MIAN SHAKIRULLAH JAN, J.---The appellant, an individual, deriving income from Sarafa business was issued a notice under section 116 of the Income Tax Ordinance, 1979 for filing the return on 25- 2-1995 instead of filing the same on 31-8-1994. Explanation furnished by the assessee was not found satisfactory and a penalty of Rs.28,648 was imposed on him under section 108 of the Ordinance.
2. The assessee, felt aggrieved, filed an appeal before the Commissioner, Income-tax (Appeals) which was accepted and the amount of Rs.28,648 was 'deleted'.
3. The Additional Commissioner Income-tax, Circle 13, Abbottabad being aggrieved of the order of the Commissioner of Income-tax (Appeals) filed an appeal before the Income-tax Appellate Tribunal but the same was dismissed hence the instant appeal under section 136 of the Ordinance.
4. The appeal was filed on the following question of law allegedly arising out of the order of the Tribunal: "(a) Whether on facts and in the circumstances of the case the learned Income-tax Appellate Tribunal was justified to uphold the order of Commissioner of Income-tax (Appeals) whereas the provision of the imposition of penalty contained in section 108 were made mandatory with effect from the Finance Act, 1994, as the word 'may' was substituted with the word 'shall'.
(b) Once it was established that the default in filing the Income-tax Return in time was without reasonable cause. Whether the learned Income-tax Appellate Tribunal was justified in confirming the penalty which was reduced by the CIT (A).
(c) Whether after the amendment in section h08 of the Income Tax Ordinance, 1979 through Finance Act, 1994, the discretion of the Assessing Officer has been restricted to determining as to whether the default was wilful. The Assessing Officer has no discretion in deviating from the rate of penalty prescribed under the said section. "
5. The learned counsel for the appellant has contended that in view of the amendment brought in section 108 of the Ordinance by amending the word 'may' for the word 'shall' and the relevant portion of which reads: "The Deputy Commissioner shall impose on such person penalty."
Now it is mandatory for the Assessing Officer to impose a penalty for the delay in filing a Return in time and the Assessing Officer shall follow this mandatory provision of law and now he has been left with no discretionary power in imposition of penalty.
6. The learned counsel for the respondents on the other hand has submitted that though the word 'may' has been substituted by the word 'shall', yet it is subject to reasonable cause shown by the assessee for not filing the Return in time and in this respect he has also referred to text of C. B.R.'s Letter C No.108(1) DTB-1/94, dated January 9, 1995: ---------.2. It appears that the substitution of word 'may' by the word 'shall' has created the impression that penalty has to be universally imposed, without any exception whatsoever, if there is a default. This is not the correct interpretation. The major prerequisite for imposition of penalty has always been a default committed 'without reasonable cause'. This precondition still persists.
The only change effected is the extinguishment of Assessing Officer's discretion when the assessee fails to explain 'reasonable cause', The position which emerges from Judicial pronouncements is that the default should be wilful. If the assessee is not guilty of gross or wilful neglect penalty is not leviable. Addl. CIT v. Chattur Singh Taragi 1980 PTD 91. It is submitted that imposition of penalty is still discretionary in a way as the authority competent to impose penalty and exercise discretion if it is convinced that default was not wilful. Inadvertent and bona fide mistake or omission need not even now be penalized because of the presence of precondition is 'reasonable cause'. Onus to prove that the assessee has committed a wilful default lies with the department.' The authority competent to impose penalty by proceedings must possess some incontrovertible evidence to initiate penalty proceedings" ...CIT v. LH Vora (1968) 17 Tax 7 (Trib). "
7. He has also submitted that the assessee has furnished a reasonable explanation/cause for the delay in filing of the Return and for which reason the Assessing Officer at the time of assessment has not proposed the imposition of penalty on the assumption of being satisfied with the explanation. It is, after a long time when the case was again taken up for the imposition of the penalty under section 108 of the Ordinance and particularly when the appeal has been decided against the original assessm ent order passed by the appellate forum.
8. The Commissioner, Income-tax (Appeals) while deciding the appeal observed that: "From the perusal of combined original assessment order passed under section 62 it reveals that the Assessing Officer did not propose issue of show-cause notice under section 116 for initiation of penalty proceedings under section 108 of the Income Tax Ordinance, 1979. Rather in the said order the admissions of the Assessing Officer are there saying that Returns have been filed and income had been declared which has normally been assessed to tax as such. "
The notice after long delay for taking the case again for the imposition of penalty and also after the completion of the original assessm ent was also taken note of.
9. The Appellate Tribunal, while agreeing with the Commissioner Income-tax (Appeals) has made a reference to the observations made by the Commissioner in his order with regard to the fact that the- Assessing Officer did not propose the issuance of show-cause notice under section 116 of the Ordinance for initiation of penalty proceedings under section 108 and also not taking the said proceedings at the time of original assessment.
10. According to section 136 appeal can only be filed when there is any question of law arising out of order under section 136, but here in this case I the question of law which has been formulated was not arising out of the, impugned order as the question before the Appellate forum was not with,: regard to the interpretation of word 'shall' or 'may' but on the facts and in the circumstances of the case the penalty which was 'deleted' by the Commissioner, Income-tax (Appeals) arid concurred by the Appellate Tribunal was on the assumption of satisfactory explanation and which hardly attract the provisions of section 136 of the Ordinance as there is no question of law arising out of the order to be determined or to be interpreted by this Court. Consequently this appeal is dismissed.