Income Tax Ordinance (XXXI of 1979)---

----Ss. 55, 56 & 108---Failure to furnish return in time ---Notice---Penalty-- Once a notice under S.56 of the Income Tax Ordinance, 1979 is issued and served on the assessee then period of default under S.55 of the Ordinance ends and from the date on which the assessee is required to file income tax return by notice under S.56 of the Ordinance the default of the assessee starts if the assessee does not file income tax return---Two penalties under S.55 and under S.56 cannot be imposed simultaneously for the same period.

Penalty can be imposed for default under section 55 of the Income Tax Ordinance, 1979 or for default under section 56 of the Ordinance. But the two penalties cannot be imposed simultaneously for the same period. The provisions of sections 55 and 56 of the Income Tax Ordinance are quite clear if the assessee does not file any return as provided under section 55 of the Income Tax Ordinance, 1979, the penalty will be imposed for default under section 55. The same is true for default under section 56 but there is no question of overlapping of the period of penalty. Once a notice under section 56 is issued and served on the assessee then period of default under section 55 ends and from the date on which the assessee is required to file income tax return by notice under section 56 the default of the assessee starts if the assessee does not file income tax return.

In the present case the period which had been taken into consideration for calculating the penalties was almost the same. Because of these reasons two penalty orders were set aside and the I.T.O. was directed to calculate the penalty for default under section 55 from the date on which the Income tax return was due to the date of service under section 56 and the penalty for default under section 56 will be calculated from the date on which assessee was required to file the income tax return by notice under section 56 to the date on which income tax return was filed by the assessee or assessment was completed by the I.T.O.

Abdul Hayee Butt for Appellant

Shahid Nasim, D.R. for Respondent

Date of hearing, 21st February, 1994.

ORDER

These two appeals have been filed on behalf of Mian Liaqat Ali c/o VIP Centre, hereinafter also referred to as the assessee, challenging the order of learned AAC, Range V, Lahore, vide A.D. Nos. 304 and 305, dated 2-11-1991. The disputed issue in these two appeals are common and inter-connected, hence these two appeals are decided by a combined order.

2. The brief facts leading to these appeals are that the assessee is an individual who did not file his Income-tax return within the statutory time allowed under section 55 of the Income Tax Ordinance. The Income Tax return of the assessee was due by 1-12-1987 but the assessee did not file any Income Tax return by this date. Subsequently, a notice under section 56 of the Income Tax Ordinance, 1979 was issued to the assessee on 15-12-1987 which was served on the assessee on 30-12-1987, wherein the assessee was required to file the Income Tax return by 30-1-1988. The assessee still did not comply even with the notice under section 56 and did not file return in prescribed time. However, the Income Tax return was filed subsequently. In pursuance of default committed by the assessee under sections 55 and 56 the ITO initiated penalty proceedings under section 108 of the Income Tax Ordinance, 1979 and levied penalty at Rs.2,280 for default under section 55 of Income Tax Ordinance, 1979, vide order dated 29-11-1989. Another penalty of Rs.1,680 was also imposed by the ITO under section 108 of the Income Tax Ordinance; 1979, vide order of same date.

3. Aggrieved by this treatment the assessee went into appeal and contended before the learned AAC that in this case penalty has been levied by the ITO twice. Penalty for default under section 56 was levied at Rs.1,680 and penalty for default under section 55 was levied at Rs.2,280. The learned AAC did not accept the contention of the assessee with the following observations:

"I have gone through the arguments of the learned counsel but I do not find myself in agreement with him. Sections 55 and 56 are independent provisions of law and their infringement will attract separate penalties. In view of the above the penalties levied are upheld."

4. The assessee still feels dissatisfied and has challenged the order of the learned AA.C., Range V, Lahore, by way of these second appeals.

5. The learned counsel of the assessee Mr. Abdul Hayee Butt, Advocate contended that the ITO has imposed penalty twice for the period 30-1-1988 to 17-7-1988 which is against natural justice and law because no person can be punished twice for the same default. The learned counsel for the assessee also contended that penalty under section 108 of the Income Tax Ordinance can be imposed for default either under section 55 or for default under section 56. The penalties under sections 55 and 56 cannot be imposed simultaneously for the same period.

6. The learned D.R. on the other hand contended that the sections 55 and 56 are independent sections and any default committed by, the assessee under the two sections attracts penalties. The learned D.R. also contended that section 108 is not actually a penalty section. It is simply a regulatory section wherein penalty is imposed on the basis of default calculated according to number of days, hence the ITO was justified in imposing penalty for default under section 55 as well as section 56.

7. I have carefully considered the facts of the case and arguments advanced by both sides. Section 108 of the Income Tax Ordinance is reproduced as under:

"108. Penalty for failure to furnish return of total income and certain statements.--where any person has, without reasonable cause, failed to furnish, within the time allowed for the purpose.

(a) Any return of total income under section 55 or 56, subsection (1) of section 65, subsection (3) of section 72 or subsection (3) of section 81, or

(b) any certificate, statement, accounts or information under section 51, 139, 140, 141, 142, 143, (143A) or 144. the Income Tax Officer may impose upon such person a penalty not exceeding one hundred rupees for every day during which the default continues."

From a perusal of the above section it is quite clear that penalty can be imposed for default under section 55 or for default under section 56. But the two penalties cannot be imposed simultaneously for the same period. The provisions of sections 55 and 56 of the Income Tax Ordinance are quite clear if the assessee does not file any return as provided under section 55 of the Income Tax Ordinance, 1979, the penalty will be imposed for default under section 55. The same is true for default under section 56 but there is no question of overlapping of the period of penalty. Once a notice under section 56 is issued and served on the assessee then period of default under section 55 ends and from the date on which the assessee is required to file. Income Tax return by notice under section 56 the default of the assessee starts if the assessee does not file Income Tax Return. A perusal of record indicates that the two penalty orders have been made on the said date i.e. 29-11-1981. The order imposing penalty at Rs.2,280 is for default under section 55 of the Income Tax Ordinance, 1979. The other order imposing penalty at Rs.1,680 is for default under section 56. Although in this order at one place ITO has indicated that penalty is being imposed for default under section 55 but if the whole order is perused carefully, it is obvious that this order is for default under section`, 56. These two penalty orders are reproduced below

"ORDER UNDER SECTION 108

Assessment in this case for the assessment year 1987-88 was finalized vide order under section 62 No.223 dated 31-8-1988. Penalty proceedings under section 108 were initiated for default of the provisions of section 55 as the return was filed on 17-7-1988 whereas last date of filing of return was 1-12-1987.

Notice under section 116 dated 31-8-1988 was served on 12-10-1988. However, assessee failed to furnish any explanation in response. A reminder dated 15-10-1989 was served on 16-10-1989 for compliance on 22-10-1989. However, no response was made. Again reminder dated 30-10-1989 was served on 2-11-1989 for compliance on 4-11-1989. Again, the assessee failed to furnish any explanation. In view of these facts, it is established that the assessee does not have any explanation to offer in his defence and wilful and deliberate default of the provisions of section 55 stands established, for which penalty is imposed at Rs.2,280 @ Rs.10 for 228 days of default with the prior approval of the IAC Range II Zone B, Lahore vide Order No.1003 dated 28-11-1989.

Assessed. Issue copy of IT 88,.IT 30; DN&C.

(Sd.)

Dated 29-11-1981

(MISS RAANA MASUD)

ITO CIRCLE 05, ZONE B, LAHORE

"ORDER UNDER SECTION 108"

Assessment in this case was finalized vide order under section 62 No.223 dated 31-8-1988. Penalty proceedings under section 108 were initiated for default of the provisions of notice under section 56 dated 15-12-1987, served on 30-12-1987 for compliance on 30-1-1988.

Notice under section 116 dated 31-8-1988 was served on 12-10-1988. However, assessee failed to furnish any explanation in response. A reminder dated 15-10-1989 was served on 16-10-1989 for compliance on 4-11-1989. Again, the assessee failed to furnish any explanation. In view of these facts, it is established that the assessee does have any explanation to offer in his defence and wilful and deliberate default of the provisions of section 55 stands established for which penalty is imposed at Rs.1,680 @ Rs.10 for 168 days of default with the prior approval of the IAC Range II Zone B, Lahore vide Order No.1003 dated 28-11-1989.

Assessed. Issue copy of IT 30, I1 88, DN&C.

Dated. 29-11-1989

(Sd.)

(MISS RAANA MASUD)

Income Tax Officer

CIRCLE 05, ZONE B, LAHORE."

From a careful perusal of the above two penalty orders it is quite obvious that the period which has been taken into consideration for calculating the penalties is almost the same. Because of these reasons two penalty orders are set aside and the ITO is directed to calculate the penalty for default under section 55 from the date on which the Income Tax return was due to the date of service under section 56 and the penalty for default under section 56 will be calculated from the date on which assessee is required to file the Income Tax return by notice under section 56 to the date on which Income Tax return is filed by the assessee or assessment is completed by the ITO.

M.BA/61/T.T Order accordingly.