The Federal Board of Revenue (FBR) is not legally empowered to issue notices to banks seeking information for conducting any inquiry, investigation or proceedings under Sections 38A and 38B of the Sales Tax Act of 1990.
In a communication to Raza Baqir, Member of Inland Revenue, FBR, Syed Naveed Andarabi, an Advocate of the Supreme Court, said that the Sales Tax Act 1990 independently recognises the status of a "banking company" from that of a "company". Under the Act, "banking company" and a "company" have been defined independently.
It has been observed that to call for information under any inquiry, investigation or proceedings, the officers of the Sales Tax Department and the Directorate of Intelligence & Investigation below the rank of Commissioner are issuing notices to the banks by exercising powers u/s 38A & 38B of the Sales Tax Act, 1990 (Act), whereas the information from a banking company can only be called in by a Commissioner under Section 38A of the Act.
The provisions of Section 38B(2) of the Act are applicable for calling of information from a person, department, company or organisation. The legislature has deliberately not included the word "banking company" in section 38B(2) ibid for the reason that the said powers are clearly vested in a Commissioner u/s 38A of the Act, leading tax lawyer said.
To substantiate this fact, reference has been made to Section 2(3AA) & 2(5AA) of the Sales Tax Act wherein the "banking company" and a "company" have been defined independent and separately of each other, respectively. This clearly means that the Sales Tax Act independently recognises the status of a "banking company" from that of a "company", top lawyer said.
The banks have to comply with the provisions of Section 33A of the Banking Companies Ordinance and also the instructions issued by the regulator, ie the State Bank of Pakistan vide BPRD Circular No7 of 2010, therefore, any notice issued by the Commissioner under Section 38A of the Act asking for information would help the banks to comply under the protection of law.
The FBR should issue instructions in this regard, so as to avoid delays and inconvenience, Naveed Andarabi said.