2000 PLP 3400 (PTD)

MIAN SHAKIRULLAH JAN, J.

The assessee, an individual derives income from manufacturing and sale of furniture who filed the Return on 11-2-1995 instead of 31-8-1994 and consequently a notice under section 116 of the Income Tax Ordinance, 1979 was issued and the explanation furnished by him was not found satisfactory and a penalty of Rs.25,050 was imposed under section 108 of the Ordinance. On appeal before the Commissioner Income-tax (Appeals) the penalty was reduced to Rs.3,000 keeping in view the assessed income of Rs.56,000 and in the light of some precedent cases on the subject with regard to the quantum of penalty imposed in relation to the assessed income. Then a recourse `was made by the Commissioner Income-tax to the Income Tax Appellate Tribunal but the request was rejected, inter alia, on the ground that the Commissioner Income-tax (Appeals) reduced the penalty after observing that the default of section 55 was not intentional and with reasonable cause with a reference to the provisions of section 108 and interpreted and explained by the Central Board of Revenue through various instructions that at the time of imposition of penalty the reasonable cause for delay may also be taken into consideration, hence the instant appeal under section 136 of the Ordinance.

2. The appeal was filed on the following questions of law alleged15 arising out of the order of the Tribunal:

(a) Whether, on facts and in the circumstances of the case the learner Income-tax Appellate Tribunal was justified to uphold the order o Commissioner of Income-tax (Appeals) whereas the provision of the imposition of penalty contained in section 108 were made mandatory with effect from the Finance Act, 1994, as the wore 'may' was substituted with the word 'shall'. (b) Once it was established that the default in filing the Income-to Return in time was without reasonable cause. Whether the learner Income-tax Appellate Tribunal was justified in confirming the penalty which was reduced by the CIT(A). (c) Whether after the amendment in section 108 of the Income Ta Ordinance, 1979 through Finance Act, 1994, the discretion of the Assessing Officer has been restricted to determining as to whether the default was wilful. The Assessing Officer has no discretion in deviating from the rate of penalty prescribed under the said section.

3. The learned counsel for the appellant has contended that in view c the amendment brought in section 108 of the Ordinance by amending the word 'may' for the word `shall' and the relevant portion of which reads:

"The Deputy Commissioner shall impose on such person penalty." Now it is mandatory of the Assessing Officer to impose a penalty for the delay in filing a Return in time and the Assessing Officer shall follow the mandatory provision of law and now he has been left with no discretionary power in imposition of penalty.

4. The learned counsel for the respondents on the other hand has submitted that though the word 'may' has been substituted by' the word 'shall', yet it is subject to reasonable cause shown by the assessee for not filing the Return in time and in this respect he has also referred to text of C. B.R.'s Letter C. No.108(1) DTB-1/94, dated January 9, 1995:

"

2. It appears that the substitution of word 'may' by the word 'shall' has created the impression that penalty has to be universally imposed, without any exception whatsoever, if there is a default. This is not the correct interpretation. The major prerequisite for imposition of penalty has always been a default committed without reasonable cause. This precondition still persists. The only change effected is the extinguishment of Assessing Officer's discretion when the assessee fails to explain 'reasonable cause'. The position. which emerges .from Judicial pronouncements is that the default should be wilful. If the assessee is not guilty of gross or wilful neglect penalty is not leviable. Addl. CIT v. Chattur Singh Taragi 1980 PTD

91. It is submitted that imposition of penalty is still discretionary in a way as the authority competent to impose penalty and exercise discretion if it is convinced that default was not wilful. Inadvertent and bona fide mistake or omission need not even now be penalized because the presence of precondition is 'reasonable cause'. Onus to prove that the assessee has committed a wilful default lies with the department'. The authority competent to impose penalty proceedings must possess some incontrovertible evidence to initiate penalty proceedings CIT v. LH Vora (1968) 17 Tax 7 (Trib.).

5. He has also contended that the assessee has furnished reasonable explanation/cause for the delay in filing of the Return and for which reason the Assessing Officer at the time of assessment has not proposed the imposition of penalty on the assumption of being satisfied with the explanation. It is after a long time when the case was again taken up for the imposition of the penalty under section 108 of the Ordinance.

6. According to section 136, appeal can only be filed when there is any question of law arising out of order under section 136, but here in this case the question of law which has been formulated is not arising out of the impugned order as the question before the Appellate forum was not with regard to the interpretation of word 'shall' or 'may' but on the facts and in the circumstances of the case the penalty which was reduced by the Commissioner Income-tax (Appeals) and concurred by the Appellate Tribunal was on the assumption of satisfactory explanation and which hardly attract the provision of section 136 of the Ordinance as there is no question of law arising out of the order to be determined .or to be interpreted by this Court.

7. Consequently the appeal is dismissed. C.M.A./M.A.K./165/P Appeal dismissed.