I.T.As. Nos. 1727/KB of 2003 and 407/KB of 2004, decided on 23rd November, 2004. VS I.T.As. Nos. 1727/KB of 2003 and 407/KB of 2004, decided on 23rd November, 2004.
2006 P T D (Trib.) 1254
[Income-tax Appellate Tribunal Pakistan]
Before S. Hasan Imam, Judicial Member and Agha Kafeel Barik, Accountant Member
I.T.As. Nos. 1727/KB of 2003 and 407/KB of 2004, decided on 23/11/2004.
(a) Income Tax Ordinance (XXXI of 1979)---
----S. 62---Assessment on production of accounts, evidence etc.---Decrease in sales---Gross loss---Estimation of sales---Validity---No doubt sales to government agencies in the present case, had reduced from 20% to 15.40% contrary to sales to limited company, which had increased from 21% to 28.19% whereas there was little decline in wholesale (from 59% to 56.33%) but this may not be taken as a sufficient reason to accept considerable decrease in sales and gross los, increase of gross profit rate---No admissible evidence had been furnished to show increase in the prices of raw material---Record was also silent in respect of any evidence showing decline in prices of raw material---Case was a no account case, assessee was duly confronted and accounts were rejected after a detailed reply was. taken into consideration by the Assessing Officer---Estimation of sales and application of gross profit rate at 7.5% was as per history of the assessee and did not warrant interference for any reason.
(b) Income Tax Ordinance (XLIX of 2001)---
----Ss. 182(2)(3), 151, 153 & 169---Penalty for failure to furnish a return or statement---Additional penalty---Separate provision had been laid down for imposing additional penalty of Rs. 200 for each day of default---Additional penalty will be taken as a separate course for which a separate notice would be necessary after action under S.182(2) of the Income Tax Ordinance, 2001 and each day of default shall start after the date of imposition of penalty under S.182(2) of the Income Tax Ordinance, 2001 which means that for imposing additional penalty it would be necessary to pass an order under S.182(2) of the Income Tax Ordinance, 2001 and thereafter on failure of the assessee to pay penalty of Rs.2000 additional penalty shall be levied at the rate of Rs.200 for each day of default---Both the penalties were independent in -nature, based on different actions, having separate starting dates and separate notice would be mandatory for each action---Action under S.182(3) of the Income Tax Ordinance, 2001 was not discretionary as such showing reasonable cause would not be necessary for the levy of additional tax---Penalty under S.182(2) and (3) of the Income Tax Ordinance, 2001 would be separate for each statement because the words "failure to furnish the statement" had been used for a situation where an assessee failed to furnish more than one statement, separate action should be proposed for each statement under S.182(2)(3) of the Income Tax Ordinance, 2001.
(c) Income Tax Ordinance (XLIX of 2001)---
----S.182(3)---Penalty for failure to furnish a return or statement---Default in respect of which penalty had been imposed under S.182(3) of the Income Tax Ordinance, 2001 should start from the date of penalty imposed under S.182(2) of the Income Tax .Ordinance, 2001, as such time had already lapsed till passing of an order under S.182(2) of the Income Tax Ordinance, 2001 which should be excluded while imposing penalty under S.182(3) of the Income Tax Ordinance, 2001.
(d) Income Tax Ordinance (XLIX of 2001)---
----S. 182(2)---Penalty for failure to furnish a return or statement---Order imposing penalty under S.182(2) of the Income Tax Ordinance, 2001 had been passed after affording opportunity of hearing to the assessee who, due to its wilful absence after due service of notice, failed to show a reasonable excuse for filing required statement within the prescribed period, as such order in this context, did not warrant interference.
(e) Income Tax Ordinance (XLIX of 2001)---
----S. 182(3)---Penalty for failure to furnish a return or statement---Statements due on 15th October 2002, were filed on 14-12-2002 (late by 58 days)---Before service of show-cause notice, dated 23-5-2003 showing compliance by 30-5-2003, there was no default attracting S.182(3) of the Income Tax Ordinance, 2001 which provided imposition of additional penalty when a person liable to a penalty under S.182(2) of the Income Tax Ordinance, 2001 continued in failing to furnish the statement, besides- a separate notice would also be mandatory---Order imposing penalty under S.182(3) of the Income Tax Ordinance, 2001 confirmed by the First Appellate Authority was unjustified and liable to be cancelled:
A.H. Faridi, I.T.P. for Appellant.
Ghulam Shabbir Memon, D.R. for Respondent.
Date of hearing: 5th October, 2004.
ORDER
S. HASAN IMAM (JUDICIAL MEMBER).---The assessee being aggrieved and dissatisfied from the order of the learned CIT(A), dated 24-11-2003, has taken objection to the order confirming rejection of account and addition of Rs.1,974,192 under section 12(18) of the repealed Income Tax Ordinance, 1979. The assessee has also alleged that the learned CIT(A) has not recorded finding on issues (i) in respect of additions at Rs.220,200 in other receipts, (ii) Rs.142,244 in scrap sales, and, (iii) Rs.275,808 being profit from sales of assets.
2. In the last the assessee has taken further objection to the order refusing to admit additional ground of appeal in respect of incorrect allowance on depreciation on the ground that no affidavit was filed to support additional ground of appeal.
3. The assessee a public limited company engaged in the business of manufacturing and selling of cloth and grain sack bags, declared net sales at Rs.14,30,83,533 and gross profit (loss at Rs.1,98,67,190). The Assessing Officer comparing declared results pertaining to assessment years 2000-2001 and 2001-2002 observed that sales have decreased considerably, there is gross loss instead of G.P. rate of 1.31% declared last year G.P. rate is showing trend from 7.33% to 1.37%. The assessee when confronted replied that the decline in sales is on account of lack of demand of products, and the production during the year had been made to the tune of 5015 M Ton as against 5449 M Ton produced last year, resulting decrease in sales during the year. The break-up of gross sales is reproduced hereunder:---
| | 2002-2003 | | 2001-2002 | |
| Government | 2,59,29,020 | (15.47%) | 3,83,22,600 | 20% |
| Limited | 4,72,52,635 | (28.19%) | 3,88,95,020 | 21% |
| Companies Wholesale | 9,43,84,985 | (56.33%) | 11,05,15,874 | 59% |
4. From the above break-up, the assessee emphasized that there is considerable decline in gross profit for the reasons that during the year under review the prices of raw. jute increased by 3,238,73 PMT as compared to last year, during the year 4,433 MT of raw jute was purchased at an excess cost of Rs.14,357,290, (ii) Jute batching price also increased by Rs.0,8900 per litre which resulted in excess payment of Rs.214,663, (iii) due to increase in cost of raw material, cost of sales also increased by a sum of Rs.1,45,71,953, (iv) the selling price decreased by a sum of Rs.2641.17 per Ton showing total decline in selling price at Rs.13,633,720.
5. The Assessing Officer after examining the explanation observed that the details filed on account of sales are not open to verification for want of complete addresses, such as verification of sales could not be made, sales to local wholesalers has increased as compared to Government departments, whereas decrease in G.P. rate is extraordinary. The Assessing Officer for the above reasons and for various other reasons including corresponding fall in the cost of sales, non-production of complete vouchers/evidence, bank statement showing no-available sales receipts, rejected the declared version of the assessee ?company, consequently estimated sales at Rs.167,500,000 and applied G.P. rate of 7.5% keeping in view the preceding assessment year resulting additional at Rs.32,429,690 (12,562,500 + 198,67,190 (i.e. gross loss)) on the trading account. The learned CIT(A) maintained the order, whereby confirmed the rejection of trading version, estimate of sales and application of G.P. rate observing that assessee has not furnished detailed of party-wise sales showing complete addresses, manufacturing expenses are also on cash basis and not open to verification, no corroborative evidence has been filed to strengthen the claim regarding increase in purchase prices of raw material.
6. Heard the learned representatives of the two parties and also perused the record. To support his version, the assessee's counsel relied upon the break-up of sales reproduced at para 3 above.
7. No doubt sale to Government Agencies has reduced from 20% to 15.40% contrary to sales to limited company, which has increased from 21% to 28.19% whereas there is little decline in wholesale (from 59% to 56.33%) but this may not be taken as a sufficient reason to accept considerable decrease in sales and gross loss, increase of Q.P. rate. Besides no admissible evidence has been furnished to show increase in the prices of raw material, jute batching and other raw material. Record is also silent in respect of any evidence showing decline in prices of raw material. This is a no account case, assessee was duly confronted and thereafter accounts were rejected after a detailed reply was taken into consideration by the Assessing Officer. We, in the circumstances supra, find that estimate of sales and application of G.P. rate at 7.5% is as per history of the assessee, hence does not warrant interference for any reason.
8. The next issue pertains to addition at Rs.19,94,192 under section 12(18) of the Income Tax Ordinance received from Director Mr. Muhammad Ashraf, Assessee furnished the details of loan, the Assessing Officer after examining the entire facts noted that loan from M. Ashraf amounting to Rs.19,15,792 obtained on long terms without banking channel and vide entry, dated 12-12-2001 on Standard Chartered Bank the amount of loan has been received as cash. The record reveals that assessee has not been duly confronted in this context, and the case law cited as 2002 PTD 1963 holding that "any amount received through cross cheques, cash or any other banking channel was not liable to tax under section 12(18) of the Income Tax Ordinance, 1979" has not been taken into consideration, hence the issue be concluded afresh by the DCIT after recording complete facts keeping in view the case-law reported above.
9. It is worth-mentioning that the learned CIT(A) has treated the issue regarding declared other? income at Rs. 2,20,200 as loan while discussing separate issue of addition of Rs.19,74,192 under section 12(18) of the Income Tax Ordinance and since this issue independent in nature, specifically taken vide ground No.9 of the grounds of appeal before the learned CIT(A), hence we find reasons to remand this issue back to the learned CIT(A) for adjudication on merit.
10. Since the learned CIT(A) has also failed to record his order in respect of addition of Rs.142,244 in scrap sales and in respect of an addition at Rs.275,808 made in respect of profit from sales of assets under Rule 85A of Third Schedule of the repealed Income Tax Ordinance, 1979 and no finding is given on additional ground of appeal related to allowance of depreciation, we therefore, find reasons to remand' the case back to the learned CIT(A) for fresh adjudication on merit on this issue also.
Appeal under section 182 of the income Tax Ordinance
11. The assessee in appeal bearing I.T.A. No. 1727/KB of 2003 has taken objection to the order, dated 26-8-2003 maintaining the penalty imposed under section 182(2) for default in furnishing statement, prescribed under sections 151 and 153 of the Income Tax Ordinance read with section 169 of the Income Tax Ordinance, 2001 within time limit. Further objection is taken to the order maintaining the levy of penalty under section 182(3) amounting to Rs.23,200 at the rate of Rs.200 per day for alleged defaults of 58 days levied along with penalty under section 182(2).
12. Record reveals that vide order under section 182, the learned Assessing Officer imposed penalty of Rs.27,200 for late filing of quarterly statement prescribed under sections 151 and 153 of the Income Tax Ordinance, 2001. According to the learned Assessing Officer, these statements were to be filed on 15-10-2002 but have been filed on 14-12-2002 after a delay of 58 days. The learned CIT(A) vide order, dated 26-8-2003 dismissed the appeal being devoid of any merit.
13. It is argued by the learned counsel for the assessee that learned CIT(A) has erred in maintaining the penalty imposed under section 182(2) for the default of statement prescribed under sections 151 and 153 ignoring the reasons of nominal delay occurred due to genuine problems. Besides penalty under section 182(3) at the rate of Rs.200 per day for alleged default of 220 days is contrary to law which provides that penalty under section 182(3) would be levied in respect of default after the imposition of penalty under section 182(2). It is added that default in respect of which penalty has been imposed under section 182(3) is in respect of delay caused before levy of penalty under section 182(2), hence order confirming the penalty under section 182(3) is contrary to law.
14. Section 182 of Income Tax Ordinance, 2001 is restricted to penalty for failure to furnish the return or statement under subsection (4) of section 150 within the time allowed under the Ordinance, whereas subsection (2) of section 182 is restricted to statement required under section 165 and penalty provided therein, is only Rs.2000. Subsection (2) further provides a condition precedent that penalty-be imposed after an opportunity of hearing has been afforded, and in case there appears no reasonable excuse. Contrary to above, subsection (3) provides that where a person liable to a penalty under subsection (2) continues to fail to furnish the statement, an additional penalty for Rs.200 for each day of default, shall be imposed w.e.f. imposition of penalty under sub-section (2).
15. The simple reading of above provision refers to following propositions:--
(i) The amount of penalty for non-submission of statement required under section 165 of the Ordinance is Rs.2000 only.
(ii) The default should be wilful, if the assessee is not wilful guilty of gross or wilful neglect, penalty would not be leviable.
(iii) Imposition of penalty is discretionary, and discretion should be exercised only in cases where it is convinced that default is not wilful, as such inadvertent and bona fide mistake or omission need. not to be penalised because of presence of pre-condition "reasonable cause".
(iv) In the circumstances, onus lies upon the Department to prove wilful default.
(v) In the circumstances, there should be a show-cause notice from the office of the authority competent to impose penalty proceedings so as to provide ample opportunity to the assessee to make out a case of bona. fide mistake and reasonable cause.
(vi) The officer imposing penalty is, therefore, required to be judicious in imposition of penalty and to give due weight to the explanation of default.
16. The next issue related to above controversy, is that notice under subsection (2) of section 182 would be sufficient for imposing additional penalty provided under subsection (3) or separate notice would be mandatory. We find that separate provision has been laid down for imposing additional penalty of Rs.200 for each day of default, hence additional penalty will be taken as a separate course for which a separate notice would be necessary after action under subsection (2) of section 182 of the Ordinance and each day of default shall start after the date of imposition of penalty under subsection (2) which means that for imposing additional penalty it would be necessary to pass an order under section 182(2) and thereafter on failure of the assessee to pay penalty of Rs.2000, additional penalty shall be levied at the rate of Rs.200 for each day of default, Apparently both the penalties are independent in nature, based on different actions, having separate starting dates, hence separate notice would be mandatory for each action. However, action under subsection (3) is not discretionary, as such showing reasonable cause would not be necessary for the levy of additional tax. We also find that the penalty under section 182(2) and (3) would be separate for each statement because the words, "failure to furnish the statement" have been used, as such where an assessee failed to furnish more than one statement, separate action would be proposed for each statement under subsections (2) and (3) of section 182.
17. It is worth-mentioning that default in respect of which penalty has been imposed under section 182(3) shall start from the date of penalty imposed under section 182(2) of the Income Tax Ordinance, 2001, as such time already lapsed till passing of an order under section 182(2) shall be excluded while imposing penalty under section 182(3).
18. In the circumstances supra, we find that order imposing penalty under section 182(2) has been passed after affording opportunity of hearing to the assessee who, due to its wilful absence after due service of notice, failed to show a reasonable excuse for filing required statement within the prescribed period, as such order in this context, does not warrant interference.
19. So far as additional penalty under section 182(3) is concerned, we find that required statements due on 15th October, 2002, were filed on 14-12-2002 (late by 58 days), but before service of show-cause notice, dated 23-5-2003 showing compliance by 30-5-2003, as such there is no default attracting subsection (3) of section 182 which provides imposition of additional penalty when a person liable to a penalty under subsection (2) of section 182 continues to fail to furnish the statement, besides a separate notice would also be mandatory as discussed above. In the circumstances supra, the order imposing penalty under section 182(3) confirmed by the learned CIT(A) is apparently unjustified and liable to be cancelled.
20. Consequently the appeal is partly allowed.
C.M.A./13/Tax (Trib.)????????????????????????????????????????????????? Appeal partly allowed.