' Z. A. CHANNA , J.-These eight petitions raise a common point, namely, the extent of the powers of the Excise and Taxation authorities to revise, during the currency of a valuation list, the property tax on old self-occupied buildings to the City of Karachi. They have accordingly been heard together and are being disposed of by this judgment.
2. The material facts for the disposal of them petitions are that the petitioners are owners/self: occupants of different properties, all of which are located in Zaihunnissa Street, which is the main shopping Centre of Karachi. These properties, according to the petitioners, are very old having been constructed over sixty years ago. All these properties, which are being used for commercial purposes, originally belonged to a Parsi lady, by name Mrs. Nalli Bag K. Spencer, from whom the petitioners are stated to have purchased the same in 1947-48. The gross annual rental value, hereinafter for the sake of brevity, referred to as the G.A.R,V., of the properties' in question was revised in 1967, when the valuation lists of the properties liable to tax under the Sind Urban Immovable Property Tax Act, 1958, hereinafter referred to as the said Act, was last revised. However, on 29-4-1971, in pursuance of the order passed under section 10(2) of the said. Act by the Director- General, Excise and Taxation, notices were issued to the petitioners to show cause why the G. A. R. V.
Of the properties in question be not enhanced. The notices proposed to enhance the G. A. R. V. In to case of the property of petitioner Abdullah in Petition No, 632/73, from Rs, 3,600 to Rs, 11,748; of petitioner Shamsul Arfin, in Petition No, 633/73, from Rs, 1,600 to Re. 5,616; of petitioner Mohammad Yasin, in Petition No 634/73, from Rs, 1,800 to Rs, 9,864; of petitioner Ibrahim in Petition No 635/73, from Rs, 2,100 to Rs 415; or yetitioner Mst. Bathir Khanum, in Petition No, 636/73, from Rs, 2,100 to Rs, 7,616; of petitioner Mst. Aisha Bait in Petition No, 637/73, from Rs, 7,800 to RA. 31,033; of petitioner Hassan Ali, in Petition N es 638/73, from Rs, 2,100 to Rs, 8,959 and of petitioner Nazlur Reiman, in Petition No, 639/73, from Rs, 1,818 to Rs, 7,767. The G. A. R. V. Of all these properties was proposed to be enhanced with retrospective effect from 1-7-1968.
3. The petitioners submitted their objections before the Assessing Authority, but their objections were rejected snd the G. A. R. V. Of the properties in question were enhanced as proposed in the notices issued to the petitioners. The petitioners accordingly filed appeals before the Additional Director. Excise and Taxation, who by his order, dated 30.10-1971, reduced the G. A. R. V. Of the property of petitioner Abdullah to Rs, 9,100, of petitioner Shamsul Arfin to Rs, 4.700, of petitioner Mohanrrnad Yasin to Rs, 6.800, of petitioner Ibrahim to Rs, 6,000, of petitioner Mst. Bashir Khanum to to Rs, 6,150, of petitioner Mst. Aisha Bei to Rs, 13,200, of petitioner Hassan Ali to Rs, 7,450 and o!
Petitiener Fazlur Reiman to Rs, 6,5 2. The petitioners filed revisions before the Director-General, Excise and Taxation, but these were all rejected by him, by his orders dated 11-11-1972, It is these orders of the three Excise and Taxation Authorities which are being impugned by these petitions.
4. Mr. Hassan A. Shaikh, who appeared for all the petitioners assailed the revision of the G. A. R. V. Of the petitioners' properties by the impugned orders on the following grounds:-
(1) That the order of the third respondent, the Director-General, in stto rnotu ordering the revision of the G. A. R. V. Of the petitioners') properties is ultra vises and contrary to the provisions of section 10(2 of the said Act; (If that the re-assessm ent made by the respondents of the properties of the peltioners is beyond the provisions of sections 7 and 9 of the said Act;
(iii) that there was no evidence or ground before the assessing authority for revising the 0. A. R. V.
Of the petitioner's properties; and !Iv) that the G. A. R. V. Of the petitioner's properties could not he revised in view of the provisions of the Sind Urban Rent Restriction Ordinance, 1959.
5. In support of his first contention, Mr. Hassan A. Shaikh submitted that though under section 10(2) of the said Act the third respondent seemed to be invested with wide powers to revise any order passed by or to pass any order in respect of any proceedings taken by a subordinate Excise and Taxation authority, he can only tike action under the said section if he has called for and examined the record of the proceedings or the order to be revised or modified, and that further before he can pass an order adverse to a party he must give him an opportunity of being heard as required by the principles of natural justice. Mr. Hassan A. Shaikh complained that the order of the third respondent, remanding the case of the assessment or the properties of the petitioners to the first respondent and directing him to initiate fresh assessment under section 5 of the said Act in respect of the said properties, was pawed on the basis of an order made by the Additional Commissioner, Karachi, in an altogether different case, without the record of the proceedings or the orders of the assessing authority in respect of the petitioner's properties being before hint (the third respordeet and without his giving any opportunity of hearing or notice to the petitioners.
6. The learned Advocate-General, however, submitted that the petitioners had not in their petitions assailed or sought relief in respect of the above remand order of the third respondent, which was passed as far back as on 24-10-1970, and reference to whiten has been made not only in the show- cause notices issued to the petitioners by the first respondent, but also in the order, dated 18-5- 1971, of the 2nd respondent, and consequently the petitioners could not be permitted to challenge the said order. We find force in the contention of the learned Advocate-General and hence do not feet called upon to examir e the vires of the said order.
7. Coming to the next submission of Mr. Hassan A. Shaikh, there is no doubt that the assessment of the properties of the petitioners could not be revised, nor in fact was revised under the provisions of section 7 of the said Act. That section lays down the mode by which a valuation list is to be periodically made. However, the respondents were not purporting to make a periodic valuation list but only to revise the assessm ent of the petitioners' properties. Thus the respondents' action would amount to making modifications in the valuation list so far as the properties of the petitioners are concerned. This power is conferred by section 9 of the said Act. They show-cause notices to the petitioners were also issued to them by the first respondent under that section, which inter alia empowers the assessing authority, at any time, to make such amendments in the valuation list as appear to it to be necessary in order to bring the list into accord with existing circumtances." if, therefore, the assessm ent of any property as shown in the valuation list is not in accord with the existing circumstances,. The assessing authority has the power, even during the currency of the valuation list, to revise the assessment of such property and modify the assessment list accordingly, of course after giving the prescribed notice to the owner of the property concerned and taking into consideration any objections that he may make to the proposed revision.
8. It next fails to be considered whether the valuation of the petitioners' properties as shown in the valuation list of 1967 was not or had ceased to be in accord with "existing circumstances".
Connected with this issue is the question whether the impugned revision of the G. A. R. V. Of the petitioners' properties was on the basis of the principles for ascertainment of G. A. R. V. Laid down in section 5 of the said Act. The said section provides that the annual value of any property shall be ascertained by estimating the gross. Annual rent at which such property might reasonably be expected to be let from year to year, less the allowances for any furniture let with the property, the cost of repairs to the prooeity and any land revenue paid thereon. The Assessing Authority, however, while observing in his impugned order that he was revising the a A. R. V. Of the petitioners' properties keeping in view their locality, rates of rent in the locality and the condition of the buildings, appears to have applied what is known as the "fair formula," as observed by the 2nd respondent in his impugned order of 30-10-1971. The second respondent has also in his impugned order adoped this formula though with certain modifications. We have not been taken into confidence nor does it appear from tne impugned orders as to what this formula exactly is, but from the impugned orders of the first and second respondents, it appears that the basis of this formula is a fixed rate per square foot of the property to be assessed, and different rates have been laid down for different localities and different standards of construction. It is quite possible that the G. A. R. V. Of the petitioners' properties was not assessed in 1967 according to the so-called "fair formula", and the revised G. A. R. V. Of these properties may be in consonance with the said formula. That formula may be appropriate in the case of new buildings or constructions or those the ceding of rent whereof is not limited under the Sind Urban Rent Restriction Ordinance, 1959, but the point to b considered is whether the said formula can be made the sole basis of determining the G. A. R. V. Of buildings, the coining of rent whereof is fixed under the said Ordinance, without taking into consideration and giving due weight to such ceiling.
9. It was contended on behalf of the petitioners by Mr. Hassan A. Shaikh that not only the circumstances in relation to the petitioners' properties, since their G. A. R. V. Was revised in 1967, had not altered in that they continued, as before, to be self-occupied by the petitioners, but further the impugned orders have not taken into consideration the material circumstance that ceiling had been fixed for the rent which could be charged for the properties in question under the Sind Urban Rent Restriction Ordinance 1959. In support of his contention that the latter was a material circumtance, which could not possibly be ignored. Mr. Hassan A. Shaikh placed reliance on the decision of their Lordships of the Supreme Court in the case of Abdullah Mohammad Peer Mohammad v. Karachi Municipal Corporation (1). The learned Advocate-General also placed reliance on that decision in support of his contention that the impugned orders suffer from no illegality. His contention was that since there was no evidence to show that the rent of the petitioners' properties had been fixed or determined under the aforesaid Ordinance, the ceiling of rent prescribed under that Ordinance could not possibly be taken into consideration by the respondents. The case under report arose out of assessment of the annual value of certain hotels in the city of Karachi for levy of property tax under the City of Karachi Municipal Act, 1933. Section 97 of that Act empowered the Karachi Municipality to impose property tax on the 'annual value' of buildings and lands, and 'annual value' was defined to mean "the annual rent (less a deduction of 10%) for which any building or land, inclusive of furniture or machinery contained or situate therein or thereon might reasonahiy be expected to be let from year to year It will be seen that the basis of assessm ent under section 5 of the said Act is practically identical with that under the Karachi Municipal Act, 1933. It was argued before their Lordships that the 'annual rental value' of a building under the above Municipal Act could not be fixed in excess of 'fair rent' fixed by the Karachi Rent Restriction Act, 1953. On the other hand, it was argued on behalf of the Karachi Municipality that since 'fair rent' is to be fixed by the Controller under the Act last mentioned, and the prohibition contained in
(1) P D 1971 SC 130 ' section 7 of that Act is agaiest the charging by any landlord of any rent higher than the "fair rent' fixed by the Controller, provisions of the said Act relating to fair rant' could not be taken into consideration and had no relevancy for the purposes of determining the 'annual value' under the Karachi Municipal Act. Their Lordships of the Supreme Court, while agreeing with the contentions made on behalf of the Karachi Minicipality that lair rent' could not be determined without applying to the Controller under the Karachi Rent Restriction Act, 1953, observed as follows:- "It is unnecessary to pursue the argument any further for even if the Karachi Rent Restriction Act, 1953, in terms did not apply to assessment under the City of Karachi Municipal Act, 1933 its provisions constituted a relevant consideration in determining what a hypothetical tenant might reasonably be expected to pay for a building or land from year to year.
' We agree, however, in the view that in the absence of any mode prescribed in the tetute the Chief Assessor and Collector is not bound to apply any particular formula for determining the 'annual value' and that in terms the provisions of the Karachi Rent Restriction Act, 1953, did not apply to the assessm ent of 'annual value' under the City of Karachi Municipal Act, 1933. But as required by section 107(1) the Municipal Commissioner must act in accordance with the principle prescribed in section 97(2) and determine annual rent (less a deduction of 10 per cent ) for which any building or land exclusive of which any building or land exclusive of furniture or machinery contained or situate therein might reasonably be expected to be let from year to year. In arriving at this conclusion he should take all the circumstances into consideration one of them being the ceilings fixed in the Karachi Rent Restriction Act, 1953. Since replaced by the West Pakistan Urban Rent Restriction Ordinance VI of 199. As observed earlier a hypothetical tenant would not be acting reasonably in offering or agreeing to pay rent at a rate forbidden by law."
10. The above observations of the Supreme Court, in our opinion, apply with greater force to the case of the petitioners, for under the West Pakistan Urban Rent Restriction Ordinance, 1959, as amended by West Pakistan Urban Rent Restriction (Amendment) Act, 1965, the 'fair rent' of non- residential buildings in Karachi, constructed before 15th August, 1947, which were let on or prior to the first day of December, 149, has been fixed by the Ordinance itself, and has not been left to be determined by or at the discretion of the Rent Controller. Since, it is the case of petitio- ners that their properties in question were constructed 60 years ago except in the case cf part of the property of petitioner Met. Aisha Bai, which was added much later on, and further according to the averments made by the petitioners, which have not been disputed, that they have been in occupation of their respective properties since 1947-48 the provisions of subsection (7 of section 4 of the West Pakistan Urban Rent Restriction Ordinance, fixing the ceiling of 'fair rent', will apply to such properties. This was, therefore, in the words of their Lordships of the Supreme Court "a relevant consideration in determining what a hypothetical tenant might reasonably be expected to pay for a building or land from year to year". This relevant consideration has admittedly not been taken into account by the respondents in passing the impugned orders. We are, therefore, of the opinion that the Unpaged orders suffer from a legal infirmity.
11. The learned Additional Advocate-General invited our attention to the counter-a a davits filed by the Excise and Taxation Sub-Inspector in the office of respondent No, 1 in Petitions Nos. 632/73, 633/73 and 637/73. According to the averments made in the counter-affidavit in Petition No, 632/ 73, petitioner Abdullah in that case has let out the property to Messrs Cafe Oxford, who are said to be paying him a rent of Rs, 1,600 per month and additionally Messrs Cafe Oxford are realising Rs, 20 per day from the Pan-Cabin attached to the Cafe. Mr. Hassan A. Shaikh strongly disputed these allegations and produced for our inspection documents to show that Cafe Oxford was registered in the name of and was being run by petitioner Abdullah. He also produced some photographs to show that there was no Pan-Cabin in the said Cafe or anywhere else on the property of petitioner Abdullah. In the counter-affidavit filed in Petition No, 633/73, it is asserted that a small portion of the premises of the petitioner Sharnsul Arlin has been let out ro a Book-stall at Re. 30 per day and in another portion a Show-case of Sofenee Products has been established and this fetches a rent of Rs, 9es per month. In Writ Petition No, 637/73 it is stated in the counter-affidavit of the Excise and Taxation Sub-Inspector that the ground-floor has been let out to Messrs Olympia Watch Company and this alone fetches a rental of Rs, 600 per month. These, however, have not been the grounds on th basis of which the impugned orders were passed and the G. A. R. V. Of the properties of the petitioners were revised. Even if we were to accept the contentions in the counter-affidavits regarding the letting out of portions of the properties in dispute, the question woald arise as to from what date these properties were let out. This is an important question in view of the fact that the G.
A. R. V. Was enhanced and revised with effect from 1-7-1968.
12. The learned Advocate-General also invited our attention to 3 unreported decisions of this Court in C. Es. Nos. 524/72 (1), i.15/59 (2), and 257/76 and 579/76 (3). One of us was party to the decision in the last-name& cases, In C. P. 524/72 a Division Bench of this Court has held that revision of assessm ent of commercial property in the Sadder area of City of Karachi, from Rs, 28,000 to Rs, 48,000, on the basis of 1 rupee per Taft,, is not unreasonable in the circumstances of the case. In C.
P. 115/59, one of the questions which arose for consideration of the Division Bench that decided the said petition was the mode of assessment and determination of the value of the property for the purposes of the Capital Gains Tax under section 16 of the West Pakistan Finance Act.
163. The said section speaks of 'fair market value of the property' in determining the value. It was held that in taking 16 years rent, at the annual rental value of Rs, 11,892, as the value of the property, the Excise and Taxation authorities had only taken a reasonable view. In C. Ps. 275/76 and 579/76, it was held that the assessee's property should be assessed, not according to the commercial tormula adopted by the Excisi. And Taxation authorities, but in accordance with the formula for industrial units, and accordingly the case was remanded to the Director-General, Excise and Taxation, for so assessing the property of the assessee. These decisions, do not in our opinion, assist the case of the respondents.
13. Since the respondents have failed to take into consideration, a hilt revising the G. A. R. V. Of the petitioners' properties, the very relevant consideration is that "the hypothetical tenant would not be acting reasonably in offering or agreeing to pay rent at a rate forbidden by law", nor do the impugned orders indicate that amendments in the valuation list relating to the properties in question are found to be necessary for bringing the list into accord with existing circumstance, we would set aside the impugned orders as being without lawful authority, and remand the case to the third respondent to decide the revision applications filed by the petitioners, after giving them an opportunity of being heard, and taking into account the above relevant consideration and also to consider whether amendments in the G. A. R. V. Of the petitioner properties are necessary (and if so, to what merit) in order to bring the valuation list into accord with existing circumstances.
' In the circumstances of the case, we make no order as to costs.
Order accodingly.