2004 PLP (Trib (PTD)

Rs.1,40,97,000 Cost of 111 marlas (rear) @ Rs.1,01,000 per Marla Rs.1,12,11,000 Rs.2,53,08,000

7. The AR argued that the information regarding purchase of plot was already in possession of the Department even before the end of the accounting year of the appellant Company i.e. June 30, 1999. In support thereof the AR submitted copy of the Revision Order passed under section 7(8A) of the Finance Act, 1989 which was adjudicated by the Commissioner of Income Tax and Wealth Tax, Sialkot Zone, Sialkot under the Capital Value Tax Rules 1989. At page 2 of the said Order the CIT observed as under; "The submissions of the petitioner have been examined in the light of the above mentioned documents and the record peruses it revealed that a definite information was regarding registration of the said plot was available with the Assessing Officer in the shape of MEO letter No. SK‑BUNG/47/35, dated 18‑3-99 addressed to ale Sub‑Registrar Sialkot and a copy was duly forwarded by the MEO Gujranwala Circle to the Assessing Officer. " The AR of the appellant contended that the condition precedent for reopening of assessment under section 65 is possession of "definite information" by the Deputy Commissioner of Income Tax whereas no fresh information whatsoever came in possession of the Assessing Officer after completion of the assessment order present case. In fact the Department had merely an information which was already available on record even before the end of the accounting year of the appellant i.e., in the shape of MEO letter No SK‑BUNG/47/35, dated 18‑3‑1999 and a challan of Rs.1,20,483 issued by the Tax Department towards the capital value tax and payment was duly made the appellant in the Government treasury on 26‑3‑1999 whereas the show‑cause notice under section 65 was .issued on 28‑7‑2000 and consequently assessment was reopened on 11‑12‑2000 i.e. after expiry one year and four months from payment of CVT Support in this regard was from the following judgments of the Superior Courts. 1990 PTD 338 (SC Pak); 2000 PTD (Trib.) 2949 and 1997 PTD (Trib.) 2381. The learned AR has also referred to page 2 of the assessment order made under section 62/65 which reads as under:‑‑ "Obviously, balance amount of Rs.20,235,827 (25,308,000 5,085,754) had been received by the owners". While as at page 5 of the said order it has been held as under: "The assessee has not disclosed the cost of property paid to the owners of the land in these circumstances the only guideline is to evaluate property in accordance to the provisions of rule 207A of the Income Tax Rules, 1982 which is also mandatory in such situations".

8. In this background it was argued that, the above observations of the Assessing Officer cannot be held as definite information. Those observations are based on presumption. There was nothing on record wherefrom the Assessing Officer deduced that the money has changed hands. In fact this is supposition, the truth of which had yet to be established after putting to further trial. The Assessing Officer should have brought on record irrefutable evidence to substantiate his contention which is missing in this case. In no way this information can be regarded as definite information as is contemplated in section 65 of the Income Tax Ordinance 1979. Thus, the proceedings conducted prior and subsequent to notice were in fact in furtherance of a preconceived belief that the plot was purchased by making payment to the previous lessees. In case the Assessing Officer was in possession of definite information as required under the law then there was no need with the CIT(A) to seek following clarification recorded at 3 of the appellant order as under:‑‑ "During the course of appeal proceedings specific clarification was requisitioned from the learned AR vide order sheet entry, dated 2‑10‑2001 on the following issues:‑‑ (1) The seller has to receive any consideration for transferring his title to property known as 47 Zafar Ali Road, Sialkot Cantt. does it mean that he had not acquired Lease Right, which generally determine rates notified by the DC or fair market value of the property. (2) If the Lease Hold Right has been transferred without any consideration, because it did not confer any Ownership Rights then why other such mutations of immovable properties in Cantonment areas were being made for certain consideration as per DC rates. (3) The learned A.R., was also verbally required to cite any parallel cases of mutation of immovable property in Cantonment Boards which were made without any consideration for transfer of such Lease Hold Rights similar to his own case.

9. In this regard it was contended by the AR that proper compliance was made to the queries and contention of the CIT(A) that no compliance has been made in respect of the above is not correct. A specific 'ground at S. No.2 has been raised in this respect in the ground, of appeal. However, the learned AR stated that nothing was paid by the assessee to the previous lessees. It is so because a direct lease of 99 years has been executed in favour of appellant after expiry of previous lease of 99 years. While in other eventuality leasehold right are usually transferred and a no new lease agreement is executed whenever any change occurs in the lease hold rights prior to termination of lease period specified in the agreement. Reliance has been placed by the AR on the following judgments of the Superior Courts. 1998 PTD 781 (Trib.); 1993 PTD (Trib.) 1681 and 1997 PTD (Trib.) 1994.

10. The learned AR of the appellant also contended that the Assessing Officer while issuing notice under section 65 ticked clause for "escaped assessment" but he was not sure in his mind that he has to assess or reassess the escaped income, therefore, further tick as required under the law was made. In fact this was a case of under-assessed and not all escaped assessment. Thus reopening of such assessment was not sustainable in law. As new or fresh information was lacking coupled with it the defect of not ticking the relevant clause of the notice issued under section 65, which makes the whole proceedings illegal because this is a question of assumption of correct jurisdiction Support in this regard has been drawn from following judgments:‑‑ 2000 PTD (Trib.) 2531 and 1997 PTD (Trib.) 1994.

11. The learned AR further argued that the provisions of section 65 cannot be invoked in a case where income of the assessee is subjected to the regime of presumptive tax and placing reliance by the Assessing Officer on the judgment of Hon'ble Lahore High Court in Writ Petition No. 867 of 1999, dated 30‑7‑2000 is not at all relevant with the case of appellant. This judgment is delivered in a case where the assessee has declared much higher income from export business than the imputable income. On the contrary, the same income has been assessed on reassessment which Was originally imputed by the Assessing Officer under section 80CC of the Income Tax Ordinance, 1979. Strength on this regard has been sought from judgment cited as 2000 PTD (Trib.) 2193 whereby it was held as under: "Whether once it was held that any transactions was covered under presumptive tax regime, then all subsequent actions were to be taken pertaining to presumptive tax regime and no provisions relating to normal law shall be attracted until and unless provided for to be otherwise in Ordinance held yes. " Further the august Supreme Court of Pakistan in its judgment reported as PLD 1997 SC 582 = 1997 PTD 1555 where in it is held as under:‑‑ "We may observe that the object of section 80C seems to be to eliminate the hassle of filing of returns by an assessee and going through the normal procedure culminating of an assessment order and to eliminate the involvement to the minimum extent of the Income Tax Department. To achieve the above object above subsection 4 was enacted."

12. The learned AR also added that since income assessed and reassessed under section 80CC is on the same figure and there is no evidence whatsoever with the Assessing Officer that assessee is carrying out any other business activity which is liable to be taxed under the normal provisions of the law therefore, action of the Assessing Officer in invoking the provisions of section 65 are illegal and also without any lawful authority. Thus, the A.R. stated that tote judgments referred to by the learned Legal Advisor relates to the period prior to introduction of presumptive tax regime, hence this judgment is not applicable to the facts of the present case.

13. Our attention has also been drawn at page 5 and 6 of the order passed by the First Appellate Authority whereby the following was observed; "The arguments advanced by the AR and Department have been examined in depth and in a nut shell the whole dispute revolves round the issue as to whether the acquisition of property under reference constituted a purchase for which the value was to be determined under clause (ii) of Rule 207(A) as contended by the Department or that the acquisition of the said property was merely acquiring the property on rent, which had similar meaning of LEASE as contended by the appellant. The appellant, has dilated in depth to prove his case that acquisition of property was merely acquiring the same on rent which was synonymous with LEASE and has relied on judgment reported as (1999) 80 Tax 82 (Trib.). And, therefore, he was covered under Clause (ii) of Rule 207(A) for valuation purposes and that provisions of Clause (ii) of rule 207(A) did not apply. The contention offered by the AR, is self‑contradictory in more than one ways:‑‑ (a) AR contended vide his letter, dated 24‑5‑2001 that he had acquired property on 99 years lease and paid annual rent of Rs.13419 therefore, his case falls within the purview of Rule 207(A) (iii). It is pertinent to observe that a strange logic is at play in the above argument of learned AR. He claims to be tenant and wants to be valued under Rule 20 A)(iii) claimed by learned AR refers to ownership which is being denied so forcefully. (b) If it is question of acquisition of lease synonymous with rent as interpreted by judgment reported 1999 PTD (Trib.) 2875 then for what purposes he had disclosed value of property at Rs.4,984,318 in the Balance‑Sheet as an asset Rent is an item of Revenue Expenditure debitable to the Profit and Loss. Account and not to be shown as an Asset in the Balance‑Sheet as done in the instant case. (c) The appellant, has also paid CVT on the acquisition of property under reference at a value determined at Rs.265,20,

000. It is further pertinent to point out that the appellant had filed revision petition, disputing the valuation made by the Assessing Officer. The revision petition was dismissed and value determined at Rs.26,50,000 was maintained vide revision order, dated 24‑11‑2000, if the appellant case was of lease/rent then why he opted to pay CVT was applicable to purchase of property and not for a rent/lease as contended by the appellant. The revision petition being a final judgment on the issue of CVT had also determined the value of the plot and this order is final on the issue of valuation subject to amendment in DC rates for front and back side. Therefore, the Assessing Officer was in possession of definite information and had rightly assumed jurisdiction under section 65, the appellant, has conveniently tried to by‑pass a glaring fact of purchasing the property by treating it as Lease synonymous with rent. Appellant's AR was confronted by the under‑signed with the fact that why the sellers had divested themselves on lease hold rights synonymous with ownership rights of a piece of 111‑Kanals plot situated at a prime location in Sialkot Cantt. which as per DC rates was worth more than 25 million. And was there any parallel case where such right, was divested without any consideration. The learned AR failed to address the issue squarely and found it convenient not to commit anything in writing on the issue. Fact of the matter is that appellant purchased property, 47 Zafar Ali Road, Sialkot Cantt. for which MEO, Gujranwala Cantt. had fixed price at Rs.258,08,000 and, 20% of the value fixed was charged as LEASE transfer rights amounting to Rs.5,058,754 and documentation charges Rs.87,556, total amount being Rs.5,934,

318. The Appellant only declared 20% documentation charges paid to Cantonment Board and made arrangements with Sellers to get the said property lease transfer, in his name through an attorney Mr. Allah Ditta, a confidante of .the appellant, affidavit of attorney and evidence that the attorney, was never paid any amount as sale consideration. The Assessing Officer in order to verify the bona fide of the affidavit issued summons under section 148 to the attorney Mr. Allah Ditta, who on one pretext or, another did not appear. Non‑attendance of attorney was communicated to the appellant vide letter, dated 16‑6‑2001. The appellant, did not produce the attorney for verification of his affidavit, therefore the contents of affidavit were not accepted by the Assessing Officer, being Bad Document. Even otherwise the consideration of transfer of lease right was to be paid to owner and not the Attorney. The owner was never produced before the Assessing Officer, during assessment proceedings. The value fixed by MEO Gujranwala vide his letter No. SK. Building/47/22, dated 17‑1‑1998 at Rs.253,08,000 is valid price fixed by a competent authority and payment of 20% as transfer/mutation charges constituted acceptance of price fixed by the MEO. The contentions of the AR are also not based on sound reasoning because in case of rented properties ownership is not transferred to tenant, whereas, in the instant case the ownership was transferred to the assessee/appellant. He has acquired the right, to construct of building on the plot and even the right of transfer and sale of the said property. For all practicable purposes it is a case of ownership and not rent. The term LEASE was used in alt properties sold/transferred in Cantonment Board areas through out Pakistan having the right for resale, construction, devolution to Heirs subject to certain Rules and Regulations determined by the Cantonment Authorities. In respect of para. (a) to above the learned AR submitted copies of the lease agreement, dated March 18, 1999 executed (between the lessor MEO Gujranwala and the lessee the appellant) whereby clause 27 to 31 read as under": "Provided always that if any part of the rent hereby reserved shall be in arrear or unpaid for one calendar month 'next after any of the days whereon the same shall have become due whether the same shall have been demanded or not or if there shall have been in the opinion of the Military Estates Officer any breach by the lessee or by any person claiming through or under him off any of the covenants or conditions hereinafter contained then and in such case the lessor may notwithstanding the waiver of any previous cause or right of re‑entry enter upon any part of the premises hereby demised or of the building thereon in the name of the whole and thereupon the said premises and building shall remain to the use of and be vested in the lessor and this demise shall absolutely determine and the lessee shall not be entitled to any compensation whatever.

14. With the help of the said lease agreement, which is subject to termination in case of non‑payment of annual rent it was stated lay, the learned AR, that in the case of a rented property Rule 207A(iii) is applicable and the authorities below were patently wrong in considering that the assessee's case fall under Rule 207A(ii). According to him the only confusion is due to the fact that Cantonment Boards are exempt from levy of income tax otherwise assessment of the Cantonment Boards would have been made under section 19 of the Ordinance and premium would have been, adjusted under section 12(13) and 12(14) of the Ordinance and valuation of properties having leasehold right more than 20 years would have been made applicable as per Rule 207A(iii).

15. Coming to para. (b) above, the AR argued that since the' plot was acquired on a lease of 99 years it is, therefore, this was a premium paid which had to be capitalized as per normal accounting practices. As regard para. (c) above it was mentioned that CVT is also payable on leasehold assets which have been acquired for a period of more than 20 years. As the appellant has acquired lease‑hold, rights for a period of 99 years which are subjected, to CVT. The question as to whether CVT is payable of the premium amount or the value determined by the Assessing Officer this matter is pending with the Hon'ble High Court.

16. So far as issuance of notice under section 148 to the attorney is concerned, the AR argued that the Assessing Officer should have issued a notice to the previous lesses for confirmation of payment made to the assessee rather issuing to the so‑called attorney, are illegal, and are without any lawful authority:

17. As regards ownership of the plot, the learned AR contended that the appellant enjoys lease‑hold rights for a period of 99 years and according to the present policy of renewal of lease‑hold rights, the assessee had to pay premium in order to get extension of lease‑hold rights and in case of non‑payment of premium at the time of renewal the tease agreement will stand terminated without any right on the part of the appellant.

18. Coming to the addition made under section 13(1)(d) the learned AR argued that addition under section 13(1)(d) can only be made if the assessee had made investment or was found in respect of any such year to be the owner of any valuable article and amount expended on making such investment exceeded the amount recorded in this behalf in the books of account maintained by him in the present case the appellant has recorded the amount actually paid by him inclusive of CVT and the incidental charges in its books of accounts. It is pertinent to mention that once the Assessing Officer has admitted at page 5 of his order (redundant part has already been reproduced in this judgment) that he had no clue of payment of actual cost to the owner of the land. Thus taxation taxation of addition of Rs.202,49,946 under section 13(l)(d) is on the basis of wild guess and fanciful estimates is not maintainable in law. The judgment cited at 1997 PTD (Trib.) 1094 has been based upon which is squarely applicable to the facts of the present case.

19. The AR further argued that provisions of section 13(1)(d) of the Ordinance cannot be invoked on account of lowness of cost and if some one else has acquired an assets cheaper than its fair market value, he has necessarily acquired the said asset at the market value but lessor value has been declared to suppress the real income. In this regard the learned AR argued that mere fact that the market value of an asset is allegedly higher than the consideration paid by the appellant for its acquisition does not justify addition under section 13(1)(d). Support has been drawn from the following, judgments: 2001 PTD 1386 (H.C. Lah.); NTR 1995 (Trib.) 11 and 1997 PTD (Trib.) 1097.

20. The learned AR also pointed that though section 13(1)(d) empowers the Assessing Officer to treat any unexplained investment as income but addition had to be based on sound footings because section 13(1)(d) of the Income Tax Ordinance, 1979 being deeming provisions, was fiction of law which ought to be construed strictly in accordance with letter of law. A case‑law cited at 1997 PTD (Trib.) 2091 has been relied upon.

21. Arguing further it was stated that while applying provisions of section 13 the Assessing Officer should have to determine actual investment made by the assessee and determination thereof should never be a wild guess or fanciful estimate or on the basis of personal views. Reliance has been placed on the judgment cited at 1997 PTD (Trib.) 2197. According to the AR the CIT(A) was more concerned regarding chaos and anarchy which in his opinion will be created if arguments 6f the AR in support of valuation of properties in Cantonment Boards are treated as rented properties. In fact the CIT(A) had failed to discharge his duties as Judicial Officer. By giving impugned observations he has entered into the realm of administrative/supervisory capacity. Support in this regard has been sought from the judgment cited as 1993 PTD (Trib.) 1172.

22. We have given our anxious thought to the averments advanced at the bar on behalf of both the parties. Perusal of the facts available on record reveals that the information regarding purchase of plot was already in existence with the Department as the premium amount of Rs.50,58,754 had already been declared by the assessee in its balance- sheet. In addition to, the assessee had also obtained CVT from the tax Department whereby the Assessing Officer valued this plot for the purpose of CVT at Rs.2,65,20,000 by adopting per Marla value at Rs.1,20,000 as was fixed by the District Collector, Sialkot. In this background the question which was posed for our consideration was as to whether the provisions of section 65 are attracted in a case where difference in valuation of an asset has arisen. Certainly such information cannot constitute "definite information" the term as has been used in subsection (2) of section 65 of the Income Tax Ordinance, 1979 for the purpose of invocation of this section. The information available with the Assessing Officer for invocation of section 65 does not fall within the parameter of "definite information" because this information has to put to further trail. The element of probabilities cannot be ruled out from such information meaning thereby that this information was based on conjectures, surmises and whims. The whimsical inference drawn from such information cannot take place of a definite information. The information which is also debateable cannot be held to be a definite information. The higher Appellate Courts have already held that such information cannot be treated as definite information and reference in this regard is made to the judgments reported as 1990 PTD 338 (SC Pak.), 1997 PTD (Trib.) 239 and 2000 PTD (Trib.) 2949.

23. This is also interesting to note that there is not an iota or evidence available with the department that the assessee had made payment over and above the premium actually paid to the Cantonment Board i.e. Rs.50,58,

754. In fact the Assessing Officer had no evidence whatsoever that the money has changed hands. Actually the Assessing Officer is under legal obligation to bring on record irrefutable evidence prior to reopening of the already completed assessment which could be said to be definite in its character as is contemplated in section 65 of the Income Tax Ordinance 1979. Any proceedings conducted prior and subsequent to the notice issued under section 65 are in fact in furtherance of a pre‑conceived belief that the plot was purchased by making much higher payment viz. the premium paid to the previous lessee.

24. In view of foregoing discussion and in the given scenario, we have no hesitation in holding that the proceedings in this case were initiated under section 65 in absence of having any definite information available with the Assessing Officer. The only information which was in possession of the Department in no way could be constituted as a "definite information" to which the provisions of section 65 of the Income Tax Ordinance, 1979 are attracted. Consequently, the order made under section 62/65 of the Income Tax Ordinance stands cancelled being Assessing Officer acted in flagrant violation of law to reopen the assessment framed under' section 80CC of the Income tax Ordinance, 1979. Since we have disposed of the assessee's appeal on the sole ground of reopening of assessment under section 65 of the Income Tax Ordinance, 1979, therefore, we decline to dilate upon the other contentions raised by the learned counsel for the appellant before us.

25. In the result, the assessee's appeal is accepted. C.M.A./1066/Tax (Trib.) Appeal accepted.