2000 PLP (Trib (PTD)

(b) the tax under clause (a) shall be collected in the same manner and at the same time as the customs duty, as. if such goods (even though exempt from such duty) were liable to such duty, and all the provisions of the Customs Act; 1969 (IV of 1969) shall, so far as may be, apply accordingly: Provided that in the case of a manufacturer importing raw materials other than edible oils exclusively for its own use, the Regional Commissioner of Income-tax may certify reduction of the rate of collection up to one hundred percent, if the aggregate of tax paid or collected during that year equals the amount of tax paid by such assessee in the immediately preceding year and the certificate is not issued during the first year of assessee's business: Provided further that the provisions of this subsection shall not apply to

(i) any person re-importing re-useable containers for re-export qualifying for customs and sales tax exemption on temporary import under Customs Notification SRO 344(1)/95, dated the 25th April 1995; or (ii) any person importing the following petroleum products namely: 'Motor Spirit (MS), Furnace Oil (FO), JP-1 and NTBE': Provided also that if at any stage it is known that the provisions of this proviso have been misused, such person shall be treated as an assessee in default in respect of such tax and treated accordingly. Explanation.

As used in this subsection

(i) 'value' in relation to any goods, means the value as determined under section 25 of the Customs Act, 1969 (IV of 1969); as if the goods were subject to ad valorem duty; and (ii) 'Collector of Customs' means a person appointed as Collector of Customs under section 3 of the Customs Act, 1969 (IV of 1969) and includes a Deputy Collector of Customs, an Assistant Collector of Customs or an officer of Customs appointed as such under the aforesaid section. (5-A) Any person, being an authorised dealer in foreign exchange, shall at the time of realisation of foreign exchange proceeds on account of export of goods by a person, being an exporter or on account of commission due to an intending commission agent, deduct tax at the rates specified in the First Schedule. (5-AA) Every banking company shall at the time of realisation of proceeds on account of supply of goods to an exporter under an inland back to back letter of credit, deduct tax at the rates specified in the First Schedule. (5-AAA) Notwithstanding anything contained in this Ordinance or in any other law for the time being in force

(a) the Collector of Customs, in the case of every importer of wheat, who opened a letter of credit before the nineteenth day of May, 1999 other than a person who filed a bill of entry before the said date, shall, in addition to the tax collectable under subsection (5),. collect tax equal to ninety per cent of the amount of difference in the exchange rate prevailing at the close of banking hours on the said day as notified by the National Bank of Pakistan for setting T.T. and O. D., and the rate at which payment in foreign exchange was made or foreign exchange was booked, as the case may be; and (b) the tax under clause (a) shall be collected in the same manner and at the same time as the customs duty as if such goods (even though exempt from such duty) were liable to such duty, and all the provisions of the Customs Act, 1969 (1V of 1969), shall, so far as may be, apply accordingly. The provisions of this subsection shall take effect from the 12th day of June, 1999. (5-B) On encashment of any bearer certificate (whether in Pakistan rupee or foreign currency) purchased on or after the 15th day of June, 1995, issued by or on behalf of the Government, banking company, financial institution or any company referred to in sub-clause (a) or sub-clause (b) of clause (16) of section 2, any local authority or any finance society, any person responsible for encashment of such certificate shall deduct advance tax, at the time of encashment of such certificate, at the rate specified in the First Schedule. (6) Any person responsible for the collection of motor vehicles tax shall, at the time of collecting the said tax, collect income-tax at the rates specified in the First Schedule in respect of any transport vehicle: Provided that where the motor vehicles tax is collected in instalments, Income-tax may also be collected in like manner: Provided further that the collection of tax in respect of passenger transport vehicles with registered seating capacity of not less than (ten) persons shall be made (for a period of ten years commencing with the first day of July of the year of make of such vehicles.) (6-A) The principal officer of a company shall, at the time of making payment to a shareholder, not being a company, on account of dividends, deduct tax at the rate specified in the First Schedule: (7) The principal officer of any domestic company shall. before the company issues bonus shares or bonus to its shareholders, pay to the credit of the Federal Government the, tax at the rates specified in the First Schedule; and where the principal officer fails to do so the company of which he is the principal officer, shall, without prejudice to any other liability which it may incur under this Ordinance, be deemed to be an assessee in default in respect of the said tax: Provided that the tax payable in respect of bonus shares or bonus, as the case may be, may be recovered from the-shareholder receiving such bonus or bonus shares, if it cannot be recovered from the company and all the provisions of this Ordinance shall, so far as may be, apply accordingly. (7-A) Any person making sale, by public auction, of any property belonging to the Government, a local authority, a public company, a foreign association declared to be a company under clause (16) of section 2, or a foreign contractor or consultant or consortium shall collect advance tax, computed on the basis of sales price of such property and at the rate specified in the First Schedule, from any person to whom such property is sold, and credit for the tax so collected in any financial year shall; subject to the provisions of section 53, be given in computing the tax payable by the person purchasing such property for the assessment year commencing on the first day of July next following the said financial year, or in the case of an assessee to whom section 72 or section 81 applies the assessment year, if any, in which the 'said date' as referred to therein, falls, whichever is the later. Explanation.

For the purposes of this subsection, sale of any property includes the awarding of any lease to any person, including a lease. of the right to collect octroi duties, tools, fees or other levies, by whatever name called. (7-B) Any person responsible for making any payment in full or to part (including a payment by way of an advance) to any person, on account of the rent of house property (including rent of furniture. fixture and services) if any, on behalf of Government. a local authority, a company, a non-Government charitable institution, a private educational institution, a hospital, a clinic or a maternity home, or the diplomatic mission of a foreign State shall, where the annual rent of such property exceeds one hundred thousand rupees, deduct advance tax, at the time of making such payment, at the rate specified in the First Schedule, and credit for the tax so deducted in any financial year shall, subject to the provisions of section 53, be given in computing tax payable by the recipient for the assessment year commencing on the first day of July next following the said financial year, or in the case of an assessee to whom section 72 or section 81 applies, the assessment year, if any, in which the 'said date' as referred to therein falls, whichever is the later. "(7-BB)(a) At the time of approving any building plan for construction in respect of any building, not being a residential house, the person responsible for such approval, shall collect advance tax from the owner of such property on the estimated cost of construction of such building at one-half of the rates specified in the First Schedule, and the credit for the tax so collected in any financial year shall, subject to the provisions of section 53, be given in computing the tax payable by such owner for the assessment year commencing on-the first day of July next following such financial year, the assessment year in which the 'said date' as referred to therein, falls, whichever is the later; and (b) at the time of issuing completion certificate for the building referred to in clause (a), the person responsible for issuance of such certificate shall collect advance tax from the owner of such property on the estimated cost of construction of such building at one half of the rates specified in the First Schedule, and the credit for the tax so collected in any financial year shall, subject. to the provisions of section 53, be given in computing the tax payable by the owner of the building for the assessment year commencing on the first day of July next following such financial year, or in the case of an assessee to whom section 72 or section 81 applies, the assessment year in which the 'said date' as referred to therein, whichever is the later: Provided that the Central Board of Revenue may, by notification in the official Gazette, specify

(ii) the method for the determination of the 'estimated cost of construction'. (7-C) Any person responsible for making any payment to any person (hereinafter called the 'recipient') by way of a prize on prize bond or on account of winnings from a raffle, lottery or crossword puzzle shall deduct from the said payment (in case the payment is made 'in cash) or collect from the recipient (in case the payment is made in any other form) advance tax at the time of such payment at the rate specified in the First Schedule. (7-D) Any person responsible for making any payment by way of profit or interest on bonds, certificates, debentures, securities or instruments of any kind issued by any banking company, or any company referred to in sub-clause (a) or sub-clause (b) of clause (16) of section 2, or any local authority or any finance society, not being a payment to which subsection (2) of section 50 applies, shall deduct advance tax, at the time of making such payment, at the rate specified in the First Schedule: Provided that where the Deputy Commissioner gives a certificate in writing (which certificate he shall give in every proper case for a period of three years on the application of a recognised provident fund) that to the best of his knowledge and belief, it shall not be liable to pay tax at a rate which is less than the rate specified in the First Schedule, the person responsible for paying any, income referred to in this subsection to such recognised provident fund shall, until such certificate is cancelled by the Deputy Commissioner, pay the amount involved without deduction or deduct tax at such less rate, as the case may be.) (7-E) At the time of preparing electricity consumption bills in respect of any commercial or industrial consumer, the person responsible for preparing such bills, shall charge tax on the amount of the electricity bill at the rates specified in the First Schedule, and the credit for the tax so collected. in any financial year shall, subject to the provisions of section 53, be given in computing the tax payable by such consumer for the assessment year commencing on the first day of July next following the said financial year; or in the case of an assessee to whom section 72 or section 81 applies, the assessment year in which the 'said date' as referred to therein falls, whichever is the later. (7-F) At the time of preparing (telephone bills or issuing or selling prepaid telephone cards for mobile telephones, the person responsible for preparing such bills or issuing or selling such prepaid telephone cards shall charge tax on the amount of such bill or card, as the case may be) at the rates specified in the First Schedule, and the credit for the tax so collected in any financial year shall, subject to the provisions of section 53, be given in computing., the tax payable by such subscriber for the assessment year commencing on the first day of July next following the said financial year, or in the case of an assessee to whom section 72 or section 81 applies, the assessment year in which the 'said date' as referred to therein falls, whichever is the later: Provided that nothing contained in this subsection shall apply where the Government or a diplomat is the subscriber. (7-G) At the time of preparing gas consumption bill in respect of any commercial or industrial consumer, the person responsible for preparing such bill; shall charge tax on the amount of gas bill at the rates specified in the First Schedule, and the credit for the tax so collected in any financial year shall, subject to the provisions of section 53, be given in computing the tax payable by such consumer for the assessment year commencing on the first day of July next following the said financial year, or in the case of an assessee to whom section 72 or section 81. applies, the assessment in which the 'said date' as referred to therein falls, whichever is the later: (7-H) Every person, at the time of making sale of petroleum products to a petrol pump operator, shall collect tax on the amount of commission or discount allowed to such operator at the rate specified in the First Schedule. (8) Any sums deducted or collected, or purported to be deducted or collected, under this section shall be

(a) deemed, in cases to which subsections (1), (2) and (3) apply, to be income received by the assessee; (b) treated as payment of tax on behalf of the assessee; and (c) paid within the prescribed time and in the prescribed manner by the person making the deduction or collection, as the case may be, to the credit of the Federal Government. (9) For the purpose of this section

(a) 'person responsible' means the prescribed person and includes

(i) in the case of a company, local authority or an association of persons, the principal officer thereof; and (ii) in every other case, the payer himself; and (b) any sum from which tax is deductible under this section shall be income chargeable to tax under this Ordinance. (10) Notwithstanding the omission of the first proviso to subsec tion (2A), clause (c) of subsection (4), and the provisos to subsection (4A), subsection (5), subsection (5A), subsection (6A), subsection (7B) and subsection (7BB), and subsection of the proviso to subsection (4), under the Finance Act, 1994 (XII of 1994), and without prejudice to the provisions of section 6 or 24 of the General Clauses Act, 1897 (X of 1897), all the notifications issued under the aforesaid provisions till the 30th day of June, 1994, shall be deemed to have been validly made and continue to remain in force until specifically repealed or amended. Section 52: Liability of persons failing to deduct or pay tax.-- Where any person fails to deduct or collect, or having deducted or collected, as the case may be, fails to pay the tax as required by, or under, section 50 he shall, without prejudice to any other liability which he may incur under this Ordinance, be deemed to be an assessee in default in respect of such tax. Explanation.

For the purposes of this section, the Deputy Commission having jurisdiction under section 5 over the case of the assessee in default may initiate action. Section 52-A. Recovery from the person from whom tax was not deducted or collected.

Where any sum deductible or collectable by any person has not been deducted or collected as required by, or under section 50, the Deputy. Commissioner having jurisdiction over the case of the person from whom tax was deductible or collectable, without prejudice to any liability which the person responsible for deduction or collection of tax under section 50 may incur under this Ordinance, may recover the sum not deducted or collected from the person from whom tax was to be deducted or collected and all provisions of this, Ordinance relating to recovery of tax shall apply. Section

62. Assessment on production of accounts, evidence, etc.-- (1) The Deputy Commissioner after considering the evidence on record (including evidence, if any, produced under section 61) and such other evidence as the (Deputy Commissioner) may require, on specific points, shall, by an order in writing, assess the total income of the assessee and determine the tax payable by him on the basis of such assessment: Provided that where the assessee produces books of account as evidence in support of the return, the Deputy Commissioner shall, before disagreeing with such accounts, give a notice to the assessee of the defects in the accounts and provide an opportunity to the assessee to explain his point of view about such defects and record such explanation and the basis of computation of total income of the assessee in the assessment order. Second proviso to section 80-C(4).

Provided further that where the tax deducted or collected under any subsection of section 50 specified in clause (a) of subsection (2) is, for any reason, not collected or deducted in accordance with the said subsection or the tax so deducted is less than the amount deductible or collectable, the assessee shall be required to pay the said amount. Section

86. Charge of additional tax for failure to deduct and pay tax.

Where any person fails to deduct, or having deducted fails to pay any tax, as required by section 50, such person shall, without prejudice to any other liability which he may incur, be liable to pay additional tax at the rate (twenty-four) percent. per annum on the amount not paid for the period commencing from the date on which he was required to pay such tax to the date of the payment thereof "

10. Mr. Rehan Hassan Naqvi after going through the above provisions frankly conceded that the views expressed by Division Bench of this Tribunal vide order, dated 18-11-1999 in I.T.A. No. 1129/KB of 1996-97 and others was not in consonance with the provisions of law. Mr. Rehan Hassan Naqvi further conceded that the only requirement for making order under sections 52 and 86 was the issuance of show-cause notice and affording of reasonable opportunity of being heard to a payer/assessee in default, and consideration of the explanation furnish if any. He further conceded that a sum not deducted or collected could be recovered in accordance with the provisions of the Income Tax Ordinance relating to recovery of tax. Mr. Rehan Hassan Naqvi further conceded that the passing of order under section 52/86 is not dependent on the assessment proceedings in respect of payer under section 62 for the simple reason that the Assessing Officer is required to assessee the total income of an assessee and determine the tax payable by him on the basis of such assessment. On the other hand the deduction of tax under section 50 is not related to the total income or tax liability of the assessee/payer. All the deductions under section 50 are to be made on payments, clearing of out-station cheques, issuing of demand draft etc. collection of customs duty and sales tax, realization of foreign exchange proceeds on account of export of goods, realization of proceeds on account of supply of goods to an exporter, on encashment of any bearer certificate, collection of motor 'vehicle tax, making payment to a shareholder, issuance of bonus share or bonus to shareholder of a domestic company, of public auction of any property belonging to Government, a local authority, a public company foreign association declared to be a company or foreign contractor or consultant, or associates at the time of approving of any building plan for construction and issuance of completion certificate of the building, at the time of preparing electricity consumption bill in respect of industrial consumer, preparing of telephone bill or 'issuance of selling prepaid telephone card for mobile telephone, preparing gas consumption bill in respect of any commercial or industrial consumer, making sale of petroleum products of petrol pump operator. All the deductions or collections or any sum purported recipient to be deducted or collected shall be deemed to be income received by the assessee, treated as payment of tax on behalf of assessee and paid to the credit of the Federal Government. Any sum from which tax was deductible under section 50 shall be deemed to be income chargeable to tax under the Income-tax Ordinance. The sums on which deduction or collection is made is never added to the total income of a deducting authority and the sum deducted or collected is not adjusted towards the tax liability of the deducting authority. On the contrary it is treated as payment of tax on behalf of the assessee i.e. the recipient. Thus, no deduction or collection under section 50 has any nexus with the assessment of total income of an assessee 'payer' and is not a part of tax payable by the payer on the basis of his assessment. Mr. Naqvi has further conceded that the provisions contained in sections 52, 52A and second proviso to section 80-C (4) are in the nature of initiation of proceedings for recovery of tax not deducted or collected. Mr. Rehan Hassan Naqvi has further conceded that the sections 50, 52 and 52-A are contained in Chapter VI of the Income Tax Ordinance, 1979, which deals with the payment of tax before assess ment and these have nothing to do with section 62 which is contained in Chapter VII of the Income Tax Ordinance, containing the provisions relating to assessment. Mr. Naqvi has further conceded that a perusal of the above provisions shows that the proceedings under section 52/86 can be initiated at any stage viz., before the assessment, during the assessment proceedings and after the assessment. The only condition is that the department should prove that there is a default in deduction or collection of any tax under section 50 or the tax having deducted or collected has not been paid as required by or under section 50 of the Income Tax Ordinance. Mr. Naqvi has further conceded that the initiation of proceedings under sections 52, 52-A, 2nd proviso to sections 80-8(4) and 86 are totally independent and distinct section

156. The reason is very clear that the rectification of mistake under section 156 pertains to any mistake in the order of Income-tax authority or the Appellate Tribunal while the proceedings under sections 52, 52-A, 2nd proviso to sections 80-C (4) and 86 are contingent on commission of default by deducting authority in deduction or collection of a tax or deposit of the tax deducted or collected as the case may be. Mr. Rehan Hassan Naqvi has further conceded that in the judgment, dated 18-11-1999 in I.T.A. No. 1129/KB of 1996-97, etc. reliance has been wrongly placed on an earlier judgment by a Division Bench of this Tribunal reported as 1999 PTD (Trib.) 3357 (authored by one of us Mr. Muhammad Daud Khan, Accountant Member). In the cited judgment a totally different point was considered which related to the question of limitation. Since no period of limitation is provided in the Income Tax Ordinance for initiation of proceedings under section 52/86, therefore, it was held that the proceedings can be initiated within a reasonable time and for that purpose a parallel on the point of limitation was drawn from the period of limitation provided under section

156. The completion of assessment order of a payer was held to be terminus a quo followed by a period of four years.

11. We may further add that the orders under section 52/86 cannot be rectifictory in nature because a rectification can be made in the order by an officer who has made the original order or his successor-in-office can rectify the mistake. No other officer has any jurisdiction to rectify the mistake. On the other hand the assessment in respect of a payer shall be made by an Assessing Officer having jurisdiction over such assessee, while in the case of default any deduction or collection of tax, the Assessing Officer having jurisdiction over the case of assessee in default can initiate action by virtue of explanation to section 52 and the Deputy Commissioner having jurisdiction over the case of person from whom tax was deductible or collectable may also recover the sum deducted or collected from the person from whom tax was to be deducted or collected. Thus. the proceedings under sections 52 and 86 are totally independent in nature and are neither a part of any other proceedings nor they are subservient. to any other proceedings under the Ordinance. However, we will hasten to acid that while passing order under section 52, the Assessing Officer is required to examine whether the tax liability stands discharged either on account of offering the amount under consideration for tax or on account of recovery of tax not deducted under section 50 by initiation of proceedings under section 52-A. Once the tax has been deducted or collected from one person it cannot be deducted or collected from another person.

12. For the foregoing reasons the ratio of judgment in I.T.A. No. 1129/KB of 1996-97, I.T.A. No.671/KB of 1998-99, I.T.A. No.673/KB of 1998-99 and I.T.A. No.643/KB of 1999-2000 is not well-founded. It is not in consonance with law contained in Income Tax Ordinance, 1979 and as such it stands overruled.

13. Now we revert to the fact of the present case and we find that the Assessing Officer as well as the assessee both have acted in a manner not warranted in law. The tax consultant of the assesssee/appellant failed to furnish necessary information and details before the Assessing Officer under mistaken notion of a proposition of law which was rendered inoperative by virtue of amendments inserted by Finance Act, 1999, the Assessing Officer failed to do justice by ignoring the contents of statement under section 142 and other details which were filed before him. The miscarriage of justice has taken place to which the assessee and Assessing Officer both have contributed and, therefore, we are of the opinion that in the interest of justice the order of learned CIT (A) may be vacated and order under section 52/86 may be set aside and we do accordingly. The learned D.R has submitted that sufficient time has already elapsed and, therefore, the department may be allowed to re-consider the issue in the month of June, 2000. We agree with the proposition and, therefore, in order to save the time we direct that the appellant should appear before the Assessing Officer on 1-6-2000 without receiving any further notice of hearing from the Assessing Officer. The direction issued by us for appearance before the Assessing Officer on 1-6-2000 is to be treated as service of notice for appearance before the Assessing Officer. We further direct the appellant that all the necessary details duly supported with the evidence as required by the Assessing Officer from time to time should be furnished before the Assessing Officer. All the necessary books of account and the supporting evidence should also be produced before the Assessing Officer on 1-6-2000 so that the Assessing Officer may consider the merits of the case out-right on 1-6-2000. No adjournment is to be sought except under very compelling circumstances The Assessing Officer in addition to receiving material produced by the appellant shall afford the reasonable opportunity of hearing to the appellant. The fresh proceedings may be decided expeditiously but not hastily, keeping in view the dictate of justice.

14. The appeal is allowed as above. C.M.A./M.A.K./34/Tax (Trib.) Appeal allowed.