The Lahore High Court has held that Section 38 of Sales Tax Act authorizes Inland Revenue officers to access any business premises, manufacturing facility, registered office or any other place where stocks, business records or documents relevant under the Act are kept.
The court observed that a person holding funds belonging to the public exchequer cannot, in equity or in law, justifiably object to routine inspection proceedings meant to verify the correctness of declarations made by him.
The court observed that the inspection proceedings serve the larger public interest by ensuring that the tax collected from the public reaches the treasury without leakage, suppression or misappropriation.
The court, however said, that Section 40 of the Act contemplates search and seizure only after obtaining a magistrate’s warrants, but only where the officer has reason to believe that documents or things relevant to proceedings exist at a place.
The court said the section 30 also extends authority not only to registered persons but also to persons liable for registration, and further, to any person whose business activities may be required to be examined for any inquiry or investigation in any tax fraud committed by him, his agent or any other person, the court added.
The court said, this wide yet purpose linked statutory mandate enables revenue authorities to identify tax evasion, detect fraudulent input adjustments, uncover unreported supplies, and generally ensure that the flow of tax to the exchequer is not impeded through concealment or manipulation.
The court, however, said this power is exercisable even when no adjudicatory or penal proceedings are pending, and is intended to verify declarations, ascertain factual positions, examine stock levels, and review records maintained under federal, provincial, or local laws, the court added.
The court passed this order in a petition of Khursheed & Sons challenging the search conducted by the revenue officials at its business premises.
The court said in the present case, no coercive action has been taken against the petitioner, nor has he been deprived of property or subjected to any measure beyond a routine inspection, no measure of coercion, seizure, or forced retrieval was adopted.
The court said, verification of discrepancies is a routine and essential function of the tax administration to ensure accuracy of declarations.
The record does not disclose arbitrariness, mala fides, colourable exercise of authority or any overreach that may warrant interference in constitutional jurisdiction, the court added.
The court observed that the petitioner failed to demonstrate any infringement of legal right and dismissed the petition being devoid of any merit.
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