FTO Orders FBR to Probe Illegal Profit-Taking on Booking of Flats, Offices By Summit Bank

Federal Tax Ombudsman (FTO) Thursday directed the Federal Board of Revenue (FBR) to probe the matter of profits earned by a bank on the booking of flats, offices/penthouses, as Banking Companies Ordinance 1962 prohibits trading by banks.

In this connection, the FTO has issued an order involving the matter of trading by banks.

The FTO order revealed that the Summit Bank having a registered office at Plot No. 9-C, F-6 Markaz, Supermarket Islamabad, is engaged in the sale of flats, offices, and penthouses in violation of section 9 of The Banking Companies Ordinance 1962 which prohibits trading by banking companies. Therefore, FBR may like to probe this matter in depth related to the booking of flats, offices & Penthouses, profit arising thereon, declaration in relevant returns, and taxation thereof.

Benami Zone Karachi has already dealt with a host of similar cases, involving the same bank and directors of the complainant company therefore the instant case needs review with special reference to Benami Transactions (Prohibition) Act, 2017.

Briefly, the Complainant, a private limited company, took a lease of the property plot no. G-2 Block-2, Clifton Karachi measuring 3,832 square yards from KDA on 19.10.2002, and sold the said property to M/s Summit Bank Ltd at a price of Rs. 950,000,000/- as per the sale agreement dated 28th June 2013.

The Deptt selected the case of the complainant for Tax Year 2016 for total audit under Section 177 of the Ordinance and confronted the complainant for receipt of Rs. 1,939,500,000 exceeding the amount declared in the Tax year 2014 and added the whole amount of Rs. 1,939,500,00 under Section 111 of the Ordinance as unexplained asset creating total Tax liability of Rs. 620,640,000.

As per the complaint, the same immoveable property was taxed twice, once in Tax Year 2014 under Section 122(5A) and then again in Tax Year 2016 under Section 122(1) of the ordinance; hence this complaint

FTO’s order finding disclosed that the passing impugned order dated 30.06.2022 for Tax Year 2016 without providing an opportunity of being heard in flagrant violation of FBR’s instructions dated 23.07.2018, making addition under Section 111 without specifying any clause and taxing the same income twice; is contrary to law & procedure, the principle of natural justice, hence, unlawful parse.; and also tantamount to maladministration, in terms of Section 2(3)(i)(a) &(b) of the FTO Ordinance.

The FTO has recommended the FBR to direct the Commissioner IR Audit-I, CTO Karachi to revisit the impugned order dated 30.06.2022 for Tax Year 2016 in terms of Section 122A of the Ordinance, after affording a proper opportunity of hearing to the Complainant, on its merit as per law.

The Chief Commissioner LTO Islamabad and DG Anti Benami Initiative, FBR to probe the issue for tax evasion (if any), FTO order added.

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