ISLAMABAD: The Federal Board of Revenue’s (FBR) field offices have been barred from attaching bank accounts of the taxpayers if an appeal has formally been lodged with the Commissioner Inland Revenue (Appeals).

This has been stated by FBR in a new report submitted to the Lahore High Court (LHC) on the FBR’s policy of attachment of bank accounts of the taxpayers. The FBR has reiterated its stance that if an appeal has been filed with the Commissioner Inland Revenue (Appeals), the bank accounts of the taxpayers would not be attached. However, there is no provision in Income Tax Ordinance, 2001 that prohibits recovery for any specified period after final decision made by the Commissioner (Appeals) in favour of the tax department, FBR stated.

Earlier, the LHC has directed the attorney general for Pakistan (AGP) to update on disciplinary action taken against the FBR’s officials, who are illegally taking the extreme coercive measure of sealing bank accounts of taxpayers.

Tax experts explain how FBR implements orders issued by courts

LHC had issued an order in matter of M/s GMB Steel Furnace and Re-rolling Mills (writ petition number 68336 of 2023).

The LHC has also directed the FBR chairman to submit a report on the policy and legal position on recovering the amount by taking ultimate coercive measures of sealing accounts and recovering amounts there from.

According to the FBR’s policy and legal position governing recovery, when a liability arises in accordance with the provision of the Income Tax Ordinance, a Demand Notice is duly issued under section 137 (2) of the Ordinance, 2001. The statutory time frame of 30 days is extended to taxpayer to settle the aforementioned liability. Pursuant to the prevailing legal frame work, this liability becomes recoverable and enforceable upon the expiration of the aforementioned 30 days period, provided that no restraining order against the recovery thereof has been issued by the Commissioner IR (Appeals) or any competent judicial authority.

The FBR report said it is imperative to underscore that the law does not prescribe the initiation of recovery process while a case is under appeal before the Commissioner IR (Appeals). Nevertheless, for the purpose of facilitating taxpayers, the FBR had issued directives through formal communication in the past to the field formations.

“These directives explicitly stipulate that no coercive measures shall be undertaken if an appeal has formally been lodged with the Commissioner IR (Appeals). It is pertinent to mention that the aforementioned liability instantly becomes recoverable as the Commissioner IR (Appeals) finally decides the appeal in favour of the tax Department,” FBR added.

In the present case, the recoveries executed through bank attachment, in conformity with the provisions of section 140 of the Ordinance and in accordance with the Rules specified in Chapter XVI-A of the Income Tax Rules, 2002. Rule 210-C (3) of the Rules stipulates that the Individual upon whom the notice under section 140 is served, must remit the money to the Commissioner on the same day, the notice is served.

Suffice to submit here that the Rule 210-C (3) is part of Chapter XVI-A of the Rules, 2002 inserted by notification No. SRO 274(I)/2020 dated 02-04-2020 which was previously published as mandated by section 237 (3) of the Ordinance, 2001 vide notification No SRO111(I)/2020.

There is no provision in Income Tax Ordinance, 2001 that prohibits from the recovery for any specified period after final decision made by the Commissioner (Appeals) in favour of the department, FBR’s report added.

Copyright Business Recorder, 2023