ISLAMABAD: The Supreme Court in its judgment on Panama case has not included FBR’s representative into Joint Investigation Team (JIT) as the apex court found that the tax returns filed by Prime Minister Nawaz Sharif were neither challenged nor reopened in exercise of powers under the law and may have become past and closed transactions.
On a mere allegation of tax evasion, the court observed that it cannot be held that provisions of Article 63(1) (o) of the Constitution are attracted and Respondent No.1 (PM Nawaz Sharif) is liable to be disqualified on that score from being a member of the Parliament.
“In case the petitioners have any definite information regarding tax evasion, they are at liberty to approach the competent authorities who will proceed in the matter in accordance with law” says the judgment announced Thursday.
The Supreme Court says that it is therefore argued that the tax payment history of Respondent No.1 (PM Nawaz Sharif) clearly points towards tax evasion on his part for years on end. “On considering the arguments of both sides on the issue, we find that the Returns filed by Respondent No.1 from time to time were accepted by the tax department.
The Returns were neither challenged nor reopened in exercise of powers available to the functionaries concerned of the tax department and may have become past and closed transactions owing to afflux of time considering the period of limitation provided by the tax laws,” the judgment of SC states.
It further states that representatives of the Federal Board of Revenue and their counsel categorically stated before the Court that no definitive information was placed before the competent authorities either by the petitioners or any other person that may have furnished basis for reopening and scrutiny of the Returns of Respondent No.1.
“It was therefore stated that there was no valid reason or lawful basis available to the tax department to reopen the returns of Respondent No.1 for past years,” the SC bench says. Further, even if for the sake of argument, the allegations of tax evasion were to be given any credence, the same would not automatically attract the penal consequences of Article 63(1) (o) of the Constitution.
This is in view of the fact that the said Article is attracted only where liability has finally been determined by the competent forum and default has been committed in payment of such determined liability.
In the present case, the said prerequisites are missing. As a result, on a mere allegation of tax evasion, it cannot be held that provisions of Article 63(1) (o) of the Constitution are attracted and Respondent No.1 is liable to be disqualified on that score from being a member of the Parliament.
As far as the question of default in payment of tax on the afore-noted gifts is concerned, the learned counsel for Respondent No.1 has drawn our attention to the exemption provided under Section 39(3) of the Income Tax Ordinance, 2001. For ease of reference, the said provision is reproduced below:-
“(3) Subject to sub-section (4), any amount received as a loan, advance, deposit (for issuance of shares) or gift by a person in (a tax year) from another person (not being a banking company or financial institution) otherwise than by a crossed cheque drawn on a bank or through a banking channel from a person holding a National Tax Number shall be treated as income chargeable to tax under the head “Income from Other Sources” for the tax year in which it was received”.
The judgment states, “We have been informed that Respondent No.7 (Hussain Nawaz) held a National Tax Number (NTN) at the time when the gifts were made and continues to do so. The said assertion has not seriously been contested by the petitioners.
As such, the amounts sent by him by way of gifts to Respondent No.1 enjoyed exemption from payment of income tax and were not required to be treated as income from other sources as visualised in Section 39(3) ibid. Further, the amounts received by Respondent No.1 from Respondent No.7 were transmitted through banking channels and were duly declared to the tax authorities.
Some Tax Returns and account statements reflecting the above position have been filed and examined by us. Prima facie, the amounts received as gifts appear to be covered by the exemption provided in Section 39(3) ibid. Likewise, the cash gifts given by Respondent No.1 to Respondents No.6 (MaryamNawaz) & 8 (Hassan Nawaz) were also given through banking channels/crossed cheques and were duly declared by the donor/donee in his/her Returns where required.
As such, these transactions have not been found by the tax department to be in violation of provisions of the tax laws. “We are therefore not inclined to arrogate to ourselves the role of the tax department, and/or tax auditors, reopen the tax history of the respondents and record findings of our own” the judgment states.
The SC judgment states that the FBR took the stance that it had taken immediate cognizance of the matter and issued notices to all those whose names had appeared in the Panama Papers. This, “immediate cognizance” translated into half-hearted issuance of some notices six months after the information came into public domain which speaks volumes about the lethargy, carelessness and inefficiency displayed by the premium tax and financial watchdog of the country.
“After hearing the FBR chairman we are constrained to express our dissatisfaction and extreme disappointment on the mode and manner in which the premier taxation authority of the country has dealt with the matter” it states.
Another aspect of the case set up by the petitioner against Respondent No.1 with reference to his disqualification is that he had declared Respondent No.6 (Maryam Nawaz) as his dependent in his wealth statement for the tax year 2011.
It has been submitted that despite such admitted dependency, Respondent No.6 was not shown as a dependent and the Mayfair Properties and other assets owned/held by her were not declared in the nomination papers submitted by Respondent No.1 for his election for a seat in the National Assembly in 2013.
