ATIR directs FBR to return ‘illegally recovered’ money to taxpayer

ISLAMABAD: The Appellate Tribunal Inland Revenue, Islamabad, has directed the Federal Board of Revenue (FBR) to immediately return an amount of Rs1,088,303,543 to the corporate taxpayer which was illegally recovered by the Large Tax Office (LTO) Islamabad through the attachment of his bank account.

The tribunal has also referred the matter to the Federal Tax Ombudsman (FTO) to inquire into the matter against the involved officials and also directed the FBR chairman to take action against the concerned officials and place this judgment in the personal files of the involved officials of the LTO, Islamabad.

According to the order of the Appellate Tribunal Inland Revenue, Islamabad, the applicant submitted that while the appellate orders were passed by the CIR(A), the order with respect to the tax year 2012 was served by hand at about 2:45pm and the other for the tax year 2014 was uploaded on the portal of the FBR, ie, IRIS at 02:13pm on the same day on November 23, 2022, and the department without adhering to the law and procedure for recovery given in Chapter XVIA of Income Tax Rules, 2002, has issued the notices under section 140 to different banks between 2:47pm to 2:49pm through email and the applicant’s accounts were attached and the amount in dispute was recovered on the same day from the banks amounting to Rs1,088,303,543.

It has been contended that issuance of notice under section 140 to enforce the recovery from the banks without providing it with a reasonable time to discharge the demand and/or exercise its right to file an appeal before this tribunal was a fraud on the statute.

That, in utter disregard of the settled law, the Respondent Department willfully flouted the provisions of the Income Tax Ordinance and went on to make the recovery from the bank accounts of the applicant by abusing the due process of law on the same date.

The department has not only blatantly violated the procedure given in the recovery rules but also recklessly overlooked the settled legal principles developed by our superior courts, which are binding on all the organs of the State in terms of Articles 189 and 201 of the Constitution.

The learned AR for the appellant explained that access to justice is a fundamental right; no recovery can be made unless a matter is decided by the Appellate Tribunal, which is the first independent forum outside the departmental hierarchy.

Tribunal ruled that the revenue authorities have acted in total disregard of the settled law and due process. Tribunal has the statutory power to grant a stay of recovery and all other powers to make the power effective, we hold that in appropriate cases the Tribunal has all the powers relating to the subject matter of appeal including the power of granting a stay of recovery and refund of tax recovered by the revenue authorities.

Tribunal has the power to direct the revenue authorities to refund the tax recovered by the revenue officer unlawfully by misusing his powers. Since the RO has misused his powers and made an unlawful recovery, the tribunal considers its legal duty to curb such a trend and maintain the confidence of the public in the administration of justice and the rule of law.

“We live in a democratic setup and the taxpayers deserve to be respected for their contribution to national development. Public servants are expected to discharge their functions with responsibility but not unreasonably. The officers are supposed to work diligently but not harassingly. It is absolutely necessary for the Department of Revenue to gain public trust and confidence by acting judiciously and by avoiding harassment. We appreciate the scheme of rewarding honest and diligent officers of the Department but also feel that there is a necessity of identifying ambitious officers harassing the taxpayers by misusing their powers and seating a bad name for the whole organization. In this case, the action of the revenue, authorities in the existence of the stay order, by disobeying the binding judgements of High Courts and Apex Court and not following the clear instructions of the FBR and by recovery of the disputed demand from the Banks is highly improper, unwarranted and bad in law”, the appellate tribunal observed.

The tribunal accordingly exercised its power and directed the revenue authorities to refund a sum of Rs1,088,303,543 recovered from banks to the applicant taxpayer within a period of seven days from the date of service of this order failing which the law shall take its course.

The tribunal went on to hold that if there is an abuse of power by such an officer then no hesitation should be felt in passing stringent stricture against the officer. In the instant case, the Revenue Authorities violated the settled law in daylight and abused their discretion by making recovery in a manner not supported by the law.

Under the Government Servant (Efficiency and Discipline) Rules, 1973, the grounds of efficiency under the section include inefficiency and misconduct. Under section 7(1) of the FBR Act, 2007, the chairman, FBR has the power to decide a representation against any act of maladministration, corruption, and misbehaviour by any officer or employee of the Board or any unnecessary delay or hardship: Under section 9(1) of the Establishment of Office of Federal Tax Ombudsman Ordinance, 2000, the Ombudsman can investigate any allegation of maladministration on part of the Revenue Division or any Tax Employee.

Keeping in view the above, the matter is referred to the Federal Tax Ombudsman, who is expected to inquire into the matter and share his findings and recommendations with this Court within a period of three months, the tribunal’s order added.

Copyright Business Recorder, 2022