COMMISSIONER OF INCOME TAX VS GILANI TRANSPORT COMPANY, 2017 PTD-SUPREME-COURT 1540 (2016)

(Against order dated 31.10.2008 of High Court of Sindh at Karachi, passed in I.T.A. No. 25 of 2001)

(a) Income Tax Ordinance (XXXI of 1979) [since repealed]---

----Ss. 80-C(4) & 89---Presumptive Tax Regime---Charge of additional tax for failure to pay tax or penalty---Scope---Section 89 of the Income Tax Ordinance, 1979 empowered the department to levy and recover additional tax only in case an assessee failed to pay the whole or any part of tax levied under Chapter VII or the whole or any part of the penalty levied under Chapter XI of the Income Tax Ordinance, 1979.

For the assessment year 1991-92 a sum of Rs.240,260/- was payable by the taxpayer as tax on or before 30.09.1991 in terms of section 80-C(4) of the Income Tax Ordinance, 1979. Amount in question was not paid on its due date. It was paid subsequently over a period of time in instalments. This prompted the Income Tax Department to issue a show cause notice calling upon the taxpayer to explain why additional tax in the sum of Rs.164,823/- may not be recovered from him in terms of section 89 of the Income Tax Ordinance, 1979. Contention of department that since the taxpayer failed to pay tax on or before the due date, the department was justified in resorting to the provisions of section 89 of the Ordinance to levy and recover additional tax.

Section 89 of the Income Tax Ordinance, 1979 empowered the department to levy and recover additional tax only in case an assessee failed to pay the whole or any part of tax levied under Chapter VII or the whole or any part of the penalty levied under Chapter XI of the Income Tax Ordinance, 1979. Tax recoverable from the assessee had neither been levied under Chapter VII nor had any penalty been imposed under Chapter XI of the Ordinance which was sought to be recovered. Tax liability of the assessee arose under section 80-C(4) of the Ordinance which fell under Chapter VIII and was therefore beyond the purview of Section 89 of the Ordinance.

Further, the competent authority had not allowed stay of payment of tax or payment of the same in installments that may have furnished any justification to invoke the provisions of section 89 of the Income Tax Ordinance, 1979 to claim additional tax from the assessee. Show cause notice and order passed by the competent authority, therefore, suffered from lack of jurisdiction.

Baig Spinning Mills Ltd. v. Federation of Pakistan 2005 PTD 1102 ref.

(b) Interpretation of statutes---

----Taxing statute---Charging provisions---Such provisions were to be strictly construed in favour of the subject so that if there was any substantial doubt, it had to be resolved in favour of the taxpayer.

Hyderabad Cantonment Board v. Raj Kumar 2015 SCMR 1385; C.I.T. v. Elli Lilly Pakistan (Pvt.) Ltd. 2009 SCMR 1279 and Muhammad Amir Khan v. Controller of Estate Duty PLD 1961 SC 119 ref.

M. Habib Qureshi, Advocate Supreme Court for Appellant.

Ex parte for Respondent.

Date of hearing: 21st November, 2016.

JUDGMENT

IJAZ UL AHSAN, J.---This Civil Appeal by leave of the Court arises out of an order dated 31.10.2008 (impugned order), rendered by a learned Division Bench of High Court of Sindh at Karachi. Through the impugned order, an appeal (I.T.A. No.25 of 2001) filed by the appellant under section 136(l) of Income Tax Ordinance, 1979 ('the Ordinance') was decided against it.

2.The necessary facts for disposal of this lis are that the respondent is an individual and derives its income from the business of transportation. The income generated by the respondent is covered under the Presumptive Tax Regime as incorporated in section 80-C of the Ordinance. The record indicates that for the assessment year 1991-92 a sum of Rs.240,260/- was payable by the respondent as tax on or before 30.09.1991 in terms of section 80-C(4) of the Ordinance. The amount in question was not paid on its due date. It was paid subsequently over a period of time in installments. This prompted the Income Tax Department to issue a show cause notice dated 30.11.1998 calling upon the respondent to explain why additional tax in the sum of Rs.164,823/- may not be recovered from him in terms of section 89 of the Ordinance. He filed his reply which was rejected by the Assistant Commissioner, income Tax vide order dated 14.06.1999. In consequence a demand for a sum of Rs.164,823/- was raised. The respondent filed an appeal under section 132 of the Ordinance before the Commissioner, Income Tax (Appeals). Such appeal was allowed vide order dated 11.10.1999.

3.Aggrieved, the appellant approached the Income Tax Appellate Tribunal which upheld the decision of the lower appellate forum and dismissed its appeal vide order dated 07.03.2000.

4.Being dissatisfied, the appellant-department moved the High Court of Sindh by way of an appeal under section 136(1) of the Ordinance which too met the same fate vide impugned order dated 31.10.2008. Hence, this appeal by leave of the Court.

5.The learned ASC for the appellant submits that the learned High Court erred in interpreting the provisions of section 80-C(4) of the Ordinance. He maintains that provisions of section 80-C(4) read with section 89 of the Ordinance can be relied upon to recover additional tax. The learned counsel argues that applicability of section 89 is not limited to recovery of tax or penalty payable under Chapter VII and Chapter IX of the Ordinance.

6.We have heard the learned counsel for the appellant and carefully examined the provisions of section 80 C(4) of the Ordinance. A perusal of said Section indicates that where the assessee has no income other than the income referred to in subsection (1) of section 80-C in respect of which tax has been deducted or collected, the tax deducted or collected under section 50 of the Ordinance shall be deemed to be the final discharge of his tax liability and he shall not be required to file the return of total income under section 55 thereof.

7.Learned counsel for the appellant does not deny that the case of the respondent fell within the purview of section 80-C(4) of the Ordinance. He, however, maintains that since the respondent failed to pay tax on or before the due date, the appellant-department was justified in resorting to the provisions of section 89 of the Ordinance to levy and recover additional tax. The argument of the learned counsel for the appellant is not supported by the language of section 89 of the Ordinance which clearly and unambiguously empowers the appellant-department to levy and recover additional tax only in case an assessee fails to pay the whole or any part of tax levied under Chapter VII or the whole or any part of the penalty levied under Chapter XI of the Ordinance. It is clear and obvious to us that tax recoverable from the respondent had neither been levied under Chapter VII nor had any penalty been imposed under Chapter XI of the Ordinance which was sought to be recovered. The tax liability of the respondent arose under section 80-C(4) of the Ordinance which falls under Chapter VIII and is therefore beyond the purview of section 89 of the Ordinance.

8.There is another aspect of the matter. Chapter IX of the Ordinance deals with recovery of taxes. Section 89 thereof is undoubtedly a charging provision. It is settled law that charging provisions are required to be strictly construed in favour of the subject so that if there be any substantial doubt, it has to be resolved in favour of the taxpayer. In this regard, reference may usefully be made to Hyderabad Cantonment Board v. Raj Kumar (2015 SCMR 1385), C.I.T. v. Elli Lilly Pakistan (Pvt.) Ltd. (2009 SCMR 1279) and Muhammad Amir Khan v. Controller of Estate Duty (PLD 1961 Supreme Court 119). We therefore hold that the scope of section 85 read with section 89 of the Ordinance cannot be extended beyond the situations visualized and incorporated in the said Sections.

9.Further, neither any tax has been levied under Chapter VII nor has any order been lawfully passed in this regard. In addition, the Assistant Commissioner, Income Tax has not allowed stay of payment of tax or payment of the same in installments that may have furnished any justification to invoke the provisions of section 89 of the Ordinance to claim additional tax from the respondent. We are therefore of the opinion that the show cause notice dated 30.11.1998 and the order dated 14.06.1999 passed by the Assistant Commissioner, Income Tax suffered from lack of jurisdiction. We also find that the learned High Court has correctly relied upon an earlier judgment on the issue reported as Baig Spinning Mills Ltd. v. Federation of Pakistan (2005 PTD 1102) wherein it was held that section 89 of the Ordinance stipulates payment of additional tax by an assessee who fails to pay the tax levied under Chapter VII or the penalty levied under Chapter XI of the Ordinance. The ratio of the said judgment is fully attracted and applicable to the legal questions involved in the instant case. The learned counsel for the appellant has not been able to point out any error, defect or illegality in the impugned order that may require interference by this Court.

10.For reasons recorded above, we do not find any merit in this appeal. It is accordingly dismissed.

MWA/C-17/SC Appeal dismissed.