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Tax officials cannot shift computers from suspected units: Tax Ombudsman

ISLAMABAD (November 13 2003): Tax officials are not allowed to shift mini/ personal computers to the Collectorates during raid on business premises of suspected units under section 38 of Sales Tax Act, 1990.

Moreover, the tax officials can not access the business premises and record of the units/factories without prior permission of Central Board of Revenue (CBR).

This observation was made by Federal Tax Ombudsman (FTO) in a decision pertaining to Abbasi Distributors, Islamabad, where an Assistant Collector of Sales Tax trespassed the business premises of the unit and took away all record without seeking permission from the Board.

It is learnt that tax officials in a number of cases concerning ghee/cooking oil industry conducted raids and took away original record/computers by misusing section 38 of the Sales Tax Act, 1990.

However, after this FTO decision, the tax officials can not further misuse authority as section 38 authorises to take into custody only diskettes that can copy the entire data on the hard disk of the computer whereas taking personal computers during raid is tantamount to misusing the authority.

FTO has ordered CBR to ensure that inquiry should be initiated against the Assistant Collector of Sales Tax, Rawalpindi, Syed Junaid, who along with seven other persons forcibly took away 19 years old nephew of the complainant to the Collectorate for taking signature on the list of record, documents, processing units impounded from the business premises of the complainant instead of preparing such list on the spot.

The Assistant Collector also failed to show authority letter issued by CBR to exercise powers under section 38 of the Sales Tax Act while seeking access to the business premises and record of the complainant.

The raiding party exceeded authority under section 38 because they took into custody three computer processing units in contravention of the specific provision of section 38.

It says “such record, statements, diskettes, documents or any part thereof in original or copies thereof in such form as the authorised officer may deemed fit.”

Details showed that Assistant Collector of Sales Tax (Audit-III), Rawalpindi, Syed Junaid Arshad, took away complete record including three computers from the business premises of an Islamabad based distributor of Shell Pakistan Limited and CDL Foods.

They also took away record of his brother's business, who had temporarily set up his office at the complainant's premises. Junaid refused to give any details about the reason of raid on the concerned unit.

The raiding team did not prepare recovery memo on the spot and nephew of the complainant was released after taking signature on the recovery memo.

On the other hand, Assistant Collector opined that he was authorised to visit the premises of unit and demanded the record under section 38, 25 and 22 of the Sales Tax Act, 1990 as he alleged that registered person will tamper the record to evade sales tax.

Furthermore, despite the involvement of sales tax auditors to amicably resolve the matter, Assistant Collector deliberately tried to complicate the issue by submitting incomplete audit report to the adjudicating authorities.

He wrongly interpreted and grossly misused section 38 which does not permit trespassing any premises. Junaid along with seven other persons did not provide any authority nor proved their identity to enter complainants' premises.

Further, he hurried submission of case for adjudication without issuing audit report and show-cause notice which amounts to misusing the authority.

FTO has ordered that three computers should be returned to the complainant and inquiry should be initiated against Syed Junaid Arshad.

Compliance report should be submitted by CBR within 45 days.

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