Legal experts and chartered accountants have requested the Regional Tax Office (RTO), Islamabad to withdraw the illegal notices of external audit issued to the registered units for production of sales tax records. Sources told Business Recorder here on Friday that business community of Islamabad and Rawalpindi is confused on simultaneously launching the Federal Board of Revenue (FBR) and RTO Islamabad audit systems.
The FBR has started a transparent composite audit (sales tax and income tax) of corporate sector and Association of Persons (AOPs) through computerised balloting. The names of units were selected in the presence of representatives of trade bodies and chambers at the FBR. Tax authorities assured that the audit of only selected units would be conducted through random balloting.
At the same time, RTO Islamabad issued hundreds of notices to registered units to submit sales tax record for external audit without specifying the relevant provisions of the Sales Tax Act, 1990. The taxpayers are totally confused that if their names are not in the FBR random balloting list for audit, how the RTO Islamabad has started a separate audit exercise without taking permission of the board.
If FBR random balloting is genuine, RTO is legally authorised to demand sales tax record on the behalf of the Directorate of Revenue Receipt Audit (DRRA)? Tax experts were of the view that such multiple audit regime is totally against the reforms and transparent tax system under Tax Administration Reform Project (TARP). The multiple audit would harass the registered units.
Responding to these notices, legal experts and lawyers have conveyed to the RTO Islamabad that external audit does not falls within the preview of Sales Tax Act, 1990. Therefore, audit notices needs to be withdrawn. In many cases, when the registered units refused to submit the sales tax record, Assistant Commissioner Audit-IV RTO Islamabad issued reminders to the units.
The reminder warned that non-production of record would attract penalty of Rs 10,000 under section 25 and section 33 (9) (b) of the Sales Tax Act, 1990. Strongly contesting the legal plea taken by the Assistant Commissioner Audit-IV RTO Islamabad, tax experts said that the section 25 confer the jurisdiction for access of record to sales tax officers/officers of Inland Revenue as defined in section 30 of the Sales Tax Act, 1990 (as amended by Finance Amendment Ordinance 2009).
Under no circumstances, the DG Revenue Receipt Audit/external audit can exercise jurisdiction under section 25 of the Sales Tax Act. It is important to note that Lahore High Court in the case of Multan Enterprises verses Director General of Intelligence and Investigation has specifically held that the DG RRA are not officers of sales tax and they do not hold the jurisdiction to conduct the audit. The order was issued in the writ petition number 4094 of 2008 which was decided on June 8, 2009.
Legal experts pointed that the section 33 of the Sales Tax Act is only applicable when the officer exercising the jurisdiction is having a valid jurisdiction and is not 'coram non judice' authority. The external audit does not fall within the scope of section 33 for imposition of penalty. When this scribe contacted senior FBR officials, they said that RTO cannot demand sales tax record from the taxpayers for the purpose of external audit.
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