Law: Income Tax Ordinance, 2001

Section: 161,161(1A),165(2B),174,174(3)

Law: Income Tax Rules, 2002

Section: 29(4),44(4)

Income Tax Ordinance (XLIX of 2001)---Ss. 161(1A), 165(2B) ,  174(3)---Income Tax Rules, 2002, Rr. 29(4) ,  44(4)---Books of account, documents and records to be maintained for a period of six years---Scope of section 174(3) of the Income Tax Ordinance 2001---Taxpayer is obliged to maintain the record under section 174(3) of the Income Tax Ordinance, 2001 for a period of six years and the taxpayer cannot be compelled to produce the record for a tax year beyond the period of six years as stipulated in section 174(3) of the Ordinance---Supreme Court approved the view expressed by the Lahore High Court in the case reported as Maple Leaf Cement Factory Ltd v. Federal Board of Revenue 2016 PTD 2074. Section 174 of the Income Tax Ordinance, 2001 (‘the Ordinance’) creates an obligation on the taxpayer to maintain such accounts, documents and records as prescribed for a period of six years, except in case of pending proceedings, where the obligation of a taxpayer to maintain the record is till the final decision of the proceedings, while the same provision protects the taxpayer from being asked to produce the record beyond the said period. The tax department is under an obligation to be vigilant and efficient enough so as to proceed against a taxpayer within the statutory timeframe provided under section 174(3) of the Ordinance. In the context of the present case even though there is no specific limitation for issuance of notices under section 161(1A) or 165(2B) of the Ordinance or Rule 44(4) of the Income Tax Rules, 2002 (‘the Rules’) but these provisions cannot be actualized or given effect to unless the record, available with the taxpayer, is examined and verified by the tax authorities. Since the said provisions of law require taxpayer to maintain record for a period of six years, hence notices beyond a period of six years cannot be given effect to. As the taxpayer is under no legal obligation to maintain tax records after the said statutory period, any such notices demanding the taxpayer to furnish such information are inconsistent with the clear provisions of the Ordinance and hence unlawful. Even though notices under sections 161(1A), 165(2B) of the…

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