2023 PLP (Trib (PTD)

ANWAAR UL HAQUE, ACCOUNTANT MEMBER.

The titled income tax appeal has been preferred on behalf of the taxpayer/appellant for the tax year 2016 assailing appellate order dated 21.05.2021 passed by the learned Commissioner Inland Revenue (Appeals-VII), Lahore.

2. Brief facts of the case gathered from record are that taxpayer-appellant is an AOP, deriving income from running a departmental stores e-filed income tax return for the tax year 2016, which was taken as an assessment order in terms of section 120 of the Income Tax Ordinance, 2001. After examining the record, the DCIR observed that taxpayer fall within the definition of prescribed person within the meaning of withholding provisions as envisaged under the Income Tax Ordinance, 2001 ('the Ordinance') was liable to make tax deduction at the time of making payments under various heads and submit statements under section 165 in the prescribed manner. In order to check compliance level to the withholding provisions necessary notice under Rule 44(4) of the Income Tax Rules, 2002 read with section 161(1A) of the Ordinance was issued requiring the taxpayer to reconcile the payments made and tax deducted thereon. Reportedly, taxpayer filed partial details/documents, which were considered, however, the ACIR after going through the details/reply filed by the taxpayer treated the appellant under default and finalized the proceedings by way of passing order under sections 161/205 of the Ordinance dated 01-03-2019, whereby tax demand at Rs.302,753/- was created.

3. The taxpayer being aggrieved preferred appeal before the learned CIR(A) by assailing the same which was rejected and order of DCIR was confirmed vide impugned appellate order. Still being not satisfied, the taxpayer filed further appeal before this Tribunal on the number, of grounds of appeal as set forth in the memo. of appeal. Learned AR opened his arguments by stating that the DCIR has passed the assessment order without giving due consideration to the documents/evidences provided by the taxpayer and order under sections 161/205 of the Ordinance was passed in hasty manner merely on assumptions basis. Subsequently, the learned CIR(A) also confirmed the order of the OIR without entertaining the information/details by the taxpayer. Under the garb of these submissions, learned AR prayed for vacation of the orders of the authorities below by way of acceptances of the titled appeal.

4. On the contrary, learned DR supported the impugned order by stating that the taxpayer very badly failed to substantiate its version before the lower authorities by putting on record solid documentary evidences to support its stance, therefore, prayed for rejection of the instant appeal.

5. We have heard the rival contenders and carefully gone through the available appeal record along with relevant provisions of law. It is observed that the assessment order has been passed without entertaining the documentary evidences produced by the taxpayer. In our view no bald estimate cannot be made for the purpose of sections 161/205 without firstly establishing the fact that the appellant is withholding agent or not? Further, perusal of orders of both the DCIR and CIR(A) reveal that mere estimation has been made and further confirmed just to complete the proceedings initiated under sections 161/205 of the Ordinance ibid, without considering the merits and other legal anomalies as pointed out by the learned AR of the appellant as well as ignoring the documents available and now placed before us. Further, it is also noted that the department completed the proceedings without quoting a separate instances for default. For such type of proceedings, we take strength from the reported judgment of Hon'able Supreme Court of Pakistan cited as 2021 SCMR 1325 = 2021 PTD 1367 given in the case of CIR v. MCB Bank Ltd. The perusal of supra referred judgment reveals that it contain the complete guidelines to finalize the proceedings under this section for the purpose of default and withholding provisions.

6. In the present case the record shows that the OIR failed to appreciate section 161 of the Ordinance in its true perspective. Since all the documentary evidences/data regarding deduction of withholding tax on account of payments made to the commission agents for purchases was produced by the taxpayer the OIR failed to point out any shortfall and to confront the same to the taxpayer as required under section 161 of the taxpayer. The OIR also failed to bring on record any party/person from whom tax was liable to be withheld and taxpayer has not deducted the same. Further, the OIR failed to take into consideration or call for to discharge the liabilities by the respective person whose tax was to be deducted. Since, the tax demand is merely based on conjectures and surmises, as no specific transactional entries have been confronted or highlighted by the OIR and subsequently, confirmed by the CIR (A) without considering the submission made on behalf of the taxpayer, therefore, both the orders of the authorities below are vacated and titled taxpayer's appeal is allowed. Order accordingly. This order contains (04) and each page bears my signatures. SA/80/Tax (Trib) Appeal allowed.