' Through these two Appeals for the Tax Years 2011 and 2012 impugned the Orders Nos. 251 and 252 both dated 18-12-2013 of the learned CIR(A)-I, have been objected whereby the learned first appellate authority remanded the Order passed under sections 161/ 205 of the Income Tax Ordinance, 2001 to DCIR for de novo consideration. The appellant is of the view that the learned CIR(A) should have vacated the order passed by the DCIR instead of allowing her another opportunity to repeat the same arbitrary and high handed treatment.
2. Facts relevant for the disposal of the instant appeals, briefly stated, are that in order to ascertain the level of compliance with the withholding provisions by the appellant, the DCIR, Enforcement-II, Zone-III, LTU, Islamabad initiated proceedings under section 161 of Income Tax Ordinance, 2001 and requisitioned various details and information pertaining to compliance with the withholding provisions of Income Tax Ordinance, 2001. From the perusal of the Orders passed by the DCIR as well as the learned first appellate authority, it transpires that the Order under sections 161/205 of the ITO, 2001 was passed by the DCIR owing to non-compliance by the appellant with the statutory notices issued from time to time. The learned first appellate authority, however, observed that the audited accounts which contained material information for ascertaining the level of compliance with the withholding provisions were available with the Taxation Officer but she did not bother to examine these accounts and identify the transactions on the basis of which the appellant could be treated as 'a taxpayer in default' in terms of sections 161/205. Perusal of the appellate order further reveals that, according to the first appellate authority, the DCIR while passing the Order under sections 161/205 did not exercise due care and subjected to tax even those payments which were covered by exemption under S.R.O. 586(1)/1991 dated 30-6-1991 or were otherwise not liable to withholding provisions because of being non-cash items or where the actual payments had not been made till the closing date. Accordingly he held the Order passed under sections 161/205 as fallacious and remanded the case to the DCIR for de-novo consideration and adjudication in accordance with law and facts of the case.
' The appellant, on the other hand, feeling dissatisfied with the decision of the first appellate authority has assailed the impugned order through instant appeals before this Tribunal.
3. Opening his arguments, the learned AR contended that all the transactions which require compliance with the withholding tax provisions are recorded in the monthly statements which are regularly filed under section 165 of the Income Tax Ordinance, 2001. These statement's are filed electronically and must be before the DCIR while processing the case under sections 161/205 of the Income. Tax Ordinance, 2001. Being a compliant taxpayer, the appellant had meticulously complied with the withholding provisions, which was quite evident as per these statements. The learned AR further argued that it was very disappointing to note that the DCIR neither consulted the statements nor did she bother to examine the audited statements of accounts filed along with the return of income with a view to identifying the transactions which, in her opinion, required action under sections 161/205 of the Income Tax Ordinance, 2001. Advancing his arguments further the learned AR submitted that it was a pity that even expenses like payments for sugar cane, fuel and power, depreciation, provision for doubtful debts which were either covered by statutory exemption or were not liable to withholding tax provisions had also been subjected to tax under sections 161/205 of the Income Tax Ordinance, 2001.
' The learned AR argued that the allegation regarding non-submission of relevant record levelled by the assessing officer was patently incorrect. In fact, representatives of the appellant Trust attended the office of the DCIR and submitted voluminous record in the office of DCIR for her consideration on 24-6-2013 and 29-8-2013. He also produced the copies of relevant letters evidencing production of record before the DCIR on these dates.
' The learned AR took strong exception to the remand order of the CIR(A) and contended that although at pages 9 and 10 of appellate order, the learned first appellate authority had noted lacunas, short comings and procedural illegalities committed by the Assessing Officer, yet he decided to remand the case to DCIR instead of vacating the. Order, thus, exposing the appellant again to the same risk. He submitted a number of case-laws evidencing vacation of the Orders by the courts under similar circumstances. The Appellate Tribunal in its order passed in I.T.A. No, 1104/IB of 2010 dated 2-3-2012 held as under:-- "We have given due consideration to the rival arguments and also gone through the relevant record available on file. We have noted that the Taxation Officer passed the Order under sections 161/205 of the Income Tax Ordinance, 2001 without doing any homework i,e, scrutiny of the withholding statements filed by the respondent company electronically. The method of levy of tax as adopted by the Taxation Officer is appears to be highly unprofessional and illogical because the tax has been charged in a sweeping manner without making allowance for exempt, BTL amounts etc. Which must have been part of the overall expenses. It is by now a fairly well settled legal proposition that a subject can be burdened with the levy of tax only in accordance with law.
Had the Taxation Officer examined the withholding tax statements along with audited statements of account, he could have identified the amounts of default, if any, and confront the same to the respondent company for explanation/reply. Thereafter a judicious order could have been passed after considering the taxpayer's explanation. Since this exercise was not undertaken by the Taxation Officer while passing the Order under sections 161/205 of the Income Tax Ordinance, 2001, the said Order was not sustainable and was rightly annulled by the CIR (Appeals). We, therefore, do not find any legal infirmity in the Order of the learned CIR (Appeals) and uphold the same."
' In another case reported as 2012 PTD (Trib.) 122, the Tribunal, while explaining the procedure to be followed for involving the provisions of section 161 held as under:- "He could only see whether withholdings, as per return and statutory statements, was made or not and that any transaction, liable to withholding, had not escaped taxation. It is reiterated that no transaction can be held to have escaped deduction under section 161, unless it is established that;
(1) taxpayer is a withholding agent, (ii) a particular transaction is liable to deduction/withholding and (iii) that a specified tax of a specific person was to be withheld, who could take credit of the tax recoverable under section 161."
' The same view was expressed by the Tribunal in the judgment reported as 2004 PTD 1096 with reference to the provisions of 52 /86 of the late Income Tax Ordinance, 1979 which are parimateria with the provisions of sections 161/205 of the Income Tax Ordinance, 2001. The Tribunal held as under:-- "From the perusal of the above provisions of section 50(4), it is obvious that the tax is liable to be deducted on payments being, made by a "payer" to a "recipient" on account of supply of goods or for service rendered to or on the execution of a contract. In the case before us, the assessment order reveals that the assessing officer, failed to point out or specify the payments made by the assessee company being a payer to person being a recipient which were liable to deduction of tax under section 52 on the amount of purchases worked out by him on the basis of assumptions and guess work. It is important to point out here that the provisions of section 52 are different from the provisions of section 62 under which the assessing officer required to determine the income and to charge tax thereon. In the case of section 52, the assessee being a 'payer' has been made liable for deduction of tax on behalf of the department not being his liability. He is required to perform the function of department as a withholding agent for which he is not rewarded or compensated in any manner. The assessee as a 'payer' has to perform extra work for deduction of tax which is to be deposited in the treasury following with the submission of monthly as well as annual statements.
As discussed above, the tax under section 50(4) is to be deducted by a withholding agent at the time of making any payment on account of supply of goods, service rendered to or execution of contracts. In the case before us, the Assessing Officer failed to point out any such payment liable to deduction of tax under section 50(4) of the Ordinance. Under the circumstances, we are not inclined to interfere on behalf of the revenue."
4. Quoting example of carelessness on the part of DCIR, the learned AR submitted that the payments made to non-residents on account 'hire charges' (lease) of aircraft which had been exempted from the withholding tax provision through specific certificate issued by the concerned Commissioners on 13-11-2007 and 6-2-2008 under section 152(5A) of the Income Tax Ordinance, 2001 have not been considered. Payments of lease charges to non-resident lessor for aircraft were made during the year under appeal as well and break-up thereof was also filed during the course of proceedings. Examination of record could have prevented the DCIR to hold the Taxpayer in default in respect of these payments made to non-residents as office copies of exemption certificates must also be available on record. According to learned A.R. It is also pertinent to mention that, subsequently, through Finance Act, 2008 the requirement of obtaining exemption certificate from the concerned Commissioner was dispensed with by amending the provisions of section 152 and the appellant was allowed to make payment of hire charges (lease) without deduction of tax on its own. (Certificates produced by the learned AR show annual payment of US $ 937,388 + $ 647,860 = 1,585,248.) Similarly, the appellant was treated as a taxpayer in default even in respect of non-cash items and the expenses incurred under the heads covered by exemption under S.R.O. 586(1)/ 1991 dated 30-6-1991. He has contended that all these facts amply suggest that taxation officer had neither looked at withholding statements nor the other relevant record to identify instances of non-compliance by the appellant Trust although in the light of judgments of our courts, she was bound to undertake this exercise. Proceeding further, the learned AR contended that even if the DCIR's observation regarding non-compliance with statutory notices was accepted, there is no rebuttal to the fact that audited accounts and monthly withholding statements filed by the appellant electronically were available with DCIR and she was bound to examine the record at least to the extent of audited accounts and monthly withholding statements and confront the appellant with the deficiencies and short comings and seek necessary explanations from it. He has submitted that this does not appear to have been done and easy way was found in passing a sweeping and arbitrary order burdening the taxpayer with huge illegal tax liability for both the Tax Years 2011 and 2012.
5. The learned DR, on his turn supported the impugned Orders of the authorities below and contended that the remand order of the learned CIR(A) was justified as it provided an opportunity to the appellant to plead its case before the concerned DCIR and have the matter decided in accordance with the law. According to learned DR the appellant may explain his position before the DCIR and may again proceed before this Tribunal if at the lower forums relief in accordance with law has not been allowed.
6. We have given due consideration to the arguments of both the parties and gone through the impugned orders of the officers below and available record carefully. Facts highlighted by the learned AR of the appellant depict a very bleak picture of the situation prevailing in the Revenue Offices. Orders passed under sections 161/205 of the Income Tax Ordinance, 2001 without examination of record resulted in holding the appellant as a Taxpayer in default even in respect of payment of lease charges made to non-resident lessors, expenses covered under S.R.O. 586(1)/91 dated 30-6-1991, amounts which had not been paid upto the closing date and non-cash items although a little bit of care could have forestalled the possibility of taxation of such transactions.
There is plethora of case-law emphasizing the importance of delivery of justice to the concerned parties be that State or the Taxpayer by applying the laws in a judicious manner. The courts have gone to the extent to rule that the person entrusted with the responsibility of dispensation of justice must apply the law in a correct manner even though the person to whom the law is to be applied may not have been able to make forceful pleading. In the instant case we have noticed the erratic and arbitrary disposal of the case of the appellant in utter disregard of the norms of justice, judicial propriety and disregard for the legal procedure to he followed before raising tax liability. The learned first appellate authority did notice all these shortcomings in the Order of the DCIR but failed to take a decision which the superior courts, in such circumstances, have taken and directed the subordinate forums to take. Instead of vacating the Order as was done in the cases relied upon by the learned AR, the learned CIR(A) remanded the case to the DCIR exposing the appellant again to the high handedness exhibited earlier. Such a dispensation of justice has not been approved by the courts of this country.
' For reasons discussed supra, we agree with the findings of the learned first appellate authority but only to the extent that the Order passed by the DCIR is ridden with glaring legal laws. We cannot, however, endorse his decision to remand the case to the DCIR for de novo consideration as doing so would tantamount to gross injustice to the appellant. We, therefore, hold that the Order passed under sections 161/205 of the Income Tax Ordinance, 2001 for both the years is not sustainable in the eye 9f law and accordingly vacated.
7. Appeal succeeds in the manner to the extent discussed above. revisions by the competent authorities. Therefore, it is advisable to consult the official sources or legal professionals for the most up-to-date and accurate information.