Income Tax Ordinance (XXXI of 1979)---

----Ss. 52 & 50(4), Second Sched., Part IV, Cl. (33)---Tax Amnesty Scheme, 2000---Liability of person failing to deduct or pay tax-- Assessee, a registered firm---Capital was enhanced through the declaration of stock in Tax Amnesty Scheme, 2000 just four days before the end of the financial year---Assessing Officer treated the assessee to be an "assessee in default" on the ground that the assessee's business capital during the assessment year was increased by Rs.10,00,000 and he was under legal obligation to deduct tax under S.50(4) of the Income Tax Ordinance, 1979 on his purchases---Validity---Inclusion of stock in the firm's books of account at the fag end of the income year did not hold the assessee to be an "assessee in default"---Peculiar and extraordinary circumstances had been cropped up in the present case consequent upon which capital in business had been increased, in the books of account four days prior to close of the income year---Clause (33) of Part IV of the Second Schedule of the Income Tax Ordinance, 1979 would not attract to the facts of the case as this clause and its proviso catered altogether for different situation which did not exist in the present case for the simple reason that capital in business had never increased while executing normal business activities---Appeal of the Department was dismissed.

Nemo for Appellant.

M.A. Shamsi for Respondent.

Date of hearing: 12th March, 2003.

ORDER

Vide this appeal filed at the instance of department it has been contended that the Appeal Commissioner was not justified in annulling the order passed under section 52 because according to Clause 33 Part IV of Second Schedule to Income Tax Ordinance, 1979 the assessee was under obligation to deduct tax under section 50(4) of the Ordinance while making payments on account of purchases. Therefore, it is prayed that the first appellate order may be vacated arid the treatment accorded by the Assessing Officer restored.

2. However, none prosecuted on behalf of the department to substantiate the grounds of appeal raised in the memo. of appeal despite proper intimation of fixation of the case on the concerned quarters. Mr. M.A. Shamsi, Advocate, learned AR for the assessee attended and supported the impugned order for the reasons stated therein.

3. Facts leading for disposal of this appeal in short are that the respondent is, a registered firm which was treated to be as an assessee in default by the Assessing Officer on the ground that as the assessee's business capital, during the assessment year under appeal stood increased by Rs.10,00,000, he was thus under legal obligation to deduct tax under section 50(4) on his purchases. Since the respondent had failed to deduct tax on the purchases made during the year under appeal, he was held to be assessee in default 'in terms of section 52 of the Income Tax Ordnance, 1979. Resultantly tax demand of Rs.54,258 was created against the respondent.. On appeal the learned CIT (A) cancelled the order passed under section 52 of the Ordinance by holding that the said order was passed totally against the spirit of the Tax Amnesty Scheme introduced in 2000 and was also in contravention to Clause 33 of Part-IV of the Second Schedule to the Income Tax Ordinance, 1979.

4. After having heard the learned counsel for the assessee and also after having gone through the orders of the two authorities below as well as the relevant clause of Part-IV-of the Second Schedule to the Income Tax Ordinance, 1979 alongwith the Tax Amnesty Scheme (T.A.S.) I feel convinced that the Assessing Officer has not appreciated the facts of case while holding the respondent to be assessee in default under section 52 of the Income Tax Ordinance, 1979. What happened in this case was that in the income year starting from 1-7-1999 to 26-6-2000, the assessee's business capital remained below the prescribed limit of Rs.10,00,000 in the firm's books of account and as such the assessee was not liable to deduct tax under section 50(4) on the purchases made from different parties. It is imperative to mention that in this particular year, the C.B.R. had announced Tax Amnesty Scheme and in order to ripe its benefits stock worth Rs.12,00,000 was declared by the assessee on 27-6-2000. Inter alia, it was also provided in the scheme that this amount can be credited to the capital account of members of the registered firm. This resulted into enhancement in capital to Rs.18,88,244 in the firm's books of account on 27-6-2000. This prompted the Assessing Officer to hold the respondent to be assessee in default in terms of section 52 of the Income Tax Ordinance, 1979.

5. To my mind this inclusion of stock in the firm's books or account at the fag end of the income year does not hold the respondent to be assessee in default. In fact peculiar and extraordinary circumstances have been cropped up in this case consequent upon which capital in business has been increased, in the books of account four days prior to close of the income year. This situation can be analysed from another angle that had the assessee not declared the assets (stocks) under the Tax, Amnesty Scheme, no tax would have been contributed to the exchequer on behalf of the assessee. If the assessee .has come forward to declare such assets under the amnesty scheme he should not be dragged to tax in terms of section 52 of the Income, Tax Ordinance 1979. In view or foregoing discussion neither clause 33 of Part-IV of the Second Schedule to the Income Tax Ordinance, 1979 nor its proviso would attract to the facts of the present case. Rather this clause and its proviso cater altogether different eventuality which does not exist in the instant case for the simple reason that capital in business has never increased while executing normal business activities. I am therefore, not persuaded to intervene' in the impugned order.

6. This would result into dismissal of the departmental appeal.

C.M.A./784/Tax (Trib.) Appeal dismissed.