W.T.As. Nos.81/IB and 113/IB of 2003, decided on 20th January, 2004. VS W.T.As. Nos.81/IB and 113/IB of 2003, decided on 20th January, 2004., 2004 PTD-INCOME-TAX-APPELLATE-TRIBUNAL-PAKISTAN 1589 (2004)

(a) Wealth Tax Act (XV of 1963)‑‑‑

‑‑‑‑S. 16(4)‑‑‑Wealth Tax Rules, 1963, R.8(3)‑‑‑Assessment‑‑‑Valuation of land and building‑‑‑Property was residential property in the year under consideration which was commercialized during the next assessment year and assessee paid commercialization fee‑‑‑Assessing Officer valued the property for wealth tax purpose by applying commercial rates fixed for stamp duty for the year under consideration‑‑ Validity ‑‑‑Property when purchased was an old constructed house/residential property which was later on converted into commercial property and the commercialization fee was paid by the assessee‑‑ Property was residential property at the time of purchase and also during the assessment year under consideration, the same could not be valued on the basis of commercial rates fixed by the District Collector‑‑ Direction of the First Appellate Authority to apply residential rates was maintained by the Appellate Tribunal.

(b) Wealth Tax Act (XV of 1963)‑‑

‑‑‑S. 16‑‑‑Assessment‑‑‑Liabilities‑‑‑Disallowance of liabilities for want of verification ‑‑‑Assessee claimed than 'the same were verifiable‑‑‑Matter was set aside by the Appellate Tribunal with the direction to Assessing Officer to reconsider the said claim of liability and if the same was verified by proper evidence then it should he allowed after providing an opportunity of hearing to the assessee.

Hafiz Muhammad Idrees for Appellant (W.T.A. No.81/IB of 2003).

Zar Khalil, D.R. for Respondent (W.T.A. No.81/IB of 2003).

Zar Khalil, D.R. for Appellant (W. T. A No. 113/IB of 2003).

Hafiz Muhammad Idrees for Respondent (W.T.A. No. 113/IB of 2003).

Date of hearing: 7th January, 2004.

ORDER

SYED MASOOD UL HASSAN SHAH (JUDICIAL MEMBER).‑‑‑These cross appeals of the assessee and the Department have been directed against an order, date 30‑4-2003 (hereinafter referred to as the impugned order) passed y the learned CWT(A), Rawalpindi.

2. The assessee, besides terming the orders of both the forums below as being bad in law and contrary to the facts and circumstances of the case, has contested the same on the following grounds:‑-

(i) that the rejection of the declared Version was illegal and baseless; and

(ii) that the liability claimed at Rs.6,80,000 was fully verifiable and as such the disallowance by Taxation Officer and confirmation by CIT(A) was illegal and unjustified.

3. Hence the prayer for acceptance of declare, version or alternatively relief which may be fair and just.

4. On the other hand, the department, while terming this impugned order of the learned CWT(A) a bad in law and against the facts of the case, has contested the same on the ground that the learned CWT(A) was not justified to direct for adoption of residential rate (fixed by District Collector for the purpose of stamps) for determination of value of plot.

5. Hence the prayer of the department for the vacation of the impugned order and restoration of that of the Assessing Officer.

6. We have heard the learned representatives of the parties and have perused the respective orders of the forums below.

7. Briefly the relevant facts are, that, the assessee declared\net wealth at Rs.80,50,000 for the year under consideration. The assessee then filed revised return for the year under consideration declaring cash at Rs.140,000 against Rs.184,000 as shown in the original return. In response to statutory notices under section 16(2)/16(4), the AR of the assessee attended and case was discussed with him. The Assessing Officer confronted the assessee as to why cost of land should not be valued at commercial rate as specified by the DC for the area of Murreee Road. The AR of the assessee submitted reply by stating that at the time of purchase the plot was a residential plot but after payment of commercialization fee the nature was changed and that the plot should be assessed as residential plot for the assessment year 1998‑99 and the plot can be assessed as commercial in the subsequent years by deducting the commercialization fee paid by the assessee. The Assessing Officer did not accept the contentions of the assessee and he accordingly valued the land as per DC rate per Marla and determined that total value at Rs.2,22,56,620 by including the fee paid for approval of site‑plan etc. The claim of investment out of encashment of US Dollar Bonds was accepted and then the net value was determined at Rs.2,08,16,620. In respect of liability claimed as advance of Rs.3,80,000 the same was not allowed for want of evidence. Then after allowing basic exemption, the Assessing Officer computed taxable wealth of assessee at Rs.1,99,56,620. Against the said treatment, the assessee preferred appeal contesting the valuation of plot on commercial rates and the disallowance of liability. The learned CWT(A) came to the conclusion vide impugned order that the Assessing Officer was not justified to value on commercial rates fixed for stamp duty purposes for the year under appeal and he accordingly directed the Assessing Officer to apply residential rates. In respect of objection of the assessee with regard to disallowance of liability, the learned CWT(A) confirmed the action of the Assessing Officer With regard to levy of additional tax under section 31(i)(b)(ii), the learned CWT(A) directed the Assessing Officer to, give consequential relief as a result of relief given in the appeal.

8. Hence these appeals of the assessee and of the department against the said action of learned CWT(A) on the grounds enumerated above.

9. The learned AR contended that the property in question was an old constructed residential house purchased by the assessee through a registered deed. He further contended that the property in question was a residential property in the assessment year 1998‑99 which was later on commercialized during the assessment year 1999‑2000 and the assessee paid commercialization fee in July 1998 and July 1999. On this basis the Darned AR argued that making assessment/valuation of property in question by treating the same as commercial property and application of DC rates of commercial property was improper as has been done by the Assessing Officer. He, then in support of action of the learned CWT(A) it) that regard, stated that the learned CWT(A) has decided the issue rightly in favour of the assessee. While taking up the issue of liability claimed by the assessee, the learned AR stated that the Assessing Officer has disallowed the liability for want of evidence whereas the evidence in respect thereof was furnished and the liability was an advance for part sale which was supported by the evidence to that effect.

10. On the other hand, the learned DR disputed the action of the learned CWT(A) with regard to valuation of property and contended that the property was ‑situated in the commercial area and having the status of a commercial property and hence the action of the Assessing Officer by assessing the value of property on DC rates of commercial property was quite justified. In respect of issue of liability, the learned DR conceded that if liability was verifiable then the same was to be allowed.

11. We have considered the contentions of the parties and perused the orders of the forums below. There was nothing for dismantle the contentions of the learned AR that the property when purchased was an old constructed house/residential property which was later on converted into commercial property and the commercialization fee was paid by the assessee. In these circumstances, and also when the learned DR could not rebut the above contentions of the learned AR, we have no alternative but to endorse the action taken by the learned CWT(A) in that regard. Obviously, if the property is commercialized at a later stage and it was a residential property at the time of purchase and also during the assessment year under consideration then the same cannot be valued on the basis of commercial rates fixed by the DC. Therefore, the action r the learned CWT(A) on that score is hereby maintained. Now the regard to issue of disallowance of liability as has been objected to by the learned AR, it would be appropriate that the matter is set aside and the Assessing Officer is directed to reconsider the said claim of liability and if the same is verified then it should be allowed. Accordingly the action of both the forums below on this issue shall stand vacated and the assessment shall remain set aside with the direction to the Assessing Officer to re‑examine the claim and to allow the same if it is verified by proper evidence to that effect, after providing an opportunity of hearing to the assessee.

11. As a result of above, the appeal of the assessee shall stand accepted to the extent as indicated above and the departmental appeal shall stand rejected.

C.M.A./58/Tax (Trib.)Order accordingly.