By Arshad Sharif and Adeel Raja
ISLAMABAD, May 15, 2021: The Federal Board of Revenue (FBR) claims to have detected an undeclared joint account of Honourable Justice Qazi Faiz Isa and his wife in a report submitted to the Supreme Court of Pakistan whose findings also point out that the money trail for the three London properties was “not found satisfactory.”
The FBR report said that money trail was missing for the three (03) London properties of Honourable Justice Qazi Faez Isa’s family members as bank record clearly mentioned that money was remitted out from Pakistan to United Kingdom for maintenance and education of children and not for buying the properties.
The FBR report in its findings mentioned that the defence put forth by Mrs Sarina Isa “to explain the sources of Investment made in the purchase of (03) offshore properties has been considered and not found satisfactory.”
The 170-page FBR report was submitted to the Supreme Court by Additional Attorney General of Pakistan, Sohail Mehmood, in compliance of an order dated 19th June, 2020 in Constitution Petition No 17/2019.
However, a short order given by the Supreme Court of Pakistan in the review petitions of Honouarble Justice Qazi Faez Isa and his wife Mrs Sarina Isa, recalled and set aside the earlier judgement.
“All the subsequent proceedings, actions, orders, information and reports in pursuance of the directions contained in the short order dated 19 June, 2020 and the detailed reasons thereof, are declared to be illegal and without any legal effect. Resultantly, any such proceedings, actions, orders or reports cannot be considered or acted upon and pursued any further by any forum or authority including the Supreme Judicial Council,” the short order of the Supreme Court said.
Legal experts said that though the FBR report was made and submitted to the Supreme Judicial Council under directions of the Supreme Court of Pakistan, the report doesn’t exist legally after the short order by the Supreme Court on the review petitions.
UNDECLARED JOINT BANK ACCOUNT
FBR findings about an undeclared joint account are as follows:
“(vi) Following the receipt of information from bank on 24.08.2020 and addendum to showcause notice was issued on 26.08.2020, this notice was sent through IRIS as well as on e-mail address of the taxpayer. Through this notice the taxpayer was intimated that she also operated Account Number 0228707471003065 In MCB Clifton Branch, Karachi jointly with her husband. Although the foreign currency transactions were undertaken (as detailed above) yet it was neither declared by the taxpayer nor her husband until tax year 2018 when the latter, declared it. This aspect of the case coming into light does not have any bearing on the proceedings in hands and its cognizance, if any, shall be taken separately. It may only be observed that before tax year 2018 neither the taxpayer nor her husband honorable Mr. Justice Qazi Faez Isa has declared the said joint foreign currency bank account.”
FBR FINDING: THE MISSING MONEY TRAIL
Following are the FBR findings about the money trail which the tax payer could not justify:
(I) The taxpayer vide reply dated 09.07.2020 provided a certificate dated 06.12.2019, issued by Standard Chartered Bank, World Trade Centre Branch, Clifton, Karachi by way of an explanation of the sources of investment made into the purchase of the (03) offshore properties. Through the notices issued the taxpayer was repeatedly and specifically requested to provide supporting evidences i.e. bank statement showing the transfer of money invested in the purchase of these properties to the accounts of solicitors/sellers, but the same was not provided. Therefore, a notice u/s 176 of the Ordinance, 2001 was issued to the bank. In response, the documentary evidence submitted by the Bank revealed that foreign exchange to the tune of ? (GBP) 737,503, and $17,966 was remitted out by the taxpayer during T/Y 2003 to 2013. However, as per the documentary evidence available on record, almost all transactions carried out by the taxpayer under her own signatures carried a ?Purpose of Remittance,? other than purchase of the under Investigation offshore properties such as ?children’s education and their maintenance? etc, The aforesaid proposition goes to establish that neither the taxpayer had resources nor their trail linking them with the purchase of the properties in question. It is pertinent to mention here that the Honorable Supreme Court of Pakistan at Para 122 of its judgement dated 20.04.2017 reported as 2017 PLD SC 265 has observed that when any fact is especially within the knowledge of any person the burden of proving that fact is upon him. It further observed that the facts about generation and availability of requisite funds for acquisition of relevant properties In London, about transfer of such funds, about the mode of payment, about how, when and from whom possession of relevant properties was obtained were all especially within the knowledge of respondent and his children thus the burden of proving those facts was upon them.?
Therefore, the burden of proving the fact regarding the sources and their passage to the accounts of solicitors/sellers for purchase of offshore properties was entirely upon the taxpayer which she failed to discharge.
(iv) The taxpayer in this case has not been able to give any trail or legal justification or sources through which the following assets were created:
i). the deposits, which were made in the foreign currency bank account, maintained at the Standard Chartered Bank;
il) the three offshore properties in London.
The taxpayer has only hurtled accusations on various persons without justifying the legal resources in respect of the afore stated assets owned by the taxpayer. In other words, the acquisition of none of the above properties has been substantiated by the taxpayers.
As the present proceedings are in respect of the three offshore properties in London, the additions against concealment are only in relation thereto.”
UNEXPLAINED SOURCES FOR REMITTENCES TO UK
The FBR report raised a question about unexplained sources of funds remitted to the United Kingdom.
“(v) As highlighted at para 12 of show cause notice dated 30.07.2020 nothing has been brought on record to substantiate the sources of remitted out foreign exchange GBP7,37,503 and USD 17,966 through which any of the amounts was earned by the taxpayer. On the other hand, these amounts constitute an un-explained expenditure Incurred abroad on account of children?s education and living expenses which warrants action under the Ordinance, separately.”
MISSING ENTRIES: AGRICULTURAL INCOME AND FOREIGN CURRENCY ACCOUNT
FBR report said the tax payer could not justify or explain, till date, the source to justify deposits in the foreign currency account.
“The plea regarding earning of Agriculture Income and subsequently its deposits to foreign currency account is not evident from any of the tax declarations e-filed by the taxpayer with the department upto Tax Year 2013. Moreover, no supporting details/evidence in this regard has been provided/submitted till date. Had there been any Income on this account the same, without prejudice to its exemption, should have been disclosed in the tax returns and wealth reconciliation statements. Without prejudice to the aforesaid the taxpayer was also at liberty to revise her Income Tax Returns and Wealth Statements in terms of provisions of section 114(6) and 116(3) of the Income Tax Ordinance, 2001 which she failed to do so. In the absence of non-declarations of any Income from agriculture in her declarations the same could not be accepted as a valid source for explaining the purchase of an asset/property. Even the agriculture land declared for the first time In Tax Year 2018 has never been declared in the wealth statements e-filed for Tax Years 2012 and 2013. The taxpayer has not shown the payment of any provincial agricultural income tax or related charges. She has also not declared and then proved as to how much agricultural income was earned each year. Therefore, the taxpayer has not been able to establish the existence or availability of any agricultural Income which could serve as a source to substantiate the purchase of the (03) offshore properties. As stated aforesaid the taxpayer enjoys no immunity with regard to her foreign currency bank account in view of the proviso to Section 5(1) of PERA, 1992 The taxpayer has not been able to establish any source to justify deposits i-e credit entries in her foreign currency bank account, which remain unexplained till date.”
CLICK THE LINK TO ACCESS PDF VERSION OF FULL FBR REPORT: FBR REPORT PDF