W.T.As. Nos.1059/LB to 1068/LB, 995/LB to 999/LB of 2005, decided on 31st August, 2006. VS W.T.As. Nos.1059/LB to 1068/LB, 995/LB to 999/LB of 2005, decided on 31st August, 2006.
2007 P T D (Trib.) 754
[Income-tax Appellate Tribunal of Pakistan]
Before Zafar Ali Thaheem, Judicial Member and Mazhar Farooq Shirazi, Accountant Member
W.T.As. Nos.1059/LB to 1068/LB, 995/LB to 999/LB of 2005, decided on 31/08/2006.
(a) Wealth Tax Act (XV of 1963)---
----S:18(1)(ii)(4)---Penalty for concealment---Penalty by Special Officer---Validity---Provisions of S.18(4) of the Wealth Tax Act, 1963 clearly reveal that where non-compliance of statutory notices under S.I6(2) of the Wealth Tax Act, 1963 was committed by the assessee, the Deputy Commissioner was the competent authority to impose penalty with prior approval of Inspecting Additional Commissioner---Special Officer had passed penalty order by resorting to provisions of S.18(1)(ii) of the Wealth Tax Act, 1963, who was not competent to do so.
(b) Whether Tax Act (XV of 1963)---
--Ss. 18(1)(ii) & 16(5)-Penalty for concealment---No intention was shown in the body of ex parte assessment order for levy of penalty---Effect---Assessing Officer was under legal obligation to show his intention regarding invocation of provisions of S.18 of the Wealth Tax Act, 1963 in the body of ex parte assessment order framed under S.16(5) of the Wealth Tax Act, 1963 but he failed to do so, which was contrary to settled rationale.
1989 PTD 1221 rel.
(c) Wealth Tax Act (XV of 1963)---
----S. 18(1)(ii)---Penalty for concealment---Levy of penalty exceeding the amount of tax payable---Validity---Ex parte assessment under S.16(5) of the Wealth Tax Act, 1963 was finalized by the Assistant Commissioner determining the tax payable by the assessee at Rs.68,932 Rs.51,873, Rs.70206, Rs.79036 and Rs.1, ].1,232 for the assessment years 1993-94, 1994-95, 1995-96, 1997-98 and 1998-99 respectively---Subsequently, Special Officer initiated penalty proceedings against the assessee by resorting to provisions of S.18(1)(iii) of the Wealth Tax Act, 1963 and imposed penalty at Rs.2,30,500 Rs.2,80,266, Rs.2,56,025, Rs.202,450 and Rs. 1,81,100 for the said assessment years respectively, which was clear-cut violation of S.18(1)(ii) of the Wealth Tax Act, 1963.
(d) Wealth Tax Act (XV of 1963)---
----S. 18(1)(ii)-Penalty for concealment---Penalty order without mentioning date---Validity---Penalty order passed without mentioning date therein, made the action of Special Officer (who was not competent to pass such penalty order) to be legally infirm.
(e) Wealth Tax Act (XV of 1963)---
----Ss. 18(2) & 16(5)---Penalty for concealment---Levy of penalty after lapse of more than four years from the date of ex parts assessment---Validity---Ex parte assessment was finalized under S.16(5) of the Wealth Tax Act, 1963 on 24-1-2000 whereas the penalty proceedings had been initiated by the Special Officer after the lapse of more than lour years as was evident from notice under S.18(2) of the Wealth Tax Act, 1963 issued on 13-3-2004, which was not legally, tenable being contrary to settled rationale.
1986 PTD 588 and 1989 PTD 1333 rel.
(f) Wealth Tax Act (XV of 1963)----
----S. 18(2)-Penalty for concealment---Opportunity of being heard---Assessee was to be afforded an adequate opportunity of being heard before passing penalty order---Revenue claimed the issuance and service of statutory notices under S. 18(2) of the Wealth Tax Act, 1963 upon the assessee but the assessee denied the service of said notice by filing an affidavit---Question arose as to whether service of notice was validly effected upon the assessee or not---Held, if believed that service of notice was effected upon the assessee then too, penalty order passed by the Special Officer was not sustainable on the ground that he was not competent to pass penalty order as he was not empowered to exercise the powers of Deputy Commissioner, who was competent authority to pass such penalty order under the law.
(g) Wealth Tax Act (XV of 1963)---
----S. 18(1)(ii)--Penalty for concealment---Cancellation of---Grounds---Penalty order passed under S.18(1)(i) of the Wealth Tax Act, 1963 cancelled on the grounds that the penalty order under S.18(1)(i) had been passed by Special Officer of Income Tax/Wealth Tax which was unsustainable in the eye of law as competent authority to pass such order was Deputy Commissioner of Income Tax; that no date has been mentioned on the face of penalty order under S.18(1)(i) of the Wealth Tax Act, 1963, which made it legally and that the ex parte assessment was finalized under S.16(5) of the Wealth Tax Act, 1963 on 24-1-2000 whereas the penalty proceedings had been initiated under S.18(1)(i) of the Wealth Tax Act, 1963 by the Special Officer of Income Tax/Wealth Tax after the lapse of more than lour years as was evident from notice under S. 18(2) of the Wealth Tax Act, 1963 was not legally tenable.
Iqbal Hashmi and Yousaf Ali Ch. I.T.P. for Appellant.
Anwar Ali Shah, D.R. for Respondent.
ORDER
ZAFAR ALI THAHEEM (JUDICIAL MEMBER).---The above captioned appeals have been filed by the assessee as well as department.
The representatives on behalf of both parties are present. Therefore, the instant appeals are being disposed in the following manner:--
Assessment years 1993-94, 1994-95, 1995-96, 1997-98 and 1998-99.
For the charge years, a consolidated appellate order, dated 31-5-2006 has been impugned both by the assessee as well as department. As per memo of appeals, the Revenue is aggrieved by reduction of penalties imposed under section 18(1)(ii) by the Assessing Authority whereas the assessee terms the penalties to be illegal and prays for their cancellation.
Brief facts emanating from the orders passed by both authorities below are that an ex parte assessment under section 16(5) in the instant case was completed on 24-1-2000. Subsequently, the SOIT/WT, Circle-21, Zone-A, Lahore initiated penalty proceedings under section 18(1)(ii) against the assessee for non-compliance of notices under sections 16(2) and 18(2) of' the Wealth Tax Act, 1963 along with final Notice bearing No. 19, dated 13-3-2004 was sent through registered post but remained uncomplied with as on the due dale i.e., 20-3-2004 none appeared on behalf of the assessee. Therefore, the SOIT/WT after obtaining prior approval of IAC Range-V, Zone-A, Lahore imposed penalty under section 18(I)(ii) of the Wealth Tax Act, 1963, at, Rs.230,500, Rs.280,266, Rs.256,025, Rs.202,450, and Rs.181,100 for the assessment years 1993-94, 1994-95, 1995-96, 1997-98 and 1998-99 respectively. Feeling aggrieved, the assessee preferred appeal before CIT(A), Zone-1V, Lahore, who finding the penalties imposed by SOIT/WT on the higher side reduced the same to Rs.175,000, Rs.220,000, Rs.200,000, Rs.150,000 and Rs.120,000 for the assessment years 1993-94, 1994-95, 1995-96, 1997-98 and 1998-99 respectively.
The learned AR has vehemently argued that the action of both authorities below is not only arbitrary but also contrary to facts of the case. He has elaborated his view point by maintaining that penalty proceedings initiated under section 18(1)(ii) in the instant case were illegal as the assessee was not in receipt of any notice issued by Revenue Authorities including last notice under section 18(2) bearing No.19, dated 13-3-2004. In support of his version, he has furnished before us an affidavit duly sworn by the assessee. In addition to that, he has drawn our attention to penalty order passed under section 18(1)(ii) on which no date has been mentioned and it is not known that on what date the said order was passed. He, therefore, prays for cancellation of penalty order passed under section 18(1)(ii).
On the contrary, the learned DR has argued that penalties imposed in the instant case were quite justified as before finalization of penalty order under section 18(1)(ii) the assessee was afforded an adequate opportunity to explain the factual position by issuance of notices under section 18(2) but all in vain. He has stressed that since, default of assessee for non-compliance of notices issued to him stood established, therefore, imposition of impugned penalties with prior approval of IAC was quite justified as the penalty order passed under section 18(1)(ii) did not suffer from any legal infirmity. He has concluded his arguments with the contention that relief allowed by the learned CIT(A) by reducing the penalties imposed under section 18(1)(ii) is not only unjustified but also contrary to facts of the case because in view of aforementioned circumstances, the assessee did not deserve any kind of leniency. He, therefore, prays for vacation of the impugned order and restoration of the treatment meted out by Assessing Authority.
We have heard the arguments advanced on behalf of rival parties and also carefully gone through the relevant record available on file. Before giving our finding on the issue under consideration, we deem it proper to reproduce the provisions of section 18 as under:--
(18) Penalty for concealment.---(1) If the (Deputy Commissioner) (Appellate Additional Commissioner) Commissioner or Appellate Tribunal in the course of any proceedings under this Act, is satisfied that any person:--
(a) has without reasonable cause failed to furnish the return of his net wealth which he is required to furnish under subsection (1) or subsection (2) of section 14 or section 17 or has without reasonable cause failed to furnish it within the time allowed and in the manner required; or
(b) has without reasonable cause failed to comply with a notice under subsection (2) or subsection (4) .of section 16; or
(c) has concealed the particulars of his assets or deliberately furnished inaccurate particulars of his assets or debts;
he or it may, by order in writing, direct that such person shall pay by way of penalty:---
(i) in the case referred to in clause (a)
(ii) in the case referred to in clause (b), in addition to the amount of wealth tax payable by him, a sum not exceeding the amount of tax so payable; and
(iii) in the case referred to in clause (c) a sum (not exceeding to and half time but in no case less than) the amount of tax which would have been avoided, if the net wealth return made by such person had been accepted as correct)
(1A) If the (Deputy Commissioner) in the course of any proceedings under this Act is satisfied that any person has not paid tax under section 14A or has paid any amount which is less than the amount payable thereunder, he may direct that such person shall pay by way of penalty a sum not exceeding twenty five per cent of the whole or such portion of the tax as the case may be, as was not paid.
(2) No order shall be made under subsection (1) (or sub-section (1A)) unless the person concerned has been given a reasonable opportunity of being heard.
(3) No prosecution for an offence under this Act shall be instituted in respect of the same facts in relation to which a penalty has been imposed under this section.
(4) The (Deputy Commissioner) shall not impose any penalty under this section without the previous approval of the Inspecting (Additional Commissioner) of' Wealth Tax.
The plain reading of provisions of section 18(1) and specially the provisions of section 18(4) clearly reveals that in such-like cases where non-compliance of statutory notices under section 16(2) is committed by the assessee, the DCIT is the competent authority to impose penalty prior approval of IAC but it is pertinent to note that in the instant case the SOIT/WT Circle-21, Zone-A, Lahore has passed penalty order by resorting to provisions of section 18(1)(ii), who was not competent to do so.
Secondly, the Assessing Officer was under legal obligation to show his intention regarding invocation of provisions of section 18 in the body of ex parte assessment order framed under section 16(5) of the Wealth Tax Act, 1963 but he failed to do so, which is contrary to rationale settled in reported judgment cited as 1989 PTD 1221, the relevant portion of which is reproduced as under:--
Ss. 111 & 116. Imposition of penalty.---Income-lax Authority has to be satisfied in the course of any proceedings under' Ordinance that a certain wilful default has occurred which attracts penal provisions and that a clear direction that regard if thatshould be duly recorded in the assessment order itself and2 is not done subsequent issuance of a show-cause notice section 116 would not validate or sanctify the imposition of penalty.
Thirdly, in the instant case, an ex parte assessment under section 16(5) was finalized by ACIT Circle-01, zone-A, Lahore determining tax payable by the assessee at Rs.68,932, Rs.51,873, Rs.70,206, Rs.79,036 and Rs. 1,11,232 for the assessment years 1993-94, 1994-95, 1995-96, 1997-98 and 1998-99 respectively. Subse quently, the SOIT/WT Circle-21, Zone-A, Lahore initiated penalty proceedings against the assessee by resorting to provisions of section 18(1)(iii) and imposed penalty at Rs.230,500 Rs.280,266, Rs.256,025, Rs.202,450 and Rs.181,100 for the assessment years 1993-94, 1994-95, 1995-96, 1997-98 and 1998-99 respectively, which is clear-cut violation of subsection (ii) of section 18(1):--
(ii) in the case referred to in clause (b), in addition to the amount of wealth tax payable by him, a sum not exceeding the amount of tax so payable; and
Fourthly, the penalty order under section 18(1)(ii) has been passed without mentioning date therein, which also make the action of SOIT/WT Circle-21, Zone-A, Lahore, (who was not competent to pass such penalty order) to be legally infirmed.
Fifthly, the ex pane assessment in the instant case was finalized under section 16(5) on 24-1-2000 whereas the penalty proceedings have been initiated by SOIT/WT after the lapse of more than four years as is evident from notice under section 18(2) bearing No.19 issued on 13-3-2004, which, in our opinion, is not legally tenable being contrary to rationals settled in the following reported judgments:--
1986 PTD 588.
The learned DR, however, contended that no limit of time having been fixed by section 28 of the repealed Income Tax Act, the penalty could be imposed at any time. I could not persuade myself to agree with the contention of the learned DR,, this is settled law that where no limitation is provided a Government Agency should perform its function within a reasonable time. When assessment had been completed by the Assessing Officer as back as in December, 1974 and November, 1975, there was no justification to keep the penalty proceedings pending till 1984. If the view of the department is accepted that penalty can be imposed at any time this would lead to chaos. A sword would continue to hang on the assessee's head and the Assessing Officer at his sweet will can impose a penalty at any time as and when he likes. Such an interpretation cannot be allowed to be made. I, therefore, see no reason to interfere in the order of learned AAC, which is maintained. Both the departmental appeals fail and are hereby rejected.
1989 PTD 1333
For the assessment year 1946-47 the assessee was assessed to a certain sum of tax and assessment became final on July 24, 1954. But there was no order levying penalty in his ease till July 1, 1963. Though no period for levying the penalty has been fixed in the Indian Income Tax Act, 1922, it has been held by this Court that there should not be any inordinate delay and it should be levied within a reasonable time. Even under the new Act the period prescribed for levy of penalty is two years after the completion of the assessment. In the present case even after the order of the Tribunal on the assessment a period of nine years had elapsed. The Department has not chosen to furnish any explanation for the inordinate delay. Here reduction in the quantum of penalty is not a ground to say that no interference is justified. As there is inordinate delay we consider that the levy of penalty has not been made within a reasonable time. We, therefore, answer the reference in the negative.
Sixthly, according to provisions of section 18(2) which are reproduced below:--
(2) No order shall be made under subsection (1) (or subsec tion (1A)) unless the person concerned has been given a reasonable opportunity of being heard.
----The assessee was to be afforded an adequate opportunity of being heard before passing penalty order under consideration. Before us, the Revenue claims the issuance and service of statutory notices under section 18(2) of the Wealth Tax Act, 1963, upon the assessee but the learned AR of the assessee denies the service of said notice by filing an affidavit in this regard, which is also placed on file. In such-like situation, an ambiguity has arisen that as to whether service of notice under section 18(2) was validly effected upon the assessee or not. Suppose for argument sake if believed that service of said Notice was effected upon the assessee, then too, penalty order passed under section 18(1)(ii) by the SOIT/WT Circle-21, Zone-A, Lahore is not sustainable in view of the foregoing reasons especially on the ground that he was not competent to pass penalty order as he was not empowered to exercise the powers of DCIT, who is competent authority to pass such penalty order under the law.
Assessment years 1993-94, 1994-95, 1995-96, 1997-98 and 1998-99.
For the years under consideration, a consolidated appellate order, dated 31-5-2005 has been impugned both by the assessee and department as well. As per memo of appeals, the assessee is agitating the confirmation of penalty order passed under section 18(1)(i) of the Wealth Tax Act, 1963 and prays for its cancellation.
Brief facts emanating from the orders passed by both authorities below are that an ex parte assessment under section 16(5) in the instant case was completed on 24-1-2000. Subsequently, the SOIT/WT, Circle-21, Zone-A, Lahore initiated penalty proceedings under section 18(1)(i) against the assessee for non-submission of returns despite service of notices under sections 14(2) and 17 and especially for non-compliance of notice under section 18(2) bearing No.20 dated 13-3-2004 of the Wealth Tax Act, 1963, sent through registered post. On the due date i.e. 20-3-2004 none appeared on behalf of the assessee. Therefore, the SOIT/WT after obtaining prior approval of IAC Range-V, Zone-A, Lahore imposed penalty under section 18(1)(i) of the Wealth Tax Act, 1963, at Rs.79,675, Rs.46,895, Rs.58,900, Rs.65,000 and Rs.73,600 for the assessment years 1993-94, 1994-95, 1995-96, 1997-98 and 1998-99 respectively. Feeling aggrieved, the assessee preferred appeal before CIT(A), Zone-IV, Lahore, who also confirmed the action of SOIT/WT.
Arguments heard and record perused. The facts and circumstances on the issue under consideration are the same and the impugned penalty order passed under section 18(1)(i) also suffers from the same legal infirmities as have been discussed by us in earlier part of this order while disposing of the appeals on the issue of penalty imposed under section 18(1)(ii) for the charge years. Hence, the penalty order passed under section 18(1)(i) is also cancelled on the following grounds:--
(1) The penalty order under section l8(1)(i) has been passed by SOIT/WT which is unsustainable in the eyes of law as competent authority to pass such order is DCIT.
(2) No date has been mentioned on the face of penalty order under section 18(1)(i), which makes it legally infirmed.
(3) The ex parte assessment in the instant case was finalized under section 16(5) on 24-1-2000 whereas the penalty proceedings have been initiated under section 18(1)(i) by SOIT/WT after the lapse of more than four years as is evident from notice under section 18(2) bearing No.20 issued on 13-3-2004, which, in our opinion, is not legally tenable.
C.M.A./213/Tax (Trib.)Order accordingly.