ABDUL MALIK, ACCOUNTANT MEMBER.- In this case the assessee is in appeal against order of the CIT for the year 1989-90.
2. Relevant facts are that the Assessment Year was completed u/S. 59(1) at an net income of Rs.
68,949/- during the course of assessment proceedings for the Assessment Year 1991-92 it came to the notice of the Income Tax Officer that the assesses had purchased a residential plot. The plot of the declared value being below the market prices in view of a parallel case at NTN.05-121273. A show cause notice was issued for reopening the assessment. The Income Tax Officer found the reply unsatisfactory and reopened the assessment.
3. The plot under discussion is located in area of Garhi Shahu value of the plot was adopted at Rs.
20,000/-per maria. The plot being two Kanals 8 marlas and 94 wq. Ft. At Rs. 9,68,354/-. The declared value was Rs. 4,44,000/- and the balance addition was made by the Income Tax Officer at Rs. 5,24,354/-.
4. When the matter reached before the learned. CIT, he found the action of reopening justified and reduced valuation of the plot from Rs. 20,000/- to Rs. 15,500/-per marla.
5. Now the assessee is before this Tribunal and inter alia has taken the following grounds:-
(i) The information in the hands of the to was not a definite information but a change in opinion.
(ii) A fair market value is a price which willing buyer is agreeable to pay to seller.
(iii) The sum should really have been expended.
6. The learned AR in his arguments relied upon the case of M/s. Chappie Builders 1993- 68-Tax 1 (S.C. Pakistan). He also argued that the to obtained no definite information, it is his own opinion which is not supported by any evidence. The declared value was in accordance with valuation made by the district authorities. The learned AR also said that approval was not obtained.
7. Taking these issues, we can say that the information in the hands of the Income Tax Officer was a definite information because it has definable para meters. An information would not be in the nature of definite information if the para-meter of the information cannot be defined, It is a plot which has been valued at a certain figure by the Income Tax Officer keeping in view a parallel case.
Ordinarily, a reasonable person would not sell his property below in the market value, unless there is some special reason like the plot having some disadvantaged location or being below the adjoining areas, etc.
8. The learned A.R. maintained that in this case the assessee paid a price of a willing buyer and the Income Tax Officer had no jurisdiction to question this price and once having accepted this price, he now cannot go back and come up with a revised valuation.
9. This line of the argument of AR of the assessee when examined in the back-ground of a reported judgement of Burhan Engineering Company 1985-52-Tax-55 H.C. Karachi cannot be accepted, In this case their lordship observed that:- "reason to believe" is an honest conclusion drawn from material before the ITO".
What the Income Tax Officer cannot do is to proceed only suspicion guess work or reumour?
10. In the present circumstances, the information in the hands of the Income Tax Officer was not in the nature of information based on suspicion or reumour Under these circumstances, it was a definite information.
11. The next line of the argument of the learned AR is whether a case can be reopened on the basis of a different value of land compared to disclosed by the assessee. This issue was examined in the case of M/s Crescent Art Fabrics Ltd. 1988-58-Tax-137-H.C. Lahore, It was observed by their lordship that:- where assessm ent has been framed under self assessment scheme without indicating the cost of construction in detail, the assessm ent would be reopened.
12. In another case reported as Muhammad Bashir 1983- 47-Tax-16 H.C. Lahore sources of capital investment were accepted in house property but subsequently information obtained found that the information originally supplied was false and the house property was found to be grossly under valued. Notice u/S. 65 on discovery of new facts was held to be legal.
13. In the present case the assessme nt having been made under self assessment scheme and original valuation having been accepted without forming an opinion, there is no bar contained in law to issue notice under section 65 as held in the cases cited above.
14. Now coming to the stand of the AR regarding case of M/s Chappel Builders 1993-68-Tax 1 (S.C.Pak). In this case the assessm ent under self-assessment scheme was completed after scrutiny of the account books and relevant information which was asked for. Under these circumstances when the to had applies his mind to the facts of the cars and then accepted the genuineness of those facts, his action u/S. 65 was considered to be changed in opinion. Now it can be clearly seen that where the to had applied his mind to the facts of the case and accepted them as genuine he could not take action u/S. 65 but where at the time of original assessment, it was in accordance with declared version of the assessee. Whether the facts relate to valuation or not will not prevent him from taking action u/S. 65. In the present case, the to has not come to a conclusion nor examined the facts at the time of original assessment u/S. 59(1) and therefore, there was no change in opinion. On the other hand, the action of the to is more closely relief to the case of Genning School reported as (1993) SCMR- 96. In the case of school cited above, again the assessm ent was made under self assessment scheme. But the to cut not apply his mind to the facts of the case while making assessment u/S. 59(1) his subsequent action u/S. 65 was therefore found to be in accordance with law.
15. In view of the foregoing discussion, action of the Income Tax Officer i/S 65 was valid and it was rightly upheld by the learned. CIT.
16. Next issue relates to the valuation of plot, It was argued at the time of assessment before the to as follows:- a. The parallel case plot was a corner plot. b. When the parallel case plot was purchased there was a residential house with A-Class construction on it. c. The parallel case plot was located in a commercial area. d. The plot of the assessee is misshapen and with a narrow approach.
17. The Income Tax Officer regarding these facts observed:
(i) The said plot was not a corner plot.
(ii) When the house and the said plot were bought by the assessee it was an old building which has now been renovated and the income tax officer made a due allowance for the property constructed on the plot.
(iii) In the case of parallel plot, the plot. is not in a designated commercial area. Nevertheless it bas been used for commercial purposes.
(iv) The to observed that the assessee's plot was an ideal plot for construction of late etc.
18. When the matter reached before the learned. CIT, he gave relief to the assessee by reducing per maria rate from Rs. 20,000/-to Rs. 15,500/-.
19. However the learned Income Tax Officer having observed that the plot is an ideal for construction of flats, has himself admitted that the plot is not suitable for commercial purpose like construction of shops etc. Under these circumstances, the valuation will have to be adopted the one in the case of the residential plot. According to the valuation value for 1991 in the area of Gari Shahu rates were fixed by the district authorities from Rs. 40,000/- to Rs. 35,000/-. However due to 1 misshapen condition of the plot it would be fair if value is taken at Rs. 13,000/-per marla.
20. Under these circumstances, the valuation is further reduced to Rs. 13,000/-per marla.
I an ideal plot for construction of late etc.
18. When the matter reached before the learned. CIT, he gave relief to the assessee by reducing per maria rate from Rs. 20,000/-to Rs. 15,500/-.
19. However the learned Income Tax Officer having observed that the plot is ah ideal for construction of flats, has himself admitted that the plot is not suitable for commercial purpose like construction of shops etc. Under these circumstances, the valuation will have to be adopted the one in the case of the residential plot. According to the valuation value for 1991 in the area of Gari Shahu rates were fixed by the district authorities from Rs. 40,000/- to Rs. 35,000/-. However due to misshapen condition of the plot it would be fair if value is taken at Rs. 13,000/-per marla.
20. Under these circumstances, the valuation is further reduced to Rs. 13,000/-per marla.