VS, 2010 PTD-INCOME-TAX-APPELLATE-TRIBUNAL-PAKISTAN 1199 (2010)

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

----Ss. 182(1) & 114---Penalty for failure to furnish a return or statement---Notice dated 2-3-2009 under S.114(4) of the Income Tax Ordinance, 2001 was received by the assessee on 6-4-2009 and admittedly assessee had filed return on 9-4-2009---Penalty was imposed for failure to furnish return---Validity---Time was extended on request of assessee for filing the return---Taxation Officer in the notice under S.114(4) of the Income Tax Ordinance, 2001 had allowed 30 days time after the receipt of that notice and in failure to comply with that notice the ex parte assessment/penalty/prosecution etc. were to be initiated---Returns admittedly had been filed on 9-4-2009 in response to the notice---If the penalty order was to be made same could be made only for not more than 7 days but the Taxation Officer had calculated the defaulted days as 53---Advance tax paid by the assessee was more than the tax liability for the year under review and the assessee had to receive back the refund---Under S.182 of the Income Tax Ordinance, 2001 the penalty for failure to furnish a return or statement could be made when the default was without reasonable excuse---Reasonable cause for not filing the return had been established which was due to `the record of the case' being before the auditors, and the Taxation Officer himself had allowed the time on such ground---No justification existed for the penalty which was upheld by the First Appellate Authority without any basis---Order of First Appellate Authority was vacated and the order made by the Taxation Officer under S.182(I)/114 of the Income Tax Ordinance, 2001 was cancelled by the Appellate Tribunal.

Messrs Asim Textile Mills Ltd. I.T.As. Nos. 276 to 278 and 569/LB of 2006; I.T.As. Nos.166 to 169/LB of 2006 and 2004 PTD 1179 rel.

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

----S. 182(1)---Penalty for failure to furnish a return or statement---Purpose of penalty---Purpose of levying penalty is to deter the assessee from repeating the default in future and it cannot be made as resource mobilization/revenue generation measure.

Muhammad Iqbal Hashmi for Appellant.

Imran Raza Kazmi, D.R. for Respondent.

ORDER

JAWAID MASOOD TAHIR BHATTI, JUDICIAL MEMBER.--The appellant through this appeal has objected to the impugned order of the learned CIT(A) dated 3-10-2009 on the following grounds:

"(2) That penalty amounting to Rs.1,427,502 for late filing of return has wrongly been confirmed by the CIT(A) which is liable to be deleted.

(3) That penalty proceedings have wrongly been initiated and confirmed by the CIT(A) hence order is liable to be cancelled.

(4) That penalty is also liable to be deleted as the same has been imposed in a mechanical' manner. There is no deliberate default of the appellant. The Taxation Officer was informed that return was late filed due to late finalization of audited accounts of the appellant.

(5) That penalty amounting to Rs.1,427,502 is too high in any case which is liable to be deleted/reduced."

I have heard the learned representatives from both the sides and have also perused the impugned order of the learned CIT(A), the assessment order and other relevant record of the case.

Learned counsel representing the taxpayer has contended that the appellant has requested to the Taxation Officer for adjournment of the case as the accounts of the company were still under audit which fact has been mentioned by the Taxation officer in the order passed under sections 182(1)/114 imposing penalty for failure to furnish return under section 114. Learned counsel has pointed out from the order passed by the Taxation Officer that while calculating defaulted days the Taxation Officer has admitted that the time extended at the AR's request was upto 15-2-2009. He has contended that on 2nd March 2009 the Taxation Officer sent a notice under subsection (4) of section 114 of the Ordinance wherein in para-2, the appellant was required "to furnish on or before a return of income for the said tax year in the prescribed form and verified in the prescribed manner within 30 days of the receipt of this notice," and in Para-3 it was specifically mentioned, "that failure to comply with any of the terms of this notice may result in an ex parte assessment under subsection (1) of section 121 of the said Ordinance and may also render you liable to a penalty under subsection (1) of section 182 or prosecution under section 191 of the said Ordinance or both." The learned counsel has submitted that the above referred notice dated 2-3-2009 was received by the appellant on 6-4-2009 and admittedly the assessee has filed the return on 9-4-2009. The learned counsel has also placed before us the above referred notice sent by the Taxation Officer on 2-3-2009 and the audited accounts of the company which according to him has been received back from the auditors on 6-4-2009. Learned counsel has further contended that the tax for the year under review has been assessed by the Taxation Officer at Rs.2,69,34,326 while the assessee has already paid advance tax amounting to Rs.2,70,83,853 and the determined refund was already with the respondent department which has to be received back by the Tax Payer. Learned counsel placing reliance on the decisions of this Tribunal dated 18-12-2006 in the case of Messrs Asim Textile Mills Limited on the cross appeals vide I.T.As. Nos.276 to 278 and 569/LB/06 (assessment years 1999-2000 to 2002-2003) filed by the department and I.T.As. Nos.166 to 169/LB/06 filed by the assessee for the tax years 1999-2000 to 2002-2003, has contended that in that case it is held that "the purpose of levying penalty is to deter the assessee from repeating the default in future. Levy of penalty is not approved as a resource mobilization/revenue generation measure. That being so there can be no justification to routinely levy penalty mechanically at the maximum rate." In another case reported as 2004 PTD 1179 the Hon'ble Supreme Court of Pakistan has held that the imposition of penalty was illegal where the evasion of duty was not wilful.

On the other hand learned DR is supporting the impugned orders of the officers below but he is unable to rebut the above referred facts that the time extended on A.R.'s request for filing the return was upto 15-2-2009, while the Taxation Officer himself in his notice under subsection (4) of section 114 of the Ordinance, 2001 dated 2-3-2009 has allowed 30 days time after the receipt of that notice and in failure to comply with that notice the ex parte assessment/penalty/prosecution etc. were to be initiated against the appellant. While it is also an admitted fact that the returns have been filed on 9-4-2009 therefore, if the penalty order was to be made it can be made only for not more than 7 days but the Taxation Officer has calculated the defaulted days as 53. I am of the view that the advance tax paid by the appellant is more than the tax liability for the year under review and the appellant has to receive back the refund. Under section 182 the penalty for failure to furnish a return or statement can be made when the default is without reasonable excuse. I fortify the above referred decision of this Tribunal wherein it has been held that the purpose of levying penalty is to deter the assessee from repeating the default in future and it cannot be made as resource mobilization/revenue generation measure. In the present case on behalf of the appellant reasonable cause for not filing the return has been established which was due to the record of the case being before the auditors, and the Taxation Officer himself has allowed the time on this ground. In view of these facts and circumstances of the case and the legal position, I find no justification for the penalty. It has been upheld by the learned CIT(A) without any basis. The impugned order of the learned CIT(A) is therefore vacated and the order made by the Taxation Officer under sections 182(1)/114 of the Ordinance, 2001 is cancelled. The appeal filed by the appellant is allowed.

C.M.A./36/Tax (Trib.)Appeal accepted.