2010 P T D (Trib.) 1440
[Income-tax Appellate Tribunal Pakistan]
Before Munsif Khan Minhas, Judicial Member and Istataat Ali, Accountant Member
I.T.A. No.982/IB of 2009, decided on 17/03/2010.
(a) Income TaxOrdinance (XLIX of 2001)---
----Ss. 221 & 120---Rectification of mistake---Rectification of deemed assessment order---Scope---Assessee contended that deemed order passed by the authority could not be rectified---Validity---Wording embodied in S.120(1)(a) of the Income Tax Ordinance, 2001 specifically showed that order passed by Commissioner shall be taken to be deemed assessment---Subsection (b) of S.120 of the Income Tax Ordinance, 2001 also embody the same wording that the "return shall be taken, for all purposes of this Ordinance to be an assessment order issued to the taxpayer by the Commissioner on the day the: return was furnished"---Version of the assessee was devoid of any force because even the deemed assessment order shall be taken to have been made by the Commissioner---Even the deemed assessment order shall' amount to have been made by the Commissioner and the taxpayer could not be given any benefit on such interpretation which was not based upon solid reasoning---Court shall not interpret the law in such a manner to defeat the ends of justice.
(b) Income Tax Ordinance (XLIX of 2001)---
----Ss. 162 & 161---Recovery of tax from the person from whom tax was not collected or deducted---Failure to deduct tax---Additional tax---Recovery of---Authority could recover additional tax only from the person who failed to deduct' tax at source and not from the assessee/ appellant original amount of tax if not deducted or short deducted could be recovered from taxpayer from whom the tax should have been collected---Withholding agent was bound to pay the additional tax on the difference of the rate 6% and 5% under the law and not the taxpayer---Withholding agent was liable and demand of additional tax if due, could be raised against him and not against the taxpayer--Order passed by both the authorities below were vacated by the Appellate Tribunal up to the extent of levy of additional tax because principal amount, due to difference of rate of tax, had already been paid and additional tax could not be levied against the taxpayer, if it was levied, it could be only against the withholding agent.
Waseem Ahmed Siddiqui, F.C.A. for Appellant.
Ayesha Khalid D.R. for Respondent.
ORDER
The assessee through this appeal has objected to the impugned order dated 6-5-2009 passed by CIT(A-II) Islamabad for tax year, 2006 on the following grounds:
"(i) That the rectification order of the learned Taxation Officer is without jurisdiction and corum non judice. He is not competent to pass such rectification order.
(ii) That the additional tax imposed is also illegal.
(iii) that the case of the appellant does not attract the provisions of section 221 of the Income Tax Ordinance, 2001.
(iv) That there exists no order passed to be rectified.
(v) That no order passed by the Commissioner is liable to be rectified by any junior officer i.e. Taxation Officer."
2. The brief facts of the case are that the Taxpayer is, an individual, deriving income from contracts. The Taxpayer filed statement of final taxation claiming refund of Rs.88,065 under section 120. The Taxation Officer found that the taxpayer declared value of contract at Rs.68,577,517 which was subject to final taxation and showing tax amounting to Rs.3,428,876 @ 5% which was less than 6%. Notice under section 221 was issued and confronted to the taxpayer and reply of the assessee was found unsatisfactory and a rectification order under section 221 was passed by the Taxation Officer. Against the treatment meted out by the Taxation Officer, the assessee filed appeal before the learned first appellate authority who fully endorsed the findings of the assessing officer as the plea of the taxpayer was not based on sold grounds. He observed that it was stretching the interpretation of provision of section 120 a bit too far as the powers have been delegated to the Taxation Officer by the Commissioner and declared results of the appellant were incorrect as the tax deductible was at 6% rather than 5% as claimed deducted by the assessee which was mistake apparent from the record and also confirmed the additional tax imposed in light of the treatment of the Assessing Officer.
3. During the arguments learned AR of the assessee has argued only order passed by the authority can be rectified and not the deemed order. Relevant section 221(1) of Income Tax Ordinance, 2001 is reproduced as under:
"221. Rectification of mistakes.---(1) The Commissioner, the Commissioner (Appeals) or the appellate tribunal may, by an order in writing, amend any order passed by him to rectify any mistake apparent from the record on his or its own motion or any mistake brought to his or its notice by a taxpayer or, in the case of the Commissioner (Appeals) or the Appellate Tribunal, the Commissioner".
The learned AR of the assessee has submitted that the authority can rectify only such order which is passed by him. In the instant case, the learned Taxation Officer has never passed any order. As no order physically exists to rectify, therefore, no rectification is liable to be made. The learned AR of the assessee has also submitted that the learned Taxation Officer has not referred to any order which has been rectified by him. The order must be an order to exist physically and passed actually as the right of appeal has been conferred against order passed under section 221 of the Income Tax Ordinance, 2001. Such order is always liable to be attached with time limit which determines the jurisdictional point of the learned Taxation Officer. The time limit to pass rectification order is given as five years in the said section 221 of the Ordinance, 2001. The learned Taxation Officer even has not indicated any date of the order which has been rectified by him. In the absence of all such elements order is not competent, and further it is without jurisdiction. The learned AR has argued that the learned Taxation Officer cannot rectify any assessment deemed to have been made, under the law, by the honorable Commissioner. He, even by virtue of delegated power under section 210 cannot rectify such assessment as the junior officer cannot sit on the assessment made by his superior officer taking the said assessment as erroneous. The learned D.R. has vehemently opposed the contention of the AR by saying that deemed order is to be taken as order passed. After hearing the contentions of both the parties we think it proper to reproduce the section 120 of the Income tax Ordinance, 2001 which is as under:--
120 Assessments.---(1) Where a taxpayer has furnished a complete return of income (other than a revised return under subsection (6) of section 114) for a tax year ending on or after the 1st day of July, 2002;
(a) The Commissioner shall be taken to have made an assessment of taxable income for that tax year, and the tax due thereon, equal to those respective amounts specified in the return; and
(b) The return shall be taken for all purposes of this Ordinance to be an assessment order issued to the taxpayer by the Commissioner on the day the return was furnished.
The wording embodied in subsection (1)(a) of section 120 specifically shows that Commissioner shall be taken to have made an assessment deemed assessment order amounts to an order passed by the Commissioner. Similarly subsection (b) of section 120 of the Income Tax Ordinance, 2001 embody the same wording that the return shall be taken for all purposes of this Ordinance to be an assessment order issued to the taxpayer by the Commissioner on the day the return was furnished, so the version of AR of the assessee is devoid of any force because even the deemed assessment order shall be taken to have been made by the Commissioner. So this interpretation by the learned AR that order has not been physically passed so it cannot be amounted to an order is without any force. Hence we feel no hesitation to conclude that even the deemed assessment order shall amount to have been made by the Commissioner and the Taxpayer cannot be given any benefit on this interpretation which is not based upon solid reasoning. Even otherwise, the Courts hall not interpret the law in such a manner to defeat in the ends of justice.
The learned AR has further argued that no additional tax can be imposed on the person to whom the payment was made. In this regard the relevant section 162 of Income Tax Ordinance, 2001 is reproduced as under:
"(162) Recovery of tax from the person fro whom tax was not collected or deducted.
(1) Where a person fails to collect tax as required under division II of this part or Chapter XII or deduct tax from a 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 of the tax under subsection (1) does not absolve 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."
From the plane it is crystal clear that the authority can recover additional tax only from the person who failed to deduct tax at source and not from the appellant, original amount of tax if not deducted or shortly deducted can be recovered from taxpayer from whom the tax should have been collected.
4. We have heard both the rival parties and perused the relevant record. The section 161 is also hereby reproduced as under for ready reference:-
161. Failure to pay tax collected or deducted.---(1) Where a person--
(a) fails to collect tax as required under Division II of this Part [or Chapter XII] or deduct tax from a payment as required under Division III of this Part [or Chapter XII] [or as required under section 50 of the repealed Ordinance]; or
(b) having collected tax under Division II of this Part [or Chapter XII] or deducted tax under Division III of this part [or Chapter XIII] fails to pay the tax to the Commissioner as required under section 160, [or having collected tax under section 50 of the repealed Ordinance pay to the credit of the Federal Government as required under subsection (8) of section 50 of the repealed Ordinance. The person shall be personally liable to pay the amount of tax to the Commissioner who proceeds to recover the same.
A careful reading of the above section 161 and considering the facts of the case we are of the considered opinion that withholding agent is bound to pay the additional tax on the difference of the rate of 6% and 5% under the law and not the taxpayer. In this case withholding agent was liable and demand of additional tax if due can be raised against him and not against the taxpayer. In this scenario order passed by both of officers below are hereby vacated upto the extent of levy of additional tax because principal amount due to difference of rate of tax has already been paid and additional tax cannot be levied against the taxpayer. If it is levied then it can be only against the withholding agent. The appeal filed by the assessee is accepted accordingly.
C.M.A.175/Tax (Trib.)Appeal accepted.