DATA RICE MILLS, INDUSTRIAL AREA, MIANWALI ROAD, QUAIDABAD KHUSHAB vs COMMISSIONER INLAND REVENUE (WITHHOLDING

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DATA RICE MILLS, INDUSTRIAL AREA, MIANWALI ROAD, QUAIDABAD KHUSHAB VS COMMISSIONER INLAND REVENUE (WITHHOLDING ZONE), RTO, SARGODHA art.25---Income Tax Ordinance (XLIX of 2001), S. 161---Identical cases---Tax authorities , treatment by---Equality of taxpayers---Scope---appellant referred to an order passed by the same assessing authority in another case regarding Rice Mills where the assessing officer accepted a commission rate of 0.5% for the Tax Year 2022, as per the order under S.161(1) of the Ordinance, 2001, however, in the appellant's case, the assessing officer adopted a higher commission rate of 1% merely stating that "each case has its own facts and circumstances"---Validity---Said reasoning ,against the appellant , is not convincing as both the appellant and another case / Rice Mills are engaged in the same rice milling business in the same region under the same tax jurisdiction---Therefore, the facts and circumstances of both cases are virtually identical---The inconsistency in treatment raises concerns of unequal and discriminatory treatment---Such arbitrary differentiation without justifiable grounds violates the principles of fairness and consistency in tax assessments---The tax authority must apply the law equitably, especially when the facts of both cases are essentially the same---The disparate treatment of the appellant compared to another case / Rice Mills is not only unjustifiable but also amounts to an arbitrary exercise of discretion, which is impermissible under the law---Said discriminatory approach is in violation of art. 25 of the Constitution, which ensures equality before the law---While art. 25 of Constitution allows for reasonable classification, it must be based on intelligible differentia with a rational nexus to the object sought to be achieved---In the present case, no such difference exists between the two situations, making the differential treatment both illegal and unjustifiable---The tax department's acceptance of the same evidence in one case and rejection in the other constitutes a clear violation of art. 25 of Constitution and should be deemed unlawful---Thus, both the impugned order of the assessing officer and the CIR(a) are fundamentally flawed and beset with substantial legal defects---appellate Tribunal Inland Revenue set-aside / annulled the impugned orders being without jurisdiction---appellant, filed by taxpayer, was accepted. Ss. 122, 153, 161 & 233 and First Sched., Pt. IV, Division II---Payments made for expenses incurred by Taxpayer---With-holding/recovery of tax---Reported expenses---Changing by the Assessing Officer---Powers---Scope---Whether the adjudicating officer/an Inland Revenue officer has the authority to increase the reported expenses (the disbursement of commission) from those documented in the income tax return while conducting proceedings under S.161 of the Income Tax Ordinance, 2001 ('the Ordinance, 2001')---Held: S. 161 of the Ordinance, 2001 governs the proceedings related to the recovery of tax that has not been withheld or deducted on payments made for expenses incurred---However, the scope of S.161 is limited to addressing the failure to withhold or deduct the appropriate tax at time of making the payments towards the expenses; it does not provide authority to either increase or decrease the reported expenses, nor does it permit the adjustment of the value of purchases or other related figures---The primary mandate of S.161 is to ensure that the prescribed person complies with the requirement to withhold or deduct tax on payments made and to recover any tax that should have been withheld or deducted but was not---It does not extend to revising the underlying financial figures, such as the expenses or the values reported in the tax return, during the course of the proceedings---Therefore, the adjudicating officer or an Inland Revenue officer can only focus on the withholding or deduction of tax on payments and cannot alter the expense amounts disclosed in the return---Approach taken by the assessing officer is flawed, as it involves determining the commission amount first and then calculating the tax payable---However, such an approach is not consistent with the mandate of S.161 of the Ordinance, 2001---The correct course of action would have been to invoke S.122 of the Ordinance, 2001 to amend the assessment and make adjustments accordingly---Section 122 of the Ordinance, 2001 allows for the amendment of an assessment where there is reason to believe that the reported figures are incorrect or incomplete---However, the assessing officer cannot, under the framework of S.161, unilaterally alter the commission rate or the expense figure---Furthermore, increasing the reported commission (or any other expense) would ultimately reduce the appellant's profit, which in turn would distort the tax assessment process---This renders the entire approach taken by the assessing officer and upheld by the CIR(A) in violation of the core principles of income tax law---Moreover, Income Tax Ordinance does not allow for the estimation of tax liabilities based on presumptions or assumptions---Tax cannot be imposed based on conjecture or hypothetical scenarios---Tax assessments must be based on concrete, verifiable facts and there is no room for arbitrary or speculative determinations---Thus, any attempt to adjust the expenses or the tax liability without proper factual basis is legally unsustainable and contrary to established tax principles---Thus, both the impugned orders of the assessing officer and the CIR(A) are fundamentally flawed and beset with substantial legal defects---Appellate Tribunal Inland Revenue set-aside / annulled the impugned orders being without jurisdiction---Appeal, filed by taxpayer, was accepted, in circumstances.

DATA RICE MILLS, INDUSTRIAL AREA, MIANWALI ROAD, QUAIDABAD KHUSHAB vs COMMISSIONER INLAND REVENUE (WITHHOLDING ZONE), RTO, SARGODHA art — 2025 PTD 1867 INLAND REVENUE APPELLATE TRIBUNAL OF PAKISTAN

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