Section 25 of Sales Tax Act 1990: ATIR annuls commissioner’s audit selection

ISLAMABAD: In landmark judgement, the Appellate Tribunal Inland Revenue (ATIR) has declared the selection for audit by the commissioner under Section 25 of the Sales Tax Act 1990 as without lawful basis and stands annulled.

As per tax experts, there is a widespread misconception that an appeal to the ATIR lies only an assessment order levying some tax whereas in certain unique situations a direct appeal lies to the ATIR against any other order under any provision of the Act passed by the Commissioner Inland Revenue (CIR).

In this case through an order under Section 25 the CIR had selected the case of the taxpayer for audit by giving certain reasons as per principles laid down by the superior courts and the standing instructions of the Bard. The CIR directed the taxpayer to produce sales tax record before the concerned assessing officer.

FBR has failed to implement ATIR order

The taxpayer first filed a representation before the CIR contesting the reasons given for the selection for audit. There was no response from the CIR on the representation of taxpayer. On that direct appeal before the Tribunal was filed under Section 46 which in addition to second appeal against the order of CIR Appeals provided direct appeal against any order of CIR passed under any provision of the Act.

The ATIR bench comprising on Syed Mahmood Ul Hassan and Muhammad Tahir made the following observation in the operative part of its order: “8. We have perused the sales tax returns produced before us and found the stance of the RP to be correct.

The figures of the relevant months correspond precisely to credit note adjustment of exempt supplies and not to taxable supplies. No value addition tax was legally chargeable on such transactions. Therefore, the reasons recorded by the commissioner for audit selection are based on misapprehension of facts and misreading of return structure.

9. Accordingly, the appeal filed by the RP merits acceptance. The impugned letter issued under Section 25 of the Act 1990 is hereby set aside and audit selection made thereunder is declared to be without lawful basis and stands annulled.”

When contacted for comments Shahid Jami, tax consultant observed that the aggrieved taxpayers across the country have taken a sigh of relief from the recent appointments of able Members in the ATIR on market-based salary who are delivering justice without being influenced by figures of tax involved in a very professional manner. Court timings have also improved and after judgements are released promptly.

Copyright Business Recorder, 2025