ASAD HUSSAIN VS COMMISSIONER OF INCOME-TAX, LAHORE ZONE-B, LAHORE, 2002 PTD-LAHORE-HIGH-COURT-LAHORE 2418 (2002)

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

----S.13---Income Tax Rules. 1982, R.207-A---Valuation of immovable property---Procedure---Valuation of immovable property for the purpose of S.13 of Income Tax Ordinance, 1979, is determined under R.207-A of Income Tax Rules. 1982.

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

----S.13---Income Tax Rules, 1982, R.207-A(ii) --- Stamp Act (II of 1899), S.27-A---Valuation of immovable property---Value notified under S.27-A of Stamp Act, 1899---Land under assessment according to Revenue Record was agriculture land---Use of the land for agriculture purpose had -been abandoned for quite some time---Effect---Such land could be evaluated under 8.207-A(I1) of Income Tax Rules, 1982, which provided for determination of value as notified by the District Collector under S.27-A of Stamp Act, 1899, for the purpose of levy of stamp duty.

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

----S.13---Income Tax Rules, 1982, R.207-A---Valuation of-immovable property---Factors to be considered---When the land under assessment was occupied by the assessee, the same was an agriculture land and at the time when probe against the assessee had started, some other factories were also established there---Effect---Existence of other factories in the vicinity could not be taken into consideration while determining the value of the property purchased by the assessee.

Commissioner of Income Tax/Wealth Tax, Companies Zone-II Lawrence Road. Lahore v. Sarfraz Alt Sheikh 2000 PTD 374 eel.

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

----Ss.13 & 136(2)---Income Tax Rules, 1982, R.207-A(ii) --- Valuation of immovable property---Agricultural land used as industrial area-- Assessing Officer instead of assessing the land in question according to the rate specified by the District Collector under S-27-A of Stamp Act, 1899, assessed the same at a rate of industrial area on the ground that the land had been converted into industrial area---Assessment made by the Assessing Officer was reduced by the Appellate Tribunal and the land was assessed at the rate of another land of factory which was purchased subsequent to that of the assessee's----Contention of the assessee was that rate fixed by the District Collector was to be adopted for the purpose of evaluation of the land---Validity---Present case was covered by R.207A(ii) of Income Tax Rules, 1982---Valuation adopted by the Assessing Officer and its partial decrees by Appellate Authority were ,wrongly maintained by the Tribunal----High Court disapproved indiscriminate resort to the provisions of S.13 of Income Tax Ordinance, 1979- by Assessing Officer and observed that deeming provisions including S.13 in Income Tax Ordinance, 1979. owe their justification to discouragement of concealment- --Such provisions can neither be resorted to as a matter of course nor be taken as an easy way to generate revenue---Valuation fixed by the authorities was set aside---Reference was disposed of accordingly.

Mian Muhammad Arshad for Appellant.

Muhammad Ilyas Khan For Respondent.

Date of hearing: 9th April, 2002.

JUDGMENT

NASEEM SIKANDR, J.---This direct reference under section 136(2) of the Income Tax Ordinance. 1979 (for short the Ordinance) has been made after the refusal of the learned Income-tax Appellate Tribunal to refer following questions of law earlier submitted before them under section 136(1) of the Ordinance.

"(1) Whether in the circumstances of this case, the learned Tribunal was correct in holding CIT (Appeals) Appellate Order when rule 207-A concerning valuation of properties could not be made above District Court Rates'.

(2) Whether the ITAT was justified to ignore the following ground while discussing the appeal?

(a) That value as per District Court rate of the property comes to Rs.44,676"

(3) Whether in the circumstances of the case, the learned ITAT was justified in not considering the sale-deed which was even stated to be actual by the Assessing Officer'?"

2. The assessee/petitioner is an individual and a Member of AOP namely Messrs M. Kay Supreme Enterprises, Lahore. After having been served with notices under sections 56 and 61 of the Ordinance, the AOP returned nil income. From the wealth statement furnished by the assessee it was noted that he had shown a capital of Rs.1,73,092. The Assessing Officer observed that the assessee had not declared factory land in his wealth statement while the balance-sheet of the aforesaid AOP revealed that factory land and building had been included in the capital of the members of the AOP.

3. After usual proceedings the Assessing Officer concluded that the assessee had purchased land measuring 5 Kanals, 2 Marlas in village Atari Saroba Ferozepur Road, Lahore alongwith three other co-sharers for a total consideration of Rs.2,00,000 on 7-12-1992. The declared value in his view was marginal when seen in the light of the rate determined in respect of land under another factory Messrs Mass Pharma Factory situated the assessee. The assessee pleaded that the concerned Deputy Commissioner under section 27-A of the Stamp Act had notified the rates of residential area in the year 1991 at Rs.1,752 per Maria while his declared value indicated a rate of Rs.2.000 per marla. The declared value was accordingly desired to be accepted. The Assessing Officer however, proceeded to adopt a rate of Rs.60,000 per marla keeping in view that the rate adopted in respect of the above said factory. In this manner, an addition of Rs.14,80,000 in the hands of the assessee was made by resort to section 13(f)(d) of the Income Tax Ordinance, 1979.

4. Learned First Appellate Authority/CIT (Appeals) through an order recorded on 11-3-2000 partly agreed with the submissions made before him by the assessee that the area was not primarily an industrial area inasmuch as only the aforesaid medicine factory was located in the area which fell on the eastern side of the plot purchased by the assessee. Also he found that the adopted rate of Rs.60,000 per Marla was highly excessive. It was in this regard noted that the Revenue had adopted a rate of Rs.23,000 per Marla in respect of the land on which Messrs Mass Pharma Factory was built. Accordingly it was directed that a rate of Rs.25,000 per Marla should be adopted in respect of the plot in question. In this manner the addition made the aforesaid provision was reduced to Rs.5,80,000.

5. Learned Tribunal, on further appeal, however, maintained the order of the First Appellate Authority holding the same to be an adequate relief. Thereafter, as noted earlier, the prayer of the assessee for a reference to this Court was refused on the ground that their order had not given rise to any question of law.

6. After hearing the learned counsel for the parties, we are in agreement with the learned counsel for the petitioner that determination of the value of the land purchased by the assessee in this case is against law. Rule 207-A of the Income -Tax Rules, 1982 provides for valuation of immovable properties for the purpose of section 13 of the Income Tax Ordinance, 1979. This rule provides for four criterias on which the value of immovable properties for the purpose of that section can be determined. Sub-clause (i) of the rule provides that in case of open plots the

value shall be determined on the basis of the auction price in respect of similar plots situated in a housing scheme developed by an official authority or Government agency. In other cases, according to sub- rule (II) of that rule the value shall be determined in accordance with the rate determined by the District Collector for the purpose of stamp duty.

7. In the case in hand admittedly the plot was not situated in. any scheme sponsored by any official agency. The nature of the land at the time of transaction was covered by sub-rule (iv). As per Revenue Record it was a piece of agricultural land though its use for agriculture appears to have been abandoned for quite some time. In such situation, only sub- rule (ii) of rule 2074 was attracted which provided for determination of value as notified .by the District Collector for the purpose of levy of Stamp Duty under section 27-A of the Stamp Act, 1899. The observation of the Assessing Officer that the land in question was situated in an industrial area or was otherwise of industrial nature is factually incorrect. Mere fact that on an agricultural piece of land a factory already stood erected next to the plot purchased by the assessee by itself did not make the area to be an industrial Zone. All the more so when no officials agency had developed the area for installation' of industries. The District Collector as rightly pointed out by the assessee, had notified during the relevant period a sum of Rs.1,752 per Maria for sakni land situated in the village. The assessee having declared a .sum of Rs.2,000 per Marla was well within the minimum price determined by the District Collector for the purpose of the aforesaid. provisions of the Stamp Act, 1899. Even the Circle Inspector reported that factory of the AOP was situated at 17 KM "off" Ferozepure Road, Lahore. The establishment of some other factories in the year, 1999 by the time probe had started against the assessee could not be taken into consideration to determine the value of the property purchased on 5-11-1992. Therefore, the ratio settled in re: Commissioner of Income Tax/Wealth Tax, Companies Zone-II Lawrence Road, Lahore v. Sarfraz Ali- Sheikh (2000 PTD 374) is clearly attracted in this case.

8. The case of the assessee in our view was clearly covered by sub -clause (II) of rule 207-A of the aforesaid Rules wherein the Collector had fixed a rate of Rs.1,752 per Maria for sakni land. The valuation adopted by the Assessing Officer and its partial decrease by the First Appellate Authority were wrongly maintained by the learned Tribunal. We wish to record our disapproval of indiscriminate resort to the provisions of section 13 of the Income Tax Ordinance, 1979 by the Assessing. Officer. The deeming provisions in the Ordinance including section 13 of the Ordinance owe their justification to discouragement of concealments. These provisions can neither be made resort to as a matter. of course nor be taken as an easy way to generate revenue.

9. For the various reasons given in the penultimate para. question No.1 is answered in the negative. Questions Nos.2 and 3 as framed are not questions of law nor these, in the given situation, require an answer.

10. Reference disposed of.

Q.M.H./M.A.K./A-523/L

Order accordingly.