FBR Intelligence Unit Has No Authority in Sales Tax Related Cases: PHC

The Audit Officers of the Directorate General of Intelligence and Investigation – Inland Revenue (DG I&I-IR), do not have independent statutory powers to assess, adjudicate, or recover sales tax liabilities of sales tax registered persons. This has been categorically conveyed by the Peshawar High Court (PHC) in a judgement against the Directorate General of Intelligence and Investigation – Inland Revenue (DG I&I-IR). The landmark decision came in response to a sales tax reference filed by an Abbottabad-based taxpayer, who challenged the jurisdiction of DG I&I (IR) Audit Officer from Peshawar. Case was argued by tax lawyer Waheed Shahzad Butt and the Division Bench agreed, observing: “It is unclear how an officer of the DG I&I (IR), Peshawar, could independently calculate and assess the sales tax liability of the Applicant situated in Abbottabad. Such actions are beyond the statutory framework governing their powers.” PHC order states, “Since the entire exercise has been conducted, the liability in question assessed and a contravention report has been made by the Audit Officer of DG I&I (IR), Peshawar. Audit Officers of the DG I&l (IR), Peshawar, do not have independent statutory powers to assess, adjudicate, or recover sales tax liabilities. Their powers were limited to detection, investigation, and reporting of cases involving tax evasion, fraud, or non-compliance, preparation of contravention reports, conduct audits and seek information Every registered person operating within the supply chain claims an adjustment or refund of input tax. Without a proper determination of the input tax claimed or claimable, it is unclear how an officer of the DG I&I (IR), Peshawar, could independently calculate and assess the sales tax liability of the Applicant situated in Abbottabad. Audit Officer of DG I&I, Peshawar, unlawfully assumed jurisdiction, prepared a contravention report without conducting an audit under Section 25 or examining records under Section 38, and improperly determined a sales tax liability. These actions were without jurisdiction and void ab initio. The Adjudicating Officer, without conducting any independent inquiry or applying his own mind, simply endorsed the findings of the Audit Officer DG I&I (lR). Similarly, both the CIR (Appeals) and the Appellate Tribunal failed to address these jurisdictional and procedural defects, culminating in an unjustified imposition of huge liability upon the taxpayer. It is therefore concluded that the entire proceedings, from their very inception, being without jurisdiction and without lawful authority, are void and of no legal effect: PHC ordered