2002 PLP 2671 (PTD)

(iii) The assessment order is perfectly in accordance with law.

5. The contentions of the two sides have been considered and the relevant tax records have been examined. It is an admitted fact that no notice under section 61, 62 or 13 was ever issued to the complainant for the two years and that the Assessing Officer has conducted the entire assessment proceedings through order sheet entries. The order sheet entry dated 24‑11‑2001 related to issuance of notice under section

56. The next entry is dated 10‑12‑2001 in which the presence of Mr. Muhammad Tahir Abbas, A.R. has been recorded and according to the entry he had filed income‑tax returns, and other documents and was asked to file certain other statements/documents including personal expenditure statement and rent deed for which the case was adjourned to 14‑12‑2001. The next two order sheet entries dated 14‑12‑2001 and 10‑1‑2002, are reproduced as under: "14‑12‑2001 Present Mr. Shahid Abbas. Filed: (i) Copy of I. D. Card. (ii) NTN application copy. (iii) Copies of 143‑B statements filed alongwith proof of filing in Circle 14, Zone `B'. (iv) Copy of partnership deed. Could not furnish personal expenditure statement and rent deed. Although she holds 5 % share in the income from AOP but she is deriving rental income from a portion of house as well. Moreover, the A.R. contends that household expenditure is borne by husband who holds 95 % share income. In the absence of rent deed copy and personal expenditure statement, the A.R. is confronted on addition under section 13 (1) (e) in the presence of the IAC ‑ Range‑II, Zone C for an amount of Rs. 50,000 for the assessment year 1999‑2000 and Rs. 60,000 for assessment year 2000‑2001. Finalized accordingly. 10‑1‑2002. Approval for making addition under section 13(1)(e) obtained from IAC Range‑II vide Letter No.623/R.II."

6. In the subsequent combined assessment order dated 16‑1‑2002 the share income from AOP and income from house property were accepted as declared but additions under section 13(1) (aa) were made at Rs. 50,000 and Rs. 60,000 for the two years respectively and total income was thus assessed at Rs. 102,420 and Rs.125,723.

7. It is evident from the above that even if it is accepted that in lieu of normal notices under section 61 or 62, adequate opportunity of being heard was provided to the complainant it is obvious that the statutory requirements of , both sections 13(1) and 13(2) of the Income Tax Ordinance have not been met. Merely writing that the A.R. had been confronted with addition under section 13(1)(e) in the presence of the IAC for an amount of Rs.50,000 and Rs. 60,000 did not amount to giving a reasonable opportunity to the complainant as required by section

13. In fact the order‑sheet does not even record what the reply of the complainant was. Since the additions were made purely on estimate it can be inferred that for making the estimate the provisions of section 13(2) of the Income Tax Ordinance had been invoked which read as under: "(2) Where the value of any investment or article referred to in clauses (aa), (b), (c) or (d) or the amount of expenditure referred to in clause (e) of subsection (1) is, in the opinion of the Deputy Commissioner, too low, the Deputy Commissioner may determine, after giving a reasonable opportunity to the assessee of being heard, a reasonable value or the amount thereof, as the case may be, and all the provisions of sub section (1) shall have effect accordingly."

8. It is evident from the above that section 13(2) envisages issuance of proper notice to the assessee allowing him, a definite time for responding to the notice. Only by writing on the order‑sheet that the assessee had been confronted with the additions under section 13(1)(e) does not satisfy the requirements of law. In fact even section 13(1) clearly envisages the calling of the assessee's explanation on the relevant points which can only be done through a proper notice. In the light of the above the income‑tax assessments for the years 1999‑2000 and 2000‑2001 are found to be totally invalid and the relevant recommendation in this regard is made in para. 13 below. Wealth tax

9. With regard to wealth tax, the main points in the complaint are as follows: (i) The complainant filed wealth tax returns for the assessment years 1996‑97 to 2000‑2001 in compliance with notices under section 17 of the Wealth Tax Act issued on the basis of information obtained from survey. (ii) The complainant had claimed exemption for residential self -occupied house but w.e.f. 1‑7‑1998 one room of the self -occupied house was rented out to an AOP (consisting of the complainant and her husband) for Rs. 3,000 per month: (iii) The Assessing Officer increased the value of the rented out portion from Rs. 360,000 declared to Rs. 480,000 without approval of the IAC which was mandatory according to rule 8(3) of the Wealth Tax Rules. Furthermore, the valuation was adopted from the assessment year 199697 onwards when in fact the portion had not been rented out during the years 1996‑97 to 1998‑99 and the entire house was self‑occupied. (iv) The Assessing Officer has also imposed additional tax under section 31 (b) of the Wealth Tax Act, which is unjustified. It has thus been prayed that the wealth tax assessments framed by the Assessing Officer be declared null and void and the additional wealth tax be also deleted.

10. In the respondent's reply it is stated that the value of the rented out portion had been enhanced as no rent deed had been furnished by the complainant and only an affidavit was filed. It was also stated that the charge of additional wealth tax was not hit by any limitation and the additional tax was validly charged.

11. Neither in the respondent's reply nor during the hearing was it, however, explained as to why the value of the portion of the self‑occupied house had been adopted for the assessment years 1996‑97 to 1998‑99 when the entire house was self‑occupied during the said years and. no portion had been let out. With regard to the assessment years 1999‑2000 and 2000‑2001 also it could not be explained as to why the declared value based on declared ALV was enhanced in the wealth tax assessments when the declared ALV had been accepted in the corresponding income‑tax assessments. It could also not be explained why the furnishing of a rent deed was considered essential and the affidavit was rejected when the portion had been let out by the complainant to an AOP consisting of herself and her husband and the rent was obviously an internal arrangement. It was also admitted during the hearing that the approval of the IAC should have been obtained before enhancing the ALV and consequently the valuation, which was not done.

12. In the light of the above, the wealth tax assessments for the years 1996‑97 to 2000‑2001 and the additional tax based on the assessments, are found to be quite invalid and since definite maladministration is involved in both the income‑tax and wealth tax assessments there is also no merit in the respondent's preliminary objections.

13. In the light of the above, the following recommendations are made: (i) The income‑tax assessments for the years 1999‑2000 and 2000‑2001 be set aside by the Commissioner under section 138 of the Income Tax Ordinance with the directions that re‑assessments be made after affording the complainant a proper opportunity of being heard and that no addition be made under section 13(1)(e) without serving a proper notice on the complainant and without giving due consideration to the complainant's contentions in this regard. (ii) In the wealth tax assessments for the years 1996‑97 to 1998‑99 the value of immovable property adopted at Rs. 480,000 be deleted by the Commissioner by invoking his powers under section 25 of the Wealth Tax Act. (iii) For the wealth tax assessment years 1999‑2000 and 2000‑2001 powers under section 25 of the Wealth Tax Act be invoked by the Commissioner to reduce the valuation of immovable property from Rs. 480,000 in each year to Rs. 360,000 in each year. (iv) Consequential effect be given with regard to additional wealth tax levied in the complainant's case. (v) Compliance be reported within 30 days. C.M.A./M.A.K./407/FTO Order accordingly.