COMMISSIONER OF INCOME TAX/WEALTH TAX, COMPANIES ZONE, ISLAMABAD VS SHAKEEL EXPRESS (PVT.) LTD., ISLAMABAD, 2009 PTD-ISLAMABAD 1632 (2009)

Income Tax Ordinance (XXXI of 1979)---

----Ss. 108 & 139 [as amended by Finance Act (I of 1995)]---Income Tax Rules, 1982, R.53 [as amended by S.R.O. 1050(I)/98, dated 13-10-1998]---Filing of monthly statement of deduction of income tax from salary under S.139 of Income Tax Ordinance, 1979---Scope---Section 139 of Income Tax Ordinance, 1979 before its amendment by Finance Act, 1995 provided for filing of such statement on or before first day of September in each year regarding preceding financial year---Rule 53 of Income Tax Rules, 1982 requiring forthwith filing of such statement after deduction of tax from salary was, thus, ultra vires to such extent---Word "forthwith" as used in R.53 of Income Tax Rules, 1982 was later on substituted by words "on or before 15th day of every month" w.e.f. 1-7-1995.---Words "required under section 139" as added in R.53 vide S.R.O. 105(I)/98, dated 13-10-1998 would not mean that before such amendment, payer of salary was not required to furnish such statement---Duty of assessee to furnish such statement before 15th of every month.

(1998) PTD (Trib.) 3507 ref.

Hafiz Munawar Iqbal for Petitioner.

Shakeel Ahmad for Respondent.

Date of hearing: 28th May, 2009.

JUDGMENT

MUHAMMAD MUNIR PERACHA, J.---Vide order, dated 7-9-1998, Tax Recovery Officer imposed penalty on the assessee under section 108 of the Income Tax Ordinance, 1979 for non-submission of statement under section 139 of the Income Tax Ordinance, 1979 for the month of July, 1996 to April, 1997. Penalty was also imposed for non-submission of statement under section 142 of the Income Tax Ordinance, 1979 for the period of July, 1996 to April, 1997. The assessee challenged the said order of the Tax Recovery Officer through an appeal filed before the Commissioner of Income Tax (Appeals). The learned Commissioner of Income Tax (Appeals) vide order, dated 7-1-1999 came to the conclusion that the Tax Recovery Officer has no jurisdiction to pass order under section 108 of the Ordinance. The Department approached Income Tax Appellate Tribunal through an appeal. In paragraph 8 of the order passed by the Tribunal, the Tribunal recorded a finding that the Tax Recovery Officer had the power to impose penalty. However, in paragraph 9 of the judgment, it was found by the Tribunal:--

"It has already been held by this Tribunal in the case reported as (1998 PTD (Trib.) 3507 that there was no requirement in the relevant assessment year of any section enumerated in section 108(b) to file a statement required under rule 53 of the Income Tax Rules, 1982."

2. The order of the Commissioner (Appeals) was upheld to the extent of penalty imposed by the Tax Recovery Officer for non-submission of statement under section 139 of the Income Tax Ordinance, 1979. So far as the penalty for non-submission of statement under section 142 of the Income Tax Ordinance, 1979 was concerned, the matter was remanded to the Tax Recovery Officer. The Commissioner of Income Tax filed an application to the Tribunal for referring the following three questions of law to the High Court:--

"(i) Whether Income Tax Rules, 1982 are subordinate to the legislation of Income Tax Ordinance, 1979?

(ii) Whether section 139 is governing section in respect of rule 53 of Income Tax Rules, 1982?

(iii) Whether under the facts and circumstances of the case the learned Tribunal was justified to hold that the provisions of section 108(b) are not attracted in the events of non-compliance of rule 53?"

3. The Tribunal refused to refer the questions proposed. Paragraphs 7 and 8 of the judgment are reproduced:-

(7) As for question No.(iii) the Tribunal had decided the issue involved by relying upon a decision of this Tribunal reported as 1998 PTD (Trib.) 3507. If any question of law arises that has arisen out of the above cited case. The department has failed to show if the above mentioned decision of this Tribunal has been reversed by any superior Court. We therefore, presume that the aforementioned decision of this Tribunal holds the ground. We further find support of this view when we find that reference applications filed by the department on identical questions have already been rejected in R.A. No. 142(IB)/2000-2001 (assess ment year 1998-99), dated 4-6-2001 and R.A. No.8(IB)/2002, dated 20-3-2002. The department has failed to show to us if any decision reversing these orders has been given by a superior Court.

(8) Further in Rule 53 an insertion was made through notification S.R.O. 1050(I)/1998, dated 13-10-1998 whereby the filing of a statement under rule 53 was made a requirement of section 139 of the Income Tax Ordinance, 1979. .Before this amendment in the Rule there was no requirement to file any statement under Rule 53. This insertion in fact was made subsequent to the decision of this Tribunal reported as 1998 PTD (Trib.) 3507 above referred with section 139 was not the requirement of any of the sections enumerated in section 108. No penalty could therefore be imposed for non-filing of monthly statement under section 139 before the said amendment had been made in rule 53. Since the law as it then stood was very clear and no question of law as framed by the department arises from the Tribunal's order, we are of the considered view that the application is mis-conceived and in accordingly, rejected."

4. The Commissioner of Income Tax (Appeals) filed the present reference in this Court. The following questions of law have been proposed by the Commissioner of Income Tax Appeals:--

"(i) Whether Income Tax Rules, 1982 are subordinate to the legislation of Income Tax Ordinance, 1979?

(ii) Whether section 139 is governing section in respect of rule 53 of Income Tax Rules, 1982?

(iii) Whether under the facts and circumstances of the case the learned Tribunal was justified to hold that the provisions of section 108(b) are not attracted in the events of non-compliance of rule 53?"

5. After hearing the learned counsel for the parties, we are of the opinion that the question of law should be reframed as under:--

(i) Whether there was a requirement for person responsible paying salary to furnish to the Deputy Commissioner or any other officer authorized in this behalf by the Central Board of Revenue, a monthly statement under Rule 53 of the Income Tax Rules, 1982 before amendment made on 13-10-1998 and whether the penalty could have been imposed on the basis of default made in submitting the monthly statement?

6. We have heard the learned counsel for the petitioner as well as learned counsel for the respondent and have gone through the provisions of Income Tax Ordinance and the Rules framed thereunder.

7. The original section 139 of the Income Tax Ordinance, 1979 reads as under:--

"Statement regarding salary.---Every person responsible for paying any income chargeable under the head `salary' shall, on or before the first day of September in each year, furnish to the Income-tax Officer or any other officer authorized in this behalf by the Central Board of Revenue, a statement in the prescribed form and verified in the prescribed manner, showing---

(a) the name and address of every person who has been paid, or to whom was due, during the preceding financial year, any income chargeable under the head `Salary' exceeding such amount as may be prescribed:

(b) the amount so paid, or due to such person;

(c) the amount of tax deducted from the income of such person; and

(d) such other particulars as may be prescribed."

8. In exercise of the powers under section 165(1) of the Income Tax Ordinance, 1979, the Central Board of Revenue framed Income Tax Rules, 1982. Rule 53 provided:--

"Monthly statement of deduction.---In the case of income chargeable under the head "salary" where deduction is not made by or on behalf of Government, the person making the deduction shall forthwith send to the Income Tax Authority specified under rule 51 a statement in the following form, namely:--

9. Section 139 of the Ordinance provided that the statement was to be furnished on or before the first day of September in each year regarding preceding financial year. Rule 53 requiring to send the statement immediately after deduction of the Income Tax from the salary was therefore, ultra vires to that extent. However, section 139 of the Ordinance was amended through Finance Act, 1995. After the amendment, section 139 reads as under:--

"Statement regarding salary.---Every person responsible for paying any income chargeable under the head "Salary" shall, furnish to the Deputy Commissioner or any other officer authorized in this behalf by the Central Board of Revenue, a statement in the prescribed manner, showing---

(a) the name and address of every person who has been paid, or to whom was due, the period for which, each statement is being furnished, any income chargeable under the head "Salary" exceeding such amount as may be prescribed;

(b) the amount so paid, or due to such person;

(c) the amount of tax deducted from the income of such person; and

(d) such other particulars as may be prescribed."

10. "Prescribed" has been defined in section 2(33) of the Ordinance to mean "prescribed by rule made under the Ordinance". Vide notification, dated 23-11-1995, the words "forthwith" used in rule 53 was substituted by the words "on or before 15th day of every month". After 1-7-1995, a person deducting income tax from the salary of his employees was bound under the law to furnish to the Deputy Commissioner or any other Officer authorized in this behalf by the Central Board of Revenue, the statement showing facts mentioned in clauses "a" to "d" of section 139 in prescribed manner. The word "prescribed" was defined to mean "prescribed by the rules". Rule 53 provided that the requisite statement shall be furnished in respect of every month on or before 15th day of the said month. In view of this legal position, the assessee-company was bound under the law to furnish monthly statement before 15th of every month. No doubt the rule 53 was further amended on 13-10-1998 through S.R.O. No.1050(I)/98, and apart from other amendment, the words "required under section 139" were added in the rule. However, it does not means that before the addition of the words "required under section 139", the payer of the salary who has deducted Income Tax was not required to furnish the requisite monthly statement. The learned Income Tax Appellate Tribunal erred in law in holding that before amendment made in rule 53 through S.R.O. 1050(I)/98, dated 13-10-1998, there was no requirement to file monthly return of deduction.

11. For the reasons stated above, we answer the question framed in the positive.

S.A.K./C-16/Isl.Answer in affirmative.