Find a Lawyer

I.T.A. No. 1567/KB of 1983-84, decided on 15th September, 1987.

---Ss. 91, 129, 132, 134 & 135--Penalty--Reduction in--Competence- Assessee is debarred from calling in question an order of penalty only on the ground that no show-cause notice was issued or an application for stay of recovery of tax was pending--Powers of Appellate Authorities and Income-tax Appellate, Tribunal detailed.

Subsection (5) of section 91 of the Income-tax Ordinance, 1979 debars an assessee from calling in question an order of penalty only on the ground that no show-cause notice was issued or an application for stay of recovery of tax was pending. As far as the powers of Appellate authorities are concerned, they have been given under sections 132 and 135 of the Income-tax Ordinance. Hence subsection (5) of section 91 does not vest any power in the Tribunal, which could be exercised under subsection (4-A) of section 91.

The legislature has mentioned section 91 as a whole without excluding its subsections. As such, the order under subsection (4-A) is also to be recorded by the ITO like orders to be recorded by him under subsection (1), subsection (2) and subsection (4) as all of them are integral part of section 91. Against the order of AAC or CIT (A) the appeal lies to the Tribunal under section 134. The Tribunal has to hear second appeal against an order recorded under section 91 irrespective of the fact as to under which subsection that specific order has been recorded. It is, therefore, very much obvious that the Tribunal cannot exercise powers under subsection (4-A) section 91 of the Income-tax Ordinance. Moreover, whenever the legislature wanted to give powers to the Tribunal to be exercised in its appellate jurisdiction in addition to powers given under section 135 it has given them very clearly and in unambiguous terms. Section 111 of the Income-tax Ordinance provides the example of this additional power.

Both the AAC/CIT (A) and the Appellate Tribunal have been given powers regarding inflicting penalty under section 111. Had it been the intention of the legislature that the Tribunal should exercise its powers under subsection (4-A) of section 91, it should have laid down specific provision of law to this effect.

It is for the I.T.O. to reduce the penalty if the demand is reduced as laid down in subsection (4-A) of section 91 and no Appellate. Forum has such powers.

C.I.T. v. Begum Mumtaz Jamal P L D 1976 Lah. 761 and Nagina Textile Mills Ltd.'s case 1963 P T D 633 ref.

Muhammad Farid, D.R. for Appellant.

A.K. Shamim for Respondent.

Date of hearing: 9th September, 1987.

.--This departmental appeal is directed against the order of learned CIT(A) recorded by him or; 13-2-1984 relating to assessment year 1977-78.

The brief facts giving rise to it are that the respondent, an individual, was required to pay tax amounting to Rs.1,56,158, however, he failed to pay it and the ITO exercising his powers under section 91 imposed penalty at the rate of 10% amounting to Rs.15,615 Having been aggrieved and dissatisfied the respondent went up in appeal and the learned CIT(A) relying upon a decision of Lahore High Court reported as P L D 1976 Lah. 761, CIT v. Begum Mumtaz Jamal ordered deletion thereon. This time the department felt aggrieved and has come up in second appeal before us.

Mr. Muhammad Farid, the learned D.R. supporting the departmental appeal contended before us that the Finance Bill 1987 had added subsection (4-A) to Section 91 of the Income Tax Ordinance which was retrospective in its operation hence the penalty should be reduced in proportion to the amount of taxes reduced. He relied upon on a decision coming from no less an authority than our own Supreme Court which was recorded in Nagina Textile Mills Ltd. and has been reported as 1963 P T D 633. Mr. A.K. Shamim, the learned counsel for the respondent, however, argued that the case of Lahore High Court recorded in Begum Mumtaz Jamal's case (supra) was fully applicable under the facts and circumstances of the appeal. He further pointed out that the case of Nagina Textile Mills (supra) was also considered in Mumtaz Jamal's case.

We have heard both the learned DR as well as the learned counsel for the respondent. In order to better appreciate the issue involved, let us reproduce here Section 91 as amended up today. It reads as under: -

91-Penalty for non-payment of tax.-- (1) Where any assessee is in default in making payment of any tax (other than the tax payable under, section 53) the Income Tax Officer may impose on him a penalty not exceeding an amount equal to the said tax.

(2) The Income Tax Officer may impose a penalty under subsection (1) by one order or, in the case of a continuing default by several orders, so, however, that the total amount of penalty does not exceed the amount of such tax.

For the purpose of subsection (I), any penalty imposed under that subsection or any additional tax levied under sections 86, 87, 88 or 89 shall be excluded from the amount of tax in respect of which the penalty is imposed.

(4) Where, after an order under subsection (I) has been made, the Income Tax Officer discovers, or the assessee proves to the satisfaction of the Income Tax Officer that the amount of tax, any part thereof, in respect of which the said order was made, had been paid or any refund due to the assessee had not been set-off under section 104, before the date on which the said order was made, the Income Tax Officer shall cancel or modify the said order, as may be necessary, and the provisions of section 156 shall, so far as may be, apply as they apply to, the rectification of any mistake apparent from the record.

(4-A) Where, in consequence of any order under this Ordinance, the amount of tax in respect of which penalty under this section was imposed is reduced, the amount of the said penalty shall be reduced accordingly.

(5) Notwithstanding anything contained in any law for 'time being in force, no order of penalty made under subsection (I) shall be called in question in any Court, or tribunal or before any authority on the ground that;

(a) no show-cause notice was issued before the said order was made; or

(b) an application for stay of recovery of tax or the payment of tax in instalments had been pending before any Court or Tribunal or any other authority."

From perusal of this section it appears that it has vested exclusive power in the ITO alone regarding imposition of penalty. Subsection (1) and subsection (2) of Section 91 have specifically mentioned the ITO. Subsection (4) of section 91 has further mentioned the ITO who is supposed to pass an order under this subsection. However, subsection (3) and newly added subsection (4-A) of Section 91 do not have any mention of ITO. Thus the question arises as to whether an AAC/CIT (A) or the Tribunal is competent to record an order under subsections (3) and (4-A) of Section 91. It could be argued that since subsection (5) of section 91 is putting an embargo on a Court or a Tribunal against examination of an order of penalty for the reason that no show-cause notice was issued or because an application for recovery of stay was pending before any Court or Tribunal, this Tribunal has jurisdiction. For this reason Mr. Muhammad Farid, the learned DR, wants us to reduce the amount of penalty according to reduction in tax demand. Mr. A.K. Shamim, the learned counsel for the respondent, however, insisted that the case of Begum Mumtaz Jamal (supra) was still applicable.

We have given our careful consideration to this aspect of the matter. We think that the contention of Mr. Muhammad Farid has no legs to stand upon. Starting with subsection (5) of Section 91 let us mention that this subsection has debarred an assessee from calling in A question an order of penalty only on the ground that no show-cause notice was issued or an application for stay of recovery of tax was pending as far as the powers of Appellate authorities are concerned, they have been given under sections 132 and 135 of the Income Tax Ordinance. Hence subsection (5) of Section 91 does not vest any power in the Tribunal, which could be exercised under subsection (4-A) of Section 91. This finding is further fortified by the facts that under section 129 a specific appeal has been provided against the order of the ITO recorded under section 91. Section 129 is reproduced hereinbelow:--

"129. Appeal to the Appellate Assistant Commissioner.---( 1) Any assessee objecting to an order made y an Income Tax Officer under section [59 or 59-A (where any adjustment has been made under subsection (3) or subsection (2) ] , respectively of those section) 62, 63, 65, 68, 75, [80, 80A,1 91, 98, 99, 105 to 112 (inclusive), 114 or subsection (2) of section 148, or an order under section 78, treating the assessee as an agent of a non-resident or an order under section 156 [refusing to rectify the mistake, either in full or in part, as claimed by the assessee] or having the effect of enhancing the assessment or reducing a refund or otherwise increasing the liability of the assessee may appeal to the Appellate Assistant Commissioner against such order.

2. No appeal under subsection (1) shall lie against any order of assessment unless the tax payable under section 54 has been paid."

From its perusal it appears that the legislature has mentioned Section 91 was a whole without excluding its subsections. As such, the order under subsection (4-A). Is also to be recorded by the ITO like orders to be recorded by him under subsection (1) subsection (2)) and subsection (4) as all of them are integral part of section 91. It is also to be kept in mind that against the order of learned AAC or CIT (A) the appeal lies to this Tribunal under section 134. Thus, this Tribunal has to hear second appeal against an order recorded under section 91 irrespective of the fact as to under which subsection that specific order has been recorded. It is, therefore, very much obvious that this Tribunal cannot exercise powers under subsection (4-A) of section 91 of the Income Tax Ordinance. Moreover, let us also point out that whenever the legislature wanted to give powers to this Tribunal to be exercised in its Appellate jurisdiction in addition to powers given under section 135 it has given them very clearly and in unambiguous terms. Section 111 of the Income Tax Ordinance provides the example of this additional power. It reads as under: -

"111. Penalty for concealment of income etc.--(1) Where, in the course-o any proceedings under this Or finance, the Income Tax Officer, the Appellate Assistant Commissioner or the Appellate Tribunal is satisfied that any person has, either in the said proceedings or in any earlier proceedings relating to an assessment in respect of the same income year, concealed his income or furnished inaccurate particulars of such income, he or it may impose upon such person a penalty not exceeding two and a half times but in no case less than the amount of tax which would have been avoided if the income as returned by such person had been accepted as the correct income.

(2) For the purposes of subsection (1) and section 119, concealment of income or the furnishing of inaccurate particulars of income shall include-

(a) the suppression of any item of receipt liable to tax in whole or in part,

(b) claiming any deduction for, or showing any expenditure not actually incurred (and).

(c) any act referred to in clauses (aa), (b), (c), (d) and (e) of subsection (I) of section 13.

(3) An Appellate Assistant Commissioner or the Appellate Tribunal, on making an order under subsection (1), shall forthwith send a copy thereof to the Income Tax Officer and thereupon all the provisions of this, Ordinance relating to the recovery of penalty shall apply as if such orders were made by the Income Tax Officer."

From perusal of this section it appears that both the learned AAC/CIT (A) and the Appellate Tribunal have been given powers regarding inflicting penalty under this section. Had it been the intention of the legislature that this Tribunal should exercise its powers under subsection (4-A) of section 91, it should have laid down specific provision of law to this effect.

Thus, for the reasons given above we find no force in submission of Mr. Muhammad Farid, the learned, DR. We are of the view that it is for the ITO to reduce the penalty if the demand is reduced as laid down in subsection (4-A) of section 91 and no Appellate Forum has such powers as is contended to be vested in it. Now as far as the case of Nagina Silk Mills (supra) is concerned, it is very widely off the mark. In this case the word 'year' was redefined under section 2(17) of the repealed Income-tax Act by the Ordinance of 1960. On the strength of this amendment it was argued that it had converted the period of 4- years limitation into years of unequal length. Their Lordships of Supreme Court, however, did not enlarge the period of 4 years as laid down in section 34(2) of the repealed Income-tax Act. It was held by their Lordships that 4 years of 12 months each were actually meant by use of 'expression '4 years' in section 34(2) of the repealed Income-tax Act. Now, as far as the question of retrospective application of subsection (4'-A) of section 91 is concerned, it does not rise in these proceedings hence we refrain ourselves from entering into this controversy.

Thus, for the reasons given above we see no reason to interfere with the order of learned CIT (A) and reject the departmental appeal accordingly. However, before parting with this appeal let us mention here that we had recorded an order in this appeal earlier and rejected the departmental appeal on the ground that the Finance Bill for 1987 was not yet enacted. However, before the order could be issued the learned DR brought to our notice that the Finance Bill became Finance Act on 28th June, 1987. Since both of us had signed that order, we have, therefore, recalled it and this fresh order has been recorded which disposes of this appeal.

M.B.A./428/T. Order accordingly.

Find a Lawyer Near You

Dealing with a matter like this? Connect with a verified advocate in your city — free on SJP Lawyers Directory.