FINDINGS/DECISION This is a complaint relating to penalties under sections 108, 110 and 111 of the repealed Income Tax Ordinance, 1979 in the complainant's case. The points in the complaint are as under:--
(i) The Income Tax Officer, Gujar Khan made ex parte income-tax assessments in the complainant's case creating the following tax demands for five years:-- Assessment year Amount of Tax 1989-90 Rs.95,786 1990-91 Rs.205,637 1991-92 Rs.3,000 1994-95 Rs.97,473
(ii) Subsequently the following penalties were also imposed in the complainant's case- Assessment Year Under Section 111 Under Section 108 Under Section 110 1989-90 Rs.95,786 1000 1000 1990-91 Rs.205,637 1000 1000 1991-92 Rs.3,000 1000 1000 1994-95 Rs.97,473 1000 1000
(iii) Appeals were filed against the income tax assessments and eventually the entire demand stood deleted.
(iv) Although the main demand has been deleted the penalties levied on the basis of the demand are still outstanding and the complainant does not have the means to file appeals against the penalties. It has been prayed that in the light of the above the penalties may also be deleted.
2. In the respondent's reply it has been stated that it is correct that penalties order under sections 108, 110 and 111 were made ex parte and that the demand was still outstanding against the complainant. It is stated that the demand could only be deleted if so ordered by the relevant appellate authority. It has thus been stated that the complaint was devoid of merit and may be rejected.
3. No one attended on behalf of the complainant while the representative of the respondent appeared with necessary records. In the context of the penalties under section 111 it was noted that the penalties were levied on the basis of various additions made to the complainant's income under sections 13(1)(e), 13(1)(aa) and 13(1)(d) of the repealedIncome Tax Ordinance. On the complainant's appeals the CIT(Appeals) set aside the assessments for de novo action. The re- assessm ents were then made by the Assessing Officer who filed the assessment proceedings meaning thereby that the complainant had no taxable income. No tax A demand was thus created in any of the four years under consideration. The respondent's representatives, however, reiterated that the penalties under section 111 involved proceedings, separate from the assessment proceedings and therefore, the demand was valid against which the complainant had not filed any appeals. It is true that normally appeals have to be filed against the penalty orders also in the same manner as appeals against the assessment orders but in the instant case, however, it is an admitted position that all the penalties under section 111 were based on additions made under section 13 of the repealed Income Tax B Ordinance and since these additions vanished as a result of reassessm ent, the basis on which the penalties were levied thus no longer existed. It would, therefore, not be reasonable to let the penalty orders stand when the very basis of the penalties was not there. Necessary action for deletion of the penalties would, therefore, have to be taken in accordance with relevant provisions of law.
4. As regards the penalties under section 110 these were imposed for non compliance of statutory notices. According to this section, however, the penalty can be imposed which may be equal to 50 percent of the amount of tax which would have been avoided if the income as per return had been accepted. As already stated the complainant's income has finally been assessed as below taxable limit in all the four years, there is thus no tax on the basis of which penalty up to 50 percent could have been imposed and the provisions of section 110 were, therefore, not attracted in the case. The penalties levied under section 110 in all the five years would also, therefore, require to be deleted.
5. The penalties under section 108 amounting to Rs,1000 for each year were levied for non-filing of returns under section 55 or 56 of the Ordinance, 1979. As the department had ultimately admitted that the complainant had no taxable income she was therefore, not required to file the returns.
Hence no default was committed by her. Further, penalty under section 108 can be levied equal to one tenth of one percent of the tax payable for each day of default subject to a minimum of five hundred rupees and a maximum of twenty five percent of the tax payable. Since no demand was created against the complainant in any of the four years under consideration, there was no tax on the basis of which penalty could have been levied and as such the provisions of section 108 were not attracted in this case.
6. In the light of the above it is recommended that:--
(i) The penalties under section 111 of the repealed Income Tax Ordinance, 1979 relating to the assessm ent years 1989-90, 1990-91, 1991-92 and 1994-95 be deleted under section 122A of the Income Tax Ordinance, 2001.
(ii) The penalties under section 110 of the repealed Income Tax Ordinance, 1979 for the assessment years 1989-90, 1990-91, 1991-92 and 1994-95 be also deleted under section 122A.
(iii) The penalties under section 108 of the repealed Income Tax Ordinance, 1979 relating to the assessm ent years 1989-90, 1990-91, 1991-92 and 1994-95 be deleted under section 122A of the Income Tax Ordinance, 2001.