ISLAMABAD: The Appellate Tribunal Inland Revenue (ATIR) has annulled sales tax demand amounting to Rs1.5 billion raised by Regional Tax Office (RTO) Peshawar against a vegetable ghee mill.
The ATIR Peshawar has annulled sales tax demand amounting to Rs1.5 billion adjudged on the ground of violation of Section 73(4) of Sales Tax Act on supplies made to unregistered person by a ghee mill.
The ATIR has also withdrawn the penalty imposed on the said mill.
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In this regard, ATIR Peshawar Bench has issued a judgement against the tax department.
The crux of the order revealed that in view of the above discussion it is held that the impugned order dated 30-08 2024 finalised under the omitted Section 11(2) of the Sales Tax Act, 1990 is not sustainable as, being procedural, Section 11E inserted through Finance Act, 2024 should have been adopted for finalisation of assessment.
Secondly, even if it is presumed that the omitted Section 11(2) was adopted correctly, the assessment order is time barred as per the plain reading of First Proviso to Section 11(5) of the Sales Tax Act, 1990. Thirdly, the provisions of Section 73(4) of the Sales Tax Act, 1990 have been misread and misapplied to the facts of the instant case.
The appeal was filed against the assessment order passed by Deputy Commissioner IR, Corporate Zone, RTO Peshawar.
During examination of sales tax returns, discrepancies were found in the record pertaining to the July 2020 to June 2023. The taxpayer made supplies to the un-registered persons in violation of Sales Tax Act. Therefore, the involved input tax adjustment was inadmissible.
Later, ex-party order was passed by the concerned official of the RTO Peshawar.
According to the judgement of the ATIR, in the instant case the Learned Deputy Commissioner-IR has clearly erred, firstly, in use of legal terminologies which though is not critical to the outcome of this case is yet an error of its own.
Secondly, for the financial years 2021 and 2023 the provision of Section 73(4) is not attracted as the taxable supplies to a single person who is allegedly not registered does not exceed the threshold. The learned DC-IR did not bother to ascertain the facts available on record and has misapplied the provision of the section by considering the whole range of buyers and calculated the aggregate of tax liability which does not align with the provisions of Section 73 (4) as the section envisages “a certain person”.
For financial year 2022, the taxable supplies at serial No 15 and 16 do not exceed the threshold so they do not attract the mischief of the provision of section 73(4) of the Act, ibid. The taxable supplies of financial year 2022 i.e. from serial 1 to 14 needed thorough scrutiny and adoption of proper legal procedure which the DCIR failed to observe. It is, therefore, our considered opinion that the provisions of section 73(4) have been misapplied and misread to the fact in the instant case, ATIR said.
In view of the above discussion it is held that the impugned order dated 30-08 2024 finalized under the omitted Section 11(2) of the Sales Tax Act, 1990 is not sustainable as, being procedural, Section 11E inserted through Finance Act, 2024 should have been adopted for finalisation of
assessment. Secondly, even if it is presumed that the omitted Section 11(2) was adopted correctly, the assessment order is time barred as per the plain reading of First Proviso to section 11(5) of the Sales Tax Act, 1990.
Thirdly, the provisions of section 73(4) of the Sales Tax Act, 1990 have been misread and misapplied to the facts of the instant case.
As a sequel to the above discussion, the appeal in hand is accepted and the Assessment Order No 01/2025 dated 30.08.2024 is hereby vacated.
The tax demand created is, therefore, annulled. Consequently, the penalty imposed under section 33(5) of the Sales Tax Act, 1990 is also vacated. The instant appeal succeeds in the above terms, the ATIR order added.
Copyright Business Recorder, 2025
