Law: Income Tax Ordinance, 2001

Section: 2(19)(e),161,205

(a) Income Tax Ordinance (XLIX of 2001)----Ss. 2(19)(e) & 161---Dividend---Failure to pay tax collected or deducted---Loan---Certain amount was advanced to shareholder by the company---Taxation Officer observed that amount of advance being in the nature of dividend was liable to withholding tax but no evidence regarding deduction of tax was available on record---Taxpayer company was treated as a taxpayer in default---Validity---Amount advanced by the company to its shareholder was disclosed as loan in the statement of accounts and there was no provision in the income tax law which provides for deduction of tax on the amount of loan; it was only by fiction of law that the amount of loan was treated as dividend in the hands of beneficiary if it fulfils the conditions laid down in S.2(19)(e) of the Income Tax Ordinance, 2001---Best course open to Revenue was to treat and assess the amount of loan as "dividend income" in the hands of shareholder and charge tax thereon. (b) Income Tax Ordinance (XLIX of 2001)--- ----Ss. 161 & 205---Failure to pay tax collected or deducted---Assessee in default---Taxpayer contended that proceedings under S.161 of the Income Tax Ordinance, 2001 were initiated and finalized on 30-6-2005 by the predecessor of the officer who passed the order on 31-12-2008 and during course of earlier round of proceedings the entire record of the company had been examined and a conscious finding was recorded by the Taxation Officer regarding compliance of the company with the withholding provisions in his order dated 30-6-2005 and in presence of earlier order dated 30-6-2005 the Taxation Officer had no jurisdiction to initiate proceeding again on the basis of same data/accounts which had already been examined and adjudicated upon in the earlier round of proceedings---Validity---Consolidated order under Ss.161/205 for the assessment year 2002-2003, tax year 2003 and 2004 was passed on 30-6-2005 by the Taxation Officer after conscious application of mind to the accounts of the company---All transactions recorded in the accounts had taken place before the Taxation Officer when he finalized the proceedings under Ss.161/205 of the Income Tax…

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