Law: Income Tax Ordinance, 2001

Section: 175C

Law: Sales Tax Act, 1990

Section: 21(2)

    Summary of the Order The appellant, M/s Ahmad Glass Industries (Pvt) Ltd., challenged the order dated 21.11.2025 by which the Commissioner Inland Revenue, CTO Lahore suspended its sales tax registration under Section 21(2) of the Sales Tax Act, 1990 based on alleged discrepancies found during proceedings initiated under Section 175C of the Income Tax Ordinance, 2001. The tax authorities alleged that the appellant: Failed to charge sales tax on retail price under the Third Schedule. Did not properly distinguish supplies made to car assemblers and non-assemblers. Underreported sales and maintained irregular delivery challans. Had significant stock discrepancies and abnormal value addition differences, allegedly resulting in tax evasion of Rs. 369 million. Based on these allegations and the appellant’s non-appearance in response to the show-cause notice, the Commissioner suspended the registration. Before the Tribunal, the appellant argued that: No proper show-cause notice was served under Section 56. The allegations were vague and based on assumptions. Supplies were made to car assemblers, exempting them from retail price printing requirements. Differences in stock and value addition cannot establish tax fraud. Section 21(2) requires clear evidence of fake invoices or tax fraud, which was absent. After hearing both sides, the Tribunal held that: Suspension/blacklisting under Section 21(2) can only be invoked where there is sufficient evidence of fake invoices or tax fraud. The Commissioner failed to conduct proper inquiry or bring conclusive evidence on record. The allegations were based on presumptions, not proven through adjudication under the relevant provisions (e.g., Section 11). Issues such as stock discrepancies or reporting inconsistencies should be addressed through normal assessment and adjudication, not through extreme measures like suspension or blacklisting. Suspension of registration paralyzes business operations and must only be used in exceptional circumstances involving ongoing fraud. Such action must also comply with constitutional guarantees of due process and the right to conduct lawful business. Accordingly, the Tribunal…