MIA CORPORATION, ISLAMABAD VS SECRETARY, REVENUE DIVISION, ISLAMABAD
2012 P T D 1402
2012 P T D 1402
[Federal Tax Ombudsman]
Before Dr. Muhammad Shoaib Suddle, Federal Tax Ombudsman
Messrs MIA CORPORATION, ISLAMABAD
versus
SECRETARY, REVENUE DIVISION, ISLAMABAD
Complaint No.24/ISD/ST(08)/242 of 2012, decided on 22/02/2012.
Income Tax Ordinance (XLIX of 2001)---
----S.177---Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000), Ss. 2(3), 9 & 10---Selection of case for "Composite Audit" (covering Sales Tax and Federal Excise matters)--Complainant/corporation was aggrieved against the letter of Commissioner whereby it was informed that its case had been selected for "Composite Audit"---Contention of the complainant was that there was no provision of "Composite Audit" in the Income Tax Ordinance, 2001, Sales Tax Act, 1990 or Federal Excise Act, 2005---Submission of Departmental Representative was that the Commissioner was competent under S.177(1) of Income Tax Ordinance, 2001 to select any case for audit falling in his jurisdiction---Commissioner, of course,was competent under S.177(1) of Income Tax Ordinance, 2001 to issue notice for audit, but while exercising that power, he could not invoke the said provision on other laws---Both Sales Tax and Federal Excise laws had independent sections for audit proceedings; their consequences were different and they could not be subjected to the provision of Income Tax Law---Action of Commissioner to issue notice for 'composite audit' covering Sales Tax and Federal Excise matters simultaneously with the complainant's Income Tax affairs being without jurisdiction was tantamount to maladministration as defined under S.2(3) of Establishment of Office of Federal Tax Ombudsman Ordinance, 2000--Federal Board of Revenue was recommended to withdraw notices issued for conduct of 'composite audit' in the case of the complainant within 15 days; and report compliance within 5 days thereafter.
2011 PTD 1558 rel.
Hafiz Ahsan Ahmed Khokhar, Advisor Dealing Officer.
Atif Mehmood, Authorized Representative.
Aamar Javed DCIR, RTO, Islamabad Departmental Representative.
FINDINGS/RECOMMENDATIONS
DR. MUHAMMAD SHOAIB SUDDLE, FEDERAL TAX OMBUDSMAN.---The complainant is aggrieved against the Commissioner IR, RTO, Islamabad's Letter No.CIR (Zone-I)RTO/410 dated 17-10-2011, informing him that his case had been selected for 'Composite Audit' for tax year 2010. He was further informed by the Assistant Commissioner Audit, Zone-I, RTO, Islamabad, vide Letter No.CIR(Zone-I)RTO/2011/127 dated 19-10-2011, to produce the relevant record relating to income tax, sales tax and federal excise.
2.The complaint was sent for comments to Secretary, Revenue Division, in terms of section 10(4) of the FTO Ordinance, 2000. In response, the FBRforwardedparawisecommentsbyCommissionerIR, Zone-I,Islamabad,videLetterNo. 1(242)S(TO-11)/2012dated11-4-2012.
3.During the hearing, the AR submitted that the mode of selection of composite audit by the Commissioner IR, RTO, Islamabad, was unjustified, illegal and in violation of the principles laid down by the superior courts. There was no provision of composite audit in the Income Tax Ordinance, 2001, Sales Tax Act, 1990, or Federal Excise Act, 2005. He further submitted that the judgment of Hon'ble Sindh High Court (2011 PTD 1558) had been followed by the Hon'ble Federal Tax Ombudsman while deciding the Complaint No.572/Lhr/IT(449)/1157/ 2011. The relevant extract is as follows:--
"....It seems therefore that wherever a composite audit was deemed appropriate, the legislative intent was clearly stated, and the absence of any such provision in either the Income Tax Ordinance, 2001 or the Sales Tax Act, 1990, indicates that no such audit is permissible in relation to these two laws. For all of the foregoing reasons, we are therefore of the view that the `composite audit' in the present case was also without lawful authority."
4.He further contended that even otherwise the RTO, Islamabad, did not have the jurisdiction in the case to issue notice for conducting the audit of sales tax and federal excise matters as the same lay with the Large Taxpayers Unit (LTU), Islamabad. He finally prayed that the impugned notice of selection for composite audit be vacated.
5.The DR submitted that the Commissioner IR, RTO, Islamabad, was competent under section 177(1) of the Income Tax Ordinance, 2001, to select any case for audit falling in his jurisdiction including the case of the complainant. He further submitted that the notices for audit were issued on merit and in line with the criteria laid down by the FBR. He also submitted that the matter in hand was beyond the scope and jurisdiction of Hon'ble FTO as per section 9(2)(b) of the FTO Ordinance 2000.
6.The complaint has been examined in the light of submissions of both the parties and the judgments relied upon.
7.There is no cavil with the proposition that the Commissioner IR is competent under section 177(1) of the Income Tax Ordinance, 2001, to issue notice for audit. However, while exercising this power, he cannot invoke the said provision on other laws. Both Sales Tax and Federal Excise laws have independent sections for audit proceedings; their consequences are different and they cannot be subjected to the provisions of Income Tax law. There is no provision of 'composite audit' available in Income Tax, Sales Tax or Federal Excise laws.
8.The Hon'ble Federal Tax Ombudsman held in Complaint No.572/LHR/IT(449)/1157/2011 that the 'composite audit' being a significant departure from established practice and procedure regarding conduct of audit, and also being in violation of the High Court judgment (2011 PTD 1558) was tantamount to maladministration as defined under section 2(3) of the FTO Ordinance.
9.As regards Departmental objection in terms of bar laid down in section 9(2)(b) of the FTO Ordinance 2000, the matter has been examined and the objection found to be misconceived. Assessment of income per se is not the moot point in the complaint. Rather, the method adopted to determine the complainant's income for purposes of levy of income tax and sales tax simultaneously through conduct of a 'composite audit' is what is complained against. The 'composite audit' method exposes the complainant to double jeopardy. The Departmental objection in this regard is rejected, being without merit.
10.The contention of the complainant that the Commissioner IR, RTO, Islamabad, did not have the jurisdiction to issue the notice of audit for Sales Tax and Federal Excise was conceded by the DR, stating that for audit proceedings of Sales Tax and Federal Excise, the LTU, Islamabad, had the jurisdiction.
Findings:--
11.The action of Commissioner IR, RTO, Islamabad, to issue notice for 'composite audit' covering Sales Tax and Federal Excise matters simultaneously with the complainant's Income Tax affairs being without jurisdiction, and also being violation of the SHC judgment, is tantamount to maladministration as defined under section 2(3) of the FTO Ordinance, 2000.
Recommendations:--
12.F.B.R. to--
(i)withdraw notices issued for conduct of 'composite audit' in the complainant case within 15 days; and
(ii)report compliance with 5 days thereafter.
H.B.T./107/FTOOrder accordingly.