FEDERAL TAX OMBUDSMAN SECRETARIAT
Regional Office, Lahore
Complaint No.228/LHR/IT(167)/454/2012
Dated: 05.04.2012 *
Aala Processing Industries Pvt Ltd
5 KM Satiana Road Faisalabad
… Complainant
Versus
The Secretary
Revenue Division
Islamabad
… Respondent
Dealing Officer
:
Muhammad Munir Qureshi, Advisor
Authorized Representative
:
Tariq Rashid Bhatti, FCA
Departmental Representative
:
Shakeel Ahmad, ACIR
FINDINGS/RECOMMENDATIONS
This complaint is against non disposal of rectification
application filed under Section 221 of the Income Tax Ordinance
2001 (the Ordinance).
2.
The Complainant filed an application dated 11.02.2010 for
rectification
of
amendment
order
passed
under
Section
122(4)/122(5) of the Ordinance, raising tax demand of Rs 573,778/on account of turnover tax due under Section 113 of the Ordinance.
In the rectification application the Complainant took issue with the
Departmental contention that tax deducted at source on exports
under Section 154 of the Ordinance being final discharge of tax
liability under the fixed tax regime was not to be taken into account
for calculation of the Complainant’s turnover tax liability under
Section 113 of the Ordinance. The Complainant placed reliance on
____________________
*Date of registration in FTO Sectt.
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228/LHR/IT(167)/454/2012
Lahore High Court judgment cited as [(2010) 101 TAX 65
(H.C.Lah)] in which it was held that where tax due on aggregate
turnover under all heads was in excess of ½% of the total turnover,
no further tax was chargeable by way of turnover tax under Section
113 of the Ordinance. According to the Complainant, the Deptt had
departed from the criteria laid down in the cited High Court
judgment and had wrongly calculated the Complainant’s turnover
tax liability under Section 113 of the Ordinance. The Complainant
submitted a second application giving further calculations in support
of his contention on 05.03.2010. The Deptt did not respond to either
application. The Complainant’s case is that as a result of
Departmental inaction on the rectification applications, the same
stood accepted under Section 221(3) of the Ordinance, and was
therefore required to be implemented.
3.
When confronted, the Deptt filed a reply contending that the
Complainant’s stance was misconceived for the reason that by the
time the rectification applications were filed, the assessment order
under Section 122(4)/122(5) of the Ordinance had already been
contested in appeal. The CIT (Appeals) decided the appeal vide
No.3269 dated 06.08.2009 upholding the Departmental treatment.
Subsequently, the Appellate Tribunal Inland Revenue (ATIR) too
vide ITA No.1497/LB/2009 confirmed the order passed by the
CIT(Appeals). That being so, under the ‘doctrine of merger’ the
assessment order under Section 122(4)/122(5) of the Ordinance
stood merged into the order passed by the CIT(Appeals). There was
therefore no assessment order as such in the field to be rectified
under Section 221 of the Ordinance. It was also the Departmental
contention that the matter involved interpretation of statutory
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provisions and assessment of income and was therefore placed
outside the jurisdiction of the Hon’ble FTO.
4.
The Departmental objections to the Hon’ble FTO’s jurisdiction
have been considered and are found to be misconceived. No
interpretation of law is required so far as calculation of turnover tax
under Section 113 of the Ordinance is concerned as the law has
already been interpreted by the Hon’ble High Court in order cited
as [(2010) 101 TAX 65 (H.C. Lah)]. It has been categorically held in
para 26 thereof that:
“The use of language ‘amount representing its turnover from all
sources’ and then followed by the words ‘the aggregate of the
declared turnover shall be deemed to be income’ leaves no doubt
that the sources like import, export, local supply and local sale etc
are all to be aggregated and ½ % minimum tax is to be calculated
on its total turnover declared by him from all his sources. Thus if
after said calculation the tax deducted or paid in any of the sources
falls higher than ½ % of the aggregate turnover from all sources no
more tax is required to be paid.”
5.
The Lahore High Court order cited above was passed on
27.05.2009 before the CIT(Appeals) decided the appeal on
06.08.2009. The CIT(Appeals) was perhaps not aware of the High
Court stance in the matter when he passed his order on 06.08.2009,
taking a position contrary to that of the High Court. The High Court
judgment constituted a binding precedent for the CIT(Appeals). As
the CIT(Appeals) has ignored a binding precedent, his order dated
06.08.2009 being void ab initio is a nullity in the eye of law.
Similarly, the ATIR, in its order disposing of the Complainant’s
appeal, has also not taken cognizance of the Lahore High Court
order.
6.
The matter has been decided by the ATIR and a manifest
error is apparent on the face of the record occasioned apparently
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due to the failure of the parties to assist ATIR by drawing its
attention to judgment cited as (2010) 101 TAX 65 (HC Lah).
Findings:
7.
The Deptt’s failure to properly assist the Commissioner
(Appeals) as well as ATIR has led to a decision based on non
reading of the law, which falls within the ambit of Section 3 of the
FTO Ordinance. The Deptt’s failure to respond to two applications
by the taxpayer is also tantamount to maladministration as defined
under Section 3 of FTO Ordinance.
Recommendations:
8.
FBR to(i)
file a Review Application to enable the ATIR to bring its
order in conformity with the judgment of the Lahore High
Court; and
(ii)
report compliance within 30 days.
(Dr. Muhammad Shoaib Suddle)
Federal Tax Ombudsman
Dated: 10-08-2012
mmq/my