VS, 2010 PTD-INCOME-TAX-APPELLATE-TRIBUNAL-PAKISTAN 1503 (2010)

Income Tax Ordinance (XLIX of 2001)---

----S. 205(1B)---Additional tax---Time period for calculating additional tax---Reduction of additional tax---Short payment of advance tax was admitted---Advance tax was chargeable from 1-4-2007---Date of assessment i.e. 30-9-2008 was also undisputed---Only contentious issue was the closing date for calculation of additional tax liability---Taxpayer's assertion was that the "30th day of June of the financial year next following" was 30-6-2007 whereas the department contended that it was 30-6-2008---Additional tax was leviable from 1st April to the date of assessment of relevant tax year or the 30th June of the financial year next following---Financial year of the taxpayer company started from 1-10-2006 to 30-9-2007 and the assessment of the said year was to be made on 30-9-2008 on which the return had to be filed---Taxation Officer was legally correct in calculating the period of default from 1-4-2007 to 30-6-2008 and to levy the additional tax---First Appellate Authority had wrongly reduced the period of default from 1-4-2007 to 30-6-2007 and its order was not sustainable in the eyes of law---Order of First Appellate Authority was vacated and that of the Taxation Officer was restored by the Appellate Tribunal.

Dr. Ishtiaq Ahmad D.R. for Appellant.

Naeem Akhtar Sheikh FCA for Respondent.

ORDER

This appeal preferred by the department has assailed the order of learned CIT(A) Zone-I, Lahore recorded on 10-9-2009. The only grievance of the department is against the reduction of additional tax levied under section 205(1B) from Rs.3,25,768 to Rs.64,868.

Facts giving rise to the instant appeal are that the respondent company deriving income from manufacturing and sale of sugar filed return admitting tax liability at Rs.2,11,89,704 but paid/deducted tax under section 147 during the year at Rs.1,69,02,511. On perusal of return the Taxation Officer found the tax deducted under section 147 lesser than 90% of the admitted liability which according to him, comes to Rs.1,90,70,734. A show-cause notice was issued and considering the reply furnished by the taxpayer as unsatisfactory, additional tax under section 205(1B) was levied @ 12% for the period of default from 4-1-2007 to 30-6-2008 (i.e. 457 days) amounting to Rs.3,25,768. The calculation of additional tax made by the Taxation Officer is reproduced as below:

This treatment was assailed in first appeal as unjustified. It was contended before the first appellate authority that the additional tax was to be calculated from the first day of April, 2007 to the date on which assessment is made or the 30th day of June of the financial year next following, whichever is earlier. It was explained before the CIT(A) that the date of assessment in this case was 30th September, 2008 the earlier date was 30-6-2007. It was, therefore, contended that the period of default calculated by the Taxation Officer from 1-4-2007 to 30-6-2008 was legally incorrect and the additional tax could only be levied from 1-4-2007 to 30-6-2007. The CIT(A) observed that the period of default adopted by the Taxation Officer for working out the additional tax was not in accordance with statutory provision of law. He, therefore, directed to work out the additional tax for the period from 1-4-2007 to 30-6-2007 and, in this way, reduced the additional tax to Rs.64,868. This reduction made by the CIT(A) has brought the revenue in appeal before the Tribunal.

The learned D.R., vehemently, contended that the CIT(A) was not justified in reducing the period of default. He invited our attention to section 205(1B) which states that--

" ..where in respect of any tax year, the taxpayer fails to pay tax under subsection (4A) or (6) of section 147 or the tax so paid is less than 90% of the tax chargeable additional tax shall be calculated from the first day of April in that year to the date on which assessment is made or the 30th day of June of the financial year next following whichever is earlier."

The D.R. pleaded that the financial year of the company for tax year, 2008 falls between 1-10-2006 to 30-9-2007 and assessment of the said year was made on 30-9-2008 when return for the said period was filed, therefore, the additional tax was to be calculated from 1-4-2007 to 30-6-2008. According to him, the Taxation Officer had rightly calculated the additional tax and the CIT(A) has mis-directed himself to reduce the same. The A.R., on the other hand, reiterated his submissions as were advanced before the CIT(A) and contended that he has rightly calculated the period of default from 1-4-2007 to 30-6-2007.

The arguments of both the parties have been considered and the orders of the authorities below have also been perused. Section 205(1B) of the Income Tax Ordinance, 2001 has also minutely been gone through. Before proceeding further it would be relevant to reproduce this section for ready reference:

"(1B) where, in respect of any tax year, any taxpayer fails to pay tax under subsection (4A) or (6) of section 147 or the tax so paid is less than ninety per cent of the tax chargeable for the relevant tax year, he shall be liable to pay additional tax at the rate of twelve per cent per annum or the amount of tax so chargeable or the amount by which the tax paid by him falls short of ninety per cent, as the case may be; and such additional tax shall be calculated from the first day of April in that year to the date on which assessment is made or the 30th day of June of the financial year next following, whichever is earlier." (Under is for emphasis)

It is pertinent to mention here that short payment of advance tax is admitted. Similarly, it is also admitted that tax under section 205(1B) is chargeable from 1-4-2007. The date of assessment i.e. 30-9-2008 is also undisputed. The only contentious issue is the closing date for calculation of additional tax liability. The A.R's assertion is that the 30th day of June of the financial year next following" is 30-6-2007 whereas the department contended that it is 30-6-2008. The plain reading of this section reveals that additional tax is leviable from 1st April to the date of assessment of relevant tax year or the 30th June of the financial year next following. In the case in hand the financial year of the taxpayer company starts from 1-10-2006 to 30-9-2007 and the assessment of the said year is to be made on 30-9-2008 on which the return has to be filed. In such circumstances, the Taxation Officer was legally correct in calculating the period of default from 1-4-2007 to 30-6-2008 and to levy the additional tax. The CIT(A) has wrongly reduced the period of default from 1-4-2007 to 30-6-2007 and his order in this regard is not sustainable in the eyes of law. The order of the CIT(A) is, therefore, vacated and that of the Taxation Officer is restored.

Resultantly, the departmental appeal is accepted.

C.M.A./64/Tax (Trib.)Appeal accepted.