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Business Recorder
10-07-2025
- Business
- Business Recorder
Bank transactions don't necessarily indicate definite income of taxpayer: SC
ISLAMABAD: The Supreme Court held that the bank account and transactions do not necessarily form 'definite income' of the assessee/taxpayer. The effect of 'definite information' is to be noticed on a case-to-case basis and the source of information would then consequently decide as to the information being definite or otherwise. All transactions, therein, not necessarily demonstrate the income of the taxpayer/assessee hence unless it is established that these statements and/or entries therein disclose information of income which is 'definite', the subject instrument cannot be applied as being one having 'definite information'. 'Un-documented large-scale business transactions to be captured with help of banks' A two-judge bench, comprising Chief Justice Yahya Afridi and Justice Muhammad Shafi Siddiqui declined leave to appeal and consequently dismissed the petition of Commissioner Inland Revenue, (Special Zone for Builders and Developers) Regional Tax Office, Islamabad. The judgment authored by Justice Shafi stated that in the regime of 2001 Ordinance the 'definite information' was either left to the audit analysis which may allow Commissioner to adjudge the following, i.e., (i) any income chargeable to tax has escaped assessment; or (ii) total income has been under-assessed, or assessed at too low a rate, or has been the subject of excessive relief or refund; or (iii) any amount under a head of income has been mis-classified. Certainly there is no audit claim and even no notice under Section 111 of the Ordinance is issued and similarly statement of account alone cannot be a basis to form any of the three routes provided in the later part of Section 122(5). The court noted that the judgment in Khan CNG Station, which was also relied by the IHC, is based on the volume of natural gas which was ascertainable, as based on mathematical formula which was applied in the case, whereas, on the contrary, the statement of account on the basis of which the show cause notice was issued could not form a 'definite information' about the income of taxpayer as demonstrated by the Commissioner in its order dated 28.12.2011. The judgment observed that neither the Commissioner nor the Tribunal and the learned High Court were of the view that all credit entries in the statement of account disclosed the income of the assessee and hence it does not constitute 'definite information'. Indeed, the Tribunal is the last fact finding forum which question could neither be raised in the reference jurisdiction nor before the apex court. The minutiae of the case show that a notice under subsections 1, 5 and 9 of Section 122 of the Ordinance, 2001 was issued to the respondent (M/s Khudadad Heights, Islamabad) for the tax year 2006. The proceeding against the respondent commenced on the basis of the bank statement. The explanation provided by the taxpayer was found unsatisfactory and the assessing officer re-assessed the net income of the taxpayer. Being aggrieved of such treatment, the taxpayer filed an appeal before the Commissioner Inland Revenue (Appeals-I), Islamabad and was able to successfully established his response to some extent. The Commissioner decided the appeal on 28.12.2011. Both, the department and the taxpayer found themselves aggrieved of the order of the Commissioner filed appeal/cross-appeal before the Appellate Tribunal Inland Revenue Islamabad Bench-I, Islamabad. The Tribunal accepted the taxpayer's appeal and rejected the appeal of the department, where therefore filed reference before the Islamabad High Court (IHC). The reference was decided based on judgments including Commissioner Inland Revenue Zone-I RTO, Rawalpindi v Messrs Khan CNG Filling Station, Rawalpindi and Commissioner Inland Revenue, RTO, Bahawalpur v M/s Bashir Ahmed. The IHC judgment discussed the effects of Section 65 of the Income Tax Ordinance, 1979 as well as the effect of Section 122(5) of the Ordinance. Copyright Business Recorder, 2025
Business Recorder
25-06-2025
- Business
- Business Recorder
SC determines right meaning of FMCG products
ISLAMABAD: The Supreme Court held that Fast Moving Consumer Goods (FMCG) products do not qualify to form part of the definition provided in clause (22A) read with Clause (13AB) of Section 2 of the Income Tax Ordinance, 2001. The judgment, authored by Muhammad Shafi Siddiqui, said that the FMCG are those which are supplied in retail market as per 'their' daily demand. 'These are not directly considered as consumer items, but form a key component for many consumer products. It is meant primarily for an industrial/ commercial use,' it added. These goods in their form, as described in the orders of Appellate Tribunal Inland Revenue, Peshawar, and the Peshawar High Court (PHC), are not utilisable predominantly by the end consumers. High-potential consumer items: Pakistan govt mulling imposing FED The respondent, an individual taxpayer (M/s Sufi Tahir Nadeem), derived income from distribution (per orders) of (i) Bopp Composite/ Plain Film, (ii) Pet Film, (iii) CPP Metalized Film, and (iv) CPP Milky Film. He filed returns for the tax years 2015 to 2017. On examination by the department, that the tax liability on the respondent-taxpayer on the basis of turnover declared by him, was not proper, the return for the tax year 2015 was selected for audit under Section 177 of the Income Tax Ordinance, 2001 and the deemed assessment was accordingly amended under Section 122(1) of the Ordinance by the officer Inland Revenue creating tax liability under Section 113 of the Ordinance on the basis of declared turnover. The declared position for the tax years 2016 and 2017 was the same; consequently, the Additional Commissioner Inland Revenue invoked Section 122(5A) of the Ordinance and created tax liability under section 113 of the Ordinance on the basis of turnover declared by the respondent-taxpayer. Aggrieved of it, the respondent-taxpayer filed appeal against the amended order and took the plea before the appellate authority that he was dealing in distribution of Fast Moving Consumer Goods (FMCG), which were subjected to tax rate of 0.2 per cent (minimum tax) as per Division IX, Part-IV of First Schedule to the Income Tax Ordinance, 2001, instead of 1 per cent (minimum tax) rate applied by the Assessing Officer. The Commissioner Inland Revenue rejected the stance of the taxpayer, who then approached the Appellate Tribunal Inland Revenue, Peshawar. The Tribunal annulled the order of the authority as a consequence the Commissioner Inland Revenue (petitioner) filed Tax References before the PHC, which were dismissed and the questions of law were answered in negative against the department and in favour of the taxpayer. The department then filed an appeal before the apex court. The question before the Court was whether subject goods could be considered as 'consumer goods' for end consumers and stand-alone constitutes consumer goods within the frame of Clause 22A read with (13AB) of Section 2 of the Ordinance. Section 2(22A) describes the 'fast moving consumer goods' which means the consumer goods which are supplied in 'retail market as per daily demand of a consumer' (excluding durable goods). The bracketed insertion was provided to the Statute via Finance Act, 2017. The judgment noted that the consumer goods are those as defined in (13AB) of section 2 of the Ordinance; i.e., 'consumer goods means goods that are consumed by the end consumer rather than used in the production of another good.' Justice Shafi Siddiqui wrote that it was imperative for the Tribunal and the High Court to have adjudged whether the goods by law were FMCG and are meant for 'direct consumption' by the end consumer rather than used in the production of another good(s) in its finished form; as only then this could have been applied for any benefit to the taxpayer. These products (Bopp Composite/Plain Film, Pet Film, CPP Metalized Film and CPP Milky Film) are primarily used as a material for packing other products for various consumer goods and are not typically sold directly to consumers as a stand-alone product. The consumer may buy products packed in such films but would not typically purchase the goods. Copyright Business Recorder, 2025
Business Recorder
13-05-2025
- Business
- Business Recorder
If a case is subjudice proviso of Sec 174 (1) of ITO will kick in: SC
ISLAMABAD: The Supreme Court noted that if a case is subjudice before a legal forum then it is enough for proviso of Section 174 (1) of the Income Tax Ordinance, 2001, to kick in and dilute the effect of six-year timeframe till the matter is taken to its logical end under the law. A three-judge bench, headed by Chief Justice Yahya Afridi, and comprising Justice Muhammad Shafi Siddiqui and Justice Miangul Hassan Aurangzeb set aside the Lahore High Court (LHC) order directing that the taxpayer shall not be required by the department to produce record, on account of lapse of statutory timeframe. The question was whether the respondent was bound to maintain his tax records after the expiry of five years from the date of his deemed assessment for the tax year 2010 which was on or about 30.09.2010. ITO provisions and Section 4B: SC urged to harmonise definition of 'income' The instant matter pertains to deemed assessment for the tax year 2010. The show cause notice and reassessment orders were dated 27.02.2015 (within timeframe prescribed by law) which falls within the proviso to Section 174(3) of the Ordinance. The order said that the cognisance was taken with five years when notice was issued and notwithstanding the interim order, in the said case/ litigation on the subject of challenging a notice, the taxpayer is bound to retain documents under the law. It said; 'Therefore, whether or not any stay is operative in the matter, if the cause is subjudice it is enough for proviso to kick in and dilute the effect of six years timeframe till the matter is taken to its logical end under the law, provided that the initial notice was also within time prescribed by law. The requisite proviso may enable the department to act accordingly.' A writ petition challenging a notice dated 17.11.2016 issued by petitioners was challenged by the taxpayer on the count that it violates the findings and law laid down in Maple Leaf case. LHC allowed the petition; however, observed that proceeding of audit may continue but the taxpayer shall not be required by the department to produce record, on account of lapse of statutory timeframe prescribed to retain document in terms of Section 174 (1) of the Income Tax Ordinance, 2001. The department then approached the Supreme Court against the LHC. The apex court in CPLA issued notices, whereas, respondent chose not to appear; therefore, on 16-09-2022, the Court passed an ex-parte order. The instant matter pertains to tax year 2010. The petitioner was issued a show-cause notice under Section 122(5A) of the Ordinance, 2001 and subsequently an adverse order was passed on 27.02.2015. Thereafter, his appeal was allowed and the matter was remanded on 19.08.2015. The Court noted that a blanket cover was given to the taxpayer as far as retention of record is concerned. It said no doubt a timeframe is prescribed under the law; i.e., Section 174(1) of the Ordinance for retaining the documents; however, it is supplemented by the proviso along with an explanation inserted by Finance Act, 2010, which say; 'Provided that where any proceedings is pending before any authority or court the taxpayer shall maintain the record till final decision of the proceeding. 'Explanation: Pending proceedings include proceedings for assessment or amendment of assessment, appeal, revision, reference, petition or prosecution and any proceedings before an Alternative Dispute Resolution Committee]'. Copyright Business Recorder, 2025
Business Recorder
02-05-2025
- Business
- Business Recorder
Imports under HS Codes 3402.1300 and 3402.1190: SC dismisses petition seeking zero duty
ISLAMABAD: The Supreme Court dismissed a petition seeking zero per cent customs duty on the import of items under HS Codes 3402.1300 and 3402.1190. A three-judge bench, headed by Chief Justice Yahya Afridi and comprising Justice Muhammad Shafi Siddiqui and Justice Shakeel Ahmad decided the matter on an appeal against the Sindh High Court (SHC) verdict. The petitioner (Surfactant Chemicals Company (Pvt) Limited, Karachi) sought exemption from customs duty in excess of zero per cent (0%) vide SRO 565(I)/2006, dated 05.06.2006 as amended vide SRO 474(I)/2016, dated 24.06.2016] on the import of items under HS Codes 3402.1300 and 3402.1190. SHC judgment: SC reserves verdict on DG Customs Valuation's pleas As the respondents (Secretary Ministry of Finance & Customs Department), declined relief, the petitioner filed constitutional petitions before the Sindh High Court claiming that the goods imported by the petitioner-company were fully covered by the exemption as per Column (3) of the Table at Serial (3) of the amending SRO. The respondents stance was that they were/are neither registered/recognised by the Federal Ministry of National Food Security and Research nor were manufacturer of pesticides. The petitioner claimed that it is not required to get such registration or approval, as the petitioner by itself is not a manufacturer of any agricultural pesticides. The petitioner stated that it imports, formulates and manufactures agricultural surfactants/surface active agents namely stabilisers, emulsifiers and solvents which were used in manufacturing pesticides. The judgment noted that under the SRO the treatment of such goods on its import as zero per cent duty is not absolute; it is qualified/contingent upon terms in the SRO itself. The requisite condition in respect of goods on zero per cent in terms of Serial (3) of the Table in Column (2) is apparent which requires approval by the Ministry of National Food Security and Research which has not been fulfilled by the petitioner. The goods were imported and were classified under HS Code 3402.1190 and 3402.1300 of the Pakistan Customs Tariff. On the strength of HS Code alone, as available in the column, the treatment cannot be extended as zero per cent duty, for such goods the pre requisites are inevitable. The judgment said that the treatment of goods disclosed in the SRO were subject to fulfillment of certain obligations. The amended SRO itself put the petitioner under obligations to provide its qualification in order to fetch the exemption as it was only available for manufacturing or formulation of agricultural pesticides by manufacturers and formulators and this could only be recognized and approved by the Ministry of National Food Security and Research. The Column (2) has restricted and prescribed a condition and the treatment of goods of Column (3) in terms of exemption of customs duty could only be if condition prescribed in Column (2) is met. Admittedly, the petitioner is neither recognized nor approved by the Ministry of National Food Security and Research either as manufacturer or formulator of Agricultural pesticides. The Court said that the application of the order passed in Constitution Petition No.D-8496 of 2017 was also rightly distinguished in impugned judgment as it relates to clause 133 of the Sixth Schedule to the Sales Tax Act, 1990 and was not pari materia with the aforesaid SRO. The Restriction, as is apparent in the ibid SRO, is not seen in respect of goods disclosed in clause 133 of the Sixth Schedule to the Sales Tax Act, 1990. Copyright Business Recorder, 2025
Express Tribune
08-02-2025
- Politics
- Express Tribune
SHC seeks arguments on plea against PECA
KARACHI/ISLAMABAD: A division bench of the Sindh High Court (SHC) on Friday sought more arguments on the admissibility of a petition against the Prevention of Electronic Crimes Amendment Act (Peca), while another petition was filed in the Islamabad High Court (IHC) against the legislation. The SHC bench, led by Chief Justice Muhammad Shafi Siddiqui, took up the petition against Peca amendments. Barrister Ali Tahir, the lawyer for the petitioner, informed the bench that they had challenged sections 2R and 26A of Peca. The lawyer said that the Section 26A criminalised the transmission and receipt of information by declaring it "false and fake". He added that sections G and H of the act used the words "false, fake and misrepresentation" in a very vague manner. He said that sections 2R and 26A were in violation of the articles 19 and 19A, and the fundamental rights given in the Constitution. He added that Articles 19 and 19A of the Constitution granted every citizen the right to freedom of expression within reasonable limits. The chief justice asked the lawyer what was the harm in removing illegal and objectionable contents from social media. Barrister Ali Tahir replied that under Peca, the authority would use "judicial powers" to determine which content was objectionable and should be removed. The chief justice further remarked that what was wrong if an institution enforced compliance with the laws of the country. Barrister Ali Tahir raised the issue of restrictions on some social media platforms. He cited the closure of X in Pakistan and said that journalists had been disappeared in the past. He said that after the Peca amendments their problems would multiply. The chief justice remarked that the petition before the court was not about the disappearance of journalists. He asked the lawyer to satisfy the court that this petition was admissible, and adjourned the hearing till Monday.
