I.T.A. No.2758/LB of 1995, decided on 19th March, 2002 VS I.T.A. No.2758/LB of 1995, decided on 19th March, 2002, 2002 PTD-INCOME-TAX-APPELLATE-TRIBUNAL-PAKISTAN 2355 (2002)

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

‑‑‑‑Ss. 88, 116 & 54‑‑‑Charge of additional tax for failure to pay tax with return‑‑‑Mandatory‑‑‑Opportunity of being heard‑‑‑Provisions of S.116, Income Tax Ordinance, 1979. provide that reasonable opportunity of being heard, would be given to Assessee and that Assessing Officer had discretion not to impose penalty if the defaulter provided sufficient cause for his failure to comply with a particular provision of the Ordinance‑‑‑Such type of discretion was not available to the Assessing Officer while imposing additional tax under Ss.86, 87, 88 & 89 of the Income Tax Ordinance, 1979‑‑‑If, however, assessee failed to make due payment of income tax within prescribed time, the Assessing Officer would impose additional tax under the said provisions of the Income Tax Ordinance, even if the assessee had put up sufficient cause in his defence‑‑‑Assessing Officer, in case of assessee's failure to make payment of due tax under the Income Tax Ordinance, 1979 will charge additional tax although the demand of tax had been stayed by the Income Tax Authorities‑‑‑Appellate Tribunal rejected the plea of assessee that charge of additional tax under S.88 of the Income Tax Ordinance, 1979 was discretionary and not mandatory.

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

‑‑‑‑Ss.88 & 156‑Charge of additional tax for failure to pay tax with return‑‑‑Opportunity of being heard‑‑‑Object‑‑‑Right of being heard should be given to assessee before imposition of additional tax under any provision of Income Tax Ordinance, 1979‑‑‑Right of being heard could not be denied to a taxpayer in any case‑‑‑Demand of additional tax had been created by the Assessing Officer as a part of his assessment order which was passed after providing reasonable opportunity of being heard to the assessee‑‑‑Assessing Officer passed rectification order under S.156 of the Income Tax Ordinance, 1979, after hearing the assessee for the year under consideration and imposition of additional tax under S.88 of the Income Tax Ordinance, 1979, was maintained by the First Appellate Authority‑‑‑First Appellate Authority rejected assessee's contention that additional tax had wrongly been imposed under S.88 of the Income Tax Ordinance, 1979‑‑‑Facts clearly showed that the additional tax in question had been imposed by the Assessing Officer and it had been maintained by the First Appellate Authority after hearing the assessee‑‑ Object of providing reasonable opportunity of being heard in the case of imposition of additional tax was that the assessee should be able to express his view point regarding the amount of tax due, period of tax, delay etc. so that the computation of additional tax should :tot be made on wrong basis‑‑‑Such objective having been achieved in the present case contention of the assessee having not been heard was rejected.

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

‑‑‑‑S.54, Expln.‑‑‑Provision of explanation to S.54, Income Tax Ordinance, 1979 is retrospective in operation ‑‑‑Assessee contended that explanation to S.54 of the Income Tax Ordinance, 1979 could not be applied retrospectively to the return of income tiled by the assessee for the year 1992‑1993‑‑‑Validity‑‑‑Contention of assessee was misconceived as explanation added to S.54 of the Income Tax Ordinance, 1979, which interprets the words "Tax Payable" as used in the section was placed on the statute book by Finance Act, 1993, with a clear mention that explanation shall always be deemed to have been so added‑‑‑Since the explanation in question had been clearly intended by the Legislature to have retrospective effect, the objection by the assessee was ill‑founded and was rejected by the Tribunal.

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

‑‑‑‑Ss. 86, 87, 88, 89 & 54‑‑‑Charge of additional tax‑‑‑Due tax ‑‑‑Non payment of‑‑‑Discretion to levy additional tax‑‑‑Opportunity of being heard‑‑‑Charge of additional tax under Ss.86 to 89 of the Income Tax Ordinance, 1979 was obligatory if a taxpayer had failed to make payment of due tax within the prescribed period and Assessing Officer had no discretion to waive or remit or forego the levy ‑‑‑Appellate Tribunal found that reasonable opportunity of being heard should be provided before imposing additional tax and in the present case such opportunity had already been so provided‑‑‑Explanation to S.54 of the Income Tax Ordinance, 1979 was retrospective in nature and had rightly‑been applied by the Assessing Officer in the case of assessee‑‑‑Appeal filed by the assessee/appellant was rejected and order of the First Appellate Authority was maintained by the Tribunal.

Mamy Beverage v. Naseem 1995 PTD 91; PLD 1978 SC 89; Sales Tax Appeal No.46/LB of 1999 and Koro v. The State PLD 1963 Kar. 256 irrelevant.

Messrs Elahi Cotton Mills Ltd. and others v. Federation of Pakistan (1997) 76 Tax 5 (SC) rel.

M. Iqbal Hhshmi for Appellant.

Ahmad Kamal, D.R. for Respondent

Date of hearing: 9th February, 2002.

ORDER

MUHAMMAD SHARIF CHAUDHRY (ACCOUNTANT MEMBER).‑‑--Appeal has been filed by an assessee which is a public limited company and derives income from manufacturing and sale of Ghee against the appellate order, dated 26‑4‑1995 passed by Commissioner of Income Tax (Appeals‑Zone 1), Faisalabad under section 132 of the Income Tax Ordinance for the year 1992‑93. Following grounds of appeal have been raised:‑‑

"(2) That learned CIT(A) has wrongly confirmed the action of Assessing, Officer regarding imposition of Additional‑tax amounting to Rs.5,92,311.

(3)That demand of Additional‑tax under section 88 is liable to be deleted for the following reasons:‑‑

(i)It has been imposed without granting an opportunity of being heard.

(ii)That at the time of filing of return, the said Explanation was not on the Statute Book and in the absence of this Explanation/at the time of filing of return, no default can be alleged.

(iii)That Explanation inserted in the Statute Book after the filing of return cannot be interpreted in a way which will render all the tax payers as defaulters for the previous two years who have filed return before the insertion of Explanation.

(iii)That even otherwise in view of undertaking given by the Revenue in the Honourable Lahore High Court that no recovery of tax under section 80‑D of the Income‑tax Ordinance, 1979 shall be made, the Assessee cannot be said to have defaulted for the purposes of Additional‑Tax."

2. Appellant's A.R. and respondent's D.R. have been heard and available records have been perused.

3. The A.R. of the assessee has given thought provoking and detailed arguments in favour of the contentions which have been raised in the grounds of appeal and mentioned supra. The sum and substance of his pleadings is that:---

(i)Additional tax which is levied under section 88 read with section 54 of the Income Tax Ordinance is not automatic and mechanical. It is rather discretionary. The I.T.O. can exercise his judicious discretion and he may or may not impose additional tax keeping in view the circumstances of a case. If an assessee puts up a sufficient cause the tax may not be imposed. According to the A.R. section 88 of the Income Tax Ordinance does not say that in case of failure to pay tax under section 54 assessee shall pay additional tax rather the words used by this section of the Income Tax Ordinance are that, "he shall be liable to pay ,additional tax ...." The words "shall be liable to pay" have been interpreted by the Courts to the effect that the officer empowered to impose a levy has judicious discretion to impose it or not. The learned A.R. has relied upon by following judgments of the superior Courts:

(a)1995 PTD 91 Judgment of the Lahore High Court under Sales Act of 1990 in the case of Mamy Beverage v. Naseem.

(b)PLD 1978 Supreme Court 89 Judgment of the Supreme Court of Pakistan

(c)Sales Tax Appeal No.46/LB of 1999, dated 25‑3‑1999 Judgment of the Customs, Excise and Sales Tax Appellate Tribunal, Lahore.

(d)PLD 1963 (WP) Karachi 256 Judgment of Karachi High Court in Koro v. The State.

(ii)Right of being heard should be given to an assessee before additional tax isimposed

(iii)Explanation to section 54 of the Income Tax Ordinance was placed on the statute book by Finance Act of 1993 while the assessee had submitted its return of income for the year 1992‑93 much earlier. Thus, this Explanation cannot be interpreted in a way which will render the taxpayers as defaulter for the previous two years who had filed returns before the insertion of Explanation.

(iv)Department had given undertaking before the honourable High Court that no recovery of tax under sections 80C and 80D of the Income Tax Ordinance shall be made during the proceedings. So, the assessee cannot be said to have defaulted for the purpose of additional tax and, therefore, no additional tax be levied.

4. The abovementioned contentions of the, assessee and the arguments of his A.R. have been strongly opposed by the learned D.R. The D.R. has quoted C.B.R.'s Circulars and says that additional tax is a part of the main assessment order which was passed after hearing the assessee. The D.R. further says that section 88 does riot provide opportunity of being heard to the assessee and it is in open contrast to section 13 and section 116 of the Income Tax Ordinance where the assessee had been provided specifically opportunity of being heard before any deemed income under section 13 is assessed or before any penalty for any offence committed by him under section 108 to section 111 etc. is imposed.

5. We have gone through the assessment order of the ITO, order of rectification passed by the ITO under section 156 and impugned appellate order of the learned Commissioner. We have also considered the contentions of the parties and the pleadings made at the bar by their authorized representative. Let us examine the contentions of the appellant and its A.R. and discuss and adjudge the same as under:‑‑‑

(i)We do not contribute to the view, held by the AR of the assessee that imposition of additional tax under section 88 of the income Tax Ordinance is discretionary anti not obligatory in case of assessee's failure to make payment of tax under section 54 of the said Ordinance. Section 88 of the Income Tax Ordinance reads as follows:‑‑

"Charge of additional tax for failure to pay tax with the return.‑‑Where any assessee fails to pay tax under section 54 or the tax so paid is less than the tax payable under that section, he shall be liable to pay additional tax at the rate of (,twenty‑four) per cent per annum on the amount loot paid or the amount by which the tax paid .by him falls short of the tax payable under that section. as the case may be, and such additional tax shall be calculated from the first day of October or the date on which the tax was payable, whichever is the later, to the date on which the is paid or the date on which an order under subsection (1) of section 59, (section 59A), section 62, section 63 or section 65, as the case may lie, is made, whichever is the earlier?"

The words used by section 88, "he shall be liable to pay additional tax ...." have been interpreted by the A.R. of the assessee to contain an element of discretion in the hands of the Income tax Officer. According to him. the I.T.O. may not impose additional tax under section 88 even it tax due under section 54 has not been paid by the assessee provided the assessee furnishes sufficient cause for the non‑payment. In our view this contention of the learned A. R. is erroneous. The case law produced by the A.R. in support of his view is not relevant.

The judgment of the learned Lahore High Court in the case of Mamy Beverages v. Naseem reported as 1995 PTD 91 relates to additional tax and penalty imposed by Deputy Collector, Central Excise and Sales Tax Department Rawalpindi under Sales Tax Act of 1990. In the concluding para of its judgment the learned Court observed (these observations of the Court have been highlighted by the A.R. in support of his view) as under:‑‑‑

"As already observed in the present case, there is no dispute as regards the facts from which it .is clear that there was no deliberate failure on the part of the petitioner to pay the sales tax within the due period. Indeed the petitioner had deposited the amount due in the Government treasury, though on account of inadvertent error under a wrong head of account. In these circumstances, it would not be said that the petitioner had deliberately evaded to pay the sales tax or was a defaulter. That being so, it was clearly not liable to pay any additional sales tax. "

From the above observations of the learned Court it is obvious that the petitioner had deposited the amount of sales tax due in the Government treasury though on account of inadvertent error under a wrong head of account. In these circumstances the learned Court held that assessee had not committed any default and he was not liable to pay any additional sales tax. So far as the judgment of the Customs, Excise and Sales Tax Appellate Tribunal, Lahore in Sales Tax Appeal No.46/LE of 1999, dated 25‑3‑1999 is concerned, that also relates to sales tax and talks of penalty provisions including additional tax under Sales Tax Act of 1990. This judgment is also not relevant. The judgment of the Honourable Supreme Court of Pakistan reported as PLD 1978 Supreme Court 89 and that of honourable Karachi High Court cited as PLD 1963 Karachi 256 relate to fine or penalties levied under Civil or Criminal Laws by Civil Courts. These judgments are also not relevant to the case of the A.R. which is under Income Tax Ordinance, 1979.

It would not be out of place to observe that each enactment has its own objectives and temperament and cases decided by the Courts under one enactment may not necessarily apply to the cases under another enactment. So far as the imposition of fine or penalties is concerned under Civil and Criminal Laws, the view point of the A.R. is correct that the Courts have discretion. It has been held by the higher judiciary that the words, "liable to fine or penalty" or the words, "liable to sentence" give discretion to the concerned authorities working under Civil and Criminal Laws not to impose fine or not to award sentence if the accused provides sufficient cause for his omission or commission. Even Income Tax Ordinance, 1979 under its section 116 provides that reasonable opportunity of being heard would be provided to the assessee. This section 116 has been interpreted alongwith other sections of the Income Tax Ordinance, dealing with penalties, by the Courts that the I.T.O. has discretion not to impose penalty if the defaulter provides sufficient cause for his failure to comply with a particular provision of Income Tax Law. But such type of discretion, we are sorry to say, is not available to the Income‑tax Officer while imposing additional tax under sections 86, 87, 88 and 89 of the Income Tax Ordinance. If the assessee fails to make due payment of income tax within prescribed time and this fact has been established by ITO. the ITO has to impose additional tax under the abovementioned provisions of the Income Tax Ordinance even if the assessee has put up sufficient cause in his defense. We would go even farther to say that the Income‑tax Officer in case of assessee's failure to make payment of due tax under the income Tax Ordinance will have to charge additional tax although the demand of tax has been stayed by Income Tax Authorities. So we reject the plea of the learned A.R. that charge of additional tax under section 88 is discretionary and not compulsory.

(ii)We agree with the A.R. of the assessee that right of being heard should be given to assessee before imposition of additional tax under any provisions of Income Tax Ordinance. This right of being heard cannot he denied to a taxpayer in any case. In instant case we have examined ate facts. The disputed demand of additional tax has been created by the Income‑tax Officer as a part of his assessment order which was passed after providing reasonable opportunity of being heard to the assessee. The ITO B passed rectification order under section 156 after hearing the assessee for the year under consideration and imposition of additional tax under section 88 was maintained. In appeal the, learned Commissioner rejected assessee's view point that., additional tax has wrongly been imposed under section 88. From these facts it is also clear that the additional tax in question has been imposed by the Assessing Officer and it has been maintained by the learned Commissioner after hearing the assessee.

The objective of providing reasonable opportunity of being heard in the case of imposition of additional tax is that the assessee should be enabled to express his vie point regarding the amount of tax due, period of tax delay etc. so that the computation of additional tax should not be made on wrong basis. This objective has been achieved in the instant case and so the contention of the A.R. of the assessee on the issue of being heard is rejected.

(iii)The next contention expressed by the A.R. of the assessee is that Explanation to section 54 of the Income Tax Ordinance, 1979 which was placed on the statute book by Finance Act of 1993 cannot be applied retrospectively to the return of income filed by the assessee for the year 1992‑93. This contention of the A.R. of the assessee, we regret to point out, is again misconceived. Explanation added to section 54 of the Income Tax Ordinance, which interprets the words "tax payable" as used in this section C was placed on the statute book by Finance Act of 1993, no doubt, but it was clearly declared that this Explanation shall always be deemed to have been so added. Since the Explanation in question has been clearly intended by the Legislature to have retrospective effect, the objection raised by the A.R. is ill founded and hence rejected.

(iv)The learned D.R. has not controverted the contention of the A.R. that department had given undertaking to all the taxpayers who had challenged sections 80C and 80D, etc. before the High Court regarding non‑recovery of tax during the pendency of the proceedings under the said sections. But this undertaking does not mean that no additional tax would be levied on assessee's non‑payment of tax under section 80D when the decision on the fate of section 80D would be made by the Honourable Courts. Moreover, it is also a known, fact that the learned High Court had not granted any stay against recovery of' tax to the assessee in writing with the condition that additional tax would not be levied on the amount of tax payable under section 54 read with section 80D. Since the fate of section 80D was decided ultimately by the Honourable Supreme Court of Pakistan in its landmark judgment reported as (1997) 76 Tax 5 (SCP) in the case of Messrs Elahi Cotton Mills Ltd. ant others v. Federation of Pakistan in favour of the Income Tax Department, the tax under section 80D became payable by the assessee as ordained by section 54 of the Income Tax Ordinance on the date of filing of return of income. In view of this situation, we believe, the Income Tax Department is justified to impose additional tax under section 88.

6.In view of the foregoing discussion we feel no hesitation to hold that charge of additional tax under sections 86 to 89 of the Income Tax Ordinance, 1979 is obligatory if a taxpayer has failed to make payment of due tax within the prescribed period and ITO has no discretion to waive or remit or forego the levy. We also hold that reasonable opportunity of being heard should be provided before imposing additional tax and in the instant case such opportunity has been so I provided already. Explanation of section 54 of the Income Tax Ordinance is retrospective in nature and has rightly been applied by the Income Tax Officer in the case of the assessee. Therefore, it would be most appropriate if' the appeal filed by the assessee‑appellant is rejected i and the impugned appellate order of the learned Commissioner is maintained.

7. Consequently, appeal filed by the assessee fails.

C.M.A./M.A.K./358/Tax (Trib.)Appeal dismissed