2010 PTD 150

ORDER

1. ISTATAAT ALI, ACCOUNTANT MEMBER.--- This appeal has been filed by the assessee against order dated 26-2-2007 passed by C.I.T.(A), Islamabad. It was found by the Assessing Officer that during tax year 2003 assessee made payments in Japanese Yen Currency to M/s. Taisi Corporation, Japan for execution of contract of construction of Kohat Tunnel Project. These payments were made by applying fixed conversion rate which resulted in excess payment in Pak Rupees without deduction of tax @ 6%. Accordingly action under section 161/205 was taken vide order dated 23-12-2003 for recovery of principal amount of default and additional tax. This action under sections 161/205 was incomplete as the amount of default under, section 161 was not fully charged. Accordingly a show-cause notice under sections 161/205 was issued to the authority on 11-5-2006 and short deduction of tax was communicated to the authority as per following calculations:--

2. Prevailing Rupees equivalent of Yen.

3. Rs.686,733,075

4. Equivalent amount at freezed rate of 1 Yen=0.348641 rupees.

5. Rs.494,583,520

6. Excess payment already confronted.

7. Rs.192,149,555

8. Amount on which action already taken under sections 161/205.

9. Rs.59,070,517

10. Tax already charged under section 161.

11. Rs.3,544,231

12. Balance payment against which action was to be taken.

13. Rs.1323, 079, 039

14. Tax @ 6% to be charged .under section

15. Rs.7,984,745 161.

16. Amount of default.

17. Rs.7,984,745

18. Addl. Tax 24% for 911 days. From 1-1-2000 to 30-6-2002.

19. Rs.----------

20. Addl. Tax @ 18% for 1095 days From 1-7-2002 to 30-6-2005.

21. Rs.3,599,041

22. Addl. Tax @ 12% for 294 days From 1-7-2005 to 20-4-2006.

23. Rs.771,785

24. Total Addl. Tax.

25. Rs.4,370,826

2. The assessee was required to explain its position about short deduction of withholding tax. The assessee did not file any explanation/reply in spite of proper service of notice. Therefore withholding tax amounting to Rs.7984745 and additional tax of Rs.4370826 was charged as per impugned order dated 30-5-2006. The assessee filed appeal against the creation of aforesaid liability which was rejected by C.I.T.(A) vide his impugned order dated 26-2-2007. Now the assessee has filed second appeal on the following grounds:---

(i) That the order of the learned C.I.T.(A) is bad in law and on facts.

(ii) That the learned C.I.T. (A) was not justified in upholding the order of the taxation officer, which was based on change of opinion, which is not permissible under the law.

(iii) Without prejudice to the above, the working of taxation officer of the amount of defaulted tax and additional tax is under incomprehensible and without any basis.

3. It was stated by learned AR that Assessing Officer had already issued an order under sections 161/205 on 23-12-2003. If there was any mistake/deficiency or error in calculation of tax, it could/should have been rectified under section 221. Fresh order under sections 161/205 could not be passed. Therefore, the impugned order of the Assessing Officer is legally void. Learned AR vehemently pressed that two separate orders cannot be made in respect of same default. First order dated 23-12-2003 was passed on difference of account of payments subjected to withholding tax vis-a-vis that omitted from it. He stated that Assessing Officer instead of passing a rectification order made fresh order in respect of same default which is legally incorrect.

4. Learned DR stated that original order under sections 161/205 dated 23-12-2003 was ex parte because the assessee opted not to comply with the show-cause notice issued by the Assessing Officer. It was due to default on the part of the taxpayer the correct amount of payments was not subjected to withholding tax. The Assessing Officer was therefore fully justified to pass a supplementary order through which the omitted amount of payments was also subjected to withholding tax. In this manner the liability created against the taxpayer is legally correct. Therefore, there was no need of any rectification because there was no mistake apparent from record in the original order calling for rectification. Fresh facts came into notice of the Assessing Officer who .conducted fresh proceedings for charge of withholding tax and his action is fully according to law.

5. We have considered arguments of both the sides in the light of relevant record and we tend to agree with learned AR that if there was c any mistake in the first order under sections 161/205, the Assessing Officer could/should have rectified it under section 221. Passing of fresh order under sections 161/205 in respect of omitted amount of default is tantamount to a fresh independent order. When an assessment is made in respect of income of a taxpayer, any error or omission appearing therein can be rectified under section 221. Fresh assessment cannot be made in respect thereof because it will be a case of double assessment which is not permissible under law. Exactly same situation prevails in this case which in our opinion is not rightful in the eyes of law. We therefore hold that in this case rectification could/should have been made under section 221. The impugned order under sections 161/205 is therefore illegal which is hereby cancelled.

26. C.M.A./117/Tax(Trib.) Appeal accepted.