LAHORE: The sales tax department has secured penalty and default surcharge imposed against a taxpayer due to delay in filing of tax return and deposit of tax due.
As per details, tax authorities had initiated recovery proceedings against a taxpayer for filing delayed tax return. However, the Appellate Tribunal Inland Revenue set aside imposition of penalty and default surcharge on the ground that liability on account of principal amount of tax stood discharged voluntarily prior to initiation of recovery proceedings.
However, the department was of the view that show cause notice was issued on the allegations of delayed filing of tax returns and delayed payment of tax due and payable, whereby the factum of delay in filing returns and non-payment of tax on due dates was acknowledged which situation attracts incidence of penalty and default surcharge.
He taxpayer objected to this approach that the department cannot make an order of assessment of tax if default is addressed upon payment of tax before issuance of notice along with default surcharge and penalty and filing of returns after due date. However, the higher appellate forum did not agree with taxpayers maintaining that consequence of incidence of default is default surcharge and penalty, even if no tax is payable as per the tax return.
Default position can only be reversed/addressed by opting for concession prescribed in the law subject to fulfilment of conditions depending upon ye nature of default. Mere filing of delayed return of tax, before issuance of notice, would not be considered as act of compliance, especially when default had triggered, which can be reconciled upon voluntarily meeting the conditions prescribed in the law.
It is inconceivable how a default, once accrued, would stand reconciled without fulfilling the legal requirements, which are required to be given effect without referring to incidence of any order of assessment of tax or notice, as condition precedent for claiming default surcharge and penalty, adding that creating novel condition tantamount to legislate through a judicial verdict.
Therefore, the department proved its case and the higher appellate forum set aside the order of the tribunal and remanded the matter to the department for de novo determination after affording opportunity of hearing to parties.
Copyright Business Recorder, 2025
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