2001 PLP (Trib (PTD)

"The scrutiny of the assessment record reveals that during the course of proceedings, assessee has failed to prove valid sale transaction of H.No. 20-B, Abid Majeed Road, Lahore Cantt., because:

??????????? (a) No proper registered sale deed has been executed before the Registrar although it was specifically mentioned in the agreement, dated 4-6-1991, that sale deed will be executed within one year. (b) The house is mortgaged with HBL, Central Branch, Karachi against credit facility of Rs.10.00 (M) in favour of Dascon (Pvt.) Ltd. Lahore and the loan has not been liquidated as yet: (c) Neither the house has been de mortgaged nor any NOC/Non? recumbrance certificate has been obtained from Bank. (d) The sale of land in Village Jirahi, Adiyala Road, Rawalpindi has not been attested by the Tehsildar. Further, mutation in revenue record has not been made. (e) The Letter No. ADV:ASS:171, April 10,? 1995 issued by Mr. Muhammad Ozair, V.P. & Manager. HBL, Central Branch-1, Habib Bank Plaza, Karachi-74000, confirms that the property bearing Plot No.B-20 situated at .bid Majeed Road, Lahore Cants owned by Mrs. Asma Aslam Baig is still under equitable mortgage with-us against credit facility allowed to M/s. Dascon (Pvt.) Ltd. It has also been mentioned in this letter that as far as NOC for the sale is concerned our bank has not given any permissions to settle the mortgaged property and any wilful act for its disposal will be subjected to criminal offence." In view of the position discussed in the assessment order, the Assessing Officer established the fact that the assessee had concocted a false story and it seemed mocker, with the revenue if the assessee's contentions were to be accepted. In the opinion of the Assessing Officer, the explanation regarding the accretion in wealth amounting to Rc.42,50,000 was not satisfactory and supported by valid reasons and as such the same was deemed to be income o` the assessee for the assessment year 1993-94 under section 13(1)(aa) of the Ordinance and charged to tax accordingly with the prior approval of the IAC accorded vide No. 1820, dated 31-5-1999.

6. The assessment order was contested by the assessee before the learned AAC, Rawalpindi, on the ground that the Assessing Officer was not justified to add rental value of H. No.20-B, Abid Majeed Road, Lahore, it income of the assessee as the assessee never received this income for the assessment years 1992-93 to 1994-95 and that the Assessing Officer was not justified to make addition under section 13(1)(aa) on account of sale of house and land for the assessment year 1993-94.' The learned AC considered the contentions of Mr. Shehzad. Qazi, FCA/AR of the assessee and without appreciating the facts of the case or making proper appratsai of evidence/material available on the relevant record, passed the appellate order in a perfunctory manner with the findings reproduced hereunder:

'"The appellant has amply clarified and proved documentarily source of Rs.42,50,000 satisfying the provisions and conditions of section 13(1)(aa). The purchaser accepts the purchase of the House No.20-B and plot at' Adiyala. The documents presented by the appellant are an affidavit duly attested by the Consulate in Canada and a sale deed, which should have satisfied the Assessing Officer. Since the house at Lahore is mortgaged, the same cannot be transferred and since the purchaser has bought the same to the present state, the department should not have any objection to this. Thirdly, the department has failed to prove the mala fide (concocted story) of the appellant by pity means or documentary evidence. Merely non-acceptance; of these should not become the basis of rejection of the appellant's claim and version. In view of these facts, the addition under section 13(1)(aa) is deleted for all the years under appeal. The rent estimated in all these years is consequently also deleted. The rent if any could not have been received by the appellant when she does not remain its owner." Hence , these appeals.

7. Having examined all aspects of the case, we are of the considered view that the learned AAC has fallen in error by holding that the assessee had amply clarified and proved documentarily the source of Rs.42,50,000 satisfying the provisions and conditions of section 13(1)(aa) of the Ordinance. There were no basis to give such a finding and no reliable document was available to prove the source of money claimed to have been received by the assessee. Admittedly, the assessee was found to be the owner of the money amounting Rs.42,50,000 and it was not for the Assessing Officer to prove that the explanation tendered by the assessee was unsatisfactory. The Assessing Officer clearly expressed his opinion that the explanation offered by the assessee was not satisfactory for the purpose of addition of the deemed income under section 13(1)(aa) of the Ordinance. If" was his opinion which really mattered for the purpose of section 13(1) such opinion was expressed on firm grounds. Besides, there was not an iota of evidence produced at any stage of proceedings by the assessee that Rs.42,50,000 were ever received from abroad in foreign exchange or otherwise paid to her in Pakistan in a manner as could be reflected in the bank account or any other authentic record. The learned AAC has also not made correct appraisal of the documentary evidence presented by the assessee. The so-called "Affidavit" had no evidentiary value because it was a piece of paper, not even attested by the Consulate in Canada, and did not prove the alleged fact that there was a genuine purchaser of the assessee's house at Lahore and plot of land at Adiyala (Rawalpindi) for which the entire money was actually paid to her. The learned AAC has also referred to the "sale deed" in the appellate order but no such sale deed was shown to have been made. Even the learned AR of the assessee has admitted before us that such a sale deed never existed. In these circumstances, no purchaser could be deemed to have accepted the alleged purchase of the house property from the assessee. The learned AAC was not justified in observing that since the house at Lahore was mortgaged, the same could not be transferred and since the purchaser had bought the same in the present state, the department should not have any objection to that. No basis whatsoever are available for us to accept such an observation because the purchaser had actually not bought any property. Even now, the learned AR of the assessee concedes the fact that the property in question still remains mortgaged with the bank and there is no claim of any purchaser against the mortgaged property. The onus of proving the fact that the assessee had concocted the story was not on the department since the burden was placed upon the assessee under section 13(1) of the Ordinance to offer satisfactory explanation to the effect that the sum of money admittedly available with her in the relevant year was from a definite source and was not to be treated as unexplained money liable to be added ass her deemed income for the assessment year 1993-94. The learned AAC has also erred in deleting the property income in respect of House No.20-B, Abib Majeed Road, Lahore, merely with the observation that "the rent, if any, could not have received by the appellant when she does not remain its owner". The property in question remained in the ownership of the assessee. It was mortgaged with the bank. Utility bill continued to be paid in the name of the assessee. There was no evidence that the alleged purchaser had taken possession of the property, given legal notice to the tenants for change of tenancy rights and made any effort to claim ownership rights against mortgaged property. In these circumstances, the annual value of the property in question had to be charged in the hands of the assessee as income from house property and the alleged purchaser could not be treated as the owner of the house property within the meaning of the expression used in section 19 of the Ordinance.

9. The question of ownership of immovable property for the purpose of charge of income tax on rental income from such property has come under consideration in a number of cases. Thus in Bachu Bai F E. Dinshaw v. CIT reported as 1967 PTD 170, the Executors of the Estate of Late F.E. Dinshaw sold that property, received full sale consideration and gave possession of property to the purchaser but no regular sale-deed was executed. The Executors were held to be the owners of property within the meaning of section 9 of, the Income Tax Act. The importance of a registered sale-deed in determining the ownership of property was highlighted in the following words:-- ?....the question of ownership of property to dispute shall have to be determined on the law administered in Pakistan and not any broader or general notions of ownership. It is well-established general principle that where the law prescribes a mode of transfer compliance with that mode is necessary in order to confer title against third parties. It seems to us that when the law requires a registered instrument title or ownership cannot be conferred by mere agreement of parties. This is quite clear from the provisions of section 54 of the Transfer of Property Act and section 19 of the Registration Act." In B.D. Avari v. CIT cited as 1989 PTD 670 (H.C. Kar.). the assessee had sold his property to his minor sons through agreement and sale consideration was received by him. No registered sale-deed was, however, executed. It was held that under section 54 off the Transfer of Property Act, a contract of sale does not create any right in the property. The right in property is created on registration of sale-deed. Therefore, the assessee was owner of property and liable to pay tax on rental income from the said property. In CIT v. Hans Raj Gupta (1982) 137 ITR 195, the assessee sold his properties to two companies who had paid full sale consideration but registered sale-deeds were not executed. The assessee was held to be liable to be assessed to tax on income from these properties as he remained owner of properties irrespective of the fact that he was not earning any income therefrom. In another case, cited as CIT v. Zorostrian Building Society Limited, (1976) 102 ITR 499, the assessee had entered into an agreement to sell his property. The buyer had paid full price and taken possession of property. It was held that even though the purchaser was put into possession with all other rights incidental thereto, in the absence of a registered sale-deed, the transferee could not be regarded as owner. "

10. It may also be mentioned that the Registration Act, 1908, requires that the sale of immovable property must be through a registered document. Section 49 of the said Act stipulates that unless such document is registered, the right title or interest of the seller in the property is not extinguished nor that of purchaser created Similarly, under section 54 of the Transfer of Property Act, a contract of sale does not create any right in the property because such right is created only on registration of sale-deed. In this case, there was a simple agreement to sell which was never acted upon and no deed was made for sale and transfer of the property in question. Such a sham arrangement could not satisfy the requirements of section 13(1) or section 19 of the Ordinance since the house property remained in the ownership of the assessee and the source of money declared by the assessee could not be attributed to any genuine sale of the said property.

11. For the facts and reasons stated above, we hold that the impugned order, being devoid of correct interpretation of the provisions of the Ordinance and based on improper appraisal of evidence and incorrect appreciation of facts of the case, is not sustainable in the eye of law. It is, therefore, vacated and those of the Assessing Officer are restored.

12. Resultantly, the appeals of the department succeed. C.M.A./M.A.K./106/Tax(Trib.)?????????????????????????????????????????????????????????? Appeals succeed