Meeting revenue collection targets: IR officials accused of attaching bank accounts

ISLAMABAD: The Inland Revenue field formations have been accused of attaching the bank accounts of different taxpayers including directors of companies to meet June 2023 assigned revenue collection targets, it is learnt.

In an apparent move to achieve unrealistic budgetary targets, the Inland Revenue has been accused of resorting to illegal recovery measures with total disregard for the statutory provisions and guiding rather binding principles laid by the superior courts.

According to a recent instance in spite of a stay order of the Appellate Tribunal Inland Revenue dated 13 June 2023 in the case of Better Builders & Traders (Pvt) Ltd the Deputy Commissioner Inland Revenue, Unit -02, Zone -V, Corporate Tax Office Lahore on June 15, 2023 attached the bank accounts of the director for recovery of the stayed amount of dues of the company.

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When the taxpayer met the tax hierarchy with the stay order, the Department tried its best in vain to press the director to sign an order sheet entry stating that he has no objection to recovery made from his bank account.

When contacted Shahid Jami, tax consultant explained that under section 139(1) of the Income Tax Ordinance 2001 in the case of a private limited company if the tax payable cannot be recovered from the company then every person who was a director in that tax year shall be jointly and severally liable for payment of tax due by the company.

However, superior courts have laid down binding principles in this regard but in June each year, these are disregarded by field formations as higher officials are also supportive of high-handedness.

Jami explained that in a judgment reported as 2015 PTD 458 the Lahore High Court had held that recovery from the director cannot be initiated unless all possible recovery measures against the company were taken but the recovery could not be made. The relevant extract is as under:

“8- The words, ‘cannot be recovered from the company’ make it obligatory for the Taxation Officer/ Commissioner to show, after employing due process, that tax was not recoverable from the company. A director or shareholder cannot be proceeded against for the recovery without exhausting all modes of recovery against the company.

The director/shareholder is required to be confronted, under this section, that tax is not recoverable from the company, therefore, he is being held liable, otherwise he would be taken by surprise on notice under section 140. Though, this section is a ‘non obstante’ provision, excluding Companies Ordinance, 1984, yet the basic principle that ‘company is a distinct personality, independent of its shareholders/ directors’ could not be ignored.

9- After insertion of Article 10A in the Constitution of Pakistan, 1973, ‘fair trial’ and ‘due process’ are fundamental rights of every citizen for ‘determination of his civil rights and obligations’.

Before shifting the obligation of the tax from company to its director under section 139 of the Ordinance, the director should be confronted and be given an opportunity to defend himself. The Apex Court in a recent judgment Sarfraz Saleem v. Federation of Pakistan and others (PLD 2014 SC 232) has held:—

“4- …every person, for determination of his civil rights and obligations or in any criminal charge against him shall be entitled to fair trial and due process”…

In another case Babar Hussain Shah and another v. Mujeeb Ahmed Khan and another (2012 SCMR 1235), the Hon’ble Court has highlighted the import of Article 10A in the words:—

“11- ….concept of fair trial and due process has always been the golden principles of administration of justice but after incorporation of Article 10-A in the Constitution of the Islamic Republic of Pakistan, 1973 vide 18th Amendment, it has become more important that due process should be adopted for conducting a fair trial and order passed in violation of due process might be considered to be void….”

In a Suo Motu Case No.4 of 2010, reported as (PLD 2012 SC 553), Hon’ble Supreme Court of Pakistan has held that right to free trial and due process is to be read as part of every statute; relevant excerpts are reproduced hereunder:—

“27- …law, or custom or usage having the force of law, which is inconsistent with the right to a ‘fair trial’ would be void by virtue of Article 8 of the Constitution….”

“…Right to a fair trial has been associated with the fundamental right of access to justice, which should be read in every statute even if not expressly provided for unless specifically excluded…”

10- No proceedings were undertaken to show; first that tax was not recoverable from the company, secondly to hold the petitioner as liable to pay tax under section 139, after confronting and providing opportunity of being heard. Petitioner’s right of “due process” and “fair trial” is found to have been violated. Therefore, the impugned notice under section 140 of the Ordinance is held as void.“

Jami urged the FBR should incorporate the court-binding guidelines in a circular for strict adherence by the field formations as they have attained finality as the department had not filed an appeal before Supreme Court.

Copyright Business Recorder, 2023