ISLAMABAD: Islamabad High Court (IHC) has ruled that the taxpayer has the right to file an estimate of the advance tax payable under section 147 of the Income Tax Ordinance 2001, and thereafter pay an amount that the taxpayer deems to be due in accordance with such estimate.
Explaining the judgement of the IHC, a leading tax expert, Asif S Kasbati told Business Recorder that the IHC has recently issued an order in writ petition (WP 4793 of 2016) in case of a microfinance bank and three others.
The IHC observed that in view of the language of Section 147 of the IT Ordinance read together with Section 205 and the ratio in the aforesaid judgments, a taxpayer has the right to file an estimate of the advance tax payable under Section 147(6) and thereafter pay an amount that the taxpayer deems to be due in accordance with such estimate.
He stated that the petitioner was aggrieved by a notice under section 147 of the IT Ordinance for payment of advance tax and notice dated 28.12.16 under Section 138(1) ordering attachment of property of the taxpayer for its failure to pay installment of advance tax due for Tax Year 2017.
The IT Ordinance, at the time of issuance of the impugned notices, vested no authority in the taxation authorities to affect recovery of the amount that they deem to due under Section 147 in contradiction of any tax estimate filed by the petitioner/taxpayer under Section 147(6).
The scheme of the IT Ordinance is based on self-assessment undertaken by the taxpayer.
The Ordinance then vested power in taxation authorities to undertake reassessment of the tax return filed by a taxpayer in compliance with provisions of the IT Ordinance, and seek recovery of any non-payment or short payment on the basis of such reassessment, he referred to the IHC judgement.
The IHC further stated that section 147(6) also enables the taxpayer to self-assess advance tax liability to the extent that such taxpayer estimates that the tax payable for the relevant tax year is likely to be less than the amount he is required to pay under section 147(1).
In the event that the estimate filed by the taxpayer under section 147(6) is incorrect, a remedy is provided under Section 205 to impose a surcharge to the extent of short payment to penalize the taxpayer.
This was the settled law at the time when the impugned notice was issued.
This interpretation of law is further strengthened with the authority erstwhile not extended, ie, to affect recovery, if such authorities come to the conclusion that the estimate filed under Section 147(6) is misconceived.
The amendment in law now confers a power on the taxation authorities which previously did not exist.
This change in law is in itself manifestation that the impugned notice issued prior to such change in Section 147(6) was devoid of legal authority. The IHC held that the instant petition was allowed and consequently the impugned notices being suffered from jurisdictional defect as having been issued without legal authority were declared to be void ab initio and of no legal effect, the tax expert added.
Copyright Business Recorder, 2021