2010 P T D (Trib.) 1470

 
[Income-tax Appellate Tribunal Pakistan]
 
Before Munsif Khan Minhas; Judicial Member
 
I.T.A. No.567/IB of 2010, decided on 1st June, 2010.
 
 (a) Income Tax Ordinance (XLIX of 2001)---
 
----Ss.182(1) & 114---Penalty for failure to furnish a return or statement---Tax payable---Imposition of
penalty for late filing of annual income tax return---Validity---Provisions of S.182(1) of the Income Tax
Ordinance, 2001 clearly established the imposition of penalty linked with the tax payable---Absence of
tax payable was fatal for imposition of penalty---Penalty for default of S.114 of the Income Tax
Ordinance, 2001 would only become leviable when there was a "tax payable" but when there was no tax
payable by the taxpayer, levy of penalty was not justified---No error or infirmity in the order of First
Appellate Authority was found which was upheld and maintained by the Appellate Tribunal ---Appeal
of the department was dismissed being devoid of any merit. 
 
(b) Income Tax Ordinance (XLIX of 2001)---
 
----Ss.182 (1) & 144---Penalty for failure to furnish a return or statement---Tax payable ---Penalty had
been prescribed in Sub-Cl. (i) of S.182 of the Income Tax Ordinance, 2001---Said clause had specified
that penalty should be imposed on the basis of tax payable, whereas in the present case, no tax had
become payable even on assessment--Restriction imposed on calculation of penalty was one tenth of one
per cent of tax payable and maximum limit was 25% of the tax payable---Base point was the tax
payable, resultantly second part of clause (i) came into operation only when initial calculation of penalty
had been made on the basis of tax payable---For imposing penalty for default under S.114 of the Income
Tax Ordinance, 2001, the pre-requisite was the tax payable by such assessee---Fulfilment of basic
ingredient of "tax payable" thus was a condition precedent for levying the penalty.  
 
(c) Interpretation of statutes---
 
----Tax statute is to be interpreted strictly and to be followed as per its language without stretching the
meanings of the same. 
 
(d) Interpretation of statutes---        
 
----In the matter of taxation, literal approach had to be followed provided it did not lead to manifest
absurdity. 
 
Sardar Zafar Mehmood, D.R. for Appellant.
 
Zahid Hussain, A.C.M.A. for Respondent.
 
 
ORDER
 
MUNSIF KHAN MINHAS, JUDICIAL MEMBER.---This appeal has been filed by the department
against the order, dated 15-3-2010 passed by C.I.R. (Appeals) on the following ground:
 
"That the learned CIR (A) was not justified to annul the order with the remarks that penalty was
imposed in the presence of extension allowed whereas the application for extension was rejected
by the department".
 
2. Brief facts leading to this appeal are that Taxpayer is a Private Limited Company. Return for the year
under consideration was E-Filed on 23-1-2009 which was late by 23 days as the due date of filing of
return was 31-12-2008. The Taxation Officer imposed a penalty under section 182(1) for late tiling of
annual income tax return for 23 days. In first appeal relief was allowed.
 
3. Before us the Department has contested the relief allowed at the first appeal stage but when asked to
explain as to how bringing anything plausible that penalty could be imposed and secondly without
following the procedure as laid down in section 182 that its imposition could be possible. Nothing
material in reply to it was submitted before us. The learned AR has supported the order by substantiating
the stance with earlier orders passed by the Tribunal, wherein it has been held that penalty shall be
imposed on the basis of the tax payable.
 
4. I have heard both the parties and have also perused the available record. It is imperative that the
original text of the section 182(1) be properly gone through for dilating upon the issue which has been
placed before us. For convenience, provision of section 182(1) is being reproduced as under:
 
"Any person who, without reasonable excuse, fails to furnish, within the time allowed under this
Ordinance, [return of income [or a statement as required under subsection (4) of section 115 or
wealth statement] for any tax year] as required under this Ordinance shall be liable for a penalty
to one-tenth of one per cent of the tax payable for each day of default subject to a maximum
penalty of five hundred rupees and a maximum penalty of twenty-five per cent of the tax payable
in respect of [that tax year]"
 
Undisputedly, it is as a result of non-compliance to provisions of section 114 i.e. not filing of return
within the prescribed span of time, that the penalty has been imposed so it is a default in compliance to
the provisions of section 114, which situation is covered under the section 182(1) ibid. For it the penalty
has been prescribed in sub-clause (i) ibid. This clause has specified that penalty shall be imposed on the
basis of the tax payable, whereas in the instant case before us no tax has become payable even on
assessment. Restriction imposed on calculation of penalty is one tenth of one, per cent of tat payable and
maximum limit is 25% of the tax payable, thus inevitability the base point is the tax payable, resultantly
second part of clause (i) comes into operation only when initial calculation of penalty has been made on
the basis of tax payable. For imposing the penalty for default under section 114 ibid, the pre-requisite is
the tax payable by such assessee. Fulfilment of basic ingredient of "tax payable" is a condition precedent
for levying the penalty. There cannot be two opinions that tax statutes are to be interpreted strictly and
are to be followed as per its language without stretching the meanings of the same. Had the intent of
statute was to impose the penalty in a situation like instant case then its linkage with tax payable would
not have been expressed. Such interpretation is further strengthened from the provisions of section
182(1) ibid where for imposition of penalty, linkage has been expressed with the tax payable. In the
matter of taxation, literal approach has to be followed provided it does not lead to manifest absurdity.
Here importantly the penalty provisions are to be interpreted strictly, where relevant provisions of
section 182 (1) are clearly establishing the imposition of penalty is linked with the tax payable, then it
has to be followed. The absence of tax payable is fatal for it. So keeping in view the provisions of
section 182(1) I do not have any hesitation in holding that penalty for default of section 114 only
becomes leviable when there is a "tax 'payable" but in the instant case when no tax has been imposed on
the Taxpayer, levy of penalty is not justified. Hence I find no error or infirmity in the order of the
learned CIR(A) which is upheld and maintained. The departmental appeal being devoid of any merit is
dismissed.
 
C.M.A./94/Tax(Trib.)                                                                           Appeal dismissed.