BAIG ENTERPRISES, LAHORE vs COMMISSIONER INLAND REVENUE, ZONE-IV, RTO, LAHORE Ss

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BAIG ENTERPRISES, LAHORE VS COMMISSIONER INLAND REVENUE, ZONE-IV, RTO, LAHORE Ss. 11(2), 11(3), 23 & 73---Claim of input tax, disallowance of---Tax fraud---Supplier blacklisted subsequently---Effect---Inadmissible transactions---Scope---Misuse of credentials (user-ID, password etc.) of registered person, plea/allegation of---Stance of the appellant (registered person) was that its user-ID and password were allegedly misused by hackers, leading to filing of fabricated returns and fictitious purchases without the knowledge of the appellant for which an application had already been filed with the FIA Cybercrime Wing regarding misuse of credentials which substantiated that the appellant was not the real beneficiary of any such transactions---Validity---Notably, the appellant (registered person) placed on record a complaint before the FIA Cyber Crime Wing alleging misuse of login credentials; however, no investigation report or conclusive finding had been produced in said regard---In a growing number of cases, the taxpayers had taken the defence that their login and PIN were compromised and misused by unscrupulous elements; in almost all such cases, applications were filed with the FIA Cyber Crime Wing, yet no finalized investigation had been produced on record in any matter---FBR's login and PIN protocol set a high bar against casual compromise, however, the same does not absolve the Department of its responsibility to inquire and verify once such a defence is raised---The absence of departmental investigation or forensic analysis into when, how, and from which device the login was accessed was a serious omission which undermined the integrity of the assessment proceedings---An assessment disallowing input tax on the basis of "tax fraud" must rest on clear, positive findings directly linking the registered person to the alleged fraudulent scheme---The order of the Assessing Officer in the present case did not identify the device, IP address, or time-stamps from which the returns and invoices were uploaded; it did not examine the appellant's internal office systems or obtain IRIS audit logs to test the veracity of the appellant's claim; it did not trace the movement of consideration through banking channels as mandated under S. 73 of the Sales Act 1990; it died not map the transactional chain from supplier to appellant and onwards to any buyer or refund; and it did not state whether the appellant issued further invoices or obtained any refund by using the impugned input---Said gaps rendered the order non-speaking on material facts and left core statutory conditions under Ss. 7, 8, 11, 23 and 73 of the Sales Act, 1990 unaddressed---The subsequent blacklisting of a supplier is undoubtedly a red flag but it is not, in itself, a self-executing ground to deny input tax claimed in earlier periods---Department must still establish either that the appellant had knowledge of the fraud, or invoicing and banking transactions were violated---Without such findings, liability cannot be fastened on the registered person merely because its supplier was later blacklisted---Where fraud is alleged, the evidentiary burden on the department is heavier than mere suspicion---Conclusory statements cannot substitute concrete findings on primary facts---At the same time, a taxpayer cannot succeed merely on a bald plea of "hacked credentials" unless such a plea is supported by a verifiable trail---There is, therefore, a reciprocal duty: the taxpayer must furnish logs, devices or bank statements within its power and the Department must subject that material to proper forensic scrutiny before drawing adverse conclusions---On the current record, the fact-questions which remained unanswered yet were indispensable to a lawful determination were : login forensic, office-system audit, banking trail, chain mapping, supplier status by period, third-party responses from confirmations: supplier/downstream buyers and reconciliation of invoice numbers, quantities and values---Without grappling with the who, when, and how of the alleged claim, and without tracing the actual flow of goods and money, the impugned order did not meet the statutory standard for an adverse determination under S. 11 of the Sales Tax Act, 1990---The CIR(A)'s concurrence with the Assessing Officers on principal tax, without first addressing these deficiencies (fact-questions), also fells short of the obligation to deliver a reasoned order dealing with the taxpayer's material pleas and evidence---Appellate Tribunal Inland Revenue remanded the matter to the Assessing Officer to conduct a comprehensive inquiry into the said issues (fact-questions)---Appeal, filed by registered person, was disposed of accordingly.

BAIG ENTERPRISES, LAHORE vs COMMISSIONER INLAND REVENUE, ZONE-IV, RTO, LAHORE Ss — 2026 PTD 790 INLAND REVENUE APPELLATE TRIBUNAL OF PAKISTAN

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