Income Tax Ordinance, 2001 — Section 183: Exemption from penalty and default surcharge

5[183. Exemption from penalty and default surcharge.— The Federal Government may, by notification in the official Gazette, or the Board by an order published in the official Gazette for reasons to be recorded in writing, exempt any person or class of persons from payment of the whole or part of the penalty and default surcharge payable under this Ordinance subject to such conditions and limitations as may be specified in such notification or, as the case may be, order.] 1 Full stop substituted by semicolon through Finance Act, 2019. 2 New clauses (c) & (d) added through Finance Act, 2019. 3 New sub-section (2) added through Finance Act, 2020 dated 30th June, 2020. 4 Sub-section (2) omitted by the Finance Act, 2021. The omitted sub-section read as follows: “(2) Where a person fails to furnish or update a taxpayer’s profile within the due date or time period specified in sub-section (3) of section 114A or within the date as extended by the Board under section 214A, such person shall not be included in the active taxpayers’ list for the latest tax year ending prior to the aforesaid due date or extended date: Provided that without prejudice to any other liability under this Ordinance, such person shall be included in the active taxpayers’ list upon filing the taxpayer’s profile after the due date or extended date, if the person pays surcharge at Rupees

(a)twenty thousand in case of a company;

(b)ten thousand in case of an association of persons; and

(c)one thousand in case of an individual.” 5 Section 183 substituted by the Finance Act, 2010. The substituted section 183 read as follows: “183. Penalty for non-payment of tax.- (1) A taxpayer who fails to pay any tax (other than penalty imposed under this section) due under this Ordinance by the due date shall be liable for a penalty equal to –

(a)in the case of the first default, five per cent of the amount of tax in default;

(b)in the case of a second default, an additional penalty of twenty per cent of the amount of tax in default;

(c)in the case of a third default, an additional penalty of twenty-five per cent of the amount of tax in default; and

(d)in the case of a fourth and subsequent default, an additional penalty of up to fifty per cent of the amount of tax in default as determined by the Commissioner, but the total penalty in respect of the amount of tax in default shall not exceed one hundred per cent of such amount of tax.

(2)Where, in consequence of any order under this Ordinance, the amount of tax in respect of which any penalty imposed under sub-section (1) is reduced, the amount of the penalty shall be reduced accordingly.” 396 Chapter X – Procedure 1[ ] 2[ ] 3[ ] 4[ ] 1 Section 184 omitted by the Finance Act, 2010. The omitted section 184 read as follows: “184. Penalty for concealment of income.- (1) Where, in the course of any proceedings under this Ordinance, the Commissioner, Commissioner (Appeals), or the Appellate Tribunal is satisfied that any person has either in the said proceedings or in any earlier proceedings relating to an assessment in respect of the same tax year concealed income or furnished inaccurate particulars of such income, the Commissioner, Commissioner (Appeals), or the Appellate Tribunal, as the case may be, may, by an order in writing, impose upon the person a penalty equal to the amount of tax which the person sought to evade by concealment of income or the furnishing of inaccurate particulars of such income.

(2)For the purposes of sub-section (1), concealment of income or the furnishing of inaccurate particulars of income shall include –

(a)the suppression of any income or amount chargeable to tax;

(b)the claiming of any deduction for any expenditure not actually incurred; or

(c)any act referred to in sub-section (1) of section 111.

(3)Where any income or amount declared by a taxpayer is claimed by the taxpayer to be exempt from tax or any expenditure declared by a taxpayer is claimed by the taxpayer to be deductible, the mere disallowance of such claim shall not constitute concealment of income or the furnishing of inaccurate particulars of income, unless it is proved that the taxpayer made the claim knowing it to be wrong.

(4)Where a Commissioner (Appeals) or the Appellate Tribunal makes an order under sub-section

(1), the Commissioner (Appeals) or the Appellate Tribunal, as the case may be, shall immediately serve a copy of the order on the Commissioner and thereupon all the provisions of this Ordinance relating to the recovery of penalty shall apply as if the order were made by the Commissioner. (5) Where, in consequence of any order under this Ordinance, the amount of tax in respect of which any penalty imposed under sub-section (1) is reduced, the amount of the penalty shall be reduced accordingly.” 2 Section 185 omitted by the Finance Act, 2010. The omitted section 185 read as follows: “185. Penalty for failure to maintain records.- A person who, without reasonable excuse, fails to maintain records as required under this Ordinance shall be liable for a penalty equal to –

(a)in the case of the first failure, two thousand rupees;

(b)in the case of a second failure, five thousand rupees; and

(c)in the case of a third and subsequent failure, ten thousand rupees.” 3 Section 186 omitted by the Finance Act, 2010. The omitted section 186 read as follows: “186. Penalty for non-compliance with notice.- (1) A person who, without reasonable excuse, fails to comply with any notice served on the person under section 116 or 176 shall be liable for a penalty equal to –

(a)in the case of the first failure, two thousand rupees;

(b)in the case of a second failure, five thousand rupees; or

(c)in the case of a third and subsequent failure, ten thousand rupees.

(2)Where a person liable for a penalty under sub-section (1) has an assessed tax liability for the tax year in which the failure occurred of less than twenty thousand rupees, the amount of the penalty imposed under sub-section (1) shall be reduced by seventy-five per cent.“ 4 Section 187 omitted by the Finance Act, 2010. The omitted section 187 read as follows: “187. Penalty for making false or misleading statements.- (1) Where a person –

(a)makes a statement to an income tax authority that is false or misleading in a material particular or omits from a statement made to an income tax authority any matter or thing without which the statement is false or misleading in a material particular; and

(b)the tax liability (including the liability for advance tax under section 147) of the person computed on the basis of the statement is less than it would have been if the statement had not been false or misleading (the difference hereinafter referred to as the “tax shortfall”), 397 Chapter X – Procedure 1[ ] 2[ ] 3[ ] PART XI OFFENCES AND PROSECUTIONS