ORDER: MR. MUHAMMAD JAWED ZAKARIA, JUDICIAL MEMBER.--(1). The appellant/department being aggrieved and dissatisfied, filed appeal against the impugned order No. 60 dated 21.04.2014 passed by the learned CIR (Appeals), Karachi. The department has raised the grounds of appeal as put-forth in the memo of appeal.
2. Brief facts of the case as transpired from the record are that the Officer Inland Revenue issued show cause notice dated 01-11-2013 for compliance by 08-11-2013, confronting the taxpayer for levy of penalty under section 182(1)(A) of the Income Tax Ordinance, 2001 on account of non e-filing of statement under section 165 of the Income Tax Ordinance, 2001 pertaining to the month of July, 2013. The Officer Inland Revenue did not allow extension of time and explanation offered did not find favour with the Officer Inland Revenue, who passed the impugned order and imposed penalty of Rs. 50,000/- under section 182(1) of the Income Tax Ordinance, 2001 on 11.11.2013.
3. Being aggrieved and dissatisfied with the treatment meted out by the OIR taxpayer preferred appeal before the learned CIR(A) who vide his impugned order reduced the penalty amounting to Rs. 10,000/-.
4. Feeling aggrieved and dissatisfied with the impugned order passed by the learned CIR(A) now the department has come up in appeal before this Tribunal.
5. This court issued notice to the parties, in response thereto, Mr. Muhammad Aslam Jamro, appeared on behalf of the Appellant as D.R while Mr. Agha Faqir Muhammad Senior Advocate, appeared on behalf of the taxpayer.
6. For the revenue the, learned D.R., appearing before this court, has argued that the order of the learned Commissioner Inland Revenue (Appeal-II), Karachi is bad in law and contrary to the facts of the case. Learned DR further narrated that the learned Commissioner Inland Revenue (Appeals- II), Karachi was not justified in reducing and restricting penalty to the tune of Rs. 10,000/- instead of Rs. 50,000/- as penalty order passed by the OIR u/s. 182(1)(1A) of the Income Tax Ordinance, 2001 without considering the facts of the case. Finally, he prayed that the impugned order passed by the learned CIR(A) be vacated.
7. The learned counsel for the taxpayer, on the other hand, strongly opposed the contentions made by the learned DR. he supported the order passed by the learned CIR(A). He vehemently argued that the penalty was imposed by the DCIR on the ground that the taxpayer has failed to file statement under section 165 of the Income Tax Ordinance, 2001 and the DCIR had failed to appreciate that the taxpayer was not required to file statement under section 165(5) of the Income Tax Ordinance, 2001 as the taxpayer is neither collecting tax under Division-II of Part V or Chapter XII of the Income Tax Ordinance, 2001 nor deducting tax from a payment under Division II of Part V or Chapter XII of the Income Tax Ordinance, 2001. The Learned counsel, then went on to stress in his arguments that the taxation authorities. failed to appreciate that the respondent is not prescribed person "as defined under section 153(7) of Income Tax Ordinance, 2001 and as such is not required to file statement under section 165 of Income Tax Ordinance, 2001, and hence, there is no willful default on the part of the respondent, hence, the proviso to section 165 of the Income Tax Ordinance, 2001 is not applicable. The section 165 and proviso is appended below for easy reference:
165. "Statements.--(l) Every person collecting tax under Division H of this Part or Chapter XII or deducting tax from a payment under Division III of this Part or Chapter XII shall, furnish to the Commissioner a monthly statement in the prescribed form sitting out-- (a)the name Computerized National Identity Card Number, Tax Number and address of each person from whom tax has been collected under Division II of this Part or Chapter XII or to whom payments have been made from which tax has been deducted under Division III of this Part or Chapter XII in each month.
(b)the total amount of payments made to a person from which tax has been deducted under Division III of this Part or Chapter XII in each month.
(c)the total amount of tax collected from a person under Division II of this Part or Chapter XII or deducted from payments made to a person under Division III of this Part or Chapter XII in each month; and (d)such other particulars as may be prescribed:"
Provided that every person as provided in sub-section (1) shall be required to file withholding statement even where no withholding tax is collected or deducted during the period.
The supra quoted proviso was inserted vide Finance Act, 2010 which is nothing but subject to fulfillment of prerequisite conditions of sub-section (1) of the Section 165 of the Income Tax Ordinance, 2001. He further went on say that in the case of any contradictory in main section and proviso, the formar shall prevail over later, he also urged that the respondent in this appeal regarding the penalty of Rs. 10,000/- is also unwarranted and uncalled for but he gracefully confessed that the taxpayer, being meager amount of penalty has not preferred appeal, hence, he did not press for deletion of Rs. 10,000/-. He further emphasized that even otherwise invoking of penalty provision not permissible when there is no revenue loss occurred to the national exchequer and the penalty imposed by the DCIR without appreciating the intent of Section 182 of the Income Tax Ordinance, 2001. Learned counsel for the taxpayer further argued that the impugned order passed by the learned CIR(A) is legal, lawful and in accordance with law and no lacuna/error in the impugned order passed by the learned CIR(A). In his penultimate arguments, he also referred before this Court S.R.O. 978(1)/2013 dated 13th November, 2013 in order to further strengthen his contention, the contents whereof runs as under:-- Dated: 13th November, 2013 NOTIFICATION (Income Tax)
S.R.O. 978(1)/2013:- In exercise of powers referred by Sub-section (2) of section 53 of the Income Tax Ordinance, 2001 (XLIX of 2001), the Federal Government is pleased to direct that the following further amendments shall be made in the Second Schedule to the said ordinance, namely:-- In the aforesaid Schedule:-- (i)In Part III, after clause (15), the following new clause shall be added, namely:-- "(16) The minimum penalty for failure to furnish statement under sections 115, 165 or 165A as mentioned in column (3) against serial No. (1A) in the Table given in sub-section (1) of section 182 shall be reduced to ten thousand rupees and (ii)In Part IV, after clause (81), the following new clauses shall be added, namely:-- "(82) The provisions of subsection (2) of section 116 shall not apply for the tax year 2013 to an individual or a member of an association of persons whose last declared or assessed income, of the declared income for the year is less than one million rupees."
"(83) The provisions of subsection (4) of section 116 shall not apply for the tax year 2013 to a person other than a company or a member of an association of persons falling under final tax regime
(FTR) and has paid tax less than thirty five thousand rupees."
Finally he has prayed that impugned order passed by the learned CIR(A) be maintained.
8. Both the learned representatives appearing at the bar have been heard and carefully examined the available case record. It is observed that the learned CIR(A) has rightly reduced the penalty amount. It is further noted that the OIR was not justified to impose penalty of Rs. 50,000/- u/s. 182(1)
(1A) of the Income Tax Ordinance, 2001 when, in the tax year under appeal, as contended by Mr. Agha Fakir Muhammad, learned Senior Advocate of Supreme Court that the penalty under sub- clause (1A) of Section 182(1) of Income Tax Ordinance, 2001 is imposed where a person fails to furnish a statement as required under sections 115, 165 or 165A of the Ordinance, within due date.
The learned Deputy Commissioner failed to appreciate that the respondent was not required to file statement under section 165(5) of the Ordinance, 2001 as the appellant is not collecting tax under Division-II of Part-IV of Chapter-XII of the Ordinance, 2001 or deducting tax from a payment under Division under Division-II of Part-V of Chapter-XII of the Ordinance, 2001. The learned Deputy Commissioner failed to appreciate that the appellant is not "prescribed person" as defined under section 153(7) of the Ordinance, 2001 and as such is not required to file statement under section 165 of the Ordinance, 2001, further more there is no revenue loss has occurred to the national exchequer that the penalty is imposed without appreciation of intent to section 182 of the Income Tax Ordinance, 2001 that impugned order dated 11-11-2013 passed under section 182(1) of the Income Tax Ordinance, 2001 is illegal, unlawful and without jurisdiction and the impugned order is illegal and void as no proper opportunity of being heard was given to the appellant." The learned DR, could not refute or rebut the finding of CIR(A) with concrete evidence. Under the facts and circumstances of the case, It is opined that the law ought not to be used to penalize a taxpayer unless it can be shown that the default on the part of the taxpayer had resulted in any loss of revenue. In the present case, no such loss of revenue is evident "Had the intent of statute was to impose the penalty in a situation like instant case then its linkage with tax payable would not have been expressed, that the department has failed to establish its claim/contention, therefore, the impugned Order passed by the learned CIR(A) is found legal, lawful and in accordance with law, hence no interference is required in it.
9. Before parting with this judgment, I may observe that it is incorrect impression of revenue department that the penalty has to be universally imposed, without any exception whatsoever, if there is a default. This is not correct interpretation. The major prerequisite for imposition of penalty has always been a default committed "commits any offence" the onus to prove lies on department.
All Officers Inland Revenue is directed to be judicious in imposition of penalty. In penalty proceedings authorities must act fairly and honestly. Section 182 of Income Tax Ordinance, 2001 by no means is charging provisions and the legislature intention was not to generate tax or revenue income and the purpose and intention of the penal provisions, is not the source of resources mobilization. It was only mode of ensuring collection of taxes and compliance thereof. The revenue department cannot be allowed to use provisions to section 182 as substitute of normal assessm ent or new source of revenue/tax originating provisions.
10.Consequently, the appeal filed at the instance of revenue is hereby dismissed accordingly.