' Petitioner being individual assessee filed her Income Tax Return for the year, 1995-96 declaring her income to be Nil. The assessm ent was made under section 62 of the Income Tax Ordinance (hereinafter referred to as the Ordinance, 1979) and proceedings were filed on 15-11-1995. The assessm ent was however, reopened under section 65 of the Ordinance and the same was revised.
Being not satisfied with the order, dated 24-6-1998 passed by the Assessing Officer the petitioner filed appeal before the Additional Commissioner of Income Tax of Appeals, Peshawar, which was allowed. The additions made by the Assessing Officers were deleted vide judgment/order, dated 26-11-1998. Aggrieved with the said order the department filed appeal before the Income Tax Appellate Tribunal, Peshawar. The Departmental appeal was allowed vide judgment/order, dated 20-7-2000. Being not contended with the said judgment and order the petitioner filed application under subsection (1) of section 136 of the Ordinance before the Income Tax Appellate Tribunal, Peshawar for referring the questions of law drawn by the applicant to this Court for determination, but the said application was rejected vide order, dated 26-5-2001. The petitioner has now filed the reference in hand which was admitted to regular hearing to determine the following questions:--
(1) Whether as per facts and in the circumstances of the case, a gift deed between two Muslims especially brother and sister shall be valid without registration?
(2) Whether as per facts and in the circumstances of the case, a gift of huge amount can only be accepted if it has been transferred through banking channel?
(3) Whether as per facts and in the circumstances of the case, the assessee has offered plausible explanation about the nature and source of investment in terms of section 13 of subsection (1) of "the Ordinance"?
2. Mr. Abdur Rauf Rohaila, Advocate the learned counsel representing the petitioner argued that the petitioner had declared her source of income which was duly supported by documentary evidence, but the Assessing Officer as well as the learned Members of the Tribunal failed to appreciate the same.
3. It was also argued that the petitioner was gifted a sum of Rs,10,00,000 by her brother namely Allauddin which was verified by the Tehsildar of the area where her brother was residing; that the income of her brother was more than Rs,10,00,000. After verification of the source there was no justification to reject the gift.
4. It was also argued that the Market/Plaza had not been completed till 30-6-1995 as electricity meter was installed in the said property on 20-1-1996 and in these days no business can be held in any market or plaza without electricity; The petitioner, therefore, did not receive any income on rents in the said assessm ent year, but these facts were not properly appreciated by the Assessing Officer as well as the learned Tribunal whereas the Appellate Additional Commissioner had properly appreciated these facts.
5. On the other hand Mr. Eid Muhammad Khattak the learned counsel representing the Income Tax Department argued that the orders of the Assessing Officer as well as Income Tax Appellate Tribunal were based on sound reasoning hence need no interference by this Court.
6. We have heard the learned counsel for the parties at length and perused the available record.
7. So far as the first question as to whether a gift deed between two Muslims especially brother and sister would be valid without registration is concerned, answer to this question is in affirmative. The plea of the petitioner was that she was gifted Rs,10,00,000 by her brother namely Allauddin, who was a landlord of Mian Banda, Tehsil Timargara, District Dir and she was still co-sharer in the inherited property. In order to verify as to whether the said gift was genuine or not, the Assessing Officer directed Allauddin, the donee to appear before him. His (donee's) statement was recorded in which he affirmed the factum of execution of gift deed. In order to further verify the gift and to satisfy himself as to whether Allauddin had sufficient means to gift Rs,10,00,000 to his sister, the Assessing Officer wrote letter No,1049, dated 15-5-1997 to Tehsildar Timargara to report as to whether Allauddin had sufficient source of income. The said Tehsildar responded in affirmative vide Letter No, 338/Tehsil, dated 2-6-1997 verifying that the value of the property of Allauddin and his income was exceeding Rs,10,00,000. There was sufficient documentary evidence in the shape of affidavit in which all the three requisites of a valid gift had been completed, statement of Allauddin recorded by the Assessing Officer and letter of Tehsildar Timargara, dated 2-6-1997 to prove that a sum of Rs,10,00,000 had been gifted by Allauddin to his sister, the petitioner. The Assessing Officer discarded the gift without assigning any reason. The learned members of the Tribunal also rejected the gift on the ground that the pleas raised by the petitioner were self-contradictory; in that on the one hand she claimed to be co-sharer in the property and on the other hand she claimed that a huge sum of Rs,10,00,000 was gifted to her, but we have not been able to find ourselves in agreement with the findings of the Tribunal. The stand of the petitioner was never contradictory.
From the very beginning she asserted that she was given Rs,10,00,000 as gift by her brother. She never claimed to have sold any portion of her property to her brother or to have received any usufruct in the shape of said amount. It is common knowledge that in farflunged area of Dir people do not generally give share of the landed property to the married sisters and in almost all the cases property is retained by the male members of the family. However, the womenfolk are compensated by giving them meager amount in case of their need, in presence of the above mentioned documentary evidence the gift could not be discarded.
8. It is pertinent to mention here that under section 138 of Muhammadan Law by Mulla a gift is complete when there is a declaration of gift by the donor, acceptance of gift, express or implied by or on behalf of the donee and delivery of possession of the subject of the gift by the donor to the donee. Unregistered gift deed, notwithstanding the amendment of section 49 of Registration Act by Registration Amendment Ordinance, 1962 was admissible in evidence. Donor and the donee being brother and sister were governed by Muslim Law and as mentioned above the registration of the document was not sine qua non for validity of the gift.
9. So far as the second question as to whether the amount of gift can be accepted if transferred without banking channel is concerned, answer of the same is also in affirmative. Subsection (18) was inserted to section 12 of the Income Tax Ordinance, 1979 by Finance Act, 1987. This subsection was, however, held in abeyance. The Federal Government while exercising powers granted in subsection (2) of section 14 of the Ordinance issued Notification No, S.R.O. 838(1)/87, dated October 26, 1987, added clause (7) in Part VI of Second Schedule to the Ordinance. The said subsection (18) of section 12 of the Ordinance was brought into force with effect from 1-7-1990 by Finance Act, 1990.
It was, however, through Finance Act, 1992 that another subsection i,e, (18-A) was inserted in section 12 of the Ordinance which was made effective from 1-7-1992. It was omitted by Finance Act, 1996 which means that subsection (18-A) of section 12 remained on statute book from 1-7-1992 to 30-6-1996. Due to insertion of subsection (18) of section 12 of the Ordinance certain difficulties had arisen for the assessees, therefore, Central Board of Revenue in order to facilitate the assessees made certain relaxation by issuing Circulars Nos.3, 11 and 12 of 1992 and Circular No,1 of 1993. When we read section 12(18) with the above mentioned Circulars, we are of the view that since the transaction which took place through gift was duly verified by the Assessing Officer not only by recording statement of Allauddin, but by the letter of the Tehsildar Timargara also, we feel no hesitation to hold that such transfer could be made without banking transaction.
So far as the third question as to whether the assessees has offered plausible explanation about the nature and source of investment in terms of subsection (1) of section 13 is concerned, answer to this question is also in affirmative. The assessee has given plausible explanation that a sum of Rs,10,00,000 was gifted to her by her brother Allauddin and she had Foreign Exchange Bearer Certificate amounting to Rs,23,00,000 which were encashed by her. She had an amount of Rs,33,00,000 out of which cost of purchase of plot, renewal charges etc. Were met by her. The amount shown in cash was also spent by her on construction of plaza. The explanation given by the assessee was plausible, hence the same could not be turned down without assigning any reasons.
' The Registrar of this Court is directed to send certified copy of this judgment under the seal of the Court and under his signature to the Income Tax Appellate Tribunal in terms of section 136(5) of the Ordinance with the direction to do the needful.