Non-declaration of purchases: compliant taxpayers cannot be penalised for buyers' faults: ATIR

Appellate Tribunal Inland Revenue has said that the officers working under the administrative control of Federal Board of Revenue (FBR) are under legal obligation to seek clarification regarding purchases from the buyers rather than raising imaginary/illusionary tax demand against fully compliant taxpayers.
It is learnt that while explaining the provisions of Computerised Risk Based Evaluation of Sales Tax (CREST), the ATIR has ruled that applicant cannot be burdened with the obligation to produce the record before the Department. If his buyer did not declare the purchases from him he cannot be penalised as the legal requirement that buyer should be active as the relevant time was not disputed by the Department.
The ATIR order states, "This miscellaneous application under section 57 of the Sales Tax Act, 1990 has been filed by the above named applicant pointing out certain mistake in the ex-parte order. In response to call notice Waheed Shahzad, advocate appeared on behalf of the applicant while Hussnain Ahmad Hali, departmental representative (DR) was present on behalf of the Department. Both of them were heard. The learned AR stated that the case was earlier adjourned for the presentation of record by the learned DR but that was not produced and hence the finding in the main order that "the department may revisit the e-portal CREST in association with the appellant" would result in putting the appellant through the same cumbersome procedure for no fault of his".
The ATIR further observed that it has considered the arguments of the AR and perused the record. "We are inclined to accept the contention of the AR in view of the following grounds of appeal that were taken in the main appeal but not considered."
The Appellant cannot be penalised for any fault on the part of the buyers who have not shown purchases made from the registered person and have not declared the correct quantity/value of goods purchased from the registered person in their respective returns. It is a settled law that no one would suffer for the act of others. That if at all, the buyers had failed to declare correct quantity/value of goods purchased from the registered person in their returns, it does not impose any liability on the registered person. The officers working under the administrative control of the FBR are under legal obligation to seek clarification from the buyers rather than raising imaginary/illusionary tax demand against the fully compliant taxpayer/Appellant.
On the other hand, the payment proof and supplies invoices were duly provided to the Respondent regarding those buyers who did not show their purchases in return and so far as the miss-matching of purchase is concerned it may be reconciled over the succeeding tax periods because the buyer has legal right to declare its purchases within six succeeding months.
As the DR did not have the record, therefore, there is no reason to doubt in statement of learned AR that payment proof and supplies invoices were not provided. In view of this factual position, it is accepted that applicant cannot be burdened with the obligation to produce the record before the Department. If his buyer did not declare the purchases from him he cannot be penalised as the legal requirement that buyer should be active as the relevant time was not disputed by the Department. Therefore, the main order is rectified in the following manner:
That if the department so desires he may confront the buyers with the evidence provided by the applicant to find out why they did not declare the purchases from him. If it is denied by them that no purchases were made for there is a difference in value, only then the applicant may be confronted afresh with his denial for rebuttal. Subsequently, the department may draw the inference based on the explanation of the applicant, ATIR ruled.