CH. SHAHID IQBAL DHILLON (JUDICIAL MEMBER).--- This order shall dispose of the titled three appeals pertaining to tax years 2014, 2015 and 2016 which have been preferred by the taxpayer against three separate orders all dated 28.05.2018, passed by the learned CIR(A) Faisalabad.
2. Brief facts of the case are that the taxpayer e-filed its returns for income in compliance to section 114(4) of the Income Tax Ordinance, 2001 on 27-09 -2016, 11-10-2017 and 25-12-2017 for the Tax years 2014 to 2016 respectively having tax chargeable already paid in all the Tax years under appeals. The Deputy Commissioner (IR) issued show-cause notice bearing No.2505 dated 17-01-2018 for the Tax years 2014 to 2016 confronted the taxpayer that; "your Income Tax Return for the tax year 2014 on 27-09-2016, whereas, last dated of filing of return was 31.12.2014. The return is late by (631) days. Failure to furnish within due date attracts penal action under section 182 of the Income Tax Ordinance, 2001. The return of for the tax years 2015 and 2016 are late by (645) days and (354) days respectively" . Accordingly , he passed the impugned penalty orders under section 182 of the Income Tax Ordinance, 2001 creating demands of Rs.824,620/-, Rs.1,397,158/- and Rs.944,050/- for the Tax years 2014 to 2016 respectively .
3. Being dissatisfied with the order passed under section 182 of the Ordinance, the taxpayer filed appeals before the learned CIR(A), Faisalabad. The learned CIR(A) after considering the submissions of the appellant confirmed the order of the learned DCIR with the following observations: "No reasons for late filing of return was assigned by the AR. A return of income is required to be filed by the due date irrespective of the fact whether any tax mount is payable or not. The Hon'ble Supreme Court of Pakistan in a case reported as 2001 PTD 781 has held, "when law requires something to be done in a particular manner then the same must be done in that manner" Therefore, the tax payable is required to be determined on the basis of declared/assessed income and not the amount payable with the return. Therefore, the conclusion drawn by the appellant was totally wrong and incorrect. This being the position, no interference is made to the impugned order ."
4. Being dissatisfied with the treatment accorded by the learned CIR(A), taxpayer has come up in 2nd appeal before the Tribunal on the ground mentioned in the memo of appeal.
5. During arguments, the learned AR states that the assessing officer did not consider the true facts of the case and contended that the penalty has been provided by the legislature in cases where any person who, without reasonable excuse, fails to furnish returns of income or wealth statement for any tax year within the time allowed under the Ordinance, 2001 whereas the amount of penalty is required to be calculated on the basis of tax payable in respect of that tax year, whereas there is no reference to chargeability of tax. In instant case the department automatically selected the case of the taxpayer for audit under section 214D of the Income Tax Ordinance, 2001 for late filling of returns. This fact is also a penal action in terms of audit proceedings and secondly the penal action in terms of penalty proceedings under section 182 of the Income Tax Ordinance, 2001.
6. For audit proceedings, he contended that section 214E of the Income Tax Ordin ance, 2001 has been introduced vide Finance Supplementary (Amendment) Act, 2018 on 08-04-2018 to close the automatically selected cases for audit under section 214D of the Income Tax Ordinance, 2001. For sake of facility section 214E is reproduced as under: "214E. Closure of audit. ---Notwithstanding the omission of section 214D, audit of income tax affairs of a taxpayer under subsection (2) of section 214D shall be deemed to have been concluded, if---
(i) taxpayer has been selected for audit under subsection (1) of the omitted section 214D;
(ii) notice under section 122 has not been issued;
(iii) the taxpayer has revised return voluntarily , by thirty first day of December , 2018, along with payment of 25% higher tax than the tax paid with return on the basis of taxable income and where no tax is payable 2% of the turnover and where no turnover is declared penalty under entry at Serial No. 1 of subsection (1) of section 182 has been paid voluntarily: Provided that the condition of revision, 25% higher tax or 2% of the turnover shall not apply , if the taxable income of the taxpayer includes only salary income or income subject to final taxation under subsection (1) of section 169 or subject to taxation under Sections 5, 5AA, 6, 7, 7A or 7B.
Explanation . ---For the removal of doubt it is clarified that only audit initiated as a result of automatic selection under the omitted section 214D shall stand abated under this section and audit initiated or to be initiated on the basis of definite information or otherwise as per provisions of section 177 or 214C shall be conducted independently ."
The taxpayer company availed this facilit y and e-filled revised returns for the Tax years 2015 and 2016 on 01-01- 2019 by enhancing the tax @ 25% from the previous return tax and deposited the Rs.698,579/- and Rs.666,702/- for the Tax years 2015 and 2016 respec tively . The concerned worthy Commissioner Inland Revenue, Corporate Zone, RTO, Faisalabad closed the audit proceedings vide Order under section 177 of the Income Tax Ordinance, 2001 (Closure of Audit under section 214E) for the Tax years 2015 and 2016 intimated the taxpayer with the following words: "In view of section 214E, audit proceedings-initiated under section 214D are hereby closed."
7. For penalty proceedings, he relied on a case reported as 2013 PTD 387 (Sindh High Court); wherein their Lordships have held that: "on examination of the legal provision as referred to hereinabove, it has come on record that since there was no tax payable along with return thus the provision of section 182 was not applicable to the facts of this case."
Levy of penalty is a matter of discretion which must be exercised by the authorities judiciously on consideration of relevant circumstances. Penalty should not be imposed merely because it is lawfu l to do so. If the offence is of a technical or venial in nature, the authorities will be justified in refusing to levy penalty . The law in this regard is well- settled by the decision of the Supreme Court of India reported as Michael Fernandes v. C.W.T., Mysore , (1974)
95 ITR 532 (Mys), wherein their Lordship have held that: "An order imposing penalty for failure to carryout a statutory obligation is the result of a quasi-criminal proceedings, and penalty will not ordinarily be imposed unless the party obliged either acted defiance of law or was guilty of conduct contumacious or dishonest, or acted in conscious disregard of its obligations. Penalty will not also be imposed merely because it is lawful to do so. Whether penalty should be imposed for failure to perform statutory obligations is matter of discretion of the authority to be exercised judicially and on a consideration of all the relevant circumstances. Even if minimum penalty is prescribed, the authority competent to impose the penalty will be justified in re-fixing to impose penalty , when there is technical or venial breach of provisions of the Act or where the breach flows from bona fide belief that the offender is not liable to act in the manner prescribed by statute."
9. Conversely , the learned DR supported the levy of penalty and - contended that default on the part of the taxpayer is patent, therefore, the assessing authority was justified to levy penalty .
10. Anxious consideration has been given to the contention raised in the memo of appeals. Section 182 of the Income Tax Ordinance, 2001 by no means is charging provisions and the legislature was not to generate tax or revenue income and the purpose and intention of the penal provision, is not the source of mobilisation. It was only mode of ensuring collection of taxes and compliance thereof. The revenue department cannot be allowed to use provision of section 182 as substitute of normal assessment or new source of revenue/tax originating provisions. In the present case, no loss of revenue is evident. It is incorrect impression of reven ue department that the penalty has to be C universally imposed, without exception whatsoever , if there is a default. This is not correct interpretation. In penalty proceedings authorities must act fairly and honestly . We agree with the contentions raised by the counsel for the appellant regarding imposition of token penalty instead of calculated per day default. As natural sequel token penalty of Rs.25,00 0/- be imposed for the Tax year 2014 as default was committed by the appellant and deleted the penalty imposed for the Tax years 2015 and 2016 being Closure of Audit under section 214E of the Income Tax Ordinance, 2001 as the appellant has already revised return voluntarily fulfilled the actual liability accrued by the taxpayer in these Tax years under consideration.
11. Taxpayers appeals succeed in the manner and to the extent as indicated above.