MUNSIF KHAN MINHAS (JUDICIAL MEMBER).---The Taxpayer has filed these appeals against the consolidated order dated 13-1-2011 passed by the learned CIR(A-I) Islamabad for the tax years 2007, 2008 and 2009 on the following grounds:-- Tax Years 2007 and 2008 (1) That the Appellate order of. Commissioner Inland Revenue (Appeals-I) under section 221 and taxation officer are both bad in law and contrary to the fact and circumstances of case.
(2) That rectification. Of mistake under section 221 of the Ordinance can only be made where mistakes are apparent or floating on the surface of record. Where an officer while rectifying the original assessm ent enters into controversy, investigates into the matter, reassess the evidence and on that basis interprets the provision PTD of law and form an opinion different from the order, then it will not amount to rectification of the order. In fact taxation officer try to grab the powers of section 122(5) and section 122(5)B under the umbrella of section 221 of the Ordinance. Decisions of higher forum on this account are for reference.
Case Laws 2004 PTD 452 2003 PTD 2683
(3) That the worthy Commissioner Inland Revenue. (Appeals-I) totally erred to consider the opinion that the ambit of section 221 of the Income Tax Ordinance, 2001 transgressed in the instant case as the main issue involved was apportionment of expenses. Whereas fact of the case is that all the issues regarding re apportionment of expenses was duly accepted by the taxation officer at the time of hearing and no adverse - inference were drawn by taxation officer.
(4) That checking and verification of assessee's record or call of record is only done once his case is selected for audit. Checking of withholding taxes compliance could be only the prerogative of Commissioner Enforcement. Disallowances on account of rent under section 21(c) are corrective only if case is selected for audit. In absence, there is no legal jurisdiction, by which a valid assessm ent order could be amended.
(5) That order of Taxation Officer Inland Revenue on account of inadmissibility of rent and order of worthy Commissioner Appeal to uphold order of the taxation officer on this account is without legal sanctity.
(6) The Commissioner Inland Revenue (Appeals-I) rejected the appeals on the ground that taxation officer rightly disallowed the amount of rent as it fell under mischief of section 21(C) of Income Tax Ordinance, 2001. Whereas we provided the proof of deduction of taxes of amounting Rs.2,160,000 out of 2,634.447 and remaining amount of Rs.474,447 was below the threshold taxable limit and paid to different individuals therefore deduction of taxes on these amounts are unjustified.
(7) Besides the following additional issue is involved in the Tax year 2008. Provision for doubtful debt pertains to debtor associated with advertising agency business. Agency business falls under presumptive tax regime. Hence inadmissibility does not effect the tax base. Taxation officer wrongly prorated distribute doubtful debt between PTR and Normal Tax Regime without any evident.
TAX YEAR 2009 (1) That Taxation officer grossly erred himself while calculating the WWF. WWF is only leviable to the "Industrial Establishment". Messrs Midas Communication is advertising agent does not fall under definition of Industrial Establishment.
2. Brief facts leading to these appeals are that taxpayer conducts the business of an advertising agency and also undertakes event management activities Finance (Amendment) Ordinance, 2009 etc. During the course of desk audit of the returns it transpired that there are various mistakes floating/apparent on the surface of the record were confirmed to the taxpayer and assessments were rectified under section 221 of the Income Tax Ordinance, 2001. Being aggrieved with the treatment given by the Deputy Commissioner, the Registered person preferred appeal before the learned CIR(A-I) who after considering the facts and circumstances of the case confirmed the assessm ent order.
3. Being dissatisfied with the treatment accorded by the learned CIR (A-II), Taxpayer has come up in 2nd appeal before the Tribunal.
4. We have heard the arguments and perused. We prefer to record the issue were findings as below:-- Disallowance on account of rent under section 21(c); Learned AR contends that on major amounts withholding tax was withheld and also paid in Government Exchequer. Above said figures were below thrashhold of taxable limits, and tax was not liable to be deducted. Learned AR states that in response to the show cause notice he explained this position to the learned DCIR but she did not demand the proof of the same. Needless to mention here that when a show cause notice is issued and a particular fact is confronted to the taxpayer. It is bounden duty of the taxpayer not only to reply the fact in issue just by assertion, but also to produce relevant proof of the same. It is neither the game to play hide and seek nor any officer is supposed to issue a notice repeatedly. Hence this argument of the learned AR that after reply embodying assertion that tax was not withheld because of being below the thrashhold limit, officer should have again issued a notice demanding the proof of the assertion is without any logic. The reply should be comprehensive and coupled with proof. However to meet the ends of justice an opportunity is granted to the taxpayer for the production of the proof in detail embodying the name of tenant, rent agreement before the learned DCIR to prove that these payments were below the thrashhold limit. After setting aside the orders passed by officer, we remand the case to DCIR to afford opportunity of being heard to taxpayer and then A pass the order as per law and facts of the case.
Provisions for doubtful debts: Learned. AR contends that for tax year 2008 DCIR wrongly prorated doubtful debts between PTR and NTR. Learned first appellate authority confirmed the order of DCIR on the plea that no proof of the bad debts was submitted. Secondly it is not an admissible expense being in the nature of the provision.
After hearing the respective contentions of the parties we are of the view that provision for doubtful debts is inadmissible expense. The B provision heads towards ultimate declaration of bad debts, when provision for bad debts is declared that relates to the whole of business capital because it has to be subtracted from there. Taxpayer is not supposed to be given the choice to declare the same under PTR when it is inadmissible and to take the advantage of zero tax impact. Bad debt is to spread over whole of the business of the Company and not to a particular head. Hence the orders passed by the both of the officers below are upheld on this count.
WWF 2009 Levy of the WWF has not been contested on facts and merits of the case rather it has been contested on legal grounds in view of the case-law of a single bench referred 2011 PTD 748. It has been contended that notice under section 221 was issued by the learned DCIR, assessment was recorded by the DCIR and not by the Taxation Officer. Section 2(38A) of the Income Tax Ordinance, 2001 was inserted through Finance (Amendment) Ordinance, 2009 which expired after 4 months, as the same was approved by the National Assembly; and the order recorded by the DCIR after four months was not legal and was without jurisdiction and that when a statute came to an automatic end by efflux of time, no prosecution for acts done during the continuance of expired statute could commence after the date of its expiry because that would amount to the enforcement of a dead statute. Fact of the matter in this case is that order was passed on 26-3- 2010. Earlier the substitution was made through Finance (Amendment) Ordinance, 2009 was re- promulgated as Finance (Amendment) Ordinance, 2010 and remain effective till 5-6-2010.
However, notice as well as assessme nt was made by DCIR whose authority did not find mention in Workers Welfare Ordinance, 1971. By amending Income Tax Ordinance, 2001, at the time of inserting section 2(38A) through Finance (Amendment) Ordinance, 2009, Workers Welfare Fund Ordinance, 1971 was not amended.
3. Resultantly, order passed by DCIR is without jurisdiction.
Hence, in the earlier order of single bench it was brought in to the knowledge of F.B.R. That the Workers Welfare Fund Ordinance, 1971 was also to be amended accordingly. After amendment as per contention of learned DR, still the department has got time to revisit the file after the amendment of Workers Welfare Fund Ordinance, 1971. The nut shell of the impugned order is that levy of Workers Welfare Fund Ordinance, 1971 is held to be without jurisdiction, null and void. The taxpayer appeals accepted on this issue accordingly. .