ISLAMABAD: Appellate Tribunal Inland Revenue Islamabad has ruled that Tax Laws Amendment Act, 2024 has a retrospective effect and a reference may be filed in the High Court against the order of Commissioner Inland Revenue (Appeals).

This has been held by Appellate Tribunal Inland Revenue (Division Bench-I), Islamabad, while deciding a matter of a Trading Company of Mandi Bahauddin against Commissioner Inland Revenue, Regional Tax Office (RTO), Sargodha.

The order of the Appellate Tribunal Inland Revenue revealed that we have no doubt that the amendment introduced by the Act of 2024, which establishes the pecuniary jurisdiction of appellate authorities, has a retrospective effect.

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According to the law, any matter pending before the Commissioner (Appeals) where the value of the tax assessment or refund exceeds the pecuniary limit should be transferred to the respective ATIR(s), which holds the pecuniary jurisdiction under the relevant provisions of the statute, namely the Income Tax Ordinance, the Sales Tax Act, 1990, and the FED Act, 2005.

The order said that a deeper analysis of the amendment introduced by the Act of 2024 revealed that the legislature intended to simplify the appeal process from a dual forum to a single forum, while maintaining both appellate forums, i.e., the CIR (A) and the ATIR. Under the previous system, an aggrieved person could file an appeal before the CIR (A) and subsequently at the ATIR without considering any monetary limits for filing of appeal.

However, under the new system, the taxpayer can file the appeal at either of these forums based on the value of the assessed tax or refund. If the value of the assessed tax or refund is Rs10 million or below, the forum is the CIR (A); for amounts exceeding Rs 10 million, the forum is the ATIR.

Both appellate forums are considered final fact-finding authorities within their respective domains. Nonetheless, a person aggrieved by the decision of these forums may challenge the decision on a point of law by filing a reference under section 47 of the Sales Tax Act, 1990 before the respective High Court.

This new regime is set to take effect on May 3, 2024. To manage the transition to the new appeal regime at the CIR(A) level, the legislature designated June 16, 2024, as the date from which cases exceeding the threshold of Rs 10 million will be transferred to the ATIR, while cases valued at or below Rs10 million will remain with the CIR(A). This transition was necessary because cases might have been listed or nearing conclusion at the CIR (A) during the interim period (May 3, 2024, to June 16, 2024). Therefore, a transition period was required to smoothly switch from the old regime to the new regime, transferring cases from the CIR (A) to the ATIR.

It is important to note that there is no prohibition on the CIR (A) deciding cases valued over Rs 10 million during this gap period (May 3, 2024, to June 16, 2024). Hence, to preserve the taxpayers’ rights, section 46 of the Sales Tax Act, 1990 includes the phrases “Subject to section 43A” and “Commissioner (Appeals)”.

Given this backdrop, the Act of 2024 has introduced, for the first time, a pecuniary jurisdiction for the Commissioner (Appeals) and the Appellate Tribunal Inland Revenue (ATIR) to receive and entertain appeals by amending the Ordinance. Before the Act of 2024, the Ordinance did not specify any pecuniary jurisdiction for appellate authorities.

In the instant case, the issue pertains to the assessment of tax under the Sales Tax Act, 1990, with a tax amount assessed at Rs.1,342,244/-. Therefore, as per subsection (2) of section 43A of the Sales Tax Act, 1990 the reference application under section 47 of the Sales Tax Act, 1990 is to be made before the High Court.

By respectfully following the above judgments, the objection raised by the office is upheld, and the office is directed to promptly return the appeal to the appellant, tribunal added.

Copyright Business Recorder, 2024