Law: Income Tax Ordinance, 2001

Section: 120(1)(A), 122(5), 122(1), 122(9), 122(4), 205, 113

  Case Summary The taxpayer filed a return for Tax Year 2021 declaring income of Rs. 969,500. Tax authorities found undeclared purchases of Rs. 12,250,695, leading to proceedings under the Income Tax Ordinance, 2001. The taxpayer revised the return and paid minimum tax @ 0.25%, but the Assessing Officer: Applied 1.5% minimum tax under section 113 Imposed penalty and default surcharge The CIR(A) upheld this decision, after which the taxpayer filed a second appeal. Main Issue Whether the taxpayer is entitled to minimum tax at 0.25% (reduced rate) or 1.5%. Arguments Taxpayer (Appellant): Claims to be a distributor of fast-moving consumer goods (FMCGs). Under Division IX of Part I of First Schedule, such distributors are taxed at 0.25%. This provision has no requirement of active taxpayer status. Applying Clause 24D (Second Schedule) (which requires active status) is incorrect. Tax Department: Argues taxpayer was non-active under Sales Tax law. Therefore, reduced rate is not available. Justifies applying 1.5% tax rate. Tribunal Findings Two different provisions exist: First Schedule (Division IX) → 0.25% rate for FMCG distributors (no condition) Second Schedule (Clause 24D) → 0.25% but conditional (active taxpayer status) Tribunal held: First Schedule is the main charging provision. Conditions from Second Schedule cannot be imposed on First Schedule. If two interpretations exist, the one favorable to the taxpayer must be adopted. Key Conclusion If the taxpayer is proven to be an FMCG distributor, then: → Minimum tax = 0.25% (not 1.5%) Final Decision The case is remanded (sent back) to the Assessing Officer to: Verify whether the taxpayer is actually a distributor of FMCGs. If confirmed: → Tax must be charged at 0.25%. ORDER appellant/taxpayer Titled appeal has been filed at the against the Impugned order dated 14-06-2023 of the Commissioner Inland Revenue (Appeals) Bahawalpur CIRA, Whereby the order passed under section 122(4) of the Income Tax Ordinance, 2001 (The Ordinance, 2001) was confirmed. 2. Brief facts of the case as per impugned order are that the taxpayer, an Individual, filed return declaring Income at Rs. 969,500/for tax year…