Law: Income Tax Ordinance, 2001

Section: 18(3),22(12),151,161,161(1),161(2),122(5 A),221

Law: Income Tax Rules, 2002

Section: 34

INCOME TAX ORDINANCE, 2001 (XLIX OF 2001) Sections: 151, 161, 161(1), 161(2) - Failure to pay tax collected or deducted - Show Cause Notice - DCIR asked the appellant to reconcile tax deduction on payment of expenses - Appellant raised legal objections and also filed replies, which were turned down - Orders passed u/s 161 - Appeal before CIR(A), for tax year 2007, dismissed, whereas cases for tax year 2008 to 2012 remanded back to DCIR - Appellant has contested dismissal of appeal for tax year 2007 and also agitated non-adjudication of appeals on legal grounds for tax years 2008 to 2012 - Validity - FACTS Proceedings in this case for tax year 2007 to 2012 were initiated by issuing show cause notices u/s 161 of the Ordinance. The DCIR took figures from the audited accounts and asked the appellant to reconcile tax deduction on payment of these expenses. The appellant raised legal objections and also filed replies on merit. On merit, the DCIR observed that appellant failed to substantiate its claim of deduction of tax. He therefore passed orders u/s 161 of the Ordinance. Appeal before CIR(A), for tax year 2007, was dismissed whereas cases for tax year 2008 to 2012 were remanded back to DCIR on merit to allow opportunity of being heard to the appellant. The appellant has contested dismissal of appeal for tax year 2007 and also agitated non-adjudication of appeals on legal grounds for tax years 2008 to 2012. ARGUMENTS The learned AR argued that in all proceedings u/s 161 of the Ordinance, the department took shelter of of honourable Supreme Court of Pakistan in Bilz (Pvt.) Ltd v. Deputy Commissioner of Income Tax and another 2002 PTD 1 wherein the apex court held that it was responsibility of the taxpayer to prove that there was no default as it has knowledge of the persons to whom payments were made. Learned AR argued that this of apex court is taken as an authority for a broad and general proposition that since the taxpayer especially has knowledge of the persons to whom payments were made, all that the tax authorities have to do for purposes of section 161 is to identify the payment. It is then for the taxpayer entirely to show whether the required deductions…

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