2013 PLP 418 (PTD)

2. Briefly stated the Assistant Director/Investigating Officer, Directorate of Intelligence and Investigation vide notice dated 3-5-2012 requisitioned record for the period 11/2009 to 4/2011 for verification of input tax amounting to Rs.351,150 allegedly claimed against fake/flying invoices. A corrigendum was issued on 26-5-2012 wherein amount referred in the notice dated 3-5-2012 was enhanced to Rs.1,095,

247. According to the Directorate, the complainant could not produce reliable evidence in support of valid purchases. He provided a post-dated cheque of Rs.1,000,000 for clearance on 30-9-2012 vide undertaking dated 28-8-2012. He also assured that he would pay further tax, if required. He would also provide record requisitioned by the Department for scrutiny.

3. According to the AR, the Directorate of Intelligence and Investigation, IR, harassed the complainant for payment of tax, without determination of his liability under the law. No coercive measures could be effected prior to the adjudication of liability by the adjudicating authority holding jurisdiction in the case. Hence this complaint.

4. The complainant prayed that the Department be ordered to determine his liability, as per law, after providing opportunity of hearing to him, and to return his cheque dated 30-9-2012.

5. When confronted, the Directorate contended that during the period 11/2009 to 4/2011 the complainant claimed input tax against fake and fictitious invoices issued by the suppliers namely Tanveer and Company and Azure Enterprises, Lahore. During the investigation, the complainant could not provide record/documents in support of valid purchases, proof of physical transfer of goods or payment through bank in terms of section 73 of the Sales Tax Act, 1990 (the Act).

6. The DR reiterated the Department's written arguments. According to him, there was no maladministration involved in the case. However, he denied the allegations of coercion and harassment. Further contended that tax in the case of the supplier had already been assessed. No further tax was required to be assessed in this case.

7. According to the AR, if the tax had already been assessed in the case of supplier, then why the complainant was being harassed and compelled to make payment. Further submitted that after filing the complaint before the Hon'ble FTO on 11-9-2012, a Writ Petition was filed in the Lahore High Court on 12-9-2012. The High Court passed interim order on 13-9-2012 that "Respondents are free to proceed against the petitioner in determining and adjudicating the tax liability of the petitioner under Sales Tax Act, 1990. However, before any such determination is finalized, petitioner will not be harassed or unlawfully detained for the recovery of sales tax unless the same is duly determined". In compliance with the order, the Directorate discontinued the proceedings. However, recovery of tax through cheque, without adjudication, being contrary to law was tantamount to maladministration, which needed to be addressed by the Hon'ble FTO.

8. Both the parties have been heard and record perused. Under the law, the Directorate of Intelligence and Investigation can conduct inquiry about the fake and fictitious invoices and any fraudulent practices, but it is beyond their jurisdiction to adjudicate the tax demand. It is to be adjudicated by the adjudicating authority, as per law, after providing opportunity to the taxpayer. The taxpayer cannot be compelled to pay tax before completion of the process of adjudication. Findings:

9. The coercive recovery of tax without any determination of tax liability, being contrary to law, is tantamount to maladministration under section 2(3) of the FTO Ordinance. Recommendations:

10. FBR to direct the Chief Commissioner to

(i) determine the complainant's tax liability, as per law, after observing due process; (ii) adjust the tax liability so determined against cheque dated 30-9-2012; and (iii) report compliance within 30 days. CMA/204/FTO Order accordingly.