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

‑‑‑‑Ss. 108 & 5(1)(c)‑‑‑Penalty‑‑‑Jurisdiction of Tax Recovery Officer‑‑ Scope‑‑‑Tax Recovery Officer had proper and lawful jurisdiction to consider imposition of penalties under S.108(b) of the Income Tax Ordinance, 1979.

I.T.As. Nos.361 and 362/19 of 1997‑98 rel.

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

‑‑‑‑Ss. 108(b), & 139 to 142‑‑‑Penalty‑‑‑Penalty was imposed for non-filing of monthly statements ‑‑‑Assessee contended that taxable payments having not been made statements on monthly basis were not required to be filed‑‑‑First Appellate Authority set aside the order of penalty and ordered de novo consideration of the matter‑‑‑Validity‑‑‑No serious prejudice had been caused to the Department, as the Tax Recovery Officer or any other officer of competent jurisdiction would have full authority to make de novo decision after proper consideration of factual and legal position of the case and after giving proper opportunity of being heard to the assessee‑‑‑Provisions of Ss. 139 to 142 of the Income Tax Ordinance, 1979 had been amended through the Finance Act, 1995 and the requirement of filing annual statements in the prescribed form and verified in the prescribed manner ' alongwith the date of 1st September of each year had been dispensed with.

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

‑‑‑‑S.108(b)‑‑‑S.R.O. No.1018(1)/98, dated 3‑10‑1998‑‑‑S. R. O. No.1050(I)/98, dated 13‑10‑1998‑‑‑S. R. O. No.1355(I)/98, dated 2‑12‑1998‑‑‑Penalty‑‑‑No penalty could be imposed under S.108(b) of the, Income Tax Ordinance, 1979 for non‑filing of monthly statements before the amendments were made in the Rules through S.R.O.1018(I)/98, dated 3‑10‑1998 and S.R.0.1050(I)/98, dated 13‑10‑1998.

I.T.A. No.384(IB) of 1999‑2000 rel.

Muhammad Tahir Khan, D.R. for Appellant.

Riffat Hussain Malik for Respondent.

Date of hearing: 16th August; 2001.

ORDER

The above captioned appeal at the instance of the Department is directed against the order, dated 23‑4‑1998 passed by the learned CIT(A), Zone‑I, Islamabad, in respect of the assessment year 1998‑99, whereby penalty amounting to Rs.77,400 imposed under section 108(b; of the Income Tax Ordinance, 1979 (hereafter the Ordinance) has been set aside for de novo consideration after giving proper opportunity to the assessee.

2. We have heard the learned representatives of both the parties and considered the facts and circumstances of 'the case in the light of the orders passed at the lower forums.

3. The relevant facts leading to these appeals are that the Tax Recovery Officer (TRO), imposed penalty of Rs.77,400 for the alleged defaults under sections 139', 141 and 142 of the Ordinance on the ground that the assessee was required to file monthly statements under the said sections for the months August, September, and October, 1997. When challenged m first appeal, it was contended by the learned A.R. of the assessee that taxable payments were not made and, therefore, statements on monthly basis were not required to be filed. The learned CIT(A observed that the penalty for default . of monthly statements was apparently debatable and if the assessee had made non‑taxable payments, there was no justification for imposition of penalty. The issue' was, therefore, set aside for de novo consideration for giving proper opportunity to the assessee, for verification of taxable payments, and refraining of the order by an officer having proper jurisdiction.

4. Having examined all aspects of the case, we are of the firm opinion that the TRO had lawful jurisdiction to pass penalty orders under section I08(b) of the Ordinance; as also held by the Division Bench of this Tribunal in ITAs Nos.36‑1‑362/113 of 1997‑98, dated 4‑8‑1999. The learned Tribunal also held that the earlier judgment of this `tribunal, sitting at Islamabad on the point of validity of jurisdiction order issued by Commissioner of Income‑tax under section 5(1)(c) had no binding effect, being per incuriam. We, therefore, hold that the TRO, had proper and lawful jurisdiction to consider imposition of penalties under section 108(b) of .the Ordinance.

5. As regards the setting aside of the penalty order, we are of the considered view that no serious prejudice has been caused to the Department, as the TRO or any other officer of competent jurisdiction will have full authority to make de novo decision after proper consideration of factual and legal position of the case andafter giving proper opportunity of being heard to the assessee. The legal position is that sections 139 to 142 of the Ordinance had been amended through the Finance Act, 1995 and the requirement of filing annual statements in the prescribed form and verified in the prescribed manner alongwith the date of 1st September of each year had been dispensed with. Thereafter, corresponding amendments were not made in the relevant rules to provide for obligatory furnishing of monthly statements under the said sections until proper amendments were made vide SRO No.1018(I)/98 dated October 3, 1998, SRO No. 1050(1)/98, dated 13‑10‑1'998 and SRO No.1355(1)/98, dated 2‑12‑1998. Thus, it was held by this Tribunal in ITA No.384(IB) of 1999‑2000 vide order, dated 5‑12‑2000 that no penalty could be imposed under section 108(b) for non‑filing of monthly statements before the amendments were made in the rules through these Notifications of 1998.

6. In a number of similar cases where penalties under section 108(b) were imposed, we noticed many infirmities and lacunae in the penalty orders which did not stand test of appeals. Some of our main findings recorded in the various decisions are as under:‑‑‑

(i) Stereotype/pro forma orders of penalty could not be passed in a mechanical manner as these were not sustainable in the eyes of law.

(ii) The amendments introduced vide SRO 1116(1)/95, dated 23‑11‑1995 clearly indicated that whenever any statement was required to be furnished under particular section, the said section was specifically inserted in the marginal note and the body of the rule. Penalty under section 108(b) could be levied for wilful default in furnishing of such statements which were specifically required to be furnished in the rules under, sections specified in section 108(b)‑‑‑(1998) 78 Tax 15.(Trib) relied upon.

(iii) There was no requirements of filing nil statements under any of the sections of the Ordinance and the rules made thereunder in respect of transactions covered under sections 139 .to 142 of the Ordinance read with the rules framed by the C.B.R. Division Bench's decision in ITGA Nos.361 and 362(IB) of 1997‑98, dated 4‑8‑1999 followed:

(iv) 'The requirement of filing any statements under section 139 was made obligatory by amending rule 53 of the Income Tax Rules, 1982 vide Notification No.SRO 1.01.8(1)/98, dated‑ October 3; 1998, which could not be applied retroactively.

(v) Cognizance of any wilful default on the part of an assessee could only be taken in accordance with the amendments made in the relevant sections and rules since 1995, only if the statutory statements were not furnished without reasonable cause within the time allowed for that purpose as stipulated in section 108 of the Ordinance.

(vi) Show‑cause notice under section 116 of the Ordinance could not be issued in the absence of any material to suggest that the statutory statements were actually required to be filed by an assessee and there was failure to furnish such statements without reasonable cause. This could not be done merely on presumptions, surmises and conjectures.

(vii) A reasonable opportunity of being heard was required to be given under section 116 of the Ordinance for any alleged failure, without reasonable cause, on the part of an assessee. Reasonable opportunity did not comprise merely of issuing notices and receiving their replies but included examination of the case by an independent, impartial and unbiased officer.

(viii) The major pre‑requisite for imposition of penalty under section 108 was that the default committed was without reasonable cause and such default was wilful. If an assessee was not guilty of gross or wilful neglect, penalty was not leviable. The onus to prove that the assessee had committed wilful default was on the Department. The authority competent to impose penalty proceedings must posses some uncontrovertible evidence to initiate penalty, proceedings, (Case‑law relied upon in C.B.R's. Letter No. 108(I)/DTB‑1/94, d4tted January 9, 1995).

(ix) A speaking order of penalty was required to be passed under section 108 to clearly show that the officer applied his mind to all facts and circumstances of the case, explanation (if any) tendered by the assessee was considered and properly dealt with in the order, the default was wilful and without reasonable cause, and a real, fair or proper opportunity of being heard was provided to the assessee under section 116 of the Ordinance.

7. As a result of this order, the appeal of the Department stands disposed of to the extent and in the manner indicated above.

C. M. A. /M. A. K./180/Tax(Trib.) Order accordingly