VS, 2008 PTD-INCOME-TAX-APPELLATE-TRIBUNAL-PAKISTAN 1683 (2008)

Income Tax Ordinance (XLIX of 2001)--

----Ss. 161, 166, 120(1)(b), 122, 153, 155 & 205---Income Tax Ordinance, (XXXI of 1979), S.52---Failure to pay tax collected or deducted---Assessee in default--Assessment finalized was amended, later on, order was passed under Ss.161/205 of the Income Tax Ordinance, 2001 treating the assessee in default and imposing additional tax for non-compliance of S.153 of the Income Tax Ordinance, 2001 on the ground that assessee, while making certain payments in the fixed assets like computers, furniture and vehicles etc. had not withheld the tax---Contention of the assessee company was that fixed assets was purchased from its sister concern and tax was rightly not deducted, as the provisions of S.153 of the Income Tax Ordinance, 2001 were not attracted upon the transactions of fixed assets---Assessment was made under Ss.161/205 of the Income Tax Ordinance, 2001 instead of making order under S.122 of the Income Tax Ordinance, 2001 by amending the order as Taxation Officer had a right to amend the order---Order in field was illegal and against the spirit of provisions of S.122 of the Income Tax Ordinance, 2001 and needed to be declared as null and void---Assessment order under S.122(1) of the Income Tax Ordinance, 2001 had been passed on 26-6-2006 and assessee had been declared as taxpayer in default on 10-1-2007, which was against the law---Order was cancelled by the First Appellate Authority---Considering the factual as well as legal position, Appellate Tribunal held that First Appellate Authority had rightly cancelled the assessment order and did not interfere in the order of First Appellate Authority---Departmental appeal was dismissed.

1999 PTD 4028; 2006 PTD 1888; 2002 PTD 2705; 2005 PTD 1303 (Trib.) and 2003 PTD 1167 ref.

Sabiha Mujahid, D.R. for Appellant.

Dawood Iqbal, ITP for Respondent.

ORDER

JAWAID MASOOD TAHIR BHATTI, (JUDICIAL MEMBER).---Through this appeal, the appellant-Department has objected the impugned order of the learned CIT(A), dated 8-5-2007 for the Tax year, 2005 on the following sole ground:

(2) That CIT(A) was not justified to cancel order under section 52 as the purchases made by the taxpayer falls under the supply and these were liable to deduction of tax under sections 153 and 155 of the Income Tax Ordinance, 2001.

On perusal of the above referred ground, I have found that the ground is vague, as the learned CIT(A) has not cancelled the order passed under section 52, but has cancelled the order passed under section 161/205 of the Income Tax Ordinance, 2001.

As the above mistake according to the learned DR is a typing error and is, therefore, ignored.

Facts leading to the instant appeal are that the assessee, in this case, is a Private Limited Company engaged in the business of foreign currency. Original assessment in this case for the tax year under review was finalized under section 122(1) of the Income Tax Ordinance, 2001 on 26-6-2006. The Taxation Officer as mentioned in the assessment order on perusal of documents/details furnished during the audit proceedings as well as assessment order observed that the taxpayer has committed default of not deducting tax under sections 153 and 155 of the Income Tax Ordinance, 2001. As per the assessment order, the taxpayer company was confronted through show-cause notice issued under section 166 of the Income Tax Ordinance, 2001 to explain as to why it may not be treated as taxpayer in default. In compliance thereto, on behalf of the taxpayer, detailed reply was filed, which has been elaborated in the body of the order. The Taxation Officer after considering that reply unsatisfactory, treated the taxpayer as taxpayer company in default by invoking the provisions of section 161 and charged the tax so deducted in respect of various transactions and also charged additional tax under section 205 of the Income Tax Ordinance, 2001. Against which, the taxpayer filed appeal before the learned CIT(A), who has cancelled the order passed by the Taxation Officer with the following observations:

"After examination of assessment record and having considered the contention of both the parties it has been observed that taxpayer company has treated appellant in default by invoking provision of section 161 of the Income Tax Ordinance, 2001 with regard to purchase of fixed assets during the period relevant to the tax year, 2005. The AR of the taxpayer company has vehemently contested the legality of action of the ground that the provision of section 161 of the Income Tax Ordinance, 2001 are not attracted in the instant case."

He has contended that there was neither a supply nor the subject matter was goods. Reliance in this regard has been placed on judgment of learned ITAT reported as 1999 PTD 4028 and 2006 PTD 1888 wherein it has been held that:--

"As already observed the interpretation of word "goods" as adopted by the Assessing Officer does not find support either from the Income Tax Ordinance or for that matter from any other law. The consistent view of the superior Courts in Pakistan that in cases of fiscal statutes only the letter of law should be seen has sufficiently been highlighted in re: Collector of Customs V. C.B.R. (Supra). It is also an accepted proposition that the words used in a statute if not defined therein should be assigned their ordinary dictionary meaning. Reference to the aforesaid two dictionaries supports the contention of the learned counsel. The sale of immovable property including land and building along with machinery installed therein could by no imagination treated as supply of goods of services rendered. It will again be noted that the Assessing Officer in this case confined himself to the definition of word "goods" no referring on the provision of presumptive tax regime proceeded to ring home at transaction before him amounted to supply of goods and therefore the provisions of deduction at source or advanced tax were applicable. The agreement evidencing transaction was accepted without any objection. In the agreement except for some machinery which was not a part of the factory nothing indicated neither "supply" of any kind or the alleged supply comprised of any "goods". It was pure and simple transfer of capital assets including the 'immovable property. There was no continuity present of proposed in the whole transaction which could be said to attract the phrase "supply" as used in the said provision. In fact I have my observations respecting the alleged admitted liability as made by the petitioners before the Assessing Officer. However, since that part of the issue is not before me I will refrain from making any observations".

It has been further observed that assessee's sister concern Messrs Dollar East Company Limited has already discharged his responsibility under sections 50(4) and 52 on the same transaction then there would be no justification with the Taxation Officer having jurisdiction over the withholding agent as assessee in default. Since the same payment can neither be subjected to tax at two stages nor can a person be considered as assessee in default.

In view of the judgment of the learned ITAT quoted supra, the invocation of section 161 of the Income Tax Ordinance, 2001 is not legally sustainable in the eye of law. The assessment order so framed and the additional tax imposed for the aforesaid reason is declared to be void ab initio and ineffective. The same is therefore accordingly cancelled".

Mrs. Sabiha Mujahid representing the appellant Department has contended that as the taxpayer has himself admitted that taxpayer-company has purchased various items from Messrs Dollar East Pvt. Ltd. Gujranwala, there was no justification to cancel the order passed by the Taxation Officer on the basis of the decision, which was not relevant in the present case. She has contended that it was the duty of the taxpayer company to deduct tax as warranted under the law. Messrs Dollar East Pvt. Ltd. was penalized under section 52 of the repealed Ordinance, 1979 on its own default in the assessment year 2001-2002, whereas the taxpayer company purchased various items during the period relevant to tax year, 2005. She is of the view that taxpayer-company has committed default for not deducting tax under sections 153 and .155 on account of various transactions, therefore, the Taxation Officer has rightly invoked the provision of section 166, which is the relevant legal provision, but the learned CIT(A) has cancelled the order without any justification.

On the other hand, Mr. Dawood Iqbal, ITP has appeared on behalf of the assessee/respondent and is supporting the impugned order of the learned CIT(A). He is of the view that the learned CIT(A) has rightly cancelled the order passed by the Taxation Officer, as the order passed under sections 161/205 of the Income Tax Ordinance, 2001 was bad in law and contrary to the facts and record. He is of the view that Taxation Officer was unjustified to invoke proceedings under section 161, as transactions are not covered under section 153. He has argued that Taxation Officer was unjustified to declare the assessee company as assessee in default on the transaction that already has been taxed in the hands of the recipient. He has contended that Taxation Officer was unjustified to make assessment under section. 161/205 on 10-14-2007 after the completion of assessment under section 120(1) on 20-6-2006.

I have heard the learned representatives from both the sides and have also perused the impugned order of the learned CIT(A), assessment order passed under sections 161/205 of the Ordinance, 2001, relevant provisions of the law and the case-law referred by the parties.

As per the assessment record, the assessee-Company submitted its income tax return on 31-12-2005 under section 14(1)(a) under Self-Assessment Scheme along with various annextures and audited accounts. Assessment was completed by accepting the return on the same date i.e. 31-12-2005 in accordance with the provisions of section 120(1)(b) of the Income Tax Ordinance, 2001. That assessment was amended by the Taxation Officer on 26-6-2006 under section 122(1) of the Ordinance, 2001. Later on, order, dated 10-1-2007 was passed by the Taxation Officer under sections 161/205 of the Income Tax Ordinance, 2001 treating the taxpayer company in default and imposing additional tax for non-compliance of section 153, as according to Taxation Officer, taxpayer company while making certain payments in the fixed assets like computers furniture and vehicles etc. has not withheld the tax. On behalf of the taxpayer, it has been contended that taxpayer company has purchased fixed assets as reflected in the fixed assets schedule along with the return from its sister concern Messrs Dollar East Pvt. Ltd. are being properly reflected in the schedule of fixed assets, the tax was rightly not deducted, as the provisions of section 153 are not attracted upon the transactions of fixed assets. In this regard, the decision of Hon'ble Lahore High Court reported as 1999 PTD 4020 and 2006 PTD 1888 have been referred, wherein interpreting the word "goods", it has been observed that the word "goods" being not defined in the Income Tax Ordinance, should be assigned ordinary dictionary meaning and the sale of immovable property including land, building along with installed machinery thereon could by no imagination treated as supply of goods of services rendered. It has further been observed in this judgment that Taxation Officer has confined himself to the definition of the word "goods" by referring to the provisions of Presumptive Tax Regime proceeds to bring home at transaction before him amounted to supply of goods and therefore the provisions of deduction at source or advance tax were applicable. The agreement evidencing transaction was accepted without any objection. In the agreement, except for some machinery which was not a part of the factory, nothing indicated neither "supply" of any kind nor the alleged supply comprised of any "goods". It was pure and simple transfer of capital assets including the immovable property. There was no continuity present of proposed in the whole transaction which could be said to attract the phrase "supply" as used in the said provision. The Hon'ble High Court has held that provisions of section 50(4) of the repealed Ordinance, 1979 were not attracted to the transaction evidencing the sale of land, building and the fixed plant and machinery sold as part of the factory. In the present case, there was neither a "supply" nor its subject-matter was "good". The transaction of sale otherwise being not liable to any incidence of income tax under any of the heads given in section 15 of the Ordinance the question of deduction of advance tax did not arise at all. The Hon'ble High Court in another decision reported as 1999 PTD 4028 has held that "The interpretation of the word "goods" as adopted by the Assessing Officer does not find support either from the Income Tax Ordinance or for that matter from any other law. The consistent view of Hon'ble Supreme Court of Pakistan that in cases of fiscal statute, only letter of law should be seen as sufficiently been concluded by the Hon'ble High Court that the provisions of section 50(4) of the Ordinance were not attracted through transaction evidencing the sale of land, building and fixed plant and machinery sold and part of the factory". I have further noted that in this, case, assessee's sister concern, who is the recipient Messrs Dollar East Pvt. Ltd. has already discharged his responsibilities under sections 50(4) and 52 on the same transaction in assessment years 2001-2002 and 2002-2003 etc. as has been mentioned in the impugned order of learned CIT(A) that it has been elaborated by the assessee in his written submission in response to show-cause notice sent by the Taxation Officer on 29-12-2006. As the tax on the same transaction has been deposited, or not applicable or already held as assessee in default then the Taxation Officer has no authority to declare the assessee in default. In this regard, the decision reported as 2002 PTD 2705 has been referred, wherein it has been held that "For the purpose of treating the withholding agent as assessee in default it is incumbent upon the officer passing order under section 52 of the Ordinance to see that no tax has been paid on the same receipts by the recipient. In case, it is established that the recipient has paid tax on the payments or the authority having jurisdiction of the recipient has declared that no tax is payable on such payments, then there would be no jurisdiction with the officer having jurisdiction over the withholding 'agent to treat withholding agent as assessee in default, since the same payments can neither be subject to tax at two stages nor can a person be considered as assessee in default in respect of payments which in the hands of the recipient are adjudged as non-chargeable to tax". I have further noted recipient in this case has already been declared as assessee in default by the same Assessing Officer in the assessment year, 2001-2002 and the recipient did not deduct tax on certain assets like motorcycles and vehicles, because concerned parties having exemption certificates. On behalf of the assessee, it has been contended that Taxation Officer has made the assessment under sections 161/205 instead making the order under section 122 by amending the order, as the Taxation Officer has a right to amend the order. It has been contended that it is a settled principle of law that things should be done as required under the law and the learned CIT(A) has power under section 122 to amend the assessment as many times as may be necessary. It has, therefore, been contended that the order under sections161/205 in the field is illegal and against the spirit of provisions of section 122 and needs to be declared as null and void. It has further been contended that assessment order under section 122(1) has been passed on 26-6-2006 and the assessee has been declared as taxpayer in default on 10-1-2007, which is against the law, as has been held by this Tribunal in a decision reported as 2005 PTD 1303 (Trib.). In this regard, the judgment of this Tribunal reported as 2003 PTD 1167 has also been referred, wherein it has been held that the provision of section 161 is not a charging provision, as the amount deducted from this mode is an adjustment against the demand of the recipient of the money. In the present case, the recipient Messrs Dollar East Pvt. Ltd. as has been contended by the taxpayer has closed its business, which means that the deducted amount would be the advance income tax in the books of recipient company, the assessee in the present case, who is the sister concern, which should have to be refunded in accordance with the decision of this Tribunal reported as 2003 PTD 1167.

After considering all the above factual as well as legal position, I am of the view that the learned CIT(A) has rightly cancelled the assessment, order, therefore, I find no warrant for interference in the impugned order of the learned CIT(A), which is upheld and the appeal filed by the Department is dismissed.

C.M.A./61/Tax (Trib.)Appeal dismissed.