SC rejects Commissioner IR's plea against LHC order
The petitioner department had assailed the LHC, Rawalpindi bench's order dated 26.03.2025, whereby, reference application filed under Section 47 of the Sales Tax 1990 by the petitioner against the order dated 4.01.2024 passed by the Appellate Tribunal Inland Revenue (ATIR), Islamabad, was dismissed.
A two-judge bench of Justice Munib Akhtar and Justice Aqeel Ahmed Abbasi heard Commissioner Inland Revenue's appeal.
The court noted that the show cause notice and the Order-in-Original passed by the Assistant Commissioner Inland Revenue in the instant case, against the respondents (M/s Mustafa Enterprises) are based on vague and frivolous allegations and certain conclusions have been made on mere presumptions only, whereas, no material or evidence has been produced to substantiate the same.
The court further noted that while passing the Order-in-Original, the Assistant Commissioner Inland Revenue exceeded his jurisdiction while travelling beyond the very premises and the allegations made in the show cause notice, whereas, the respondents were never confronted with any such allegations or entries as reflected in the bank statement which were subsequently furnished by the respondents, showing the details of the total amount and the particulars of suppliers from whom purchases were made.
It observed that while initiating the proceedings against the respondents, there was no material or evidence available on record to make out a case against the respondents of illegal or inadmissible claim of input tax adjustment, whereas, the entire proceedings and the Order-in-Original passed in the instant case was based on presumptions, whereas, no inquiry or verification was made by the department in respect of alleged fake/flying invoices.
The SC judgment said that the ATIR and the Division Bench of LHC were justified to set aside both the Order-in-Original and the Order-in-Appeal, while recording concurrent findings on facts which does not suffer from any illegality or error.
The proceedings in the instant matter were initiated by Deputy Commissioner Inland Revenue Unit-IV Cantt Zone RTO, Rawalpindi vide show cause notice dated 10.08.2021, whereby, the respondents were required to submit the record to prove as to whether the purchases made for the (Tax Period July 2019 to June 2020) amounting to Rs323,722,601 against which an amount of Rs55,032,846 was claimed as input tax, were actually made by them.
It was further alleged in the show-cause notice that the record submitted by the respondents does not prove as to whether such purchases were actually made by the respondents during subject period, therefore, they have also failed to comply with the requirements of Section 73 of the Act.
It was concluded that respondents did not purchase any coal from the local suppliers and unlawfully claimed input tax on the basis of fake/ flying invoices issued by the dubious suppliers, therefore, caused loss to the national exchequer to the tune of Rs55,032,846 by violating the provisions 6,7,8,22,23,26 and 73 read with Section 2(37) of the Act.
Copyright Business Recorder, 2025
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