161(1) (Order to pay tax not deducted / collected from payer)

Name: JAMSHEED ARSHAD Registration No 3520116620605

Address: HOUSE-3 STREET-14 SEHMARI ROAD, SHALEMAR Tax Year : 2018
BAGH Period : 01-Jul-2017 - 30-Jun-2018
Medium : Online
Contact No: 923004210152 Due Date : 30-Jun-2019
Document Date 30-Jun-2019

ORDER UNDER SECTION 161/205 OF THE INCOME TAX ORDINANCE, 2001

The taxpayer, an individual, derives income from manufacturing of basic Iron and steel. Return for the tax year
2018 was e-filed. The taxpayer is a withholding agent being a prescribed person in terms of section 153(9) of
the Income Tax Ordinance, 2001. The taxpayer, therefore, was liable to e-file monthly/annual statements
under section 165.
Under the provisions of sub section (2) of section 165 of the Income Tax Ordinance, 2001, the
taxpayer was obliged to submit separate statements as per Division-II of Part-V [or Chapter XII] in respect of
payments made under the head Salary where tax deduction is required under section 149. Non-filing of
statements u/s 149 and 165 of the Ordinance has resulted into the following discrepancies: -
Disclosures of reasons of non-deduction of tax have been made in columns (15) to (18) of the statements
under section 165. However, the taxpayer company has failed to provide documentary evidence in support of
the reasons of non-deduction despite issuance of various statutory notices.
From the perusal of Income Tax return, it has been observed that the taxpayer has failed to deduct tax
while making payments on account of various heads; chunk of the payments were made without tax deduction
and hence, failure to deduct tax within the meaning of section 161(1)(a) was found quite evident.
Non filing of statements u/s 165 of the Income Tax Ordinance 2001 shows that the declared results of
the taxpayer are not reliable and not in conformity with the requirements of section 165 read with rule 44(4).
It is further elaborated that tax deduction by a withholding agent is an obligation assigned by
law and does not entail tax liability of withholding agent, hence, non-compliance is considered to be without
reasonable cause. The honorable apex court, in a case Re: Bilz (Pvt) Ltd. Vs DCIT Multan (2002 PTD 1 (S.C. Pak)
has ruled that it is the duty of the withholding agent to produce necessary records to justify discharge of its
legal obligation and hence, failure to file party-wise details, records of tax deduction, reconciliation and
reasons along with documentary evidence to justify failure to deduct tax is extraordinary and without
reasonable cause to invoke the provisions of section 161(1)(a), 161(1)(b) and 205. The relevant part of the
judgment is reproduced hereunder:-
“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 deductions to be 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, if it is found due against a party,
then such statue cannot be interpreted liberally in order to make out a case in favor of an assesse who has
failed to pay the tax.”

OPPORTUNITIES OF HEARING PROVIDED

1. In view of the forgoing, the taxpayer was required to reconcile the position in terms of Rule 44(4) vide
notice No. Unit-06 dated. 17.12.2018 issued for due date of 01.01.2019.
2. Due date, no body attended nor any application for adjournment received.

3. Reminder notice issued for 12.02.2019. On due date AR of the tax payer attended the office and
request for adjournment case adjourned for 28.02.2019.

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RTO (CORPORATE) LAHORE, TAX HOUSE SYED MAUJ E DARYA ROAD LAHORE
 161(1) (Order to pay tax not deducted / collected from payer)

Name: JAMSHEED ARSHAD Registration No 3520116620605

Address: HOUSE-3 STREET-14 SEHMARI ROAD, SHALEMAR Tax Year : 2018
BAGH Period : 01-Jul-2017 - 30-Jun-2018
Medium : Online
Contact No: 923004210152 Due Date : 30-Jun-2019
Document Date 30-Jun-2019

4. On due date nobody attended nor any application for adjournment received. A show cause notice
under section 161(1A) issued for 28.03.2019.
5. On due date, no body attended nor any application for adjournment received case refix for
21.05.2019.

6. On due date A R of the tax payer attended the office and submit the detail of Local Purchases along
with electricity bills with proof of paid tax @ Rs. 1/- on per unit of their electricity consumption, salaries &
Wages, Power & Generator , Repair & maintenance, Miscellaneous, Traveling & Conveyance ,Rent, Markup &
Bank Charges Printing Stationery, Postage & Telephone, Legal & Professional charges, Freight Outward,
Entertainment for the tax year 2018.
a. The proceedings under section 161/205 of the Ordinance are concluded as detailed below under
various heads:

PURCHASES OF RAW MATERIAL EXPENSES OF RS.96,540,000/-

AR of the taxpayer attended the office and submitted the detail of Local Purchases which is reproduced is as
under.
“Tax payer is running the Re- Rolling steel mill and regularly filed their tax return. The tax payer after the
necessary insertion through Finance Act 2014 i.e. 235B of the Income tax Ordinance 2001 tax on steel
melters, Re- Rolling etc. Which says that Re- Rolling mills has paid the tax @ Rs. 1/- on per unit of their
electricity consumption. Therefore the chargeability of tax u/s 153(1) (a) on the purchases of electricity
amounting to Rs.96,540,000/- as pointed out in show cause notice is not attracted in this case as the
taxpayer fulfill provision of section 235B (Photo copies of electricity bills for the period july 2017 to june 2018
for your kind perusal.)”
Detail scrutiny of electricity bills produces by the AR of the tax Payer the contention of the taxpayer carries
weight. Hence, no default of withholding tax is established.

DAILY WAGES,LABOUR AND SALARIES EXPENSES OF RS.2,646,326/-

The taxpayer contended that tax was proper deducted where applicable. He further contended that payments
made to lower staff did not attract the provisions of section 149 of the Tax Ordinance, 2001 being BTL
payments. In support of contention, the taxpayer furnished copies of salary/wages register and monthly salary
sheets along with certificate of social security and EOBI. In the light of documentary evidence furnished by the
taxpayer are not fully acceptable an amount of Rs.180,326/- is found as default amount and withholding tax
is charged at Rs, 9,016/-
OTHERS DIRECT EXPENSES OF RS.1,979,539/-

The details submitted by the taxpayer have been examined and found that the taxpayer has claimed the said
head as taxable & below taxable limit. To prove his contention the tax payer has provided the copies of ledger
accounts. However, upon examination it transpired that the taxpayer did not deduct tax on payments made
under this head to the tune of Rs.325,539/- therefore, the same are to be taxed at Rs. 26,043/-.

DAILY WAGES,LABOUR AND SALARIES EXPENSES OF RS.1980,000/-

The details submitted by the taxpayer in shape of salary sheets have been examined with in the light of
provisions of section 149 of the Income Tax Ordinance, 2001. To substantiate his contention taxpayer also
provided following list of data such as particulars of the recipients including their project code, employment

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RTO (CORPORATE) LAHORE, TAX HOUSE SYED MAUJ E DARYA ROAD LAHORE
 161(1) (Order to pay tax not deducted / collected from payer)

Name: JAMSHEED ARSHAD Registration No 3520116620605

Address: HOUSE-3 STREET-14 SEHMARI ROAD, SHALEMAR Tax Year : 2018
BAGH Period : 01-Jul-2017 - 30-Jun-2018
Medium : Online
Contact No: 923004210152 Due Date : 30-Jun-2019
Document Date 30-Jun-2019

number, no of days salary paid, computerized National Identity card number (CNIC).Salary sheets also include
thumb impression, signature and revenue stamp against each payment made under the head of daily wages
and labor. From the submitted record it is observed that most of the salaries were below the taxable limit and
does not attract the provisions of section 149 of the Income Tax Ordinance, 2001. Therefore contentions of
the taxpayer accepted Hence, no default of withholding tax is established.
TRAVELLING/ CONVEYANCE EXPENSES OF Rs. 215,600/-

The detail submitted by the taxpayer has been examined and found that the taxpayer has claimed that proper
tax was deducted and deposited in Government account where applicable. Regarding balance purchase AR of
the taxpayer contended that all purchases were made below the thresh old limit of withholding tax. To prove
his contention, the tax payer has provided the copies of ledger accounts which have been examined. Hence,
no default on account of withholding provisions is established.

COMMUNICATION EXPENSES OF RS.96,400/-

The detail submitted by the taxpayer has been examined and found that the taxpayer has claimed the said
head as taxable & below taxable limit. To prove his contention, the tax payer has provided the copies of
ledger accounts which have been examined. Hence, no default on account of withholding provisions is
established.

STATIONERY EXPENSES OF RS.60,322/-

The detail submitted by the taxpayer has been examined and found that the taxpayer has claimed the said
head as taxable & below taxable limit. To prove his contention, the tax payer has provided the copies of
ledger accounts which have been examined. Hence, no default on account of withholding provisions is
established.

PROFESSIONAL CHARGES OF RS.50,000/-

The detail submitted by the taxpayer has been examined and found that the taxpayer has claimed the said
head as below taxable limit. However, perusal of detail reveals that the taxpayer failed to deduct the tax on
this account therefore, the same is charged to tax at Rs.5,000/-

OTHERS INDIRECT EXPENSES OF RS.375,335/-

The detail submitted by the taxpayer has been examined and found that the taxpayer has claimed the said
head as below taxable limit. However, perusal of detail reveals that the taxpayer failed to deduct the tax on
payment of Rs. 117,700/- therefore, the same is charged to tax at Rs. 9,416/-

ORDER AS TO DEFAULT SURCHARGE UNDER SECTION 205:

Perusal of FBR online database and record shows that substantial tax refund is due to the taxpayer. As the
available amount of refund exceeds the recoverable amount of demand under section 161 of the Income Tax
Ordinance, 2001 for tax year 2018, default surcharge under section 205 of the Income Tax Ordinance, 2001 is
not liable in the instant case, in view of the reported judgment 2001 (84) Tax 162 (Trib.). Therefore, the
taxpayer is liable to pay tax of Rs. 49,475/- under sections 161 of the Ordinance as computed and discussed

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RTO (CORPORATE) LAHORE, TAX HOUSE SYED MAUJ E DARYA ROAD LAHORE
 161(1) (Order to pay tax not deducted / collected from payer)

Name: JAMSHEED ARSHAD Registration No 3520116620605

Address: HOUSE-3 STREET-14 SEHMARI ROAD, SHALEMAR Tax Year : 2018
BAGH Period : 01-Jul-2017 - 30-Jun-2018
Medium : Online
Contact No: 923004210152 Due Date : 30-Jun-2019
Document Date 30-Jun-2019

above.

Default u/s 161 is calculated as under:

S.No. NAME OF HEAD Amount of default

1 Salaries Rs. 9,016 /-
2 Other direct Expenses Rs. 26,043 /-
3 Professional Charges Rs.5,000 /-
4 Other Indirect Expenses Rs. 9,416 /-
Total RS. 49,475/-

Hence, total default u/s 161 of the Ordinance is established at RS. 49,475/- The taxpayer is held liable to pay
the above worked out tax of Rs. 49,475/-on account of failure to deduct tax under section 161(1)(a) by way of
this order.

This order contains pages and each page carries my signatures and official seal.
Issue copy of this order along with the demand notice to the taxpayer.

Default Surcharge
Description Code Amount
Default surcharge for failure to collect / deduct tax at
924051 0.00 0.00 49,475.00
source (on Taxpayer's version)

Shahzad Ali Khan

Assistant / Deputy Commissioner (Enforcement & Collection)
Inland Revenue, Unit-VI, Range-II, Zone-IV
RTO (CORPORATE) LAHORE, TAX HOUSE SYED MAUJ E DARYA ROAD LAHORE

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RTO (CORPORATE) LAHORE, TAX HOUSE SYED MAUJ E DARYA ROAD LAHORE
 161(1) (Order to pay tax not deducted / collected from payer)

Name: JAMSHEED ARSHAD Registration No 3520116620605

Address: HOUSE-3 STREET-14 SEHMARI ROAD, SHALEMAR Tax Year : 2018
BAGH Period : 01-Jul-2017 - 30-Jun-2018
Medium : Online
Contact No: 923004210152 Due Date : 30-Jun-2019
Document Date 30-Jun-2019

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RTO (CORPORATE) LAHORE, TAX HOUSE SYED MAUJ E DARYA ROAD LAHORE