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

‑‑‑‑S.65‑‑‑Additional assessment‑‑‑" Definite information" ‑‑‑Value in a parallel case, whether a definite information‑‑‑By no stretch of imagination it could be said that in a parallel case the value being different the same could be called as "definite information" for invoking jurisdiction under S.65 of the Income Tax Ordinance, 1979.

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

‑‑‑Ss.13(1)(d) & 65‑‑‑Income Tax Rules, 1982, R.207‑A‑‑‑Addition‑‑ Valuation of property‑‑‑Adjacent property‑‑‑Parallel case‑‑‑Value declared according to the registered deed was considered to be low and on the basis of value declared regarding the adjacent property, the estimate was made and added the same in net income under S.13(1)(d) of the Income Tax Ordinance, 1979‑‑‑First Appellate Authority annulled the assessment on the ground that S.65 of the Income Tax Ordinance, 1979 was not applicable as the facts on record did not indicate any definite information with the Department with regard to under statement of the value of the property and value declared was in accordance with R.207A of the Income Tax Rules, 1982‑‑‑Validity‑‑‑No evidence was available to support Department's case that the money paid was more and registered was less‑‑‑Such evidence could be in forum of an agreement to sell, some Bank draft or other similar Bank entry, or some other source from which assessee had made excess payment but nothing had been brought on record‑‑‑Word `definite information' used in S.65 of the Income Tax Ordinance, 1979 and the words `in the opinion of in S.13(2) of the Income Tax Ordinance, 1979 would not mean `reason to suspect' how strong it may be‑‑‑Only that evidence could be used for reopening of an assessment and for subsequent addition under S.13(2) of the Income Tax Ordinance, 1979 which gave reason to believe that the assessee had paid more amount than what had been registered and in this regard all the parameters fixed by the superior Courts required attendance for finalizing of the assessment‑‑‑Section 13 of the Income Tax Ordinance, 1979 was a deeming provision and could not be applied without some objective evidence‑‑‑First Appellate Authority rightly annulled the assessment‑‑‑Order of the First Appellate Authority was maintained and appeal of the Department was rejected by the Appellate Tribunal.  

Messrs Edulji Dinshaw Limited v. I.T.O. 1990 PTD 155 and Messrs Arafat Woollen Mills Ltd. v. I.T.O., Companies Circle‑1, Karachi 1990 SCMR 697; Messrs A.G. Siemen v. C.I.T. (sic) 1991 SC 773; 1999 PTD (Trib.) 8; CIT v. Shah Nawaz Limited and others 1993 SCMR 73 and NLR 1995 (Trib.) 100 rel.

Mrs. Sabiha Mujahid, D.R. for Appellant.

Tariq Javed Raja for Respondent.

Date of hearing: 4th June, 2002.

ORDER

KHAWAJA FAROOQ SAEED (JUDICIAL MEMBER). ‑‑‑This is a case of difference of opinion between learned brothers of the ITAT Both have given reasons for their point of view and the same require separate discussion as the reasons are quite relevant for arriving at the conclusion. Although the facts have been narrated by both but still for the application of appropriate law reproduction of the same is of relevance.

The assessee purchased a residential house, which was adjacent a shop for the purposes of demolishing and construction of commercial property. This house measuring 4 Marlas and 88 sq. ft. was situated at Plot No.F‑1227, which forms extension of Azam Cloth Market. At the time of original assessment these facts were available on record, however, the case was finalized under S.A.S. the house was purchased for Rs.315,000.

The Assessing Officer considered the value declared to be as low and on the basis of the value declared by the adjacent property, made the estimate and added the same in net income under section 13(1)(d). The learned CIT(A) found that all the information in relation to said property was on record at, the time of original assessment. The value declared and the assessment framed was after conscious application of mind. The adjacent property being a constructed shop was not a parallel case in the sense that the property under discussion was residential house. Furthermore, it is covered from all three sides, and on its other two side there are still residential houses. The learned CIT(A) also observed that the amendment, brought into the rules by way of rule 207A is also applicable on the facts and circumstances of the case and the department having no proof of the under statement of the value was hit by this amended rule. Furthermore, in this regard the higher Courts have instructed not to invoke section 13 where the department does not have any proof of under‑statement especially when the document is registered under section 28A of the Stamp Act. These arguments convinced learned CIT(A) who annulled the assessment. While giving his final verdict the learned CIT(A) further observed that in this case section 65 was not applicable as the facts on record do not indicate any definite information with the Department with regard to under statement of the value of the property. These factors came for consideration before the Tribunal and learned Judicial Member appreciated the same. He found himself convinced with the legal position on the basis of rule 207A as well as the case‑law mentioned in the order of the CIT(A) and relied upon by him earlier.

The learned Accountant Member, however, was not convinced that these factors were satisfactory enough to annul the addition. He found some distinction in the facts of the referred case in the manner that the purchaser therein was in adverse possession of the property; hence was in advantageous position as against the seller who was obliged to dispose of this property on lesser rate than was obtaining in the market.

The learned Accountant Member was also convinced that the adjacent property situated at F‑1228 have been purchased by some person for a consideration of Rs.37,50,000 formed a `definite information' with regard to under statement of the value by this assessee.

Before me A.R. and D.R. both have reiterated earlier stands.

The A.R. has supported the order of the CIT(A) and that of the learned J.M. while the learned D.R. says that the finding of learned A.M. is the correct appreciation of the facts and law.

My humble view besides my tilt towards revenue in this case is guided by section 65, section 13, rule 207A and the decision given by the Honourable Supreme Court, High Court and ITAT itself. The value declared by the assessee on the basis of its purchase deed which is Rs.315,000 apparently appears to be quite low but at the same time the facts that the adjacent property is a shop ready for use for commercial purpose and that the property under discussion is a residential house which requires still a lot of investment for its conversion into shops for commercial use is a very prominent distinguishing factor. Keeping this doubt in view and the decisions of the Supreme Court defining the words `definite information' in terms of Messrs Edulji Dinshaw Limited, Central Insurance Company, ginning Schools and Chappal Builders I am unable to subscribe to the views of the learned D.R. By no stretch of imagination one can hold that in a parallel case the value being different can be called as `definite information' for invoking jurisdiction under section 65.1 have referred few judgments but for brevity I reproduce here one para. from the famous judgment of Central Insurance Company reported as 1993 SCMR 1232 = 1993 PTD 7616. The Honourable Mr. Justice Ajmal Mian defining section 65(2) has held that the power of the Income Tax Ordinance to reopen is qualified by a clog i.e., "definite information" and it means:‑‑‑

"The ratio of the above cases seems to be that if an assessee discloses all the material facts without any concealment and the assessment has been consciously completed by the Income‑tax Officer, in such a case in the absence of discovery of any new fact which can be treated as a definite information, there cannot be any scope for reopening of the assessment under the provisions of section 65 of the Ordinance on the grounds referred to in clause (a) or (b) of subsection (1) of section 65. In other words, any change of opinion on the basis of the same material by the Income‑tax Officer will not warrant pressing into service section 65(1) of the Ordinance. In the instant cases, it is an admitted position that the appellants had not concealed any fact. On the contrary, they disclosed the interest earned by them on the Khas Deposits Certificates/Defence Saving Certificates to their balance sheets and claimed exemption under Item (72) of the Second Schedule read with section I of the Ordinance. No fresh facts have been discovered by Income‑tax Officer except that the Income Tax Department had received the Circular from the Central Board of Revenue, referred to hereinabove in para. 2. The question, therefore, arises, whether the Circular can be treated as a definite information in terms of sub section (2) of section 65 of the Ordinance."

While giving the above finding I mentioned with full respect that the Honourable Supreme Court had before it the earlier decision in the case mentioned by me supra reported as Messrs Edulji Dinshaw Limited v. I.T.O. 1990 PTD 155 and Messrs Arafat Woollen Mills Ltd. v. I.T.O. Companies Circle‑I, Karachi 1990 SCMR 697. The second arguments that negates the departmental view is regarding application of rule 207. It may be worth‑mentioning that the Honourale Supreme Court of Pakistan much earlier than the introduction of this rule had laid certain principles with regard to an agreement of this kind. The Honourable Supreme Court in its judgment reported as (sic) (1991) SC 773 in the famous case of Messrs A.G. Siemen v. C.I.T. gave the following verdict:‑‑‑

"Coming to the specific Islamic Rules of interpretation as was briefly discussed in connection with another fiscal question in the case of Mian Aziz A. Shaikh. A Fundamental principle, is established that when two contracting parties agree to do something by a mutual valid contract or intend doing so, and it is not prohibited by Islam, a third party, like the Income Tax Department or for that matter the Court has no power to modify either the contract or with what they intended to do with it. "

The Honourable Mr. Justice Muhammad Afzal Zullah in the same judgment finally concluded as follows:‑‑‑

"As a necessary conclusion drawn from the foregoing, it can be safely held in this case also that on the touchstone of Islamic Rules of interpretation, which unless excluded otherwise, under the present Constitutional set‑up the Courts are bound to apply in preference to the contrary so‑called accepted rules of interpretation under the other jurisprudential concepts (and the fiscal law are no exception in this behalf), the Income‑tax Authorities cannot change the nature of the contract intended by the parties thereto under the pretext that the rule of interpretation of a fiscal law in this behalf, is different. "

This goes without saying that the judgment is binding on all of us and is relevant on the facts of the present case as well. It is perhaps on the basis of such a development the Legislature subsequently intended to keep a check on the discretion of the Assessing Officer and rule 207A was introduced. This rule directs for acceptance of the registered sale‑deed wherever the same is at par with the Stamp Act by virtue of section 28A. Furthermore, this rule has been held to be as retrospective by the Honourable I.T.A.T. vide its judgment reported as 1999 PTD (Trib.) 8. Tote reliance of the Tribunal for holding it as retrospective was upon the famous case of CIT v. Shah Nawaz Limited and others reported as (1992) 66 Tax 126. In the said judgment the Supreme Court has held that all remedial and curative Legislations are retrospective. I dare mention a judgment decided by Mr. M. Irshad the then Judicial Member reported as NLR 1995 (Trib:) 100 which has been referred by the CIT(A) as well as by the learned judicial Member, wherein it has been held that where acquisition of property is by registered sale‑deed. ordinarily the consideration of it should be accepted as the value of the property. The exception to this rule is that the Revenue should prove that the consideration shown in the deed was too low and that the assessee acquired the property by spending more money. In this regard mere saying that the market value of an asset was higher than the price the assessee has actually paid for its acquisition is not enough. In the present case there are some doubts but there is no evidence to support department's case that the money paid was as more and registered was less. Such evidence could be an agreement to sell, some bank draft or other similar bank entry, or some other source from which assessee had made excess payment. Nothing of the sort has been brought on record. The word `definite information' used in section 65 and the word `in the opinion of in section 13(2) does not mean `reason to suspect' how strong it may be. Only that evidence can be used for reopening of an assessment and for subsequent addition under section 13(2) which gives reason to believe' that the assessee has paid more amount than what has been registered and in this regard all the parameters fixed by the Honourable superior Courts require attendance for finalizing of the assessment. From this angle of the proceedings and also having in my mind that section 13 is a deeming provision, I cannot agree on its application without some, objective evidence. Such additions have never been permitted by the Honourable superior Courts of the country. I am obviously bound by the directions and findings given therein and my strong suspicion about the value, which I share that my learned brother Accountant Member, does not permit me to agree with his ultimate finding. I, therefore, endorse the view of the learned Judicial Member that it was a fit case for annulment and the CIT(A) has rightly crone so.

The results obvious that the order of the CIT(A) stands Maintained and the departmental appeal is rejected.

C.M.A3563‑A/Tax(Trib.)Appeal rejected.