ISLAMABAD: The Federal Tax Ombudsman (FTO) has directed the Federal Board of Revenue (FBR) to investigate all cases where coercive measures including attachment of bank accounts were done through issuance of tax recovery notices during pendency of appeals.
According to an order issued by the FTO office on Tuesday, the FTO has categorically declared that initiation of coercive measures through issuance of notices under Section 138(1) of the Income Tax Ordinance during the pendency of appeal against the laid down procedure is tantamount to maladministration.
The FTO has further instructed the FBR will direct the Member Inland Revenue (Operations) to examine such cases across the country and to see whether provisions of Section 138 of the Ordinance and instructions conveyed through circular of 2020 and re-enforced vide circular of 2021 are being complied with and take remedial action wherever required, the FTO order added.
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When contacted tax lawyer Waheed Shahzad Butt, who has represented the case, informed that disciplinary and criminal proceedings may be initiated against the IRS officers, who are cheating the FBR, taxpayers and damaging the taxation system of Pakistan for unduly harassing the taxpayers under the garb of tax recovery powers by issuing recovery notices, he added.
The taxpayer informed that such type of practice is prevailing in various regional tax offices (RTOs) and prayed to issue directions to FBR to ensure uniformity and to clarify that whether issuance of notice u/s 138(1) of the Ordinance constitute initiation of coercive measures or not, authorised representative added.
Briefly, the complainant filed an appeal before the Commissioner Inland Revenue (CIR) (Appeals-II) Islamabad against the order passed u/s 122(4) of the Ordinance dated June 28, 2023 creating a demand of Rs 76.479 million. During pendency of appeal notice u/s 138(1) of the Income Tax Ordinance was issued for recovery of tax.
The complainant requested the assessing officer to withdraw the notice issued u/s 138(1) of the Ordinance on account of instructions of Board regarding non-taking of coercive measures during pendency of appeal.
On the other hand, the tax department refused to withdraw the same and according to them issuance of notice u/s 138(1) of the Ordinance during the pendency of appeal does not constitute coercive measures but in fact it is reminder for voluntarily depositing of tax liability, hence this complaint.
In response, FBR admitted that during pendency of appeal before the CIR (Appeals) no coercive measures can be taken for recovery of tax.
The department said that the instructions of FBR have been complied and reiterated that issuance of notice u/s 138(1) of the Ordinance does not constitute initiation of coercive measures. On the other hand, AR stated that issuance of notice u/s 138(1) of the Ordinance means initiation of coercive measures.
The AR stated that although the Chief Commissioner Inland Revenue, Regional Tax Office Islamabad has constituted the committee in pursuance of provisions of Section 138(4) of the Ordinance and FBR’s instructions conveyed through Circular C No 7(20)S(IR-Operations)2020 dated 12.10.2021 and reinforced vide Circular No 7(20)S(IR-Operations) /2021/209984R dated 05.10.2022 but the procedure laid down has not been followed as notice u/s 138(1) of the Ordinance has been issued without obtaining approval of the above said committee.
Arguments put forth by both the departmental representative and authorised representative have been examined in the light of relevant rules and regulations. The authorised representative also referred to certain decisions of various courts wherein it is emphasised that no coercive measures should be taken during the pendency of first appeal. The departmental representative did not dispute, however, insisted that issuance of notice u/s 138(1) of the Ordinance does not constitute initiation of coercive measures.
The FTO office said that it is clear that issuance of notice 138(1) of the Ordinance amounts to initiation of coercive measures and sub-section (4) of Section 138 of the Ordinance reinforce this point of view wherein it is stated that for regulating the procedure of recovery under Section 138 of the Ordinance FBR may make rules and in pursuance of these provisions the FBR has issued directions vide Circular C No 7(20)S(IR-Operations)2020 and reinforced vide Circular No 7(20)S(IR-Operations) /2021/209984R dated 05.10.2022.
Copyright Business Recorder, 2024