Finance Act restricts IRO’s presence to business premises only

LAHORE: The Finance Act has restricted the presence of Inland Revenue Officer (IRO) to business premises only. Previously, the Bill had proposed that the Officer can be placed at the premises of the person.

Tax experts have pointed out that a similar provision (Section 40B) is present in the Sales Tax Act 1990. However, it is restricted to registered persons and monitoring of taxable goods under the STA. This amendment in the ITO has given broad powers to the board or chief commissioner to post any officer or other official on the premises of any person to monitor production, supply of goods (even those goods that are exempt from sales tax by operation of primary legislation (Section 13) or delegated legislation (SRO, Notification etc).

Further, they added, a similar provision (Section 54(1)) is present in the Sindh Sales Tax on Services Act (SSTSA) 2011, which allows the SRB Board to post an officer of the SRB to the premises of a registered person(s) or class of such persons to monitor the provision of services by such registered person(s).

Compared to the SSTSA, the newly introduced Section 175A is broader in that it applies to any person(s). Now the officer posted shall also be at liberty to monitor production of all goods and services being provided even if they are not registered under the STA or SSTSA. This means that the FBR will now be empowered with more information than before in conducting sales tax audits.

According to the taxonomists, the powers are against the foundational self assessment scheme of the ITO and will be prone to litigation on the plea of discrimination. They said it seemed that this amendment might have been introduced in light of the ad-interim orders issued by the courts of law, in various cases, including the case of Jadeed Feeds Industries v/s Federation of Pakistan and Others, wherein the FBR has been barred to post officers to premises where the taxpayer does not produce taxable supplies, so that the power to post officers to premises even where no taxable supplies are being produced, can be exercised under the ITO as opposed to the STA.