Messrs BISMA TEXTILE MILLS LTD. vs FEDERATION OF PAKISTAN and others
This constitutional petition challenges a demand for sales tax amounting to Rs. 3,789,778 issued by the Sales Tax Department against the petitioner, Messrs Bisma Textile Mills Ltd., based solely on an internal audit report. The core legal question is whether a taxpayer can be held liable for tax demands derived from an audit report without being provided a copy of said report or being afforded an opportunity to rebut its findings. The Lahore High Court held that the petitioner cannot be burdened with tax liability based on an audit report with which they have not been confronted. The Court ruled that the principles of natural justice require that the taxpayer be given access to the audit report and a reasonable opportunity to point out flaws or rebut its authenticity. Consequently, the Court allowed the petition, directing that any future liability must be determined through a proper contravention case, initiated by a formal show-cause notice, ensuring the petitioner is granted a fair and adequate opportunity to respond before any final adjudication under the Sales Tax Act.
- Can a taxpayer be held liable for a tax demand based on an audit report without being provided a copy of that report?
- Is a taxpayer entitled to an opportunity to rebut the findings of an audit report before a tax liability is finalized?
- Does an audit report alone constitute a final determination of tax liability under the Sales Tax Act 1990?
- Sales Tax Act 1990
ORDER
Learned counsel for the petitioner contends that an amount of Rs.3,789,778 has been demanded from the petitioner on the basis of an audit report. The petitioner, however, has not been furnished a copy of the audit report nor has any opportunity been granted to the petitioner to point out flaws in such report and to show cause why the amount demanded might not be payable by the petitioner.
2. Learned counsel for the petitioner contends that even though the petitioner has deposited an amount of Rs.1,500,000 with the respondent- #TBS .71 #TBE Department on 12-6-2001 this was done under protest and on the express conditions that the audit report, which forms the basis of the demand against the petitioner, will be supplied to the petitioner. Admittedly, this has not been done despite the lapse of almost one month from the date on which the deposit of, the aforesaid sum was made with the Sales Tax Department by the petitioner.
3. Learned counsel for the petitioner further contends that the audit report itself cannot constitute a determination of the petitioner's liability for payment of sales tax. According to him the petitioner has to be afforded a reasonable and adequate opportunity of going through the audit report and to point out flaws, if any, in such report with the object of rebutting the basis or authenticity of such report.
4. The aforesaid contentions of learned counsel have obvious merit. The petitioner cannot be burdened with liability merely on the basis of an audit report with which the petitioner has not been confronted. In these circumstances, the present petition is allowed.
5. This order, however, shall not prevent the Sales Tax Department from preparing a contravention case in accordance with law on the basis of the audit report and other material, if any. The matter should thereafter be adjudicated in accordance with the provisions of the Sales Tax Act after a show-cause notice has been issued 'to the petitioner and the petitioner has been afforded a reasonable and adequate opportunity of responding such show-cause notice. This ,petition is disposed of in the above terms. .
Cited by 13 cases
- Commissioner Inland Revenue, Lahore vs Messrs Descon Engineering 2023 PTD 492
- Commissioner Of Inland Revenue vs Messrs Naila Kareem and others 2021 PTD 1492
- Messrs Chawala Enterprises, Faisalabad vs The Commissioner Inland 2022 PTD (Trib.) 1336
- Muhammad Khalid Qureshi vs Province of Punjab through its Secretary, Excise & Taxation Department, Lahore, & another 2016 LHC 3157
- MUHAMMAD KHALID QURESHI vs PROVINCE OF PUNJAB PUNJAB through Secretary, Excise and Taxation Department, Lahore and another 2017 PTD 805
- MUHAMMAD KHALID QURESHI vs PROVINCE OF PUNJAB through Secretary, Excise and Taxation Department, Lahore and another 2017 P.C.T.L.R. 122, 2017 PTD 805, 2017 CLC 523
- M/s Amina Z. Beauty Salon vs Federation of Pakistan etc. 2015 LHC 6515
- Messrs AMINA Z. BEAUTY SALON through Managing Member vs FEDERATION 2016 PTD 654
- TAYIABA KHATOON Versus The COLLECTOR, COLLECTOR OF CUSTOMS (APPEALS) 2014 PTD 1
- 2010 PTD 832 2010 PTD 832
- 2010 PTD 957 2010 PTD 957
- Muhammad Khalid Qureshi vs Province of Punjab through its Secretary, Excise & Taxation Department, Lahore and another 2017 P.C.T.L.R. 122
- Commissioner Inland Revenue, Lahore vs M_s Descon Engineering Limited, Lahore 2022 LHC 3034