COMMISSIONER INLAND REVENUE ZONE-I, LTU vs MCB BANK LIMITED S — 2021 PTD 1367 SUPREME-COURT

Fields are extracted from the reported citation and judgment text. Where a detail is not stated in the record, it is not shown.

COMMISSIONER INLAND REVENUE ZONE-I, LTU VS MCB BANK LIMITED S. 161---Failure to pay tax collected or deducted---Show cause notice---General and vague Show-Cause Notices issued by tax authorities under S. 161 of Income Tax Ordinance, 2001 by incorrectly relying on the observations of the High Court in the judgment reported as Bilz (Pvt) Ltd. v Deputy Commissioner of Income Tax and another 2002 PTD 1, PLD 2002 SC 353 ("Bilz case")---Supreme Court deprecated such misreading of the Bilz case by tax authorities and termed general and vague Show-Cause Notices issued under S. 161 as a fishing expedition and roving inquiry. Citation Name: 2021 PTD 1367 SUPREME-COURTBookmark this Case COMMISSIONER INLAND REVENUE ZONE-I, LTU VS MCB BANK LIMITED S. 161---Failure to deduct tax---Show cause notice---Legality---Show cause notice issued to the taxpayer did not merely demand information regarding deductions; it also contained the monthly breakup of the deductions allegedly required under various sections, and also the amounts actually deducted and the alleged difference---In other words, there was an application of mind to the question whether there had been a failure to deduct and if so, on what basis and in what amount---Show cause notice under S. 161 of the Income Tax Ordinance, 2001 was validly issued---Appeals were partly allowed. Citation Name: 2021 PTD 1367 SUPREME-COURTBookmark this Case COMMISSIONER INLAND REVENUE ZONE-I, LTU VS MCB BANK LIMITED S. 161---Failure to pay tax collected or deducted---Show cause notice---Section 161 of the Income Tax Ordinance, 2001 ('the 2001 Ordinance')---Scope---Section 161 of the 2001 Ordinance became applicable not simply because a payment was made (or a transaction or event happens) but rather on a failure to either collect tax or deduct it---Failure was the triggering event, therefore, it was a gross misreading of S. 161 to conclude that for the said section to apply all that the Commissioner had to do was point to a payment, and that was sufficient to cast the burden wholly and solely on the taxpayer to show that there was no failure---At the very least, initially, there must be some reason or information available with the Commissioner for him to conclude that there was, or could have been, a failure to deduct---Such reason or information must satisfy the test of objectiveness, i.e., must be such as would satisfy a reasonable person looking at the relevant facts and information in an objective manner---Threshold was not so stringent as to require "definite information" but it was also not so low as to be bound merely to the subjective satisfaction of the Commissioner; it was only if this threshold was successfully crossed that the notice could be issued, and it was only then that the burden may shift on the person allegedly in default to show that S. 161 did not, or ought not to, apply Commissioner Inland Revenue v. Islam Steel Mills 2015 PTD 2335 overruled.

COMMISSIONER INLAND REVENUE ZONE-I, LTU vs MCB BANK LIMITED S — 2021 PTD 1367 SUPREME-COURT

Case information

Judgment text as reported

Other judgments reported in 2021 PTD