Pakistan Case LawMUHAMMAD ZAFAR IQBAL Versus SECRETARY REVENUE DIVISION, ISLAMABAD
This complaint was filed against an alleged unlawful withholding assessment order passed under Section 161 read with Section 205 of the Income Tax Ordinance, 2001 for tax year 2013, following the annulment of the original assessment by the Commissioner Inland Revenue (Appeals). The core legal question was whether the department could legally repeat an assessment order after its earlier order had been annulled and had attained finality due to the department's failure to appeal, and whether such action constituted maladministration. The Federal Tax Ombudsman held that an annulled order ceases to legally exist and that repeating the assessment without lawful authority to retrieve revenue is arbitrary and illegal, amounting to maladministration under the Federal Tax Ombudsman Ordinance, 2000. The Federal Tax Ombudsman recommended that the Federal Board of Revenue direct the Commissioner to revisit the unlawful order within 21 days and report compliance. The Federal Tax Ombudsman laid down the principle that an annulled assessment order is legally void and the department cannot arbitrarily repeat the assessment to retrieve revenue without following the proper process of law.
- Whether the department can repeat a withholding assessment order after the original order has been annulled by the Commissioner Inland Revenue (Appeals)?
- Does the repetition of an assessment order after its annulment amount to maladministration under the Federal Tax Ombudsman Ordinance, 2000?
FINDINGS/RECOMMENDATIONS
ABDUR RAUF CHAUHRY, FEDERAL TAX OMBUDSMAN.--- This complaint is against alleged unlawful order passed under sec ion 161 read with 205 of the Income Tax Ordinance, 2001 (the Ordinance) for tax year 2013.
2.The complaint was sent for comments to Secretary Revenue Division, in terms of Section 10(4) of the Federal Tax Ombudsman Ordinance 2000. In response, the FBR submitted its comments vide letter dated 01.01.2016.
3.According to the AR, CIR(Appeals) passed order dated 05.03.2016 annulling the order for the tax year 2013. Deptt: did not file appeal to the ATIR and therefore it attained finality. However, the Deptt: repeated the same withholding assessment order on 28.10.2015 without selection of case for audit by FBR/CIR. No Bar Code appeared on the notice issued (computerized system generated notice) which was required with effect from 01.07.2015 as per FBR Notification No.1(177)S(IDT-FATE)/2015, dated 30 06.2015. He also relied on High Court Judgment in WP 8466 of 2015 which was produced during the hearing also. He prayed that unlawful orders be quashed as it amounted to maladministration.
4.The DR contended that tax was not withheld by some dealers and, therefore, tax demand was raised against the Complainant as per law under section 161 with default surcharge under section 205 of the Ordinance. He averred that annulment and setting aside an order are synonymous as per ATIR's order No.ITA Nos.420 and 421/LB 408 and 409, dated 01.12.2009. So after annulment of earlier order by CIR(A), another order was passed to retrieve the loss of revenue and there was no element of maladministration.
5.Both the parties heard and case record examined. An annulled order is legally void order which ceases to have existence. In numerous cases, this office has held on the strength of case laws that if the Deptt fails to file second appeal in the Appellate Tribunal, appeal effect is required to be allowed to the decision ref CIR(A) within two months as prescribed in law. The judgment of Lahore High Court cited by the AR is also relevant in the instant case. There is no provision of law which would permit retrieval of loss of revenue' in an illegal manners'. The Dept'l treatment is, therefore, arbitrary and illegal.
Findings:
6.Repetition of assessment after annulment of earlier order by CIR(A) is arbitrary and unlawful tentamounting to maladministration in terms of sections 2(3)(ii) of the FTO Ordinance, 2000.
Recommendations:
7.FBR to--
KMZ/37/FTO Order accordingly.
Judges on this bench
- Abdur Rauf Chaudhary78 judgments
- Federal Tax Ombudsman30 judgments