Law: Income Tax Ordinance, 2001

Section: 39(3),111,59,114,122,210,211,111(1)(b),1 14(4),122(5),122(9),210(1A)

Law: Income Tax Ordinance, 1979

Section: 59(1),62,63,65

(a) Income Tax Ordinance (XLIX of 2001)--- ----Ss. 111(1) (b) & 122(5)---Unexplained income or assets---Addition was made on the ground that out of ten cheques issued to the Director, amount of six cheques were not recorded in the ledger account of the taxpayer/company---Inference was that the taxpayer/company had under reported the debit side of the balance sheet to the extent of such amount to off set the credit side of the balance sheet---Taxpayer contended that Assessing Officer misdirected himself by attempting to cross match the payment made by the company from the customer ledger account which was specifically meant for keeping track records of transaction of shares of listed securities; and misconstrued the nature of payment as an investment without any basis and even without appreciating the facts of the case; and Director of the company had also been a customer of the company and was maintaining customer account with the company to carry out his proprietary transactions of shares of listed companies; and customer account with the company was exclusively meant for or keeping track records of his transactions of shares of listed securities, whereas the payments represented repayment of loans which the Director had advanced to the company through normal banking channels to meet the paucity of funds for meeting day to day routine expenses and to minimize the burden of financial shares; and for purpose of keeping track record of such loan and advances, the company maintained separate ledger account of director loans/advances---Validity---While making addition and upholding the treatment, the authorities below had misdirected themselves by attempting to cross match the payment made by the taxpayer/company from the customer ledger account which was specifically meant for keeping track records of transaction of shares of listed securities---Taxation Officer had misconstrued the nature of payment made by the taxpayer/company to its director as an investment without any basis and even without appreciating the facts of the case---Recipient besides being the Director of the company had also been a customer of the company and was maintaining the customer…

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