Law: Income Tax Rules, 2002

Section: 44(4)

Law: Income Tax Ordinance, 2001

Section: 161,205(3)

Law: Income Tax Rules, 2002
Section: 44(4)
Law: Income Tax Ordinance, 2001
Section: 161,205(3)
The Department filed four appeals against appellate orders Nos. 14, 15, 16, and 17 dated 15.01.2018 passed by the learned CIR (Appeals-I), Lahore, relating to tax years 2009 to 2012.
The taxpayer, a limited company and withholding agent, was examined to verify compliance with withholding tax provisions on payments such as purchases, services, and fixed assets. Proceedings were initiated under sections 161 and 205(3) of the Income Tax Ordinance, 2001, resulting in tax demands of Rs. 3.91 million, Rs. 5.23 million, Rs. 4.76 million, and Rs. 4.40 million for the respective tax years.
Aggrieved by these orders dated 22.06.2016, the taxpayer filed appeals before the CIR(A), who annulled the orders of the tax authorities. The Department challenged these decisions before the Tribunal, mainly contesting the deletion of default surcharge imposed under section 205(3).
The taxpayer's counsel argued that substantial refunds were available in each year (ranging from Rs. 24 million to Rs. 177 million), and therefore, no willful default existed to justify the levy of default surcharge.
After hearing both parties and examining the record, the Tribunal agreed with the CIR(A)'s findings. It held that, in the presence of significant refundable amounts, the levy of default surcharge was unjustified. The CIR(A)'s decision relied on established case law from the Supreme Court of Pakistan and the Lahore High Court.
Consequently, the Tribunal upheld the appellate orders, confirmed the deletion of default surcharge, and dismissed the Department's appeals.
ORDER:
MUHAMMAD JAMIL BHATTI: (ACCOUNTANT MEMBER):--

    
Through the titled four appeals have been filed by the department against the impugned appellate orders Nos.14, 15, 16 and 17 dated 15.01.2018 passed by the learned CIR(Appeals-I), Lahore.
2. Brief facts of the cases are common that the appellant a limited company for the tax years 2009,2010,2011 and 2012 were examined in order to ascertain as to whether various provision of withholding tax have correctly been adhered to or not. the taxpayer being a withholding agent was obliged to deduct tax on certain payments like purchase of raw packing material, different services and addition in fixed assets etc. the taxpayer vide this letter dated 14th May, 2015 was requested to submit the reconciliation under rule 44(4) of the Income Tax Rules 2002. The appellant is aggrieved of the order dated. 22.06.2016 finalized u/s 161/205(3) of the income Tax Ordinance, 2001 (the Ordinance hereinafter) by the tax years 2009, 2010,2011,2012 whereby the DCIR have created tax demand amounting to Rs.3,909,761/-, Rs. 5,229,409/-, Rs.4,764,336/- and Rs.4,402,504/-.
3. Being aggrieved, the taxpayer preferred appeal before the learned CIR(A) who by virtue of his impugned appellate orders dated 15.01.2018 annul the orders passed by the OIR and the department aggrieved with the treatment of the learned CIR(A) and filed appeals before this forum.
4. The common contentions of the learned DR are that the order of the Learned CIR(Appeal-1), Lahore vide No.14,15,16 and 17 is bad in law and against the facts of the case. He further argued that the learned CIR(A) was not justified to delete the default surcharge at Rs.2,180,888/-, Rs.5,229,409/-, Rs.4,764,336/- and Rs.4,402, 504/-charged u/s 205(3) without appearing the facts of the case a as the taxpayer failed to deposit the actual tax charged u/s 161 of the Income Tax Ordinance.
5. The contentions of the learned AR of the taxpayer only contested the levy of default surcharge on the grounds that huge refunds aggregating in every years are different of Rs.24 Million, Rs.147.708 Million, Rs.177 Million and Rs.155 Million are available in favour of the appellant. He further stated that no willful default was involved hence the default surcharge levied by the officer is not maintainable.
6. We have heard both the parties and have gone through available record on the file. We feel inclined to agree with the findings of the learned CIR(A) as his order is based upon proper appreciation of facts and law. Therefore, the appeal is decided on merits.
7. For the sake of reference, it would be appropriate to reproduce the findings of the learned CIR(A):
"I have considered the arguments of the AR and perused the record. I agree with the AR that in the presence of refunds there was no justification for levy of default surcharge. Reliance in this context is placed on the case laws as under:-
2004 PTD 1179 (Supreme Court of Pakistan) 2011 PTD 181 (Supreme Court of Pakistan) (2004) 89 TAX 136 (Lahore High Court) 2004 PTD 1048 (Lahore High Court)
Therefore, respectfully following the dictum laid down by the High Courts the default surcharge is vacated."
9. We have no hesitation to agree with the findings of the learned CIR(A) who has rightly 
deleted the default surcharge as discussed supra with reference of the Higher fora. Hence, the order of the CIR(A) is confirmed.
10. The appeal of the department stands disposed of as discussed above.
SD/-
(MUHAMMAD JAMIL BHATTI)
ACCOUNTANT MEMBER
SD/-
(MONIM SULTAN) JUDICIAL MEMBER