TAXATION OF UNEXPLAINED INCOME AND ASSETS*

TAXATION OF UNEXPLAINED INCOME AND ASSETS* TAXATION OF UNEXPLAINED INCOME AND ASSETS* [A COMPARATIVE STUDY OF SECTION 13 OF THE INCOME TAX ORDINANCE, 1979 AND SECTION 111 OF THE INCOME TAX ORDINANCE, 2001] By Muhammad Shahid Baig, Advocate, Lahore Our today's topic is very vast, controversial and sensitive. It is not possible to discuss all the pros & cons of this subject in one sitting. However, I will try to present a brief comparative study of section 13 of the old law i.e. Income Tax Ordinance, 1979 and corresponding section of new law i.e. Section 111 of the Income Tax Ordinance, 2001. Learned friends, I am not going to add any thing in your existing knowledge about the subject rather it is a process of sharing knowledge. This effort by inc is just to refresh your memories about the subject. *Lecture delivered on 19-5-2005 at Lahore Tax Bar. Direct taxes occupy very important field in our life both from the point of view of public finance, development and transformation of our social life, according to our Constitutional commitments. It is therefore, essential that ideas on these subjects should be scientifically and logically understood and appreciated. Judicial power is a Constitutional concept. It is an independent and separate function of Government, which is exercised through Judges appointed by the State. In Pakistan there is the functional distribution of power as a consequence of a system of division between the three organs of the State of which judiciary is one of them and it must be understood to be inherent in the Courts to interpret, construe and apply the law. Judicial power is therefore, that part of the sovereign power of the State which is inherent in the judiciary or the judicial department as an independent and coordinate branch of the Government by reason of the system of division of power itself under which, the Legislature makes, the Executive executes and the Judiciary construes the law. Power to hear and determine a matter and a power to interpret are the well known attributes of the judicial power. The power which the Courts of general jurisdiction and the High Court exercise to correct jurisdictional errors in collateral proceedings is called the power of judicial review. The basic function of the Legislature is to make laws and judiciary is responsible to understand, construe and interpret the laws. It is the judiciary who while exercising the power of judicial review gathers the intention of the Legislature contained in any law to apply the same in true perspective. This process of interpretation takes years to comprehend the laws. Similar is the position with our today's subject. The judiciary took almost two decades to comprehend this law viz section 13. Unexplained income and assets were being subjected to tax through fiction of law as per deeming provision i.e. section 13 of the repealed Income Tax Ordinance, 1979. If we go in the history of this subject, the concept of taxing deemed income by fiction of law was first time introduced in Pakistan in 1965 when two subjections i.e. 4(2A) and (2B) were introduced in the repealed Income-tax Act, 1922 through Finance Act, 1965. Finance Ordinance, 1972 further amended sub-section (2B) of section 4 of the repealed Act. Since the provision of subsection (2B) were attracted when the assessee did not record the investments made by him in the books of accounts. The scope of this section was enlarged so as to make it applicable even when such investments are not shown in the wealth statement. Besides this, in subsection (2B) of section 4 of the repealed Act, four new subsections were added as (2C), (2D), (2E) and (2F). With the promulgation of the Income Tax Ordinance 1979 these said subsections were rationalized and redrafted in section 13. The corresponding provisions of both the repealed Act and Ordinance are 4(2)(a) 13(1)(a) New 13(1) (aa) 4(2) (b) 13(1) (b) 4(2) (d) 13(1) (d) New 13 1 Proviso 4(2)(f) 13(2) As I stated earlier, the judiciary took almost twenty years to comprehend and interpret this complicated, controversial and complex provision of law i.e. section 13 of the repealed Ordinance. In fact this subject is very vast and highly sensitive and there has been a veritable war between the taxpayers and tax collectors about the invocation and interpretation of this deeming provision of the fiscal statute. Now a new chapter has been opened by enacting section 111 of the Income Tax Ordinance 2001. The corresponding provisions of the repealed and newly promulgated Ordinance are: 111(1)(a) 13(1)(a) 111(1)(b) 13(1)(aa), 13(1)(b) and 13(1)(c) 111(1)(c) 13(1)(e) 111(2) 13(1)(e) Proviso 111(3) 13(1)(d)/ /13(2) 111(4)(a) 13(2A) 111(4)(b) New 111(5) 13(3) Deleted 13(2) Now I will discuss the comparative provisions one by one:- *** 111(1)(a)??????????? V/S??????????? 13(1)(a) (New) 111. Unexplained income or assets Where--‑ (a) any amount is credited in a person's books of account; and the person offers no explanation about the nature and source of the amount credited or the explanation offered by the person is not,. in the Commissioner's opinion, satisfactory, the amount credited, shall be included in the person's income chargeable to tax under the head "Income from other sources" to the extent it is not adequately explained. (Old) 13. Unexplained income or assets, etc., deemed to be income. (1) here-‑ (a) any sum is found to be credited in the books of an assessee maintained for any income year; and the assessee offers no explanation about the nature and source ofsuch sum, shall be deemed to be the income of the assessee of such income year chargeable to tax under this Ordinance: Learned Friends, Both these provisions deal with cash credits only No approval of IAC is required as per old law to make addition under section 13(1)(a) likewise Commissioner or the officer to whom powers are delegated under section 210 of the Income Tax Ordinance, 2001, is fully competent to make addition under section 111 (1)(a) without any approval. No valuation is required so sections 13(2) and 111(3) are not applicable. Onus of providing source of money is on the taxpayer to prove that a receipt does not bear the character of income. To invoke these provisions, the sum should be found credited in the books of the taxpayer maintained for any income year. Taxpayer should be given proper opportunity if the taxpayer offers no explanation about the nature of source thereof or the explanation offered is not satisfactory in the opinion of the assessing officer only then the sum credited shall be assessed as deemed income. Maintenance of books is a sine qua non, if no books are maintained no deposit or credit entries are found then these provisions would not apply (64 TAX 17) Taxpayer should be given proper opportunity to explain each and every entry otherwise it may cause miscarriage of justice (1987 PTD 41) Penalty provisions are not applicable in respect of section 13(1)(a) (Ref: Clause (c) of subsection (2) of section 111 and CBR's circular number 1(1)DT14/91 dated 28-4-1991) *** 111(1)(b)??????????? V/S??????????? 13(1)(aa), 13(1)(b) & 13(1)(c) (New) 111. Unexplained income or assets) Where--‑ ??????????? (b) a person has made any investment or is the owner of any money or valuable article; and the person offers no explanation about the nature and source of investment, money, or valuable article, or the explanation offered by the person is not, in the Commissioner's opinion, satisfactory, the value of investment, money or value of article, shall be included in the person's income chargeable to tax under the head "Income from Other sources" to the extent it Is not adequately explained. ''(Old) 13. Unexplained income or assets, etc., deemed to be income. (1) Where (aa) the assessee is found to have made any investment or is found to be the owner of any money or valuable article, in any year; or the assessee is found to have. made any investment in any income year which is not recorded in the books of account maintained for that income year or is not shown in the wealth statement or return of wealth furnished under section 58 in respect of that income year; or the assessee is found in respect of any income year to be the owner of any money or valuable article which is not recorded in the books of account, if any, maintained by him or is not shown by him in any wealth statement or return of wealth furnished under section 58 in respect of that year. And the assessee offers no explanation about the nature and source of such, investment, acquisition of the money or valuable article or the explanation offered by him is not, in the opinion of the Deputy Commissioner satisfactory, the value of the investment, the money or the value of article, shall be deemed to be the income of the assessee of such income year chargeable to tax under the Ordinance. The clause (aa) of Section 13(1) of the repealed Income Tax Ordinance, 1979 was new in the sense as it had no corresponding provision in the Income Tax Act, 1922. It was introduced through Finance Ordinance, XXV of 1980. It is applicable from the Assessment year 1980-81. Learned Friends, Where Accounts are not maintained.---Section 13(1) (aa) applies to the cases where neither any accounts are maintained nor any wealth statement has been furnished and the taxpayer has made an investment or is found to own any money or valuable article. Where Accounts are not maintained.---Section 13(1)(b) applies to the cases where accounts are maintained or Wealth Statement is filed and the Taxpayer has made investment which is not recorded in the Books of Accounts maintained by him or is not shown in the Wealth Statement filed by him. It should be remembered that an investment must either appear in the books or in the Wealth Statement depending upon whether it is a business investment or otherwise. Where Accounts are not maintained.---Section 13(1)(c) the Taxpayer is found to own money or a valuable article which is not recorded in the books (if the money or article relates to his business) or shown in the Wealth Statement filed (if it does not relate to business) Such money or article must ordinarily appear either in his books or the Wealth Statement. In contrast to these 3 different provisions of old law, only one provision i.e. 111(b) has been provided in the new law which applies to all the 3 situations i.e. when a person has made any investment or is the owner of any money or valuable article. Prima-facie this provision is applicable in both the situations whether accounts are maintained or not or whether Wealth Statement is filed or not. No doubt that new law requires every Taxpayer to maintain Books of Accounts but if any Taxpayer does not maintain accounts even then addition on account of above can be made in his case besides other legal consequences which he may face for non maintenance of accounts. If the Commissioner discovers information about the investment, money or valuable article then it is immaterial whether Account Books are maintained or Wealth Statement is available. The only point is that if Taxpayer offers no explanation about the source or he fails to adequately explain the source, then the addition will be made under the head income from other sources Sine qua-non - Condition Precedent Unless it could be shown that the Taxpayer has made an investment or was found to be owner of money or valuable article, no addition could be made under section 13(l)(aa). 1988-57 Tax 56??????????????????? ??????????????????????? ??????????? 1988 PTD 117????????? In order to understand these comparative provisions of law, it is essential to comprehend the concept of investment. Investment As per Black's Law Dictionary (Sixth Edition) An expenditure to acquire property or other assets in order to produce revenue; the asset so acquired. The placing of capital or laying out of money in a way intended to secure income or profit from its employment. Securities & Exchange Commission V. Wickham D.C. Minn., 12 F. Supp. 245, 247. To purchase securities of a more or less permanent nature, or to place money or property in business ventures or real estate, or otherwise lay it out, so that it may produce revenue or gain (or both) in the future. Investment.---In common parlance, the term means the putting out of money on interest, either by way of loan or purchase of income producing property; a form of property viewed as vehicle in which money may be invested; the loaning or putting out of money at interest, so as to produce an income. In its most comprehensive sense it is generally understood to signify the laying out of money in such a manner that it may produce a Revenue, whether the particular method be a loan or the purchase of stocks, securities, or other property. The term will also include the laying out of monies in Foreign Government Bonds. ITAT's View It is employment of money in such a way as to produce income. It means placing of money to secure income. Amount spend in purchase of some property also comes within the ambit of investment. Concept of Ownership and Possession in Clauses (aa), (c) and (d) of Section 13. These clauses can only be invoked where the assessee is found to be the owner of any money or valuable article and not merely in possession of any money or article as visualized in the said clauses of section 13. Burden of Proof of Ownership Where lies? The Burden of proof is on the Department to establish that the assessee could be required to be regarded as the owner of any money or value article the burden of proof lay on the Department to prove that assessee was owner of amounts despite the fact that credits were in the name of different known parties and Department had power to make such parties appear before it: Held yes. 1985 PTD 433. Opportunity is a sine qua non. Where no specific opportunity is given assessment should be annulled and not be set-aside. Where mandatory. requirement not complied ? Addition should be deleted instead of setting aside the same with Direction for filling up the lacunas. *** 111(1)(c)??????????? V/S??????????? 13(1)(e) (New) 111(1)(c) 111. Unexplained income or assets: (1) Where--‑ (c) a person has incurred any expenditure; and the person offers no explanation about the funds from which the expenditure was made or the explanation offered by the person is not, in the Commissioner's opinion, satisfactory, the amount of expenditure shall be included in the person's income chargeable to tax under the head "Income from other sources" to the extent it is not adequately explained. (Old)??? 13(1)(e) 13. Unexplained income or assets, etc., deemed to be income. (1) Where-‑ (e) an assessee has, during any income year, incurred any expenditure, and the assessee offers no explanation about the nature and source of money from which the expenditure was met, or the explanation offered by him is not, in the opinion of the Deputy Commissioner satisfactory, the amount of the expenditure, shall be deemed to be the income of the assessee of such income year chargeable to tax under this Ordinance. These clauses relate to money spent by a taxpayer on consumptive nature of expenditures i.e. when no assets are created by such expenditure e.g. Expenditure on marriage, travel, entertainments, etc. Learned Friends, Expenditure is an act of expending or layout and covers process of using as well as money spending. There is no element of Return. Addition under section 13(1)(e) can be made when the taxpayer offers no satisfactory explanation regarding excess amount of expenditure or the money from which the expenditure was made. Assessee unless held to have expended the amount on his own self, no amount held can be added as deemed income. -‑ Burden of Proof is on the department Unlike in the case of cash credit, the burden is upon the Assessing Officer to prove by some reasonable material or evidence that the taxpayer has incurred the expenditure. No addition is justified on the basis of mere general or personal observation. In a case no material was available on record to support the additions made by the Assessing Officer Appellate Authority observed that Mere general or personal observation of the Assessing Officer of high living standard of assessee or that income of the assessee was declared at ridiculously low figure after suppressing receipts could not be termed to be legal in the circumstances. I.T.A. No.534/LB of 1988-89 Views of ITAT 55 Tax-119 Duties of' Assessing Officer 55-TAX 119 - 1987 PTD 300 It is the duty of Assessing Officer to collect circumstantial evidence regarding the standard of living of an assessee. The expression "standard of living" is a comparative term. It depends upon status consciousness, habits and way of living in the same locality may lead different type of lives, as far as the expression "standard of living" is concerned. These days a jungle of flats is coming up in even the so-called posh localities of the city. A person living in a flat may have a different standard of living than a person living in a bungalow built on a plot of 1000 sq.yds. Similarly, a person whose children go to most expensive school of the city would be having a' higher standard of living than a person whose children receive their education in' ordinary schools. Likewise, a person may be spending more money on his food by eating mutton and poultry etc. but another person may confine himself to ordinary food. A person having air-conditioners in all bed-rooms would be maintaining higher standard of living than a person having no air conditioners at all, though living in the same locality. Again, a person may spend a lot of money on his electricity bills if he is levish in its consumption but, on the contrary, a person with careful use may cut appreciably his electricity expenses. No addition should be made on account of low drawings by using stock-phrases of "standard of living" or "posh locality" or "school going children", etc. An Assessing Officer has at his disposal enough staff who can make private investigations to ascertain the correct standard of living of a particular assessee by checking the electricity, telephone and gas bills; by finding out the number of capacity of the cars used by him; by knowing the exact number of the family members of the assessee. He should further collect information as to how many members of the family of an assessee are earning members and how many school-going. In case of school-going children, it can be find out as to whether the children were going by school-bus or by public transport. If the children are having any tuition, this fact can also be kept into consideration. The number of domestic servants is also indicative of the standard of living of a person. Whether a person is living in a bungalow or a flat is also a very relevant question. Eating habits of one community are different 'from another. Other habits of life are also very important as far as the house-hold expenditure is concerned. A careful Assessing Officer would collect the material on the above noted points which are definitely not exhaustive. So these provisions can not so liberally be applied. Income from other Sources under section 39 of the Income Tax Ordinance, 2001 As per new law the amount credited, the value of the investment, money, value of the Article or amount of expenditure shall be included in the person's income chargeable to Tax under the head income from other sources under section 39 of the Income Tax Ordinance, 2001. ? 111(2)? V/S??????????? 13(1)(e) 1st Proviso Addition in the year preceding to year of discovery. The 1st Proviso to section 13(1) provides that when discovery is made after the completion of Assessment for the concerned year, the income chargeable to tax under this section shall be included in the total income of the Income year relevant to Assessment year in which the said discovery is made. But this Proviso remained suspended till 30-6-2000 by virtue of Clause (7) Part IV of the 2nd Schedule. This clause was omitted by Finance Ordinance, 2000 making this proviso operational w.e.f. 1-7-2000. Earlier additions were made in the relevant year by invoking remedial provisions like 65/66-A. Under the new Ordinance tax year is the financial year which the person follows. This concept is different from the concept of assessment year which used to be a period of 12-months following the end of the financial year. Tax year is defined in section 74 of the new Ordinance. The department was facing difficulties in taxing unexplained income and assets. Since they were to be taxed in the tax year in which the discovery was made as at such time the taxpayer would not have filed the Return of Income for that tax year. This law has now been amended through Finance Act, 2004. The unexplained income and assets are now to be taxed in the tax year immediately preceding the financial year in which the discovery is made i.e. if an unexplained income or asset is discovered during the tax year 2005 such amount should be added for the tax year 2004. *** 111(3)? V/S??????????? 13(1)(d)/13(2) 111 (3) New Where the declared cost of any investment or valuable article or the declared amount of expenditure of a person is less than reasonable cost of the investment or the valuable article, or the reasonable amount of the expenditure, the Commissioner may, having regard to all the circumstances, include the difference in the person's income chargeable to tax under the head "Income from Other Sources" in the tax year immediately preceding the financial year in which the difference is discovered. 13(1)(d) Old the assessee has made investment in any income year or is found in respect of any such year to be the owner of any valuable article and the [Deputy Commissioner ] finds that the amount expended on making such investment or in acquiring such valuable article exceeds the amount recorded in this behalf in. the books of account maintained by him or shown in the wealth statement [or return of wealth] furnished under section 58 in respect of that year; or. 13(2) Old Where the value of any investment or article referred to in [clause (aa), (b)], (c) or (d), or the amount of expenditure referred to in clause (e) of subsection (1) is, in the opinion of the [Deputy Commissioner], too low, the [Deputy Commissioner] may determine, after giving a reasonable opportunity to the assessee of being heard, a reasonable value or the amount thereof, as the case may, and all the provisions of subsection (1) shall have effect accordingly. Basic principles while proceeding under section 111(3)/ 13(1)(d)/13(2) Books of Accounts/Wealth Statement Both these provisions are applicable' where Books of Account are maintained or Wealth Statement is tiled. In absence of both, these provisions would not be applicable. Onus on Revenue ? The onus of proving the existence of the circumstances which can enable the Assessing Authority to invoke these provisions is on the Revenue. Condition Precedent Source where from additional investment was made Before an addition is made under section 13(1)(d), the Assessing Officer has to find that the assessee had really expended more money to acquire the asset than he has shown in the Books of Accounts or Wealth Statement. The mere fact that the market value of an asset is allegedly higher than the price the assessee paid for its acquisition does not justify addition under section 13(1)(d). The Tax is levied under section 13 on black money by which an asset is acquired and not on the asset itself. If no such material is available with the Assessing Officer that assessee has really expended more money than declared, the Assessing Officer should accept value recorded in the sale deed. (NTR 1995 Trib 11). 2002 PTD 473 ??????????????????????? ??????????????????????? ??????????? Lahore High Court. Addition of the kind should not be made without pointing out the source where from the alleged investment was made. No addition on the basis of mere allegation of understatement of consideration in the Registered Sale Deed. No addition can be made on the basis of such material which was collected at the back of the Taxpayer and not disclosed to the Taxpayer to rebut. These provisions may be applicable in respect of purchaser but not to the sellers at all. Double Approval & Double Notices Till Assessment year 1992-93 13(1)(d) The Assessing Officer should first issue Notice under section 13(2) and after receiving the assessee's reply and with the approval of the IAC the Assessing Officer should first determine the amount of Tax under section 13(2) and then Notice under section 13(1) should be issued and taking the explanation of the assessee with the prior approval of the IAC, the addition should be made, where no such procedure has been followed, the addition had been made illegal and was directed to be deleted. Failure to comply with the mandatory provisions of statute entails annulment and the case could not be set-aside. 2004 PTD (Trib.) 2300. Even after 1992-93 single. approval of IAC under section 13(1) and single confrontation to the Taxpayer under section 13(1)/2 was expressly required. However as per larger Bench Decision dated 12-12-1994. Single/combined Notice can be issued which fulfills the requirements of law under sections 13(1) & 13(c). New Law Approval is not required but other principles will mutatis mutandis apply as before. The Principles of Natural Justice are also to be construed as part and parcel of the newly promulgated Fiscal Statute read with section 24(A) of the General Clauses Act, 1897. Nothing is mentioned about issuance of Notice, but it must be issued. *** 111(4)(a)??????????? V/S??????????? 13(2A) 111 (4)(a) New Subsection (1) does not apply,-‑ to any amount of foreign exchange remitted from outside Pakistan through normal banking channels that is encashed into rupees by a scheduled bank and a certificate from such bank is produced to that effect; and 13 (2A) Old The provisions of this section shall not apply in respect of any amount of foreign exchange remitted from abroad through normal banking channels and got enchased in **Pakistan rupees from a scheduled bank and a certificate is produced to that effect from such bank. Following is an extract from CBR's Circular No.5 of 2001, dated July 4, 2001, explaining the corresponding provision of the Income Tax Ordinance, 1979:-‑ "A new subsection (2A) has been introduced in section 13 which envisages that sources of foreign remittances from abroad through normal banking channel, which are encashed from a scheduled bank and a certificate of encashment is produced to that effect, would neither be probed nor would addition be made under section 13 on that account." Following is an extract from CBR's Circular Letter C.No.4 (32)TP-I/90-Pt., dated September 21, 2002:‑ "The undersigned is directed to refer to your letter No. NIL dated August 30, 2002 on the subject and to state that there is no difference in the provisions of section 13(2) of repealed Income Tax Ordinance, 1979 and section 111(4) of the Income Tax Ordinance, 2001." It is clarified that provision of subsection (4) of. section 111 does not require that sender and recipient of foreign remittances should necessarily be the same person. No probe will be made in the case of recipient of any amount of foreign exchange remitted by a person, from outside Pakistan through normal banking channels that is encashed in Pakistani rupees from a scheduled bank and a certificate to this effect is obtained. *** Limitation is provided in New Law for 5-years. 111 (4) (b)??????????? VS??????????? New Subsection (1) does not apply,-‑ to any amount referred to in subsection (1), relating to a period beyond preceding five tax years or assessment years.] In earlier law, limitation was subject to sections 56, 65 & 66-A and no limitation was provided in section 13. *** Valuation of Assets. 111 (5) VS??????????? 13(3) 111 (5) New The Central Board of Revenue may make rules under section [237] for the purposes of this section. 13 (3) Old The Central Board of Revenue may by rules provide for the determination of the value of any property or article for the purposes of this section.] Rules by CBR Rule 228 of the Income Tax Rules, 2002 Valuation of assets.---(1) The valuation of immovable property for the purposes of section 111 of the Income Tax Ordinance 2001, shall be taken to be-‑ (a) in the case of open plot, the value determined by the development authority or Government agency on the basis of the auction price in respect of similar plots in the area where the plot in question is situated; (b) in the case of properties given on rent, the value equal to ten years capitalized value assessed on the annual rental value; (c) in the case of agricultural land, the value equal to the average sale price of the sales recorded in the Revenue Record of the estate in which the land is situated for the relevant period/time; or (d) in any other case, the value determined by the District Officer (Revenue) or provincial authority authorized in this behalf for the purposes of stamp duty. (2) For the purposes of section 111 and subject to sub-rule (2), the value of motor cars and jeeps shall be determined in the 'following manner, namely:‑ (a) the value of the new imported car or jeep shall be the C.I.F. value of such car or the jeep, as the case may be, plus the amount of all charges, customs-duty, sales tax, levies octroi, fees and other duties and taxes leviable thereon and the costs incurred till its registration; (b) the value of a new car or jeep purchased from the manufacturer or assembler or dealer in Pakistan, shall be the price paid by the purchaser, including the amount of all charges, customs-duty, sales tax and other taxes, levies, octroi, fees and all other duties and taxes leviable thereon and the costs incurred till its registration; (c) the value of used car or jeep imported into Pakistan shall be the import price adopted by the customs authorities for the purposes of levy of customs-duty plus freight, insurance and all other charges, sales tax, levies, octroi, fees and other duties and taxes leviable thereon and the costs incurred till its registration;, (d) the value of a car or jeep specified in clauses (a),. (b) and (c) at the time of its acquisition shall be the value computed in the manner specified in the clause (a) (b) or (c), as the case may be, as reduced by a sum equal to ten per cent of the said clause for each successive year, up to a maximum of five years; or (e) The value of a used car or jeep purchased by an assessee locally shall be taken to be the original cost of the car or the jeep determined in the manner specified in clause (a), (b) or (c), as the case may be, as reduced by an amount equal to ten per cent for every year following the year in which it was imported or purchased from a manufacturer. (3) In no case shall the value be determined at an amount less than fifty per cent of the value determined in accordance with clause (a), (b) or (c) or the purchase price whichever is more. (4) For the purposes of section 61, the value of any property donated to a non-profit organization shall be determined in the following manner, namely:‑ (a) the value of articles or goods imported into Pakistan shall be the value determined for the purposes of levy of customs duty and the amount of such duty and sales tax, levies, fees, octroi and other duties, taxes or charges leviable thereon and paid by the donor; (b) the value of articles and goods manufactured in Pakistan shall be the price as recorded in the purchase vouchers and the taxes, levies and charges leviable thereon and paid by the donor; (c) the value of articles and goods which have been previously used in Pakistan and in respect of which depreciation has been allowed, the written down value, on the relevant date as determined by the Commissioner; ??????????? (d) the value of a motor vehicle shall be the value as determined in accordance with rule, and (e) the value of articles or goods other than those specified above, shall be the fair market value as determined by the Commissioner. Rule 207A, B, C of the Income Tax Rules, 1982 207A. Valuation of immovable properties.---The valuation of immovable properties for the purposes of section 13 of the Income Tax Ordinance, 1979, shall be taken to be-‑ (i) in the case of open plots the value, determined by the development authority or Government agency on the basis of auction price in respect of similar plots in the area where the plot in question is situated. (ii) in other cases the value determined by the District Collector for the purposes of stamp duty. (iii) in the case of properties given on rent, equal to ten years' capitalized value based on annual rental value as defined in clause (b) of subsection (2) of section 19 of the Ordinance. (iv) in the case of agricultural land equal to the average sale price of the sales recorded in the Revenue Record of the estate in which the land is situated. 207B. Valuation of motor cars and jeeps.--The value of motor cars and jeeps shall be determined in the following manner, namely:-‑ (a) The value of the new imported car or jeep shall be the C.I.F. value of such car or the jeep, as the case may be, plus the amount of all charges, customs-duty, sales tax, levies, octroi, fees and other duties and taxes leviable thereon and the costs incurred till its registration. (b) The value of a new car or jeep purchased from a manufacturer or assembler or dealer in Pakistan, shall be the price paid by the purchaser, including the amount of all charges, customs-duty, sales tax and other taxes, levies, octroi, fees and all other duties and taxes leviable thereon and the costs incurred till its registration. (c) The value of used car or jeep imported into Pakistan shall be the import price adopted by the customs authorities for the purposes of levy of customs-duty plus freight, insurance and all other charges, sales tax, levies, octroi, fees and other duties and taxes leviable thereon and the costs incurred till its registration. (d) The value of a car or jeep specified in clauses (a), (b) and (c) at the time of its acquisition shall be the value computed in the manner specified in the clause (a) or clause (b) or clause (c), as the case may be, as reduced by a sum equal to ten per cent of the said value for each successive year, up to a maximum of five years. (e) The value of a used car or jeep purchased by an assessee locally shall be taken to be the original cost of the car or the jeep determined in the manner specified in clause (a) ox clause (b) or clause (c), as the case may be, as reduced by an amount equal to ten per cent for every year following the year in which it was imported or purchased from a manufacturer: Provided that in no case the value shall be determined at an ' amount less than fifty per cent of the value determined in accordance with clause (a), (b) or (c) or the purchase price whichever is more. 207C. Valuation of articles or goods donated.---For the purposes of subsection (1) of section 47 of the Ordinance, the value of any article or goods donated shall be determined in the following manner, namely: (i) The value of articles or goods imported into Pakistan shall be the value determined for the purposes of levy of customs duty and the amount of such duty and sales tax, levies, fees, octroi and other duties, taxes or charges leviable thereon and paid by the donor; (ii) the value of articles and goods manufactured in Pakistan shall be the price as recorded in the purchase vouchers and the taxes, levies and charges leviable and paid by donor; (iii) articles and goods which have been previously used in Pakistan and in respect of which depreciation has been. allowed, the written down value, on the relevant date as determined by the income tax authority; (iv) the value of a motor vehicle shall be the value as determined in accordance with rule 207B; and (v) the value of articles or goods other than those specified above, shall be the fair market value as determined by the concerned Deputy Commissioner of Income Tax. ITAT's View (Tax Forum April 2004) Vol.8 No.4 Tax Forum 47 We are strengthened from the judgment viz 1998 PTD 3395, 1998 PTD 394 and 1993 SCMR 462 wherein it has been held that the registered documents had legal sanctity and stronger evidence was required to cast doubts about its authenticity. Other quoted case is 1991 PTD 486. Furthermore, Rule 207-A has already been held to be applicable retrospectively. Reliance in this behalf has been placed on 2002 PTD 2418 (H.C. Lahore) and (2000) .81 Tax 241 (H.C) Even otherwise, it is the bounded duty of the Revenue to prove that the appellant assessee had actually invested the sum intended to be assessed in the purchase or requisition of such property and in case . of failure to do so, the addition is to be considered as unlawful. 2004 PTD (Trib.) 1492. In addition, a lot of case law has developed and acceptance of the registered sale deeds on the basis of Rule 207-A as well as earlier judgment of the Supreme Court of Pakistan in PLD 1991 SC 368 = 1991 PTD 488 (SC Pak) and a chain of judgments by ITAT, has become almost obligatory No addition can be made beyond the documents registered on the basis of D.C. notification by the DCIT unless some specific proof comes to. the knowledge of the department. This step of Government of Pakistan of Preserving a procedure for addition under section 13 is a well income step and it has controlled a situation which was coming as bad name and was more of adverse effect then of positive Tax recovery. However without going into the nicety of the amendment and or other, such factors now .that the learned Tribunal as well as the Hon'ble High Court has held Rule 207-A to be as applicable even on the pending proceedings we hold that the order of the CIT (A) was fully justified. A parallel case which factually was not on all fours on the facts and circumstances of this case could also not be of any help in disregarding instructions of the legislature in terms of Rule 207-A. Lastly what should be the course of action? As per old law when any investment was discovered during the pendency of assessment proceedings, the addition was made accordingly. However, when discovery was made after the completion of assessment, then the remedial provisions were available in the repealed fiscal law to retrieve the loss of revenue like section 65 & 66A etc. Limitation provisions were accordingly applicable and no limitation was provided in section 13 of the repealed Ordinance. Another important point is that the law regarding making of addition in the year of discovery was dispensed with and it remained un-operational till 30-6-2000. Later on clause (7), Part IV of Second Schedule to the Income Tax Ordinance, 1979 was restored with effect from 1-7-2000. Likewise in newly promulgated Ordinance, 2001, prior to amendment made in section 111(2) through Finance Act 2004, the addition on account of above was liable to be made for the tax year during which the discovery was made. I think the lawmakers were not properly conscious while drafting this very vital provision of law. So the department had to face a lot of hardships due to poor drafting of this provision. However, soon after i.e. just after three years, amendment was made to provide that addition on account of the above should be made for the year preceding the tax year in which discovery was made. Now if discovery is made during the tax year 2005 then the addition would be made for the tax year 2004. Now there is another problem, that whatever and whenever any Return is filed by a taxpayer it becomes an assessment order in the light of section 120 of the Income Tax Ordinance 2001. Now if any addition is to be made for any completed assessment then provisions of section 122 should be invoked. Since no corresponding provision to section 66A of the repealed Ordinance was available in new law. However lawmakers have now inserted subsection (5A) through Finance Act, 2003 in section 122. On the other hand the law regarding delegation of powers by the Commissioner. i.e. section 210 has also been amended by inserting subsection (1-A) through Finance Act 2004 which says the Commissioner shall not delegate the powers of amendment of assessment contained in subsection (5A) of section 122 to a taxation officer below the rank of Additional Commissioner of Income Tax. C.B.R. also issued a circular in this regard, which further says that powers under section 122 (5)(A) should not be delegated to the Deputy Commissioners and that any authorization if already made to the Deputy Commissioners earlier be cancelled. It is now well settled that (i) if existing material on record has been ignored, the remedy is section 122(5)(A) and (ii) if any definite information comes to the possession of the Assessing Officer, the remedy is section 122 (1)