value of an immovable property comprising lands and buildings shall be estimated with due regard to the nature and size of the property, the amenities available and the price prevailing for similar property in the same locality or in the neighbourhood of the said locality provided' it does not exceed 10 times of ALV of such property. Since the method of valuation of properties in both the enactments are quite different, we do not agree with the learned IAC that assessee's share in the house subsequently assessed in wealth tax assessment at Rs.821,742 (which is not final and is subject to appeal) can justify action against ITO's order who accepted the value of assessee's house at Rs.342,803.

(iii) The AR of the assessee has also pointed out that the house was under construction and a further investment of Rs.50,000 was made towards its completion in the subsequent years. When the property is incomplete, we feel no hesitation to say, the action under section 13(2) does not lie.

7. In view of the foregoing discussion the order passed by the IAC under section 66A of the Income Tax Ordinance for the year under consideration in the instant case being contrary to law is annulled and thus assessee's appeal is accepted.

C.M.A:/M.A.K./445/Tax(Trib.) Appeal accepted.