BEFORE MUHAMMAD AKHTAR NAZAR MIAN, ACCOUNTANT MEMBER AND SYED KABIRUL HASAN, JUDICIAL MEMBER VS BEFORE MUHAMMAD AKHTAR NAZAR MIAN, ACCOUNTANT MEMBER AND SYED KABIRUL HASAN, JUDICIAL MEMBER
2002 P T D (Trib.) 350
[Income-tax Appellate Tribunal Pakistan]
Before Jameel Ahmed Bhutto, Accountant Member and Karamat Hussain Niazi, Judicial Member
I.T.A. No. 79/IB of 1998-99, decided on 18/08/2001.
(a) Income Tax Ordinance (XXXI of 1979)---
-----Ss. 111, 13(1)(aa) & 138E---Penalty for concealment of income etc.-- Addition---Settlement---Addition made under S.13(1)(aa) of the Income Tax Ordinance, 1979 was reduced by the Income Tax Settlement Commission with the consent of the assessee---Assessing Officer initiated penalty proceedings for concealment ---Assessee contended that settlement was an agreement with the Department and in view of the agreement between the Department and assessee, the right of Department to impose penalty was automatically waived off---Validity---Penalty was rightly imposed on the admitted amount of deemed income under S.13(1)(aa) of the income Tax Ordinance, 1979 settled at the level of Income Tax Settlement Commission---Nothing in the order of the Settlement Commission was available to show that besides reducing the quantum of deemed income, there was any settlement on the question of penalty under S.111 of the Income Tax Ordinance, 1979---Proceedings for assessment of income which included addition under S.13(1)(aa) were independent in their nature and could not be equated with the penalty proceedings---Settlement reached with the Income-tax Settlement Commission had not placed any bar on the penalty proceedings to spite of the agreement of the assessee on the quantum of deemed income as terms of settlement did not include the penalty to question in the order of the Settlement Commission---No agreement existed with the Income Tax Department or with any competent Income-tax Authority about the quantum of deemed income---Penalty for concealment of income was required to be considered independently under S.111 of the Income Tax Ordinance, 1979 in circumstances.
(1998) 42 Tax 87 (Trib.) distinguished.
(b) Income Tax Ordinance (XXXI of 1979)---
----S.138-E---Disposal of applications by the Settlement Commission-- Settlement---Agreement----Settlement reached by the assessee at the level of the Income-tax Settlement Commission could not be treated as an agreement with the Income-tax Department.
Sh. Anwar-ul-Haq for Appellant.
Muhammad Tahir Khan, D.R. for Respondent
Date of hearing: 18th August, 2001
ORDER
JAMEEL AHMED BHUTTO (ACCOUNTANT MEMBER).-- The above captioned appeal at the instance of the assessee is directed against the appellate order, dated 12-6-1998 passed by the learned A.A.C., Sargodha Range, Sargodha, in respect of the penalty order under section 111 of the Income Tax Ordinance, 1979 (hereafter the Ordinance) for the assessment year 1991-92. It is contended that the penalty order, dated 28-6-1997 is arbitrary, capricious, against law and facts of the case. It is further stated that the learned A.A.C. has erred in confirming the penalty order of the Special Officer of Income-tax. Finally, it is urged that in view of the agreement between the department and the assessee, the right of the department to impose penalty was automatically waived off.
2. We have heard the learned representatives of both the parties and considered the facts and circumstances of the case in light of the orders passed at the lower forums and the arguments advanced before us.
3. The relevant facts leading to this appeal are that the assessee, an individual deriving income from legal profession as a lawyer, was assessed for the assessment year 1991-92 on 19-6-1994 at the net income of Rs. 4,58,000 out of which an amount of Rs. 3,93,000 was added as deemed income under' section 13(1)(aa) of the Ordinance. Feeling aggrieved with this assessment, first appeal was preferred before the learned A.A.C. who confirmed the assessment order. Thereafter, the assessee went to the Income-tax Settlement Commission, Islamabad, which reduced the amount of addition under section 13(1)(aa) to Rs. 1,56,500. In connection with the penalty proceedings initiated under section 111 of the Ordinance, the Assessing Officer observed that the Settlement Commission had not given any directions about the penalty proceedings already initiated in this case and, therefore, a reminder to notice under section 116 was issued and served upon the- assessee on 30-4-1997. The learned A.R. of the assessee took the plea that the assessee was not liable for any penalty for the reason that the Settlement Commission was constituted with a view to wind up unnecessary and undue litigation and settle the demand which was finally settled and that whenever there is an agreement, the department automatically waives off the right to impose the penalty. This contention of the assessee was not accepted by the Assessing Officer as the matter relating to penalty remained untouched and no directions were made in the order of the Settlement Commission. The penalty was, therefore, imposed at Rs. 36,475 with the prior approval of I.A.C. which was equal to the amount of tax evaded by the assessee on account of addition under section 13(1)(aa) settled at the level of the learned Settlement Commission at Rs. 1,56,500. The assessee filed another appeal against the penalty order, dated 28-6-1997. Mr. Anwarul Haq Sheikh, Advocate, attended the appeal proceedings and submitted written arguments which are reproduced in the impugned order, dated 12-6-1998. The learned A.A.C. examined the assessment record in the light of the grounds of appeal and the contention of the learned A.R. and came to the conclusion that the issue of addition under section 13(1)(aa) of the Ordinance was settled by the assessee with the Income Tax Settlement Commission which had given the calculation in its order and reduced the amount of addition from Rs. 3,93,000 to Rs. 1,56,500. The learned A.A.C. reproduced the relevant part of the order 'of the Settlement Commission which showed that the assessee had agreed to an addition of Rs. 1,56,500 under section 13(1)(aa) but no bar had been placed upon the Revenue for not imposing the penalty under section 111 of the Ordinance. The learned A.A.C. further observed that the consent of the assessee for the agreed addition of Rs. 1,56,500 itself was admission on his part for concealment of income. In view of these facts, the action of the Assessing Officer was upheld and order imposing penalty of Rs. 36,475 under section 111 was confirmed. Hence this appeal.
4. We have given anxious consideration to the arguments advanced by the learned counsel for the assessee and the position explained by the learned D.R. We are of the firm opinion that the penalty amounting to Rs. 36,475 was rightly imposed on the admitted amount of deemed income under section 13(1)(aa) settled at the level of Income Tax Settlement Commission, whereupon the assessee had withdrawn second, appeal filed with the income-tax Appellate Tribunal. There is nothing in the order of the Settlement Commission to show that besides reducing the quantum of deemed income from Rs. 3,93,000 to Rs. 1,56,500, there was any settlement on the question of penalty under section 111 of the Ordinance. The proceedings for assessment of income which included addition under section 13(1)(aa) were independent in their nature and could not be equated with the penalty proceedings under section 111 of the Ordinance. The settlement reached with the Income-tax Settlement Commission had placed no bar on the penalty proceedings in spite of the A agreement of the assessee on the quantum of deemed income which was reduced from Rs. 3,93,000 to Rs. 1,56,500. The fact that the terms of settlement did not include the penalty in question is evident from the order of the learned Settlement Commission. Had the order provided for any settlement regarding penalty, it would have followed the provisions of subsection (5) of section 138E of the Ordinance which read as follows:
"5. Every order passed under subsection (4) shall provide for the terms of settlement including any demand of tax, penalty or interest, the manner in which any sum due under the settlement shall be paid and all other matters to make the settlement effective and shall also provide that the settlement shall be void if it is subsequently found by the Commission that it has been obtained by fraud or misrepresentation."
It is also noteworthy that the appeal filed by the assessee before I.T.A.T. which was subsequently withdrawn was not in respect of any penalty and, therefore, the order of the learned Settlement Commission could not be construed in a manner as to suggest that by reducing the amount of addition under section 13(1)(aa) on agreement basis, no penalty proceedings for the concealment of income could be initiated by the department.
5. The contention of the learned counsel for the assessee that there was any agreement between the department and the assessee whereby the department automatically waived off its rights to impose penalty is also untenable. There was no such agreement between the Income Tax Department or any of the Income-tax Authorities enumerated in section 3 of the Ordinance. The settlement reached by the assessee at the level of H the Income Tax Settlement Commission was a voluntary action on the part of the assessee who preferred to withdraw the appeal against assessment from the income-tax Appellate Tribunal and to settle the issue with the learned Commission. Such a settlement cannot be treated as an agreement with the income Tax Department.
6. The learned counsel for the assessee has relied upon the case reported as (1998) 42 Tax 87 (Trib.) wherein it was held that the agreement of an assessee' for the purposes of assessment of income itself was not a proof of concealment. The facts and circumstances of this reported case are clearly distinguishable and out of context of section 13 of the Ordinance. In the instant case before us, there was no agreement with the Income Tax Department or any competent Income-tax Authority about the quantum of deemed income under section 13(l)(aa) of the Ordinance. Penalty for concealment of income was therefore, required to be considered independently under section 111 of the Ordinance. Concealment of income or the furnishing of inaccurate particulars of income included the act on the part of the assessee as was referred to in section 13(1)(aa), as clearly mentioned in clause (c) of subsection (2) of section III of the Ordinance. Before imposing the penalty under section 111, a reasonable opportunity of being heard was given to the assessee as -required under section 116 of the Ordinance and prior approval of the I.A.C. in writing was also obtained while passing the penalty order under section 111, dated 28-6-1997.
7. For the facts and reasons stated above, we do not find any merit in the appeal of the assessee which is hereby rejected.
C.M.A./M.A.K./148/Tax(Trib.).Appeal rejected.