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ISLAMABAD: Federal Tax Ombudsman (FTO) has declared that the compulsory registration of a professional lawyer under the Sales Tax Act, 1990 by the Federal Board of Revenue (FBR) was based on wrong application of law, reflecting maladministration under FTO Ordinance.

In a landmark order, the FTO has observed the said compulsory registration of a professional lawyer under the Sales Tax Act, 1990 is equivalent to administrative excesses, incompetence and inefficiency in discharge of duties by compulsory registration of the complainant, without scrutinizing the facts, tantamount to maladministration under FTO Ordinance, FTO order said.

The complaint has been pleaded by a Lahore based lawyer, Waheed Shahzad Butt, before the FTO where a senior advocate by profession has compulsorily been registered as a “retailer”, through issuance of illegal sales tax registration number on forged documents by misusing CNIC by some PRAL/FBR tax employees.

FTO order states, “Evidently, the compulsory registration of a professional lawyer under the Act by the Department was based on wrong application of law. Even otherwise, under Rule 175 of the Pakistan Legal Practitioners & Bar Councils Rules, 1976, a lawyer is not allowed to join or carry on any other profession, business, service or vocation. Although, allegation of misuse of CNIC could not be established; however, compulsory registration of the complainant in the instant case, in view of the legal and factual position discussed supra, reflects a decision, which is contrary to law/rules based on irrelevant grounds, thus, maladministration of the department is evident.

FTO probes ‘misuse’ of powers by Large Taxpayer Office

The complaint was filed against FBR/PRAL functionaries alleging illegal act, through misuse of powers available under fiscal statutes by registering the complainant under the sales tax laws and demanding to file sales tax returns and payment of penalty on account of non-filing of returns, since the date of compulsory registration. Precisely, the Complainant alleged that his CNIC was misused by some persons, with the active connivance of FBR/PRAL functionaries and was compulsorily registered by the Sales Tax Deptt, although he neither applied for sales tax registration nor filed any sales tax returns. Upon receipt of notice from the department to file sales tax returns, for the last six years, the complainant approached the Chief Commissioner, for cancellation of the STR and lodging FIR against the persons involved in misuse of his CNIC, after proper investigation.

The department treated the professional advocate as a retailer. The tax department utilized the turnover declared by the Complainant in his return of income but failed to notice that his tax profile mentioned his principal activity as “Service/Service Provider/ Lawyer/Advocate/ Legal Services”, whereas no transaction was declared under the column opening stock, net purchases and closing stock, which establishes that no activity with reference to sale/supply of goods was involved and, thus, action of compulsory registration was not justified: FTO order states.

Administrative excesses, incompetence, ineptitude, inefficiency in discharge of duties by compulsory registration of the Complainant, without scrutinizing the facts, tantamount to maladministration, in terms of Section 2(3)(i)(a) and (ii) of the FTO Ordinance. FBR to direct the Commissioner-IR, Lahore to call for record of proceedings in exercise of powers conferred under Section 45A of the Act and examine “legality and propriety of the order for compulsory registration” and pass a speaking order in terms of proviso to the Rule 6(4) of the Sales Tax Rules, 2006, the FTO order added.

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