Tax tribunal criticizes CTO Islamabad for incompetence in major property case

The Appellate Tribunal Inland Revenue (ATIR) Islamabad has issued a sharp rebuke to the Corporate Tax Office (CTO) Islamabad for its professional incompetence in handling a significant property business case, highlighting serious procedural flaws and misapplication of tax laws, Business Recorder reported. 

In a recent order, the tribunal instructed the concerned officer to begin reassessment proceedings from Tax Year 2019. ATIR emphasised that the CTO’s mishandling of the case resulted in a failure to adhere to statutory provisions, specifically those under Sections 39(3), 69, 90, 109, 153(1)(b), 113C, and 18(1)(d) of the Income Tax Ordinance. 

The tribunal warned that neglecting these legal duties would lead to a continued loss of public revenue.

The ruling also serves as a strong reminder to tax officers of their professional responsibilities, particularly in high-value cases involving major businesses. The tribunal’s decision is expected to lead to a closer examination of operational practices at the CTO Islamabad, setting a precedent for improved accountability in tax offices across the country.

The case revolves around a taxpayer engaged in the real estate business, including the sale and purchase of land, plots, apartments, and commercial properties. 

ATIR directed that the income from land acquisition should be treated as service income under Section 153(1)(b) of the Income Tax Ordinance, with tax rates applied based on whichever results in a higher revenue outcome. 

Additionally, the tribunal ordered a thorough evaluation of relevant documents, intercompany transactions, and financial statements to assess the true economic ownership of the income.

The ruling also focuses on a significant advance of Rs.36.1 billion recorded in the taxpayer’s accounts, instructing the Assessing Officer to assess income according to the true economic substance of the transactions.

Tax experts believe this decision may prompt a broader review of the CTO’s operations and push for more rigorous enforcement of tax laws in future high-stakes cases.