1989 PLP (Trib (PTD)

A.A. ZUBERI (ACCOUNTEANT MEMBER).-- These six appeals have been filed by an `individual' who enjoys income from dividend, interest and salary. These assail consolidated order dated 31-5-1986 passed by the learned C.I.T.(A), Zone 1, Lahore. While two appeals relate to assessment proper, the other four impugning the penalties.

2. The learned counsel explained that returns (initially) filed under self-assessment scheme were selected for D.S. and (finally) income was determined at Rs.7,837,733 in the year: 1983-84, (declared RsA,50,785) and at Rs.8,29,036 (declared Rs.101,96','e' in the year 1984-85. In both, the years additions were made for unexplained investment at Rs.7.210,410 in 1983-84 and at Rs.6,57,070 in 1984?

85. In addition, income by fiction of law by resort to section 13 (1) (e) was taken at Rs.70,000 (each) in both the years.

3. Mr. Rehan Naqvi the learned counsel for the Appellant first of all assailed the addition for unexplained investment at Rs.7,210,410 in 1983-84 and at Rs.657,070 in 1984-85. The learned counsel attacked these three angles: (i) violation of protection granted to foreign exchange remittance against inquiry by the assessing officer vide Circular No.3 of 1982; (ii) non-acceptance of the validity of gift received from abroad; and (iii) conjectures and surmises in the treatment by the assessing officer.

4. Violation of C.B.R. Circular No.3 of 1982.-- Explaining the background the learned counsel, Mr. Naqvi, submitted that in the wealth statement filed with the returns, the Appellant had declared the above two sums as "foreign remittances (gift) received". When inquired by the assessing officer, it was explained that these represented gifts made in favour of the Appellant by his brothers who were staying in Cameroon for well over a decade and had sources of earnings there. These remittances were claimed as exempt under C.B.R. Circular C. No.l (28) ITI /82 dated 18-9-1982 = (1983) 47 Tax 27 (Statutes). Still, the assessing officer asked the Appellant (on 8-12-1983) to furnish addresses of the Donors as also the relationship with the Appellant. On this the Appellant challenged the jurisdiction of the assessing officer to undertake such an inquiry at first before the assessing officer himself; then made reference to the C B R and also filed writ petitions in the High Court; but finally, vide letter dated 18-1-1984 full particulars of the Donors, their address (etc.) were supplied to the assessing officer. Notwithstanding this, the assessing officer held that the circular was not applicable to the facts obtaining in the Appellant's case. This the learned CIT (A) confirmed. In fact, Mr. Rehan Naqvi continued, the Appellant co-operated with the Department despite full protection provided by the above-mentioned Circular which categorically directed the assessing officer not to probe into the sources of foreign exchange remittances and on 11-1-1984 and 17-1-1984, all particulars as asked for were supplied to the assessing officers establishing the factum of the gifts, the nature and relationship with the Donors, the genuineness as also the financial worth of the Donors with the help of bank accounts through which the transfers were made. In short, except for the copy of the Passport and the Bank Statements, all relevant particulars were furnished. The learned counsel referred to Maxwell's Interpretation of Statutes (12th edition, page 43) as also to Craies Statutory Law (7th edition page 70-71) to develop the argument that circulars and instructions are to be strictly interpreted in support and m aid of law. In addition, the learned counsel, Mr. Rehan Naqvi attempted to highlight the disparity in the treatment meted out to the Appellant compared to other individuals/assessees bearing NTN Nos. 07-03-1229555; 07-03-1230701 and 07-03-1227032 wherein, in similar circumstances, the remittances from abroad were accepted without questions. This, according to him, violated the Equality of Citizens conferred by Article 25 of the Constitution of the Islamic Republic of Pakistan. Pointing out that the corresponding Article is the Indian Constitution is 14, the learned counsel referred to decisions reported as AIR 1967 SC 1836 and AIR 1967 Bombay 235 to canvass equality of treatment is a vested right of a citizen. Mr. Rehan Naqvi vociferously pleaded that no inquiry could be made into the sources of remittances of foreign exchange moreso when the C.B.R. repeatedly reaffirmed that the concession granted in this respect was still operative. This was done as late as 17-4-1985 in reply to letter dated 25-11-1984 and addressed (on the subject) by the President of the Lahore Income Tax Bar and letter dated 16-5-1985 addressed by the C.B.R. to Messrs Riaz & Company, Chartered Accountants, Lahore.

5. Mr. Ilyas Khan the learned Legal Adviser of the Income-Tax Department assisted by the two D.Rs. (Messrs Javed Tahir Butt and Vakil Ahmad Khan) appeared for the respondent. He submitted that writ filed by the appellant in the Lahore High Court was withdrawn on 30-5-1984 on the undertaking that he "wants to move the departmental authorities to satisfy that his case is covered by C.B.R. Circular dated 18-9-1982". Therefore, any objection to the effect that the assessing officer was debarred by the above Circular to inquire about the source of foreign exchange remittances could not be raised at this belated stage. Taking up Circular Mr. Ilyas Khan the learned LA. developed the argument that the key-word is "foreign exchange earnings" and not "foreign exchange remittances". This distinction, according to the learned LA., was important because the Appellant nowhere made out a case that what was received from abroad was his "earnings" in foreign exchange., Moreover, it is an admitted position that the earnings belonged to the Donors and were not that of the Appellant who, in this case, is the Donee. Mr. Ilyas Khan carried his arguments further by pointing out that the Appellant moved the C.B.R. to seek clarification whether his case was covered by the Circular and the author of the Circular himself informed him that it was not so. This verdict was most authentic about the spirit, the intent and the object of the Circular as it came from the author of the Circular itself. In the opinion of the learned LA the reply dated 10?3-1984 from the C.B.R. prompted that Appellant to withdraw the writ from the High Court on 30-5-19&

4. There was, therefore, estoppel by law and by conduct against the Appellant to challenge the competency or the jurisdiction of the assessing officer to probe into remittances received by him and to give verdict thereon. It was important, the learned LA. avered that the decision by the C.B.R. was acquiesced and no writ filed by invoking Article 25 of the Constitution at a latex stage of the proceedings.

6. As about the disparity of treatment, the D.R. assisting the LA., clarified that these were looked into, the appraisal of evidence by them was found convincing and "in the opinion of the I.T.O. satisfactory". This, all the more establishes the credentials of the assessing officer who took an adverse view only when he felt the facts of a case so warranted.

7. Validity of gift from abroad.--About the gifts made by the two real brothers of the Appellant (Messrs Masood A. Sheikh and Fayyaz A. Sheikh) who ate said to reside in Cameroon, the learned counsel (Mr. Rehan Naqvi) elaborated that under the Mohammadan Law the essentials of a valid gift are: (a) dedication of the gift by the Donor; (b) the acceptance of the gift by the Donee; and (c) delivery of property. All these essentials were satisfied in the gifts made to the Appellant. He referred to the declarations made by the two brothers, which, according to him, were attested by a lawful authority of the Government of Cameroon and thus placed these beyond doubt as respects genuineness. The acceptance of the gifts was evident from the fact that the amounts were credited in the bank account of the Appellant i.e., the Donee; and the same was true about the delivery of possession. The learned counsel made a reference to a certificate from the Bank of Oman, submitted under the Foreign Exchange Regulation Act, 1947 to the State Bank of Pakistan together with the copy of the Appellant's account in City Bank, Lahore; as also two certificates from the Union Bank of the Middle East Ltd., Lahore and from the Bank of Omam Limited, Lahore all of which clearly showed that the amounts represent remittances on account of gift which were duly reported to concerned authorities. In the face of these documents, the learned counsel asserted, it was beyond doubt that foreign exchange remittances in the shape of valid gifts were received by the Appellant which were channeled for industrial investment and, therefore, the conditions prescribed in the Circular for exemption were fully satisfied, hence there was no justification to treat these incomes from undisclosed source, as was done by the assessing officer and upheld by the learned CIT (A). 7-A. The learned LA rebutted the arguments by the learned counsel for the Appellant by contending that in addition to the three essentials of a valid gift, as dilated upon by Mr. Rehan Naqvi. it also was essential to establish the capability of the Donors to ascertain whether they were in sound financial position to make the gifts. This was important because gift could not be made of a property which a donor does not possess or own. Mr. Ilyas Khan tried to erode the veracity of the ? gifts by contending that the two documents of the so-called gifts are in fact mere declarations (as mentioned on the top of the documents) about the transfer of money (allegedly) as gift in consideration of love and affection' giving the Donees the authority to hold the same "absolutely for ever to use the same in any manner he chooses". According to the learned LA. it was significant that these 'declarations' did not bear any date and the attestation on the documents is of a much later date than the date (mentioned in the same documents) on which the amounts are said to have been transferred. Mr. Ilyas Khan, the learned LA. continuing his arguments submitted that the so-called Donors were said to be residing in Cameroon but the remittances were received in Pakistan through UAE; Dubai through City Bank London; or through Union Bank of Middle East, Dubai and mysteriously none of these. originated from Cameroon where the Donors are said to be residing and earning their living. More importantly, at no stage of the proceedings before the assessing officer a link could be established between the funds from the place where these were gifted (Cameroon) and its transfer to London (or Dubai) for final transfer to Pakistan and no such proof is available even now. Therefore, according to the learned LA., the onus placed on the Appellant was not properly discharged to establish beyond reasonable doubt that remittances were free of charge and transferred to the Appellant by way of capital, loan or gift. One of the learned D.Rs., assisting the LA., emphasized that the modus operandi is a clever and shady devise to go around the law, is evident from the fact that Cameroon was selected as the residing abode of the donors because this is a French-speaking country and has no direct diplomatic contact with Pakistan. The intention was to place the assessing officer in an impossible situation as respects any attempt for verification about the factum of residence of Donors in that country and about their financial standing. The D.R. minced no word to argue that the money belonged to the Appellant and the whole endeavour was a dubious devise to introduce undisclosed (and consequently untaxed) income in the garb of foreign exchange remittance when the persons set up as Donors never lived in Cameroon and were not in sound financial position to remit huge sums aggregating crores of rupees. According to the D,R. if these persons were genuine the mere enormity of the tax involved was enough economic consideration to summon these Donors from Cameroon (at an expense of few thousands of rupees) to tender their Passports before the assessing officer together with evidence about their financial worth in Cameroon and also to establish a link of remittances to Pakistan with their origin from Cameroon. The D.R. read out from a document in his possession in which the alleged Donor (Mr. Fayyaz Ahmad Sheikh s/o Sheikh Attaullah) totally refused before art income-tax authority about making any gift to any one in Pakistan and about his stay in Cameroon. According to his own admission Mr. Fayyaz is a man of humble means who went to England only to evade his liabilities in Pakistan Moreover, in England also he did not prosper much, consequently choose to return to Pakistan and is presently doing petty cotton brokerage in Multan. He never enjoyed such financial prosperity as to gift crores of rupees or else he would have set up some reasonable source of income in U.K. or in Pakistan. This survey of circumstances, according to the learned D.R. clearly proved that the documents by the Appellant were fabricated and even signature on these were forged because as per identity card of one of the alleged Donor-- (Mr: Fayyaz A. Sheikh) now obtained by the Income Tax authorities, these not even remotely tallied with those obtaining on the `declarations' filed by the Appellant.

8. Infirmity in the treatment to the appellant =- As respects the treatment meted out by the assessing officer by including sums at Rs.72,10,410 in 1983-84 and at Rs.657,070 in 1984-85; as "undisclosed investment", the learned counsel submitted that the assessing officer went purely by conjectures and surmises which is so glaring from the fact that he did not care to mention the section of the Ordinance under which he deemed the remittances as income for inclusion in the total income. The learned counsel pointedly referred to such observations as: "even otherwise it looks so highly illogical that the Assessee, and Industrialist of country level fame--would receive gifts from persons of so ordinary means" and "as person of so ordinary means was certainly not in a position to make huge remittances .... as gift to the Assessee". He characterised these as purely conjectural and not based on evidence placed on record and, therefore, not sustainable findings. The learned LA. controverted these arguments by pointing out that before concluding that the investments and acquisitions to the extent of the above sums, represented income from undisclosed source within the meaning of section 30 of the Ordinance, the assessing officer afforded full opportunity to the Appellant to tender documents in the form of copies of passports, the bank statements and financial worthiness of the Donors. Since these were not furnished, even after pertinent inquiries, with which the Appellant was duly confronted; the conclusion was inescapable that the whole amount claimed to have been received as gifts were Appellant's own income from unproved and undisclosed sources. The assessing officer clearly mentioned in the penultimate paragraph of his order that the amounts fell within the purview of section 13 and, therefore, with the prior approval of the authority prescribed by law the same were deemed as income thus there was no erroneousness in the conclusion reached and treatment meted out.

9. Addition under section 13 (1) (e)--The learned counsel explained that the Appellant had disclosed household expenses at Rs:30,000 in each year: The assessing officer estimated these at Rs.100,000 per annum and made addition at Rs.70,000 (each) in the two years under-consideration. The learned counsel pleaded that the family of the appellant comprised of five Members (self; wife, one son and two daughters), of these, the wife and one son were existing Assessees having incomes at Rs.75,000 and Rs.50,000 respectively. Therefore, together with the Appellant's household expenses at Rs.30,000, the aggregate income of the family came to Rs.1,55,

000. In addition,, the Appellant's total income included an amount of Rs.42,622 for perquisites treated as salary with the result that the combined income to the family for household expenses totalled Rs.1,97,622 which was enough for a family of five and to support the education of a son in the American School to which a reference was made by the assessing officer. The addition for suppressed household expenses was, therefore clearly unwarranted and needs to be quashed. The learned C I T (A), therefore, erred in upholding the same.

10. After a careful consideration of the rival arguments addressed to us by the two learned counsel and on appraisal of the evidence and documents as are available on record, I am of the view that there has been no violation of C B R Circular, reported as (1983) 47 Tax 27 (Statutes). This Circular is titled "non-?repatriable investment proof of foreign exchange earnings" and was issued when it came to the knowledge of C.B.R. that attempts were being made to assess even a from abroad which came through banking channels, particularly from those Overseas Pakistanis who have (or had) been assessed to tax in Pakistan at sometime to the past. After reaffirming Government's policy of making funds, remitted from abroad for non-repatriable industrial investment, beyond question and after referring to certain amendments made in the repealed Act, the Circular gave final directions in paragraph 3, as under:- "All assessing officers under your charge, may therefore, be directed not to probe into the sources of foreign exchange earnings brought into Pakistan through proper banking channels for industrial investments etc." A bare reading of the above (especially the portions underlined) leaves no room for doubt that three conditions were to be cumulatively satisfied to escape probe by the assessing officer namely: (a) the remittances of foreign exchange should represent `earnings'; (b) these should flow through proper banking channels; and (c) be brought for the purpose of industrial investments. In addition the proclamation in the first paragraph of the Circular is also of significance where it was said that the remittances by Overseas Pakistanis (who were existing assessees or had beer; assessees in the past) were being inquired into which necessitated affirmation that the policy whereby' concession from probe was granted, continued the remittances were for industrial investments or (to be more precise ) for non-repatriable industrial investments.

11. In the Appellant's case, the remittances did not represent "earnings" but were admittedly `gifts'. Whatever documents have been tendered simply showed that what was received in Pakistan was somebody else's earnings which were gifted to the Appellant. Again these were remitted to by the Donor but not brought into Pakistan by the Appellant at his own volition or choice. I, therefore, entertain no doubt that the basic requirement having not been satisfied, the case of the Appellant could not enjoy the protection (against probe) granted by Circular of 1982. It appears pertinent to highlight that the declaration' in respect of the gifts unequivocally authorised the Donee "to hold the same for ever to use 11 in any manner he chooses". Thus, the third requirement that purposes of funds remitted from abroad should be "for industrial investment fell short of the prescribed requirement inasmuch as even the Donor cannot be said to have' remitted the money for non-repatriable industrial investment. Therefore, even if the amount came to Pakistan through banking channels and was for industrial investment, these could not detract from the assessing officer's authority to make probe into the sources of those remittances. I, therefore, reject this stand by the Appellant.

12. However, on the foregoing finding, I would not altogether shelve the case of the Appellant for, despite rejection of plea for exemption from enquiry into the sources of funds, the assessing officer was still obliged to objectively consider the nature and source of foreign exchange remittances so as to determine the value and worth of the explanation offered in reply to queries aimed at addition by resort to section 13 of the Income Tax Ordinance. This I shall presently discuss. .

13. As has been summarised above, the remittances were said to have been made by the two brothers of the Appellant, who resided to Cameroon, made the gifts out of `love and affection' and transferred these to Pakistan through banking channels. It would, therefore, be much to the point to see whether the gifts were really made and whether this factum is duly established by evidence brought on record. The basic documents presented to this end are the declarations, which are in French and were got translated into English for facility of examination by the Income Tax authorities. These documents (from both the donors) are couched in the same language and (as pointed out by the learned L.A. for the Department; are not gift deeds simpliciter but merely announcements made at a stage subsequent to the date of remittances although these inter alia say "hereby transfer the following moneys". I find force in the objection by the learned LA. that these documents do not bear any date and, therefore, their sanctity as a reliable document is not fully end finally established. Moreover, it was necessary to show that the money, which was gifted, did really exist in the ownership and possession of the Donors and that it was the same money which came to Pakistan through proper banking channels and did not represent Appellant's own funds as is the finding by the assessing officer. Although assessment was made at a much later date than the date of the so-called gifts, on conclusive evidence was tendered, to this behalf. The link establishing the transfer of the money from Cameroon to UK (or to UAE) is conspicuously missing together with reasonable proof to show that the bank accounts in UK/UAE were operated by the same persons who have been declared as Donors. It cannot be easily overlooked that extraordinary large sums were introduced as gifts and, therefore, any prudent person who has been!, dealing with the Income Tax Department would, to such a situation, make it doubly sure to have proper documentation from the very beginning to help him face the queries by the assessing authorities. It is, therefore, unbelievable that no ' record of the financial worthiness of the Donors was secured and - no J correspondence preserved so as to prove that the property did exists, the gifts were indeed made, and how the money travelled from bank to bank, from city to city, and from country to country. I am further inclined to agree with the argument advanced by the learned D.R. that it would be too much and to on unreasonable to put all the onus on the assessing officer expecting him to launch investigations in a distant land like Cameroon, to collect such facts as may contradict (or support) the stand taken before him. There is no dearth of decisions, particularly from Indian jurisdiction, wherein it has been held that an assessee cannot be asked to perform an impossibility. I am firmly of the view that on the same criterion the assessing officer also cannot be called upon to carry out inquires as are beyond his powers and (in fact) out of territories of Pakistan may be, if the Donors were within Pakistan, the assessing officer could summon them, under section 148 of the Ordinance, if the accounts were in local banks he could secure bank statements under section 144 of the Ordinance, but possibly no such exercise could be undertaken in respect of persons who were said to be residing 1 outside Pakistan where the assessing officer's jurisdiction did not extend. In addition, he was faced with such difficulties as the non-existence of a proper diplomatic establishment of Pakistan in that country. The onus was, therefore, clearly devolved on the Appellant not only to explain' but to do so to the "satisfaction" of the assessing officer that the money which was introduced by him was such as could not be taxed. An exercise of this nature was all the more necessary because the Supreme Court of Pakistan has unequivocally held" the I.T.O. is not bound to rely on all evidence when not satisfied...notwithstanding there being no direct and definite evidence with him to approve their incorrectness ... no rule of law compels a Judge to accept evidence if believed to be a pack of lies" (P L D 1979 SC 949). Evidently the burden falling on the Appellant in this regard was not properly discharged if viewed in the light, of the verdict given by the Supreme Court of Pakistan in Re: Samina Shaukat Ayub Khan P L D 1981 SC 85. ??????????? "

it was for the Appellant to show that she was covered by the exemption She clearly failed to do for the reason that she could not satisfactorily explain the source of entire amount of cash found in her hands, nor of the total accretion thereto in subsequent years." All the factors and attributes can be ascertained only if the assessee places all the relevant facts before the Income Tax authorities for otherwise the nature of the income and its source are clearly left in the realm of speculation." Again, the learned Judges of the Lahore High Court ruled in Re: Islam Jewellers P L D 1978 Lah. 890 that when an assessee introduces an investment it is his duty to establish the nature and source of the same and the Revenue, in such circumstances, is not obliged to locate the exact source of the sums. The foregoing pronouncements by the superior Courts, narrow down the scope of the endeavour of an Appellate authority to simply ascertain whether the assessing officer did not feel satisfied on proper grounds or that he exercised his authority in a capricious or in judicial manner. To this end is the finding by the Supreme Court of Pakistan in Re: Miss Asia (P L D 1979 SC 949). Much to the point is the observation by the learned Judges of the Lahore High Court in yet another case reported as Magna Industries 1980 PTD 35, to the effect that the expression "in the opinion of the I.T.O:" should be, given weight unless it is wholly, arbitrary or capricious. There is no dearth of case-law to the effect that for claiming exemption from charge of tax, the responsibility devolves on the claimant to clearly establish that the concession granted by law fully covers his case: This was not properly discharged, in the present case, so as to measure up to the tests laid down by the Supreme Court of Pakistan in re Saminat Shaukat Ayub Khan (ibid).

14. Before parting with the case I may recall that alongwith the present appeals the Bench had heard few more appeals filed by the wife and the-son of the Appellant where also the controversy revolved round the remittances from abroad received by way of gift from these very gentlemen i.e. Messrs Maqbool A. Sheikh and Fayyaz A. Sheikh. While scanning through the assessment record of those Appellants I discovered that remittances of exactly similar character were introduced in the years 1981-82 and 1982-83 also. When those assessments were reopened, the assessing officer finally bended out the same dispensation as to the present Appellant but no appeals were filed and the benefit of set off against Special National Fund Bonds was availed. This conduct clearly amounts to acceptance of the adverse verdict by the assessing officer about the two Donors and about the remittances which is quite identical to the finding in the appeals-in-?hand and has resulted in the conclusion that the entire amount represented Appellant's own income from unproved and undisclosed sources.

15. In the light of the principles so authoritatively and conclusively enunciated by various superior Courts and on the basis of the attending facts and circumstances as discussed hereinabove, I feel no hesitation to hold that no infirmity beset the assessments when the assessing officer rejected the validity of the gifts and held that the money in possession of the Appellant was not explained in a manner which could satisfy him, or for that matter any reasonable prudent person, that the same did not come from unproved and undisclosed sources. To sum up, my irresistable conclusion is: (i) the Appellant failed to discharge his onus to prove, beyond reasonable doubt, that the sums introduced by him as gift' were of such character as could neither be probed into nor included in his ' income; but (ii) the assessing officer extended sufficient opportunity to the Appellant to make out his case and exercised due negligence in evaluation the evidences presented to him to arrive at a conclusion which a reasonable person would in similar circumstances and on similar evidence reach. As the findings by the two officers below fulfil the tests of reasonableness and justification, I UPHOLD the same and REFUSE to INTERFERE.

16. I further hold that the arguments about the Appellant having been offered a discriminatory treatment compared to the three cases cited by the learned counsel, lacks genuineness and force. The circumstances of those cases, as narrated to us, with the help of the record, by the D.R., clearly distinguish those from the facts obtaining in the case of the Appellant. Thus, the insinuation about prejudicial treatment, is in my view UNFOUNDED.

17. Coming to the addition made for suppressed house-hold expenses at Rs.70,000 each in the year 1983-84 and 1984-85 I am of the view that the assessing officer did not judge the matter in the right perspective. Apparently, the claim for expenses looked understated but facts which were relevant were not given due consideration. It is borne out from record that substantial income was assessed in the hands of the wife and one of the sons declared household expenses at Rs.50,

000. These together with Appellant's perquisites (taxed at Rs.42,622 in one year and at Rs.10,800 in the other) resulted in family fund for household expenses at a reasonable amount of over Rs.1,00,

000. I am, therefore, of the opinion that no addition was warranted for alleged suppression of household expenses. The same is therefore, ordered to be DELETED.

18. Appeals against penalties imposed under section 91.-- Penalties were imposed at 2.5% and 5 % in each year on 9-5-1985 and 30-5-1985. These aggregated Rs.326,753 for the assessment year 1983-84 and Rs.33,756 for 1984-85. The learned CIT (A) confirmed the penalties discarding the plea that these were not maintainable in view of Lahore High Court's decision in Re: Begum Mumtaz Jamal P L D 1976 Lah. 761.The relief as granted by us would result in automatic reduction in the penalty as per provisions of subsection. (4-A) of section 91 of the Income Tax Ordinance. Ordered accordingly.

19. For the, reasons recorded hereinabove the two appeals against assessments SUCCEED partly inasmuch as an addition of Rs.70,000 in each-of the assessment years is KNOCKED OFF. The four other appeals relating to penalty also SUCCEED inasmuch as consequential relief would accrue. . MIAN ABDUL KHALIQ JUDICIAL (MEMBER I)-- On going through the order written by my learned brother the Accountant Member, I find myself unable to agree with the conclusions of maintaining the additions made as "unexplained income" at Rs.72,10,410 and' RsA;57,070 and proportionate? educate on (if penalties in accordance with subsection (4 A) of section 91 of the Income Tax Ordinance, 1979 (hereinafter called the Ordinance). However, I agree With the conclusions of my learned brother on the issue of deletion of addition at Rs.70,000 made under section 13 (1) (e) -of the Ordinance in each of the year under review: In this view of the matter, I am writing dissenting order on the aforesaid different issues. HISTORY OF THE APPEALS At the instance of the assessee two appeals challenging the quantum of assessment for the charge years 1983-84 and 1984-85 were filed assailing the combined order of the learned CIT (A) Zone-1; Lahore dated 31-5-1986. The assessee's authorised representative moved an application before the learned Chairman, Income Tax 'Appellate Tribunal for-out of turn hearing of these appeals at Karachi or Islamabad. The learned Chairman vide order dated 29-6?1986 transferred these appeals for hearing by Islamabad Bench in second week of August, 1986. As one of the learned Members of Islamabad Bench liked to be disassociated with these appeals vide his note dated 15-7-1986, the matter was. again placed before the learned Chairman who on 19-7-1986 retransferred the appeals for hearing, by a Special Bench at Lahore. Thereafter, the assessee's AR moved another application on 12-8-1986 contending that as per directions of the High Court in Writ Petitions Nos.2446, 2450 and 2451 of 1985, an important question of interpretation of C.B.R's. Circular was involved, the appeals may be directed to be heard by a Full Bench. In these circumstances the learned Chairman vide order dated 19-8-1986 directed that the assessee's appeals be heard out of turn by a Full Bench of three Members. As per this order on 3-9-1986 the assessee's appeals were heard by a Full Bench. In the order written and signed by me, I had deleted both the additions made by the departmental officers. My signed order was also signed by my learned brother the Judicial Member-II who added his own note as well. My learned brother the then Accountant Member who did not sign the order just recorded on the order sheet that due to his transfer he could not write his dissenting order. In this background by order of the learned Chairman, these appeals have been laid for hearing before a Larger Bench of five Members including the two Members who had heard the matter earlier. Simultaneously the assessee's four appeals regarding levy of aggregated penalties at Rs.3,26,753 and Rs.33,756 were also heard. . As I happened to be the author of the order at the time of hearing of appeals by a Full Bench of three Members I -am writing this order while taking cognizance of the evidence submitted at the time of earlier hearing in the form of copies of letters as well as assessment orders of parallel cases. All that evidence forms part of the record of the appeals. I have also taken into consideration the material as available on assessment record till making of assessment by the I.T.O. The facts of the case arc that for the charge year 1983-84 the assessee, a Chief Executive of Sunshine Group of Companies, filed return declaring income at Rs.4,50,

785. In the details furnished alongwith the return, sources of the assessee's income were dividend, interest, Director's remunerations, perquisites etc. Certificates in support of Director's remunerations from the Companies concerned were also filed. For this year the assessee's case was covered 'by immunity clause of Self-Assessment Scheme. The declared income being m(5re than Rs.50,000, statement of assets and liabilities was filed disclosing net wealth as on 30-6-1983 at.Rs.1,28,40,636 as against Rs.55,71,788.as on 30-6-1982. The assessee reconciled his assets by declaring foreign remittances received in this year at Rs.72,10,

410. The details of the remittances were: (i) From Mian Maqsood A. Sh. UAE Dubai through Bank of Oman on 21-4-1983 Rs.25,76,880 (ii) From Mian Maqsood A. Sh. UAE Dubai through Bank-of Middle East on 16-5-1983 Rs.12,96,420 (iii) From Mian Tiaz Ahmad Sh. London through City bank on 16-5-1983 Rs.30,15,000 (iv) From Mian Fiaz Ahmad Sh. UAE Dubai through Bank of Oman on 6-4-1983 Rs.3,22,110 ??????????????????????????????????????????????????????????????????????????????????? Total: Rs.72,10,410 ??????????????????????????????????????????????????????????????????????????????????? 2? For the assessment year 1984-85 the assessee derived income from the same sources as of the earlier year. Return was filed declaring income at Rs.1,01,

966. The assessee's case having been selected for detailed scrutiny, notices under section 61/62 of the Ordinance were issued. On requisition the assessee filed statements of assets and liabilities as on 30-6-1984 and on comparison with statement as on 30-6-1983 it transpired that in this year value of net assets stood raised to Rs.1,35,52,407 as against Rs.1,28,40,636 of the earlier year, reflecting thereby an increase of Rs.7,11,

771. The assessee claimed accretion in reconciliation statement on account of foreign remittances sent by his real brother namely Mr. Fiaz Ahmad Sh. from UAE at Rs.6,57,070 through. Banking channels.

3. The I.T:O required the assessee to furnish the address of the remitters and their relationship with him. In reply it was stated that foreign remittances received by the assessee were covered by C.B.R. Circular No. 1 (28) ITI/82 dated 18-9-1982 (hereinafter called the Circular). The assessee protested against the I.T.O.'s action of probe vide letter dated 18-1-1984; the contents of which were: "Kindly- refer- to the correspondence resting with your Letter No.1033 Cent-Ill, dated 14-1-1984. It is submitted that the matter has already been cleared by the Chairman, Central Board of Revenue vide his Letter C. No. 1 (3) IT-3/81 (2), dated 4-9-1982 for the assessment year 1981-82. On the other hand the Central Board of Revenue made its decision open by issuing C.B.R. Circular No.l (28) ITI/82, dated 12-9-1982, for the information of all the assessees. In these circumstances your letter asking for the details of source of origin especially when a Certificate from the Bank regarding remittances from abroad (out of Pakistan) had already been furnished is against the Board's decision and directions. Thus when the facts are same it is upto the Central Board of Revenue, rather the Ministry who, had given decision as mentioned in the Circular referred to above to decide or withdraw the concession allowed. I will, therefore, request you to kindly refer this matter to the Central Board of Revenue for onward transmission to the Ministry for decision whose action still persists and is binding on all. Since the case was not selected by the Central Board of Revenue who is competent authority for detailed scrutiny selection, you may please issue the assessment order as all the relevant details as required by the Circular had already been submitted."

4. It seems that the C.B.R. sought comments from the learned Commissioner of Income Tax, Central Zone, Lahore who vine letter dated 11-1?-1984 after giving facts sent the following reply to the Member (Income Tax) CA.R. Islamabad: "Since this year the claim is that the amounts received are gifts the assessee has to prove not only the factum of the gift bill also the details of giftors before the gifts can be accepted. The Claim that their cases are covered by the Board's Circular referred to above is also untenable for the reasons mentioned above. It is, therefore, requested that we may be permitted to reject the claim of immunity and require him to furnish the full details' of the giftors so that necessary verification can be made from the UK authorities who are likely to have information on the subject as gifts are liable to tax under the U.K. Income-tax law."

5. The Central Board of Revenue vide letter dated 10-3-1984 sent the following reply to the assessee as well as to the learned Commissioner of Income Tax, Central Zone, Lahore:- "Reference your representation dated 18-1-1984 on the above subject addressed to the Income Tax Officer,. Central Circle III, Lahore and a copy endorsed to the Central Board of Revenue, Islamabad. The undersigned is directed to say that the Circular referred to by you does not apply to the case of abovementioned assessee. It is, therefore, regretted that your request cannot be acceded to. The information requested by the .Income Tax Officer may please be provided to him:" 6: Thereafter, the assessee filed Writ Petition in the High Court challenging the ITO's- action of making probe and not allowing exemption of foreign remittances under "the Circular". That writ petition was withdrawn by the assessee's AR on 30-5-1984 stating that the assessee wanted to move the departmental authorities to establish that his case was covered by "the Circular".

7. On 25-11-1984 the President of Lahore Tax Bar Association, Lahore wrote a letter to the Secretary, Ministry of Finance, Government of Pakistan, Islamabad seeking clarification regarding immunity granted to the assessees for the foreign remittances under "the Circular" as Income Tax Department had started investigations seeking clarification from the assessee regarding passport and family members of remitter, reasons. for remittances, tax agreement prevailing m the country from where the- amount was remitted, annual income of foreign remitted and tax paid- in foreign country. The following reply was sent by the Second Secretary of C.B.R. on 17-4-1985:- "Sub:--FOREIGN REMITTANCES I am directed to refer to your letter dated 25-11-1984 on the above subject and to say that there 'is no change in Government Policy as contained in the Board's Circular Instruction of 1982." 8.???????? REPORT OF LEARNED CIT CENTRAL ZONE On 25-4-1985 the learned C.I.T. Central Zone, Lahore wrote letter No.5011 to the learned Regional Commissioner of Central Region, Lahore on the subject of remittances from abroad. It is pertinent to bring on record the contents of that letter which are as under:- There are fourteen cases of this Zone wherein foreign remittances in the form of gifts are stated to have been received. Circumstances necessitating the probe are briefly explained in each case as follows: (1) Mian Aftab Ahmad Sheikh M.D. Sunshine Group of Coy. Rs.72,10,410 (2) Mian Hassan Aftab Sheikh c/o above Rs.26,54,220 (3) Mrs. Nasreen Aftab Sheikh c/o above. Rs.49,19,808 The wealth statements accompanying their returns for 1983-84 manifest gifts of the aforesaid amounts purported to have been received from abroad. The assessees were required to furnish the addresses of the donors and their relationship with them. The information was refused and the assessee took the stand that the remittances were covered by CBR'S Circular C. No.l (28) ITI/82 dated 18-9-1982. The plain reading of the said circular indicates that it forbids enquiries regarding the source of foreign exchange earning brought into Pakistan through proper banking channels for industrial investment only. The circular obviously applies to non-Pakistanis or Pakistan non-residents working abroad who were not resident in Pakistan during the period they earned income abroad. Under law, earnings relating to persons who have been resident in Pakistan are liable to tax. Secondly, only those remittances are not to be probed which are brought in under the NRI schemes. In the instant case the money had not been brought in for such purpose. It may also be pointed out that the said three assesses had been declaring huge amounts each year either as gift from abroad or winnings from Prize Bonds. The details of which are given below:- 1981-82 1982-83 ?Prize Bonds 4.40,000 10,90,000 Hassan Aftab Sheikh ?Prize Bonds 4,30,000 11,10,000 Foreign Remittances 7,40,000 ??????????? - 11,73,000 11,10,000 Prize Bonds 4,95,000 11,05,000 Foreign Remittances 7,40,108 12, 35,108 11,05,000 For both the years, under directions of the Board claims were accepted by the department and the assessments were completed under the immunity clause, During 1983-84 the amounts were claimed to have been received as gifts and the assessee, therefore, had to prove not only the tactum of gift but also the details of giftors. The assessee's claim for immunity was not acceptable as it was not covered by the Board's Circular referred to above. A detailed report was submitted to the C.B.R. under this officer letter No. Jud Con-644, dated 11-1-1984. The assessee also made a represent to the C.B.R. claiming immunity from scrutiny in terms of Board's Circular letter dated 18-9?1982. The C.B.R. upon consideration of all the material facts, vide its C. No.1 (2) IT-9/83-84 dated 10-3-1984 declined to accept the assessee's claim for immunity from probe. All the three cases have since been finalized and the orders released by including among others foreign remittances in the: total income of the assessee. (4) Mr. Hidayat Ullah Sufi c/o Sufi Soap & Chemicals Industries Ltd. 9,95,852 (5) Mr. Khalid Hidayat Ullah c/o above 6,88,942 (6) Mr. Tariq Hidayat Ullah c/o above 6,88,942 In these three cases also foreign remittances were alleged to have been received as gifts from abroad. The facts being identical as in the case of directors of the Sunshine Group of Companies, the remittances were considered to fall outside the purview of Board's Circular instructions 18?9-1982. The assessee was called upon to furnish documentary evidence in corroboration of the alleged gifts, but before any finding could be arrived at further action was stayed by the Central Board of Revenue through telex received vide C No. 1 (28) IT.I-82/Pt, dated 7-6-1984. The stay order still subsists and no further action has been taken. (7) Malik Mohammad Arshad C/o Gulshan Carpets Ltd. 37,79,166 (8) Malik Mohammad Ashiq 4,71,200 ?The facts are exactly similar as in the above cases. No probe has been undertaken as yet and the assessments are pending. (9) Mr. Sadaqat Shaft c/o Montgomery Flour & Genl. Mills Ltd., Lahore 3,99,3322 (10) MrAhad Samad c/o Pakistan Industrial Gases Ltd. 1,07,000 (11) Mr. Zahid Samad c/o above. 23,000 (12) Ch. Abdul Latif c/O Fine Gas Co. Ltd. Mrs. Abdul Latif 33,40,000 17,20,000 The question of foreign remittances through gifts is involved in these four cases. Assessments were finalized under Self-Assessment Scheme. The receipt of foreign remittances came to notice after the completion of assessments. No action has been initiated to reopen the completed assessments in order to verify the genuineness or otherwise of the alleged gifts. (13) Mr. Khurshid Akhtar Khan c/o Gulshan Carpets Ltd. 4,54,290 ??????????? The assessment is still pending. No probe has been initiated so far. (14) Mohammad Ismail Charan c/o Regional Ceramics Ltd. Lahore 15,00,000 ??????????? Remittances received as gift from abroad. Not covered by Board's Circular instructions dated 18-9-1982. Assessment still pending."

9. It cannot be gathered from the assessment order dated 21-4-1985 as to how the assessee's case was taken out of immunity available to him in the 1st year. It seems that the I.T.O. had initiated proceedings of seeking information regarding foreign remittances on perusal of the details of wealth statements of the year under review as well as of the preceding year and after receiving letter of C.B.R. dated 1-3-1984 be assumed jurisdiction for processing normal assessment. The I.T.O. ruled out the assessee's pica of exemption from making probe regarding foreign remittances holding that "the Circular" forbids inquiries regarding the source of foreign exchange earnings brought into Pakistan through proper banking channels for industrial investment. The I.T.O. was of the view that the Circular applied to Pakistanis or Pakistanis non-residents working abroad who are not resident in Pakistan during the period they earned income abroad. The other reason assigned by the I.T.O. was that only those remittances were, not to be probed which were brought under the NRI Scheme. In the assessee's case it was concluded that the remittances were from persons who did not have sufficient funds at their disposal during their earnings in Pakistan. The assessee's plea of exemption from probe was mainly discarded holding that the C.B.R. had not accepted that plea. The assessee's plea of remittances to be gifts also did not find favour with the I.T.O., who held that the assessee could not tender any evidence to establish either earnings of the remitters or their travelling from their country of stay to the countries where from remittances were made. In both the years entire foreign remittances received by the assessee at Rs.72,10,410 and Rs.6,57,070 were taxed at his hands as income from undisclosed sources under section 13 read with 30 of the Ordinance.

10. The assessee filed first appeals and simultaneously availed the remedy of Constitutional jurisdiction of the Punjab High Court by filing Writ Petitions Nos.2446 and 2447 of 1985. These writ petitions were disposed of by a Single Bench vide order dated 9-6-1985 holding as under:- . "The main contention in all these petitions is that in violation of a circular letter issued by the Central Board of Revenue, the Income Tax Officer has, while making the assessment, probed into the source of the foreign remittances received by the petitioner. I am informed that the petitioner has also filed appeals from the orders of the Income-tax Officer which are pending before the Commissioner (Appeals). Since the question raised involves interpretation of a departmental circular it will be more convenient that the petitioner should pursue the departmental remedy in the first instances before availing of the Constitutional remedy. Mr. Ilyas Khan who appears on behalf of the department states that the Commissioner will endeavour to dispose of the appeals within three weeks." 11: On appeal the learned C.I.T. (A) did not accept the assessee's plea that the circular forbade the departmental officers from making probe in respect of sources of foreign exchange brought into Pakistan through banking channels on non-repatriable basis for NRI Scheme. Twofold reasons were given for this conclusion; firstly, it was held that origin of only those funds could not be questioned which were remitted from abroad for non-repatriable industrial investment and in the assessee's case no such evidence was available; secondly, the immunity from scrutiny did not appear to be applicable to gifts received from abroad. The first appellate authority also held that the I.T.O. was empowered to call for information about the financial position of the donors. Reliance was also placed by the learned CIT (A) on the CBR's reply sent to the assessee on 10-3?1984 stating that exemption claimed by him under "the Circular" was not available. The first appellate authority also approved the ITO's order on the alternate plea of foreign remittances as to be gifts holding that no evidence was adduced to establish travelling of the donor's from Cameroon to London or U.A.E., for making remittances and additions made under section 13 read with section 30 of the Ordinance were maintained.

12. The appellant's AR contended inter alia: (a) That the departmental officers erred in law in holding that provisions of "the circular" were not applicable to the assessee's case merely because of reply given by the CBR. The Circular was stated to be fully applicable to the foreign remittances received by the assessee. (b)??????? That the assessee's case was fully covered by immunity allowed by "the circular" as complete documentary evidence was produced-.before the I.T.O. to establish the remittances from abroad through banking channel on non-repatriable basis and for the purposes of industrial investment made by the assessee. (c)??????? that under "the circular" exemption of foreign remittances has been allowed in all the other cases and a discriminatory treatment was erroneously meted out in the assessee's case. (d)??????? that the department officers fell in error in not appreciating the distinction between "gift" and "remittances". The plea of the assessee's AR was that alternate plea regarding receipt of foreign remittances as gift stood duly established as ingredients of gift were complied with. The remittances received as a gift were stated to be fully qualified for exemption under "the circular". (1) Mian Sadaqat Shafi NTN 07-01-1700238 Assessment year 1983-84 (2) Mr. Hidayat Ullah Sufi N T N 07-03-1229555 Assessment year 1983-84 (3) Mr. Tariq Hidayat Ullah N T N 07-03-1230701 Assessment year 1983-84 (4) Ch. Abdul Latif N T N 07-06-1718288 Assessment year.1983-84 (5) Mr. Mohammad Ismail Charan NTN 07-07-3250519 Assessment year 1983-84) (6) Mr. M.M. Ashiq N T N 07-06-1476533 Assessment year 1983-84) ??????????????????????????????????????????????????????????????????????????????????? On rehearing by Larger Bench reliance was placed on three cases only. In all these cases as per assessee's AR remittances made from abroad through banking channels in non-repatriable industrial investments were accepted under "the circular". The assessee's AR also produced copy of letter of Central Board of Revenue dated April 24, 1985 in support of his plea that the contents of "circular" were binding in all the cases. This letter was sent by the C.B.R. to the Commissioner of Income Tax Central Zone, Lahore on the representation of Mr. Hidayat Ullah Sufi and it is pertinent to bring on record the entire contents of the said letter which are as under:- "Subject:- Mr. Hidayat Ullah Sufi c/o Sufi Soap and Chemicals Industries Ltd. Lahore Assessment year 1983-84 Gift under non-repatriable industrial investment in Pakistan. I am directed to refer to your letter No. Jud/A-130-84-85/3156, dated 19-1-1985 on the above subject and to say that the Board's policy is associated vide Board's instruction dated 18-9-1982 remains unchanged. Action may please be taken accordingly."

13. The contentions of the learned Legal Adviser of the Department having been recorded in his order by my learned brother need not be reiterated. Departmental reply was virtually the same as stated earlier. The only additional factor stated at the time of rehearing of the appeals by the Larger Bench was that one of the learned IAC's acting as a departmental representative read out some statement alleged to have been made by one of the remitters of money from abroad to the assessee. It could not be established as to how and under which provision of law that statement was obtained. After completion of assessment as well as hearing of first appeal when the matter was sub judice before the Tribunal the law did not empower any departmental officer to make any further probe on the issues involved. On the principle that the assessment merges in the appellate order, second appeals are to be decided on the basis of material available at assessment record. The only power for obtaining fresh material is with the Tribunal under section 135 (1) of the Ordinance call for any particulars regarding the matters arising in appeal or cause further inquiry to be made by the ITO. In this case no order was passed by the Tribunal under section 135 (i) of the Ordinance calling for further particulars or directing any inquiry be the I.T.O. during the pendency/rehearing of appeals. The Department did not file any application for seeking permission to file any additional evidence procured after completion of assessments. As a result the alleged statement of one of the remitters could neither be considered in evidence nor relied upon. I am deciding the appeals while totally ignoring the aforementioned statement of the remitter. CIRCULAR

14. Before dealing with the submissions of the representatives of the parties 1. deem it appropriate to bring on record "the circular" the contents of which are: Income Tax Ordinance, 1979 (XXXI of 1979) C.No.1 28) ITI/82 ?????????????????????????????????????????????????????? Government of Pakistan ?????? Central Board of Revenue ? Islamabad, the 18th September 1982 From: Mr. Muhammad Arif Asim Second Secretary To: All Commissioners of Income Tax (Except Revision/ Appeals). Subject: NON-REPATRIABLE INVESTMENT, PROOF OF FOREIGN EXCHANGE EARNINGS It has come to Board's notice that attempts have been made to assess the remittances from abroad through banking channels particularly from those Overseas Pakistanis who have/had been assessed to income tax in Pakistan at sometime in the past. It may be pointed out that the Economic Coordination Committee of the Cabinet had decided in 1972 that origin or funds remitted from abroad for non-repatriable industrial investment should not be questioned. 2.? Similarly subsection (2) of Section 4 of the repealed Act which enabled an Income Tax Officer to subject to tax remittances to wife by a husband working abroad out of his untaxed foreign income was deleted through Finance Ordinance, 1973. The purpose was to encourage the inflow of foreign currency.

3. Need for encouraging the inflow of foreign exchange still being there, the Government policy in this regard continues unchanged. All Assessing Officers under your charge may therefore be directed not to probe into the sources of foreign exchange earn s brought into Pakistan through proper banking channels for industrial investment etc." ADJUDICATION OF CIRCULAR '

15. After giving careful consideration to the submissions of the representatives of the parties, I am of the firm view that the Departmental officers misinterpreted the circular and erred in not allowing exemption to the assessee on the basis of contents of `the circular'. In the first paragraph of the circular the requirements stated are: (i) remittances to be from abroad through banking channels particularly from those Overseas Pakistanis who have/had been taxed in Pakistan at sometime in the past; (ii) the remittances should be non-repatriable and for industrial units. In `the circular' all the three paragraphs are independent of each other under para. 1 use 'of the word particularly means that remittances by Overseas Pakistanis not subjected to tax in Pakistan also enjoyed exemption. Remittances to the assessee having been made by Pistanis who had been taxed in Pakistan and being through banking channels were exempted from probe under para. 1 the same were on non-repatriable basis. Paragraph No.2 deals with independent provision of the I.T.O.'s power under subsection (2) of section 4 of the repealed Income Tax Act 1922 (hereinafter called the Act). My reason for holding paragraph No. 2 to be independent is evident from the use of word `similarly'. Earlier under subsection (2) of section 4 of the Act, the I.T.O. was empowered to tax remittances made by a husband working abroad out of his untaxed income at the hands of his wife. This power Of the I.T.O. was taken away by repealing subsection (2) of section 4 through Finance Ordinance, 1973. Obviously this step of the Government was for encouragement of inflow of foreign remittances. The fact of repeal of original powers given to the I.T.O. lends full support to my conclusion that this provision was made over and above the concessions given by the Government in paragraph 1 of the circular. Third paragraph of `the circular' finally elaborates the provisions of paragraphs Nos. 1 and 2 regarding encouragement of inflow of foreign remittances till further directions of the Government. In this paragraph all the Assessing Officers were prohibited from making any probe regarding sources of foreign exchange earnings brought into Pakistan through proper banking channels for non-repatriable industrial investments etc. The circular does not make any mention of the new plea now advanced on behalf of the department that it applied to non-residents working abroad who were residents in Pakistan during the period they earned income abroad. The circular also does not contain any provision regarding verification or probe of earnings made abroad it also does not mention that the earnings of the remitter should be established before remitting or the remittances are to be supported by .any earning certificate. The obvious conclusion thus is that any amount earned by a Pakistani living abroad by fair or foul means or through normal business and sent to Pakistan through banking channels could not be probed. Under the Foreign Exchange Regulation Act, 1947 certain conditions were prescribed for inflow of the remittances as gifts. I Thereafter, the Government in the interest of foreign exchange earnings deeme4 it fit to allow further concessions exempting production of any evidence regarding earnings abroad. One such like instance is that till few years ago, there used to be a specific condition of production of earning certificate in the case of a gift of a car sent by a Pakistani to his parents. Latter on this condition was waived and now each Pakistani having stay of two years abroad is entitled to send a car as gift I to his parents without production of earning certificate. This concession is' available to all Pakistanis after every two years. This establishes that the Government is not concerned whether the remitter was making legal or illegal earnings in foreign countries. My conclusion thus is that the circular does not provide for establishing foreign exchange earnings of the remitter in the foreign countries. In the facts and circumstances of the assessee's case, remittances having been admittedly made through normal banking channels for the purposes of non?-repatriable industrial investment were not open to any probe by the departmental officers. All the requirements as laid down in paragraph 1 of the circular stood duly complied with. The assessee had never sought permission for repatriation of the remittances received by him and in his reply he explained that the received amounts were invested in industrial investment. The alternate plea of the assessees' A R does not matter much as admittedly the assessee had received the remittances from abroad and it is of no importance whether the remittances were gift or not. Only requirement of non-repatriable receipt of remittances stands fulfilled. In the assessment order, the I.T.O. arrived at the conclusions without taking into consideration or discussing the assessee's reply filed on 3-6-1984 wherein it was explained in detail that the foreign remittances were received through normal banking channels and were supported by necessary bank certificates placed on record. The remittances were stated to be non-repatriable because the assessee had never applied to the Government of Pakistan for seeking permission for repatriation of the said amount. As an alternate plea, in the reply, the assessee had explained that the foreign remittances being gifts from real brothers were not repatriable. In support of the alternate plea of gift, the assessee had produced copies of declarations of the donors dated 5-9-1984. These declarations were of Mr. Fiaz Ahmad Sh. and Mr. Maqsood Ahmad Sh. the real brothers of the assessee deposing the fact of foreign remittances made through banking channels. The donors being residents of Younda BP 1188 had made the declarations in French language, copies of which were got translated into English and attested by the Notary Public. In the same reply the assessee had given the details alongwith documentary evidence regarding investment of the foreign remittances. It is pertinent to bring on record the reply of the assessee on the relevant issue which runs as under:- "The amount so received on account of foreign remittance has been invested' in Hassan Aftab Textile Mills Ltd. This company was incorporated as a private limited company on 30-9-1975. Photo copy of the Certificate of Incorporation is attached as Annex. "A/I". It was converted into a public limited company on 30-4-1976. Photo copy of conversion alongwith a copy of the Memorandum and Article of Association is attached as Annexure B'. The company went into production in 1978 with an investment of approximately Rs.32 million. A copy of balance-?sheet for the year ending 30-9-1978 is attached as Annex. `C'. The company decided to expand its activities by adding another Wing Spinning Unit of 15,000 spindles on 13-7-1981. An application was made to the Investment Promotion Bureau in this regard on 13-7-1981. Copy of application is annexed as Annex. `D'. The project was approved by the Government of Pakistan vide their letter dated 8-12-1981 (Annexure-E). The agreement to purchase machinery at a cost of Rs.774 million Japanese Yen was signed on February 5, 1983 for the purchase of 12,480 spindles. Copy of the agreement is attached as Annex. `F. An application was made to United Bank Ltd. on 20-4-1983 for complete financing in Pakistan Rupees as well as the guarantee in foreign exchange. The company offered that Rs.12.5 million will be deposited m margin account for investment in this project. Photo copy of the letter is annexed as Annex. `C'. The bank approved the financial assistance for investment on 21-6-1983 in which condition of deposit of Rs.12.5 millions to be invested in the project by company as Margin-was attached. Photo copy of the Bank's letter dated 21-6-1982 is enclosed as Annexure `H'. The letter of credit was established by United Bank Ltd. vide their letter dated 13-8?1983. Photo copy of the Bank's letter is attached as Annex. `J'. The machinery has been imported and shipped vide s.s. "Eastern Splendour" Annexure K. The erection of the Project is in progress and it is expected that the new unit will start its trial production with a total investment of approximately Rs.85 million in July/August, 1984." It is this project i.e. Hassan Aftab Textile Mills in which major amount of foreign remittances received through proper banking channel have been invested. The detail is given as under: INVESTMENT IN HASSAN AFTAB TEXTILE MILLS LTD. An amount of Rs.48,61,000 was deposited in the purchase of share account with Hassan Aftab Textile Mills Ltd. before 30th June, 1983. Copy of a certificate from the said Company is enclosed as Annex. `L'. This money was invested primarily for the purpose of meeting the financial requirements for opening of the letter of credit, which was established-by the United Bank Ltd. as stated above. The assessee made a request to the company for allocation of shares (Annex. L/I') which was considered in a meeting of the Board of Directors of the Company held on 27th October, 1983. In this meeting it was resolved to allocate shares for the said amount to the assessee. Copy of the resolution is enclosed as Annex. `M'. The letter of allotment was issued by the Company on 5-12?1983. Copies of the letters of allotment are enclosed as Annex. `N'. The share certificate giving the distinctive numbers of the shares was issued on 3rd of April, 1984. Copy of the certificate is attached as Annex. `O'. It may kindly be appreciated that Rs.48,61,000 out of foreign remittances received by the assessee has been invested in Hassan Aftab Textile Mills Ltd. and is, therefore, not to be probed in view of the C.B.R. Circular letter dated 18-9-1982. In this regard it is further submitted that Rs.2,50,000.in addition to the above mentioned amount was also invested in Hassan Aftab Textile Mills by way of purchase of shares. The project is still in progress. The fact that the foreign remittance has g9ne into industrial investment stands established. (b) DEPOSIT WITH SPINNING MACHINERY CORPORATION OF PAK. The Sunshine Textile Mills Ltd. were interested in installing 12,500 spindles and wanted to purchase the same. For this purpose an advance of Rs.3,00,000 was made to the Spinning Machinery Corporation of Pakistan Ltd. vide the Cheque No.726912 dated 6-6-1983. Copy of the letter is annexed as Annex. `P'. It may be appreciated that this amount has also gone in Industrial Investment in the name of proposed Sunshine Textile Mills Ltd.' (c)??????? Payment towards Bank The loan procured for the purposes of Sunshine Jute Mills was partially repaid from the amount received on account of remittances. This repayment of the remaining loan of Rs.13,65,000 which was used for establishment of Sunshine Jute Mills was repaid from the amount received on account of foreign remittances. This repayment started on 10th of April, 1983 and was concluded on 6th of June, 1983. Copies of the correspondence with the Banks on loan account are enclosed as Annex. `Q'. It is submitted that out of Rs.72,10,410 an amount of Rs.67,76,000 was invested and utilized for the purposes of industrial development. This amount is, therefore, covered under the said circular of Central Board of Revenue and is not to be brought within the purview of taxation. An amount of Rs.4,34,410 was retained for personal expenses:'

17. The I.T.O. erroneously discarded the assessee's plea of receipt on foreign remittances as gifts holding that the assessee had failed to prove not only the factum of gift but also the details of the giftors. The assessee was called upon to furnish the following details and information in this behalf: (i)???????? Evidence as to quantum of gift; (ii)??????? Evidence regarding financial position of the donor; (iii)?????? Attested copies of the passport of the donors; (iv)?????? Copies of the bank accounts of the donors concerned for the period during which the remittances were made. The I.T.O. could not appreciate the assessee's plea of exemption and erroneously concluded that the assessee had failed to offer any plausible explanation or any documentary evidence as to travelling or movement of the donors from their country of origin, to the other for making remittances. The I.T.O. was not competent under law to explore the financial position of the donors for the remittances made under the Circular by making comparison of their earning in Pakistan in the assessment years 1970-71 through 1975-76. It seems that both the departmental officers mainly relied on the reply of the Central Board of Revenue refusing exemption of the assessee on the basis of the Circular. I feel no hesitation in holding that .the CBR's reply of the assessee dated 10-3-1984 was capricious as after allowing a concession no distinction could be made by an arbitrary or executive order. The authority issuing the Circular had allowed exemption in general on certain principles and there could not be any deviation, t distinction or any exception in interpreting that Circular. The departmental officers mainly relied on the interpretation of the CBR. In fact CBR's interpretation was not sacrosanct as two separate interpretations could not be made even by the author of the Circular in the cases of identical nature.

18. Both the departmental officers unnecessarily indulged in discussion of validity of the remittances as gift. The donors living abroad having admitted making of gift and the remittances having been made to the donee through normal banking channel's, no provision of the Ordinance empowers the I.T.O. to verify the financial position of the donors. The remittances having been established to have been received by the assessee through normal banking channels, the gift was completed and requirements of "the Circular" stood duly complied with. In this view of the matter I hold that the remittances received by the assessee if considered to be gift were fully valid in the eye of law and enjoyed immunity from probe, ??????????

19. This brings me to the grievance about distinguished treatment given to the assessee. As per list of common cases furnished by the assessee and the Department wherein exemption wallowed to the assessee in respect of remittances received from abroad through banking channels on the basis of the same Circular. Though it is not essential for me to discuss the details of the cases wherein the Department had accepted the plea of the assessees regarding exemption but the parties having furnished the list, I deem it appropriate to make a passing reference on the facts of those cases as well. In the case of Mian Sadaqat Shafi, (GIR No.07-O1-1700238) foreign remittances of Rs.3,99,332 made by the assessee's brother as a gift were exempted under the same Circular. In the 3 case of Mr. Hidayatullah Sufi, (G.I.R. No. 07-03-1229555) a sum of Rs.9,95,852 was exempted under the same Circular holding that no probe could be made regarding sources of foreign remittances received by the assessee. The C B R had also informed in this case vide letter dated 24-4-1985 that as per "the Circular" no probe could be made in this behalf. In the case of Mr. Tariq Hidayat Ullah Sufi, (G.I.R. No.07-03-1230701) a sum of Rs.6,88,942 was exempted on account of foreign remittances under the same Circular. In the case of Ch. Abdul Latif (G.I.R. No.07-06-1718288) exemption was allowed under the Circular to the foreign remittances at Rs.33,40,000-received by the assessee and Rs.17,20,000 by his wife. In the case of Mr. Mohammad Ismail Ali Charan, (G.I.R. No. 07-07-3250519) on the basis of certificates of banks foreign remittances at Rs.11,00,000 were held to be exempt. In this case the assessee had also produced documentary evidence in support of gift. In the case of Mr. M.M. Ashiq c/o Gulshan Carpets Industries Ltd. (G.I.R. No.07-06-1476533) foreign remittances at Rs.21,23,240 were exempted under the Circular holding:- "The necessary details/evidence in respect of remittances have been filed. The remittances were received through banking channels. The same are verifiable and are in order." The Department could not produce a single case wherein exemption claimed by any assessee under the Circular was not allowed. Reply of the C.B.R. to the President Lahore Tax Bar and to some other assessees also establishes that the Circular was operative and functional without any distinction of probe in a singled out case. As a result of the above discussion, orders of the departmental officers are modified deleting the additions made in both the years under review as foreign remittances received by the assessee. Those remittances being exempt from probe under "the Circular" were erroneously added as the assessee's income "u/s 13/30 of the Ordinance. Additions in both the years stand deleted.

20. This brings me to the assessee's next grievance regarding penalties imposed for non-payment of tax demand as created by the assessment order. The law established by various reported and unreported cases of High Courts is that if the basic assessment order undergoes a change in appeal, the very levy of tax on that basis ceases to be a legal demand. In such like circumstances the penalties are to be deleted in toto. Provisions of subsection (4A) of section 91 of the Ordinance having been incorporated on 1-7-1987 by Finance Act VI of 1987 could not be made applicable with retrospective effect. Penal provisions are always prospective in nature. The penalties having been imposed before incorporation of the said subsection (4A) of section 91 of the Ordinance had thus to be deleted. I modify the orders of the departmental officers directing deletion of penalties in toto for both the years. AS PER MR. ABRAR HUSSAIN NAOVI JUDICIAL MEMBER-II.

1. As stated above by my learned brother, the Judicial Member, this case was earlier heard by a Full Bench of three members. Since, I as a Member of that Bench had earlier expressed my view in writing which was later on placed under a sealed cover, I did not wish to be associated with this case again and I expressed my desire in this respect. However, much against my wish, I was included in the Larger Bench, which has now heard the case. After rehearing the case and even after reading the reasoning of my learned brother, the Accountant Member, I hold the same views as earlier expressed and reiterate.

2. After going through the orders of my learned brothers the Accountant Member and the Judicial Member, I could not persuade myself to agree with the reasoning and conclusion arrived at by the learned Accountant Member. I would like to add my own views to support the conclusion arrived at by my learned brother, the Judicial Member. I need not reiterate the facts, which have already been detailed by the learned Judicial Member. The admitted facts, which are borne out from the record are: The assessee received certain amounts by remittances from abroad from close relation through banking channels. These amounts have duly been shown in the account books of the assessee. The precise question involved in this case is, as to whether these amounts received by the assessee from abroad are unexplained within the meaning of Section 13 of the? Income-tax Ordinance. At the outset, I would like to point out that the department has unnecessarily laid a stress on the letter of the C.B.R. dated 18th September, 1982. As a matter of fact the whole case has been pivoted around this letter as if this was the letter which has the force of law. This letter was issued by the C.B.R. which might be considered at best a letter of policy to be followed by the Commissioners. Certainly, it had no force of law nor can any addition be made in the income of an assessee on the basis of this letter. The relevant law under which the addition could be made and in fact has, been made is Section 13 of the I.T. Ordinance, 1979. Therefore, we have to see as to whether the additions made under this Section could be termed as deemed income and whether the conditions as given under section 13 have been fulfilled.

3. In order to reach at a correct conclusion, we have to understand the concept of taxing the income of an assessee with particular reference to certain amounts which are otherwise not income liable to tax but, by fiction of law, these amounts received or invested by an assessee are deemed to be income under section 13 of the Income-tax Ordinance. If there is 'an income from known or unknown sources, the law lays down that it is to be taxed at the hands of the assessee under various heads of income unless it is exempted from payment of tax under any provision of the Income-tax Ordinance. In such cases where an assessee claims exemption, the burden of proof is 'on him to show that this income falls under any of the provisions for exemption given by the statute. The case where the income is not in fact income' but is deemed to be income by, fiction of law, the position is entirely different. Here the assessee is not required to prove that section 13 does not apply in his case. What is required from him is to give explanation (not proof) as to the nature and source of any sum invested, acquisition of money or valuable article etc. If the assessee does not offer any explanation, or the explanation offered by him is not satisfactory such an amount or investment can be termed as income of the assessee by fiction of law.

4. Thus if an amount is found in the books of accounts of an assessee, the assessing officer is entitled to ask for his explanation in regard to the nature anti source of such a sum or money. If in such a case the assessee explains that the amount was received by him from `A', the assessee's job is over. He has to do no more than that because both the nature and source of money received by him have been duly explained by him. From here the duty of the Income-tax Officer starts. The assessing officer has to find out as to whether `A' has in fact given this money to the assessee or not. If the I.T.O. finds that `A' did give this money to the assessee, then, so far as the 4ssessee is concerned, the amount in question is properly explained and the I.T.O. is under obligation to accept the explanation of the assessee. However, the assessing officer has always the power to give a. finding that in fact the assessee never received the money from `A'. It can be shown that the money has not changed hands and the assessee's explanation was incorrect. But in a case where the transfer of money from `A' to an assessee is proved and not disputed by the assessing officer, he has no power to term it as deemed income under fiction of law because the assessee's only duty was to -give explanation as to the nature and source of his money which is adequately discharged. The assessing officer has no business and no power' under the law to go into a further question as to whether `A' was capable to give this money to the assessee or as to what was the source of his income and whether 'A' had legally or illegally earned this money or n t. If the I.T.O. goes into this question he would be involving `A' whose income is not under discussion before him. Once it is proved that `A' has passed on he money to the assessee then the duty of the assessing officer is to probe in the income of `A' and if he is not satisfied as to the nature and source of the income of `A' then assessment at his hands can be made and not at the hands of the assessee. If we accept the principle that the assessing officer can go into the source of the loaner or the donor that would place an assessee in an impossible position. Take for instance, an assessee ho, in dire need, borrows money from `A' who is a smuggler or has an illegal mans of income. If the I.T.O. requires the assessee to prove the source of income of the loaner in such a case, will it be possible for the assessee to ask the loaner to give evidence before the I.T.O. as to the source of his income. Naturally, it would not be possible for the assessee unless this would be a collusive arrangement. In such circumstances, only that assessee would be able to prove the nature and source of such loan or gift if it was bogus. In. a genuine case, the position of an assessee can be well-imagined if he asks `A' the loaner or donor, to prove the sours: of his income. Section 13 of the Ordinance required from the assessee to explain the nature and source of his investment or expenditure etc.' anal not of the person from whom he has received the money etc. The same principle would be true in case of foreign remittances. If the assessing officer calls for an explanation in regard to the nature and source of certain amounts shown, in the assessee's books of accounts and it is explained that the amounts received were sent from abroad through banking channels the assessee's explanation is satisfactory and no further question can be asked to him; The assessing officer can only disbelieve the explanation of the assessee where he finds that no remittances have been received by the assessee. As to what was the source of the person who has sent the remittances from abroad and what are his earnings, whether he had capacity to send this money to the assessee are absolutely irrelevant questions and the I.T.O. is not empowered to go into these questions because that would be questions which would be relevant for the assessment of a person who has sent the money to the assessee whose case is certainly not before the assessing officer.

6. Now applying this principle the assessing officer has termed the amounts received by the assessee as his income under section 13 not because the amounts are not explained by 'the assessee nor because the explanation of the assessee was unsatisfactory but on the ground that the assessee has not been able to prove that the persons who had sent these remittances had adequate means to send these amounts to him. To my mind the assessing officer has certainly exceeded his jurisdiction, which he is not vested with under section 13 of the Income-tax Ordinance to go into these questions.

7. The assessing officer had made certain presumptions without any basis or proof. He has assumed that the: money received by the assessee from abroad is in fact the assessee's money. This presumption is only based on conjecture and there is not an iota of evidence or material with the assessing officer with which this presumption call be supported. If the assessing officer considered these amounts as in fact income of the assessee, the burden was on him to prove that the amounts received from abroad in fact belonged to him. Since the assessing officer had added this income under section 13 of the Ordinance, he has to tontine himself within the four corners of that section. The assessee was only required to give an explanation as to the nature and source of the money received by him which explanation having been given, the assessing officer could not reject t the explanation merely on conjectures, possibilities and probabilities.

8. Now I come to the letter issued by the C.B.R. dated 18-9-1982 which has already been reproduced in para. 14 above by my learned brother, the Judicial Member. It has not been properly appreciated by the I.T.O as well as by the t learned C.I.T (A)./Para. 1 of the letter in fact is, not relatable to the assessees who receive the foreign remittances. From the wording of the para it is clear that this is referable to the assessees who have-sent the remittances: The para starts with the words : "It has come to notice that attempts have been made to assess remittances from abroad through banking channel particularly from those Overseas Pakistani who have/had been assessed in the Income-tax Department at some time in the past." This seems to be relatable to the cases where the assessees who have/had been assessed in Pakistan; had gone abroad and sent remittances in Pakistan. This para. is certainly not relatable for the recipient of the foreign remittances. For the recipient of the foreign remittances para. 2 is relevant where an instance has been quoted which supports the interpretation that foreign remittances are not to be probed into. Here it maybe stated that under subsection (2) of section 4 of the repealed Income-tax Act (also referred to by the C.B.R. in its letter dated 18-9-1982) remittances received by a wife from husband, not resident in Pakistan, was deemed to be income accruing in Pakistan to the wife. This subsection is reproduced below for reference:- "(2) For .the purposes of subsection (1), where a husband is not resident in Pakistan, remittances received by his wife resident in Pakistan, out of any part of his income which is not included in. his total income shall be deemed to be income accruing in Pakistan to the wife". This subsection was subsequently omitted in 1973.

9. The department's case as put by the legal Adviser was that foreign I remittances can be probed and ultimately taxed at the hands of the recipient in Pakistan under section 13 of the Ordinance. If this argument is correct there was no need of subsection (2) of section 4 to be incorporated. The very fact that under subsection (2) of section 4 of the repealed Income-tax Act certain kinds of foreign remittances received from husband, not resident in Pakistan, by wife residing m Pakistan, was to be included in her total income under the deemed income provision, makes it clear that such an income could not be otherwise termed as income nor it could be included in the total income of the wife under any other? provision of the repealed Income-tax Act. Had there been any general power under any provisions of the repealed Income-tax Act, there was no need to incorporate such a provision. This makes it absolutely clear that foreign remittances received from abroad could not be included in the total income unless it was specifically termed as deemed income of an assessee. It may be noted that under subsection (2) of section 4 a particular kind of foreign remittances could be termed as deemed income of the wife which also shows that other remittances even under that provision of law could not be treated as deemed income by fiction of law. It may further be noted that section 13 of the Income-tax Ordinance is pari materia with section 4 (2A) to 4 (2E) of the revealed Act. This further makes it clear that foreign remittances ipso facto cannot be termed as income at the hands of the recipient because no provision corresponding or similar to section 4(2) of the repealed Act, has been incorporated in section 13 of the Income-tax Ordinance.

10. Another point, which also needs some comments and on which the learned Legal Adviser as well as the learned OR have very much relied, is the last words in para. three of the aforesaid letter of the C.B.R It was contended on behalf of the department that the Notification (as if it was a Notification for exemption of income) only exempts that part of foreign remittances which were brought into Pakistan through proper banking channels for "industrial investment etc". It was contended that the assessee's remittances were not for industrial investment (though it has been shown by the learned J.M. that such amounts were utilized for industrial investment). The arguments of the learned legal Advisor were misconceived because he ignored the word etc.' We are not aware as to what was intended for using the word etc., in this letter. However, one thing is certain that it was not necessary that foreign remittances should have been confined for industrial investment only. Such amounts could also be utilized for some other investment as well for which the learned Income-tax Officer has not made any probe.

11. The next point, which needs some comments is the nature of remittances. It has been shown that these were the gifts received by the assessee from abroad from his close relation. For a gift as is well known, under Muhammadan Law there arc three, ingredients; declaration, transfer of possession and acceptance. In the present case all the three ingredients are combined in one fact that an amount has been sent from abroad as gift and has been received by the assessee and incorporated in his books of accounts. The very fact that the amounts have been termed as gift established the declaration of the donor and the factum of transfer of the amount through banking channels is not disputed and the third ingredient of acceptance is obvious and has not been disputed by the department. I am not aware of any principle of law in regard to gift where in order to examine the validity of gift any authority can go into the question as to how the subject-matter of gift was acquired by the donor particularly when the subject-matter is movable property. If at all, the factum of gift can be questioned by a person who has interest in the gifted property or by the donor himself if he claims to have revocated it. Therefore, even-otherwise the gift made by the donor to the assessee cannot be doubted nor the validity of the gift can be challenged.

12. Even if it be assumed that the gift as such had not been proved, though it has been shown that the gift was complete as envisaged by Muhammadan Law, even then the department has no case. The assessee had shown certain amounts in the books of accounts which are required to be explained by him, His explanation was that the amounts were received through banking channels from abroad. This fact is not disputed. The nature of the amounts received could be of three kinds. It could be a gift, a loan or a Sadqah (charity). Even if the gift had not been proved then either it could be a loan or a charity. Even then the explanation of the assessee cannot be termed as unsatisfactory. Under section 13 the only requirement from an assessee is that the amounts received are adequately explained. Mere fact that an amount received as gift by an assessee did not fulfil the requirements of gift; would not change the factum of receipt of the amounts nor such an explanation could be said to be unsatisfactory.

13. It may be noted that by amendment in law by the Finance Ordinance, 1984, an addition made under section 13 of the Ordinance is to be treated as concealed income under section 111 (2) of the Ordinance. Therefore, any addition made under section 13 as deemed income would also entail penalty under section 111 of the Ordinance. It may further be stated that in case of concealment of income an assessee is liable to be punished with imprisonment for a term, which may extend to five years as well as with fine under section 119 of the Ordinance. Therefore, section 13 has to be interpreted strictly and this is well established that where two interpretations are possible one in favour of the assessee is to be accepted. This could be more true in a case where such an interpretation, as placed by the department, would- also entail penalty under section 111 as well as the prosecution under section 119 of the Ordinance.

14. The last point, which needs some comments is the way in which the assessee's case has been singled out in order to examine these remittances so as to treat them as deemed income. One factor which has been taken into account by the assessing officer as well as the learned C I T (A) and has also been agitated by the Legal Adviser and the learned D.R. was that the assessee has been in the habit of including certain amounts showing as out of Prize Bonds etc., in the earlier years. I fail to see any logic or reason or even the validity of this argument. The prizes or prize bonds have been given exemption under the Income-tax law, These prizes have been shown in the earlier years to have been won which were also accepted by the department as such. I fail to understand as to how any adverse inference can be drawn from this fact against the assessee in the assessment years under consideration. Secondly, the circumstances under which the assessee's case was taken out has been given in detail by the learned Judicial Member which I 'need not reiterate. However, one fact is certainly to be highlighted here. The assessee had made an application to the C.B.R. that his case should not be probed under the aforesaid Notification as the I.T.O. had no jurisdiction to do so. The C.B.R. asked for the comments of the Commissioner vide its letter dated 25-4-1985. The learned C.I.T. Central Zone, Lahore submitted his report vide his letter No.501 in which it was stated that there were 14 cases of his zone in which foreign remittances in the form of gifts were stated to have been received and three reasons were given in case of present assessee and two others of his family to exclude them from the Notification:- (1) That the Notification dated 18-9-1982 of the C.B.R. did not apply on the assessee. Only these remittances are not to be robed into which are brought in under N.T.R. Scheme and in the present case the money had not been brought in for such purposes. (2) That the assessee has been showing prize money and has been declaring huge amounts from winning prize bonds. (3) That the assessee in the present case is not only to prove the factum of gifts but also details of the gifters (Donors).

15. It is obvious that the second point, which has already been dealt with, is absolutely irrelevant. The first point has also been dealt with above. As for the factum of gift it has been manifested above that it stands proved. However, I fail to understand as to how the detail of donor's (termed by the department as gifter) source of income can be asked to the assessee. The donor might have begged, borrowed, or stolen the amount but the donee has nothing to do with it nor the I.T.O. can ask any question from the donee in this regard. As stated above, such question can only be asked to the donor and not to the donee. Obviously, in the case like this, the donor's assessment was not before the department nor was it in the jurisdiction of the assessing officer. If at all such a question was relevant that can be relevant in the case of the donor.

16. I may add further that during my service of 10 years in the Tribunal I have not come across a single case where the Foreign remittances have not been accepted by the department as adequate explanation either under sections 4 (2-A) to 4(2-E) of the repealed Income-tax Act or under section 13 of the I Income-tax Ordinance.

17. For the foregoing reasons, agreeing with the learned Judicial Member, the additions made by the assessing officer on account of foreign remittances are directed to be deleted. MIRZA MUHAMMAD WASIM ACCOUNTANT MEMBER.-- After a careful consideration of the views of my learned brothers regarding the additions of Rs.72,10,410 and Rs.6,57,070 made by the I.T.O. to the assessee's income in the years 1983-84 and 1984-85 respectively, I find myself in agreement with the decision of the learned Accountant Member (Mr. A.A. Zuberi) to maintain the additions. My views on various aspects of the matter are recorded hereunder.

2. The first issue that 1 would like to take up is the question of the applicability of the C.B R circular letter C. No.l (28) ITI/82, dated 18-9-1982 to the case before us. Although I agree with my learned brother the Judicial Member-II (Mr. Abrar Hussain Naqvi), that undue importance seems to have been given in the case to this Circular, I consider it necessary to dwell on it at some length because it has been the assessee's basic contention from the very beginning that in view of the contents of the Circular the I.T.O. was not empowered to probe into the funds received by him in the shape of foreign remittances. During the arguments before us also, particular emphasis was laid on this point by the learned counsel for the assessee and in fact the finding of my learned brother the Judicial Member-I (Mian Abdul Khaliq) that the additions made by the Income-tax Officer be deleted is primarily based on-the point of applicability of the C.B.R. circular to the instant case.

3. In the context of the Circular the first point 1 would like to make is that the said Circular is in fact not applicable to the instant case and there was thus no valid basis for the assessee's claim that m the light of the circular he was immune from any probe or questioning by the Income-tax Officer with regard to the foreign remittances shown by him. I would in fact agree with the learned J.M II to so far as he has observed that basically the issue has to be examined in the light of the provisions of section 13 of the income-tax Ordinance. Tarts what the I.T.O was basically concerned with in the case were the accretions in the assessee's wealth relevant to the assessment years 1983-84 and 1984-85 amounting to Rs.7,268,848 and Rs.7,11,

771. Subsection (1) of section 13 of the Income-tax Ordinance, 1979 and more specifically its clause (aa) clearly provides that where an assessee is found to have made any investment or is found to be the owner of any money or valuable article in any year the I.T.O. can require him to explain its nature and source and if the assessee offers no explanation or the explanation offered by him is not, in the opinion of the Income-tax Officer, satisfactory the value of the investment, money or article "shall be deemed to be the income of the assessee of such income year ...." In the instant case the assessee had shown certain assets or investment in his wealth statement as on 30-6-1983 and 30-6?1984 and in so far as these assets or investments did not exceed the assets or investments shown in the wealth statement for the preceding year the assets stood accounted for as far as the particular income year was concerned. It was only the balance assets (or accretion) as on 30-6-1983 and 30-6-1984 which required an explanation by the assessee in the light of section

13. It may be added that in the case of accretion during a particular income year the I.T.O. could even otherwise legitimately ask about the assessee's sources of funds and to draw his inference about the income of the assessee during the income year, even if section 13 were not there. In fact clause (aa) of section 13(1) of the Income-tax Ordinance was inserted as late as in 1980 and the repealed Income-tax Act had no exactly corresponding provision but it has all along been possible for the I.T.O. to draw an inference regarding the actual income of the assessee during an income year if the assessee was unable to give a satisfactory explanation of the accretion in wealth during that particular year. The main difference brought about by the introduction of the said clause (aa) is that the matter is no longer confined to the accretion within a particular income year and it has become possible for the value of an investment etc. to be deemed as the income of one year although it may have been made in earlier year or years. In the instant case, thus, what we are dealing with is the matter of the assessee's explanation relating to the accretion in his wealth during a particular income year and with the question whether the explanation offered by the assessee with regard to the accretion was satisfactory. The explanation for the-accretion given by the assessee was that the investment had been made by him out of cash gifts received from the assessee's brothers who were residing in Cameroon. While giving this explanation the assessee also claimed immunity from further questioning or probe in the light of the C.B.R's circular dated 18-9-1982. The said circular has been reproduced by the learned J.M. I in para 14 of his note and it can be seen from its very first paragraph that it in fact deals with attempts made to assess the remittances from abroad through banking channels particularly from those Overseas Pakistanis who have/had been assessed to Income-tax in Pakistan at sometime in the past'. This means that attempts had been made to assess the remittances from abroad from Overseas Pakistanis as the income of the said Overseas Pakistanis taxable in Pakistan and it is such attempts that have been discouraged in the circular. In the instant case, no attempt whatsoever was made to tax the remittances as the income of the Overseas Pakistani making the remittances. What the I.T.O. did was to try to obtain an adequate explanation of the accretion in the wealth of the assessee (who is not an overseas PakiF4ani) and to find out whether the explanation offered by him i.e., that the money was received from abroad as a gift, was satisfactory. This was not an attempt on the I.T.O.'s part to assess the remittances from abroad received through banking channels. It may be further elaborated in this context that if the assessee's brothers had acquired properties or had made investments in their own names in Pakistan and had remitted money from abroad for the purpose, the directions in the C.B.R.'s circular would have restrained the I:T.O. from trying to make out a case that the remittances were subject to tax in Pakistan. In the instant case the remittances as such, have not been taxed as the income of an Overseas Pakistani by the Income-tax Officer. He has only enquired into the sources of accretion in the wealth of the assessee during the relevant income year and has considered the assessee's explanation regarding cash gifts from his brothers residing abroad but has not found it to be satisfactory. He has thus treated the accretion in the assessee's hands as unexplained accretion which cannot- be termed as an attempt to `assess the remittances from abroad'. I am thus of the view that the C.B.R.'s circular was not relevant in the case and the assessee's plea that the circular debarred the I.T.O. from making the additions does not, therefore, have any merit. It may be added that it is in this context that the C.B.R.'s reply dated 10-3-1984 to the assessee (reproduced in para 5 of the learned JM's note) needs to be read and it would be seen that the C.B.R.'s observation that the, circular did `not apply' to the assessee's case was quite valid.

4. Apart from this we have to bear in mind that the circular instructions issued by the C.B.R. cannot be construed to allow any exemption to incomes, which is not otherwise available under the law. Such a power of granting exemptions can only be exercised by the Federal Government under section 14 of the Income-tax Ordinance through a Notification in the official Gazette. The C.B.R.'s circular under consideration is not a Notification of -the Federal Government and it can only be considered to be operative within the framework of the law and not outside it. To consider the real import of the circular within the framework of the existing law it would, therefore, be worthwhile to refer back to each of its three paragraphs. The first paragraph disproves all attempts made to assess the remittances from Overseas Pakistanis particularly those Pakistanis who had been assessed to Income-tax in Pakistan at sometime in the past. Now such efforts can only be made by trying to establish that the remittances represented income, which, according to the law, was taxable in Pakistan. In this connection we may for example refer to the provisions of section 11 of the Income-tax Ordinance which defines the scope of `total income' and lays down that in the case of a resident, total income includes all income from whatever source derived which is received, or is deemed to be received in Pakistan, or accrues or arises, or is deemed to accrue or arise in Pakistan and also all income which accrues or arises to the resident outside Pakistan. In the case of a non?resident on the other had, total income includes only such income which is received or is deemed to be received in Pakistan or which accrues or arises in Pakistan Thus in order to attempt to tax the remittances from an overseas Pakistani the Income Tax Officer can try to establish that the said person was in fact a resident and was thus taxable in Pakistan on his worldwide income. Clause (40) of the section 2 of the Income-tax Ordinance defines a `resident' as an individual who in any income year is in Pakistan for a period or periods amounting to one hundred and eighty-two days or more during that year or is in Pakistan for a period of ninety days or more during the income year and who within the four years preceding that year has been in Pakistan for a period amounting in all to, three hundred and sixty-five days or more. Thus in order to tax the foreign remittances of an overseas Pakistani an Income-tax Officer may raise questions about not only the period of his stay in Pakistan during a particular income year but also about his movements during the past four years as well as the origin of the funds remitted to Pakistan. That is why there is a special reference in the circular to Overseas Pakistanis `previously assessed to tax in Pakistan' as in such cases the I.T.O. may be more tempted to try to establish the status as a resident for tax purposes. Such attempts would, however, obviously lead to unnecessary hardship for genuine non-resident Pakistanis and it is this type of hardship that the circular, seeks to alleviate when in its first para it refers to the 1972 Cabinet decision that the origin of funds for NRI investment should not be questioned. Obviously if a person is actually resident in Pakistan and he has foreign source income, no C.B.R. Circular can exempt the foreign income unless the law specifically allows such an exemption. Similarly, the circular cannot be considered to mean that whenever any assets of a person resident in Pakistan are sought to be explained in terms of foreign remittances claimed to have been received by him, such an explanation has to be automatically accepted and the source of the acquisition of the assets considered as duly explained.

5. Coming now to the second paragraph of the circular we see that it refers to the deletion of subsection (2) of section 4 of the repealed Income-tax Act which subsection had enabled the Income-tax Officer to tax the remittance sent by a husband working abroad to his wife as income in the hands of the wife. As is evident from the paragraph itself, the example of this deletion (which took place in 1973) was given basically to further illustrate the Government's policy (dating back to the 1972 Cabinet decision referred to in the first paragraph) to encourage the inflow of foreign currency. The paragraph also serves to remind the Departmental Officers that remittances from Overseas Pakistanis received, for instance, by their dependents do not by themselves constitute income in the hands of the recipients. Such a clarification seemed to be necessary because there could be a possibility that the words `income from whatever source derived, which is received, or is deemed to be received, in Pakistan .... " appearing in subsection (1) of section 11 of the Ordinance could be construed in such a way as to tax the foreign remittances as income in the hands of the recipients. The C.B.R. Circular thus serves to remind the Departmental Officers that transfer payments of this sort do not constitute `income' for the purposes of the Income-tax Ordinance. In the case before us, it is again not a situation where there has been any attempt to tax foreign remittances as income in the hands of the recipient merely by virtue of their receipt in Pakistan. The case of the Department, on the other hand, is that the accretion in the hands of the assessee could not be explained through the foreign remittances which allegedly were never sent by the assessee's brothers (or any Overseas Pakistani) but represented the assessee's own income. Since there was no attempt on the part of the Income-tax Officer to tax the remittances in the hands of the assessee merely because of their receipt in Pakistan there was no obligation on him, in the context of para. 2 of the C.B.R. Circular to accept the assessee's explanation without question. 6 As regards the third and last paragraph of the Circular it reiterates the Government policy to save overseas Pakistanis from unnecessary bother and to encourage foreign remittances. It thus asks the Commissioners of Income-tax to direct their assessing officers not to probe into the sources of foreign exchange earnings' brought into Pakistan through proper banking channels for industrial investment etc. The circular cannot grant any special exemption in respect of foreign exchange earnings' which may otherwise be taxable in Pakistan and it therefore, contains the aforesaid directions only because by virtue of the provisions of section 11 of the Income-tax Ordinance the foreign source income of a non-resident is not to be included in his total income for purposes of tax in Pakistan and thus any attempt to tax the remittances from non-resident Pakistanis or to probe into their sources of earnings could cause injustifiable hardship m their case.. Here again in the instant case the Department's view is that the remittances did not represent the foreign `earnings' of a non-resident Pakistani and again, therefore; the C.B.R. Circular did not place any bar on the action contemplated by the Income-tax Officer. It may be added in this connection that a perusal of the contents of the letter of the President? Lahore Tax Bar Association, dated 25-11-1984 referred to by the learned Judicial Member-I in para. 7 of his note shows that the letter dealt with the difficulties being faced by Pakistanis `living abroad' who wanted to make remittances to Pakistan but were being asked questions by the Income-tax Department regarding their passports, their family members, the reasons for the remittances, the tax agreement with the country of the remitter's residence, the total foreign income of the remitter and the tax paid in the foreign -country etc. Now such questions, if these were in fact being raised by the Income-tax Officers, would amount to unnecessary harassment for genuine non-resident Pakistanis whose foreign income is in any case not taxable in Pakistan. Thus when the C.B.R. sent the reply, dated 17-4-1985 to the President, Income-tax Bar Association reproduced in para 7 of the note of the learned Judicial Member-I it in fact did nothing more than to, repeat that there was no change in the Government policy that such harrassment to non-resident Pakistanis should not take place. I need hardly repeat that in the instant case it was not a question of taxing the foreign remittances by virtue of their mere receipt in Pakistan or a question of causing harassment to any non?resident earners of foreign income but a question whether the assessee's explanation that the receipts represented gifts from his brothers was genuine. Thus again the C.B.R. instructions in no way restrained the I.T.O. from examining the acceptability of the assessee's explanation.

7. While on the subject of the Circular I would also like to deal briefly with the assessee's contention that the remittances were in fact for non-repatriable investment which contention has been discussed in detail in para. 16 of the note of the learned Judicial Member-I who has also reproduced the letter which the assessee had written to the ITO, giving the details of the investment made by the assessee. In this connection, the Department has quite validly argued that the contention of the assessee is negated by his own claim that the remittances represented cash gifts from abroad which could be utilized by the assessee in whatever manner he pleased. Furthermore, the mere fact that a person does not seek to remit the profits or capital relating to an investment, does not make the investment a `non-repatriable investment'. In fact a relevant paragraph in a Government publication which inter alia explains the N R I Scheme reads as under:

"Non-repatriable investment Scheme or N R I Scheme In order to encourage investment in the industrial sector, the Government has provided under the NRI Scheme, to the Pakistanis residing and working abroad the facility of importing machinery through their foreign resources. Before June, 1979, it was necessary to obtain prior approval of the Investment Promotion Bureau for import of machinery under this scheme. But now a licence can be obtained direct from the Import and Export Department without any prior approval. Under this Scheme, machinery of the value upto Rs.50,000,000 can be imported so as to set up industrial concerns in the permissible sector provided that the total value of the entire project does not exceed Rs.100,000,

000. Under the said' Scheme, Import Licences can be obtained even for old second-hand machines without prior approval. The scheme also allows the importer to sell the factory set up with the machinery imported under the scheme." The publication then goes on to explain the procedure for grant of import licences under the NRI Scheme and also explains how an existing industrial unit can also import machinery under the scheme for purposes of balancing, modernisation and replacement by contacting a Pakistani residing abroad who may be prepared to purchase the machinery out of his foreign resources under an agreement with the existing unit in which case also the import licence would in any case be issued to the Pakistani residing abroad. The point which I would like to make by referring to the NRI Scheme is that any investment made by a person resident in Pakistan from out of funds purported to have been received from abroad does not make it a non-repatriable investment. In fact the word `non repatriable'' itself refers to investment by a non-resident since to `repatriate' means to `restore or send back to one's country' (Chambers' Twentieth Century Dictionary, New 1983 Edn.). `Repatriable' or `Non-repatriable are thus terms which are used in the context of investments by non-residents (and not by residents) depending on the conditions attached to the investments by the, Government. In the case of `non-repatriable' investment it is not possible for the non-resident investor to repatriate the capital to his country of residence. In view' of these facts relating to the N.R.I. Scheme the assessee was not justified in claiming that the investments made by him were in fact `Non-repatriable Investments' in the context of the C.B.R. Circular and that the purported foreign remittances (over which the assessee and not any non-resident remitter had full control) were for purposes of N.R.I. 1t may be further added that according to the assessee himself part of the funds were utilized for repayment of back-loans obtained by M/s. Sunshine Jute Mills and a part was retained even for personal E expenses. These are not investments even in the usual sense, let alone `Non repatriable Investments' in the technical sense in which the term has been used in the C.B.R. Circular.

8. I now come to the point regarding the alleged discriminatory treatment against the assessee which has been considered in para 19 of the note of the learned J.M.I. There is force in the Department's argument that on the receipt of the intimation from the C.B.R. that his case was not covered by the circular dated 18-9-1982, the assessee did not invoke the provisions of Article 25 of the Constitution by riling any writ petition and in fact accepted the position that he would plead his case on its own merits. Apart from this there is no actual indication that there was any discrimination against the assessee or that in all; other identical situations foreign remittances were accepted without probe by the I.T.O. In fact it is evident from para. 12 of the note of the learned J.M.1 that at the time of the hearing of the appeals by a three-member Bench, six so-called parallel cases had been quoted by the counsel for the assessee to substantiate the contention that the assessee had been discriminated against but that during the hearing by the Larger Bench only three cases were relied upon. This only seems to indicate that the assessee had realised that in other cases (apart from his own) also the department had actually not accepted the remittance without any probe. Actually, as we shall see hereunder, in one of the cases originally quoted by the assessee substantial addition under section 13(1)(aa) was in fact made by rejecting the assessee's explanation of gift in the shape of foreign remittances.

9. Actually, the Department's explanation in respect of each of the so?-called parallel cases mentioned in para. 12 of the learned J.M.I's note has been made available to us together with copies of the relevant assessment orders. It is seen that the case at serial No. (1) was finalized under section 59 (1) of the Ordinance (being immune from detailed scrutiny) and there is no mention in the assessment order of any remittances having been considered by the ITO. It is explained by the Department that the remittances in the case amounted to only Rs.3,99,

332. The cases at serial numbers (2) to (4) are the ones which were quoted by the assessee's counsel during the hearing by this Larger Bench. In the cases at serial numbers (2) and (3) it is evident from the assessment orders that the matter was examined in detail at the level of the C.B.R. and after protracted proceedings the C B R finally decided that no further probe was necessary in the cases and that the assessee's explanation was to be accepted. It has been further explained by the Department that in these two cases the persons making the remittances had been living abroad for 18 years and the remittances had been found to be genuine. In the case at serial number (4) it is evident from the assessment order that the assessee had himself been living in Dubai for several years and had been doing business there and that the remittances were out of the foreign income earned during his residence in Dubai. In the case at serial number (6) it is explained by the Department that it is a case of the assessee's transfer or residence from Qatar to Pakistan and the bringing in of cash and other goods, which were later sold. It can be seen from the foregoing that it would be wrong to' assume that-foreign remittances were automatically accepted in any of the cases merely on the basis of the C.B.R. Circular. In fact the Circular was mentioned only in the cases at serial numbers (2) and (3). Most important, however, in the present context is the case at serial number (5) in which, as in the assessee's case, the claim of gift received in the shape of foreign remittances was rejected by the Income-tax Officer and an addition of Rs.10,00,000 was made under section 13 (1) (aa) of the Income-tax Ordinance. The Department in its written submission has also referred, to some other cases in which too the explanation relating to t foreign remittances was not accepted and additions were made to the assessee's income. In the light of the above discussion, find no merit in the assessee's A' contention that he was discriminated against when he was not allowed immunity from probe regarding the foreign remittances in spite of the contents of the C.B.R. Circular.

10. In the light of the foregoing discussion in the context of the C.B.R.I Circular of 18-9-1982 I hold that the circular could in no way be construed to impose any prohibition on the Income-tax Officer to examine the assessee's explanation regarding foreign remittances on merits and that the said circular did not provide (and in fact could not provide) any immunity to the assessee from probe or questioning in the context of section 13 or any -other provision of the Income-tax Ordinance. 11 Having thus held that the C.B.R. Circular of 18-9-1982 could in no way prevent the Income-tax Officer from examining the accretion in the assessee's wealth in the context of section 13 of the income-tax Ordinance let me now come to the provisions of subsection (1) of the said section whose clause (aa) is the clause most relevant in the instant case. Under the said provisions, where in the course of any proceedings under the Ordinance the assessee is found to have made any investment or is found to be the owner of any money or any valuable article in any year and the assessee offers no explanation about the nature and source of such investment or acquisition of the money or valuable article `or the explanation offered by him is not in the opinion of the Income-tax Officer satisfactory' the value of the investment, the money or the value of the article `shall be deemed to be the income of the assessee' for the relevant income year. C The more important words in subsection (1) of section 13 for our purposes are the words `explanation' and `satisfactory'. It is obvious that where the assessee is found- to have made any investment (as in the instant case) the I.T.O. can ask the assessee to explain the source of the investment and if the explanation is not in the opinion of the I.T.O. satisfactory, the value of the investment is to be deemed to be the income of the assessee. The rationale of this provision is that when an assessee makes an investment or is in the possession of any money or valuable article the first presumption is that the investment has been made or the money or article acquired out of the assessee's own income. That income may, of course have already been subjected to tax or may be exempt from tax or may not be income at all being, for instance, a capital receipt or a loan etc. It is for this reason that under section 13 the I.T.O. has to call for the assessee's explanation ' which may or may not be found satisfactory by the I.T.O. The word `satisfy' has, according to the dictionary, several connotations but the meaning relevant in the present context is `to free from doubt' or `to convince' (Chambers' 20th Century Dictionary, New 1983 Edn.). Thus, the assessee's explanation should be such that its veracity should not be beyond reasonable doubt and it should be convincing to a rational person. To remove any doubts about the explanation and to render ii convincing the assessee can, of course, produce such evidence or proof as he may find necessary and the I.T.O. can also ask for such further evidence or proof as he may require m order to be satisfied with the explanation. It need not, of course, be a query at a single point of time in the assessment proceedings and it is always possible for the I.T.O. to raise further queries and to ask for more evidence on receipt of the reply or replies from the assessee till such time as he is in a position to come to a final conclusion regarding the assessee's explanation being satisfactory or otherwise for purposes of section

13. In the case before us the question, which has to be decided is whether the assessee's explanation with regard to the accretions in his wealth was a satisfactory explanation for purposes of section

13. The learned Judicial Member-II has also considered this to be the basic question in the case and I therefore respectfully agree with him as far as the identification of the main issue is concerned. The learned Judicial Member-II, in paras 4 and 5 of his note has also discussed the nature and extent of the onus placed on the assessee and on the Income-tax Officer by section

13. Here again I would agree with regard to his general line of interpretation but would respectfully disagree in the context of some very important and vital details. I have already, in this para, tried to show that the onus of satisfactory explanation, evidence or proof does not necessarily devolve on the assessee at only a single point in the proceedings under section 13 and that the onus can keep shifting between the assessee and the Income-tax Officer depending on the circumstances and the nature of the explanation or evidence. Thus when the learned J.M. II expresses the view that if an assessee explains, for instance, that an amount was received by him from `A' the assessee's job is over, I cannot quite agree because the Income-tax Officer can certainly then ask the assessee to furnish proof or evidence in support of his explanation if this has not already been done. I may add here that there seems to be an underlying view in the learned J.M. II's note that the onus placed on the assessee by the use of the word `explanation' in section 13(1). is somehow lighter than the onus which would have been placed by the word `proof. This, 1 would respectfully say does not appear to be so. The word `explain' means `to make plain or intelligible' and something cannot usually become plain or evident unless there is supporting proof or evidence. In my opinion actually the word `explanation' used in conjunction with the word `satisfactory' places a heavier onus on the assessee than the use of the word `proof would have because the explanation does not only have to be accompanied by necessary proof to make it plain or evident but also it has to be intelligible and has to stand to reason. Coming back to the findings of the learned J.M.II, he in para. 4 of his note goes on to say that if the Income-tax Officer finds that `A' did give the money to the assessee, the amount in question would stand properly explained but that on the other hand the I.T.O. can always give the finding that in fact the assessee never received the money from `A' and that the money never changed hands, in which case, of course, the assessee's explanation would be found to be incorrect. The learned J.M.II further observes that the Income-tax Officer has, however, no business and no power under the law to go into the further question whether `A' was capable of giving the money to the assessee or what `A's' source of income was or whether he had acquired the money legally or not. The learned J.M.II has further held that once it is proved that `A' has passed on the money to the assessee, then the duty of the assessing officer is to probe into the income of `A' and not of the assessee. Now, I would agree with these observations only in a qualified manner. There can, of course, be no dispute that if, as observed by the learned J.M. II the Income-tax Officer finds that the assessee never received any money from `A' the assessee's explanation in this regard would not be satisfactory, but the subsequent observations of the learned J.M. II seem to imply that what he is referring to is only the apparent transfer of money from `A' to the assessee and not the actual facts in this regard. To such a view, however, it would not be possible for me to subscribe. I must emphasise in this context that the assessee's job is not over or at least his explanation is not satisfactory merely because he has explained that he received the money from `A'. It is the I.T.O.'s duty to ascertain that the explanation is correct and that the money was received from `A' factually and not merely on paper. I must point out that the explanation or evidence should not merely be with regard to the changing of hands of the money but also that the money actually belonged to the person who is purported to have given it to the assessee, I would, therefore, not agree with the view that the assessing officer has no business and no power under the law to go into the further question whether `A' was capable of giving the money to the assessee or what `A's' source of income was. In my opinion this would actually be a very vital question and the I.T.O. should certainly go into it before he can find the assessee's explanation to be satisfactory. I would, of course, agree that the legality or illegality of the money acquired by `A' is not material but what is material is that he had adequate money of his own (in whatever way acquired) to give to the assessee. If no satisfactory evidence of this is available the underlying presumption in section 13 that any assets acquired by an assessee are out of his own income is not dispelled. This is particularly so where the purported giver of the money is himself outside the pale of taxation e.g. where he derives income from say agriculture or where he resides outside the tax jurisdiction of Pakistan. Let me illustrate this by the example of an assessee who is found to be in possession of certain money, which is explained to have been received from `A'. There may be definite evidence that the sum of money was in fact handed over to the assessee by `A' but the adequacy of the explanation does not end there. Suppose that on further enquiry it is explained that the source of income of `A's' agricultural holding was negligible and that he could not possibly have advanced the money out of his agricultural income. In this situation, although there is evidence that the money passed from `A' to the assessee, the latter"s explanation would still not be satisfactory for purposes of section

13. In such a situation the Income-tax Officer would be quite justd1ed in again confronting the assessee with his findings and asking for his further explanation. Now, the assessee may not have any further explanation and in such a case the Income-tax Officer would be justified in making an addition to the assessee's income under section

13. On the other hand there may still be a valid explanation together with the necessary proof e.g. that `A' had sold his ancestral house and the money was advanced to the assessee out of the sale proceeds. If this explanation is found to be correct there would be no justification for making any addition under section

13. In this given example it would not be reasonable for us to hold that when the Income-tax Officer finds that the money was admittedly given by `A' he should try to make an assessment in the case of `A' who may otherwise be a virtual pauper. The point in this regard is that the explanation offered by the assessee should not be satisfactory merely on paper but that it should neglect the factual position and should convince any rational person. In the case before us we have to deal with the question whether the explanation given by the assessee was satisfactory in this sense and whether the evidence adduced by him in support of his explanation could be considered as adequate. Now in the present case there were, as we have already seen, substantial accretions in the assessee's wealth during the assessment years 1983-84 and 1984-85. These accretions were explained by the assessee as being primarily due to gifts in the form of foreign remittances received from the assessee's two brothers who were statedly residing in Cameroon. The purported gifts amounted to.Rs.72,10,410 and Rs.6,57,070 for the assessment years 1983-84 and 1984-85 respectively. For the assessment year 1983-84 the two brothers Mian Maqsood A. Shaikh and Mian Fayyaz A. Shaikh not only statedly gifted the respective amounts of Rs.38,73,300 and Rs.33,37,110 to the assessee but also statedly gifted a total of Rs.26,54,220 and Rs.49,19,808 to the assessee's son and wife during the same year, thus bringing the overall cash gifts to Rs.14,784,438 during the year. Now it is not usual, even in the case of close relatives (such as brothers) for gifts of millions of rupees to pass from one to the other out of `love and affection'. Therefore, the mere enormity of the purported gifts itself placed a heavy onus on the assessee, not only to show that the money was in fact received from his brothers but also that the brothers were in a financial position to make such huge cash gifts. 1n the absence of conclusive evidence in this regard, the assessee's explanation could not be termed as satisfactory by any rational standard. What actually happened in the case, however, was that the assessee's main contention throughout the proceedings remained that the Income-tax Officer was not empowered to probe into the source of remittances received from abroad. Finally the evidence or proof that the assessee did furnish was (a) the declarations of gift purported to have been signed by the assessee's brothers and (b) certificates from the Bank of Oman, Citibank and Union Bank of the Middle East showing that amounts received in foreign exchange had been credited in the assessee's account. The certificates dated 6-4-1983 and 21-4-1983 from the Bank of Oman which relate to the purchase of U.S. $ 25,000 and U.S. $ 200,000 (Rs.3,22,100 and Rs.28,76,880) do not indicate the name of any remitter of foreign exchange and do not therefore, fulfil even the most basic requirement. In the case of Citibank, however, copy of a letter dated 2nd June, 1984 addressed by the Bank to the assessee has been furnished before us confirming that UK pound sterling 150,000 (Rs.30,15,000) was received under telex dated 13th May 19831 from Mr. Fayyaz Ahmed Shaikh. This letter is not available on the Income-tax records and it is not clear whether it was produced before the Income-tax Officer. The certificate from Citibank, which is available on the Income-tax record is an encashment certificate dated 16th May, 1983 certifying the encashment of L 150,000 by Mr. Aftab Shaikh. Similarly copy of a certificate dated 31st May, 1984 relating to U.S. $ 100,000 received on the order of Mr. Maqsood Shaikh has been furnished before us although it is not available on the tax records. My main point however is not that there is imperfect evidence that the remittances were actually sent under the names of the assessee's brothers, but that even if it was established that in the case of each remittance the name of the remitter was shown as Fayyaz Ahmad or Maqsood Ahmed, the assessee's explanation would still not be satisfactory for purposes of section 13 unless it was established that these persons had the means to remit such huge amounts to the assessee, Now, as we have already noted, the assessee not only claimed to have received foreign remittances amounting to Rs.72,10,410 by way of gift from his brothers during the assessment year 1983-84, but his wife and son also statedly received Rs:75,74,028 from the same sources during the same year. In order to accept the explanation regarding such huge sums what is needed is certainly much more than the undated declarations of gifts purported to have been signed by the two brothers and some certificates from banks to the effect that the remittances were received vide orders of one Mr. Fayyaz Shaikh or one Mr. Maqsood Shaikh. If these two gentlemen were really the mufti-millionaires they were made out to be and if they really had such unbounded affection for the assessee and his family, it should not at all have been difficult for the assessee to really establish their fnancial worth. In this connection the Department was quite right in pointing out that the gentlemen could even have been summoned by the assessee from abroad to render all the evidence that was required to establish their financial worthiness. As it is, many vital questions remained unanswered by the assessee and it could for instance not be explained adequately as to how, if the assessee's brothers were living in Cameroon as claimed, did the remittances originate from the U.K. or? from the Dubai. It was hinted by the learned counsel for the assessee that perhaps the assessee's brothers were making exports from Cameroon and had, therefore, large foreign exchange deposits abroad from out of which the remittances were made. If, however, such an explanation was correct the assessee should have been able to acquire from his brothers some reasonable proof of the volume of the export business (or any other business) conducted by them. In this connection copies of their bank statements could have been furnished which in fact had been specifically asked for by the Income-tax Officer. An examination of the bank statements by the Income-tax Officer would have helped in establishing the financial means of the so-called donors and would in no way have implied a probe into the legality or otherwise of their earnings. The assessee could also have furnished other evidence of the assets held abroad by the so-called donors e.g. regarding their immovable properties, because if they could make gifts of millions of rupees, they would obviously have substantial assets of their own also.? Similarly it should not have been difficult for the assessee to obtain copies of their passports from his brothers, which again were specifically called for by the I.T.O. and which could have shown their movement from the one country to the other and may have provided some explanation regarding the fact that the remittances had originated in U.K. and Dubai. There is thus, no justification whatsoever for the assessee's failure to obtain and furnish vital supporting evidence from his brothers particularly when there was danger that a substantial part of the funds which they had so affectionately gifted to the assessee may be in danger of being appropriated by the Income-tax Department. Under the given circumstances, therefore, I have absolutely no hesitation in holding that the assessee failed to discharge the onus of rendering a satisfactory explanation with regard to the accretion in his wealth which onus was placed on him by the provisions of section 13 of the Income-tax Ordinance. The additions made to the assessee's income under section 13 of the Income-tax Ordinance by the I.T.O. were therefore, justified. It may be added that there was definite justification for the I.T.O. to also hold that even otherwise the unexplained accretion could be considered as income from undisclosed sources taxable under section 30 of the Income-tax Ordinance since, as already discussed earlier, the Income-tax Officer could draw an inference regarding the assessee's income during a year if the accretion in wealth during that particular year remained unexplained. I may add that if there is an implied argument that the remittances could not represent the assessee's undisclosed income because these were received from abroad, the argument would not be valid because for one thing, the device of channeling back undisclosed income in the shape of foreign remittance is by no means unknown and more important, it is not for the Income-tax Officer to establish the source and nature of-the assessee's undisclosed income if the assessee himself is unable to give a satisfactory explanation of the accretion in his wealth.