1999 PLP 3288 (MLD)

(iv) The opinion of valuator or experts. The consideration of the aforesaid factors would in a vast majority of cases be correct guidelines and save a statutory functionary from criticism on ground that the decision is arbitrary." Besides, the West Pakistan Capital Gains Tax Act being a fiscal Statute has to- be considered with some exactness. Indeed, if the authorities are of the view tat the value disclosed is incorrect, they can form their own estimates, but such estimates too have to be in accordance with the rules, reasonableness and best judgement. In the present case the respondent No. 1 had evidently ignored even the guidelines provided in rule 8 of the West Pakistan Capital Gains Tax Rules, 1964, Such aspect, despite an observation contained in the remand order dated 11-2-1990 passed in Civil Appeal No. 197/1989 has not been considered in the judgments impugned in this Revision. The attorney of the legal representatives of the deceased applicant -plaintiff has further drawn my attention to the provision of section 16 of the Act IX of 1963 and Rule 8 of the West Pakistan Capital sins Tax Rules 1964 which being relevant are reproduced hereunder: 16 (1) A capital gains tax shall' be levied on any profits or gains arising from the sale, exchange or transfer of immovable property effected after the 30th day of June, 1963, within urban areas specified by Government under section 3 of the West Pakistan Urban Immovable Property Tax Act, 1958 (West Pakistan Act No. V of 1958); Provided that the tax shall not be levied on the transfer of immovable property in consequence of the compulsory acquisition thereof under any law for the time being in force relating to compulsory acquisition of property for public purposes; or the distribution of immovable property on the total or partial partition of a Hindu undivided family or the distribution of such property for the dissolution of a firm or other association of persons or on the liquidation of a company or under a deed on gift, bequest, will or transfer on irrevocable trust. The amount of the capital gains shall be computed after making the following deductions from the full value of the consideration for which he sale, exchange or transfer of property is made:

(a) expenditure incurred solely in connection with each transaction, and (b) actual cost to the assessee of the property including any expenditure of a capital nature incurred and borne by him in making any additions or alterations thereto: Provided that: Where a person who acquires a property from the assessee, whether by sale, exchange or transfer is a person with whom the assessee is directly or indirectly connected or where the authority making the assessment has reason to believe that the sale, exchange or transfer was effected with the object of avoidance or reduction of the liability of the assessee the full value of the consideration for which the sale, exchange or transfer is made shall be taken to be the fair market value of the property on the date on which the sale, exchange or transfer took place; (ii) Where the immovable property was acquired by the assessee before the first day of January, 1950, he may on proof of its fair market value on the said date to the satisfaction of the assessing authority, substitute for the actual cost such market value which shall be deemed to be the actual cost to him of the immovable property; (iii) where the immovable property became the property of the assessee by succession, inheritance or devolution, or under any of the circumstances referred to in the proviso to subsection (I) its actual cost allowable to him for the purpose of this subsection shall be its actual cost to the previous owner thereof.

3. The tax shall be levied according to the scale set out in the Seventh Schedule to this Act. Government may by notification exempt any class of immovable property from the levy of tax under this section." Rule 8 of West Pakistan Capital grains Tax Rules runs:-- "If in the opinion of the Excise and Taxation Officer, the actual cost of, property, as stated by the assessee is not correct and is to be determined in pursuance of clause (ii) of the proviso to subsection (2) of section 16 of the Act, or the value of the consideration in terms of money is to be determined in pursuance of- rule 7, the excise and Taxation Officer may, among other factors, take into consideration

(i) the value of consideration of sales or transfers of similarly situated and similarly used urban immovable property made in the year 1950, or as the case may be, made on or about the time of the sale or transfer in question; or (ii) the gross annual value of such property in the year 1950, or as the case may be, in the year of sale or transfer, ascertained, for the purposes of any law relating to tax on urban immovable properties then in force in the urban area, and fix the actual cost or, as the case may be, the value of consideration, at, an amount exceeding fifteen times but not exceeding twenty times the gross annual value. " It is contended on behalf of the applicants/plaintiffs that the orders' passed by the, respondents Nos. 1 to 3 are not in conformity with the above provisions. Such provisions require issuance of notices in, the prescribed form and giving opportunity to lead evidence to the proposed assessee. Reliance was placed to substantiate the above contention again on the judgment in the case of Abid & Sons Limited (supra) wherein the salient features of the above-referred legal provisions have been noted down as follows: "Having stated the relevant salient features, appearing in the West Pakistan Finance Act of 1963 and the West Pakistan Capital Gains Tax Rules, 1964, the following results emerge:

(i) That, after a sale is completed, the seller shall disclose all the particulars as are stated in C G T-I form. (ii) The Assessing Authority shall examine that form to find out the correctness, or, otherwise of the disclosures. (iii) That out of the sale price, the assessee can conduct the actual cost incurred, or, borne by him for the initial purchase of the property, together with expenditure of capital nature borne by the seller in making any additions or alterations. (iv) If the Assessing Authority is satisfied with the disclosures in form CGT-1, he shall call upon the seller to pay the tax, which is payable on the basis of such disclosures, (v) If the Assessing Authority, on examination of form CGT-1, comes to the conclusion that the seller and purchaser are directly or indirectly connected, or, if he comes to believe that the transaction has been effected with the object of avoidance and reduction of the liability to pay the tax, then he can open the case by issuing a notice in form CGT III. (vi) After giving the notice in form CGT-III the Assessing Authority shall afford to the seller a hearing and also give him an opportunity to lead evidence on the point. (vii) After hearing and examination of witnesses, the Assessing Authority shall determine the full value of the consideration for the sale, which shall be taken to be the fair market value of the property on the date of sale. . (viii) For the purposes of arriving at such conclusions in regard to the full value, or, consideration, the Assessing Authority shall have to consider the price at which sales, or, transfers of similar situated properties have been effected. (ix) That the decision of .the Assessing Authority shall be according to best judgment. " Applying the above principles, in the present case, the respondents have not placed on record any material to establish due compliance with the above referred legal provisions. The sole witness examined in the matter did make following statements during his evidence in Court: "The defendant No. 1 innovated its own sale and purchase to make out a case for recovery of tax of Rs. 4,740." "The plaintiff filed an appeal before the Director Collector Excise and Taxation, Karachi which she dismissed without a notice to the plaintiff as the notice posted by her reached with the plaintiff advocate after the date of hearing. " "The plaintiff filed a Revision before the Director General Excise Sindh, Karachi which he also dismissed shifting the burden of proof on the plaintiff." "The orders of the defendants Nos. 1, 2, 3 are arbitrarily illegal, and or in violation of the judgment of the Honourable High Court passed in his behalf. " The above statements made in the examination-in-chief were not questioned in the cross-examination. No evidence, whatsoever, was led on behalf of the respondents with the result that even the written statement filed on behalf of the respondents lost its evidentiary value. With such position on record, there was hardly any justification to uphold the orders passed by the Taxation Authorities. It is an established position of law that the Civil Courts being the Courts of plenary jurisdiction have the inherent jurisdiction to strike G down an order which is patently illegal and in excess of jurisdiction. Reference in this behalf may be made to the case of Federation of Pakistan v. Malik Ghulam Mustafa Khan reported in P. L. D. 1989 SC

26. The stand taken on behalf of the respondents for remand of the matter to respondent No. 1 also cannot be accepted since these proceedings have arisen out of the civil suit seeking declaration and decree for money in following terms: (a) If he declared that order of defendants Nos. 1 to 3 viz dated 17-1-1983, 26-3-1983 and 20-12-1983 respectively are illegal, ultra vires, perverse and mala fide and are passed against law and spirit of. Capital Gains Tax Act. . (b) Decree for a sum of Rs. 4740 with 2 % above Bank rate till the date of realization against the defendants be passed jointly or severally. " Since I have already found that the order dated 17-1-1983 passed by respondent No. 1 cannot be sustained at the touchstone of law laid down in the case of Abid & Sons Limited (supra) with the result that the subsequent orders based on the said order passed by the respondent No. 1 also fall to the ground. The deceased applicant-plaintiff, therefore, was entitled to declaration and decree for money, as claimed, subject to the modification that interest would be payable from the date of the decree. The principles laid down in the case of Abid & Sons Limited had apparently escaped the notice of the two Courts below and are applicable to the present, proceedings. In the circumstances, this revision application is allowed, the judgments I dated 17-12-1992 and 17-5-1993 passed in Civil Suit No. 776 of 1985 and Civil Appeal No. 33/1993 by the learned Vth Senior Civil Judge Karachi South and the District Judge, Karachi South are set aside and it is declared that the order dated 17-7-1983 passed by respondent No. 1 and the subsequent orders based I thereon dated 26-3-1983 and 20-12-1983 passed by the respondents Nos. 2 & 3 respectively are unlawful, of no legal effect and contrary to law. The suit of the applicants is decreed in the sum of Rs. 4,740 with simple interest at the rate of 14% from the date of decree till realisation against the respondents Nos. l to 3 who are liable to pay the same jointly as well as severally. The applicants shall also be entitled to the costs throughout. H.B.T./M-437/K Revision accepted.