SALES TAX DRAFT REFUND RULES, 2004 TURNING TAXPAYER'S DREAMS INTO NIGHT-MARES

SALES TAX DRAFT REFUND RULES, 2004 TURNING <!--[if gte mso 10]> SALES TAX DRAFT REFUND RULES, 2004 TURNING TAXPAYER'S DREAMS INTO NIGHT‑MARES By Amjad Javaid Hashmi, Advocate, Lahore RULES IN CONFLICT WITH THE PARENT STATUTE: This is a seventh version of the Refund Rules since 1991. Even this seventh exercise fails to capture the essence, the intent and the scope of the refund provisions of the Sales Tax Act, 1990. Rules are framed in strict subordination to the dictates of the parent statute. These draft rules collide with this criterion. The refund provisions relating to exporters expressly stipulate that the input tax "shall be refunded not later than thirty days of filing of return". The proposed rules flout with impunity such an important right of the taxpayers. Not a single line has been written in the draft rules on this score. Thus; the rules do not inspire you as a proactive, fair and a pragmatic document to better serve and facilities the taxpayer's community. The spirit of 'quid pro quo to promptly refund the over paid taxes (interest free loan to the exchequer) by the complaint taxpayer is missing. Its tone and tenor runs counter to the avowed self‑assurance of an emerging "economic sovereignty" as asserted by the Minister for Finance and Economic Affairs in his latest interview to a private TV channel. DEFECTIVE STRUCTURE: The draft refund rules are structurally defective as well. They deal only with one segment of the taxpayers community i.e. exporters. All other registered persons in the category of manufacturers, importers, wholesalers, investors and retailers have been simply ignored. Whereas the 'manner and mode' of refund to all these persons is duly provided in the existing Refund Rules, 2002. HOSTILITY OF RULES TO SHIELD COMPLACENCY OF INNER WORKING: A deterrent and at times a hostile mind set runs throughout the draft. Most of the operating paras are couched in a negative language. Refund claimant is a potential villain and by default profiled as "low risk, medium risk or high risk". In some other provisions; the underlying threat unfolds as the "claimant shall be responsible for any misdeclaration or provision of incorrect data or document and shall be liable for penal action". It seems that complacency of the inner working of the department has been shielded under the thick veneer of misplaced deterrence. RULES DO NOT MATCH THE PRACTICES OF GOOD GOVERNANCE: The draft refund rules also fall on the left side of the best practices of goods governance. They do not incorporate consistency, predictability and transparency. Inconsistency is the norm. The rules are being revised every two years since the introduction of VAT mode of collection of sales tax in 1996 i.e. 1998, 2000, 2002 and 2004. No study has been made public to justify such a rapid and repeated scrapping of rules since 1996. As far as, business and economic environment in Pakistan is concerned no compelling reasons support this strange ritual of two yearly revision of refund rules. 'STANDARDS' YIELD TO DISCRETION: Predictability is missing. Self‑imposed processing 'standards' of a refund claim as proposed in the draft yield to the discretionary power at various levels of refund process. A refund claim even when verified by the 'STARR' Software can be rejected at will by the tax functionary next to the verifying functionary. He can ask for additional details even when all the prescribed documents are submitted alongwith the claim. Any "discrepancy", however frivolous it might be, can prejudice your claim and that too without prior opportunity of being heard. You will be intimated but only after the damage has been done to your fiscal rights. Economic efficiency is the prime victim of such pervasive unpredictability. No investor would be willing to invest in such a frustrating and unpredictable environment of tax regulations. TAX APARTHEID OF OLD RULES CREEPS INTO DRAFT RULES: The compromise to transparency that underlied the existing Refund Rules of 2002 have crept into the proposed Rules of 2004 in an art form. The refund scheme of 2002 classified the claimants (exporters as well as non‑exporters) into 'gold', 'silver and 'other' categories on fulfillment of a smudgy criteria. This classification, the Rules, 2002 touted, will add efficiency in the system of processing refund claims. A 'gold' claimant was entitled to refund with 24 hours, a 'silver' claimant in 15 days and "others" in 30 days. The data of the refund claims lodged and processed over the past two years since the introduction of 'classification' system tell us a different story. Majority of the claims get "killed" while going through the classification ordeal. You forget your refund claim. You are worried more to stay in the status of gold class, to slip into the lower class of silver category or to further step down to the most disadvantaged class of the "others". We find a lucky few claimants who were paid refund within the stipulated period of their respective class. Thus, the 'classification' system introduced in the existing Rules, 2002 has practically failed both as a professed tool of efficiency in the inner working of the Department and as a positive policy to win the approval and confidence of the complaint taxpayers. Despite the failure of the Sales Tax Refund Policy of classification of claimants the proposed refund Rules of 2004 continue to follow this dubious approach of determining the "skin" of the refund claimants as `green', `red' and `yellow' in parallel to the `gold', `silver' and `others' categories. The STARR Software will now formally determine the `skin' of the claimant on some classification criteria under Rules, 2004 which is yet to be approved by the C.B.R. Whether such parameters and their rationale will be made public and dialogued between the taxpayers and the stakeholder, no assurance is contained in the draft rules. SOFTWARE (STARR) PARTAKES THE CHARACTER OF LAW/ RULES: Information technology, throughout the world, is used firstly to improve the accuracy, efficiency and productivity of the back office. Secondly; it is never elevated as an ingredient of any law or attendant procedure. Quite contrary to the time‑honoured norms of legislative practices the admittedly faulty software acronymed as STARR (Sales Tax Automated Refund Repository) has been sanctified in the draft refund rules as a diagnostic tool to determine the veracity of a refund claim. Whereas; the experience of the refund claimants, tax professionals and other stakeholder has endorsed that the use of STARR in its pilot phase has come out as a handy device to delay, drag, sideline and "defer" 'even a genuine claim of an exporter beyond the mandatory period of one month. This innovation of red‑tapism in the garb of computerization may not be allowed to taint an otherwise exporter friendly refund policy'. The fruits of the STARR Software, if any, have so far proved to be poisonous even for the most compliant and prudent taxpayer. Despite the `usage' of STARR, refund claims of MNCs, non resident companies and big exporting units are pending for years. The plight of the micro, small and medium exporters in pursuit of their refund rights can only be guessed. The Karachi Chamber of Commerce and Industry in its pre‑budget presentations has estimated the amount of stuck up refund claims at rupees 59 billions (one billion dollar). CUMBERSOME REFUND PROCEDURE: The mode and manner of processing the claim of the proposed Green skinned, Yellow skinned and Red skinned claimants continues to be cumbersome, whimsical and discretionary. It is like asking a mouse to enter and exist from the same hole with many cats sitting in a multi levelled cage. Green category claim would be entered, examined, scrutinized, scanned, sanctioned and delivered ordinarily through following stages:‑‑ (1) Uploading of claim in STARR (uploading deadline not given). (2) Determination (parameters not yet made by C.B.R) by STARR about the "skin" of the claim as Green, Yellow or Red (time period for parametric selection‑not provided). (3) The processing officer matches the Green claims with the supportive documents (in what time, not shown). (4) The processing officer sends notice for partly or fully inadmissible claim within fourteen days (from what date this counting would start, not clear). (5) The processing officer writes a report (in what time, not given) and sends it to the officer‑in‑charge (in what time, not given). (6) The officer in charge sanctions the admissible refund (in what time, not given) or with the prior approval of the Collector calls for additional documents or information (under what circumstances such approval will be initiated not given). (7) Claim is sent for post‑refund audit (the scope of such audit and in what timeframe it will be conducted not given). (8) Sending of original sanction order (in what time, not given) to the Treasury Officer for cheque issuance (in how many days cheque will be issued, not shown). (9) The Taxation Officer sends the cheque to the claimant only through courier service. A glow or a red claim would go through some additional processing stages inclusive of a "comprehensive" pre‑refund scrutiny. (10) And now the bad luck phase. Any "discrepancy" (nature and extent not defined for the purpose of these rules) found in the post‑refund audit will downgrade the status of the claimant. A green claimant would slip down to a yellow status under intimation to the claimant. No opportunity will be provided to the claimant to explain his position prior to his "skin" conversion. Subsequently; at the claimant's perseverance; the downgraded status of yellow/red claimants will be restored to that of a green only when the discrepancy is removed. The Job spread of the above said processing flow of yellow, green or red claimants will have to pass through a minimum of nine desks (sub‑systems). In order to abide by the mandatory provision of refunding an exporter's claim within a month of filing of return; every sub‑systems/processing stage must not take more than three days i.e. 9 x 3 = 27 days i.e. say a month's time. No strict whistle blowing of internal control have been installed in the draft rules to ensure the passage of the claim to meet the prescribed statutory period of one month while processing an exporter's claim. HARMONIZING SUPPORT DOCUMENTATION: The prescribed regime of support documentation to a refund claim remains more or less the same since 1996 Rules. The refund provisions expressly provide for the adjustment, carry over of input taxes that may result due to exchange of Debit/Credit Notes between a supplier and a buyer. The Refund Rules do not requisition the copies/originals of the Debit/Credit Notes in support of the refund claims in the relevant tax period. The rules also provided that the refund cheque has to be deposited in the `declared bank account' of the claimant. On the other hand; the prescribed documents do not call for any such particulars. We therefore, suggest that the regime of supporting document may be reviewed in the context of Debit/Credit Notes and the declaration of the refund specific bank account. ARBITRARY REFUSAL OF REFUND CLAIMS: The principle of objectivity does not govern the proposed Rules, 2004 in respect of "inadmissible refunds". The draft rules contemplate that "any refund claim or, part thereof is found not admissible under the law a notice shall be served on the claimant requiring him to show‑cause in writing, within fourteen days, as to why the refund claim or, as the case may, part thereof should not be rejected and as to why the claimant should not be proceeded against under the relevant provision of the law" Apparently; this provision sounds of meeting the principles of natural justice. The fact is that the above provisions provide no objective criteria on the basis of which the processing officer, the officer incharge, the Additional Collector or the Collector will arrive at the conclusion of issuing the show‑cause notice and consequent rejection of the claim. The parent statute, on the other hand, contemplate an expressly objective criterion of rejecting the refund claim as tendered below:‑‑ (a) the processing officer/the officer‑in‑charge/the Additional Collector or the Collector must have "reason to believe" to the effect that (b) "input tax" was not admissible as refund; and to this end (c) some "investigation" is in progress; or (d) some "verification" is Pending And only after verifying through such a high alert scrutiny process the refund claim be `rejected' or 'accepted'. Thus; the sales tax law, what may be the circumstances, no where compromises the right of refund to a taxpayer. The key to rejection of a claim is a "reason to believe". In the latest case reported as Super Electronics v. RCIT, 2004 PTCL 74, the Honourable Lahore High Court has also elucidated the scope and reach of the terms "reason to believe" in the context of `sufficiency of cause'. Identical observation was made in the case reported as Mac Pac Films v. Federation of Pakistan 2001 PTD 1574 Karachi High Court has held that:‑‑ "Belief must be based upon reasonable grounds and not on mere suspicions, gossip, and rumour"..."it did not mean purely subjective satisfaction‑‑‑‑but reason must be held in good faith and could not be mere pretence." The aforesaid judgments would help us to conclude that in the event of rejection of a refund claim the sales tax law creates a strict obligation against the sales tax authorities. Inadmissibility/rejection of a refund claim must‑ be based on substantial grounds as laid down under the statute and not merely on suspicion, perception, or mere pretence. Thus the proposed provision to issue a letter of rejection arbitrarily within 14 days of the filing of the return is totally repugnant to the spirit of refund provisions. COMPENSATION ON DELAYED REFUNDS: Refund statute abhors delayed payment of refunds. Before 1st July, 1996; additional payment of delayed refund was admissible @ 14% per annum in respect of refunds due under sections 61 and 66. After July, 1996; this additional payment is warranted to all delayed refund under section 10 of the Sales Tax Act. All the rules made so far as silent in respect of safeguarding the statutory right of the taxpayers in the context of delayed payment of refund. This provision has a dual role. It places a check on the complacency of the tax machinery and an insurance of expeditious re‑entry of idle capital into the productive hands of the complaint taxpayers/entrepreneurs. DESTINATION SPECIFIC DISQUALIFICATION OF REFUND CLAIMS: A news item published in a prestigious business daily newspaper hinted that the C.B.R is contemplating to further incorporate in the proposed Rules, 2004 some destination specific (goods exported to UAE, South Africa) disqualifications on the refund claim of exporters. It would be an illegal move 'ab initio' and in conflict with the scheme of parent statute. Barring a very limited range of specified goods, type of supplies, type of persons and type of activity; sales tax law envisages no barriers to lawful claim of credit (refund) of input taxes. CONCLUSION‑REFUND IS NOT A CONCESSION BUT A FISCAL RIGHT: The scheme of sales tax laws is based on voluntary compliance. It rewards a complaint taxpayer and punishes the delinquent. That is why suo moto refund is enjoined in the law by carry forward and or excess input taxes during the next 12 tax periods. The law provides that where excess input taxes could not be claimed "through inadvertence, error or misconception", even such amount can be refunded on satisfaction of the Collector Sales Tax. The above said beneficial, positive, proactive and pragmatic approach of the parent refund provisions do not find due deference in the proposed Rules of 2004. It is also feared that the rules makers have not learnt any lesson from the impracticability of the seven earlier versions of refund rules and the overall disillusionment and distress caused by them to the taxpayers community. The refund laws are not concessions. They are in fact fiscal rights of the taxpayers. An objective refund policy must underwrite a claimant's right of refund without any demur and without suffocating it in the "classification" incubus. We therefore propose that all the provisions of the proposed refund rules which tend to witch‑hunting a refund claimant rather than examining a genuine claim must be reviewed and harmonized with true purpose and spirit of the parent statute. A fair tax administration will be able to raise more taxes with fewer efforts. This is the only factor on which the rules makers in the C.B.R. are required to be motivated. LETTER FROM CODE TEN TO THE CENRAL BOARD OF REVENUE, FBI, AND AMERICAN CIA BASED IN ISLAMABAD TO THE CHAIRMAN, CENTRAL BOARD OF REVENUE (Non‑declaration of marriage and funeral expenses by Tax Evaders in the Annual Expenditure statement with effect from 30‑6‑1990 to 30‑6‑2004‑‑‑investigation regarding) To The Chairman, Central Board of Revenue, Islamabad SUB: NON DECLARATION OF MARRIAGE AND FUNERAL EXPENSES BY TAX EVADERS IN THE ANNUAL EXPENDITURE STATEMENT WITH EFFECT FROM 30‑6‑1990 TO 30‑6‑2004‑INVESTIGATION REGARDING. Dear Sir, A recent survey was conducted by the American FBI by Inspection of secret records of tax payers of Income‑tax payers from Peshawar to Karachi through the connivance of the Income Tax agencies and it transpired from the Annual expenditure statements filed by majority of tax payers that these persons have failed to declare the following expenses in particular:‑‑ (i) Marriage Expenses (ii) Funeral expenses (iii) Transportation Expenses Non‑declaration of these expenses is a crime in the eye of law warranting concealment of Income Tax proceedings under section 116 of the Income Tax Ordinance, 1979 from the date of concealment till the present day. Details of these expenses can be procured from the following sources:‑‑ (1) Marriage Expenses.‑‑‑The major source is the marriage halls, wedding halls, Five Star Hotels, Motels etc. where these functions are conducted who can provide the details of each and every marriage of son daughter and total amount paid and its mode of payment. This must be got done now without delay. (2) The Marriage Halls and Five Star Hotel can also provide details of the Barber who get the PAKAI of the Deghs etc. and he can also be valuable source of information of other marriages taking place elsewhere, than, the hotels or marriage halls. (3) The Printing Press Like Sigma Printing Press of Rawalpindi etc. can also provide valuable data regarding the number of wedding cards printed and expenses incurred thereon in its printing and the number of guests invited. (II) As regard Funeral and Namaz‑e‑Janaza expenses, these can be obtained from the Caretaker of each and every graveyard like the 1/8 Graveyard where each grave land piece costs of Rs.4,50,000 per Grave top 5,000,000 per grave. The Coffin, and other ceremonies also entail expenses and these are also not declared in the Annual Expenditure Statement by all Taxpayers at all. If the Funeral Expenses are declared by our real father the United States of America, why cannot the United States of Pakistan also compile this data for Income Tax purposes. Details of the people who have gone to the Grave since 1990 to 30‑6‑2004 should be obtained from the Municipal Committees, Corporations, Caretakers of the Graveyards which can be handed over to PRAL Limited Islamabad for compilation, assimilation and further transmission to the ACIT/DCIT of each Zone for reopening of the Income tax assessment. This must be got done now without delay. In case this exercise is not conducted and cases of Income tax are not reopened on the pattern as directed as above, the matter shall be reported to the Media for publication. LETTER FROM F.M. MALIK & CO., ADVOCATES TO MEMBER, DIRECT TAXES, CENTRAL BOARD OF REVENUE (Re: Clarification regarding the tax deduction at source under Division‑III of Part III of First Schedule read with section 153(1) C of Income Tax Ordinance, 2001) Our Ref No.MFM‑B185. [20th April, 2004] To Member Direct Taxes, Central Board of Revenue, Government of Pakistan, Islamabad. CLARIFICATION REGARDING THE TAX DEDUCTION AT SOURCE UNDER DIVISION‑III OF PART III OF FIRST SCHEDULE READ WITH SECTION 153(1) C OF INCOME TAX ORDINANCE, 2001. Dear Sir, In this connection with above subject, we would like to seek clarification the words "Gross Amount Payable" for those assessees, whose businesses are as a contractor and filed the statement under section 115(4) of Income Tax Ordinance, 2001, the rate of tax has applied under Division‑III of Part‑II of the First Schedule read with sections 153(1)C and 158(b) of Income Tax Ordinance, 2001 we quote as under:‑‑ (A) 153. Payments for goods and services.‑‑‑(1) Every prescribed person making a payment in full or part including a payment by way of advance to a resident person or permanent establishment in Pakistan of a non‑resident person‑‑‑ (a) for the sale of goods; (b) for the rendering of 1 [ ] service; (c) on the execution of a contract, other than a contract for the 2[sale] of goods or the rendering of 3[ ] services, shall, at the time of making the payment, deduct tax from the "Gross Amount Payable" at the rate specified in Division III of part III of the First Schedule. (B) 158. Time of Deduction of Tax.‑‑‑A Person required to deduct tax from an amount paid by the person shall deduct tax‑‑‑ (a) in the case of deduction under section 151, at the time the amount is 3 [paid or] credited to the account of recipient 3 [, whichever is earlier]; and (b) in other cases, at the time the amount is actually paid. (C) Division‑III of Part‑III of First Schedule of Income Tax Ordinance, 2001. (3) The rate of tax to be deducted from a payment referred to in clause (c) of subsection (1) of section 153 shall be‑‑‑ (a) in the case of a contract with a value exceeding thirty million rupees, 6% of the gross amount payable; or (b) in any other case, 5 % of the gross amount payable. Keeping in view of above sections and provisions of Income Tax Ordinance, 2001 you are requested to clarify that;‑‑ (a) Whether Gross Amount Payable mean that the Billing Amount actually received by Contractor during the financial year ending, apart from value of written contract? OR Whether Gross Amount Payable mean that the Billing Amount actually payable by the Tax Deducting Authority, in light of value of written contract? (b) Whether the Tax Deducting Authority rightly deducted the tax @ 6% on the basis of written contract value exceeding thirty million rupees, but the Gross Receipts has received by contractor during the financial year below thirty million? (c) Whether the Tax Deducting Authority rightly deducted the tax @ 6% on the basis of written contract value (25 million + 6 million) combinedly Exceeding thirty million rupees, during the financial year? (d) Whether the Assessing Officer was rightly justified in recovery of the 1% Difference of Tax from assessee, in the light of Gross Receipts of the various contracts Declared in statement under section 115(4) of Income Tax Ordinance, 2001 by the assessee, Exceed thirty million rupees. The Difference of Tax Deducting Authorities has rightly deducted the Tax @ 5 % on the basis of value of contract below thirty million or at the time of amount is actually paid. We are requesting you please may kindly clarify the above questions, in light of aforesaid submission at your earliest as possible. Thanking you. LETTER FROM F.M. MALIK & CO., ADVOCATES TO THE SECRETARY (ASSESSMENT) CENTRAL BOARD OF REVENUE Our Ref. No.MFM‑B193 4th May, 2004. Re: Clarification Regarding the Working of Proportionate Income Under Circular No. 12 of 1991, dated 30‑6‑1991 read with Circular No. 7 of 1992 on the Declared/Assessed Income Under the Income Tax (Repealed) Ordinance, 1979 and Ordinance, 2001) CLARIFICATION REGARDING THE WORKING OF PROPORTIONATE INCOME UNDER CIRCULAR No.12 OF 1991, DATED 30‑6‑1991 READ WITH CIRCULAR No.7 OF 1992 ON THE DECLARED/ASSESSED INCOME UNDER THE INCOME TAX (REPEALED) ORDINANCE, 1979 AND ORDINANCE, 2001 Dear Sir, With connection of above subject, we would like to seek clarification on the working of proportionate Income Declared/assessed, other than sections 80C and 80CC, covered under section Income Tax Ordinance (Repealed), 1979 and read with section 148, 153, 154, .... covered under section 115(4) of Income Tax Ordinance 2001. The Example as under:‑‑ [A] Statement of Account Declared by Assessed Assessee (i) Receipts 199,119,559 199,119,559 [Covered under section 143‑B (115(4)] (ii) Gross Profit Receipts 11,488,590 11,488,590 [Covered under section 143‑B [115(4)] (iii) Commission Receipts Other than 612,510 1,050,000 [Covered under section 143‑B (115(4)] (iv) Profit & Loss Expenses 10,190,900 9,307,182 (v) Net Profit 1,910,200 3,231,408 Proportionate Income 5,858 16,951 [As Per Below Working] = = = = = == = = = [B] Working of Proportionate Income Declared as under:‑‑ Proportionate Income = Net Profit x Commission Receipts Declared. Total Gross Receipts = 1,910,200 x 612,510 5,858 = 199,732,069, Explanation of Proportionate. Income Declared (i) Proportionate P&L Exp = Profit & Loss Exp x Commission Receipts Total Gross Receipts = 10,190,900 x 612,510 = 31,252 199,7321,069 (ii) Gross Proportionate Income after allowing The Trading Expenses = (Gross Profit + Comm.) x Commission Total Gross Receipts = (11,488,590 + 612,510) = 12,101,100 x 612,510 = 37,110 199,732,069 (iii) Net Proportionate Income = 37,110 ‑ 31,252 = 5,858 Declared = = = [C] Working of proportionate Income Assessed as under;‑‑ Net Profit (Assessed x Commission Receipts (Assessed) Gross Receipts (Assessed) = 3,231,408 x 1,050,000 16,951 200,169,559 = = = = = Explanation of Proportionate Income Assessed (i) Proportionate P&L Exp = Profit & Loss Exp x Commission Allowed Receipts Total Gross Receipts = 9,307,182 x 1,050,000 = 48,821 200,169,559 = = = = = (ii) Gross Proportionate Income After Allowing the Trading Exp= (Gross Profit + Commission) x Commission (Assessed) Total Gross Receipts = (11,488,590 + 1,050,0001 = 12,538,590 x 1050,000 = 65,772 200,169,559 (iii) Net Proportionate Income = 65,772 ‑ 48,821 = 16,951 = = = Note:--- Total Gross Receipts= Receipts Covered under section [143B] [115(4)] + Commission Receipt Other than under section [143‑B [115(4)] It is therefore, requested that necessary clarification may kindly be issued on the above working of proportionate income, whether are correctly done, or pointed out to us correct working of proportionate Income under example of Circular No. 12 of 1991, read with para. 5 of Circular No.7 of 1992 at your earliest as possible. LETTER FROM AHSAN‑UL‑HAQ, PRESIDENT, OKARA TAX BAR ASSOCIATION TO THE PRESIDENT OF ISLAMIC REPUBLIC OF PAKISTAN (Decision of President Islamic Republic of Pakistan in Complaint No. 530 of 2002 against the findings of the Federal Tax Ombudsman dated 9‑9‑2002 violation of the decision. by the Central Board of Revenue‑ Submission Regarding) [8th May, 2004] The Honourable President, Islamic Republic of Pakistan. SUBJECT:‑ DECISION OF PRESIDENT ISLAMIC REPUBLIC OF PAKISTAN IN COMPLAINT NO.530 OF 2002 AGAINST THE FINDINGS OF THE FEDERAL TAX OMBUDSMAN DATED 9‑9‑2002‑VIOLATION OF THE DECISION BY THE CENTRAL BOARD OF REVENUE ‑SUBMISSION REGARDING. Respectfully Sheweth, Your honour have passed an order in a reference under section 32 of the E.O.F.T.O. Ordinance, 2000 vide Reference No. 111/2002‑(FTO) Law; dated 11‑11‑2002 as per following. "The Federal Tax Ombudsman has recommended that the Commissioner shall amend by the suo moto action under section 122(5) of the Income Tax Ordinance, 2000 the assessment framed on 31‑12‑2001 (Assessment year 2000‑2001). The Commissioner referred to in section 122(5) of the 2001 Ordinance is the Assessing Officer and his power to amend an assessment is exercisable only if the conditions set out in the sub section are fulfilled. Further, the 2001 Ordinance which came into force on 1‑7‑2002 does not apply to the assessment order for the assessment year 2000‑2001. Law Division's recommen dation proposing acceptance of the Agency's representation is well founded. (2) Accordingly the President has been pleased to accept the representation of the Commissioner and set aside the F.T.O.'s findings, dated 9‑9‑2002 in Complaint No.530‑1 of 2002." The decision is based upon the following:‑‑ (a) That Ordinance, 2001 came into force on 1‑7‑2002 hence, does not apply to the assessment year prior to 1‑7‑2002. (b) That section 122 of the Income Tax Ordinance, 2001, is charging section, hence it has no retrospective effect. It can also be derived from the above decision as per following:‑‑ (a) That order under section 122 could only be amended if the original order has been issued or treated to have been issued by the Commissioner, whereas in the preceding assessment years no such authority had ever been holding the field, hence the order passed by authority of the repealed Ordinance cannot be amended by the authority of Income Tax Ordinance, 2001. (b) That no saving under section 239 of the Income Tax Ordinance, 2001 is available to the action taken under section 122 for the preceding assessment year. So far as reliance on section 239(4) of the Income Tax Ordinance, 2001 is concerned, it is limelight clear that no such saying for pending assessment is available. Your Honour, despite a clear finding in the decision referred to hereinabove and doubtless language of the statute, the C.B.R. has issued a letter vide Ref. C. No. (12) IT‑Jud 04, dated 24‑4‑2004 (copy enclosed), whereby interpretation of your honour's decision has been made as per following:‑‑ "The matter has been considered in the Board. It is clarified that subsection (1) of section 122 of the Income Tax Ordinance, 2001 was amended through Finance Ordinance, 2002 to extend its applicability to an assessment order issued under sections 59, 59A, 62, 63 and 65 of the repealed Ordinance, 1979 as well. As such the observation of the Honourable President of Pakistan being in the context of the facts of a specific case relevant to assessment for the assessment year 2000‑2001 framed before the aforesaid amendment in law is, therefore, not operative. " Your honour, the C.B.R. does not fall in the hierarchy to interpret the law. It is the exclusive prerogative of the Courts. The C.B.R. has acceded her powers. In fact the institution has refused to abide by the decision of your honour. Sir, if this treatment is meted out to the decision of the institution of such a high profile, then we can imagine very easily, how harsh treatment would be meted out to the decision of rest of the institution in Pakistan. Now C.B.R. has been issuing notices to the assessees for invocation of provisions of section 122 of the Ordinance, 2001 for the preceding assessment years. The officers of the department are repeatedly saying that they have been directed by the higher authorities of the C.B.R. not to accept the decision of the President and carry on the invocation of the provision of the section ibid. So far as date of insertion of amendment in section 122, is concerned, it is submitted that Law, Justice and Human Rights Division gave its opinion on 11‑11‑2003, when the aforesaid provision was holding the field. The C.B.R.'s view that the agency ibid has given the said opinion before the amendment in the section is absolutely against the facts. In the light of the submissions supra your honour is requested to intervene in the matter and direct the C.B.R. to accept the decision referred to hereinabove in letter and spirit. Thanking you