BLI PAKISTAN (PVT.) LTD. VS GOVERNMENT OF PAKISTAN, 2017 PTD-LAHORE-HIGH-COURT-LAHORE 2050 (2017)

Income Tax Ordinance (XLIX of 2001)---

----Ss. 182 & 165---Constitution of Pakistan, Art. 73---Requirement of filing statement of withholding tax---Penalty for non-filing of withholding tax statement---Determination as to what constitutes a "Money Bill" under Art. 73 of the Constitution---Nature and scope of imposition of "penalty" under the Income Tax Ordinance, 2001---Petitioners impugned vires of S. 182(1) of the Income Tax Ordinance, 2001 which provided for penalty in case of failure to furnish statement of withholding tax as required under S. 165 of the Income Tax Ordinance, 2001---Validity---In terms of Art. 73 of the Constitution, for purpose of a "Money Bill", any provision dealing with imposition, abolition, remission, alteration or regulation of any tax was included meaning thereby that any law relating to regulation of any tax fell within domain of "Money Bill"---Purpose of penalty was to ensure that statutory provisions of the Income Tax Ordinance, 2001 were complied with and failure to do so would render a taxpayer liable under S. 182 of the Income Tax Ordinance, 2001---For purpose of levy of such penalty, an exercise had to be carried out by the Department, wherein it was to be determined whether or not non-filing of withholding statement was deliberate and whether the same was done with a mala fide intent---For purpose of levy of penalty, mens rea was an essential ingredient---High Court observed that challenge to the vires of S. 182(1) of the Income Tax Ordinance, 2001 was not competent---Constitutional petition was disposed of, accordingly.

D.G. Khan Cement Company Ltd. and others v. Federation of Pakistan and others 2004 SCMR 456 rel.

Khurram Saeed for Petitioners.

Muhammad Ajmal Khan for Petitioners (in W.Ps. Nos.27554/2013, 2901/2014 and 40714 of 2016).

Shahid Sarwar Chahil and Sarfraz Ahmad Cheema for Respondents with Dr. Ishtiaq Ahmad Khan, Director Legal FBR.

Tahir Mahmood Ahmad Khokhar, Assistant Attorney General for Pakistan.

ORDER

AYESHA A. MALIK, J.---Through this consolidated order, I intend to decide upon the issues raised in W.Ps. Nos.6565/2015, 27554/2013, 2901/2014 and 40714/2016 as common questions of law arise in all the stated petitions.

2.The Petitioners are all taxpayers and their common grievance is that they did not file the withholding tax statement as required under section 165 of the Income Tax Ordinance, 2001 ("Ordinance"), hence the Respondents issued show-cause notices calling for an explanation and stating that they are liable to the penalty under Section 182 (1) of the Ordinance.

3.The Petitioners have challenged the vires of Section 182(1) of the Ordinance, which provides that a person who fails to furnish the statement as required under Section 165 of the Ordinance within the due date shall pay a penalty of Rs.2500/- for each day of default subject to a minimum penalty of Rs. 50,000/-. In the case of instant petition, show-cause notice was issued on 16.02.2015, which states that the Petitioner failed to file the statement under Section 165 of the Ordinance for the stated period and the Petitioner was asked to justify its failure to e-file the statement within the given time and to produce any document/information in support of its explanation before the Respondents for verification of the information provided. The Petitioners in W.Ps. Nos.27554/2013, 2901/2014 and 40714/2016 were issued show-cause notices on 26.09.2013, 17.01.2014 and 14.12.2016 providing the details of the days of default for not filing the statement, the penalty amount. The Petitioners have been asked to explain their failure to e-file monthly statement as per Section 165 of the Ordinance.

4.Counsel for the Petitioners argued that Section 182(1) of the Ordinance is ultra vires the Constitution of the Islamic Republic of Pakistan, 1973 ("Constitution") as the Constitution only authorizes Parliament to make laws regarding tax on income and they cannot legislate on penalty for non-filing the statement under Section 165 of the Ordinance. Learned counsel further argued that Section 182(1) does not give the Petitioners any chance to have the delay condoned as the Respondents will operate in a mechanical way. They argued that the quantum of the penalty is excessive and not justified.

5.Report and para wise comments have been filed by the Respondents. Learned counsel for the Respondents argued that the Constitution provides under Article 73(2)(a) for the imposition, abolition, remission, alteration or regulation of any tax and these subject matters fall within the definition of Money Bill. Learned counsel further argued that the definition of tax as given in Section 2(63) of the Ordinance, includes penalty, therefore, the legislature is competent to legislate on any matter for the purposes of regulating any tax. Learned counsel argued that for the purposes of the instant petitions show-cause notices have been impugned. The Petitioners are required to file their replies and explain the cause of the delay or non-filing the statements. In such cases, the Respondents undertake a verification process so as to determine whether or not the Petitioners non-filing was deliberate or technical and they also determine whether there was any loss of revenue and thereafter, determine whether minimum or maximum penalty should be levied. In such cases the competent authority looks into the matter and decides it as per the facts of the case.

6.Report and para wise comments have also been filed by the Federation of Pakistan. Learned Assistant Attorney General for Pakistan adopts the arguments advanced by the learned counsel for the Respondents.

7.The Petitioners are admittedly non-filers or late filers of the Statement required under Section 165 of the Ordinance. Consequently, show-cause notices were issued to them wherein they were asked to explain their failure in filing the statement under Section 165 of the Ordinance. In terms of Article 73 of the Constitution for the purposes of a Money Bill any provision dealing with the imposition, abolition, remission, alteration or regulation of any tax is included meaning thereby that any law relating to the regulation of any tax falls within the domain of Money Bill. The purpose of the penalty section is to ensure that the statutory provisions of the Ordinance are complied with and failure to do so will render a taxpayer liable under section 182 of the Ordinance. For the purposes of levy of penalty an exercise has to be carried out by the Respondents wherein they have to determine whether or not the non-filing was deliberate and whether it was done with mala fide intent. For the purpose of levy of penalty mens rea is an essential ingredient, which has to be established in terms of the judgment of the august Supreme Court of Pakistan rendered in a case cited at "D.G. Khan Cement Company Ltd and others v. Federation of Pakistan and others)" (2004 SCMR 456), therefore, as such any challenge to the vires of section 182(1) of the Ordinance is not made out. Furthermore, the Petitioners have impugned a show-cause notice in terms of which a reply was sought and the matter needs to be looked into by the competent authority. As so far there is no determination on minimum or maximum penalty which is contemplated in section 182(1) of the Ordinance itself. Hence no case for interference is made out.

8.The Petitioners are directed to file replies to the impugned show-cause notices raising all their contentions within seven days of receipt of certified copy of this order and if such replies are filed, the same will be decided strictly in accordance with law through a speaking order by the competent authority before taking any coercive action against the Petitioners. However, if such replies are not filed within the stipulated period, the Respondent FBR will be at liberty to proceed in the matter in accordance with law.

9.Disposed of in the above terms.

KMZ/A-77/L Order accordingly.