2011 PTD 733
ORDER
AM1AD IKRAM ALI (ACCOUNTANT MEMBER).--- The taxpayer has filed second appeal against CIT(Appeals) order on common grounds except for the ground regarding truck freight.
2. Parties have been heard on ground is disposed off as under:-
TRUCK FREIGHT - FOR TAX YEAR 2006 ONLY.
3. Payments of Rs.7581779 were confronted to the taxpayer for action under sections 161/205 on the ground that no reduction of tax A was made therefrom. And that taxpayer was personally liable for paying the defaulted amount of tax on the ground neither that "ledger account and supporting document evidence did not prove that both" the stipulations i.e.:--
(i) the vehicle/truck/tanker was owned by an individual and
(ii) the vehicle should have been engaged for a single journey during the whole year had not been satisfied.
The Taxation Officer therefore held that reliance on C.B.R. Circular 27 of 1991 dated 24-8-1991 was misplaced. The Taxation Officer therefore taxed half of said payment i.e., Rs.37,90,890. While the remaining half was not taxed is not clear from the assessment order. The CIT(Appeals) upheld the addition as the requirements of Circular 24 of 1991 were not satisfied, The CIT (Appeals) also held that the case reported as 2008 PTD 1227 was not relevant as it was the duty of the taxpayer to identify the party to whom payments were made.
4. The following is the ground of appeal in the matter:--
"That the invocation of provisions of sections 161/205 of I.T.O, 2001 on payments of Truck Freight is uncalled for and unjustified because specifically exclusion from tax deduction as per wording of proviso to section 21(1)."
5. Section 21(1) deals with non-admissibility of expenditure on which deduction has not been made. 'Action under section 161/205 has nothing to do with the action under section 21(1) read with its proviso. That this section only says that expenditure incurred on freight charges which in aggregate exceeds 50,000 rupees and payment has not been made through banking channel shall not be treated as inadmissible expenditure. This order is under sections 161/205 and the ground appears irrelevant. The A.R. did not argue on this aspect. The A.R. reiterated his earlier stance of relief because of Circular 27/1991 which already stands rebutted for the reason as neither' of the conditions i.e., ownership by individual nor vehicle engaged for a single journey had been satisfied:
6. The A.R. also stated-that High Court had in case reported as 2008 PTD 1227 held that where the supplier was not identified the liability created under section 52 could not be associated with any taxpayer and therefore could not be collected as tax so collected could not be allowed as credit to any one. The DR argued that liability had been created under section 161 and therein the taxpayer has been held to be personally responsible. The finding of the High Court that section 52 of old legislation is not a charging section also becomes untenable in the light of section 161 of the new legislation which holds taxpayer personally liable to pay. Section 161 is reproduced hereunder:--
"(a) fails to collect tax as required under Division II of this Part [or Chapter XII] or deduct tax from a payment as required under Division III, of this Part [or Chapter XII] [or as required under section 50 of the repealed Ordinance]; or
(b) having collected tax under Division III of this Part [or Chapter XII] or deducted tax under Division III of this Part [or Chapter XII] fails to pay the tax to the Commissioner as required under section 160, [or having collected tax under section 50 of the repealed Ordinance pay to the credit of the Federal Government as required under subsection (8) of section 50 of the repealed Ordinance,] the person shall be personally liable to pay the amount of tax to the Commissioner [who may [pass an order to that effect and/ proceed to recover the same].
[(IA) No recovery under subsection (1) shall be made unless the person referred to in subsection (1) bas been provided with an opportunity of being heard]."
7. The D.R further argued that in the case reported as Supreme Court 2002 PTD 1 it had been held that it was the duty of the taxpayer to identify parties to whom payment was made and give reasons and evidence to prove that no deduction was required (in respect of the payments on which tax was not deducted). The apex court had also held that if the department identified payments liable to withholding tax it had discharged its duties."
8. The question before the apex court was whether an assessee can be held to be assessee in default for not having deducted tax under clause (a) of subsection (4) of section 50 of the Income Tax Ordinance, 1979, if the Assessing Officer has not identified the recipient from whom tax should have been deducted.'
The apex court found that the action under section 50(4A) was rightly taken and there was no question to be answered. The observations of the apex court are as under:, -
"The amount of the payments has also been mentioned in the notice but the column of withheld tax indicates that it was not deducted and no reason in this behalf has been offered by the petitioner. Inasmuch as despite availing sufficient opportunities before the Deputy Commissioner Income Tax no details were furnished for not deducting the tax. Therefore, we are of the Opinion that the petitioner. !laving notice/knowle dg e that tax has to be deducted from-the categories of the parties mentioned in the, above noted provision of law itself has failed to fulfil its obligation, therefore, under these circumstances the petitioner shall be considered to be assessee in default for not deducting the tax from the parties to whom the supplies were made by it. In our opinion, there was no necessity for the Assessing Officer to identify the names the parties to whom the supplies were made because the record is maintained by the supplier i.e. petitioner and it is the duty of the petitioner to maintain the record and show that as to why deductions were not made from different parties at the time of making supplies to them.
8. Learned counsel stated that the Assessing Officer after having gone through the registers should have pointed out the parties from whom the advance tax was liable to be deducted. We are afraid that the contention raised by the learned counsel has no force because as it has been observed hereinabove that it is the petitioner firm itself who made the supplies, therefore, no one else better than it would have knowledge that from whom the deduction is to he made. The department had successfully discharged its obligation by making reference of the details of the supplies, which were made under different heads as per the contents of the show-cause notice. It may be noted that according to the settled principle of law that a fiscal statute has to be construed in its true perspective and in respect of payment of income tax, it is found due against a party, then such statute cannot be interpreted liberally in order to make out a case in favour of an assessee who has failed to pay the tax. As such, we are of the opinion that in view of the clear provisions of section 50(4)(a) of the Ordinance, no law point requiring interpretation by the Lahore High Court as well as by this Court is made out. Therefore, it is held that an assessee who has failed to deduct the tax in terms of section 50(4)(a) of the Ordinance was rightly declared to be an assessee in default and cognizance of the matter was rightly taken by the Income Tax Department within the meaning of section 52 read with section 86 of the Ordinance."
9. In view of the liability created under sections 161/205 is upheld. The next issue is regarding action under sections 161/205 in areas of loading and unloading, marketing expense on sales office maintenance and stores purchase in cases where recipients have not been identified. The ground of appeal is common for all heads except repair and maintenance, This issue lifts already been thrashed out. No further dilation is required more so because the A.R. did not raise any distinct arguments other than those discussed above.
10. For tax year 2007 and additional expenditure, on doubling expenses was also subjected to action under sections 161/205. This has also been contested for the reason the recipient has not been identified. This also stands discussed above. The appeal on this ground is also rejected in the light of reasons assigned earlier.
11. Regarding repair and maintenance action under sections 161/205 it is also stated to be regarding BTL payments. The A.R. argued that the payments of regarding store purchases and repair Maintenance were below taxable limits i.e., Rs.10,000 for services and Rs.25,000 for supplies and were not liable to action under section 161 read with S.R.O. 586(I)/91 dated June 30, 1991. The learned A.R. has not realized the "Taxation Officer has already excluded BTL purchases from action under section 161 as mentioned in Para-8 Page-6 of his order. He has only subjected payments made to associated parties and said parties did not have exemption certificates. Therefore, the action under section 161 is maintained.
12. Action under section 205 also does not require interference to the extent action under section 161 has been maintained in the earlier part of his order. Appeal is disposed of as above.
C.M.A./10/Tax(Trib.) Order accordingly.