Present
Mr.
Justice Faisal Arab
Mr. Justice Aqeel Ahmed Abbasi.
Date
of hearing : 02.12.2011
Date
of order : 02.12.2011
Applicant : Commissioner (Legal) Inland Revenue, Large Taxpayers Unit, through Mr.Muhammad Altaf Mun, Advocate.
Versus
Respondent M/s Habib Metropolitan Bank Ltd.
O
R D E R
Aqeel Ahmed Abbasi, J. This Reference Application has been filed by the Commissioner (Legal) Inland Revenue against the order dated 28.6.2010 passed by the Appellate Tribunal Inland Revenue (Pakistan) Karachi in I.T.A. No.179/KB/2010. Following questions of law are said to have arisen from the impugned order, which have been referred for opinion of this Court.
“1. Whether under the facts and circumstances of the case, the learned Tribunal was justified in upholding the order of CIT (Appeals), at the touch stone of section 182 of the Income Tax Ordinance, 2001?
2. Whether under the facts and circumstances of the case, mensrea was essential for the levy of penalty u/s 182 of Income Tax Ordinance, 2001?
3. Whether under the facts and circumstances of the case, the learned Tribunal was justified in relying upon the decision of CIT (Appeals) that Taxation Officer has incorrectly workout the penalty on the basis of tax charged on the total income instead of tax payable alongwith the return, which was not applicable?
4. Whether under the facts and circumstances of the case, the learned Tribunal was justified to hold that since the Taxation Officer had failed to reply to the request of the taxpayer regarding extension of time, therefore he was justified to presume that his request for extension of time had been granted, when sub section (4) of section 119 of the Income Tax Ordinance, 2001 only allows extension beyond 15 days in exceptional circumstances?”
2. Brief facts as stated in the Reference Application are that the taxpayer company in this case was required to file return of income for the subject tax year by 31.01.2008. However, the same was filed on 19.02.2008, which was late by 19 days. Accordingly, Show Cause Notice under Section 182 (1) of the Income Tax Ordinance, 2001 dated 05.01.2009 was issued to the taxpayer for imposition of penalty on late filing of return. Such show cause notice was responded by the assessee vide letter dated 12.01.2009, wherein it was stated that extended time had been allowed to the taxpayer to file return of income on or before 31.01.2008, However, on expiry of this period, an application for further time was made to grant extension till 01.02.2008 and 13.02.2008. The Assessing Officer did not accept such explanation and held that since no extension was allowed to the taxpayer beyond 31.01.2008 and thus the return filed on 19.02.2008 is late by 19 days and attracts penalty under Section 182 (1) of the Income Tax Ordinance, 2001. Consequently, the Deputy Commissioner/T.O-1, E&C Division, Large Taxpayer Unit, Karachi, imposed penalty under Section 182 (1) of the Income Tax Ordinance, 2001 for late filing of return. The order was assailed by the taxpayer before the Commissioner Inland Revenue (Appeals-I), Karachi, who vide its order dated 25.11.2009 set aside the order of the Taxation Officer and cancelled the penalty order passed under Section 182 (1) of the Income Tax Ordinance, 2001. Such order was assailed by the Commissioner Income Tax before the Appellate Tribunal Inland Revenue (Pakistan) Karachi, who vide its impugned order dated 28.06.2010 dismissed the appeal of the department and maintained the order passed by the CIT (Appeals).
3. Being aggrieved by these orders, the Commissioner (Legal) Inland Revenue, Large Taxpayers Unit, Karachi, has filed instant reference application.
4. Mr. Muhammad Altaf Mun, learned counsel for the applicant has contended that since the return filed by the respondent was late by 19 days, whereas no extension of time was granted by the Commissioner under Section 119 of the Income Tax Ordinance, 2001, therefore, the return filed by the respondent cannot be treated as within time hence the same attracted the provisions of section 182 (1) of the Income Tax Ordinance, 2001. It has been further submitted that the Tribunal was not justified to hold that mensrea was essential for the levy of penalty under Section 182(1) of the Income Tax Ordinance, 2001. Per learned counsel, since there was a delay of 19 days and no order was passed under Section 119 of the Income Tax Ordinance, 2001 by the concerned Commissioner granting extension of time, therefore, it will be presumed that such request was declined.
5. From perusal of the order passed under Section 182 (1) of the Income Tax Ordinance, 2001, it may be seen that the Taxation Officer has acknowledged that there was request made by the respondent for seeking extension of time in filing of return till 01.02.2008 and 13.02.2008. However, the Taxation Officer while observing that there was no order allowing extension to the taxpayer beyond 31.01.2008, held that the return filed on 19.02.2008 was late attracts penalty under Section 182 (1) of the Income Tax Ordinance, 2001. In First Appeal, the Commissioner Inland Revenue (Appeals-I), Karachi, after hearing both the parties and examining the case-law on the subject held as follows:
“7. In
the light of above decision it is held when application for extension of time
applied by the appellant were not replied by the Taxation Officer, the
appellant could presume that its request for extension of time had been granted
and thus, had reasonable cause for non-filing of the Return by the due date. It
was the duty of the Commissioner to intimate the appellant whether its request
for extension of time for furnishing of return had been granted or refused
which the Commissioner failed to do so. The appellant had rightly assumed that
the extension seek for has been granted in absence of any intimation regarding
rejection of its request, therefore, the action of the Taxation Officer
penalizing for the default not committed by the appellant cannot be allowed to
be sustained.
8. The
Taxation Officer has incorrectly worked out the penalty on the basis of tax
charged on the total income instead of tax payable along with Return as rightly
been contested by the appellant duly supported by the case law which is
squarely applicable in the appellant’s case. Besides the tax payable along with
return has been duly paid by the appellant on 29.09.2007 well before the due
date hence imposing of penalty by the Taxation Officer is not justified.
Therefore, the penalty order passed under section 182(1) of the Income Tax
Ordinance, 2001 being unwarranted and unlawful is hereby Cancelled.”
6. The Appellate Tribunal Inland Revenue (Pakistan) Karachi, while concurring with the above finding of the Commissioner (Appeals) has dealt with issue in the following manner:
“We have heard the learned representatives from both the sides and have also perused the impugned order, penalty order the case law referred and the other available record of the case. We have found that in this case the Taxation Officer failed to reply the request of the taxpayer regarding extension of time, therefore, he was justified to presume that his request of extension of time had been granted. Even otherwise there is no dispute that the taxpayer has fully adjusted his tax liability within time and there was a reasonable cause for non-filing of electronically return by due date. We are of the view that it was the duty of Commissioner to intimate the taxpayer whether his request for extension of time for furnishing of return had been granted or refused which the Commissioner failed to do so, therefore, the taxpayer in this case has rightly assumed that the extension sought for has been granted in the absence of any intimation regarding rejection of its request, specifically for this reason that there were technical difficulties in e-filing. The learned CIT(A) has rightly held that the action of the Taxation Officer penalizing for the default not committed by the taxpayer cannot be allowed to be sustainable. It has rightly been held that the Taxation Officer has incorrectly worked out the penalty on the basis of tax charged on the total income instead of tax payable alongwith return as rightly been contested by the taxpayer duly supported by the case law which squarely applicable in the instant case.”
7. We are of the considered view that once the assessee had applied for extension of time under Section 119 of the Income Tax Ordinance, 2001, it was the duty of the concerned Commissioner to pass appropriate order on such application. Admittedly, no order of rejection for grant of extension of time was passed by the Commissioner. Under the circumstances, it cannot be presumed that the request for extension of time to file return of income, made by the taxpayer under the law stood declined by the Commissioner. No one can be allowed to take advantage of own default, omission and non-compliance of statutory provisions. Admittedly, assessee has paid all taxes due under the Income Tax Ordinance and no default in this regard has been pointed out by the Taxation Officer, whereas in addition to filing application seeking extension of time, reasonable explanation has also been given by the taxpayer for such request. There is nothing on record which could establish the mensrea or willful default on the part of the Taxation Officer in submitting return within due date or the extended date.
8. In view of hereinabove, we are of the opinion that the imposition of penalty in a mechanical manner by Taxation Officer was not justified. We are persuaded to agree with the concurrent finding of the commissioner (Appeals) and Appellate Tribunal Inland Revenue (Pakistan) Karachi on the subject which depicts correct position of law, hence does not require any interference by this Court in its reference jurisdiction.
9. Accordingly, instant Reference Application was dismissed in limine in the morning along with listed application vide short order dated 02.12.2011 and these are the reasons for such short order. Whereas questions proposed are answered in affirmative against the applicant.
JUDGE
JUDGE