1986 PLP 450 (PTD)

K.A. GHANI, J.‑‑By this application made under section 17(2) of the Sales Tax Act, 1951 the Commissioner of Sales Tax (Central Lone,) Karachi the applicant has made an application for consideration and answer by this Court the following questions of law which have arisen out of the order passed by S.T. A. Tribunal v. Bench Karachi on 17th June, 1976 in S.T.A. No.' 169/KB of 1973‑74 assessment year (1) Whether on the facts and in the circumstances of the cases the learned Tribunal was justified in cancelling the penalty levied under subsection (4) of section 12 of the Sales Tax Act, 1951.? (2) Whether the principles of natural justice applied to the case of default or non‑payment of the tax covered under subsection (4) of section 12 of the Sales Tax Act, 1951, and could the Tribunal not have given the respondent an opportunity of being heard and passed a proper order instead of allowing the appeal? 2 The facts of the case are that in respect of the assessment year 1968‑69 a notice of demand for payment of sales‑tax amounting to Rs.35,286 was served on the respondent who was required to pay the said amount by 25th June, 1973. As the respondent failed to pay the tax demanded within the prescribed time, on 15th July, 1973 the Sales Tax Officer passed an order under section 12(4) of the Sales Tax Act, 1951 thereby imposing a penalty of Rs.1, 000 which was directed to paid on or before 5th August, 1973 failing which a further sum Rs.50 for every day during which the default continued was required to be paid. Against the order thus passed the respondent preferred an appeal before the Income‑tax Appellate Tribunal at Karachi assailing the same on the sole ground that no show cause notice was served before imposing the penalty in question. The learned Tribunal being of the opinion that Sales Tax Officer had acted in violation of the principle of natural justice in imposing the penalty in question without issuing a prior show "cause notice and providing the assessee a fair chance to show cause held that these omissions rendered the order to be bad in law. Accordingly by order passed on 17th June, 1975 the order of the Sales Tax Officer was set aside and the appeal was allowed. Not being satisfied with the order of the learned Tribunal passed as above mentioned, the applicant/ Commissioner of Sales Tax moved an application for stating the case and referring the questions of law reproduced above to this Court. This application, however, was rejected by the learned Tribunal by order passed on 4th March, 1977. In the circumstances stated above application under section 17(2) of the Act, 1951 has been moved in this Court for consideration and answering the questions referred above.

3. In order to appreciate the legal aspects of the case while considering the questions raised, it would be relevant first to refer here to section 12(4) of the Act of 1951 which for the sake of convenience is reproduced below:‑ Section 12(4). "If a person fails without reasonable cause to pay tax as provided in subsection (1) that Sales Tax Officer may direct that such person shall pay, by way of penalty, a sum not exceeding one thousand rupees and in the case of a continuing default, a further sum not exceeding fifty rupees of every day during which the default continues." Mention here be also made to section 46(1) of Income‑tax Act, 1922, reproduced below, conferring almost in identical terms powers on Income‑tax Officer to impose penalty. "46(1) When an assessee is in default in making a payment of tax, the Income‑tax Officer may in his discretion direct that, in addition to the amount of the arrears, a sum not exceeding that amount shall be recovered from the assessee by way of penalty." A perusal of section 12(4) of the Ac: of 1951 and the provisions of section 46(1) of the Act of 1922 would show that though the term 'reasonable cause' which appears in the earlier mentioned section has not been used in section 46(1) yet construing the latter enactment the superior Courts of our country have consistently held that in a case where the assessee was not given opportunity to show cause before any order imposing penalty was made, such an order being against the principles of natural justice, would be void. This rule was recently reaffirmed in the case reported as Commissioner of Income‑tax, West Zone, Karachi v. Sind Land Development Mirpurkhas 1985 P T D 515 and the following question referred to the Court was answered in the affirmative by a learned Division Bench of this Court:‑ "Whether on the facts and in the circumstances of the case the Tribunal was justified in vacating the order of penalty passed by the Income‑tax Officer under section 46(1) of the Income‑tax Act, 1922?"

4. It may be mentioned here that while answering the above question, in the cited case, reliance was placed upon the cases reported as Messrs Bawani Violen Textile Mills v. Commissioner of Income‑tax PLD 1967 Kar. 688; The Commissioner of Income‑tax, Rawalpindi Zone, Rawalpindi v. Begum Mumtaz Jamal 1976 P T D 1982; Commissioner of Income‑tax, Karachi (Fast), Karachi v. Azam Industries Ltd., Karachi 1980 P T D 26 and Commissioner of Income‑tax, Lahore v. Zamir and Sons, Lahore 1981 P T D 137.

5. We are in respectful agreement with the rule laid down in the above cases and accordingly our answers to the above questions which have been raised in this application shall be as follows:‑ Question No

Answered in the affirmative. Question No

First limb of the question is answered in the affirmative. As regards the second part of the question the same was not pressed for an answer before us being not relevant for purposes of disposal of this application. In the circumstances of the case the parties are left to bear their own costs. M.B.A Reference answered.