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Official Citation: 2012 PTD 1750
Court / Jurisdiction: INLAND REVENUE APPELLATE TRIBUNAL OF PAKISTAN
Parties: MUHAMMAD IRSHAD CHEEMA vs C.I.R., R.T.O., GUJRANWALAShoaib Ahmad Sh.,Mrs. Samia Ijaz
This judicial decision was delivered by the INLAND REVENUE APPELLATE TRIBUNAL OF PAKISTAN. The matter involves proceedings between MUHAMMAD IRSHAD CHEEMA and C.I.R., R.T.O., GUJRANWALAShoaib Ahmad Sh.,Mrs. Samia Ijaz, officially reported as 2012 PTD 1750. The court reviewed applicable Pakistani statutes, procedural requirements, and governing case-law authorities. The full text below contains the complete facts, arguments, and legal reasoning rendered by the honorable bench.
2012 P T D (Trib.) 1750
[Inland Revenue Appellate Tribunal of Pakistan]
Before Muhammad Nawaz Bajwah, Judicial Member and M.B. Tahir, Accountant Member
MUHAMMAD IRSHAD CHEEMA
versus
C.I.R., R.T.O., GUJRANWALA
I.T.A. No.143/LB of 2012, decided on 12th April, 2012.
Income Tax Ordinance (XLIX of 2001)---
----Ss. 122(1), 122(5)(i), 111(1)(b), 120, 115(4), 114 & 68---Amendment of assessment---Unexplained income or assets---Tax year 2005---Cash gift---Purchase of house---Statement of final taxation under S.115(4) of the Income Tax Ordinance, 2001 was filed declaring brokerage commission upon which tax was paid as final discharge of tax liability---Information was received by the department that taxpayer had purchased a house---Taxpayer, in the wealth statement as on 30-06-2004, declared a cash gift from wife---Assessing Officer observed that no evidence regarding the availability of fund was furnished by the taxpayer and found that taxpayer had made investment in purchase of property out of unexplained investment which was liable to be included under S.111(1)(b) as "income from other sources"---Show cause notice was issued to amend the assessment under S.122(1) read with S.122(5)(i) of the Income Tax Ordinance, 2001---Taxpayer explained that property was purchased out of past savings and cash gift from wife who was also a taxpayer---Explanation was accepted to the extent of past savings whereas the cash gift from wife was rejected; and assessment for tax year 2006 was amended under S.122(1) of the Income Tax Ordinance, 2001 and an addition was made under S.111(1)(b) of the Income Tax Ordinance, 2001---Taxpayer contended that Assessing Officer was not justified to treat the statement filed under S.115(4) of the Income Tax Ordinance, 2001 as deemed assessment under S.120 of the Income Tax Ordinance, 2001; that Assessing Officer had unjustifiably and illegally invoked the provisions of S.122(1) of the Income Tax Ordinance, 2001 as no deemed or any other assessment order was in field which could be further amended by resorting to the provisions of S.122 of the Income Tax Ordinance, 2001; that statutory notices in terms of Ss.68 and 111 of the Income Tax Ordinance, 2001 were not issued; that assessment completed was not maintainable in the eye of law; that there was sufficient sources to invest in purchase of property; and authorities below had erred in law to reject the gift received from the wife, who was also a taxpayer; and that even otherwise Assessing Officer had no jurisdiction to reject the cash gift received by the taxpayer falling in the period relevant to tax year 2004 as the same was time barred---Validity---Taxpayer was not under legal obligation to file a return of income under S.114(4) of the Income Tax Ordinance, 2001 and was only required to file statement under S.115(4) of the Income Tax Ordinance, 2001 which was merely a declaration of final taxation---Taxation Officer treated the statement as deemed order under S.120 of the Income Tax Ordinance, 2001 and amended the same under S.122 of the Income Tax Ordinance, 2001 whereas provision of S.122 of the Income Tax Ordinance, 2001 revealed that the statement filed under S.115(4) of the Income Tax Ordinance, 2001 was out of scope of S.122 of the Income Tax Ordinance, 2001---Assessing Officer had illegally and unjustifiably discarded the cash gift received by the husband from wife who was also a taxpayer---Cash gift received by the taxpayer from his wife was mentioned in the wealth statement filed for the period ended on 30-6-2004, which could not be discarded by the Assessing Officer as the same was barred by time---No justification was available to reject the cash gift received by the taxpayer from his wife---Taxpayer duly furnished wealth statement as on 30-6-2000 along with reconciliation statement as well as affidavit of his wife regarding cash gift---Submission of these documents was duly mentioned by the Assessing Officer in his order---Cash gift from wife was a valid gift for the purposes of taxation---Order passed under S.122(1) of the Income Tax Ordinance, 2001 for tax year 2006 was not maintainable in the eye of law which was annulled by the Appellate Tribunal---Order of First Appellate Authority was vacated and appeal filed by the taxpayer was accepted.
2008 PTD (Trib.) 19 rel.
Shoaib Ahmad Sh., for Appellant.
Mrs. Samia Ijaz, D.R. for Respondent.
Date of hearing: 12th April, 2012.
ORDER
The titled appeal pertaining to Tax Year 2006, has been preferred at the behest of taxpayer, calling in question the impugned order dated 23-9-2011, passed by the learned CIR (Appeals), Gujranwala.
2. The relevant facts leading to the instant appeal are that taxpayer in this case is an individual and derives income from brokerage/ commission, was not obliged to file return of income under section 114. Therefore statement of final taxation under section 115(4) was filed for the tax year 2006, declaring brokerage commission at Rs.434,000 upon which tax paid at Rs.43,400 as final discharge of tax liability for the year. Subsequently, information was received by the department that the taxpayer had purchased 1-Kanal, 15-Marlas residential house situated at Vanjowali, Wazirabad on 11-5-2006, for a total consideration of Rs.46,00,000. Accordingly, a notice dated 22-10-2010 was issued to submit certain documentation which were duly provided by the taxpayer in response to a second reminder letter dated 14-12-2010. In the wealth statement as on 30-6-2004, the taxpayer declared a 7-Marla property valuing Rs.500,000 and Rs.36,90,000 as gift from wife. It is also observed by the Assessing Officer that no evidence regarding the availability of fund was furnished by the taxpayer. Therefore, it was held by the Assessing Officer that the taxpayer had made investment in purchase of property at Rs.48 lacs out of unexplained investment which was liable to be included under section 111(1)(b) as "income from other sources". Accordingly, a show-cause notice was issued by the Assessing Officer to amend the assessment under section 122(1) read with section 122(5)(i) of the Ordinance. In response to notices issued by the Assessing Officer, the taxpayer explained that he had purchased the property in question out of past savings and a gift amounting to Rs.39,60,000 received from his wife who is also a taxpayer. However, the explanation submitted by the taxpayer was only accepted to the extent of past savings at Rs.600,000 whereas the cash gift received by the taxpayer from his wife was rejected by the Assessing Officer. Consequently, the assessment for the tax year 2006 was amended under section 122(1) and an addition of Rs.42,00,000 was made under section 111(1)(b) of the Ordinance. Being aggrieved, the taxpayer preferred appeal before the learned CIR(A) who vide impugned order upheld the action of the assessing authority.
3. The learned AR of the appellant assailed the orders of the authorities below as contrary to law and facts of the case. It is the contention of the learned AR of the appellant before us that the Assessing Officer was not justified to treat the statement filed under section 115(4) as deemed assessment under section 120 of the Ordinance. It was submitted by the learned AR that Assessing Officer had unjustifiably and illegally invoked the provisions of section 122(1) as no deemed or any other assessment order was in field which can be further amended by resorting to the provisions of section 122. It is also the AR's contention before us that statutory notices in terms of sections 68 and 111 were not issued in the case, therefore, assessment completed is not maintainable in the eye of law. It is further submitted by the learned AR that the taxpayer has sufficient sources to invest in purchase of property in question and the authorities below had erred in law to reject the gift received from his wife Mst. Asmat Bibi, who is also a taxpayer. It is contended by the AR that even otherwise, the taxpayer has no jurisdiction to reject the cash gift received by the taxpayer falling in the period relevant to tax year 2004 as the same was time barred. On the contrary, the learned DR supported the orders passed by the authorities below.
4. We have heard the arguments put forth by the learned representatives of both the sides and have carefully gone through the available record. After due consideration, we find that the arguments advanced by the learned AR carry substantial weight. The instant taxpayer in the case was not under legal obligation to file a return of income under section 114(4) and was only required to file statement under section 115(4) which is merely a declaration of final taxation. The Assessing Officer treated the said statement as deemed order under section 120 and amended the same under section 122 whereas bare perusal of the provision of section 122 reveals that the statement filed under section 115(4) is out of scope of section 122 of the Ordinance. Furthermore, the Assessing Officer has illegally and unjustifiably discarded the cash gift received by the taxpayer who is also a taxpayer. The cash gift received by the taxpayer from his wife, Mst. Asmat Bibi, is appearing in the wealth statement filed for the period ended on 30-6-2004, which cannot be discarded by the Assessing Officer at this stage as the same is barred by time. Even on merit, the taxpayer has a strong case as there was no justification to reject the cash gift received by the taxpayer from his wife. The taxpayer duly, furnished before the assessing authority the wealth statement as on 30-6-2000 along with reconciliation statement as well as Affidavit of his wife regarding cash gift. The submission of these documentation was duly mentioned by the Assessing Officer on page-2 of his order. It has already been decided by this Tribunal in a number of cases that cash gift from wife is a valid gift for the purposes of taxation. Reliance in this behalf is placed on a case reported as 2008 PTD (Trib.) 19, wherein a Full Bench of this Tribunal settled the controversy regarding cash gift and held that "cash gift from husband to wife and from brother to sister is distinguishable from the gifts made during an ordinary course of business. Keeping in view the peculiar circumstances and the culture prevalent in our, country, a gift from husband to wife or involving any other family member could not be anticipated to be made through banking channels".
5. In view of the above, observations made by us, we are inclined to hold that the order passed under section 122(1) for tax year 2006 is not maintainable in the eye of law which is hereby annulled. Order of the learned CIR(A) is accordingly vacated and appeal filed by the taxpayer is accepted.
CMA/125/Tax(Trib.) Appeal accepted.