I.T.AS. NOS.445/KB TO 449/KB OF 1998-99, DECIDED ON 19TH MAY, 1999 VS I.T.AS. NOS.445/KB TO 449/KB OF 1998-99, DECIDED ON 19TH MAY, 1999VV
1999 P T D (Trib.) 3357
[Income-tax Appellate Tribunal Pakistan]
Before Muhammad Daud Khan, Accountant Member and Tahseen Ahmed Bhatti, Judicial Member
I.T.As. Nos.445/KB to 449/KB of 1998-99, decided on 19/05/1999.
(a) Income-tax---
----Notice---Non-compliance---Date of order---Cognizance was taken of assessee's failure to comply notice on due date by the Assessing-Officer and order was passed the very next day---Validity---Natural assumption was that the Assessing Officer must have waited on due date till the close of office hours---Passing of order next day was no violation of any criterion laid down for the purpose---Absence of words "reserved for orders" though desirable but not fatal to the proceedings.
1981 PTD 210 and PLD 1975 Lah. 1317 ref.
(b) Income Tax Ordinance (XXXI of 1979)---
----Ss.52, 86 & 63---Provisions of Ss.52, 86 & 63---Distinction-- Proceedings raising demand under S.52/86 of the Income Tax Ordinance, 1979 on assessee's failure to deduct tax under S.50 of the Ordinance were different from ex parte order under S.63 for assessee's failure to comply with statutory notice under Ss.56, 58 & 61 etc. of the Income Tax Ordinance, 1979---Default of such notices may not only result in ex parte orders but also imposition of penalties and prosecution under various sections in Chaps. XII & XIII, Income Tax Ordinance, 1979.
(c) Income Tax Ordinance (XXXI of 1979)---
----Ss.52 & 86---Liability of person failing to deduct or pay tax---Creation of demand---Assessment order---Contention was that orders under 5.52/86 of the Income Tax Ordinance, 1979 resulted in demand and were therefore, essentially assessment orders---Validity---Orders raising demand under S.52/86 of the Income Tax Ordinance, 1979 were not "assessment orders" though such orders did result in raising of tax demand---Assessment orders quantify the real or notional earning of the assessee and tax demand thereon---Orders under S.52 of the Income Tax Ordinance, .1979 were in respect of statutory obligation of payers to withhold taxes from payment to others when they default---Additional tax for such defaults were calculated as per provisions of S.86 of the Income Tax Ordinance, 1979 and that was not for default of taxpayer's own tax liabilities but only for their delinquency in matters of observing or fulfilling their statutory obligations.
PLD 1989 Lah. 121 ref.
(d) Income Tax Ordinance (XXXI of 1979)---
----Ss.52/86, 61, 62 & 63---Liability of person failing to deduct or pay tax-- Additional tax---Production of accounts---Limitation---Time limits prescribed .for assessment under Ss.62 & 63 of the Income Tax Ordinance, 1979 were not applicable to order passed under S.52/86 by the Assessing Officer-- Period of three years prescribed under law for the purpose of enforcing production of accounts was also only for the restricted purpose of notice under S.61 of the Income Tax Ordinance, 1979 and nothing else---Notice under S.61 may be issued for earlier years also and time limit of three; years for enforcing production of accounts will then apply to period of three years preceding the year for which assessment/re-assessment proceedings were being conducted, ---limit for action under S.65 of the Income Tax Ordinance, 1979 was five years--Assessing Officer may call old accounts up, to eight years.
(e) Income Tax Ordinance (XXXI of 1979)---
----Ss.52/86 & 156---Liability of person failing to- deduct or pay tax-- Additional tax---Limitation---Assessment years 1992-93 to 1996-97---Orders under S.52/86 of the Income Tax Ordinance, 1979 were passed for six years Le. Assessment years 1992-93 to 1996-97 by the Assessing Officer-- Validity---Orders under S.52/86 of the Income Tax Ordinance; 1979 be passed within time limit of four years prescribed under S.156 of the Income Tax Ordinance, 1979---Orders for the assessment years 1992-93 and 1993-94, being beyond such time-were void while orders for the other three years being within time were sustained by Tribunal.
1996 PTD (Trib.) 65 rel.
Rehan Hasan Naqvi and,Ms. Lubna Pervez for Appellant
Ali Akbar Deepar. D.R. for Respondent
Date of hearing: 14th May, 1999.
ORDER
MUHAMMAD DAUD KHAN (ACCOUNTANT MEMBER).---In these five appeals the assessee appellant assails orders under section 52/86 -)assed by the, DCIT and confirmed by CIT(A) vide his consolidated appellate ,order No.2/21, dated 22-7-1998.
2. Mr Rehan Hasan Naqvi and Ms. Lubna Pervez, Advocates appeared for the appellant while Mr. Ali Akbar Deepar, learned D.R. represented department's case before us.
3. We have heard both the parties to appeal and perused the assessment and appellate order. Mr. Rehan Hasan Naqvi assailed the DC'sIT orders mainly on the ground that these being supposedly ex parte orders were not passed on the day of alleged default and were inordinately delayed and therefore, void and liable to be annulled. He vehemently criticised C'SlT(A) orders in which due cognizance not taken of these vital and fatal defects and DC'sIT orders were, upheld. Learned D.R. on his part defended DC'sIT as well as C'SIT(A) order.
4 We have carefully considered the arguments from both the side. The facts of the matter are that the assessee-company were given show-cause notice for the purpose on 18-5-1998 and date of compliance was 26-5-1998. On this date no compliance was made rather a request for 30 days extension was received. DCIT allowed extension for 15 days and adjourned the case to 9-6-1998. No compliance was made on the extended date either and not even a bare request for extension was received. DCIT noted the factum of default on the order-sheet on that date (9-6-1998) and passed the order next day i.e. 10-6-1998. Mr. Rehan Hasan Naqvi denied receipt of any intimation from DCIT fixing date of compliance as 9-6-1998. Also he cited cases reported as 198 t PTD 210 and PLD 1975 Lah 1317 to the effect that ex parte orders be passed on the day of default or at least a decision to this effect be made on the day of default. However in our considered view both these arguments are of no help in context of the matter under consideration. Assessee should not have taken his request for adjournment as granted or waited over indefinite period for DC'sIT response. It should have ascertained its fate and made necessary compliance on the due date.
5. The ratio decidendi of the cases cited at Bar does not help the assessee in the matter before us. In one case the time lag was of 13 days while in the other it was of allegedly two days. In this case cognizance was taken of assessee's failure to comply on due date and order was passed next very day It is natural to assume that DCIT must have waited on 9-6-1998 till the close of office hours. Passing of order next day is no violation of any criterion laid down for the purpose. Absence of words "reserved for orders" though desirable are not fatal to the proceedings. Further nature of these proceedings namely raising of demand under section 52/86 for assessee's alleged failure to deduct tax in accordance with the provisions of section 50 is different from ex prate order under section 63 for assessees failure to comply with statutory notice under sections 56 58 and 61 etc. Default of these notices may not only result in ex parte orders but also imposition of penalties and prosecution under various sections in Chapters XII and XIII of the Income Tax Ordinance, 1979. Here the matter was only of assessee explaining its position in matter of tax as deducted from payments to other All the law for ex parte order is not strictly speaking applicable to these proceedings. We find nothing wrong in DCIT passing orders when assessee failed to explain their position on the issue more than 3 weeks after issuance of show-cause notice for the purpose.
6. Mr. Rehan Hasan Naqvi's next argument was that all the orders are inordinately delayed and therefore, void. These orders under section 52/86 resulted in creation of demand and were therefore, essentially assessment orders. He referred to a case decided by Lahore High Court reported as' PLD 1989 p.121 defining the word assessment. Alternately these orders should have been passed within a period of 90 days as held in the matter of charge of W.W.F. by a D.B. of this Tribunal. As these orders were neither passed within time limit prescribed for the purpose of assessment under section 64 nor within 90 days of the framing of assessment when cognizance should have been taken of these matters, these were all according to him, time- barred and hence void. He vehemently rebutted D.R's. arguments before us to the effect that as no time limit was Prescribed for orders under section 52/86 all the orders were valid under the law. According to him mere non-mentioning of time limit specifically in some sections didn't mean a licence for Assessing Officers to sleep for years and then wake up and dig past. After all there should some time limit for the purposes of tax assessments or tax proceedings or for assessees to keep records and make compliance with Assessing Officer's requirements. According to him D.C. I.T. is debarred from asking for accounts of more than three years prior to current year.
7. We have carefully considered all these arguments. Orders raising demand under section 52/86 are not "assessment orders" though these do result in raising of tax demand. Assessment orders quantify the income or earnings real or notional of the assessee concerned and tax demand thereon while orders under section 52 are in respect of statutory obligation of payers to withhold taxes from payments to others when they default. Additional taxes for such defaults are calculated as per provisions of section 86 and these are not for default of taxpayer's own tax liabilities but only for their delinquency in matters of observing or fulfilling their statutory obligations. Time limits prescribed for assessment under sections 62 and 63 are therefore not applicable in such cases. The period of 3 years prescribed under law for the purposes of enforcing production of accounts is also only for the restricted purpose of notice under section 61 of Income-tax and nothing else. Notices under section 61 may be issued for earlier years also and time limit of three years for enforcing production of accounts will then apply to period of three years preceding the year for which assessment/reassessment proceedings are being conducted. Time limit for action under section 65 is five years. This way Assessing Officer may call up to 8 years old accounts. Mr. Rehan Hasan Naqvi could not cite any law for destruction of accounts by assessees after 3 years or embargo on Assessing Officer to enforce their production after three years from current year. Hence action of DCIT in calling for accounts or accounting information for more than 3 years in this case was lawful.
8. There is however, force in arguments of Mr. Rehan Hasan Naqvi that indefinite and limitless periods of time can't be allowed to Assessing Officers to dig out past matters and thus cause great hardship to taxpayers. Why should after all taxpayers be punished for lethargy or inaction of the Assessing Officers? Sections 139--143 prescribe for periodical filing of detailed statements under pains of penalties and prosecutions. Assessing Officers can enforce compliance of provisions of section 50 by enforcing these statements and prompt remedial actions for delinquencies and defaults. Therefore while we don't endorse Rehan Hasan Naqvi's views regarding time limits prescribed for assessment proceedings being applicable to orders under section 52/86, or that such orders constitute assessment proceedings or such orders he passed simultaneously with order under section 62 etc. or within 90 days thereof we are of the view that orders under section 52/86 be passed within time limit of 4 years prescribed under section 156 and as laid down for the purpose of charging additional tax under section 87 by a Full I Bench of this Tribunal cited as 1996 PTD (Trib.) 65. Thus orders, for 1992-93 and 1993-94 being beyond this time limit are held void while orders for other three years being within time are sustained. Mr. Rehan Hasan Naqvi also complained that calculations of tax under section 52 or additional tax under section 86 was not wholly correct as his clients had discharged their liabilities. He could not however, support his claim by furnishing statements of tax deductions under section 50 on ground that books were with official assignee. We therefore, direct that DCIT should carry out necessary rectification as. per law as and when assessee produces adequate evidence or material necessitating such action.
9. The appeals of the assessee for 1992-93 and 1993-94 succeed while appeals for 1994-95, 1995-96 and 1996-97,fail and are dismissed.
C.M.A./M.A.K./72/Tax(Trib.) Order accordingly.