1998 PLP (Trib (PTD)

Dep. as per Schedule 6,52,927 7,01,177 Repair & Maint. Exps. in A.Y. 1979-80 were different by the I.T.O. over the two years of the1, 34,181 out of which 2/3rd were disallowed and 1/3rd were deferred. 44,727 7,45,904 Taxable Income 32,72,856 Income-tax @ 30% Super tax @ 25 % 9,81,857 8,18,214 18,00,071 9,426 17,90,645 12,85,545 12,57,274 27,895 20,073 47,825 1,28.496 27,67,108 9,76,463 Assessed as per Income-tax

30. Issue Notice of Demand and intimation accordingly. Income-tax Officer Cos. Circle A-7, Karachi.

14. The learned D.R. has submitted that in the case of Jennings Private School supra reliance was placed on behalf of the department on the judgment of Justice Saad Saud Jan in the case of Crescent Art Fabric Ltd. wherein it has been held that the principle of change of opinion was not available to an assessee where the assessment orders do not indicate that the cost of construction was examined in detail at the time when the assessment orders were made and the Hon'ble Supreme Court did not disapprove the finding and as such it would be deemed to have been approved by the Hon'ble Supreme Court of Pakistan. The learned D.R. has submitted that the department initiated re-assessment proceedings after about three years of the completion of assessment, after receiving definite information in the form of assessment by the capital gain tax authorities wherein the fair market value of the property was assessed at Rs.17,16,

960. The learned D.R. has submitted that in order to attract the plea of change of opinion it is necessary to order that the facts on the basis of which assessment is reopened were available before the assessing officer at the time of original assessment and a particular opinion was formed after conscious application of mind to those facts. After fulfilment of these conditions only the assessing officer is debarred from embarking to another conclusion on the consideration of same facts. The learned D.R. has submitted that in the facts and circumstances of then present case no question of any change of opinion arises.

15. We have carefully considered the contentions raised on behalf of the learned representatives for the parties and the facts obtaining on record. After very careful and anxious consideration of the entire facts we are persuaded to agree with the submission of learned D.R. The reason being that at the time of original assessment framed under section 59(1) though the appellant disclosed the value of property purchased at Rs.6,00,000 and produced the registered sale-deed also but at that time there was no positive evidence available with the assessing officer and as such he could not exclude the return from the purview of self-assessment scheme and without excluding the return from the purview of self-assessment scheme the assessing officer had no jurisdiction to conduct full-fledged scrutiny/enquiry into the valuation of property. Subsequently, when the assessing officer came into possession of the definite information about under-valuation of property then only the notice under section 65 was issued. Thus, the facts available on record indicate that the material which formed basis of the issuance of notice under section 65 (the assessment order of capital gain tax authority) was not available with the assessing officer at the time of framing of assessment under self-assessment scheme If the assessing officer would have been in possession of this assessment order and then he would have accepted the return under self-assessment scheme the appellant could validly advance plea of the change of opinion. We are fortified in our views with atleast two judgments in addition to the judgment of Hon'ble Mr. Justice Saad Saud Jan in the case of Crescent Art Fabric Limited already referred, while considering the judgment of Hon'ble Supreme Court of Pakistan in the Jennings Private School. The first judgment is by Mr. Justice Nasir Aslam Zahid in the case of Shadman International (Pvt.) Limited v. I.T.O. 1991 PTD 387 (Sindh H.C.), in that case assessment for the assessment year 1985 86 was in the first instance finalized under the self-assessment scheme under section 59 of the Income Tax Ordinance, 1979, but the same was reopened under section

65. On service of notice under section 65 the Managing Director of the assessee company furnished all details and explanations and after examination of the case the matter was compromised and an agreement was reached with the I.T.O. In pursuance of the said agreement further addition of Rs.6,00,000 was made to the total assessed income. The second assessment order was made on 28-2-1987. However, information was received from the officer of I.A.C. of Income-tax (Survey and Collation, Karachi) on 6-5-1987 that the total income for the year was under-assessed. It was informed that the assessee purchased a plot measuring 1000 sq. yards at a reported value of Rs.8,35,000 which was grossly understated as market value of the plot at the relevant time was much higher. It was further intimated that another plot admeasuring 1000 sq. yards was purchased by` N.D.F.C. on 3-11-1983 about a year before the deal by assessee for a value of Rs.59,00,

000. It was intimated that both the plots were exactly comparable. A show-cause notice was issued followed by a notice under section 65 and the assessee challenged the issuance of notice under section 65 before the Hon'ble High Court through a writ petition. Before the Division Bench of the Hon'ble Sindh High Court it was contended that information received was merely an opinion of the Survey and Collation Wing of the Income-tax Department and even if it was information which related to the sale price of another property, it was a case of change of opinion, therefore, the notice was issued without jurisdiction. Reliance was placed on behalf of assessee on the following judgments: (i) Eduljee Dinshaw Limited v. I.T.O. PLD 1990 SC 399. (ii) Arafat Woollen Mills v. I.T.O. 1990 SCMR 697. (iii) Jaison International (Pvt.) Ltd. v. I.T.O. 1989 PTD 1141. (iv) Republic Motors Limited v. I.T.O. 1990 PTD 889. (v) Car Tunes v. I.T.O. PLD 1989 Karachi 337. (vi) I.T.O. v. Panama (Pvt.) Ltd. (1974) 97 ITR 210.

16. The Hon'ble judges of the Sindh High Court observed that in PLD 1990 SC 399, it was held that once all the facts have been fully disclosed by the assessee and considered by the Income-tax Authorities and the assessment have been consciously completed, and no new fact has been discovered, there can be no scope for interference with these concluded transactions under the provisions of section 65 on the ground that the income chargeable to tax under the Ordinance has escaped assessment or has been understated. In the other judgments also same view was taken. On behalf of department a plea way taken that after issuance of first notice under section 65 and passing of order on 28-2-1987 a report was received from the office of I.A.C. (Survey and Collation) containing information that assessee has declared to have purchased Plot No.158/S, Block 2, P.E.C.H.S. Karachi measuring 1000 sq. yards for Rs.8,35,000 on 5-12-1984 while information collected by the Survey Department reveal that Plot No.158/R, Block 2, which is immediately adjacent to the plot purchased by the assessee was purchased by N.D.F.C. on 3-11-1983 for Rs.59,00,

000. The area of plot purchased by N.D.F.C. is also 1000 sq. yards. The purchase price declared by the assessee is quite low as compared with the market value rate. The learned counsel for the assessee contended that the report of Survey and Collation Wing of the Income-tax Department was an opinion and further submitted that the information stated in the report related to another plot and, therefore, on the basis of this report no show-cause notice under section 65 could be issued. The Hon'ble Judges of Sindh High Court did not accept the contention and held that the plots were adjacent to each other and, therefore, the report of Survey and Collation wing of the Income-tax Department gives fresh/new factual information and on the basis of this information collected/received after the previous assessment, the I.T.O. was entitled to issue another show cause notice under section 65 of the Ordinance. It was further held that, "it is not a case where the I.T.O. lacked jurisdiction to issue a notice under section 65.

17. In the case of M/s. Ramzan & Sons v. I.T.O. (PLD 1991 PTD 503) validity of notice under section 65 of the Income-tax Ordinance was challenged. The relevant facts were that the assessee was engaged in the business of construction and engineering. The assessee filed return of total income for the assessment years 1986-87 and 1987-88 claiming immunity from total audit. Alongwith the return, the assessee submitted all the required and requisite documents like, wealth statement, statement of accounts and supporting evidence as required under the self-assessment scheme for the two assessment years. Before completion of assessment assessing officer issued notice, reply whereof was sent and finally assessments were completed under section 59(1). Subsequently, assessing officer issued notice under section 65 alongwith the letter alleging misdeclaration, concealment, charging depreciation improperly and wrong declaration of the written down value of various machineries. The assessee assailed the reopening of assessment and the department alleged that the reopening proceedings were initiated on the basis of definite information which was received during the course of assessment for the later years. It was further contended on behalf of the department that the original assessments were completed without applying mind and without scrutiny of accounts. It was contended on behalf of assessee before the Hon'ble Sindh High Court that the returns were filed by making compliance of all the requirements laid down in the self-assessment scheme and any discrepancy in filing document or providing particulars or withholding of any required information could lead to disqualification from the benefit of self-assessment scheme. In this case also the judgments of Hon'ble Supreme Court of Pakistan in the case of Eduljee Dinshaw Limited and Arafat Woollen Mills were cited. Mr. Justice Salim Akhtar did not agree with the contention that the ratio laid down in the case of Eduljee Dinshaw Ltd. and Arafat Woollen Mills was applicable to the facts of d held that the assessments were completed under self-assessment scheme without any scrutiny and information was obtained in subsequent years, therefore, issuance of notice was justified. Finally it was held by the Hon'ble High Court that, the respondent did not have those informations at the time of making the assessment, nor he had applied his mind and determined these facts. In these circumstances the respondent had the jurisdiction to issue notice under section 65 of the Income-tax Ordinance.

18. Applying the ratio of above judgments we are of the considered opinion that the issuance of notice under section 65 was not the result of change of opinion because at the time of completion of original assessment the information which was received subsequently was not available and neither any enquiry was made on the point of valuation of the property purchased nor any occasion arose for conscious application of mind by the assessing officer. The second contention raised on behalf of appellant is that the assessment order by the capital gains authority cannot be treated as definite information. Mr. Arshad Siraj has submitted that the information by the assessing officer was a mere suspicion. The point in issue already stands decided against the assessee by a Division Bench of this Tribunal sitting at Islamabad vide judgment reported as 1991 PTD (Trib.)

639. The above judgment is binding on us and, therefore, the contention of Mr. Arshad Siraj is repelled. It has been held in the judgment cited above that, "it is our considered opinion that the assessment was rightly reopened under section 65 of the Ordinance (ibid) as the I.T.O. Circle 21 Rawalpindi had received definite information from the Excise and Taxation Department Rawalpindi with regard to the amount for which property was allegedly purchased by the assessee".

19. For the foregoing reasons it is held that the assessing officer was justified in issuing notice under section 65 and in the facts and circumstances obtaining on record it is not a case of lack of jurisdiction on the part of assessing officer.

20. Mr. Arshad Siraj has next submitted that valuation of property even as reduced by the learned C.I.T.(A) is on higher side. He initially contended that the declared value may be accepted and in the alternative the estimated value should not exceed the valuation arrived at by the capital gain tax authority which is Rs.17,16,

960. W e are persuaded to agree with the second submission of Mr. Arshad Siraj and direct that the value of property be adopted at Rs.17,16,960 :and after deducting the declared value at Rs.6,00,000 the addition under section13(1)(d) be restricted to Rs.11,16,960 only.

21. The appeal stands disposed of as above. M.B.A./524/Trib Order accordingly.