Lahore High Court (LHC) has reserved a judgement on an anomaly in the Investment Tax Scheme-2008, which has been offered to the general public for legalisation of hidden income/assets. Justice Khawaja Farooq Saeed of LHC heard the arguments of both the sides and reserved the final judgement.
The case mainly related to the question as to why the un-explained income of Rs 500,000 declared before August 8 under the Investment Tax Scheme (income tax circular 3 of 2008) was not accepted in a case where proceedings were pending against the taxpayer.
Naved A. Andrabi Advocate informed the LHC that the issue mainly involves cases where taxpayers had accepted the FBR offer for legalisation of un-disclosed income under circular 03 of 2008. There was no restriction on availing the scheme, where the proceedings were pending against the taxpayers under circular 3. Some taxpayers filed their declarations for legalisation of unexplained income before the issuance of amended circular 08 of 2008. Under the amended circular, the scheme would not be applicable where proceedings were pending against the taxpayers.
Investment Tax Scheme was issued vide Circular 3 of 2008 on July 1, 2008. The salient features of the scheme were that all the existing and non-existing taxpayers were allowed to declare their un-disclosed assets/income which was not charged to tax before June 30, 2008 could be declared by paying tax @ 2% of the fair market value of such income/assets.
The scheme was immediately availed by quiet a few persons including such persons against whom proceedings were under process by the taxation authorities either under audit or other proceedings under the Income Tax Ordinance, 2001. The scheme was introduced by circular 3 of 2008 allowed the existing taxpayers to avail benefits of the scheme even if the proceedings were pending or under process with the taxation authorities.
On August 08, 2008 the FBR issued circular 8 of 2008 whereby the Investment Tax Scheme was unilaterally amended and the scheme was declared to be not applicable where proceedings were pending before the department, appellate authority or any court.
The benefit of the Investment Scheme was availed where proceedings were initiated by the department and declarations were filed before August 08, 2008, however, the department rejected all such declarations by taking support of Circular 8 of 2008 and re-initiated the proceedings to finalise the cases.
The petitioner was of the view that the rejection made by the department has been challenged before the LHC on the ground that the declarations made under circular 3 of 2008 cannot be rejected on the basis of amendment made by circular 08 of 2008.
It was contended that the taxpayers who had acted in light of the offer made by Circular 03 of 2008 and had filed their declarations before the issuance of amending Circular 08 of 2008 had accrued vested right which now cannot be taken away. On July 15, 2008 the petitioner availed the benefits of the Investment Tax Scheme 2008 and declared sum of Rs 500,000 as unexplained income. After a lapse of more than a month the department intimated the taxpayer that the declaration filed does not qualify to be accepted under the scheme as the proceedings against the Petitioner were pending and in progress at the time of introduction of the scheme.