RTO Peshawar contests FBR permission to cement maker

RECORDER REPORT

ISLAMABAD: The Federal Board of Revenue has allowed a cement manufacturer to hire a reputable chartered accountant firm for audit, which has been strongly contested by Regional Tax Office (RTO) Peshawar, as the RTO is in process of finalizing a case of massive tax concealment against the unit – a sheer demonstration of lack of intra-departmental coordination. 

Sources told Business Recorder here on Monday that the RTO Peshawar is pursuing a case of concealment of taxes against a cement manufacturer. The matter has also been taken up at the higher judicial fora. The show cause notice has been served to the unit and matter is being investigated taking into account the available tax record. On the request of the cement manufacturer, the FBR had allowed the unit to hire a chartered accountant firm for audit. The RTO has requested the FBR to decide the matter on the basis of available documents and record on merit. The FBR should not allow the cement manufacturer to hire any chartered accountant firm for carrying out audit as the RTO is already in the process of verification of tax records. The FBR’s permission to allow a chartered accountant firm to conduct audit on the behalf of the cement manufacturer would hamper ongoing departmental investigation against the unit. The investigation against the unit should be completed without assigning the task to any firm of Chartered Accountants due to concealment of material facts by the unit in the court. Therefore, the FBR should withdraw its earlier letter with immediate effect, enabling the RTO to pursue the show cause notice already issued to the cement manufacturer.

Details of the case revealed that recently, the Board vide letter F.No.3(107)STJ/2012 dated 30th April, 2012 directed this RTO to act in accordance with the instructions issued by the Board vide letter dated April 11-2011 followed by two other letters. However, contents of the above referred letters of FBR are apparently contradictory to its earlier letter put forth by cement manufacturer before the High Court during hearing proceedings. But contrary to the above, the unit concealed the FBR’s instructions which had also been endorsed to them at the time of hearing proceedings before the High Court Peshawar.

The basic controversy arising out of the above referred letters is that the Board in its letter dated January 18, 2011 has stated “to apprise the court about the decision of the Board to conduct single point audit through reputable audit firms, to determine whether the incidence of tax has been passed on or not..” On the other hand, the Board in its letter dated April 11, 2011 has stated that “the request of third party audit made by the applicant ie cement manufacturer has been examined in the Board. The unit may be advised to pursue its case before the adjudication/appellant forum.

Precisely, on one side the FBR has accepted the request of the petitioner (unit) vide letter dated January 18, 2011 and decided to conduct single point audit through reputable audit firm, but on the other side after a few months, the FBR had changed its stance and issued another letter dated April 11, 2011 advising the unit to pursue its case before the adjudication/appellate forum, but without having withdrawn its earlier letter.

It merits mentioning that mala fide intention of the applicant company can be ascertained from the fact that they advertently concealed the FBR’s instructions dated April 11, 2011 in their favor and did not apprise the court during hearing proceedings which resulted into the decision by the court against the real facts of the matter under reference. Therefore, at this stage, the request of the applicant company is not maintainable, accordingly, the decision of the Board with reference to verification of section 3D by the Chartered Accountants firm is not appropriate.

In light of above facts, in order to obviate the show cause notices, it will be more appropriate to advise this RTO to decide the matter upon the available documents and record on merit without assigning the task to any firm of Chartered Accountants due to concealment of material facts by the unit before the High Court, Peshawar.

Therefore, Board is requested to withdraw its letter vide C.No.1(6)FED/2009/9840-R dated 12-07-2012 with immediate effect and this RTO may be allowed to pursue the show cause notices already issued, RTO Peshawar added.