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

‑‑‑‑S. 13(1)(d)‑‑‑Wealth Tax Act (XV of 1963), Preamble ‑‑‑Addition‑‑ Valuation of properties‑‑‑Although, the making of valuation on the wealth tax side and determination of value of property on income tax side were made in separate perspective but yet the very scale of evaluation of property for both the purposes may likely to remain common for arriving at a final value of the property.

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

‑‑‑‑S. 13(1)(d)‑‑‑Income Tax Rules, 1982, R. 207‑A‑‑‑Addition‑‑ Property was purchased with status of residential property through a registered sale‑deed‑‑‑Such property was converted into commercial property by paying commercialization fee by the purchaser/assessee himself‑‑‑Addition was made by evaluating such property by applying District Collector's rate of commercial property on the ground that value of registered sale‑deed was understated‑‑‑Validity‑‑‑According to CI. (ii) of R.207‑A of the Income Tax Rules, 1982, the value of immovable properties for the purposes of S.13 of the Income Tax Ordinance, 1979 had to be taken according to the value determined by the District Collector for the purposes of stamp duty and no departure could be made from the value of the property which had been accepted by the Registration Officer for stamp duty purposes as per District Collector's rates of residential property‑‑‑When there was no evidence to disprove the sale price mentioned in the registered sale‑deed which being a public document had presumption of truth, same could not be rejected on mere assumptions or conjectures and surmises‑‑‑Registered sale‑deed outright could not be rejected with regard to the sale price entered therein except when rebutted by a cogent evidence by establishing that the assessee expended more amount than the sale price shown in the registered deed‑‑‑No such evidence existed to make addition under S. 13(1)(d) of the Income Tax Ordinance, 1979‑‑‑Deletion of addition by the First Appellate Authority was maintained by the Appellate Tribunal.

(1983) 48 Tax 73 (Trib.) ref.

1996 PTD (Trib.) 1088; NTR 1995 Trib. 11; NTR 1995 Trib. 109 and 1993 PTD (Trib.) 952 rel.

Altaf Mahmood Khan, DCIT/DR for Appellant.

Hafiz Muhammad Idress for Respondent.

Date of hearing: 16th January 2004.

ORDER

This departmental income tax appeal has been directed against an order, dated 10‑4‑2003 (hereinafter referred to as the impugned order) of the learned CIT(A) Rawalpindi whereby he deleted the addition made by the Assessing Officer under section 13(1)(d) of 'the late Income Tax Ordinance, 1979 (hereinafter called the Ordinance).

2. Besides terming the impugned order as bad in law and against the facts of the case, the department has contested the deletion of the addition for the reasons to the effect, (i), that the property purchased by the assessee and other co‑owners was situated in commercial area of Murree Road, Rawalpindi and for all practical purposes it was a commercial property at the time of completion of transaction and (ii) that the learned CIT(A) merely relied upon registration authorities and the registration authorities generally do not investigate the status and nature of the property on spot.

3. Hence the prayer through this appeal for the vacation of the impugned order and restoration of that of the Assessing Officer.

4. We have heard the learned representatives of the parties and have gone through the orders of the forums below.

5. Briefly the relevant facts as per assessment order are the that the assessee with the status of individual declared Nil income in the return in response to notice under section 56 of the Ordinance, 1979 indicting share of AOP against column "Nature of Business" in the return. In the wealth statement, the assessee shown capital at Rs.1,500,000 which was inclusive of 1/4 share of Plot No. D/92‑93, Murree Road, Rawalpindi and that also another equal co‑sharer Haji Gul Rehman declared value of his share at Rs.14,40,000 prior to the filing of wealth statement by the assessee. The Assessing Officer observed that the share of the assessee was Rs.14,00,000 and the total registered price of the plot was Rs.56,00,000. The Assessing Officer further observed that the plot was located on main Murree Road, Rawalpindi and therefore, the actual price of the plot was to be accounted for accordingly irrespective of its nature. Accordingly, the Assessing Officer through notice under section 13(2)/13(1)(d) alongwith notice under section 61 confronted the assessee in that regard as per contents of the notice reproduced in the assessment order showing his intention, to adopt purchase rate at 8.3,50,000 per Marla being commercial rate specified by the District Collector and less fee paid by the assessee at net rate of Rs.2,80,500 per Marla and to add excess cost of the purchase price to the income of the assessee under section 13(1)(d) of the Ordinance. 1979. The assessee in reply thereto submitted his point of view to writing as detailed in the assessment order mainly stating that the above plot was a residential plot when it was purchased and registered deed was executed as per D.C. rates prescribed for that purpose and that the adopting of value of the plot on the basis of D.C. rate of commercial property was unjustified and further the nature of property was changed after payment of commercialization fee during assessment order 1999‑2000 and as such the declared value cannot be rejected. The Assessing Officer did not accept the said contention/explanation of AR of the assessee for the reasons as detailed in the assessment order mainly stating that the plot was located at main Murree Road, Rawalpindi and the actual price was much more than the registered purchase price. The Assessing Officer observed that he was having reasons to believe that the assessee paid much higher price or acquired the plot of higher worth than the registered price shown by the assessee. The Assessing Officer gave his reasons in para. 2 of the assessment order. He also referred the sale price of another plot which was sold on 9‑7‑1999 at Rs.9,06,976 per Marla in the interior of Satellite Town, Rawalpindi. He further fortified his stance with the reason that the plot was located on the main Murree Road, Rawalpindi which was a commercial location. He then referred the decision of the Tribunal reported as (1983) 48 Tax 73 (Trib) in respect of interpretation of section 13 of the Ordinance and reproduced relevant part of the said decision in the assessment order. Thereafter, he came to the conclusion that the registered purchase price shown by the assessee definitely did not represent the actual prevalent price at the material time and as such was quite understated. He accordingly adopted the value of 1/4 share of the assessee in the plot at Rs.4,347,750 in excess of registered price and added a sum of Rs.29,477,759 under section 13(1)(d) as deemed income in the hands of the assessee with prior approval of IAC and determined income as per computation given in the assessment order.

6. Against the said addition made by the Assessing Officer, the assessee went in appeal before the first appellate forum contesting that the addition under section 13(1)(d) was illegal and unwarranted and that the property was purchased through registered sale‑deed which could not be rejected without any cogent evidence and therefore, the assessment order was illegal. The assessee also took exception to the commercial rate applied because, he according to him purchased residential property and later on commercialized and commercialization fee was paid. He also objected to the issuance of notice under section 116. The learned CIT(A) vide impugned order after referring case‑law deleted the addition made by the Assessing Officer.

7. Now the department has agitated the said action before us.

8. At the very outset we may like to point out that we have in another case vide order of even date i.e. (20‑1‑2004) accepted the plea of the assessee in that case in respect of valuation of the property in question as being residential property on wealth tax side which was the case of other co‑sharer Haji Gul Rehman in cross‑appeals/W.T.A. No. 81/IB of 2003 and W.T.A. No. 113/IB of 2003 filed by the assessee and the department for the assessment year 1998‑99. The assessment year under consideration in the instant appeal is the same and the instant appeal is on income tax side and is having the question with regard to addition made under section 13(1)(d) on the point of understated purchase price of the plot in question considering the same as commercial property instead of residential property to be evaluated according to commercial rates specified by the District Collector for stamp duty purposes. Therefore, we have to see as to whether two different views can be taken with regard to determination of valuation of the same property on wealth tax side and on income tax side. Although, we are conscious of the fact that the making of valuation on the wealth tax side and determination of value of property on income tax side are made in separate perspectives but yet the very scale of evaluation of property for both the purposes may likely to remain common for arriving at a final value of the property in question. We have to see to this proposition in the context of contentions of both the sides.

9. The learned DR in support of grounds of appeal mainly focused his arguments on the point that the property was a commercial property purchased for commercial purpose wherein now 'Rabi Center' has been situated. He contended that the value taken by the learned Assessing Officer was rightly taken on the basis of D.C. rates of commercial area and there appeared under statement of price in the purchase deed and therefore the actual price being higher was rightly added by the learned Assessing Officer under section 13(1)(d) and there was no justification with the learned‑CIT(A) to delete the same.

10. On the other hand, Mr. Hafiz Muhammad Idrees Advocate/the learned counsel for the assessee contended that the property in question was purchased through registered sale‑deed and the price mentioned in the registered sale‑deed could, not be rejected without any cogent evidence. He further contended that the Assessing Officer has not quoted parallel case of the same area to establish that the valuation was under stated. He then drew our attention to the findings of the learned CIT(A) and contended that the learned CIT(A) has referred and quoted various case‑law on the issue in question. He then referred 1996 PTD (Trib.) 1088 to support his contention that the registered deed being public document and the price shown therein was to be believed which was having an element of authenticity unless rebutted by any evidence to that effect. He further referred cases reported as NTR 1995 Trib. 11, NTR 1995 Trib. 109 and 1993 PTD (Trib.) 952 to support his argument that the sale price shown in the registered deed cannot be reelected. He then contended that once the registration authority had accepted the D.C. rates of residential area for the registration of the sale-deed of the property in question then the Assessing Officer could not apply commercial rates for adopting the purchase price more than as entered in the registered sale‑deed. He then reiterated 4hat the property was purchased with the status of residential property and then the purchasers themselves got the status of property converted into commercial property by paying commercialization fee and then the 'Rabi Center' was constructed thereon.

11. We have considered the respective contentions of the parties at length and have gone through the orders of the forums below minutely alongwith case‑law referred by the learned counsel for the assessee.

12. In the background of the stated facts of the case and findings of the forums below alongwith respective contentions of the learned representatives of the parties, we have to determine as to whether the property purchased through a registered sale‑deed in the status of residential property by applying D.C. rates of residential property for stamp duty purposes can be evaluated as a commercial property for adopting D.C. rates of commercial property in that area and as such sales price shown on the basis of registered sale‑deed can be termed and declared as understated value of the property for invoking the provisions of section 13(1)(d) for making additions of the differential in sale price and value so arrived at?

13. At this juncture, we may to like to refer here rule 207A of the Income Tax Rules which was in respect of valuation of immovable properties fog the purposes of section 13 of the Ordinance, 1979. According to clause (ii) of the said rule, the valuation of the immovable properties for the purposes of section 13 shall be taken according to the value determined by the District Collector for the purposes of stamp duty. So, on the basis of this rule which is in respect of valuation o immovable property, no departure can be made to the value of the property in question which has been accepted by the Registration Officer for stamp duty purposes as per D.C. rates of residential property. Moreover, we have accepted the plea of the assessee on the wealth tax side. In these circumstances, the arguments of the learned AR of the assessee carry weight and force which even otherwise have also not been rebutted by the learned DR by any cogent reasoning of that effect. Obviously, when there was no evidence to disprove the sale price mentioned in the registered sale‑deed which being a public document was carrying presumption of truth and hence the same could not be rejected on mere assumptions or conjectures and surmises. Moreover, the reported cases relied upon by the learned AR as referred to above were fully applicable to the proposition in hand regarding evaluation of property in question in the presence of registered sale‑deed. Obviously a registered sale‑deed out-rightly could not be rejected with regard to the sale price entered therein except when rebutted by a cogent evidence by establishing that the assessee expended more amount than the sale price shown in the registered deed. There was no such evidence with the Assessing Officer to make the addition under section 13(1)(d) of the Ordinance, 1979. Therefore, the action of the learned CIT(A) of deletion of the addition was not liable to be interfered with and hence the same is hereby maintained.

14. Resultantly, the departmental appeal shall stand rejected.

C.M.A./59/Tax (Trib.) Appeal rejected.