2017 PLP (Trib (PTD)

MUHAMMAD JAWED ZAKARIA, JUDICIAL MEMBER.

This appeal has been filed by the taxpayer against the impugned Order No. 78 dated 24.12.2013 passed by the learned Commissioner Inland Revenue (Appeals-II), Karachi whereby the learned CIR(A) confirmed the order passed by the OIR. The taxpayer has agitated the following grounds of appeal as put-forth in the memo of appeal.

2. On the date of hearing, Mr. Muhammad Moazzam, Advocate appeared on behalf of the taxpayer/appellant while Mr. Iqbal Hussain Shaikh appeared on behalf of the Respondent/Department as D.R.

3. During the course of hearing, learned counsel for the taxpayer has argued that the impugned order of the Commissioner Appeal-II, Karachi is bad in law and contrary to the facts and circumstances of the case. Learned counsel for the taxpayer further contended that the learned Commissioner Appeal-II, Karachi has erred in imposing penalty under section 182(1) of the Income Tax Ordinance, 2001 for non-filling of statement under sections 149/165 of the Ordinance. He has further asserted that the learned Commissioner appeal has ignored the principal clause on the basis of which statement is required to be submitted. Learned counsel for the taxpayer further pleaded that the learned Commissioner appeal has ignored this fats that during the said year business of your appellant was non-operative and no deduction were made. He has drawn attention this court that the learned Commissioner appeal has seriously erred to pass order on the basis of assumption. Learned counsel for the taxpayer further argued that the learned CIR(A) totally ignored the condition lay down in the Proviso for compulsory submission of statement under section 165 of the Ordinance just to fruitless word whereas the said condition has cleared the truthful meaning of Proviso of Section 165 of the Ordinance. He has further asserted that the law is to be interpreted in the totality of the scheme contained in a particular statute and is not to be taken in isolation. Learned counsel for the taxpayer further pleaded that if there are two possible construction of the words of the statute, than the effect is to be given to the one that is (in) favour of the citizen and not the one that enhance or increases burden on him. According to learned counsel for the taxpayer that the learned Commissioner appeal has seriously erred not to follow section 182(1)(2) of the Income Tax Ordinance, 2001. Learned counsel for the taxpayer further argued that the learned Commissioner Appeal has grossly erred not to follow superior Courts Judgment. He has further contended that the order of the learned CIR(A) is arbitrary, perverse, unreasonable, unjust, oppressive and discriminatory and has no legal basis, therefore, the order passed by the learned CIR(A) may be declared illegal, void and ultra-vires of the Constitution of Pakistan, 1973 and Income Tax Ordinance, 2001. Lastly, he has prayed that impugned order passed by the learned CIR(A) be vacated.

4. On the other hand, learned DR vehemently opposed the contentions made by the learned AR. He strongly supported the order passed by the learned CIR(A). He has contended that the impugned order passed by the learned CIR(A) is legal, lawful and in accordance with law. Finally, he has prayed that the order of the learned CIR(A) may be maintained.

5. Both the learned representatives appearing at the bar have been heard and carefully examined the available case record. A reply submitted by the taxpayer before the taxation officer which reproduced as under:-- "In response to this office letter the taxpayer vide his letter dated 02-10-2013 has submitted that there was no any transaction made from July to June 2011. The contents of the letter are reproduced as under: "With reference to your show cause notice under section 182(1) of the Income Tax Ordinance, 2001 bearing No.AC-B/WHT Zone/Audit Para 4.11/RTO-III/2013/137 dated 25-09-2013 alleging that the assessee company for failure to furnish monthly statement under sections 149 and 145 of the Income Tax Ordinance, 2001, for four quarters of above tax year and in this connection it is informed you that the company was incorporated on 12-10-2009 and since then the company has not started any business activities for hired any employee on its strength which means that there is not any transaction on which question for deduction of tax may arise consequently monthly statement under sections 149/165 were not due, therefore, did not file. In view of the aforesaid, we request you to kindly withdraw your show-cause and drop the penalty proceedings under section 182(1) as intended being a dormant company for your satisfaction photocopy of Bank Statement since incorporation to date enclosed"

6. It is noted that the OIR was not justified to impose penalty of Rs.20,000/- under section 182 of the Income Tax Ordinance, 2001 when, in the tax year under appeal, as contended by the learned counsel for the taxpayer that the penalty under sub-clause (1A) of section 182(1) of Income Tax Ordinance, 2001 is imposed where a person fails to furnish a statement as required under section 115, 165 or 165A of the Ordinance, within due date. It is observed that learned CIR(A) totally ignored the condition lay down in the Proviso for compulsory submission of statement under section 165 of the Ordinance just to fruitless word whereas the said condition has cleared the truthful meaning of Proviso of section 165 of the Ordinance. It is further noted that the law is to be interpreted in the totality of the scheme contained in a particular statute and is not to be taken in isolation. It is further observed that if there are two possible construction of the words of the statute, than the effect is to be given to the one that is (in) favour of the citizen and not the one that enhance or increases burden on him. It is further pointed out that the OIR failed to appreciate that the respondent was not required to file statement under section 165(5) of the Ordinance, 2001 as the appellant neither was collecting tax under Division-II of Part-IV of Chapter-XII of the Ordinance, 2001 nor was deducting tax from a payment under Division under Division-II of Part-V of Chapter-XII of the Ordinance, 2001. The OIR failed to appreciate that the appellant as such was not "prescribed person" as defined under section 153(7), of the Ordinance, 2001 and as such was not required to file statement under section 165 of the Ordinance, 2001, further more there is no revenue loss has occurred to the national exchequer, owing to supra allegation, therefore the penalty is imposed without appreciation of intent to section 182 of the Income Tax Ordinance, 2001. Thus, the impugned order passed by the learned CIR(A) is illegal, unlawful and without jurisdiction. The learned DR, could not refute or rebut the assertion made out by the learned counsel of the appellant with concrete evidence. Under the facts and circumstances of the case, it is opined by this court that the law ought not to be used to penalize a taxpayer unless it can be shown that the default on the part of the taxpayer had resulted in any loss of revenue. In the present case, no such loss of revenue is evident. 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, that the taxpayer is entitled to grant relief from this court, hence, the Orders passed by the authorities are hereby vacated.

7. Before parting with this judgment, I may observe that it is incorrect impression of revenue department that the penalty has to be universally imposed, without any exception whatsoever, if there is a default. This is not correct interpretation. The major prerequisite for imposition of penalty has always been a default committed "commits any offence" the onus to prove lies on department. All Officer Inland Revenue is directed to be judicious in imposition of penalty. In penalty proceedings authorities must act fairly and honestly. Section 182 of Income Tax Ordinance, 2001 by no means is charging provisions and the legislature intention was not to generate tax or revenue income and the purpose and intention of the penal provisions, is not the source of resources mobilisation. It was only mode of ensuring collection of taxes and compliance thereof. The revenue department cannot be allowed to use provisions to section 182 as substitute of normal assessment or new source of revenue/tax originating provisions.

8. Consequently, the appeal filed at the instance of taxpayer is hereby allowed. Order accordingly. HBT/107/Tax(Trib.) Appeal allowed.