The Finance Bill 2018 has provided legal cover to the actions of Directorate General (Intelligence and Investigation) Inland Revenue against the tax evaders and investigations in sales tax matters. A tax expert told Business Recorder that the judgement of Lahore High Court (LHC) in July 2017 had set aside SRO 116 of the Federal Board of Revenue (FBR) relating to the powers and functions of Directorate General Intelligence and Investigation, Inland Revenue under Sales Tax Act 1990. The question arises whether the Finance Bill 2018 has given legal cover to the actions of the directorate retrospectively or for future actions, he questioned.
Finance Bill 2018 has proposed to insert Section 30A in the Sales Tax Act where the powers are conferred to Directorate General Investigation. The Finance Bill proposes to provide legal coverage to orders of Directorate General (Intelligence and Investigation) as if these powers were conferred before the commencement of Finance Act,2018. According to the proposed section 30A in the Sales Tax Act, (Directorate General Intelligence and Investigation Inland Revenue), Directorate General (Intelligence and Investigation) Inland Revenue shall consist of a Director General and as many Directors, Additional Directors, Deputy Directors and Assistant Directors and such other officers as the Board may, by notification in the official Gazette, appoint. The Board may, by notification in the official Gazette specify the functions and jurisdiction of the Directorate General and its officers and confer the powers of authorities specified in section 30 upon the Directorate General and its officers."
Presently, SRO.116 empowered the Directorate General Intelligence & Investigation to exercise power and functions of investigation. The said SRO was declared as illegal in a Lahore high Court judgment issued in July 2017.
The Lahore High Court (LHC) had set aside SRO 116 of the Federal Board of Revenue (FBR) relating to the powers and functions of Directorate General Intelligence and Investigation, Inland Revenue under Sales Tax Act 1990 and declared the SRO 116 as illegal.
According to a judgement of LHC in writ petition No. 37358 of 2016, SRO 116 is hereby set aside as being ultra vires the powers of the FBR and is declared without lawful authority and is of no legal effect. The FIRs registered and the criminal prosecution set in motion in pursuance of SRO 116 are also set aside and quashed.
The LHC judgment added that the federal government is directed to frame rules with regard to the transfer and postings under the Federal Board of Revenue Act, 2007 (Act, 2007) of officers and employees of the FBR. The FBR is directed to frame rules with regard to the Directorates and their functioning. In particular, the FBR will enact rules for structuring the powers given in section 37A which is couched in a broad language and confers wide powers on officers of Inland Revenue, LHC judgement of July 2017 added.
Under the Finance Bill, a section 30A was proposed in the Sales Tax Act 1990 where the powers are conferred to Directorate General Investigation to exercise power and function of investigation into sales tax evasion. Another tax expert added that a validation section 74A was proposed in the sales tax act 1990. As per amendments, the validation section provides legal coverage to orders of Directorate General (Intelligence and Investigation) as if these powers were conferred before the commencement of Finance Act, 2018.
The proposed amendment in section 74A said that, "Notwithstanding any omission, irregularity or deficiency in the establishment of or conferment of powers and functions on the Directorate General (Intelligence and Investigation), Inland Revenue and authorities specified in section 30A, all orders passed, notices issued and actions taken, before commencement of the Finance Act, 2018, in exercise or purported exercise of the powers and functions of the officers of Inland Revenue under this Act by the Director General (Intelligence and Investigation), Inland Revenue or the authorities specified in section 30A shall be deemed to have been validly passed, issued and taken under this Act," proposed section in Finance Bill 2018 added.
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