Maverick Developments Private Limited (MDL) has demanded Chairman Federal Board of Revenue (FBR) of directing Commissioner Ishtiaq Ahmad Khan and Deputy Commissioner Inland Revenue (DCIR) Sumera Kanwal to issue a public apology to MDL for misuse of authority.
It said that the public apology to be widely circulated in print and electronic media. Furthermore, another demand has been made to transfer both the Commissioner and DCIR from their current posts to serve in rigorous assignments; and make this reprimand part of their personnel files in FBR, followed by their dismissal from service for gross misuse of authority, rent seeking, harassment of taxpayer, spreading terrorism at taxpayer's premises against the damages suffered by MDL in their hands.
MDL is a group of hoteliers of international repute based in USA and Pakistan. MDL and all of its group companies have an immaculate record of voluntary tax compliance. MDL has recently finished development of a residential condominiums building in Liberty Market area, Lahore (namely, Hyde Park). During audit proceedings under section 177/214C for tax year 2015, wherein no construction expense was incurred, neither any bookings were made, the concerned tax officials wanted to assess this project under section 36 of Income Tax Ordinance, 2001 (i.e. to treat MDL as a "contractor" rather than a "developer").
The matter was deliberated at length with the officers whereby MDL contended to be assessed under section 7C (fixed tax regime). During the deliberations, the officers offered MDL to settle the matter by paying underhand amounts in lieu of overstating the expenses and understating the revenue. MDL, in response, showed its inability to do such mis- declarations (which seems to have become the main cause for the dispute to arise).
With no agreement in sight on claim of applicability of section 7C and non-applicability of section 36, MDL approached the honorable Lahore High Court to obtain an injunction on the applicable law. On Jan 16, 2019, the honorable court was pleased to admit Writ 2449/2019 and passed interim order of "no coercive action against the petitioner" during the pendency of the writ.
The Department, being annoyed at filing of the writ petition, and despite the aforesaid restraining order of the honorable LHC, on Jan 24, 2019 on the instructions of Commissioner Ishtiaq Ahmad Khan, raided the premises of MDL, manhandled its employees and seized the records and computers. The FBR party also went to a different business (Smart Hotel) operated by the owners of MDL and dispersed all over the hotel floors and started banging on the guest room doors, thereby spreading terror and harassment among the hotel guest and staff.
To pressurize MDL, the FBR party was accompanied by cameramen which made one-sided footage that was aired on local channels for 8 continuous hours in headlines. MDL approached the LHC and filed a contempt petition. On Feb 6, 2019, the Commissioner Ishtiaq Ahmad Khan (who was called in person to explain his position) appeared before the honorable court and unequivocally apologized for not following the orders of the court. The court, showing restraint, kept a lenient view of the matter and disposed of the contempt petition. It is important to note that, while returning the records of MDL after almost two weeks, the Commissioner and DCIR (Sumera Kanwal) were extremely appreciative of the accuracy of records kept by MDL.-PR
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