MESSRS BILZ (PVT.) LTD. VS DEPUTY COMMISSIONER OF INCOME-TAX, MULTAN
2002 P T D 1
[Supreme Court of Pakistan]
Present: Iftikhar Muhammad Chaudhry and Hamid Ali Mirza, JJ
Messrs BILZ (PVT.) LTD.
Versus
DEPUTY COMMISSIONER OF INCOME-TAX, MULTAN and another
Civil Petitions Nos. 2789-L to 2791-L of 2001, decided on 25/09/2001.
(On appeal from the judgment/order, dated 23-4-2001 passed by Lahore High Court, Lahore in I. T. As. Nos. 18 to 20 of 2000).
(a) Income Tax Ordinance (XXXI of 1979)---
----S. 50(4A)---Constitution of Pakistan (1973), Art. 185(3)---Deduction of tax at source ---Assessee in default---Show-cause notice for recovery of advance income-tax not deducted at source---Failure to identify the names of the parties in the notice to whom supplies were made ---Assessee made ten payments during the year 1995-96 for which income was not deducted at source---Amount of the payments was mentioned in the notice but the column of withheld tax indicated that the tax was not deducted and no reason in that behalf had been offered by the assessee---Despite availing sufficient opportunities before the Income-tax Authorities, no details were furnished for not deducting the tax---Effect---Where the assessee had notice/knowledge that tax had to be deducted from the categories of the parties mentioned in S.50(4A) of the Income Tax Ordinance, 1979, and assessee itself had failed to fulfil its obligation, the assessee was considered to be "assessee in default" for not deducting the tax from the parties to whom the supplies were made by it---Assessing Officer was not obliged to identify the names of the parties to whom the supplies were made because the record was maintained by the supplier i.e. the assessee and it was the duty of the assessee to maintain the record and show as to why deductions were not made from the parties at the time of making supplies to them ---Assessee who failed to deduct the tax in terms of S.50(4A) of the Income Tax Ordinance, 1979, was rightly declared to be an "assessee in default" and cognizance of the matter was rightly taken by the Income-tax Department within the meaning of S.52 read with S.86 of the Income Tax Ordinance, 1979---Leave to appeal was refused.
(b) Interpretation of statutes---
----Fiscal statute---Interpretation---Fiscal statute has to be construed in its true perspective and in respect of payment of tax, if it is found due against a party, then such statute cannot be interpreted liberally in order to make out a case in favour of an assessee who has failed to pay the tax.
Iqbal Naeem Pasha, Advocate Supreme Court and M.A. Qureshi, Advocate-on-Record for Appellant (in all Cases).
Nemo for Respondents.
Date of hearing: 25th September, 2001.
JUDGMENT
IFTIKHAR MUHAMMAD CHAUDHRY, J.---In the above petitions, judgment, dated 23rd April, 2001 passed by Lahore High Court, Lahore has been assailed with the prayer to grant leave to appeal. As statedly identical question of law is involved in all the matters, therefore, we intend to dispose them of by instant common judgment.
2. Facts giving rise to all these cases are similar, therefore, need not to be noted separately. Besides it, following proposition of law has been formulated on behalf of the petitioners, therefore, the relevant facts necessary for attending this proposition will be mentioned hereinbelow:
"Whether an assessee can be held to be assessee in default for not having deducted tax under clause (a) of subsection (4) of section 50 of the Income Tax Ordinance, 1979, if the Assessing Officer has not identified the recipient from whom tax should have been deducted."
3. As per case set-up by petitioner in C.P.L.A. No. 2789-L of 2001, the Deputy Commissioner of Income-tax, Circle -01, Range-III, Multan issued a show-cause notice, dated October 31, 1998 to petitioner which is reproduced hereinbelow in extenso:---
Ref. No. 310??????????????? ??????????????????????????????????? Office of the
Dated: Saturday, October 31, 1998????????????????? Deputy Commissioner of Income?
??????????????????????????????????????????????????????????????????????? tax Circle-01, Range-III, Multan
To
???????????
The Principal Officer,
M/s. Bilz (Private) Limited,
Abdali Road, Multan.
Subject: Show-cause notice under sections 52/86 in respect of non?-deductions on account of various purchases/Supply of Machinery, Materials, etc. Assessment Year 1995-96.
As per section 50(4), you were required to withhold tax 2.50% at the time of payments on account of purchase/supplies etc. made from various parties. Perusal of the record revealed that you have made the following payments for the period as mentioned below and as against the following withholding has not been made as under:---
| S. No. | Details of payments | Amounts of Payments | W.H. Tax 2.50%? | Tax with hold | Payable |
| 1. | Payment on A/c of Construction | 33,916,284 | 847,907 | Nil | 817,907 |
| 2. | Payment on A/c of Machinery | 2,270,727 | 56,768 | Nil | 56,768 |
| 3. | Furniture & Fixtures | 7,725,314 | 193,133 | Nil | 193,133 |
| 4. | Electrical Appliances | 13,513,582 | 337,840 | Nil | 337,840 |
| 5. | Lifts | 24,948,018 | 623,700 | Nil | 623,700 |
| 6. | Miscellaneous Assets | 23,853 | 5,596 | Nil | 5,596 |
| 7. | Telephone? Installations?? | 1,755,943 | 43,899 | Nil | 43,899 |
| 8. | Kitchen/Laundry Equipments | -- | -- | Nil | -- |
| 9. | Air-Conditioners | -- | -- | Nil | -- |
| 10. | Crockery | -- | -- | Nil | -- |
| | Total | 84,353,721 | 2.108,843 | Nil | 2,108,843 |
On this basis, the following amounts of additional (sic) under section 86 is worked out and total comes as under:---
| Amount of default | Days of default | Addl. Tax? ? 15 % | Total payable |
| 2,108,843 | 1,315 | 1,139,642 | 3,248,485 |
In this way, you have failed to comply with your statutory obligation under section 50(4) of the Income Tax Ordinance, 1979. I intend to tract you as an assessee in default for the above failure and to charge additional as above. You are required to furnish your written explanation to this context by 6-11-1998.
(KH. ADNAN ZAHIR),
Deputy Commissioner Income-tax,
Wealth Tax (Circle-01, Range-III, Multan.
4. It may be noted that identical show-cause notices were issued to petitioner in respect of the assessment years 1996-97 and 1997-98. Petitioner contested the notices and ultimately the Deputy Commissioner of Income Tax concluded that the petitioner (assessee) has failed to fulfil its legal obligation under section 50 (4) of the Income Tax Ordinance, 1979 (hereinafter referred to as "the Ordinance") and made a default by not deducting income-tax from different payments for which the assessee is declared as an assessee in default as provided under section 52 read with section 86 of the Ordinance, and an amount of Rs. 28,05,144 was found due against it. Similarly, in respect of remaining two assessment years mentioned hereinabove the petitioner was held to be an assessee in default and different amounts were found due against it. Petitioner instituted separate Appeals being No. 48 to 51 before Commissioner Income Tax against the orders of Deputy Commissioner Income Tax, Multan. However, the appeals were allowed by means of joint order, dated 11th March 1999. Against the appellate order the Deputy Commissioner Income Tax, Circle-01, Multan preferred separate Appeals being No. I.T.A. No. 2698/LB of 1999 (Assessment Year 1994-95 I.T.A. No. 2695/LB of 1999 (Assessment Year 1995-96) I.T.A. No. 2696/LB of 1999 (Assessment Year 1996-97) and I.T.A. No. 2697/LB of 1999 (Assessment Year 1998-99) before the Income Tax Appellate Tribunal, Lahore Bench, Lahore. The appeals were allowed vide order, dated 7th June, 2000 as a result whereof the orders of Assessing Officer levying taxes against petitioner under section 52 read with section 86 were restored. Petitioner preferred appeals under section 136 of the Ordinance being I. T. As. Nos. 17 of 2000 to 20 of 2000. The appeals were dismissed by Lahore High Court, vide impugned order because petitioner failed to raise question of law arising out of the judgment of the Tribunal. As such instant petitions have been filed.
5. Learned counsel for petitioner in support of the proposition noted hereinabove contended that the Appellate Bench of the Lahore High Court, failed to note that this proposition being a question of law was arising out of the order of the Tribunal, dated 7-6-2000, therefore, it has a duty to dispose it of according to law. He further stated that the learned Appellate Bench declined to exercise jurisdiction resulting in causing injustice and prejudice to the petitioner. On merits he elaborated that it was duty of the Assessing Officer to have pinpoint the parties from whom petitioner was required to recover withholding tax and in absence of such particulars of the parties, the Deputy Commissioner had no authority to declare the petitioner-assessee in default, therefore, for such reason impugned order deserved to be interfered with.
We have heard learned counsel for petitioners and have also carefully gone through the impugned order. It would be appropriate to reproduce hereinbelow provisions of section 50(4)(a) of the Ordinance:---
"50. Deduction of tax at source.---(1) . . . . . . . . . . . . . . . .
(2) ????????.
(3) ????????.
Notwithstanding anything contained in this Ordinance,---
(a) any person responsible for making any payment in full or in part (including a payment by way of advance) to any person [,being resident,] (hereinafter referred to respectively as `payer' and `recipient'), on account of the supply of goods or for service rendered to, or the execution of a contract With the Government, or a local authority, [or a company,] [a registered firm,] or any foreign contractor or consultant or consortium shall, [,where the total value, in any financial year, of goods supplied or contracts executed exceeds fifty thousand rupees, or services rendered exceeds ten thousand rupees,] deduct advance tax, at the time of making such payment, at the rate specified in the First Schedule, and credit for the tax so deducted in any financial year shall, subject to the provisions of section 53, be given in computing the tax payable by the recipient for the assessment year commencing on the first day of July next following the said financial year, or in the case of an assessee to whom section 72 or section 81 applies, the assessment year, if any, in which the `said date', as referred to therein, falls, whichever is the later:
[Provided that the provision of this clause shall, apply, mutatis mutandis, to any payment made on or after the first day of July, 1998, to a non-resident person on account of execution of a turnkey contract, a contract or sub-contract for designing, supply of plant and equipment and construction of power projects, a contract for construction, assembly or like project in Pakistan or any other contract for construction or for services rendered other than that to which the provisions of subsections (3A) and (4A) apply.]
[Explanation.---For the purposes of clause (a) the expression `supply of goods' includes both cash and credit purchase of goods by the payer, whether under a contract or not on credit or in cash].
(b) ?????????.."
7. A perusal of above provision manifestly makes it clear that law itself has identified the parties from whom deduction is to be made. Firstly a party who makes supply of goods or for services rendered to, or the execution of a contract with the Government or a local Authority or a Company or a registered firm or any foreign contractor or consultant or consortium shall, where the total value in any financial year of goods supplied or contracts executed exceeds fifty thousand rupees, and secondly or service rendered exceeds ten thousand rupees, shall be the parties from whom the tax is to be deducted at the time of making such payment at the rate specified in the First Schedule. It may be noted that at the relevant time as per the contents of the show-cause notice the rate of deduction of the advance tax was 2.50%. A perusal of the show-cause notice, dated October-31, 1998 issued in respect of non-deduction of the tax for the year 1995-96 indicates that petitioner made ten payments. The amount of the payments has also been mentioned in the notice but the column of withheld tax indicates that it was not deducted and no reason in this behalf has been offered by the petitioner. Inasmuch as despite availing sufficient opportunities before the Deputy Commissioner Income-tax no details were furnished for not deducting the tax. Therefore, we are of the opinion that the petitioner having notice/knowledge that tax has to be deducted from the categories of the parties mentioned in the above noted provision of law itself has failed to fulfil its obligation, therefore, under these circumstances the petitioner shall be considered to be assessee in default for not deducting the tax from the parties to whom the supplies were made by it. In our opinion, there was no necessity for the Assessing Officer to identify the names of the parties to whom the supplies were made because the record is maintained by the supplier i.e. petitioner and it is the duty of the petitioner to maintain the record and show that as to why deductions were) not made from different parties at the time of making supplies to them.
8. Learned counsel stated that the Assessing Officer after having gone through the registers should have pointed out the parties from whom the advance tax was liable to be deducted. We are afraid that the contention raised by the learned counsel has no force because as it has been observed hereinabove that it is the petitioner firm itself who made the supplies, therefore, -no one else better than it would have knowledge that from whom the deduction is to be made. The department had successfully discharged its obligation by making reference of the details of the supplies, which were made under different heads as per the contents of the show-cause notice. It may be noted that according to the settled principle of law that a fiscal statute has to be construed in its true perspective and in respect of payment of income-tax, if it is found due against a party, then such statue cannot be interpreted liberally in order to make out a case in favour of an assessee who has failed to pay the tax. As such, we are of the opinion that in view of the clear provisions of section 50(4)(a) of the Ordinance, no law point requiring interpretation by the Lahore High Court as well as by this Court is made out. Therefore, it is held that an assessee who has failed to deduct the tax in C terms of section 50(4)(a) of the Ordinance was rightly declared to be an assessee in default and cognizance of the matter was rightly taken by the Income-tax Department within the meaning of section 52 read with section 86 of the Ordinance.
For the foregoing reasons, we see no merit in the instant petitions, as such same are dismissed and leave to appeal is declined.
Q.M.H./M.A.K./B-49/S ???????????????????????????????????????????????????????????????????? Petition dismissed.