Some registered taxpayers in Lahore have received audit notices by the concerned field formations of Federal Board of Revenue (FBR) in violations of the provisions of Sales Tax Act, 1990 and without observing lawful process of audit and arbitrary tax demand has been raised against the taxpayers.
Tax experts told Business Recorder here on Sunday that under the Sales Tax Act, 1990 (Act) it is inevitable that the taxpayers shall first be selected for audit by the FBR and only then would the field formation conduct its audit in accordance with procedure given in Section 25 of the Act and thereafter, due tax (if any) may be recovered after issuing show cause notices.
A Lahore-based tax lawyer Waheed Shahzad Butt told this correspondent that present move by FBR's field formations in Lahore is illegal and without lawful jurisdiction, being against the guarantees given in Article 4, 10A, 18 & 25 and in contradiction with the provisions of the Act. Direct show cause notices issued by the field formation, in fact selecting the taxpayers for audit of their tax affairs, are not only illegal but also violation of Constitution hence, a nullity in the eyes of law.
Direct show-cause notices issued to some taxpayers for payment of arbitrary imaginary tax demands by field formations of RTO Lahore is simply an act without lawful jurisdiction. If the law had prescribed a specific method and given specific powers for doing of a thing in a particular manner, such provision of law is to be followed in letter and spirit and achieving or attaining the objective of performing or doing of a thing in a manner other than that provided by law would not be permitted, tax lawyer added.
Show-cause notices under Section 11(2) and 11(3) of the Sales Tax Act, 1990 have been served on the taxpayers by the field formations, whereby the taxpayers have been practically selected for audit of their tax affairs and directing the taxpayers to pay the amount of arbitrary taxes. Direct show cause notices, without fulfilling the statutory obligations under the law and without any objective criteria, offends the equality clause of the constitution, not permissible under the law. The amendments brought about in the three fiscal statutes, through Finance Act, 2010 namely; Section 214C of the Income Tax Ordinance, 2001, Section 42B of the Federal Excise Act and Section 72B of the Sales Tax Act, 1990 empower only FBR to select cases for audit and the powers of the field formations have been restricted and reduced to mere conducting of the audit of the taxpayers, after the cases have been selected by the FBR.
Tax lawyer further added that the law does not permit the field formations to directly recover the tax demand raised in their mindset as the power to do so still rests with the FBR and none else can exercise this power i.e., selection of case for audit and then raising demand of tax (if any) after issuing show cause notice to the taxpayers.
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