2003 PLP (Trib (PTD)

3. We have heard both the parties and also perused the relevant record available on file. It, is observed that during the assessment -proceedings it was explained by the AR that the building is yet under construction and only advances of Rs.104,599,638 were received from various parties and the details of advances received during the year as well as complete details of parties from whom advances were received was provided and it was noted that all the amounts were received through proper banking channel. The Assessing Officer was satisfied that these transactions do not attract the provisions of section 12(18) of the Income Tax Ordinance, 1979. However, the IAC observed that bank account deposits amounting to Rs.16,453,431 represented the cash deposits which the Assessing Officer failed to take cognizance of, in terms of section 12(18) of the Income Tax Ordinance, 1979. Section 12(18) is reproduced as under:

"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. The AR of the assessee emphasised the importance of the words "claimed" or "shown" as advance. It was pointed out that for cash to fall within ambit of section 12(18) it must be. "claimed' or "shown" as advance and the assessee had done neither. The AR has relied upon the following observation of Lahore High Court in the case reported as PLJ 2001 Lah. 885:

"Statute has to be interpreted in the sense it had been used and expressed. The provisions of section 12(18) at the relevant time did not attract unless two conditions were answered. First, that there was a "loan", received by an assessee and secondly that it was so claimed are shown by him. Where any of the two requirements were not answered, the provisions were not attracted." An amendment was brought about by the Finance Act, 1998 which added the words "gift" or "advance". Both these conditions are now also applicable to "gift" or "advance" as well. The learned AR argued that the IAC failed to prove that the cash deposits were money, received by the assessee as advance and failed to dislodge the argument that it was his own money. If the money has not been received from another person, it cannot by any stretch of. imagination come within the purview of section 12(18). The AR further argued that Revenue had failed to identify the other person or person and vehemently argued that the Town money cannot be labelled as cash advance and IAC had acted arbitrarily to declare the cash deposits as cash advances and the IAC acted on presumption which the law does not permit. The AR has relied upon the cases decided by I.T.A.T. bearing I.T.A. No.681/LB of 1998 and I.T.A. No. 259/KB of 1997-98 wherein it has been held that the cancellation of assessment on presumption, surmises and whims by the JAC cannot be upheld.

4. About the nature of cash deposits the AR stated that these were assessee's own money. A plaza was under construction which necessitated the maintenance/retention of enough cash and the amount of Rs.16,451,131 did not represent a lump sum cash deposits but spread over a period of 12 months. Explaining the reason and justification for cash deposits, the learned AR of the assessee has drawn the attention to para 6C and para 6D of the assessee's reply, dated 9-3-2001 appearing in order of the IAC under section 66A which are reproduced as under:-- It may also please be noted that at times we have to deposit the cash in certain banks for the reason that we had issued the cheque for payment, from that account, however, realizing that the balance in account is less and the cheque may be dishonoured, we, deposit, the amount of shortfall from case in hand." Similarly some times we draw the cash from one bank account and it is deposited in the other for the reason that higher balance is required in a particular account for the reason narrated above and for other reasons. For example Rs.10,00,000 was withdrawn from MCB Account No.626-8 on 11-3-2000 and the same amount was deposited on the same date in. UBL A/c No; 3962 UBL: From MCB A/c 48-2 Rs.240,000 was withdrawn and deposited in UBL A/c No. 3962 on 1-9-1999. Similarly on 3-4-2000 Rs.783,000 was withdrawn from MCB A/C No. 626-8 ,and deposited in UBL A/c No. 3962 on the same day. These are only few examples to illustrate our contention." The AR has also pointed out that after the cancellation of assessment order by the IAC, the DCIT has started proceedings as fresh and has issued notice under section 13(1)(aa) showing, his intention to add Rs.16,454,431 as unexplained amount. The AR argued that this notice proved conclusively that the cash deposits were not cash advances liable to be added under section 12(18).

5. The DR reiterated the arguments mentioned in the order under section 66A. He was unable to identify a single transaction out of the declare advances of Rs.104,599,368 which was in cash and not through banking channel nor pointed out any example out of Rs.16,454,431 which could be said to be advances given by any customer.

6. We have carefully considered the rival arguments. It is observed that the IAC has not brought on record any evidence to establish that the entire amount of cash deposits or any part of these were received as Advances from any customer. To attract the provision of section 12(18), the amounts must not only be cash but also received as Advance from a, person. Any form of cash deposit does not ipso facto make it a cash advance.

7. The Revenue has failed to establish the important nexus of these deposits with any customers who paid advances for shop etc. which was a necessary legal requirement and whatever else the cash deposit may be, the IAC has failed to establish them as cash advances. We therefore, have no hesitation in vacating the impugned order under section 66A and restore the order of the Assessing Officer made under section 62 of the Income Tax Ordinance, 1979.

8. As a result the assessee's appeal is allowed accordingly. C.M.A./740/Tax (Trib.) Appeal allowed.