FTO orders RTO-II Karachi to withdraw show-cause notice

KARACHI: The Federal Tax Ombudsman (FTO) has directed the Regional Tax Office (RTO)-II Karachi to withdraw show-cause notices in a case of input adjustment claim on invoice issued by a blacklisted unit.
In his order, Abdur Rauf Chaudhry, FTO, on April 10, maintained the order passed by the Commissioner Appeals, who allowed input adjustment to the taxpayers on the ground that the transactions were made at a time when the other party was active.
According to details of the case, complainant Raab Packages (Private) Limited filed an appeal on December 11, 2014 against the commissioner Inland Revenue Zone-IV, RTO-II Karachi for declaring the issuance of show-cause notice as void ab-intio as the issue was already adjudged by the commissioner Inland Revenue (Appeals-II) on May 26, 2014.
The reply submitted by the representative of the Federal Board of Revenue (FBR) RTO-II Karachi said the complainant had claimed input tax on the invoices of Sunny Corporation, a fraudster blacklisted by the revenue authority.
Therefore, the input tax claimed by the complainant could not be entertained under various sections of the Sales Tax Act, 1990.
The RTO issued Order in Original (ONO) on April 22, 2013, on which the complainant moved to CIR (Appeals). The commissioner appeals set aside the case on the ground that the supplier was operative at the time of the transaction.
The RTO-II; however, not opted to make an appeal before the Appellate Tribunal within the stipulated time. Therefore, the order of the commissioner was considered final.
The regional tax office again on June 19, 2014 and November 21, 2014 issued notices to the taxpayers, containing the same allegation that had already attained finality after the appellate order.
On the other hand, Sunny Corporation on its blacklisting filed a constitutional petition before the Sindh High Court. The court in its interim order on October 8, 2013 directed the tax authorities to immediately lift suspension or blockage. However, the court restrained petitioners from claiming refunds or adjustment. The FBR representative made ground on high court order for disallowing the input adjustment.
The FTO in his findings in the case observed issuing fresh show-cause notice on same allegations already decided and set aside by the commissioner appeals appears not covered under the law without reopening the instant appeal order by the revenue authority.
The FTO directed the chief commissioner RTO-II, Karachi to withdraw impugned show-cause notice issued on the already adjudged issue within 15 days.
“If the Federal Board of Revenue wants to issue fresh show-cause notices, then it should reopen the order-in-appeal strictly in accordance with the provisions of the Sales Tax Act, 1990,” the order said.
Tax experts said refunds or input adjustment should be allowed to those taxpayers who made sales / purchases with those units, which were active at the time of the transactions.
There are thousands of cases in which refunds were deferred or rejected on similar grounds by the tax departments, they added.