A tax expert told Business Recorder that the division bench Lahore High Court has remanded back the said case to the ATIR on the basis that the appellate tribunal has not fulfilled the requirement of fair trial and due process of law as envisaged under Article 10A of the Constitution of Pakistan.
According to the order of the LHC, "Tribunal is the last forum for consideration of questions of fact and the right of the parties to address their arguments on factual aspects cannot be taken away or abridged. It would thus be proper to send the matter back for adjudication afresh. Since we have decided the instant reference application on a preliminary issue, the rest of the questions raised are not required to be answered,"
The background of the departmental reference application was that Jahangir Khan Tareen in his return of total income for Tax Year 2011 as well as in the wealth reconciliation statement had declared exempt agricultural income at Rs 700,282,263, and claiming its exemption under section 41. The assessing officer initiated proceedings under section 122 of the Income Tax Ordinance, 2001 inter alia on the basis that in the nomination form filed before the Election Commission of Pakistan in the relevant columns the agricultural income for Tax Year 2011 was declared at Rs 160,000,000 and the difference of Rs 540282263 warranted addition under section 111(1).
On due date of 08.08.2016, adjournment was sought on behalf of the taxpayer but the same was refused and ex parte amendment order was passed by making the addition confronted and raising tax liability of Rs 199,107,224. The taxpayer filed appeal before Commissioner (Appeals) on 11.08.2016 who vide order dated 02.09.2016 upheld the amendment order. On that the taxpayer filed second appeal before the appellate tribunal.
Before the appellate tribunal the moot point was that as per assessing officer in the income tax return the agricultural income had been inflated as compared to the nomination form and on the agricultural income declared in the federal income tax return provincial agricultural income tax was not paid to the BOR, Punjab, whereas as per taxpayer the following proviso to section 111(1) inserted through Finance Act, 2013 was not applicable to tax year 2011:
"Provided that where a taxpayer claims the nature and source of amount credited or the investment made, money or valuable article owned or funds from which expenditure was made, by way of agricultural income, such explanation shall be accepted to the extent of agricultural income worked back on the basis of agricultural income tax paid under the relevant provincial law."
The appellate tribunal through its order dated 24.10.2016 accepted the contention that the aforesaid proviso inserted with effect from 01.07.2013 is applicable to the tax year 2014 and thus not relevant to tax year 2011 and the declared agricultural income as supported with evidence produced before tribunal was genuine and correct.
On that the commissioner Inland Revenue filed reference before the Lahore High Court on multiple questions of law arising out of the order of the tribunal, wherein the first question was whether tribunal has fulfilled the requirement of fair trial and due process of law as envisaged under Article 10A of the Constitution. The division bench of the Lahore High Court has answered the question in negative and has sent the matter back to the tribunal for fresh adjudication and has observed rest of the questions are not required to be answered.
When contacted, Shahid Jami, Lahore-based tax consultant explained that though the court has observed that the assessing officer and commissioner (appeals) have not provided fair opportunity of hearing to the taxpayer and the same has been repeated by the tribunal by not giving fair opportunity to the department.
He was of the view that no proceedings in any other case has been initiated on account of any discrepancy between the information provided in the nomination papers and the information declared in the tax return even in those cases where the elected parliamentarians have been disqualified by the superior courts for giving wrong declaration about the assets held. He added that similarly the assessment proceedings were finalized within days by bypassing the standing instructions of the board to give three notices before making assessment and to give clear margin of at least 15 days in each notice.
Jami pointed out that in line with proviso to section 111(1) inserted through Finance Act, 2013 the provincial assembly also inserted section 3B in the Punjab Agricultural Income Tax 1997 through provincial Finance Act 2013 providing that the provincial agricultural income tax would be payable on the income declared in the federal income tax return.
He added that the BOR Punjab also started retrospective application of section 3B, which was contested before the Lahore High Court by the person declaring agricultural income in the federal income tax return and the court through its judgment reported as 2016 PTD 910 had held that section 3B came into effect on 01.07.2013 hence recovery for assessment year 2012 and 2013 cannot be made under section 3B as the same is not retrospective.
Jami pointed out that since retrospective application of the identical provision had already been disapproved by the Lahore High Court therefore the tribunal had rightly held that proviso to section 111(1) inserted through Finance Act 2013 is not applicable to TAX YEAR 2011.
Jami urged that the FBR should obtain copies of nominating form from the Election Commission of all the candidates and not of the elected ones and scrutinize the same with the declared version to the tax authorities and additional information available in its database, he added.
Copyright Business Recorder, 2017