Law: Income Tax Ordinance, 1979

Section: 13,62,59

(a) Income Tax Ordinance (XXXI of 1979)----Ss.13, 62 & 59---Self-Assessment Scheme (1990)---C.B.R. Circular No.5 of 1990, para. 4(ii)---Selection of case for audit---Income Tax Officer while taking the case out of Self-Assessment Scheme had not to prove conclusively the understatement of income as mere suspicion of understatement of income was sufficient for selection of case for audit. The word used in clause (ii), para. 4 of C.B.R. Circular No.5 of 1990 is "suspected" that is mere suspecion of understatement of income is sufficient for selection of -case for audit. The I.T.O. has not to prove conclusively the understatement of income because once the I.T.O. has conclusive proof of understatement of income that return filed by the assessee will not qualify for Self-Assessment Scheme it will be a case of concealment. Perhaps this was the reason the C.B.R. was careful to introduce the word "suspected" in the clause. However, this suspicion should be based on material evidence. In the present case the assessee purchased property and on the basis of enquiry the I.T.O. came to the conclusion that there was understatement of investment in the property. Understatement of investment has to be assessed to tax under section 13 in the year in which the property was purchased by the assessee and by considering it as deemed income. While completing the assessment the I.T.O. cannot ignore the deemed income. If the I.T.O. has to ignore the valuation of the Collector then he has to give some valid reasons. The I.T.O. had adopted the cost of construction of first floor at Rs.300 per sq. ft. but on what basis the cost of construction had been adopted, had not been clarified. Total covered area of the first floor was 623 sq. ft. and I.T.O. had adopted the value of construction of two rooms at Rs.2,00,000 which comes to Rs.321 per sq. ft. Normally cost of construction of the first floor is lesser than cost of construction of ground floor but if the valuation adopted by the I.T.O. was upheld then cost of construction of upper floor would be more than the cost of construction of ground floor. Valuation adopted was on the basis of enquiries made by the Inspector from the estate…

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