APPELLATE TRIBUNAL INLAND REVENUE, PESHAWAR
(SINGLE BENCH)
STA No.101/PB/2021
MA (Condonation) No.25/PB/2021
(Tax
Period July-2017 to June-2018)
M/s Badar
Enterprises,
Plot #
193/1-2, Road # 7, Industrial Estate,
Gadoon
Amazai, District Sawabi. …Appellant
Versus
CIR (Mardan Zone), RTO, Peshawar. …Respondent
Appellant
by : Mr. Ishtiaq Ahmad, Advocate/AR
Respondent
by : Mr. Ishfaq Ahmad, DR
Date of
Hearing : 11.10.2024
Date of Order : 11.10.2024
O R D E R
M. M. AKRAM (Judicial Member): The titled appeal, along with an MA
(Condonation), has been filed by the appellant registered person against the
impugned Appeal Order No. 251 of 2020 dated March 8, 2021, passed by the
Commissioner Inland Revenue (CIR) (Appeals), Peshawar, concerning the
tax period from July 2017 to June 30, 2018.
2. The key facts culled out from the record
are that the appellant, a registered Association of Persons (AOP) under the
Partnership Act, 1932, operates in the business of juice manufacturing at the
Industrial Estate, Gadoon Amazai, Swabi. A show cause notice was issued
following a desk audit for the tax year 2018 (July 1, 2017, to June 30, 2018),
without prior intimation to the appellant, citing the following discrepancies:
i. Suppression of Sales.
ii. Non-payment of further tax on supplies
made to unregistered persons.
iii. Variation in purchases/imports.
iv. Variation in utilities leading to alleged
suppression of production and sales.
v. Non-deduction and non-payment of
withholding Federal Excise Duty (Sales Tax at 16% ad valorem).
vi. Improper filing of Annexure-F to the Sales
Tax return.
vii. Improper filing of Annexure-J the Sales Tax
return.
The appellant provided a detailed response to
the show cause notice. As a result, the Adjudicating Officer vacated several of
the allegations, specifically:
i.
Suppression of Sales.
ii.
Non-payment of further tax on supplies to unregistered persons.
iii.
Discrepancies in utilities in relation to production and sales.
However, the remaining four observations were
upheld despite the appellant’s defense, as detailed in Order No. 20/2020 dated
11.08.2020. Dissatisfied with this decision, an appeal was subsequently filed
by the appellant contesting the following points:
a. Variation in purchases/imports.
b. Non-deduction and non-payment of
withholding Federal Excise Duty (Sales Tax at 16% ad valorem).
c. Improper filing of Annexure-F to the Sales
Tax return.
d. Improper filing of Annexure-J to the Sales
Tax return.
The appellant requested a thorough
reconciliation of the records regarding these observations. After conducting a
detailed review, the Commissioner Appeals IR vacated all observations except
for the non-filing of Annex-F and Annex-J with the Sales Tax return, for
which a penalty of Rs. 5,000 per return was imposed in Order in Appeal
No. 251/2020 dated March 8, 2021. Dissatisfied with this outcome, the appellant
has filed the current appeal along with an MA (Condonation) before this forum,
challenging the remaining penalties.
3. The case was heard on October 11, 2024.
During the hearing, Mr. Ishtiaq Ahmad, Advocate, appeared on behalf of the
appellant/registered person and reiterated the arguments outlined in the
grounds of appeal. Conversely, Mr. Ishfaq Ahmad, DR, represented the department
and defended the impugned order issued by the learned CIR (Appeals).
4. I have considered the arguments and
reviewed the record. The record indicates that the appellant filed the appeal
22 days late, explaining that the delay was neither intentional nor deliberate.
The learned counsel argued that due to the COVID-19 pandemic and the ensuing
lockdown, the appeal could not be submitted within the prescribed time. These
claims were supported by an affidavit. The counsel further explained that
during the lockdown, all judicial activities, including those of the High
Courts, Apex Court, Federal and Provincial Tribunals, and Special Courts, were
suspended. Once the lockdown ended, the appeal was promptly filed.
Additionally, he contended that, according to established legal principles and
the Limitation Act, 1908,
the limitation period is suspended during extraordinary circumstances such as
the Covid-19 pandemic and only resumes once such events conclude. The
appellant's argument is persuasive. Therefore, I find that there was sufficient
cause preventing the timely filing of the appeal. In light of these
circumstances, the application is accepted, and the delay in filing the appeal
is hereby condoned.
5. The core
question in the instant appeal revolves around whether the failure to file or
improper filing of Annex-F and Annex-J along with the return
falls within the scope of the penalty provision described in Serial No.1 under
column (2) of the Table to section 33 of the Sales Tax Act, 1990 and whether
the revenue department was justified in imposing penalties under this
provision. To properly understand the provision, it is
useful to first reproduce the relevant section of the law as it stood at the
time, which reads as follows:
“33. Offences and penalties:- Whoever commits any offence described in column (1) of the Table below shall, in addition to and not in derogation of any punishment to which he may be liable under any other law, be liable to the penalty mentioned against that offence in column (2) thereof:–
TABLE
|
Offences |
Penalties |
Section of the Act to which offence has reference. |
|
(1) |
(2) |
(3) |
|
1. Where any person
fails to furnish a return within the due date. |
Such person shall
pay a penalty of five thousand rupees: Provided that in case a person files a
return within ten days of the due date, he shall pay a penalty of two hundred
rupees for each day of default. |
26 |
Key Points to Consider:
1.
Provision's Scope: The provision in question specifically penalizes the failure to
furnish a return within the due date. The penalty is primarily
concerned with the non-filing of the return and is silent about the incompleteness
or omission of specific annexures or schedules like Annex-F and Annex-J.
2.
Annex-F and Annex-J:
o Annex-F typically relates to the sales
tax or VAT reporting of input tax credits, while Annex-J
is used for output tax reporting or other details.
o These annexures form an integral part of the tax return process,
particularly in systems dealing with indirect taxes like VAT or sales tax.
Their non-filing could mean that the return is incomplete or defective.
3.
Is Annex-F and Annex-J Part
of "Return"? Whether the failure to file
Annex-F and Annex-J would amount to "non-filing of a return" depends
on how the law defines a "return". If the return is legally
required to be filed along with all prescribed annexures, then failure
to submit these annexures could potentially be considered as a defective or
incomplete return, but not necessarily a failure to file a return
altogether. The Sales
Tax Act, 1990 itself does not explicitly state that a sales tax
return is incomplete without specific annexures like Annex-F (for input tax
details) and Annex-J
(for output tax details). However, the relevant rules and procedures under the Sales Tax Rules, 2006,
which operationalize the Act, do imply that these annexures are integral parts
of the return.
Critical Analysis:
1.
The intent of the Penalty
Provision: The penalty provision
seems to focus on cases where the return is not filed at all by the due date,
imposing penalties on persons who entirely fail to submit a return
within the deadline. This would suggest that the primary target is the complete
non-filing, rather than incomplete or defective filing.
2.
Defective Filing versus
Non-Filing: The failure to submit
Annex-F and Annex-J would likely be considered a defective filing rather
than a non-filing. As a result, the penalty for non-filing may not apply unless
the law specifically treats a return without these annexures as no return at
all. Typically, defective or incomplete filings are handled through corrective
measures rather than penalties for non-filing. Most tax laws like the Income
Tax Ordinance, 2001 [Section 120(3)] allow taxpayers to submit missing
information (like annexures) within a specified period after filing the
original return.
3.
Justification of the
Department's Action: If the department has
imposed the penalty for non-filing of the return simply because Annex-F
and Annex-J were not submitted, the justification might not hold if:
o The taxpayer has submitted the main return on time.
o The law does not explicitly treat the omission of these annexures as non-filing
of the return.
CONCLUSION
The failure to submit Annex-F and Annex-J
should be seen as a defective filing, not as a non-filing of the return.
Hence, the imposition of penalty by the assessing officer in terms of Serial
No.1 under column (2) of the Table to section 33 of the Sales Tax Act, 1990 for
non-filing under the provision for late or non-submission does not
appear justified unless the relevant law treats an incomplete return (missing
annexures) as equivalent to non-filing.
6. For what has been discussed above, the appeal of the appellant
is accepted and the penalty imposed in terms of Serial No.1 under column (2) of
the Table to section 33 of the Sales Tax Act, 1990 is deleted.
|
|
(M.
M. AKRAM) JUDICIAL
MEMBER |
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