MIAN TAUQEER ASLAM (JUDICIAL MEMBER) .----The subject appeal of the taxpayer for assessment year 1999- 00 and departmental appeal for assessment year 1996-97 were decided by this Tribunal vide consolidated order dated 16.08.2006. Being aggrieved, the Department filed. Reference before the Hon'ble Lahore High Court and the same was decided vide PTR No.551 of 2006, and the matter was remanded to this Tribunal with the following observations / directions: - "10. The question of law in these referen ce applications is therefore, answered in the negative and the reference applications are accepted. The impugned orders are set aside and the cases are remanded to the Tribunal for the determination in each case regarding the reasonableness of the period within which the notices have been issued under section 161 of the Ordinance and whether on the facts and circumstances of the case the said notices ought to be sustained on the touchstone of having been issued within a reasonable period of time or not. The Tribunal shall, in so determining, be guided by the judgment of the Supreme Court of Pakistan and the Sindh High Court referred to above".
2. The following question of law has been answered in the negative by the Honorable Lahore High Court:- "Whether under the facts and in the circumstances of the case, the learned ITAT was justified to prescribe time limitation for action under section 161 of the Income Tax Ordinance, 2001 whereas the law does not provide any such limitation for such action as it is more akin to recovery of outstanding taxes for which no limitation period has been prescribed."
3. The present proceedings arise from Hon'ble Lahore High Court order dated 16.08.2006 whereby the Tribunal's earlier order was set-aside and case has been remanded back to the Tribunal to determine (a) the reasonableness of the period within which the notices have been issued under section 161 of the Ordinance and (b) whether on the facts and circumstances of the case the said notices ought to be sustained on the touchstone of having been issued within a reasonable period of time or not. The Tribunal has been directed to be guided by the judgment of the Supreme Court of Pakistan in Civil Appeals Nos 1901-1092/2009 Messrs Pakistan Mobile Communication (Pvt.) Ltd. v. The Commissioner of Inland Revenue dated 17.05.201 1 and the Sindh High Court judgement 2013 PTD 1659 Messrs Habib Bank Limited v. FOP. The case was fixed for hearing to decide the appeal in the light of the observations/directions appearing at Para-10 of the judgment of the Hon'ble Lahore High Court.
4. Briefly stated, the relevant facts of the case are that proceedings under sections 161/205 of the Income Tax Ordinance, 2001 for the assessment years 1996-97 and 1999-00 were initiated against the taxpayer company because it made payments under Golden Handshake Scheme but no tax was deducted or deposited. Accordingly , for recovery of withholding tax not deposited a show-cause notice under sections 161/205 dated 15.12.2003 was issued for both the years. As the taxpayer company despite several adjournments failed to provide evidence of any tax being deducted and deposited therefo re the assessing officer decided that the taxpayer has nothing to say and treated it as assessee in default by pass ing the order under sections 161/205(3) of the Income Tax Ordinance, 2001, dated 01.01.2004 and worked out the tax liability for both years as under: - 1996-197 1999-00 Amount of payment made under Golden Handshake26,504,216 1,239,833 Tax deductible under section 149 @ 10 %2,650,421 123,983 Additional tax under section 205(3) 31.12.023,816,606 89,268 Total tax 6,467,027 213,251
5. Being aggrieved, the taxpayer went in appeal before the learned CIR(A). The Appeals for assessment years 1996-97 and 1999-00 were decided vide appellate Orders Nos. 243 and 244 dated 24.05.2004 in the following manner: - "It is to be appreciated that while the period of limitation prescribed under section 156 of the repealed Ordinance in respect of the assessment order dated 28.6.1997 expired much before the date of impugned order i.e. 1.1.2004, yet, the assessment completed under section 62 of the repealed Ordinance on 29.3.2001 pertaining to assessment year 1999- 2000 was still open to rectification under section 156 of the repealed Ordinance.
Under the circumstances of the case, the impugned order is found to be hit by limitation so far as it pertains to assessment year 1996-97 only. It shall accordingly stand cancelled for said the assessment year 1996-97. No such legal infirmity is found in the impugned order pertaining to assessment year 1999-2000".
6. Being aggrieved of above appellate order the taxpayer filed an appeal before the Income Tax Appellate Tribunal for the tax years 1999-2000 on the groun d that the assessment was barred by time limitation. Perusal of Tribunal's earlier order dated 16.08.2006, reveals that this Tribunal had decided the appeals on the point of limitation with the following observations:- "7. We have heard the learned representatives of both sides and have also perused the orders passed by the authorities below . The learned AR drew our attention to a reported judgment of the Hon'ble Karachi High Court, reported as (2004) 89 Tax 188, 'whereby the Hon'ble High Court, has decided that period of limitation has to be calculated from the end of the financial year and not from the date of assessment order as held by the learned first appellate authority .
8 We have examined the reported, case law cited supra which, in our considered judgment, is 'on all fours' with the case of the assessee, in view of which, the order passed under sections 161/205(3) of the Income Tax Ordinance, 2001, for the assessment year 1999-00, is null and void being barred by limitation of time and hence not sustainable in the eyes of law. The order of the learned CIT(A) for assessment year 1999-00, is accordingly vacated".
7. Being aggrieved of the above order of the Tribunal the Commissioner of Income Tax /department filed an.
Income Tax Reference application before the Honorable Lahore High Court. The case was remanded deciding the question of law in negative meaning thereby that ITAT was not justified to prescrib e time limitation for action under section 161 of the Income Tax Ordinance, 2001. On the facts the Tribunal was directed to determined (a) the reasonableness of the period for recovery under section 161 of the Ordinance and (b) whether on the facts and circumstances of the case recovery/assessment ought to be sustained on the touchstone of having been issued within a reasonable period of time or not.
8. To determine the above, the case was fixed for hearing which was represe nted by both the parties. The arguments of both sides were heard and the available record was perused. The facts and circumstances of this case are clearly stated in the Tribunal's order mentioning the transaction of Golden Hand Shake Scheme payments mentioned in the return on which withholding income tax was deductible but no withholding tax was deposited. For the recovery of the tax a notice under sections 161/205 was issued on 15.12.2003. The order under sections 161/205 was passed on 1.1.2004. The order further states that the original assessment order under section 62 of the Income Tax Ordinance, 1979 for the assessment year 1996-97 was completed on 28.06.1997 and for the assessment year 1999-00 the assessment was completed on 29.03.2001. In deciding the appeal the learned CIR(A) concluded that the period of limitation prescribed under section 156 of the Repealed Ordinance would apply therefore for the assessment year 1996-97 the limitation had expired much before the date of the impugned order dated 01.01.2004. As for the assessment year 1999-00, the learned CIR(A) held that the order originally passed under section 62 on 29.03.2001, was still open to rectification under section 156 of the repealed Ordinance hence he confirmed the order under section 161 passed by the assessing officer for assessment year 1999-00. The Tribunal decided the appeal relying on a reported judgment of the Honourable Karachi High Court 2003 PTD 1517 , whereby the Honurable High Court had decided that the period of limitation has to be calculated from the end of the Financial year and not from the date of assessment order . The Tribunal considered this judgment as "on all fours" with the case and held the order passed under sections 161/205 for the assessment year 1999-00 as null and void being barred by limitation of time, and, vacated the order of CIR(A). Resultantly the recovery order under section 161 of IT Os, 2001 were held as time barred although on dif ferent reasons regarding the calculation of time period.
9. We have examined the judgment relied by the Tribunal i.e. Commissioner of Income-T ax Zone-C, Karachi v.
Messrs Agha's Super Market, Karachi reported 2003 PTD 1571 = 2004 89 Tax 188. We observed that in this judgment there is no discussion on the subject in question and it is simply based on an earlier judgment of the High Court of Sindh, Karachi reported as "Commissioner of Income Tax v. Kamr an Model Factory (2002 PTD 14).
The said judgment is altogether on a different subject matter involving charge of Worker's Welfare Fund and not recovery of income tax under section 52 of the Ordinance, 1979. Not charging WWF at time of passing order under section 62 was a mistake evident from record rectifiable under section 156 of the Ordinance, 1979. While to hold a taxpayer as an assessee in default there is no requirement of passing the recovery order under section 52 simultaneously at the time of passing the assessment of income order under section 62 of the Ordinance, 1979. It cannot be said that there was an error in the order passed under section 62 while assessing the income that required subsequent rectification. This same judgment 2003 PTD 1571 (88 TAX 188) relied upon by the Tribunal in deciding the appeal was also considered by the Islamabad High Court and found distinguishable and not applicable to a case under section 52 in deciding the ITRs Nos.44 and 45 of 2007 in case of CIR v. Pakistan Mobile Communication (Pvt.) Ltd., which was upheld by the Supreme Court of Pakistan in Civil Appeals Nos 1901- 1092/2009 M/s Pakistan Mobile Communication (Pvt.) Ltd v. The CIR dated 47.05.201 1. The Lahore High Court in a later reported judgment cited as 2016 PTD 2074 , Maple Leaf Cement Factory (Pvt.) Ltd. v. FBR observed on the above judgment as under:- "The judgment of the Supreme Court of Pakistan rendered in Civil Appeals Nos.1091 and 1092 of 2009 which too is an authority for its own facts. In that judgment, the controversy was regarding the question of limitation in order to substantiate actions initiated by the income tax authorities under section 52 of the Income Tax Ordinance, 1979 and whether the provisions of section 156 could be made applicable in such cases. The answer to these questions were returned in the negative by the Supreme Court and it was held that no period of limitation was prescribed in section 52 of the Ordinance, 1979 and none could be imported in the said provision by reference to section 156 of the Ordinance, 1979. It was in this context that observations were made that this was a deliberate omission by the legislature so that there can be no possibility of evasion or failure to arise the requisite tax."
10. We have also considered whether the Sindh High Court judgement 2013 PTD 1659 M/s Habib Bank Limited v. FOP would apply to the facts and circumstanc es of the case in hand. The relevant portion of the said judgment is reproduced hereunder:- "36. For the foregoing reasons, we are of the view that such a time related limiting factor does exist in relation to the exercise of powers under section 161, although it is not of course, a bar of limitation as such. This brings us to the next question: what is the point in time, beyond which the Commissioner , if he is to act at all, must justify the taking of action? Where does the, dividing time line lie, beyond (but not before) which the Commissioner carries the onus that he must discharge? In our view, it is in answer to this question that section 174 becomes relevant. If the Commissioner takes action under section 161 for a failure to deduct tax, and the amount from which the deduction had to be made was relatable to the deducting authority's income (in the manner explained in para 29 above) then any such action taken beyond the period up to which the deducting authority had to maintain its books of account, etc. under section 174 would require proper justification. The onus would then be on the Commissioner to explain why action was being taken belatedly . If there is a proper justification, then the onus would stand discharged and the action would be sustainable in law (subject of course, to any other defenses available to the deducting authority). If however , there is no proper justification, then the onus would not be discharged and the action would be liable to be set aside. The reason why the time fixed for purposes of section 174 provides the necessary dividing time line is as canvassed by learned counsel for the petitioners. Beyond that time, in law and for purposes of the 2001 Ordinance, the deducting authority / taxpayer would not be under any obligation to maintain the books of account, etc. the opportunity of hearing envisaged by section 161(1A), which is mandatory , may well become illusory . But by reason of section 174, it is not for the deducting authority / taxpayer to show that this is so once the period stated in this section has elapsed. Rather , it would for the Commissioner to justify his belated action. The onus would lie on him and not other way around."
The same issue of the time limiting facto r and determination of the reasonable time to be as provided in section 174 was decided by the Lahore High Court in reported judgment cited as 2016 PTD 2074 Maple Leaf Cement Factory (Pvt.) Ltd. v. FBR and the Honourable High Court after discussing Sindh High Court judgement 2013 PTD 1659 Messrs Habib Bank Limited v . FOP in detail preferred to dif fer as under:- "16. The only judgment which directly deals with the issue in hand is a reported judgment of the Sindh High Court viz. Habib Bank Ltd. v. Federation of Pakistan through Secretary , Revenue Division and 5 others (2013 PTD 1659 ) and the following observations are relevant: "...The statements of tax deducted were duly filed, again many years before the action was begun. Thus, there is no doubt that if the Department had been so minded, it could have taken the impugned action much earlier and well before the period stipulated in section 174 had elapsed. It did not however , do so. No proper justification has been provided for the belated action. In our view, the onus that lies on the Department has not been discharged.
Thus, although it cannot of course be said that the impugned actions are barred by limitation, the Department has nonetheless failed to cross the threshold of the time related limiting factor identified in the paras hereinabove. The actions are not sustainable and the exercise of the statutory power conferred by section 161 is, in the facts and circumstances of the present cases, unlawful."
17. Although, in the judgment of the Sindh High Court, the exercise of statutory powers and the action taken under section 161 were declared unlawful, I will not go to the extent of declaring those actions as unlawful as, in my opinion, the provisions of section 161 and the soliciting of information under sections 165 and 177 of the Ordinance, 2001 may proceed on its own and the only power which can be placed is on the department to compel the petitioners to furnish records beyond a period of five years. However as can be seen, the Sindh High Court did not conclusively render a holding on whether a taxpayer was or was not obliged to provide the documents beyond a period of five years. By relying upon a concept of "time related limiting factor" and by reading section 174 with section 161, it was held that "justification had to be provided for the belated action ". What if the justification was in fact forthcoming? In my opinion, as adumbrated, the taxpayer is relieved of his obligation to maintain the record beyond a period of five years and to produce it upon notice to do so."
11. We have considered the facts of the case as well as the ratio decidendi settled by the following judgments namely Commissioner of Income Tax v. Messrs Agha's Super Market, Karachi reported 2003 PTD 1571 = 2004 89 Tax 188; Commissioner of Income Tax v. Kamran Model Factory (2002 PTD 14); Supreme Court of Pakistan in Civil Appeals Nos. 1901-1 092/2009 Messrs Pakistan Mobile Communication (Pvt.) Ltd. v. The CIR dated 17.05.201 1 Sindh High' Court judgement 2013 PTD 1659 Messrs Habib Bank Limited v. FOP; Maple Leaf Cement Factory (Pvt.) Ltd. v. FBR 2016 PTD 2074 = 2016 PTCL 548. We are convinced that limitation of section 156 of the Repealed Income Tax Ordinance, 1979 does not apply to instant case as held by Supreme Court of Pakistan in Civil Appeals Nos 1901-1092/2009 Messrs Pakistan Mobile Communicatio n (Pvt.)
Ltd. v. The CIR dated 17.05.201 1. Further , the facts and circumstances in instant case are that of recovery of withholding tax on expenses under Golden handshake scheme declared in the income tax return. It's not disputed whether declared Golden handshake payments attracted withholding income tax. The assessing officer's only question was to show tax deposit challans. The taxpayer did not provide these challans. Further in this case no records were being called from the taxpayer for examination. We are convinced that as no accounts were being called by the assessing officer, therefore the time prescribed for calling of records under section 174 does not attract in this case. Here issue is not audit or examination of accounts to determine a default of withholding tax but instead issue is payment of tax due to the government. Here assessing officer did not intend to call for and examine the records to determine a default in compliance with obligations as a withholding agent. But instead he asked to see tax payment challans but these were not provided. These have not been produced before the assessing officer, the CIR(A), or the tribunal in previous proceedings as well as the present remand back proceedings. The reasonable of time to assess and determine the amount of default on examination of documents or records is not the issue in hand, hence question of reasonableness of time or time limiting factor does not arise.
Hence in the facts and circumstances of the case the Sindh High Court judgment in Messrs Habib Bank Limited v. FOP 2013 PTD 1659 as well as the later judgment by the. Lahore High Court in Meple Leaf Cement Factory (Pvt.) Ltd. v. FBR 2016 PTD 2074 = 2016 PTCL 548 do not support the claim of taxpayer . Further we observe that the provisions of section 161(1) of Income Tax Ordinance, 2001 as amended by Finance Act, 2002 and existing till today still provides for recovery of tax not withheld or not credited to the Government under section 50 of the repealed Ordinance, 1979. The intent of legislature is very clear that a tax not paid under section 50 of repealed ordinance can still be recovered today under section 161 of the Ordinance, 2001. By prescribing a limitation of section 174 for recovery of default committed under section 50 would make part of section 161 as redundant or superfluous. It is settled law that redundancy or superfluity can be attributed to a provision of law. In view of above, we are convinced that no time limitation can be prescribed for recovery under 161 of withholding tax default which includes a default committed under section 50 of the repealed Ordinance, 1979. For the above reasons the appellate order of the learned CIR(A) is vacated and the recovery order under section 161 of the Ordinance, 2001 is upheld as valid under law for both the years.
12. The other aspect of the case is the period of default for the purpose of section 205 of the Ordinance, 2001. The additional tax was charged in cursory manner upto 31.12.2002 while the order under section 161 has been passed on 01.01.2004. In this case the normal assessment order was passed under section 62 of the Repealed Ordinance, 1979 on 28.06.1997 for tax year 1996-97 and for assessment year 1999-00 assessment under section 62 was completed on 29.03.2001. The assessing officer at that time had all the information with him regarding the expenses under Golden Handshake scheme but he failed to use it then to determine the default of withholding tax and to recover it by passing appropriate order under section 52 of the Ordinance, 1979 which was applicable at the relevant time. The delay in charging the recovery is attributable to the assessing officer not taking the action although the information was available with him in the financial statements provided with the return or before the finalization of the normal law assessment under section 62 of the Ordinance, 1979. Once the relevant information was available with the department then any inaction or delay in not using it is attribu table to the department. In the reported landmark judgment on the issue of additional tax under the Sales Tax Act, 1990, the Supreme Court of Pakistan has held that each and every case has to be decided on its own merits as to whether the evasion of payment of tax was wilful or mala fide, decision on which would depend upon the question of recovery of additional tax : Reliance Messrs D.G. Khan Cement Company Ltd. and others v. The Federation of Pakistan and others 2004 SCMR 456 = 2004 PTD 1 179.
Further , the charge of additional tax for the delay over many year is thus not justified especially when much of the delay was attributable to the department and the taxpayer cannot be further burdened for a delay that is not due to its fault. Considering the above facts of the case, we are convinced the default period to be excessive in the circumstances. We hold that the reasonable period of default be taken to end on the dates of 28.06.1997 for tax year 1996-97 and 29.03.2001 for assessment year 1999-00 being date on which assessment under section 62 was completed and that the rates applicable during the default period under section 86 of the repealed Ordinance, 1979 be applied to determine the additional tax.
12. Resultantly , departmental appeal succeeds as discussed above.
13. This order consists of (10) pages and each page bears my signature.