Terms like ‘money trail’ irrelevant in Justice Isa case, SC told

Updated November 14, 2019

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Justice Qazi Faez Isa who is facing a presidential reference filed in the Supreme Judicial Council. — SC website/File
Justice Qazi Faez Isa who is facing a presidential reference filed in the Supreme Judicial Council. — SC website/File

ISLAMABAD: Justice Qazi Faez Isa’s counsel Babar Sattar told the Supreme Court on Wednesday that the terms “money trail” became a part of popular vocabulary largely because of the Panama Papers case but were irrelevant in the case against the judge.

The counsel for Justice Isa, who is facing a presidential reference filed in the Supreme Judicial Council, argued before a ten-member, full court that money trails relate to funds going through money loops and changing forms and hands, while keeping identities of the beneficiaries secret.

Read: Reference against Isa modelled on Panama Papers, says lawyer

But here there is no such case, Mr Sattar said, emphasising that the property in question was in the name of the spouse and children of the judge and they may have a perfectly reasonable explanation only if someone asked them for it under the relevant law.

During the hearing, Justice Maqbool Baqar asked if an income tax officer could be asked to explain whether or not the judge had carried out the exercise as mentioned under Section 116 of the Income Tax Ordinance (ITO) 2001.

The counsel said the tax liability was a matter between a citizen and the state and no tax demand could be generated against the citizen except by a competent authority under the tax law.

He explained that ITO was only concerned with taxable income and not with assets or what one might do with the income in relation to which no tax was due, like gifts and foreign income of non-residents.

Likewise, the term “dependant” is not defined in ITO, but the concept exists mostly in relation to deductions and does not increase the tax liability of a taxpayer. Every individual only pays tax on his/her income and only accounts for assets that are a product of his/her income and no one else’s.

He contended that the obligation to file a tax return and the obligation to pay tax were two different issues. The disclosure of the asset would not protect the income from taxation or create a tax demand in case of non-disclosure.

There might be certain assets that might not show up on anyone’s returns, the counsel said. He cited the example that if a father gifts some money to his daughter at her wedding and she buys a car, this gift will never show up on the wealth statement of the husband nor of the father. Additionally, it would not show up on the wife’s statement.

Mr Sattar cited the Khawaja Asif case of 2018 to establish that a tax demand or an assessment order had to be issued by an authority competent to recover government dues, adding that Mr Asif was not disqualified by the apex court because the competent authority had not made such a demand.

He argued that the only purpose a wealth statement served was to act as a balance sheet for reconciliation of income in order to ensure that no income escaped tax. But there was no separate tax on assets as impliedly being referred to in the presidential reference, he said and added that ITO was only concerned with taxing income.

He said that in case the wealth statement had not been filed or contained deficiencies the income tax return filed would not be considered complete. And in case of any deficiency, the income tax commissioner would issue a notice to the taxpayer under Section 120 of the ITO, informing him of the deficiencies and providing him the time to rectify the defects.

If the defects were removed during the given time, the return would be deemed complete, he said, adding that in the present case no notice was issued by the commissioner to Justice Isa specifying any defects in the returns filed by him for 2011 or 2013.

Under Section 122 of the ITO if the commissioner felt that the returns filed by the petitioner judge were not accurate and some income had escaped taxation, the official could have issued an amended assessment order, which had not been issued till date.

To the extent of the property purchased by Justice Isa’s wife in 2011, as no amended assessment order was iss­u­ed within the limitation period of five years, the assessment stood as final and the vested rights of the judge could not be taken away by a contrary finding by the tax authorities at this stage.

Published in Dawn, November 14th, 2019