(i) Whether Dettol was exempt from payment of sale tax in term of notifications SRO 598(I)/94 date 9.6.1994? (ii) Whether the show-cause notice dated 23.10.1998 was time barred under subsection (2) of section 36 of the Sale Tax Act,1990?
Case Title : Reckit And Colman Pk Ltd. V. Collector, Collector of sale tax & etc.
Decision: The issue of whether this product is a disinfectant, or a medicinal preparation has been settled by the classification ruling issued by WCO. Therefore, in the present proceedings, no exception can be drawn to such classification. We may also add that such classification is a matter of record since 1990; hence, the same is not being applied retrospectively as argued and the case law relied upon is of no help in the present fact. Therefore, question No.1 is answered accordingly, in negative, against the Applicant and in favor of the Respondent.
In view of the above facts and circumstances of this case, this Reference Application is partly allowed to the extent of question No.2 regarding limitation as above, whereas, it stands dismissed to the remaining extent.
FILING OF REFUND APPLICATION WITH PRESCRIBED PARTICULARS TO THE SATISFACTION OF THE COMMISSIONER IS MANDATORY BEFORE CLAIMING REFUND
Case Title : COMMISSIONER INLAND REVENUE APPEALS LAHORE VS ADG LDI (PVT.) LTD.
Brief Facts:
In the instant case, the Appellant taxpayer,
being a private limited company, filed
return of income for Tax Year 2016 by
adjusting the admitted tax liability of Rs.
871,767 with the prior year’s tax refund.
The tax officer issued notice for
amendment of assessment under section
122(5A) of the Ordinance on the
contention that the Taxpayer adjusted the
previous year’s refund without filing refund
application. The Taxpayer did not file any
response, therefore, the tax officer passed
order for amendment of assessment by
treating the return filed erroneous and
prejudicial to the interest of revenue.
The appellant preferred appealed before
the Commissioner Appeals, who confirmed
the tax officer’s decision. Being aggrieved
with the Commissioner Appeal’s decision,
the Taxpayer filed an appeal before the
ATIR.
Decision:
The ATIR dismissed the appeal filed by the
Appellant Taxpayer and decided the matter
in favor of the tax department. The ATIR
held that section 170 of the Ordinance
specifies the procedure for claiming tax
refund, whereas, Rule 71 of the Rules
prescribes that an application for refund of
tax shall be made in the proforma specified
in Part VI of First Schedule to the Rules.
Further, the refund application shall be
accompanied by such documents,
statements and certificates as specified in
the Ordinance and the Rules.
The ATIRE further observed that upon
verification of the excess payment of tax,
the Commissioner shall either apply the
excess tax paid in reduction of any
outstanding liability or refund the
remainder. If the Commissioner is not
satisfied, he may pass an order refusing
the claimed refund.
It was held that the whole process does
not allow self-adjustment of refund
amount, hence in the absence of refund
application and verification of refund, the
refund adjustment was disallowed by the
ATIR
POWER OF OFFICER TO RECOVER DEFAULT SURCHARGE THROUGH FRESH NOTICE AFTER WINDING UP RECOVERY PROCEEDINGS
Case Title : CHINA POWER HUB GENERATION COMPANY (PVT.) VS PAKISTAN THROUGH SECRETARY MINISTRY OF FINANCE AND OTHERS
The Court held that:
ï‚· Firstly, default surcharge is not
mandatorily payable as it has to be
adjudicated upon and this adjudication
has to be done along with the main
order being passed in terms of s.161 of
the Ordinance.
ï‚· If not, then in each and every case, ï‚· In our considered view, there cannot
be separate or independent
proceedings under both the sections. If
it is a case of confronting a taxpayer
under section 161 then it has to be
done simultaneously.
ï‚· Matter has been finally adjudicated
without imposing any default
surcharge, hence, subsequent
proceedings initiated by way of another
show cause notice cannot be sustained
and by no stretch of imagination,
subsequent notice for the same issue
under the same provision can be
justified.
ï‚· Further aspect of this case is provided
in proviso of section 205(1), which
says that if a person opts to pay the
tax due on the basis of an order under
s.129 i.e. decision in Appeal by the
Commissioner on the 1st Appeal on or
before the due date given in the notice
under section 137(2) issued in
consequence of the said order and
does not file an appeal under section
131, he shall not be liable to pay
default surcharge for the period
beginning from the date of the order
under section 161 to the date of
payment.
ï‚· Here in the instant matter, the
Petitioner, notwithstanding to what has
been held hereinabove, has paid the
amount adjudged through an order
section 161 pursuant to a demand
notice under section 137(2) without
even resorting to 1st Appeal in terms
of section 129 of the Ordinance.
ï‚· Lastly, imposition of default surcharge
should be adjudicated, based on willful
default and presence of mens-rea.
ï‚· It is suffice to say we have come to the
conclusion that the impugned Show
Cause Notice(s) itself was without
jurisdiction and is to be set-aside /
quashed.
which culminates after legal
proceedings by way of Appeal and
Reference as provided under the
Ordinance, a new show cause notice
would be issued in a mechanical
manner, that since the litigation has
ended against a taxpayer, then he is
liable for payment of default surcharge
as provided under section 205 ibid.
This with utmost respect is an incorrect
approach by the Respondents.
ï‚· It is the officer concerned having
jurisdiction who has to first issue a
combined notice under section 161
read with section 205 of the Ordinance,
confronting a taxpayer as to why the
amount of tax not withheld or
deducted be recovered and further as
to why in failure to do so, the default
surcharge be also recovered.
THE TAX DEPARTMENT SHALL NOT INVOKE THE PROVISIONS OF SECTION 140 WITHOUT SEEKING PRIOR APPROVAL FROM FBR
Case Title : SARDAR WASEEM ILYAS VS FEDERATION OF PAKISTAN, ETC
Brief Facts:
The taxpayer's appeal was pending before the ATIR for the decision; however, in the meantime, the Department forcefully recovered the amounts from the taxpayer's accounts maintained in a Bank. Hence, the taxpayer filed a miscellaneous application against the above action before the ATIR.
Decision:
LHC allowed the petition and directed the Department to return the amount to the petitioner within 15 days and held that the provisions of section 140 shall be invoked when the Department believes that the taxpayer may run away with the demand, which will become irrecoverable forever. Such action against an active taxpayer, for the sake of recovery only, amounts to robbery, if due process is not followed.
Until it is incorporated in the Rules, the Department shall not invoke the provisions of section 140, without seeking prior approval from FBR. Reliance was placed on decisions reported as 2015 PTD 458, 2016 PTD 1799, 2021 PTD 162, and 2022 PTD 1763, whereby directions were given, confirming the fundamental rights of the taxpayer under Article 10A of the Constitution of the Islamic Republic of Pakistan, 1973 with a specific direction that non-recoverability should be confronted to the taxpayer through a notice under the section 139 of the Ordinance.
In the instant case, notice under Section 140 of the Ordinance does not disclose any detail of creating or shifting the demand enforceable against the petitioner. It has already been held that proceedings under section 138 are sine qua non for invoking the provisions of section 140. Reliance was placed on the judgment reported as 2023 PTD 146.
TAXPAYER SHOULD NOT BE FORCED TO PAY A DEMAND CREATED BY A REVENUE AUTHORITY UNLESS THE ORDER CREATING SUCH DEMAND HAS UNDERGONE THE SCRUTINY OF AT LEAST ONE INDEPENDENT FORUM.
Case Title : ABDUL RASHEED, KARACHI VS THE COMMISSIONER-IR, Zone-II, LTU- II, KARACHI
The taxpayer should not be forced to pay a demand created by a Revenue Authority unless the order creating such demand has undergone the scrutiny of at least one independent forum. Reliance is placed on following decisions:
2006 PTD 535
2006 PTD 2207
2003) PTD 1746 = 89 Tax 177
NONE OF THE ASSETS OF A NONPROFIT ORGANIZATION MAY CONFER PRIVATE BENEFIT TO ANOTHER PERSON
Case Title : KASHF FOUNDATION VS CHIEF COMMISSIONER INLAND REVENUE, LTU, FEDERAL BOARD OF REVENUE
Lahore High Court in its judgment held that the Commissioner Inland Revenue had rightly withdrawn the approval granted to a Non-Profit Organization on the basis that private benefit was extended to an associated concern.
