SHAHID MASOOD MANZAR (JUDICIAL MEMBER).--- This appeal has been filed against learned CIR (A)'s order No,975/2017 dated 13-02-2017 passed under sections 161/205 of the Income Tax Ordinance, 2001, whereby the ACIR's action of charging WHT on the gross amounts of expenses claimed under various heads, without examining the records presented before the assess ing officer had been remanded back for 'de novo' consideration. While deciding the case, learned CIR(A) had observed as under:-- "...Perhaps the documents / details filed by the appellant through letter dated 31-05-2016 were not in front of the assessing officer at the time of finalizing the impugned order ..."
2. Succinctly , facts of the case are that the Assessing Officer initiated proceedings under sections 161/205 read with Rule 44(4) of Income Tax Rules, 2002. In this regard first show-cause notice was issued on 21-05-2016 for compliance on 31-05-2016. According to the Assessing Officer, second notice was issued on 08/11/2016 for compliance on 14/11/2016. This time Mr. Abur-Rehman CFO attended along with Syed Ali Zaidi Manager Finance and pleaded that the documents were already provided. However , the appellant was again asked on 17/11/2016 to provide complete detail/documents in the prescribed format and final date of hearing was fixed on 28-11-2016.
According to the Assessing Officer, the appellant neither provided the required detail nor any body appeared to seek adjournment. The order was, howe ver, passed on 29-12-2016, i,e, about one month after the final date of hearing, [without providing another opportunity or examining the already provided detail/documents]. Thus on the basis of first show-cause notice dated 21-05-2016,[without examining the detail documents submitted on 31-05- 2016], the officer applied maximum/flat rates of withholding tax on all the gross amounts of the expenses claimed by the appellant as per P & L account.
The taxpayer pleaded before the first appellate authority , that the higher appellate 'fora' never endorsed an ex parte order passed on the date not fixed for hearing. Moreover , the Assessing Officer had failed to consider the detail/documents provided and crossed the boundaries of natural justice. No instances of default of non-deduction of WHT were given in the order , which is mandatory under the law, where taxpaye r provides the detail/documents in support of his claims. The evidence of submission of the detail/ documents on 31-05-2016 before the Assessing Authority was acknowledged by the learned CIR (A), but instead of cancelling the impugned order he deemed it proper to remand the case back to the Assessing Officer. The appellant was grieved by such decision and did not accept it, hence, has come up before this forum to seek justice.
3. The appellant has taken following contentions against the impugned order:
(i) That the learned CIR (A) had erred in not taking cognizance of the fact that appellant had deducted / withheld TAX [due] from the eligible payments and deposited the same in Govt. treasury within the stipulated time period;
(ii) That in such circumstances, this Hon'ble forum [ATIR] had granted relief to the appellant [in earlier tax years as well] by examining detail / documents as produced at the time of hearing;
(iii) That the learned CIR (A) has travelled beyond his jurisdiction [under section 129], in setting-aside the order for 'de novo' assessment;
(iv) That the learned CIR (A) has erred in not taking cognizance of the fact that the ex pane order , passed on the date NOT FIXED for hearing, merit annulment / cancellation;
(v) That the learned CIR (A) had erred in not following the principle of binding precedents / appellate decisions of the higher appellate fora';
(vi) That the learned CIR (A) had erred in ignoring the appellate decisions reported as 95 Tax 126 [2007 PTD 1203 ] and IT As Nos, 317-318/LB/2016 [dated-29-03-2016];
(vii) That the learned CIR (A) has erred in not considering the ground of appeal pointing out that the ORDER WAS PASSED, ON THE DATE THAT WAS NOT FIXED FOR HEARING. In such situation, Hon'ble Peshawar High Court in the case law reported as 2014 YLR 485 had held as under: "No ex-parte proceeding should be ordered when case was not fixed for hearing---Defendants were placed ex- parte in the suit on the date which was not fixed for hearing---Subsequent proceeding conducted against the defendants which culminated into ex-parte decree was nullity in the eye of law in its very inception."
(viii) That the learned CIR (A) was not justified to set-aside the order [for 'de novo' examination by the ACIR], after his observations that the detail / document required by the learned assessing officer were duly submitted on 31-05- 2016, which fact is proved from the acknowledgement [receipt] of L TU Islamabad;
(ix) That under section 128(4), the learned CIR(A) was authorized to accept the detail documents produced before him and should have honored the appeal instead of sending it back to the assessing officer for making improvement;
(x) That setting-aside the order was tantamount to making the appellant to go through torturous exercise of satisfying the ACIR again, when the assessing authority had already ignored the voluminous detail submitted on 31-05-2016. On the basis of above grounds, acceptance of appeal and vacation of the impugned order has been prayed for .
4. The learned A.R. has also produced the same voluminous records/documents for our inspection as produced before both the assessing of ficer, as well as the learned CIR (A).
5. The appeal revolves around four main contentions of the appellant:
(i) Instead of setting aside, the 'ex parte' order passed on the date not fixed for hearing should have been annulled
(ii) That passing an ex parte order without examining the voluminous details submitted on 31-05-2016, [which is proved from the acknowledgment issued by the "IPD" counter of the L TU Islamabad] merited cancellation;
(iii) That the learned CIR (A) had erred in setting aside the order despite his observations that the appellant as submitted the require detail on 31-05-2016;
(iv) That setting aside the order means providing the Department to improve its case and fill in the 'lacunae' left at the time of the original order;
(v) That for the Tax years 2009; 2010 and 2011, the appellant was granted relief by the learned Tribunal by accepting the records produced by the appellant which both the lower 'fora' had ignored.
6. The first and foremost legal ground agitated before us was that the ex parte order passed on the date which had not been fixed for hearing had not been endorsed by the higher appellate 'fora' . He has quoted following case laws/reported judgments to support his contention: We have heard the learned representative of the appellant and the Department and take up the issues as under: An ex parte order passed on a date not fixed for hearing is nullity in law and has been deprecated by the higher appellate 'fora': some of the authoritative reported judgments are: (i) 1973 PTD 283 (LHC); (ii) 1975 PTD 58 (LHC);
(iii) 2014 YLR 485 (PHC); (iv) 1995 PTD (Trib.) 1159; (v) 2007 PTD (Trib.) 1203; (vi) 2004 PTD 2040 (FTO) 1203.
An excerpt from the case law reported as 2014 YLR 485 (PHC) would be very useful in deciding the issue at hand: "...No ex parte proceeding should be ordered when case was not fixed for hearing---Defendants were placed ex parte in the suite on the date which was not fixed for hearing--subsequent proceeding conducted against the defendants which culminated into ex pane"
The above view is further fortified by the Tribunal's latest order in appeal I.T .A. No,39/LB/2013 dated 15-08-2017.
7. Regarding passing an order without examination of the records produced before the assessing as well as lower appellate authority , the learned Tribunal while disposing of appeal I.T.A. No,558/LB/2017 dated 17-08-2017, have observed as under: "...The Honorable courts of the country have not approved the non-considerin g the evidence / record made available which is sufficient enough in nature for passing the order and yet disposing of the appeal by sending it back to OIR, is visibly contrary to these findings. Reliance is placed on the judgm ent of the Honorable Supreme Court of Pakistan cited as 2010 SCMR 1 119."
At Para No, 5 of the same order , the learned ATIR has further observed that: "5. It is also important to mention here that putting the taxpayer to face the series of litigation simply to cover the deficiencies of tax imposing authority would not be justifiable. The record/explanation filed before the assessing officer , was available on record and the copies of the same were also produced before us at the time of hearing as well as before the learned CIR (Appeals). Affidavit from the appellant was also filed before us, confirming on solemn affirmation that requisite substantiated were also produced before both the authorities below who preferred not to examine it by pointing out the exact amount / figure which could be made liable to withholding tax, but kept silence for the best reasons known to them. It is without performing the bounded duty of examining the record for specifically pointing out where tax deduction / withholding though legally due has not been done, thus respondent department has failed to bring on record the facts for disproving the stance of the appellant that incorrect illegal tax demand has been created statedly for failure to deduct/withhold the tax under section 161. The department has not even submitted a counter affidavit in this way not challenging as incorrect, is plainl y accepting the same as correct allowing us also to accept the contentions of the appellant. The learned first appellate authority has preferred not to examine the record so as to pass a speaking order and importantly the reasons for so doing have not been made part of record. Evidently the respondent Department has failed to make out a case in its favour by not pointing out the specific defect of non-deduction / non-withholding of tax despite the availability of the requisite evidence / information on record whereas the appellant / taxpayer by proving the submissions vis availability of the legally required information/ evidence on record has been absolved of its duty as per settled law. We have examined the record made available and have been able to reach to the conclusion that the stance of Respondent / Department is factually incorrect so creation of withholding tax...is illegal".
"6. So keeping in view the detailed conte mplations supra we are persuaded to cancel the order under section 161 dated 30.11.2016 as well as the Order under section 205 passed by the DCIR and vacate the order dated 31-01- 2017 passed by the learned CIR(A) Lahore only to the extent of issue of withholding tax demand."
The learned A.R. has pleaded that the above case law is on all four to the facts of the appellant, therefore, the impugned order should be cancelled.
8. On facts, it is observed that the record produced before us shows the detail / documents regarding the payments from which:
(a) Tax was withheld and deposited in Govt. Treasury;
(b) Tax was not required to be withheld [by the appellant] from following categories of suppliers/vendors:
(i) To whom the payment made was below threshold for WHT ;
(ii) Those who had produced exemption certificates from the concerned Commissioners;
(iii) Those who made supplies out of imported goods and were covered under subsection (5)(a) of section 153 of the Ordinance, which is reproduced below: "Subsection (1) shall not apply to---(a) a sale of goods where the sale is made by the importer of the goods and tax under section 148 in respect of such goods has been paid and the goods are sold in the same condition as they were when imported";
9. Record was also produced with regard to supply of pharmaceutical products (Cath. Lab/Surgical Goods), covered under the provisions of clauses (24A) Part-II which provides for reduced rate of tax deduction @ 1% on pharmaceutical products and Clause (47A) Part IV; clause (47A) Part IV of Second Schedule which is in pari materia to subsection (5)(a) of section 153, in-so -far-as wording of both the provisions is similar which provide that subsection (1) shall not apply to a sale of goods where the sale is made by the importer of the goods and tax under section 148 in respect of such goods has been paid and the goods are sold in the same condition as they were imported";
10. The consolidated order I.T.As. Nos, 660; 661; and 662/IB/2014 dated 03-07-2014 read with I.T.A. No, M.A.(R)
102/18/2014 dated 01-10-2014, passed for the Tax years 2009; 2010; and 2011, by the tribunal on the similar issue in case of this very appellant shows that the record which were produced but not examined by the lower 'fora' was accepted and the orders under sections 161/205 were cancelled.
11. On his turn, the learned D.R. vehemently opposed the contention made by the learned AR of the taxpayer . He supported the impugned orders of the officers below and accordingly prayed that the same may be upheld by dismissing the instant appeal being devoid of any merit.
12. After going through facts of the case, detail/documents produced before us, and the case law relied upon by the learned A.R. we are of the opinion that the orders of both the learned lower authorities suffer from legal as well as factual infirmities. The appellant has proved its case whereas the department has failed to dislodge the grounds of appeal/arguments put on behalf of the appellant. W e observe as under:
(i) That an ex parte order passed on the date not fixed for hearing is not sustainable under the law;
(ii) That an order passed without examination of detail/documents produced before the assessing authority cannot be set aside to punish the taxpayer without there being any fault at his end;
(iii) That in case of the same appellant, this Tribunal had accepted the detail/documents for the tax years 2009; 2010; and 2011, which were produced but not examined by the lower 'fora' are acceptable at the Tribunal's level for this tax year as well.
13. In these circumstances, taxpayer's appeal is allowed and the orders of the authorities below are annulled.