Law: Income Tax Ordinance, 2001

Section: 161, 205 & 236G

INCOME TAX ORDINANCE, 2001 (XLIX OF 2001)---Sections: 161, 205 & 236G - Advance tax on sales tax to distributors, dealers, and wholesalers - Failure to pay tax collected or deducted - Show Cause Notice passing of impugned order by the assessing officer charging tax and default surcharge - Validity -FACTSBrief facts culled out from the record are that the taxpayer is a Private Limited Company engaged in the manufacture and sale of yarn. Return of income for the tax year 2017 was e-filed accompanied by audited accounts on examination of which it was noticed that certain transactions under various heads have been made during the year under consideration. To ascertain proper deduction of withholding taxes, notice under section I61(1A) of the Income Tax Ordinance, 2001 (“the Ordinance”) was issued. On the given date the taxpayer produced a reply along with supporting documents and tax deduction challans. The assessing officer passed the impugned order under section 161/205 of the Ordinance and charged total default tax at Rs.4,403,990 and default surcharge @ 12% at Rs.528,479. Being aggrieved, the appellant filed appeal before the learned Commissioner Inland Revenue (Appeals) who decided the appeal but taxpayer, still aggrieved, preferred appeal before Tribunal assailing impugned order on a number of grounds.ARGUMENTSHe explained that the appellant is a manufacturer of cotton yarn which is the intermediary goods and therefore, does not come within the ambit of section 236G ibid, hence, the appellant was not required to collect advance tax from wholesalers while selling cotton yarn to them.On the contrary, the learned DR opposed the appeal and contended that the appellant is a manufacturer of yarn and has made supplies partly to unregistered persons and partly to registered persons but failed to provide evidence which could establish the fact that these persons are manufacturers. The learned CIR(A) has rightly confirmed the order of the assessing officer.DECISIONSale of cotton yarn is not covered within restricted meaning of textile used in section 236G of Ordinance - - For what has been discussed, we are inclined to hold that because the sale of cotton yarn…

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