IN THE SUPREME COURT OF PAKISTAN 
  (APPELLATE JURISDICTION) 
 
 
PRESENT: 
MR. JUSTICE UMAR ATA BANDIAL 
MR. JUSTICE IJAZ UL AHSAN 
MR. JUSTICE MUNIB AKHTAR 
 
 
Civil Appeal No.1127 of 2011 
Against judgment dated 26.05.2009 passed by 
the Peshawar High Court, Peshawar in T.R. 
No.85 of 2007.  
 
 
Commissioner of Income Tax (legal) 
Regional Tax Officer, Peshawar. 
 
 
…Appellant(s) 
 
Versus 
Safeer Jan  
 
 
 
 
 
…Respondent(s) 
 
For the Appellant(s): 
Mr. Rehman Ullah, ASC  
 
 
 
For the respondent(s): 
Syed Mudassar Ameer, ASC 
 
Date of Hearing:  
 
05.11.2019 
 
O R D E R   
 
 
 
IJAZ UL AHSAN, J.- This appeal by leave of the 
Court is directed against a judgment of the Peshawar High 
Court, Peshawar dated 26.05.2009 (“impugned judgment”). 
Through the impugned judgment, Income Tax Reference 
No.85 of 2007 filed by the appellant was dismissed.  
 
2. 
 
Leave was granted by this Court on 13.12.2011. 
For ease of reference, the leave granting order is reproduced 
below: 
 
“Leave of the Court is sought on the ground that 
where the statute has provided a mode and mechanism for 
money transaction any side way or by way to defeat such 
mode and mechanism would tend to defeat the soul and 
spirit of the law. 
CIVIL APPEAL NO.1127 OF 2011 
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We, in this view of the matter, grant leave to consider 
the point mentioned above.” 
 
3. 
 
The brief facts necessary for decision of this lis are 
that the Respondent is an individual deriving income from 
salary and agriculture. Return was filed declaring the income 
at Rs.65,000/- for the assessment year 2001-02 and 
Rs.230,000/- for the assessment year 2002-03. In view of the 
fact that the declared income was not supported by 
documentary proof and it was found that the source of 
income and investment had swelled up exponentially, the 
Department came to the conclusion that the Respondent had 
concealed his income. Therefore, notice under Section 61 of 
the Income Tax Ordinance, 1979 (since repealed) [hereinafter 
to be referred as “the Ordinance”] alongwith detailed memo 
was issued. The Respondent contested the notice and 
produced wealth reconciliation statement, record of land 
revenue, accounts of M/s Khalil Enterprises (a partnership 
Firm), gift deeds from Mrs. Jani Begum, Mr. Ali Raza, Ms. Jan 
Parwana and Mrs. Sarwat Mehmood. The said documentation 
was produced to justify the accretion of Rs.11,490,640/-. The 
Taxation Officer did not accept the contention of the 
Respondent regarding withdrawal of the amount of Rs.2.9 
million from the Firm and added the same under Section 
13(1)(aa) of the Ordinance. Similarly, the amount of gifts 
received from various members of the family was also added 
under Section 12(18) of the Ordinance.  
 
4. 
 
As far as the addition of Rs.2.9 million withdrawn 
from the account of the Firm is concerned, it was found that 
CIVIL APPEAL NO.1127 OF 2011 
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the said amount was the share of the Respondent out of the 
income of the Firm namely, M/s Khalil Enterprises. The said 
Firm was an existing assessee of the Circle. The amount was 
fully explained as reflected in the Wealth Statements and 
Wealth Reconciliation Statements. Since the Respondent had 
fully explained the amount in question as his share out of the 
income of the Firm that accumulated over the years. This fact 
was duly supported by the record including audited balance 
sheet showing that the said amount was fully tax paid. 
Consequently, no addition under Section 13(1)(aa) of the 
Ordinance could be made. The said issue is not before us.  
 
5. 
 
As far as the amount gifted to the Respondent by 
other share holders of the Firm through gift deeds executed 
between the partners is concerned, the Assessing Officer had 
added the said amount under Section 12(18) of the Ordinance 
for the reason that the transaction had not been undertaken 
through banking channels. The said finding of the Taxation 
Officer was challenged before the Commissioner of Income 
Tax (Appeals), who set aside the same, vide order dated 
15.09.2005. This order was upheld by the Income Tax 
Appellate Tribunal and was not disturbed by the learned High 
Court.  
 
6. 
 
The learned counsel for the Appellant has 
repeated the same argument to the effect that the Taxation 
Officer was justified in adding the amounts allegedly received 
by the Respondent by way of gifts from other partners of the 
CIVIL APPEAL NO.1127 OF 2011 
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Firm in view of the fact that the transactions in question were 
not through banking channels.  
7. 
 
We have heard the learned counsel for the parties 
and examined the record. Section 12(18) of the Ordinance 
appears to be relevant in the present case. For ease of 
reference, the said provision of law is reproduced below: 
“Where any sum claimed, or shown, to have been received 
as loan or advance or gift by an assessee during any income 
year commencing on or after the first day of July, 1998, from 
any person, not being a banking company, or a financial 
institution notified by the Central Board of Revenue for this 
purpose, otherwise than by a crossed cheque drawn on a 
bank, or through a banking channel from a person holding a 
National Tax Number, the said sum shall be deemed to be 
the income of the assessee for the said income year 
chargeable to tax under this Ordinance.” 
 
8. 
 
A plain reading of Section 12(18) of the Ordinance 
shows that the said provision is attracted when loans, 
advances and gifts are received in cash. However, in the case 
before us, admittedly, no cash exchanged hands. Members of 
the AOP had only authorized the Respondent to withdraw a 
certain amount from their share in the AOP. As such no cash 
had been paid or received which fact has clearly been 
mentioned in the gift deeds executed between the partners. 
The transaction was ex facie reflected in book entries made in 
the records of the AOP. Further, the language of the gift deeds 
is clear that the amount gifted was liable to be withdrawn by 
the donee (Respondent) from the share of donors in M/s 
Khalil Enterprises which further lends support to the findings 
recorded by three lower fora that only a right was given to the 
Respondent to withdraw the amounts in question from time 
CIVIL APPEAL NO.1127 OF 2011 
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to time from the share of the donors in the AOP and that no 
transaction which could be interpreted as immediate and 
actual transfer of funds had taken place.  
 
9. 
 
This being the position, we are in no manner of 
doubt that the provisions of Section 12(18) of the Ordinance 
were not attracted in this case and the Commissioner of 
Income Tax as well as the Income Tax Appellate Tribunal and 
the learned High Court were correct in recording findings to 
that effect. Learned counsel for the Appellant has not been 
able to persuade us to take a different view from the one 
taken by the lower fora.  
 
10. 
 
For the afore-noted reasons, we do not find any 
merit in this appeal. The same is accordingly dismissed. No 
order as to costs.    
    
 
 
 
 
 
 
 
 
 
JUDGE 
 
JUDGE 
 
 
JUDGE 
ISLAMABAD, THE  
05.11.2019 
ZR/* 
‘Not Approved For Reporting’