MRS. AMBREEN ASLAM, JUDICIAL MEMBER .----Through his order , I intend to dispose off the titled appeal filed by the taxpayer against Order bearing No.1621 dated 20-06-2017, passed by the learned Commissioner Inland Revenue (Appeals), Hyderabad on the following grounds:-
1. That the order passed by the Commissioner Inland Revenue (Appeals), Hyderabad [CIR (A)j issued vide order No.1621 passed under section 129/182(1) of the Income Tax Ordinance, 2001 (the Ordinance) dated June 20, 2017 received on February 02, 2018 against the Appellant viz the Manager of Tando Adam Branch c/o Sindh Bank Limited and acting on behalf of the Sindh Bank Limited, is bad in law and against the facts of the case.
2. That the learned CIR(A) erred to confirm the impugned order alleging a default committed by the Appellant for not carrying out action in response to the notice issued under section 140 of the Income Tax Ordinance, 2001 for recovery of tax demand as defaulted by an account holder of the bank. It is submitted that the learned CIR(A) erred in not appreciating that the action of the Bank was delayed because the DCIR could not provide evidence to the effect that he had delegated powers to issue recovery notice under section 140 enabling the bank to act accordingly . Such action for not providing evidence of delegation of powers for taking action under section 140 of the Ordinance is non-adherence to the instruction which were issued by the Chief Commissioner's (Regional Tax Office-III, Karachi) vide letter No. CCIR/R TO-III/S.O-II/014/7.63 dated June 16, 2014.
3. That the learned CIR(A) was not justified to maintain the impugned order levying penalty of Rs.272,974 at 3% of the alleged demand of Rs.9,099,122/- which was to be recovered on account of a defaulted party , when the Bank had a balance in defaulter account only of Rs.170,627/- and consequently penalty at 3% thereof, without prejudice, is Rs.5,1 19/-.
4. That the learned CIR(A) erred in ignoring the DCIR issuing notice of penalty under section 182 of the Ordinance and the action is taken without first establishing the case of violation which has factually not been committed as flagrant violation or complete disregard of the law .
5. That the learned CIR(A) was not justified to maintain the DCIR invoking penal action under section 182(1) Serial 14 of the Ordinance on your Appellant rather than invoking provision of sections 160, 161, 162 and 163 on the Bank. Therefore, the DCIR erred in imposing at straight a penalty of Rs.272,974/- on Appellant which is not in consonance of scheme of law .
6. That the CIR(A) erred confirmed the impugned penalty order for 'recovery of demand of Rs.9,099,122/- which demand has in fact been revoked by the concerned Commissioner through, notice No.DCIT/E&C- X/RTO/HYD/2016-17/1546 dated December 08, 2016. The penalty levied is of consequential nature and should be deleted because the main demand under the alleged default is no more in existence.
7. That the learned CIR(A) erred confirmed the DCIR is not appreciating the facts that the Appellant is an employee of the Bank, being the Manager of the branch, the Appellant could only marked debit block to any impugned taxpayer's/defaulter account and pass on any received notice to Head Office for subsequent compliance. Hence, there was no mens rea involved from the Appellate side. It needs to be appreciated that the Bank to ensure that the notice under section 140 was issued within the legal authority for compliance.
8. That the appellant craves permission to add, amend, and alter the above grounds of appeal on or before hearing.
2. Brief facts of the case as gathered from the record are that this is a case of an individual Mr. Dildar Hussain c/o Sindh Bank Limited, Tando,Adam. He is an employee of Sindh Bank Limited and serving as branch manager of Sindh Bank Limited, Tando Adam.
3. The taxpayer being branch manager of Sindh Bank Tando Adam, was served upon the notice under Section 140 of the Income Tax Ordinance, 2001 vide letter No.274 dated 30-08-2016, vide said notice he was obliged under law to furnish the cheque/pay order of amount mentioned therein but unfortunately he failed to fulfill his legal obligation and keep department in waiting for the cheque on one pretext or the other . Seein g no signs from the compliance from the manager , show cause notice for charge of penalty under section 182 of the Income Tax Ordinance, 2001 vide letter No.530 dated 30-09-2016 and No.1194 dated 07-11-2016 were issued to the manager Sindh Bank Limited, Tando Adam Branch. Despite proper service the Bank Manager Sindh Bank failed to reply the notice therefore, the DCIR had passed Order No.DCIR/E&C-X/R TO/HYD/2015- 16/ dated 16-1 1-2016.
4. Against the treatment meted out form the aforementioned Order passed by DCIR, the appellant preferred appeal before learned CIR(A) who decided the appeal of the appellant by passing Order bearing No.1621 dated 20-06- 2017 with following observations: i) The record shows that the appellant has committed default of making compliance to section 140 of Income Tax Ordinance, 2001 and did not remit the amount of Rs.9,099,122/- to the department despite proper service of notice under section 140 of Income Tax Ordinance, 2001. ii) Even after the issuance and service of show cause notice for penalty under section 182(1) of Income Tax Ordinance, 2001, the appellant failed to comply the above notice and bent upon the non-compliance to the notices of department, therefore, the penalty was rightly charged at Rs.272,974/- under section 182(1) (Serial No.14 of Table) of Income Tax Ordinance, 2001.
4). In view of the above, the penalty charged at Rs.272,974/- through impugned order passed by the Deputy Commissioner Inland Revenue under section 182(1) of Income Tax Ordinance, 2001 for Tax Year 2016 is hereby confirmed."
5. Being aggrieved and dissatisfied from the aforementioned order passed by learned CIR(A), the taxpayer preferred titled appeal before this Tribunal.
6. On the date of hearing, Mr. Syed Nayyar Raza Zaidi, ACMA attended Cour t proceedings on behalf of the appellant/taxpayer while Mr . Abid Aziz Memon, DR attended on behalf of respondent/taxpayer .
7. During course of proceedings, learned AR argued that the order passed by the Commissioner Inland Revenue (Appeals), Hyderabad [CIR (A)] issued vide order No.1621 passed under section 129/182(1) of the Income Tax Ordinance, 2001 (the Ordinance) dated June 20, 2017 received on February 02, 2018 against the Appellant viz the Manager of Tando Adam Branch c/o Sindh Bank Limited and acting on behalf of the Sindh Bank Limited, is bad in law and against the facts of the case.
8. Learned AR further argued that the learned CIR(A) erred to confirm the impugned order alleging a default committed by the Appellant for not carrying out action in response to the notice issued under section 140 of the Income Tax Ordinance, 2001 for recovery of tax demand as defaulted by an account holder of the bank. It is submitted that the learned CIR(A) erred in not appreciating that the action of the Bank was delayed because the DCIR could not provide evidence to the effect that he had delegated powers to issue recovery notice under section 140 enabling the bank to act accordingly . Such action for not providing evidence of delegation of powers for taking action under section 140 of the Ordinance is non-adherence to the instruction which were issued by the Chief Commissioner's (Regional Tax Office-III, Karachi) vide letter No. CCIR/R TO-III/S.0-II/014/7.63 dated June 16th, 2014.
9. Learned AR urged that the learned CIR(A) was not justified to maintain the impugned order levying penalty of Rs.272,974/- at 3% of the alleged demand of Rs.9,099,122/- which was to be recovered on account of a defaulted party , when the Bank had a balance in defaulter account only of Rs.170,627/- and consequently penalty at 3% thereof, without prejudice, is Rs.5,1 19/-.
10. Learned AR contended that the learned CIR(A) erred in ignoring the DCIR issuing notice of penalty under section 182 of the Ordinance and the action is taken without first establishing the case of violation which has factually not been committed as flagrant violation or complete disregard of the law. He further contended that the learned CIR(A) was not justified to maintain the DCIR invoking penal action under section 182(1) serial 14 of the Ordinance on your Appellant rather than invoking provision of sections 160, 161, 162 and 163 on the Bank.
Therefore, the DCIR erred in imposing at straight a penalty of Rs.272,974/- on Appellant which is not in consonance of scheme of law .
11. Learned AR argued that the CIR(A) erred confirmed the impugned penalty order for recovery of demand of Rs.9,099,122 which demand has in fact been revoked by the concerned Commissioner through notice No . DC IT/E&C-X/R TO/HYD/2016-17 /1546 dated December 08, 2016. The penalty levied is of consequential nature and should be deleted because the main demand under the alleged default is no more in existence.
12. Learned AR further argued that the learned CIR(A) erred confirmed the DCIR is not appreciating the facts that the Appellant is an employee of the Bank , being the Manager of the branch, the Appellant could only marked debit block to any impugned taxpayer's/defaulter account and pass on any received notice to Head Office for subsequent compliance. Hence, there was no mens rea involved from the Appellate side. It needs to be appreciated that the Bank to ensure that the notice under section 140 was issued within the legal authority for compliance. Lastly , he prayed for setting aside the impugned order passed by learned CIR(A).
13. On the other hand, the learned DR vehemently opposed the arguments advanced by the learned representative of the taxpayer and fully supported the order passed by the learned CIR(A) by stating that the order passed by the learned CIR(A) is legal, lawful and within the framework of law. He prayed for dismissal of the instant appeal of the taxpayer .
14. I have considered the arguments advanced by the learned representatives of both sides, perused the case record including impugned order and the grounds containing in the appeal. To decide the instant appeal the question before me is whether the impugned order requires interference?
15. Precisely department alleged against the appellant that he being the manager of the branch on receipt of notice under section 140 of Income Tax Ordinance, 2001 has failed to fulfill his legal oblig ation and kept the department in awaiting, so the department charge penalty under section 182 of Income Tax Ordinance, 2001.
16. Keeping in mind above allegations, I have taken in account the record, record reveals that notice under section 140 of Income Tax Ordinance, 2001 was issued to the appellant in capacity of bank manager on 30-8-2016. The appellant on receipt of notice marked debit block to the account holder and at that time account holder had Rs.170,627/- and recovery default charge was of Rs.9,099,122/-, being so the appellant wrote letter to the department by mentioning that he blocke d the debit of taxpayer but he needed to share relevant approval for the bank's trail and record.
17. It is not denied by the department that the applicant did not block debit of the taxpayer , beside this I have not found mens rea on the part of the appellant for the reason number one that on the receipt of notice under section 140 of Income Tax Ordinance, 2001, he blocked the account of the taxpayer . Secondly , he being head of compliance, vigilance and fraud risk official sought relevant approval for the bank audit trail and record. Last not the least the department revoked the recovery notice issued to the taxpayer for the sake of convenience, I am reproducing the same.
OFFICE OF THE DEPUTY COMMISSIONER'
INLAND REVENUE, ENFORCEMENT AND COLLECTION UNIT -X REGIONAL TAX OFFICE, HYDERABAD AT SINJHORO ROAD, SANGHAR 0235-920231 No./DCIR/E&C-X/R TO/HYD/2016-17/1546 Dated. 08.12.2016 To, THE MANAGER, NBP, MCB, ABL, UBL, HBL MEEZAN BANK, ASKARI, BANK AL HABIB AL-F ALAH, SONERI, SINDH BANK TANDO ADAM SUBJECT : REVOCA TION OF NOTICE UNDER SECTION 140 "As per Appeal Order of the Learned Commissioner Inland Revenue Appeals Hyderabad vide No.1285 dated 26- 10-2016 the Appeal of tax payer succeeded. As such this office notice under section 140 of. the Income Tax Ordinance, 2001 issued vide No.274 dated 30.08.2016 for recovery of demand outstanding against of Mr. Imtiaz Ahmed CNIC No.44206-3862916-7 a Amounting to Rs.9,099,122/- is hereby revoked till further notice.
Sd- (MUMT AZ ALI THEBO)
DEPUTY COMMISSIONER (IR)
Copy to; The tax payer for information.
(MUMT AZ ALI THEBO)
DEPUTY COMMISSIONER (IR)
18. Keeping in mind above position, I am of the view that this is a fit case of miscarriage of justice, therefore, the impugned order is set aside, in result appeal of the appellant is accepted.
19. Appeal stands disposed of f in the manner as indicated above.