ORDER SYED MUHAMMAD JAMIL RAZA ZAIDI, JUDICIAL MEMBER - Through this appeal the Department has challenged the impugned order dated 16.9.2010(pertaining to the tax year 2007 passed by the.
Learned CIR(A-II). The Department has agitated on the following grounds:- "2. The learned Commissioner Inland Revenue (Appeal-11) is not justified to delete the penalties under Section 182 of the Income Tax Ordinance, 2001 imposed amounting to Rs. 2,000/- being initial penalty and Rs: 1,12,200/- being default in days.
3. That the tax payer was under legal obligation to furnish the statements under Section 165 of the Income Tax Ordinance, 2001 through e-filing as well as hard copy.
4. That the learned Commissioner of Inland Revenue (Appeals-ll) has erred in accepting the mere evidence regarding alleged filing of statements under Section 165 in time i.e. 30.9.2007 considering the Board's SRO No. 662(I)/2007, dated 8.6.2007 simply relying upon after-thought alleged evidence produced before him by the tax-payer in the shape of acknowledgment by the department affixing stamp on it."
2. On the date of hearing, Dr. Muhammad Ali Saand represented the Department whereas Mr. Muhammad Faruq Ibrahim appeared on behalf of the taxpayer/assessee.
3. Brief facts of the case are that the tax-payer is a Private Limited Company and is engaged in running a hospital in the name and style of M/s. National Medical Centre (Pvt.) Limited. On non- compliance of show-cause letter under Section 190/182 and for non-filing of statements under Section 165 of the Income Tax Ordinance, 2001, Taxation Officer passed orders under Section 182 and 182(3) imposing penalties at Rs. 2,000/- and Rs. 112,200/-'. Being dissatisfied with the treatment meted out by the Taxation Office, the taxpayer/assessee preferred an appeal before the learned CIR(A) who, vide his impugned order, observed that initial penalty of Rs. 2,000/- was wrongly imposed as compliance of letter dated 21.3.2009 was duly made on 27.3.2009.
4. While pleading his case, the learned AR of the taxpayer/assessee has argued that the tax- payer/assessee has filed annual statements under Section 165 of the Income Tax Ordinance, 2001 which were duly acknowledged by the Department. He has argued that copies of letter and evidences were also filed with the learned CIR(A) admitted in the body of the order, therefore, orders were passed under Section 129 of the Income Tax Ordinance, 2001, dated 30.7.2010 which were rectified vide orders under Section 129/221, dated 16.9.2010 against a rectification application, In support of his arguments, the learned AR of the taxpayer/assessee had relied upon of case-laws cited 2004 PTD 745, 1980 PTD 74 (Trib.) and Hon'ble Supreme Court in the case of M/s. National Foods 65 Tax 274 before the first appellate forum, wherein it was held that mistakes being apparent from record must be obvious and patent mistakes and falls in the ambit of rectification, In view of the averments made above, the learned AR of the taxpayer/assessee has prayed that the order of the learned CIR(A) being in accordance with law, may be upheld.
5. In rebuttal, the learned D.R. Contended that required documents and evidences were not filed, therefore, in view of the lack of evidence and non-furnishing of necessary documents before the Taxation Officer, the appeal of the taxpayer/assessee is liable to be dismissed as, according to provision of Section 128(5) of the Income Tax Ordinance, 2001, the learned CIR(A) is not empowered to accept any documentary evidence submitted before him that was not produced before the Taxation Officer, In this view of the matter, the learned DR has prayed that the order of the learned CIR(A) being illegal and without jurisdiction, may be vacated and that of the Taxation Officer may be restored.
6. We have heard the learned representatives of the two sides and have also perused the impugned orders of the learned CIR(A), the Taxation Officer as well as the available record of the case.
7. Having considered the rival arguments and after examining the legality of the case, I have found that the taxpayer failed to furnish any evidence in respect of filing the statements before the Taxation Officer. The taxpayer/assessee was duly confronted through a show- cause notice but on the date of compliance, the taxpayer neither complied with the show-cause notice nor requested for an adjournment in the matter. Lt appears from the record that as a consequence of the non- compliance of the notice on part of the taxpayer, the Taxation Officer imposed penalty under Section 182 & 182(3) of the Income Tax Ordinance, 2001 by treating the taxpayer a taxpayer in default. Thereafter the learned CIR(A) by accepting the evidence of filing of the statement produced by the taxpayer, deleted the penalty imposed by the Taxation Officer. But, if we go through the provision of Section 128(5) of the Income Tax Ordinance, 2001, it is glaringly obvious that the learned CIR(A) is not empowered to admit/accept the evidence furnished by the taxpayer at the first appellate stage.
8. For the sake of brevity, it would be expedient if we reproduce the relevant provision of Section 128(5) of the Income Tax Ordinance, 2001, which is as follows:- "The Commissioner (Appeals) shall not admit any documentary material or evidence which was not produced before the Commissioner unless the Commissioner (Appeals) is satisfied that the appellant was prevented by sufficient cause from producing such material or evidence before the Commissioner.
Therefore, in light of the provision of the law contained in Section 128(5) of the Income Tax Ordinance, 2001, it is observed that the learned CIR(A) has accepted the evidence by violating the provision of this section, as he is not authorized to accept the evidence furnished by the taxpayer at the first appellate stage, It is also established that the taxpayer did not comply with the Taxation Officer's notice which resulted in the penalty order. After examining the facts of the case as well as legal position, I deem it fit and reasonable to remand back the matter to the Taxation Officer for fresh adjudication and vacate the orders of both the officers below with the directions that the taxpayer should furnish the evidence before the Taxation Officer and the Taxation Officer is directed to decide the matter in accordance with law after affording an adequate opportunity to the taxpayer/assessee to present necessary documents and evidence in support of his case.