2012 PLP (Trib (PTD)

The titled appeal pertaining to Tax Year 2010 has been preferred at the behest of taxpayer calling in question the impugned order dated 14-2-2012 passed by the learned CIR(A), Gujranwala.

2. Briefly stated, the relevant facts are that the annual turnover of the taxpayer for the year under consideration exceeds Rs.50(M). Through Finance Amendment Act, 2008, AOPs having turnover of Fity Million rupees or above in tax year 2007 and onward falls in the definition of "prescribed person". The taxpayer being a withholding agent was obliged to deduct tax and deposit into government exchequer as required under section 153(1)(a) of the Income Tax Ordinance, 2001 which it failed to do so. The assessing authority issued different letters requiring the taxpayer to provide party-wise details and evidence of tax deduction on raw material purchased locally during the period relevant to tax year 2010 but no compliance was made. Finally default for non-deduction of tax being established. The taxpayer was treated as taxpayer in default for non-deduction of tax under section 153 of the Income Tax Ordinance, 2001 and total tax under sections 161/205 of the Income Tax Ordinance, 2001 was charged at Rs.23,252,

112. Being aggrieved the taxpayer went in appeal before the CIR(A), who vide impugned order dated 14-2-2012, dismissed the same by upholding the order under sections 161/205 of the Income Tax Ordinance, 2001 passed by IRO.

3. The learned AR for appellant has vehemently contended that the assessing authority has passed the impugned order without taking into consideration the facts of the case. It was argued that the ex parte order passed under sections 161/205, without providing proper opportunity of being heard was illegal and unlawful as notices were not served upon the taxpayer. Secondly, the A.R. of the taxpayer contended that order passed under sections 161/205 was also illegal as the status of the taxpayer during the year under consideration as well as during Tax Year 2009, was that of individual and not of AOP as return for Tax Year 2009, available on record was filed in the status of individual and the return of Tax Year 2010 was also filed by Mr. Liaquat Ali as sole proprietor and he was shown as owner of 100% shares of capital investment in the return, therefore, provisions of section 153(7)(h) of the Income Tax Ordinance, 2001, did not apply in the case of the appellant for Tax Year 2009 as well as Tax Year 2010, and the status in the return for Tax Year 2010 as AOP was indicated due to compulsion of e-filing owing to the technical reason of delay caused by the PRAL authorities regarding change in constitution and particulars of status in spite of application for which taxpayer could not be blamed to that effect.

4. The learned AR of the taxpayer has stressed upon the status of taxpayer as an individual and not of AOP. In support of his contention, he has produced copies of returns filed manually for tax years 2009 and 2010 being evidence showing status of individual. Further, he placed before us the copies of return which were e-filed with the NTN: 1243557-7, having status of individual, Dissolution Deed, affidavits of the Taxpayer as well as of his disassociating partner namely Mr. Muhammad Tauseef who is working under the name Messrs Islamabad Steel Re-Rolling Mills, SIE-II, Gujranwala since 1st July, 2008, intimation dated 28-6-2010 to the Commissioner Inland Revenue, Information and Processing Division, RTO, Gujranwala, regarding cancellation of AOP NTN and Certificate issued by the Gujranwala Steel Melter and Re-rolling Mills Association, Gujranwala.

5. On the contrary learned DR has strongly supported the orders of authorities below and contended that the status of taxpayer is of AOP and before the CIR(A) as well as before this Tribunal he has changed his stance. She argued that, if the AOP was dissolved then the intimation under section 117 of the Income Tax Ordinance, 2001, is mandatory within fifteen days of its dissolution and taxpayer being an AOP is a prescribed person who was required to deduct tax under section 153(7)(h) of the Income Tax Ordinance, 2001.

6. We have heard the arguments put forth by the learned representatives of both the sides and have carefully gone through the available record. After due consideration, we find that main dispute between the taxpayer and the revenue is the determination of status of taxpayer either of individual or AOP. A perusal of the returns along with other connected documents produced before us shows that the returns filed by the taxpayers for the Tax Years 2009 and 2010 is of Individual not of an AOP. The learned AR of the taxpayer invited our attention to the NTN of the return manually filed as well as e-filed which is 12435577-7, whereas the NTN shown in the impugned order of CIR(A) and IRO is 1277079-5 which is entirely different.

7. The learned AR of taxpayer have further submitted that the intimation regarding closure of business under section 117 of the Income Tax Ordinance, 2001, was not necessary because that section pertains to discontinuation of business whereas, in the case of taxpayer the business was never discontinued rather change took place in the status of taxpayer so the provisions of section 117 of the Income Tax Ordinance, 2001, are not applicable to the taxpayer. Further despite these facts, the intimation was duly sent to concerned authorities for the cancellation of AOP NTN. The learned AR for the taxpayer categorically contended before us that the provisions of section 153(7)(h) are not attracted in the instant case because taxpayer is an individual not AOP, whereas, section 153(7)(i) was inserted through Finance Act, 2010 which is applicable to individual relevant for the Tax year, 2011.

8. In our considered view, the contentions raised by the AR for the taxpayer carry much weight to establish his status being of an individual. The lower authorities below have not applied their judicious mind; rather they proceeded to pass an ex parte order under sections 161/205 of the Income Tax Ordinance, 2001, in arbitrary, whimsical, and technical manner and completely brushed aside the material/evidence provided by the taxpayer for determining his status. In such scenario, we are in line with arguments of the AR of the Taxpayer and have no ambiguity in our mind to declare the taxpayer as an individual who is not obliged to deduct tax under section 153(7)(h) or (i) of the Income Tax Ordinance, 2001, for the year under consideration. Resultantly the order of CIR (Appeals) is vacated and the order passed under sections 161/205 by the assessing authority is hereby annulled.

9. The appeal of the taxpayer succeeds in the manner as indicated above. CMA/127/Tax(Trib.) Appeal accepted.