Sources told Business Recorder here on Friday that the FBR and the AGP officers agreed that since the matter was sub judice in the Apex court, therefore, we may await the decision on the issue. The FBR officers fully endorsed this decision. The issue mainly related to the non production of sales tax registered person's records to the audit by FBR/field offices. Tax authorities explained that the Auditor General can perform functions and exercise powers of audit only in relation to the accounts of Federation and of the Province and the accounts of any authority or body established by the Federation or a province.
They further stated that FBR has never disputed the above powers of the Auditor General of Pakistan. Going one step further to facilitate the audit authorities of the Auditor General for audit of Sales Tax receipts, the FBR kept on providing the records (books of account) of private registered persons as per modalities agreed upon between FBR and audit authorities, till the time when it was found that the said letter was in direct conflict with the findings of Division Bench of Peshawar High Court vide order dated September 18, 2008 and also endorsed by the Supreme Court that officers of Auditor General of Pakistan are neither Sales Tax Officers under section 30 of the Sales Tax Act, 1990 nor they are authorised under the Sales Tax Rules, 2005 to have access to the premises and accounts of any registered unit under the Sales Tax Law.
The judgement of the Peshawar High Court was assailed before the Supreme Court after consultation with the officers of the Auditor General. The operation of the order of Peshawar High Court was suspended by the Apex Court vide order dated January 9, 2009 and the arrangement between FBR and audit authorities agreed upon vide letter dated April 10, 2006 continued. During the hearing, the counsel of FBR argued the case at some length, however, when the Court confronted him with the finding of the High Court that Sales Tax department may conduct fresh audit of the unit, he did not press the appeal further and consequently findings of the Peshawar High Court attained finality upto the level of Supreme Court vide judgement dated April 13, 2012, FBR said.
In the meanwhile, the Single Bench of the Lahore Court vide judgement dated July 7, 2010, while dealing with the same issue held that FBR and its sub-ordinate department have every right to summon the sales tax record of a registered unit under section 25 of the Sales Tax Act, 1990 and is bound to submit the same to DGRRA. In view of the above situation, the matter was reviewed in the Board and to avoid defiance of the orders of the Peshawar High Court and the Supreme Court the arrangement between the FBR and audit authorities discontinued vide Board's letter dated September 8, 2010.
The judgement of the single bench of the Lahore High Court dated July 7, 2011 was in contravention with the order of the Supreme Court dated April 13, 2010 and acceptance of the viewpoint of audit authorities to follow this judgement in rem in the presence of judgement of Division Bench of the Peshawar High Court, was not possible.
Consequently to resolve the controversy this judgement was assailed before the Supreme Court and CP No 1947 to 1949 of 2010 are pending before the Supreme Court. The matter was also referred to the Law Division for opinion by audit authorities as well as the Board. The Law Division has rendered its opinion thrice on the issue dated April 19, 2008, February 24, 2011 and September 20, 2012.
In the first opinion dated April 19, 2008, it has no where been mentioned that the Sales Tax Officers under any provision of the Sales Tax Act or any other law or under any provisions of the Constitution are bound to call for record (books of accounts) of a private registered person for submission before the audit authorities.
In the second opinion of the Law Division dated February 24, 2011, given to the Auditor General, the views given in earlier opinion were reiterated and it was again nowhere mentioned therein that the officers of the sales tax department under the Sales Tax Act, 1990 are bound to summon the record (books of accounts) of a private registered person for submission before the audit authorities.
Third opinion of Law Division dated September 20, 2012 given in response to Board's reference is primarily based on provisions of section 12, 13 and 14 of the Auditor General Ordinance, 2001 and the judgement of the Supreme Court dated July 21, 2011 in CP No 993 of 2011 in the case of ODGCL. The gist of advice is that in the light of Apex Court judgement dated July 21, 2011 the judgement of Lahore High Court dated July 7, 2010 can be implemented. The Lahore High Court judgement provides that FBR can all books of Accounts of sales tax registered persons for RRA Audit.
Tax authorities reiterated that FBR never denied production of record relating to registered persons available with it to the audit authorities, the controversy is only to the extent that whether the sales tax authorities are bound to call for record (Books of Accounts) of private registered person for submission before the audit authorities, and if so under which provision of Sales Tax Act, 1990 or under which section of AG Ordinance, 2001, sources said.
After the judgement of Lahore High Court in the case of M/s ChenOne (Pvt) Ltd whereby the Court has also barred the Sales Tax Officers from calling of record (books of accounts) for audit unless the case is selected by the Board. In the light of this recent judgement the Commissioner Inland Revenue cannot call record (books of accounts) of a private registered person for audit. In this legal background the sales tax authorities are not in a position to call for such record (books of account) for the authorities of the Auditor General. If in the opinion of the audit authorities, they have powers to conduct audit of any registered person under the AG Ordinance, 2001 they may exercise these powers. The FBR and its field offices have always extended co-operation for audit of records which is in their possession.
Sources said that since the matter is sub judice before the Supreme Court, Public Accounts Committee has been requested by FBR vide letter dated October 22, 2012 that if it deems this to be appropriate may request the Supreme Court to take up CP No 1947 to 1949 of 2010 pending before it for early decision so that the law is settled for good.