KARACHI: A larger bench of Appellate Tribunal Inland Revenue Karachi has barred the tax officers from forwarding unlimited enquiries to the taxpayers under section 122(5A) of the Income Tax Ordinance, 2001 and ordered to fix all such appeals before the respective benches for order on merit.
The Tribunal ruled that unlimited enquiries from taxpayers are not permissible under 122 (5A) and it comes within the ambit of fishing and roving enquiries, which not legal.
The bench was hearing the application filed by M/s Meezan Bank Limited, Karachi, M/s Jaffar Brothers (Pvt.) Ltd and M/s. Novartis Pharma Pakistan that a number of appeals were pending before the Tribunal regarding Section 122(5A) of the ordinance.
The appellants submitted whether unlimited enquiries are permissible under section 122(5A) as interpreted by LTU, Karachi, and if yes then what will be the difference between 122 (5A) and section 177, wherein officer is empowered to call books of account, record, information, evidences, explanations probe the matter in depth and conduct unlimited enquires.
The representatives of the appellants pointed out that tax department was asking via notices issued under section 122(5A) and thereafter proceeding to create tax demands, which tantamount to fishing and rowing.
They added that the notices were issued to the taxpayers without any concrete justification and merely on the observations of the tax assessment officers.
The larger bench in its judgment said, ‘We are in complete agreement with the appellants’ representatives that a line is to be drawn for conduct of enquiries. We are of the firm view that if there is apparent illegality or error of law in the already finalized assessment order u/s 120 or u/s 122 and there is apparent loss of revenue, only then the tax officer is empowered to conduct inquiries under section 122(5A).
The larger bench comprised of Ahmed Saeed, Dr. Manzoor Ahmad, Nazir Ahmad, Muhammad Waseem and Ambreen Aslam.