2021 PLP (Trib (PTD)

MRS. AMBREEN ASLAM, JUDICIAL MEMBER.

Through this single order we intend to dispose of the titled appeals filed by the taxpayer against Combined Order bearing Nos.20 to 39/A-I, dated 7-5-2019, passed by the learned Commissioner Inland Revenue (Appeals-I), Karachi on the following common grounds:

1. That the Combined Order passed for the months from July 2015 to November 2016 and March 2017 to June 2017 under section 129 of Income Tax Ordinance, 2001 (the Ordinance); by the learned Commissioner Inland Revenue (Appeals-I), (CIRA) Karachi is bad in law and on facts.

2. That the learned CIRA erred in confirming action of Deputy Commissioner Inland Revenue (DCIR), E&C Unit-03, Range-B, Zone-III, Large Taxpayers Unit, Karachi of passing an order under section 182 of the Ordinance. It is submitted that DCIR had erred passing Orders under section 182(2) of the Ordinance relating to the months from July 2015 to November 2016 and March 2017 to June 2017 by referring applicability of Serial Number 1A of subsection (1) of section

182. That DCIR then levied penalty of Rupees two thousand five hundred for each day of default for late filing of monthly statement under section 165 of the Ordinance.

3. That the learned CIRA erred in not appreciating that the taxpayer had been facing problems for filing the monthly statements under section 165 of Ordinance, through FBR IRIS portal. Consequently, the learned CIR(A) could not give due weightage that the resultant levy of penalty under section 182(1) was excessive and uncalled for as no mens rea or ulterior motive is involved for late or non-filing of monthly statement under section 165 of the Ordinance, relating to the months from July 2015 to November 2016 and March 2017 to June 2017

4. That the learned CIRA also erred in not appreciating that due tax on payments was deducted and paid in time and the prime responsibility of tax deduction had been met and hence the incidence of penalty which belong to supplementary compliance of reflecting tax withholding through the medium of monthly withholding statement, be deleted.

5. That the appellant craves for permission to alter, amend or add further grounds of appeal before or at the time of hearing of the case.

2. Brief facts of the case as gathered from the record are that the taxpayer Messrs Hussain Mills Limited holding NTN 0803202 is a private limited company by status. The taxpayer was required to furnish monthly statements under section 165 of the Income Tax Ordinance, 2001 for the months from July 2015 to November 2016 and March 2017 to June 2017 by the 15th day of the month following the month to which the withholding tax pertains. However, the taxpayer failed to file the required statements within the due date which is an offence liable to be penalized under section 182 of the Income Tax Ordinance, 2001.

3. Show-cause notices under section 182(2) of the Income Tax Ordinance, 2001 for imposition of penalty for failing to furnish monthly statements under section 165 of the Ordinance for the for the months from July 2015 to November 2016 and March 2017 to June 2017 within the due date were issued to the taxpayer. The said notices were dispatched through registered courier service and electronically transmitted to the taxpayer on IRIS. As per Rule 74 of the Income Tax Rules, 2002 transmission of notices electronically is a proper mode of service of notices. In response to the notices the taxpayer submitted its reply. Not satisfied with the reply of the taxpayer, the DCIR had passed following orders: S. No. Order DC No. Dated Period Days Penalty Amount (Rs.) 1. 06/85 27th March 2019 July, 2015 492 1,230,000/- 2. 07/85 27th March 2019 August, 2015 461 1,152,500/- 3. 08/85 27th March 2019 September, 2015 430 1,075,000/- 4. 09/85 27th March 2019 October, 2015 400 1,000,000/- 5. 10/85 27th March 2019 November, 2015 370 925,000/- 6. 11/85 27th March 2019 December, 2015 338 845,000/- 7. 12/86 27th March 2019 January, 2016 308 770,000/- 8. 13/86 27th March 2019 February, 2016 279 697,500/- 9. 14/86 27th March 2019 March, 2016 249 622,500/- 10. 15/86 27th March 2019 April, 2016 219 547,500/- 11. 16/86 27th March 2019 May, 2016 188 470,000/- 12. 17/86 27th March 2019 June, 2016 158 395,000/- 13. 18/86 27th March 2019 July, 2016 126 315,000/- 14. 19/86 27th March 2019 August, 2016 96 240,000/- 15. 20/86 27th March 2019 September, 2016 65 162,500/- 16. 21/86 27th March 2019 October, 2016 35 87,500/- 17. 22/86 27th March 2019 November, 2016 5 12,500/- 18. 26/87 27th March 2019 June, 2017 62 155,000/- 19. 23/87 27th March 2019 March, 2017 671 1,677,500/- 20. 24/87 27th March 2019 April, 2017 640 1,600,000/- 21. 25/87 27th March 2019 May, 2017 610 1,525,000/-

4. Against the treatment meted out from aforementioned orders passed by the DCIR, the taxpayer preferred appeals before learned Commissioner-IR (Appeals) who decided appeals of the taxpayer by passing a Combined Order bearing No.20 to 39/A-I dated 07-05-2019 with the following observations: "4,3 The appellant being a withholding agent was required to deduct and deposit withholding of tax under various provisions of the Income Tax Ordinance, 2001 on payments made under different heads of the expenditure and file withholding statements in terms of section 165 in the prescribed format in a manner and mode provided therein. But the appellant failed to file such monthly statements for 21 months in a row within prescribed time which is an admitted facts. Also, appellant failed to follow the modes and manner of providing particulars of withholdee as set out in the prescribed format as per clauses a) to d) of section 165(1) of the Income Tax Ordinance, 2001. Instead, the appellant furnished single liner data showing only accumulative figure of tax withheld and deposited and no particulars of withholdee's as set forth and required in subsection (1) of section 165 was provided. The learned officer took cognizance of such persistent default of the appellant and issued notices for levy of penalty under serial No. 1A of table as per subsection (1) of section 182. 4.4 However, in the appeal proceedings the learned AR has taken the first stance that appellant had faced problem in e-filing as Iris portal was not uploading CPRs attached. But this contention is not supported with documentary evidence to prove that there was any such fault actually present. How it is believable that the appellant faced such problem for around two years but did not intimate the relevant authorities for its redressal perhaps waiting for divine help to intervene and fix the problem suo motu. If for the sake of argument such plea is considered for a while, why the appellant did not file such statements manually. Learned AR had no answer to this question. It is to be noted that this is not a case of small ship in a remote locality, where one can conceive such lapses but a case of large taxpayer's unit from whom such delinquent conduct, that too on such flimsy grounds is beyond comprehension. 4.5 The learned AR's next contention is that the appellant had discharged its statutory obligation of withholding tax and its deposit into government treasury, hence there is no loss of revenue. Such contention of the learned AR is also found not tenable as withholding statements have been filed by the appellant in a manner which goes against such stance of the appellant. Neither quantum of payments made to difference parties in ascertainable nor such individual parties have been identified from whom tax has been withheld. In such a situation how can it be claimed that any loss of revenue has not occurred. Rather, it portrays of dear picture of well intended default of the appellant of not deducting tax from payments as mandated by the relevant provisions of law. Filing a single finer withholding statement showing only the aggregate amount of tax claimed to be have deposited is not only sheer violation of relevant provisions of law but also is an evasive maneuver by the appellant to restrain the department to conduct any kind of audit of such withholding statements. Admittedly, withholding statement have not been furnished as per prescribed format, therefore learned officer has rightly pointed out that appellant had deliberately avoided to give information of withholdees to avoid annual exercise of reconciliation of withholding statements. Even otherwise, when the appellant was able to fill certain columns on withholding statements, it is unlikely to assume that the columns relating to withholdee's could not be filled on FBR's e-portal. Non-declaration of such vital information had practically made the purpose of filling of such withholding statement un-useful and redundant. As, with exclusion of such vital information, the learned officer was in no position to conduct withholding proceedings. 4.6 The learned AR on the basis of FBR Circular letter C.No.108(I) DTB-1(94) dated 09.01.1995 and other various cases laws contended that the penalty may not be imposed if the taxpayer/assessee is not guilty of gross of willful negligence and that penal provisions are machinery provision and cannot be used as substitute of charging provision of tax levy. It is evident from above mentioned facts that the appellant is found guilty of gross negligence by not filing withholding tax statements continuously for about 21 months in time and purposely not providing details as prescribed under the law. Case laws dated are dearly distinguishable as is evident from portions highlighted by the learned AR and reproduced above. Even some what relevant case laws (2017 PTD 770, 2010 PTD (Trib.) 1373) does not fall on all fours to the facts of instant case simply for the fact that in these cases manual returns/withholding statements were filed. But in this case even the same has not been done. Hence, neither the FBR circular nor the case law replied upon by the learned AR can come to rescue the appellant in view of peculiar facts of the this case. 4.7 In view of above discussion, stance of the appellant is rejected being devoid of any merits. The impugned orders thus stands confirmed being passed well in accordance with law."

5. Being aggrieved and dissatisfied with the aforesaid order passed by learned CIR (Appeals), the taxpayer preferred titled appeal before this Tribunal.

6. On the date of hearing, Mr. Ameer Ali Akbar, ACA, along with Mr. Muhammad Siddiq, ITP attended Court proceedings on behalf of the appellant/taxpayer while Mr. Asif Jamali, DR attended on behalf of respondent/department.

7. During course of proceedings, learned AR argued that the Combined Order passed for the months from July 2015 to November 2016 and March 2017 to June 2017 under section 129 of Income Tax Ordinance, 2001 by the learned Commissioner Inland Revenue (Appeals-I), (CIRA) Karachi is bad in law and on facts as the learned CIRA erred in confirming action of Deputy Commissioner Inland Revenue (DCIR), E&C Unit-03, Range-B, Zone-III, Large Taxpayers Unit, Karachi of passing an order under section 182 of the Ordinance.

8. Learned AR further argued that DCIR had erred passing an Order under section 182(2) of the Ordinance relating to the months from July 2015 to November 2016 and March 2017 to June 2017 by referring applicability of Serial Number 1A of subsection (1) of section

182. The DCIR then levied penalty of Rupees two thousand five hundred for each day of default for late filing of monthly statement under section 165 of the Ordinance.

9. Learned AR urged that the learned CIRA erred in not appreciating that the taxpayer had been facing problems for filing the monthly statements under section 165 of Ordinance, through FBR IRIS portal. Consequently, the learned CIR(A) could not give due weightage that the resultant levy of penalty under section 182(1) was excessive and uncalled for as no mens rea or ulterior motive is involved for late or non-filing of monthly statement under section 165 of the Ordinance, relating to the months from July 2015 to November 2016 and March 2017 to June 2017.

10. Learned AR contended that the learned CIRA also erred in not appreciating that due tax on payments was deducted and paid in time and the prime responsibility of tax deduction had been met and hence the incidence of penalty which belong to supplementary compliance of reflecting tax withholding through the medium of monthly withholding statement, be deleted. Lastly, he prayed for setting aside of impugned order passed by learned CIR(A).

11. On the other hand, the learned DR vehemently opposed the arguments advanced by the Learned counsel for the registered person and fully supported the order passed by the learned CIR(A) by stating that the order passed by Inland Revenue Officer and the order passed by the learned CIR(A) are legal, lawful and within the framework of law. Lastly, he prayed for dismissal of titled appeals of the taxpayer.

12. We have considered arguments advanced by the learned representatives of both sides so also perused the case record including impugned order and the grounds containing in the appeal. To decide the instant appeal the question before us is whether the impugned order requires interference?

13. Precisely the department alleged against the taxpayer that the appellant/assessee was required to furnish monthly statements in term of Section 165 of the Income Tax Ordinance, 2001 for the months from July 2015 to November 2016 and March 2017 to June 2017 but the taxpayer failed to do so therefore, the department penalized the assessee in terms of Section 182 of the Income Tax Ordinance, 2001.

14. Keeping in mind above assertions of the department, we have taken in account the orders-in-original, the perusal of the same indicates that on receipt of show-cause notices, the appellant/assessee filed its written reply for the sake of convenience, the said reply is being reproduce here: "Regarding late filing of statement, we would like to inform you that the Company is facing problems in electronic filing of the monthly withholding tax statement for subjected period on IRIS portal. In some cases IRIS portal is not importing CPRs while uploading the CPRs from the payment tab of IRIS portal. In this connection we refer judgment reported (2010 PTD (Trib.) 1373 "

15. From the above excerpt, it is evident that the taxpayer explained the reasonable causes rather we would say the sufficient cause as he put the burden upon the department by claiming that the system of the FBR at that time was ineffective as was not accepting the importing CPRs.

16. Since the taxpayer shifted the burden upon the department as per our opinion, the department had a very good chance to controvert the alleged ineffectiveness of IRIS. It is matter of record that nothing is available on record which could suggest the department has tried to peruse said assertion.

17. So keeping in mind above circumstances, we are of the view that the department is failed to point out any mens rea on the part of taxpayer therefore, we are of the view that the department could not be permitted to generate new income under the garb of penalty.

18. So in view of above, impugned order is set aside, in result appeals of the taxpayer are accepted.

19. Appeals stand disposed off in the manner as indicated above. SA/20/Tax (Trib) Appeals accepted.