I.T.A. No. 5704/LB of 2005, decided on 21st March, 2007. VS I.T.A. No. 5704/LB of 2005, decided on 21st March, 2007., 2007 PTD-INCOME-TAX-APPELLATE-TRIBUNAL-PAKISTAN 1943 (2007)

Income Tax Ordinance (XXXI of 1979)---

----Ss. 108(a)(i), 55, 56 & 80D---Penalty for failure to furnish return of total income and certain statements---Assessee was enjoying exemption for imposition of income tax and tax imposed under S.80D of the Income Tax Ordinance, 1979 was deleted by the First Appellate Authority---Levy of penalty was made for non-riling of return but in response to notice under S.56 of the Income Tax Ordinance, 1979---Validity---Where provisions of S.108(a)(i) of the Income Tax Ordinance, 1979 clearly established the imposition of penalty with the tax payable, then it had to be followed---Penalty for default of S.55 of the Income Tax Ordinance, 1979 only became leviable when there was a "tax payable" but when no tax had been imposed on the assessee as it enjoyed exemption from tax -and even on assessment nothing could be imposed as Income Tax then penalty could not become leviable---Appeal of the Department was dismissed by the Appellate Tribunal.

2002 PTD (Trib.) 237 ref.

M. Muzaffar Khan Lashari, D.R. for Appellant.

Ahmad Nauman, I.T.P. for Respondent.

ORDER

The titled appeal is directed against the order, dated 1-6-2005, solely to contest the deleting of penalty imposed under the provisions of section 108. The sections refer-red to in this order are of the Income Tax Ordinance, 1979 (Repealed).

2. Facts in brief of the case are that the income tax return was not filed within the- prescribed time but was filed in compliance to notice under section 56. For each day, the default continued that the penalty was imposed. It is also pertinent to mention that respondent/assessee enjoys exemption from imposition of income tax, and undisputedly the tax imposed under section 80D was also deleted in appeal by the Tribunal. The penalty has been imposed simply by stating that contention of the assessee is not satisfactory. Before the learned First Appellate Authority it was argued that income/receipts of the respondent/assessee are not taxable and secondly reply has not been given due weightage prior to imposition of penalty. Relief was allowed after considering such arguments.

3. Before us the Department has contested the relief allowed at the first appeal stage but when asked to explain as to how without bringing anything plausible that penalty could be un-posed and secondly without following the procedure as laid down in section 108 that its imposition could be possible. Nothing material as reply to it was submitted before us. The learned AR has supported the order by substantiating the stance with a citation as 2002 PTD (Trib.) 237.

4. We have heard both the parties and have also perused the available record. It is imperative that the original text of the section 108(b) be properly gone through for dilating upon the issue which has been placed before us. For convenience of provision of section 108 are being reproduced as under:--

"108 Penalty for failure to furnish return of total income and certain statements. Where any person has, without reasonable cause, failed to furnish, within the time allowed for the purpose: --

(a) any return of total income under section 55 or 56, subsection (1) of section 65, subsection (3) of section 72 or subsection (3) of section 81; or

(b) any certificate, statement, accounts or information under sections 51, 129, 140, 141, 142, 143 139, (143A) (143B) or 144, the Deputy Commissioner shall impose upon such person a penalty.

(i) (in case of default specified in clause (a), an amount equal to one tenth of one per cent of the tax payable for each day of default subject to a minimum of five hundred rupees and a maximum of twenty five per cent of the tax payable.

(ii) in case of default specified in clause (b), an amount equal to two thousand rupees and a further sum equal to two hundred rupees for every day during which the default continues.

Undisputedly, it is as a result of not compliance to provisions of section 55 i.e. not filing of return within the prescribed span of time, that the penalty has been imposed so it is a default in compliance to the provisions of section 55, which situation is covered under the section 108(x) ibid. For it the penalty procedure has been prescribed in sub-clause (i) ibid. This clause has specified that penalty shall be imposed on the basis of the tax payable, whereas in the instant case before us no tax has become payable even on framing of assessment. Restriction has been imposed that on calculation of penalty on the basis of tax payable, it should be to a minimum of Rs.500 and maximum 25% to of the tax payable, thus inevitability the base point is the tax payable, resultantly second part of clause (i) comes into operation only when initial calculation of penalty has been made on the basis of tax payable. For imposing the penalty for default under section 55 ibid, the prerequisite is the assessing the tax payable by such assessee, it is only after it that procedure for levying the penalty comes into action. There cannot be two opinions that tax statutes are to be interpreted strictly and are to be followed as per its language without stretching the meanings of the same. Had the intent of statute was to impose the penalty in a situation like instant case then its linkage with tax payable would not have been expressed. Such interpretation is further strengthened from the provisions of section 108(a)(ii) ibid where for imposition of penalty nothing has been expressed about the tax payable. In the matter of taxation, literal approach has to be followed provided it does not lead to manifest absurdity. Here importantly the penalty provisions are to be interpreted strictly, where relevant provisions of section 108(a)(i) as clearly establishing the imposition of penalty with the tax payable, then it has to be followed, so in the absence of tax payable being the fatal for it. So keeping in view the provisions of section 108(a)(i) we do not have any hesitation. in holding that penalty for default of section 55 only becomes leviable when there is a "tax payable" but in the instant case when no tax has been imposed on the respondent/assessee as it enjoys exemption from tax and even on assessment nothing could be unposed as Income Tax then penalty could not become levaible.

5. Keeping in view the discussion supra we feel inclined to uphold the order passed at the first appeal stage.

6. The departmental appeal fails.

C.M.A./C-62/Tax (Trib.)Appeal dismissed.