APPELLATE TRIBUNAL INLAND REVENUE, DIVISION BENCH-I ISLAMABAD
ITA No.82/IB/2020
(Tax Year, 2014)
ITA No.83/IB/2020
(Tax Year, 2015)
ITA No.84/IB/2020
(Tax Year, 2016)
ITA No.85/IB/2020
(Tax Year, 2017)
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Mr. Zammurd
Khan; Zameendar House, Naseerabad, Rawalpindi Cantt. NTN:3544777-0 |
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Appellant |
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Vs |
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The
Commissioner Inland Revenue, RTO, Rawalpindi. |
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Respondent |
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Appellant by: |
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Mr. Faisal Jaffar Khan, Adv. |
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Respondent by: |
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None. |
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Date of hearing: |
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12.05.2026 |
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Date of order: |
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12.05.2026 |
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O R D E R
M. M. AKRAM (JUDICIAL MEMBER): The
appellant–taxpayer has preferred the present appeals against Appellate Order
Nos. 393, 394, 395, and 396 of 2019, all dated November 18, 2019, were passed
by the learned Commissioner Inland Revenue (Appeals-III), Regional Tax Office,
Rawalpindi, relating to Tax Years 2014 to 2017. The appeals have been
instituted on the grounds set forth in the respective memoranda of appeal.
Since common questions of law and facts are involved in all these appeals, the
same are being adjudicated through this consolidated order.
2. Briefly stated, the department initiated
proceedings under section 182(1) of the Income Tax Ordinance, 2001 (“the
Ordinance”) on the allegation that the appellant failed to furnish returns
of income for the relevant tax years within the prescribed due dates as
required under section 114(1) of the Ordinance. Thereafter, show cause notices
were issued to the appellant proposing the imposition of a penalty under
section 182 of the Ordinance. As no reply or compliance was furnished by the
taxpayer, the Assessing Officer proceeded ex parte and imposed penalties
amounting to Rs.20,000 for each of the tax years under consideration on account
of non-filing of returns.
3. Being dissatisfied with the aforesaid
penalty orders, the appellant assailed the same before the learned Commissioner
Inland Revenue (Appeals-III), RTO, Rawalpindi. The learned CIR(A), after
examining the available record and considering the facts of the case,
maintained the penalties imposed by the Assessing Officer. Aggrieved by the
said appellate orders, the appellant has now filed the instant appeals before
this Tribunal.
4. The appeals came up for hearing on May 12,
2026. During the course of arguments, the learned Authorized Representative (AR)
appearing on behalf of the appellant reiterated the submissions advanced in the
memorandum of appeal. Despite service of notice, none appeared on behalf of the
department to contest the appeals.
5. We have carefully examined the record, the
impugned orders, and the relevant provisions of the Ordinance. The controversy
involved in the present appeals relates to the legality and validity of
penalties imposed under section 182(1) of the Ordinance on the allegation that
the appellant failed to furnish returns of income under section 114(1) within
the prescribed time. At the outset, it is necessary to reproduce and interpret
the relevant statutory provision governing the imposition of a penalty. At the
relevant time, Serial No. 1 of the Table appended to section 182(1) of the
Ordinance provided as follows:
“182. Offences and
penalties.— (1) Any person who commits any offence specified in column (2)
of the Table below shall, in addition to and not in derogation of any
punishment to which he may be liable under this Ordinance or any other law, be
liable to the penalty mentioned against that offence in column (3) thereof:—
TABLE
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S.
No |
Offences |
Penalties |
Section
of the Ordinance to which offence has reference |
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1 |
2 |
3 |
4 |
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1 |
Where any person
fails to furnish a return of income as required under section 114 within the
due date. |
Such person shall
pay a penalty equal to 0.1% of the tax payable in respect of that tax year
for each day of default, subject to a maximum penalty of 50% of the tax
payable, provided that if the penalty worked out as aforesaid is less than
twenty thousand rupees or no tax is payable for that tax year, such person
shall pay a penalty of twenty thousand rupees: Explanation.— For the purposes of this entry, it is declared that the
expression “tax payable” means tax chargeable on the taxable income on the
basis of an assessment made or treated to have been made under section 120,
121, 122 or 122C. |
114
and 118 |
6. A plain reading of the above provision
makes it abundantly clear that the legislature has prescribed a specific
mechanism for the computation of penalty. The primary basis for the levy of
penalty is not a fixed amount; rather, it is linked with the “tax
payable” in respect of the relevant tax year. The penalty is to be
calculated at the rate of 0.1% of the tax payable for each day of default,
subject to the prescribed ceiling. Only thereafter, if the amount so computed
falls below Rs. 20,000 or where no tax is payable for the relevant year, the
minimum penalty of Rs.20,000 becomes attracted.
7. Thus, the statutory scheme clearly
envisages the following sequential exercise before imposition of penalty:
i. First, determination of taxable income
and tax payable for the relevant tax year through an assessment or deemed
assessment under sections 120, 121, 122, or 122C of the Ordinance;
ii. Secondly, computation of penalty at the
prescribed rate with reference to such determined tax liability;
iii. Lastly, where the amount so calculated is
less than Rs.20,000, or where no tax is payable, the minimum penalty of
Rs.20,000 may be imposed.
The
phrase “tax payable” used in the provision is of pivotal
significance and cannot be rendered redundant or otiose. The Explanation
appended to the provision expressly links the determination of “tax payable”
with an assessment made or treated to have been made under the relevant
charging and assessment provisions of the Ordinance. Therefore, unless and
until the Assessing Officer first determines the taxable income and resultant
tax liability of the taxpayer, the machinery provision relating to the computation
of penalty cannot be set into motion.
8. In the present cases, the record reveals
that the Assessing Officer proceeded directly to impose a flat penalty of
Rs.20,000 for each tax year without first determining the tax payable for the
relevant years in terms of the Explanation to section 182(1). No assessment
order under sections 120, 121, 122, or 122C has been brought on record from
which it could be ascertained whether any tax was actually payable by the
appellant and, if so, to what extent. Likewise, there is no computation
available on record demonstrating that the penalty calculated at the prescribed
rate of 0.1% of tax payable per day of default resulted in an amount less than
Rs.20,000 so as to justify the invocation of the minimum penalty clause.
9. The Assessing Officer, therefore, bypassed
the mandatory statutory mechanism and mechanically imposed the minimum penalty
straightaway. Such an approach is clearly inconsistent with both the language
and intent of section 182(1) of the Ordinance. It is a settled principle of
interpretation that where a statute prescribes a particular manner for doing a
thing, the same must be done in that manner alone and not otherwise. The
department could not legally ignore the foundational requirement of determining
“tax payable” and directly resort to the imposition of a minimum penalty.
10. It is further observed that penalty
provisions, being penal in nature, are required to be construed strictly.
Before saddling a taxpayer with penal consequences, the department is under a
legal obligation to establish the existence of conditions precedent envisaged
by the statute. A penalty cannot be imposed in an arbitrary or routine manner
merely because there was a technical or procedural default. The record in the
instant appeals does not demonstrate any conscious disregard of law, deliberate
defiance, or contumacious conduct on the part of the appellant. Rather, the
penalties appear to have been imposed mechanically without proper application
of mind to the statutory requirements.
11. The learned Commissioner Inland Revenue
(Appeals), while upholding the impugned penalties, also failed to appreciate
the true import of the expression “tax payable” and the mandatory
procedure prescribed under section 182(1). The appellate orders do not disclose
any finding that tax liability had first been determined in accordance with law
before imposition of penalty. Consequently, the impugned orders suffer from
legal infirmity and cannot be sustained.
12. In view of the foregoing discussion, we are
of the considered opinion that the Assessing Officer acted beyond the scope of
the relevant provision by imposing straightaway penalties of Rs.20,000 for each
tax year without first determining the tax payable and without undertaking the
computation mechanism expressly mandated under section 182(1) of the Ordinance.
The impugned penalties were thus imposed in violation of the law and are liable
to be vacated. Accordingly, the appeals filed by the appellant succeed, the
impugned appellate orders passed by the lower authorities are annulled, and the
penalties imposed under section 182(1) for Tax Years 2014 to 2017 are hereby
deleted.
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Sd/- (M. M.
AKRAM) JUDICIAL
MEMBER |
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Sd/- (SHARIF UD DIN KHILJI) MEMBER |
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