Supreme Court admits Additional Commissioner IRS competent to issue notice under section 122(5A) of Income Tax Ordinance, 2001

KARACHI: The Supreme Court of Pakistan has admitted Additional Commissioner Inland Revenue (IRS) as the competent authority to issue notice a taxpayer under section 122(5A) of the Income Tax Ordinance 2001.
The Supreme Court has dismissed the petition for leave to appeal submitted by Ms Oceans Pakistan Limited and upheld the judgment of Islamabad High Court dated April 16, 2012 that left it open for the Additional Commissioner Inland Revenue (FBR) to decide the issues and that the petitioner is to be governed by the Ordinance 2001.
Additional Commissioner Inland Revenue had issued a show cause notice to Oceans Pakistan Limited, an oil exploring company, proposing to re-open finalized assessment of petitioner for not having offered itself for tax liability on gain earned from the sale of working interest.
The company had sold out its working interest in Mirpur Khipro oil and gas fields and LPG Plant to Ms B.P. Pakistan through a joint memorandum dated September 17, 2009 but gain on this account had not been offered for tax liability.
The company approached Islamabad High court, which dismissed the petition and left it open for the Additional Commissioner Inland Revenue.
The counsel of Oceans Pakistan Ltd submitted before the Supreme Court that the notice had been issued by the Additional Commissioner Inland Revenue, who was not authorized to do so under the Ordinance 2001 because under section 122(5A) of the Ordinance 2001, it is the Commissioner, who may amend or further amend the assessment order.
To this, the counsel for the FBR referred to section 210 of the Ordinance 2001, which provides that the Commissioner may, by an order in writing, delegate all or any of his powers or functions to the officer mentioned therein. In particular the counsel for FBR referred to section 210(1A), which provides that the Commissioner shall not delegate the powers of amendment of assessment contained in section 122(5A) to an officer of Inland Revenue below the rank of Additional Commissioner Inland Revenue.
The counsel of Oceans Pakistan also submitted that by virtue of Mines and oil-field and mineral development (Government Control) Act, 1948, particularly section 3B of the Amending Act of 1976, the petitioner company enjoys freezing of income tax in respect of exploration etc. and if at all any taxable liability is to be imposed upon the petitioner-company, it should be in terms of the Income Tax Ordinance 1979 for the reason that when the agreement was executed between the President of Pakistan and the petitioner company, the Ordinance 1979 was in holding the field and was in vogue.
Counsel for FBR responded that Section 3B of the Act 1976 is only available in respect of operational working of the company and it will not include any other activity like leasing out the working interest.
The Supreme Court rejected the leave and dismissed the petition.

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