(a) Income Tax Ordinance (XXXI of 1979)---

----S.144(c)---Income Tax Officer, Inpsecting Assistant Commissioner, Commissioner or any other officer authorised in this behalf by the Commissioner or C.B.R., may, by notice in writing, require a person, including a banking company to furnish such information or such statement or accounts as may be specified in such notice.

(b) Income Tax Ordinance (XXXI of 1979)---

----Ss.144 & 108---S.R.O. 1157(1)/89, dated 26-11-1989---S.R.O. 253(1)/89, dated 20-3-1989---Income Tax Officer (Survey and Registration) has been vested with the power of seeking information under S.144 and imposing penalty under S.108.

(c) Income Tax Ordinance (XXXI of 1979)---

----S.2(32)---Assessee would fall within the definition of "person" irrespective of the fact that he is an individual or a firm or an association of persons or any other artificial juridical person.

(d) Income Tax Ordinance (XXXI of 1979)---

----S. 144---S.R.O. 1157(1)/89, dated 26-11-1989---S.R.O. 253(1)/89, dated 20-3-1989---Income Tax Officer (Survey and Registration) has jurisdiction to call for information from an existing assessee.

(e) Income Tax Ordinance (XXXI of 1979)---

----Ss.108 & 144---Penalty, imposition of---Maximum penalty is imposed in the extreme cases of defiance and default ---Assessee to be given an opportunity of offering his explanation to the notice under 5.144---Excessive penalty without reason---Miscarriage of justice.

In the present case a show-cause notice was served on the assessee under section 108 read with section 116 but they sought extension of time which was refused for the reason that the assessee was adopting delaying tactics. But there was nothing on record to show that the assessee was adopting delaying tactics. On the other hand, the facts that first notice was served on 23rd January, 1990 under section 144(c) and the reminder was issued on 10th December, 1990 and that the penalty was imposed on 18th August, 1991 after serving notice under section 116 on 7th February, 1991, indicate that it was the assessing officer who delayed the matter for reasons best known to him. Moreover, the imposition of maximum penalty of Rs.100 per day again indicates punitive approach of the assessing officer. Maximum penalty is imposed in the extreme cases of defiance and default. It was not understood that on what basis he could hold that the assessee was not prevented by any reasonable cause. Miscarriage of justice had been caused. Assessee should have been given an opportunity of offering his explanation to the notice of I.T.O. (Survey and Registration) dated 6th February, 1991 under the facts and circumstances of the case.

The error of the I.T.O. (Survey and Registration) lay in the fact that he failed to provide adequate opportunity to the assessee to show cause against the notice issued under section 108 read with section 116 of the Income Tax Ordinance.

Tribunal after setting aside the order of penalty sent the matter back to the I.T.O. (Survey and Registration) with the direction that he should, after giving adequate opportunity to the assessee, record his order under section 108 of the Income Tax Ordinance as it empowered him to impose a penalty under it in case of default of notice issued under section 144. However, while imposing penalty I.T.O. should keep into consideration all the facts and circumstances which emerged out of the explanation offered by the assessee. Even if the assessee did not offer any explanation, he should not record his order with punitive approach.

Asrar Rauf, D.R. for Appellant.

Haji Yousuf, I.T.P. for Respondent.

Date of hearing: 2nd June, 1992.

ORDER

Under section 144(c) of the Income Tax Ordinance, an Income Tax Officer, the Inspecting Assistant Commissioner, the Commissioner, or any other officer authorized in this behalf by the Commissioner of C.B.R. may by notice in writing, require in person, including a Banking Company to furnish such information or such statement of accounts as may be specified in such notice. In exercise of his such powers, the I.T.O., Survey and Registration served a notice, dated 23rd January, 1990 on M/s. AI-Mustafa Builders, the respondent, on 23rd January, 1990. From perusal of record, it appears that the notice was not complied with. Evidently the matter went in oblivion and almost after 11 months, the I.T.O. felt constrained to serve a reminder dated 10th December, 1990 on respondent on 15th December, 1990. Fortunately, this time, the I.T.O. appears to have impressed upon the respondent that he meant 'business and consequently, he was obliged with a reply, dated 19th December, 1990 that all the details and information sought by him were furnished to him by the respondent as far back as assessment year 1988-89. This time, the I.T.O. acted promptly in informing the respondent. by his letter, dated 3rd January, 1991 that the information submitted earlier was incomplete as it did not disclose either the addresses of the purchasers, or total price of a unit. It appears that this notice did not elicit any response from the respondent. The assessing officer, therefore, on 6th February, 1991, issued a show-cause notice as to why penalty under section 108(0 be not imposed upon the respondent. It also appears that a show-cause notice under section 116 was also served on the respondent on 7th February, 1991. However, the respondent appears to have remained undaunted and just sought extension of time which was, however, refused by the I.T.O. for, the reason that he took it to be amounting to a dilatory tactic. Consequently, he imposed penalty @ Rs.100 under section 108(a) of the Income Tax Ordinance for a period commencing from 31st January, 1991 up to 19th February, 1991 with prior approval of his Inspecting Assistant Commissioner. It may be noted that the I.T.O. imposed penalty of Rs.38,600 after almost 6 months on 18th August, 1991.

2. Apparently, the respondent felt aggrieved and went up in appeal. It was vehemently canvassed before the learned C.I.T. (A) that Survey Department was not empowered to impose penalty for committing default by non-furnishing of information required under section 144(c) of the Income Tax Ordinance. Alternatively, it was also pleaded before the learned C.I.T.(A) that the amount of penalty was in any case, excessive. The learned C.I.T.(A) was impressed by these submissions and accepting both of them ordered cancellation of penalty order. This time, the department feels aggrieved and has come up in second appeal.

3. Mr. Asrar Rauf the learned D.R. supporting the departmental appeal, vehemently argues that the learned C.I.T.(A) fell in serious error in cancelling the penalty imposed under section 108(a) of the Income Tax Ordinance. Inviting my attention to S.R.O. 253(1)/89, dated 20th March, 1989, the learned D.R. submitted that in its Second Schedule, sections 138 to 149 have been mentioned as functions of Commissioners of Income Tax (Survey and Registration). In support of his contention, he has filed photostat copy of page 32 of "Salam's Income Tax Law". According to learned D.R. section 144 empowered the I.T.O. to call for relevant information from the respondent without any distinction of old or new tax-payer and in default section 108 vested in him the jurisdiction of imposing penalty. He has, therefore, concluded that after allowing the appeal, the order of the I.T.O. be restored.

4. Haji Yousuf, appearing for the respondent, has strenuously supported the impugned order. Firstly, the learned counsel submits that S.R.O. 253 mentions functions of the Commissioners of Income Tax (Survey and Registration). He contends that it was the duty of the department to establish that such functions were delegated to the I.T.O. but since they have failed to discharge their burden, the impugned order called for no interference. Alternatively, the learned counsel argues that even if it is held that the I.T.O. (Survey and Registration) had the power of imposing penalty under section 108, the I.T.O. in charge of a circle, also enjoyed such power. As such, it was the duty of the C.B.R. to specify under section 5(2) of the Income Tax Ordinance as to who would exercise this power to the exclusion of the other. He has also submitted that sections 108 and 144 also mentioned the I.T.O. It was, therefore, all the more necessary for C.B.R. to exercise their jurisdiction under section 5(2) of the Income Tax Ordinance. The learned counsel has quoted extensively from Maxwell, 12th Edition, page 153, Jurisdiction and Judicial Review by Justice Fazal Karim, page 77 and Principles of Interpretation by Shaukat Mehmood. In addition to this, the learend counsel has cited following rulings from Pakistan:

Azad J & K PLD 1959 58; PLD 1967 Lah. 810; PLD 1973 SC49; PLD 1975 Lah. 1477; PLD 1984 Lah. 345; PLD 1986 Kar. 211 and PLD 1990 SC 68.

The learned counsel has also

cited the following case-law from Indian jurisdiction: .

AIR 1935 Bom. 167; AIR 1940 PC 105; AIR 1962 SC 547; AIR 1965 SC 132; AIR 1969 All. 526 and AIR 1969 Raj. 169.

The learned counsel has also invited my attention to Article 77 of the Constitution of Islamic Republic of Pakistan and "Words and Phrases of Indian Constitution" by Chakravarti (1986 Edition).

5. I have heard both the learned D.R. as well as learned counsel for the respondent. The opening part of the S.R.O. 253 reads as follows:

"S.R.O. 253(1)/89, dated 20-3-1989.--In exercise of the powers conferred by clause (a) of subsection (1) of section 5 of the Income Tax Ordinance, 1979 (XXXI of 1979), the Central Board of Revenue is pleased to, direct that the Commissioners of Income Tax (Survey and Registration), specified in column (2) of the Schedule I below and any other authority subordinate to them shall perform the functions as specified in Schedule II below in respect of persons or classes of persons or classes of cases or areas falling in the jurisdiction of Commissioner of Income Tax specified in column (3) of the said Schedule I ... ... ... .... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ... ....:' (Emphasis added).

From perusal of underlined portion, it appears that the I.T.O. was vested with the functions of Commissioner of Income Tax (Survey and Registration). However, from my research, I came across S.R.O. 1157(1)/89, dated 26th November, 1989 which specifically superseded S.R.O. 253. Its opening part is reproduced hereinbelow:--

"S.R.O. 1157(1)/89, dated 26-11-1989.--In supersession of S.R.O. No.253 x/89, dated 20th March, 1989 and in exercise of the powers conferred by clause (a) of subsection (1) of section 5 of the Income Tax Ordinance, 1979 (XXXI of 1979), the Central Board of Revenue is pleased to direct that the Commissioner of Income Tax (Survey and Registration), specified in column (2) of the Schedule I below and any other authority subordinate to them, shall perform the functions as specified in Schedule-II, as per powers assigned in Schedule III, below, in respect of persons or classes of persons or classes of cases or areas falling in the jurisdiction of Commissioner of Income Tax specified in column (3) of the said Schedule I ??????????????????????????.." (Emphasis added).

6. From. perusal of these S.R.Os., it appears that the former has 2 and 6. the latter 3 Schedules. First schedule of both specifies the Commissioners of e Tax who are designated as Commissioners of Income Tax (Survey and Registration) throughout Pakistan whereas schedule II of both mentions Red lions of Commissioners of Income Tax (Survey and Registration). However, S.R.O. 1157 has Third schedule also which mentions power of I.T.O. (Survey and Registration). Let me mention here that sections 108 and 144 have been specifically mentioned in Schedules II and III of both S.R.Os. Thus, it is clear from perusal of both S.R.Os. that the LT.O. (Survey and Registration) has been vested with the power of seeking information under section 144 and imposing penalty under section 108.

However, since the penalty order in dispute was recorded on 18^th August, 1991, it was governed by S.R.O. 253. The first argument of Haji Yousuf that there was no proof that I.T.O. was given such power therefore, stands repelled.

7. Now turning to section 5(2) of the income Tax Ordinance, let me firstly reproduce it and it reads as under:

"Section 5(2): -Where any directions issued under subsection (1) have assigned to two or more income tax authorities the same functions or functions in respect of the same persons or classes of persons or the same area, they shall perform their functions in accordance with such orders as the central Board of Revenue, or any other authority to whom they are subordinate, may make for the allocation of functions and the distribution of the work to be performed."

It is clear from it that the C.B.R. have been given the powers to make allocation of functions and the distribution of the work to be performed where they find that two or more income tax authorities have the same functions to dorm in respect of same persons or classes of persons or the same area perform? since the C.B.R. have issued aforesaid S.R.Os. in discharge of their duty, I don't find any force in submission of Haji Yousuf. It is true that in the opening part of both S.R.Os., section 5(1)(a) has been mentioned. However, I find that they have virtually exercised their powers under subsection (2) as well defines hold this view because the Second schedule of S.R.O. 253 specifically defines the functions of Commissioners of Income Tax (Survey and Registration) including those functions which are to be exercised by them under sections 108 and 144 of the Income Tax Ordinance. It is equally true that both the C.B.Rs. have made a distinction between functions and powers of the Commissioners of Income Tax (Survey and Registration) in S.R.O. 1157. Here, sections 108 and 144 have been described as powers of Commissioners of Income Tax (Survey and Registration). However, I think that this difference in both S.R.Os. simply shows the lack of proper appreciation of various provisions of the Income Tax Ordinance. Nevertheless, it does not cause any prejudice to the respondent.

8. The next argument of Haji Yousuf is that the I.T.O. (Survey and Registration) had no jurisdiction to call for information under section 144(c) of the Income Tax Ordinance from an existing assessee while conducting survey. This argument has found favour with the learned C.I.T.(A). However, with due respect I do not see any force in it. Before proceeding further, let me reproduce section 144 of the Income Tax Ordinance which is as follows:

"Power to call for information.--The Income Tax Officer, the Inspecting Assistant Commissioner, the Commissioner or any other officer authorised in this behalf by the Commissioner or the Central Board of Revenue, may, by notice in writing, require----

(a) any assessee to furnish within such time as may be specified in such notice a statement showing the names and addresses of all persons to whom he has paid in any income year rent, interest, commission, royalty or brokerage, or any annuity amounting to not less than four hundred rupees together with particulars of all such payments;

(b) any dealer, broker or agent or any person concerned in the management of a Stock or Commodity Exchange to furnish, within such time as may be specified in such notice, a statement showing the names and addresses of all persons to or from whom he, or the Exchange, has paid or received in any income year any sum amounting to not less than five thousand rupees in the aggregate, in connection with the transfer of assets, together with particulars of all such payments and receipts;

(c) any person, including a banking company, to furnish such information or such statement or accounts as may be specified in such notice:

Provided that no such notice shall be issued to any banking company as respects any client, except with the prior approval of the Commissioner in the case of an Income Tax Officer, or the Central Board of Revenue or any other income-tax authority authorised by it in this behalf in the case of the other officer.

From its perusal, it appears that the words underlined by all means include an I.T.O. of Survey and Registration within their fold. This is also clear from the S.R.Os. reproduced above. Thus the I.T.O. (Survey and Registration) was an officer authorised to call for information under section 144.

9. Now from perusal of clause (c), it appears that an authorised officer under section 144 may call for information from "any person". The word `person' has been defined by section 2(32) of the Income Tax Ordinance and includes an individual, a firm, an association of persons etc. etc. Thus it is clear that the respondent would fall without the definition of `person' irrespective of the fact that he is an individual or a firm or an association of persons or any other artificial juridical person. I am, therefore, unable to see anything in section 144 which may support the submission of Haji Yousuf, the learned counsel for the respondent. In my humble opinion, it was applicable in the case of respondent. However, this does not seem to be end of the matter. A part of the argument of Haji Yousuf, however, is still to be met.

10. His argument is that an I.T.O. (Survey and Registration) has no jurisdiction to call for an information from an existing assessee. I have already discussed the powers of I.T.O. (Survey and Registration) under section 144. Row let me turn to S.R.O. 253. Its Schedule II is as follows:

"SCHEDULE II

??????????????????????? FUNCTIONS OF COMMISSIONER OF INCOME TAX

(SURVEY AND REGISTRATION)

1. Functions as specified in sections 85 to 98, 100, 104, 108 to 120, 123, 124, 126, 134(2), 134(3), 136(1), 136(2), 137(1), 138 to 149, 156, 161, 162 of the Income Tax Ordinance, 1979 (XXXI of 1979).

2. Internal survey for collecting information under sections 139 to 144 of the Income Tax Ordinance, 1979 from various Departments and Organizations.

3. External survey of properties, business and professions.

4. Collect information concerning income tax assessees through external and internal survey, supplying it to assessing authorities and ensuring its utilization by them in a text region.

5. Preparation of Communication Slips (I.T. 93) based on information collected and their dissemination to concerned Zonal assessing officers.

6. Booking of non-filers of returns of income tax on the National Tax Register of the concerned circle as a result of internal and external survey.

7. Monitoring of tax payments under section 50 of the Income Tax Ordinance, 1979.

8. Matching important information with tax payer's declared version for detection of misdeclaration and to issue verification notes for zonal assessing officers.

11. From perusal of its clause (a), it appears that the powers under sections 108 and 144 have been described as the functions of Commissioners of Income Tax (Survey and Registration). It is also clear from perusal of its clause (6) that booking of non-filers of returns of income-tax on the national tax register has also been described as a function of the Commissioner of Income Tax (Survey and Registration). However, neither in this S.R.O. nor in S.R.O. 1157, I find any indication whatsoever that the I.T.O. (Survey and Registration) has no jurisdiction to call for information from an existing assessee. I am even prepared to hold that even if the S.R.O. should have prohibited seeking of any information from existing assessee, I would have taken it as a mere departmental direction and not a prohibition on the exercise of powers vested by section 144 of the Income Tax Ordinance for the simple reason that in such case, the S.R.O. would have been of no illegal effect being in conflict with section 144. In view of this discussion, I, therefore, find aforesaid submission of Haji Yousuf also devoid of any merits.

12. Finally, let me also point out that the argument of Haji Yousuf that since section 108 vests the power of imposing penalty in the I.T.O., it cannot be imposed by an I.T.O. (Survey and Registration) is concerned, with due respect to him, I again find no force in this submission firstly because S.R.O. 253 has specifically vested such power in the I.T.Os. (Survey and Registration) and secondly because the C.B.R. have jurisdiction of vesting such powers in him. This argument, therefore, also stands rejected.

13. In the end, let me deal with the finding of learned C.I.T. (A) as to whether the imposition of penalty is excessive. I have already pointed out that a show-cause notice was served on the assessee under section 108 read with section 116 but they sought extension of time which was refused for the reason that the respondent was adopting delaying tactics. But with due respect to the assessing officer, I do not find anything on record to show that the respondent was adopting delaying tactics. On the other hand, the facts that first notice was served on 23rd January, 1990 under section 144(c) and the reminder was issued on 10th December, 1990 and that the penalty was imposed on 18th August, 1991 after serving notice under section 116 on 7th February, 1991, indicate that it is the assessing officer who delayed the matter for reasons best known to him. Moreover, the imposition of maximum penalty of Rs.100 per day again indicates punitive approach of the assessing officer. Let me mention at this juncture that maximum penalty is imposed in the extreme cases of defiance and default. I am unable to understand that on what basis he could hold that the respondent was not prevented by any reasonable cause. Here I think that miscarriage of justice has been caused. I think that the respondent should have been given an opportunity of offering his explanation to the notice of I.T.O. (Survey and Registration) dated 46th February, 1991 under the facts and circumstances as discussed above.

14. Now as far as the citation of case-law and reliance on the taxtbooks by Haji Yousuf are concerned, with due respect to him, I do not think that they are applicable under the facts and circumstances of this case. I, therefore, refrain myself from dilating on them. Let me also mention at this juncture that there is no violation of any provision of Constitution of Islamic Republic of Pakistan as alleged by the learned counsel for the respondent inasmuch as the I.T.O: (Survey and Registration) had the legislative authority to impose the penalty on the respondent as he violated with impunity the direction contained in notices issued under section 144(c) of the Income Tax Ordinance. Nevertheless, the error of the I.T.O. (Survey and Registration) lies in the fact that he failed to provide adequate opportunity to the respondent to show cause against the notice issued under section 108 read with section 116 of the Income Tax Ordinance.

15. In view of discussion made above, I allow this departmental appeal and after setting aside the impugned order, send the matter back to the I.T.O. (Survey and Registration) with the direction that he should, after giving adequate opportunity to the respondent, record his order under section 108 of the Income Tax Ordinance as it empowers him to impose a penalty under it in case of default of notice issued under section 144. However, I feel tempted to observe that while imposing penalty, he should keep into consideration all the facts and circumstances which emerge out of the explanation offered by the respondent. Let me also mention that even if the respondent did not offer any explanation, he should not record his order with punitive approach.

16. The appeal stands disposed of accordingly.

M.BA./1619/T???????????????????????????????????????????????????????????????????????????????????? Order accordingly.