1984 PLP (Trib (PTD)

5. The assessee's A. R. inter alga contended: - (a) That all the three properties having been purchased by the assesses vide registered sale-deeds, valuation mentioned therein is conclusive proof of consideration passed on between the parties and the I. T. O. was not competent to doubt the valuation mentioned therein. In case there was any element of understatement of the consideration provisions of section 13 of the Ordinance were not attracted and additions if any could have been made by the Gift Tax Officer under section 4(a) of the Gift, Tax Act. (b) that both the officers below erred in fixing much higher valuation of the properties ignoring documentary evidence tendered by .the assesses in the form of copies of registered sale-deeds of other properties of the same locality and of the sauce period. The evidence produced by the assessee was stated to be sufficient to establish that considera tion mentioned in the sale-.deeds of the purchased properties was the market price at the time of purchase. (c) that for the purposes of ,calculation of galas tax valuation determined by the Excise & Taxation Officer has erroneously been discarded by the officers below. That authority is equally a Government Functionary 'having concurrent powers for determination of sale price on the basis of other sale transactions and prescribed formula of 20 times of the A. L. V. In case consideration mentioned in the sale-deeds was to be discarded, price as fixed in assessments made by the Excise & Taxation should have been adopted. Both the officers below have faked to assign any reason for not accepting the valuation determined by the Excise & Taxation Officer. (d) that in any case valuation adopted by the learned C. I. T. (Appeals) is still excessive and it has not boon fixed in accordance with prevailing market value as established from comparable cases produced by the assessee before the I. T. O. In the departmental appeal, it was contended by the D.R. that relief allowed by the learned C. I. T. in reduction of value of the properties purchased by the assesses being excessive in percentage terms is unjustified. It was further submitted on behalf of the department that the learned C. I. T. has totally ignored the valuation of comparable cases. Regarding contentions of the assessee's A. R., the D. R. reiterated the reasons advanced by tae

1. T. O. and contended that the I. T. O was fully competent to determine market value as for the purposes of determining the quantum of unexplained investments, assessee's case was covered by sub-caluse (d) of section 13 of the Ordinance.

6. After hearing the parties at length and on going through the relevant provisions of law, we find that section 13 of the Ordinance is parellel provision of section 4(2-A) of the Repealed Income-tax Act, 1922. Provisions o section 13 is in the nature of substantive law providing for any addition o account of specific amounts of credits, investments or expenditure a envisaged therein unless linked with the suppressed profits of business o profession and is to be strictly made under this section and not under the other general provisions of the Ordinance. It merely restates the rule o evidence that because the assessee alone can explain facts and in case he offers no explanation or his explanation is unsatisfactory, an inference can be drawn against aim for holding that the items represent his fictional income. Position of proceedings under Income-tax Ordinance, 1979, is fairly distinguish able as it is an independent legal fiction fairly different from civil law. Veracity of purchase price of an immovable property given in the title of the sale-deed is considered to be final under the civil law. Similar is the position under Registration Act, Stamp Act. Transfer of Property Act and Evidence Act In the cases of pre-emption usually higher sale price is mentioned intentionally as a safeguard for preventing possibility of filing of pre-emption suit against the seller and the purchaser. In innumerable- pre-emption cases, superior Courts have held that the purchase price mentioned in the sale-deed will prevail notwithstanding the fact that the actual bargain was of different price. In the Income-tax proceedings, provision being of establishing credits, invest ments and expenditure is absolutely different from civil law. It is also well settled by now by various authorities of higher Courts that provisions of Civi law and Evidence Act are not applicable fee extenso to the income-tax proceed ings. We have no hesitation in holding that under section 13 of the Income-tax Ordinance, 1979, the I. T. -O. has the powers to determine the "deemed income" of an assessee. If consideration settled by the parties in the registered sale-deed is doubted to be understated and not in accordance with the prevailing market price, provision of section 13 empowers the I. T. O. t proceed in the matter to ascertain the prevalent market value for determining "deemed income" of an assessee. Mere fact that the sale transaction is registered in itself does not render the case to be immune from provisions o section 13 of the Ordinance. After holding that the I. T.O. was empowered to proceed under section 13 of the Ordinance, we take up the assessee's plea that addition of difference of sale price as mentioned in the registered sale-deeds and actual market price was not covered by section 13 of the Ordinance, rather was hit by section 4(a) of the Gift Tax Act. Suffice it to say, that both the provisions are independent of each other, subject to exception of general law that no one can be punished twice for the same offence. Section 4 of the Gift Tax Act provides: Gift to include certain transfers. For the purposes of this Act :

(a) where property is transferred otherwise than for adequate considera tion, the amount by which the market value of the property at the date of the transfer exceeds the value of the consideration shall be deemed to be a gift made by the transferor. Primarily section 4 of the Gift Tax Act is meant for discouraging evasion of gift tax as may be designed by collusive or concessional transactions. Provision of sub-clause (a) is for the purposes of Gift Tax Act as gift itself is a transfer of movable or immovable property by one person to another. Definition of gift in clause (xii) of section 2 of the Gift Tax Act includes the transfer of any property deemed to be a gift under section

4. According to section 4(a) of the Gift Tax Act transfer should be made only for an adequate consideration. In cage it is found that any transfer was made without adequate consideration, the transaction shall be treated as a gift to the extent the consideration fails short of the price mentioned and the market value. In that event difference between the market price and the declared purchase price shall be deemed to be a gift made by the seller to the purchaser and gift-tax shall be payable by the seller. Under section 13 of the Ordinance, the I. T. O. is competent to determine reasonable market price of any property if it is found that on the date of sale consideration mentioned in sale-deed is: understated. In such circumstances, difference of the determined market price and declared consideration shall b treated to be taxable deemed income of the buyer. The above two provisions of different Fiscal laws shall be applicable to the same transaction as one covers the investments referred to under section 16 of the Ordinance and the other becomes explicit when read with clause (a) of section 4 of the Gift Tax Act. Both these provisions being legal fiction cannot be considered as alternate provisions and none can prevail o override the other. However, there exists a legal lacuna. Before the I. T. O., a buyer can take up the plea that in case there is understatement of purchase price then under the provisions of Gift Tax Act, the seller be charged gift to on the shortfall, the gift tax provisions being earlier in origin. In sub section (2) of section 13 of the Ordinance overriding clause in the form of "Notwithstanding anything contained in any law for the time being in force" is missing. Another aspect of the matter is that quantum of tax under Gift fax Act is less as compared to that in the income-tax proceedings. Provision which is more beneficial to the subject is to prevail. It is also against cannons of justice to tax buyer and seller for the same transaction under two different laws. Anomally to be resolved by the law-makers is that if difference of sale price mentioned in the sale-deed and market price determined by the G. T. O. is taxed as a gift at the hands of the seller, how could the same amount be taxed as the deemed income of the buyer practicularly when it has not been provided expressly and explicity to apply the either provision. It is for the law-makers either to delete clause (a) of section 4 of the Gift Tax Act or to prefix any overriding clause in subsection (2) of section 13 of the Ordinance. Till. today, both the provisions are good piece of law, none have preference over the other. It is for the law-makers to resolve this controversy. In the assessee's case provisions of section 4(a) of the Gift Tax Act are not attracted, he being a buyer and that provision is applicable to the sellers of properties. In such like situation, provisions of section 13 of the Ordinance were fully available to the

1. T. O. to proceed against the assessee according to law. Taking up the legal aspect of section 13 of the Ordinance, the I. T. O. while determining valuation of the properties purchased by the assessee held that additions were being made under clauses (era), (d) and (e) of section 13(1) of the Ordinance. For the charge year 1979-80, provisions of sub-clause (aa) was not available, the same having been inserted by Ordinance XXV of 1980 with effect from 1-7-1980. Provision of sub-clause (e) relied by the I. T. O. was also not attracted as that deals with any "expenditure" incurred in any income year and "investment" made by the assessee in purchase of properties being not "expenditure" was not bit by provision of sub-clause (e). Expenditure is an act of expanding or lay out and covers process of using as well as money spending whereas "investment" is employment of money in such a way as to produce income. "Investment" means placing of money to secure income; but in "expenditure" there is no element of return. Amounts spent in purchase of property being "investment", on that score no addition can made under sub-clause (e) of section 13 of the Ordinance. The only provision of law available to the department for making addition as unexplained investment thus was of sub-clause (d). The assessee having not maintained any books of accounts, second part of sub-clause (d) was fully attracted. In simple language it means that if an assessee has made investment in an income year and the

1. T. O. finds that the amount expanded on making such investment exceeds the amount shown in the wealth-statement tinder section 58 in respect of that year and the assessee offers no explanation regarding source of investment or his explanation is unsatisfactory, excess amount of investment shall be deemed to be income of the assessee. In the instant case as per wealth-statement as on 31-3-1978 valuation o the assessee's assets stood at Rs. 1,15,824 and as per wealth-statement ending 31-3-1979 valuation of assets after excluding claimed liabilities a Rs. 1,10,000 was at Rs. 2,92,

503. Investment of Rs. 3,00,00 made by the assessee haying exceeded tire valuation of assets as per last wealth-statement the I. T. O. was fully competent in invoking provisions of sub-clause. (d) of section 13 of the Ordinance. For resolving the assessee's next submission regarding valuation fixed by the Excise & Taxation Officer to be binding on the I. T. O. it is pertinent to point out that Provincial Taxation Laws also provide for determination of fair market price of a capital asset under rule 8 of the Capital Gains Tax Rules, 1964, which provide an under: - "If in the opinion of the Excise & Taxation Officer the actual cost of property as stated by the assessee is not correct or is to be determined in pursuance of clause (ii) or clause (iv) of proviso to subsection (2) of section 16 of the Act on the value of the consideration in terms of money is to be determined in pursuance of rule 7, the I.-T. O. may, among ether factors take into consideration: - (i) the value of consideration of,: sale or transfers of similarly situated and similarly used urban immovable property made in the year 1959 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 1 950 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 than 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 15 times but not exceeding 20 times of the gross annual value." This provision ordains that in case valuation of any property mentioned in the registered sale-deed is found to be low as compared to the prevailing market value at the time- of sale, the

1. T. O. may adopt fair market value to safeguard the interests of revenue. A provision has been made for guidance of the Excise & Taxation Officer for determining the fair market value either on the basis of other similar sale transactions or at an amount exceeding 15 times but not exceeding 20 times of the gross annual Jetting value of the property. This provision thus prescribes two modes for determining the market value of the property. Though, Excise do Taxation Authority, air also a Government Functionary for making assessments for the purposes of collection of gains-tax but in no case valuation determined by that functionary debar another function of the Government from applying its own independent mind under another statute. Assessment made by the Excise & Taxation Officer is thus not strictly binding on the Income-tax Authority but it may be taken a one of the considerations for determining the fair market value. A Division Bench of the Tribunal has already held in 1983 P T D (Trib) 241 the A. L. V. of any building determined by the Excise & Taxation Authorities is not binding on the W. T. O. for determining A. L. V. of that very building for purposes of levy of wealth-tax. This principle is equally applicable in the case of determining Capital Gains Tax. The way in which assessment is made by the Excise Authorities for determining capital gains-tax of any property is just a guess work. These assessments are made without strictly following any judicial principles of law and evidence. In fact, these are in the nature o administrative orders. In many cases, we have noticed that in order to just if arbitrary determination of gains tax, the Excise Authorities refer to few assessment orders of that locality wherein price charged to gains tax differs from each other. In some cases, we have noticed that only one lined order has been passed fixing the price of the property for tax purposes of levy of gains-tax. Since the assessments made for the gains tax purposes are not based on any basis or principles of law, no reliance can safely be placed on the valuation determined for the purposes of levy of gains tax.

7. This brings us to the last and common grievance of the parties that valuation of the properties purchased by the assessee has not been fixed by the officers below on any basis or ether transactions of registered sale -deeds. For determination of this issue, we would deal with each property separately. (I, II) omitted. .

8. As a result of the above discussion, departmental appeal being devoid of any merits is dismissed. Appeal filed at the instance of the assessee succeeds to the extent indicated above. GHULAM MURTAZA KHAN (MEMBER). -I agree with the arguments as well as the conclusion drawn by my learned brother in respect of all the issues. In paragraph 6 of his order, however, my learned brother bas, inter alia, discussed the provisions contained in section .4(a) of the Gift Tax Act and the deeming clause contained in section 13 of the Income-tax Ordinance, 1979. My learned brother has recorded the submissions of the learned counsel of the assessee to the effect that the provisions of different fiscal laws have become applicable to the same transaction, the one covers the investment referred to under section 13 of the Ordinance and the other under section 3(a) of the Gift Tax Act. In the first instance it is contended the quantum of Gift Tax Act is less as compared to that of the Income-tax proceeding provision and the one which is more beneficial to the subject is to prevail. Further, these two provisions of lay under different statutes appear to be against the cannon of justice to tax the buyer and the seller for the same transaction under two different laws. My learned brother seems to be impressed by the issue raised by the learned counsel although in effect he has held that it is for the law-makers either to delete clause (a) of section 4 of the Gift Tax Act or to prefix an overriding clause in subsection (2) of section 13 of the Ordinance. In his own words, "since, however, both the provisions are good piece of law none can have preference over the other and that it was for the law-makers to resolve this controversy . In my humble opinion the two provisions of law are different from each other but they seem to have been promulgated for a common purposes, The provisions contained under section 13 relating to deemed income take car of unexplained incomes/investments, etc. Whereas the provision contained in the Gift Tax Act is different inasmuch as basically and looking to the scheme of the Gift Tax Act this fiction is intended to counteract the evidence to Gift-tax by making gifts in the guise of sales or transfers at nominal price specially to benefit the deemed donees who could be their relatives. Secondly this provisions of law acts as deterrent to collusive understatement of values by the parties in property transactions. Further, there does not seem to be anything wrong if parties to the same transaction suffer tax under different statutes. This is not something unusual. For example the royalties from mines were held liable to cess under the Bengal Cess Act as well as to income-tax (1 L R 34 Cal. 257, 288). It may also be pointed out that almost identical provisions of law exist in section 2512(6) of the U. S. A. Gift Tax Act and section 38(2) of the Newzealand Death Duties Act. In the Australian Gift Duty Assessment Act also similar provisions exist in section 17 of the Act. Section 4(I)(a) of the Indian Gift Tax Act is almost similar to that of ours. I am therefore of the humble opinion that it is not necessary to delete clause (a) of subsection (4) of the Gift Tax Act and or put an overriding clause in subsection (2) of section 13 of the Income-tax Ordinance. The object of the existing provisions in the two statutes is common that the transactions should be recorded at the fair market value both, by the buyer as well as the seller. M. Z. M. Order accordingly.