DR. FARRUKH ANSARI, ACCOUNT ANT MEMBER .----This appeal has been filed by the taxpayer, a public limited company , against the order of Commissioner (Appeals-I), Karachi, in the matter related to the imposition of penalty under the entry at Serial No. 14 of subsection (1) of section 182 of the Income Tax Ordinance, 2001 for the tax year 2017. The appeal is filed on the following grounds:- "1.That the order passed under section 129 of Income Tax Ordinance, 2001 (the Ordinance); by the learned Commissioner Inland Revenue (Appeals-I), (CIRA) Karachi is bad in law and on facts.
2. That the learned CIRA erred in maintaining action of Deputy Commissioner Inland Revenue (DCIR), E&C Unit- 03, Range-B, Zone-III, Large Taxpayers Unit, Karachi, for passing the Order under section 182(1) selecting omnibus charge mentioned at Serial Number 14 of the Ordinance of subsection (1) of section 182 for levying penalty three percent of amount of withholding tax of Rs.21,600,816 which works out Rs.648,024 on account of not providing the complete description of vendors in monthly statement under section 165 of the Ordinance, relating to the period from July , 2016 to June, 2017.
3. That the learned CIRA erred in not appreciating that taxpayers had problem of FBR IRIS portal for filing the monthly statements under section 165 of Ordinance. Consequently , the learned CIRA could not give due weightage of resultant charge of penalty under section 182(1) at serial number 14 of the Ordinance that is it is excessive and uncalled for as no mens rea or ulterior motive is involved for non-providing the complete description of vendors in monthly statement under section 165 of the Ordinance, relating to the period from July, 2016 to June 2017. It is submitted that due tax on payments was deducted and paid in time and hence the incidence of penalty be deleted.
4. That the appellant craves for permission to alter, amend or add further grounds of appeal before or at the time of hearing of the case."
2. Brief facts of the case are that the appellant, had allegedly failed to file the statements of tax deduction under section 165 of the Income Tax Ordinance, 2001 for the months of July 2016 to June 2017 in the prescribed format.
The appellant had only given the cumulative figure of the tax deposited by it for each month and hence penalty under the entry at Serial No. 14 of subsection (1) of section 182 of the Income Tax Ordinance, 2001 was imposed as per the following details:- S. No.Month Amount of Tax (Rs.)Penalty at 3% of Amount
1. Jul. 16 277, 667 8, 330
2. Aug. 161,649,66949,490
3. Sep. 161,942,47258,274
4. Oct. 161, 791, 63953,749
5. Nov. 16 1,474,1 1144,223
6. Dec. 161,662, 59949, 878
7. Jan. 171,489,04944,671
8. Feb. 171,559,79246, 794
9. Mar. 172,301,80069,054
10. Apr. 171, 475, 69044,271
11. May. 174,044, 915121, 347
12. Jun. 171,931,413 57,942 Total 21, 600, 816648,024
3. The appellant filed appeal before the learned Commissioner (Appeals-I), Karach i, who confirmed the order , with the following narration:- "3.7 The appellant being a withholding agent was required to deduct and deposit withholding of tax under various provisions of the Income Tax Ordinance, 2001 on payments made under different heads of the expenditure. The appellant being withholding agent required in terms of section 165 to furnish monthly withholding statement in the prescribed format in a manner and mode provided therein.
3.8. The appellant filed monthly stateme nts within prescribed time which is an admitted fact. However , appellant failed to follow the mode and manner of providing particulars of withholdee as set out in the prescribed format as per clauses (a) to (d) of section 165(1) of the Income Tax Ordinance, 2001. Instead, the appellant furnished single liner data provided accumulative figure of tax withheld and deposited and no particulars of withholdee's as set forth and required in subsection (1) of section 165 has been provided for. The learned officer has taken cognizance of said default of appellant and issued notices for levy of penalty under serial No. 14 of table as per subsection (1) of section 182 but the appellant failed to make compliance that constrained the learned officer to pass penalty order as per show-cause notice under the provision as confronted and levied three percent of tax involved on twelve monthly withholding statement e-filed by the appellant but were not in accordance with the format providing particulars of withholdee.
3.9 However , in the appeal proceedings the learned AR has taken the stance that providing of particulars of withholdee was beyond the control of the appellant due to some technical errors and glitches of FBR e-portal.
Since the appellant failed to give such stance before the learned officer despite the fact reasonable opportunity was provided therefore the impugned order is silent on such technical error/glitches of FBR e-portal and stance or department as such not available to adjudicate. Hence, this submission of the appellant also cannot be given a favorable consideration being not supported with concrete material evidences. Even otherwise, when the appellant was able to fill certain columns on withholding statements, it is unlikely to assume that the columns relating to withholdee's could not be filled on FBR's e-portal. Non-declaration of such vital information had practically made the purpose of filling of such withholding statement un-useful and redundant. As with exclusion of such vital information, the learned officer was in no position to conduct withholding proceedings. Also, the appellant was given notices to explain such position but the appellant opted to stay away rather than responding. No plausible explanation was offered for such wilful default. The learned AR has relied upon various case laws in support of his contention as reproduced above but the same are found not relevant to the facts and circumstances of the instant case.
3. 10 In of above discussion, stance of the appellant is rejected being devoid of any merits. The impugned order thus stands confirmed."
It is against this order that the taxpayer has filed the instant appeal.
4. The case was fixed for hearing on 04.03.2020 and in response to the notices, Mr. Muhammad Siddique, Advocate appeared for the appellant, while Mr. Amjad Hussain Janwri, Departmental Representative appeared for the respondent. Both the learned representatives were heard.
5. The learned Authorised Representative, appearing for the appellant submitted that the appellant had filed its statements of tax deduction but the vendor's information was not included in the statements and only the amount of tax deduction was given. The system had accepted these statements and there was no loss of revenue. No notice was given to the appellant for correction of statements. Relying upon the decisions of this Tribunal in I.T.A. No. 661/LB/2012 dated 05.10.2016 and 2003 PTD 1698 , he submitted that the penalty could not be imposed in the case. In response to a query , the learned Authorised Representative submitted that although there had been some instances of late filing by the appellant in the past, the recent history of the appellant was that of timely filing of statements.
6. The learned Departmental Representative for the appellant submitted that there was a regular pattern of filing of statements in improper form which showed that the default was wilful. The respondent had provided an opportunity to the appellant by issuance of show-cause notice to the appellant before the imposition of penalty . He further submitted that the appellant could not take refuge on the pretext that it was not aware about the alleged default as the ignorance of law was not an excuse.
7. I have gone through the orders of the officers below as well as the submissions of both the learned representatives. I have also gone through various documents submitted before this Bench by the learned Authorised Representative of the appellant in support of his contention. The appellant has taken the plea before this Bench that although it had filed its statements for all the impugned periods, but it had not included the vendor's information in the statements. The learne d Authorised Representative of the appe llant has submitted copy of the statement for the period 01 -- Jul -- 2016 to 31 -Jul -- 2016 dated 20 -- Dec -2016 as an example, which contains the following details:- Computations DescriptionCodeTotal AmountAmount Exempt from Tax / Subject to fixed / Final TaxAmount Subject to Normal Tax Withholding Income Tax92010.00 277,667.00 0.00s This statement was due in the month of August 2016, but as the date of the document indicates, the purported statement was filed in December 2016, i.e. it was late by four months. Besides this delay in filing of the purported statement, this document did not contain any details except the amount of tax deducted at source.
8. It would be useful at this stage to go through the statutory provision of section 165 of the Income Tax Ordinance, 2001 as it stood during the impugned tax year in order to further appreciate the issue at hand. The section read as under:- "165. Statements .----(1) Every person collecting tax under Division II 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 setting out -
(a) the name, Computerized National Identity Card Number , National 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 deduc ted 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 subsection (1) shall be required to file withholding statement even where no withholding tax is collected or deducted during the period.
Explanation .----For the removal of doubt, it is clarified that this subsection overrides all conflicting provisions contained in the Protection of Economic Reforms Act, 1992 (XII of 1992), the Banking Companies Ordinance, 1962 (LVII of 1962), the Foreign Exchange Regulation Act, 1947 (VII of 1947) and the regulations made under the State Bank of Pakistan Act, 1956 (XXXIII of 1956), if any, on the subject, in so far as divulgence of information under section 165 is concerned.
(2) Every prescribed person collecting tax under Division II of this Part or Chapter XII or deducting tax from payment under Division III of this Part or Chapter XII shall furnish or e-file stateme nts under subsection (1) by the 15th day of the month following the month to which the withholding tax pertains.
(2A) Any person who, having furnished statement under subsection (1) or subsection (2), discovers any omission or wrong statement therein, may file a revised statement within sixty days of filing of statement under subsection
(1) or subsection (2), as the case may be.
(3) Board may prescribe a statement requiring any person to furnish information in respect of any transactions in the prescribed form and verified in the prescribed manner .
(4) A person required to furnish a statement under subsection (1), may apply in writing, to the Commissioner for an extension of time to furnish the statement after the due date and the Commissioner if satisfied that a reasonable cause exists for non-furnishing of the statement by the due date may, by an order in writing, grant the applicant an extension of time to furnish the statement.
(5) The Board may make rules relating to electronic furnishing of statements under this section including, -
(a) mandatory electronic filing of statements; and
(b) determination of eligibility of the data of such statements and e-intermediaries, etc.
(6) Every person deducting tax from payment under section 149 shall furnish to the Commissioner an annual statement in the prescribed form and manner ."
The law is thus very clear that the statement has to be filed by the prescribed date, has to contain the prescribed information regarding the persons from whom the tax is deducted or collected and has to be in the prescribed form.
9. It would be useful to refer to the judgme nt of the honourable Lahore High Court in the case of Commissioner of Income Tax / Wealth Tax, Companies Zone III, Lahore v. Idara-I-Kissan Lahore, reported as 2006 PTD 2569 . In this judgment, the honourable Lahore High Court has held that it was settled law that if the law prescribes a particular manner and procedure in which the things are required to be done, the same must be done that way or not at all. Going by this principle, the statement purported to have been filed by the appellant is an invalid statement and is a nullity in the eyes of law. The repeated filing of such invalid statements for twelve months in succession along with the delay of four months in filing of the purported statem ent for the month of July 2016 (which is the only purported statement the copy of which has been provided at the time of hearing) also gives a positive indication of mens rea on part of the appellant, although complete reliance cannot be made upon this single factor , in the absence of any other indications in this regard. There appears to be a growing consensus that the penalty proceedings are at least quasi-criminal proceedings and the presence of mens rea is essential for the imposition of any penalty under the Income Tax Ordinance, 2001. Reliance can be placed in this regard upon the judgment of the honourable Lahore High Court in the case of Bhola Weaving Factory v. Custom, Excise and ST AT, reported as 2004 PTD 1048 and the judgment of the honourable Sindh High Court in the case of CIT v. Habib Bank Limited, reported as 2007 PTD 901 . The Black's Law Dictionary , Ninth Edition, defines "mens rea" as under:- "mens rea. [Law Latin "guilty mind]. The state of mind that the prosecution, to secure a conviction, must prove that a defendant had when committing a crime; criminal intent or recklessness. Mens rea is the second of two essential elements of every crime at common law, the other being actus reus. -- Also termed mental element; criminal intent; guilty mind". The recklessness may in turn be defined as the lack of proper caution or carelessness about the consequences of an act.
10. The mens rea, in short, denotes the state of mind that would compel a person to deviate from the law or to commit an offence, which also encompa sses recklessness within its ambit. The concept of mens rea basically revolves around the state of mind and the conduct of the person. It requires an overview of the facts surrounding a particular case in order to establish the mens rea. Besides the repetitive conduct of the defaulting taxpayer , the advantage drawn as a result and other surrounding factors have to be taken into consideration in order to establish it.
11. The cases relied upon by the learned counsel of the appellant do not come to the help of the appellant as there is a repeated default of telve consecutive months in the instant case. Besides this the appellant has not submitted any transaction-wise details even at this stage, which would support its plea that there is no loss of revenue as a result of this default. The plea regarding problems at the FBR portal is also not tenable due to the prolonged period of default and the failure on part of the appellant to adduce any evidence to show that the matter was taken up with the Board. The appellant has also not brought any evidence of filing the statements manually if it faced any problem with the electronic filing of the same.
12. There is another aspect of this case that merits consideration. I have already held in the preceding part of this order that the statements purportedly filed by the appellant are invalid statements and are thus a nullity in the eyes of law. The default therefore attracted the provision of the entry at Serial No. (1A) of subsection(1) of section 182 of the Ordinance, instead of the provision of entry at Serial No. 14. This aspect is especially important as the entry at Serial No. (1A) is a special provision and would thus prevail over the general provis ion of the entry at Serial No. 14.
I therefore remand the matter back to the respondent to (i) look into the case afresh vis a vis the presence of mens rea in the case, and (i) take the action afresh in the light of this finding under the correct entry of subsection (1) of section 182.
13. The appeal is decided in the manner indicated above.