ZAHID SIKANDAR (JUDICIAL MEMBER). The titled second appeal has been preferred by the CIR under section 131 of the Income Tax Ordinance, 2001 (hereinafter referred as the 'ITO') against the Order No.39 dated 26.02.2014 passed by the Learned CIR (Appeals-III), Lahore, wherein the Learned CIR(A) has remanded the case to the assessing officer for de-novo consideration with the direction to proceed strictly in accordance with law and in the light of observations made under the said order.
2. Brief facts of the case are that the respondent/taxpayer is an AOP and is engaged in the business of manufacturing of basic iron and steel products. Return for the tax year 2012 and monthly withholding statements under section 165 ITO were filed by the taxpayer. However, on examination, the Learned assessing officer noted that the taxpayer failed to deduct tax properly while making payments on account of various heads and chunk of payment were made without deduction. The Learned assessing officer proceeded to issue notice to the taxpayer under sections 161(1A)/205 of the Income Tax Ordinance, 2001 along with follow up reminder.
3. The taxpayer filed the reply which was found unsatisfactory by the Learned assessing officer. The Learned DCIR observed that the taxpayer being withholding agent was obliged to deduct tax, however, he failed to adhere with the withholding provisions of Income Tax Ordinance, 2001 and declared the taxpayer to be in default of tax deduction. The Learned DCIR vide order dated 07.08.2013 under sections 161/205 treated the taxpayer in the following manner:- Head of expenseAmount of expensesPayment on which tax was liable to beTax rate Tax liable to be deducted Tax deducted asEvident shortfall claimed by you deducted payment on which tax not deducted per statement under section 165 Manufacturing/trading expenses: Salaries and wages2,192,0942.192,094,5%109,605--109,605 Other expenses 3,989,5963,989,5966%239,376--239,376 Stores/spares 872,390872,3906%52,343--52,343 Profit and Loss Expeses: Salaries and Wages600,000600.0005%30,000--30,000 Travelling and Conveyance54,56254,5626%3,274--3,274 Communication on Charges 50,23650,2362%1,005 --1.005 Selling Expenses (Freight outward etc.)235,413235,4133.5%8,239--8,239 Others 2,826.1112,826,11 16%169,567--169,567 Total Tax Default under section 161 613,409--613,409 Order as to default surcharge under section 205: Tax under section 161(1)(a) 613,409 Default surcharge under section 20592,011 Total 705,420
4. Feeling aggrieved by the order of the Learned DCIR, the respondent taxpayer filed an appeal under section 127 of the Income Tax Ordinance, 2001 before the Learned CIR(A). The Learned CIR (Appeals), after hearing the matter, remanded the case to the assessing officer for de-novo consideration. Hence, this second appeal has been filed by the department against the order of the Learned CIR (Appeals).
5. The only ground agitated by the Learned DR during the course of hearing is that the Learned CIR(A) cannot remand back the matter to the assessing officer hence the impugned order is illegal and unlawful. On the other hand, the Learned AR supported the order of the Learned CIR(Appeals) and submitted that evidence in support of his contentions were furnished before the learned DCIR and the taxpayer is not a defaulter of tax deduction. He further submitted that the Learned DCIR did not consider the evidence provided by the taxpayer.
6. We have heard the arguments of representatives of both the parties and perused the impugned order as well as the order passed by the assessing officer.
7. We will first decide the legal question raised by the Learned DR whether the Learned Commissioner (Appeals) is vested with power under the Income Tax Ordinance to remand a case with regards to the provisions under sections 161/205. Under the scheme of Income Tax Ordinance, 2001, Sections 127-129 are the provisions which are related to the appeals before the CIR (Appeals).
A person may file an appeal against the order passed by the commissioner or officer Inland Revenue under section 127. Then the procedure for the hearing of appeal is provided in section 128 of ITO. The power to decide an appeal is given in section 129 of ITO. The relevant part of section 129 with regards to disposal of appeals by Commissioner (Appeals) is reproduced as under for ready reference: "129 (a) Make an order to confirm, modify or annul the assessment order, after examining such evidence as required by him respecting the matters arising in appeal or causing such further enquires to be made as he deems fit; or
(b) In any other case, make such order as the Commissioner (Appeals) thinks fit.
8. The above referred section has two shades. In case of an appeal against an assessment order the Commissioner (Appeals) may confirm, modify or annul the order whereas in any other case, the commissioner (Appeals) may make such order as he deems fit. The words confirm, modify and annul used in section 129(1)(a) confine and limit the power of the Commissioner Appeals to decide an appeal against an assessm ent order. The legislature has specifically inserted these words specifying the powers of Commissioner (Appeals) to exclude any other way of disposal of appeal against assessm ent orders. Hence, it is clear from the plain language of section 129(1)(a) that the Commissioner (Appeals) is not vested with power to remand a case where the appeal is against an assessm ent order under the provisions of Income Tax Ordinance, 2001 and he can only confirm, modify or annul the assessm ent order of assessing officer. However, in case of appeal against an order other than assessm ent order, the Commissioner (Appeals) may pass an appropriate order as he thinks fit. The term 'as he thinks fit' has been elaborated by courts of our country as well as by Indian courts in various judgments.
9. In the case reported, as Babulal Nagar v. Shree Synthetichs Lt., AIR 1984 DV 1164, 1165, the Supreme Court of India has held that "Section .... Confers a very wide jurisdiction on the... Court to pass any order 'as it think fit', context otherwise indicates, 'as it deems fit. And the latter expression mean to make an order in terms of the statute, an order which would give effect to a right which the Act has elsewhere conferred.....The expression "as it thinks fit" confers a very Wide jurisdiction enabling it to take an entirely different view on the same set of facts and he as the same connotation, unless context otherwise indicates, 'as he deems fit, which means to made an order in terms other statute, which would give effect to a right which the act has elsewhere conferred.
In another tax case, the Supreme Court of India in case titled as CIT v. Assam Travel Shipping Service reported at 1993 PTD 885 (1993) 199 ITR 1 (SC), has defined these phrases in the following words "The expression 'as he thinks fit' is wide enough to include the power of remand to the authority competent to make the requisite order-in-accordance with law in such a case even though the Tribunal itself could not have made the order enhancing the amount of penalty.
10. After considering the above referred judgments, it is safely observed that the phrase 'make such order as the Commissioner (Appeals) thinks fit given in Section 129(1)(b) is not a restricted term, phrase or expression rather it gives wide powers and broad discretion to Commissioner (Appeals) to pass an order including a remand of case to the assessing officer keeping in view the merits of the case and based on his judicial conscience. Needless to observe that such power and broad discretion are not limitless and have to be exercised within legal bounds. Hence, we feel no hesitation to hold that under section 129(1)(b), the Commissioner (Appeals) is vested with the powers to remand a case in an appeal against any order under Income Tax Ordinance, 2001 other than an assessm ent order.
11. Now in the context of this case, a question arises as to what is the nature of proceedings under sections 161/205 ITO to determine the power of the Commissioner (Appeals) for the purpose of disposal of appeal under section 129 of ITO.
12. In the scheme of fiscal laws, normally there are three distinct types of provisions provided under the law namely charging provisions, assessment provisions and collection provisions. Charging provisions relate to levy and charge of tax, assessment provisions deal with the assessment, calculation or quantification of ax whereas collection provisions relate to the mode and manner of recovery or collection of tax. Provisions under section 161 are of collection of recovery in nature and are distinct from provisions of assessment in the Income Tax Ordinance. The provisions under section 161 are neither provisions for assessment of income nor same are charging provisions rather provisions of section 161 are simpliciter in nature of collection/recovery of tax. Reliance is placed on a judgment passed by full bench of this tribunal in a case titled Commissioner Inland Revenue v. Messrs Medimakers Pharmaceuticals reported in 2018 PTD 1533. The relevant concluding para is here as under:-- "52. In view of above examination of various provisions of Income Tax Ordinance, 2001, we are of the firm opinion that the assessm ent order framed under section 120 or 122 are distinct from the provisions of section 161. Former being of second type of fiscal statute viz. an assessment of income and tax, whereas later is an order for Collection or recovery of tax."
13. This court is of the opinion that since the proceedings under sections 161/205 are of recovery or collection of tax and not assessm ent proceedings therefore, the Learned Commissioner (Appeals) under section 129(1)(b) has power to remand the case below. Hence, the argument of the Learned DR in this respect is rejected.
14. The Learned assessing officer confronted the whole amount appearing in the return of income of the taxpayer without establishing these that these were all payments. Neither the Learned assessing officer pointed out specific default in terms of section 161 nor identified names and addresses of the parties from whom and how much tax was to be deducted. Therefore, the Learned Commissioner (Appeals) has rightly held that the impugned order under sections 161/205 was passed without following statutory provisions and without properly considering the contentions of the taxpayer. However, the Learned CIR (Appeals) also considered the statement filed by taxpayer under section 165 submitted as NIL or showing incomplete payments not valid and in violation of statutory provisions from withholding agent side. Thus, keeping in view the discrepancies from both sides, the Learned CIR (Appeals) remanded the matter to assessing officer for de-novo consideration.
15. We do not find any illegality in the order dated 26.02.2014 passed by the Learned CIR(A), hence the same is upheld. The appeal of the department is dismissed.
16. Order accordingly.