NASIM SIKANDAR, J.-- This reference under Section 136(2) of the Income Tax Ordinance, 1979 (since repealed) was admitted on 23.5.2001 to consider and answer the following four questions of law which were stated to have arisen out of the impugned order of the Tribunal dated 11.10.1994:-
(i) Whether on the facts and in the circumstances of the case the Income Tax Appellate Tribunal was correct in rejecting the grounds taken by the appellant resisting the issuance of the notice under Section 65 whereby all the proceedings towards the completion of the assessment for the assessm ent year 1989-90 were sought to be declared as nullity in law?
(ii) Whether on the facts and in the circumstances of the case the Income Tax Appellate Tribunal was correct in upholding the assumption that the difference between the cost of land incurred by the applicant and that disclosed by another assessee for an undisclosed piece of land amounted to "definite information" coming into the possession of the Income Tax Officer enabling him to invoke jurisdiction under Section 65 of the Income Tax Ordinance, 1979? ......
(iii) Whether on the facts and in the circumstances of the case the Income Tax Appellate Tribunal was correct in continuing the proceedings without lawful adjudicating on the point of unlawful assumption of jurisdiction under Section 65 of the Income Tax Ordinance, 1979?
(iv) That even if the assessm ent could be re-opened whether the 1TO could have made the assessm ent without confronting the applicant with all the material facts on which he relied and discarding the parallel cases cited by the applicant?"
2. According to the statement of the case the petitioner a joint stock company limited by shares was incorporated as public limited company at Lahore on 26.4.1987. The company returned nil income for the assessm ent year 1988-89 on the ground of having done no business during the income year ending on 30.9.1987. Subsequently the case of the assessee for that period was re- opened on the ground that it had purchased 44 kanals, 15 marlas of land in Tehsil Chunian on 28.4.1987 and that its declared consideration/price of Rs. 6,78,800/- evolving a rate per kanal at Rs.
15,168/- was too low to be believed when compared with similar other transactions.
3. The assessee contested the re-opening of the assessment on the ground that in absence of availability of a definite information as contemplated in Section 65 of the Ordinance the initiation of re-opening proceedings was illegal. On facts it was stated that the land purchased by it was situated at a distance of more than 41 k.m. From Lahore and was at least two k.m. Inside the. Main road. The Assessing Officer rejected all the submissions made in this regard on the ground that there being a common knowledge that the land situated in Tehsil Chunian was likely to be declared as tax free zone, the declared value was totally unrealistic and grossly under-stated. After making a reference to at least two cases, particularly the one in which some land in the vicinity was purchased by another assessee in June, 1988 for Rs. 50,000/- per kanal the Assessing Officer proceeded to apply the same rate in respect of the assessee. In this manner the total value of the piece of land was computed at Rs. 22,37,500/r and the difference between the declared and the estimated value at Rs. 15,58,700/- was brought to tax on deeming the same to be an income of the assessee by resort to the provisions of Section 13(1 )(d) of the Ordinance, 1979.
4. The assessee failed before the first appellate authority as to his objection against re-opening of cases under Section 65 of the Ordinance, 1979. However, it was allowed partial relief only by way of reduction in the estimated price of land by Rs. 5,000/- per kanal.
5. On further appeal a Division Bench of the ledrned Tribunal by way of the impugned order not only maintained the re-opening of the assessment but also found the relief already given to the assessee. By fixation of price per kanal at Rs. 45,000/- to be fair and reasonable in the facts and circumstances of the case. Subsequently they also refused to make a reference to this Court of the said four questions.
6. After hearing the learned counsel for the parties and on taking question No. 2 first, we are in agreement with the learned counsel for the appellant that re-opening of the case of the assessee was certainly unjustified. The Assessing Officer failed to bring home the availability of definite information as contemplated in Section 65 of the repealed Ordinance to re-open the case. The view of their Lordships of the Supreme Court as expressed in re: E.F.U. General Insurance Co. Ltd. v.
Federation of Pakistan (PLD 1997 SC 700) and re: Central Insurance Co. v. Central Board of Revenue (1993 SCM R 1232) lends support to the submissions made at the bar that mere reference to a declared value by another assessee is not by itself a definite information to become a sufficient ground to re-open a completed assessment. The idea of sanctity of a completed assessment is certainly averse to the re-opening based upon conjectures and surmises.
7. In the first place there hardly appears any conceivable good reason for a public limited company to under-state value of land purchased by it. In fact the converse appears more probable because the company Managers at times over state the price of property acquired by a company in order to either mis-appropriate the balance between the declared and the actual value paid or otherwise to keep some money out of books to meet exigencies of" business. !n such cases a definite information can be said to be available only if a legally acceptable proof of higher payment comes to light or is discovered by the Assessing Officer. A payment through a financial or banking institution can be one of the instances of such proof.
8. In the cases of the kind in hand an Assessing Officer must identify the source where from the understated founds emanated. That will obviously mean that excess amount was expended by directors and an addition, if it could be made, would be possible only in their hands and not in the hands of the company which is yet to start business. However, as observed earlier, the idea that the directors of a public limited company will understate the value of the property purchased immediately on the incorporation of the company appears far-fetched, unrealistic and un- supported by general human experience. Also we are of the view that generally the sale price of a property cannot be measured by any hard and fast rule inasmuch as mostly it is the need of the seller and desire of the purchaser that determines the real value, In case of real estate particularly, the location or situation of an immovable property merits high in setting the price.
9. The opinion of the Assessing Officer that since there was a general impression in the market that Tehsil Chunian will shortly be declared as a tax free zone is certainly correct. However, while comparing the lands transacted in the area after almost eight months of the purchase of the purchase made by the assessee he over looked the fact that in such cases a period of eight months was sufficient to increase the value of the land in the locality many times. This happens on account of the fact that jobbers and investors who have no real intention to construct a house or a factory in a proposed housing or industrial scheme make use of the market sentiments to multiply their investments.
10. Be that as it may, when the assessee had returned nil income for the assessment year under review and had also disclosed the factum of having purchased the aforesaid property, the revenue was obliged to look into the same before making a direction for filing of the return by simply writing a short line on the order sheet, It needs emphasis that such casual attitude on the part of the Assessing Officers is not only prejudicial to the interest of the revenue itself but also to that of the assessee as well, It needs to be noted that in cases of purchases of immovable properties, by the time an assessm ent is re-opened after a couple of years, the market value stands increased so much that a declared purchase price starts looking meagre, It is basically for the reason of passage of time and the fact that the investors had, in the meanwhile, artificially given a look of boom to the market. Therefore the declared value which was absolutely realistic at the relevant time starts appearing fabulous and un-realistic. Same appears to have been the situation in the present case.
11. Therefore, both on legal as well as on factual plane we are in agreement with the assessee. It is that, firstly, no definite information was available with the Assessing Officer to justify invocation of the provision of Section 65 of the Ordinance. Secondly, that determination of the value of the property in hand was clearly open to exception for the aforesaid reasons. Accordingly our answer to the question No. 2 is in the negative. Rest of the three questions, after answering question No. 2 become only of academic interest and therefore, are not required to be answered.