VS, 2008 PTD-INCOME-TAX-APPELLATE-TRIBUNAL-PAKISTAN 400 (2007)

Income Tax Ordinance (XXXI of 1979)---

----Ss. 52, 86 & 50(4)---Liability of persons failing to deduct or pay tax---Setting aside of time-barred order passed. under S.52 of the Income Tax Ordinance, 1979 when legally order merited cancellation/ annulment---Validity---All the recipients statedly were limited companies---If for any reason they were held to be as supply contractor, they had already suffered the incident of tax in the manner that their assessments were to be made before the end of the two subsequent years in which they had filed their returns---Assessing Officer did not find the assessee to be in default during the financial years, or on inspection of their books during proceedings under S.61 of the Income Tax Ordinance, 1979 and suddenly he became wiser after almost 5 years without having access to books or any such other relevant material---Was not known in whose account this deducted tax was going to be adjusted: admittedly this was not the tax of present assessee---Order passed by the authorities below were vacated by the Appellate Tribunal, in circumstances.

2003 PTD (Trib.) 1167 rel.

Siraj-ud-Din Khalid and Aurangzeb for Appellant.

Najam-ud-Din Khan, D.R. for Respondent.

ORDER

The assessee in this case, a private limited company, has filed appeal before us against the order of CIT(A), Zone-II, Lahore, dated 29-6-2007 for the assessment year 1998-99.

2. The assessee has called in question:--

(i) That the First Appellate Authority is legally not justified in setting aside the time barred order passed under section 52 of the Income Tax Ordinance, 1979 (repealed) when legally order merited cancellation/annulment.

(ii) That the First Appellate Authority is legally not justified in setting aside the time barred order passed under section 86 of the Income Tax Ordinance, 1979 (repealed) when the same merited cancellation/annulment.

3. Arguments heard. Record perused.

4. Brief facts of the case are that the Assessing Officer perused the assessment record and found that the assessee has not fulfilled its legal obligation in respect of deduction of tax under section 50(4) of the Repealed Income Tax Ordinance, 1979. The Assessing Officer issued a show-cause notice and reply of the same was considered unsatisfactory. Therefore, fax under section 52 and additional tax under section 86 of the repealed Income Tax Ordinance, 1979 amounting to Rs.399,349 and Rs.287,430 respectively was levied.

5. Feeling aggrieved with the treatment meted out by the Assessing Officer, the assessee preferred an appeal before the First Appellate Authority.

6. The CIT(A) held that the plea of the appellant that it was not an assessee in default and levy of tax was barred by time, also needs verification, set aside the issue, with the direction that specific notice specifying the basis and meeting the objections raised by the assessee be issued before levying the tax under section 52 of 1986 of the Repealed Income Tax Ordinance, 1979.

7. The AR of the assessee contends that for the assessment year 1998-99 notice under section 52 was given on 15-2-2003 and order was passed under section 52/86 on 31-3-2003. It became time-barred on 30-6-2002. In the view of the matter, the order is time-barred. They have relied on the judgment cited as 2003 PTD (Trib.) 1167. The relevant portions for ready reference are reproduced as below:--

"The learned L.A. is successful in convincing us that the judgment reported as 2000 PTD 14 (High Court) does not apply on the facts and circumstances of this case. The Honourable Karachi High Court in this judgment has fixed 30 days for charging W.W.F. by an Assessing Officer after finalization of assessments. This has been so interpreted in keeping view the words mentioned in the W.W.F. Act. The words used therein are "as soon as thereafter". No such words exist in section 52. Similarly, we are also convinced and learned L.A. on the basis of the judgment of the Full Bench is correct in saying that Nishat case no more holds field. However, learned L.A. himself conceded that no law can be left with unlimited application. It is true that no clue is given in section 52 itself with regard to its application, however, reference can be drawn from the scheme of law and other provision of the Income Tax Ordinance, 1979."

The accumulated result of the above discussion is that section 52 is only a machinery section introduced to effect the deductions under various provisions of section 50. It is not a charging provision and the amount deducted through this mode is adjustable against the demand of the recipient of the money or in other words of the supply contractor etc. The finding given by various Courts, which are so far in field, do not favour the Department if the recipient is unidentifiable or that he has paid tax himself. For reference (1982) 137 ITR 230 in CIT v. Manager, Madhya Pradesh State Coop. Development Bank Ltd. which judgment has been followed in Pakistan in many cases. Reference may be made to 2000 PTD (Trib.) 2605.

This, therefore, goes without saying that when D.C.I.T. is not permitted to call for books beyond the above period how can be allowed to assess the default of a person beyond. The determination of the purchases liable to deduction can only be from the accounts; hence there is no question about issuance of a notice beyond this period.

The initiation of proceedings under section 52 requires consideration from another angle. Section 50 deals with deduction of tax by various agencies under particular circumstances. It makes an obligation upon certain persons to deduct tax from such other persons, who come within the prescribed parameters. Section 52 declares the defaulter as an assessee in default and section 52(A) allows D.C.I.T. to recover the advance tax from the recipient of money. This is where if the recipient of money against supplies settles his account the default diminishes. However, on non-deduction the assessee in default remains chargeable under section 86." He is liable to pay 24% additional tax for not complying with his legal duty. All these provisions if ignored by the Assessing Officer in the proceeding like this cannot be initiated where the recipient has paid taxes. In the present case almost all the recipient statedly are limited companies. If for any reason they are held to be as supply contractor, they have already suffered the incident of tax in the manner that their assessments were to be made before the end of the two subsequent years in which they had filed their returns. Still further, the Assessing Officer did not find this assessee to be in default during the financial years, or on inspection of their books during proceedings under section 61 and suddenly he becomes wiser after almost 5 years for 1995-96 without having access of books or any such other relevant material. Still further this is not known in whose account this deducted tax is going to be adjusted. Admittedly this is not the tax of this assessee-whose tax is this it is also not known."

8. In view of the foregoing reasons, the orders passed by both the authorities below are vacated by accepting the appeal.

C.M.A./181/Tax (Trib.)Appeal accepte