Blow to FBR Tribunal sets aside tax claim against PTI leader

ATIR judgment says demand raised in ‘indecent haste and with a pre-determined mind’

ISLAMABAD: A judicial body has set aside Rs199 million tax demand against the PTI’s senior leader Jahangir Tareen, ruling that the Federal Board of Revenue has acted in indecent haste and with a pre-determined mind.

A two-member Appellate Tribunal Inland Revenue (ATIR), Lahore bench, passed the judgment against the FBR’s decision to recover an extra Rs199.1 million from the PTI lawmaker. The judgment is seen as one of the harshest against the FBR.

The Regional Tax Office (RTO) Lahore had raised the tax demand against Tareen in May this year. This was the time when the PTI was about to launch a countrywide movement against the government over the Panama leaks. The RTO Lahore had raised the demand against Tareen on the grounds that the taxpayer understated his agriculture income and also showed a big chunk of income as gift to avoid paying Rs199 million as tax.

The demand was raised in “indecent haste and with a pre-determined mind”, according to the tribunal’s judgment. In his Income Tax Return for tax year 2011, Tareen declared agriculture income at Rs700.2 million while the same was declared at Rs160 million in the nomination form submitted before the ECP, showing a difference of Rs540.3 million.

Agriculture income is exempted from taxes. The FBR added Rs540.3 million into taxable income of Tareen, but the tribunal ordered that this was done with “a pre-determined mind”.

The other allegation against him was that Tareen declared Rs190 million as gifts, which are also exempted from income tax. The tribunal ruled that this issue was raised in “indecent haste”.

“The appellant (Tareen), being one of the top taxpayers of the country, having a consistent history of compliance, maintaining more than necessary documentation… deserved a fair and transparent treatment,” ruled the tribunal.

Sources in the FBR insisted that the move was originally aimed at unearthing the trail of money which went out in foreign trusts. However, due to serious incompetency issues of the tax authorities, the opportunity has been lost, they added.

There was a need to take disciplinary action against those who acted in indecent haste, according to the people having knowledge of the case.

The tribunal gave its decision on factual points of the case, which has excluded the option of going to the high court against the decision. Now, the only option in front of the FBR is to file rectification application with the tribunal. The sequence of the events that the tribunal narrated in its judgment showed the authorities concerned had something in their mind even before they moved against Tareen.

The RTO Lahore of the FBR issued notice to Tareen in May this year. Before the conclusion of the proceedings in the RTO, the FBR decided to transfer the case to the Large Taxpayer Unit (LTU) Lahore and issued an order that Tareen should deposit Rs199 million additional tax by August 8, 2016.

The FBR passed ex parte (one-sided) payment order against Tareen despite the fact that his lawyer sought an adjournment of the case.

“The Officer Inland Revenue denied sufficient opportunity of hearing to Jahangir Tareen and the FBR’s notice of treating gift as income was without lawful authority and patently illegal,” ruled the tribunal. The ex parte order was passed within a record time of ten days after issuing only one notice and that, too, without confronting the taxpayer, observed the tribunal.

Similarly, the Commissioner Inland Revenue decided the first appeal within a record time of 22 days after issuing only one notice and by refusing to admit any documentary evidence, ruled the judicial body.

“It was surprising to note that at the second appellate stage, the respondent (the FBR) suddenly lost interest in the case, which it had been so eagerly, anxiously and vehemently pursing,” according to the tribunal order. The tribunal ruled that Rs190 million was a genuine gift received from family members through crossed cheques.

The FBR’s lawyers sought adjournments of the case three times at the second appeal stage, which the tribunal’s orders showed were aimed at wasting time.

“The bench was of the considered view that the respondent’s (the FBR) repeated requests for adjournment and for change of bench was a deliberate strategy with motives.”

When the third adjournment was also expired, the FBR lawyer submitted an application for transfer of the case from the tribunal bench to another bench, which was rejected.

Published in The Express Tribune, November 12^th, 2016.