AUDIT OF MEGA ISSUE TITLED LOW TAX TO GDP RATIO

IN RESPECT OF REGIONAL TAX OFFICE, MULTAN

(DIRECT TAXES)
AUDIT REPORT 2010-11
IN RESPECT OF REGIONAL TAX OFFICE MULTAN
Capital expenditure treated as revenue expenditure
S.#

PDP/
AO #

3.1.1/42

Name of
the
taxpayer

Tax
Year

Loss of
revenue
(Rs)

Departmental Compliance

Audit Remarks (20.12.2010)

DAC Directive
21.12.2011

M/s. Pak
Arab
Fertilizer
Ltd

2006

242323514

Case referred to Audit Division for remedial action.

Audit Remarks

Latest compliance

Under process

26.07.2011

29.07.2011

2012The DAC directed the RTO

to complete the proceedings as
per law and report compliance to
audit / FBR by
20-1-2011.

Charged Rs.282222143/-. In pursuance of the directions of

learned ATIR, the CIR( Appeals) granted stay of recovery upto
5th of June, 2011 or till decision of appeal. The appeal is still
pending.

Department has added back amount

paid to privatization commission and
amortization of goodwill as pointed
out by audit. Copy of charging order
to be provided.

24.11.2011. The taxpayer filed appeal before CIR(A) who

annulled the amended order on 25.06.2011. Department filed 2nd
appeal before ATIR on 03.10.2011.
Mater is Subjudice

Page8

20.06.12 The learned ATIR upheld the decision of CIR(A) vide

ITA No.366/LB/2012 dated 05.04.2012. 01.02.2013

Recovery awaited.
28.11.2011
Subjudice
21.05.2012 to 22.05.2012

Department has filed reference before Honorable High Court on

03.08.2012.

Matter is subjudice before ATIR.

08.07.2013

Subjudice

The matter is still pending at High Court

08.07.2013

29.11.2013. Still Subjudice before High Court.

Subjudice

Latest compliance 15.01.2014

Still subjudice before High Copurt.

1 mega issue a.r.2011-12 2012-13 rto multan (direct/indirect taxes) (f)

04.02.2013

04.08.2011
During the course of DAC
meeting, the RTO provide copy of
order u/s 122(5A). The DAC
directed the RTO to recovery the
amount by 30.08.2011 and report
compliance of Audit/FBR.
21.08.2013
The DAC directed the RTO to
pursue the case at appropriate
forum for out of turn hearing and
report compliance to Audit/FBR by
15.09.2013.

Wrong adjustment of B.F. Losses against income

2

3.1.2/48

M/s. Arain
Mills Ltd

2006

4628739

Under process

Under process

The DAC directed the RTO to

complete the proceedings as per
law and report compliance to
audit / FBR by
20-12011.

Latest Compliance 26.07.2011

The order u/s 122(1)/122(5A) for T.Y 2005 was passed by
the Taxation Officer, LTU Lahore in which the declared
loss was absorbed and income was assessed.
The
taxpayer company went in appeal before CIR (Appeals1) Lahore who passed the appellate order dated
16.04.2010 cancelling the order u/s 122 and restoring the
original income/loss. Therefore the loss declared for the
Tax Year 2005 has rightly been carried over and set-off
against the income for T.Y 2006.

29.07.2011
The CIR (A) declared order
passed u/s 122(5A) by the
taxation officer As illegal for the
T.Y 2005.. The department to
intimate the status of 2 nd appeal
whether filed or not.

24.11.2011
The record of taxpayer has been received on transfer
from RTO Lahore. Status of filing of appeal against the
CIR(A) orders could not be ascertained from the record.
Letter has been addressed to CCRTO Lahore to confirm
the status of 2nd appeal.
20.06.2012 Reminder has been issued to CCIR RTO
Lahore to confirm the status of 2nd appeal.
Letter/ 2nd Reminder has been written to the CCIR RTO
Lahore vide No.5888 dated 13.02.2013 to confirm the
status of 2nd appeal.

Page8

08.07.2013 Case record was received on transfer from

RTO Lahore. The CIR(Appeals-1) Lahore cancelled the
order passed under section 122(1)/122(5). As per
available record 2nd appeal against which has not been
filed. Para may kindly be treated as finally disposed off.
Latest Compliance 29.11.2013. Inspite of repeated
reminder from CCIR RTO Multan to CCIR RTO-II, Lahore
vide letter No.5888 dated 13.02.2013, no reply has been
received, that whether 2nd appeal was filed or not by the

2 mega issue a.r.2011-12 2012-13 rto multan (direct/indirect taxes) (f)

28.11.2011
Compliance pending as yet.
21.05.2012
to
22.05.2012
Compliance of DAC directives
dated 04.08.11 still pending.

04.02.2013 Matter is reportedly

under process.
08.07.2013
Matter
is
process

reportedly

under

04.08.2011
The RTO informed that status of
filing of appeal against the
decision of the CIR (A) is yet be
confirmed from RTO, Lahore
where from the case was
transferred to RTO, Multan. The
DAC directed the RTO to make
necessary confirmations and
intimate to Audit and FBR by
15.0.2011.
21.08.2013
DAC directed the RTO to get
the position verified from audit
by 15.09.2013.

then officer concerned.

Latest Compliance 15.01.2014
The RTO Lahore has confirmed vide his office letter
No.5850 dated 08.01.2014 that 2nd appeal has been
filed in this case (copy enclosed)
Short levy of tax due to anon allocation proportionate expenses.
3

3.1.9/34

M/s. Bank
Al-Habib
Ltd

2009

143792622

Show cause notice u/s 122(5A) was issued on the issue of

un-absorbed depreciation which has been contested by
the taxpayer company before the Hble High Court and is
pending for adjudication. As soon as the decision from the
Hble Court is received the case will be decided as per
law.
26.07.2011
Writ petition of the taxpayer is pending before Hble High
Court. The court has granted stay of proceedings. A Misc.
application for vacation of stay and early disposal of the
petition has been filed in the court which is pending.

Under process
29.07.2011
Subjudice
28.11.2011
Subjudice
21.05.2012 to 22.05.2012
The case may be pursued for
early hearing.

24.11.2011
Still subjudice before High Court

04.02.2013
Subjudice

Latest compliance
20.06.2012
Still subjudice before High Court.
Legal Advisor has requested the Chief Justice of Lahore
High Court Lahore to constitute forthwith a tax and
commercial D.B. for urgent hearing vide letter dated
06.04.2012.

Page8

01.02.2013
Subjudice before Lahore High Court.

3 mega issue a.r.2011-12 2012-13 rto multan (direct/indirect taxes) (f)

08.07.2013
Subjudice

The DAC directed the RTO to

request for early hearing and
complete the proceedings as per
law and report compliance to
audit / FBR by
20-1-2011.
04.08.2011
The RTO informed that the
taxpayer has filed Writ Petition
against selection the case for
audit and accordingly all other
actions including action in light of
audit observation is pending. The
DAC directed the RTO to keep
audit and FBR posted with
progress on periodic basis.
21.08.2013
The DAC directed the RTO to
pursue the case at appropriate
forum for out of turn hearing and
report compliance to Audit/FBR
by 15.09.2013

08.07.2013
The matter is still pending at High Court
15.01.2014
Still Subjudice before High Court.

3.1.9/53

M/s.Kh.
Bashir
Ahmad &
Co. (Pvt)
Ltd

2009

927097

Under process

20.12.2010

21.12.2012

26.11.2011

Under process

Order u/s 122(9)/122(5) dated 29.06.2011 has been

passed by the audit officer taking into consideration the
apportionment of expenses as per books of account
against the presumptive income.

29.07.2011 The department to revisit the order u/s 122(9)/122(5)

dated
29.6.2011
regarding
proportionate of expenses.[

The DAC directed the RTO to

complete the proceedings as per
law and report compliance to
audit/FBR BY 20.1.2011

01.12.2013
Order u/s 122(5) has been finalized by the Audit Division
taking into consideration the apportionment of expenses
as per books of account against the presumptive income.
15.01.2014
Order u/s 122(5A) has been passed vide DCR No.136
dated 08.02.20111 copy enclosed.
5

3.1.9./34
Multan
Zone

M/s.
Gulshin-eIqbal Flour
Mills

2008

659261

Case referred to Audit Division for remedial action.

Under process

Latest compliance 26.07.2011

29.07.2011

The remedial action u/s 122(5A) has been completed on

30.04.2011 by creating tax demand Rs.774121/-.Recovery
in progress

Recovery awaited

Page8

24.11.2011
Recovery awaited.

4 mega issue a.r.2011-12 2012-13 rto multan (direct/indirect taxes) (f)

28.11.2011
Still recovery awaited
21.05.2012 to 22.05.2012

The DAC directed the RTO to

complete the proceedings as per
law and report compliance to
audit / FBR by 20-1-2011.
04.08.2011
The RTO informed that an
amount point out by Audit has
been charged. The DAC directed
the RTO to recover the same by
30.08.2011 under intimation to

20.06.2012

Recovery may be expedited

Audit /FBR.

After passing order u/s 122(A) dated 30.04.2011 the same

was rectified vide order u/s 221 dated 29.06.2013. As a
result of this order no demand remained recoverable an
the already created demand of Rs.774121/- was taken
into (-) a/c. Under the circumstances para may kindly be
considered as settled.

04.02.2013. Recovery is still

awaited.

21.08.2013

02.12.2013.
The remedial action under section 122(5A) had been
completed on 30.04.2011 by created tax demand of
Rs.774121/- on the observation of audit authorities. The
AR of the taxpayer moved an application for rectification
on the plea that the claim of Depreciation in the said tax
year was not allowed in the ratio of receipt under normal
and presumptive regime. The Additional Commissioner
Audit taking into account facts, material available on
record it is concluded that the plea of the taxpayer is
correct and mistake apparent from record and amended
assessment u/s 122(5A) of the Income Tax Ordinance,
2001 vide dated 30.04.2011 is hereby rectified u/s 221 of
the Income Tax Ordinance, 2001. Copy of rectified order is
enclosed for ready reference.
15.01.2014

Page8

Rectified u/s 221 vide DCR No.01/145 dated

29.06.2013. No demand is recoverable copy enclosed.

5 mega issue a.r.2011-12 2012-13 rto multan (direct/indirect taxes) (f)

08.07.2013
Recovery is still awaited.

DAC directed the RTO to

expedite the recovery and report
progress to Audit/FBR by
15.09.2013

AUDIT OF MEGA ISSUE TITLED LOW TAX TO GDP RATIO IN AUDIT REPORT 2011-12
IN RESPECT OF REGIONAL TAX OFFICE, MULTAN
(DIRECT TAXES)
Short levy of tax due to non allocation of proportionate expenses.
S.#

DP/ Para
No.

Name of
Taxpayer

Amount
involved

Tax
Year

Departmental Reply

Audit Remarks
29.12.2011

DAC Directives
04.01.2012

5.3.4/
12978/01

M/s.
Shujabad
Weaving
Mills Ltd
2700524-7

20,222,891

2010

Under process

Under process

The RTO seeks time to submit reply,

the DAC directed the RTO to submit
definite progress in the matter by
15.03.2012 to Audit / FBR.

Latest Compliance 06.05.2013

The matter has been taken up by the Commissioner
Inland Revenue Zone-II, RTO Multan has passed order
u/s 122(5A) vide DCR # 1/1 dated 01-03-202 creating
additional demand of
Rs. 18,886,692/-. Later on
the CIR(A) who vide his A.O No. 344, dated 27-04-2012
has vacated the order u/s 122(5A) being illegal. Copies of
orders are enclosed. The para may please be treated as
settled.

06.05.2013
Department to file 2nd appeal if
not filed, and status of appeal to
be intimated to audit.

21.08.2013
DAC directed the RTO to inform the
status of filing of 2nd
Appeal to Audit/FBR by 15.09.2013

Latest compliance 29.11.2013.

2nd appeal has been filed and case is Subjudice.
Latest compliance 15.01.2014.

Page8

2nd appeal has not been filed by the CIR. The DCIR has
been directed vide letter No.384 dated 19.06.2012 that
fresh order may be pass in the light of order of the
CIR(Appeal)

5.3.4/

M/s. Pak

337,383,00

2010

Case has been referred to Audit for remedial action.

6 mega issue a.r.2011-12 2012-13 rto multan (direct/indirect taxes) (f)

Under process

-d0-

12978/01

Arab
Fertilizer
(Pvt) Ltd
0786750

06-05-2013
Asstt; for tax year 2010 has been amended u/s 122(5A) by
the CIR Zone-II, RTO, Multan vide order dated 15-032012. The issue regarding Apportionment of expenses
between normal sales and export sales /exempt sales was
confronted to the taxpayer. However after considering the
reply of the taxpayer the contention of the taxpayer was
accepted vide order dated 15-03-2012. Copy of order is
enclosed. Para may be treated as settled.
Latest compliance 29.11.2013.

06.05.2013

21.08.2013

Department to re-visit the issue

regarding proportion of expenses
as pointed out by audit & submit
reply accordingly.

DAC directed the RTO to revisit the

case and report compliance to
audit/FBR by 15.09.2013

Under process

-do-

Latest compliance 06.05.2013

006.05.2013

The RTO seeks time to submit reply,

the DAC directed the RTO to submit
definite progress in the matter by
15.03.2012 to Audit / FBR.

The matter has been taken up by the Commissioner

Inland Revenue Zone-II, RTO Multan has passed order
u/s 122(5A) vide DCR # 12/02 dated 23-04-202 creating
excessive determination of refund amounting to
(Rs.8,289,367/-) Copy of order is enclosed. The para may
please be treated as settled.

The RTO seeks time to submit

reply, the DAC directed the RTO
to submit definite progress in the
matter by 15.03.2012 to Audit /
FBR.

As per DAC directive the department has re-visit the case

and contention of the taxpayer found in order, therefore,
para may kindly be treated as settled.
Latest Compliance 15.01.2014
Subjudice before High Court.

5.3.4/
13085/05

M/s. Ahmad
Hassan
Textile Mills
1000978-8

10480,761

2010

Latest compliance 29.11.2013

Page8

The case has been re-visit by the department and it has

been observed that rectification in this case is required
and refund has been in advertently written at
Rs.8289667/- instead of demand. Reply in this regard is
awaited form the taxpayer
Latest compliance 15.01.2014
Order u/s 122(5A) has been passed vide DCR No.12/02
dated 23.04.2012 recovery is under process.

7 mega issue a.r.2011-12 2012-13 rto multan (direct/indirect taxes) (f)

21.08.2013
DAC took serious concern for not
comply
its
previous
DAC
directives. DAC directed the RTO to
furnish reply/progress to audit/FBR
by 15.09.2013.

5.3.4/a

M/s. Colony
Mills Ltd
2585135

43,673,452

Under process

-do-

Latest compliance 06.05.2013

The matter relates to audit division and the audit para
along with necessary documents has been sent to audit
unit-01, Zone-II fro necessary action at their end. Further
progress report may very kindly be called from concerned
audit unit.

006.05.2013

Latest compliance 29.11.2013

The matter has been taken up by the Audit Officer,
however, due to non-corporative attitude of the taxpayer
the case has not been finalized yet. However the same
may be finalized within a fortnight on the basis of available
information with the department.
Latest compliance 15.01.2014

Page8

Proceeding are under process.

AUDIT REPORT 2012-13

8 mega issue a.r.2011-12 2012-13 rto multan (direct/indirect taxes) (f)

The RTO seeks time to submit

reply, the DAC directed the RTO
to submit definite progress in the
matter by 15.03.2012 to Audit /
FBR.

The RTO seeks time to submit reply,

the DAC directed the RTO to submit
definite progress in the matter by
15.03.2012 to Audit / FBR.
21.08.2013
DAC took serious concern for not
comply
its
previous
DAC
directives. DAC directed the RTO to
furnish reply/progress to audit/FBR
by 15.09.2013.

IN RESPECT OF REGIONAL TAX OFFICE MULTAN

Unlawful Issuance Of Refund Without Observance Of Tax Law For Rs.217.50 Million
S.#

PDP/

Name of the taxpayer

Tax Year

Loss of
revenue
(Rs)

Departmental Compliance

M/s. Hyundai Engineering

Ltd.

2006

4628739

The case of M/s Hyundai Engineering Limited pertain to this

observation which falls within the jurisdiction of this Zone.

AO #
1

3.1

Page8

Income Tax Return for assessment year 1996-97 to 200203 were filed declaring loss and claiming refund.
Assessment for all the assessment year were completed
under the normal law and certain additions were made
which result in reduction of losses as well as refunds. The
taxpayer filed appeals against these assessment before the
Learned CIT (Appeals), Multan. The CIR (Appeal) allowed
relief to the taxpayer, however, department filed 2 nd appeal
in ATIR Lahore and the taxpayer also filed appeal before
ATIR. The 2nd appeal of the taxpayer were succeeded,
whereas appeal of the department stand failed. On the
basis of ATIR Audit appeal effect were given in all the
assessment year under section 62/132/221 of the Income
Tax Ordinance, 2001 on 05.03.2009 creating refund. The
taxpayer filed refund application which were process and
proposal of refund for the Assessment Year 1996-97 to
2002-03 was furnished to the Commissioner-IR, Zone-II
(Now Special Zone), RTO, Multan which was accepted and
administrative approval for issuance of refund was granted
by the then Commissioner on 27.01.2012 as detailed
below:-

9 mega issue a.r.2011-12 2012-13 rto multan (direct/indirect taxes) (f)

Audit remarks.

losses
correctly
and
were also

Assessment
Year

Amount
of
refund issued

1996-97

Rs.21,215,032/-

1999-2000

Rs.26,107,793/-

2000-2001

Rs.6,766,984/-

2002-2003

Rs.51,319,946/-

Total:

Rs.105,315,212/-

The B.F
were
allowed
refunds
correctly

determined as a result of appeal effect order and refund

was issued with the prior administrative approval of the
competent authority. The matter regarding jurisdiction of
the case it is stated that the jurisdiction of the case was also
assigned to RTO, Multan by the Board, therefore, objection
on this issue is not in order. It is, therefore, proposed that
the Audit Observation may kindly be settled.
Latest Compliance 29.11.2013
Contested.

Page8

Since refund was created as a result of appeal effect order

and the case was assigned by the Board to this Zone/RTO

10 mega issue a.r.2011-12 2012-13 rto multan (direct/indirect taxes) (f)

Page8

11 mega issue a.r.2011-12 2012-13 rto multan (direct/indirect taxes) (f)