1988 PLP rib (PTD)

ABRAR HUSSAIN NAQVI (JUDICIAL MEMBER).--These are two cross-appeals, one by the assessee and the other by the department relating to the assessment year 1985-86. The assessee is an individual deriving income from book binding and share income from two firms.

2. Brief facts of the case are that the assessee declared a loss from business at 119.11,380 against which the I.T.O. estimated the income at Rs.11,21,

095. The assessment proceedings were started against the assessee on receipt of a complaint that he had purchased a building known as 'Katri' 140-A Inside Bhati Gate, Lahore for an amount of Rs.18,00,000 in his own name and in the name of his wife and children. According to the registered sale-deeds the property was purchased as under:- Mr. Ali Muhammad Rs.1,30,000 1/3rd share Mst. Shahnaz Begum Rs. 65,000 1/6th share Minor son Rs. 65,000 1/6th share Mr. Mubarik Ahmed (son) Rs. 65,000 1/6th share Mr. Muhammad Saleem (son) Rs. 65,000 1/6th share Total Rs.3,90,000 The I.T.O. however, was of the view that the market value of the property Inside Bhati Gate, Lahore was from Rs.45,000 to Rs.50,000 per Marla. The I.T.O. also observed that the Punjab Government had fixed the rate of this area for the registration purposes at Rs.40,000 per Marla. Keeping these facts. in view the I.T.O. adopted the market value of the property purchased by the assessee at Rs.35 000 per Marla and cost of purchase was adopted at Rs.11.20.000. The declared cost of Rs.1 96 500 was deducted (Rs.1,30,500 + Rs.65,000) and balance of Rs.9 23,500 were added as income from undisclosed sources. Another addition was made by the I.T.O. for an amount of Rs.1,50,000 which had been shown by the assessee as liability.

3. On appeal the learned C.I.T. (A) reduced the value of the property and adopted the market rate at Rs.30,000 per Marla and the value was worked out at.Rs.9,60,

000. In regard to the addition on account of liability of Rs.1,50,000 the learned C.I.T.(A) deleted the addition on the ground that Mr. Shaukat Ali Tahir from whom the amount was allegedly taken by the assessee had given an affidavit that such an amount was advanced by him to the assessee.

4. The learned counsel for the assessee first took a legal objection that no addition could be made under section 13 'of the Ordinance unless it could have been discovered during the course of any proceedings under this Ordinance. The learned counsel relied upon the opening words of section 13 which reads as under:- "Where in the course of any proceedings under this Ordinance .... The learned counsel vehemently contended that no proceedings were pending before the I.T.O. when notice was issued to the asses see to file the return. It was submitted that the discovery of any concealment or escapement was of the nature given in clauses (a) to (c) of section 13(1), and should be in the course of any proceedings and the proceedings cannot be started on account of discovery. In order to appreciate the contention of the learned counsel, it has to be first seen as to what are the 'proceedings' and how do they start. The learned counsel appears to be under the impression that proceedings under this Ordinance only means the assessment proceedings. Though the word 'proceedings' has not been defined but at the same time the meaning cannot be confined to the assessment proceedings alone. Under section 13 the proceedings should be 'under this Ordinance Now under the Income-tax Ordinance there are many kinds of proceedings. There can be inquiry proceedings such as under sections 144, 145 or under section 146 of the Ordinance. Then there can be the recovery proceedings. Therefore, the word 'proceedings' used under section 13(1) does not mean the assessment proceedings alone, these proceedings can include all proceedings, which can or may be taken before the start of the assessment proceedings. Now a complaint had been received in this case and the inquiry proceedings were started by the Income-tax Officer against the assessee. It may be noted that before issuing any notice to the assessee for filing the return, the Income-tax Officer had conducted an inquiry on 14-1-1987. Therefore, even if the complaint is to be ignored the discovery could be said to have been made by the Income-tax Officer in the course of the inquiry proceedings. Therefore, it cannot be said that the discovery by the Assessing Officer in regard to the undisclosed income of the assessee was not in the course of 'any proceedings under this Ordinance'. This contention of the learned counsel is, therefore, I rejected.

5. The next contention of the learned counsel for the assessee was that the value given in the registered sale-deed should have been accepted by the Income-tax Officer. The learned counsel first contended that 'Qanoon-e-Shahadat' is applicable to the proceedings before the Income-tax Officers and under that law presumption of truth is attached to the registered documents and unless the Income-tax Officer had evidence to rebut that evidence, he had no jurisdiction to evaluate .the property other than what had been shown in the registered sale-deeds. He further submitted that Article 165 of Qanoon-e-Shahadat lays down that it overrides all other laws.

6. This contention of the learned counsel is also devoid of any) force. Qanoon-e-Shahadat is the special law and so is the Income-tax', Ordinance which empowers the Income-tax Officer to evaluate the properties shown by the assessees in their documents or in their wealth-statements. Moreover, Qanoon-e-Shahadat makes the registered documents as admissible evidence but these documents are not the final documents so far as contents of these documents are concerned and in any case they can bind the contracting parties and not the third parties as the Government or the Income-tax Authorities.

7. The learned counsel for the assessee has relied upon a number of cases in support of his contention. The cases relied upon are Khalid Bashir v. Fazal Abbas; 1981 S C M R 701, Ali Mohammad v. Malik Sanwal and others, P L D 1961 Pesh 62, Muhammad Latif v. Lala Ramchand and others P L D 1970 SC 299 and Rai Harendra Lai Roy Bahadur v. Hem Chandra Nashar and another A.I.R. 1949 Privy Council

179. All the four cases are not relevant in the facts and circumstances of the present case. The two cases of the Supreme Court as well as the third case of Peshawar High Court are in regard to the Pre-emption Act. Even in these cases it has not been said by the Courts that the Courts could not go behind the sale deeds. What the superior Courts have held in these cases is that where it is proved that the sale price shown in the registered sale-deed has been paid, the registered sale-deed should be accepted as such for the purpose of value of the property sold. In the fourth case decided by the Privy Council, again it was a dispute between the two private parties namely; proprietor and tenants in regard to apportionment of compensation or, account of acquisition of land under the Land Acquisition Act. None of the above cases are related to the Income-tax Law. It may be noted here that under section 13(1)(d) of the Ordinance the Income-tax Officer has been empowered to refuse to accept the amount shown by the assessee recorded in his books of accounts or shown in his wealth-statement and under subsection (2) of section 13 he has been further empowered to determine a reasonable value of the property acquired by the assessee. The learned counsel for the assessee has not been able to produce any case where the superior Courts have given a decision that the Income-tax Officer is bound to accept the value given in the registered sale-deed. The learned counsel has also relied upon a Circular of the Central Board of Revenue bearing No.1568-S (WT)/80 which has been reproduced at page 289 of Volume 42 of Taxation. The learned counsel contended that the Central Board of Revenue has made a directive that the value given in the registered documents in regard to immovable properties should be accepted. This contention is also devoid of any force. Inter alia; it only provides that right, title or interest to or in any immovable property is determinable on the basis, of position obtainable in Government records. The registered documents were directed to be treated as the final evidence in this regard. Firstly; this Circular is related to Wealth-tax. Secondly, the Central Board of Revenue's circular only lays down that registered documents should be accepted as final evidence in regard to right, title or interest in any immovable property: Nowhere it lays down that the value given in the registered document should be accepted as such. Even otherwise, the entries made in the sale-deeds are based on mutual contract between two private persons and it is common knowledge that correct valuation is not always given in the registered sale deeds. It is for this reason that the Government has fixed the minimum rates of the properties on the basis of which the value for the purposes of registration is adopted. The assessing officer had made a reference and we asked the learned D.R. to produce the copy of the order fixing the minimum rate of the property at Lahore. The learned D. R., however, was not able to produce the copy of the aforesaid Notification but the learned counsel for the assessee had produced a photo copy of the proposal of minimum sale rate per Maria of open plots in different localities fallen in Lahore Tehsil. This is ostensibly signed by Tehsildar City Lahore as well as by the Excise and Taxation Officer, Gain-tax Lahore. However, this document does not bear any stamp to give any authenticity. However, even according to this document produced by the assessee the value of the plots in the walled city has been given as under:- - (1) Residential. Rs.10,0,00 per Marla (2) Commercial (except Shah Alam, Azam Markets and Sooha Bazar) Rs.25,000 per Marla

8. Now, it is evident from the report of the Inspector that even before the purchase of this property the press was already installed in this building and 39 workers were engaged in doing the book binding. It may further be stated that even if the document produced by the learned counsel is to be accepted it is the minimum rate which has been fixed by the Authorities and not the maximum rate. In view of the fact that the machinery was already installed in the building it could be safely assumed that it was a commercial building. It is also to be noted that the minimum value has been fixed in regard to the plots and the property purchased by the assessee is not a plot but also includes building. Keeping all these facts in view the rate fixed by the learned Commissioner of Income-tax (Appeals) at Rs.30,000 per Marla seems to be reasonable and is confirmed. On this issue both the assessee as well as the department fail.

9. The next contention of the learned counsel for the assessee was that the property had in fact been purchased as stated above, by the assessee his wife and three sons. It was submitted that the assessing officer was wrong in observing that the assessee's A.R. vide its letter dated 21-4-1987 had admitted that the whole investment was made by the assessee. This has been denied by the learned counsel for the assessee. The letter of the A.R. of the assessee has not been produced before us for our perusal. The learned counsel for the assessee has produced the various sale-deeds in the name of the assessee, his wife and sons. This aspect of the case needs further examination. All the five persons who are the vendees accordingly to the registered sale-deeds have to be issued notices and the Income-tax Officer has to give finding as to whether the other co-vendees had any independent source of income and if so I could they explain the purchase of property. After making a thorough inquiry if the assessing officer comes to the conclusion that the entire investment was made by the assessee, then the addition could be made alter providing a reasonable opportunity of being heard tot the assessee as to the source of investment

10. There is another error in the assessment order as has been pointed out by the learned counsel for the assessee that the Income-tax Officer had assumed that the property was purchased for an amount of Rs.1,96,500 (Rs.1,30,nnp and Rs.65,000) and the balance of the amount was added by the assessing officer as income from undisclosed sources. As a matter of fact the value according to the registered sale-deeds in favour of all the five vendees works out to Rs.3,90,

000. Therefore, if the assessee can explain this amount then the addition could only be made to the extent of difference between the market value as maintained above minus Rs.3,90,000.

11. The department is aggrieved against the deletion of Rs.1.50,000 which has been added by the Income-tax Officer under section 13(1) (aa) of the Ordinance. The learned D.R. contended that the notice had been issued to Mr. Shaukat Hussain Tahir but was received back with the report of process-server that he was not traceable for want of proper address,

12. After hearing the parties we feel that both the assessing officers as well as the learned Commissioner of Income-tax (Appeals) are wrong in passing the respective orders. The Income-tax officer disbelieved the loan only because Mr. Shaukat Hussain was not traceable for want of proper address without asking the assessee to produce the person concerned. At the same time the learned Commissioner of Income-tax (Appeals) has accepted the affidavit of Mr. Shaukat Hussain without looking into the question as to when the loan was advanced and what was the mode of advancing the loan. Therefore, on this issue, we set aside the assessment and remit the case back to the Income-tax Officer with the direction that the inquiry should be conducted as to whether the assessee had received a loan from Mr. Shaukat Hussain and if he is not satisfied about the genuineness of the loan, the addition may be made in accordance with law.

13. As a result of the above discussion, both the appeals of the assessee as well as that of the department are disposed of as above. M.B.A./532/T Order accordingly.