2013 PLP (Trib (PTD)

SOHAIL AFZAL (ACCOUNTANT MEMBER).

This appeal has been filed by the taxpayer against the order dated 15-6-2010 passed by the learned CIR (Appeal) confirming the penalty order dated 10-10-2009.

2. Facts leading for disposal of the instant case are that the Taxpayer is registered as public limited company, engaged in the production of ceramic tiles and other ceramic items. The appellant was obliged to submit return for the tax year 2008 on or before 31-12-2008 under section 114 of Income Tax Ordinance, 2001, however the appellant e-filed the said return on 6-3-2009 which was late by 64 days. Consequently the Deputy Commissioner issued Notice No. 114 dated 5-8-2009 to the appellant wherein a penalty amounting to Rs.348,045 under section 182(1) was proposed for late filing of return. In response thereto, the appellant filed Reply dated 17-8-2009 and pointed out the actual tax liability amounting to Rs.5,514,895, tax deducted amounting to Rs.4,137,826 and resultant tax payable amounting to Rs.1,337,069 hence the penalty on the tax payable was worked out as Rs.88,

132. The Deputy Commissioner being dissatisfied with the said assertions of appellant sent another notice to the appellant bearing No. 184 dated 20-8-2009 and expressed his intentions to impose penalty amounting to Rs.352,953 on the basis of Total Tax Liability amounting to Rs.5,514,895 terming it the tax payable by the appellant. Again the appellant filed detailed Reply dated 26-8-2009 to the said Notice wherein apart from providing the reasonable cause for the delayed filing of return, the term "Amount of Tax Payable" was also explained in detail. The taxation officer, however, feeling dissatisfied with the appellant's contentions rejected the said replies and maintained the proposed penalty amounting to Rs.352,953 through the Order dated 10-10-2009. Being aggrieved with the action of the Deputy Commissioner the appellant company filed appeal before the learned CIR(A), who by virtue of his order dated 15-6-2010 confirmed the penalty order. This has forced the appellant to come up in appeal before the Appellate Tribunal Inland Revenue.

3. I have heard the arguments advanced by both the parties and also perused the relevant available record. It is imperative that the original text of the section 182(1) be properly gone through for dilating upon the issue which has been placed before me. For convenience provision of section 182(1) is being reproduced as under:-- "Any person who without reasonable excuse, fails to furnish, within the time allowed under this Ordinance, return of income [or a statement as required under subsection (4) of section 115 or wealth statement] for any tax year [as required under this Ordinance shall be liable for a penalty to one-tenth of one percent of the tax payable for each day of default subject to a minimum penalty of five hundred rupees and maximum penalty of twenty five percent of the tax payable in respect of [that tax year]." Without any shadow of doubt, it is as a result of non compliance to provisions of section 114 of the Income Tax Ordinance, 2001 i.e. non filing of annual income return within the prescribed span of time under the law, that the penalty has been imposed so it is a default in compliance to the provisions of section 114, which situation is covered under the section 182(1) of the IT Ordinance, 2001. For the purpose of quantification penalty has been prescribed in the said section. This section has specified that penalty shall be imposed on the basis of the tax payable, whereas in the instant case before me the quantum of tax payable is altogether different as adopted by the Taxation Officer and as confirmed by the learned CIR(A). Restriction imposed on each day of default and maximum limit is 25% of tax payable in respect of that tax year, thus inevitability the base point is tax payable, resultantly second part of section comes into operation only when initial calculation of penalty has been made on the basis of 'tax payable'. For imposing the penalty for default under section 114 ibid, the pre-requisite is the tax payable by such taxpayer. Fulfillment of basic ingredient of "tax payable" is a condition precedent for levying the penalty, there is no other opinion on this issue.

4. So keeping in view the provisions of section 182(1), I do not have any hesitation in holding that penalty for default of section 114 only becomes leviable when there is a "tax payable" but in the instant case the same has been levied on the basis of 'tax chargeable' which is not permissible under the law as the relevant explanation defining the term 'tax chargeable' and 'tax payable' was inducted vide Finance Act, 2011, so levy of penalty is not justified. In this case 'tax payable' is only Rs.1,377,069 while the figure adopted by the taxation officer at Rs.5,514,895 is wrong, it is 'tax chargeable'.

5. In the given circumstances, I have no option except to vacate the orders of the authorities below and remand the case to Assistant Commissioner Inland Revenue, RTO, Faisalabad with the directions to compute the penalty on the basis of 'tax payable' instead of 'tax chargeable' in the instance case and fresh order be passed strictly in accordance with the directions contained in this order. On the contrary the assessee-appellant is also at liberty to adduce any documentary or material evidence in support of his contention during the proceedings before him.

6. As a result, the assessee's appeal is disposed of to the extent and in the manner as indicated above. SAK/90/Tax(Trib.) Case remanded.