2002 PLP 2274 (PTD)

The complainant alleged that the Assessing Officer has wrongly issued a notice for payment of Capital Value Tax amounting to Rs.105,000 and additional tax at Rs.31,500 relating to assessment year 1997-1998.

2. The facts stated in the complaint are that the complainant had purchased agricultural land in the month of August, 1996 for Rs.21,00,000 and paid Local and Provincial taxes amounting to Rs.2,10,

000. The Income‑tax Department has served recovery notice for assessment year 1997‑98 on 27‑11‑2001 showing demand of Capital Value Tax amounting to Rs.105,000 and Additional Tax Rs.31,

500. The complainant alleged that the department has never issued and served assessment order and demand notice prior to recovery notice hence the recovery notice dated 27‑11‑2001 is illegal.

3. The respondent submitted that the complainant had purchased agricultural land and paid the fees amounting to Rs.2,10,000 to the Local and Provincial Governments for mutation of " the property. The complainant has not paid Capital Value Tax which is chargeable @ 5 % . The officer proceeded under rule 8 of Capital Value Tax Rules, 1990 for recovery of CVT alongwith additional tax. The complainant has deposited Rs.30,000 out of total demand of Capital Value Tax.

4. The Complainant contended that the Assessing Officer neither opportunity to hear nor served any assessment order or prior to 17‑11‑2001, therefore, levy of additional tax is not in accordance with natural justice.

5. Mr. Manzoor Ahmed DCIT stated that the complainant had to pay CVT @ 5% at the time of mutation of property which he did not pay and now on the is of audit report a recovery notice has been issued to the complainant.

6. Under subsection (1) of section 7 of the Finance Act, 1989 capital value tax on the capital value of assets shall be payable by every individual who acquires immovable property by purchase. According to subsection (7) of section 7 where the capital value tax is not collected from the person liable to pay it, the tax may be collected by an officer designated by the CBR in this behalf from the said person, and the provisions of section 32 of the Wealth Tax Act shall apply to the collection of the capital value tax. Under subsection (8) of section 7 where any person fails to collect or having collected fails to pay the capital value tax as required, he shall be personally liable to pay the tax alongwith additional tax at the rate of 15 % per annum for the period for which such tax or part thereof remains unpaid. Primary liability of payment of tax is on the purchaser but in case the registration authority fails to deduct the tax then the authority shall be liable to pay additional tax @ 15 %. In the present case the department has served a recovery notice demanding actual capital value tax and additional tax amounting to Rs.105,000 and Rs.31,500 respectively.

7. The department under subsection (7) of section 7 of the Act can only demand actual capital value tax from the complainant. The additional tax may only be recovered from the registering authority as provided under section 7(8) of the Act. Hence the notice dated 27‑11‑2001 is required to be revised. In the circumstances it is A recommended that:‑‑‑ (i) The Commissioner of Wealth Tax to revise the Recovery Notice dated 27‑11‑2001 in accordance with subsections (7) and (8) of section 7 of the Finance Act, 1996. (ii) Compliance be reported within 30 days. C.M.A./M.A.K./310/FTO Order accordingly.