LHC’s orders on confrontation of alleged differential values in sales tax returns with income tax returns

ISLAMABAD: The Lahore High Court (LHC) has categorically held that the confrontation of alleged differential values in sales tax returns with income tax returns by the tax department was not supported by any definite information.

The income tax reference prepared by the Federal Board of Revenue (FBR) has been dismissed by a division bench of the LHC.

In its order, the divisional bench (DB) of LHC found no merit in the questions raised by the applicant department.

Talking to Business Recorder, tax lawyer, Waheed Shahzad Butt, who represented a taxpayer, stated that the assessing officer merely relied upon entries appearing in the sales tax returns while completely disregarding the factual explanations and documentary evidence furnished by the respondent taxpayer, calling it illegal intervention by the department. These actions were discarded by the Tribunal, and are now confirmed by the LHC.

LHC order states “Tribunal has lawfully held that confrontation of differential values was not based on any definite information, as the assessing officer has simply relied upon the sales tax returns and ignored the factual explanation offered by the respondent taxpayer. Documents show that certain items reflected under the head of imports did figure in the sales tax returns, which items were not transformed into income for the relevant tax period. Therefore, the reliance of the applicant department on the sales tax returns for construing ‘definite information’ in this case is baseless. The existence of the ‘definite information’ is ‘sine qua non’ for the amendment of the assessment. No substance in the question sought to be raised; the same is answered in the negative.”

This landmark ruling would serve as a landmark judgment by curbing the unbridled powers frequently exercised by field formations of the FBR and ensuring lawful protection for the taxpayers, Waheed Butt added.

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