COMMISSIONER OF INCOME TAX/WEALTH TAX, FAISALABAD VS Messrs JEHLUM FABRICS, FAISALABAD, 2006 PTD-LAHORE-HIGH-COURT-LAHORE 2866 (2006)

(a) Income Tax Ordinance (XXXI of 1979)---

----Ss. 13(1)(a)(aa), 111, 136(2) & 62---Reference to High Court---"Unexplained investment"---"Cash credit"---Changing addition from S.13(1)(aa) to S.13(1)(a) of Income Tax Ordinance, 1979---Scope---Unexplained cash as per cash book---Nature---Effect---Department, on examination of books of accounts detected that assessee had changed the figures and closing balance was shown at enhanced figure---Addition was made under S.13(1)(aa) of Income Tax Ordinance, 1979 by treating the same as 'unexplained investment'---Commissioner Income Tax, upheld addition made under S.13(1)(aa) of the Ordinance and income was reduced---Appellate Tribunal while accepting plea of assessee that S.13(1)(aa) of the Ordinance was not applicable, applied provisions of S.13(1)(a) by treating the manipulation of cash book as 'cash credit'---Department contended; that findings of Tribunal were not correct as none of the amounts were debited or credited in books of accounts of assessee; that unexplained black money emanating from suppressed draft was available with assessee who kept the same out of books of accounts; that assessee concealed said amount and was held by Assessing Officer as owner of money on relevant dates and that unexplained money introduced in books and utilized in business was to be taxed under S.13(1)(a) of the Ordinance---Validity---Held, consequence of addition under S.13(1)(aa) of the Ordinance were different from addition under S.13(1)(a)---Application of S.13(1)(a) entailed penal consequences under S.111 of Income Tax Ordinance, 1979, but no such liability arose under S.13(1)(aa)---Addition was on amount of cash credits appearing in accounts of assessee---Unexplained credits were actionable under S.13(1)(a) and not under S.13(1)(aa) of the Ordinance---Decision of Tribunal treating action against assessee under S.13(1)(a) was legal and no infirmity or illegality was found in that respect---Questions raised in the reference were misconceived.

(b) Interpretation of statutes---

----Out of two interpretations, one favourable to tax-payer was to be adopted.

Muhammad Ilyas Khan for Petitioner.

ORDER

The case of the respondent-assessee was selected for total audit through random ballot, by computer. On examination of books and accounts it was detected that the assessee has changed the figures and closing balance was shown at enhanced figure. In this way, an addition of Rs.1,73,260 was made under section 13(l)(aa) of the Income Tax Ordinance, 1979 by treating the same as unexplained investment. Total income was determined at Rs.6,90,769. The Commissioner of Income Tax (Appeals), Faisalabad upheld, the addition of Rs.1,73,260 made under section 13(1)(aa) of the Income Tax Ordinance, 1979 but the income was reduced from Rs.6,90,769 to Rs.6,64,769 for assessment year 1991-92. Learned Appellate Tribunal accepted the plea of the respondent that section 13(1)(aa) is not applicable. Learned Tribunal while applying the provisions of section 13(1)(a) by treating the aforesaid manipulation of cash book as cash credit. The petitioner refused to refer the proposed questions of law to this Court vide order, dated 18-10-1994. The request of the petitioner through R.A.No.173/LB/1994 was declined and the petitioner filed the instant reference on the following questions:--

(i) "Whether the learned Income Tax Appellate Tribunal was justified in changing the addition from 13(1)(aa) to 13(1)(a) of the Income Tax Ordinance, 1979 under the circumstances of the instant case?"

(ii) "Whether the unexplained cash as per the cash book was not in the nature of money owned by the assessee as envisaged in clause (aa) of subsection (1) of section 13 of the Income Tax Ordinance; 1979 and was merely a sum credited in the books of accounts particularly when no credit to this effect was created?"

2. Learned counsel for the petitioner has contended that findings of the learned Tribunal are not correct as none of the amounts debited or credited, in the books of accounts of the assessee. The unexplained black money emanating from suppressed draft was available with the assessee who kept the same out of the books of accounts. The assessee concealed this amount and was held by Assessing Officer as owner of the money on the relevant dates. The unexplained money introduced in the books and utilized in the business is liable to be taxed under section 13(1)(a) to the case of the petitioner.

3. We have heard the learned counsel for the petitioner and perused the material available on the record.

4. Consequences of addition under section 13(1)(aa) were different from addition under section 13(1)(a). The application of section 13(1)(a) entails penal consequences under section 111 of the Income Tax Ordinance, 1979. On the other hand, no such liability flows from action under section 13(1)(a). The addition was on amount of cash credits appearing in the accounts of the respondent. Unexplained credits are actionable under section 13(1)(a) and not under section 13(l)(aa) of the Ordinance. Even otherwise it is settled principle of interpreting a Statute, that out of two interpretations, one which is favourable to the taxpayer is to be adopted. The decision of the Tribunal treating the action against the respondent under section 13(1)(a) is legal and no infirmity or illegality is seen in this respect. The questions raised in this reference, are misconceived and are answered accordingly.

S.M.B./C-47/LReference dismissed.