ISLAMABAD: Appellate Tribunal Inland Revenue (ATIR) Islamabad is shocked that the Large Tax Office (LTO) Islamabad has treated a large taxpaying company, i.e., an airline as a “Kiryana shop” for illegal recovery of withholding taxes.

A two-member bench of the ATIR headquarters, Islamabad has issued a judgment against the LTO Islamabad and deleted tax charged, under all heads, from the said airline company.

Giving very strong observations about the attitude of tax machinery toward foreign investors, the ATIR bench regretted, “keeping in view the peculiar circumstances of the country, our economic advancement is dependent upon the inflow of foreign investment. It goes without saying that only knowledgeable bureaucracy can resolve the problems of foreign investors, who at present are reluctant to invest in our country because of the problems there are likely to encounter because of the hostile attitude of the State machinery”.

According to the order of the ATIR, proceedings were initiated under section 161 of the Income Tax Ordinance 2001 against the said company engaged in the business of operating an airline. The company is a regular filer of the statements of withholding taxes, but the assessing officer considered himself above the statutory provisions of the law and issued an order against the company.

The whole order of the ATIR bench repeatedly questioned the role of the LTO officials while dealing with this case of the airline, particularly Masood Akhtar Commissioner Inland Revenue Audit LTO Islamabad. “We feel inclined to hold that the case of the airline company has not been handled with the degree of seriousness and professionalism as is expected of officers saddled with the responsibility of administration of justice in accordance with law,” ATIR bench highlighted.

“For these reasons, the ATIR is left with no option except to conclude that the case of the appellant company has been handled in an irresponsible manner like that of a ‘Kiryana shop’.

A lot of information was available in the withholding tax data disclosed in the withholding tax statements and if the Deputy Commissioner Inland Revenue (DCIR) had bothered to examine this data, fairly and diligently the result would definitely have not been different from the impugned Order,” ATIR order said.

In the light of discussed facts, the ATIR bench has no hesitation to hold that the Order passed under section 161 of the Income Tax Ordinance, 2001 does not conform to the procedure prescribed by the courts for scrutiny of facts and determination of tax liability. The principle of audi alteram partem (nobody can be condemned unheard) has been seriously violated. Another glaring violation of the principle of finality of proceedings as enshrined in the judgment of the Supreme Court of Pakistan render the impugned order a nullity in the eye of law. In order to meet the ends of justice, the ATIR bench has vacated the Order. Resultantly tax charged under section 161 of the Income Tax Ordinance under all the heads stands deleted, it added.

ATIR order stated that the ATIR bench has no hesitation to agree with the authorized representative (AR) of the airline that the principle of audi alteram partem (nobody can be condemned unheard) has been seriously violated by the author of the impugned Order.

We are shocked to note that, at the instance of Masood Akhtar Commissioner IR, Audit-I, the DCIR jumped to a conclusion which was not justified with reference to the facts of the case and its history. The additional commissioner had already adjudicated upon this issue and there was no lawful justification for the DCIR to reconsider the issues which had been adjudicated upon by a senior officer. The departmental representative (DR) could not prove from the record that the transactions disclosed under each head in the statements filed under various withholding sections of the Income Tax Ordinance were examined by the DCIR in order to identify payments made by the appellant, if any, where it had failed to deduct tax as per law nor could he give any plausible explanation or justification for charging tax u/s 161 of the Income Tax Ordinance on the consolidated amounts. He had also no explanation to offer regarding the basis for application of rate of tax ignoring the prescribed statutory rates, ATIR stated.

The ATIR has endorsed the copy of this Order to the Chairman FBR with the request that the field formations be directed to apply law strictly in a manner enunciated by the courts. This objective can be achieved only if the officers of FBR keep themselves updated with the latest judgments of the Courts, ATIR order added.

Copyright Business Recorder, 2022