2010 PLP (Trib (PTD)

MUNSIF KHAN MINHAS, JUDICIAL MEMBER.

This appeal has been filed by the department against the order, dated 15-3-2010 passed by C.I.R. (Appeals) on the following ground: "That the learned CIR (A) was not justified to annul the order with the remarks that penalty was imposed in the presence of extension allowed whereas the application for extension was rejected by the department".

2. Brief facts leading to this appeal are that Taxpayer is a Private Limited Company. Return for the year under consideration was E-Filed on 23-1-2009 which was late by 23 days as the due date of filing of return was 31-12-2008. The Taxation Officer imposed a penalty under section 182(1) for late tiling of annual income tax return for 23 days. In first appeal relief was allowed.

3. Before us the Department has contested the relief allowed at the first appeal stage but when asked to explain as to how bringing anything plausible that penalty could be imposed and secondly without following the procedure as laid down in section 182 that its imposition could be possible. Nothing material in reply to it was submitted before us. The learned AR has supported the order by substantiating the stance with earlier orders passed by the Tribunal, wherein it has been held that penalty shall be imposed on the basis of the tax payable.

4. I have heard both the parties and have also perused the available record. It is imperative that the original text of the section 182(1) be properly gone through for dilating upon the issue which has been placed before us. For convenience, provision of section 182(1) is being reproduced as under: "Any person who, without reasonable excuse, fails to furnish, within the time allowed under this Ordinance, [return of income [or a statement as required under subsection (4) of section 115 or wealth statement] for any tax year] as required under this Ordinance shall be liable for a penalty to one-tenth of one per cent of the tax payable for each day of default subject to a maximum penalty of five hundred rupees and a maximum penalty of twenty-five per cent of the tax payable in respect of [that tax year]" Undisputedly, it is as a result of non-compliance to provisions of section 114 i.e. not filing of return within the prescribed span of time, that the penalty has been imposed so it is a default in compliance to the provisions of section 114, which situation is covered under the section 182(1) ibid. For it the penalty has been prescribed in sub-clause (i) ibid. This clause has specified that penalty shall be imposed on the basis of the tax payable, whereas in the instant case before us no tax has become payable even on assessment. Restriction imposed on calculation of penalty is one tenth of one, per cent of tat payable and maximum limit is 25% of the tax payable, thus inevitability the base point is the tax payable, resultantly second part of clause (i) comes into operation only when initial calculation of penalty has been made on the basis of tax payable. For imposing the penalty for default under section 114 ibid, the pre-requisite is the tax payable by such assessee. Fulfilment of basic ingredient of "tax payable" is a condition precedent for levying the penalty. There cannot be two opinions that tax statutes are to be interpreted strictly and are to be followed as per its language without stretching the meanings of the same. Had the intent of statute was to impose the penalty in a situation like instant case then its linkage with tax payable would not have been expressed. Such interpretation is further strengthened from the provisions of section 182(1) ibid where for imposition of penalty, linkage has been expressed with the tax payable. In the matter of taxation, literal approach has to be followed provided it does not lead to manifest absurdity. Here importantly the penalty provisions are to be interpreted strictly, where relevant provisions of section 182 (1) are clearly establishing the imposition of penalty is linked with the tax payable, then it has to be followed. The absence of tax payable is fatal for it. So keeping in view the provisions of section 182(1) I do not have any hesitation in holding that penalty for default of section 114 only becomes leviable when there is a "tax 'payable" but in the instant case when no tax has been imposed on the Taxpayer, levy of penalty is not justified. Hence I find no error or infirmity in the order of the learned CIR(A) which is upheld and maintained. The departmental appeal being devoid of any merit is dismissed. C.M.A./94/Tax(Trib.) Appeal dismissed.