1998 PLP (Trib (PTD)

8. We have carefully considered the contentions raised on behalf of learned representatives for the parties and have perused the provisions of law referred to by Mr. Anwarul Haq and the material available on record. We have already reproduced some of the provisions of law while narrating the contentions raised on behalf of the learned counsel for the appellant. In order to appreciate the contentions raised before us we would further like to reproduce provision contained in section 131-A of the Negotiable Instruments Act, 1981 as well as one of the deposit-at-call so that the nature of the document may be determined. Section 12 (18) is also reproduced hereunder: "131-A. Application of Chapter to drafts.

The provisions of this Chapter shall apply to any draft, as defined in section 85-A, as if the draft were a cheque. " Gole Cloth Allied Bank Faisalabad (0239) DEPOSIT-AT-CALL No.391967 Dated 28th June. 1994. Received from

Rupees

the sum of as a Deposit repayable at call. For Allied Bank of Pakistan Ltd. Rs.4,22,035 Officer Manager When payment is required, this receipt must be returned to the Bank duly discharged by the Depository under the words "Received Payment". Section 12(18): Income Tax Ordinance, 1979 "Where any sum, or the aggregate of sums, claimed, or shown, to have been received as loan by an assessee during any income year commencing on or after the first day of July, 1987, from any person, not being a banking company, or a financial institution notified by the Central Board of Revenue for this purpose, otherwise than by a crossed cheque drawn on a bank, exceeds one hundred thousand rupees, the same sum or the aggregate of sums shall be deemed to be the income of the assessee for the said income year chargeable to tax under this Ordinance: Provided that, where the said loan is claimed, or shown, by way of the explanation, referred to in subsection (1) of section 13, in a case to which the first proviso to the said subsection applied, the income under subsection shall relate to the assessment year referred to in the said proviso. "

8. Our findings, on the above issue are as under. A perusal of the deposit-at-call shows that it contains a recital to the effect that a certain amount has been received from a certain person on account of another certain person which has been deposited and is repayable at call. It further contains instruction that, "when payment is required, this receipt must be returned to the bank duly discharged by the depositor under the words "received payment". It means that the deposit-at-call is a receipt showing deposit of certain amount in the bank and at the same time the bank binds itself to pay the amount of deposit-at-call to the depositor whose name is shown in the document. It further contains the name of the person who has deposited the amount in the bank on behalf of appellant in this case. Thus, by means of deposit-at-call the transaction is made through normal banking channel whereby the drawer and payee are identifiable as it shows the name of person who has deposited the amount and further the name of person who is entitled to receive the amount shown in the document. It is in the nature of an instrument in writing containing an unconditional order for payment to certain person whose name is shown in the document-at-call. We are of the opinion that the expression "at call" and "on demand" serve the same purpose and, therefore, the document falls within the purview of bill of exchange as defined in section 5 of the Negotiable Instruments Act 1881. As this particular bill of exchange is drawn on bank and is 'payable-at-call, therefore, it is deemed to be a cheque as, defined in section 6 of the Negotiable Instruments Act, 1881. At the same time as the order to pay money is drawn by Allied Bank and is payable by the Allied Bank of Pakistan, therefore, it is a draft as defined in section 85-A of the Negotiable Instruments Act, 1881. According to section 124 of the Negotiable Instruments Act, 1881, "where a cheque bears across its face and addition of the name of a banker, either with or without the words "not negotiable," that addition shall be deemed crossing and the cheque shall be deemed to be crossed specially, and to be crossed to that banker." As already observed the provisions of Chapter XV of the Negotiable Instruments Act which contains provision to the crossing of cheques is applicable to any draft as defined in section 85-A as if the draft were a cheque, the deposit-at-call would be deemed to be a cross cheque. We are fortified in our views that deposit-at- call is a draft, from the meaning of term draft in the Dictionary of Banking and Finance by Derrick G Hanson (1985 Edition) as follows: "Bills of exchange on demand, or after sight or after date are called drafts, because they are drawn by one person on another. Cheques are sometimes called drafts. But the word is used principally when referring to a banker's own draft, or instrument drawn upon another banker or upon one of his own branches."

9. In the same dictionary the terms banker's draft is explained as, "person who wishes to remit money to someone in another place may, if he does not send his own cheque, obtain from his banker a draft on demand payable to the person which is to be paid the money. It is further stated with reference to the law in U.K. that "the banker's draft may be effectively crossed in any of the ways mentioned in section 76 of the bills of exchange Act." It is further stated that where a customer applies for a banker's draft an authority to debit his account should accompany the application, unless a cheque accompanies it. Considering the above citations we are persuaded to agree with the submission of Ch. Anwarul Haq that the deposit-at-call is actually in the nature of a draft, as before the issuance of deposit-at-call the drawer deposits in cash with the bank and thereafter, document is issues as is the requirement in the case of a draft.

10. For the foregoing reasons we are of the considered opinion that the deposit-at-call fulfils the requirement of section 12(18) of the Income Tax Ordinance, 1979 as in fact it is a cross cheque drawn on a bank. It is therefore, held that the learned two officers below were not justified in holding that the loan received by the appellant company at Rs.39,42,720 was liable to be added under section 12(18) of the Income Tax Ordinance, 1979 as, deemed income. The addition, therefore, stands deleted.

11. The appellant has further objected to the addition made under section 13(1)(aa) at Rs.20,00,000 Mr. Anwarul Haq has drawn our attention to the finding of assessing officer contained in the assessment order which reads as follows: "Addition under section 13(1)(aa) The examination of the cash book produced by the assessee revealed that an amount of Rs.55,84,462.34 was available as cash on 26-6-1994 and on the same date i.e. 20-6-94 an amount of Rs.20,00,000 was deposited in the bank Account No.6470 maintained with Allied Bank Limited, Faisalabad as per entry in the cash book leaving the balance cash at Rs.35,84,462.34. However, as per bank statement in respect of bank Account No.6470 with Allied Bank Ltd. Gole Cloth, Faisalabad furnished by the assessee alongwith the details and documents furnished, this amount of Rs.20,00,000 has been credited in the account not as a cash deposit but as a deposit through transfer which clearly means that the cash of Rs.20,00,000 claimed to have been deposited in the bank Account No.6470 has not already been deposited. This clearly means that the amount of Rs.20,00,000 deposited in the bank Account No.6470 with Allied Bank Limited is a different amount and is not the amount alleged to have been deposited in cash, it, therefore, stands established that the amount of Rs.20,00,000 alleged to have been deposited in the bank has not actually been deposited and the assessee understated his income to the extent of Rs.20,00,

000. Keeping in view all these facts, a show-cause notice under section 13(1) bearing No.0531275, dated 24-5-1997 has been issued confronting the assessee all the facts with the intention that said amount of Rs.20,00,000 will be added towards his income as concealed income. It was further requested to please intimate the nature and sources of the amount of Rs.20,00,000 In response to said notice, the A.R. of the assessee submitted written explanation which is reproduced as under: (a) A sum of Rs.20,00,000 was withdrawn from cash in hand on 20-6-1994. (b) The bank was requested to issue four pay-orders in the sum of Rs.20,00,000 against the cash paid. Copies of the pay-order are enclosed. It may be noted that all the four pay orders bear consecutive serial number and are dated 26-6-1994. It is, therefore, evident that the pay-orders were issued against cash at one and the same time. It clearly established that the cash paid was the amount withdrawn from cash in hand on 26-6-1994. (c) That later on, on the same day, the said four pay-orders were surrendered to the bank for credit in company's Account. Copy of the Deposit slip is enclosed. (d) That amount received by the bank through the four pay-orders was recorded as transfer entry on 26-6-1994. It is evident from the facts as stated above and the documentary evidence as produced, that the credit entry for a sum of Rs.20,00,000 dated 26-6-1994 represents the same amount which was withdrawn from cash in hand on the same day All the facts and evidence produced is verifiable from the bank concerned . There is no evidence on record for the unwarranted presumption that the credit entry somehow represents the untaxes money. Reply of the assessee has duly been considered and found unsatisfactory. The assessee could not put-forth any plausible explanation to the notice under section 13(1) which is rejected on following grounds: (1) When an amount of Rs.20,00.000 was available with the company then there was no need to first get orders issued and then deposit the same in the .bank. (2) No such entry regarding issuance of pay order and then deposit of the same in the bank account is available in the books of account of the company which means the contention taken by the assessee is just distortion of facts. (3) The assessee's contention that the pay orders were purchased by the company is also factually incorrect. These pay orders were purchased by three persons as clearly mentioned in the pay orders/issue slip. This clearly established that the amount were deposited by the said persons in the company's account and not by the company itself. Hence the reply of the assessee was rejected. Therefore, the worthy Commissioner of Income/Wealth Tax Companies Zone, Faisalabad vide this office Letter No.815, dated 28-6-1997 has been requested that necessary approval to make addition of Rs.20,00,000 under section 13(l)(aa) of the Income Tax Ordinance, 1979 for the assessment year 1994-95 may kindly be accorded."

12. Mr. Anwarul Haq has pointed out that the assessing officer has not doubted the source of this amount and, therefore, no addition can be made under section 13(1)(aa). The learned D.R. has not disputed the above contention and, therefore, it is held that the addition is not sustainable in law and fact which is hereby deleted.

13. The last objection is to various disallowances in the profit and loss account. Mr. Anwarul Haq, learned counsel for the appellant has submitted that the additions in the profit and loss account were made without confronting the appellant as required under the law. He has drawn our attention to the finding by learned C.I.T.(A) that, "it is apparent from the assessment order that the appellant was never confronted or called upon to explain the shortcomings as pointed out by the assessing officer. In these circumstances, we are of the opinion that the additions without confronting the assessee are not sustainable and consequently stand set aside. The assessing officer .is directed to decide the issue relating to the expenses, claimed in the profit and loss account afresh after specifically confronting the appellant as required in the proviso to section 62 of the Income Tax Ordinance, 1919. The appeal is allowed as above. M.B.A. /513/Trib. Appeal allowed.