‘Tax authorities have failed to issue supplementary show-cause notice’

LAHORE: Tax authorities allegedly fail to issue supplementary show-cause notice in case taxpayers raise new factual grounds after receiving the already issued show-cause notice from the department, said sources.

Instead, they said, the department prefers to invoke original jurisdiction based on the already issued show-cause notice to address the new factual grounds raised by taxpayers.

Even the already issued departmental notices are often found infructuous in the sense that these notices do not mention the relaxation available to a taxpayer under any particular SRO.

However, deputy commissioners of the Inland Revenue strike down the new factual grounds in their replies to the department on receiving the already issued show-cause notice.

While highlighting the significance and purpose of a show-cause notice, the sources pointed out that a show-cause notice is a formal communication from an authority informing the recipient of an alleged violation or non-compliance with a law and providing them with an opportunity to respond to the said allegations. It embodies the principle of natural justice, which requires that parties to a dispute be given a fair hearing before any decision is made that may affect their rights or interests.

The principles of due process and fairness mandate that the recipient of a show cause notice be given adequate time to respond and present their case, said sources, adding that taxpayers should be given access to relevant evidence and information and the opportunity to be heard before any action is taken against them.

According to them, the tax authorities should demonstrate that they are not biased, their decision is based on the facts of the case and the relevant law, and the recipient’s rights and interests are protected. They said taxpayers should be given a fair and transparent opportunity to present their case before any adverse order affecting their rights and interests is passed.

Tax practitioners have further pointed out that a show-cause notice can also be viewed as being akin to alternative dispute resolution (ADR) as it provides a pre-litigation opportunity for the recipient to present their position and show cause. By doing so, the matter can potentially be resolved before it escalates and requires any adjudication.

This not only saves time and resources but also encourages the efficient resolution of disputes, acting as an effective mode of resolving disputes outside of the traditional legal framework, they added.

Copyright Business Recorder, 2023