Sye d Shahid Bahar, J. Instant lis is an Income Tax Reference (ITR) under Section 133(1) of the Income Tax Ordinance, 2001.
In the titled References Nos. 26/2012 and 27/2012, some common question of law and facts are involved and the same have been filed against the consolidated judgment dated 20.01.2012 passed by the Appellate Tribunal Inland Revenue (ATIR) Azad Jammu and Kashmir Council Muzaffarabad, hence, these references were clubbed up and are being disposed of through this single Judgment.
Brief facts of the case are that the appellant Malik Muhammad Yaseen Manager UBL Bhimber Branch was treated as withholding Tax agent by the taxation officer and resultantly the respondent herein was required to furnish monthly and annual withholding tax statement of his brand. The respondent Manager filed statements in response to the notices issued by the taxation officer concerned, but the taxation officer finding that the statement offered/submitted was not comprehensive and satisfactory enough as well as incomplete, thus he opted to impose penalty on him.
The respondent was penalized in the tone of Rs.2000 for the Financial year 2007-08 and a penalty for a period from July 2008 to June 2009 amounting to Rs.24000/- was also imposed. The respondent feeling aggrieved from penalty order filed an appeal before the Commissioner Income Tax (CIT) (appeals) but the same was discarded, resultant of which the respondent preferred appeals before Appellate Tribunal Inland Revenue AJ&K (ATIR). Ultimately, the learned ATIR quashed the order of penalty by reversing the decision impugned therein dated 23.05.2011, through the impugned judgment dated 20.01.2012, hence, the instant references.
The following question of law has been raised by the petitioners:--
1. Whether on the facts and circumstances of the case the learned Appellate Tribunal Inland Revenue was legally justified to annual and upset the orders carrying concurrent finding? If the answer is in negative whether order of Appellate Tribunal Inland Revenue sustainable in law?
2. Whether on the facts and circumstances of the case, the order of the Learned Appellate Tribunal Inland Revenue is speaking order and enjoy the status of Judicial order in view of Order xx. Rule 04 & 05 of CPC Section 24-A of general clauses act, read with settled law by the superior Courts? If the answer is in negative whether order of Appellate Tribunal Inland Revenue is legally maintainable?
3. Whether on the facts and circumstances of the case, the case law referred in the order of Appellate Tribunal Inland Revenue is relevant and applicable in the instant case? If the answer is in negative whether the order of Learned Appellate Tribunal Inland Revenue is maintainable?
4. Whether on the facts and the circumstances of the case, the circular 13 1991 under the repealed Ordinance of 1979 read with Income Tax Rule 44(1) and 44(2) is applicable in the instant case? If the answer is in negative whether the order of Appellate Tribunal Inland Revenue is maintainable?
Haji Muhammad Afzal Khan, the learned counsel for the petitioner submitted written arguments wherein it has been contended that Taxation Officer Bhimber assessed and imposed penalty under Section 182(1) and (2) for failure to file annual statement under Section 165 for the Financial Year 2007-08 Rs.2000/- and imposed penalty for failure to file monthly statement reading period from July 2008 to June 2009 @ Rs.2000 for default of each statement, total penalty Rs.24000/-. He contended that the assessing officer passed the order after, giving due opportunity to the respondent. He staunchly contended that respondent went in second appeal before the learned ATIR who after hearing, arbitrarily while ignoring the prevailing law and passed the impugned order, which is against the law and facts and liable to be set-aside. He vigorously contended that the question of law has been raised through the instant reference which needs to be resolved. The learned counsel lastly prayed for acceptance of the instant references.
Mian Sultan Mahmood, the learned counsel for respondent also submitted written arguments, wherein the stance of the petitioner has been negated. The learned counsel submitted that learned Taxation Officer /ACIT Circle-08 Bhimber illegally treating the respondent-Manager UBL Bhimber Branch to be taxpayer without NTN Number and without address even issued notice and thereby forced and pressurized for submitting prescribed annual statement for Tax year 2008 under Section 165 of the Ordinance patently against the law and against legal mandate of the respondent as Branch Manager of a Registered Taxpayer Bank managing its income tax affairs through its Regional Office at Mirpur. The learned counsel staunchly submitted that the income tax affairs are regulated and controlled by Company Circle of the Inland Revenue Department with Regional officer Mirpur of the Taxpayer Bank having team of specialized tax experts for that purpose and Taxation Officer Income Tax/ACIT Circle-08 Bhimber is not competent to issue the notice to individual Branch Manager of the Taxpayer Bank or to initiate penal proceedings or to take any penal action under provisions of the Income Tax Ordinance, hence, the-proceedings conducted and the penalty order issued by the taxation officer Circle-08 Bhimber is without jurisdictional competence and without lawful authority. He further submitted that the proposed questions of law does not arise from the order of the learned ATIR, hence, the reference is not competent and is liable to be dismissed.
We have, given our dispassionate thought to the arguments of the learned counsel for the parties and gone through the record of the case with utmost care.
The petitioners herein claiming that the learned CIT (Appeals) concurring with the views of assessing Officer and rejected the appeals, so, in case of concurrent finding on fact and law the respondent filed appeal before the learned ATIR, who passed the judgment against the law by misreading and non-reading of evidence. The petitioners further took stand that the judgment of the learned ATIR was based upon the case law referred by the respondent, which was not relevant to the instant matter, hence, the judgment of the learned ATIR may be set at naught.
On the other side, the respondent averred that the finding of Taxation Officer that the statement was not comprehensive and complete, imposed penalty upon him and he was penalized in the tune of Rs. 2000/- per month and total penalty imposed upon him for financial year 2008-09 was of Rs. 24000/-. He filed appeal before Commissioner Income Tax (Appeals) Mirpur, A.K but the learned CIT, after hearing the parties, confirmed the order and appeal was dismissed vide order dated 23.05.2011 and the same was set-aside by the learned AITR through the impugned order.
It is necessary to reproduce the question of law raised by the petitioner herein, the same are as below:-
1. Whether on the facts and circumstances of the case the learned Appellate Tribunal Inland Revenue was legally justified to annual and upset the orders carrying concurrent finding? If the answer is in negative whether order of Appellate Tribunal Inland Revenue sustainable in law?
2. Whether on the facts and circumstances of the case, the order of the Learned Appellate Tribunal Inland Revenue is speaking order and enjoy the status of Judicial order in view of Order xx. Rule 04 & 05 of CPC Section 24-A of general clauses act, read with settled law by the superior Courts? If the answer is in negative whether order of Appellate Tribunal Inland Revenue is legally maintainable?
3. Whether on the facts and circumstances of the case, the case law referred in the order of Appellate Tribunal Inland Revenue is relevant and applicable in the instant case? If the answer is in negative whether the order of Learned Appellate Tribunal Inland Revenue is maintainable?
4. Whether on the facts and the circumstances of the case, the circular 13 1991 under the repealed Ordinance of 1979 read with Income Tax Rule 44(1) and 44(2) is applicable in the instant case? If the answer is in negative whether the order of Appellate Tribunal Inland Revenue is maintainable?
Haji Muhammad Afzal Khan, the learned counsel for the petitioner submitted written arguments wherein it has been contended that Taxation Officer Bhimber assessed and imposed penalty under Section 182(1) and (2) for failure to file annual statement under Section 165 for the Financial Year 2007-08 Rs.2000/- and imposed penalty for failure to file monthly statement reading period from July 2008 to June 2009 @ Rs.2000 for default of each statement, total penalty Rs.24000/-. He contended that the assessing officer passed the order after, giving due opportunity to the respondent. He staunchly contended that respondent went in second appeal before the learned ATIR who after hearing, arbitrarily while ignoring the prevailing law and passed the impugned order, which is against the law and facts and liable to be set-aside. He vigorously contended that the question of law has been raised through the instant reference which needs to be resolved. The learned counsel lastly prayed for acceptance of the instant references.
Mian Sultan Mahmood, the learned counsel for respondent also submitted written arguments, wherein the stance of the petitioner has been negated. The learned counsel submitted that learned Taxation Officer /ACIT Circle-08 Bhimber illegally treating the respondent-Manager UBL Bhimber Branch to be taxpayer without NTN Number and without address even issued notice and thereby forced and pressurized for submitting prescribed annual statement for Tax year 2008 under Section 165 of the Ordinance patently against the law and against legal mandate of the respondent as Branch Manager of a Registered Taxpayer Bank managing its income tax affairs through its Regional Office at Mirpur. The learned counsel staunchly submitted that the income tax affairs are regulated and controlled by Company Circle of the Inland Revenue Department with Regional officer Mirpur of the Taxpayer Bank having team of specialized tax experts for that purpose and Taxation Officer Income Tax/ACIT Circle-08 Bhimber is not competent to issue the notice to individual Branch Manager of the Taxpayer Bank or to initiate penal proceedings or to take any penal action under provisions of the Income Tax Ordinance, hence, the-proceedings conducted and the penalty order issued by the taxation officer Circle-08 Bhimber is without jurisdictional competence and without lawful authority. He further submitted that the proposed questions of law does not arise from the order of the learned ATIR, hence, the reference is not competent and is liable to be dismissed.
We have, given our dispassionate thought to the arguments of the learned counsel for the parties and gone through the record of the case with utmost care.
The petitioners herein claiming that the learned CIT (Appeals) concurring with the views of assessing Officer and rejected the appeals, so, in case of concurrent finding on fact and law the respondent filed appeal before the learned ATIR, who passed the judgment against the law by misreading and non-reading of evidence. The petitioners further took stand that the judgment of the learned ATIR was based upon the case law referred by the respondent, which was not relevant to the instant matter, hence, the judgment of the learned ATIR may be set at naught.
On the other side, the respondent averred that the finding of Taxation Officer that the statement was not comprehensive and complete, imposed penalty upon him and he was penalized in the tune of Rs. 2000/- per month and total penalty imposed upon him for financial year 2008-09 was of Rs. 24000/-. He filed appeal before Commissioner Income Tax (Appeals) Mirpur, A.K but the learned CIT, after hearing the parties, confirmed the order and appeal was dismissed vide order dated 23.05.2011 and the same was set-aside by the learned AITR through the impugned order.
It is necessary to reproduce the question of law raised by the petitioner herein, the same are as below:-
1. Whether on the facts and circumstances of the case the learned Appellate Tribunal Inland Revenue was legally justified to annual and upset the orders carrying concurrent finding? If the answer is in negative whether order of Appellate Tribunal Inland Revenue sustainable in law?
2. Whether on the facts and circumstances of the case, the order of the Learned Appellate Tribunal Inland Revenue is speaking order and enjoy the status of Judicial order in view of Order XX Rules 04 & 05 of CPC Section 24-A of General Clauses Act, read with settled law by the superior Courts? If the answer is in negative whether order of Appellate Tribunal Inland Revenue is legally maintainable?
3. Whether on the facts and circumstances of the case, the case law referred in the order of Appellate Tribunal Inland Revenue is relevant and applicable in the instant case? If the answer is in negative whether the order of Learned Appellate Tribunal Inland Revenue is maintainable?
4. Whether on the facts and the circumstances of the case, the circular 13 1991 under the repealed Ordinance of 1979 read with Income Tax Rule 44(1) and 44(2) is applicable in the instant case? If the answer is in negative whether the order of Appellate Tribunal Inland Revenue is maintainable?
A perusal of file shows that the learned Taxation Officer was not authorized to seek such details without permission of Commissioner Income Tax or the FBR, in such like position the act of the appellant therein and respondent herein was not amount to a deliberate defiance or against the law and rules. In this regard, the learned ATIR, has rightly referred the case laws in its Judgment. In case reported as 2005 PTD 1 Lahore H.C, it has been held that as under: "It was held that statutory permission to impose penalty was a jurisdictional fact which could be raised at any time and Additional Commissioner ought to have obtained approval under Section 116 (a) of Income Tax Ordinance, 1979.
The learned ATIR has rightly referred the case laws by delivering its judgment and arrived at just and proper decision. Moreover, the proposed questions of law do not arise from the order of the learned ATIR. The learned Taxation Officer and the learned Appellate Forum CIT have also overlooked the directions of CBR enclosed in Circular No. 13 of 1991, which clearly provides that:- "Circular No. 13 of 1991 (Income Tax)
Subject: Deduction of Tax under sub-section (2-A) of ' Section 50 of the Income Tax Ordinance, 1979.
8. The banks shall not be required to disclose the accounts and names of recipients of interest or profit. However, the banks shall continue to provide information under Section 144 of the Income Tax Ordinance, 1979 in respect of particular bank accounts to which the Commissioner of Income Tax or the Central Board of Revenue gives permission to any of the Income Tax authorities mentioned therein."
It is worthwhile to mention here that the respondent duly complied with and submitted the requisite statements of Bhimber Branch etc. while remaining within his legal mandate under relevant provisions of the Banking Companies Ordinance 1962, Circular 13 of 1991 (Income Tax) issued by the Board of Revenue and the Protection of Economic Reforms Act, 1992 in force.
Moreover, the Circular No. 13 of 1991 are saved under Section 239 of the Income Tax Ordinance 2001.
In connection with the above matrix of the instant reference application the petitioners feeling aggrieved from the decision of ATIR formulated as many as 4 questions of law seeking answers of the same, thus, the question of law are accordingly decided as infra:- i. Yes the learned ATIR rightly dealt with the matter and annulled the finding of below fora's, so suggested in opinion are liable to answer in composite and compare manner as in our opinion the cause of the suggested law points is:- Whether the learned ATIR is justified in law to reverse the concurrent findings of the forums below?
Answer is repelled in affirmative manner. Yes the learned ATIR was justified to reverse the concurrent findings of below forums as
(1) Penalty could not be imposed . upon Malik Muhammad Yaseen, non-petitioner herein as it could be imposed upon branch Manager, that too withholding tax is deducted at the regional office level at Mirpur, thus, the Taxation Officer Bhimber was not 'equipped with jurisdiction to impose a penalty on the appellant, moreso no willful default was oozing from record, hence, imposition of penalty was not warranted by law, and no deliberate attempt or mens rea could be established by the appellant which could entail penalty.
Reliance is this regard is placed on 1980 PTD 227 K-HC, 2010 PTD 534 P and 1998 PTD 1103.
In backdrop of the above we do not find any reasons to have considered the question as purposed by the applicant in a manner adopted by the authority without establishing mens rea on part of the respondent and fixing the non-applicant in the matter cannot be approved and endorsed, as due process of law is hallmark of entire justice system.
Imposition of penalty to the extent of respondent Muhammad Yaseen is not sustainable in the eye of law as income tax is a tax on a person in relation to his income. It cannot be imposed in general terms, it is imposed on the income of a person natural or artificial as defined in Section 3, assessm ent has to be made against a person and the tax has to be collected from the assessee.
The tax is not made a change to the income upon which it is levied he could not be made responsible in his capacity on behalf of financial institution by treating him tax payer without NTN number, thus, the respondent neither a taxpayer nor a withholding tax agent was held responsible to undergo penalty.
It is settled principle of law that a thing which is required to be carried out in a specific manner cannot be done otherwise. All fictions of law are to be interpreted and applied by law strictly and doubt, if any, is to be resolved in favour of assessee (taxpayer). Ready reference in this regard is PTCL 2005 CL 187.
The learned Appellate Tribunal Inland Revenue (ATIR) has rightly observed that the order of penalty does not fulfill the legal requirements. Thus, the titled reference applications in hand are hereby dismissed. A copy of this Judgment be sent to Registrar ATIR.