Dozens stationery traders penalised for purchases from blacklisted companies

The Regional Tax Office (RTO) Islamabad has unilaterally penalised dozens of stationery suppliers and traders for allegedly making purchases from blacklisted and suspected companies, which is a serious violations of tax laws.
The representatives of the Islamabad Stationery Association told Business Recorder here on Sunday that RTO Islamabad has suddenly issued one-sided Orders-in-Original against the units without providing any opportunity to the stationery suppliers to submit their viewpoint as admissible under the law. The tax department has imposed penalties on the argument that the purchases had been made from blocked/suspended units. However, the factual status is that when purchases were made, these firms were not suspended during past tax period. At that time, these firms were active and business transactions were carried out with them. If these firms have been suspended at a later stage, how the tax department can penalise the stationery units for past period when these firms were not blacklisted.
In few cases, the RTO Islamabad has issued final show cause notices without issuing any preliminary or initial notice. These final show cause notices have not referred to previous notice and action has been taken against the taxpayers through such final show cause notices. Moreover, no specific provision of Sales Tax Act has been mentioned in such notices. The units which received such final show cause notices are shocked due to the fact that such notices have been unlawfully dispatched without providing any chance to the concerned persons.
Sources said that the Orders-in-Original have been issued to the stationery suppliers and traders, which has created panic among the entire sector. It is shocking to note that how the RTO Islamabad has issued final orders without hearing viewpoint of the concerned units. In certain cases, the notices have not been dispatched by the RTO which further resulted in harassment of business and trade community.
The representatives of the association said that such unilateral actions against the taxpayers have been taken to generate revenue for meeting assigned targets by the FBR. This is a clear violation of reforms in the tax administration under the Tax Administration Reform Project (TARP). Under the TARP, it is necessary to facilitate the taxpayers without causing harassment to them. Contrary to this, the RTO Islamabad has violated FBR's reform agenda, issuing final legal orders ignoring the basic legal aspects of the law. The suspended firms were operative and functioning at that time and firms were not blocked/suspended during the past period.
If the tax department wanted to issue the Orders-in-Original, the legal aspects should be duly considered by the tax department. FBR Chairman Salman Siddique and FBR Member Domestic Operations Khalid Aziz Banth should immediately take notice of the harassment caused by the RTO Islamabad by taking disciplinary action against the officials, the association requested.
It said that it is totally unjustified to impose such huge penalties without realising the fact that such purchases were made at the time when the firms were not blacklisted, suspected or suspended by the department. If now a firm has been blacklisted, why the stationery unit be penalised for conducting transactions with the firm in the past? they added.
One Order-in-Original issued by the RTO Islamabad to a stationery unit said that the unit has claimed input tax adjustment on the basis of invoices issued by Suspended/ Blacklisted/ Blocked units in violation of section 7 of the Sales Tax Act, 1990 read with section 8 of the Act. Accordingly, a Show Cause Notice dated 1st December 2010 was issued under section 11 of the Sales Tax Act, 1990 and hearing was fixed on December 16th 2010. In response to the notice, a written reply was received. In the written reply, the unit said that the input claim is genuine and the suspend/blocked firms were operative/functioning at that time and firms were not blocked/suspended during the said period. Whereas in the record available on web portal system of FBR, the taxpayer has suppressed the value-addition and non-filer in the tax period 02/2009 and failed to pay the due amount of tax. Another unit also failed to pay any amount of sales tax in the relevant tax period of July 2009.
"I have gone through the case record and heard both parties' written and verbal arguments. It has been observed that the registered person reply is not satisfactory and also failed to produce any documentary evidence, which means that the registered person has nothing to offer in their defence. The charges levelled in the show-cause notice thus stand established. The unit has been directed to pay sales tax in violation of section 7 of the Sales Tax Act, 1990 read with section 8(ca) of the Act along with default surcharge under section 34 and penalty under section 33 ibid from their respective tax periods, of the issuance of this order and the recovery action under section 36 of law shall be initiated against them," Order-in-Original added.
The RTO Islamabad has issued similar Orders-in-Original to other units causing serious problems for the business and trade, the association added.