Complainant heavily taxed on pension received as remittance: FTO tells FBR to transfer jurisdiction, revisit impugned order

ISLAMABAD: The Federal Tax Ombudsman (FTO) has taken serious notice of illegal transfer of jurisdictions of an 80-year-old pensioner, who has been heavily taxed on account of pension received as foreign remittance.

While disposing of a complaint, the Ombudsman took cognizance against illegal transfer of jurisdictions and directed the FBR to transfer jurisdiction of an 80-year-old complainant from Large Tax Office (LTO) Lahore to LTO Karachi and to revisit the impugned order for Tax Year 2016 in terms of section 122A of the Income Tax Ordinance.

Brief facts of the case were that the complainant was 80-year-old retired pensioner, ex-president of a commercial bank and had been residing in Karachi since 1984. He had been receiving pension from

a foreign bank in New York in US dollar which was drawn through a Pakistani bank since 1993. He sent an email to the FBR to inquire about taxability of pension and asked whether it was required to be declared in Asset Scheme 2019 and whether it could be invested in Pakistan Banao Certificate.

The FBR replied in writing that it was not required to be declared in Asset declaration Scheme and also confirmed that he could invest in PBC, despite confirmations from FBR in writing, LTO, Lahore issued an assessment order for tax year 2015 creating tax liability of Rs. 44 million and another order for Tax Year 2016 creating tax liability of Rs. 33 million.

Whereas, the old aged taxpayer provided all the evidences of his retirement from a bank in New York, receipt of monthly pension till date through banking channel which was declared in wealth statement for Tax Year 2016 on account of pension received as foreign remittance and deposited in a bank and evidence of receipt of gift from her wife (a return filer) and the assessment order by CIR (Appeals-I) and the complainant had already filed appeal before Income tax Appellate Tribunal, Lahore. But so far no response had been received.

It was pertinent to mention in FTO’s findings that in terms of Section 209(5) of the Ordinance, the Commissioner shall have jurisdiction in respect of any person carrying on business, if the person’s place of business is within such area. The relevant portion of income tax provision is reproduced below:

“Within the area assigned to him, the Commissioner shall have jurisdiction,(a) In respect of any person carrying on business, if the person’s place of business is within such area, or where the business is carried on in more than one place, the person’s principal place of business is within such area

(b) In respect of any other person, if the person resides in such area”

Thus, in terms of above provision, the jurisdiction of the Complainant lies with Karachi but unfortunately, the complainant was being assessed in Lahore. The Complainant agitated the issue of jurisdiction in writing but the Assessing officer bulldozed the submission of the complainant as well as even the letter issued by his own boss Chief International Taxes for transfer of jurisdiction and issued order for Tax Year2016 creating huge tax liability without lawful jurisdiction.

The FTO’s findings further stated that;“ Objections to jurisdiction are to be decided before proceeding in the matter by adjudication authority (1999) 80 TAX 115 (H.C. Lahore). As a result, show cause notice under section 122(9) for Tax Year 2016 becomes defective and if notice is prima facie defective and error is incurable, the entire proceedings including assessment order for Tax Year 2016 are null and void. Even otherwise on merit, the Complainant provided sufficient documentary evidences to prove his innocence. This was a classic case of maladministration where a taxpayer has been burdened with huge amount of tax only because of the fact that his case was lying with LTO Lahore. Such type of unlawful acts does not inspire confidence of the taxpayers; rather they create mistrust between the FBR and a taxpayer.”

Accordingly, the Tax Ombudsman directed the FBR to transfer jurisdiction of the complainant from AEOI Zone Lahore to AEOI Zone Karachi and to revisit the impugned order for the Tax Year 2016 in terms of section 122A of the ordinance and also to call for explanation CCIR, LTO Lahore to call for explanation of the AD CIR, Range-2, AECI Zone LTO Lahore, who without settling the issue of jurisdiction, completed the impugned assessment proceedings.

Copyright Business Recorder, 2022