1990 PLP (Trib (PTD)

These departmental appeals are directed against the consolidated order of the learned AAC recorded by him on 30‑6‑1985 relating to assessment years 1979‑80 and 1980‑81.

2. It appears from perusal of the penalty order that it was recorded under section 91(1) of the Income Tax Ordinance 1979 (hereinafter referred to as the Ordinance). It also appears that the I.T.O. originally created a demand of Rs. 71,297 against the respondent and since he committed default the I.T.O. levied penalty under section 91(1) of the Income Tax Ordinance, 1979 at Rs. 7,130 at the rate of 10%. Having been aggrieved and dissatisfied the respondent went up in appeal. From perusal of the impugned order it appears that it was contended before the learned AAC that the I.T.O. fell in error in levying penalty under section 91(1) of the Ordinance on the entire amount of tax payable though the stay order was granted by the learned CIT (A) Hyderabad Zone, Hyderabad on 12‑9‑1984. It further appears from a perusal of the same order of the learned A.A.C. that Commissioner of Income‑tax was pleased to direct the respondent to deposit 25% of total tax and the recovery of the balance amount was stayed till learned contention of the extent of The I.T.O. is, therefore, directed to proceed accordingly.

3. The learned A.A.C. therefore disposed of both appeals in the light of observation made above. Mr. A.D. Bhatti, the learned D.R. supporting the departmental appeal contended that under section 91. of the Income‑tax Ordinance, the I.T.O. has been given power to impose penalty in those cases where an assessee was found in default of making payment of any tax. According to him the order of stay was wholly irrelevant as far as the power of the I.T.O. regarding imposition of penalty was concerned.

4. None for the respondent has turned up in spite of satisfactory service of hearing notice.

5. I have heard learned D.R. and have also gone through the assessment as well as impugned order. The learned D.R. has raised quite interesting point of law and I want to dispose it of at some length and to start with I reproduce herein below section 91 of the Income Tax Ordinance, 1979; which reads: "91.???? Penalty for non‑payment of tax.‑‑- (1) Where any assessee is m default in making payment of any tax (other than the tax payable under section 53) the I.T.O. may impose on him a penalty not exceeding an amount equal to the said tax. (2) The LT.O may impose a penalty under subsection (1) by one order or, in the case of a continuing default, by several orders, so, however, that the total amount of penalty does not exceed the amount of such tax. (3) For the purpose of subsection (1), any penalty imposed under that subsection or any additional tax, levied under section 86, 87, 88 or 89 shall be excluded from the amount of tax in respect of which the penalty is imposed (4) Where, after an order under subsection (1) has been made, the I.T.O. discovers, or the assessee proves to the satisfaction of the I.T.O. that the amount of tax or any part thereof,? respect of which the said order was made, had been paid or any refund due to the assessee had not been set?off under section 104, before the date on which the said order was made, the I.T.O. shall cancel or modify the said order, as may be necessary, and the provisions of section 156 shall, so far as may be, apply as they apply to the rectification of any mistake apparent from the record. (5) Notwithstanding anything contained in any law for the time being in force, no order of penalty made under subsection (1) shall be called in question in any Court or Tribunal or before any authority on the ground that‑‑ (a) No show‑cause notice was issued before the said order was made; or (b) An application for stay of recovery of tax or the payment of tax in instalments had been pending before any Court or Tribunal or any other authority. From perusal of subsection (1) of section 91 of the Income‑tax Ordinance it appears that the legislature has given the power to the I.T.O. for levying penalty in those cases in which an assessee is in default of making payment of any tax other than the tax payable under section

53. However if read subsection (2) of section 85 it appears to me that the legislature has given the power of granting stay of payment of tax or for allowing payment in instalments to the IAC. The Commissioner of Income‑tax also appears to have same powers as those of an IAC under section 5(1)(c). Similarly, from perusal of subsection (6) of Section 134 it further appears that this Tribunal has also been given power of staying the recovery of the tax. The CBR have taken note of both subsection (2) of section 85 and subsection (6) of section 134 in their Circular No. 4 of 1979 dated 23‑8‑79 and No. 15 dated 26‑6‑

80. Thus if read subsection (1) of Section 91 it appears to me 'hat the expression "in default in making payment of any tax" means and implies whether deliberately or otherwise." I have come to this conclusion because the legislature has deliberately used words "without reasonable cause" in section 108 the Ordinance which are conspicuous by their absence in section

91. However, legal position, of non‑payment of tax because of stay order granted by competent authority is altogether different. It is, therefore, obvious that in those cases where the payment of any tax has been stayed, an assessee cannot ordinarily be deemed to be in default of making payment of any tax. However, section 89 provides an exception to this rule regarding stay order or instalment order granted by IAC. I am, therefore, of the view that in all those cases of stay order or instalment order, which are not covered by section 85(2) the general rule still holds the reins. It is pertinent to note that the expression "may impose" has been used in subsection (1) which means vesting of a discretion in an Income‑tax Officer under subsection (1) of section 91 regarding imposition of penalty under the facts and circumstances of each case. In other words an I.T.O. has power to impose penalty in those cases in which the default in making payment of any tax' is deliberate or otherwise on the part of an assessee but not because of a stay order which has been granted by a competent authority. In my humble view such default is caused by operation of law hence it is protected under the principle that such stay order suspends the order against which it is directed. A Full Bench of Lahore High Court consisting of such eminent Judges like Munir, Muhammad Sharif and Cornelius have discussed this concept of suspension of the impugned order at length in a case reported as PLD 1949 Lahore 100, Karam Ali v. Raja. I think it is because of this reason that legislature has not used the word "shall" in subsection (1) otherwise the significance of granting stay would have been lost and would have been called upon to harmoniously interpret the provisions of subsection (1) of section 91 and subsection (6) of section

134. But such pleasant situation has been fortunately avoided. However let me add that the discretionary power of I.T.O. under subsection (1) of section 91 is neither arbitrary nor‑can be exercised capriciously. Moreover, as observed by Indian Supreme Court in a case reported as (1969) 71 1TR 800, I.T.O. v. Damodar Bhatt (M), it cannot be used even 'on extraneous consideration not germane to the occasion and from the, order recorded by the Income‑tax Officer it should be clear that he has applied his mind to all the facts relevant to the proper exercise of his description. Surely I the grant of stay order is such a consideration.

6. Before proceeding further it would not be out of place to mention that the principle that the stay order in effect provisionally suspends or makes non?existent an order against which it is aimed at has also been propounded by other High Courts of the sub‑continent and the latest case reported as (1970) 78 ITR 784, Gouri Shankar Awasti v. Income‑tax Officer comes from Calcutta High Court. Moreover, as laid down in another case from the same High Court which is reported as (1972) 84 ITR 520 Union of India .v. Nawn (BC), it is a recognised principle of law that the mere fact of pendency of appeal does not operate as a stay order nor does it affect the excitability of a decision appealed against and in‑fact it is this principle which has been enacted in clause (b) of subsection (5) of section 91 of the Income‑tax Ordinance, 1979. With due respect to the learned Departmental Representative this clause does not mean that an order of stay has been rendered nugatory or meaningless by its enactment. 1t actually refers to an application for stay of recovery or the payment of tax in instalment which is just pending and no order has been recorded by any Court or Tribunal or any other authority. If any stay order is granted as I have discussed earlier, the I.T.O. has to take his hands off and an assessee would not he deemed during the period of stay to have committed any default in making payment of any tax so as to attract the provision of subsection (1) of section 91 of the Income Tax Ordinance; 1979. Let me also at this juncture point out that it is the passing of the stay order which is material for suspending the demand and its date of communication does not make it effective from that date. 1n this connection I am once again tempted to refer to the leading case in Pakistan of Karam Ali (Supra). It is true that aforesaid ruling emerged out of the provision of Order 41 Rule 5 of Civil Procedure Code but in my humble opinion it lays down universal principle regarding the date of the stay order from which it becomes effective, namely, the date of passing of order and not the date of its service on concerned authorities. Thus, in view of discussion made above I hold that the learned AAC issued correct direction to the I.T.O. and his order is well founded in law for the assessment years involved. Let me mention here that the provision regarding levying of additional tax for the period of stay also was introduced by the Finance Ordinance of 1980.

7. Mr. A.D. Bhatti, the learned D.R. however contended in the alternative that the I.T.O. had already recorded the order according to the direction of learned AAC. But with due respect to the learned D.R. if it is so the I.T.O. can, of course, mention in his order aforesaid fact while giving appeal effect. However I would advise him to record a speaking order rather than an ambiguous and confusing order, which he recorded in instant case.

8. Before parting with this case let we deal with one more pertinent point which is very much relevant. I feel tempted to point out that in section 89 the legislature has specifically laid down that the stay granted by an IAC shall not debar an I:T.O. from levying additional tax for the period of stay. But such provision has been significantly and meaningfully omitted in section 91 of the Ordinance. However, section 89 of the Income‑tax Ordinance has not referred to the stay orders granted by RCIT or the Income‑.tax Appellate Tribunal. As such, stay order granted by such authorities would not attract the provisions of section

89. However, the question whether section 91(5)(a) violates the Principles of Natural Justice is left open for decision in some appropriate case.

9. In view of discussion made above both the departmental appeals are found to be devoid of any merit and stand rejected accordingly. M.B.A. /855/T???????????????????????????????????????????????????????????????????????????????????? Appeals rejected.