2008 PLP (Trib (PTD)

SYED KAZIM RAZA SHAMSI (MEMBER JUDICIAL).

This Sales Tax second appeal is directed against an order dated 26-5-2007 passed by Collector (Appeals) Lahore whereby an Order-in-Original No.142/06 dated 31-10-2006 passed by Deputy Collector (Adjudication) Lahore was upheld wherein a liability of Rs.237598 along with additional tax and penalty was adjudged against the appellant.

2. Facts of the case briefly stated are that during audit of the appellant for the year July, 2000 to June, 2001 it was found that there was difference between the income and sales tax returns relating to the appellant on the basis of which it was detected that the sale was suppressed to the tune of Rs.1583989. The registered person was called upon to explain as to why the said amount should not be recovered from him which show-cause notice was contested resulting into the determination vide an order-in-original which order-in-original was maintained by Collector (Appeals). Hence this appeal.

3. The counsel appearing on behalf of the appellant stated that the show-cause notice issued on 30-6-2006 was barred by time, therefore, no recovery could be effected from the registered person and secondly while determining the amount of sales tax the department has relied upon income tax record of the appellant. In this connection he has referred to judgments reported as 1992 SCMR 1898, PLD 2005 SC 842, 2006 PTD 271, 2007 PTD (Trib.) 127 and 2004 PTD

868. The arguments have been rebutted by the Auditor appearing on behalf of the department who submitted that the show-cause notice was issued within the period of five years, therefore, the department can recover the sales tax from the appellant.

4. Arguments heard. Record perused. The record shows that the department had audited the accounts of the appellant for the period 1-7-2000 to 30-6-2001. According to section 36(1) if any irregularity was found during the audit that should be confronted to the registered person by serving a notice within a period of five years. According to show-cause notice available at page 5 of this paper book the date of issuance of the notice as recorded is 30-6-2006 i.e. the last day of completion of five years but the postal envelop shown by the counsel at the time of arguments and appended with the appeal showed the date of dispatch as 7-7-2006 meaning thereby that the notice was received by the appellant after lapse of 8 days of the completion of five years, against wording of section 36(1) of Sales Tax Act, 1990 that the notice should be served on the registered person within five years. The dates mentioned above clearly manifest that the show-cause notice was not served within period of five years, therefore, the department is not entitled to recover the amount as mentioned in the show-cause notice. The case of the department is also weak on the second point for the reason that it is consistently held by the superior Courts of the country that the income tax record cannot be made basis for adjudging the liability under Sales Tax Act, 1990. In view of this situation, the orders passed by both the lower forums are the result of non-appreciation of the law therefore, are liable to be set aside.

5. For the foregoing reasons, appeal is accepted by setting aside the impugned orders as a result of which the show-cause notice issued to the appellant on 30-6-2006 is set aside. Parties be informed through registered post or by UMS.

6. File be consigned after completion. C.M.A./6/Tax (Trib) Appeal accepted.