MUHAMMAD NAWAZ ABBASL J-- These connected appeals by leave of the Court directed against the judgment dated 1.2.2007 passed by Peshawar High Court, Peshawar, in Tax References Nos. 6 to 11 of 2005-filed by the appellant under Section 133(4) of the income Tax Ordinance, 2001, involving common question of law and facts, are proposed to the disposed of through this single judgment.
2. The question of law raised therein for determination was as to whether an un-registered sale agreement would create title in the immovable property and notwithstanding the legal position in terms of Transfer of Property Act, 1882, what is the legal status of such an agreement for the purpose of-tax liability under Income Tax Ordinance, 1979.
The leave was granted in these appeals vide order dated 10.5.2007, as under:- "The contention of the learned counsel for the petitioner, that neither Tribunal nor the High Court has properly considered the question as to whether on unregistered sale agreement does or does not create title, right or interest in the property for the purpose of taxability under Section 13(1)(aa) and 13(1)(b) of the Income Tax Ordinance, 1979 is not without force. Consequently, we grant leave in all these connected petitions to consider the above question of law. The appeals shall be heard on present record within six months and parties may. If so required, place on record additional documents.''
3. The claim of the respondents/assessee in the present case was that immovable property subject-matter of an unregistered sale agreement was wrongly added by the Assessing Officer in their assets to determine their tax liability for the Assessment Years 1992-93 and 1994-95 as they already having sold the property in question were no more owners of the property and notwithstanding the fact that the property was not transferred through registered sale- deed, the same for all intents and purposes, would be- treated as the property of buyer and its addition in.
The name of assessee for the purpose of taxability under Section 13(1 )(aa) of the Income Tax Ordinance. 1979. Was without lawful authority. The respondents, being aggrieved of the order of Assessing Officer, filed an appeal before Commissioner of Income Tax (Appeals-I), Peshawar, who vide order dated 3.8.1999 disposed of the same in the following terms:- "Viewed in the light of above facts assessments for assess years 1990-91, 1992-93 and 1994-95 are set aside on the issue of addition under Section 13(1)(aa) with the direction to reframe the assessm ents in the light of above directions.
"As a result appeals for all the years on the issue of income from' legal practice are succeeded whereas assessm ents for asset years 1991-91, 1992-93 and 1994-95 on the issue of additions under Section 13(1 )(aa) are set aside."
4. The department being- dis-satisfied with the order of the Commissioner (Appeals.-I) filed separate appeals before the Income Tax Appellate Tribunal (Bench), at Peshawar, under Section 132 of the Income Tax Ordinance, 1979, and on dismissal of these appeals by the Tribunal vide order dated 17,3.2004; the department filed Income Tax References under Section 133(4) of the Income Tax Ordinance, 2001, in the' Peshawar High Court, Peshawar. The Tax References were dismissed by the learned Division Bench of the High Court vide impugned judgment with the observation that unregistered sale agreement by virtue of Section 53-A of the Transfer of Property Act, 1882, was capable of enforcement under-the law, therefore, the same would have the status of document of title under the tax laws and consequently, the assessment of. The Income Tax of the assessee with addition of the subject property in terms of Section 13(1 )(aa) of the Income Tax Ordinance, 1979, would not be legal.
5. The learned counsel for the appellant has contended that sale agreement either registered or unregistered, is not as such recognized a document of title in law and unless the sale is completed in terms of Section 54 of the Transfer of Property Act, 1882, read with Section 17 of the Registration Act, 1908, the title of the property would not be changed-, in nutshell, the contention of the learned counsel is that in absence of transfer of ownership in proper manner in accordance with law. The title of the property would remain with the original owner and notwithstanding the execution of sale agreement registered or un-registered the property subject-matter of such agreement would be treated the property of the original owner for the purpose of taxability under Income Tax Ordinance, in the present case, the Tribunal as well as the High Court were misled in holding that property subject-matter of sate agreement, would not be considered the property of respondents for the purpose of assessm ent under Income Tax Ordinance.
6. Despite service, no one appeared op behalf of the respondents in these appeals therefore, they are proceeded against ex parte.
7. The learned Judges in the High Court with reference to Section 53-A of the Transfer of Property Act, 1882, held that the title in the property subject-matter of sale agreement would vest in the buyer and would not be added as property of assessee under Section 13(1 )(aa) of the Income Tax Ordinance, 1979.
8. The law is that sale agreement registered or unregistered may not as such confer title and unless the title is established under the law, it may not be ispo facto treated a document of title, therefore, the assertion that notwithstanding the transfer of ownership of property through a registered deed, the assessee having sold. The property by way of an agreement to sell was not more real owner of the property under the law. Has no legal sanction. The sale agreement in respect of immoveable property may create a legal right in favour of purchaser of property to claim its ownership but cannot as such confer the title, therefore, oral acknowledgement of title on the basis of an agreement may not have the implication of change of ownership, in the present case, the assessee under the law was owner of the property subject-matter of agreement for all practical purposes including the assessment for the purpose of income. Tax and consequently, without transfer of the property in the name of prospective buyer in the manner recognized under the law, its status would remain unchanged.
9. The Commissioner (Appeals-I) partly allowed the appeal to the extent of addition of Section 13(1;
(b) of Income Tax Ordinance 1979 in respect of the legal practitioner income with direction for re- framing of the assessm ent in terms of Section 13(1)(aa) of the Income Tax Ordinance, 1979. The examination of the question of law raised therein in the light of the facts in the background would lead to the conclusion that no exception can be taken to the order passed by the Commissioner (Appeals-I) and t Income Tax Appellate Tribunal as well as High Court have been mis-directed in forming a contrary opinion. The settled legal position is that without transfer of property in proper manner recognized in law, it would be treated the property of original owner and the provision of Section 53-A of the Transfer of Property Act, 1882, would not automatically take effect to exclude the operation of Section 13(1 )(aa) of Income Tax Ordinance, 1979, for the purpose of assessment of the income tax.
10. In the light of the foregoing reasons, we are of the considered opinion that the view taken by the Income Tax Appellate Tribunal and the High Court was not in consonance to the spirit of law either under Transfer of Property Act, 1882, or for the purpose of Income Tax Ordinance, 1979.
11. These are the reasons for our short order of even date by virtue of which these appeals were allowed and all the cases were remanded for re-assessment in terms of the order of /Commissioner Income Tax (Appeals-I), Peshawar. The short order reproduced hereunder, shall be treated as part of this judgment:- "For the reasons to be recorded later, these connected appeals Nos. 1280 to 1285 are allowed, the common order impugned in these appeals is set aside and all the cases are remanded for reassessm ent in terms of the order Of Commissioner, Income Tax (Appeals), Peshawar.
12. There shall be no order as to costs.