The taxpayer through this appeal has assailed an order passed under section 88 of the repealed Income Tax Ordinance, 1979 dated A 23-5-2008. Additional tax was imposed for non-payment of tax liability along with return for assessment year 2002-2003. This order was upheld by the Commissioner (Appeals) vide its order dated 17-2-2009, which is impugned before us.
2. The AR, explaining his case, submits that tax payable under section 54 was deposited after adjustment of tax credit available to appellant under section 107AA of the Income Tax Ordinance.
The credit of tax availed by the taxpayer under section 107AA was confronted by department in proceedings under section 62. Adjustment of tax credit in assessment year 2002-2003 was denied and was held to be available to the taxpayer in tax year 2003. On the basis of Order under section 62, proceedings under section 88 were initiated. Learned AR has read section 54 of the Income Tax Ordinance along with subsection (4) of section 107AA to substantiate that under section 54, taxpayer was liable to deposit only such tax which in its opinion was payable. Any different interpretation or determination of tax payable by the Taxation Officer in any different proceedings would not make the taxpayer as defaulter under the section 54. He has relied on judgment of the honourable Lahore High Court in Commissioner of Income Tax v. Lahore Cantonment Cooperative Housing Society Lahore reported as 2002 PTD 629. The DR, in reply, could not dispute the facts narrated by the AR. He however, submits that the taxpayer had wrongly worked out and adjusted tax credit under section 107AA. He adds that taxpayer could not take advantage of its own mistake by not depositing tax under section 54.
3. We have gone through the relevant provisions of law and record of the case is perused in light of the arguments. Section 54 of the repealed Income Tax Ordinance, 1979 is reproduced hereunder:- Section 54. Paym ent of tax with return of income: "(1) Every person who is required, under this Ordinance to furnish a return of total income shall pay the tax payable, on the basis of such return, on or before the date on which he is so required to furnish such return." (Under lining is for emphasis)
4. Reproduced part of section 54 shows that the tax payable under this section is on the basis of return for the relevant assessm ent year. Perusal of subsection (4) of section 107AA also reveals that in case Deputy Commissioner holds that. Tax credit was not allowable, he shall re-compute the tax payable by the assessee for the relevant tax year. Subsection (4) of section 107AA is also reproduced as under:-- "(4) Where any credit is allowed under this section and subsequently it is discovered by the Deputy Commissioner of Income Tax that any one or more of the conditions specified in this section was, or were, not fulfilled, as the case may be, the credit originally allowed shall be deemed to have been wrongly allowed and the Deputy Commissioner may, notwithstanding anything contained in this Ordinance, recomputed the tax payable by the assessee for the relevant year and the provisions of section 65 shall, so far as may be, apply accordingly." (Under lining is for emphasis)
5. The submissions made by the AR of the taxpayer are duly supported by the verdict given in case CIT v. Lahore Cantonment Cooperative Housing Society Lahore 2002 PTD 629. Relevant part from the judgment by Lahore High Court is reproduced:- "After hearing learned counsel for the parties, we will agree with the learned counsel for the respondent that the view adopted by the Tribunal is perfectly in accordance with law. Section 54 of the Income Tax Ordinance which is a substituted version of section 45-A of the late Income Tax Act, 1992 requires every person filing a return of total income to pay "tax payable", on the basis of such return" in other words the payment of tax is on admitted liability only. It has no reference or relation to the income which may finally be determined by the Assessing Officer. Where a person declares nil income either on the ground of his being not chargeable to tax or for the reason that income earned by him was exempt from levy of tax, he is not expected to pay any tax on the basis of such return. The determination of claim or enhancement of his income at a subsequent stage does not change the legal requirement as detailed in section 54 of the Ordinance. The words of the statute are clear and do not admit of any interpretation other than the one already made by the Tribunal.
Since the provisions of fiscal statutes are to be construed strictly we entertain no doubt that penal provisions of section 88 were not attracted to the case of the assessee. An admitted liability, or the one determined by an Assessing Officer after long drawn proceedings are absolutely two different things. The concession given by the law to pay tax with return only, to the extent or an admitted liability of the income being returned therein cannot possibly be circumvented by ignoring the express words of the statute."
6. The language of law is very clear. It is assessee/taxpayer who has to determine/calculate tax payable as per declaration in the return for the relevant period, which shall be the tax payable on the basis of such return. If the declaration in the return is modified later under sections 62 and 65 or any other provision, the tax payable, under latter section shall not be taxable under section 54.
7. For reasons noted above and the ease-law relied upon by the AR, the action under section 88 is declared against the provisions of law, hence is annulled.
' The appeal is accepted.