In a landmark judgment, Appellate Tribunal Inland Revenue (ATIR) has reprimanded Directorate of Intelligence and Investigation (I&I) Inland Revenue (IR) that the DG I&I has become a supra constitutional body and acts in an unbridled manner.
A division bench of the Appellate Tribunal Inland Revenue has also warned the Agency for not operating beyond its scope and mandate. The author of this important order is Nadir Mumtaz Warraich Accountant Member Appellate Tribunal Inland Revenue Islamabad.
The appeal has been filed by taxpayer/appellant against Appeal Order No.771 of 2019 dated 23rd April, 2019 u/s 161/205 of the Income Tax Ordinance, 2001 by Commissioner IR (Appeals-III), Rawalpindi.
"The role of the Directorate of I & I (IR) remains restricted to carrying out studies to identify tax potential rather than exposing individual taxpayers to the wrath of the state", Appellate Tribunal declared.
Appellate Tribunal Inland Revenue has also highlighted that how the agency officials are illegally operating and creating problems for the registered taxpayers and business community resulting in harassment, a tax expert said.
Appellate Tribunal regretted that the DG I&I (IR) cannot issue directives and lacks any lawful authority to do so as then the field authorities act in a mechanical manner and upon a command performance without application of mind which is highly undesirable especially as the reporting mechanism of DG I&I (IR) is distinct to that of the field formations.
Appellate Tribunal Inland Revenue has also laid down parameters for the agency and warned that it should not act as a parallel organisation of the FBR.
According to an order issued by the division bench of the tribunal IR, we have heard both parties, gone through all the grounds/additional grounds of appeal and the precedents cited before us.
It is an admitted position by the assessing authority that information was received from Directorate General Intelligence & Investigation (IR) through a raid u/s 175 and the same was confronted to the taxpayer/appellant without any independent application of mind by the assessing authority.
It seems that the DG I&I has become a supra constitutional body and acts in an unbridled manner. In an earlier judgment of this Tribunal ITA No. 1529 (IB) 2018 for Tax Year 2016 dated 6.5 2019 certain principles were laid down prescribing the parameters of DG I&I.
The assessing authority initiated and took action and all the subsequent actions flowed from the information received from DG I&I by characterizing the information as "definite information" which in any case has no relevance to non withholding of tax u/s 161/205 on alleged purchases.
The order u/s 161/205 and the entire proceedings on the whole appear to be a kneejerk reaction to a directive of I&I authority instead of examination on the merit of the case and order was passed u/s 161 of the Ordinance to apparently close the proceedings.
ppellate Tribunal Inland Revenue has deprecated the practice of any parallel action by DG I&I (IR) as a taxpayer cannot be exposed to multiplicity of proceedings/organizations as the Federal Board of Revenue is already functioning/administering the statutes through its field information and DG I&I IR role should be restricted to providing information and data to the field formation which shall process the information/data in accordance with law as it deems fit and not under any administrative compulsion.
The examination of the facts of the case as brought before us impressed upon us that the seizure/search/raid report u/s175 was generated by the Directorate of I & I (IR) whereas the order u/s 161/205 was finalized by another distinct agency i.e RTO , Abbottabad and we hold that the proper manner and procedure should have been that the RTO Abbotabad should have intimated the appellant that the visit/search/raid leading to possible seizure/impounding of record would be made within a specific period of time ,preferably within 2 to 3 weeks , so as to not disrupt the business activities of the appellant for a prolonged period.
There may be a reasonable cause to conduct raid at the business premises once it has been forewarned that it is under investigation and this should be intimated by the RTO concerned to the taxpayer/class of taxpayers so identified on the basis of researched trends and market patterns.
The role of the Directorate of I & I (IR) remains restricted to carrying out studies to identify tax potential rather than exposing individual taxpayers to the wrath of the state. No taxpayer running manufacturing activities can cease his manufacturing/retail business simply to avoid taxation and investigation and physically on site investigation under the relevant provisions of the tax statutes can be carried out in an amicable environment instead of threat perception or victimization or excesses by the taxation authorities, tribunal order added.
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