COMMISSIONER INLAND REVENUE, ZONE-I, LTU, LAHORE vs MARWAT ENTERPRISES (PVT

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COMMISSIONER INLAND REVENUE, ZONE-I, LTU, LAHORE VS MARWAT ENTERPRISES (PVT.) LIMITED, LAHORE Ss.161(1B) & 162---Income Tax Rules, 2002, R.44(4)---Advance tax---Failure to pay tax deducted or collected---Default surcharge, recovery of---Show-cause notice, issuance of---Principles and pre-requisites for issuing a show notice under Ss. 161 & 162 of the Income Tax Ordinance, 2001 stated. S.16---advance tax---Scope---Purpose of advance tax is collection of tax in advance and its adjustment at later stage but not charging or levy of tax---For collection of advance tax, certain persons are obliged, by the Statute, to collect and deposit the same in treasury---Person obliged, under the Statute, to withhold or deduct tax of another person is in fact an agent of the State---If he fails to comply with the statutory obligation, such tax can be recovered from him. R.44(4)---Income Tax Ordinance (XLIX of 2001), S. 161---Advance tax---Annual statement of tax collected or deducted---Scope---Practice of calling reconciliation, in absence of any statement, is against the spirit of R.44 of the Income Tax Rules, 2002---Rule 44 envisages, unequivocally, that reconciliation has to be of the biannual or annual statements with other material and declaration submitted in or with the return---If there is no statement filed by the taxpayer, no occasion of reconciliation arises---It is duty of the Commissioner, as tax administrator to ensure that biannual or annual statements are filed within the time stipulated by the Statute---Commissioner is equipped with power of imposing penalty, if statutory obligation is not fulfilled by any taxpayer---In the present case had Commissioner fulfilled the duty of ensuring compliance for filing statements, at the earliest, the occasion of issuing notice under S.161 of the Income Tax Ordinance, 2001 for tax years in question, would never have arisen as the amount, to be collected or deducted would have been deposited in Exchequer much earlier---Reference was disposed of. Ss.161(1B)---advance tax---Failure to pay tax deducted or collected---Effect---Subsection 161(1B) of the Income Tax Ordinance, 2001 casts an obligation upon the Commissioner or Taxation Officer to satisfy itself that the tax due of the person, from whose payment advance tax was to be deducted or collected, has been paid---Rationale in subsection (1B) is very simple that a tax liable to be adjusted against tax due, cannot be recovered when the tax due is already paid---Recovery of any amount, thereafter, not adjustable against tax due for the relevant period, shall have to be refunded and the whole exercise for recovery would be futile, as tax collected would not become part of National Exchequer rather would burden it with an expense which could have been expended for recovery of tax due---Pursuit of creating such demands by tax administrators, to meet budgetary targets, not only wastes resource and revenue but burdens the judicial hierarchy up to the level of the Supreme Court---Tax authorities cannot launch expeditious probes, and shift the burden under S.161, from the very inception, wholly and solely on the taxpayer by the expedient of simply identifying one or more payments, or a class or category of payments. Ss.161 & 162(2)---advance tax---Failure to pay tax deducted or collected---Default surcharge, recovery of---Scope---Provisions of S.162(2) of the Income Tax Ordinance, 2001 regarding imposition and recovery of default surcharge etc. are only attracted where failure to deduct tax is established under S.161.

COMMISSIONER INLAND REVENUE, ZONE-I, LTU, LAHORE vs MARWAT ENTERPRISES (PVT — 2023 PTD 732 LAHORE-HIGH-COURT-LAHORE

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