I.   BACKGROUND

1.  This refers to the related Important TLQC  2026 of ---------- about CIRA has no power to remit to AO but to decide - LHC, in trail, blue, italic and double line

2.  We also refer to several other TLQCs including (a) 1318 of ----------- about ST& FED – Raid, Search & Seizure, Time Bar, No Ownership but of Tenant – ATIR (b) 566 of ------------ about SST valid Notice, Time – Bar and Banking services tax ability scope

II.   EXECUTIVE SUMMARY

1.   The core issues raised by the Applicant Taxpayer for Tax Year 2019 are:

·                     The assessment order was passed beyond the prescribed six-year period for a special tax year under the Income Tax Ordinance.

·                     The Commissioner Appeals (CIRA) lacked the authority to remand the matter back to the Commissioner.

·                     The remand order implicitly extended the period of limitation, which is not permissible.

·                     Audit proceedings for TY 2019 could not be re-initiated in 2024 or later, as they must be completed within the tax year they were initiated.

2.   IHC found merit in the applicant's arguments, particularly that audit proceedings for TY 2019 cannot be re-initiated at this stage. Citing previous judgments, the Court affirmed that a remand order cannot extend the period of limitation beyond what is legally prescribed.

3.  The Impugned Order by the CIRA was deemed unsustainable because the CIRA does not have the authority to remand a matter back to the Commissioner; instead, they must decide the case based on the existing record. Therefore, the Court set aside the Impugned Order and remanded the matter back to the CIRA to consider all objections raised by the applicant, provide an opportunity to be heard, and issue a reasoned order in accordance with the law.

III.    DETAILS

A.    Case Reference

We would inform you about ------------------------ (Attachment CS7256.1) in the ensuing paragraph, with emphasis in bold & Underline, heading ours for quick reading.

B.  Learned counsel Submission

Learned counsel for the applicant states that the assessment order has been passed beyond the period prescribed under the Income Tax Ordinance as the assessment order was not passed within a period of six years given that it was a special tax year. He further states that the Commissioner Inland Revenue (Appeals)'s order is not sustainable as he remanded the matter back to the Commissioner for purpose of issuance of fresh notices under section 122 which could not be done for two reasons:

(a)   The Commissioner Inland Revenue (Appeals) is not vested with authority to remand the matter back to the Commissioner.

(b)  By exercise of the power of such remand, the period of limitation could not have been extended, which has implicitly been done through the said order. He further submitted that the remand order has also directed that a proper audit report be issued prior to the issuance of a show-cause notice for the purpose of section 122(9) of the ITO. He states that audit proceedings must be completed within the tax year in which the audit has been initiated. As audit was undertaken in tax year 2019, no audit report could be generated in the year 2024 or thereafter when the impugned order was passed.

C.   --HC Deliberations

1.   --HC heard the learned counsel for the Tax Department and we have not been impressed by his arguments in defending the impugned order. There is weight in the argument of the learned counsel for the applicant that audit proceedings for tax year 2019 cannot be re-initiated at this stage. There is also a judgment of this Court reported as ------------------------ wherein the Court has held that through issuance of a remand order, the period of limitation cannot be extended beyond that prescribed in law.

2.   However, given that these issues have not been considered by Commissioner Inland Revenue (Appeals), we are not minded to give a definitive finding on such matters. The impugned order is not sustainable in view of the judgment of the Supreme Court in ---------------------------- wherein it has been held that the Commissioner Inland Revenue (Appeals) is vested with no authority to remand the matter back to the Commissioner and must decide the matter based on the record before the Commissioner. We therefore set aside the impugned order. We remand the matter back to the Commissioner (Appeals) who will consider all the objections raised by the applicant after affording him an opportunity to be heard and decide the same through a reasoned order in accordance with law.

IV.    FURTHER DETAILS & SERVICES

Should you require any clarification or explanations in respect of the above or otherwise, or require Income Tax, Federal & Provincial Sales Tax or Withholding Tax Statement, Advisory, Return Filing or Review services, please feel free to email Mr Amsal at amsal@kasbati.co with CC to info.kasbati@professional-excellence.com, asif.s.kasbati@professional-excellence.com.