Tax defaulters: Recovery to be made from money held in term deposits/Pos

To ensure recovery from tax defaulters, the Federal Board of Revenue (FBR) has empowered Inland Revenue (IR) officials to recover tax from defaulters from money held in term deposits or pay orders, etc, which are due at a later stage.
These powers have been granted to the tax officials through SRO 274(I)/2020 issued on Friday under the procedure for recovery of tax from persons holding money on behalf of the taxpayers.
The FBR has extended the scope of recovery from tax defaulters under the new rules.
Explaining new recovery rules, tax experts explained that the FBR has issued instructions that on receipt of the notice under Section 140 of the Income Tax Ordinance 2001, the person shall make the payment immediately or on the date that it becomes due to the tax defaulter.
This means that if the notice is not withdrawn, the amount available at a later stage shall also be payable to the tax department. The easiest examples would be pay orders or term deposits held in the name of the tax defaulters, which are due for payment at a later date.
According to the new rules, the person shall send or remit the money to the commissioner through pay order or demand draft, or through banking transfer or cheques for payment to the government treasury on the same day the notice is served, or in case the money is to become due for payment to the defaulter at a future date, on the same date it become due.
Where a person is liable to make a series of payments to the taxpayer, the commissioner may specify the amount to be paid out of each payment until tax due has been paid, the rules said. Tax experts added that the right of appeal has been provided to the defaulters and appeals would be decided by the concerned chief commissioner of the RTO or the Large Taxpayers Unit (LTU).
According to the new recovery rules, where any tax is due under Section 137 of the Income Tax Ordinance, the commissioner may serve a notice upon any person in the prescribed form.
Provided that where the power to issue notice of recovery has been delegated by the commissioner, prior approval of the commissioner shall be obtained, who shall satisfy himself as to the service of order and that no refund due to the defaulter is available for adjustment against the tax demand.
He shall also satisfy him that no application for rectification is pending hearing against the demand. The FBR said that a copy of the notice shall be forwarded to the defaulter at his last known address, and in case an account or money is held jointly, to all the joint-holders on their last known address.
The FBR added that the recovery of tax shall be made only to the extent of tax due by the taxpayer. Provided that in case the money is held jointly with any person other than the defaulter, the shares of the joint-holders in such account shall be presumed, until the contrary is proved, to be equal. Every person to whom a notice is issued shall be bound to comply with such notice.