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March 9, 2021

National Bank challenges Rs36 billion tax recovery

Business

March 9, 2021

KARACHI: National Bank of Pakistan (NBP) has challenged the tax recovery of more than Rs36 billion by the Federal Board of Revenue (FBR) against alleged compensation claims of the bank, sources said on Monday.

The Sindh High Court (SHC) has granted a stay against any tax recovery action by the authorities. The bank had filed an appeal before the SHC, said the sources in the FBR. NBP is registered at Large Taxpayers Office (LTO) Karachi for assessment and audit.

The sources said the LTO had selected the multiple years for audit of the bank. They further said the tax office discovered discrepancies of around Rs57 billion. After adjustment of refund claims of the bank, the orders were issued for the recovery of Rs36 billion. Officials at the LTO Karachi said unverified claims were rejected because withholding tax statements were not matched. The officials said the cash payment receipts presented by the bank were also not matched. However, the NBP said during the year the taxation officer issued show-cause notices under section 221 of the Income Tax Ordinance, 2001 to the bank to withdraw compensation on delayed refunds already given to the bank, and questioned issuance of refund orders already issued to the bank in the past several years which had become past and closed transactions and thus legally fall outside the scope of rectification.

“The amount involved is Rs14.8 billion and Rs21.25 billion respectively. These notices being totally illegal were challenged by the bank before the SHC which instructed the taxation officer not to take adverse action,” the bank said in a statement.

The SHC has stayed the recovery of tax demands, the bank said. The bank as a matter of abundant caution also filed appeal before CIR(A) and the hearing may take place after the SHC decides the outcome of petitions filed in favour of the bank, it added.

The bank further said in other cases SHC quashed the show-cause notices issued in previous round in 2013 for passing orders for tax years 2006 and 2007 under section 161 of the Ordinance on the grounds that these were time-barred in terms of section 174(3) of the Income Tax Ordinance, 2001. The Supreme Court on tax office appeal has subsequently allowed taxation officer to initiate proceedings through fresh notices, subject to certain directions.

“Orders are recently passed by taxation officer for tax years 2006 and 2007 on June 30, 2020, treating the bank as taxpayer-in-default and raising tax demands of Rs1,032 million and Rs1,395 million respectively,” it said. The bank has filed appeals before CIR(A) primarily on the grounds that Supreme Court’s instructions have been blatantly ignored as cogent reasons for late proceedings were not given and neither amount of tax default nor names of parties were disclosed in the show-cause notices or the orders. “The orders are also assailed for being passed in quite arbitrary manner and various legal and factual mistakes are made therein,” the bank said.