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2012 P T D 645 [Peshawar High Court]

Before Syed Sajjad Hussain Shah and Waqar Ahmad Seth, JJ

FAZAL WAHAB

Versus

COMMISSIONER OF INCOME TAX, PESHAWAR

Tax Reference No.15 of 2005, decided on 11th October, 2011.

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

----S.12(18)---Amount received as loan by assessee---Exclusion of such loan from total income-

--Scope---Such loan must be advanced through cross-cheque---Object of enacting S.12(18) of
Income Tax Ordinance, 1979 being to prevent evasion of tax through dubious/fictitious
transactions---Principles.

(b) Interpretation of statutes---

----Nothing would be imported in a provision giving clear meaning.

(c) Evidence---

----Documentary evidence---Beneficiary of a document would be bound to prove same through

cogent evidence beyond shadow of doubt.

Abdur Rauf Rohaila for Petitioner.

Eid Muhammad Khattak for Respondent.

Date of hearing; 11th October, 2011.

JUDGMENT

WAQAR AHMAD SETH, J.---The petitioner, through this Tax Reference, has assailed the
judgment and order dated 23-6-2005 passed by learned Income Tax Appellate Tribunal.

2. Facts of the case are that Messrs Fazal Wahab Patta Kamani Maker/Dealer, G.T. Road,
Peshawar is an individual deriving income from properties as well as from business. The
petitioner/assessee filed income tax return for the assessment year, 2001/2002 under the Income
Tax Ordinance, 1979 (Repealed) declared income from both the sources at Rs.1,73,680. The case
was selected for total audit through Computer Random Ballot. The assessment was finalized
under section 62 by estimating the sales and making addition under section 12(18) of the
Repealed Ordinance.

3. Being aggrieved, the petitioner/assessee impugned the order of the Assessing Officer
before Commissioner Income Tax (Appeals), who set aside the addition made under section
12(18) of the Ordinance.

4. Not contented with the said order, both the petitioner and revenue department filed cross
appeals before Income Tax Appellate Tribunal, Peshawar, who partially accepted the same vide
order dated 23-6-2005 whereby addition made under section 12(18) by the Assessing Officer
was upheld and the issue of reduction of sale by the Commissioner Income Tax (Appeals) was
maintained, hence the Tax Reference in hand by the petitioner raising the following questions of
law:--

(1) Whether as per facts and in the circumstances of the case, the Tribunal has correctly
interpreted the provisions of section 12(18) of the Income Tax Ordinance, 1979 (hereinafter
referred to as "the Ordinance")?
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(2) Whether as per facts and in the circumstances of the case, the assessee has successfully
explained the sources of investment, in term of section 13(1)(aa) of "the Ordinance"?

(3) Whether as per facts and in the circumstances of the case, the dictum laid down by
this honourable court in case titled Messrs Utman Ghee Industries v. Commissioner of Income
Tax (2002 PTD 63) has correctly not followed by the lower courts on the plea that the
department has filed appeal against the said judgment?

(4) Whether as per facts and in the circumstances of the case, in view of acceptance and
admission of the loanee with regard to the advancement of amount the provision of section
12(18) of "the Ordinance" can be attracted?

(5) Whether as per facts and in the circumstances of the case, the ratio laid down by the
Lahore High Court in W.P. No.13534 of 2001 has been correctly interpreted by "the Tribunal"?

(6) Whether as per facts and in the circumstances of the case, if the sources of investment
declared found plausible, but still addition will be justified irrespective of the fact of change in
one hand to other?

5. This court admitted the Tax Reference in hand on the point that issue regarding
application of section 12(18) of the Income Tax Ordinance, 1979 has already been settled by this
court and is still in the field but the Commissioner Income Tax (Appeals), Peshawar has not
followed the judgment of this court on the ground that appeal has been preferred against the said
judgment, which is still pending.

6. Learned counsel for petitioner contended that the notice issued by the Assessing Officer
under section 13(1)(aa) of the Repealed Ordinance was successfully explained and the addition
under section 12(18) was uncalled for. He relied on the case titled Messrs Utman Ghee Industries
v. Commissioner of Income Tax reported through 2002 PTD 63. His further contention was that
if the Assessing Officer was not satisfied with the explanation offered by the petitioner/assessee,
then the Assessing Officer should have passed the order under section 13(1)(aa) instead of
section 12(18) ibid. It was also contended that the Assessing Officer did not bother to cross
examine that person from whom the loan has been obtained, he could either have asked the
petitioner to produce the concerned party or he could apply section 48 and called them for
verification and in case the party had failed to appear and after cross examination they had
denied of giving this loan, then only the Assessing Officer could have made this addition.

7. On the other hand, learned counsel appearing on behalf of respondent vehemently

controverted the plea of the petitioner and relied on a judgment titled Commissioner of Income
Tax v. Messrs Utman Ghee etc. reported through 2008 SCMR 2933.

8. We have carefully examined the respective contentions as agitated on behalf of the

parties in the light of relevant provisions as contained in the Income Tax Ordinance, 1979
(Repealed). We have also perused the order of Commissioner Income Tax (Appeals) dated
10-6-2003 and the impugned order of learned Income Tax Appellate Tribunal dated 23-6-2005,
besides, order of the Assessing Officer dated 31-12-2002 and have gone through the judgments
cited by learned counsel.

9. Before dilating upon the assertions of both the parties, it will be beneficial to reproduce
both the relevant sections of the repealed Ordinance, 1979, which are as under:--

Section 13(1)(aa)

The assessee is found to have made any investment or is found to be the owner of any money or
valuable article, in any year.

Section 12(18)

Where any sum, or the aggregate of sums, claimed, or shown to have been received as loan by an
assessee during any income year commencing on or after the first day of July, 1987, 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, exceeds (one
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hundred) thousand rupees, the said sum or the aggregate of sums shall be deemed to be the
income of the assessee for the said income year chargeable to tax under this Ordinance.

10. It is clearly mentioned in section 12(18) that any `loan' shall be advanced through cross
cheques. It is an established proposition of law that if any provision gives a clear meaning,
nothing shall be imported. The plea of the petitioner/assessee that the order passed under
section 62 read with section 12(18) is untenable.

11. The intention and purpose of section 12(18) was to prevent any dubious/fictitious
transaction for the evasion of Income Tax. Moreover, it is settled law that a person/party who is
beneficiary of a document, it is his bounden duty to prove that document through cogent
evidence, beyond shadow of doubt but in the instant case the burden was shifted to the Assessing
Officer instead of producing those persons in support of their affidavits, one on ten rupees stamp
paper and the other on a plain paper.

12. It is a matter of common knowledge that most of the assessee would adopt device that
whenever income or any other sum chargeable to tax was received, they try their level best to
skip it, therefore, check was imposed on fictitious loans to stop this kind of practice. The
intention of the legislative while enacting section 12(18) was to keep check on any type of
fictitious transactions, hence any transaction through banking channel shall also qualify the
wisdom. The Income Tax Appellate Tribunal rightly set aside the order of the Commissioner
Income Tax (Appeals) and restored the order of the Assessing Officer, hence the questions
regarding application of section 13(1)(aa) read with section 12(18) are answered in negative.

In view of the above, the instant tax reference is dismissed.

S.A.K./324/P Reference dismissed.