1997 PLP (Trib (PTD)

IFTIKHAR AHMAD BAJWA (ACCOUNTANT MEMBER).

In this appeal relating the assessment year 1990-91, legality of proceedings under section 65 has been called in question.

2. Appellant, as individual, derived income from sale of cloth on wholesale basis. For the year under appeal, return declaring income of Rs.1,21,348 had been field under the self-assessment scheme, instead of accepting the return, proceedings for regular assessment were initiated in which wealth statement for the year ending 30-6-1990 was also requisitioned and placed on record. Subsequently, appellant's claim that the return fulfilled the requirements of the self-assessment scheme was accepted and declared income was accepted under section 59(A) of the Ordinance.

3. During this year, appellant had shown purchase of a shop in Panorama Centre, Lahore for Rs. 1,20,000 which reflected average rate of Rs.1,200 per sq. ft. on the basis of assessment in some other cases in which purchase price of shops in the same building had been adopted at Rs.7,000 per sq. ft. the I.T.O. concluded that the purchase price had been understated by the appellant and reopened the assessment under section 85 of the Ordinance. In subsequent proceedings, value of the shop purchased by the appellant was adopted at Rs.6,00,000 and thus an addition of Rs. 4,30,000 was made under section 13(1) (d) of the Ordinance. The CIT(A) reduced the average cost to Rs.5,500 per sq. ft., and thus, the total addition was reduced from Rs.4,80,000 to Rs. 4,30,000.

4. According to appellant's Authorised Representative, proceedings under section 65 in this case were totally unjustified. It was claimed that the Assessing Officer had no definite information showing understatement of income from the year under appeal. It was contended that the purchase price was very much in the knowledge of the I.T.O. who had examined the case on various dates before completing the assessment under section 59 of the Income Tax Ordinance. It was argued that the Assessing Officer who was aware of the purchase price of the shop could have set apart the case for total audit under para. 4(ii) of Circular No.5 of 1990 dated 25-6-1990 (laying down self-assessment scheme for 1991) if he had any doubts that the price was understated. Appellant's A.R. cited a number of judgments of the superior Courts in which it has been held that merely because another property had been transacted at a higher value was not enough justification to discard the value recorded in the registered deed. It was pointed out that the Assessing Officer had cited two cases in which value of shops in Panorama Centre had been adopted at Rs.7,000 per sq. ft. but the two shops enjoyed prime location being located on the front facing the Mall Road on the ground floor whereas appellant had purchased a shop in the basement at the back of the building. Appellant's AR cited judgment of the Tribunal in the case reported as 1993 PTD (Trib.) 1681 wherein proceedings under section 65 on the basis of similar comparison of purchase price of other properties had been held to be unsustainable. In coming to the above conclusion, the Tribunal had followed a number of judgments of the superior Courts in which proceedings under section 65 it the absence of direct information had not been approved.

5. It was also pointed out by appellant's A.R. that even in the two cases cited by the I. T. O., the value had not been declared by the assessee nor any evidence in support of the value adopted in the assessment was available. The facts of the two cases statedly had not been confronted to the appellant in the course of assessment proceedings. The value adopted in the two cases were also stated to be disputed as appeals against the assessments were still pending.

6. Appellants contentions are not without merits. The C.I.T.(A) rejected appellant's contentions mainly on the ground that the original assessments had been made without examining the statement of assets and liabilities whereas the record shows that the assessment under section 59(A) was made after several hearings of the case in which wealth statement had also been obtained. In fact the hearing of the case on several dates was mentioned in the assessment order under section 59(A) also. The information regarding the purchase price was available with the I.T.O. at the time of completing original assessment and has apparently been examined by him. The subsequent view that the declared purchase price was an under statement was thus a change of opinion. The proceedings under section 65 on a mere change of opinion are not tenable. Moreover, the purchase price of another property with a vastly dissimilar situation did not constitute definite information of under assessment of income which is a pre requisite for proceedings under section

65. The proceedings under section 65 were obviously unsustainable. The impugned order is, therefore, cancelled. C.M.S./311/Trib. Order accordingly.