Responds to FBR’s notice on Rs35.9m penalty: Sarina Isa questions FBR commissioner’s jurisdiction

ISLAMABAD: The wife of Supreme Court’s judge Qazi Faez Isa has questioned the territorial and legal jurisdiction of the tax authorities directing her to pay Rs35.8 million as penalty for her tax liabilities.

“You [FBR Commissioner] do not have territorial jurisdiction and on that issue, the FBR’s own record confirms that my tax returns were filed at Karachi, thereby only a commissioner at Karachi has jurisdiction. Similarly, you also do not have legal jurisdiction. To process information received through the Automatic Exchange of Information mechanism with other countries, pursuant to the Multilateral Convention on Mutual Administrative Assistance in Tax Matters — the jurisdiction assigned to you as Commissioner Inland Revenue, AEOI Zone, Islamabad, is restricted to cases falling in the jurisdiction of LTU Islamabad,” Mrs. Sarina Isa responded to the FBR’s notice on Tuesday.

Mrs. Isa submitted a seven-page reply with Commissioner Zulfiqar Ahmad, who slapped her a penalty for tax liability by producing a 164-page order against her following the Supreme Court’s order about three London properties case.

Mrs. Isa, who is going to challenge this order next month, has raised questions about Zulfiqar Ahmad hearing her tax matters.

“Since you [Zulfiqar] had already given a finding against me -- your letter dated 10th May, 2019 bearing No 140 titled ‘Complaint from PM office’-- I had requested that you [must] not proceed with my case, but still you did, and did so vigorously; not once providing me the mandated minimum period of 15 days to respond to a single one of your eight notices. Coincidentally, you received a promotion on 25th July, 2019 vide FBR notification no. 1874-IR/2019. Of the dozens of commissioners in FBR, the only one who had given a finding against me was selected,” her reply revealed, a copy of which was also exclusively made available with this correspondent.

Despite several attempts made by this correspondent in the past few days, the FBR neither replied to queries by the Geo News’ pertaining to this case, except to confirm that a detailed report into Mrs. Isa’s case was submitted before the apex court.

The Supreme Court’s June 19, 2020 Order had stated that, “The concerned commissioner of Inland Revenue shall himself issue appropriate notices under the Income Tax Ordinance, 2001.”

“Since you [Zulfiqar] are not the ‘concerned commissioner’ you have acted in violation of the Supreme Court Order,” Mrs. Isa argued in her reply. This correspondent spoke to tax experts who said that the issue of jurisdiction has time and again been highlighted as being of fundamental importance in the judgments handed down by the superior courts.

The case of Commissioner Inland Revenue Vs. Nestle Pakistan Ltd (2014 PTD 1472) dealt with sections 30 and 31 of the Sales Tax Act, 1990, where a superior court held: “…it is important to consider the structure of administrative tax governance under the Act. This is visible from the nature of appointments of the officers and the scope of the powers enjoyed by them under the Act. This specific nature of jurisdiction is reaffirmed in Section 31 of the Act, where the officer of Inland Revenue is under an obligation to exercise such powers and discharge such duties as are conferred or imposed on him under this Act.”

“I had voluntarily declared my assets in London as soon as a declaration in this respect was required by Section 116A of the Ordinance, which was inserted by the Finance Act, 2018 on 22nd May, 2018, and I did so without receipt of any notice from FBR. Moreover, the documents pertaining to the acquisition of assets and taxpayer’s sources of funds, including certificate from the bank (where I maintained my foreign currency accounts) were provided, which unfortunately you chose not to consider. These accounts were not concealed; instead, I had declared them and they were previously known to the State Bank of Pakistan, and in respect of which I have never been questioned,” she further stated.

“I also did not conceal, nor attempted to conceal my London properties, which stood in plain sight in my and my children’s names. If we wanted to conceal them, we would have created a trust or company and hidden these assets under one or more different names and behind a corporate name and veil,” she further argued.

“This does not call for imposition of penalty. In any event, my salary paid by the Karachi American School since the year 1982 was disregarded; the sale proceeds and profits earned from the sale of two properties in Clifton, Karachi were also disregarded; and so too were my earnings from my agricultural lands; without disputing that I had worked in the Karachi American School since 1982, had bought and sold two properties in Clifton, Karachi and owned the stated agricultural lands. You disregarded my entire life of work and earnings by a stroke of the pen and assumed that I could not buy properties equivalent in value to a house built on a 500 square yards plot. Is this because I am a woman? Therefore, for all the reasons mentioned above, kindly withdraw the purported notice,” she added.

The Commissioner, Zulfiqar Ahmad, passed his order on September 14, 2020 after the FBR team conducted a forensic analysis of the report of Sarina Isa's assets, investigation of her total transactions of GBP 0.698 million transferred from Karachi to London from the year 2003 to June 2013 in particular. It also conducted a forensic analysis of net assets worth Rs119.915 million of Sarina Isa for the tax year 2017-2018, officials told the Geo News. They further asked Mrs Sarina that her three London properties worth Rs104,680,020 have to be justified against the declared investment of Rs2,404,320.