ISLAMABAD: Lahore Tax Bar Association (LTBA) has strongly opposed the proposed abolition of the first Appellate Forum of Commissioner Appeals, saying it would pose complexity in administering the relevant fiscal laws and provision of justice to taxpayers.
According to a communication of LTBA to Finance Minister, the government is contemplating the abolition of the First Appellate Forum of Commissioner Appeals, the primary fact-finding authority in tax matters, as provided under the Income Tax Ordinance, 2001, Sales Tax Act, 1990 and Federal Excise Act, 2005 beside the Appellate Tribunal which is the secondary but final fact-finding authority. This decision proposes to shift the entirety of the burden onto the Appellate Tribunal Inland Revenue, the second appellate forum, which after abolition of the aforesaid tier would become only the sole fact-finding authority.
As champions of the rule of law and advocates for the betterment of society as enshrined in the Constitution, the tax advisors are deeply concerned about the potential repercussions of this proposed change. The First Appellate Forum serves a critical role in ensuring a fair and impartial assessment of tax issues before they escalate to higher levels of appeal.
LTBA strongly believed that maintaining the First Appellate Forum is essential for upholding transparency, accountability, and due process in the tax appeal process. Its abolition could disrupt the delicate balance of the tax dispute-resolution system and impact the rights of taxpayers across the country.
Currently, the Appellate Tribunal Inland Revenue (ATIR) is already overwhelmed with a substantial backlog of cases, with more than 70,000 appeals currently pending before the tribunal. This staggering number highlights the immense burden faced by the ATIR in addressing tax disputes and underscores the necessity of retaining the First Appellate Forum as an essential component of the tax appeal system.
Furthermore, approximately 70 percent of the decisions rendered by the Commissioner of Inland Revenue (Appeals) (CIR-A) are being finalised at that stage, with no further appeals filed before the ATIR. Only 30% of cases proceed to the Appellate Tribunal Inland Revenue for further litigation.
This distribution exemplifies the crucial role played by the Commissioner Appeals in efficiently resolving tax disputes and reducing the caseload of the higher appellate body.
Furthermore, the proposal to eliminate the CIR-A forum raises significant apprehensions about the increased workload that would be shifted directly to the High Courts for resolution. Given the existing caseload and operational challenges faced by the High Courts, the removal of the CIR-A as the first appellate authority could lead to a surge in tax-related cases being escalated to the High Courts, thereby exacerbating the burden on these judicial bodies.
It is also highlighted that the proposed abolition would also pose complexity in administering the relevant fiscal laws and provision of justice to the taxpayers because of the following: -
(i); After abolition of the first appellate forum the tribunal would become the sole fact-finding authority.
(ii); In case an order of the Inland Revenue Authority is reversed, deleted or modified on factual basis not acceptable to department then what will department do to get any remedy under the law because;
(iii); Under the present hierarchy and proposed restructuring the forum of High Court is to approach only in case where question is arisen on applicability or otherwise of a particular provision of law and not on factual relieves.
(iv); This way the taxpayer and department, as well, would face hardships, if a final decision on fact is made by the Appellate Tribunal being a sole fact-finding authority leaving no room for any genuine and justifiable action.
LTBA stated that a neighbouring county has, recently, established a first departmental appellate authority as a fact-finding forum in their four layered appellate hierarchy for tax dispute resolution.
Meaning thereby, there has always been a need of first departmental appellate authority, even in economies with bigger tax base than ours.
It is broadly accepted internationally that legislation which contravenes people fundamental rights cannot be consistent with the rule of law. Any unilateral change in the structure of the courts for tax dispute resolutions, notwithstanding, it has also been a subject of constitutional law, will be against the principle of natural justice.
This first appellate forum was provided under the Income Tax Act, 1922 when the said act was firstly promulgated in the sub-continent and existing since then without any sort of tinkering, as the basic principles/ concepts of the said act were adopted by all the countries came into existence after independence in 1947 meaning thereby that the said forum is functioning efficaciously and beneficial to both the department and taxpayers, as well.
“Therefore, in view of given these insights in to the current dynamics of tax appeal process, as above, we respectfully urge you to reconsider the decision to abolish the First Appellate Forum of Commissioner Appeals and to engage in a dialogue with stakeholders to explore alternative solutions that preserve the integrity of the tax appeal mechanism.”
LTBA further said in the light of insights, preserving the forum of Commissioner Appeals and would be vital for streamlining the resolution of tax disputes, alleviating the burden on the ATIR, and ensuring timely and effective adjudication of appeals.
LTBA suggested establishing clear timeframes for the disposal of appeals by the CIR-A to streamline the resolution of tax disputes and enhance accountability in the tax administration system. By introducing specific time limits for the disposal of appeals at the Commissioner Appeals level, we can ensure expeditious handling of cases, reduce backlog, and provide taxpayers and stakeholders with certainty regarding the resolution of their appeals. This proactive measure will not only enhance the overall efficiency of the tax appeal process but also contribute to upholding the principles of transparency and fairness in tax administration, it said.
Implementing timeframes for the disposal of appeals by the CIR-A will promote a more structured and systematic approach to handling tax disputes, enabling timely decisions and reducing the likelihood of appeals escalating to higher appellate bodies, it maintained.
LTBA believed that instituting time-bound guidelines for the disposal of appeals by the Commissioner of Inland Revenue (Appeals) presents a viable alternative to abolishing the existing forum, ensuring that the tax appeal process remains efficient, equitable, and responsive to the needs of all stakeholders.
The LTBA said it is committed to collaborating with the government to safeguard the interests of taxpayers and uphold the principles of justice and equity in Pakistan’s tax administration.
Copyright Business Recorder, 2024
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