I.T.A. No. 930/IB of 2005, decided on 22nd July, 2006. VS I.T.A. No. 930/IB of 2005, decided on 22nd July, 2006., 2007 PTD-INCOME-TAX-APPELLATE-TRIBUNAL-PAKISTAN 509 (2006)

Income Tax Ordinance (XXXI of 1979)---

----S.12(18)---Income deemed to accrue or arise in Pakistan---Loan---Addition was made on the ground that loan had appeared in the wealth statement for which no evidence was filed to prove that the loan was routed through banking channel---Assessee explained that liability of the said amount was distributed among the members equally---Loan was advanced by one of the members of the agreement that if the loan was not repaid, he was to become 1/3rd shareholder in the plot and it was the 1 /3rd share which had appeared in the wealth statement as a liability and it was not a transaction legally and merely a transfer of liability for which the provisions of S. 12(18) of the Income Tax Ordinance, 1979 were not attracted---Validity---Assessing Officer, instead of following the directions of the Appellate Tribunal had embarked on a course for which he had no mandate---First Appellate Authority had failed to appreciate the legal position and had also erred in upholding an addition which was not in accordance with law---Addition made under S.12(18) of the Income Tax Ordinance, 1979 was ordered to be deleted.

Black's Law Dictionary 7th Edition and 1989 PTD 909 (SC of Pakistan ref.

Naeem-ul-Haq for Appellant.

Amjad Khan Khattak, D.R. for Respondent.

ORDER

The appellant an individual is aggrieved with the order of the learned C.I.T.(A), dated 5-5-2005 wherein the addition made under section 12(18) of the Income Tax Ordinance, 1979 (hereinafter called the repealed Ordinance) had been confirmed.

2. Brief facts of the case are that since no return had been filed by the appellant for the assessment year 1992-93, a notice under section 56 of the Ordinance was issued on the basis of an information that the appellant had purchased 1/3rd share in Plot No.94-W, Blue Area, Islamabad for a consideration of Rs.51,77,318. Whereas subsequent statutory notices were also allegedly not complied with, assessment was framed under section 63 of the Ordinance and the unexplained amount of Rs.51,77,318 was charged to tax as unexplained investment under section 13(1)(aa) of the Ordinance. At a later stage, the honourable ITAT remanded the case back to the Assessing Officer with the following directions:---

"9. For the foregoing reasons, therefore, we set aside the impugned order of the Commissioner. The case is remanded back to the Assessing Officer with the following directions:---

(i) he shall scrutinize and re-assess the amount to be added under section 13(1)(aa), if any, for the assessment year 1992-93 A keeping in view the wealth statements for the relevant year and the explanation with regard to sources of assets reflected therein:

(ii) he shall verify from C.D.A. and any other relevant record, the date of completion of the building constructed by the assessee/ A.O.P. and re-compute tax liability as may be necessary, in accordance with law; and

(iii) for the foregoing purposes, afford due opportunity to the assessee to explain his case and furnish supporting evidence as may be necessary."

In the re-assessment proceedings, the Assessing Officer observed that in the wealth statement as on 30-6-1992, a loan amounting to Rs.45,00,000 A had appeared for which no evidence was filed to prove that the loan was routed through banking channel. Accordingly this amount was added under section 12(18) of the Ordinance. It may be pertinent to mention here that the Assessing Officer did not resort to any addition under section 13(1)(aa) of the Ordinance. The First Appellate Authority upheld the action of the Assessing Officer and confirmed the addition of Rs.45,00,000 under section 12(18) of the Ordinance. This addition of Rs.45,00,000 under section 12(18) of the Ordinance is the subject-matter of the instant appeal.

3. The learned counsel for the appellant has been heard. It was vehemently contended at the outset that since the Assessing Officer had failed to follow the directions of the honourable ITAT the order was not maintainable. He conceded that such deviation could be made only if the case had been remanded back for de novo consideration. But since the directions were specific, the Assessing Officer had to follow them in letter and spirit in order to put the facts in the right perspective. The learned Counsel narrated that the plot in question was initially purchased by one Ch. Khudadad, Ch. Mukhtar Hussain (the appellant) and Aamir Shakeel were inducted as members of the A.O.P. and the liability amounting to Rs.45,00,000 each was distributed among the members equally since in 1998. Ch. Mukhtar Hussain had advanced a loan of Rs.12,00,000 to Ch. Khudadad and as per agreement, if the loan was not repaid by Ch. Mukhtar he was to become 1/3rd shareholder in the plot. The learned counsel reiterated that it was this 1/3rd share Rs.45,00,000 B which had appeared in the wealth statement as a liability and since it was not a transaction legally and merely a transfer of liability, therefore, the provisions of section 12(18) were not attracted. At this stage it would be pertinent to reproduce this relevant provision which is as under:---

"12(18) 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: Provided that where the said loan as advance or gift is claimed or shown by way of the explanation, referred to in sub-section (1) of section 13, in a case to which the first proviso to the said subsection (1) applies, the income under this subsection shall relate to the assessment year referred to in the said proviso".

The learned counsel further argued that while interpreting this provision it was necessary to first refer to the two vitally important terms namely "sum" and "receive" which have been explained as under:---

"SUM" A quantity of money, a' legal summary or abstract, a compendium (Black's Law Dictionary 7th Edition).

"RECEIVE" clearly connotes a specified sum passing into the possession of the receiver. (1989 PTD 909 (SC of Pakistan))

The learned Counsel argued that in the instant case since no sum had been received as loan or advance or gift by the appellant and instead it was simply a case of transfer of liability, the provisions of section 12(18) could not be invoked. The learned D.R. failed to rebut the claim with any counter arguments.

In the light of the above facts, we feel that in the first place the Assessing Officer, instead of following the direction of the honourable ITAT has embarked on a course for which he had no mandate, the First Appellate Authority has failed to appreciate the legal position and has C also erred in upholding an addition which was not in accordance with law. Accordingly, addition made under section 12(18) of the Ordinance is ordered to be deleted.

As a result the appeal succeeds in the manner as indicated above.

C.M.A.1203/Tax(Trib.)??????????????????????????????????????????????????????????????????????? Appeal accepted.