PETER C/o Messrs PETER & CO. vs COMMISSIONER INLAND REVENUE, RTO, ISLAMABAD Ss

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PETER C/o Messrs PETER & CO. VS COMMISSIONER INLAND REVENUE, RTO, ISLAMABAD Ss. 172(3)(a), 172(3)(b), 172(3)(c), 172(3)(d), 172(3)(e), 172(3)(f) & 223---Non-resident person---Authorized / statutory representative of taxpayer, role of---Scope---A non-resident company conducted business through a branch office in Pakistan , which had been represented by a Chartered Accountants Firm , however , later non-resident company closed its business---Chartered Accountants (Appellant ) assailed orders passed by the Tax Authorities ( the Commissioner Inland Revenue and the Assistant Commissioner Inland Revenue) treating them (Appellant) as a representative of said non-resident Company under S.172(3)(f) of the Income Tax Ordinance, 2001 ('the Ordinance 2001')---Held, that, the Assistant Commissioner based his decision on the pendency of an Income Tax Reference before the High Court, where notice could not be served on the respondents as directed by the (High) Court---Notably, the High Court, dismissed the tax reference-under-discussion filed by the tax authorities against non-resident company---Therefore, the foundation on which the appellant was declared as statutory representative no longer held field, rendering the Assistant Commissioner's decision unsustainable and legally untenable---Thus, status of Appellant did not automatically qualify them for appointment as a representative under S.172(3)(f) of the Income Tax Ordinance, 2001, but the same required a distinct fiduciary relationship and financial connection with the non-resident company---Appellate Tribunal Inland Revenue annulled the orders passed by the Tax Authorities---Appeal was allowed, in circumstances. S.172---Non-resident person---authorized / statutory representative of taxpayer, role of---Scope---Business or fiduciary relationship with the non-resident person, absence of---a non-resident company conducted business through a branch office in Pakistan, which had been represented by a Chartered accountants Firm, however, later non-resident company closed its business---Chartered accountants (appellant) assailed orders passed by the Tax authorities (the Commissioner Inland Revenue and the assistant Commissioner Inland Revenue) treating them (appellant) as a representative of said non-resident Company under S.172(3)(f) of the Income Tax Ordinance, 2001 ('the Ordinance 2001')---Validity---Section 172(5) of the Ordinance 2001, has provided that the declaration of a representative under S.172(3) is subject to subsections (4) and (5)---For the purposes of the present controversy, relevant subsection (5) mandates that an opportunity for a hearing must be provided to the person being declared as a representative---a person who has been afforded this opportunity must demonstrate to the Commissioner that they have not been in any fiduciary or business relationship with the non-resident person for whom they have been appointed as a representative---The grounds available to such a person are outlined in S.172(3)(a) to (e), which allow them to show that they have no business or fiduciary relationship with the non-resident person---However, when subsection (3)(f) is read in isolation, the plain reading of the provision may leave the person without any grounds to present during the hearing, which would render the opportunity for a hearing redundant, which could not have been the intention of the legislature---Therefore, it is essential that some reasoning be provided to a person appointed as a representative under S.172(3)(f) to ensure that the hearing serves a meaningful purpose---Thus, the reasoning available to such a person should align with that enumerated in subsections (a) to (e), allowing them to present to the Commissioner during the hearing that they have no business relationship with the non-resident person, or that the information available to the Commissioner is inaccurate or irrelevant---In said manner, the true intent of subsection (5), which provides an opportunity for a hearing, will be fully realized---Thus, status of appellant did not automatically qualify them for appointment as a representative under S.172(3)(f) of the Income Tax Ordinance, 2001, but the same required a distinct fiduciary relationship and financial connection with the non-resident company---appellate Tribunal Inland Revenue annulled the orders passed by the Tax authorities---appeal was allowed, in circumstances . Ss. 172(3)(a), 172(3)(b), 172(3)(c), 172(3)(d), 172(3)(e), 172(3)(f) & 173---No-resident person---Authorized / statutory representative of taxpayer, role of---Scope---A non-resident company conducted business through a branch office in Pakistan, which had been represented by a Chartered Accountants Firm, however, later non-resident company closed its business---Chartered Accountants (Appellant) assailed orders passed by the Tax Authorities (the Commissioner Inland Revenue and the Assistant Commissioner Inland Revenue) treating them (Appellant) as a representative of said non-resident Company under S.172(3)(f) of the Income Tax Ordinance, 2001 ('the Ordinance 2001')---Validity---Section 172 of the Ordinance, 2001 stipulates that a representative appointed under S.172(3)(f) must establish a fiduciary relationship with the non-resident person they represent ; subsection (f) of S.172(3) must be interpreted in conjunction with subsections (a) to (g) of the same section to ensure a harmonious understanding; without said interpretation, the tax authorities would be armed with unbridled powers, enabling them to appoint any individual as a representative, regardless of the necessary relationship with the non-resident person---Said relationship is essential to ensure that the representative can effectively fulfill their legal obligations, including the payment of tax liabilities--A representative must bear vicarious liability for the taxes owed by the non-resident company, which inherently requires a significant business connection between the representative and the non-resident company---Furthermore, S.172(3)(f) should be read in conjunction with S.173, which outlines the liabilities and obligations of representatives---As per subsection (1) of S.173, every representative is responsible for performing duties and obligations imposed under the Ordinance, 2001, including the payment of tax---In the absence of any fiduciary relationship with the non-resident company, appointing a representative under S.172(3)(f) could result in the individual being held vicariously liable for tax responsibilities without any actual involvement or relationship with the non-resident company, as clearly intended by sub-sections (a) to (g) of S.172(3)---Thus, status of Appellant did not automatically qualify them for appointment as a representative under S.172(3)(f) of the Income Tax Ordinance, 2001, but the same required a distinct fiduciary relationship and financial connection with the non-resident company---Appellate Tribunal Inland Revenue annulled the orders passed by the Tax Authorities---Appeal was allowed, in circumstances. Ss.172(3)(a), 172(3)(b), 172(3)(c), 172(3)(d), 172(3)(e), 172(3)(f) & 223---Non-resident person---Authorized / statutory representative of taxpayer, role of---Scope---A non-resident company conducted business through a branch office in Pakistan , which had been represented by a Chartered Accountants Firm, however, later non-resident company closed its business---Chartered Accountants (Appellant) assailed orders passed by the Tax Authorities (the Commissioner Inland Revenue and the Assistant Commissioner Inland Revenue) treating them (Appellant) as a representative of said non-resident Company under S.172(3)(f) of the Income Tax Ordinance, 2001 ('the Ordinance 2001')---Held, that the Assistant Commissioner's rational for declaring the appellant as statutory representative under S.172(3)(f) of the Ordinance, 2001, was legally flawed---The Assistant Commissioner relied on the fact that the appellant had previously acted as the authorized representative in the tax reference filed by the Commissioner Income Tax on 05.04.1997 and continued in this capacity up to the Appellate Tribunal level---Appellant served as an authorized representative in past which did not inherently validate their appointment as a representative under S. 172(3)(f) of the Ordinance, 2001---The role of an authorized representative under S.223 of the Ordinance, 2001 differs fundamentally from a statutory representative under S.172(3)(f), with the latter carrying specific fiduciary obligations and financial responsibilities, which fact, the Assistant Commissioner failed to comprehend---It is important to note that an authorized representative does not bear the same level of responsibility or vicarious liability as a representative---Therefore, the Tax Authorities cannot automatically appoint an authorized representative as a representative without establishing the required significant financial connection between the appellant and non-resident person, thus, such declaration lacked justification---Thus, status of Appellant did not automatically qualify them for appointment as a representative under S.172(3)(1) of the Income Tax Ordinance, 2001, but the same required a distinct fiduciary relationship and financial connection with the non-resident company---Appellate Tribunal Inland Revenue annulled the orders passed by the Tax Authorities---Appeal was allowed, in circumstances. S.172(3)(f)---Non-resident person---authorized / statutory representative of taxpayer, role of---Scope---Number of tax years---applicability---a non-resident company conducted business through a branch office in Pakistan, which had been represented by a Chartered accountants Firm, however, later non-resident company closed its business---Chartered accountants (appellant) assailed orders passed by the Tax authorities (the Commissioner Inland Revenue and the assistant Commissioner Inland Revenue) treating them (appellant) as a representative of said non-resident Company under S.172(3)(f) of the Income Tax Ordinance, 2001 ('the Ordinance 2001')---Held, that the order passed by the assistant Commissioner, declaring the appellant as the representative, when read in conjunction with the relevant notice of hearing (dated 23.11.2016), appointed the appellant as the representative for all current and future tax years---However, S.172(3) of the Ordinance 2001, specifically provides for the declaration of a representative for a single tax year only---Therefore, based on said principle alone, the order passed by the assistant Commissioner was illegal and unsustainable in law---appellate Tribunal Inland Revenue annulled the orders passed by the Tax authorities---appeal was allowed, in circumstances.

PETER C/o Messrs PETER & CO. vs COMMISSIONER INLAND REVENUE, RTO, ISLAMABAD Ss — 2025 PTD 1904 INLAND REVENUE APPELLATE TRIBUNAL OF PAKISTAN

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