VS, 2008 PTD-INCOME-TAX-APPELLATE-TRIBUNAL-PAKISTAN 1706 (2008)

(a) Income Tax Ordinance (XLIX of 2001)---

----S. 162 & Seventh Sched. Part-III, Division-IV---Recovery of tax from the person from whom tax not collected or deducted---Service of notice---Opportunity of being heard---Taxation Officer after confronting notices for short deduction of tax levied tax @ 1.25% instead of tax withheld @ 1 %---Order of Taxation Officer was cancelled by the First Appellate Authority for the reason that service of notice was improper---Validity---Notice admittedly had been issued---Order of the Taxation Officer embodied defect that explanation furnished by the assessee was unsatisfactory---Department having issued notice, there was no jurisdictional defect---Held, withholding tax in respect of dry dates had to be 1.25% as per provision of Part-III of the Seventh Schedule to the Income Tax Ordinance, 2001---Order framed by the First Appellate Authority was not in accordance with law---Order of First Appellate Authority was vacated by the Appellate Tribunal and that of Taxation Officer was restored.

2006 (94) Tax 317 (SC Pak.) ref.

(b) Income Tax Ordinance (XLIX of 2001)---

----Ss. 162(2), 169(3), 122(1) & 122(5)--Recovery of tax from the person from whom tax was not collected or deducted---Assessee contended that he being exporter, filed statement under S.69(3) of the Income Tax Ordinance, 2001 which was deemed to be finalized for reopening the same, it was necessary to take steps under S.122(1) or S.122(5) of the Income Tax Ordinance, 2001 but department instead of that, had preferred to pass order under S.162 of the Income Tax Ordinance, 2001, which was without any jurisdiction---Validity---Subsection (2) of S.162 of the of the Income Tax Ordinance, 2001 was related to additional tax and not for collection of short tax---Taxation Officer had passed the order under 6.162(1) of the Income Tax Ordinance, 2001 which was an independent section and invoking of such section was correct---Tax deducted @ 1% was treated as short deduction of tax, it was just and proper to pass order, under S.162(1) of the Income Tax Ordinance, 2001, which was an independent section and related to such relevant situation as in the case in hand.

1993 SCC 1049 and 2006 PTD 1542 ref.

Abdul Tahir for Appellant (in I.T.As. Nos. 21/KB and 22/KB of 2007).

Shahabuddin Osto D.R. for Respondent (in I.T.As. Nos. 21/KB and 22/KB of 2007).

Shahabuddin Osto D.R. for Appellants (in I.T.As. Nos.51/KB and 52/KB of 2007).

Abdul Tahir for Respondent (in I.T.As. Nos.51/KB and 52/KB of 2007).

ORDER

Above captioned cross-appeals have been filed by the assessee and the department against the consolidated order, dated 13-11-2006, passed by the learned Commissioner of Income Tax (Appeals) Hyderabad. Assessee and department in the above appeals have agitated on the following common grounds:

"Assessees Appeals for Tax years 2004 and 2005.

That the learned CIT(A) Hyderabad passed the order under section 162 of the Income Tax Ordinance, 2001 which is bad in law, unjustified and without merits.

That the appellant being an Exporter of Dry Dates. Being aggrieved by the orders passed under section 162 of the Income Tax Ordinance, 2001 for tax year 2003 by the Taxation Officer of Income Tax, Enforcement-V, Sukkur has filed this appeal and contests the application of tax deduction rate as per Part-III of Seventh Schedule @ 1.25% as against declared rate @ 0.75% on the following grounds of appeals:

That the impugned order passed is a mechanical and stereotyped .order by filing in few blank columns without proper and conscious application of mind. It is therefore, not sustainable in the eyes of law.

That the learned CIT(A), Hyderabad has not passed any speaking order under section 24-A of General Clauses Act, 1897.

That the order sheet is silent regarding the issuance of notice to assessee before passing the order.

That the attested copy of notice, dated 1-8-2006 did not mention any date of hearing and the same has not been served upon the assessee.

That the Taxation Officer has failed to accept the plea that the deemed assessment stands finalized and he was not empowered to invoke the section 162 after the completion of the assessment.

That the apex Court has held in his decision reported as 1993 SCC 1049 that the C.B.R's. interpretation of the provision of law cannot be termed as judicial interpretation and also citation No.2006 (2006 PTD 1542).

That when the show-cause notice has not been served upon the assessee, nor the date of hearing is mentioned in the said purported notice, therefore, the order should not be cancelled but it should be annulled as per law.

That according to the principles laid down by the Honourable Court in case reported in 2006 (94) Tax 317 (SC Pak.) according to which when the department opts to reopen the case for scrutiny/audit/detailed analysis, a notice to the assessee has to be given before proceedings adverse to his interest.

DEPARTMENTAL APPEALS FOR THE TAX YEAR 2004-2005.

That the order passed by the learned CIT(A) Hyderabad .is bad in law and on facts.

That the learned CIT(A) was not justified to cancel the assessment order passed under section 162 of the Income Tax Ordinance, 2001 treating service of show cause as improper.

That the learned CIT(A) was not justified to cancel the order whereas the show-cause notice was served on the proper person who had been receiving almost all other correspondence made by the Taxation Officer.

2. Brief facts of the case are that assessee had exported dates and bank on realizing export proceeds deducted 1% withholding tax before making payments on such receipts to the taxpayers. Taxpayers accordingly filed statements declared amount of export receipts realized and tax deducted there on by the bank and claimed as full and final discharge of liability. Department has made recourse to the section 162 on the ground that the subject "export of dry dates" are covered in Part-III of the Seventh Schedule because same was not covered by Parts-I, II or IV of the said Schedule and charge the withholding tax @ 1.25% in accordance with Division IV, Part-III, of the Seventh Schedule of the Income Tax Ordinance, 2001. Assessee deducted withholding tax @ 1% while as per Taxation Officer, rate of tax was 1.25% as per Part-III of the Seventh Schedule. Taxation Officer after confronting notices for short deduction of tax, levied tax @ 1.25%. Assessee being aggrieved with the treatment meted out by the Taxation Officer went in appeals before the learned Commissioner of Income Tax (Appeals), who vide impugned order cancelled the action of Taxation Officer for the reason that service of notice was improper. Department and Assessee dissatisfied with the treatment meted out by the learned CIT(A), filed present appeals before this Tribunal.

We have proposed to dispose of all the appeals in this single order. We first take the appeals of the department:--

I.T.A. Nos.51 and 52/KB of 2007

4. Learned D.R. Mr. Shuhabuddin Osto has contended that the learned CIT(A) was not justified to cancel the assessment order passed under section 162 of the Income Tax Ordinance, 2001, treating service of show-cause notice as improper. According to learned D.R. show-cause notice was served on the proper person who had been receiving almost all other correspondence made by the Taxation Officer. He has further argued that notice was served upon the assessee, therefore, order of the learned CIT(A), for cancelling the assessment order is not proper. According to learned D.R. the issue of short of deduction of tax @ 1.25% has already been decided against the assessee at the level of this Tribunal, therefore, sufficient relief may kindly be provided.

5. On the other Mr. Abdul Tahir ITP, learned counsel for the respondent assessee has argued that notice has not been served upon the assessee nor the date of hearing is mentioned in the said purported notice, therefore, the order should not be cancelled but, it should be annulled as per law. According to learned counsel for the assessee being' exporter, assessee filed statements under section 169(3), which as deemed to be finalized for reopening the same, it was necessary to take steps under section 122(1) or 122(5) of the Income Tax Ordinance, 2001 but department instead of that has preferred to pass order under section 162 of the Income Tax Ordinance, 2001, which is without any jurisdiction.

6. We have heard both the parties and perused the orders of the officers below and relevant record.

6A. Regarding the issue of invoking the section 162 after completion of the assessment, we have the benefit to reproduce the section 162 as under: --

162(1). Where as person fails to collect tax as required under Division II of this Part [or Chapter XII] or deduct tax from payment as required under Division III of this Part [or Chapter XII] the Commissioner may [pass an order to that effect and] recover the amount not collected or deducted from the person from whom the tax should have been collected or to whom the payment was made.

(2) The recovery to tax under subsection (1) does not absolve the person who failed to deduct tax as required under Division III of this Part [or Chapter XII] from any other legal action in relation to the failure, or from a charge of additional tax or the disallowance of a deduction for the expense to which the failure relates, as provided for under this Ordinance.

7. From perusal of above section 162(2) we have found that this subsection (2) relates to additional tax not for collection of short tax, therefore, Taxation Officer has passed the order under section 162(1) which is an independent section; hence invoking the section 162 by the Taxation Officer is found correct.

8. Regarding the tax deducted at rate of 1% which was treated as short deduction of tax, in these circumstances it was just and proper to pass order under section 162(1) of the Income Tax Ordinance, 2001 which is an independent section and relates to this relevant situation as in the case in hand.

9. Regarding the claim of department notice was served upon the assessee and the. assessee has claimed that notice was not served upon him. We have the benefits to reproduce the following relevant portion of observation of learned CIT(A):--

"The arguments advanced by the A.R. of the appellant are considered. From perusal of case record, it transpires that Assessing Officer treated the taxpayer in default for recovery of short deduction of tax which was deductible under section 154 of the Income Tax Ordinance, 2001. The Assessing Officer issued show cause Letter No.98, dated 29-8-2006 and No.47, dated 1-8-2006 require the taxpayer to pay short deduction as the rate of tax applicable on Export of Dry Dates was @ 1.25% as against deduction made at 1% of total export proceeds, which were not properly served on the appellant. However, in the absence of proper service of show-cause notice the order passed under section 162 cannot stand in the test of appeal. The action of the Assessing Officer to finalize the assessment without affording opportunity of being heard to the appellant is not sustainable in the eyes of law. Thus the orders passed are, therefore, cancelled.

10. From perusal of above finding of learned CIT(A), it transpired that he has cancelled the assessment order for the reason that notice was not served upon the assessee. Before us learned D.R. has contended that notice was served upon the assessee. In this case it is an admitted fact that notice has been issued. Besides this order of the Taxation Officer embodies defect that explanation furnished by the assessee is unsatisfactory. It is not the case that department has not issued notice. So in such cases there is no jurisdictional defect. At the most assessee can again be afforded opportunity of hearing but here the case is different because the issue involved in the case in hand has already been decided by this Tribunal in their order bearing I.T.As. Nos.1045, 1047, 1048, 1049, 1050, 1053, 1054 and 1055/KB of 2006 Messrs Sachal Sarmast Traders and others, dated 31-7-2007, wherein it has been held that "withholding tax in respect of dry dates has to be 1.25% as per provision of Part-III of the 7th Schedule to the Income Tax Ordinance, 2001. As matter of fact many miscellaneous applications were also filed in respect of above mentioned Tribunal cases which were also dismissed. In this view of the matter and in view of the ratio of above Tribunal decision we are of the opinion that the order framed by the learned CIT(A) is not in accordance with law. In this case facts are admitted. Question of law has already been resolved as mentioned above. So it will be futile exercise to remand the case just on the plea that assessee be again afforded an opportunity of being heard. It will be futile exercise and mere wastage of time. Therefore, it will be just and proper to vacate the impugned order of the learned CIT(A) and to restore the orders passed by the Taxation Officer which is accordingly restored.

11. Consequently both the appeals filed by the department are allowed.

I.T.As. Nos.21 and 22/KB of 2007

12. Now we take the appeals of the assessee. Assessee in these appeal shave agitated the above mentioned grounds but as we have already decided the above appeals of the department in which the impugned order of the learned CIT(A) is vacated and the orders passed by the Taxation Officer are restored. Therefore, both the appeals filed by the assessee stand dismissed.

13. All the cross appeals are disposed of in the manner as indicated above.

C.M.A./71/Tax(Trib.)Order accordingly.