VS, 2010 PTD-INCOME-TAX-APPELLATE-TRIBUNAL-PAKISTAN 1714 (2010)

Income Tax Ordinance (XLIX of 2001)---

----Ss.21(g), 120 & 122(5)---Sales Tax Act (VII of 1990), Ss.33 & 34---Deductions not allowed---Fine or penalty---Returns were filed declaring loss which were taken to be an assessment order---Re-assessments were finalized at net income---Relief was allowed by the First Appellate Authority on the issue of set off of determined/assessed losses as well as addition made under S.21(g) of the Income Tax Ordinance, 2001---Department contended that fine on charged sales tax was also in the nature of fine and was fully covered by S.21(g) of the Income Tax Ordinance, 2001; and the deletion of the same was contrary to law---Assessee contended that Sales Tax Act, 1990 provided charge of additional tax under S.34 of the Sales Tax Act, 1990 while present nomenclature of such action was default surcharge; that section 33 of the Sales Tax Act, 1990 caters for the situation where fine or penalty was to be imposed; that had it the intention of the legislature, default surcharge would have been incorporated under S.33 of the Sales Tax Act, 1990 rather than bringing same under separate head and that First Appellate Authority was quite justified in deleting the disallowance made under S.21(g) of the Income Tax Ordinance, 2001---Validity---Section 21(g) of the Income Tax Ordinance, 2001 referred to the term such as fine/penalty but in the Sales Tax Act, 1990 default surcharge had been categorized independently under S.34 of the Sales tax Act, 1990 while S.33 of the Sales Tax Act, 1990 dealt with the situation where fine would be imposed ---Departmental appeal was dismissed by the Appellate Tribunal being devoid of any merit.

2004 PTD 1179 ref.

Dr. Ishtiaq Ahmad, D.R. for Appellant.

Yousaf Saeed, F.C.A. for Respondent.

ORDER

The Revenue has come up in appeal for the tax years 2004 and 2005 calling in question the impugned order dated 24-9-2009, passed by the learned CIT (Appeals-1), Lahore. Common grounds for both the tax years are as under:-

Tax years 2004 & 2005.

(1) That the order of the learned CIT(A) was not justified in directing that on the basis of latest position of decision of appeals the set off of determined/assessed losses be given to the taxpayer.

(2) That the learned CIT(A) was not justified in deleting the disallowance under section 21(g) of the Income Tax Ordinance, 2001.

Tax year 2005.

(1) That the learned CIT(A) was not justified in holding that minimum tax under section 113 of the Income Tax Ordinance, 2001 be calculated on aggregate turnover from all sources.

2. Briefly stated the facts leading to the filing of present appeals are that the returns of income for the charge year 2004 and 2005 were filed declaring loss for both the years under appeal which were taken to be an assessment order in terms of section 120 of the Income Tax Ordinance, 2001 (hereinafter called the Ordinance). However, the department during the examination of assessment record and other financial statement/notes to accounts found that assessments already finalized were erroneous in so far as prejudicial to the interest of Revenue for the reasons as spelled out in the show-cause notice dated 12-2-2009. After completion of proceedings re-assessments were finalized under section 122(5A) of the Ordinance at net income of Rs.6,595,670 and Rs.17,859,908 for both the years respectively. On appeal before the learned First Appellate Authority, relief was allowed to the taxpayer on the issue of set off of determined/assessed losses as well as addition made under section 21(g) of the Ordinance.

3. On the issue of levying of minimum tax under section 113, the direction given by the learned First Appellate Authority that the minimum tax should be tax aggregated from all sources was also challenged.

4. Feeling dissatisfied with the treatment accorded to the assessee at the first appellate level. The department is in further appeal before the Tribunal.

5. Both the parties have been heard and relevant orders perused. Right from the outset, the learned D.R. appearing one behalf of the Revenue submitted that since with regard to issues of set off determined/assessed losses and calculation of minimum tax under section 113 on the basis of aggregated turnover from all sources, the case has been sent back to the assessing officer for reconsideration, hence he does not want to contest the aforesaid two issues. However, the learned D.R. strenuously assailed the findings recorded by the learned CIT(A) whereby he directed to delete the disallowance made under section 21(g) Ordinance. It was contended by the learned D.R. that fine on charged sales tax is also in the in the nature of fine and is fully covered by section 21(g) of the Ordinance, hence deletion of the same was contrary to law. In this respect the learned D.R. relied upon judgment of the Supreme Court of Pakistan reported as 2004 PTD 1179. The relevant extract of the same is as follows:---

"(27) In view of these decisions, it could not be argued by the appellants that imposition of penalty or additional tax under section 34 was mandatory and there was no discretion left with the authorities to allow any concession.

(28) Each and every case has to be decided on its own merits as to whether the evasion or payment of tax was willful or mala fide, decision on which would depend upon the question of recovery of additional tax. In the facts and circumstances of this case, we find that non-payment of the sales tax within tax period was neither willful no it could be construed to be mala fide evasion or payment of duty, therefore, the recovery of additional tax as penalty or otherwise was not justified in law."

6. On the contrary, the learned A.R. submitted that Sales Tax Act, 1990 provides charge of additional tax under section 34 of the Sales Tax Act while the present nomenclature of this action is default surcharge. It was further submitted that even otherwise section 33 of the Sales Tax Act caters for the situation where fine or penalty is to be imposed. The learned A.R. elaborated that had it the intention of the legislation default surcharge would have been incorporated under section 33 rather than bringing it under separate head, therefore, the learned First Appellate Authority was quite justified in deleting the disallowance made under section 21(g) of the Ordinance.

7. We have heard the learned counsel for both the parties and have gone through the relevant orders. In the light of the arguments advanced at the bar, we are not in agreement with the assertions made by the learned D.R. Undoubtedly, section 21(g) refers to the term such as fine/penalty but the Sales Tax Act default surcharge has been categorized independently under section 34 of the Sales Tax Act while section 33 deals with the situation where fine would be imposed. In this view of the fact we do not see any merit in the departmental appeal which is hereby dismissed.

C.M.A./91/Tax(Trib.)Appeal dismissed.