' Through the titled appeal the Revenue has assailed the impugned order dated 26-04-2012 passed by the learned CIR (Appeals-II), Lahore. The sole grievance of the Revenue is that the learned CIR(A) was not justified to delete the penalty imposed under section 182(1) of the Income Tax Ordinance, 2001.
2. Briefly stated the facts of the case are that the respondent/ taxpayer is an AOP, deriving income as a cotton ginner. Return of income/statement under section 115(4) for the tax year 2010 was e- filed on 21-12-2011. The ACIR observed that the taxpayer had, not filed e-filed income tax return/statement under section 115(4) within due date, which attracted penalty under section 182(1) of the Income Tax Ordinance, 2001. Accordingly, show-cause notice followed by reminder was issued in response to which reply was filed stating that return/statement under section 115(4) was filed manually within due date i,e, 30.10.2010; but it was e-filed on 21.12.2011. The counsel of the taxpayer further contended that as there was no loss of revenue, hence imposition of penalty was not justified. The reply tendered by the learned counsel of the taxpayer was found un-satisfactory, hence the ACIR passed a penalty order under section 182(1) of the Income Tax Ordinance, 2001 by imposing penalty at Rs,502,767/-. Being aggrieved by the treatment meted out by the ACIR., the taxpayer approached the learned CIR(A) who vide an order dated 26-04-2012 deleted the penalty IA on the following grounds:-- i) That the ACIR failed to mention S. No, of section 182(1) of the Ordinance wherein different defaults and different penalties have been catered. Ii) That as no loss of revenue was caused hence imposition of penalty was not justified as compliance of law had been made by timely filing manual return of income/statement under section 115(4) and later through e-filing return of income. Iii) That tax due was paid along with return filed manually. Iv) That by e-filing the requisite return, the ATIR vide I.T.A. No,1364/LB/99 (Tax year 2007) dated 05-01-2010 deleted penalty under section 182(1) of the Ordinance. v) That penal provisions are invoked to create deterrence and boost voluntary compliance level and not for the sake of generating revenue.
3. No one appeared on behalf of the respondent/taxpayer despite of proper service of notice and, therefore, we intends to proceea ex parte to decide the appeal on the ba -4, of available record.
The learned D.R. Has been heard who contended that the learned CIR(A) was not justified to delete the penalty under section 182(1) of the Income Tax Ordinance, 2001 merely on non-mentioning of the Sr. No, of section 182(1) relating to the offence, which is covered under section 126(2)(b) of the Ordinance. She further elaborated that the learned CIR(A) has ignored sub-rules 2(D) and (2E) of Rule-73 of the Income Tax Rules, 2002 which state that in case of an Association of persons, electronic filing of income tax return and withholding statements are mandatory from the first day of July, 2009 onwards.
4. After hearing the learned D.R. And going through the impugned findings recorded by the learned CIR(A), we are of the view that the order of the learned CIR(A) is self-contradictory because on the one hand he has observed that by filing the requisite return the appellant has discharged its liability legally but on the other hand he has advised the appellant to be careful in future about his legal obligations.
5. We are of the considered view that default was committed by the appellant. The fact that the appellant was obliged to e-file his return which was not e-filed within the due date but after a delay of 81 days has been admitted both by the appellant and the learned CIR(A). Return filed manually on 30-10-2010 was not a valid return as envisaged under section 115(4) read with sub- rules (2D) and (2E) of Rule .73 of the Income Tax Rule", 2002.
6. The grounds taken by the learned CIR(A) for deleting the penalty under section 182(1) are not valid, as discussed hereunder:-- a). As regards the observation of the learned CIR(A) about non-mentioning of Sr. No, of section 182(1), the said omission is protected under section 126(2)(b) of the Income Tax Ordinance, 2001.
The penalty order is absolutely clear about the specific default committed by the appellant for which penalty is being imposed. b). As regards the observation of the learned CIR(A) about no loss of revenue due to manual filing, the same is misconceived. There are numerous provisions of law which are meant to ensure compliance of certain procedures and to prevent violations of such procedures which may not necessarily result in any loss of revenue. Many taxpayers who are obliged to e-file their returns have deliberately been manually filing their returns with mala fide intentions. It is alarming that for tax year 2014, which was sixth year of mandatory e-filing of Returns for AOPs, number of manual filers of return (AOPs) was 2839. Since data of such returns is not entered in the system, being invalid returns in terms of section 115(4) read with sub-rules (2D) and (2E) of D Rule 73 of the Income Tax Rules, 2002, such returns escape selection for audit. In such cases, imposition of penalty remains the only deterrence.
7. In view of the above, the order of the learned CIR(A) is vacated and that of the OIR is restored.