LAHORE: Federal Tax Ombudsman (FTO) has directed the Federal Board of Revenue (FBR) to probe the matter of declaration/taxation of the profits earned by a bank on booking of flats, offices/penthouses, as Banking Companies Ordinance 1962 prohibits trading by banks.
In this connection, the FTO has issued an order involving the matter of trading by banks. The FTO order revealed that a bank having registered office at F-6 Markaz, Supermarket Islamabad, is engaged in sale of flats, offices, penthouses in violation of Section 9 of The Banking Companies Ordinance 1962 which prohibits trading by banking companies.
Therefore, the FBR may like to probe this matter in depth related to booking of flats, offices and penthouses, profit arising thereon, declaration in relevant returns and taxation thereof.
Benami Zone Karachi has already dealt a host of similar cases, involving the same bank and directors of complainant company therefore the instant case needs review with special reference to Benami Transactions (Prohibition) Act, 2017.
Briefly, the complainant, a private limited company, took lease of the property plot in Clifton Karachi measuring 3832 square yards from KDA in 2002 and sold the said property to the bank at a price of Rs 950,000,000 as per sale agreement dated 28.06.2013.
The department selected the case of the complainant for Tax Year 2016 for total audit under Section 177 of the Income Tax Ordinance (Ordinance) and confronted the complainant for receipt of Rs 1,939,500,000 exceeding the amount declared in Tax year 2014 and added the whole amount of Rs 1,939,500,00 under Section 111 of the Ordinance as unexplained asset creating total tax liability of Rs 620,640,000.
As per complaint, the same immoveable property was taxed twice, once in Tax Year 2014 under Section 122(5A) and then again in Tax Year 2016 under Section 122(1) of the Ordinance.
FTO’s order finding disclosed that the passing impugned order dated 2022 for Tax Year 2016 without providing opportunity of being heard in flagrant violation of FBR’s instructions of 2018, making addition under section 111 without specifying any clause and taxing the same income twice; is contrary to law & procedure, principle of natural justice, hence, unlawful parse and also tantamount to maladministration, in terms of the FTO Ordinance.
The FTO has recommended the FBR to direct the Commissioner IR Audit-I, CTO Karachi to revisit the impugned order dated June 30, 2022 for Tax Year 2016 in terms of Section 122A of the Ordinance, after affording proper opportunity of hearing to the complainant, on its merit as per law.
The chief commissioner LTO Islamabad and DG Anti Benami Initiative, FBR to probe on the issue for tax evasion (if any), FTO order added.
