2016 PLP (Trib (PTD)

MUHAMMAD JAWED ZAKARIA (JUDICIAL MEMBER).

By this single order, I intend to dispose the above titled appeals filed by the taxpayer against the consolidated impugned order dated 21-05-2014 passed by the learned CIR(A), Hyderabad. The department has raised the grounds of appeal as put-forth in the memo of appeal.

2. Brief facts, giving raise to this appeal, as revealed from the record, are that the return of income for the tax year 2011 was filed on 07-01-2012 declaring loss Rs.4,305,844/- and net profit at Rs.61,760,134/- and for the tax year 2012 was also e-filed on 29-12-2012 declaring loss Rs.1,509,883,917/- and net profit at Rs.130,324,389/-. The return so filed and audited accounts were examined and it was observed that the taxpayer had not paid WWF along with return of income as per amended provision of WWF Ordinance, 1971, which was payable @2% of accounting profit, perusal of return of income shows that the taxpayer has made adjustment of WWF for arrival of taxable income and claimed WWF but this liability neither paid along with return of income nor offered for adjustment against refund due to the taxpayer which is evident from S.No.178 of the return of income (WWF payable Rs.0). Subsequently, the deemed assessment/ income was amended under section 122(1) of the Income Tax Ordinance, 2001 and WWF has been charged and WWF demand has been adjusted against excess income tax refund. However, subsequently a show cause notice was issued to the taxpayer. In response thereto, A.R. of the taxpayer filed written reply before the OIR. Being not satisfied with the reply of the taxpayer, OIR passed order under section 205 of the Income Tax Ordinance, 2001, levied default surcharge of Rs.4,97,419/- for tax year 2011 and of Rs. 2,22,372/- for tax year 2012 and issued demand notice to the taxpayer for both the year.

3. Being aggrieved and dissatisfied with the treatment meted out by the OIR, taxpayer filed appeal before the learned CIR(A) who vide his consolidated impugned order confirmed the order of the OIR.

4. Again feeling aggrieved and dissatisfied with the consolidated impugned order passed by the learned CIR(A) now the Taxpayer has come up in appeal before this Tribunal for redressal of grievances.

5. This court issued notice to the both parties, in response thereto, Mr. Najeeb Moochalla (FCA) appeared on behalf of the Appellant/ Taxpayer while Mr. Javed Iqbal Tarad appeared on behalf of the Respondent/Department as D.R.

6. During the appeal hearing proceeding before this court, the learned counsel vehemently urged appended below arguments for the following assessment years. ITA No. 273/KB/2014 (Tax Year 2011) "That the learned officer DCIR, Karachi in his order dated 03-04-2014 received by our client on 05-04-2014, has pointed out in serial No. 178 of the tax return e-filled showing WWF amount of Rs.

0. However the WWF amount on the declared taxable profit as per return worked out to Rs.1,603,574/- @ 2%. Instead of showing this amount of serial No. at 178 of the tax return, the tax payer has shown of Rs. 0, since the tax return of the company, has no system of adjusting the WWF amount against the declared refund at serial No. 173 of Rs.39,965,790/- This anomaly in the company's return has been pointed to PRAL from number of quarter including Karachi Tax Bar Association (KTBA), but till the filing of return no system of adjusting the WWF amount has been inserted to show the said adjustment. Subsequently, the appellant also moved a rectification letter to the officer, giving a reported case-law 2010 PTD (Trib.) 1975 where by the default, surcharge cannot be levied if the taxpayer has sufficient refunds to its credit. After the e-filling of the tax return for the tax year 2011, the taxpayer's case for tax year 2011 has been amended under section 122(1) in which the DICR, LTU, Karachi has disallowed certain P&L expenses and thereby has raised the WWF amount to Rs.2,014,083/- which amount has also been adjusted in the amended order against the refund due to the taxpayer for the said year. Therefore, once the adjustment has been made in the order itself by the learned DCIR, Karachi nullifies the outstanding WWF amount as such the question of default surcharge does not raise as per reported case supra. Hence, levy of default surcharge at Rs. 497,419/- is liable to be vacated." ITA No. 274/KB/2014 (Tax Year 2012) "The taxpayer while e-filing the return for tax year 2012 has declared an accounting profit at Rs. 130,324,389/- in the tax return. The WWF thereby worked out at 2% of the accounting profit amounts of Rs. 2,606,488/-. The WWF amount on the declared accounting profit as per return worked out to Rs.2,606,488/- at @ 2% on accounting profit. The taxpayer had shown this amount at serial No. 155 of the tax return at Rs.0, since the tax return of the company, has no system of adjusting the WWF amount against the declared refund at serial No. 147 of Rs.34,736,240/-. This anomaly in the company's return has been pointed to PRAL from number of quarter including Karachi Tax Bar Association (KTBA), but till the filing of return no system of adjusting the WWF amount has been inserted to show the said adjustment. However, the learned Additional Commissioner selecting the case under the audit for the tax year 2012 has amended the order for tax year 2012 under section 122(1) in which the Officer has adjusted the WWF amount at Rs.2,606,488/- in the amended order against the refund due to the taxpayer for the said year. Therefore, once the adjustment has been made in the order itself by the learned Additional Commissioner, Karachi nullifies the outstanding WWF amount as such the question of default surcharge does not arise as per reported case law 2010 PTD (Trib.) 1975. Hence, the default surcharge levied at Rs.222,373/- by the learned officer in his order dated 03.04.2014 accompanied by the notice of demand is illegal and liable to be vacated." The learned AR further stressed that the default surcharge cannot be levied if the taxpayer has sufficient refund to its credit. Finally, he has prayed that the impugned orders passed by the learned CIR(A) be vacated.

7. On the other hand, learned D.R. strongly opposed the contentions made by the learned counsel for the taxpayer and has supported the order passed by the officers below. Learned D.R contended that the taxpayer has not paid WWF along with return in accordance with the provisions of WWF Ordinance. Learned D.R. further contended that subsequently the said return was amended and OIR has framed order under section 122(5A) of the Income Tax Ordinance, 2001 and imposed WWF. The OIR has adjusted WWF demand against income tax refund and worked out the balance refund. Learned D.R. further pleaded that in the impugned order, the OIR has imposed default surcharge for non-payment of WWF at the time of filing of return. He has further added that the OIR has imposed default surcharge in respect of disputed WWF. Learned D.R. further narrated that the order passed by the authorities below are legal, lawful and in accordance with law. Lastly he has prayed that the impugned order passed by the learned CIR(A) be maintained.

8. Both the learned representatives appearing at the bar have been heard and carefully examined and also perused available case record. It is observed that the taxpayer also filed rectification application on 18-04-2014 and 25-04-2014 before the taxation officer but the same are still pending. It is further observed default surcharge, cannot be levied on the basis of presumption and assumption where the determined refund is available and the taxpayer has not denied any payment of WWF and the taxation officer adjusted the same against available determined refund. The taxpayers legitimate money was laying in Government/ Revenue department's treasury. Despite giving compensation/markup, the department has imposed extra burden under the garb of default surcharge, in instance cases the OIR had not appreciated the fact that certain unadjusted refunds were due from the department at the time of alleged default, if it is true, the default surcharge is not leaviable. Keeping in view the above facts and circumstances of the case, the learned CIR(A) has failed to apply his judicious mind and passed impugned order without considering the facts, therefore, the impugned order passed by the learned CIR(A) is hereby vacated and default surcharge is deleted, hence, these appeals by the taxpayer are hereby allowed.

9. Before parting with this judgment, I may observe that Revenue/ fiscal laws are not in the nature of penal laws, and the deterrent provisions are neither charging nor revenue generating provisions. The taxation laws are substantially remedial in their charter and are intended to prevent deception, suppress public wrong and promote good reputation of taxing department in taxpayers' eyes. Hence, they ought to be construed in such a way as to accomplish all those objects.

10. Both the appeals filed by the taxpayer are disposed of in the manner indicated above. HBT/55/Tax(Trib.) Appeals allowed.