1997 P T D (Trib.) 2141
[Income-tax Appellate Tribunal Pakistan]
Before Khawaja Farooq Saeed, Judicial Member and
Iftikhar Ahmad Bajwa, Accountant Member
LT.A. No.6454/LB of 1995, decided on 18/04/1996.
Income Tax Ordinance (XXXI of 1979)---
----Ss. 12(18) & 13(1)(d)---Additions---Validity---Assessee, being Director of company, took loan through bearer cheque---Cheque was withdrawn by loaner himself---Copy of certificate of Bank was produced---Learned I.-T.O. considered that it was in contravention of S.12(18)---Held, keeping in view spirit of Legislation, there was no doubt in mind that additions made and confirmed by officers below were not maintainable in law---Law introduced for curtailing evil should not be used as lever against rightful tax payers by way of interpretation.
1993 PTD Note 133 at p.183; 198 ITR 1110 and 1996 PTD (Trib.) 100 ref.
Dr. Illyas Zafar for Appellant.
Zafar Ahmad, D.R. for Respondent
Date of hearing: 18th April, 1996.
ORDER
KHAWAJA FAROOQ SAEED (JUDICIAL MEMBER).---The appeal has been filed against Order No.2613 dated 21-9-1995. The assessee assails confirmation of the addition made under section 12(18) at Rs.4,50,000, Rs.25,346 under section 13(1)(e) and Rs.6,000 again under section 13(1)(e). The facts of the case are that the appellant took a loan of Rs.4,80,000 from M/s. Surgeon Surgical (Private) Limited, Sialkot of which the assessee is a Director. The loan was taken through bearer cheque which the learned I.T.O. considered to be hit by the provision of section 12(18) and thereby added above amount as income of the assessee. The argument of the learned I.T.O. for this addition is that the law requires such lending of loan through cross cheque. Another addition on account of household expenses was made by adopting the same at Rs.1,35,000 as against declared of Rs.1,09,654 which finally ended. to an addition of Rs.25,346. Similarly Rs.6,000 were also added considering it as the deemed income on account of excess perquisites.
2. Before the learned CIT(A) -the assessee contested this treatment Which could not find favour and the appeal was rejected on the basis of following arguments:---
"Perusal of assessment record shows that Circular No.3 of 1992, dated 27-2-1992 was issued with specific purpose that any loan which is given by Company to its directors should be in the form of cross cheques, which is not the position in the appellant's case. Certificate issued by Muslim Commercial Bank only specifies that bearer cheques were encased by the appellant. The basic purpose of the section 12(18) leas been defeated Therefore, the Assessing Officer was justified in making addition under section 12(18) of the. Income Tax Ordinance, 1979. Personal and household expenses adopted at Rs.1,39,000 are also reasonable keeping in view that appellant was Director of 2 Private Ltd. Companies and plea taken that appellant was living jointly with his brother and wife who are also assessees and contributing to the household expenses do not absolve the appellant from the charge that household expenses declared at Rs.1,09,654 keeping in view the standard of living are on the lower side.
Addition made under section 13(1)(e) Rs.25,346 is reasonable and does not call for any interference. Addition made on account of non- declaration of perquisite amounting to Rs.6,000 is also on strong footings as in the previous year A.R. of the appellant had agreed the addition of Rs.6,000 on account of perquisites when the conditions were the same. "
3. Before us the learned A.R. has argued that the loans were through cheques and it has been certified by the bank that the same has been withdrawn by the loanee himself. He, however, admitted that it was not a cross cheque. He has also produced a copy of the certificate of bank which has earlier been filed before I.T.O. also. Relying upon Circular No.3 the learned AR said that the purpose of the impugned legislation is to curtail the bogus loans and not to charge the actual loans. Referring to Circular No.3 he brought out attention to the following paras:---
"It has been brought to the notice of the Board the genuine loans shown to have been received from identifiable persons through the banking channels are being deemed to be the income of the assessee and subsection (18) of section 12 of the Income Tax Ordinance, 1979 merely on the ground that the amount of such loans, has not been received through crossed bank cheques.
2. The matter has been considered in the Board. Since the basic purpose of the aforesaid provision of law is to check fictitious loans and to preclude back dated introduction of creditors iii the books of accounts. Assessing Officers should not invoke the provisions of section 12(18) in respect of genuine loans received by way of cross cheques, pay orders, demand drafts or telegraphic transfers, etc., through the banking channels.
3. In any case, where the nature and source of the amount of money is not satisfactorily explained, addition to the income of the assessee can still be made under section 13, notwithstanding the claim that any loan was received through cross bank cheque, pay order, demand draft, telegraphic transfer or any other instruments."
The learned A.R. has mostly relied on para. No.2 of circular wherein strict directions by the Central Board of Revenue:---
Not to invoke the provision of section 12(18) in respect in genuine loans etc; through the banking channels. He argued that the circular having been issued by Central Board of Revenue by way of interpretation of section 12(18) is fully applicable and in fact binding on the subordinate officers. The use of word ' etc.' in circular by no stretch can be considered as without purpose. It is connected with the main purpose of the provision which is to check the fictitious loans and to preclude back dated introduction of creditors. Referring back he said that the bank transaction in the impugned case is much earlier to the date of assessment hence question .of back dated introduction of creditors does not arise. It is true that it was not a cross cheque but at the same time it is still under the normal banking channels. While referring to Circular Nos.11 and 12 he further argued that these two circulars deal with the loans received by an assessee through bearer-cheques and cash but, however, restrict the same for the assessment year 1991-92 i.e., in respect of the transactions which have earlier been made in the accounts of the assessee prior to the-amendment. The learned A.R. has also relied upon various reported judgments in support of his claim. Firstly the cited judgment reported as 1993 PTD page 183 Note 133 what originated from 198 ITR 1110. He referred to the para regarding interpretation of the taxing statutes which speaks:--
"Objects and reasons for acting provision can be considered."
Similarly, he cited another recent judgment of the Income Tax Appellate Tribunal reported as 1996 PTD (Trib.) 100 wherein the honourable Tribunal gave following observations:---
"Central Board of Revenue Circular ....
If a beneficial view is taken by C.B.R. in favour of assessee, Income Tax Appellate Tribunal, in exercise of its judicial discretion, would not interfere so as not to deprive the assessee of such beneficial treatment.
Income Tax Ordinance (XXXI of 1979) ....
S.8 .C.B.R. instructions. Order, instructions, and directions of C.B.R. are binding on all the officers entrusted with the execution of Income Ordinance, 1979.
Interpretation of Statutes...
Fiscal statute ...If there is any doubt in the interpretation of fiscal statute, it is to be resolved in favour of assessee. "
On the same point he cited another judgment of the Income Tax Appellate Tribunal reported as 1991 PTD 758 which speaks, "While interpretation the statutes, it is the duty of the Courts to suppress the mischief and advance the remedy".
4. Relying upon these judgments, he said that purpose of the impugned provisions being to curb the back dated introduction of fictitious loans. It should not be expanded over to the genuine loans even if the same have not been issued through crossed cheques. He continued that it is for this background that the Central Board of Revenue immediately felt the need of interpreting the impugned provision and Circular No.3 was introduced. He said the Circular No. 11 though restricted the loans given by bearer cheque to be exempt from the provisions of section 12(18) for the current year being pending on the date of issuance of the Circular No. 11 i.e., on 27-1-1992 yet, however, the same cannot over vide the provisions of Circular No.3 which not only out-rightly examined the purpose of legislation in its clause (1) but also purposely used the word ' etc' read with cross cheque, pay order and demand draft.
5. It is true that Circular No. 11 did create some doubt by its language when it says "for current assessments (underlined for emphasis) which are pending on issuance of clarification on this issue". But, however, keeping in view the principle of ' ejusdem generis' the word ' etc' would include the bearer cheques also provided the same otherwise fulfil other requirements. In the impugned case) the bank has issued a letter which 'certifies the genuineness of the transaction in the following manner:---
"It is certified that the Cheque No.002476, dated 18-4-1992 for Rs.2,70,000 paid on 21-4-1992 and cheque No.002478 dated 28-4-1992 for Rs.180,000 paid on 30-4-1992 issued by M/s Surgeon Surgical (Pvt.) Limited, Sialkot in favour of Mr. Muhammad Yaqoob Director of the Company."
The certificate clearly speaks of the facts that the loan which was received by the assessee was a genuine transaction between, the company and the Director. In keeping view the spirit of the legislation and Circular No.31, issued by the Central Board of Revenue we have no doubt in our mind' that the additions made and confirmed by the officers below are not maintainable in law. When the law is introduced for curbing evil' it should not be used as a lever against the rightful tax payers by way of interpretation.
6. We, therefore, order for deletion of the amount added at Rs.4,50,000 under provisions of section 12(18). Regarding addition on account of household expenses, the expenses declared by the assessee at Rs.1,09,654 cannot be considered as below On the other hand, the estimate of the learned ITO is also without any basis which cannot be allowed as held by Income Tax Appellate Tribunal in its famous judgment reported 1987 PTD page 300. The addition of Rs.6,000 is, however, genuine which is hereby confirmed.
(7) The appeal of the assessee is accordingly disposed of in the manner mentioned above.
C.M.S./288/Trib. Appeal disposed of.