TELECARD LTD., KARACHI VS TAXATION OFFICER (E&C-09) ENFORCEMENT AND COLLECTION DIVISION LARGE TAX PAYERS UNIT
2008 P T D 130
[Karachi High Court]
Before Muhammad Afzal Soomro, C.J. and Syed Mahmood Alam Rizvi, J
Messrs TELECARD LTD., KARACHI
Versus
TAXATION OFFICER (E&C-09) ENFORCEMENT AND COLLECTION DIVISION LARGE TAX PAYERS UNIT and another
Constitution Petition No.D-854 and C.M.A. No.2770 of 2007, decided on 14/11/2007.
.Income Tax Ordinance (XLIX of 2001)---
----Ss. 131(5), 183 & 190---Constitution of Pakistan (1973), Art. 199---Constitutional petition-Non-payment of outstanding tax by assessee---Pendency of appeal before Appellate Tribunal---Issuance of show-cause notice to assessee under 5.190 of Income Tax Ordinance, 2001 for. imposition of penalty under 5.183 thereof---Validity---Assessee had not filed before Tribunal any stay application under S.131(5) of the Income Tax Ordinance, 2001---Revenue had not committed any illegality in sending impugned notice to the assessee---High Court dismissed constitutional petition in circumstances.
Muhammad Arshad along with Manager for Petitioner.
Javed Farooq for Respondent No.1
ORDER
SYED MAHMOOD ALAM RIZVI, J.---The petitioner has been aggrieved with show-cause notice dated 27-3-2007 under section 190 for Imposition of Penalty under section 183 of the Income Tax' Ordinance, 2001 for non-payment of outstanding tax demand and has filed this petition with the following prayers:---
(1) To declare that the impugned Notice bearing No.TO-09/ (E&C)/ LDU/2007/04, dated April 5, 2007, issued by respondent No.1, calling upon the petitioner to make payment on or before 14th April, 2007, failing which coercive action shall be taken, is void, unwarranted and illegal, until the final decision is passed in the matter.
(2) To declare that the amount demanded by the respondent No.1 is not recoverable form the petitioner No.1 is not recoverable from the petitioner in any manner whatsoever, till the final decision of applicability of section 236 of Income Tax Ordinance, 2001 is made.
(3) Restrain the respondents from taking any coercive steps against the petitioner, till the disposal of the appeal before the Tribunal and the final determination of the ADR Committee on the subject-matter.
Brief facts of the case are that the petitioner is a public limited company dealing in the business of sale of Pay Phone calling cards. The assessing officer subjected the petitioner under section 236 of the Income Tax Ordinance, 2001 regarding Sale of Pay Phone Calling Prepaid Cards. The petitioner assailed the assessment orders before Commissioner of Income Tax (Appeal) and inter alia, sought relief for discount allowed to the distributors. The CIT (A) after hearings passed an order and allowed the relief for discount as allowed to the distributors. The rebate was given to them at 20 per cent and it was directed in the following manner:---
"So far as the issue of discount allowed to distributors which as per the A.R. was not considered by the Taxation Officer while charging tax under section 161 read with section 236 of the Income Tax Ordinance, 2001, I find force in the contention of the A.R. The details of the discount allowed have also been provided and are also evident from a perusal of the audited accounts for the two years under appeal. Moreover, this office while deciding appeal of the appellant for the tax year 2003 (for the period January to June, 2003) via order dated March 8, 2004 on a similar issue considered this aspect and directed the Taxation Officer to re-compute the tax liability. Accordingly, the Taxation Officer is directed to calculate the amount of tax under sections 236/161 by excluding the amount of discount from gross sales of payphone cards. It is further directed that sales of payphone cards amounting to Rs.426,071,603 and discount thereon of Rs.23,549,010 be excluded from the tax so calculated for the tax year 2003 since these sales have already been subjected to action under sections 161/236 of the Income Tax Ordinance, 2001. by the Taxation Officer through order dated March 31, 2003."
The Income Tax Official sent them a recovery notice for Payment of demand of Rs.104,675,307 for the Tax Year 2003 and Rs.229,313,551 for the Year 2004 under sections 161/236 of the Income Tax Ordinance, 2001.
Thereafter, a notice dated 30-9-2006 was issued to the petitioner regarding discount allowed as per CIT (A) direction Rs.52,305,027 and thereafter, shown net sales of Rs.500,321,499 and tax thereon @ of 10 per cent was demanded at Rs.50,032,150. under section 161 of the Income Tax Ordinance. Against the order of CIT (A), the petitioner has filed second appeal before the learned Income Tax Appellate Tribunal in the month of May, 2004 under section 131 of the Income Tax Ordinance, 2001. The petitioner has contended that since 2004, the said appeal has not been decided and meanwhile, the matter has even been referred to the Alternate Dispute Resolution Committee, but that the petitioner's request was declined and subsequently, a committee has been formed including Commissioner of Income Tax LTU and it appears that matter would be resolved. Learned counsel for petitioner has contended that the petitioner are the owner/phone subscriber and not selling pre-paid phone cards and both the matters are subjudice and the impugned show-cause notice has been issued with mala fide intention and for harassment, therefore the petitioner has filed this petition with the above detailed prayers. Meanwhile, he has also placed on record notice dated 5-11-2007 issued by the respondents directing the petitioner to pay the balance demand for the Tax Years 2003 to 2004 at Rs.68,863,712 and Rs.180,562,652 respectively, and same has to be paid till 14-11-2007 and it was clearly mentioned that in case of non-compliance of the order action would be initiated for recovery proceedings in accordance with law.
Mr. Jawaid Farooqi, learned counsel for respondent No.1 has argued that the petition on the face of it, is not maintainable as appeal has been filed before the learned I.T.A.T. under section 131 of the Income Tax Ordinance, 2001 and by virtue of subsection (5) of section 131 of the Income Tax Ordinance, 2001 the petitioner would have to file on application for stay, and in case no stay is granted, the Income Tax Authorities could lawfully initiate proceedings for recovery of the aforementioned amount ever if the cases were pending before learned I.T.A.T. and ADRC. Subsection (5) of section 131 of the Income Tax Ordinance, 2001 reads as under:--
(5) Notwithstanding that an appeal has been filed under this section, tax shall, unless recovery thereof has been stayed by the Appellate Tribunal, be payable in accordance with the assessment made in the case:
Provided that where recovery of tax has been stayed by the Appellate Tribunal by an order, such order shall cease to have effect on the expiration of a period of three months following the date on which it is made, unless the appeal is decided, or such order be withdrawn by the Appellate Tribunal earlier:
Provided further that the Appellate Tribunal shall not make an order which has the period of six months in aggregate.
We have asked the learned counsel for the petitioner whether any stay application was filed before the I.T.A.T. The learned counsel and Manager of the petitioner conceded that no such application was filed before the I.T.A.T.
Mr. Jawaid Farooqi has pointed out that even the copy of the appeal has not been filed in this petition. As regards the contention of the petitioner whether they were selling pre-pay phone cards, this is a factual controversy is to be decided either before the learned I.T.A.T. or ADRC. He relied upon the case of Julian Hoshang Dinshaw Trust v. Income Tax Officer, Circle XVIII, South Zone Karachi (1981) 43 Tax 92 H.C. Kan) and has contended that when an appeal is pending before the learned Tribunal recovery proceedings could only be stayed by the learned I.T.A.T.
We have heard both the counsel, perused the record and the case-law. It is an admitted position that petitioner has not filed any stay application under section 131(5) of the Income Tax Ordinance before the learned I.T.A.T. hence no illegality has been committed by the respondent to send the impugned notice to the petitioner. Learned counsel for the petitioner has pointed out annoyance and agony of the petitioner as he was hanging for the last three years before the learned I.T.A.T and the matter had not been resolved. Keeping in view the above facts and circumstances, the learned A.D.R.C. is hereby directed to decide the matter expeditiously preferably within 3 months, and if the petitioner chooses to file application for stay before the I.T.A.T. the same should be entertained on merits. Meanwhile operation of the impugned notice is suspended. The petition is dismissed in the above terms along with the listed application.
S.A.K./T-23/KPetition dismissed.