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I.T.A. No.1439/LB of 2012, decided on 27th March, 2014.

----Ss.111(1)(b) & 121---Unexplained income or assets---Purchase of shop---Payment was made to seller of property in foreign currency out of foreign currency account---Revenue contented that taxpayer failed to produce encashment certificate of foreign remittances received through banking channel and First Appellate Authority was not justified to entertain verbal contention that payment was made in US Dollars whereas according to registered purchase deed, payment was made in Pak rupees and cheque number or date had been mentioned; that cheque produced was for US Dollars 58508 and there was an entry of cash withdrawn; that if said amount was converted into Pak rupees, that would come to about Rs.3.6 million, whereas property in question was purchased for Rs.2.00 million as per registered purchase deed; and that taxpayer failed to explain that property was purchased out of explainable sources available with him---Taxpayer contended that he had sent foreign remittances from Saudi Arabia out of its salaries directly to the bank account; and at the time of purchase of property US 103147 were available in his account; and withdraw US 58508 and converted into Pak rupees from the open market and out of that amount he purchased the property; and since he had sources of amount credited in his bank account, the provisions of subsection (1) of S.111 of the Income Tax Ordinance, 2001 would not attract; and provisions of subsection (4) of S.111 of the Income Tax Ordinance, 2001 provided that any amount of foreign exchange remitted from outside Pakistan through normal banking channels that was encashed into pak rupees by a scheduled bank and a certificate from such bank was produced to that effect, was not applicable in the case of the taxpayer since he had otherwise explainable sources of investment---Validity---Taxpayer had duly produced the necessary documentation regarding maintenance of foreign currency account and depositing the foreign currency in the said account from abroad through foreign remittances---Copies of cheques and bank statements were also produced---At the relevant time when the taxpayer purchased the property in question, the taxpayer had sufficient amount in his Foreign Currency account to make invest for purchase of property---Provisions of subsection (4) of S.111 of the Income Tax Ordinance, 2001 were not attracted in the present case as the taxpayer had explainable sources to make investment---Availability of sources was satisfactorily proved by the taxpayer through documentary evidence---First Appellate Authority had rightly deleted the addition made under S.111(1)(b) of the Income Tax Ordinance, 2001---Order of First Appellate Authority was maintained and appeal of the department was dismissed by the Appellate Tribunal. Ms. Shabana Aziz, D.R. for Appellant. M. Yasir Abdul Khaliq, for Respondent. Date of hearing: 27th March, 2014.

The titled appeal pertaining to tax year 2006, has been preferred at the instance of Revenue, calling in question the impugned order dated 24-5-2012, passed by the learned CIR (Appeals), Gujranwala. 2. Briefly stated, the relevant facts in brief are that the proceedings in the case were initiated on the basis of information that the taxpayer had purchased a shop measuring 4-Marlas at Narowal for a consideration of Rs.22,00,000. Therefore, statutory notices were issued to the taxpayer probe the source of investment and to file wealth statement along with reconciliation statement. In response, the taxpayer duly responded to these notices and filed certain documentation / information and explained that the taxpayer has sufficient sources to make investment and payment was made to the seller of property in question in foreign currency out of FC A/c maintained with HBL, CDA Civic Centre, Islamabad. However, the assessing authority rejected the plea of the taxpayer on the ground that the taxpayer has failed to submit documentary evidences with regard to encashment of foreign remittances through schedule bank. Consequently, the assessing officer passed order under section 121(1) and made addition under section 111(1)(b) amounting to Rs.22,00,000 being unexplained income. Being aggrieved, the taxpayer went in appeal before the learned CIR(A) and assailed the treatment meted out at assessment on number of legal and factual grounds. The learned CIR(A) annulled the order passed under section 121(1) for tax year 2006, after observing that the taxpayer had sufficient sources to make investment in purchase of property to the tune of Rs.22,00,000. 3. The learned DR assailed the annulment of assessment by the learned CIR(A) as contrary to law and facts of the case. It is contended by the learned DR that the learned CIR(A) was not justified to hold that the taxpayer has sufficient sources to make investment in purchase of property in question. It is contended by the learned DR that the taxpayer has failed to produce before the assessing authority relevant encashment certificate of foreign remittances received through banking channel. It is asserted by the learned DR that the learned CIR(A) was not justified to entertain the verbal contention of the AR that payment was made in US Dollars vide Cheque No.103391 dated 17-11-2005 whereas according to registered purchase deed dated 16-12-2005, payment was made in Pak rupees and no cheque number or date has been mentioned. It is also submitted by the AR that Cheque No.103391 dated 17-11-2005 is, for US Dollar 58508 and it was an entry of cash withdrawn. It is submitted by the DR that if this amount is converted into Pak rupees, it would come at about Rs.3.6 million, whereas property in question was purchased for Rs.2.00 million as per registered purchase deed. It is further submitted by the learned DR that the assessing officer was justified to pass order under section 121 and make addition under section 111 as the taxpayer has failed to explain that the property was purchased out of explainable sources available with him. 4. The learned AR submitted that the taxpayer is an overseas Pakistani and employee of Messrs Annandah Medical Company (MADAUS AG), Jeddah, Saudi Arabia since 1998. The taxpayer from Jeddah through application dated 3-11-2001 approached to Messrs HBL, CDA Civic Centre Branch, Islamabad, for opening foreign currency account and after opening said account the taxpayer from Saudi Arabia sent foreign remittances out of its salaries directly to the said bank account at Islamabad. At the time of purchase of the said shop US 103147 were available in his account. On 17-1-2005, the taxpayer withdrawn US 58508 and converted into Pak rupees from the open market and out of that amount he purchased the shop under discussion. It is contended by the AR that since the appellant has sources of amount credited in his bank account, the provisions of subsection (1) of section 111 would not attract. He further stated that the provisions of subsection (4) of section 111 which provides that any amount of foreign exchange remitted from outside Pakistan through normal banking channels that is encashed into pak rupees by a schedule bank and a certificate from such bank is produced to that effect, is not applicable in the case of the taxpayer since he has otherwise explainable sources of investment. 5. I have heard the arguments put-forth by the learned representatives of both the sides and have carefully gone through the available record. After due consideration, I find that no exception can be taken to the treatment as accorded by the learned CIR(A) which is found to be fair and reasonable in the ambient circumstances of the case. During the course of appeal proceedings, the learned AR duly produced before me the necessary documentation regarding maintenance of foreign currency account and depositing the foreign currency in the said account from abroad through foreign remittances. Copies of cheques and bank statements" were also produced before this forum. Perusal of the same would reveal that at the relevant time when the taxpayer purchased the shop in question, the taxpayer has sufficient amount in his said F/C account to make invest for purchase of shop in question. The provision of clause (a) of subsection (4) of section 111 are not attracted in this instant case as the taxpayer has explainable sources to make investment. The availability of sources was satisfactorily proved by the taxpayer through documentary submitted before me. Under such circumstances, I find no reason to disturb the order of the learned CIR(A) who has rightly deleted the addition made under section 111(1)(b). Order of the learned CIR(A) is accordingly maintained and appeal of the department is dismissed. CMA/69/Tax(Trib.) Appeal dismissed.

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