2004 P T D (Trib.) 422

[Income-tax Appellate Tribunal Pakistan]

Before Khawaja Farooq Saeed, Judicial Member and Imtiaz Anjum, Accountant Member

I.T.A. No.3105-LB of 2002, decided on 21/04/2003.

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

----S.66-A---Powers of Inspecting Additional Commissioner to revise Deputy Commissioner's order- --Error of fact---Error of law-- "Erroneous"---Connotation---Error of fact is also considered as relevant for cancellation of assessment under S.66-A of the Income Tax Ordinance, 1979---Earlier judgments on the subject had only considered an 'order as "erroneous" if it had an error of law---Word `erroneous' in almost all the legal dictionaries had been defined to mean an "error of law"--"Error" may include in its meanings all kinds of mistakes but the word ."erroneous" means basically "an error of law".

Black's Law Dictionary, 5th Edn., published by West Publishing Company in 1979 ref.

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

----S.66-A---Powers of Inspecting Additional Commissioner to revise Deputy Commissioner's order---"Erroneous"---Connotation---Word "erroneous" even if is expanded to the `error of fact' it still could not be considered wide enough to consider an estimate, a gossip, a feeling, which gives reason to suspect, an apprehension or possibility of a better judgment by way of superior wisdom and` experience.

1984 PTD 137; 1991 PTD (Trib.) 321 and (1969) Tax 51 (Trib.)

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

----S.66-A---Powers of Inspecting Additional Commissioner to revise Deputy Commissioner's order---"Erroneous"---Connotation--Where the Legislature was very particular in mentioning the word, "erroneous", Appellate Tribunal could not exercise jurisdiction which was ~ not provided by S.66-A of the Income Tax Ordinance, 1979.

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

----S.66-A---Powers of Inspecting Additional Commissioner to revise Deputy Commissioner's order---Review---Inspecting Additional Commissioner was not empowered with the jurisdiction to review the assessment---Power of revision was available with the Commissioner who may exercise it either suo motu or at the request of the assessee.

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

----S.66-A---Powers of Inspecting Additional Commissioner to revise Deputy Commissioner's order---"Erroneous"---Connotation---"Error"-- "Mistake"---Word "erroneous" had been used purposely by the Legislature and it was not synonymous to error or mistake or such other connotations of wider implication.

(f) Words and phrases---

----- Erroneous" and "error"--Connotations---Word "erroneous" is an adjective which is parallel to blundering, counterfeit, devoid of truth, fallacious, false, faulty, groundless, spurious, unfounded, unsustainable, untrue and wrong etc. while. the word "error" is synonymous to false conception, false impression, incorrect mistake, misprint, misunderstanding etc.

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

----S.66-A---Powers of Inspecting Additional Commissioner to revise Deputy Commissioner's order---Unsure situation---Unsure situations could not be made the base of invocation of order under S.66-A of the Income Tax Ordinance, 1979.

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

----S.66-A---Powers of Inspecting Additional Commissioner to revise Deputy Commissioner's order---Powers of the Inspecting Additional Commissioner are supervisory to avoid arbitrary exercise of powers by the Assessing Officer and to ensure safeguard of the Revenue.

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

----S.66-A---Powers of Inspecting Additional Commissioner to revise Deputy Commissioner's order---Language of S.66-A of the Income Tax Ordinance, 1979 suggests that "the order should be erroneous by reference to definite violation or deviation from law".

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

----S.66-A---Powers of Inspecting Additional Commissioner to revise Deputy Commissioner's order---Any hypothetical, vague or uncertain situation, interpretation liable to two different decisions etc. could not extend the power of the Inspecting Additional commissioner under S.66-A of the Income Tax Ordinance, 1979.

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

----S.66-A---Powers of Inspecting Additional Commissioner to revise Deputy Commissioner's order---Disagreement between the two officers i.e. Assessing Officer and Inspecting Additional commissioner could not grant jurisdiction to the Inspecting Additional Commissioner under S.66-A.of the Income Tax Ordinance, 1979.

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

----Ss.66-A, 27, 28, 29(3)(b), 50(4), 80C & Third Sched., R.7(2)(b)---Income Tax Rules, 1982, R.207-A---Constitution of Pakistan 1973, Fourth Sched., Part I, Federal Legislative List, Item No.50---Powers of Inspecting Additional Commissioner to revise Deputy Commissioner's order---Sale of business---Assessment---Cancellation of assessment on the ground that there was a definite value of franchising rights and on surrender of such rights it was to be essentially accounted for towards the declared profit and gain on sale of land was also. not offered for tax which was claimed as exempt---Sale of palates, empty bottles etc. was subject to charge under S.80C of the Income Tax Ordinance, 1979-- Validity---Sale of assets was well within the knowledge of Assessing officer at the time of assessment---Assessee's accounts were found to be verifiable---While going through the sales, Gross Profit etc., Assessing officer considered himself legally bound to accept the accounts-- Assessing Officer having applied full mind, Inspecting Additional Commissioner's apprehension that assessee had managed its affairs so as to take the benefit of exemption available to a class of immovable assets was not justified---Some of the purchases of assessee were considered as liable to deduction and he was found to be as assessee in default and was charged under S.52 of the Income Tax Ordinance, 1979---At subsequent stage saying that assets of assessee sold to third party were liable to deduction and S.80C of the Income Tax Ordinance, 1979 came into operation was far-fetched idea which could not be supported---Assessing Officer was very particular in mentioning that "downfall in G.P. on account of empties and shells was attributable to discontinuation of business" and no adverse inference was drawn in this regard ---In presence of such unequivocal findings the opinion of Inspecting Additional Commissioner that it was a case of "supply" and Assessing Officer had erroneously not seen the same from the said angle was a "difference of opinion" ---Observation of Inspecting Additional Commissioner was not covered within the definition of word "erroneous" ---Two opinions that sale was supply and coverable under S.50(4) of the Income Tax Ordinance, 1979 or not was not covered within the connotation of the word "erroneous" ---Order pf Inspecting Additional Commissioner speaks of the doubts, apprehensions, indefiniteness and lack of confidence in the observations---Entire language of the order of Inspecting Additional Commissioner speaks about his opinion---Sale-deed was registered with the concerned Authorities and required stamps/duties were paid---None of the concerned agencies challenged the validity of contract and Collector of Land Revenue' did not object to the value proposed for registration-- No situation thus existed for cancellation of assessment order "under S-66-A of the Income Tax Ordinance, 1979---Cancellation of assessment order in the circumstances was without jurisdiction and was disapproved by the Appellate Tribunal.

1991 PTD 488; 1981 SCMR 701; 1998 PTD (Trib.) 3395; 1999 PTD 4028; Julian Hoshang Dinshaw Trust v . ITO 1992 SCMR 250; CIT v. Forbes Campbell & Co. PLD 1978 Kar. 1047 = 1978 PTD 328; CIT v. R.K. Parasuram 2001 PTD 3410; 2002 PTD 1379 and CIT v. B.C. Srinivasa Setty 128 ITR 294 ref.

Ch. Anwarul Haq for Appellant.

Muhammad Asif, DR for Respondent.

Date of hearing: 26th November, 2002.

ORDER

KHAWAJA FAROOQ SAEED (JUDICIAL MEMBER).---This appeal has been filed by the assessee against order under ,section 66-A. The assessee a private limited was engaged in business of manufacturing through a bottling plant in Gujranwala under the franchise arrangement with Messrs Coca Cola International. Assessment in this case had already been finalized the record of which was examined by the revising authority who considered the assessment as erroneous and prejudicial to the interest of Revenue and after issuance of a notice to him cancelled the same. The main argument for cancellation of the order was if net wealth of the tangible assets stood at Rs.118,422,857 and consideration for restraining to enter into business was worth Rs.9,44,00,000 logically certain value of the goodwill in the hands of the company also existed. The IAC, therefore, held that there was a definite value of the franchising rights, which belonged to the assessee-company and on surrender of these rights it was to be essentially accounted for towards the declared profit. Further as per balance-sheet as on 30-6-1998 the assessee-company had disclosed a gain of Rs.3,72,49,319 on sale of land under ownership of the company. This sale was not offered for tax and was claimed, as exempt. Further that the amount of sale attributable to land was enhanced than its actual proportion in the total sale consideration so as to acquire maximum gain out of the same. This was called as , manipulation so as to avoid proper gain assessable and chargeable to tax as per the provisions of rule 7(2)(b) of the Third Schedule of the Income Tax Ordinance, 1979. The splitting up thus was called as plan for tax evading. Since said arrangement had been accepted by the Assessing Officer erroneously not appreciating these facts the order was called erroneous and prejudicial to the interest of Revenue and was cancelled. Certain other objections were also raised but since ultimately the additions were made only in two heads reference to the same is not required. Basically addition ultimately has been made in the head of sale of pallets, empty bottles and gain on surrender of assessable under section 27 of the Income Tax In this regard the explanation given by the assessee AR at the stage of the IAC was that firstly the bifurcation has been made on the basis of the contract between the seller and the buyer and secondly there is no element of supply in this case. The learned AR at the time of hearing before us challenged the cancellation from certain other angle also. He said that the company, has not only made agreement with this party but has also purchased its' franchise from the other agents. The Department has only cancelled the order in respect of this company- and has not doubted this contract in respect of others. He remarked that the words "erroneous and prejudicial to the interest of Revenue" have not been appreciated in its true legal meanings and spirit of law. The Assessing Officer had, before making assessment, appreciated each and every aspect separately and the objections of the learned IAC are merely change of opinion and there is nothing on record to prove that. any error existed in the order passed by the Assessing Officer. He remarked that pre-determination of the learned IAC is evident from his actions. He had firstly raised as many as more than eight objections, however, ultimately reserved its finding in respect of only two. He said the only argument used against the assessee in respect of reduction in the value of land is that the assessee purchased a piece of land, during the year at a much lesser price. He said that said property had been purchased three years prior to the sale of this land. The advance had been paid much earlier and the sale-deed was executed on these dates. He repeated that this fact is bearing on record in the manner that said advance has been shown in the books of the assessee and to the balance-sheet in all the earlier years: Furthermore, the value determined by the Assessing Officer is miscalculation, From the arguments of learned two sues on which the assessment has been cancelled are as follows:

(a)That inter head allocation of the sale amount is concocted in the manner that land has been registered at a higher price than actually received.

(b)That the sale of palates, empty bottles etc. was subject to charge under section 80C hence liable to the assessment accordingly.

Furthermore, that the sale of the empty bottles have been shown at a lesser rate than market price and the loss assessed therein was a concocted figure.

The A.R. while attacking the reasons brought our attention to the agreement wherein the "assets" .have been defined under Article 1 and it has been mentioned that the same "shall have the meaning given in section 2.1.1." which speaks as follows:--

"2.1. Purchase of Assets.

2.1.1. On the terms and subject to the conditions set forth in this Agreement, Seller and, Seller's Group and each of them hereby agrees and undertakes to sell assign convey transfer and deliver free and clear of any encumbrances to Buyer, or cause to be sold assigned conveyed transferred and delivered free and clear from all encumbrances to. buyer, as the case may be, and buyer hereby agrees to purchase accept and acquire, the assets set forth on Schedule 2.1.1. together with additional assets acquired in compliance with this Agreement and acceptable to buyer (collectively the "Assets").

Article 3 deals with the purchase price and 3.1.1.1.1 deals with the total consideration and the same speaks as follows:--

"3.1.1.1.1. the amount of Pakistan Rupees sixty four million seventy seven thousand four hundred eighty two (Rs.64,000,482), for the Assets set forth in section A of Schedule 2.1. (other than the land owned by Aamer Hayat Khan Niazi);

3.1.1.1.2. plus the amount in Pakistan Rupees for the plant and machinery, the bottles, shells and pallets, the signs hoardings cables and wall paintings, the deeps freezers visicoolers ice chests and ice cubes, the motor vehicles, the stock-in-trade and the accounts receivables from dealers and stockists comprised in the Assets and set forth in section B of Schedule 2.1.1: determined through .the pre-Closing audit in the manner specified in section B of Schedule 2.1.1.:

3.1.1.1.3. plus the amount in Pakistan Rupees for advances and pre-payments set forth in section D of Schedule 2.1.1. which have been verified and confirmed in the manner set forth in section D of Schedule 2.1.1. ;

3.1.1.1.4 plus the agreed value of permitted additional assets less the value of deleted or destroyed assets;

3.1.1.1.5. plus the amount of Pakistan Rupees five million four hundred eighty-one thousand nine hundred fourteen (Rs.5,481,914), being reimbursement of cost incurred by Seller for carrying out certain maintenance and upgrades to the Seller's plant and machinery at the request of Buyer;

3.1.1.1.6 less the liabilities set forth in section A and section B of Schedule 2.2. determined in the manner specified therein; and

3.1.1.2. to Aamer Hayat Khan Niazi the amount of Rupees ten million one hundred twenty-five thousand nine (10,125,009) for the land comprised in the Assets set forth in section A of Schedule 2.1.1. ,which is owned by him.

3.1.2. After the Closing to Seller;

3.1.2.1. the value of the Accounts Receivable verified in the manner set forth in sectioh C of Schedule 2.1.1. ;

3.1.2.2. plus the amount in Pakistan Rupees for the Bottles, Shells and Pallets and deep freezers, visicoolers, ice chests and ice cubes set forth in section C of Schedule 2.1.1. verified in the manner specified therein;

3.1.2.3. less the liabilities set forth in section C and section D of Schedule 2.2 determined in the manner specified therein;

3.1.3. The amount payable under this section 3.1. is referred to as the "Purchase Price". The Purchase Price will be finalized following Closing through the Closing Audit."

The Schedule 2.1.1 deals with the total value of the assets and the same speaks as follows;--

Schedule 2.1.1 to the

Asset Purchase Agreement dated 22 December, 1997 By and between Durrani Bottling Company (Private) Limited and others And

Coca-Cola Beverages Pakistan Limited

Assets

(Details of the Assets are set forth on the attached Annexes, ail of which should be read with and shall form a part of this Schedule 2.1.1.)

Value in Pakistan

Section ARupees

Land

Seller 43,734,772

Aamer Hayat Khan10,125,009

Niazi

Buildings53,859,781

20,342,710

74,202,491

Section B

Assets to be taken over subject to Pre-Closing Audit

Plant and machinery subject to Note B-254,345,375

below

Bottles, shells (wooden and plastic)

and pallets at Seller's plant and duty

paid godown at By Pass Road,

Gujranwala, and in-trade with dealers35,037,853

and stockists (as at August 31, 1996),

subject to -Notes B.3, B.4 'and B.5

below.

Signs, hoardings, cabins and wall2,439,191

paintings, subject To Note B.6 below.

Deep freezers, visicoolers, ice chests and

ice cubes at Seller's plant at By Pass

Road, Gujranwala and In-trade with

dealers and stockists (as August 31, 1996)22,500

subject to Note B.7 below.

Motor vehicles, subject to Note B.817,113,000

below

Stock-in-trade (raw and packing materials,

work-in-progress and finished goods .

including duty paid) and stores and

spares -at Seller's plant and duty paid

godown at By Pass Road, Gujranwala

(as at August 31, 1996), subject to Note.14,607,997

B.3 below

Accounts Receivable due from dealers and

Stockists (as of June 30, 1997), subject to3,501,285

Note B.9 and B.10 below.

127,067,201

The detail of land has been mentioned in the attachment to the Schedule which includes the determination or current market val to of the land alongwith its description speaks as follows:

ATTACHMENT TO SCHEDULE 2.1.1.

OF-THE ASSET PURCHASE AGREEMENT

DURRANI BOTTLING COMPANY (PRIVATE) LIMITED

DETAILS OF LAND

S.No.	Description		Area
A	Durrani Bottling Company (Pvt) Ltd	Kanals	Marlas	Sq.Ft
	Several pieces or parcels of land situated in Mouza Khayali Shahpur Tehsil and District Gujrawala and comprising the following Khewat Khatoni and Khasra Numbers	55	18	203
	Khewat Number	Khatoni Number	Khasra Numbers	Area Kanals	Marlas	Sq.Ft
A.1	2.519	2.890	1882/1817	-	3	-
	2.519	2.890	1818	5	12	-
	2.519	2.890	1834	1	3	-
	2.519	2.890	1835	6	18	-
	2.519	2.890	1836	3	14	-
	2.519	2.890	1993	4	5	-
	2.519	2.890	2002	-	15	-
	2.519	2.890	1994	-	9	-
			Sub total	24	19	-
A.2	1,448	1,571	2001/1	1	13	28
	1,448	1,571	2001/2	1	13	28
	1,448	1,571/1	2004	1	9	161
	1,448	1,571/1	1991	1	11	478
	1,448	1,572	1995	3	6	55
	1,448	1,573	1990	3	6	52
			Sub total	12	19	99
A.3	1,448	1,571	1985	-	25	217
			Sub total	1	11	23
A.4	1,448	1,571/1	2004	-	11	23
			Sub total	1	11	23
A.5	1,448	1,571/1	1985	-	3	136
			Sub total	-	3	136
	2088	2455	9850/1994	-	10	-
	2197	5566	9853/2002	7	3	-
	2197	5566	2003	7	7	-
			Sub total	15	-	-

Similarly he brought our attention to attachment to Schedule 2.1.1. of the assets purchase agreement that describes details of bottles and shells which start from page 1 of 2 of the agreement and has been detailed on almost seven different pages. For brevity we are not detailing all of them but it indicates that it separately describes quantity of bottles with colour, number and size lying with dealers, factory and other customers. Similarly, it also details the number of wooden pallets, plastics pallets separately lying with various stockists and the factory customers etc. All this quantity and price thereon has been signed after audit by A.F. Ferguson and Company and has dully been detailed after due payment of the revenue to the Revenue Department. Conveyance deed of immovable properties for Rs.118,422,857 has also been written. This conveyance deed comprises of 51 pages and indicates all and every item.

This is where the point of view of the Department requires more discussion. The author of the judgment Mr. Muhammad Aslam who himself was present argued that the assessee was provided 10 different opportunities. He was sent two notices and 8 personal appearances were allowed. In this opinion the report of A.F. Ferguson Karachi was at the instance of the buyer. The report comprises of 22 pages with 20 annexures. The Assessing Officer says that this report indicates that the assessee had another set of books, which he had concealed. This alone is enough to hold that the order was erroneous. Furthermore the assessee company had sold out its entire project in lump sump and no bifurcation in respect of initial contract was made. It is on the initiation of the assessee himself and was not a regular part of the transaction. He referred page-59 of the Sale-Deed and said that the Annexure of the same were never produced to the Department. Further that the assessee has not explained the circumstances in which value of the assets was inflated. He said that the relinquishment of rights in terms of goodwill etc. is a capital receipt and is not taxable as capital gain under section 27. He added that the empty bottles, deep freezers and wooden pallets were in fact supplied to the other parties. The assessee should have offered this as a supply for assessment under section 80-C. This supply was liable to deduction under section 50(4) and was assessable under presumptive tax regime. This alone, he remarked was an error which caused prejudice to the interest of Revenue. On the other hand the AR has referred various judgments explaining the circumstances in which jurisdiction under section 66-A can be invoked. He also argued that the land having been sold after due registration as required by the Stamp Act on the basis of the value have sanctity. The higher Courts have never permitted disrespect to a registered sale-deed and even have gone to hold that a contract between the two Muslims should not be disregarded unless some specific evidence is available ref. Messrs Siemen A.G. 1991 PTD 488 SC. The sale-deed has further been supported by the Supreme Court of Pakistan in 1981 SCMR 701/703 by the words that an endorsement of the Sub-Registrar on the back 'of the deed mentioning amount paid or received before him raises a legal presumption. The actuality of consideration if not reported by any evidence has to be given effect. Referring a judgment of the ITAT reported as 1998 PTD (Trib.) 3395 he said that now Rule 207-A has also come into operation for all practical purposes. In the aforementioned judgment the Tribunal has held that the sanctity of registered sale should not be disturbed without having some contrary evidence. He also referred 1999 PTD 4028 (H.C. Lah.) .in which Mr. Justice. Nasim Sikandar while deciding an issue in respect of application of section 52 found that the transaction of sale of factory land, building and machinery was simply a sale transaction. This was not to be treated as a supply chargeable to, tax under section 50(4). It has been held that land, machinery and building are not goods and consequently their sale is not a supply. This he referred by remarking that the pallets and bottles in addition to plant and building does not form the shape of a supply.

Further the issue was challenged from another angle. The imposition of tax on capital gain arising out of the transfer of the immovable property was said to be beyond the taxing power of the Federation. The Constitution of Pakistan, 1973 Fourth Schedule, Part-I of the Federal Legislature list, Item No.50 excludes it from the charge by the Federation. Therefore, the levy of tax on such gain through impugned order was argued to be as liable to cancellation. Reference has been made to the judgment reported as 1992 SCMR 250 in Julian Hoshang Dinshaw Trust v. ITO. The action of the JAC of calling this as goodwill was also further challenged by saying that the money earned at Rs.5,26,27,731 by the appellant out of the sale of land constitutes "Capital, Gain" from the sale of immovable property and therefore, the same cannot be termed as "Goodwill". The A.R. remarked that the learned I.A.C. has erred in law in holding that the difference of Rs.4,03,02,281 (in excess of value of property determined in terms of Rule 207-A of the Income Tax Rules, 1982 as per rate notified by the D.C.) is "Goodwill" that existed in the hands of the appellant-company and therefore, taxable under section 27 of the Ordinance 1979 on the relinquishment/surrender of right of business of manufacturing and sale of Coca Cola Brand of Beverage. Relying upon CIT v. Forb & Campbell and Co. PLD 1.978 Kar. 1047 = 1978 PTD 328. It was said that even the compensation paid under said circumstances is not a goodwill. It is a capital gain which amount is not taxable under law. Talking about the nature of the contract A.R. said that the appellant had neither purchased Coca Cola Brands nor the same was sold by him In any case self-generated goodwill is a capital receipt which is not taxable. Reliance is on CIT v. R.K. Parasuram 2001 PTD 3410. Talking about the method of computation of goodwill the A.R. said that even if the point of view of the Department is accepted there is no method for calculation of the cost of goodwill, hence no one can calculate gain. He relied upon 2002 PTD 1379 and said that in this case cost having not been determined, goodwill or gain cannot be computed. The learned I.A.C. has even failed to "Compute" the alleged capital gain on the sale of alleged goodwill/assets in ,terms' of sections 27, 28 and 29 ~ of the Ordinance, hence the levy of tax on such assets is not maintainable ref. CIT v. B.C. Srinivasa Setty 128 ITR 294. Still further in terms or section 29 of the Ordinance the learned I.A.C. has failed to determine the "Fair Market Value" of the alleged "Goodwill" as on the date on which it become the property of the appellant.

Challenging the procedure A.R. said that the learned JAC has also failed to obtain approval' from the Commissioner in terms of clause (b) of subsection (3) of section 29 of the Ordinance to determine the price of the alleged goodwill/asset acquired, hence the levy of tax on such asset is not maintainable. He repeated that, without prejudice to the above, the learned JAC has failed to allow of acquisition of the alleged capital asset and expenditure incurred wholly and exclusively in connection with the transfer thereof in terms of section 28, hence the levy of tax on such assets is not maintainable. It was added that any transfer encompassed by section 27 of the Ordinance has to fall under the governance to its computation provisions of sections 28 and 29. A transaction to which provisions of sections 28 and 29 could not be applied is "never intended" by section 27 of- the Ordinance, to be the subject. Reference CIT v. B.C. Srinivasa Setty 128 ITR 294.

Talking again about the new inserted rule 207-A it was that, for the purpose of section 13 of the Income Tax Ordinance, 1979 the Income Tax Department may invoke the provisions of Rule 207-A framed in terms of subsection (1) of section 27-A of the Stamp Act, 1899. On the same anology the IAC was bound to accept the sale price said property stated in an instrument of which subsection (3) of 27-A of the said Act applied.

The above discussion with respect to various aspects of the case in hand makes the things quite clear. Even if give some weight to the averment of the IAC with regard to the value following the lowest rates fixed by .C. as well as parallel cases we are obliged to note that the discussion is a compact unit and that the value has been r the two parties after a long exercise through a leading Chartered Accountants Company of the country. The value of each and every item has been determined only no location and the price has been agreed mutually between the seller and the buyer, which is a multinational. The Department's main objection and doubt is that the minimum rate prescribed by the D.C. is much lower than the deal and that the assessee has purchased land at an average per Marla price of Rs.1,260 only. This has been rebutted by saying that the said plot was purchased in actuality many years ago and year for which the price of Rs.1,260 per Marla is calculated, only balance of the contract was paid. In any case even if it is accepted that there was some manipulation, it stands accepted and it cannot be held to be as erroneous by simply disagreeing with the Assessing Officer. It was obviously duty of the Assessing Officer to see the validity of the contract and to find faults therein. The IAC cannot just disagree by presuming that assessee has manipulated the contract. In earlier part of this order we have detailed the property by reproducing the relevant part of the contract in which the number of various "Khatas and Khatoonis" with size of the plot has been separately mentioned. The price has been determined by separately highlighting price of each parcel of land and the matter has been properly checked by Collector of land revenue who charged due stamps. The provision of section 66-A is a very stringent provision as it cancels a finalized order. It is correct that now the error of fact is also considered as relevant for cancellation, however, the earlier judgments on the subject had only considered an order as "erroneous" if it had an error of law. The word `erroneous' in almost all the legal dictionaries have been defined to mean an error of law. It 'is correct that an "error" may include in its meanings all kinds of mistakes but the word "erroneous" means basically "an error of law". In this regard one can refer Blacks Law Dictionary 5th Edition Published by West Publishing Company in 1979. Defining the word erroneous it speaks as follows:--

Erroneous: Involving error; deviating from the law. This term is not generally used as designating a corrupt or evil act.

Similarly erroneous assessment and erroneous judgment have been defined as follows:--

Erroneous assessment. Refers to an assessment that deviates from the law and is therefore, invalid, and is a defect that is jurisdictional in its nature, and does not refer to the judgment of the Assessing Officer in fixing the amount of valuation of the property. In Blatt, 41 N.M. 269,67 P.2d 293, 301.

Erroneous judgment. One rendered according to course and practice of Court, but contrary to law, upon mistaken view of law, or upon erroneous application of legal principles.

Above definitions have been followed in many earlier and recent judgments. In this regard we can refer 1984 PTD 137 (II.C. AJK); 1991 PTD (Trib.) 321 and (1969) Tax 51 (Trib.). going through the ratio decided of-the above judgments one can come to the obvious conclusion that the word "erroneous" even if is expanded to the `error of fact' it still cannot be considered as wide enough. to consider an estimate, a gossip, a feeling which gives reason to suspect, an apprehension 'or possibility of a better judgment by way of superior wisdom and experience. It is a different word than error and mistake. The income tax law is very specific in charging various situations. For a mistake, which is synonymous to the word error, a separate section has been provided. Even for this wider connotation the opinion of the Court is that the "mistake" that floats from the order is the one, which can be rectified. In the present situation where the legislature is very particular in mentioning the word "erroneous" we cannot allow extension of arms by exercising jurisdiction which is not provided by section 66rA. The IAC is not empowered with the jurisdiction to review the assessment. The power of revision is available with the Commissioner who may exercise it either suo motu or at the request of the assessee Similarly, the situation where some information comes to the knowledge of the Department with regard to non-disclosure of income by the assessee the law has protected such escapement of income by way of section 65 of the Income Tax Ordinance, 1979. The discussion, therefore, makes it clear that the word "erroneous" has been used purposely by the legislature and it is not synonymous to error or mistake or such other connotations of wider implication. Even the judgments referred for this purpose by the two sides make above situation very clear with. regard to usage of this word. In this regard the definition mentioned by us above of the erroneous assessment also very clearly says that this applies on the assessments which deviate from law and on defects, which are of jurisdictional in its nature. The definition' further categorically says that it does not refer to the judgment of the Assessing Officer in fixing the amount of valuation of property. Keeping above discussion in view we will have to revert back to the facts of this case once again.

The Assessing Officer made an assessment in which he discussed the issue of sale of property specifically which was subsequently rectified through an order under section 156. The items sold by this assessee were treated as turnover through rectification order and tax @ 5 % under section 80-D was charged thereon. This rectification was carried out on 15-3-2000 while the original order under section 62. is dated 21-2-2000. This fact among others indicate that the Assessing Officer had dealt with this issue with cautious mind and after going through the related facts on record. Thus even if some wider connotation is to be attached to the word "erroneous" as against the settled interpretations still the Department cannot claim to have ignored the related aspects as above. In the assessment order on page 3 the fact of the sale of the assets have been discussed in the following manner:--

"The assessee Messrs Durrani Bottling Co. (Pvt.) Ltd. had sold out its entire assets to Messrs Coca Cola Beverages International (Pvt.) Ltd., on 8-1-1998 and as per copy of final accounts, profit of Rs.2,41,84,688 has been shown on the disposal of assets excluding land. The said profit has been included as per Note No. 14 under the head "Other Income" in the P&L A/c. For the assessment year 1996-97 and 1997-98, G.P. rate on the sales of Beverages has been shown by the assessee at 30.72 % and 30.68% respectively, G.P. shown for the year under review on the saits of Beverages as indicated above i.e. 34.93 % is as such considered fair and reasonable. The downfall in G. P. on account of empty and Shells has attributed to discontinuation of business and sale of entire assets as mentioned earlier. Therefore, no adverse inference is drawn to this regard for low declared G.P. rates for Empties and Wooden Shells A/Cs.

A careful scrutiny of books of accounts of the assessee reveals that for sales declared maximum ascertainable addresses of the parties have been recorded in the books of accounts. Assessee has furnished packages-wise details of sales for the year ending, 30-6-1998 the comparison of which with the books of accounts of the assessee has revealed that the figures shown do tally with the figures recorded in the books of accounts. History of the case is also acceptance of declared version in respect of sale account, hence, the declared version of sales is being accepted as per history of the case.

The description given above gives two impressions, one that the issue with regard to sale of assets to Coca Cola Beverage International was well within the knowledge of the ITO and while going through the other aspects with regard to sales, G.P. etc. he considered himself legally bound to accept the accounts. Secondly; that all aspects of the assessee account were found to be as verifiable and the profit as per final accounts at Rs.2,41,84,688 was considered as regular including income from other income. The ITO having applied full mind the IAC on the basis of the apprehension that the assessee has managed its affairs so as to take the benefit of exemption available to a class of immovable assets F is not justified. Furthermore, some of the purchases of the assessee were considered as liable to deduction and he was held to be an assessee in default in the assessment order. For his default he was charged under section 52. Now at a subsequent stage saying that the assets of this assessee sold to the third party were liable to deduction and section 80-C comes into operation is far-fetched idea which under the circumstances cannot be supported. We need not repeat again that the Assessing Officer was very particular in mentioning in the order that the "downfall in G.P. on account of empties and shells is attributable to discontinuation of business". It is. after this narration that the Assessing Officer says "therefore, no adverse inference is drawn in this regard for low declared G.P. rates for empties and wooden shells accounts". In the presence of these unequivocal findings the opinion of the IAC that it was a case of supply and the ITO has erroneously not seen the same from the said F angle is obviously a difference of opinion which requires a longstanding arguments for both the sides. The observations that require support of the arguments by the IAC is obviously not covered within the definition of word "erroneous". The two opinions that whether this sale was supply and coverable under section 50(4) or not by no stretch of imagination can be covered within the connotation "erroneous". The other situation whether the same is prejudicial to the interest of Revenue or not though is in conjunction with above yet comes after determination of the error. As already mentioned above word "erroneous" is an adjective which is parallel to blundering, counterfeit, devoid of truth, fallacious, false, faulty groundless, spurious, unfounded, unsustainable, untrue and wrong etc. while the word "error" is synonymous to false conception, false impression, incorrect mistake, misprint, mis under-standing etc. etc.

Coming to the order of the learned IAC the language which he has used at different pages does not give a particular instance of the order being "erroneous-. For example at page 2 in a separate para the learned IAC says:--

"Now the Assessing Officer was required to examine this fact in the true prospective of its faithful/bona fide working arrived at by the company. The Assessing Officer has given wrong observation with regard to' treatment of this issue in the, office note. He has erroneously and conversely observed that "sale price does not involve under-statement" which in fact was not appropriate inference according to the existing situation. He in fact, should have seen the inter head allocation made by the company for taxable portion and non-taxable portion arisen out of the same sale-deed. He in fact, had failed to appreciate of this aspect and erred in completing assessment. This omission on the part of the DCIT was erroneous insofar as prejudicial to the interest of Revenue. Therefore, the assessee was confronted through detailed notice under section 66-A bearing No.985/R-I dated 1-4-2002. A detailed discussion in this regard is made in the next part of this order.

Above paragraph and others in the order all speak of the doubts, apprehensions, indefiniteness and lack of confidence in the observations. The learned IAC proposes that the Assessing, Officer was required to H examine this fact in true perspective. In his opinion he had erroneously and conversely observed that sale price does not involve understatement in the office note. He, therefore, has opined that he should have seen the inter head allocation made by the company for taxable portion and non-taxable, portion. The entire language speaks about his opinion. The learned IAC himself is not very sure about the proposal he is making. As already mentioned above such unsure situations cannot be made the base I of invocation of the order under section 66-A. In the observations the learned IAC has totally ignored that before agreeing with the other party on inter head allocation the matter was referred to a renowned firm of Chartered Accountants who had submitted their report after due audit of the entire project. Subsequently, the contract was duly registered with the concerned authorities and required stamps/duties were paid by the buyers. None of the concerned agency challenged the validity of the contract and more particularly the Collector of Land Revenue did not J object to the value proposed for registration. Even the buyer who was required to pay the charges of the adhesive tax did -not object to the value of the land and paid Government charges which normally come to approximately 20% of the cost of immovable property in totality. All the circumstances, therefore, bring us to the obvious conclusion that in this case the situation of cancellation of the order under section 66-A did not exist. There was neither an error of law or of fact in this case. The powers of the learned IAC are supervisory to avoid arbitrary exercise of g powers by ITO and to ensure safeguard of the revenue. This is a check introduced by the legislature with a very properly and strongly worded language. As dilated upon above the language suggests that the impugned order should be erroneous by reference to definite violation or deviation L from law. The language is clear and is to be read in conjunction with the earlier part: It is the record of the assess which is, to be inspected and the erroneousness should float from the surface of the order at the' time of inspection. . The subsequent part that says about the enquiry etc. is after establishment of the erroneousness. Any hypothetical, vague or uncertain situation, interpretation liable to two different decisions etc. h obviously cannot extend the power of the IAC. Furthermore, a disagreement between the two officers i.e. ITO and the IAC also cannot grant jurisdiction to the IAC. The IAC' in this case has totally ignored these aspects and the other facts. The cancellation of the order by him, therefore, is without any, jurisdiction hence is disapproved.

The learned A.R. has argued the case from the angle of calculation of capital gain etc. and has submitted certain case-law which we ignore for the reason that we have factually and legally considered the order of the IAC to be of no legal effect. This appeal, therefore, obviously results in cancellation of the order of the IAC and restoration of the order of the Assessing Officer.

C.M.A./968/Tax(Trib.)Order cancelled.