Law: Income Tax Ordinance, 2001

Section: 161,133

  Summary The Islamabad High Court dismissed Income Tax References No. 61, 62, and 63 of 2018, filed by the Commissioner Inland Revenue against the Appellate Tribunal Inland Revenue's order dated 07.05.2018. The dispute concerned a tax demand raised under Section 161 of the Income Tax Ordinance, 2001, alleging failure by the taxpayer to withhold tax. The tax department argued that the demand was raised because the taxpayer failed to produce records despite being given opportunities. However, the Commissioner Inland Revenue (Appeals) had held that the demand was based on presumptions and lacked identification of specific payments on which withholding tax was allegedly not deducted. The Court upheld the Tribunal's decision, holding that the Commissioner Inland Revenue (Appeals) has no authority to remand a case back to the Commissioner. Relying on Commissioner Inland Revenue, Zone-1, LTU v. MCB Bank Limited (2021 SCMR 1325), the Court observed that before invoking Section 161, the Commissioner must possess objective information identifying specific payments that attracted withholding obligations and showing a possible failure to deduct tax. Since the tax department failed to identify such payments and merely relied on presumptions, the demand could not be sustained. Consequently, the references were found to be without merit and were dismissed.   JUDGMENT SHEET  Babar Sattar, J:- Through this judgment we will decide I.T.Rs No.61, 62 and 63 of 2018. Through these income tax references the judgment rendered by the Appellate Tribunal Inland Revenue dated 07.05.2018 has been impugned pursuant to which the demand generated by the Commissioner, which was set aside by the Commissioner Inland Revenue (Appeals) (“CIRA”) was upheld, but the order of the CIRA to the extent that the matter was remanded back to the Commissioner was set aside.  2. Learned counsel for the Commissioner submitted that the tax department had generated a demand in terms of section 161 of the Income Tax Ordinance, 2001 (“ITO”), in ex-parte                2 | P a g e…