I.T.A. No. 5495/LB of 2002, decided on 8th May, 2006. VS I.T.A. No. 5495/LB of 2002, decided on 8th May, 2006., 2007 PTD-INCOME-TAX-APPELLATE-TRIBUNAL-PAKISTAN 199 (2006)

Income Tax Ordinance (XXXI of 1979)---

----Ss. 12(18), 27(2)(a)(ii)(b), 56 & 61---Income deemed to accrue or arise in Pakistan---Returns declaring nil business income and capital assets gain exempt under S.27 (2)(a)(ii)(b) of the Income Tax Ordinance, 1979 gifted by the husband of the of the assessee were filed in response to notice under Ss. 56 and 61 Income Tax Ordinance, 1979---Affidavit of husband of the assessee was also filed---Claim regarding exemption was rejected for the reason that the gift had not been received through banking channel and addition under S.12(18) of the Income Tax Ordinance, 1979 was made---Validity---Purpose of S.12(18) of the Income Tax Ordinance, 1979 was to check the back dated fictitious transactions and S.12(18) of the Income Tax Ordinance, 1979 was not applicable in valuable transactions---Donor, the husband of the assessee, had filed an affidavit and the Taxation Officer or the First Appellate Authority had not doubted the contents of the affidavit filed by the donor---No justification was available for the addition made under S.12(18) of the Income Tax Ordinance, 1979---Order of the First Appellate Authority as well as one passed by the Taxation Officer under S.62 of the Income Tax Ordinance, 1979 were vacated and the addition made under S.12(18) of the Income Tax Ordinance, 1979 was deleted by the Appellate Tribunal.

2002 PTD 63 and I.T.As. Nos. 2397 and 2398/LB of 2001 ref.

Vol. 9 No.8 Tax Forum 25 rel.

Naeem Munawar for Appellant.

Mrs. Sabiha Mujahid, D.R. for Respondent.

ORDER

Through this appeal, the appellant has objected to the impugned order of the learned CIT(A), dated 24-9-2002 for the assessment year 1999-2000 upholding the addition made by the Taxation Officer under section 12(18) of the repealed Income Tax Ordinance, 1979.

The assessee, in this case, is admittedly a Parda Nasheen household lady. The proceedings in this case were initiated by the Taxation Officer on the basis of complaint against Sheikh Muhammad Ilyas, husband of the assessee. It was alleged that the present appellant/assessee Mst. Rahat Ilyas has purchased a plot. Notices under sections 56 and 61 were issued and the appellant filed returns declaring nil business income and capital assets gain exempt under section 27(2)(a)(ii)(b) gifted by the husband at Rs.6,00,000. An affidavit of Sheikh Muhammad Ilyas husband of the assessee was also filed. The Taxation Officer rejected the claim of the assessee regarding exemption for the reason that the gift has not been received through banking channel and has, therefore, made the addition under section 12(18) of the repealed Income Tax Ordinance, 1979 at Rs.6,00,000. The appellant agitated the treatment meted out by the Taxation Officer before the learned CIT(A), but the appeal was also rejected. Now the matter is before this Tribunal.

Mr. Naeem Munawar, Advocate has appeared on behalf of the appellant and has contended that assessee is a Parda Nashee lady. She is not involved in any business and even was not assessee. He has submitted that under subsection (18) of section 12 of the repealed Income Tax Ordinance, 1979, it has been specifically mentioned that "where any sum claimed, or shown, to have been received as loan or advance or gift by an assessee", but the appellant in this case was not assessee, as has been defined in subsection (6) of section 2 of the repealed Income Tax Ordinance, .1979, as in that section; three categories have been mentioned. Under the first category, every person in respect of whom any proceedings under the Ordinance have been taken. Under the second category, every person, who is required to file return of total income under section 55, section 72 or section 81 and under the third category, any person, who is deemed to be an assessee or assessee in default under any provision of this Ordinance. He, has, therefore, contended that as the appellant in this case was not an assessee, provisions of section 12(18) are not applicable in this matter. Even otherwise, according to the learned counsel, purpose of this section as already been held by this Tribunal as well as by the Hon'ble High Court is to give protection to genuine transactions of the assessee, which were verifiable and identifiable. He has, in this respect, placed reliance on the decision of Hon'ble Peshawar High Court reported as 2002 PTD 63. The learned counsel for the appellant, in this regard, has also referred another case reported as 2006 PTD 529 (H.C. Pesh.) wherein it has been held that "Since transactions are taken place through gift was duly verified by the Assessing Officer not only by recording statement of donor, but by the letter of Tehsildar also, such transfer could be made without banking transaction", as in this case, it was held that explanation given by the assessee was plausible and the same could not be turned down without assigning any reason. The learned counsel for the assessee has also placed before us the decision of this Tribunal, dated 26-5-2005 in I.T.As. Nos. 1684 and 1685/LB of 2001 filed by the assessee and I.T.As. Nos.2397 and 2398/LB of 2001 filed by the Department (assessment years 1998-99 and 1999-2000) reported in Vol. 9 No.8 Tax Forum 25 in which the matter of difference of opinion has been resolved by the Full Bench of this Tribunal, the author of which is also the Member of this Bench, wherein it has been held that "the deeming provisions of section 12(18) have been introduced to check, the back dated fictitious transactions, to justify resources, and where the source of sum is decided and it is found to be a good money, irrespective of the technical flaws in its change from one hand to another, an addition would be unjustified". In view of these submissions, the learned counsel for the appellant has submitted that there was no justification in the present case for invoking section 12(18) of the repealed Income Tax Ordinance, 1979 and it has been requested that the addition in this regard may please be deleted.

On the other hand, learned D.R. is supporting the impugned orders of the Officers below. She has contended that gift received by the assessee has been admitted and is admittedly not through banking channel and has rightly been treated to be income of the assessee under section 12(18) by the Taxation Officer and the learned CIT(A) has rightly upheld the addition.

We have heard the learned representatives from both the sides and have also perused the impugned order of the learned CIT(A), the assessment order and the case-law referred by the learned counsel for the appellant.

We are of the view that this Tribunal as well as by the Hon'ble High Courts have already held that purpose of section 12(18) is to check, the back dated fictitious transactions and section 12(18) is not applicable in valuable transactions. In this case, donor the husband of the appellant has filed an affidavit and the Taxation Officer or the learned CIT(A) have not doubted the contents of the affidavit filed by the donor, the husband of the appellant we, therefore, find no justification for the addition made under section 12(18) of the repealed Income Tax Ordinance, 1979. The impugned order of the learned CIT(A) as well as order passed by the Taxation Officer under section 62 are, therefore, vacated and the addition made under section 12(18) amounting to Rs.6,00,000 is deleted.

The appeal filed by the assessee is allowed.

C.M.A./146/Tax (Trib.)??????????????????????????????????????????????????????????????????????? Appeal accepted.