The Lahore High Court (LHC) has restrained banks (WHT agents) from charging enhanced rate of income tax on all banking transactions of the petitioner, who is resisting non-filer income tax rates under Income Tax Ordinance, 2001 on all payments including banking transactions.
It is learnt that LHC's restraining order came in response to petition filed by a Lahore-based tax lawyer Waheed Shahzad Butt challenging the collection of enhanced rates of income tax by treating his status as non-filer (inactive) on the Active Taxpayer List (ATL) issued by FBR. LHC has stopped banks from collecting income tax on banking transactions of the said petitioner.
Petitioner stated that through present petition he questioned the working of respondents to flout the provision of Income Tax Ordinance, 2001 governing Active Taxpayer status under Section 2(23A) of the Ordinance, which is without lawful jurisdiction, biased, unconstitutional and equivalent to severe mal-administration of justice. Petitioner and various taxpayers are facing problems to become Active Taxpayer on ATL issued by FBR despite filing their income tax returns manually, as tax department is picking only electronically filed returns for the purposes of ATL.
ATL has become more important after the amendments made in the Income Tax Ordinance through the Finance Act, 2015 under which the gap of withholding tax rates had been widened for income tax return filers and non-filers. Primary condition for becoming a filer in terms of Ordinance deals with income tax matters is that the taxpayer's name should appear in the "ATL". Section 2(23A) deals with this issue which reads as "Filer" means a taxpayer whose name appears in the active taxpayers' list issued by the Board from time to time or is holder of a taxpayer's card. This means that only the taxpayers' whose name appears in ATL would be considered as 'filers' and all other taxpayers shall be treated as Non-Filer. In the light of provisions of Section 114 & 118 of the Ordinance read with Rule 73 of Income Tax Rules, 2002, there are many cases where the taxpayers have filed their income tax returns for tax year 2014 manually, as they were not legally required to submit the income tax return online/electronically. However, even then their names are not appearing in the ATL, petitioner said.
Despite filing complete tax return for the tax year 2014, name of the petitioner has not been included in the ATL. The matter was duly communicated to the concerned Chief-CIR. Matter was forwarded by the Chief-CIR to the DBA and Incharge Lab for filing report. Thereafter matter has been referred to the Member (IT). On silence, a specific written request was forwarded to the Member (IT) at email address memberit@fbr.gov.pk. Petitioner has been treated as "Non-Filer" and higher rates of income tax deduction have been applied, which is highly unjust, unconstitutional and equivalent to severe mal-administration of justice.
Petitioner further added that the reduced maladministration/mal-treatment in the tax establishment would mean that more tax officials are working efficiently and honestly and when that becomes a reality most of our country's problems with revenue mobilisation will stand resolved and present phase of taxpayer's irritation shall be turned into taxpayer's facilitation in real terms. It appears public functionaries representing FBR/IT-Wing/PRAL are least interested in rule of law because they are simply protecting each other and saving their skin by passing the buck when there is issue of accountability.
Provision of Section 2(23A) of the Income Tax Ordinance has been misused by the respondents to flout the law at their own whims. The treatment with the petitioner is illegal and unconstitutional being ultra vires, discriminatory and based on some mala fides. Respondents have no authority to mold the law enacted by the Parliament at their own sweet will to control the ATL to target some persons by turning their status Inactive. It is the duty of respondents to dispense justice and functionaries representing FBR are supposed to uphold the dignity of law. On the other hand due to illegal acts of omission and commission, the process of law is being abused badly, the petitioner added.