LAHORE: The Lahore High Court has allowed a sales tax reference of JDW Sugar Mills, owned by Pakistan Tehreek-i-Insaf’s estranged leader Jahangir Khan Tareen, against the Inland Revenue department of the Federal Board of Revenue (FBR).

The mills filed the reference against an order passed by an appellate tribunal of the Inland Revenue on June 29, 2015.

Advocate Sultan Ali Awan, the mills’ counsel, submitted before the court that his client was issued a show-cause notice on April 16, 2005 for the tax period of 2000-02 on the basis of an audit report containing certain allegations. He said the department passed an order against the mills in 2006, which was challenged before the collector (appeals).

The appeal was also dismissed and the taxpayer/applicant moved another appeal before the appellate tribunal, which was also rejected through the impugned order.

The counsel argued that the original order passed by the department in 2006 was beyond the prescribed period of limitation specified under the Sales Tax Act 1990. A legal adviser of the department failed to rebut the fact about the limitation.

In its decision, a two-judge bench of the LHC headed by Justice Sajid Mahmood Sethi observes that the record shows the original order was issued after more than nine months of the issuance of the show-cause notice to the taxpayer/mills.

The bench notes that the maximum time limit for passing such an order as provided under section 36(3) of the Sales Tax Act 1990 was 90 days with a maximum extension of 120 days.

It rules that an observation made by the appellate tribunal that the central board of revenue extended the period of adjudication is unsustainable as in any case order-in-original having been passed after expiry of 210 days from the issuance of show-cause is unsustainable in the eye of law.

The bench observes that legal controversy as to the order-in-original having been passed beyond the period of limitation is nullity has already been answered by the Supreme Court in a 2017 judgement.

“This reference application is decided in favour of applicant-taxpayer and against the respondent department,” the bench concludes its decision.

Published in Dawn,June 17th, 2022