Audit of tax receipts: AGP office empowered to acquire record

The Auditor General of Pakistan office is legally empowered to summon the Federal Board of Revenue (FBR) to acquire taxpayers'' record for audit under Constitution, AGP Ordinance, Sales Tax Act 1990 along with judgements of the Supreme Court of Pakistan, Inland Revenue Appellate Tribunal and Federal Tax Ombudsman (FTO) office in this regard.
Sources told Business Recorder here on Saturday that the AGP office has written a letter to the ''FBR on the audit of the tax receipts by the AGP department. According to the AGP, prior to 1990, sales tax and central excise (now federal excise) were used to be collected under supervised clearance procedure with central excise and sales tax staff posted in manufacturing units with their offices at factory gates to watch inflow of raw materials, production, outflow of manufactured goods, etc after payment of leviable duties and taxes. Both Central Excise & Sales Tax Department and the manufacturing units were maintaining prescribed record under the tax law. Audit was then used to be conducted on the basis of record maintained by the Central Excise and Sales Tax Department.
In 1990, the previous Sales Tax Act, 1951 was replaced by the Sales Tax Act, 1990 switching its collection TO self-assessment and self-clearance procedure. Since sales tax was then being collected with central excise, which was on supervised clearance procedure, the self-assessment and self-clearance of sales tax remained in transition phase up to 1996 when Collectorates of Sales Tax were made independent of Central Excise. Later on Central Excise was also switched to self-assessment and self-clearance in 2005 through Federal Excise Act, 2005 and it was again merged with sales tax for purposes of collection.
The AGP office said that the sales tax and federal excise are now being collected from taxpayers on self assessment and self clearance basis. Taxpayers submit monthly return to the RTOs/ LTUs through e-filing and pay sales tax on-line or through computerised Payment Receipt and are required to maintain initial accounts in its support under the Sales Tax Act, 1990 and the Federal Excise Act, 2005. They are obliged to produce the record so maintained to the sales tax and federal excise officers (now called Inland Revenue Officers) as and when requisitioned by them. These initial accounts are not private record of taxpayers but are of tax/duty collected by them on behalf of government along with cost of their supplies/services. The initial accounts form the basis of assessment of tax/duty. The FBR has denied the access of such record in hard or soft form to the Audit on the basis of self conceived interpretation of judgement of the Peshawar High Court and the Apex Court in a particular case. This has jeopardised our audit activity to a great extent. The judgement was applicable to a particular case which pertained to the Central Excise & Salt Act, 1944 and the Pakistan (Audit and Accounts) Order, 1973 which are repealed laws and are no more in the field. The Law and Justice Division was apprised of the factual position which gave opinion in favour of the Audit twice on 19.05.2008 and 14.02.2011. In order to linger on the matter, the FBR disputed this opinion and made a back reference on April 16, 2011 on flimsy grounds. Audit brought this matter into the notice of the PAC which fully endorsed the viewpoint of the Audit twice on May 30, 2011 and September 26, 2011. Audit as well as public accounts committee (PAC), disposal of the reference made to Law and Justice Division by the FBR is still awaited.
In the meanwhile, in three cases Lahore High Court, Rawalpindi Bench and in one case the Islamabad High Court gave judgements which support stance of the Audit. In the later case, the Apex Court has also given judgement, which indirectly supports the Audit''s stance. As to the former three cases, FBR went into appeals in the Apex Court forming their own Chief Commissioner and our Director General Audit as proforma respondents. It may be worth mentioning that FBR has filed three appeals although neither FBR nor the Federation was an aggrieved party in Lahore High Court''s judgements appealed against. Aggrieved parties were taxpayers, which have been made respondents. Thus FBR has filed appeals at the cost of the national exchequer in the interest of the taxpayers against interests of the Federation. The obvious reason may be to avoid accountability and parliamentary oversight. Audit has a strong defence in the light of Articles 169 and 170 of the Constitution read with Sections 12 and 14 of the AGP''s Ordinance, Sales Tax Act, judgements of Apex Court, Inland Revenue Appellate Tribunal, Federal Tax Ombudsman, etc. All these provide access to the Audit to the initial accounts which form the basis of accounts/returns which are auditable by the Department of the Auditor-General of Pakistan. Audit requisitions such initial accounts requesting their auditee organisation (ie FBR) to summon such record/ accounts under powers bestowed upon then (u/s 25 of the Sales Tax Act, 1990) for making available to the Audit, the AGP office added.