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26 FEBRUARY, 2015

Mr. Ali Ahsan Warrwaich


Assistant Commissioner Inland Revenue
Withholding Taxes Unit-03
Regional Tax Office-II
Lahore
Dear Sir,
SHOW CAUSE NOTICE UNDER SECTION 182(1A) OF THE INCOME TAX
ORDINANCE, 2001 FOR NON FILING OF MONTHLY STATEMENT UNDER
SECTION 165 OF THE INCOME TAX ORDINANCE, 2001
Reference is made to your show cause notice bearing No. 2044/03 dated 18
February 2015 on the subject captioned above, whereby you have observed that
the above named taxpayer companyhad not e-filed its monthly statements for
the month of December 2014. Based on this observation, you have called upon
the explanation from taxpayer company as to why penalty under section 182 of
the Income Tax Ordinance, 2001(the Ordinance) may not be imposed on it for
default in e-filing the monthly statements for the month of December 2014.

In this regard, it is submitted that the taxpayer company has duly e-filed
the said monthly statements under section 165 (1) of the Income Tax
Ordinance, 2001 (the Ordinance). Copies of the acknowledgment slips are
enclosed herewith for your kind perusal and record.
In this regard it is stated that during the period under consideration, the
taxpayer company experienced various difficulties in e-filing its monthly
statements due to the following system errors in e-portal of the Federal Board of
Revenue (FBR):
i.
ii.

Latency issues in e-portal


Non-recognition of e-portal logon user name & password

In a bid to resolve the errors, the taxpayer company contacted the PRAL
authorities in Islamabad on helpline number 051-111-772-772 as well as the
local PRAL office in Lahore, who were of the opinion that the reported errors
were of the system which would be fixed in due course. Even when e-portal
started responding rather normally, intermittent outage still continued, hence,
interfering the taxpayer company in e-filing the statements.
It is evident from the reasons explained above that the taxpayer company could
not e-file the monthly statement on due date by reason of causes beyond its
control. Mere few days delay in e-filing of the monthly statements for the month
of October 2014 was unintentional and hence, the unintentional delay merits
condonation.
It is pertinent to mention herewith the FBR has itself restrained its field officers
from imposing penalty where the default is not willful vide Circular No. C. NO.
108(1)DTB-1/94 dated 09 January 1995, the directive paragraph of which is
reproduced below:

2. It appears that the substitution of word ``may'' by the word ``shall''


has created the impression that penalty has to be universally imposed,
without any exception whatsoever, if there is a default. This is not the
correct interpretation. The major prerequisite for imposition of penalty
has always been a default committed ``without reasonable cause''. The
position which emerges from judicial pronouncements is that the default
should be wilful. It the assessee is not guilty of gross or wilful neglect,
penalty is not leviable - Addl. CIT Vs Chattur Singh Taragi (1980) 41 Tax
95. It is submitted that imposition of penalty is still discretionary in a way
as the authority competent to impose penalty can exercise discretion if it
is convinced that default was not wilful. Inadvertent and bonafide mistake
or omission need not even now be penalised because of the presence of
precondition i.e. reasonable cause. Onus to prove that the assessee has
committed a wilful default lies with the Department. The authority
competent to impose penalty proceedings - CIT Vs L.H. Vora (168) 17
Tax 37 & (1974) 30 Tax (Trib).
3. In view of the above facts, it is requested that all officers may kindly be
advised to be judicious in imposition of penalties and give due weightage
to the explanation of default before imposition of penalty. This has
become more important because of enhancement in the amount of
penalties leviable.
We hope that considering the facts of the case in the light of the above quoted
directive of the FBR, your good self would exercise leniency and condone the
unintentional default of the taxpayer company.
You are, therefore, requested to kindly condone delay in e-filing of monthly
withholding statements for the month of December 2014.by vacating the
aforesaid notices and oblige.
Yours faithfully

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