ECONOMY PESTICIDES CHOTI ZAREEN, DERA GHAZI KHAN VS SECRETARY, REVENUE DIVISION, ISLAMABAD, 2013 PTD-FEDERAL-TAX-OMBUDSMAN-PAKISTAN 412 (2012)

Sales Tax Act (VII of 1990)---

----Ss.7 & 45A---Determination of tax liability---Adjustment of input tax against purchases---According to information available with Federal Board of Revenue, such purchases were not declared in the sales tax return of the supplier---Bank statement and copies of cheques/ demand drafts/pay orders were provided in response to show-cause notice and claimed that payment to supplier was made through bank in terms of S.73 of the Sales Tax Act, 1990---Clearance of cheques was not reflected in the bank statement---Complainant was required to provide sales tax return of the supplier, which he did not do---Order-in-original was passed for payment of tax along with penalty---Complainant contended that valid invoices were issued by the supplier and the payment was made through bank;that bank statement and copies of invoices were not considered on merits; that requirement to produce sales tax return of the supplier was uncalled for; that such document ought to have been obtained directly from the supplier insteadof compelling the complainant; and that orders-in-original were passed without considering the evidence or going for independent verification, which was tantamount to maladministration---Validity---Inland Revenue Officer observed that cheques/demand drafts/payorder were not reflected in the bank statement---Taxation Officer should have verified the transactions directly from the bank which had not been done---No verification of purchases was made from the supplier and instead order-in-original was passed arbitrarily---Such act of passing orders-in-original was tantamount to maladministration---Federal Tax Ombudsman recommended that Federal Board of Revenue direct the Chief Commissioner to invoke jurisdiction under S.45A ofthe Sales Tax Act, 1990, to pass a fresh speaking order, as per law.

Haji Ahmad, Advisor Dealing Officer.

Sh. Ghulam Asghar for Authorized Representative.

Saleem Akhtar, DCIR Departmental Representative.

FINDINGS/RECOMMENDATIONS

DR. MUHAMMAD SHOAIB SUDDLE (FEDERAL TAX OMBUDSMAN).---This complaint is filed against unlawful order-in-original dated 13-7-2012.

2.According to the Department, the complainant adjusted input tax of Rs.381,088 during tax period 12 of 2011 against purchases made from the supplier namely Messrs ICI Pakistan Limited. As per information available with FBR, the same was not declared in the sales tax return of the supplier. Show cause notices were issued on 10-3-2012, 8-5-2012 and 23-5-2012. In response, the complainant provided bank statement and copies of cheques/demand drafts/pay orders and claimed that payment to the supplier was made through bank in terms of section 73 of the Sales Tax Act, 1990 (the Act). Perusal of the documents revealed that clearance of cheques/DD etc. was not reflected in the bank statement for the period from 1-6-2011 to 30-6-2011. Further, the complainant was also required to provide sales tax return of the supplier, which he did not do. Order-in-original was passed for payment of tax amounting to Rs.381,088 along with penalty of Rs.19,054.

3.According to the complainant, he made purchases of Rs.2,381,800 from ICI Pakistan Limited during 12/2012. Valid invoices were issued by the supplier and the payment was made through bank. In support thereof the bank statement and copies of the invoices were provided, which were not considered on merits by the Inland Revenue Officer (IRO). Further contended that the requirement to produce sales tax return of the supplier was uncalled for. He ought to have obtained the said document directly from the supplier instead of compelling the complainant. The IRO arbitrarily passed order-in-original without considering the evidence or going for independent verification, which was tantamount to maladministration.

4.The DR reiterated the Department's written arguments. He contended that the Hon'ble FTO had no jurisdiction to entertain the complaint relating to assessment and determination of tax liability. Further submitted that the complainant adjusted input tax which was not reflected in the supplier's account. According to him, there was no maladministration involved in the case.

5.Both the parties have been heard and record perused. The objection with regard to the jurisdiction of the Hon'ble FTO is misconceived. The Office of FTO is looking into whether theestablishedprocedureandprocesseswerefollowedinthecase,notanymatterrelatingtoassessmentordeterminationoftaxliabilityper se.

6.TheIROexaminedthebankstatementfortheperiodfrom 1-6-2011 to 30-6-2011 and observed that cheques/demand drafts/pay orders dated 10-8-2011, 1-12-2011 and 23-12-2011 were not reflected therein. These cheques/DDs pertained to the subsequent period. So these could not be verified from bank statement of the preceding period. The IRO should have verified the transactions of the subsequent period directly from the bank. This has not been done. No verification of purchases was made from the supplier and instead order-in-original was passed arbitrarily.

Findings:

7.The arbitrary act of passing order-in-original is tantamount to maladministration under section 2(3)(ii) of the FTO Ordinance.

Recommendations:

8.FBR to direct the Chief Commissioner to---

(i)invoke jurisdiction under section 45A of the Sales Tax Act, 1990, to pass a fresh speaking order, as per law; and

(ii)report compliance within 30 days.

CMA/203/FTOOrder accordingly.