I.T.A. No. 8/LB of 2006, decided on 3rd May, 2006. VS I.T.A. No. 8/LB of 2006, decided on 3rd May, 2006., 2007 PTD-INCOME-TAX-APPELLATE-TRIBUNAL-PAKISTAN 123 (2006)

Income Tax Ordinance (XXXI of 1979)---

----S. 12(18)---Income deemed to accrue or arise in Pakistan---Addition---Gift amount from mother was received through cross cheque which was deposited in the account of Association of Persons---Addition was made on the ground that individual gift was not received through cross cheque as the gift should have been received in the bank account of the person to whom the gift was made---Assessee contended that provisions of law were not applicable where some loan, gift or advance was received by a cross cheque drawn on a bank and the law did not further lay down the requirement of receipt in the personal account---Validity---Only requirement for avoiding the mischief of S.12(18) of the Income Tax Ordinance, 1979 was to receive the loan or gift or advance through a crossed cheque drawn on bank---Gift was received through a cross cheque drawn on hank---Authorities below clearly erred not only in adding the expression "in his account" in the provision of law, which was not there, but also by invoking these provisions as the case was of invocation of deeming provisions which were to be invoked 'strictly on the basis of express language used by the Legislature---No scope was available in such like cases for going beyond the wording used in the provisions of law---Bank account of the Association of Persons was in fact the bank account of the members---Action of the Assessing Officer was not maintainable, particularly in the background of admitted position on gift payment through a crossed cheque---Provisions of S.12(18) were also not attracted in the case of genuine, identifiable and traceable transactions and the transaction in this case was fully traceable---Authorities below grossly misdirected themselves in invoking and upholding these provisions of law---Orders passed by the authorities were not maintainable either factually or legally---Assessee's appeal was allowed, the orders of authorities below were vacated and addition made was annulled/cancelled by the Appellate Tribunal.

2002 PTD 63; Vol. 7 No.2 Tax Forum 63; 2001 PTD 1180; Vol. 10 No.02 Tax Forum 44; 2005 PTD 2577; (2005) 92 Tax 205; 2004 PTD (Trib.) 1377; 2004 PTD (Trib.) 1572 and 2006 PTD (Trib.) 864 rel.

Asim Zulfiqar, A.C.A. and Zulfiqar Ali Sheikh, I.T.P. for Appellant.

S. Ashraf Ahmad Ali, D.R. for Respondent.

ORDER

NASEER AHMAD (ACCOUNTANT MEMBER).---The titled appeal, arising out of order, dated 2-11-2005 passed by the first appellate authority in respect of assessment year 2002-2003, relates to three real brothers who are members and hold equal share in an AOP, operating under the name and style Messrs Nagshbani Stores, Multan Road, Lahore.

2. Mr. Zulfiqar Ali Sheikh, ITP represented the appellants whereas, Mr. Ashraf Ahmed Ali appeared on behalf of the Revenue.

3. Facts in brief are that the appellant received a sum of Rs.1,283,333 as gift from the mother which was made through a cross cheque No.211751, dated 22-1-2002 drawn on National Bank of Pakistan, Saidpur Branch, Lahore. The said cheque was deposited in the current account of the AOP. On an examination of the wealth statement filed by the appellant, where the receipt was shown as gift from mother, the Assessing Officer, in the course of finalizing the assessment proceedings, required the appellant to produce bank statement showing receipt of gift through cross cheque. While responding to the queries of the Assessing Officer, the appellant explained the above mode of receipt, however, the Assessing Officer feeling dissatisfied with the submissions of the appellant, invoked the provisions of section 12(18) of the repealed Income Tax Ordinance, 1979 as in his vide the individual gift was not received through cross cheque. In arriving at the above conclusion the Assessing Officer also formed a view that the gift should have been received in the bank account of the person to whom the gift is made.

4. Feeling aggrieved by the treatment given by the Assessing Officer the appellant filed appeal before the first appellate authority who, dismissed the appeal by agreeing with the contentions of the Assessing Officer.

5. The learned AR while opening the arguments submitted that both the authorities below have erred in drawing adverse inference against the appellant because the provisions of section 12(18) of the repealed Income Tax Ordinance, 1979 provided for only one condition i.e. receipt of gift by a crossed cheque drawn on a bank. Following provisions were quoted during the course of the appellate proceedings:

"Where any sum claimed, or shown, to have been received as loan or advance or gift by an assessee during any income year commencing on or after the first day of July, 1998, from any person, not being a banking company, or a, financial institution notified by the Central Board of Revenue for this purpose, otherwise than by a crossed cheque drawn on a bank, or through a banking channel from a person holding a National Tax Number, the said sum shall be deemed to be the income of the assessee for the said income year chargeable to tax under this Ordinance...."

On the basis of the above provisions, the learned AR argued that the provisions of law are not applicable where some loan, gift or advance is received by the a crossed cheque drawn on a bank and the law does not further lay down the requirement of receipt in the personal account. It was submitted that the authorities below erred in adding words to the statute which are not there. Beside the above arguments the learned AR further relied upon various judgments both delivered by High Courts and this Tribunal where this position has been settled that the deeming provisions of section 12(18) of the repealed Income Tax Ordinance, 1979 can be validly invoked in case of fictitious and bogus transactions. Since in the present appeal the genuineness of the transactions is not disputed, therefore, these provisions, the learned AR further argued, could not have been invoked in the light of the ratio of the judgments. In connection with the latter argument, the learned AR relied upon 2002 PTD 63 (Peshawar High Court), Vol. 7 No.2 Tax Forum 63 (Lahore High Court), 2001 PTD 1180 (Lahore High Court), Vol. 10 No.02 Tax Forum 44 (Lahore High Court), 2005 PTD 2577 (Lahore High Court) (2005) 92 Tax 205 (Peshawar High Court), 2004 PTD 1377 (Trib.) 2004 PTD 1572 (Trib.) and 2006 PTD 864 (Trib.).

6. The learned DR, while supporting the orders of the authorities below, stated that the provisions have been rightly invoked in the present case and no interference is called for in the orders passed by the authorities below. The main emphasis of the learned D.R. was on the provisions of law as have already been quoted by us above.

7. We have given due consideration to the submissions of both the sides and have also examined the record, including the orders passed by both the authorities below. We feel persuaded by the submissions of the learned AR so far as the interpretation of the provisions of section 12(18) of the repealed Income Tax Ordinance, 1979 is concerned. The learned AR is correct in pointing out that the only requirement for avoiding the mischief of section 12(18) of the repealed Income Tax Ordinance, 1979 is to receive the loan or gift or advance through a crossed cheque drawn on bank. There is no doubt that in the present appeal the gift was received through a crossed cheque drawn on a bank therefore, we feel that the authorities below clearly erred not only in adding the expression "in his account" in the provisions of law, which is not there but also by invoking these provisions in the present case as his is a case of invocation of deeming provisions which are to be invoked strictly on the basis of expressed language used by the legislature. In such-like provisions there is no scope of going beyond the wording used in the provisions of law. Even otherwise the contention of the Assessing Officer is misplaced because the bank account of the AOP is in fact the bank account of the members. Hence by no stretch of imagination the action of the Assessing Officer is maintainable, particularly in the background of admitted position on gift payment through a crossed cheque.

8. We are also in full agreement with the findings recorded by the Courts on the subject that these provisions are not attracted in the case of genuine, identifiable and traceable transactions. In the present appeal there is no iota of doubt that the transaction is fully traceable therefore the authorities below grossly misdirected themselves in invoking and upholding these provisions of law. Agreeing, for the reasons recorded in the cited judgments, in totality with the findings recorded by the Courts in the judgments, relied upon by the learned AR and referred to by us above, we feel convinced that the order passed by the authorities below are not maintainable either factually or legally. Resultantly the appeal filed by the assessee is allowed, the orders of the authorities below are vacated and the addition made by the Assessing Officer is annulled/cancelled. The appeal filed by the assessee is accordingly accepted.

C.M.A./158/Tax (Trib.)Appeal accepted.