I.TA. NO. 426/LB OF 1992-93, DECIDED ON 2ND FEBRUARY, 1994. VS I.TA. NO. 426/LB OF 1992-93, DECIDED ON 2ND FEBRUARY, 1994.
1995 P T D (Trib.) 1176
[Income-tax Appellate Tribunal Pakistan]
Before Iftikhar Ahmad Bajwa, Accountant Member and Nasim Sikandar, Judicial Member
I.TA. No. 426/LB of 1992-93, decided on 02/02/1994.
Income Tax Ordinance (XXXI of 1979)---
----S.12(18)---Addition---Deemed income ---Assessee alongwith his four brothers had pooled their funds. to purchase a property---Movement of funds from the four brothers to the assessee, held, was nothing more than an advance for a legitimate purpose and money so advanced was not hit by the mischief of S.18(12) of the Income Tax Ordinance, 1979---Addition in the assessee's income was ordered to be deleted by the Tribunal.
Muhammad Nawaz Khan, I.T.P. for Appellant.
Haji Ahmad, D.R. for Respondent.
Date of hearing: 2nd February, 1994.
ORDER
IFTIKHAR AHMAD BAJWA (ACCOUNTANT MEMBER).---In this appeal relating to assessment year 1991-92, appellant calls in question the addition of Rs.21,00,000 which had been made under section 12(18) of the Income Tax Ordinance.
2. Appellant an individual, received salary from M/s. Shezan Bakers and Confectioners (Pvt.) Limited and M/s. Shezan Hotels and Restaurants (Pvt.) Limited. During the year under appeal he expended Rs.25,50,000 in connection with the purchase of a residential house in Lahore Cantonment Cooperative Housing Society. To meet this expenditure, amounts totalling Rs.21,00,000 were received by the appellant from his four brothers. The investment in property amounting to. Rs.25,50,000 appeared among the assets and the amount of Rs.21,00,000 was shown as a liability in the wealth statement as on 30-6-1991. Since the amount of Rs.21,00,000 had been received in cash, the I.T.O. treated it as cash loan taxable under section 12(18) of the Income Tax Ordinance.
3. Appellant had explained that the amount in question represented advance by his four brothers for investment in property which was to be equally shared by the five brothers. An agreement executed on stamp paper and acknowledgements issued to four brothers by the appellant were also produced before the I.T.O. The explanation was not accepted by the I.T.O. who held the aforementioned evidence as collusive arrangement. The C.I.T. (Appeals) also upheld the findings of the I.T.O.
4. Appellant's authorised Representative Muhammad Nawaz Khan contended that the findings of the I.T.O. and the C.I.T. (Appeals) were contrary to the facts of the case and a genuine explanation had been rejected without justification. The A.R. drew our -attention to the written explanation filed before the I.T.O. on 26-2-1992 wherein it was explained that under the bye-laws of the society the property could be transferred only to a single individual therefore it was arranged between the five brothers that appellant would get the property transferred in his name in the first place and subsequently it would be converted into a joint property of the five brothers. It was explained that joint ownership through family settlements were probably allowed by the society. It was, therefore, decided by the appellant and his brothers that subsequently all brothers would have equal share in the property through such a settlement. At the same time, it was also settled that if the scheme of joint ownership fell through, the property was to be disposed of and five brothers were to share the proceeds equally. The A.R. argued that the I.T.O. was not justified in rejecting a valid agreement, which was backed by contemporaneous evidence.
5. While rejecting the explanation, the I.T.O. observed that "it is an established practice in the market that back date stamp papers are available at a premium in remote areas in Lahore District area and anywhere else in Pakistan. This is obviously a collusive arrangement executed only when the assessee was caught on the wrong feet". These observations were vehemently disputed by the A.R. It was contended that the date of purchase of stamp -paper and name and address of the stamp vendor had been provided by the appellant but in spite of appellant's insistance the I.T.O. and C.I.T. (Appeals) did not summon the stamp-vendor to ascertain the correct position. According to the A.R. the Revenue Authorities were not justified in disbelieving the date of execution of the agreement and. its genuinness as the same was verifiable from the register of the stamp-vendor.
6. Appellant had explained that the property in question was not meant to be exclusive ownership of the appellant and the five brothers (including the appellant) were to have equal share in the property. According to the A.R. this explanation was not an afterthought or a collusive arrangement as assumed by the I.T.O. It was stated that appellant and his brothers were a close knit family and the five brothers had equal shares in family controlled business as well as immovable properties. It was shown by the A.R. that even in other properties which had been purchased in previous years, appellant and his brothers had equal shares. A copy of appellant's wealth statement which had been filed in the course of assessment proceedings, was produced to show that besides the property under discussion, appellant owned only three other immovable properties namely a house at Gulberg, Lahore, a shop at Clifton, Karachi and land in Lahore District. These properties were purchased at different times in the earlier years and each of these properties was jointly owned by the five brothers in equal shares. The position of share in business was also claimed to be the same. Thus, joint ownership of the property, intended to be purchased during the year under appeal, was claimed to be in keeping with the family's tradition and past practice.
7. The A.R. drew our attention to C.B.R. Circular No.12 of 1992 wherein it had been directed that provisions of section 12(18) should not be invoked for assessment year 1991-92 in respect of cash deposits in the names of directors in the account books of companies if the deposits are otherwise genuine and verifiable. It was contended that the amount of Rs.21,00,000 had been deposited with the company and appeared in the ledger account of the appellant in the accounts of M/s. Vasna International (Pvt.) Limited, in the form of two credits of Rs.12,50,000 and Rs.8,50,000 on 4-3-1991 and 5-3-1991 respectively.
8.The D.R. opposed this contention and explained that the said Circular covered transactions between directors/partners and companies/firms, and transactions between sister-concerns. We need not, go into this issue in view of our finding regarding the nature of the amount received by the appellant.
9. As shown above, appellant had ample evidence to show that he alongwith his four brothers had pooled their funds to purchase a property and thus movement of funds from the four brothers to the appellant was nothing more than an advance for a legitimate purpose. The money advanced to the appellant by his brothers was not hit by the mischief of subsection (18) of section 12 of the Income Tax Ordinance. The addition of Rs.21,00,000 in the assessment under appeal is, therefore, deleted.
10. The appeal succeeds as above.
M.BA./111/TAppeal allowed.