Income Tax Ordinance (XXXI of 1979)---

----Ss. 52 & 50---Liability of person failing to deduct or pay tax---Deduction at source ---Assessee in default ---Assessee had not deducted tax from commission paid to agents---Assessing Officer treated the assessee as 'assessee in default'---Assessee explained that payments in question were partly received in shape of trade. discount and. partly as commission in the rough ratio of, 70 % and 30 % which were accepted by the First Appellate Authority who directed the Assessing Officer to treat 70% of the payments Subject to withholding tax-Validity--Collection of tax or assessment of income-tax was basically. the function of Revenue Authorities and not that of a person who was making the payment ---Assessee had been burdened with heavy responsibility which involved extra cost since the assessee. had to engage staff to deduct tax and to make payments to the treasury and also to subsequently follow the legal proceedings and for these services he had no reward to claim---Assessing Officer. should be extremely careful in completing all the formalities before treating the assessee as an "assessee in default "---Assessing Officer had not probed the matter in depth to examine the plea of the assessee with regard to distinction between commission and trade discount---Assessing Officer could have at least referred to the copies of the accounts available on the' assessment record to verify plea of the assessee---Appellate Tribunal declined interference with the order of First Appellate Authority in circumstances.

Javaid Iqbal Rana, D.R. for Appellant.

Irfan Ilyas, A.C.A. for Respondent.

Date of hearing: 14th December, 1999.

ORDER

The above captioned departmental appeals arise out of an order dated 28-1-1999 recorded by the learned CIT (Appeals), Zone-II, Lahore on the following common ground:---

"The learned CIT (Appeals) was not justified in reducing the commission amount as the assessee was properly confronted before passing the order and in the books of accounts the amount was shown as commission. "

2. The relevant facts in brief are that the Assessing Officer found that the assessee had not deducted tax from commission paid to the agents. He, therefore, issued show-cause notice and after rejecting the explanation treated the assessee to be an assessee in default. He levied tax at 10% of the amount of commission in each year and also levied the additional tax in each year. Before the learned CIT (Appeals), the assessee took the plea that the payments in question were partly trade discount and partly commission in the rough ratio of 70% and 30%. The learned CIT (Appeals) accepted this plea and directed the Assessing Officer to treat 30% of the, amounts as trade discount which is not liable to deduction and 70% to be commission payments subject to withholding tax.

3. The parties' have been heard and relevant orders perused. Both the parties. did not have any records to assist us in this matter. The learned A.R. of the assessee-respondent, however, submitted that the ,requirement to withhold tax at 10% from the commission payments was enhanced in July, 1991 which is beyond the period of assessment year 1991-92. Before such date the requirement was to deduct the tax only if the commission exceeded a sum of Rs.50,000 in the year. A perusal of the impugned order of the Assessing Officer shows that the assessee had taken this plea of distinction between commission and trade discount before the Assessing Officer which had been summarily dismissed. It may be pertinent to mention here the provision of section 50 of the Income Tax Ordinance, imposes a liability on the authority or agency or the assessee, making certain payments, to deduct tax therefrom and also there are provisions which require him to pay over such tax deducted and also to file various statements. Any default in these responsibilities, is subject to heavy penalties and liabilities. One must appreciate that the collection of tax or the assessment of income or tax is basically the function of the Revenue authorities and not a person who is making a payment. Not only the assessee has been burdened with heavy responsibility but also it involves extra cost since the assessee has to engage staff to deduct tax and to make the payments to the treasury and also to subsequently follow , the legal proceedings and for these services he has no reward to claim: In view of. these facts. we feel that the Assessing Officer, while proceeding under section 52 of the Ordinance, should be extremely careful and to complete all the formalities before treating the assessee as an assessee in default. In the present case the Assessing Officer has not really probed the matter in depth to examine the plea of the assessee with regard to the distinction between commission and trade discount. The Assessing Officer could have at least referred to the copies of the account available on the assessment record to verify such plea of the assessee. The learned A.R. of the assessee has also drawn our attention to the time lag in the proceedings. As per the impugned order, a show-cause notice was issued on 4-9-1997 whereas the order has been passed on 5-1-1998 without According any further opportunity to the assessee. In these circumstances, we see no reason to interfere in the order of the learned CIT (Appeals). The appeals are dismissed.

C.M.A./M.A.K./13/Tax(Trib.)???????????????????????????????????????????????? Appeals dismissed.