FBR notice seeking 18-year-old tax details shot down

SC says board did not send its notice to company within five years

ISLAMABAD: The Supreme Court on Friday set aside a notice issued by the Federal Board of Revenue (FBR) to private company seeking details of its sales tax returns from 2001 to 2005.

A three-member bench headed by Justice Umar Ata Bandial declared that the FBR had not sent its notice to the company within the stipulated period of five years.

At the start of the hearing, the FBR counsel maintained that the company had evaded around Rs30 million on account of sales tax between 2001 and 2005.

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However, the company has been paying sales tax since 2009.

Justice Bandial observed that the FBR counsel’s argument implied that a company that had stepped forward to pay taxes was now being asked to present details of its accounts that were several years old.

“What kind of procedure is this?” the judge remarked. “It compels one to avoid paying taxes even if one is willing to do so,” he added.

“This is why our industries are shifting to Bangladesh and Sri Lanka. Did the FBR realise in 2016 that a company had not paid its taxes in 2005?”

Justice Ejazul Hasan maintained that as per law, show-cause notices must be served within a period of five years.

Justice Bandial noted that the court would have admitted the matter if the FBR had served a show-cause notice by 2009.

The FBR counsel replied that the board discovered the tax evasion in 2013.

Justice Faisal Arab inquired as to why the FBR had sent the notice in 2016 when the case was detected in 2013.

The counsel said an inquiry was launched in 2013 after the detection of the fraud. Justice Arab questioned as to why it took three years to complete the inquiry.

Flour mills

In another case, the Supreme Court observed that contrary to its claims, the government was subjecting the business community to unnecessary hardships.

“The operations of exporters are being subjected to constraints,” Justice Mushir Alam noted while heading a two-member bench hearing the flour mills’ bank guarantees case.

The court ordered the Punjab government to return the bank guarantees deposited on account of imports by flour mills.

The flour mills’ counsel argued that the bank guarantees were deposited in dollars and the State Bank had endorsed the amount in local currency.

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The Punjab food department director told the court that the guarantee claims were withheld because the flour mills were unable to present the required documents.

Justice Qazi Faez Isa asked the food department director about the documents that were not furnished by the flour mills. “We cannot comprehend what kind of assurance is the food department is looking for?” he remarked.

The court later dismissed the provincial government's appeal against the refund of bank guarantee claims.