President Asif Ali Zardari has endorsed findings of the Federal Tax Ombudsman (FTO) Dr Muhammad Shoaib Suddle in a case of public interest litigation pertaining to Federal Board of Revenue (FBR) discretionary powers on issuance of income tax circular under Section 206 of the Income Tax Ordinance 2001.
It is learnt here on Sunday that the President has confirmed the FTO's findings to set up a committee of experts to provide feed-back that no circular is amenable to routine misuse and mis-interpretation. The authority of the Federal Tax Ombudsman (FTO) to look into cases involving maladministration on his own volition (suo motu powers) has been fully endorsed by the President of Pakistan in a decision issued by exercising powers under section 32 of the Federal Tax Ombudsman Ordinance, 2000, so that Federal Board of Revenue (FBR) cannot indulge in arbitrary interventions without any check or hindrance
Now, the FBR is legally obliged to immediately set up a committee of experts to provide feed-back that no circular is amenable to routine misuse and mis-interpretation, tax lawyer added.
Sources told Business Recorder that earlier FTO Dr Muhammad Shoaib Suddle had ruled that the blanket immunity granted to the suppliers and service providers of five zero-rated export sectors Under SRO 333(I)/2011 read with income tax circular No. 06/2011 was discriminatory against the honest taxpayers, who regularly pay their taxes.
On a complaint filed by Lahore based tax lawyer Waheed Shahzad Butt, the FTO had given its findings on a suo motu action in C.No.97/ISD/SUO-MOTO(03)/957/2011. This is a landmark order of the Dr Muhammad Shoaib Suddle as an amnesty scheme explained through income tax circular granted by the FBR to the sellers and service providers of five zero-rated sectors has been declared as contrary to law.
The Presidential order issued by Ministry of Law, Justice and Parliamentary Affairs vide No. 126/2011-Law (FTO) further confirmed the issue of (Public Interest Litigation) before the FTO. Any person/citizen/taxpayer of the country may be an aggrieved party when due to widespread mal-administration on the part of FBR functionaries the state exchequer loses revenue or involvement in futile litigation.
Sources said that the FTO is required by the terms of the statute that governs the working of the Office of the FTO to unmask maladministration and recommend action to prevent its recurrence and this is exactly what the FTO has done in the instant case.
In the light of provisions of Section 206 of the Income Tax Ordinance, 2001, the FBR may issue circulars to provide guidance to the taxpayers and its functionaries. The circulars shall be binding on FBR functionaries but quite amazingly at the same time these shall not be binding on a taxpayer. Apparently, it is strange that a document issued by the FBR to clarify a proposition of law or interpreting any law shall be binding on its functionaries but at the same time it shall not be binding on taxpayers. It clearly means that FBR is not empowered by the statute to clarify, interpret or explain the legal provisions of the Income Tax Ordinance. That's why taxpayers have intentionally been excluded from the domain of circular/clarification venture of FBR, they added.
It appears that the law has wisely drafted the provision of section 206 as it intentionally restricts the scope of jurisdiction and powers granted to FBR to issue circulars/clarifications. It also means that FBR functionaries cannot compel the taxpayer to follow any interpretation of law if done by the FBR through a circular. FBR is exercising powers available u/s 206 by issuing circulars/clarifications/letters and thereafter superseding the same. In this backdrop, the suo motu intervention of the FTO is the need of the hour, tax expert said.
The recommendations issued by the FTO are strictly in line with the Rule 14(1)(c) of the Rule of Business 1973. The Rule categorically provides the range of matters where consultation with the Law, Justice and Human Rights Division is mandatory. The Law, Justice and Human Rights Division shall be consulted before the issue of an order, rule, regulation, by-law, notification, etc. However, the issue of Rule 14(1)(c) has been decided against the recommendations of the FTO.
In the light of Presidential order issued by Ministry of Law vide No. 126/2011-Law (FTO), following recommendations issued by FTO to FBR stands confirmed "set up a committee of experts to provide feed-back that no Circular is amenable to routine misuse and mis-interpretation"
It is worth mentioning that the FTO had ruled in a case that the issuance of Circular No.06 of 2011 dated 18-6-2011 and subsequent clarificatory letters by the FBR being contrary to law was tantamount to maladministration under Section 2(3) of the Establishment of the Office of Federal Tax Ombudsman Ordinance, 2000.
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