CHINA POWER HUB GENERATION COMPANY (PVT.) LIMITED vs PAKISTAN through Secretary Ministry of Finance Ss

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CHINA POWER HUB GENERATION COMPANY (PVT.) LIMITED VS PAKISTAN through Secretary Ministry of Finance Ss. 205(3); proviso, 129, 131, 137, 153 & 161---With-holding agent, responsibility of---Amount of tax not withheld by withholding agent---Default surcharge, on amount of text not withheld---Taxpayer not filing appeal under S.131 of Income Tax Ordinance, 2001---Effect---Petitioner / company (China Power Hub Generation Company (Pvt.) Limited) filed constitutional petition to impugn Show-Cause Notice(s) issued under S. 205(3) of the Income Tax Ordinance, 2001 ('the Ordinance, 2001') for tax years 2017, 2018 and 2019 for payment of default surcharge on amount of tax not withheld or deducted by it (petitioner) as withholding agent in terms of S. 153 of the Ordinance, 2001---Validity---Impugned notice(s) had been issued under S. 205(3) of the Income Tax Ordinance, 2001 ('the Ordinance, 2001')---Section 205(3) had a proviso and it provides that if a person opts to pay the tax due on the basis of an order under S.129 of the Ordinance, 2001 [i.e. decision in Appeal by the Commissioner on the 1st Appeal] on or before the due date given in the notice under S. 137(2) of the Ordinance 2001 issued in consequence of the said order and does not file an appeal under S. 131 of the Ordinance 2001, he shall not be liable to pay default surcharge for the period beginning from the date of the order under S. 161 of the Ordinance, 2001 to the date of payment---Said proviso is beneficial inasmuch as it waives even the total amount of default surcharge which may have been imposed through an order S.161 of the Ordinance, 2001, if the tax-payer after filing of 1st Appeal and passing of an order by the Commissioner under S. 129 of the Ordinance 2001 does not pursue any further Appeal---In the present matter, the petitioner had paid the amount adjudged through an order under S. 161 pursuant to a demand notice under S.137(2) of the Ordinance, 2001 without even resorting to 1st Appeal in terms of S. 129 of the Ordinance, 2001, whereas, for reasons best known to the Respondents / Department an honest and tax compliant person had been dragged into this litigation without any substantial basis in hand---Even if any amount of default surcharge would have been imposed or adjudged along with the order under S. 161 of the Ordinance, 2001, it was subject to waiver, if the Petitioner had filed 1st Appeal and after passing of an order under S. 129 of the Ordinance, 2001 had paid the adjudged amount of tax---It had discouraged the petitioner from being tax complaint; rather encouraged the petitioner to pursue 1st Appeal in all cases---Therefore, even when looked into from this angle, the impugned notices were wholly unwarranted in law---Hence, the impugned show-cause notices issued in terms of S. 205(3) of the Ordinance, 2001, were not sustainable and liable to be quashed / set-aside---High Court set-aside the impugned show-cause notices issued under S.205(3) of the Ordinance, 2001 in respect of relevant tax years (2017, 2018 and 2019), declaring the Order(s) passed thereon to have been issued / passed without lawful authority and jurisdiction---Constitutional petition, filed by taxpayer/company, was allowed, in circumstances. Citation Name: 2024 PTD 1218 KARACHI-HIGH-COURT-SINDH CHINA POWER HUB GENERATION COMPANY (PVT.) LIMITED VS PAKISTAN through Secretary Ministry of Finance s. 137, 153, 161 & 205(3)---With-holding agent, responsibility of---Amount of tax not withheld by withholding agent---Default surcharge on amount of tax not withheld---Scope---Petitioner /company (China Power Hub Generation Company (Pvt.) Limited) filed constitutional petition to impugn Show-Cause Notice(s) issued under S. 205(3) of the Income Tax Ordinance, 2001 ('the Ordinance, 2001') for tax years 2017, 2018 and 2019 for payment of default surcharge on amount of tax not withheld or deducted by it (petitioner) as withholding agent in terms of S. 153 of the Ordinance, 2001---Submission of the petitioner is that for tax years 2017 and 2018, it (petitioner ) was issued Notice under Ss. 161 & 205 of the Ordinance, 2001, and for Tax Year 2019 under S. 161 of the Ordinance, 2001, whereafter pursuant to an order, the adjudged amount was paid as per demand notice under S. 137(2) of the Ordinance 2001; thus, after payment of the entire amount as claimed, impugned Notice(s) had been issued without lawful authority and jurisdiction as no further Notice could be issued for recovery of Default Surcharge which was never adjudicated by the Officer concerned---Question was whether another Notice in respect of the same alleged default can be issued for which earlier a Notice was already issued and while adjudicating the matter, no default surcharge was imposed---Argument of the Department was that once the amount adjudged under S. 161 of the Ordinance, 2001 was paid without objection and any further appeal, the amount of default surcharge became payable mandatorily without further objections---Validity---Argument of the Department was misconceived as, first, default surcharge is not mandatorily payable as it had to be adjudicated upon and such adjudication has to be done along with the main order being passed in terms of S. 161 of the Ordinance, 2001; if not, then in each and every case, which culminates after legal proceedings by way of Appeal and Reference as provided under the Ordinance, 2001 , a new show-cause notice would be issued in a mechanical manner---It is the officer concerned having jurisdiction who first has to issue a combined notice under S.161 read with S. 205 of the Ordinance, 2001, confronting a taxpayer as to why the amount of tax not withheld or deducted be recovered and further as to why on failure to do so, the default surcharge be also recovered---There can't be separate or independent proceedings under both the (Ss. 161 & 205 of the Ordinance, 2001)---If it is a case of confronting a tax-payer under S.161 of the Ordinance, 2001 , then it has to be done simultaneously---It is only in this manner that the officer passing the order under S. 161 of the Ordinance, 2001 can decide and come to a conclusion that the taxpayers conduct also warrants imposition of a default surcharge---High Court set-aside the impugned show cause notices issued under S.205(3) of the Ordinance 2001 in respect of relevant tax years (2017, 2018 and 2019), declaring the Order(s) passed thereon to have been issued / passed without lawful authority and jurisdiction---Constitutional petition, filed by taxpayer/company, was allowed, under circumstances. Citation Name: 2024 PTD 1218 KARACHI-HIGH-COURT-SINDH CHINA POWER HUB GENERATION COMPANY (PVT.) LIMITED VS PAKISTAN through Secretary Ministry of Finance Ss.137, 153, 161 & 205(3)---Withholding agent, responsibility of---Amount of tax not withheld by withholding agent---Default surcharge on amend of tax not withheld---Scope---Petitioner / company (China Power Hub Generation Company (Pvt.) Limited) filed constitutional petition to impugn Show-Cause Notice(s) issued under S. 205(3) of the Income Tax Ordinance, 2001 ('the Ordinance, 2001') for tax years 2017, 2018 and 2019 for payment of default surcharge on amount of tax not withheld or deducted by it (petitioner ) as withholding agent in terms of S. 153 of the Ordinance, 2001---As regard passing of an order pursuant to the impugned show-cause notice on the pretext that the interim order was not served upon within time, since the Court had come to the conclusion that the impugned Show-Cause Notice(s) itself was without jurisdiction and was to be set-aside / quashed; hence, by applying the principle of taking notice of the subsequent events to grant requisite relief, without going into the exercise of determination that whether the ad-interim order was served or not High Court also set aside the order passed subsequently, pursuant to the impugned Show-Cause Notice(s)---High Court set-aside the impugned show-cause notices issued under S. 205(3) of the Ordinance, 2001 in respect of relevant tax years (2017, 2018 and 2019), declaring the Order(s) passed thereon to have been issued / passed without lawful authority and jurisdiction---Constitutional petition, filed by taxpayer/company, was allowed, in circumstances. Citation Name: 2024 PTD 1218 KARACHI-HIGH-COURT-SINDH CHINA POWER HUB GENERATION COMPANY (PVT.) LIMITED VS PAKISTAN through Secretary Ministry of Finance Ss. 137, 153, 161 & 205(3)---With-holding agent , responsibility of---Amount of tax, not withheld by withholding agent---Default surcharge on amount of tax not withheld---Scope---Officer, powers of---If for some reason the officer concerned has failed to adjudicate the quantum of Default Surcharge, the only inference which can be drawn is, that the officer has consciously not imposed any default surcharge. Citation Name: 2024 PTD 1218 KARACHI-HIGH-COURT-SINDH CHINA POWER HUB GENERATION COMPANY (PVT.) LIMITED VS PAKISTAN through Secretary Ministry of Finance Ss. 137, 153, 161 & 205(3)---Default surcharge, imposition of---Mens-rea, absence of ---Scope and effect---Default surcharge is not to be imposed in a mechanical manner; but only after a proper adjudication as to the willful default and presence of mens-rea---In the present case, it had been averred on behalf of the petitioner all along that firstly, after submission of reply, the allegation of not withholding / deducting tax against host of issues was decided in his favour; whereas, even a rectification was also allowed in respect of one tax-year, and lastly, the only issue decided against it was in respect of withholding of tax for payment made under offshore-contracts and was a case of interpretation of S. 152 of the Ordinance, 2001 as according to the petitioner the title of assets was transferred outside Pakistan; hence it was a case of a genuine interpretation of the contracts and the applicability of the Ordinance, 2001 on such contracts---In these circumstances, it would have been even a difficult proposition to sustain imposition of any default surcharge---Each and every case has to be decided on its own merits as to whether the evasion or payment tax was wilful or mala fide, decision of which would depend upon the question of recovery of additional tax---High Court set-aside the impugned show-cause notices issued under S.205(3) of the Ordinance, 2001 in respect of relevant tax years (2017, 2018 and 2019), declaring the Order(s) passed thereon to have been issued / passed without lawful authority and jurisdiction---Constitutional petition, filed by taxpayer/company, was allowed, in circumstances.

CHINA POWER HUB GENERATION COMPANY (PVT.) LIMITED vs PAKISTAN through Secretary Ministry of Finance Ss — 2024 PTD 1218 KARACHI-HIGH-COURT-SINDH

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