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

----S.108---Income' Tai Rules, '1982, R.53---Penalty---Penalty could be imposed if there was default in furnishing statement under section enumerated in S.108, Income Tax Ordinance, 1979---Such penalty was not extendable to any other default prescribed in Income Tax Rules, 1982.

1994 PTD (Trib.) 1423 ref.

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

----Ss.5l, 108(b) & 139---Income Tax Rules, 1982, R.53---Penalty---Failure to furnish statement under R.53, Income Tax Rules. 1982 was contravention of S.139 of the Income Tax Ordinance, 1979 for which penalty could be imposed---Penalty imposed under S.51 of the Ordinance was rightly set aside for S.51 had no relevance with R.53 of the Rules.

The penalty under section 108 (b) of the Income Tax Ordinance, 1979 shall be levied for default in furnishing of such statements which were specifically required to be furnished in the Rules under the sections specified in section 108(b). Since statement under Rule 53 of the Income Tax Rules, 1982, the default whereof had taken place in the present case, was not required to be furnished under section 139, therefore, the Assessing Officer was not justified in imposing penalty under section 108(b) for the reason that the failure to furnish statement under Rule 53 contravenes the requirement of section 139 of the Income Tax Ordinance, 1979.

(c) Income-tax---

----Pecuniary liability, imposition of---Principle---Fine, penalty, tax or any other pecuniary liability was to be imposed under a clear and unambiguous law---Doubt was to be resolved in favour of assessee who was to be saddled with such liability.

Shahid Bashir, D.R for Appellant.

Zahid Jamil, C.A. for Respondent

ORDER

MUHAMMAD MUJIBULLAH SIDDIQUI (CHAIRMAN). ---The above appeal at the instance of department is directed against the order. dated 31-10-1996 in I.T.A. No.459, relating to assessment year 1996-97 by the teamed C.I.T.(A-1), Faisalabad.

2. Heard Mr. Shahid Bashir learned representative for the department and Mr. Zahid Jamil, FCA, learned representative for the assessee/respondent.

3. The sole objection raised on behalf of the department is that the learned C.I.T.(A) was not justified is cancelling the penalty under section 108(b) of the Income Tax Ordinance, 1979 as the same was levied in accordance with the law.

4. Briefly stated the relevant facts are that the respondent is a private limited company. The assessee company was required to file annual as well as periodical statements under Rules 157 and 53 of the Income Tax Rules, 1982. The respondent filed annual statement under Rule 197 within the due date but monthly statements required to be filed under Rule 53 were not filed within the prescribed time. The Assessing Officer, therefore, issued a show- cause notice to the respondent stating therein that the respondent company failed to file monthly prescribed statement under section 51 read with Rule 53 of 1982 and, therefore, was liable to the levy of penalty prescribed under section 108.

5. The respondent company replied that there was no default in deducting the tax under section 50 of the Income-tax Ordinance or any payment thereof in government treasury within the prescribed time. It was further averred that the period for which penalty was intended to be imposed under section 108(b) was also legally incorrect and the proposed amount of penalty was baseless. The respondent further submitted that its computer system was out of order and now the monthly statements were being filed regularly. The respondent, therefore, requested for dropping the penalty proceedings. The Assessing Officer in its show-cause notice had confronted with the period of default and penalty intended to be imposed as follows

6. The Assessing Officer did not accept the explanation for the following reasons:

"Rule-53 In the case of income chargeable under the head 'salary' where deduction is not made by or on behalf of Government, the persons making the deduction shall forthwith send to the Income-tax Authority specified under Rule-51 a statement as prescribed under Rule-53.

Under section 108(6) Where any person has, without reasonable cause failed to furnish within the time allowed for the purpose, any certificate, statement, accounts or information under sections 51, 139, 140, 141, 142 and 143 the authorised Officer shall imposeupon such person penalty for such default as the rate specified under section 108 of the Income Tax Ordinance, 1979. "

7. The Assessing Officer ultimately held that the respondent company committed default of non-submission of prescribed statements on due dates and were filed on 6-4-1996 which were required to be submitted under section 139 to 144. He, therefore, levied penalty under section 108 at Rs.205,200. The respondent preferred first appeal contending that the penalty imposed was excessive, illegal and uncalled for. Before the learned C.I.T.(A) the main plank of the arguments, centered around the calculation of period of default. It was submitted that more than one penalties were levied for the similar period and in respect of similar nature of default which was not permissible. Reliance was placed in this behalf on the order of this Tribunal reported as (1994) 70 Tax 48 (Trib). It was further contended that penalty could be imposed in the case of non-deduction of tax under section 50, which was not the case.

8. The learned C.I.T.(A) found merit and force in the contention regarding calculation of the period of default and further held that if the assessee had failed to deduct and pay the tax under section 50 then the action of I.A.C would have been justified. He further held that the tax was deducted as provided under section 50(1) and was also paid in the government treasury. No loss was caused to the revenue and, therefore, the quantum of penalty imposed was not correct in the eye of law. He ultimately cancelled the penalty as illegal for the above reasons.

9. Being aggrieved with the cancellation of penalty the department has preferred this second appeal before us. The learned D.R. Mr. Shahid Bashir has submitted that the learned C.I.T.(A) cancelled the penalty on misappreciation of facts and with wrong observations that the penalty had been levied illegally. He has further submitted that the facts in the judgment reported as (1994) 70 Tax 48 (Trib) were totally different and, therefore, the ratio in the said judgment was not applicable to the facts of the present case. He has further submitted that the point if any loss has been caused to the revenue or not is irrelevant, in the facts and circumstances of the present case where penalty was imposed for non-compliance of the directions contained in the statutory rules. The learned D.R. further contended that the late filing of the monthly statements prescribed under Rule 53 of the Income Tax Rules, 1982 is admitted and, therefore, in the wake of admitted default the Assessing Officer was fully justified in levying penalty under section 108(6) of the Income-tax Ordinance, while the learned C.I.T.(A) was not justified in cancelling the penalty on irrelevant and extraneous considerations.

10. On the other hand, Mr. Zahid Jamil, learned counsel for the respondent has submitted that the penalty under section 108(6) can be levied if any person fails to furnish, without reasonable cause, within the time allowed for the purpose, certificate, statement, accounts or information under sections 51, 139, 140, 141, 142, 143, 143-A, 143-B or 144. He has thus, argued that the imposition of penalty is confined to the default in respect of certificate, statements, etc., required to be furnished under the sections enumerated in section 108 only. He has urged that the penalty prescribed under section 108(6) shall not be extended to the default in furnishing every statement prescribed in the Income-tax Rules, 1982 for want of sanction in law. He has proceeded on to argue that the annual statement under Rule 197 is required to be filed under section 139 of the Income Tax Ordinance, 1979 which is evident from the perusal of Rule 197 and thus, any failure on the part of an assessee in filing such statement shall entail penalty under section 108(6) of the Income Tax Ordinance, 1979. According to Mr. Zahid Jamil the statement under Rule 53 is not the requirement of any section enumerated in section 108(6) and, therefore, any default in filing statement under Rule 53 shall not result in the imposition of penalty under) section 108(6) of the Income Tax Ordinance, 1979.

11. The learned D.R. has not denied the proposition that penalty under section 108(6) can be imposed if there is any default in furnishing any statement prescribed under the sections enumerated in section 108(6) of the Income Tax Ordinance, 1979 and not otherwise. However, he has submitted that the C.B.R. in its letter C.No.9(36)-IT-J of 1993, dated 18-2-1996 has explained that vide amendments made in Income Tax Rules 1982 through S.R.O. 1116(1)-95, dated 23-11-1995 the requirement of furnishing annual/monthly statements have been extended to other subsections of section 50, requiring submission of statements under various situations. The C.B.R. in this letter addressed to all the Regional Commissioners of Income tax has further instructed that emerging position is as follows:

12. On the basis of above letter of C.B.R. addressed to all the Regional Commissioners of Income-tax, the learned D. R. has, submitted that statement under Rule 53 has been treated as a statement under section 139, which is enumerated in section 108(b) and consequently the failure to furnish statement under section 53 within the prescribed time, shall entail imposition of penalty. Mr. Zahid Tamil, learned representative for the respondent while replying to the contentions of learned D.R. has submitted that the Income Tax Rules, 1982 have been framed by the C.B.R. under section 165 of the Income Tax Ordinance, 1979, for which purpose procedure has been prescribed in section 165 of the Income Tax Ordinance, 1979 itself. The C.B.R. has been amending rules from time to time and certain amendments were made in the Income-tax Rules, 1982 through S. R. O. 1116(1) of 1995, dated 23-11-1995 in prescribed manner which has been referred to in the C.B.R. letter relied upon by the learned D.R. He has submitted that no amendment has been made indicating that the statement under section 53 is required to be furnished under section 139 of the Income Tax Ordinance, 1979 and, therefore, the legal position cannot be changed merely by issuing a letter to the Regional Commissioners of Income-tax, until and unless amendment is made in the rules in the manner prescribed in section 165 of the Income Tax Ordinance, 1979.

13. We have given our anxious consideration to the facts and circumstances in the present case and the contentions raised by the learned representatives for the parties before us. Both the learned representatives for the parties have agreed to the proposition that the penalty under section 108 can be imposed if there is failure to furnish any statement under the sections, enumerated in section 108 and the penalties prescribed under section 108 do not extend to any other default prescribed in the Income-tax Rules, 1982 and, therefore, we need not to dilate on this point. However, we would like to observe that we agree with the views of the learned representatives for the parties in this behalf.

14. The point for consideration before us is whether the statement required to be filed under Rule 53 is the requirement of any section enumerated in section 108(b) of the Income-tax Ordinance. At the very outset we would like to observe that the legal position was not clear to the learned I.A.C. Range-VII, Faisalabad who passed the penalty order, as he has observed on page 1, of the penalty order, that the statement under Rule 53 read with section 51 is required to be filed on 15th of each month. However, from the tenor of concluding part of the penalty order it appears that the penalty has been imposed because of the failure to furnish statements prescribed under section 139. The learned D.R. has also argued on the basis of C.B.R. letter, dated 18-2-1996 referred to above that statement under Rule 53 is required to be furnished under section 139 of the Income-tax Ordinance. We are of the opinion that reference to section 51 by the I.A.C. who passed the penalty order was totally misplaced as it has no relevance to Rule 53. The reason being that under section 51 of the Income Tax Ordinance, 1979 every person deducting or collecting tax under section 50 is required to furnish a certificate of deduction or collection of tax to the person to or from whom such payment or collection has been made. While under Rule 53 monthly statement of tax on income chargeable' under the head salary is required to be sent to income-tax. authority specified under Rule 51.

15. Now we will examine if statement under Rule 53 of the Income Tax Rules, 1982 has been prescribed under section 139 of the Income-tax Ordinance or not. Replying to the contention of Mr. Zahid Jamil that the statement under Rule 197 is the only statement prescribed under section 139, the learned D.R. has submitted that prior to the Finance Act, 1995 legal position was as argued by Mr. Zahid Jamil but with the amendments made by Finance Act, 1995 the legal position has changed. According to the learned D.R. upto 30th of June, 1995 the words "on or before the 1st day of September in each year" were there in section 139, with the result that every person responsible for paying income chargeable under the head salary was required to furnish to the Deputy Commissioner or any- other officer authorised in this behalf by the C.B.R., the annual statement under Rule 197. He has submitted that however, with the omission of the words, "on or before the first day of September in each year" the requirement of section 139 is not confined to the annual statement under Rule 197 but it is extended to Rule 53 also which prescribes a monthly statement of the deduction of tax on income chargeable under the head salary and is required to be furnished on or before 15th day of every month. In order to appreciate the contention raised by the learned D.R. we have examined various circulars issued by the C.B.R., wherein the effect of amendments, made by Finance Act,- 1995 have been considered and subsequent amendments have been made in the Income-tax Rules, 1982. The original section 139 read as follows:

"139. Statement regarding salary. Every person responsible for paying any income chargeable under the head 'salary' shall, on or before the first day of September in each year, furnish to the Income Tax Officer or any other officer authorised in this behalf by the Central Board of Revenue, a statement in the prescribed form and verified in the prescribed manner, showing---

(a)the name and address of every person who has been paid, or to whom was due, during the preceding financial year, any income chargeable under the head 'salary' exceeding such amount as may be prescribed;

(b)the amount so paid, or due to such person;

(c)the amount of tax deducted from the income of such person, and

(d)such other particulars as may be prescribed.

16. After amendments by Finance Act, 1995 section 139 reads as follows:

"139. Statement regarding salary.---Every person responsible for paying any income chargeable under the head 'salary' shall, furnish to the Deputy Commissioner or any other officer authorised in this behalf by the Central Board of Revenue, a statement in the prescribed manner, showing---

(a)the name and address of every person who has been paid, or to whom was due, during the period for which each statement is being furnished, any income chargeable under the head 'salary', exceeding such amount as may be prescribed;

(b)the amount so paid, or due to such person;

(c)the amount of tax deducted from the income of such person; and

(d)such other particulars as may be prescribed.

17. A comparison of the above two sections shows that by Finance Act, 1995 the words "on or before the 1st day of September in each year" and the words "in the prescribed form and verified" and the words "preceding financial year" were omitted from the original section. By Finance Act, 1995 certain other amendments were also made in the Income Tax Ordinance, 1979 and the C.B.R. issued Circular No.4 of 1995 (IT), dated 9-7-1995 vide C. No. I 167(1)ITP of 1995 explaining the various provisions for the guidance of subordinate officers. In para. 14 of the above Circular it was stated as follows:

"14. Statements to monitor withholding tax.

Sections 139, 140, 141, 142 and 143 prescribe annual statements regarding salary, dividend and bonus, etc. in order to ensure regular monitoring of withholding taxes, these sections have been amended so as to prescribe furnishing of statements at different time intervals."

18. The view of C.B.R. is very much evident from the above para. which clearly contains that sections 139 to 143 prescribe annual statements regarding salary, dividend and bonus etc. The effect of amendment introduced by Finance Act, 1995 according to C.B.R. was that in the original sections 139 to 143, all the statements were required to be furnished on or before the 1st day of September in each year which was causing problems in the monitoring of withholding tax and, therefore, in order to facilitate the monitoring of withholding tax the above sections were amended in such a way that the date prescribed for furnishing of statements in all the above sections which was 1st day of September in each year was omitted. Thereafter, C.B.R. made various amendments in the Income Tax Rules, 1982 under section 165(1) of the Income Tax Ordinance, 1979 to carry out the purposes of amendments introduced in the Income-tax Ordinance by Finance Act, 1995. These amendments were made vide S. R. O. 1116(1) of 1995, dated 23-11-1995 to which reference has been made in the C.B.R. letter C.No.9(36) IT-J of 1993, dated 18-2-1996 on which the learned D.R. has placed reliance. In this letter it is stated that statements under Rules 53 and 197 are to be

furnished under section 139. However, a perusal of Income-tax Rules, 1982 as amended by S.R.O.1116(1) of 1995, dated 23-11-1995, shows that no such amendment has been made from which it could be inferred that statement under Rule 53 is required to be furnished under section 139 of the Income Tax Ordinance, 1979. A perusal of the Income-tax Rules, 1982 shows that wherever any-statement under the Income-tax Rules is required to be furnished under a particular section of the Income Tax Ordinance, 1979 the said section is specifically mentioned in the rule. The annual statement required under Rule 197 is under the following head:

"Annual statement under section 139 regarding salary during the financial year."

19. In the body of rule also it is specifically stated that "a return under section 139 on or before 1st day of September each year shall be furnished by every person responsible for paying income chargeable under the head salary..." Likewise, in rule 199 it is specifically stated that annual statement under section 140 is to be furnished. In the same manner rules 200, 201, 201-A 201-B, 201-C, 201-D, 201-E, 201-F, 202-A, 202-B etc., specifically contain the sections of the Income-tax Ordinance under which the statements are required to be furnished. We further find that under S.R.O. 11160) of 1995, dated 23-11-1995 which has been referred to in the C.B.R. letter C.No.9(36)/1T-J of 1993, dated 18-2-1996, various amendments have been made in the rules and wherever it was intended that the statement under a particular rule is to be made a requirement of a particular section of the Income Tax Ordinance, the said section has been duly inserted in the rule. We find that vide above S.R.O. two amendments were made in Rule 53. The first amendment was that for the word "forthwith" the words and figure "on or before 15th day of every month" was substituted and the second amendment was that after the words "in the following form" the words "and verified in the manner indicated therein" were inserted. However, no words such as, under section 139", were inserted in Rule 53. Likewise, in Rule 57 similar amendments were made and a sub-rule was added whereby dates for furnishing statements were specified but the section under which statement under Rule 57 is required to be furnished was not inserted in the body of rule. However, section 57-A was substituted by the same S.R.O. and the section under which statement is required to be furnished was inserted. In the original Rule 57-A the title was as follows:

"Statement regarding interest on bank accounts are deposits."

20. After amendment vide S.R.O. 1116 referred to above the heading was amended as follows:

"Quarterly statement under section 141 regarding interest on bank accounts or deposits."

21. In the body of rule also it was inserted that a statement under section 141 is to be furnished. Likewise, in Rule 61 amendment was made whereby in the marginal note after the word "statement" the words and figure under section 142" were inserted.

22. Thus, on perusal of the amendments introduced by the C.B.R. vide S.R.O. 1116(1) of 1995, dated 23-11-1995, it is clearly indicated that wherever any statement was required to be furnished under a particular section, the said section was specifically inserted in the marginal note and the body of rule. Conversely, it can be taken that if no section is inserted in the marginal note and body of a rule the statement or information is not required under any particular section but it is in the sort of general requirement. The result would be that in the absence of a particular section in any rule it would not be deemed to be requirement of that particular section and when it is read with section 108(b) of the Income-tax Ordinance providing penalty for failure to furnish any certificate, statement, accounts or information specified in section 108, no penalty would be levied for default in the furnishing of such statement. The penalty under section 108(b) shall be levied for default in furnishing of such statements which are specifically required to be furnished in the rules under the sections specified in section 108(b). Since Rule 53, the default whereof has taken place in the present case is not required to be furnished under section 139, therefore, the assessing officer was not justified in imposing penalty under section 108(b) for the reason that the failure to furnish statement under Rule 53 contravened the requirement of section 139 of the Income Tax Ordinance, 1979.

23. It is established principle of law that any fine, penalty, tax or any other pecuniary liability is to be imposed under a clear and unambiguous law and if there is any doubt it is to be resolved in favour of assessee/a person who is to be saddled with such pecuniary liability.

24. For the foregoing reasons we are persuaded to agree with the submission of learned counsel for the assessee that the penalty imposed by the assessing officer was not sustainable in law. We agree with the contention of learned D.R. that the learned C.I.T.(A) cancelled the penalty for wrong reasons. However, the cancellation of penalty is hereby maintained in view of the legal position discussed above.

25. The appeal at the instance of department stands dismissed accordingly.

C.M.A./557/Trib. Appeal dismissed.