I.T.As. Nos. 1360/KB of 1999-2000 and 2057/KB of 2002, decided on 11th January, 2003. VS I.T.As. Nos. 1360/KB of 1999-2000 and 2057/KB of 2002, decided on 11th January, 2003., 2003 PTD-INCOME-TAX-APPELLATE-TRIBUNAL-PAKISTAN 1361 (2003)

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

----Ss.66-A, 13(1)(d) & 59-A---Stamp Act (II of 1899), S.32---Powers of Inspecting Additional Commissioner to revise Deputy Commissioner's order--Return was accepted under S.59-A of the Income Tax Ordinance, 1979 after verification that the stamps of the value fixed on the registered sale-deed of property acquired was properly registered by the District Registrar-Inspecting Additional Commissioner cancelled such order on the ground that Assessing Officer had accepted the declared value of property notwithstanding that it was ridiculously low when compared with the valuation which was required to be made on the basis of Collector's rates and directed for taking appropriate measures towards retrieving loss of Revenue through de novo proceedings ---Validity-- Order passed by the Assessing Officer under S.59-A of the Income Tax Ordinance, 1979 was patently erroneous and prejudicial to the interest of Revenue on the basis of examination of whatever was available on record---Letter issued by the Assessing Officer showed the intention for proceeding under normal law and copy of conveyance deed whereunder the declared value of the property appeared ridiculously low from the valuation if made at the collector's rate---Order of the Inspecting Additional Commissioner was fair to get the opinion or to consider that the prejudice had been caused to Revenue and Inspecting Additional Commissioner was right to consider that the order was erroneous as well as prejudicial to the interest of Revenue---Order by the Inspecting Additional Commissioner under S.66-A of the Income Tax Ordinance, 1979 was maintained by the Appellate Tribunal.

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

----S. 59-A---Assessment on the basis of return---Assessment after production of evidence regarding value of property ---Validity-- Section 59-A of the Income Tax Ordinance, 1979 specifically requires that the return can be accepted by the Assessing Officer under this provision of law, when the Assessing Officer was satisfied without requiring the production of evidence that a return furnished under S.55 of the Income Tax Ordinance, 1979 was correct and complete---Once some evidence was required to be produced, the said return could not legally be accepted under S.9-A of the Income Tax Ordinance, 1979 and under the law the said assessment was required to be completed under the provisions of law other than those contained in S.59-A of the Income Tax Ordinance, 1979---Order passed by the Assessing Officer under S.59-A of the Income Tax Ordinance, 1979 was patently erroneous in law in circumstances.

(c) Words and phrases---

----"Consider"---Meaning---Word "consider" refers to hold an opinion which depends on something which prima facie looks to be probably true and does not require/include any incontrovertible evidence.

Chamber's Dictionary ref.

(d) Income-tax---

----Property acquired by assessee---Value, determination of---Principle.

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

----Ss 13(1)(d) & 58---Finance Act (IV of 1999)---Addition---Wealth statement--Insertion of the words "or return of wealth" in S.13(1)(d) of the Income Tax Ordinance, 1979 was made by Finance Act, 1999 and for the assessment year 1998-99 the filing of wealth tax return did not absolve the Assessing Officer of his responsibility of obtaining a wealth statement under S.58 of the Income Tax Ordinance, 1979 for proceedings under S. 13(1)(d) of the income Tax Ordinance, 1979.

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

----Ss. 13(1)(d) & 58---Addition---Amount actually expended on acquiring property by the assessee exceeded the amount shown in the wealth statement---Addition---Procedure---For assessment year 1998-99 the prescribed procedure for action under S.13(1)(d) of the Income Tax Ordinance, 1979 was to obtain a wealth statement under S.58 of the Income Tax Ordinance, 1979, then to prove with evidence that the amount actually expended on acquiring property exceeded the amount in the wealth statement and only then the such addition under S.13(1)(d) could be made and that also after completing other legal prescribed formalities.

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

----Ss. 13(1)(d) & 58---Addition---Addition was made without calling wealth statement by issuance of notice under S.58 of the Income Tax Ordinance, 1979---Validity---Procedural deficiency existed on the part of the Assessing Officer in considering the addition under S.13(1)(d) of the income Tax Ordinance, 1979---Order was set aside by the Appellate Tribunal, with the directions that de novo proceedings may be taken up by calling wealth statement under S.58 and addition under S.13(1)(d) of the Income Tax Ordinance, 1979 may be made if the circumstances so justify after bringing in evidence so as to give the finding that the amount expended in acquiring the immovable property exceeded the amount as shown in the wealth statement.

1993 SCMR 462; 1980 PTD 394; 1995 PTD 90; PLD 1974 Note 129 at p.189; 1993 PTD 1108 = 1993 SCMR 1108 and 1990 SCMR 34 ref.

Arshad Siraj for Appellant.

Inayatullah Kashani, D.R. for Respondent.

Date of hearing: 11th January, 2003.

ORDER

MUHAMMAD AKHTAR NAZAR MIAN (ACCOUNTANT MEMBER). ---These two appeals by an individual are directed against the treatment meted out to him for the assessment year 1998.99. The appellant had submitted return of income which, qualified to be processed under the relevant Self-Assessment Scheme; the appellant had also filed the wealth tax return alongwith return of income. On scrutiny of wealth tax return, the Assessing Officer found that the assessee purchased one half share in Property Nos.101-102, Shahrah-e-Faisal, Karachi and she was of the opinion that the declared value of the property was ridiculously low as compared to the valuation if made on the basis of collector's prescribed rates. The Assessing Officer wrote a letter to the assessee on 30-6-1999 asking the assessee to explain as to why his return might not be taken out of the purview of the said Self-Assessment Scheme and processed under normal law. The assessee submitted the Conveyance Deed of the immovable property to the Assessing Officer, which contained a certificate by the Chief Inspector of Stamp Collector, Board of Revenue Sindh, Karachi to the effect that under section 32 of the Stamp Act, 1899, the instrument required stamp duty of Rs.302,400 only and the deed with the stamps of this value affixed on it was accordingly registered by the District Registrar. In spite of having made these enquiries, the Assessing Officer accepted the return under section 59A of the Income Tax Ordinance, 1979 (hereinafter called the Ordinance) vide IT-30 and demand notice, dated 8-9-1999.

2. On examining the assessment record, the IAC considered that the order passed by the Assessing Officer under section 59-A of the Ordinance was erroneous insofar as it was prejudicial to the interest of Revenue because the Assessing Officer had accepted the declared value of the property notwithstanding that it was ridiculously low when compared with the valuation which was required to be made on the basis of collector's rates. He therefore, cancelled the order under section 59-A and directed the Assessing Officer "for taking appropriate measure towards retrieving loss of Revenue through de novo proceedings". The first appeal by the assessee is against this order passed by the IAC under section 66-A of the Ordinance.

3. Consequent upon cancellation of assessment under section 66-A, the Assessing Officer started the re-assessment proceedings which culminated into an order passed by him on 8-5-2000 whereunder in the declared income an addition of Rs.5,123,946 was made under section 13(1)(d) of the Ordinance. The assessee/appellant went in appeal before the learned CIT(A) Zone-VI Karachi, challenging the addition under section 13(1)(d) of the Ordinance, but the learned CIT(A) dismissed his appeal on 10-7-2002 and this second appeal before us impugns the said order of the learned CIT(A), dated 10-7-2002.

4. Since the issues are common we intend to dispose of both the appeals through this consolidated order after hearing in detail the Representatives of both the parties and perusing the orders of authorities below.

Order under section 66-A:

5. It is submitted by the learned A.R. that the Assessing Officer had made necessary enquiries about investment in the property and thereafter she had decided not to exclude the case from the per-view of the relevant Self-Assessment Scheme, that is why the order had been passed under section 59-A of the Ordinance: he said order was therefore, not erroneous and no prejudice could have possibly been conceived to have been caused to the Revenue by conscious acceptance of the declared value of the property by the Assessing Officer. It was mere presumption by the learned IAC that the value of the property had not been properly declared in the conveyance deed and therefore his order passed on surmises could not stand in the eyes of law.

6. We have considered the submissions made by the learned A.R. and we are of the view that the order passed by the Assessing Officer under section 59-A of the Ordinance, was patently erroneous and on the basis of examination of whatever was available on record, the IAC was justified in considering that the order made by the Assessing Officer was prejudicial to the interest of Revenue as well. We have reached this conclusion after going through the provisions of sections 59-A and 66-A of the Ordinance which are reproduced below for the sake of ready reference (underlining is by us):--

"59-A. Assessment on the basis of return.---(1) If the Deputy Commissioner is satisfied without requiring the presence of the assessee or the production by him of any evidence that a return furnished under section 55 is correct and complete, he shall, by an order in writing assess the total income of the assessee and determine the tax payable on the basis of such return.

(2) The provisions of subsection (3) of section 59 shall apply to an assessment and determination under this section as they apply to an assessment and determination under that section."

"66A. Powers of Inspecting Additional Commissioner to revise Deputy Commissioner's Order.-(1) "The Inspecting Additional Commissioner may callfor and examine the record of any proceedings under this Ordinance, and if he considers that any order passed therein by the Deputy Commissioner is erroneous insofar as it is prejudicial to the interests of Revenue, he may, after giving the assessee an opportunity of being heard and after making or causing to be made, such enquiry as he deems necessary, pass such order thereon on the circumstances of the case justify, including an order enhancing or modifying the assessment, or cancelling the assessment and directing a fresh assessment to be made."

7. As stated earlier in the foregoing paragraphs, before making the assessment under section 59A, the Assessing Officer had made enquiries' and directed the assessee to produce the evidence before her with regard to the investment in the purchase of property. Section 59-A specifically requires that the return can be accepted by the Assessing officer under the provision of law, when the Assessing Officer is satisfied without requiring the production of evidence that a return furnished under section 55 is correct and complete. Once some evidence was required to be produced, the said return could not legally be accepted under section 59-A and under the law the said assessment was required to be completed under the provisions of law other than those contained in section 59-A. With these observations we hold that the order passed by the Assessing Officer under section 59-A was patently erroneous in law.

8. Under section 66A, the IAC is empowered to take action if he considers that the order is erroneous and prejudicial to the interest of Revenue. As per Chamber Dictionary "consider" means "to look at attentively or carefully; to think or deliberate on; to take into account; to attend to regard as; to think; hold the opinion (that); to reward; To think seriously or carefully; to deliberate" and the "opinion" means "what seems to one to be probably true; judgment, estimation; favourable estimation, (Shakesp), arrogance (Shakesp), reputation (Shakesp)". The word "consider" therefore refers to hold an opinion which depends on something which prima facie looks to be probably true and does not require/include any incontrovertible evidence in this respect.

9. Let us now examine this case in the light of meaning given supra. The records which the IAC examined contained the letter issued by the Assessing Officer to the assessee/appellant showing the intention for proceeding under normal law and also the copy of the Conveyance Deed whereunder the declared value of the property appeared ridiculously low from the valuation if made at the collector's rates. So it was fair to eve the opinion or to consider that the prejudice has been caused to Revenue and the IAC was right to consider that the order was erroneous (as held by us also in Para 7 above), as well as prejudicial to the interest of Revenue. With these observations we maintain the order made by the IAC under section 66-A of the Ordinance.

Order under section 62/66A.

10. As referred supra, the Assessing Officer proceeded to make assessment under normal law, consequent upon cancellation of the order passed by the Assessing Officer under section 59-A and ultimately he made an addition of Rs.5,123,946 under section 13(1)(d) of the Ordinance in the declared income to arrive at total income of Ps.5,360,135. The arguments of the learned A.R. against the said addition under section 13(1)(d) briefly stated are that;

(i) the addition had been made without lawful jurisdiction;

(ii) the Assessing Officer was over influenced by the fact that his previous order had been cancelled under section 66-A by this IAC who had formed an opinion that the investment in the property had grossly been understated;

(iii) the evidence produced by the assessee before the Assessing Officer was not judiciously examined; and

(iv) on facts there was no reason to make such an addition under section 13(1)(d) of the Ordinance.

11. It is argued by the learned A.R. that the property under consideration was not free from encumbrances. This is why even the Registrar had thought it necessary to pave a certificate of Chief Inspector of Stamp to the effect that under the circumstances the stamp duty of Rs.302,400 was payable in respect of this conveyance deed of the immovable property. The Assessing Officer had not brought any evidence to dislodge a registered deed which has sanctity attached to it and cannot be ignored as a matter of course; this sanctity can be broken only With some evidence. In this connection he has referred to a case decided by the Hon'ble Supreme Court of Pakistan and reported as 1993 SCMR 462 which has been followed by this Tribunal in a case reported as 1980 PTD 394. Again it is stated that some enquiries were made by the IAC from Shell Pakistan Limited at the back of the assessee which had never been confronted to the asses see-appellant by the IAC or by the Assessing Officer and no opportunity was offered to the appellant to cross-examine the said witness. The learned A.R. states that such a statement recorded at the back of the assessee was not a good evidence as held in a case reported as 1995 PTD 90. It is further stated by the learned A.R. that "opinion" could be formed on the basis of some tangible evidence capable of sustaining such opinion and only then some action under the law could be taken. In this connection he has referred to cases reported as PLD 1974 Note 129 at P.189 and 1993 PTD 1108 = 1993 SCMR 1108. He asserts that no such evidence has been collected or brought on records by the Assessing Officer.

12. In the end the learned A.R. has gone to the provision of section 13(1)(d) (as they existed for the purposes of assessment for the assessment year 1998-99), to contend that for the assessment year 1998-99, the Assessing Officer could make any addition if he had found that the amount expended on making investment or in acquiring such valuable article exceeded the amount recorded in this behalf in the books of account maintained by the assessee or shown in the wealth statement furnished under section 58 in respect of that year (Emphasis is ours). It is stated that the assessee being an individual was not maintaining any accounts and, therefore, the Assessing Officer was required to give his findings on the basis of wealth statement furnished under section 58 of the Ordinance which in the present case was never required by the Assessing Officer. In the assessment year 1998-99, suo motu filing of wealth statement was not a prerequisite for submission of return under the Self-Assessment Scheme and no notice under section 58 had been issued by the Assessing Officer so as to find that investment shown in the wealth statement was less than the amount actually expended in making such investment. The learned A.R. further stressed that for giving a finding on an issue the Assessing Officer has to prove that the amount actually expended exceeded the amount recorded in the statement. In the instant case there was no wealth statement before the Assessing Officer and no evidence was brought on record by the Assessing Officer to prove that the amount actually expended exceeded the amount shown in the wealth statement, or for that matter even in the conveyance deed which was duly registered. According to the learned A.R. this proves that the Assessing Officer had proceeded without jurisdiction and he was over influenced by the cancellation of previous order by his IAC although the de novo proceedings were required to be made which means that the matter required to be tried anew, as if it had not been heard before and as if no decision had been previously tendered on the issue. In this connection the learned A.R. has referred to a case quoted as 1990 SCMR 34. The learned A.R. therefore, has requested that orders made by authorities below may be annulled as having been made without proper jurisdiction or application of mind.

13. The learned D.R. on his turn states that this Tribunal has held in some cases that the Assessing Officer is not restrained from questioning the price declared by the assessee in the Conveyance Deed and that the value in the sale-deed is not always binding on the Assessing Officer. In this connection he has cited the cases reported as 1995 PTD 1 and 2001 PTD (Trib.) 2926.

14. We shall first discuss the defence taken by the learned D.R. by referring to the reported cases. We have gone through the cases and found that it has been held in these cases that without a rebuttal, presumption of truth is attached to a registered deed but the Assessing Officer is not restrained from the questioning the price which in all probability is thought to have been received or payable to the assessee. It has been further held that acceptance of the value declared in sale-deed by the other official agencies is not binding upon an Assessing Officer who can always reject the same on the basis of well-conceived evidence and keeping in view the obtaining circumstances in each case. We therefore, find that the constraint is there to accept the contents of a registered' deed unless the facts show availability of valid reasons to consider in the circumstances of 'the case that actual transaction was made at a price other than that shown in the sale-deed or a contract deed. In case of availability of such an independent evidence, the department, however has right to reject the value declared in the sale-deed/conveyance deed. There is no apparent dispute between the cases cited by both the learned representatives. What is required under the law and in the circumstances of the case is that normally a registered deed may be accepted as such unless there is evidence to rebut the contents of the registered deed as being incorrect. Bringing in of the evidence against the contents of the registered deed is naturally the responsibility of the authority which does not intend to accept the contents of the said registered deed.

15. Now we come to other arguments of the learned A.R. We have perused the order made by the Assessing Officer and we conclude that undoubtedly the Assessing Officer was influenced by the fact that his IAC had already considered the value of transaction in the registered deed to be lower than what was to be taken on the basis of Collector's rates. Further, he has not proceeded in accordance with the provisions of law. The provisions of section 13(1)(d) relevant for the assessment year 1998-99 were as under:--

"Where the assessee has made investment in any income year or is found in respect of any such year to be the owner of any valuable article and the Deputy Commissioner finds that amount expended on making such investment or in acquiring such valuable article exceeds the amount recorded in this behalf in the books of account maintained by him or shown in the wealth statement furnished under section 58 in respect of that year, and the assessee offers no explanation about excess amount or the money from which the expenditure was made or the explanation offered by him was not in the opinion of the DCIT satisfactory, the excess amount shall be deemed to be the income of the assessee of such income year chargeable to tax under this Ordinance":

16. It may be stated that the insertion of the words "or return of wealth" in section 13(1)(d) was made by Finance Act, 1999 and therefore, for the assessment year 1998-99 the filing of wealth tax return does not absolve the Assessing Officer of his responsibility on obtaining a wealth statement under section 58 for proceedings under section 13(1)(d). We have also noticed that the requirement of suo motu filing of wealth statement-alongwith return of income where the total income was not less than one hundred thousand rupees had been dispensed with on omitting subsection (2) of section 58- by Finance Act, 1996 and the proviso in subsection (1) of section 58 for suo motu filing of wealth statement if the-income declared was not less than two hundred thousand rupees was inserted by the Finance Act, 2000. Thus for the assessment year 1998-99 the prescribed procedure for action under section 13(1)(d) was to obtain a wealth statement under section 58, then to prove with evidence that the amount actually expended on acquiring property exceeded the amount shown in the wealth statement and only then the said addition under section 13(1)(d) could be made and that also after completing other legal prescribed formalities. The learned A.R. has stated at bar that while dealing with the case in the original or the de novo proceedings notice under section 58 had never been served by the Assessing Officer. In these circumstances we hold that there is procedural deficiency on the part of the Assessing Officer in considering; the addition under section 13(1)(d). With this position in view, we feel it justified to set aside the orders of the authorities below so far as de novo proceedings are concerned with the directions that the de novo proceedings may be taken up by calling wealth statement under section 58 and the addition under section 13(1)(d) may be made, if the circumstances so justify after bringing in evidence so as to give the finding that the amount expended in acquiring the immovable property exceeded the amount as shown in the wealth statement. Needless to add that the appellant has to be afforded reasonable opportunity of being heard on each issue.

17. Consequently, the, appeal against order under section 66A fails and is dismissed and the appeal against order under section 62/66A succeeds to the extent and in the manner as indicated above.

C.M.A./668/Tax (Trib.) Order accordingly.