The appeal has been filed on the instance of the assessee wherein initiation of proceedings u/s 65 and subsequent additions made u/s. 13 is contested to be illegal and also unjustified even on the facts of the case.
2. The assessee and individual filed his original return declaring income from interest amounting to Rs. 55,890/- which was accepted under Self Assessment Scheme. Subsequently, during the assessm ent proceedings for the assessment year 1994-95, the department initiated proceedings u/s. 65 after observing that the impugned assessee has purchased a plot No. 26 Block-A, Part-1 of Government Employees Co-operative Housing Colony situated in Chak No. 213/RB, Faisalabad. The size of the plot is, 1 kanal 19 marlas and 6 Sarsai. The declared average rate of the assessee per maria is Rs. 14,019/-. The value was considered towards lower side and the same was pitched at the rate of 28,000/- per maria, thereby addition was made at Rs. 5,54,667/-. In this regard the case relied upon by Learned I.T.O, was NTR No. 0600199 in the case of Dr. Fateh Muhammad Chaudhry whose plot is 1 kanal, 7 Sarsai in size and the same exists in phase-II of the same society. The assessees case is that the referred plot not a parallel plot as the same is two kilometers away from the impugned plot and the same is in a different phaze of the same society. The plot which assessee considers is relevant exists at NTR No. 03-04-0661443 which is in the same locality and infect in the same line where the assessees plot exist. The A.R. Has pointed it out that the plot referred by the assessee is just three plots away from the impugned plot, hence the same is more relevant then the plot referred by the I.T.O. He informed that plot No. 29 was also assessed at Rs.
28,000/-. But however, in appeal before the first appellate authority the value was reduced to Rs.
19386/- per maria. The departmental appeal filed against this order was dismissed by Income Tax Appellate Tribunal in limine for want of certified copies of the impugned order. The value of this plot attained finality in this manner.
3. The assessee filed an appeal before the CIT(A) Zone-II, Faisalabad contesting the case on various points including opining of the case u/s. 65, service of notice relevance of the referred case and the method of adopting valuation under section 13. The first appellate authority repelled the points regarding legality of notice u/s. 65 etc; however, reduced the addition to Rs. 4,50,000/- as against Rs. 5,54,667/-.
4. Before us the learned A.R. Of the assessee Mr. Muhammad Younas Khalid argues that the very initiation of the proceedings u/s. 65 was illegal for want of definite information. He said that the word "Definite/information" has been defined in detail in the judgments reported as 1988-57-Tax- 14(AJK) (1993)- 68 Tax 86 Supreme Court of Pakistan, (1993) 68 Tax (Trib.) 155, 1996 P.CT.L.R. 1364 (Trib.). In all the above judgments the main thrust is on the definition which does not allow inclusion of any estimate, gossip or bar surmises. The word definite as defined in the referred judgments refers to something with which one can form a definite opinion the information i.e., authenticated and which leads to a belief and does not give rise to CL. 133 an estimate. In short it cannot be based on vague or general presumption and it only refers to fix, precise and which is all clear or specific in all respects. The word has been defined in Blacks Law Dictionary as follows:-- "Definite" Fixed, determined, defined, bounded, "Information" and accusation exhibited against a person for some criminal offense, without an indictment. An accusation in the nature of an indictment, from which it differs only in being presented by a competent public officer on his oath of office, instead of a grand jury on their oath. A written accusation made by a public prosecutor without the intervention of a grand jury. Salvail V. Sharkey 108 R. I. 63, 271 A. 2nd 814, 817. In most states the information may be used in place of a grand jury indictment to bring a person to trial. As regards federal crimes, see Fed. R. Crimes. P. 7 See also arraignment Indictment. As to joinder of informations, see Joinder."
5. The other arguments taken by him was in respect of nonticking of the notice u/s. 65, he said that non-ticking of any of the four points in the notice u/s. 65 so as to determine the base of the re- opening that the I.T.O, has not applied his mind and he infect and nothing on record to pin-point under what precise provision of enactment, he wish to proceed. This way by not applying his mind he has made the proceedings as unlawful which alone in the opinion of the A.R. Refers the whole proceedings as void and illegal ab initio. Reliance in respect thereto has been made on the judgments reported as 1971-82-ITR- 821 Supreme Court of India, 1959-35-ITR-383 also Supreme Court of India, 1996-74-Tax. 229, Lahore High Court, 1988- PTD-973. In this regard the judgment given by honourable High Court of Pakistan being more applicable, relevant part is reproduced which is as follows "The notice dated 21-2-1995 under section 65 aforementioned issued to the petitioner does not indicate under what sub-section of the section it has been issued; when confronted, Hie Learned counsel for the department contended that as already show cause notice was issued to the petitioner which the petitioner had submitted explanation; is understood that the notice has been issued under sub-para-C of section 65(1) of the Ordinance, which is misconceived; as under the law, the assessing officer is required to apply his mind cautiously and to indicate the assessee under section 65(1) under what reason; his assessment is sought to be reopened as reopening of a case to some extent is a penal action; so the assessee he prepared to meet the consequence of reopening of an assessment. As the notice prima facie is defective and the error is not curable as it does not indicate the reason of reasons he said income already assessed in the hands of the petitioner.
Without discussing the merits of the case, as the notice itself, being illegal ab initio, the proceedings initiated on the basis of the said notice are set aside, the petition is accepted accordingly.
While advancing his arguments, he said that the proceedings being illegal the super-structure built there on automatically crumbles to ground. The aforementioned judgments he said applies with more force on the impugned case as the 1TO had not issued a Show-cause notice to the assessee, prior to the issuance of a notice under section 65 which also is against the principle of natural justice and the notice even on this score was illegal."
6. He further said that there was no reason to discard the declared value being based on a registered with some stronger evidence in term of definite information. The cases relied upon in support of this arguments are:- NTR 1995 Trib-11 1991- PTD (Trib) 639 1993-PTD (Trib) 952 We shall mention here a para from 1993 PTD (Trib.) 952 = 957 which is as follows:~ "The bare reading of the bare language of section 13(l)(d) of the Ordinance would show that it does not say that where an assessee has made any investment or acquired any article the difference between the market value of the investment or the article and the consideration paid by the assessee for making the investment of acquiring the article will be deemed as income of the assessee. Clause (d) ibid would be applicable only where the I.T.O, finds that the assessee has expended more amount for making the investment or acquiring the valuable article than the amount recorded in the books of accounts maintained by the assessee or shown in the wealth statement furnished under section 58 of the Ordinance."
7. Coming to the merits of the case he argued that besides difference in area, the referred plot is two K.M. Away from the impugned plot. In this regard in his opinion the plot referred by the assessee being of the same size and situated in the same lane was more relevant. On the question that the same was pitched to a lower figure by Learned CIT(A) and that the departmental appeal in respect there to having been rejected on the basis of a legal lacuna in the appeal how can the same be considered to have attained finality in respect of estimate by the ITAT. He replied that the value adopted by the Learned CIT(A) was also after considering facts and circumstances of the case and the value has neither been contested to be lower in any other forum nor it has been adopted at a higher rate in any other parallel case.
8. He also argued that even otherwise adoption of value at Rs. 5,49,667/- was not tenable in the eyes of law as no mandatory notice required u/s 13(l)(d) and 13(2) for making addition of Rs.
5,54,667/- was issued by him asking for explanation regarding source of investment for the additional amount which was a pre-condition before making assessment u/s. 13.
The summary of above discussion is as follows (i) That the plot referred by the department besides being smaller in size is also not comparable even otherwise being in a different phase and also away by two K.M. From the impugned property.
(ii) That the reference given by the assessee is of some help to the assessee being a plot of the same line where the impugned plot exists and also for the reason that the same is identical in size, but we still can not rely upon the same as the Tribunal rejected departmental appeal on technical flaws and issue of valuation has not been thrashed out in keeping view the facts of that case.
(iii) The word "definite information" as defined by the Superior Courts and used in section 65 presupposes the existence of such evidence which can not be controverted' with arguments. In the impugned case it is established that the case referred by the department was not a parallel case.
This fact is also established by the action of Learned CIT(A) who reduced the value through partially. By discarding ITOs base of estimate the Learned CIT(A) has supported the assessees plea that the value adopted at Rs. 28,000/- per maria in the case of the plot which became base of reopening was not at all relevant. Even otherwise the fact that the department has adopted a different value of some other plot cannot be considered as a definite information. The re-opening of assessm ent u/s 65 is bound to end in enhancement in the income of the assessee and may also end in penalty. This is why the legislature has used the word "definite" (underlining is ours for emphasis) so as to qualify the word information with it. Since the superior courts have already threshed out the definition, of the word "definite information", in the above referred judgments, we need not go into it one again. We shall only add that the department should work hard before re- opening assessm ent u/s 65 so that the proceedings initiated thereof may stand the test of appeal and well deserved revenue is not lost for slack of some Government functionary. Even otherwise no one should be penalized only on the basis of estimates, gossips and surmises. The above referred judgment in term of acceptance of agreement between two Muslims, acceptance of registered deed etc., by the ITAT and still higher judicial forums is pointer of the fact that the courts wish to put their foot down on the arbitrary use of discretion and to give benefit of doubt to the assessee on the questions relating to rejection of the agreements and of registered deeds. There is now unanimity in opinion of the Superior Courts that the same should not straightway be rejected without having evidence in contrary. We, also do not have any doubt in our mind that the law has development to the extent and have almost attained now finality in respect of above issues.
Applying the same on the present case we give our finding as follows That the 1TO should not re- open the assessm ent u/s 65 on the basis of estimates and must bring evidence which can not be refuted by arguments as the requirement of law in term of evidence can not be fulfilled by relying upon the value of some other plot being different from the declared by the assessee. We, therefore, do not agree that there was some definite information available for re-opening of assessment u/s
65. We also can not support discarding of registered deed without having some evidence that the same was incorrect. These two lacunas coupled with the defect of not ticking the such provision of Section 65 so as to determine whether the assessee is under assessed or escaped assessment, made the whole proceeding as illegal. The notice u/s 65 as such is cancelled. The effect of our finding is that original order prior to reopening shall stand in the eyes of law. The appeal is disposed of in the manner and to the extent as mentioned above. revisions by the competent authorities. Therefore, it is advisable to consult the official sources or legal professionals for the most up-to-date and accurate information.