M.As. (A.G.) Nos. 1103/LB to 1107/LB of 2006 and W.T. As. Nos.537/LB to 541/LB of 2003, decided on 23rd January, 2007. VS M.As. (A.G.) Nos. 1103/LB to 1107/LB of 2006 and W.T. As. Nos.537/LB to 541/LB of 2003, decided on 23rd January, 2007., 2007 PTD-INCOME-TAX-APPELLATE-TRIBUNAL-PAKISTAN 2155 (2007)

(a) Wealth Tax Rules, 1963---

----R.8(4C)---Wealth Tax Act (XV of 1963), S.17-B---Hall let out on hire---Assessment was cancelled by the Additional Commissioner of Income Tax holding the assessee to be owner of the land as well as the superstructure with the direction to make fresh assessment in view of R.8(4C) of the Wealth Tax Rules, 1963 and explanation by the assessee was Pound to be unsatisfactory---Validity---Rule 8(4C) of the Wealth Tax Rules, 1963 made it clear that it would only be applicable in case of "Hall owned and managed by same person" whereas assessee from very start of the proceedings under S.17-B of the Wealth Tax Act, 1963 had been stating that the assessee was not the owner of the land but only managing superstructure---Additional Commissioner, in spite of elaborate explanation by the assessee stressed that the hall and the land was owned and managed by the assessee---Contention of the assessee was that since the land in question was not owned by him, hence the assessment could not be made in his hands under R.8(4C) of the Wealth Tax Rules, 1963---Ownership of the property, however, needed some verification with regard to the land---Case was set aside and remanded to the Assessing Officer with the direction to look into the matter again and if the assessee was not owner of the land then R.8(4C) of the Wealth Tax Rules, 1963 was not applicable and only superstructure was to be assessed in the hands of the assessee.

(b) Wealth Tax Act (XV of 1963)---

----S.17-B---Power of Inspecting Additional Commissioner to revise Wealth-tax Officer's order---Scope---Assessee contended that Additional Commissioner of Income Tax had no jurisdiction to invoke provisions of S.17-B of the Wealth Tax Act, 1963 as such powers vest in Inspecting Additional Commissioner---Validity---Assessee failed to make out a case with regard to jurisdiction of the Additional Commissioner of Income 'Tax/Wealth Tax under S.17-B of the Wealth Tax Act, 1963---No interference was made by the Appellate Tribunal on the point of jurisdiction of the Additional Commissioner.

Syed Abid Raza Kazmi for Appellant.

Ghazanfer Hussain D.R. for Respondent.

Date of hearing: 16th December, 2006.

ORDER

Titled five wealth tax appeals pertaining to the assessment years 1996-97 to 2000-01 have been filed at the instance of the assessee calling in question separate impugned orders dated 24-6-2003 passed wider section 17-B by the Additional Commissioner Income Tax whereby he cancelled the wealth tax assessments for all the years under consideration. The assessee challenged the cancellation of assessments under section 17-B of the repealed Wealth Tax Act, 1963 (hereinafter called the repealed Act) being unjustified. Besides miscellaneous application seeking permission to press additional grounds have also been filed. The permission was granted, hence the same succeed accordingly. The additional grounds raised by the assessee are as follows:--

(i) That the order dated 24-6-2003 of the Additional Commissioner of Income Tax and Wealth Tax Sialkot Range, Sialkot passed under section 17-B of Wealth Tax Act, 1963 is bad in law and contrary to the facts of the case.

(ii) That the impugned order is without jurisdiction and illegal. The Additional Commissioner of Income Tax and Wealth Tax had no power/jurisdiction to invoke the provisions of section 17-B of said Wealth. Tax Act, 1963. The power to invoke the provisions of section 17-B of said Wealth Tax Act vests in Inspecting Additional Commissioner of Wealth Tax.

(iii) That the learned Additional Commissioner of Income Tax and Wealth Tax was not justified to change his first stand by issuing second illegal show-cause notice to the appellant to invoke provisions of 17-B of said Wealth Tax Act.

(iv) That Rule 8(4C) is not applicable in the case of the appellant because the land on which Marriage Hall exists is not owned by the appellant.

(v) That rule 8(4C) is not applicable for valuation of property in the case of the appellant because the annual receipts of the appellant are from various sources means and not from mere letting out the Hal] on hire.

2. Briefly stated the facts of the case are that the assessee is an individual who filed wealth tax returns declaring net wealth for the years under consideration at Rs, 8,56,640, Rs.7,82,866, Rs.582,154, Rs.8,68,764 and Rs.8,63,498. Apart from other properties, the assessee has shown ownership of superstructure i.e. Shadi Hall namely Bait-ul-Aroos. The Assessing Officer accepted the claim of the assessee that landof the Shadi Hall did not belong to him in view of the PT-1 Form. However, the Assessing Officer did not accept the value declared, hence he adopted the value of structure @ Rs.125, Rs.140, Rs.155, Rs.170 and Rs.190 respectively for the assessment years 1996-97 to 2000-2001. The value of superstructure was worked out at Rs.12,10,625, Rs.13,55,900, Rs.15,01,175, Rs.16,46,410 and 18,40,150. After working out the value of crockery, cash in hand and cash in bank, total wealth was estimated at Rs.16,91,265, Rs.18,22,766, Rs.19,97,329, Rs.22,19,214 and Rs.23,67,648 respectively.

3. Later on the Additional Commissioner of Income Tax after examination of assessment record observed that wealth tax assessment framed in the case of the assessee was erroneous insofar as prejudicial to the interest of Revenue. The main contents of the show-cause notice dated 26-11-2002 are as follows:--

"You have declared that you are paying rent of land to the owner of the ground area of the property being assessed by the name of Bait-ul-Aroos, Paris Road, Sialkot anti in support of this contention you have provided PT-1, Form which according to the Assessing Officer reveals the ownership o1' the superstructure in your name and ownership of the land in the name of another person i.e. Mr. Mehmood Ahmad Sultani etc. (Alleged owner of land area). It is not understood how the laud as per the alleged PT-1 Form is owned by Mr. Mehmood Ahmad Sultani and in the same Form the ownership .of the superstructure is in your name'? This contention is absolutely devoid of any merit is against the practice and penalty illegal. Secondly your Income Tax record does not bear testimony to your contention. For all the assessment years mentioned above, you have not claimed the rent which is allegedly paid to Mr. Mehmood Ahmad Sultani on account of the sue of land as claimed by you in your Wealth Tax proceedings. For all the years, your P & L A/c is silent about the payment of any such rent/lease money during the relevant period. This office is led to believe that the land is also owned by you which you have failed to disclose and have thereby furnished inaccurate particular regarding your wealth."

4. The counsel of the assessee filed detailed reply vide letter dated 16-12-2002 whereby not only he explained that land of the property does not belong to him but also raised a legal objection that the Additional Commissioner is not empowered to proceed under section 17-B of the repealed Act. The Additional Commissioner of Income Tax issued another show-cause notice under section 17-B on 5-4-2003 whereby he observed that the Assessing Officer made the valuation of the property in complete disregard of Rule 8(4C) of the repealed Act, .hence he showed his intention to proceed under section 17-B of the repealed Act. In response to the said show-cause notice, the assessee again filed a detailed reply whereby once again jurisdiction of the Additional Commissioner was challenged. As tar as disregard of rule 8(4C) is concerned, it was submitted that rule 8(4C) applies where the Hall and the superstructure is being owned by the assessee. However, the Additional Commissioner of Income Tax held the .explanation to be unsatisfactory and holding the assessee to be owner of the land as well as the superstructure assessment framed by the Assessing Officer was cancelled under section 17-B with the direction to the Assessing Officer to make afresh assessment in view of Rule 8(4C) of the repealed Act. Hence the instant appeals by the assessee.

5. The learned A.R. of the assessee contended that the Additional Commissioner of Income Tax has no jurisdiction to invoke provisions of B section 17-8 as powers vest in Inspecting Additional Commissioner. It was further argued that while replying to the show-cause notice issued by the Additional Commissioner it was elaborately explained that land in question was not owned by the assessee but the Additional Commissioner rejected the claim without any cogent reasons. It was argued that the Additional Commissioner in the second show-cause notice changed his stance 'and' issued show-cause notice observing that assessment framed was illegal in view of Rule 8(4C) of the repealed Act. It was argued that Rule 8(4C) applies only where land as well as the superstructure belongs to one person. It was argued that Rule 8(4C) does not apply to the assessee's case for the reason that the assessee is not running the sole business of letting out the hall on hire but instead assessee's receipts are from various means, such as receipts on account of cooking the food stuff brought by the customers/parties, receipts from providing crockery, 'receipts from providing services etc. It was argued that this fact is also verifiable from the Income Tax record of the assessee. The learned D.R. on the other hand opposed the arguments advanced by the learned A.R.

5. We have heard both the parties and have gone through the relevant orders. In our view the sole contention of the assessee is with regard to jurisdiction of the Additional Commissioner of Income Tax and application of Rule 8(4C) of the repealed Act. It would not, be out of place to mention here that in reply to both the show-cause notices issued on 26-11-2002 and 5-4-2003 the counsel of the assessee raised the legal objection that power to invoke provisions of section 17-B of the repealed Act vests in Inspecting Additional Commissioner of Income Tax and not in Additional Commissioner of Wealth Tax, but surprisingly, at both occasions the Additional Commissioner did not bother to dilate upon the jurisdiction. For the sake of convenience we would like to reproduce the extract from the reply given by the counsel of the assessee in response to first notice under section 17-B dated 16-12-2002 which is as follows:--

"Section 17-B of the Wealth Tax Act, 1963 was inserted by Finance Act, 1992 with effect from Assessment year 1992-93 whereby Inspecting Assistant Commissioner of Wealth Tax was vested with powers to revise order of the Wealth Tax Officer which statute was amended by Finance Act 1993 vesting this power to revise order in Inspecting Additional Commissioner of Wealth Tax to revise the order of Deputy Commissioner of Wealth Tax. Thus section 17-B of Wealth Tax Act, 1963 empowers the Inspecting. Additional Commissioner of Wealth Tax to revise the order of the Deputy Commissioner of Wealth Tax and not Additional Commissioner of Wealth Tax. No. corresponding amendment in the statute/section 17-B of-Wealth Tax Act, 1963 to substitute the Inspecting Additional Commissioner as Additional Commissioner has been made nor the Additional Commissioner has before appointed as Inspecting Additional Commissioner by the Central Board of Revenue to exercise the powers under the Wealth Tax Act so far. Thus the show-cause notice mentioned in the subject issued by your good-self under section 17-B in the capacity of Additional Commissioner is without jurisdiction and is liable to be withdrawn having no legal sanctity".

6. Rule 8(4C) is reproduced as under:--

"Where the Hall is owned and managed by the same person the value shall be determined at 85% of 10 times the gross annual receipts in the immediately assessment year ending on or immediately before the valuation date."

7. The plain reading of the Rule 8(4C) makes it clear that it would only be applicable in case of "Hall owned and managed by same person" whereas assessee/counsel of the assessee from very start of the proceedings under section 17-B has been stating that the assessee is not the owner of the land, but only managing superstructure. To clarify the position, it would be in the fitness of things to reproduce the reply of the counsel of the assessee with regard to show-cause notice under section 17-B which is as follows:--

"The assessee Syed Asif Ali Shah on the death of his father mined Asghar Ali Shah took possession of Superstructure later on renovated to marriage hall titled Bait-ul-Aroos. He is not at all the owner of the land measuring 4 Kanals as per PT-1 and 5-K as per contention of the owners of the land. PT-1 Forms for the years 1992-93, 1997-98 and 2001-02 are enclosed herewith as Annexures A, B & C which clearly show that the land is owned by Mehmood Ahmad Sultani, Mst. Nazir Begum and others. The owners of the land (land known as Bait-ul-Aroos) Mst. Nazir Begum, Mst. Bashir Begum and Mst. Balgees Begum etc. to the extent of their 3/4 share made agreement to sell their share of land in question to one Mr. Aurangzeb Mirza for consideration of Rs.1,00,00,000 as per agreement dated 22-8-1995 photocopy of this sale agreement/contract is enclosed in proof thereof as Annex-D. Later on the purchaser Mr. Aurangzeb Mirza filed civil suit against the said owners for possession through specific performance of the aforesaid contract in the Court of Senior Civil Judge, Silakot. Photocopy of the said suit/plaint is enclosed herewith as Annex-E. In the meantime owners of 1/4 share of land in question namely Mst. Noon Khurshid Sultani, Saleem Ahmad Sultani, Mst. Munawar Saultana Shirazi and Farooq Ahmad Sultani etc heirs of Bashir Ahmad Sultani sold their share of land through four Registered sale-deeds to Azhar Ali Shah and Agha Ali Shah. Photocopies of these four sale/purchase deeds are enclosed as Annexures F, G, H & I. Accordingly this fact of change of ownership of land to the extent of 1/4 share in the names of Azhar Ali Shah and Agha Shah is reflected in PT-1 Form for the year 1997-98, as Amiex-Band PT-1 Form for the year 2001-02 as per Annexure-C. The above mentioned Civil suit filed by Mr. Aurangzeb Mirza in the Court of Senior Civil Judge Sialkot against the owners of land to the extent of 3/4 share was decreed in favour of the plaintiff Mr. Auranzeb Mirza by the senior Civil Judge, Sialkot on 2-3-2000 on the basis of admission/compromise/contract on sale executed between the owners of the land (sellers namely Mst. Nazir Begum, Mst. Bashir Begum, Mst. Balgees Begum and Mehmood Ahmad Sultani etc.) and purchaser Mr. Aurangzeb Mirza. Photocopy of the judgment of the Senior Civil. Judge dated 2-3-2000 along with copies of compromise of the parties, statement of Special Attorney of the defendants (original owners) recorded in the Court are enclosed as Annex-J and K. It is further explained that the ownership of land to the extent of 3/4 share which was decreed by the Senior Civil Judge in the name of Mr. Aurangzeb Mirza has been pre-empted by Azhar Ali Shah and Agha Shah in the Court of Senior Civil Judge Sialkot through a pre-emption suit filed by them as co-owners of the land in question. These pre-emptors also deposited Zar-i-Suim in Government Treasury. Photocopy of the suit/plaint filed by Azhar Ali Shah and Agha Shah in the Court of Senior Civil Judge, Sialkot and deposit receipt of Zar-i-Souim amount is enclosed as Annex-L. Property Tax is also being paid in respect of Superstructure and land by the assessee and owners of lend separately. Copies of property Tax payment receipts arc also enclosed in proof thereof. Certified copies of Annexures E & L have not yet been issued by the concerned Court. The same shall be provided later on if required.

The facts discussed above clearly prove that the ownership of the land is not Chat of the assessee namely Syed Asif Ali Shah but instead the land is owned by the individuals as mentioned above. Superstructure was built by Asghar Ali Shah father of the assessee Asif. Ali Shah on land on consideration of rent in respect of land. But the rcpt has not been paid to the owners by the assessee. Syed Asif Ali Shah due to dispute/litigation of the owners as discussed above. The asssessee has neither contended/declared nor claimed the payment of land rent to the owners anywhere in Income Tax proceedings as well as Wealth Tax proceedings. Your honors presumption regarding ownership of the land by the assessee Syed Asif Ali Shah, is not based on Pacts. PT-1 Form was produced during Wealth Tax assessment proceedings showing the ownership of the land by Mehmood Ahmad Sultani etc. and not in proof of payment of land rent to the owners. Since payment of laud rent has not been declared/ claimed by the assessee in any proceedings, it cannot be attributed to the assessee as mentioned by your good self's show-cause notice under reply. Wealth Tax Assessments for the assessment years 1996-97 to 2000-01 already completed in respect of superstructure owned, by the assessee are in no way erroneous and prejudicial to the interest of Revenue. Since the Laud is not owned by the assessee Syed Asif Ali Shah, the same cannot be assessed in his hands under the provisions of law."

8. Bare perusal of the order passed under section 17-B shows that the Additional Commissioner in spite of elaborate explanation by the learned A.R. of the assessee stressed that the hall anal the land was being owned and managed by the assessee. It is the contention of the assessee that since the land in question is not owned by him, hence the assessment cannot be made in his hands under Rule 8(4C) ibid. As regards jurisdiction of the Additional Commissioner of Income Tax/Wealth Tax to section 17-B is concerned, we would like o say that the learned A.R. has failed to make out a case. Even otherwise, no case law was produced in support of his contention hence on the point of jurisdiction of the Additional Commissioner, no interference is required. However, the ownership of the property namely Bait-ul-Aroos needs some verification with regard to ownership of land. Therefore, the case is set, aside and remanded to the Assessing Officer with the direction to look into the matter again and in the assessee is not owner of the land then Rule 8(4C) ibid is not applicable and only superstructure be assessed in the hands of the assessee.

9. It is ordered accordingly.

C.M.A./105/Tax (Trib.)Order accordingly.