The sales tax registration of Atlas Honda Limited was restored after the order passed by Sindh High Court, which also restricted the Large Taxpayers Unit (LTU) Karachi from taking any coercive action till next hearing date.
In its order passed on October 20, 2014, the court issued notice to deputy attorney general to appear before the court on November 05, 2014. Meanwhile, the court ordered the commissioner, LTU Karachi not to take any coercive action against the petitioner in respect of audit proceedings initiated in the case till next date of hearing, whereas, the order of the commissioner passed on October 14, 2014 whereby the registration of the petitioner suspended and user ID blocked shall remain suspended till next date of hearing and the user ID of the petitioner be de-blocked.
Seeking relief against the order of the commissioner, Atlas Honda Limited filed petition against the initiation of audit proceedings for tax period July 2011 to June 2012, in respect of sales affairs on the grounds that after insertion of the Section 72-B in the Sales Tax Act, 1990 through Finance Act, 2010 only, the board has the authority to select a case for audit.
The counsel for the petitioner submitted that on the controversy several petitions were pending before the court, wherein notices had been issued and the tax department had been directed not to take adverse action pursuant to such audit proceedings.
The counsel also submitted that the identical controversy has been resolved by the Lahore High Court in the case of Chen one Stores vs. Federal Board of Revenue.
The counsel said that initially petitioner has responded to the audit proceedings initiated by the LTU Karachi and supplied the relevant details and information without prejudice to the objections with regard to their jurisdiction, however, since the respondents have recently suspended the registration of the petitioner whereas, user ID has been blocked in violation of provision of Section 21(2) of the Sales Tax Act, which according to the counsel provides for extreme action under situation i.e. if a registered person is involved in issuance of fake invoices or tax fraud, whereas, per learned counsel, such extreme action cannot be taken on the alleged non-compliance or non-submission of documents.
It may be mentioned here that the Federal Board of Revenue (FBR) had suspended sales tax registration of the two-wheeler automobile manufacturer on refusal to provide inventory details to the auditors of Inland Revenue. The official FBR website was also displaying the status of the company as non-active and suspended taxpayer for sales tax registration. As per details, the local office of Inland Revenue selected the company for audit in March 2014 for the period April 2011 to March 2012 after detecting discrepancies in purchased goods and its utilizations.
The FBR sources said that initially the company resisted on the selection for audit arguing that a commissioner of Inland Revenue could not select cases for audit. However, the company later on cooperated with the authorities after realising the changes in the law regarding the powers of a commissioner for selecting cases for audit.
Through Finance Act, 2013 an explanation inducted to Section 25 of Sales Tax Act, 1990 that states: “It is declared that the powers of the Board, Commissioner or officer of Inland Revenue under the sections 25, 38, 38A, 38B and 45A are independent of the powers of the Board under section 72B and nothing contained in section 72B restricts the powers of the Board, Commissioner or Officer of Inland Revenue to have access to premises, stocks, accounts, records etc under these sections or to conduct audit under these sections.”
Section 72B of the Act authorizes the FBR to select cases for audit through computerised random balloting. In the case of the Atlas Honda, the two wheeler automobile manufacturer, the tax authorities had asked for records as described under Section 22 of the Act where taxpayer is liable to provide records of supplies and purchases showing description, quantity and value of goods.
The FBR sources said that the company had provided soft copies of purchases made but no further details were provided about utilisation against manufacturing. The tax authorities repeatedly insisted on the records and finally issued show cause notice, on which the company refused to further cooperate.
The sources said that sales tax registration of the company was suspended under Sales Tax General Order (STGO) No. 35/2012 dated June 30, 2012 where a commissioner can suspend the registration of a company on refusal to allow access to business premises or ‘refusal to furnish records to an authorised Inland Revenue Officer.’
-Published on pages#-18-19 October 2014 edition of MOBILE WORLD Magazine